FairPoint Communications 2011 Annual Report Download - page 42

Table of Contents
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We did not repurchase any equity securities during the three months ended December 31, 2011.
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During the quarter ended December 31, 2011, pursuant to the Plan, the Company issued (i) 1,102 shares of Common Stock in the aggregate to holders
of allowed unsecured claims against FairPoint Communications (the “FairPoint Communications Unsecured Claims”) under the Plan, and (ii) warrants to
purchase an aggregate of 1,878 shares of Common Stock, subject to adjustment upon the occurrence of certain events described in the Warrant Agreement that
the Company entered into with the Bank of New York Mellon, as warrant agent, on the Effective Date, to holders of FairPoint Communications Unsecured
Claims under the Plan.
Based on the Confirmation Order, the Company relied on Section 1145(a)(1) of the Bankruptcy Code to issue the new securities described above.
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On March 31, 2008, we completed the acquisition of Spinco, pursuant to which Spinco merged with and into FairPoint, with FairPoint continuing as
the surviving corporation for legal purposes. Spinco was a wholly-owned subsidiary of Verizon and prior to the Merger the local exchange business of Verizon
New England Inc. in Maine, New Hampshire and Vermont and the customers of Verizon and its subsidiaries (other than Cellco Partnership) (collectively, the
“Verizon Group”) transferred certain specified assets and liabilities of the local exchange 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 FairPoint by Spinco under the purchase method of accounting because Verizon stockholders owned a majority of the shares of the
consolidated Company following the Merger and, therefore, Spinco is treated as the acquirer for accounting purposes. The following financial information
reflects the transaction as if Spinco had issued consideration to FairPoint’s shareholders. As a result, for the year ended December 31, 2008, financial
information derived from the statement of operations reflects the consolidated financial results of the Company by including the financial results of the Verizon
Northern New England business for the three months ended March 31, 2008, the financial results of Spinco for the nine months ended December 31, 2008
and the financial results of FairPoint for the nine months ended December 31, 2008. Financial information derived from the statement of operations for all
periods prior to April 1, 2008 reflects the actual results of the Verizon Northern New England business for such periods. Financial information derived from
the balance sheet reflects the consolidated assets and liabilities of FairPoint and Spinco at December 31, 2008.
As of the Effective Date, we adopted fresh start accounting in accordance with guidance under the applicable reorganization accounting rules, pursuant
to which our reorganization value, which represents the fair value of the entity before considering liabilities and approximates the amount a willing buyer
would pay for the assets of the entity immediately after the reorganization, was 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 amount remaining after
allocation of the reorganization value to the fair value of identified tangible and intangible assets was reflected as goodwill, which is subject to periodic
evaluation for impairment and was determined to be completely impaired at September 30, 2011. In addition to fresh start accounting, our post-emergence
consolidated financial statements reflect all effects of the transactions contemplated by the Plan. Therefore, our post-emergence statements of financial position
and statements of operations are not comparable in many respects to our consolidated statements of financial position and consolidated statements of
operations for periods prior to our adoption of fresh start accounting and prior to accounting for the effects of the reorganization, including the historical
financial statements contained herein.
On the Effective Date, in accordance with the Plan, all equity compensation plans in effect at the end of 2010 were terminated and all awards thereunder
were cancelled and extinguished. In addition, on the Effective Date, in accordance with the Plan, (i) certain of our employees and a consultant of ours received
Common Stock awards, consisting of restricted shares of Common Stock and/or
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