FairPoint Communications 2007 Annual Report Download - page 62

Table of Contents
as of the last day of each fiscal quarter to be applied as a mandatory repayment of the principal amount of outstanding B term loans
under our existing credit facility (or an amount equal to 50%, if our leverage ratio is less than or equal to 5.25:1.00); (vii) provides for
more restrictive negative covenants, minimum liquidity requirements and increased mandatory prepayments from proceeds of debt and
equity issuances; (viii) provides for acceleration of the maturity of the borrowings under our existing credit facility to June 30, 2009 if
certain vendor debt incurred by us in connection with the merger is outstanding as of such date and has a mandatory payment date on or
prior to the maturity of the borrowings under our existing credit facility as of such date; (ix) prohibits us from incurring additional
obligations of more than $58.4 million (subject to certain reductions contained in the fifth amendment to our existing credit facility)
related to the merger after March 31, 2008; provided that we may make cash expenditures not to exceed $20 million in the aggregate from
the proceeds of equity issuances or if we have received a reimbursement obligation from Verizon or another third party acceptable to the
lenders under our existing credit facility and certain other conditions are satisfied; (x) provides for higher interest rate margins (3.00% on
base rate loans and 4.00% on Eurodollar loans), a Eurodollar rate floor of 2.50% and repayment premiums payable during the two year
period beginning on May 1, 2008 upon certain repayments of borrowings under our existing credit facility, which provisions would
become effective as of May 1, 2008 if our existing credit facility has not been repaid in full on or prior to such date; and (xi) provides for
higher interest rate margins (5.00% on base loans and 6.00% on Eurodollar loans), a Eurodollar rate floor of 3.25%, which provisions
would become effective as of January 1, 2009 if our existing credit facility has not been repaid in full on or prior to such date. We paid the
lenders an amendment fee of $1.7 million in connection with the fifth amendment. We have also agreed to pay additional fees of 0.25%,
1.5% and 2.5% of the aggregate amount of all outstanding term loans and revolving commitments of the lenders outstanding on the
effective date of the fifth amendment to the lenders under the existing credit facility on April 1, 2008, May 1, 2008 and January 1, 2009,
respectively, if our existing credit facility is not repaid in full on or prior to such dates.
We anticipate that we will not be permitted to pay dividends on our common stock pursuant to our existing credit facility as
amended by the fifth amendment to our existing credit facility; provided that we would be permitted to 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 we have repaid in full all of the obligations owing under the existing credit facility. Our management believes that the fifth amendment
to our existing credit facility was necessary to avoid events of default relative to certain covenants in our existing credit facility as of
March 31, 2008, assuming the closing of the merger does not occur on or before March 31, 2008. We intend to repay our existing credit
facility in full in connection with the closing of the transactions, and accordingly, the provisions contained in the fifth amendment to our
existing credit facility, including those restricting the payment of dividends, would terminate as a result of such repayment and no longer
be effective. However, there can be no assurance that the transactions will be consummated.
The fifth amendment to our existing credit facility requires us to use a significant portion of our excess cash flow to reduce the
indebtedness outstanding under our existing credit facility. As a result, the cash that we retain may not be sufficient to finance growth
opportunities or unanticipated capital expenditures or to fund our operations.
Our existing credit facility contains customary affirmative covenants and also contains negative covenants and restrictions,
including, among others, with respect to redeeming and repurchasing our other indebtedness, loans and investments, additional
indebtedness, liens, capital expenditures, changes in the nature of our business, mergers, acquisitions, asset sales and transactions with
affiliates. Pursuant to the fifth amendment to our existing, we agreed to significant restrictions on the operation of our business, including
with respect to the payment of dividends, capital expenditures and future acquisitions. On March 11, 2005, April 29, 2005 and
September 14, 2005, we entered into technical amendments to our existing credit facility.
Borrowings under our existing credit facility bear interest at variable interest rates. We have entered into various interest rate swap
agreements which are detailed in note 1 of the notes to our condensed consolidated financial statements for the years ended December 31,
2007 and 2006 included in this Annual Report. As a result of these swap agreements, as of December 31, 2007, approximately 89% of
our indebtedness bore interest at fixed rates rather than variable rates. After these interest rate swap agreements expire, our annual debt
service obligations on such portion of the term loans will vary from year to year unless we enter into a
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