FairPoint Communications 2010 Annual Report Download

Download and view the complete annual report

Please find the complete 2010 FairPoint Communications annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 195

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164
  • 165
  • 166
  • 167
  • 168
  • 169
  • 170
  • 171
  • 172
  • 173
  • 174
  • 175
  • 176
  • 177
  • 178
  • 179
  • 180
  • 181
  • 182
  • 183
  • 184
  • 185
  • 186
  • 187
  • 188
  • 189
  • 190
  • 191
  • 192
  • 193
  • 194
  • 195

Table of Contents



(Mark One)




o 




(Exact Name of Registrant as Specified in Its Charter)
 
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
 
 (Zip code)
(Address of Principal Executive Offices)



 
Common Stock, par value $0.01 per share
The Nasdaq Stock Market LLC
(Nasdaq Capital Market)


Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o No
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulations S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files). Yes o No o*
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K.
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the

Table of contents

  • Page 1
    ...500 Charlotte, North Carolina (Address of Principal Executive Offices) 13-3725229 (I.R.S. Employer Identification No.) 28202 (Zip code) Registrant's Telephone Number, Ingluding Trea Code: (704) 344-8150 Segurities registered pursuant to Segtion 12(b) of the Tgt: Title of Eagh Class Common Stock...

  • Page 2
    ... company) Smaller reporting company o Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No  The aggregate market value of the common stock held by non-affiliates of the registrant as of June 30, 2010 (based on the closing price...

  • Page 3
    ...Statements and Supplementary Data 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 9A. Controls and Procedures 9B. Other Information PTRT III 10. Directors, Executive Officers and Corporate Governance 11. Executive Compensation 12. Security Ownership of Certain...

  • Page 4
    ... use by customers of alternative technologies and the loss of access lines; availability and levels of regulatory support payments; availability of net operating loss ("NOL") carryforwards to offset anticipated tax liabilities; our ability to meet obligations to our Company-sponsored pension plans...

  • Page 5
    ..."Annual Report"), FairPoint Communications, Inc. (the "Company") is restating its unaudited quarterly financial statements for the quarters ended March 31, 2010, June 30, 2010 and September 30, 2010 (collectively, the "2010 Interim Consolidated Financial Statements"). The Company's previously filed...

  • Page 6
    ... the local exchange business of Verizon New England Inc. ("Verizon New England") in Maine, New Hampshire and Vermont and the customers of Verizon and its subsidiaries' (other than Cellco Partnership) (collectively, the "Verizon Group") related long distance and Internet service provider business in...

  • Page 7
    ... per share (the "Old Common Stock"), options and contractual or other rights to acquire any equity interests. The Plan provided for: • (i) The lenders under the Credit Agreement, dated as of March 31, 2008, by and among FairPoint Communications, Spinco, Bank of America, N.A. as syndication agent...

  • Page 8
    ...the terms of the FairPoint Communications, Inc. 2010 Long Term Incentive Plan (the "Long Term Incentive Plan"); and • Members of our board to be appointed on the Effective Date (the "New Board") to receive options to purchase New Common Stock pursuant to the terms of the Long Term Incentive Plan...

  • Page 9
    ... Credit Agreement are subject to certain customary conditions. Certificate of Incorporation and By-laws Pursuant to the Plan, on the Effective Date, we filed with the Secretary of State of the State of Delaware the Ninth Amended and Restated Certificate of Incorporation of FairPoint Communications...

  • Page 10
    ...Verizon related to the Merger Agreement to the Litigation Trust with title to such claims and causes of action being free and clear of all liens, charges, claims, encumbrances and interests except for the return to FairPoint Communications of any funds deposited in the Litigation Trust bank account...

  • Page 11
    ... in each of Maine, New Hampshire and Vermont with respect to (i) certain regulatory approvals relating to the Chapter 11 Cases and the Plan and (ii) certain modifications to the requirements imposed by state regulatory authorities as a condition to approval of the Merger (each a "Merger Order," and...

  • Page 12
    ... and personnel to replace those used by Verizon to operate and support our network and back-office functions in the Maine, New Hampshire and Vermont operations we acquired from Verizon in the Merger. These services were provided by Verizon under the Transition Services Agreement, dated as of January...

  • Page 13
    ... years, communications companies, including FairPoint, have experienced a decline in voice access lines due to increased competition, including competition from wireless carriers and cable television operators, increased availability of broadband services and challenging economic conditions. While...

  • Page 14
    ... our service areas; (ii) the provision of network access to interexchange carriers for origination and termination of interstate and intrastate long-distance phone calls and dedicated private line facilities; (iii) HSD services; (iv) Universal Service Fund high-cost loop and high-cost model payments...

  • Page 15
    ... universal service support payments for high-cost areas. Universal Service Fund high-cost support revenue accounted for less than 2% of our total revenue in the year ended December 31, 2010. Data and Internet Services ("HSD") We offer broadband Internet access via DSL technology, fiber-to-the-home...

  • Page 16
    ...long-distance services to our LEC customers and may elect to use our billing and collection services. Our LECs charge interexchange carriers a billing and collection fee for each call record generated by the interexchange carrier's customer. Directory Services. Through our local telephone companies...

  • Page 17
    ... Switched ("IP/MPLS") network that is fully fiber optic based (the "Next Generation Network", branded the "VantagePoint" network) in NNE has a level of coverage and capacity that we believe is unmatched in our marketplace. Each of our local exchange companies has a long history in the communities it...

  • Page 18
    Table of Contents Our systems are supported by a combination of employees and contractors. Our internal IT group supports data center operations, data network operations, systems analysis and custom software development. We use professional services firms for the majority of software maintenance ...

  • Page 19
    ...fiber optics and installing facilities to provide voice, video and Internet services to residential and business customers. Cable high-speed Internet services are generally competitive with our Internet services in both pricing and the speed of such services. We estimate that as of December 31, 2010...

  • Page 20
    ..., reforming high-cost and low-income programs to promote universal service, to make those funds more efficient while promoting broadband communications in areas that otherwise would be unserved. We also expect the FCC to undertake new rulemakings addressing changes to interstate access charges and...

  • Page 21
    ... subject to change. Our ILEC operations in Maine, New Hampshire and Vermont and, effective July 1, 2010, our Legacy FairPoint operations in Maine and Vermont, are subject to price cap regulation of access charges. Under price cap regulation, limits are imposed on a company's interstate rates without...

  • Page 22
    ... FCC's rules in the forms of Interstate Access Support ("IAS") and Interstate Common Line Support ("ICLS"). We receive IAS support in all three of our federal price cap study areas (Maine, New Hampshire and Vermont). We also continue to receive ICLS support in our rate-of-return study areas. These...

  • Page 23
    ... their telephone numbers when changing carriers, referred to as local number portability; (iii) ensure that competitors' customers can use the same number of digits when dialing and receive nondiscriminatory access to telephone numbers, operator service, directory assistance and directory listing...

  • Page 24
    ...for their long-distance services, provided that they comply with certain existing and additional safeguards, such as providing special access performance metrics, offering low-volume calling plans and making available certain monthly usage information on customers' bills. The FCC also has ruled that...

  • Page 25
    ... the power to grant and revoke franchises authorizing companies to provide communications services. In some states, our intrastate long-distance rates are also subject to state regulation. States typically regulate local service quality, billing practices and other aspects of our business as well...

  • Page 26
    ... "Vermont Board"). In connection with the Chapter 11 Cases, we negotiated with representatives of the state regulatory authorities in each of Maine, New Hampshire and Vermont with respect to (i) certain regulatory approvals relating to the Chapter 11 Cases and the Plan and (ii) the Merger Orders. We...

  • Page 27
    .... Our board of directors is required to appoint a "regulatory sub-committee" that will monitor compliance with the terms of the NH 2008 Order, as modified by the New Hampshire Regulatory Settlement, and all other regulatory matters involving the States of Vermont, New Hampshire and Maine. We...

  • Page 28
    .... The New Board is required to appoint a "regulatory sub-committee" that will monitor compliance with the terms of the ME 2008 Merger Order, as modified by the Maine Regulatory Settlement, and all other regulatory matters involving the States of Vermont, New Hampshire and Maine. We appointed...

  • Page 29
    ... reliability. If the Vermont Board authorizes us to use the high-cost USF funds, and to the extent permitted by FCC rules, we may invest the high-cost USF funds in network infrastructure that will support the deployment of broadband services to an additional 5% of access lines on a timeline that...

  • Page 30
    ...upon consummation of the Merger. The AFOR provides for the capping of rates for basic local exchange services and allows pricing flexibility for other services, including intrastate long-distance, optional services and bundled packages. Under the terms of the ME 2008 Merger Order, among other things...

  • Page 31
    ... Verizon Northern New England business committed to make broadband capability available to 75% of its access lines in Vermont by 2008 and 80% of its access lines in Vermont by 2010 with milestones of 65% and 77% for 2007 and 2009, respectively. The Amended Incentive Regulation Plan provides pricing...

  • Page 32
    ... to new funding for roads. It is not certain whether funding will be available to us for this potential obligation. Environmental Regulations Like all other local telephone companies, our 33 LEC subsidiaries are subject to federal, state and local laws and regulations governing the use, storage...

  • Page 33
    ... buyer would pay for the assets of the entity immediately after the reorganization, has been allocated to the fair value of assets in conformity with guidance under the applicable accounting rules for business combinations, using the purchase method of accounting for business combinations. The...

  • Page 34
    ... Common Stock that may be held or acquired by our directors, executive officers and other affiliates, as that term is defined in the Securities Act, which will be restricted securities under the Securities Act. Restricted securities may not be sold in the public market unless the sale is registered...

  • Page 35
    ... to pay dividends in the future will be at the discretion of our board of directors and will depend upon limitations imposed by orders of state regulatory authorities, results of operations, financial condition, contractual restrictions contained in the agreements governing our Exit Credit Agreement...

  • Page 36
    ... ability to execute on our business plan. Our future operating performance, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. In addition, our ability to borrow funds in the future to make payments on...

  • Page 37
    ... impact on our business, financial condition, results of operations, liquidity and/or the market price of our Common Stock. Our finanging arrangements subjegt us to various restrigtions that gould limit our operating flexibility, our ability to make payment on our debt and to fund dividends, if any...

  • Page 38
    ... These losses resulted mainly from competition, including competition from bundled offerings by cable companies, the use of alternate technologies as well as challenging economic conditions and the offering of DSL services, which prompts some customers to cancel second line service. We believe that...

  • Page 39
    ... our business, finangial gondition, results of operations, liquidity and/or the market prige of our Common Stogk may be materially adversely affegted. We originate and terminate calls on behalf of long-distance carriers and other interexchange carriers over our network in exchange for access charges...

  • Page 40
    ... for our services and resulting loss of access line equivalents which could have a material adverse effect on our business, financial condition, results of operations, liquidity and/or the market price of our Common Stock. In addition, if state regulators in Maine, New Hampshire or Vermont were to...

  • Page 41
    ... Chief Executive Officer, are employed pursuant to an employment agreement. Mr. Sunu's current employment agreement expires on August 24, 2013. The loss of any member of our senior management team, due to retirement or otherwise, and the inability to attract and retain highly qualified technical and...

  • Page 42
    ...to internal control over financial reporting, standards established by the Public Company Accounting Oversight Board define a material weakness as a deficiency in internal controls over financial reporting that results in a reasonable possibility that a material misstatement of a company's annual or...

  • Page 43
    ...to decline based on historical trends. We receive IAS in all of our price cap study areas (Maine, New Hampshire and Vermont) and ICLS in our rate-of-return study areas. The FCC also is considering changes to its rules governing who contributes to the Universal Service Support mechanisms, and on what...

  • Page 44
    ... with those new rules might cost. Similarly, we cannot predict whether or to what extent federal or state legislators or regulators might impose new network access, security, environmental or other obligations on our business. Risk of losses from rate reduction. Our local exchange companies that...

  • Page 45
    ..., these cases have not been closed. For a discussion of the Chapter 11 Cases, see "Item. 1-Business-Emergence from Chapter 11 Proceedings." We are subject to certain service quality requirements in the states of Maine, New Hampshire and Vermont. Failure to meet these requirements in any of these...

  • Page 46
    ... table shows the high and low closing sales prices per share of our Old Common Stock as reported on the Pink Sheets from January 1, 2010 to December 31, 2010 and October 26, 2009 to December 31, 2009, and on the NYSE from January 1, 2009 to October 23, 2009. The stock price information is based on...

  • Page 47
    ...ends on December 31, 2010. This graph assumes that $100 was invested on February 4, 2005 (the date of the initial public offering of our Old Common Stock) in our Old Common Stock and in each of the market index and the sector index at the closing price for FairPoint Communications and the respective...

  • Page 48
    ... businesses of Verizon New England in Maine, New Hampshire and Vermont and the customers of the related voice and Internet service provider businesses in those states to subsidiaries of Spinco. The Merger was accounted for as a "reverse acquisition" of Legacy FairPoint by Spinco under the purchase...

  • Page 49
    ...to purchase New Common Stock pursuant to the terms of the Long Term Incentive Plan. As of March 25, 2011, we had 26,197,432 shares of Common Stock outstanding. The following financial information should be read in conjunction with "Item 7. Management's Discussion and Analysis of Financial Condition...

  • Page 50
    ...) per share Cash dividends per share Operating Data: Capital expenditures Access line equivalents(2) Residential access lines Business access lines Wholesale access lines(3) HSD subscribers Summary Cash Flow Data: Net cash provided by operating activities Net cash used in investing activities Net...

  • Page 51
    ... includes voice access lines and HSD lines, which include DSL lines, wireless broadband, cable modem and fiber-to-thepremises. Wholesale access lines include residential and business resale lines and unbundled network element platform ("UNEP") lines. Long-term debt at December 31, 2010 and 2009...

  • Page 52
    ...and personnel to replace those used by Verizon to operate and support our network and back-office functions in the Maine, New Hampshire and Vermont operations acquired from Verizon. These services were provided by Verizon under the Transition Services Agreement from March 31, 2008 through January 30...

  • Page 53
    ... Service Fund payments for high-cost loop support, local switching support, long-term support and ICLS. Access. We receive revenues for the provision of network access, including interstate access and intrastate access. Network access revenues are earned from end-user customers and long-distance...

  • Page 54
    ... HSD, Internet and other services. Other services. We receive revenues from other services, including video services (including cable television and video-over-DSL), billing and collection, directory services, public (coin) telephone and the sale and maintenance of customer premise equipment. The...

  • Page 55
    .... Spinco was a wholly-owned subsidiary of Verizon that owned Verizon's local exchange and related business activities in Maine, New Hampshire and Vermont. Spinco was spun off from Verizon immediately prior to the Merger. Spinco served approximately 1,562,000 access line equivalents as of the date of...

  • Page 56
    ... in special access revenues driven by increased efforts to sell our excess network capacity to other carriers as well as the availability of such excess capacity resulting from the build-out of our Next Generation Network. Data and Internet services. Data and Internet services revenues increased...

  • Page 57
    ... on the change in fair market value of interest rate swap derivatives. During the year ended December 31, 2009 we recognized a net non-cash gain of $12.3 million related to our derivative financial instruments. In connection with the filing of the Chapter 11 Cases, the Swaps were terminated by the...

  • Page 58
    ... rates and minutes of use compared to 2008, reflecting the impact of access line loss and technology substitution as well as weakness of the economy. Data and Internet services. Data and Internet services revenues decreased $5.0 million to $109.9 million in 2009 compared to 2008. The Telecom Group...

  • Page 59
    ... instruments. In connection with the filing of the Chapter 11 Cases, the Swaps were terminated by the counterparties and have been recorded on the consolidated balance sheet at the termination values provided by the counterparties. Gain on early retirement of debt. Gain on early retirement of debt...

  • Page 60
    ... our Exit Credit Agreement would have the option to terminate their commitments to make further extensions of revolving credit thereunder. If we are unable to repay our obligations under our Exit Credit Agreement, the lenders could proceed against any assets that were pledged to secure such facility...

  • Page 61
    ...create liens, engage in mergers, consolidations and other fundamental changes, make investments or loans, engage in transactions with affiliates, pay dividends, make capital expenditures and repurchase capital stock. The Exit Credit Agreement also contains minimum interest coverage and maximum total...

  • Page 62
    ... by Verizon, and then FairPoint drew $470.0 million under the Term Loan and $5.5 million under the Delayed Draw Term Loan concurrently with the closing of the Merger. Subsequent to the Merger, we borrowed the remaining $194.5 million available under the Delayed Draw Term Loan. These funds were used...

  • Page 63
    ... the Pre-Petition Credit Facility relating to the Chapter 11 Cases described herein, the commitments under the Revolving Credit Facility were automatically terminated. Accordingly, as of December 31, 2010, no funds remained available under the Revolving Credit Facility. The Term Loan B Facility and...

  • Page 64
    ... Maine, New Hampshire and Vermont, and approved by the Bankruptcy Court as part of the Plan. For a description of these capital expenditure requirements, see "Item 1. - Business - Regulatory Environment - State Regulation - Regulatory Conditions to the Merger, as Modified in Connection with the Plan...

  • Page 65
    ... Agreement and related agreements had required us to make payments totaling approximately $45.4 million to Verizon in the first quarter of 2009, including a one-time fee of $34.0 million due at Cutover, with the balance related to the purchase of certain Internet access hardware. The settlement set...

  • Page 66
    ..., plant and equipment; Valuation of long-lived assets, including goodwill; Accounting for software development costs; and Purchase accounting. Revenue Recognition. We recognize service revenues based upon usage of our local exchange network and facilities and contract fees. Fixed fees for voice...

  • Page 67
    ...other post-retirement benefit plan assumptions, including the discount rate used, the long-term rate-of-return on plan assets, and medical cost trend rates are periodically updated and impact the amount of benefit plan income, expense, assets and obligations. Accounting for Income Taxes. Our current...

  • Page 68
    ... 2010, we made certain assumptions including an estimated royalty rate, a long-term growth rate, an effective tax rate and a discount rate, and applied these assumptions to projected future cash flows of our consolidated FairPoint business, exclusive of cash flows associated with wholesale revenues...

  • Page 69
    ... a payment if the variable rate was above the fixed rate. Pursuant to our Pre-Petition Credit Facility, we were required to reduce the risk of interest rate volatility with respect to at least 50% of our Term Loan borrowings. In connection with the Chapter 11 Cases, all of the Swaps were terminated...

  • Page 70
    ... Page FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES: Report of Management on Internal Control Over Financial Reporting Report of Independent Registered Public Accounting Firm CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008: Consolidated Balance Sheets...

  • Page 71
    ... our billing system and our general ledger in a timely manner. In addition, project accounting controls were not adequate to ensure charges to capital projects were appropriate or that projects were closed in a timely manner. Also, procedures for the review of our income tax provision and supporting...

  • Page 72
    Table of Contents Report of Independent Registered Publig Tggounting Firm The Board of Directors and Stockholders of FairPoint Communications, Inc. We have audited the accompanying consolidated balance sheets of FairPoint Communications, Inc. (Debtors-in-Possession) (the "Company") as of December...

  • Page 73
    ...obligations Accounts payable Accrued interest payable Other accrued liabilities Total gurrent liabilities Capital lease obligations Accrued pension obligation Employee benefit obligations Deferred income taxes Unamortized investment tax credits Other long-term liabilities Total long-term liabilities...

  • Page 74
    ... Statements of Operations Years ended Degember 31, 2010, 2009 and 2008 (in thousands, exgept per share data) 2010 2009 2008 Revenues Operating expenses: Cost of services and sales, excluding depreciation and amortization Selling, general and administrative expense, excluding depreciation and...

  • Page 75
    ... to Verizon Employee benefit adjustment to comprehensive income Balance at December 31, 2009 Net loss Restricted stock cancelled for withholding tax Forfeiture of restricted shares Stock based compensation expense Employee benefit adjustment to comprehensive income Balance at December 31, 2010 53...

  • Page 76
    ... Years ended Degember 31, 2010, 2009 and 2008 (in thousands) 2010 2009 2008 Net loss Other comprehensive (loss) income, net of taxes: Defined benefit pension and post-retirement plans (net of $4.6 million tax expense, $5.4 million tax expense and $56.4 million tax benefit, respectively) Total other...

  • Page 77
    ...Acquired cash balance, net Net capital additions Net proceeds from sales of investments and other assets Net gash used in investing agtivities Cash flows from financing activities: Loan origination costs Proceeds from issuance of long-term debt Repayments of long-term debt Contributions from Verizon...

  • Page 78
    ... urban communities, primarily in northern New England, offering an array of services, including high speed data ("HSD"), Internet access, television and broadband product offerings, to both residential and business customers. FairPoint operates in 18 states with approximately 1.4 million access line...

  • Page 79
    ...periods prior to the Merger include the wireline-related businesses, Internet access, long-distance and customer premises equipment services provided by the Verizon Northern New England business to customers in the states of Maine, New Hampshire and Vermont. All significant intercompany transactions...

  • Page 80
    ... revenues were determined using applicable billing system data and average access lines in service; cost of services and sales, selling, general and administrative expenses and interest expense were allocated based on the percentage of the Verizon Northern New England business revenues related to...

  • Page 81
    ... of the following (amounts in thousands): 2010 2009 Senior secured credit facility Senior Notes Interest rate swap Accrued interest Accounts payable Other accrued liabilities Capital lease obligations Other long-term liabilities Employee benefit obligations Liabilities subject to compromise 80...

  • Page 82
    ... or retirement benefits; and (3) pre-Petition Date liabilities that have been approved for payment by the Bankruptcy Court and that the Company expects to pay (in advance of a plan of reorganization) in the ordinary course of business, including certain employee-related items such as salaries and...

  • Page 83
    ... networks and facilities or under revenuesharing arrangements with other communications carriers. Revenues are primarily derived from: access, pooling, voice services, Universal Service Fund receipts, Internet and broadband services, and other miscellaneous services. Local access charges are billed...

  • Page 84
    ... enhancement plan in Vermont totaling $25.0 million, and (iii) pay for network improvements in New Hampshire totaling $49.2 million (the "New Hampshire Funds"). During the three months ended June 30, 2009, the Company requested that the New Hampshire Funds be made available for general working...

  • Page 85
    ... contributions to the plans by the Company in order to meet funding requirements under ERISA. (h) Materials and Supplies Materials and supplies include new and reusable supplies and network equipment, which are stated principally at average original cost, except that specific costs are used in the...

  • Page 86
    ... 31, 2009 that a possible impairment of long-lived assets was indicated by the filing of the Chapter 11 Cases as well as a significant decline in the fair value of the Old Common Stock. In addition, as of December 31, 2010, as a result of changes to the Company's financial projections related to the...

  • Page 87
    ... ASC. (l) DeIt Issue Costs On March 31, 2008, immediately prior to the Merger, Legacy FairPoint and Spinco entered into the Credit Agreement, dated as of March 31, 2008 ("PrePetition Credit Facility"), consisting of the Revolving Credit Facility, the Term Loan (defined as a senior secured term loan...

  • Page 88
    ...31, and October 1, 2010, the Company made certain assumptions including an estimated royalty rate, a long-term growth rate, an effective tax rate and a discount rate, and applied these assumptions to projected future cash flows of the consolidated FairPoint Communications business, exclusive of cash...

  • Page 89
    ... the Chapter 11 reorganization, management believes it can support the realizability of its deferred tax asset only by the scheduled reversal of its deferred tax liabilities and can no longer rely upon the projection of future taxable income. (p) Stock-Iased Compensation Plans The Company accounts...

  • Page 90
    ..., data and voice communication services to residential and business customers as one business segment as defined in Segment Reporting Topic of the ASC. The Company consists of retail and wholesale telecommunications services, including voice, high speed Internet, and other services in 18 states. The...

  • Page 91
    ... the transfer of specified assets and liabilities of the local exchange business of Verizon New England in Maine, New Hampshire and Vermont and the customers of the Verizon Group's related voice and Internet service provider businesses in those states to Spinco and the entities (including an entity...

  • Page 92
    ... of the total net purchase price of the Merger is shown in the table below (in thousands): Cash Current assets Property, plant, and equipment Investments Excess cost over fair value of net assets acquired Intangible assets Other assets Current liabilities Long-term debt Other liabilities Total...

  • Page 93
    ... debt obligations. The risk management control systems involve the use of analytical techniques, including cash flow sensitivity analysis, to estimate the expected impact of changes in interest rates on the Company's future cash flows. The Company uses variable-rate debt to finance its operations...

  • Page 94
    ... into interest rate swap agreements to manage fluctuations in cash flows resulting from interest rate risk. The Swaps effectively changed the variable rate on the debt obligations to a fixed rate. Under the terms of the Swaps, the Company was required to make a payment if the variable rate was below...

  • Page 95
    ...'s long-term debt at December 31, 2010 and 2009 was approximately $1,539.7 million and $1,619.9 million respectively, based on market prices of the Company's debt securities at the respective balance sheet dates. The Company failed to make the September 30, 2009 principal and interest payments...

  • Page 96
    .... The Company had continued to accrue interest expense on the Pre-Petition Credit Facility, as such interest is considered an allowed claim per the Plan. All pre-petition debt was terminated on the Effective Date. Prior to March 31, 2008, debt held by the Verizon Northern New England business was...

  • Page 97
    ...portion of the Revolving Credit Facility commitments, payable quarterly in arrears on the last business day of each calendar quarter and on the date upon which the commitment is terminated. The Pre-Petition Credit Facility also provided for payment to the lenders of a commitment fee from the closing...

  • Page 98
    ...Credit Facility was terminated on the Effective Date. Old Notes On March 31, 2008, Spinco issued $551.0 million aggregate principal amount of the Old Notes. The Old Notes were set to mature on April 1, 2018 and were not redeemable at the Company's option prior to April 1, 2013. Interest was payable...

  • Page 99
    .... The New Indenture also restricts the Company's ability to pay dividends on or repurchase its common stock under certain circumstances. As a result of the Chapter 11 Cases, the Company did not make any principal or interest payments on its pre-petition debt during the year ended December 31, 2010...

  • Page 100
    ... to the terms and conditions of the DIP Credit Agreement and related orders of the Bankruptcy Court. As of December 31, 2010, the Company had not borrowed any amounts under the DIP Credit Agreement and letters of credit totaling $18.7 million had been issued under the DIP Credit Agreement. The DIP...

  • Page 101
    ...by state regulatory authorities to the extent that any DIP Grantor is prohibited from granting a lien and security interest therein pursuant to applicable law. As of December 31, 2010, the Company had not borrowed any amounts under the DIP Credit Agreement, however letters of credit had been issued...

  • Page 102
    ... assets and employee benefit obligations in the balance sheet prior to the Merger. After June 30, 2006, Verizon management employees, including management employees of the Verizon Northern New England business, ceased to earn pension benefits or earn service towards the company retiree medical...

  • Page 103
    ... benefit obligation and funded status of the plans are as follows for the years ended December 31, 2010 and 2009: Qualified Pension Post-retirement Healthgare Year ended Degember 31, (In thousands) Year ended Degember 31, 2010 2009 2010 2009 Fair value of plan assets: Fair value of plan...

  • Page 104
    ... million on September 1, 2010, at which time the Company's net pension obligation was decreased by this amount. The plans' portfolio strategy emphasizes a long-term equity orientation, significant global diversification and financial and operating risk controls. The plans' diversification seeks to...

  • Page 105
    ... that are measured at fair value using significant unobservable (Level 3) inputs as of December 31, 2010 is as follows: Funds Regeivable from Verizon (In thousands) Hedge Funds Other Tssets Total Balance at December 31, 2008 Actual gain (loss) on plan assets Purchases and sales Transfers in and...

  • Page 106
    ...periodic benefit cost related to the Company's post-retirement healthcare plans was $41.2 million for the year ended December 31, 2008, of which $22.5 million related to net periodic benefit cost for the three months ended March 31, 2008. Other pre-tax changes in plan assets and benefit obligations...

  • Page 107
    ... used in determining net periodic cost are as follows: Year ended Degember 31, 2010 2009 Nine months ended Degember 31, 2008 Qualified Pension Discount rate Expected return on plan assets Rate of compensation increase Post-retirement Healthcare Discount rate Rate of compensation increase...

  • Page 108
    ...The expected long-term rate-of-return on qualified pension plan assets is based on target allocations of 50% equity and 50% fixed income securities for the management plan and 70% equity and 30% fixed income securities for the associate plan. The asset allocation at December 31, 2010 for the Company...

  • Page 109
    ... the 401 (k) Plan years ended December 31, 2010 and 2009, the Company matched 100% of each employee's contribution up to 5% of compensation. For the 401(k) Plan year ended December 31, 2008, the Company generally matched in the Legacy FairPoint 401(k) plans 100% of each employee's contribution up to...

  • Page 110
    ... by rule, to rely on future earnings to offset our NOLs during the Chapter 11 Cases. A reconciliation of the Company's statutory tax rate to its effective tax rate is presented below (in percentages): 2010 2009 2008 Statutory Federal income tax (benefit) rate State income tax (expense) benefit, net...

  • Page 111
    ... below (in thousands): 2010 2009 Deferred tax assets: Federal and state tax loss carryforwards Employee benefits Allowance for doubtful accounts Investment tax credits Alternative minimum tax and other state credits Basis in interest rate swaps Bond issuance costs Service quality rebate reserve...

  • Page 112
    ... (after-tax) for the payment of interest and penalties accrued in the consolidated balance sheet at December 31, 2010 and 2009, respectively. The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and with various state and local governments. The Company is...

  • Page 113
    ... federal income tax return and combined state income tax returns in the states of Maine, New Hampshire and Vermont. The operations of the Verizon Companies, including the Verizon Northern New England business, for periods prior to the Merger were included in a Tax Sharing Agreement with Verizon...

  • Page 114
    ... pursuant to which Spinco merged with and into FairPoint, with FairPoint continuing as the surviving corporation for legal purposes. In order to effect the Merger, the Company issued 53,760,623 shares of common stock, par value $.01 per share, to Verizon stockholders for their interest in Spinco. At...

  • Page 115
    ... the FairPoint Communications, Inc. (formerly MJD Communications, Inc.) Stock Incentive Plan (the "1998 Plan"). The 1998 Plan provided for grants of up to 1,317,425 nonqualified stock options to executives and members of management, at the discretion of the compensation committee of the board of...

  • Page 116
    ... Employee Stock Incentive Plan provided for grants to members of management of up to 1,898,521 options to purchase common stock, at the discretion of the compensation committee. During 2002, the Company amended the 2000 Employee Stock Incentive Plan to limit the number of shares available for grant...

  • Page 117
    ...stock options to members of the Company's board of directors and certain key members of the Company's management. Shares granted to employees under the 2005 Stock Incentive Plan vest over periods ranging from three to four years and certain of these shares pay current dividends. At December 31, 2010...

  • Page 118
    ..., stock units and stock options to members of the Company's board of directors and certain key members of the Company's management. Shares granted to employees under the 2008 Long Term Incentive Plan vest over periods ranging from two to three years and certain of these shares pay current dividends...

  • Page 119
    ... nondividend paying shares, the compensation expense is reduced by the present value of the dividends which were not paid on those shares prior to their vesting. The following table presents information regarding non-vested stock granted to employees under the 2008 Long Term Incentive Plan: Weighted...

  • Page 120
    ... New England Business Stock-Iased Compensations Plans Prior to the Merger, the Verizon Northern New England business participated in the Verizon Communications Long Term Incentive Plan (the Verizon Plan). The Verizon Plan permitted the granting of nonqualified stock options, incentive stock options...

  • Page 121
    ... with Verizon for the provision of local telephone services, network access, billing and collection services, interconnection agreements and the rental of facilities and equipment. These services were reimbursed by Verizon based on tariffed rates, market prices, negotiated contract terms that...

  • Page 122
    ... transactions was not readily available. (17) Quarterly Finangial Information (Unaudited) Overview of Restatement In this Annual Report on Form 10-K for our fiscal year ended December 31, 2010 (this "Annual Report"), FairPoint Communications, Inc. (the "Company") is restating its unaudited...

  • Page 123
    ... in revenue associated with certain customer billing, special project billings and intercompany/official lines. The restatement only affects the first three quarterly periods of 2010. The Company is currently reviewing the design of its controls and procedures in order to remediate the material...

  • Page 124
    Table of Contents First quarter Restated Segond Third quarter quarter (in thousands, exgept per share data) Restated Restated Fourth quarter 2010: Revenue Net loss Loss per share $ 270,801 $ (86,330) $ $ (0.97) (0.97) First $271,563 ... of revenue (see note 3(a) for further information). 123

  • Page 125
    ... certain employee and general computer expenses between cost of services and selling, general and administrative...line items in the interim consolidated income statements are summarized as follows: Three months ended Margh 31, 2010 Ts regasted Tdjustments Restated (in thousands, exgept per share data...

  • Page 126
    ... thousands, exgept per share data) Revenues Operating expenses: $ 273,992 114,480 98,454 70,559 283,493 (9,501) $ (2,429) $ 271,563 133,211 97,062 71,472 301,745 (30,182) Cost of services and sales, excluding depreciation and amortization Selling, general and administrative expense, excluding...

  • Page 127
    ...31, 2010 and 2009 represents the termination value of the swaps as determined by the respective counterparties following the event of default described herein. See note 8 for more information. The Company does not measure any financial assets or liabilities at fair value as of December 31, 2010 and...

  • Page 128
    ... services and resulting loss of access line equivalents which could have a material adverse effect on the Company's business, financial condition, results of operations, liquidity and the market price of the Company's Common Stock. In addition, if state regulators in Maine, New Hampshire or Vermont...

  • Page 129
    ... 2010, the Company began to issue SQI rebates related to the Maine 2008 and 2009 SQI penalties to customers over a twelve month period. (d) Performance Assurance Plan Credits As part of the Merger Orders, the Company adopted certain PAPs in the states of Maine, New Hampshire and Vermont. Failure...

  • Page 130
    ... the initial five-year term of the amended agreement, which term ends on April 1, 2013. As of December 31, 2010, the Company has met this purchase commitment. (21) Reorganization and Fresh Start Tggounting Pro Forma Tdjustments (Unaudited) Upon confirmation of the Plan by the Bankruptcy Court...

  • Page 131
    ... Accounts payable Claims payable and estimated claims accrual Accrued interest payable Other accrued liabilities Total gurrent liabilities Capital lease obligations Accrued pension obligation Employee benefit obligations Deferred income taxes Unamortized investment tax credits Other long-term...

  • Page 132

  • Page 133
    ... (as defined in Rules 13a-15(f) and 15d15(f) of the Exchange Act). Internal control over financial reporting is a process designed by, or under the supervision of, our principal executive officer and principal financial officer, and effected by our board of directors, management and other personnel...

  • Page 134
    ...processes for the Northern New England operations, including information technology, order provisioning, customer billing, payment processing, credit and collections, inventory management, accounts payable, payroll, human resource administration, tax and general ledger accounting. With the exception...

  • Page 135
    Table of Contents ITEM 9B. OTHER INFORMTTION Not applicable. 133

  • Page 136
    ... Company other than being a director or stockholder of FairPoint Communications. Diregtors The following sets forth selected biographical information for our directors. Edward D. Horowitz - Chairman of the Board of Directors - Mr. Horowitz currently serves as the chairman of EdsLink LLC, a New York...

  • Page 137
    ...University of North Carolina at Chapel Hill. He is a certified public accountant in New Hampshire and North Carolina. Committees of the Board of Diregtors Our board of directors has four separately designated standing committees: an audit committee, a compensation committee, a corporate governance...

  • Page 138
    ... committee reviews with our management and independent registered public accounting firm the scope and results of the annual audit, our accounting firm's independence and our accounting policies. The audit committee is required to report regularly to our board of directors to discuss any issues that...

  • Page 139
    ...a group that owns, more than ten percent of a registered class of our equity securities, to file reports of ownership and changes in ownership with the SEC and if listed on a national exchange, such national exchange. Officers, directors and beneficial owners of more than 10% of our common stock are...

  • Page 140
    ...: Secretary, Stockholder Communications, FairPoint Communications, Inc., 521 East Morehead Street, Suite 500, Charlotte, North Carolina 28202. The sender should indicate in the address whether it is intended for the entire board of directors, the non-management directors as a group or an individual...

  • Page 141
    ... HR Consulting has been retained by the Company to provide actuarial and employee benefit consulting services for the Company's retirement and group medical plans. The aggregate fees paid to Mercer in 2010 were $125,000 for executive compensation consulting service and $261,000 for actuarial and...

  • Page 142
    ... the Chief Executive Officer and the Chief Executive Officer approves the goals of the other NEOs and the compensation committee reviews them. Long Term Incentives/Equity Awards We adopted the 2010 Long Term Incentive Plan effective as of the Effective Date that allows for a variety of stock-based...

  • Page 143
    ...plans, and thereby receive, for example, group health insurance, group term life insurance and short-term and long-term disability insurance. The costs of these benefits constitute only a small percentage of each executive officer's total compensation. Post-employment Severance and Change-in-Control...

  • Page 144
    ... 31, 2010; (ii) the Company achieving an average monthly target of 77.5% for customer service calls that are answered within 20 seconds (the "Call Center Service Target") at the Company's consumer, business, collections and repair call centers in Maine, New Hampshire and Vermont (collectively...

  • Page 145
    ... a cash payment equal to the cost of COBRA medical insurance, group life insurance and long-term disability insurance coverage for an additional period of two years. The employment agreement sets forth the terms and conditions of Mr. Sunu's employment as Chief Executive Officer of the Company for...

  • Page 146
    ...,224 359,986 564,911 909,912 335,198 521,567 852,375 Peter G. Nixon President Shirley J. Linn Executive Vice President, General Counsel and Secretary 317,308 278,291 Lisa R. Hood (4) Senior Vice President and Controller 2010 2009 2008 2010 310,308 243,269 223,435 250,178 16,393 - 54,047 11...

  • Page 147
    ... common stock, options and contractual or other rights to acquire any equity interests, were cancelled and extinguished on the Effective Date. See "Item 1. Business-Bankruptcy-The Plan-New Long Term Incentive Plan and Success Bonus Plan." Outstanding Equity Twards at Degember 31, 2010 The following...

  • Page 148
    ... 533,334 - - 0.95 7/1/2019 - - - - Tjay Sabherwal Executive Vice - - - - - - - - - - President, Chief Financial Officer Tlfred C. Giammarino Executive Vice - - - - - - - - - - President, Chief Financial Officer Peter G. Nixon President 3/12/2002 12/12/2003 3/3/2009...

  • Page 149
    ... (2) These awards were granted under the FairPoint Communications, Inc. 2008 Long Term Incentive Plan for the performance period January 1, 2009 through December 31, 2011. Payout of awards is based 50% on the Company's TSR, as defined in the award agreement, versus its peer group in the Dow Jones...

  • Page 150
    ... Chairman of the Board of Directors and Chief Executive Officer - - - - - Tjay Sabherwal Executive Vice President, Chief Financial Officer - - - - - Tlfred C. Giammarino Executive Vice President, Chief Financial Officer - - - - - Peter G. Nixon President - - 8,923 - 72,975...

  • Page 151
    ...Mr. Sabherwal, on August 24, 2010. Each severance agreement provides, subject to certain other conditions, that we will pay severance and provide benefits to the subject executive (i) in the event of such employee's termination without cause or following a change in control, or (ii) within two years...

  • Page 152
    Table of Contents The following table shows cash compensation that would have been payable under the agreements with the NEOs (other than Messrs. Hauser and Giammarino, who resigned during 2010) if their employment had terminated on December 31, 2010. Tggeleration and Continuation of Equity Twards ...

  • Page 153
    ... Prior to March 31, 2010, this award was paid in the form of restricted stock or restricted units, at the recipient's option, which are issued under FairPoint's 2005 Stock Incentive Plan or 2008 Long Term Incentive Plan. These awards vested in four quarterly installments from the grant date, and the...

  • Page 154
    ... Resources Vice President and Controller Vice President and Treasurer Vice President, Integrated Marketing Communications Vice President, Product and Marketing Management The following sets forth selected biographical information for our executive officers who are not directors. Peter G. Nixon. In...

  • Page 155
    ... she specialized in general business matters, particularly mergers and acquisitions. Kathleen McLean. In March 2010, Ms. McLean was appointed as our Executive Vice President and Chief Information Officer. Prior to joining us, Ms. McLean served as Senior Vice President, Customer Service in Verizon...

  • Page 156
    ...Item 1. Business - Emergence from Chapter 11 Proceedings - Long Term Incentive Plan and Success Bonus Plan." Segurity Ownership of Certain Benefigial Owners Section 16(a) of the Securities Exchange Act of 1934 requires our officers and directors, and persons who own, or are part of a group that owns...

  • Page 157
    ... H. Sunu(2) Ajay Sabherwal(3) Peter G. Nixon(4) Shirley J. Linn(5) Lisa R. Hood(6) Todd W. Arden Dennis J. Austin(7) Edward D. Horowitz(8) Michael J. Mahoney(9) Michael K. Robinson(10) David L. Treadwell(11) Wayne Wilson(12) All directors and executive officers of FairPoint as a group(19 persons)(13...

  • Page 158
    ...098 shares of restricted stock. Other than the information relating to its percentage ownership of our common stock, based solely on information contained in a Schedule 13D filed with the SEC on February 3, 2011, by Angelo, Gordon & Co., L.P. (address: 245 Park Avenue, 26th Floor, New York, NY 10167...

  • Page 159
    ... more information about director independence, see "Item 10. Directors, Executive Officers and Corporate Governance." ITEM 14. PRINCIPTL TCCOUNTING FEES TND SERVICES The following table sets forth the aggregate fees paid or payable to Ernst & Young LLP, our independent registered public accounting...

  • Page 160
    ... delegating to management its responsibilities to pre-approve services to be performed by our independent registered public accounting firm. PTRT IV ITEM 15. EXHIBITS, FINTNCITL STTTEMENT SCHEDULES (a) Financial Statements The financial statements filed as part of this Annual Report are listed in...

  • Page 161
    ..., thereunto duly authorized. Fairpoint Communications, Inc. Date: March 31, 2011 By: /s/ Paul H. Sunu Name: Paul H. Sunu Title: Chief Executive Officer and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following...

  • Page 162
    ... Change in Control and Severance Agreement, dated as of September 3, 2008, by and between FairPoint and Ajay Sabherwal.†(6) 10.11 10.12 10.13 10.14 FairPoint Communications, Inc. 2010 Long Term Incentive Plan.†(1) 10.15 10.16 10.17 10.18 FairPoint Communications, Inc. 2010 Success Bonus Plan...

  • Page 163

  • Page 164
    ..., dated February 1, 2008.(14) Order of the Vermont Public Service Board, dated February 15, 2008.(15) Order of the New Hampshire Public Utilities Commission, dated February 25, 2008.(16) FairPoint Insider Trading Policy.* Filed herewith. Indicates a management contract or compensatory plan or...

  • Page 165

  • Page 166
    ... to the Current Report on Form 8-K of FairPoint filed on January 24, 2008. (12) Incorporated by reference to the Quarterly Report on Form 10-Q of FairPoint for the period ended June 30, 2009. (13) (14) Incorporated by reference to the Annual Report on Form 10-K of FairPoint for the year ended...

  • Page 167
    ... to guide all employees, officers and directors of the Company and its subsidiaries and controlled affiliates in meeting our goal to achieve the highest business and personal ethical standards as well as compliance with the laws and regulations that apply to our business. This Code covers a wide...

  • Page 168
    ... to the Company's business. 1. Compliance with Laws, Rules and Regulations Obeying the law, both in letter and in spirit, is the foundation on which this Company's ethical standards are built. All employees, officers and directors must respect and obey the laws of the cities, states and countries...

  • Page 169
    ... the Company and the other company. The Audit Committee of the Board (the " Audit Committee ") must approve in advance any such investment (other than purchases of $50,000 or less of stock of a publicly traded company). (d) Related Parties As a general rule, you should avoid conducting business or...

  • Page 170
    ... reports and other information it files with or submits to the SEC and in other public communications, such as press releases, earnings conference calls and industry conferences, made by the Company. In meeting such standards for disclosure, the Company's executive officers and directors shall...

  • Page 171
    ...The purpose of business entertainment and gifts in a commercial setting is to create good will and sound working relationships, not to gain unfair advantage with customers. No gift or entertainment should ever be offered, given, provided or accepted by any Company employee, officer, director, family...

  • Page 172
    ... in order to make responsible business decisions. Many employees, officers and directors regularly use business expense accounts, which must be documented and recorded accurately. If you are not sure whether a certain expense is legitimate, ask your supervisor or contact the Company's Controller...

  • Page 173
    ...CEO or CFO. 11. Protection and Proper Use of Company Assets All employees, officers and directors should endeavor to protect the Company's property, electronic communications systems, information resources, facilities and equipment and ensure their efficient use. Theft, carelessness, and waste have...

  • Page 174
    ... to help enforce this Code, and to that end, you should promptly report violations of this Code in accordance with the guidelines set forth in Section 16 of this Code. Employees, officers and directors are encouraged to report to supervisors, managers, his or her Human Resources business partners...

  • Page 175
    ... General Counsel at the following address: FairPoint Communications, Inc., 521 East Morehead Street, Suite 500, Charlotte, NC 28202, Attention: Shirley J. Linn. If) You may also report any violations of this Code on an anonymous and confidential basis through the EthicsPoint Hotline link set forth...

  • Page 176
    .... Compliance Required The matters covered in this Code are of the utmost importance to the Company, its shareholders and its business partners, and are essential to the Company's ability to conduct its business in accordance with its stated values. We expect all of our employees, officers, directors...

  • Page 177
    ...or the Legal Department, knowing that my questions or reports to these sources will be maintained in confidence to the extent feasible and appropriate. _____ Employee Name _____ Signature _____ Date Please sign and return this form to: Human Resources/Staffing FairPoint Communications, Inc. 770...

  • Page 178
    ... C-R Long Distance, Inc. Community Service Telephone Co. Sidney Telephone Company Utilities, Inc. China Telephone Company Maine Telephone Company Standish Telephone Company UI Long Distance, Inc. Berkshire Telephone Corporation Berkshire Cable Corp. Berkshire Cellular, Inc. Berkshire New York Access...

  • Page 179
    ... Paso Long Distance Company The El Paso Telephone Company FairPoint Communications Missouri, Inc. Unite Communications Systems, Inc. ExOp of Missouri, Inc. FairPoint Carrier Services, Inc. (f/k/a FairPoint Communications Solutions Corp., f/k/a FairPoint Communications Corp.) FairPoint Broadband, Inc...

  • Page 180
    ... to the 2010 Long Term Incentive Plan of our report dated March 31, 2011, with respect to the consolidated financial statements of FairPoint Communications, Inc. in this Annual Report (Form 10-K) for the year ended December 31, 2010. /s/ Ernst & Young LLP Charlotte, North Carolina March 31...

  • Page 181
    ..., summarize and report financial information; and (ii) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting. Date: March 31, 2011 /s/ Paul H. Sunu Paul H. Sunu Chief Executive Officer

  • Page 182
    ... and report financial information; and (ii) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting. Date: March 31, 2011 /s/ Ajay Sabherwal Ajay Sabherwal Chief Financial Officer

  • Page 183
    ... OF 2002 In connection with the Annual Report on Form 10-K of FairPoint Communications, Inc. (the "Company") for the year ended December 31, 2010 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Paul H. Sunu, Chief Executive Officer of the Company, certify...

  • Page 184
    ... SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report on Form 10-K of FairPoint Communications, Inc. (the "Company") for the year ended December 31, 2010 as filed with the Securities and Exchange Commission on the date hereof (the...

  • Page 185
    ..., officers and directors of FairPoint Communications, Inc. (the " Company ") with respect to transactions in the Company's securities. The Company has adopted this policy and the procedures set forth herein to help prevent insider trading and to assist the Company's employees, officers and directors...

  • Page 186
    ... Trading on Material Nonpublic Information . No employee, officer or director of the Company and its subsidiaries and no Family Member of any such person, shall engage in any transaction involving a purchase or sale of the Company's securities, including any offer to purchase or offer to sell (other...

  • Page 187
    ...not trade in the Company's securities until Thursday. 2. Tipping. No employee, officer or director of the Company shall disclose or pass on ("tip") Material Nonpublic Information to any other person, including a Family Member or friend, nor shall such person make recommendations or express opinions...

  • Page 188
    ... applicable federal securities laws, and to avoid even the appearance of trading on the basis of inside information, the Company requires that officers, directors and all employees in the accounting and finance departments of the Company designated by the Company's Insider Trading Compliance Officer...

  • Page 189
    ... or director must contact the Company's Insider Trading Compliance Officer not less than two (2) business days prior to commencing any trade in the Company's securities. This pre-clearance requirement applies to any transaction or transfer involving the Company's securities, including a stock plan...

  • Page 190
    ... a 401(k) plan account if the loan will result in a liquidation of some or all of a participant's Company stock fund balance and (d) an election to pre-pay a plan loan if the pre-payment will result in allocation of loan proceeds to the Company stock fund. 13. Employee Stock Purchase Plan . This...

  • Page 191
    ... that the employee, officer or director is trading based on inside information. Transactions in options also may focus the trader's attention on short-term performance at the expense of the Company's long-term objectives. Accordingly, transactions in puts, calls or other derivative securities, on an...

  • Page 192
    ... to the Insider Trading Compliance Officer at least two weeks prior to the proposed execution of documents evidencing the proposed pledge. Post-Termination Transactions This Policy continues to apply to transactions in Company securities even after an employee, officer or director has resigned or...

  • Page 193
    ... Compliance Officer at the following address: General Counsel FairPoint Communications, Inc. 521 E. Morehead Street, Suite 500 Charlotte, NC 28202 Telephone: (704) 227-3662 E-mail: [email protected] and [email protected] Certifications All employees, officers and directors of the Company...

  • Page 194
    ...read and understand the Company's Insider Trading Policy, dated January 24, 2011. I understand that the Insider Trading Compliance Officer is available to answer any questions I have regarding the Insider Trading Policy. 2. I will comply with the Insider Trading Policy for as long as I am subject to...

  • Page 195
    ...-CLEARANCE REQUEST FORM To: FairPoint Communications, Inc. (the "Company") Insider Trading Compliance Officer From: Re: Proposed transaction in the Company's Securities This is to advise you that the undersigned intends to execute a transaction in the Company's securities on 20__, and does hereby...