FairPoint Communications 2009 Annual Report Download - page 109

Table of Contents
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expected to result in capital expenditures in Maine in excess of the minimum capital expenditure requirements described above.
The order issued by the state regulatory authority in Vermont also requires the Company to make capital expenditures in Vermont during the first
three years after the closing of the Merger in the amount of $41 million for the first year and averaging $40 million per year in the first two years and
averaging $40 million per year in the first three years following the closing. Pursuant to the Vermont order, the Company is required to remove double
poles in Vermont, make service quality improvements and address certain broadband build-out commitments under a performance enhancement plan in
Vermont, using, in the case of double pole removal, $6.7 million provided by the Verizon Group and, in the case of service quality improvements under
the performance enhancement plan, $25 million provided by the Verizon Group. In Vermont the Company has also agreed to certain broadband build-
out milestones that require the Company to reach 100% broadband availability in 50% of the Company's exchanges in Vermont, which could result in
capital expenditures of $44 million over such period in addition to the minimum capital expenditures required by the Vermont order as set forth above.
The Company is also required to make capital expenditures in New Hampshire of at least $52 million during each of the first three years after the
closing of the Merger and $49 million during each of the fourth and fifth years after the closing of the Merger. The amount of any shortfall in any year
must be expended in the following year, and the amount of any excess in any year may be deducted from the amount required to be expended in the
following year. If any shortfall in any year exceeds $3 million, then the amount that the Company is required to spend in the following year shall be
increased by 150% of the amount of such shortfall. If there is any shortfall at the end of the fifth year after the closing of the Merger, we will be
required to spend 150% of the amount of such shortfall at the direction of the NHPUC. The NHPUC may require that a portion of these increased
capital expenditures be directed toward state programs rather than invested in the Company's assets. The Company is required to spend at least
$56.4 million over the 60-month period following the closing of the Merger on broadband infrastructure in New Hampshire, which is expected to result
in capital expenditures in New Hampshire in excess of the minimum capital expenditure requirements described above.
The Company also had the availability of $49.2 million contributed to the Company by the Verizon Group, and $1.1 million in interest earned
thereon, to make capital and operating expenditures in New Hampshire in addition to those described above for unexpected infrastructure improvements
proposed by the Company and approved by the NHPUC. These funds were reflected on the Company's March 31, 2009 balance sheet as restricted cash
to be used only in accordance with the NH 2008 Settlement. During the three months ended June 30, 2009, we requested that these funds be made
available for general working capital purposes. By letter, dated as of May 12, 2009, the NHPUC approved the Company's request, conditioned upon the
Company's commitment to invest funds on certain NHPUC approved network improvements in New Hampshire on the following schedule:
$15 million by the end of 2010, an additional $20 million by the end of 2011 and an additional $30 million by the end of 2012. This investment
commitment is inclusive of the $50 million previously required by the NHPUC.
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