FairPoint Communications 2007 Annual Report Download - page 96

Table of Contents
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The existing credit facility requires certain mandatory prepayments, including first to prepay outstanding term loans under the
existing credit facility and, thereafter, to repay loans under the revolving facility and/or to reduce revolving facility commitments with,
subject to certain conditions and exceptions, 100% of the net cash proceeds the Company receives from any sale, transfer or other
disposition of any assets, 100% of net casualty insurance proceeds and 100% of the net cash proceeds the Company receives from the
issuance of permitted securities and, at certain times if the Company is not permitted to pay dividends, with 50% of the increase in the
Company’s Cumulative Distributable Cash (as defined in the existing credit facility) during the prior fiscal quarter. Reductions to the
revolving commitments under the existing credit facility from the foregoing recapture events will not reduce the revolving commitments
under the existing credit facility below $50.0 million.
The existing credit facility provides for voluntary prepayments of the revolving facility and the term facility and voluntary
commitment reductions of the revolving facility, subject to giving proper notice and compensating the lenders for standard Eurodollar
breakage costs, if applicable.
The existing credit facility requires that the Company maintain certain financial covenants. The existing credit facility contains
customary affirmative covenants, including, without limitation, the following tests: a minimum interest coverage ratio equal to or greater
than 3.0 to 1.0 and a maximum leverage ratio equal to or less than 5.50 to 1.0. The existing credit facility also contains negative covenants
and restrictions, including, among others, with respect to redeeming and repurchasing other indebtedness, loans and investments,
additional indebtedness, liens, capital expenditures, changes in the nature of the Company’s business, mergers, acquisitions, asset sales
and transactions with the Company’s affiliates. The existing credit facility restricts the Company’s ability to declare and pay dividends
on its common stock as follows:
• The Company may use all of its available cash accumulated after April 1, 2005 plus certain incremental funds to pay
dividends, but may not in general pay dividends in excess of such amount. “Available Cash” is defined in the existing credit
facility as Adjusted Consolidated EBITDA (a) minus (i) cash interest expense, (ii) repayments of indebtedness other than
repayments of the revolving facility (unless funded by debt or equity), (iii) consolidated capital expenditures (unless funded by
long-term debt, equity or the proceeds from asset sales or insurance recovery events or related to the Merger), (iv) cash taxes,
(v) cash consideration paid for acquisitions (unless funded by debt or equity), (vi) cash paid to make certain investments, and
(vii) certain non-cash items excluded from Adjusted Consolidated EBITDA and paid in cash and (b) plus (i) the cash amount of
extraordinary gains and gains on sales of assets (excluding the gain realized on the sale of the Company’s investment in the
Orange County-Poughkeepsie Limited Partnership) and (ii) certain non-cash items excluded from Adjusted Consolidated
EBITDA and received in cash. “Adjusted Consolidated EBITDA” is defined in the existing credit facility as Consolidated Net
Income (which is defined in the existing credit facility and includes distributions from investments) (a) plus the following to the
extent deducted from Consolidated Net Income: provision for income taxes, interest expense, depreciation, amortization, losses on
sales of assets and other extraordinary losses, certain one-time charges recorded as operating expenses related to the transactions
contemplated by the Merger Agreement (subject to an overall cap on the amount of such charges which may be added back) and
certain other non-cash items, and (b) minus, to the extent included in Consolidated Net Income, gains on sales of assets and other
extraordinary gains and all non-cash items.
• The Company may not pay dividends if a default or event of default under the existing credit facility has occurred and is
continuing or would exist after giving effect to such payment, if the Company’s leverage ratio is above 5.25 to 1.00 or if the
Company does not have at least $10.0 million of cash on hand (including unutilized commitments under the existing credit
facility’s revolving facility).
The existing credit facility also permits the Company to use available cash to repurchase shares of its capital stock, subject to the
same conditions.
The Company may obtain letters of credit under the revolving facility to support obligations of the Company and/or obligations of
its subsidiaries incurred in the ordinary course of business in an aggregate
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