FairPoint Communications 2007 Annual Report Download - page 80

Table of Contents
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On February 25, 2008, the Company entered into the Fifth Amendment, or the Fifth Amendment, to its existing credit facility in
order to accommodate the Merger (as defined below in note 3(a)) related costs expected to be incurred and due through March 31, 2008,
and to meet certain restrictive debt covenants as of various dates for the period March 31, 2008 through December 31, 2008. Additionally,
the Company amended its agreement with Capgemini, or the Capgemini Second Amendment, to defer all amounts due as of March 31,
2008 in the event that the closing of the Merger is not consummated or is delayed beyond March 31, 2008. The Company expects to
continue to incur significant monthly costs related to the Merger through the closing of the Merger. Management of the Company believes
that the Fifth Amendment was necessary to avoid events of default relative to certain covenants as of March 31, 2008, assuming the
closing of the Merger does not occur on or before March 31, 2008. In the event that the Merger does not occur on or before March 31, 2008
and the Company plans to continue to pursue the Merger, the Company will either seek to obtain third-party financing (as permitted in the
Fifth Amendment) or cease incurring expenditures related to the Merger until the Merger closes.
Among other things, the Fifth Amendment: (i) allows the Company to continue to satisfy pre-closing cash expenditures and cost
obligations related to the Merger during the three months ending March 31, 2008; (ii) provides accommodations for certain restructuring
charges that the Company would incur if the Merger is not consummated; (iii) amends the interest coverage ratio maintenance covenant to
require its interest coverage ratio to be not less than 1.85:1.00 for any fiscal quarter ending after December 31, 2007, and on or prior to
December 31, 2008, and 2.50:1.00 for any fiscal quarter ending after December 31, 2008 and on or prior to December 31, 2009 and
2.75:1.00 for any fiscal quarter ending thereafter; (iv) amends the leverage ratio maintenance covenant to require the Company’s leverage
ratio to not exceed 6.50:1.00 for any quarter ending after December 31, 2007 and on or prior to December 31, 2008, 5.00:1.00 for any
fiscal quarter ending after December 31, 2008 and on or prior to December 31, 2009 and 4.50:1.00 for any fiscal quarter ending
thereafter; (v) restricts the Company’s ability to pay dividends on and repurchase shares of common stock if (1) the Company’s total
leverage ratio exceeds 4.50:1.00 (previously 5.25:1.00) on the dividend calculation date and/or (2) our cash on hand is less than
$20 million (previously $10 million), (vi) provides more restrictive negative covenants and minimum liquidity requirements, requires
minimum repayments if certain financial conditions are met, and increases mandatory prepayments from proceeds of debt and equity
issuances; (vii) provides for acceleration of the maturity of the borrowings under the Company’s existing credit facility to June 30, 2009 if
the amounts due under the Capgemini Second Amendment are outstanding as of that date and has a mandatory payment date on or prior
to the maturity of the borrowings under the credit facility as of such date; (viii) limits the Company to $58.4 million in merger related
expenditures through March 31, 2008; (ix) prohibits the Company from making any cash expenditures related to the Merger after
March 31, 2008 unless the Company raises up to $20.0 million of additional capital or has a reimbursement agreement from a third party
agreed to by the lenders and certain other conditions are satisfied; (x) allows the Company to incur one-time cash restructuring charges
(including severance) up to $17.8 million during the quarters ended June 30, 2008 and September 30, 2008 in connection with the
termination of the Merger Agreement; (xi) 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 premiums payable during the two year period beginning on May 1, 2008 upon certain
repayments of borrowings under the Company’s existing credit facility, which provisions would become effective as of May 1, 2008 if its
existing credit facility has not been repaid in full on or prior to such date and (xii) 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.
The Company will pay fees of approximately $30.6 million to the lenders in connection with the Fifth Amendment. These fees are
payable as follows: $1.7 million due in February 2008, $1.7 million due in April
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