FairPoint Communications 2007 Annual Report Download - page 5

Table of Contents
November 16, 2007, and Amendment No. 5 to Agreement and Plan of Merger, dated as of February 25, 2008, referred to herein as the
merger agreement. Pursuant to the merger agreement, Spinco will merge with and into FairPoint and, following completion of the merger,
the separate existence of Spinco will cease. FairPoint will survive the merger and will hold and conduct the combined business operations
of FairPoint and Spinco. We refer collectively to the transactions described above as the merger. When the merger is completed and prior to
the elimination of fractional shares, Verizon stockholders will collectively own approximately 60% and FairPoint stockholders will
collectively own approximately 40% of the shares of our common stock following the merger, on a fully diluted basis (excluding treasury
stock, certain specified options, restricted stock units, restricted units and certain restricted shares outstanding as of the date of the
merger agreement). On August 22, 2007, our stockholders voted to approve the adoption of the merger agreement and to approve the
issuance of shares of our common stock to Verizon stockholders pursuant to the merger agreement.

In connection with the merger, Verizon and Spinco entered into a Distribution Agreement, dated as of January 15, 2007, as amended
by Amendment No. 1 to Distribution Agreement, dated as of March 30, 2007, Amendment No. 2 to Distribution Agreement, dated as of
June 28, 2007, Amendment No. 3 to Distribution Agreement, dated as of July 3, 2007, and Amendment No. 4 to the Distribution
Agreement, dated February 25, 2008, referred to as the distribution agreement, under which Verizon and its subsidiaries (other than
Cellco Partnership doing business as Verizon Wireless), collectively referred to as the Verizon Group, will transfer certain specified assets
and liabilities of the local exchange business of Verizon New England Inc., or Verizon New England, in Maine, New Hampshire and
Vermont and the customers of the related long distance and Internet service provider business in those states to subsidiaries of Spinco. In
exchange therefore, Spinco will:
• issue additional shares of Spinco common stock to the Verizon Group, referred to as the distribution;
• pay a special $1,160 million cash payment to the Verizon Group; and
• issue senior notes due 2018 in an aggregate principal amount of approximately $540 million, or the notes, to the Verizon Group.
After the distribution and immediately prior to the merger, Verizon will spin-off Spinco by distributing all of the shares of Spinco
common stock to a third-party distribution agent to be held collectively for the benefit of Verizon stockholders. We refer collectively to the
transactions described above as the spin-off.
To comply with the conditions to the approval of the merger and related transactions imposed by state regulatory agencies, the
Verizon Group will also contribute at or prior to the spin-off approximately $316.2 million in cash to the working capital of Spinco in
addition to the amount specified in the distribution agreement as currently in effect. Additionally, Verizon will not receive credit for the
$12.0 million that Verizon spent in expanding its DSL network in Maine, which the Verizon Group was entitled to receive as an offset to
its capital contribution obligations under the distribution agreement as currently in effect. Of the approximately $316.2 million, the
Verizon Group may contribute $25.0 million to us on the second anniversary of the closing date of the merger or, at its option, pay to us
on the closing date of the merger the net present value of that amount which is estimated to be approximately $24.0 million, which amount
is to be used by us to make capital expenditures in New Hampshire. The aggregate required capital contributions required to be made by
the Verizon Group are referred to collectively as the required capital contribution. For purposes of this Annual Report, it is assumed that
the Verizon Group will make the required capital contribution in the approximate amount of $316.2 million prior to the closing of the
merger.
We expect that the Verizon Group will seek to exchange the notes issued by Spinco to the Verizon Group for certain outstanding debt
obligations of the Verizon Group. We then expect that the notes thereby exchanged will be sold through an offering in accordance with the
provisions of Rule 144A under the Securities Act. We refer collectively to the transactions described above as the debt exchange.
3