10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2010.
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to

Commission File Number 333-56365

FairPoint Communications, Inc.
(Exact Name of Registrant as Specified in Its Charter)

Delaware (State or Other Jurisdiction of Incorporation or Organization)	13-3725229 (I.R.S. Employer Identification No.)
521 East Morehead Street, Suite 500 Charlotte, North Carolina (Address of Principal Executive Offices)	28202 (Zip Code)

(704) 344-8150
(Registrant's telephone number, including area code)

         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 ý    No o

         Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer", "accelerated filer" and"smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer ý Non-accelerated filer o Smaller reporting company o

         Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No ý

         Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.** Yes o    No o

         As of October 29, 2010, there were 89,964,144 shares of the registrant's common stock, par value $0.01 per share, outstanding.

         Documents incorporated by reference: None

*

The registrant is not currently required to submit electronically and post Interactive Data Files in accordance with Rule 405 of Regulation S-T.

**

The registrant has filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code but has not yet distributed securities under a plan confirmed by a court.

INDEX

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of September 30, 2010 (Unaudited) and December 31, 2009	5
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2010 and 2009 (Unaudited)	6
	Condensed Consolidated Statement of Stockholders' Deficit for the nine months ended September 30, 2010 (Unaudited)	7
	Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2010 and 2009 (Unaudited)	8
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2010 and 2009 (Unaudited)	9
	Notes to Condensed Consolidated Financial Statements (Unaudited)	10
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	60
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	80
Item 4.	Controls and Procedures	81
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	83
Item 1A.	Risk Factors	84
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	86
Item 3.	Defaults Upon Senior Securities	86
Item 4.	(Removed and Reserved)	86
Item 5.	Other Information	86
Item 6.	Exhibits	86
	Signatures	87

2

PART I

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

        Some statements in this Quarterly Report are known as "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Forward-looking statements may relate to, among other things:

•

the potential adverse impact of the Chapter 11 Cases (as defined herein) on our business, including our ability to maintain contracts, trade credit and other customer and vendor relationships;

•

our ability to obtain the necessary approvals from state public utilities commissions ("PUCs") and the Federal Communications Commission (the "FCC") for our proposed Modified Second Amended Joint Plan of Reorganization (as further modified, supplemented or amended, the "Plan");

•

our ability to obtain Bankruptcy Court (as defined herein) approval of the Plan and to consummate the Plan;

•

future performance generally;

•

restrictions imposed by the agreements governing our indebtedness;

•

our ability to satisfy certain financial covenants included in the agreements governing our indebtedness;

•

anticipated business development activities and future capital expenditures;

•

our ability to retain qualified management and other personnel;

•

financing sources and availability, and future interest expense;

•

our ability to refinance our indebtedness on commercially reasonable terms, if at all;

•

the effects of regulation, including restrictions and obligations imposed by federal and state regulators as a condition to the approval of the Merger (as defined herein) and the Plan;

•

material adverse changes in economic and industry conditions and labor matters, including workforce levels and labor negotiations, and any resulting financial or operational impact, in the markets we serve;

•

availability of net operating loss ("NOL") carryforwards to offset anticipated tax liabilities;

•

our ability to meet obligations to our Company sponsored pension plans;

•

material technological developments and changes in the communications industry

•

availability of and/or disruptions in the supply of products, services and equipment to us;

•

use by customers of alternative technologies;

•

availability and levels of regulatory support payments;

•

the effects of competition on the markets we serve; and

•

changes in accounting assumptions that regulatory agencies, including the Securities and Exchange Commission (the "SEC"), may require or that result from changes in the accounting rules or their application, which could result in an impact on earnings.

3

        These forward-looking statements include, but are not limited to, statements about our plans, objectives, expectations and intentions and other statements contained in this Quarterly Report that are not historical facts. When used in this Quarterly Report, the words "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and similar expressions are generally intended to identify forward-looking statements. Because these forward-looking statements involve known and unknown risks and uncertainties, there are important factors that could cause actual results, events or developments to differ materially from those expressed or implied by these forward-looking statements, including our plans, objectives, expectations and intentions and other factors discussed in this Quarterly Report and in "Part I—Item 1A. Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2009, as supplemented by our Quarterly Reports on Form 10-Q for the quarterly periods ending March 31, 2010 and June 30, 2010, and "Part II—Item 1A. Risk Factors" contained in this Quarterly Report. You should not place undue reliance on such forward-looking statements, which are based on the information currently available to us and speak only as of the date on which this Quarterly Report was filed with the SEC. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. However, your attention is directed to any further disclosures made on related subjects in our subsequent reports filed with the SEC on Forms 10-K, 10-Q and 8-K and Schedule 14A.

Except as otherwise required by the context, references in this Quarterly Report to:

•

"FairPoint Communications" refers to FairPoint Communications, Inc., excluding its subsidiaries;

•

"FairPoint," the "Company," "we," "us" or "our" refer to the combined business of FairPoint Communications, Inc. and all of its subsidiaries after giving effect to the Merger on March 31, 2008 with Northern New England Spinco Inc. ("Spinco"), a subsidiary of Verizon Communications Inc. ("Verizon"), which transaction is referred to herein as the "Merger";

•

"Northern New England operations" refers to the local exchange business acquired from Verizon and all of its subsidiaries after giving effect to the Merger;

•

"Legacy FairPoint" refers to FairPoint Communications, Inc. exclusive of our acquired Northern New England operations; and

•

"Verizon Northern New England business" refers to 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 those states prior to the Merger.

4

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(Debtors-In-Possession)

Condensed Consolidated Balance Sheets

September 30, 2010 and December 31, 2009

(in thousands, except share data)

		September 30, 2010			December 31, 2009
		(unaudited)
Assets
Current assets:
	Cash	$	99,706		$	109,355
	Restricted cash		1,712			2,558
	Accounts receivable, net		138,730			154,095
	Materials and supplies		25,654			18,884
	Other		30,082			24,042
	Deferred income tax, net		53,855			75,713
Total current assets			349,739			384,647
Property, plant, and equipment, net			1,909,735			1,950,435
Intangibles assets, net			194,890			211,819
Prepaid pension asset			9,818			8,808
Debt issue costs, net			—			680
Restricted cash			2,393			1,478
Other assets			17,054			19,135
Goodwill			595,120			595,120
Total assets		$	3,078,749		$	3,172,122
Liabilities and Stockholders' Deficit
Liabilities not subject to compromise:
	Current portion of capital lease obligations	$	1,648		$	—
	Accounts payable		67,830			61,681
	Accrued interest payable		3			36
	Other accrued liabilities		65,814			44,004
Total current liabilities			135,295			105,721
	Capital lease obligations		4,422			—
	Accrued pension obligation		58,063			51,438
	Employee benefit obligations		283,022			261,420
	Deferred income taxes		82,599			115,742
	Unamortized investment tax credits		4,419			4,788
	Other long-term liabilities		13,499			15,100
Total long-term liabilities			446,024			448,488
Total liabilities not subject to compromise			581,319			554,209
Liabilities subject to compromise			2,888,714			2,836,340
Total liabilities			3,470,033			3,390,549
Stockholders' deficit:
	Common stock, $0.01 par value, 200,000,000 shares authorized, issued and outstanding 89,964,144 and 90,002,026 shares at September 30, 2010 and December 31, 2009, respectively		900			900
	Additional paid-in capital		725,583			725,312
	Retained deficit		(997,948	)		(819,715	)
	Accumulated other comprehensive loss		(119,819	)		(124,924	)
Total stockholders' deficit			(391,284	)		(218,427	)
Total liabilities and stockholders' deficit		$	3,078,749		$	3,172,122

See accompanying notes to condensed consolidated financial statements (unaudited).

5

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(Debtors-In-Possession)

Condensed Consolidated Statements of Operations

Three and nine months ended September 30, 2010 and 2009

(Unaudited)

(in thousands, except per share data)

		Three months ended September 30,						Nine months ended September 30,
		2010			2009			2010			2009
Revenues		$	258,510		$	268,194		$	806,870		$	848,900
Operating expenses:
	Cost of services and sales, excluding depreciation and amortization		115,914			127,184			360,829			398,209
	Selling, general and administrative expense, excluding depreciation and amortization		99,523			118,157			292,460			303,905
	Depreciation and amortization		73,693			68,013			214,597			204,740
Total operating expenses			289,130			313,354			867,886			906,854
Loss from operations			(30,620	)		(45,160	)		(61,016	)		(57,954	)
Other income (expense):
	Interest expense		(35,358	)		(56,874	)		(105,709	)		(165,162	)
	Gain (loss) on derivative instruments		—			(11,536	)		—			8,595
	Gain on early retirement of debt		—			—			—			12,357
	Other		2,207			214			(905	)		6,433
Total other expense			(33,151	)		(68,196	)		(106,614	)		(137,777	)
Loss before reorganization items and income taxes			(63,771	)		(113,356	)		(167,630	)		(195,731	)
Reorganization items			(9,635	)		—			(24,677	)		—
Loss before income taxes			(73,406	)		(113,356	)		(192,307	)		(195,731	)
Income tax benefit			7,330			38,154			14,074			70,061
Net loss		$	(66,076	)	$	(75,202	)	$	(178,233	)	$	(125,670	)
Weighted average shares outstanding:
	Basic		89,424			89,366			89,424			89,235
	Diluted		89,424			89,366			89,424			89,235
Earnings per share:
	Basic	$	(0.74	)$		(0.84	)	$	(1.99	)$		(1.41	)
	Diluted		(0.74	)		(0.84	)		(1.99	)		(1.41	)

See accompanying notes to condensed consolidated financial statements (unaudited).

6

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(Debtors-In-Possession)

Condensed Consolidated Statement of Stockholders' Deficit

Nine months ended September 30, 2010

(Unaudited)

(in thousands)

	Common Stock										Accumulated other comprehensive loss
						Additional paid-in capital		Retained deficit						Total stockholders' deficit
	Shares			Amount
Balance at December 31, 2009		90,002		$	900	$	725,312	$	(819,715	)	$	(124,924	)	$	(218,427	)
Net loss		—			—		—		(178,233	)		—			(178,233	)
Restricted stock cancelled for withholding tax		(13	)		—		—		—			—			—
Stock based compensation expense		—			—		271		—			—			271
Employee benefit adjustment to comprehensive income		—			—		—		—			5,105			5,105
Balance at September 30, 2010		89,989		$	900	$	725,583	$	(997,948	)	$	(119,819	)	$	(391,284	)

See accompanying notes to condensed consolidated financial statements (unaudited).

7

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(Debtors-In-Possession)

Condensed Consolidated Statements of Comprehensive Loss

Three and nine months ended September 30, 2010 and 2009

(Unaudited)

(in thousands, except per share data)

		Three months ended September 30,						Nine months ended September 30,
		2010			2009			2010			2009
Net loss		$	(66,076	)	$	(75,202	)	$	(178,233	)	$	(125,670	)
Other comprehensive income, net of taxes:
	Defined benefit pension and post-retirement plans (net of $1.4 million $1.3 million, $3.4 million and $3.4 million tax expense, respectively)		2,101			3,267			5,105			6,553
Total other comprehensive income			2,101			3,267			5,105			6,553
Comprehensive loss		$	(63,975	)	$	(71,935	)	$	(173,128	)	$	(119,117	)

See accompanying notes to condensed consolidated financial statements (unaudited).

8

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(Debtors-In-Possession)

Condensed Consolidated Statements of Cash Flows

Nine months ended September 30, 2010 and 2009

(Unaudited)

(in thousands)

						Nine months ended September 30,
						2010			2009
Cash flows from operating activities:
	Net loss					$	(178,233	)	$	(125,670	)
Adjustments to reconcile net income to net cash provided by
	operating activities:
		Deferred income taxes					(14,375	)		(72,175	)
		Provision for uncollectible revenue					27,524			34,682
		Depreciation and amortization					214,597			204,740
		Non-cash interest expense					—			31,137
		Post-retirement accruals					27,653			25,350
		Gain on derivative instruments					—			(8,595	)
		Gain on early retirement of debt, excluding cash fees					—			(12,477	)
		Non-cash reorganization costs					(21,110	)		—
		Other non cash items					14,077			11,616
		Changes in assets and liabilities arising from operations:
			Accounts receivable				(7,812	)		(4,010	)
			Prepaid and other assets				(13,350	)		3,243
			Accounts payable and accrued liabilities				12,468			(49,953	)
			Accrued interest payable				102,535			20,896
			Other assets and liabilities, net				(4,457	)		(4,687	)
				Total adjustments			337,750			179,767
					Net cash provided by operating activities		159,517			54,097
Cash flows from investing activities:
	Net capital additions						(172,352	)		(130,122	)
	Net proceeds from sales of investments and other assets						449			1,246
		Net cash used in investing activities					(171,903	)		(128,876	)
Cash flows from financing activities:
	Loan origination costs						(1,100	)		(2,153	)
	Proceeds from issuance of long-term debt						5,513			50,000
	Repayments of long-term debt						—			(20,848	)
	Restricted cash						(68	)		65,595
	Repayment of capital lease obligations						(1,608	)		(1,615	)
	Dividends paid to stockholders						—			(22,996	)
		Net cash provided by financing activities					2,737			67,983
		Net decrease in cash					(9,649	)		(6,796	)
Cash, beginning of period							109,355			70,325
Cash, end of period						$	99,706		$	63,529
Supplemental disclosure of cash flow information:
		Non-cash issuance of senior notes					—			18,911
		Capital additions included in accounts payable or liabilities subject to compromise at period-end					1,250			16,608
		Reorganization costs paid					31,152			—

See accompanying notes to condensed consolidated financial statements (unaudited).

9

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited)

(1) Organization and Basis of Financial Reporting; Chapter 11 Cases

Organization and Basis of Financial Reporting

        FairPoint is a leading provider of communications services in rural and small urban communities, primarily in northern New England, offering an array of services, including local and long distance voice, data, Internet and broadband product offerings, to both residential and business customers. FairPoint operates in 18 states with approximately 1.5 million access line equivalents (including voice access lines and high speed data lines, which include DSL, wireless broadband, cable modem and fiber-to-the-premises) as of September 30, 2010.

        On March 31, 2008, FairPoint 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 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 long distance 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 method of accounting because Verizon stockholders owned a majority of the shares of the consolidated Company following the Merger and, therefore, Spinco was treated as the acquirer for accounting purposes. The financial statements reflect the transaction as if Spinco had issued consideration to FairPoint stockholders.

        In order to effect the Merger, the Company issued 53,760,623 shares of the Company's common stock, with a par value of $0.01 per share, to Verizon stockholders for their interest in Spinco.

Financial Reporting in Reorganization

        On October 26, 2009 (the "Petition Date"), the Company and substantially all of its direct and indirect subsidiaries (collectively, the "Debtors") filed voluntary petitions for relief under Chapter 11 of title 11 of the United States Code (the "Bankruptcy Code" or "Chapter 11") in the United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court"). The cases are being jointly administered under the caption In re FairPoint Communications, Inc., Case No. 09-16335 (the "Chapter 11 Cases").

        The accompanying Condensed Consolidated Financial Statements have been prepared assuming that the Company will continue as a going concern and contemplate the realization of assets and the satisfaction of liabilities in the normal course of business. The Company's ability to continue as a going concern is contingent upon its ability to (i) comply with the Debtor-in-Possession Credit Agreement that FairPoint Communications and FairPoint Logistics, Inc. ("Logistics", and together with FairPoint Communications, the "DIP Borrowers") entered into with certain financial institutions (the "DIP Lenders") and Bank of America, N.A., as the administrative agent for the DIP Lenders (in such capacity, the "DIP Administrative Agent"), dated as of October 27, 2009 (as amended, the "DIP Credit Agreement"), and, after the actual date of emergence from Chapter 11 protection (the "Effective Date"), a $1,075,000,000 senior secured credit facility (the "Exit Facility") to be provided to FairPoint Communications and Logistics (collectively, the "Exit Borrowers") by Bank of America, N.A., Banc of America Securities LLC and a syndicate of lenders (collectively, the "Exit Facility Lenders"), (ii) obtain the necessary approvals of the Plan from the PUCs and the FCC and (iii) obtain Bankruptcy Court

10

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited) (Continued)

(1) Organization and Basis of Financial Reporting; Chapter 11 Cases (Continued)

approval of the Plan and to consummate the Plan, among other things. As a result of the Chapter 11 Cases, the realization of assets and the satisfaction of liabilities are subject to uncertainty. While operating as debtors-in-possession under Chapter 11, the Company may sell or otherwise dispose of or liquidate assets or settle liabilities, subject to the approval of the Bankruptcy Court or as otherwise permitted in the ordinary course of business (and subject to restrictions contained in the DIP Credit Agreement), in amounts other than those reflected in the accompanying Condensed Consolidated Financial Statements. Further, a plan of reorganization could materially change the amounts and classifications in the historical Condensed Consolidated Financial Statements. The accompanying Condensed Consolidated Financial Statements do not include any direct adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities or any other adjustments that might be necessary should the Company be unable to continue as a going concern or as a consequence of the Chapter 11 Cases.

        The Reorganizations Topic of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification (the "ASC"), which is applicable to companies in Chapter 11, generally does not change the manner in which financial statements are prepared. However, it does require that the financial statements for periods subsequent to the filing of the Chapter 11 Cases distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Amounts that can be directly associated with the reorganization and restructuring of the business must be reported separately as reorganization items in the statements of operations beginning in the quarter ending December 31, 2009. The balance sheet must distinguish pre-petition liabilities subject to compromise from both those pre-petition liabilities that are not subject to compromise and from post-petition liabilities. Liabilities that may be affected by a plan of reorganization must be reported at the amounts expected to be allowed, even if they may be settled for lesser amounts. In addition, cash provided by and used for reorganization items must be disclosed separately. The Company has applied the Reorganizations Topic of the ASC effective as of the Petition Date (as defined herein), and has segregated those items as outlined above for all reporting periods subsequent to such date.

Chapter 11 Cases

        On the Petition Date, the Debtors filed the Chapter 11 Cases.

        For more information regarding the factors that led to the filing of the Chapter 11 Cases, see "Part I.—Item 1. Business—Chapter 11 Cases—Background to the Filing of the Chapter 11 Cases" contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2009.

Recent Developments Related to the Chapter 11 Cases

Regulatory Approvals in Maine, New Hampshire and Vermont

        The Company is required as a condition precedent to the effectiveness of the Plan to obtain certain regulatory approvals, which include approvals from the PUCs in Maine and New Hampshire, and the Vermont Public Service Board (the "Vermont Board"). In connection with the Chapter 11 Cases, the Company has negotiated with representatives of the state regulatory authorities in each of

11

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited) (Continued)

(1) Organization and Basis of Financial Reporting; Chapter 11 Cases (Continued)

Maine, New Hampshire and Vermont with respect to (i) certain necessary approvals relating to the Chapter 11 Cases and the Plan (each a "Bankruptcy Approval," and collectively, the "Bankruptcy Approvals") and (ii) certain modifications to the requirements imposed by those state regulatory authorities as a condition to approval of the Merger (each a "Merger Order," and collectively, the "Merger Orders"). The Company has agreed to regulatory settlements with the representatives for each of Maine, New Hampshire and Vermont regarding modification of each state's Merger Order (each a "Regulatory Settlement," and collectively, the "Regulatory Settlements"). These Regulatory Settlements and the Bankruptcy Approvals require the final approval of the applicable regulatory authorities in Maine, New Hampshire and Vermont.

        On June 24, 2010, the Maine Public Utilities Commission (the "MPUC") provided its Bankruptcy Approval and approved the Regulatory Settlement for Maine.

        On June 28, 2010, the Vermont Board failed to provide its Bankruptcy Approval and rejected the Regulatory Settlement for Vermont. Specifically, the Vermont Board did not believe that the Company had demonstrated the financial capability to meet its obligations under Vermont law and questioned certain assumptions made by the Company with respect to its financial capability after the effectiveness of the Plan. On October 20, 2010, the Company provided supplemental information to the Vermont Board, which information included a financial forecast. The Company believes that it ultimately should be able to obtain the approval of the Vermont Board. However, if the Company is unable to obtain the approval of the Vermont Board, the Company believes that it could have the Plan or a modified plan of reorganization that addresses the issues associated with Vermont and modifies the Vermont Merger Order in accordance with the Regulatory Settlement for Vermont (a "New Plan") confirmed by the Bankruptcy Court without the approval of the Vermont Board. If the Vermont Board approves the Plan or the Company is able to have the Plan or a New Plan confirmed by the Bankruptcy Court, the Company believes that the initial rejection of the Plan by the Vermont Board would not have a material adverse effect on the Company's financial condition and results of operations. However, if the Vermont Board does not ultimately provide its Bankruptcy Approval and approval of the Regulatory Settlement for Vermont and the Company fails to have the Plan or a New Plan confirmed by the Bankruptcy Court without the approval of the Vermont Board, such failure could have a material adverse effect on the Company's financial condition and results of operations, and it is unclear what, if anything, holders of claims against us, including holders of the Notes, would ultimately receive with respect to their claims. In addition, if the Plan or a New Plan is confirmed by the Bankruptcy Court without the approval of the Vermont Board but the Vermont Merger Order is not modified by the Bankruptcy Court in accordance with the Regulatory Settlement for Vermont, the loss of certain relief afforded by the Regulatory Settlement for Vermont, including the opportunity for relief from certain past service quality penalties and relief from certain future capital expenditure obligations, could have a material adverse effect on the Company's financial condition and results of operations. Furthermore, the MPUC and the New Hampshire Public Utilities Commission (the "NHPUC"), each of which has approved its applicable Regulatory Settlement, may object if the Vermont Board does not provide the relief afforded by the Regulatory Settlement for Vermont.

        On July 7, 2010, the NHPUC provided its Bankruptcy Approval and approved the Regulatory Settlement for New Hampshire.

12

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited) (Continued)

(1) Organization and Basis of Financial Reporting; Chapter 11 Cases (Continued)

Letter Agreement

        On July 8, 2010, the Plan Support Agreement (the "Plan Support Agreement"), which the Company had entered into on October 25, 2009 with certain secured lenders (the "Consenting Lenders") under the Company's Pre-petition Credit Facility (as defined herein), expired by its terms and was not renewed or extended. The Plan Support Agreement had obligated the Consenting Lenders to support the Plan, subject to the terms and conditions of the Plan Support Agreement.

        On October 13, 2010, the Company and certain secured lenders holding approximately 48% of the outstanding debt under the Pre-petition Credit Facility (the "New Consenting Lenders") entered into a letter agreement (the "Letter Agreement"). Pursuant to the Letter Agreement, the New Consenting Lenders have agreed, subject to the terms and conditions contained in the Letter Agreement, including the non-occurrence of a Termination Event (as defined below), to support the Plan and any supplemental documents, all as modified by and incorporating terms consistent with, the terms contained in the Term Sheet Regarding Modifications to FairPoint DIP and Exit Facilities and Plan of Reorganization Matters (the "Term Sheet"), which is attached as an exhibit to the Letter Agreement. The Letter Agreement (including the Term Sheet) is attached as Exhibit 10.1 to the Company's Current Report on Form 8-K the Company filed with the SEC on October 19, 2010 and is incorporated herein by reference.

        By their execution of the Letter Agreement, certain of the New Consenting Lenders have agreed to provide the Exit Revolving Loan (as defined herein) substantially on the terms and conditions set forth in the Exit Facility, subject to (i) the modifications and amendments to the Exit Facility set forth in the Term Sheet, (ii) other modifications and amendments to the Exit Facility reasonably agreed to by the Company and such lenders (each acting in good faith), and (iii) there not occurring any Termination Event which has not been waived by the New Consenting Lenders holding the number of claims specified in the Letter Agreement.

        Termination Events under the Letter Agreement include the following events: (i) the Company shall not have obtained on or prior to January 31, 2011 the approval or consent of each governmental authority, in each case free and clear of any requirement to satisfy additional conditions or modify the Plan as modified by the Term Sheet (the "Modified Plan"); (ii) at 5:00 P.M. Eastern Time on January 31, 2011 if the Modified Plan has not been fully confirmed by an order of the Bankruptcy Court on or before such date; (iii) at 5:00 P.M. Eastern Time on February 25, 2011 unless on or before such date (x) the confirmation order of the Bankruptcy Court shall not have been stayed, reversed, vacated or otherwise modified (unless otherwise consented to in writing by the steering committee of its pre-petition secured lenders (the "Steering Committee")), and there shall be no appeal or petition for rehearing or certiorari pending in respect of the confirmation order and the time to appeal and file any such petition shall have lapsed and (y) the Modified Plan shall have become effective; (iv) the Bankruptcy Court shall have entered an order pursuant to Section 1104 of the Bankruptcy Code appointing a trustee or an examiner with expanded powers to operate and manage the Company's business; (v) the Bankruptcy Court shall have entered an order dismissing any of the Chapter 11 Cases or an order pursuant to the Bankruptcy Code converting any of the Chapter 11 Cases to a case or cases under Chapter 7 of the Bankruptcy Code; (vi) the filing by the Company of any motion or pleading with the Bankruptcy Court that is not consistent with the Modified Plan, and such motion or

13

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited) (Continued)

(1) Organization and Basis of Financial Reporting; Chapter 11 Cases (Continued)

pleading is not withdrawn within five (5) business days of notice thereof by the DIP Administrative Agent or Steering Committee to the Company; (vii) the Company files, proposes or otherwise supports, or fails to actively oppose, any (x) plan of reorganization containing terms different than those contained herein or in the Modified Plan or (y) amendment or modification to the Modified Plan unless such amendment or modification is otherwise consented to in writing by the Steering Committee in its sole discretion; (viii) an extraordinary event occurs that is not contemplated in the Company's forecast presented to the Steering Committee, and such event has a material adverse effect on the business, assets, financial condition or prospects of the Company; (ix) the material breach by the Company of any of the undertakings, representations, warranties or covenants of the Company set forth in the DIP Credit Agreement and such breach continues unremedied by the Company for a period of five (5) business days after notice thereof has been given by the DIP Administrative Agent to the Company (after giving effect to applicable cure periods provided for in the DIP Credit Agreement); (x) the Bankruptcy Court grants relief that is inconsistent with the terms hereof or the Modified Plan and such inconsistent relief is not dismissed, vacated or modified to be consistent with the Modified Plan within five (5) business days after notice thereof has been given by the DIP Administrative Agent or the Steering Committee to the Company; (xi) Consolidated EBITDAR (as defined in the DIP Credit Agreement, as amended) of the Company for the period of eleven consecutive fiscal months ended on November 30, 2010 does not exceed $230,000,000 (after giving effect to any one-time adjustments consented to by the DIP Administrative Agent in its reasonable discretion); or (xii) there shall occur any of the following events after the date of the Letter Agreement: (x) the revocation or removal of the operating license of the Company or any of its subsidiaries by any public utility commission or similar regulator or the FCC in a state where the Company has material operations or conducts a material amount of business, (y) the entry of any order or the taking of any other action by any public utility commission or similar regulator or the FCC that materially impairs the ability of the Company to operate its business in the manner in which it operates on the date hereof, and in the case of each of clauses (x) and (y), such action by any public utility commission or similar regulator or the FCC is not stayed, reversed or vacated within fifteen (15) days after the occurrence thereof or (z) the Company or any relevant public utility commission or similar regulator takes any action inconsistent with any Regulatory Settlement.

Term Sheet

        The following summary of the Term Sheet is not a complete description of the Term Sheet and is qualified in its entirety by reference to the full text of the Term Sheet. None of the modifications to the Plan have been set forth in a supplement to the Plan filed with the Bankruptcy Court.

        Exit Facility.    Among other things, the Term Sheet contemplates the following modifications to the Exit Facility, the form of which was filed with the Bankruptcy Court on May 7, 2010:

•

first lien priority and payment waterfall priority for the $75,000,000 revolving loan facility (the "Exit Revolving Loan") and second lien priority for the Exit Term Loan (as defined below);

•

payment of a commitment fee equal to 2.0% of the aggregate Exit Revolving Loan commitment amount on the Effective Date;

14

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited) (Continued)

(1) Organization and Basis of Financial Reporting; Chapter 11 Cases (Continued)

•

on or prior to the third anniversary of the Effective Date, the Company may elect in its sole discretion, but subject to the absence of Events of Default under and as defined in the Exit Facility, to extend the maturity of the Exit Revolving Loan for one additional year upon payment of a continuation fee equal to 1.0% of the Exit Revolving Loan commitment amount (as it exists on the Effective Date) on the third anniversary of the Effective Date;

•

on or prior to the fourth anniversary of the Effective Date, the Company may elect in its sole discretion, but subject to the absence of Events of Default under and as defined in the Exit Facility, to extend the maturity of the Exit Revolving Loan for one additional year upon payment of a continuation fee equal to 1.0% of the Exit Revolving Loan commitment amount (as it exists on the Effective Date) on the fourth anniversary of the Effective Date;

•

modified Consolidated Total Leverage Ratio and Consolidated Interest Coverage Ratio (each as defined in the Exit Facility) maintenance tests and corresponding changes to the Consolidated Senior Leverage Ratio incurrence test;

•

modified definitions of Consolidated EBITDAR and Excess Cash Flow;

•

modified annual limits on the Company's Capital Expenditures (as defined in the Exit Facility);

•

a modified amortization schedule; and

•

a modified financial reporting requirement.

        Long Term Incentive Plan.    Among other things, the Term Sheet contemplates the following modifications to the Long Term Incentive Plan (as defined herein), the form of which was filed with the Bankruptcy Court on April 23, 2010:

•

a strike price floor for options to purchase shares of the Company's New Common Stock (as defined herein) awarded on the Effective Date to be calculated using a $1.5 billion enterprise value for the Company;

•

the award of 922,111 shares of restricted stock to management-level employees of the Company on the Effective Date, including 133,588 shares of restricted stock to be issued to David L. Hauser, the Company's former Chairman and Chief Executive Officer (which amounts do not give effect to the 50% reduction in equity interests discussed below under "Chapter 11 Cases—Recent Developments Related to the Chapter 11 Cases—Term Sheet—Other");

•

the availability of 783,651 shares of restricted stock to the New Board (as defined herein) for grants of future equity award to the Company's management (of which, up to 30,986 shares may, in the discretion of the Company's Chief Executive Officer, be accelerated and distributed on the Effective Date to new senior executives hired from outside the Company), provided that such total number of available shares will be reduced by the total number of the 30,986 shares that are subject to restricted stock awards made on the Effective Date;

•

the reservation of 175,000 shares of restricted stock in a separate pool for potential equity grants by the New Board in its sole discretion;

15

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited) (Continued)

(1) Organization and Basis of Financial Reporting; Chapter 11 Cases (Continued)

•

for options and restricted stock awards made on the Effective Date, vesting upon the termination of employment without cause will automatically be 50%, plus an additional 25% for each completed year of the award holder's service beyond the first year after the Effective Date (but not more than 100%); and

•

elimination of the prohibition against granting new awards before December 31, 2012 to persons who receive awards on or in connection with the Effective Date.

        Success Bonus Plan.    Among other things, the Term Sheet contemplates the following modifications to the Success Bonus Plan (as defined herein), the form of which was filed with the Bankruptcy Court on April 23, 2010:

•

total payouts under the Success Bonus Plan will be capped at $1.8 million;

•

bonuses will be scaled at 80% of the target amount regardless of the timing of the Effective Date, with no increases to the bonus pool to accrue after December 31, 2010;

•

no earned bonuses that were previously promised will be reduced; and

•

any additional bonus amounts may be awarded by the Chief Executive Officer in his discretion (subject to the approval of the Company's pre-Effective Date board of directors) to new and existing employees of the Company, other than to the Chief Executive Officer (who will receive 25% of the awards previously promised to David L. Hauser, who will be ineligible to receive any payments pursuant to the Success Bonus Plan).

        Litigation Trust Agreement.    The Term Sheet contemplates the following modifications to the FairPoint Litigation Trust Agreement, the form of which was filed with the Bankruptcy Court on May 10, 2010, and the corresponding provisions of the Plan: (i) removal of references to the Litigation Trust Board, (ii) inclusion of appropriate governance provisions with respect to the litigation trustee, (iii) an extension of the term of the Litigation Trust Agreement to five years and (iv) inclusion of a provision permitting the litigation trustee to request additional funding for the Litigation Trust from the Company following the Effective Date; provided, that (a) any such additional funding will be subject to the approval of the New Board in its sole discretion, (b) after giving effect to such additional funding, the Company's cash on hand may not be less than $20,000,000 (after taking into account the cash distributions to be made pursuant to the Plan as modified) and (c) no proceeds of any borrowings under the Exit Revolving Loan may be used to fund such additional funding.

        New Board.    The Term Sheet contemplates that the provisions in the Plan relating to the New Board will be modified to provide for an eight member board, with Edward D. Horowitz serving as Chair.

        Other.    The Term Sheet contemplates a 50% reduction in the aggregate amount of equity interests of the Company to be issued in connection with the Chapter 11 Cases, including shares of New Common Stock, New Warrants (as defined herein) and shares of New Common Stock to be issued under the Long Term Incentive Plan.

16

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited) (Continued)

(1) Organization and Basis of Financial Reporting; Chapter 11 Cases (Continued)

        Amendment to DIP Credit Agreement.    On August 30, 2010, the DIP Borrowers, the DIP Lenders and the DIP Administrative Agent entered into the Fourteenth Amendment to the DIP Credit Agreement, pursuant to which the maturity date of the DIP Credit Agreement (the "DIP Maturity Date") was extended to October 26, 2010.

        On October 22, 2010, the DIP Borrowers, the DIP Lenders and the DIP Administrative Agent entered into the Fifteenth Amendment to the DIP Credit Agreement (the "Fifteenth Amendment"), pursuant to which the DIP Credit Agreement was amended to reflect the applicable terms of the Term Sheet, including the extension of the DIP Maturity Date from October 26, 2010 until January 31, 2011. The Fifteenth Amendment also provides for a further extension of the DIP Maturity Date for up to an additional two months with the consent of the Required Lenders (as defined in the DIP Credit Agreement) for no additional fee and the immediate elimination of the minimum EBITDAR maintenance covenant and the maximum capital expenditures incurrence covenant contained in the DIP Credit Agreement for the remaining term of the DIP Credit Agreement, subject to further negotiation if the term of the DIP Credit Agreement is extended beyond January 31, 2011. In addition, the Company paid a fee of $0.4 million, equal to 0.5% of the total commitment under the DIP Credit Agreement, on October 26, 2010 relating to the extension of the DIP Maturity Date and related amendments.

        The Company is continuing to seek both Bankruptcy Approval and approval of the Vermont Regulatory Settlement from the Vermont Board. Upon the Vermont Board taking action, the Company intends to seek confirmation of the Modified Plan by the Bankruptcy Court.

Resignation of David L. Hauser and Appointment of Paul H. Sunu

        On August 24, 2010, the Bankruptcy Court approved (i) the Company's proposed consulting agreement (the "Consulting Agreement") with David L. Hauser and (ii) the Company's proposed employment agreement (the "Sunu Employment Agreement") with Paul H. Sunu. Accordingly, effective as of August 24, 2010, Mr. Hauser resigned as the Company's Chairman of the Board of Directors and Chief Executive Officer and as a director and became a consultant to the Company pursuant to the Consulting Agreement. In addition, effective as of August 24, 2010, the Board appointed Mr. Sunu to serve as the Company's Chief Executive Officer and as a director of the Company and Mr. Sunu and the Company entered into the Sunu Employment Agreement. The Board also appointed Jane E. Newman to serve as the Chairperson of the Company's Board of Directors and Robert S. Lilien to serve as the Chairperson of the newly formed Bankruptcy Oversight Committee of the Board of Directors. Ms. Newman and Mr. Lilien are both existing members of the Company's Board of Directors.

The Plan

        The Plan contemplates the reorganization of the Company and the discharge of all outstanding claims against and interests in the Company.

        Following the Petition Date, an ad hoc committee of the holders of the Notes (as defined herein) raised certain concerns regarding the proposed treatment of holders of unsecured claims against

17

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited) (Continued)

(1) Organization and Basis of Financial Reporting; Chapter 11 Cases (Continued)

FairPoint Communications ("FairPoint Communications Unsecured Claims"). In an effort to resolve these concerns, and after extensive negotiations, certain changes were made to the terms of the proposed financial restructuring contained in the Plan. In addition, the Plan is the result of extensive negotiations among the Company, the Steering Committee, certain unions and certain representatives of regulatory authorities in Maine, New Hampshire and Vermont. The Plan incorporates and implements various settlements reached with these parties, but is subject to the approval of the applicable state commissions or boards with respect to certain actions resulting from the Plan.

        On February 8, 2010, the Company filed an initial version of the Plan, together with an accompanying Disclosure Statement, with the Bankruptcy Court. The Plan and accompanying Disclosure Statement were subsequently amended on February 11, 2010 and March 10, 2010 and the Plan was modified further on May 11, 2010. On March 11, 2010, the Bankruptcy Court approved the adequacy of the Disclosure Statement, the solicitation and notice procedures with respect to confirmation of the Plan and the form of various ballots and notices in connection therewith. On April 23, 2010, the Company filed a supplement to the Plan (as modified, supplemented or amended, the "Plan Supplement"), which Plan Supplement was subsequently amended on May 7, 2010 and May 24, 2010. The voting deadline with respect to the Plan occurred on April 28, 2010. The vote tabulation has concluded and the Company has obtained the approval of the classes of creditors entitled to vote to accept or reject the Plan.

        The Plan will become effective only if it is confirmed by the Bankruptcy Court and upon the fulfillment of certain other conditions contained in the Plan. These conditions precedent include, but are not limited to, the following:

•

the Bankruptcy Court shall have entered the confirmation order and such confirmation order shall have become a final order;

•

the treatment of certain intercompany claims and the assumption of certain operating post-reorganization contracts shall be reasonably acceptable to the Steering Committee;

•

the conditions precedent to the Exit Facility (as defined herein) shall have been satisfied and/or waived;

•

the Company shall have obtained certain regulatory approvals, including approvals from the FCC and the PUCs in Illinois, Maine, New Hampshire, New York and Virginia and the Vermont Board, which approvals have been obtained from the PUCs in Illinois, Maine, New Hampshire, New York and Virginia; and

•

certain agreements with labor unions agreed to with respect to the Plan shall have been ratified by the applicable union membership, which ratification has already occurred.

        The conditions precedent to the Plan may be waived by the Company, except with respect to certain conditions, which waiver requires the consent of the Steering Committee. The Company cannot make any assurances as to when, or ultimately if, the Plan will become effective.

18

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited) (Continued)

(1) Organization and Basis of Financial Reporting; Chapter 11 Cases (Continued)

        The confirmation hearing to determine whether to confirm the Plan in the Bankruptcy Court commenced on May 11, 2010. The Bankruptcy Court continued the hearing, pending approvals of the PUCs in Maine and New Hampshire and the Vermont Board and the resolution of any potential dispute with respect to the litigation trust contemplated by the Plan. For a description of the status of certain regulatory approvals, see "Chapter 11 Cases—Recent Developments Related to the Chapter 11 Cases" in this note. In addition, the Plan was filed and accepted within the period in which we hold the exclusive right to file and seek confirmation of a plan of reorganization. Accordingly, no party in interest may file or solicit acceptances of a competing plan at this time. We also had the exclusive right to file a new plan until October 22, 2010 (the "Exclusivity Period Expiration Date"). FairPoint has filed a motion with the Bankruptcy Court to extend the Exclusivity Period Expiration Date to a later date in light of the fact that the Bankruptcy Court did not confirm the Plan prior to the Exclusivity Period Expiration Date. However, we cannot make any assurances as to whether the Bankruptcy Court will grant our motion to extend the Exclusivity Period Expiration Date, or, if the Exclusivity Period Expiration Date is extended, whether we will be able to obtain confirmation of the Plan prior to the ultimate expiration of the Exclusivity Period Expiration Date. If we do not have the exclusive right to file and seek confirmation of a plan of reorganization, any party in interest would be able to file or support a competing plan of reorganization.

        The summary of the provisions of the Plan and our related capital structure contained herein highlights certain substantive provisions of the Plan and our resulting capital structure and is not a complete description of the Plan or its provisions or our proposed post-petition capital structure. The summary is qualified in its entirety by reference to the full text of the Plan, which is available at www.fprestructuring.com under the "Court Filings" link. The Plan and the information on, or accessible through this website, are not part of or incorporated by reference herein. The following summary of the Plan has not been updated to reflect the terms of the Term Sheet described under "Chapter 11 Cases—Recent Developments Related to the Chapter 11 Cases—Term Sheet" in this note 1.

General

        Currently the Plan contemplates that all outstanding equity interests of the Company, including but not limited to all outstanding shares of common stock, options and contractual or other rights to acquire any equity interests, will be cancelled and extinguished on the Effective Date.

        Under the Plan, claims of (i) the lenders under a $2.03 billion credit facility, as subsequently amended, among the Company and Spinco (the "Pre-petition Credit Facility"), (ii) the administrative agent under the Pre-petition Credit Facility (the "Pre-petition Administrative Agent") and (iii) any other claims against the Company arising under the Pre-petition Credit Facility (collectively, "Pre-petition Credit Agreement Claims") will receive the following in full and complete satisfaction of such Pre-petition Credit Agreement Claims: (i) a pro rata share of the Exit Term Loan (as defined below), (ii) a pro rata share of certain cash payments, (iii) a pro rata share of 47,241,436 shares of the reorganized Company's new common stock, par value $0.01 per share (the "New Common Stock") and (iv) a pro rata share of a 55% interest in a litigation trust.

19

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited) (Continued)

(1) Organization and Basis of Financial Reporting; Chapter 11 Cases (Continued)

        In addition, claims of holders of FairPoint Communications Unsecured Claims will receive the following in full and complete satisfaction of such FairPoint Communications Unsecured Claims: (i) a pro rata share of 4,203,352 shares of New Common Stock, (ii) a pro rata share of a 45% interest in a litigation trust and (iii) a pro rata share of warrants to purchase up to 7,164,804 shares of New Common Stock (the "New Warrants"), the terms of which are more fully described in the form of Warrant Agreement which is attached to the Plan Supplement, which is available at www.fprestructuring.com under the "Court Filings" link.

        Finally, claims of holders of unsecured claims against FairPoint Communications' subsidiaries, unless otherwise agreed, will receive payment in full in cash in the amount of their allowed claims.

        The classification and treatment of all claims and equity interests in the Company are described in Sections IV and V of the Plan.

Exit Financing

        The Plan provides for the Company to incur indebtedness upon the Effective Date consisting of the Exit Facility. The Exit Facility is expected to be comprised of the Exit Revolving Loan and a $1,000,000,000 term loan facility (the "Exit Term Loan" and together with the Exit Revolving Loan, collectively, the "Exit Facility Loans"). The Exit Revolving Loan will have a $30,000,000 sublimit available for the issuance of letters of credit. Interest on Eurodollar loans under the Exit Facility will accrue at an annual rate equal to the British Bankers Association LIBOR Rate ("LIBOR") plus 4.50%, with a 2.00% LIBOR floor for the Exit Term Loans, and interest on base rate loans under the Exit Facility will accrue at an annual rate equal to 3.50% plus the highest of (i) the federal funds rate plus 0.5%, (ii) the "prime rate" publicly announced by Bank of America, N.A. from time to time, and (iii) applicable LIBOR plus 1.00%. A 0.75% commitment fee on the average daily unused portion of the Exit Revolving Loan will also accrue and be payable on a quarterly basis. The outstanding principal amount of the Exit Facility will be due and payable five years after the Effective Date (the "Exit Maturity Date"). The loan agreement governing the Exit Facility (the "Exit Facility Loan Agreement") will require quarterly repayments of principal of the Exit Term Loan in an amount equal to $2,500,000 during the first two fiscal years following the Effective Date, $12,500,000 during the third fiscal year following the Effective Date, $37,500,000 during the fourth fiscal year following the Effective Date and $50,000,000 for each of the first three fiscal quarters of the fifth fiscal year following the Effective Date, with all remaining outstanding principal of the Exit Term Loan being due and payable on the Exit Maturity Date. The Exit Facility Loan Agreement will also contain requirements that the Company prepay the Exit Facility Loans upon certain events as more specifically provided therein.

        The Exit Facility will be guaranteed by subsidiaries of the Company to be set forth on a schedule to the Exit Facility Loan Agreement, in addition to each future direct and indirect domestic subsidiary of the Company other than (x) any subsidiary of the Company that is a controlled foreign corporation or a subsidiary that is held directly or indirectly by a controlled foreign corporation or (y) any subsidiary that is prohibited by applicable law from guaranteeing the obligations under the Exit Facility and/or providing any security therefor without the consent of a PUC (together with the Exit Borrowers, collectively, the "Exit Financing Loan Parties"). The Exit Facility will be secured by first priority liens

20

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited) (Continued)

(1) Organization and Basis of Financial Reporting; Chapter 11 Cases (Continued)

upon substantially all existing and after-acquired assets of the Exit Financing Loan Parties, subject to permitted exceptions.

        The Exit Facility Loan Agreement will contain certain representations, warranties and affirmative covenants. In addition, the Exit Facility Loan Agreement will contain restrictive covenants that limit, among other things, the ability of the Exit Financing Loan Parties to incur indebtedness, 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 Facility Loan Agreement will also contain minimum interest coverage and maximum total leverage maintenance covenants and a maximum senior leverage incurrence covenant. The Exit Facility Loan Agreement will contain certain events of default, including failure to make payments, breaches of covenants and representations, cross defaults to other material indebtedness, unpaid and uninsured judgments, changes of control and bankruptcy events of default. The Exit Facility Lenders' commitments to fund amounts under the Exit Facility on or following the Effective Date will be subject to certain customary conditions as well as confirmation of the Plan.

        A copy of the form of the Exit Facility Loan Agreement is attached to the Plan Supplement, which is available at www.fprestructuring.com under the "Court Filings" link.

Certificate of Incorporation and By-Laws

        In connection with the Plan, the Company is expected to adopt a Ninth Amended and Restated Certificate of Incorporation of FairPoint Communications, Inc. (the "Amended Charter"), which is expected to become effective on the Effective Date. The Amended Charter will authorize the Company to issue up to 5,000,000 shares of preferred stock and up to 75,000,000 shares of New Common Stock. In addition, in connection with the Plan, the Company is expected to adopt Second Amended and Restated By-Laws (the "Amended By-Laws").

        A copy of the form of Amended Charter and Amended By-Laws are attached to the Plan Supplement, which is available at www.fprestructuring.com under the "Court Filings" link.

Board of Directors

        As contemplated by the Plan, on the Effective Date, the reorganized Company is expected to have a newly appointed seven person board of directors (the "New Board"). Selected biographical information for each of the seven proposed new board members, including Paul H. Sunu, who replaced David L. Hauser as Chief Executive Officer, is attached to the Plan Supplement, which is available at www.fprestructuring.com under the "Court Filings" link. In accordance with the Amended By-Laws, the initial members of the New Board are expected to hold office until the first annual meeting of stockholders which will be held following the one year anniversary of the Effective Date. Thereafter, members of the board of directors of the Company are expected to have one-year terms so that their terms will expire at each annual meeting of stockholders.

21

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited) (Continued)

(1) Organization and Basis of Financial Reporting; Chapter 11 Cases (Continued)

Long Term Incentive Plan and Success Bonus Plan

        As contemplated by the Plan, on the Effective Date, the Company will be deemed to have adopted the FairPoint Communications, Inc. 2010 Long Term Incentive Plan (the "Long Term Incentive Plan") and the FairPoint Communications, Inc. 2010 Success Bonus Plan (the "Success Bonus Plan") without any further action by the Company. Each of the Long Term Incentive Plan and the Success Bonus Plan was attached to the Plan Supplement, and may be accessed at www.fprestructuring.com under the "Court Filings" link.

        On the Effective Date, in accordance with the Plan, (i) certain employees are expected to receive (a) certain cash bonuses (the "Success Bonuses") pursuant to the terms of the Success Bonus Plan and/or (b) New Common Stock awards, consisting of restricted shares of New Common Stock and/or options to purchase shares of New Common Stock, pursuant to the terms of the Long Term Incentive Plan, and (ii) members of the New Board are expected to receive options to purchase New Common Stock pursuant to the terms of the Long Term Incentive Plan. The Success Bonuses are expected to be earned based upon certain performance measures, subject to upward or downward adjustments to reflect the timing of the Effective Date. 6,269,206 shares of New Common Stock are expected to be reserved for awards under the Long Term Incentive Plan that are expected to consist of stock options and restricted stock awards, which will be granted to certain employees of the Company and members of the New Board. On the Effective Date, (i)(a) 1,018,746 shares of restricted New Common Stock are expected to be granted to certain employees of the Company under the Long Term Incentive Plan and (b) at the sole discretion of the New Board, an additional 78,365 shares of restricted New Common Stock may be granted to certain employees of the Company and (ii)(a) 1,724,032 options to purchase shares of New Common Stock are expected to be granted to certain employees of the Company, (b) 264,030 options to purchase shares of New Common Stock are expected to be granted to members of the New Board and (c) at the sole discretion of the New Board, an additional 313,460 options to purchase shares of New Common Stock may be granted to certain employees of the Company, in each case pursuant to the Long Term Incentive Plan. These awards are expected to vest 25% on the Effective Date, and the remainder of these awards are expected to vest in three equal annual installments, commencing on the first anniversary of the Effective Date, with accelerated vesting on a change in control or a termination of an award holder's employment without cause. In addition, 2,870,573 shares of New Common Stock are expected to be available for future distribution under the Long Term Incentive Plan. However, if the aggregate enterprise value of the Company does not equal or exceed $2.3 billion on or prior to the expiration date of the New Warrants, the aggregate amount of options to purchase New Common Stock that are available for future distribution under the Long Term Incentive Plan will be automatically reduced by 620,651 shares.

Debtor-in-Possession Financing

DIP Credit Agreement

        In connection with the Chapter 11 Cases, the DIP Borrowers entered into the DIP Credit Agreement with the DIP Lenders and the DIP Administrative Agent. The DIP Credit Agreement provides for a revolving facility in an aggregate principal amount of up to $75 million, of which up to $30 million is also available in the form of one or more letters of credit that may be issued to third

22

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited) (Continued)

(1) Organization and Basis of Financial Reporting; Chapter 11 Cases (Continued)

parties for the account of the Company and its subsidiaries (the "DIP Financing"). Pursuant to an Order of the Bankruptcy Court, dated October 28, 2009 (the "Interim Order"), the DIP Borrowers were authorized to enter into and immediately draw upon the DIP Credit Agreement on an interim basis in an aggregate amount of $20 million, pending a final hearing before the Bankruptcy Court. Pursuant to a final order of the Bankruptcy Court, dated March 11, 2010, (the "Final DIP Order"), the DIP Borrowers were permitted access to the total $75 million of the DIP Financing, subject to the terms and conditions of the DIP Credit Agreement and related orders of the Bankruptcy Court. As of September 30, 2010 and December, 31, 2009, the Company had not borrowed any amounts under the DIP Credit Agreement and letters of credit totaling $18.6 million and $1.6 million, respectively, had been issued and were outstanding under the DIP Credit Agreement.

        The DIP Financing matures and is repayable in full on the earlier to occur of (i) January 31, 2011, which date can be extended for up to an additional two months with the consent of the Required Lenders (as defined in the DIP Credit Agreement) for no additional fee, (ii) the Effective Date, (iii) the voluntary reduction by the DIP Borrowers to zero of all commitments to lend under the DIP Credit Agreement, or (iv) the date on which the obligations under the DIP Financing are accelerated by the non-defaulting DIP Lenders holding a majority of the aggregate principal amount of the outstanding loans and letters of credit plus unutilized commitments under the DIP Financing upon the occurrence and during the continuance of certain events of default.

        Other material provisions of the DIP Credit Agreement include the following:

        Interest Rate and Fees.    Interest rates for borrowings under the DIP Credit Agreement are, at the DIP Borrowers' option, at either (i) the Eurodollar rate plus a margin of 4.5% or (ii) the base rate plus a margin of 3.5%, payable monthly in arrears on the last business day of each month.

        Interest accrues from and including the date of any borrowing up to but excluding the date of any repayment thereof and is payable (i) in respect of each base rate loan, monthly in arrears on the last business day of each month, (ii) in respect of each Eurodollar loan, on the last day of each interest period applicable thereto (which shall be a period of one month) and (iii) in respect of each such loan, on any prepayment or conversion (on the amount prepaid or converted), at maturity (whether by acceleration or otherwise) and, after such maturity, on demand. The DIP Credit Agreement provides for the payment to the DIP Administrative Agent, for the pro rata benefit of the DIP Lenders, of an upfront fee in the aggregate principal amount of $1.5 million, which upfront fee was payable in two installments: (1) the first installment of $400,000 was due and paid on October 28, 2009, the date on which the Interim Order was entered by the Bankruptcy Court, and (2) the remainder of the upfront fee was due and paid on March 11, 2010, the date the Final DIP Order was entered by the Bankruptcy Court. The DIP Credit Agreement also provides for an unused line fee of 0.50% on the unused revolving commitment, payable monthly in arrears on the last business day of each month (or on the date of maturity, whether by acceleration or otherwise), and a letter of credit facing fee of 0.25% per annum calculated daily on the stated amount of all outstanding letters of credit, payable monthly in arrears on the last business day of each month (or on the date of maturity, whether by acceleration or otherwise), as well as certain other fees.

23

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited) (Continued)

(1) Organization and Basis of Financial Reporting; Chapter 11 Cases (Continued)

        Voluntary Prepayments.    Voluntary prepayments of borrowings and optional reductions of the unutilized portion of the commitments are permitted without premium or penalty (subject to payment of breakage costs in the event Eurodollar loans are prepaid prior to the end of an applicable interest period).

        Covenants.    Prior to the Fifteenth Amendment, under the DIP Credit Agreement, the DIP Borrowers were required to maintain compliance with certain covenants, including maintaining minimum EBITDAR (earnings before interest, taxes, depreciation, amortization, restructuring charges and certain other non-cash costs and charges, as set forth in the DIP Credit Agreement) and not exceeding maximum permitted capital expenditure amounts. The DIP Credit Agreement also contains customary affirmative and negative covenants and restrictions, including, among others, with respect to investments, additional indebtedness, liens, changes in the nature of the business, mergers, acquisitions, asset sales and transactions with affiliates. As of September 30, 2010, the DIP Borrowers were in compliance with all covenants under the DIP Credit Agreement. Pursuant to the Fifteenth Amendment, effective October 22, 2010, the minimum EBITDAR and maximum permitted capital expenditure covenants in the DIP Credit Agreement were eliminated.

        Events of Default.    The DIP Credit Agreement contains customary events of default, including, but not limited to, failure to pay principal, interest or other amounts when due, breach of covenants, failure of any representations to have been true in all material respects when made, cross-defaults to certain other indebtedness in excess of specific amounts (other than obligations and indebtedness created or incurred prior to the filing of the Chapter 11 Cases), judgment defaults in excess of specified amounts, certain defaults under the Employee Retirement Income Security Act of 1974, as amended ("ERISA") and the failure of any guaranty or security document supporting the DIP Credit Agreement to be in full force and effect, the occurrence of a change of control and certain matters related to the Interim Order, the Final DIP Order and other matters related to the Chapter 11 Cases.

DIP Pledge Agreement

        The DIP Borrowers and certain of FairPoint Communications' subsidiaries (collectively, the "DIP Pledgors") entered into the DIP Pledge Agreement with Bank of America N.A., as collateral agent (in such capacity, the "DIP Collateral Agent"), dated as of October 30, 2009 (the "DIP Pledge Agreement"), as required under the terms of the DIP Credit Agreement. Pursuant to the DIP Pledge Agreement, the DIP Pledgors provided to the DIP Collateral Agent for the secured parties identified therein, a security interest in 100% of the equity interests and promissory notes owned by the DIP Pledgors and all proceeds arising therefrom, including cash dividends and distributions, subject to certain exceptions and qualifications (the "Pledge Agreement Collateral").

DIP Subsidiary Guaranty

        Certain of FairPoint Communications' subsidiaries (collectively, the "DIP Guarantors") entered into the DIP Subsidiary Guaranty with the DIP Administrative Agent, dated as of October 30, 2009 (the "DIP Subsidiary Guaranty"), as required under the terms of the DIP Credit Agreement. Pursuant to the DIP Subsidiary Guaranty, the DIP Guarantors agreed to jointly and severally guarantee the full

24

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited) (Continued)

(1) Organization and Basis of Financial Reporting; Chapter 11 Cases (Continued)

and prompt payment of all fees, obligations, liabilities and indebtedness of the DIP Borrowers, as borrowers under the DIP Financing. Pursuant to the terms of the DIP Subsidiary Guaranty, the DIP Guarantors further agreed to subordinate any indebtedness of the DIP Borrowers held by such DIP Guarantor to the indebtedness of the DIP Borrowers held by the secured parties under the DIP Financing.

DIP Security Agreement

        The DIP Borrowers and the DIP Guarantors (collectively, the "DIP Grantors") entered into the DIP Security Agreement with the DIP Collateral Agent, dated as of October 30, 2009 (the "DIP Security Agreement"), as required under the terms of the DIP Credit Agreement. Pursuant to the DIP Security Agreement, the DIP Grantors provided to the DIP Collateral Agent for the benefit of the secured parties identified therein, a security interest in all assets other than the DIP Pledge Agreement Collateral, any equity interests in an Excluded Entity (as defined in the DIP Pledge Agreement), any causes of action arising under Chapter 5 of the Bankruptcy Code and FCC licenses and authorizations 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.

Reporting Requirements

        As a result of the filing of the Chapter 11 Cases, the Company is now required to file various documents with, and provide certain information to, the Bankruptcy Court, including statements of financial affairs, schedules of assets and liabilities, and monthly operating reports in forms prescribed by federal bankruptcy law. Such materials have been and will be prepared according to requirements of the Bankruptcy Code. While these materials accurately provide then-current information required under the Bankruptcy Code, they are nonetheless unaudited, are prepared in a format different from that used in the Company's consolidated financial statements filed under the securities laws and certain of this financial information may be prepared on an unconsolidated basis. Accordingly, the Company believes that the substance and format of these materials do not allow meaningful comparison with its regular publicly-disclosed consolidated financial statements. Moreover, the materials filed with the Bankruptcy Court are not prepared for the purpose of providing a basis for an investment decision relating to the Company's securities, or for comparison with other financial information filed with the SEC.

Notifications

        Shortly after the Petition Date, the Company began notifying current or potential creditors of the Chapter 11 Cases. Subject to certain exceptions under the Bankruptcy Code, the Chapter 11 Cases automatically enjoined, or stayed, the continuation of any judicial or administrative proceedings or other actions against the Company or its property to recover on, collect or secure a claim arising prior to the Petition Date. Thus, for example, most creditor actions to obtain possession of property from the Company, or to create, perfect or enforce any lien against the property of the Company, or to collect on monies owed or otherwise exercise rights or remedies with respect to a claim arising prior to the Petition Date are enjoined unless and until the Bankruptcy Court lifts the automatic stay. Vendors are

25

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited) (Continued)

(1) Organization and Basis of Financial Reporting; Chapter 11 Cases (Continued)

being paid for goods furnished and services provided after the Petition Date in the ordinary course of business.

Creditors' Committee

        As required by the Bankruptcy Code, the United States Trustee for the Southern District of New York has appointed a statutory committee of unsecured creditors (the "Creditors' Committee"). The Creditors' Committee and its legal representatives have a right to be heard on all matters that come before the Bankruptcy Court with respect to the Company.

Executory Contracts—Section 365

        Under Section 365 and other relevant sections of the Bankruptcy Code, the Company may assume, assume and assign or reject certain executory contracts and unexpired leases, including, without limitation, leases of real property, subject to the approval of the Bankruptcy Court and certain other conditions. Any description of an executory contract or unexpired lease in this Quarterly Report, including where applicable, the Company's express termination rights or a quantification of its obligations, must be read in conjunction with, and is qualified by, any overriding rejection rights the Company has under Section 365 of the Bankruptcy Code. Claims may arise as a result of rejecting any executory contract.

Reorganization Costs

        The Company has incurred and will continue to incur significant costs associated with the Chapter 11 Cases. The amount of these costs, which are being expensed as incurred, are expected to significantly affect the Company's results of operations.

Impact on Net Operating Loss Carryforwards

        The Company's NOLs must be reduced by certain debt discharged pursuant to the Plan. Further, the Company's ability to utilize its NOL carryforwards will be limited by Section 382 of the Internal Revenue Code of 1986, as amended, after the Company consummates a debt restructuring that results in an ownership change. In general, following an ownership change, a limitation is imposed on the amount of pre-ownership change NOL carryforwards that may be used to offset taxable income in each year following the ownership change. Under a special rule that may be elected for an ownership change pursuant to a Chapter 11 reorganization, the amount of this annual limitation is equal to the "long term tax-exempt rate" (published monthly by the Internal Revenue Service (the "IRS")) for the month in which the ownership change occurs, multiplied by the value of FairPoint Communications' stock immediately after, rather than immediately before, the ownership change. By taking into account the value of FairPoint Communications' stock immediately after the Chapter 11 reorganization, the limitation is increased as a result of the cancellation of debt that occurs pursuant to the Chapter 11 reorganization. Because the Company expects to elect this treatment, an annual limitation will be imposed on the amount of the Company's pre-ownership change NOL carryforwards that can be utilized to offset its taxable income after consummation of the Chapter 11 reorganization. In order to prevent an ownership change that limits the Company's NOL carryforwards prior to the Effective Date,

26

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited) (Continued)

(1) Organization and Basis of Financial Reporting; Chapter 11 Cases (Continued)

the Bankruptcy Court has put in place notification procedures and potential restrictions on the trading of FairPoint Communications' common stock.

        Any portion of the annual limitation that is not used in a particular year may be carried forward and used in subsequent years. The annual limitation is increased by certain built-in gains recognized (or treated as recognized) during the five years following the ownership change (up to the total amount of built-in gain that existed at the time of the ownership change). The Company expects any NOL limitation for the five years following an ownership change will be increased by built-in gains. The Company also projects that all available NOL carryforwards after giving effect to the reduction for debt discharged will be utilized to offset future income within the NOL carryforward periods. Therefore, the Company does not expect to have NOL carryforwards after such time.

Defaults Under Outstanding Debt Instruments

        The filing of the Chapter 11 Cases constituted an event of default under each of the following debt instruments:

•

the indenture (the "New Indenture") governing the Company's new 13¹/8% Senior Notes due 2018 (the "New Notes"), which New Notes were issued on July 29, 2009 in connection with the Company's offer to exchange (the "Exchange Offer") its old 13¹/8% Senior Notes due 2018 (the "Old Notes," and together with the New Notes, the "Notes"), which Old Notes were originally issued by Spinco and subsequently assumed by the Company in connection with the Merger, for the New Notes;

•

the Pre-petition Credit Facility; and

•

the ISDA Master Agreement with Wachovia Bank, N.A., dated as of December 12, 2000, as amended and restated as of February 1, 2008, and the ISDA Master Agreement with Morgan Stanley Capital Services Inc., dated as of February 1, 2005 (collectively, the "Swaps").

        Under the terms of the New Indenture, as a result of the filing of the Chapter 11 Cases, all of the outstanding New Notes became due and payable without further action or notice. Under the terms of the Pre-petition Credit Facility, upon the filing of the Chapter 11 Cases, all commitments under the Pre-petition Credit Facility were terminated and all loans (with accrued interest thereon) and all other amounts outstanding under the Pre-petition Credit Facility (including, without limitation, all amounts under any letters of credit) became immediately due and payable. In addition, as a result of the filing of the Chapter 11 Cases, an early termination event occurred under the Swaps. The Company believes that any efforts to enforce payment obligations under such debt instruments are stayed as a result of the filing of the Chapter 11 Cases.

        Prior to the filing of the Chapter 11 Cases, the Company failed to make principal and interest payments due under the Pre-petition Credit Facility on September 30, 2009. The failure to make the principal payment on the due date and failure to make the interest payment within five days of the due date constituted events of default under the Pre-petition Credit Facility. An event of default under the Pre-petition Credit Facility permits the lenders under the Pre-petition Credit Facility to accelerate the maturity of the loans outstanding thereunder, seek foreclosure upon any collateral securing such loans

27

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited) (Continued)

(1) Organization and Basis of Financial Reporting; Chapter 11 Cases (Continued)

and terminate any remaining commitments to lend to the Company. The occurrence of an event of default under the Pre-petition Credit Facility constituted an event of default under the Swaps. In addition, the Company failed to make payments due under the Swaps on September 30, 2009, which failure resulted in an event of default under the Swaps upon the expiration of a three business day grace period.

        Prior to the filing of the Chapter 11 Cases, the Company also failed to make the October 1, 2009 interest payment on the Notes. The failure to make the interest payment on the Notes constituted an event of default under the Notes upon the expiration of a thirty day grace period. An event of default under the Notes permits the holders of the Notes to accelerate the maturity of the Notes. In addition, the filing of the Chapter 11 Cases constituted an event of default under the New Notes.

        In addition, as a result of the restatement of the Company's condensed consolidated financial statements for the quarterly period ended June 30, 2009, as set forth in a Quarterly Report on Form 10-Q/A dated April 30, 2010, the Company determined that it was not in compliance with the interest coverage ratio maintenance covenant and the leverage ratio maintenance covenant under the Pre-petition Credit Facility for the measurement period ended June 30, 2009, which constituted an event of default under each of the Pre-petition Credit Facility and the Swaps, and may have constituted an event of default under the Notes, in each case at June 30, 2009.

NYSE Delisting

        As a result of the filing of the Chapter 11 Cases, on October 26, 2009, the New York Stock Exchange (the "NYSE") notified us that it had determined that the listing of the Company's common stock should be suspended immediately.

        The last day that the Company's common stock traded on the NYSE was October 23, 2009. On November 16, 2009, the NYSE completed its application to the SEC to delist the Company's common stock.

        The Company's common stock is currently trading under the symbol "FRCMQ" on the Pink Sheets.

Risks and Uncertainties

        The ability of the Company, both during and after the Bankruptcy Court proceedings, to continue as a going concern, is dependent upon, among other things, the ability of the Company to confirm the Plan. Uncertainty as to the outcome of these factors raises substantial doubt about the Company's ability to continue as a going concern. The Condensed Consolidated Financial Statements contained in this Quarterly Report do not include any adjustments to reflect or provide for the consequences of the bankruptcy proceedings. See "Organization and Basis of Financial Reporting—Financial Reporting in Reorganization" for additional information. In particular, such financial statements do not purport to show (i) as to assets, their realization value on a liquidation basis or their availability to satisfy liabilities, (ii) as to liabilities arising prior to the Petition Date, the amounts that may be allowed for claims or contingencies, or the status and priority thereof, (iii) as to stockholder accounts, the effect of any changes that may be made in the capitalization of the Company or (iv) as to operations, the effects

28

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited) (Continued)

(1) Organization and Basis of Financial Reporting; Chapter 11 Cases (Continued)

of any changes that may be made in the underlying business. A confirmed plan of reorganization would likely cause material changes to the amounts currently disclosed in our Condensed Consolidated Financial Statements.

        As a result of the Chapter 11 Cases, realization of assets and liquidation of liabilities are subject to uncertainty. While operating as debtors-in-possession under the protection of the Bankruptcy Code, and subject to Bankruptcy Court approval or otherwise as permitted in the normal course of business, the Company may sell or otherwise dispose of assets and liquidate or settle liabilities for amounts other than those reflected in the Condensed Consolidated Financial Statements. Further, the Plan could materially change the amounts and classifications reported in the consolidated historical financial statements, which do not give effect to any adjustments to the carrying value of assets or amounts of liabilities that might be necessary as a consequence of confirmation of a plan of reorganization.

        Negative events associated with the Chapter 11 Cases could adversely affect revenues and the Company's relationship with customers, as well as with vendors and employees, which in turn could adversely affect the Company's operations and financial condition, particularly if the Bankruptcy Court proceedings are protracted. Also, transactions outside of the ordinary course of business are subject to the prior approval of the Bankruptcy Court, which may limit the Company's ability to respond timely to certain events or take advantage of certain opportunities. Due to the risks and uncertainties associated with the Bankruptcy Court proceedings, the ultimate impact that events that occur during these proceedings will have on the Company's business, financial condition and results of operations cannot be accurately predicted or quantified, and until such issues are resolved, there remains substantial doubt about the Company's ability to continue as a going concern.

(2) Reorganization

        The Reorganizations Topic of the ASC, which is applicable to companies in Chapter 11, generally does not change the manner in which financial statements are prepared. However, it does require that the financial statements for periods subsequent to the filing of the Chapter 11 Cases distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Amounts that can be directly associated with the reorganization and restructuring of the business must be reported separately as reorganization items in the statements of operations beginning in the quarter ending December 31, 2009. The balance sheet must distinguish pre-petition liabilities subject to compromise from both those pre-petition liabilities that are not subject to compromise and from post-petition liabilities. Liabilities that may be affected by a plan of reorganization must be reported at the amounts expected to be allowed, even if they may be settled for lesser amounts. In addition, cash provided by and used for reorganization items must be disclosed separately.

        The accompanying Condensed Consolidated Financial Statements have been prepared in accordance with the Reorganizations Topic of the ASC. All pre-petition liabilities subject to compromise have been segregated in the condensed consolidated balance sheets and classified as liabilities subject to compromise at the estimated amount of the allowable claims. Liabilities not subject to compromise are separately classified as current or noncurrent. The Company's condensed consolidated statements of operations for the three and nine months ended September 30, 2010 include

29

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited) (Continued)

(2) Reorganization (Continued)

the results of operations during the Chapter 11 Cases. As such, any revenues, expenses, and gains and losses realized or incurred that are directly related to the bankruptcy case are reported separately as reorganization items due to the bankruptcy.

        The Company received approval from the Bankruptcy Court to pay or otherwise honor certain of its pre-petition obligations, including employee related obligations such as accrued vacation and pension related benefits. As such, these obligations have been excluded from liabilities subject to compromise as of September 30, 2010 and December 31, 2009.

Reorganization Items

        Reorganization items represent (expense) or income amounts that have been recognized as a direct result of the Chapter 11 Cases and are presented separately in the condensed consolidated statements of operations pursuant to the Reorganizations Topic of the ASC. Such items consist of the following (amounts in thousands):

	Three months ended September 30, 2010			Nine months ended September 30, 2010
Professional fees(a)		(11,814	)		(44,922	)
Success bonus(b)		1,210			(725	)
Non-cash allowed claim adjustments(c)		—			(977	)
Cancellation of debt income, net(d)		969			21,947
Total reorganization items	$	(9,635	)	$	(24,677	)

(a)

Professional fees relate to legal, financial advisory and other professional costs directly associated with the reorganization process.

(b)

Success bonus represents charges incurred relating to the Success Bonus Plan in accordance with the plan of reorganization and terms of the Term Sheet.

(c)

The carrying values of certain liabilities subject to compromise were adjusted to the value of the claim allowed by the Bankruptcy Court.

(d)

Net gains (losses) associated with the settlement of liabilities subject to compromise.

Liabilities Subject to Compromise

        Liabilities subject to compromise refer to liabilities incurred prior to the Petition Date for which the Company has not received approval from the Bankruptcy Court to pay or otherwise honor. These amounts represent management's estimate of known or potential pre-Petition Date claims that are likely to be resolved in connection with the Chapter 11 Cases. Such claims remain subject to future adjustments. Adjustments may result from negotiations, actions of the Bankruptcy Court, rejection of the executory contracts and unexpired leases, the determination of the value securing claims, proofs of claim or other events.

30

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(2) Reorganization (Continued)

        Liabilities subject to compromise at September 30, 2010 and December 31, 2009 consisted of the following (amounts in thousands):

	September 30, 2010		December 31, 2009
Senior secured credit facility	$	1,970,963	$	1,965,450
Senior Notes		549,996		549,996
Interest rate swap		98,833		98,833
Accrued interest		176,974		74,406
Accounts payable		60,590		93,049
Other accrued liabilities		30,583		42,461
Capital lease obligations		—		7,627
Other long-term liabilities		775		787
Employee benefit obligations		—		3,731
Liabilities subject to compromise	$	2,888,714	$	2,836,340

        Liabilities not subject to compromise include: (1) liabilities incurred after the Petition Date; (2) pre-Petition Date liabilities that the Company expects to pay in full such as medical 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 vacation pay.

        The classification of liabilities not subject to compromise versus liabilities subject to compromise is based on currently available information and management's estimate of the amounts expected to be allowed. As the Chapter 11 Cases proceed and additional information and analysis is completed, or as the Bankruptcy Court rules on relevant matters, the classification and amounts within these two categories may change. The amount of any such change could be significant.

Magnitude of Potential Claims

        The Company has filed with the Bankruptcy Court schedules and statements of financial affairs setting forth, among other things, the Company's assets and liabilities, subject to the assumptions filed in connection therewith. All of the schedules are subject to amendment or modification.

        Bankruptcy Rule 3003(c)(3) requires the Bankruptcy Court to set the time within which proofs of claim must be filed in a Chapter 11 case. The Bankruptcy Court established March 18, 2010 at 5:00 p.m. Eastern Time (the "General Bar Date") as the last date and time for all non-governmental entities to file a proof of claim against the Debtors and April 26, 2010 at 5:00 p.m. Eastern Time (the "Governmental Bar Date", and together with the General Bar Date, the "Bar Dates") as the last date and time for all governmental entities to file a proof of claim against the Company. Subject to certain exceptions, the Bar Dates apply to all claims against the Debtors that arose prior to the Petition Date.

        As of October 15, 2010, claims totaling $4.9 billion have been filed with the Bankruptcy Court against the Company, $4.0 million of which have been withdrawn. The Company expects new and amended claims to be filed in the future, including claims amended to assign values to claims originally filed with no designated value. The Company has identified, and expects to continue to identify, many

31

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(2) Reorganization (Continued)

claims that the Company believes should be disallowed by the Bankruptcy Court because they are duplicative, have been later amended or superseded, are without merit, are overstated or for other reasons. As of October 15, 2010, the Bankruptcy Court has disallowed $1.1 billion of these claims and has not yet ruled on the Company's other objections to claims, the disputed portions of which aggregate to an additional $25.6 million. The Company expects to continue to file objections in the future. Because the process of analyzing and objecting to claims will be ongoing, the amount of disallowed claims may increase significantly in the future.

        Through the claims resolution process, differences in amounts scheduled by the Company and claims filed by creditors will be investigated and resolved, including through the filing of objections with the Bankruptcy Court, where appropriate. In light of the substantial number and amount of claims filed, the claims resolution process may take considerable time to complete, and the Company expects that this process will continue after the Company's emergence from Chapter 11. Accordingly, the ultimate number and amount of allowed claims is not presently known, nor is the exact recovery with respect to allowed claims presently known.

(3) Accounting Policies

(a) Use of Estimates

        The accompanying Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP, which require management to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates. The Condensed Consolidated Financial Statements reflect all adjustments that are necessary for a fair presentation of results of operations and financial condition for the interim periods shown, including normal recurring accruals and other items. The Company has reclassified certain prior period amounts in the Condensed Consolidated Financial Statements to be consistent with current period presentation. These reclassifications were made to correct the classification of PAP penalties from selling, general and administrative expenses to contra-revenue and to correct the allocation of certain employee and general computer expenses between cost of services and selling, general and administrative expenses. Correction of these classification errors resulted in decreases of $2.3 million and $5.6 million to revenue, a decrease of $1.5 million and an increase of $1.3 million to cost of services, and decreases of $0.8 million and $6.9 million to selling, general and administrative expenses for the three months and nine months ended September 30, 2009, respectively. Correction of these classification errors had no impact on loss from operations or net loss.

        Examples of significant estimates include the allowance for doubtful accounts, the recoverability of plant, property and equipment, valuation of intangible assets, pension and post-retirement benefit assumptions and income taxes. In addition, estimates have been made in determining the amounts and classification of certain liabilities subject to compromise.

(b) Revenue Recognition

        Revenues are recognized as services are rendered and are primarily derived from the usage of the Company's networks and facilities or under revenue-sharing arrangements with other communications carriers. Revenues are primarily derived from: access, pooling, local calling services, Universal Service

32

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(3) Accounting Policies (Continued)

Fund receipts, long distance services, Internet and broadband services, and other miscellaneous services. Local access charges are billed to local end users under tariffs approved by each state's public utilities commission. Access revenues are derived for the intrastate jurisdiction by billing access charges to interexchange carriers and to other local exchange carriers ("LECs"). These charges are billed based on toll or access tariffs approved by the local state's public utilities commission. Access charges for the interstate jurisdiction are billed in accordance with tariffs filed by the National Exchange Carrier Association or by the individual company and approved by the FCC.

        Revenues are determined on a bill-and-keep basis or a pooling basis. If on a bill-and-keep basis, the Company bills the charges to either the access provider or the end user and keeps the revenue. If the Company participates in a pooling environment (interstate or intrastate), the toll or access billed is contributed to a revenue pool. The revenue is then distributed to individual companies based on their company-specific revenue requirement. This distribution is based on individual state public utilities commissions' rates for intrastate revenues or the FCC's approved separation rules and rates of return for interstate revenues. Distribution from these pools can change relative to changes made to expenses, plant investment, or rate of return. Some companies participate in federal and certain state universal service programs that are pooling in nature but are regulated by rules separate from those described above. These rules vary by state. Revenues earned through the various pooling arrangements are initially recorded based on the Company's estimates.

        Long distance retail and wholesale services are usage sensitive and are billed in arrears and recognized when earned. Internet and data services revenues are substantially all recurring revenues and are billed one month in advance and deferred until earned. The majority of the Company's miscellaneous revenue is provided from billing and collection and directory services. The Company earns revenue from billing and collecting charges for toll calls on behalf of interexchange carriers. The interexchange carrier pays a certain rate per each minute billed by the Company. The Company recognizes revenue from billing and collection services when the services are provided.

        Internet and broadband services and certain other services are recognized in the month the service is provided.

        Non-recurring customer activation fees, along with the related costs up to, but not exceeding the activation fees, are deferred and amortized over the customer relationship period.

        Revenue is recognized net of tax collected from customers and remitted to governmental authorities.

        Management makes estimated adjustments, as necessary, to revenue or accounts receivable for known billing errors. At September 30, 2010 and December 31, 2009, the Company recorded revenue reserves of $10.6 million and $22.6 million, respectively. The decrease in revenue reserves during the nine months ended September 30, 2010 is primarily the result of credits that have been issued to customers.

(c) Maintenance and Repairs

        The cost of maintenance and repairs, including the cost of replacing minor items not constituting substantial betterments, is charged primarily to cost of services and sales as these costs are incurred.

33

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(3) Accounting Policies (Continued)

(d) Cash and Cash Equivalents

        The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

(e) Restricted Cash

        As of March 31, 2008, the closing date of the Merger, the Company had $80.9 million of restricted cash (the "Merger Restricted Cash"). The Company is required to use these funds to (i) pay for the removal of double poles in Vermont, as required by the Vermont Board, which at the time was estimated to cost $6.7 million, (ii) pay for certain service quality improvements under a performance 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 capital purposes. By letter dated 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 (the "NH Investment Commitment"). The NH Investment Commitment is inclusive of the $50 million previously required by the NHPUC. In addition, if the Regulatory Settlement (as defined below) with the state regulatory authority in New Hampshire is approved in connection with the Plan, the NH Investment Commitment will be reduced by $10 million, with such funds being reallocated to recurring maintenance capital expenditures to be spent on or before March 31, 2013.

        As of September 30, 2010, the Company had released $79.6 million of the restricted cash for approved expenditures under the required projects, including $1.4 million in interest earned on such restricted cash. As of September 30, 2010, $2.7 million of the Merger Restricted Cash remains for removal of double poles in Vermont. In addition, the Company also had $1.4 million of cash restricted for other purposes.

        In total, the Company had $4.1 million of restricted cash at September 30, 2010 of which $1.7 million is shown in current assets and $2.4 million is shown as a non-current asset on the condensed consolidated balance sheet.

        The Company expects that the Merger Orders will be amended by the Regulatory Settlements. The MPUC and NHPUC have approved the Regulatory Settlements for Maine and New Hampshire. However, the Vermont Board has rejected the Regulatory Settlement for Vermont. As described in note 1, on October 20, 2010, the Company provided supplemental information to the Vermont Board. If the Company is unable to obtain the Vermont Board's approval of the Regulatory Settlement for Vermont, it is unclear what effect the filing of the Chapter 11 Cases will have on the Vermont Merger Order and whether the requirements of the Vermont Merger Order would be enforceable against the Company in the future.

34

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(3) Accounting Policies (Continued)

(f) Accounts Receivable

        Accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company's best estimate of the amount of probable credit losses in the Company's existing accounts receivable. The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends, and other information. Receivable balances are reviewed on an aged basis and account balances are written off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

        As of September 30, 2010 and December 31, 2009, the Company's allowance for doubtful accounts totaled $52.1 million and $58.4 million, respectively.

(g) Credit Risk

        Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and trade receivables. The Company places its cash with high-quality financial institutions. Concentrations of credit risk with respect to trade receivables are principally related to receivables from other interexchange carriers and are otherwise limited to the Company's geographic concentration in Maine, New Hampshire and Vermont.

        The Company sponsors pension and post-retirement healthcare plans for certain employees. Plan assets are held by a third party trustee. The Company's plans hold debt and equity securities for investment purposes. The value of these plan assets is dependent on the financial condition of those entities issuing the debt and equity securities. A significant decline in the fair value of plan assets could result in additional 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 case of large individual items.

(i) Property, Plant, and Equipment

        Property, plant and equipment is recorded at cost. Depreciation expense is principally based on the composite group remaining life method and straight-line composite rates. This method provides for the recognition of the cost of the remaining net investment in telephone plant, property and equipment less anticipated positive net salvage value, over the remaining asset lives. This method requires the periodic revision of depreciation rates.

        At September 30, 2010 and December 31, 2009, accumulated depreciation for property, plant and equipment was $4.4 billion and $4.2 billion, respectively.

35

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(3) Accounting Policies (Continued)

        The estimated asset lives used to depreciate the Company's property, plant and equipment are presented in the following table:

Average Lives		Years
Buildings		45
Central office equipment		5 - 11
Outside communications plant
	Copper cable	15 - 18
	Fiber cable	25
	Poles and conduit	30 - 50
Furniture, vehicles and other		3 - 15

        The Company believes that current estimated useful asset lives are reasonable. Such useful lives are subject to regular review and analysis. In the evaluation of asset lives, multiple factors are considered, including, but not limited to, the ongoing network deployment, technology upgrades and enhancements, planned retirements and the adequacy of reserves.

        When depreciable telephone plant used in the Company's wireline network is replaced or retired, the carrying amount of such plant is deducted from the respective accounts and charged to accumulated depreciation. No gain or loss is recognized on disposition of assets.

(j) Long-Lived Assets

        Property, plant and equipment and intangible assets subject to amortization are reviewed for impairment as required by the Property, Plant, and Equipment Topic of the ASC. These assets are tested for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. An impairment charge is recognized for the amount, if any, by which the carrying value of the asset exceeds its fair value.

        The Company determined as of December 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 Company's common stock. In accordance with the Property, Plant, and Equipment Topic of the ASC, the Company performed a recoverability test, based on undiscounted projected future cash flows associated with its long-lived assets, and determined that long-lived assets were not impaired at that time.

        While no impairment charges resulted from the analysis performed at December 31, 2009, asset values may be adjusted in the future due to the outcome of the Chapter 11 Cases or the application of "fresh start" accounting upon the Company's emergence from Chapter 11.

(k) Computer Software and Interest Costs

        The Company capitalizes certain costs incurred in connection with developing or obtaining internal use software which has a useful life in excess of one year in accordance with the Intangibles-Goodwill and Other Topic of the ASC. Capitalized costs include direct development costs associated with internal use software, including direct labor costs and external costs of materials and services.

36

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(3) Accounting Policies (Continued)

        Subsequent additions, modifications or upgrades to internal-use software are capitalized only to the extent that they increase the functionality of the software. Software maintenance and training costs are expensed in the period in which they are incurred.

        In addition, the Company capitalizes the interest cost associated with the period of time over which the Company's internal use software is developed or obtained in accordance with the Interest Topic of the ASC. The Company has not capitalized interest costs incurred subsequent to the filing of the Chapter 11 Cases, as payments on all interest obligations have been stayed as a result of the filing of the Chapter 11 Cases.

        On January 15, 2007, FairPoint entered into the Master Services Agreement (the "MSA"), with Capgemini U.S. LLC. Through the MSA, the Company replicated and/or replaced certain existing Verizon systems during a phased period through January 2009. As of June 30, 2009, the Company had completed the application development stage of the project and was no longer capitalizing costs in accordance with the Intangibles-Goodwill and Other Topic of the ASC. The Company has recognized both external and internal service costs associated with the MSA based on total labor incurred through the completion of the application development stage. As of September 30, 2010, the Company had capitalized $107.0 million of MSA costs and an additional $6.9 million of interest costs.

        In addition to the MSA, the Company has other agreements and projects for which costs are capitalized in accordance with the Intangibles—Goodwill and Other Topic and the Interest Topic of the ASC. During the three and nine months ended September 30, 2010, the Company capitalized $2.8 million and $10.2 million, respectively, in software costs and did not capitalize any interest costs.

        As of December 31, 2009, the Company had capitalized $126.4 million of costs under the Intangibles—Goodwill and Other Topic of the ASC and $9.4 million of interest costs under the Interest Topic of the ASC.

(l) Debt Issue Costs

        On March 31, 2008, immediately prior to the Merger, Legacy FairPoint and Spinco entered into the Pre-petition Credit Facility, consisting of a non-amortizing revolving facility in an aggregate principal amount of $200 million (the "Revolving Credit Facility"), a senior secured term loan A facility in an aggregate principal amount of $500 million (the "Term Loan A Facility"), a senior secured term loan B facility in the aggregate principal amount of $1,130 million (the "Term Loan B Facility" and, together with the Term Loan A Facility, the "Term Loan") and a delayed draw term loan facility in an aggregate principal amount of $200 million (the "Delayed Draw Term Loan"). The Company incurred $29.2 million of debt issue costs associated with these credit facilities and began to amortize these costs over the life of the related debt, ranging from 6 to 7 years using the effective interest method.

        On January 21, 2009, the Company entered into an amendment to the Pre-petition Credit Facility (the "Pre-petition Credit Facility Amendment") under which, among other things, the administrative agent under the Pre-petition Credit Facility (the "administrative agent") resigned and was replaced by a new Pre-petition Administrative Agent. In addition, the resigning administrative agent's undrawn loan commitments under the Revolving Credit Facility, totaling $30.0 million, were terminated and are no longer available to the Company. The Company incurred $0.5 million of debt issue costs associated

37

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(3) Accounting Policies (Continued)

with the Pre-petition Credit Facility Amendment and began to amortize these costs over the remaining life of the loan.

        Concurrent with the Pre-petition Credit Facility Amendment, the Company wrote off $0.8 million of the unamortized debt issue costs associated with the original Pre-petition Credit Facility, in accordance with the Debt—Modifications and Extinguishments Topic of the ASC.

        In connection with the Exchange Offer, the Company paid a cash consent fee of $1.6 million in the aggregate to holders of Old Notes who validly delivered and did not revoke consents in the related consent solicitation prior to a specified early consent deadline, which amount was equal to $3.75 in cash per $1,000 aggregate principal amount of Old Notes exchanged in the Exchange Offer. Pursuant to the Debt Topic of the ASC, this consent fee was capitalized and the Company began to amortize these costs over the life of the New Notes using the effective interest method.

        Concurrent with the filing of the Chapter 11 Cases, on October 26, 2009 the Company wrote off all remaining debt issue and offering costs related to its pre-petition debt in accordance with the Reorganizations Topic of the ASC.

        The Company entered into the DIP Credit Agreement on October 27, 2009. The Company incurred $0.9 million of debt issue costs associated with the DIP Credit Agreement and began to amortize these costs over the nine month life of the DIP Credit Agreement using the effective interest method. Concurrent with the Final DIP Order, on March 11, 2010, the Company incurred an additional $1.1 million of debt issue costs associated with the DIP Credit Agreement and began to amortize these costs over the remaining life of the DIP Credit Agreement using the effective interest method.

        As of September 30, 2010, all capitalized debt issue costs had been fully amortized. As of December 31, 2009, the Company had $0.7 million of capitalized debt issue costs, net of amortization.

(m) Advertising Costs

        Advertising costs are expensed as they are incurred.

(n) Goodwill and Other Intangible Assets

        Goodwill consists of the difference between the purchase price incurred in the acquisition of Legacy FairPoint using the purchase method of accounting and the fair value of net assets acquired. In accordance with the Intangibles—Goodwill and Other Topic of the ASC, goodwill is no longer amortized, but instead is assessed for impairment at least annually. During this assessment, management relies on a number of factors, including operating results, business plans, and anticipated future cash flows.

        Goodwill impairment is determined using a two-step process. Step one compares the estimated fair value of the Company's single wireline reporting unit (calculated using both the market approach and the income approach) to its carrying amount, including goodwill. The market approach compares the fair value of the Company, as measured by its market capitalization, to the carrying amount of the Company, which represents its stockholders' equity balance. As of September 30, 2010, stockholders' deficit totaled $391.3 million.

38

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(3) Accounting Policies (Continued)

        Step two compares the implied fair value of the Company's goodwill (i.e., the fair value of the Company less the fair value of the Company's assets and liabilities, including identifiable intangible assets) to its goodwill carrying amount. If the carrying amount of the Company's goodwill exceeds the implied fair value of the goodwill, the excess is required to be recorded as an impairment.

        The Company performed step one of its annual goodwill impairment assessment as of October 1, 2009 and concluded that there was no impairment at that time. In light of the Chapter 11 Cases, the Company performed an interim goodwill impairment assessment as of December 31, 2009 and determined that goodwill was not impaired.

        As of September 30, 2010 and December 31, 2009, the Company had goodwill of $595.1 million.

        The Company's intangible assets consist of customer lists and trade names as follows (in thousands):

			At September 30, 2010			At December 31, 2009
Customer lists (weighted average 9.7 years):
	Gross carrying amount		$	208,504		$	208,504
	Less accumulated amortization			(56,430	)		(39,501	)
		Net customer lists		152,074			169,003
Trade names (indefinite life):
	Gross carrying amount			42,816			42,816
Total intangible assets, net			$	194,890		$	211,819

        The Company's only non-amortizable intangible asset is the trade name of Legacy FairPoint acquired in the Merger. Consistent with the valuation methodology used to value the trade name at the time of the Merger, the Company assesses the fair value of the trade name based on the relief from royalty method. If the carrying amount of the trade name exceeds its estimated fair value, the asset is considered impaired. The Company performed its annual non-amortizable intangible asset impairment assessment as of October 1, 2009 and concluded that there was no indication of impairment at that time. In light of the Chapter 11 Cases, the Company performed an interim non-amortizable intangible asset impairment assessment as of December 31, 2009 and determined that the trade name was not impaired.

        For its non-amortizable intangible asset impairment assessments at October 1, and December 31, 2009, the Company made certain assumptions including an estimated royalty rate, an effective tax rate and a discount rate, and applied these assumptions to projected future cash flows of the consolidated FairPoint Communications, Inc. business, exclusive of cash flows associated with wholesale revenues as these revenues are not generated through brand recognition. Changes in one or more of these assumptions may have resulted in the recognition of an impairment loss.

        While no impairment charges resulted from the analyses performed at October 1, and December 31, 2009, asset values may be adjusted in the future due to the outcome of the Chapter 11 Cases or the application of "fresh start" accounting upon the Company's emergence from Chapter 11.

39

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(3) Accounting Policies (Continued)

        The Company's amortizable intangible assets consist of customer lists. Amortizable intangible assets must be reviewed for impairment whenever indicators of impairment exist. See note 3(j) above.

        The estimated weighted average useful lives of the intangible assets are 9.7 years for the customer relationships and an indefinite useful life for trade names. Amortization expense was $5.6 million and $5.6 million for the three months, and $16.9 million and $17.0 million for the nine months, ended September 30, 2010 and 2009, respectively, and is expected to be approximately $22.6 million per year.

(o) Accounting for Income Taxes

        Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

        The Company files a consolidated income tax return with its subsidiaries. The Company has a tax-sharing agreement in which all subsidiaries are participants. All intercompany tax transactions and accounts have been eliminated in consolidation.

        The Income Taxes Topic of the ASC requires applying a "more likely than not" threshold to the recognition and de-recognition of tax positions. The Company's unrecognized tax benefits totaled $5.4 million as of September 30, 2010, of which $2.0 million would impact its effective tax rate, if recognized.

        In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management determines its estimates of future taxable income based upon the scheduled reversal of deferred tax liabilities, projected future taxable income exclusive of reversing temporary differences, and tax planning strategies. The Company establishes valuation allowances for deferred tax assets when it is estimated to be more likely than not that the tax assets will not be realized.

(p) Stock-based Compensation Plans

        The Company accounts for its stock-based compensation plans in accordance with the Compensation-Stock Compensation Topic of the ASC, which establishes accounting for stock-based awards granted in exchange for employee services. Accordingly, for employee awards which are expected to vest, stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as expense on a straight-line basis over the requisite service period, which generally begins on the date the award is granted through the date the award vests. The Company elected to adopt the provisions of the Compensation-Stock Compensation Topic of the ASC

40

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(3) Accounting Policies (Continued)

using the prospective application method for awards granted prior to becoming a public company and valued using the minimum value method, and using the modified prospective application method for awards granted subsequent to becoming a public company.

(q) Employee Benefit Plans

        The Company accounts for pensions and other post-retirement benefit plans in accordance with the Compensation—Retirement Benefits Topic of the ASC. This Topic requires the recognition of a defined benefit post-retirement plan's funded status as either an asset or liability on the balance sheet. This Topic also requires the immediate recognition of the unrecognized actuarial gains and losses and prior service costs and credits that arise during the period as a component of other accumulated comprehensive income, net of applicable income taxes. Additionally, a company must determine the fair value of plan assets as of the company's year end.

(r) Business Segments

        Management views its business of providing video, data and voice communication services to residential and business customers as one business segment as defined in the Segment Reporting Topic of the ASC. The Company consists of retail and wholesale telecommunications services, including local telephone, high speed Internet, long distance and other services in 18 states. The Company's chief operating decision maker assesses operating performance and allocates resources based on the consolidated results.

(s) Purchase Accounting

        Prior to the adoption of the Business Combinations Topic of the ASC, the Company recognized the acquisition of companies in accordance with SFAS No. 141, Accounting for Business Combinations ("SFAS 141"). The cost of an acquisition was allocated to the assets acquired and liabilities assumed based on their fair values as of the close of the acquisition, with amounts exceeding the fair value being recorded as goodwill. All future business combinations will be recognized in accordance with the Business Combinations Topic of the ASC.

(4) Recent Accounting Pronouncements

        On January 1, 2010, the Company adopted the accounting standard update regarding fair value measurements and disclosures, which requires additional disclosures regarding assets and liabilities measured at fair value. The adoption of this accounting standard update had no impact on the Company's consolidated results of operations and financial position.

        On June 15, 2009, the Company adopted the accounting standard relating to subsequent events. This standard establishes principles and requirements for identifying, recognizing and disclosing subsequent events. This standard requires that an entity identify the type of subsequent event as either recognized or unrecognized, and disclose the date through which the entity has evaluated subsequent events. This standard was revised by FASB Accounting Standard Update 2010-09, effective June 15,

41

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(4) Recent Accounting Pronouncements (Continued)

2010, to remove the requirement to disclose the date through which subsequent events have been evaluated. This standard is effective for interim or annual financial periods ending after June 15, 2009. The adoption of this standard had no impact on the Company's consolidated results of operations and financial position.

(5) Dividends

        On December 5, 2008, the Company declared a dividend of $0.2575 per share of common stock, which was paid on January 16, 2009 to holders of record as of December 31, 2008.

        On March 4, 2009, the Company's board of directors voted to suspend the quarterly dividend on the Company's common stock. The Company currently does not expect to reinstate the payment of dividends.

(6) Income Taxes

        For the three months and nine months ended September 30, 2010, the Company recorded income tax benefit of $7.3 million and $14.1 million, respectively. This resulted in an effective tax rate of 10.0% benefit and 7.3% benefit for the three months and nine months ended September 30, 2010, respectively, compared to an effective tax rate of 33.7% benefit and 35.8% benefit for the three months and nine months ended September 30, 2009, respectively. The 7.3% effective tax rate for the nine months ended September 30, 2010 was impacted by a one-time, non-cash income tax charge of $6.8 million during the first quarter of 2010, as a result of the enactment of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, both of which became law in March 2010 (collectively, the "Health Care Act"). Under the Health Care Act, beginning in 2013, the Company will no longer receive a federal income tax deduction for the expenses incurred in connection with providing the subsidized coverage under Medicare Part D for retiree prescription drug coverage to the extent of the subsidy the Company receives for providing that coverage. Because future anticipated retiree prescription drug plan liabilities and related subsidies are already reflected in the Company's financial statements, this change required the Company to reduce the value of the related tax benefits recognized in its financial statements in the period during which the Health Care Act was enacted.

        The effective tax rate for the three months and nine months ended September 30, 2010 was also impacted by (i) post-petition interest on debt that is not expected to be paid and, therefore, not expected to result in a future tax deduction, and (ii) non-deductible costs incurred related to the Chapter 11 Cases. In addition, tax benefits from the reported loss during the period were partially offset by an increase in the valuation allowance on the Company's deferred tax assets.

        At September 30, 2010, the Company had federal and state net operating loss carryforwards of $519.3 million that will expire from 2019 to 2030. At September 30, 2010, the Company had alternative minimum tax credits of $3.8 million that may be carried forward indefinitely. Legacy FairPoint completed an initial public offering on February 4, 2005, which resulted in an "ownership change" within the meaning of the U.S. federal income tax laws addressing net operating loss carryforwards, alternative minimum tax credits, and other similar tax attributes. The Merger also resulted in an

42

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(6) Income Taxes (Continued)

ownership change as of March 31, 2008. As a result of these ownership changes, there are specific limitations on the Company's ability to use its net operating loss carryfowards and other tax attributes. It is the Company's belief that it can use the net operating losses even with these restrictions in place.

        During the three months and nine months ended September 30, 2010, the Company excluded from taxable income $0.4 million and $22.0 million, respectively, of income from the discharge of indebtedness as defined under Internal Revenue Code ("IRC") Section 108. IRC Section 108 excludes from taxable income the amount of indebtedness discharged under a Chapter 11 case. IRC Section 108 also requires a reduction of tax attributes equal to the amount of excluded taxable income to be made on the first day of the tax year following the emergence from bankruptcy. These tax attributes will primarily consist of a reduction to the NOL carryforward and tax basis of other assets. Accordingly, the Company has recorded a full valuation allowance of $8.4 million against the future reduction of $22.0 million in tax attributes.

        In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management determines its estimates of future taxable income based upon the scheduled reversal of deferred tax liabilities, projected future taxable income exclusive of reversing temporary differences, and tax planning strategies. The Company establishes valuation allowances for deferred tax assets when it is estimated to be more likely than not that the tax assets will not be realized.

        Based upon the level of projections for future taxable income at December 31, 2008, management believed it was more likely than not that the Company would realize the full benefits of these deductible differences. However, as a result of the change in facts and circumstances during 2009, specifically that the Company filed the Chapter 11 Cases, the Company reassessed the likelihood that its deferred tax assets will be realized as of December 31, 2009. Based upon this analysis, 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. At September 30, 2010, the Company has recorded a valuation allowance of $46.3 million against its deferred tax assets which consists of a $38.4 million federal allowance and a $7.9 million state allowance.

        The Income Taxes Topic of the ASC requires the use of a two-step approach for recognizing and measuring tax benefits taken or expected to be taken in a tax return and disclosures regarding uncertainties in income tax positions. The unrecognized tax benefits under the Income Taxes Topic of the ASC are similar to the income tax reserves reflected prior to adoption under SFAS No. 5, Accounting for Contingencies, whereby reserves were established for probable loss contingencies that could be reasonably estimated. The Company's unrecognized tax benefits totaled $5.4 million as of September 30, 2010 and December 31, 2009. Of the $5.4 million of unrecognized tax benefits at September 30, 2010, $2.0 million would impact the Company's effective rate, if recognized. The remaining unrecognized tax benefits relate to temporary items and tax reserves recorded in a business

43

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(6) Income Taxes (Continued)

combination. Furthermore, the Company does not anticipate any significant increase or decrease to the unrecognized tax benefits within the next twelve months.

        The Company recognizes any interest and penalties accrued related to unrecognized tax benefits in income tax expense. For the nine months ended September 30, 2010, there was a $0.1 million increase in interest and penalties. As of September 30, 2010, cumulative interest and penalties totaled $0.9 million, net of tax.

        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 no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years prior to 2004. During the quarter ending June 30, 2009, Verizon received notification from the IRS that a tax position taken on their returns for the years 2000 through 2003 relating to the Company's Northern New England operations was settled through acceptance of the filing position. During the quarter ending June 30, 2008, Verizon effectively settled the IRS examination for fiscal years 2000 through 2003. Due to the executed tax sharing agreement dated January 15, 2007 between the Company and Verizon covering prior period tax liabilities, current period tax liabilities, tax payments and tax returns (the "Tax Sharing Agreement"), the settlement of the IRS audit resulted in an amount due to Verizon from the Company in the amount of $1.5 million relating to adjustments of temporary differences and $0.1 million of interest. As of September 30, 2010, the Company does not have any significant additional jurisdictional tax audits.

        Prior to the Merger, Verizon and its domestic subsidiaries, including the operations of the Verizon Companies, filed a consolidated 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 and were allocated tax payments based on the respective tax liability as if they were filing on a separate company basis. Current and deferred tax expense was determined by applying the provisions of the Income Taxes Topic of the ASC to each company as if it were a separate taxpayer.

        The Verizon Northern New England business used the deferral method of accounting for investment tax credits earned prior to the repeal of investment tax credits by the Tax Reform Act of 1986. The Verizon Northern New England business also deferred certain transitional credits earned after the repeal and amortized these credits over the estimated service lives of the related assets as a reduction to the provision for income taxes.

(7) Interest Rate Swap Agreements

        The Company assesses interest rate related cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating hedging opportunities. The Company maintains risk management control systems to monitor interest rate cash flow risk attributable to both the Company's outstanding and forecasted debt obligations. The risk management control systems involve the use of analytical techniques, including

44

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(7) Interest Rate Swap Agreements (Continued)

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 and fixed-rate debt to finance its operations, capital expenditures and acquisitions. The variable-rate debt obligations expose the Company to variability in interest payments due to changes in interest rates. The Company believed it was prudent to limit the variability of a portion of its interest payments. To meet this objective, from time to time, the Company entered 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 the fixed rate, or it received a payment if the variable rate was above the fixed rate.

        The Company failed to make payments of $14.0 million due under the Swaps on September 30, 2009, which failure resulted in an event of default under the Swaps upon the expiration of a three business day grace period.

        In addition, as a result of the restatement of the Company's interim financial statements filed with the Securities Exchange Commission on April 30, 2010 (the "Restatement"), the Company determined that the Company was not in compliance with the interest coverage ratio maintenance covenant and the leverage ratio maintenance covenant under the Pre-petition Credit Facility for the measurement period ended June 30, 2009, which constituted an event of default under each of the Pre-petition Credit Facility and the Swaps, and may have constituted an event of default under the Notes, in each case at June 30, 2009.

        The filing of the Chapter 11 Cases constituted a termination event under the Swaps. Subsequent to the filing of the Chapter 11 Cases, the Company received notification from the counterparties to the Swaps that the Swaps had been terminated. However, the Company believes that any efforts to enforce payment obligations under such debt instruments are stayed as a result of the filing of the Chapter 11 Cases. See note 1.

        As a result of the Merger, the Company reassessed the accounting treatment of the Swaps and determined that, beginning on April 1, 2008, the Swaps did not meet the criteria for hedge accounting. Therefore, the changes in fair value of the Swaps subsequent to the Merger have been recorded as other income (expense) on the consolidated statement of operations. At September 30, 2010 and December 31, 2009, the carrying value of the Swaps was a net liability of approximately $98.8 million, all of which has been included in liabilities subject to compromise as a result of the filing of the Chapter 11 Cases. The carrying value of the Swaps at September 30, 2010 and December 31, 2009 represents the termination value of the Swaps as determined by the respective counterparties following the termination event described above. The Company has recognized no gain or loss on derivative instruments on the condensed consolidated statement of operations during the three months and nine months ended September 30, 2010. For the three months and nine months ended September 30, 2009, the Company recognized a loss on derivative instruments totaling $11.5 million and a gain on derivative instruments totaling $8.6 million, respectively.

45

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(8) Long Term Debt

        Long term debt for the Company at September 30, 2010 and December 31, 2009 is shown below (in thousands):

		September 30, 2010			December 31, 2009
Senior secured credit facility, variable rates ranging from 6.75% to 7.00% (weighted average rate of 6.94%) at September 30, 2010, due 2014 to 2015		$	1,970,963		$	1,965,450
Senior notes, 13.125%, due 2018			549,996			549,996
	Total outstanding long-term debt		2,520,959			2,515,446
Less amounts subject to compromise			(2,520,959	)		(2,515,446	)
	Total long-term debt, net of amounts subject to compromise	$	—		$	—

        As a result of the filing of the Chapter 11 Cases (see note 1), all pre-petition debts owed by the Company under the Pre-petition Credit Facility, the Notes and the Swaps have been classified as liabilities subject to compromise in the condensed consolidated balance sheet as of September 30, 2010 and December 31, 2009.

        The estimated fair value of the Company's long-term debt at September 30, 2010 was approximately $1,365.0 million based on market prices of the Company's debt securities at the balance sheet date.

        The Company failed to make the September 30, 2009 principal and interest payments required under the Pre-petition Credit Facility. Failure to make the principal payment on the due date and failure to make the interest payment within five days of the due date constituted events of default under the Pre-petition Credit Facility, which permits the lenders to accelerate the maturity of the loans outstanding thereunder, seek foreclosure upon any collateral securing such loans and terminate any remaining commitments to lend to the Company. In addition, the incurrence of an event of default on the Pre-petition Credit Facility constituted an event of default under the Swaps at September 30, 2009, which failure resulted in an event of default under the Swaps upon the expiration of a three business day grace period. Also, the failure to make the October 1, 2009 interest payment on the Notes within thirty days of the due date constituted an event of default under the Notes. An event of default under the Notes permits the holders of the Notes to accelerate the maturity of the Notes. Filing of the Chapter 11 Cases constituted an event of default on the New Notes. In addition, as a result of the Restatement (as defined herein), the Company determined that the Company was not in compliance with the interest coverage ratio maintenance covenant and the leverage ratio maintenance covenant under the Pre-petition Credit Facility for the measurement period ended June 30, 2009, which constituted an event of default under each of the Pre-petition Credit Facility and the Swaps, and may have constituted an event of default under the Notes, in each case at June 30, 2009.

        On September 25, 2009, the Company entered into forbearance agreements with the lenders under the Pre-petition Credit Facility and the Swaps under which the lenders agreed to forbear from exercising their rights and remedies under the respective agreements with respect to any events of default through October 30, 2009. On October 26, 2009, the Company filed the Chapter 11 Cases. The filing of the Chapter 11 Cases constituted an event of default under each of the Pre-petition Credit

46

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(8) Long Term Debt (Continued)

Facility, the New Notes and the Swaps. However, the Company believes that any efforts to enforce payment obligations under these agreements are stayed as a result of the filing of the Chapter 11 Cases. For additional information about the impact of the Chapter 11 Cases, see note 1.

        The approximate aggregate maturities of long-term debt for each of the five years subsequent to September 30, 2010 are as follows (in thousands):

Quarter ending September 30,
2011	$	54,150
2012		63,300
2013		213,300
2014		214,025
2015		1,426,188
Thereafter		549,996
	$	2,520,959

        Pursuant to the Plan, the Company does not expect to make any principal or interest payments on its pre-petition debt during the pendency of the Chapter 11 Cases. In accordance with the Reorganizations Topic of the ASC, as interest on the Notes subsequent to the Petition Date is not expected to be an allowed claim, the Company has not accrued interest expense on the Notes subsequent to the Petition Date. Accordingly, $18.0 million and $54.1 million of interest on unsecured debts, at the stated contractual rates, was not accrued during the three months and nine months ended September 30, 2010. The Company has continued to accrue interest expense on the Pre-petition Credit Facility, as such interest is considered an allowed claim according to the Plan.

Pre-petition Credit Facility

        On March 31, 2008, immediately prior to the Merger, FairPoint and Spinco entered into the Pre-petition Credit Facility consisting of the Revolving Credit Facility, the Term Loan and the Delayed Draw Term Loan. Spinco drew $1,160 million under the Term Loan immediately prior to being spun off by Verizon, and then the Company drew $470 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, the Company has drawn an additional $194.5 million under the Delayed Draw Term Loan. These funds were used for certain capital expenditures and other expenses associated with the Merger.

        On October 5, 2008 the administrative agent under the Pre-petition Credit Facility filed for bankruptcy. The administrative agent accounted for thirty percent of the loan commitments under the Revolving Credit Facility. On January 21, 2009, the Company entered into the Pre-petition Credit Facility Amendment under which, among other things, the administrative agent resigned and was replaced by a new Pre-petition Administrative Agent. In addition, the resigning administrative agent's undrawn loan commitments under the Revolving Credit Facility, totaling $30.0 million, were terminated and are no longer available to the Company.

        The Revolving Credit Facility has a swingline sub-facility in the amount of $10 million and a letter of credit sub-facility in the amount of $30 million, which allows issuances of standby letters of credit by

47

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(8) Long Term Debt (Continued)

the Company. The Pre-petition Credit Facility also permits interest rate and currency exchange swaps and similar arrangements that the Company may enter into with the lenders under the Pre-petition Credit Facility and/or their affiliates.

        As of September 30, 2010, the Company had borrowed $155.5 million under the Revolving Credit Facility, including $5.5 million of funds drawn down under letters of credit during the nine months ended September 30, 2010, and there were no outstanding letters of credit. Upon the event of default under 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 September 30, 2010, no funds remained available under the Revolving Credit Facility.

        The Term Loan B Facility and the Delayed Draw Term Loan will mature in March 2015 and the Revolving Credit Facility and the Term Loan A Facility will mature in March 2014. Each of the Term Loan A Facility, the Term Loan B Facility and the Delayed Draw Term Loan, collectively referred to as the Term Loans, are repayable in quarterly installments in the manner set forth in the Pre-petition Credit Facility beginning June 30, 2009.

        Borrowings under our Pre-petition Credit Facility bear interest at variable interest rates. Interest rates for borrowings under the Pre-petition Credit Facility are, at the Company's option, for the Revolving Credit Facility and for the Term Loans at either (a) the Eurodollar rate, as defined in the Pre-petition Credit Facility, plus an applicable margin or (b) the base rate, as defined in the Pre-petition Credit Facility, plus an applicable margin.

        The Company's Term Loan B Facility debt is subject to a LIBOR floor of 3.00%. As a result, the Company incurs interest expense at above-market levels when LIBOR rates are below 3.00%.

        The Pre-petition Credit Facility provides for payment to the lenders of a commitment fee on the average daily unused 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 provides for payment to the lenders of a commitment fee from the closing date of the Pre-petition Credit Facility up through and including the twelve month anniversary thereof on the unused portion of the Delayed Draw Term Loan, payable quarterly in arrears, and on the date upon which the Delayed Draw Term Loan is terminated, as well as other fees.

        The Pre-petition Credit Facility requires the Company first to prepay outstanding Term Loan A Facility loans in full, including any applicable fees, interest and expenses and, to the extent that no Term Loan A Facility loans remain outstanding, Term Loan B Facility loans, including any applicable fees, interest and expenses, 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, subject to certain reinvestment rights, 100% of net casualty insurance proceeds, subject to certain reinvestment rights and 100% of the net cash proceeds the Company receives from the issuance of debt obligations and preferred stock. In addition, the Pre-petition Credit Facility requires it to prepay outstanding Term Loans on the date the Company delivers a compliance certificate pursuant to the Pre-petition Credit Facility beginning with the fiscal quarter ended June 30, 2009 demonstrating that the Company's leverage ratio for the preceding quarter is greater than 3.50 to 1.00, with an amount equal to the greater of (i) $11,250,000 or (ii) 90% of the Company's excess cash flow calculated after its permitted

48

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(8) Long Term Debt (Continued)

dividend payment and less its amortization payments made on the Term Loans pursuant to the Pre-petition Credit Facility. Notwithstanding the foregoing, the Company may designate the type of loans which are to be prepaid and the specific borrowings under the affected facility pursuant to which any amounts mandatorily prepaid will be applied in forward order of maturity of the remaining amortization payments.

        Voluntary prepayments of borrowings under the Term Loan facilities and optional reductions of the unutilized portion of the revolving facility commitments will be permitted upon payment of an applicable payment fee, which shall only be applicable to certain prepayments of borrowings as described in the Pre-petition Credit Facility.

        Under the Pre-petition Credit Facility, the Company is required to meet certain financial tests, including a minimum cash interest coverage ratio and a maximum total leverage ratio. The Pre-petition Credit Facility contains customary affirmative covenants. The Pre-petition Credit Facility also contains negative covenants and restrictions, including, among others, with respect to redeeming and repurchasing the Company's 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 affiliates. The Pre-petition Credit Facility contains customary events of default, including, but not limited to, failure to pay principal, interest or other amounts when due (subject to customary grace periods), breach of covenants or representations, cross-defaults to certain other indebtedness in excess of specified amounts, judgment defaults in excess of specified amounts, certain ERISA defaults, the failure of any guaranty or security document supporting the Pre-petition Credit Facility and certain events of bankruptcy and insolvency.

        The Pre-petition Credit Facility also contains restrictions on the Company's ability to pay dividends on its common stock.

        Scheduled amortization payments on the Company's Pre-petition Credit Facility began in 2009. No principal payments are due on the Notes prior to their maturity. As a result of the Chapter 11 Cases, the Company does not expect to make any additional principal or interest payments on its pre-petition debt.

        The Pre-petition Credit Facility is guaranteed, jointly and severally, by all existing and subsequently acquired or organized wholly owned first-tier domestic subsidiaries of the Company that are holding companies. No guarantee is required of a subsidiary that is an operating company. Northern New England Telephone Operations LLC, Telephone Operating Company of Vermont LLC and Enhanced Communications of Northern New England Inc. are regulated operating subsidiaries and, accordingly, are not guarantors under the Pre-petition Credit Facility.

        The Pre-petition Credit Facility is secured by a first priority perfected security interest in all of the stock, equity interests, promissory notes, partnership interests and membership interests owned by the Company.

Old Notes

        On March 31, 2008, Spinco issued $551.0 million aggregate principal amount of the Old Notes. The Old Notes mature on April 1, 2018 and are not redeemable at the Company's option prior to

49

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(8) Long Term Debt (Continued)

April 1, 2013. Interest is payable on the Old Notes semi-annually in cash on April 1 and October 1 of each year. The Old Notes bear interest at a fixed rate of 13¹/8% and principal is due at maturity. The Old Notes were issued at a discount and, accordingly, at the date of their distribution, the Old Notes had a carrying value of $539.8 million (principal amount at maturity of $551.0 million less discount of $11.2 million). Following the filing of the Chapter 11 Cases, the remaining $9.9 million of discount on the Notes was written off in order to adjust the carrying amount of the Company's pre-petition debt to the Bankruptcy Court approved amount of the allowed claims for the Company's pre-petition debt. In accordance with the Reorganizations Topic of the ASC, as interest on the Notes subsequent to the Petition Date is not expected to be an allowed claim, the Company has not accrued interest expense on the Notes subsequent to the Petition Date.

        Upon the consummation of the Exchange Offer and the corresponding consent solicitation, substantially all of the restrictive covenants in the indenture governing the Old Notes were deleted or eliminated and certain of the events of default and various other provisions contained therein were modified.

        Prior to the filing of the Chapter 11 Cases, the Company failed to make the October 1, 2009 interest payment on the Notes. The failure to make the interest payment on the Notes constituted an event of default under the Notes upon the expiration of a thirty day grace period. An event of default under the Notes permits the holders of the Notes to accelerate the maturity of the Notes.

        In addition, as a result of the Restatement, the Company determined that the Company was not in compliance with the interest coverage ratio maintenance covenant and the leverage ratio maintenance covenant under the Pre-petition Credit Facility for the measurement period ended June 30, 2009, which constituted an event of default under each of the Pre-petition Credit Facility and the Swaps, and may have constituted an event of default under the Notes, in each case at June 30, 2009.

Issuance of New Notes and Payment of Consent Fee

        On July 29, 2009, the Company successfully consummated the Exchange Offer. On the July 29, 2009 settlement date of the Exchange Offer (the "Settlement Date"), the Proposed Amendments became operative and $439.6 million in aggregate principal amount of the Old Notes (which amount was equal to approximately 83% of the then outstanding Old Notes) were exchanged for $439.6 million in aggregate principal amount of the New Notes. In addition, pursuant to the terms of the Exchange Offer, an additional $18.9 million in aggregate principal amount of New Notes was issued to holders who tendered their Old Notes in the Exchange Offer as payment for accrued and unpaid interest on the exchanged Old Notes up to, but not including, the Settlement Date.

        The New Notes mature on April 2, 2018 and bear interest at a fixed rate of 13¹/8%, payable in cash, except that the New Notes bore interest at a rate of 15% for the period from July 29, 2009 through and including September 30, 2009. In addition, the Company was permitted to pay the interest payable on the New Notes for the period from July 29, 2009 through and including September 30, 2009 (the "Initial Interest Payment Period") in the form of cash, by capitalizing such interest and adding it to the principal amount of the New Notes or a combination of both cash and such capitalization of interest, at its option. The Company intended to make the interest payments due on October 1, 2009 on the New Notes by capitalizing such interest and adding it to the principal amount of the New Notes.

50

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(8) Long Term Debt (Continued)

As such, interest payable of $12.2 million at September 30, 2009 was reflected as interest payable in kind on the condensed consolidated balance sheet. As the Notes have been classified as subject to compromise as of September 30, 2010, the Company has classified the accrued interest on the exchanged Old Notes as of September 30, 2010 of $12.2 million as subject to compromise on the condensed consolidated balance sheet. In accordance with the Reorganizations Topic of the ASC, as interest on the Notes subsequent to the Petition Date is not expected to be an allowed claim, the Company has not accrued interest expense on the Notes subsequent to the Petition Date.

        The New Indenture limits, among other things, the Company's ability to incur additional indebtedness, issue certain preferred stock, repurchase its capital stock or subordinated debt, make certain investments, create certain liens, sell certain assets or merge or consolidate with or into other companies, incur restrictions on the ability of the Company's subsidiaries to make distributions or transfer assets to the Company and enter into transactions with affiliates.

        The New Indenture also restricts the Company's ability to pay dividends on or repurchase its common stock under certain circumstances.

        In connection with the Exchange Offer and the corresponding consent solicitation, the Company also paid a cash consent fee of $1.6 million in the aggregate to holders of Old Notes who validly delivered and did not revoke consents in the consent solicitation prior to a specified early consent deadline, which amount was equal to $3.75 in cash per $1,000 aggregate principal amount of Old Notes exchanged in the Exchange Offer.

Debtor-in-Possession Financing

DIP Credit Agreement

        In connection with the Chapter 11 Cases, the DIP Borrowers entered into the DIP Credit Agreement with the DIP Lenders and the DIP Administrative Agent. The DIP Credit Agreement provides for the DIP Financing. Pursuant to the Interim Order, the DIP Borrowers were authorized to enter into and immediately draw upon the DIP Credit Agreement on an interim basis, pending a final hearing before the Bankruptcy Court, in an aggregate amount of $20 million. On March 11, 2010 the Bankruptcy Court entered the Final DIP Order, permitting the DIP Borrowers access to the total $75 million of the DIP Financing, subject to the terms and conditions of the DIP Credit Agreement and related orders of the Bankruptcy Court. As of September 30, 2010 and December 31, 2009, the Company had not borrowed any amounts under the DIP Credit Agreement and letters of credit totaling $18.6 million and $1.6 million, respectively, had been issued and were outstanding under the DIP Credit Agreement. Accordingly, as of September 30, 2010, the amount available under the DIP Credit Agreement was approximately $56.4 million of the $75.0 million made available pursuant to the Final DIP Order.

        The DIP Financing matures and is repayable in full on the earlier to occur of (i) January 31, 2011, which date can be extended for up to an additional two months with the consent of the Required Lenders (as defined in the DIP Credit Agreement) for no additional fee, (ii) the Effective Date, (iii) the voluntary reduction by the DIP Borrowers to zero of all commitments to lend under the DIP Credit Agreement, or (iv) the date on which the obligations under the DIP Financing are accelerated by the non-defaulting DIP Lenders holding a majority of the aggregate principal amount of the outstanding loans and letters of credit plus unutilized commitments under the DIP Financing upon the occurrence and during the continuance of certain events of default.

51

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited) (Continued)

(8) Long Term Debt (Continued)

        Other material provisions of the DIP Credit Agreement include the following:

        Interest Rate and Fees.    Interest rates for borrowings under the DIP Credit Agreement are, at the DIP Borrowers' option, at either (i) the Eurodollar rate plus a margin of 4.5% or (ii) the base rate plus a margin of 3.5%, payable monthly in arrears on the last business day of each month.

        Interest accrues from and including the date of any borrowing up to but excluding the date of any repayment thereof and is payable (i) in respect of each base rate loan, monthly in arrears on the last business day of each month, (ii) in respect of each Eurodollar loan, on the last day of each interest period applicable thereto (which shall be a period of one month) and (iii) in respect of each such loan, on any prepayment or conversion (on the amount prepaid or converted), at maturity (whether by acceleration or otherwise) and, after such maturity, on demand. The DIP Credit Agreement provides for the payment to the DIP Administrative Agent, for the pro rata benefit of the DIP Lenders, of an upfront fee in the aggregate principal amount of $1.5 million, which upfront fee was payable in two installments: (1) the first installment of $400,000 was due and paid on October 28, 2009, the date on which the Interim Order was entered by the Bankruptcy Court, and (2) the remainder of the upfront fee was due and paid on March 11, 2010, the date the Final DIP Order was entered by the Bankruptcy Court. The DIP Credit Agreement also provides for an unused line fee of 0.50% on the unused revolving commitment, payable monthly in arrears on the last business day of each month (or on the date of maturity, whether by acceleration or otherwise), and a letter of credit facing fee of 0.25% per annum calculated daily on the stated amount of all outstanding letters of credit, payable monthly in arrears on the last business day of each month (or on the date of maturity, whether by acceleration or otherwise), as well as certain other fees.

        Voluntary Prepayments.    Voluntary prepayments of borrowings and optional reductions of the unutilized portion of the commitments are permitted without premium or penalty (subject to payment of breakage costs in the event Eurodollar loans are prepaid prior to the end of an applicable interest period).

        Covenants.    Prior to the Fifteenth Amendment, under the DIP Credit Agreement, the DIP Borrowers were required to maintain compliance with certain covenants, including maintaining minimum EBITDAR (earnings before interest, taxes, depreciation, amortization, restructuring charges and certain other non-cash costs and charges, as set forth in the DIP Credit Agreement) and not exceeding maximum permitted capital expenditure amounts. The DIP Credit Agreement also contains customary affirmative and negative covenants and restrictions, including, among others, with respect to investments, additional indebtedness, liens, changes in the nature of the business, mergers, acquisitions, asset sales and transactions with affiliates. As of September 30, 2010, the DIP Borrowers are in compliance with all covenants under the DIP Credit Agreement. Pursuant to the Fifteenth Amendment, effective October 22, 2010, the minimum EBITDAR and maximum permitted capital expenditure covenants in the DIP Credit Agreement were eliminated.

        Events of Default.    The DIP Credit Agreement contains customary events of default, including, but not limited to, failure to pay principal, interest or other amounts when due, breach of covenants, failure of any representations to have been true in all material respects when made, cross-defaults to certain

52

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited) (Continued)

(8) Long Term Debt (Continued)

other indebtedness in excess of specific amounts (other than obligations and indebtedness created or incurred prior to the filing of the Chapter 11 Cases), judgment defaults in excess of specified amounts, certain ERISA defaults and the failure of any guaranty or security document supporting the DIP Credit Agreement to be in full force and effect, the occurrence of a change of control and certain matters related to the Interim Order, the Final DIP Order and other matters related to the Chapter 11 Cases.

DIP Pledge Agreement

        The DIP Borrowers and the DIP Pledgors entered into the DIP Pledge Agreement with Bank of America N.A., as the DIP Collateral Agent, as required under the terms of the DIP Credit Agreement. Pursuant to the DIP Pledge Agreement, the DIP Pledgors provided the DIP Pledge Agreement Collateral to the DIP Collateral Agent for the secured parties identified therein.

DIP Subsidiary Guaranty

        The DIP Guarantors entered into the DIP Subsidiary Guaranty with the DIP Administrative Agent, as required under the terms of the DIP Credit Agreement. Pursuant to the DIP Subsidiary Guaranty, the DIP Guarantors agreed to jointly and severally guarantee the full and prompt payment of all fees, obligations, liabilities and indebtedness of the DIP Borrowers, as borrowers under the DIP Financing. Pursuant to the terms of the DIP Subsidiary Guaranty, the DIP Guarantors further agreed to subordinate any indebtedness of the DIP Borrowers held by such DIP Guarantor to the indebtedness of the DIP Borrowers held by the secured parties under the DIP Financing.

DIP Security Agreement

        The DIP Grantors entered into the DIP Security Agreement with the DIP Collateral Agent, as required under the terms of the DIP Credit Agreement. Pursuant to the DIP Security Agreement, the DIP Grantors provided to the DIP Collateral Agent for the benefit of the secured parties identified therein, a security interest in all assets other than the DIP Pledge Agreement Collateral, any equity interests in an Excluded Entity (as defined in the DIP Pledge Agreement), any causes of action arising under Chapter 5 of the Bankruptcy Code and FCC licenses and authorizations 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.

(9) Employee Benefit Plans

        The Company remeasured its pension and other post-employment benefit assets and liabilities as of December 31, 2009, in accordance with the Compensation—Retirement Benefits Topic of the ASC. This measurement is based on a 6.07% weighted average discount rate, as well as certain other valuation assumption modifications.

53

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited) (Continued)

(9) Employee Benefit Plans (Continued)

        Components of the net periodic benefit (income) cost related to the Company's pension and post-retirement healthcare plans for the three months and nine months ended September 30, 2010 are presented below (in thousands).

	Three Months ended September 30, 2010						Nine Months ended September 30, 2010
	Qualified Pension			Post- retirement Health			Qualified Pension			Post- retirement Health
Service cost	$	2,628		$	3,835		$	8,390		$	10,741
Interest cost		3,699			4,299			9,722			12,260
Expected return on plan assets		(4,202	)		(2	)		(12,498	)		(2	)
Amortization of prior service cost		381			1,072			1,143			3,217
Amortization of actuarial (gain) loss		1,008			1,050			1,566			2,605
Net periodic benefit cost	$	3,514		$	10,254		$	8,323		$	28,821

        Components of the net periodic benefit (income) cost related to the Company's pension and post-retirement healthcare plans for the three and nine months ended September 30, 2009 are presented below (in thousands).

	Three Months ended September 30, 2009					Nine Months ended September 30, 2009
	Qualified Pension			Post- retirement Health		Qualified Pension			Post- retirement Health
Service cost	$	2,721		$	3,413	$	8,192		$	9,764
Interest cost		3,453			3,794		10,013			10,362
Expected return on plan assets		(5,153	)		—		(15,511	)		—
Amortization of prior service cost		363			1,073		1,089			3,219
Amortization of actuarial (gain) loss		286			1,214		598			2,542
Settlement loss		1,627			—		2,514			—
Net periodic benefit cost	$	3,297		$	9,494	$	6,895		$	25,887

        The Company has no required contributions to its defined benefit pension plans during fiscal year 2010. The Company's pension plan funding requirements are based on the Pension Protection Act of 2006 and subsequent funding relief passed by Congress and regulations published by the IRS.

        The Company expects to contribute approximately $1.9 million to its post-retirement healthcare plans in 2010 for benefit payments to current retirees.

        For the three months and nine months ended September 30, 2010, the actual gain on the pension plan assets was approximately 6.5% and 6.0%, respectively. Net periodic benefit cost for 2010 assumes a weighted average annualized expected return on plan assets of approximately 8.3%. Should the Company's actual return on plan assets continue to be lower than the expected return assumption, the

54

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited) (Continued)

(9) Employee Benefit Plans (Continued)

net periodic benefit cost may increase in future periods and the Company may be required to contribute additional funds to its pension plans after 2010.

        During the three months ended March 31, 2010, $33.3 million was transferred from Verizon's defined benefit pension plans' trusts to the Company's pension plan trust. As of June 30, 2010, a disputed amount was pending final validation by a third-party actuary of the census information and related actuarial calculations in accordance with relevant statutory and regulatory guidelines and the Employee Matters Agreement, dated January 15, 2007 between Verizon and the Company (the "Employee Matters Agreement"). The disputed amount was not included in the Company's pension plan assets at June 30, 2010 or December 31, 2009. By letter dated July 29, 2010, the third-party actuary appointed to perform the review and validation determined that an additional $2.5 million, adjusted for gains or losses since the date of the original transfer, should be transferred from Verizon's defined benefit plans' trusts to the Company's represented employees pension plan trust. This transfer was received in the amount of $2.4 million on September 1, 2010, at which time the Company's net pension obligation was decreased by this amount.

        The Company and its subsidiaries sponsor four voluntary 401(k) savings plans that, in the aggregate, cover substantially all eligible Legacy FairPoint employees, and two voluntary 401(k) savings plans that cover in the aggregate substantially all eligible Northern New England operations employees (collectively, "the 401(k) Plans"). Each 401(k) Plan year, the Company contributes to the 401(k) Plans an amount of matching contributions determined by the Company at its discretion. For the three and nine months ended September 30, 2010 and for the 401(k) Plan year ended December 31, 2009, the Company matched 100% of each employee's contribution up to 5% of compensation. Total Company contributions to all 401(k) Plans were $2.7 million and $2.3 million for the three months and $7.7 million and $7.2 million for the nine months ended September 30, 2010 and 2009, respectively.

(10) Accumulated Other Comprehensive Loss

        The components of accumulated other comprehensive loss were as follows (in thousands):

		September 30, 2010			December 31, 2009
Accumulated other comprehensive loss, net of taxes:
	Defined benefit pension and post-retirement plans	$	(119,819	)	$	(124,924	)
Total accumulated other comprehensive loss		$	(119,819	)	$	(124,924	)

        Other comprehensive loss for the three months and nine months ended September 30, 2010 and 2009 includes amortization of defined benefit pension and post-retirement plan related prior service costs and actuarial gains and losses included in accumulated other comprehensive loss.

55

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited) (Continued)

(11) Earnings Per Share

        Earnings per share has been computed in accordance with the Earnings Per Share Topic of the ASC. Basic earnings per share is computed by dividing net income or loss by the weighted average number of shares of common stock outstanding for the period. Except when the effect would be anti-dilutive, the diluted earnings per share calculation calculated using the treasury stock method includes the impact of stock units, shares of non-vested common stock and shares that could be issued under outstanding stock options. The weighted average number of common shares outstanding for all periods presented has been restated to reflect the issuance of 53,760,623 shares to the stockholders of Spinco in connection with the Merger.

        The following table provides a reconciliation of the common shares used for basic earnings per share and diluted earnings per share (in thousands):

	Three months ended September 30,				Nine months ended September 30,
	2010		2009		2010		2009
Weighted average number of common shares used for basic earnings per share		89,424		89,366		89,424		89,235
Effect of potential dilutive shares		—		—		—		—
Weighted average number of common shares and potential dilutive shares used for diluted earnings per share		89,424		89,366		89,424		89,235
Anti-dilutive shares excluded from the above reconciliation		2,524		2,674		2,510		2,312

        Weighted average number of common shares used for basic earnings per share excludes 540,476 and 640,475 shares of non-vested restricted stock as of September 30, 2010 and 2009, respectively. Since the Company incurred a loss for the three months and nine months ended September 30, 2010 and 2009, all potentially dilutive securities are anti-dilutive and are, therefore, excluded from the determination of diluted earnings per share.

(12) Stockholders' Equity

        On March 31, 2008, FairPoint completed the Merger, 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 the time of the Merger, Legacy FairPoint had 35,264,945 shares of common stock outstanding. Upon consummation of the Merger, the combined Company had 89,025,568 shares of common stock outstanding. At September 30, 2010, there were 89,964,144 shares of common stock outstanding and 200,000,000 shares of common stock were authorized.

(13) Fair Value Measurements

        The Fair Value Measurements and Disclosures Topic of the ASC (formerly SFAS 157, Fair Value Measurements ("SFAS 157")) defines fair value, establishes a framework for measuring fair value and

56

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited) (Continued)

(13) Fair Value Measurements (Continued)

establishes a hierarchy that categorizes and prioritizes the sources to be used to estimate fair value. The Fair Value Measurements and Disclosures Topic of the ASC also expands financial statement disclosures about fair value measurements. On February 12, 2008, the FASB issued FASB Staff Position ("FSP") 157-2, which delayed the effective date of SFAS 157 for one year for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis. The impact of adopting SFAS 157 and FSB 157-2 was not material to the Company's financial statements.

        The filing of the Chapter 11 Cases constituted a termination event under the Swaps. Subsequent to the filing of the Chapter 11 Cases, the Company received notification from the counterparties to the Swaps that the Swaps had been terminated. Therefore, the carrying value of the Swaps at September 30, 2010 and December 31, 2009 represents the termination value of the swaps as determined by the respective counterparties following the termination event described herein. See note 7 for more information.

        The Company does not carry any assets or liabilities at fair value as of September 30, 2010 and December 31, 2009.

(14) Commitments and Contingencies

(a)

Leases

        Future minimum lease payments under capital leases and non-cancelable operating leases as of September 30, 2010 are as follows (in thousands):

		Capital Leases			Operating Leases
Twelve months ending September 30:
2011		$	2,305		$	10,145
2012			1,801			9,053
2013			1,604			7,822
2014			1,534			5,783
2015			489			3,011
Thereafter			—			4,254
	Total minimum lease payments	$	7,733		$	40,068
Less interest and executory cost			(1,663	)
	Present value of minimum lease payments		6,070
Less current installments			(1,648	)
	Long-term obligations at September 30, 2010	$	4,422

        The Company does not have any leases with contingent rental payments or any leases with contingency renewal, purchase options, or escalation clauses.

57

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited) (Continued)

(14) Commitments and Contingencies (Continued)

(b)

Legal Proceedings

        From time to time, the Company is involved in litigation and regulatory proceedings arising out of its operations. With the exception of the Chapter 11 Cases, the Company's management believes that it is not currently a party to any legal or regulatory proceedings, the adverse outcome of which, individually or in the aggregate, would have a material adverse effect on the Company's financial position or results of operations. To the extent the Company is currently involved in any litigation and/or regulatory proceedings, such proceedings have been stayed as a result of the filing of the Chapter 11 Cases. For a discussion of the Chapter 11 Cases, see note 1.

(c)

Service Quality Penalties

        The Company is subject to certain service quality requirements in the states of Maine, New Hampshire and Vermont. Failure to meet these requirements in any of these states may result in penalties being assessed by the respective state regulatory body. As of September 30, 2010, the Company has recognized an estimated liability for service quality penalties based on metrics defined by the state regulatory authorities in Maine, New Hampshire and Vermont. The Merger Orders provide that any penalties assessed by the states be paid by the Company in the form of credits applied to customer bills. Based on the Company's current estimate of its service quality penalties in these states, increases of $7.2 million and $10.8 million in the estimated liability were recorded as a reduction to revenue for the three months and nine months ended September 30, 2010, respectively. The amounts recorded during the three months and nine months ended September 30, 2010 include $4.8 million and $2.1 million, respectively, related to prior periods. During the three months and nine months ended September 30, 2010, the Company paid out $1.8 million and $3.9 million, respectively, of service quality index ("SQI") penalties in the form of customer rebates, all of which were related to Maine fiscal 2008 and 2009 penalties. The Company has recorded a total liability of $34.4 million on the condensed consolidated balance sheet at September 30, 2010. Additional penalties may be assessed as a result of service quality issues related to transitioning certain back-office functions from Verizon's integrated systems to newly created systems of the Company, which occurred in January 2009 (the "Cutover"), which could have a material adverse effect on the Company's financial position, results of operations and liquidity.

        During February 2010, the Company entered into the Regulatory Settlements with representatives of the state regulatory authorities in each of Maine, New Hampshire and Vermont, which were made subject to the approval of the regulatory authorities in these states. The Regulatory Settlements in New Hampshire and Vermont defer fiscal 2008 and 2009 SQI penalties until December 31, 2010 and include a clause whereby such penalties may be forgiven in part or in whole if the Company meets certain metrics for the twelve-month period ending December 31, 2010. As this clause represents a contingent gain, the Company has not recognized such gain as of September 30, 2010. As of September 30, 2010, the Company has accrued fiscal 2008 and 2009 liabilities of $6.0 million for New Hampshire and approximately $11.4 million for Vermont. In addition, the Regulatory Settlement for Maine deferred the Company's fiscal 2008 and 2009 SQI penalties until March 2010. Beginning in March 2010, the Company began to issue SQI rebates related to the Maine 2008 and 2009 SQI penalties to customers over a twelve month period.

58

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

(DEBTORS-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited) (Continued)

(14) Commitments and Contingencies (Continued)

        The MPUC and NHPUC have approved the Regulatory Settlements for Maine and New Hampshire. However, the Vermont Board has rejected the Regulatory Settlement for Vermont. As described in note 1, on October 20, 2010, the Company provided supplemental information to the Vermont Board, which information included a financial forecast. If the Company is unable to obtain the Vermont Board's approval of the Regulatory Settlement for Vermont, it is unclear what effect the filing of the Chapter 11 Cases will have on the requirements, including SQI penalties, imposed by the Vermont Merger Order and whether the requirements of the Vermont Merger Order would be enforceable against the Company in the future.

(d)

Performance Assurance Plan Credits

        As part of the Merger Orders, the Company adopted certain performance assurance plans ("PAP") in the states of Maine, New Hampshire and Vermont. Failure to meet specified performance standards in any of these states may result in performance credits being assessed in accordance with the provisions of the PAP in each state. As of September 30, 2010, the Company has reduced its accounts receivable balance for the estimated amount of PAP credits based on metrics defined by the PAP. Credits assessed in Maine and New Hampshire are paid by the Company in the form of credits applied to competitive local exchange carrier ("CLEC") bills. Certain credits assessed in Vermont are paid to the Vermont Universal Service Fund, while the remaining credits assessed in Vermont are paid by the Company in the form of credits applied to CLEC bills. Based on the Company's current estimate of its PAP credits in these states, increases of $1.3 million and $5.2 million in the estimated reserve were recorded as a reduction to revenue for the three months and nine months ended September 30, 2010, respectively. During the three months and nine months ended September 30, 2010, the Company paid out $0.9 million and $4.9 million, respectively, of PAP credits. The Company has recorded a total reduction of accounts receivable of $13.9 million on the condensed consolidated balance sheet at September 30, 2010.

(e)

Volume Purchase Commitment

        On June 1, 2010, the Bankruptcy Court approved the Company's motion to assume an amended volume product purchase and sale agreement with Occam Networks, Inc ("Occam"). This motion includes a commitment by the Company to purchase at least $12.0 million worth of products from Occam during the initial five-year term of the amended agreement, which term ends on April 1, 2013.

59

Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations.

        The following discussion should be read in conjunction with the financial statements of the Company and the notes thereto included elsewhere in this Quarterly Report. The following discussion includes certain forward-looking statements. For a discussion of important factors, which could cause actual results to differ materially from the results referred to in the forward-looking statements, see "Part I—Item 1A. Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2009, "Part II—Item 1A. Risk Factors" of our Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2010 and June 30, 2010 and "Part II—Item 1A. Risk Factors" and "Cautionary Note Concerning Forward-Looking Statements" contained in this Quarterly Report.

Overview

        We are a leading provider of communications services in rural and small urban communities, offering an array of services, including local and long distance voice, data, Internet, video and broadband product offerings. We operate in 18 states with 1.5 million access line equivalents (including voice access lines and high speed data lines, which include digital subscriber lines ("DSL"), wireless broadband, cable modem and fiber-to-the-premises) in service as of September 30, 2010.

        We were incorporated in Delaware in February 1991 for the purpose of acquiring and operating incumbent telephone companies in rural and small urban markets. Many of our telephone companies have served their respective communities for over 75 years.

        As our primary source of revenues, access lines are an important element of our business. Over the past several years, communications companies, including FairPoint, have experienced a decline in access lines due to increased competition, including competition from wireless carriers and cable television operators, the introduction of DSL services (resulting in customers substituting DSL for a second line) and challenging economic conditions. In addition, while we were operating under the Transition Services Agreement, we had limited ability to change current product offerings. Upon completion of the Cutover from the Verizon systems to the new FairPoint systems, we expected to be able to modify bundles and prices to be more competitive in the marketplace. However, due to certain systems functionality issues (as described herein), we had limited ability during 2009 to make changes to our product offerings. In late June 2009, we began actively marketing and promoting our DSL product for the first time since the Cutover. While voice access lines are expected to continue to decline, we expect to offset a portion of this lost revenue with growth in high speed data revenue as we continue to build-out our network to provide high speed data products to customers who did not previously have access to such products and to offer more competitive services to existing customers. Overall, high speed data services are expected to be a key element of our operations in the future. We also expect to implement cost reductions as we gain efficiencies in our business over time.

        We are also a large provider of wholesale telecommunications services in our markets. Our ability to provide wholesale service is dependent on our network. We are in the process of making significant investments in an advanced Next Generation Network for our Northern New England operations. The Next Generation Network is an IP / Multiple Protocol Label Switched (IP/MPLS) network that is fully fiber optic based. We believe that this network architecture will enable us to expand our provision of wholesale services, especially to wireless carriers.

        We are subject to regulation primarily by federal and state governmental agencies. At the federal level, the FCC generally exercises jurisdiction over the facilities and services of communications common carriers, such as FairPoint, to the extent those facilities are used to provide, originate or terminate interstate or international communications. State regulatory commissions generally exercise jurisdiction over common carriers' facilities and services to the extent those facilities are used to provide, originate or terminate intrastate communications. In addition, pursuant to the 1996 Act, which

60

amended the Communications Act of 1934, state and federal regulators share responsibility for implementing and enforcing the domestic pro-competitive policies introduced by that legislation.

        Legacy FairPoint's operations and our Northern New England operations operate under different regulatory regimes in certain respects. For example, concerning interstate access, all of the pre-Merger regulated interstate services of FairPoint were regulated under a rate-of-return model, while all of the rate-regulated interstate services provided by the Verizon Northern New England business were regulated under a price cap model. On May 10, 2010, we received FCC approval to convert our Legacy FairPoint operations in Maine and Vermont to the price cap model. Our Legacy FairPoint operations in Maine and Vermont converted to price cap regulation on July 1, 2010. We have obtained permission to continue to operate our Legacy FairPoint incumbent LECs outside of Maine and Vermont under the rate-of-return regime until the FCC completes its general review of whether to modify or eliminate the "all-or-nothing" rule. Without this permission, the all-or-nothing rule would require that all of our regulated operations be operated under the price cap model for federal regulatory purposes. In addition, while all of our operations generally are subject to obligations that apply to all LECs, our non-rural operations are subject to additional requirements concerning interconnection, non-discriminatory network access for competitive communications providers and other matters, subject to substantial oversight by state regulatory commissions. In addition, the FCC has ruled that our Northern New England operations must comply with the regulations applicable to the Bell Operating Companies. Our rural and non-rural operations are also subject to different regimes concerning universal service.

        From 2007 through January 2009, we were in the process of developing and deploying new systems, processes 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. These services were provided by Verizon under the Transition Services Agreement through January 30, 2009. On January 30, 2009, we began the Cutover, and on February 9, 2009, we began operating our new platform of systems independently from the Verizon systems, processes and personnel. During the period from January 23, 2009 until January 30, 2009, all retail orders were taken manually and following the Cutover were entered into the new systems. From February 2, 2009 through February 9, 2009, we manually processed only emergency orders, although we continued to provide repair and maintenance services to all customers.

        Following the Cutover, many of these systems functioned without significant problems, but a number of the key back-office systems, such as order entry, order management and billing, experienced certain functionality issues as well as issues with communication between the systems. As a result of these systems functionality issues, as well as work force inexperience on the new systems, we experienced increased handle time by customer service representatives for new orders, reduced levels of order flow-through across the systems, which caused delays in provisioning and installation, and delays in the processing of bill cycles and collection treatment efforts. These issues impacted customer satisfaction and resulted in large increases in customer call volumes into our customer service centers. While many of these issues were anticipated, the magnitude of difficulties experienced was beyond our expectations.

        In the months following the Cutover, we worked diligently to remedy these issues. The order backlog was reduced significantly and order handle times returned to normal levels. Provisioning of new orders steadily improved and call volumes into the customer service centers returned to pre-Cutover levels. However, certain systems functionality supporting our collection efforts was not fully operational until 2010. While billing systems functionality and collection efforts continue to improve, invoicing has yet to return to normal. As a result of these functionality issues and past billing issues, our efforts to collect past due amounts continue to be hampered. During the third quarter of 2009, we revised the methodology of calculating the allowance for doubtful accounts based on recent collections experience. The issues discussed above and the change in methodology resulted in a significant increase in our

61

allowance for doubtful accounts during the third quarter of 2009. Overall, delays in implementing the collections software functionality, together with other Cutover issues, caused an increase in accounts receivable, which adversely impacted our liquidity.

        Due to these Cutover issues, during the three months and nine months ended September 30, 2009 we incurred $2.5 million and $28.8 million, respectively, of incremental expenses in order to operate our business, including third-party contractor costs and internal labor costs in the form of overtime pay. The Cutover issues also required significant staff and senior management attention, diverting their focus from other efforts.

        In addition to the significant incremental expenses we incurred as a result of these Cutover issues, we were unable to fully implement our operating plan for 2009 and effectively compete in the marketplace, which we believe had an adverse effect on our business, financial condition, results of operations and liquidity.

        On April 30, 2010, we filed amendments to our Quarterly Reports on Form 10-Q/A for the quarters ended March 31, 2009, June 30, 2009 and September 30, 2009 (collectively, the "Amendments") to reflect the effect of an accounting error, a one-time non-operating loss related to a disputed claim and certain billing and other adjustments. For the nine months ended September 30, 2009, the accounting error and the billing and other adjustments resulted in a $25.0 million overstatement of revenues, a $0.2 million understatement of operating expenses and a $9.6 million overstatement of other income in the financial data originally reported in our Quarterly Report on Form 10-Q for the nine months ended September 30, 2009, which was originally filed with the SEC on November 20, 2009. The Restatement, which accounts for the foregoing overstatements and understatement, resulted in a reduction in net income of $21.8 million, net of income taxes, for the nine months ended September 30, 2009.

        The accounting error and the billing and other adjustments resulted in a $2.2 million understatement of revenues for the three months ended September 30, 2009 and a $1.9 million overstatement of operating expenses for the three months ended September 30, 2009 in the financial data originally reported in our Quarterly Report on Form 10-Q for the three months and nine months ended September 30, 2009, which was originally filed with the SEC on November 20, 2009. The Restatement resulted in an increase in net income of $2.1 million, net of income taxes, for the three months ended September 30, 2009. For more information, see the Amendments as filed with the SEC.

        As a result of the Restatement, we determined that we were not in compliance with the interest coverage ratio maintenance covenant and the leverage ratio maintenance covenant under the Pre-petition Credit Facility for the measurement period ended June 30, 2009, which constituted an event of default under each of the Pre-petition Credit Facility and the Swaps, and may have constituted an event of default under the Notes, in each case at June 30, 2009.

Basis of Presentation

        On March 31, 2008, the Merger between Spinco and Legacy FairPoint was completed. In connection with the Merger and in accordance with the terms of an agreement and plan of merger with Verizon and Spinco pursuant to which we committed to purchase and assume Verizon's landline operations in Maine, New Hampshire and Vermont, Legacy FairPoint issued 53,760,623 shares of common stock to Verizon stockholders. Prior to the Merger, the Verizon Group engaged in a series of restructuring transactions to effect the transfer of specified assets and liabilities of the Verizon Northern New England business to Spinco and the entities that became Spinco's subsidiaries. Spinco was then spun off from Verizon immediately prior to the Merger. While FairPoint was the surviving entity in the Merger, for accounting purposes Spinco was deemed to be the acquirer. For more information, see note 1 to the Condensed Consolidated Financial Statements.

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        We view our business of providing voice, data and communication services to residential and business customers as one business segment as defined in the Segment Reporting Topic of the ASC.

        The accompanying Condensed Consolidated Financial Statements have been prepared assuming that we will continue as a going concern and contemplate the realization of assets and the satisfaction of liabilities in the normal course of business. For further discussion, see note 1 to the Condensed Consolidated Financial Statements.

        We have reclassified certain prior period amounts in the Condensed Consolidated Financial Statements to be consistent with current period presentation. These reclassifications were made to correct the classification of PAP penalties from selling, general and administrative expenses to contra-revenue and to correct the allocation of certain employee and general computer expenses between cost of services and selling, general and administrative expenses. Correction of these classification errors resulted in decreases of $2.3 million and $5.6 million to revenue, a decrease of $1.5 million and an increase of $1.3 million to cost of services, and decreases of $0.8 million and $6.9 million to selling, general and administrative expenses for the three months and nine months ended September 30, 2009, respectively. Correction of these classification errors had no impact on loss from operations or net loss.

Revenues

        We derive our revenues from:

•

Local calling services.  We receive revenues from our telephone operations from the provision of local exchange, local private line, wire maintenance, voice messaging and value-added services. Value-added services are a family of services that expand the utilization of the network, including products such as caller ID, call waiting and call return. The provision of local exchange services not only includes retail revenues but also includes local wholesale revenues from unbundled network elements, interconnection revenues from competitive LECs and wireless carriers, and some data transport revenues.

•

Network access services.  We receive revenues earned from end-user customers and long distance and other competing carriers who use our local exchange facilities to provide usage services to their customers. Switched access revenues are derived from fixed and usage-based charges paid by carriers for access to our local network. Special access revenues originate from carriers and end-users that buy dedicated local and interexchange capacity to support their private networks. Access revenues are earned from resellers who purchase dial-tone services.

•

Interstate access revenue.  Interstate access charges to long distance carriers and other customers are based on access rates filed with the FCC. These revenues also include Universal Service Fund payments for high-cost loop support, local switching support, long term support and interstate common line support.

•

Intrastate access revenue.  These revenues consist primarily of charges paid by long distance companies and other customers for access to our networks in connection with the origination and termination of intrastate telephone calls both to and from our customers. Intrastate access charges to long distance carriers and other customers are based on access rates filed with the state regulatory agencies.

•

Universal Service Fund high-cost loop support.  We receive payments from the Universal Service Fund to support the high cost of operating in rural markets and to provide support for low income subscribers, schools, libraries and rural healthcare.

•

Long distance services.  We receive revenues from long distance services we provide to our residential and business customers. Included in long distance services revenue are revenues received from regional toll calls.

63

•

Data and Internet services.  We receive revenues from monthly recurring charges for services, including high speed data, 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, the sale and maintenance of customer premise equipment and public (coin) telephone.

        The following table summarizes revenues and the percentage of revenues from the listed sources (in thousands, except for percentage of revenues data):

		Revenues								% of Revenues
		Three months ended September 30,				Nine months ended September 30,				Three months ended September 30,						Nine months ended September 30,
		2010		2009		2010		2009		2010			2009			2010			2009
Revenue Source:
Local calling services		$	93,521	$	97,728	$	307,405	$	332,304		36	%		36	%		38	%		39	%
Access			96,374		93,980		291,033		281,609		37	%		35	%		36	%		33	%
Long distance services			30,037		36,751		91,167		115,847		12	%		14	%		12	%		14	%
Data and Internet services			26,691		27,456		82,719		83,869		10	%		10	%		10	%		10	%
Other services			11,887		12,279		34,546		35,271		5	%		5	%		4	%		4	%
	Total	$	258,510	$	268,194	$	806,870	$	848,900		100	%		100	%		100	%		100	%

        The following table summarizes access line equivalents (including voice access lines and high speed data lines, which include DSL, wireless broadband, cable modem and fiber-to-the-premises) as of the end of each of the five most recently completed quarters:

		September 30, 2010		June 30, 2010		March 31, 2010		December 31, 2009		September 30, 2009
Access Line Equivalents:
Residential access lines			734,260		758,005		776,254		802,668		837,138
Business access lines			342,626		348,280		356,471		364,897		373,661
Wholesale access lines			89,035		91,138		93,827		97,161		98,758
	Total switched access lines		1,165,921		1,197,423		1,226,552		1,264,726		1,309,557
High speed data subscribers			288,891		289,609		283,806		288,542		293,984
	Total access line equivalents		1,454,812		1,487,032		1,510,358		1,553,268		1,603,541

Operating Expenses

        Our operating expenses consist of cost of services and sales, selling, general and administrative expenses, and depreciation and amortization.

•

Cost of Services and Sales.  Cost of services and sales includes the following costs directly attributable to a service or product: salaries and wages, benefits, materials and supplies, contracted services, network access and transport costs, customer provisioning costs, computer systems support and cost of products sold. Aggregate customer care costs, which include billing and service provisioning, are allocated between cost of services and sales and selling, general and administrative expense.

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Selling, General and Administrative Expense.  Selling, general and administrative expense includes salaries and wages and benefits, including pension and post-retirement medical benefits, not directly attributable to a service or product, bad debt charges, taxes other than income, advertising and sales commission costs, customer billing, call center and information technology costs, professional service fees and rent for administrative space. Also included in selling, general and administrative expenses are non-cash expenses related to stock based compensation. Stock

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based compensation consists of compensation charges incurred in connection with the employee stock options, stock units and non-vested stock granted to executive officers and directors.

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Depreciation and amortization.  Depreciation and amortization includes depreciation of our communications network and equipment and amortization of intangible assets.

        Through January 30, 2009, we operated under the Transition Services Agreement, under which we incurred $15.9 million of expenses during the nine months ended September 30, 2009. As of January 30, 2009, we began performing these services internally or obtaining them from third-party service providers and not from Verizon.

        In New Hampshire, all structures, poles, towers and conduits employed in the transmission of telecommunication, cable or commercial mobile radio services are taxed as real estate in the town in which such property or any part of such property is situated. Prior to July 1, 2010, the Company had an exemption from the payment of this tax. However, that exemption has been repealed effective as of July 1, 2010. The tax is calculated based upon the valuation of such property as real estate on a municipality-by-municipality basis. As the Company has been exempt from this tax in the past, we have not yet determined our exposure to such taxes. Therefore, we cannot provide an estimate of the financial impact relating to the repeal of this exemption at this time. If the impact is determined to be material, we will disclose the estimated impact in our future filings.

Results of Operations

Three Months Ended September 30, 2010 Compared with Three Months Ended September 30, 2009

        The following table sets forth the percentages of revenues represented by selected items reflected in the consolidated statements of operations. The year-to-year comparisons of financial results are not necessarily indicative of future results (in thousands, except percentage of revenues data):

		2010			% of Revenues			2009			% of Revenues
Revenues		$	258,510			100	%	$	268,194			100	%
Operating expenses
	Cost of services and sales		115,914			45			127,184			48
	Selling, general and administrative		99,523			39			118,157			44
	Depreciation and amortization		73,693			28			68,013			25
Total operating expenses			289,130			112			313,354			117
Loss from operations			(30,620	)		(12	)		(45,160	)		(17	)
Interest expense			(35,358	)		(14	)		(56,874	)		(21	)
Loss on derivative instruments			—			—			(11,536	)		(4	)
Other income			2,207			1			214			—
Loss before reorganization items and income taxes			(63,771	)		(25	)		(113,356	)		(42	)
Reorganization items			(9,635	)		(4	)		—			—
Loss before income taxes			(73,406	)		(29	)		(113,356	)		(42	)
Income tax benefit			7,330			3			38,154			14
Net loss		$	(66,076	)		(26	)%	$	(75,202	)		(28	)%

        Revenues decreased $9.7 million to $258.5 million in the third quarter of 2010 compared to the same period in 2009. Revenues for the third quarter of 2010 include corrections in the August 2009 through June 2010 calculations of SQI penalties totaling $4.8 million. In total, we recorded $7.2 million in SQI penalties during the third quarter of 2010 compared to $19.4 million recorded in the same period in 2009. Also, we recorded $1.3 million in PAP penalties during the third quarter of 2010 compared to $6.0 million recorded in the same period in 2009. Excluding the impact of these penalties,

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revenues decreased $26.6 million which primarily reflects the adverse impact of competition and technology substitution. We derive our revenues from the following sources:

        Local calling services.    Local calling services revenues decreased $4.2 million to $93.5 million during the third quarter of 2010 compared to the same period in 2009. This decrease is primarily due to the impact of an 11.0% decline in total voice access lines in service at September 30, 2010 compared to September 30, 2009, largely offset by a $12.2 million decline in SQI penalties and a $4.7 million decrease in PAP penalties recorded during the third quarter of 2010 as compared to the third quarter of 2009.

        Access.    Access revenues increased $2.4 million to $96.4 million during the third quarter of 2010 compared to the same period in 2009. Of this increase, $7.5 million is attributable to an increase in interstate access revenues, partially offset by a $5.1 million decrease in intrastate access revenues.

        Long distance services.    Long distance services revenues decreased $6.7 million to $30.0 million in the third quarter of 2010 compared to the same period in 2009. The decrease was primarily attributable to a 5.9% decrease in the number of subscribers from September 30, 2009 to September 30, 2010 coupled with a decrease in average revenue per subscriber ("ARPU").

        Data and Internet services.    Data and Internet services revenues decreased $0.8 million to $26.7 million in the third quarter of 2010 compared to the same period in 2009. The decrease was primarily attributable to a 1.7% decrease in the number of subscribers from September 30, 2009 to September 30, 2010.

        Other services.    Other services revenues decreased $0.4 million to $11.9 million in the third quarter of 2010 compared to the same period in 2009.

Operating Expenses

        Cost of services and sales.    Cost of services and sales decreased $11.3 million to $115.9 million in the third quarter of 2010 compared to the same period in 2009. This decrease is mainly attributable to significant reductions in access expenses associated with providing long distance and data and internet services and certain employee expenses.

        Selling, general and administrative.    Selling, general and administrative expenses decreased $18.6 million to $99.5 million in the third quarter of 2010 compared to the same period in 2009. The decrease is primarily attributable to a $11.3 million reduction in bad debt expense. Additionally, prior to the Petition Date, all expenses related to restructuring activities were classified as selling, general and administrative expenses. During the Chapter 11 Cases, such expenses have been classified as reorganization items. Accordingly, the three months ended September 30, 2009 included $6.1 million in restructuring expenses as compared to zero in the same period of 2010.

        Depreciation and amortization.    Depreciation and amortization expense increased $5.7 million to $73.7 million in the third quarter of 2010 compared to the same period in 2009, due primarily to higher gross plant asset balances, including capitalized software placed into service upon termination of the Transition Services Agreement.

Other Results

        Interest expense.    Interest expense decreased $21.5 million to $35.4 million in the third quarter of 2010 compared to the same period in 2009. Upon the filing of the Chapter 11 Cases, in accordance with the Reorganizations Topic of the ASC, we ceased the accrual of interest expense on the Notes and the Swaps as it is unlikely that such interest expense will be paid or will become an allowed priority

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secured or unsecured claim. We have continued to accrue interest expense on the Pre-petition Credit Facility, as such interest is considered an allowed claim pursuant to the Plan.

        Loss on derivative instruments.    Loss on derivative instruments represents net gains and losses recognized on the change in fair market value of interest rate swap derivatives. During the three months ended September 30, 2009, we recognized non-cash losses of $11.5 million related to our derivative financial 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. Accordingly, we recognized no gain or loss on derivative instruments during the three months ended September 30, 2010.

        Other income (expense).    Other expense includes non-operating gains and losses. Other income was $2.2 million in the third quarter of 2010 compared with $0.2 million in the same period in 2009. This increase is primarily attributable to a $3.0 million lease contract settlement with a vendor that occurred during the third quarter of 2010.

        Reorganization items.    Reorganization items represent expense or income amounts that have been recognized as a direct result of the Chapter 11 Cases. For more information, see note 2 to the Condensed Consolidated Financial Statements.

Income taxes. The effective income tax rate is the provision for income taxes stated as a percentage of income before the provision for income taxes. The effective income tax rate for the three months ended September 30, 2010 and 2009 was 10.0% benefit and 33.7% benefit, respectively. The decrease in the effective tax rate is primarily due to non-deductible restructuring charges and post-petition interest.

        Net loss.    Net loss for the three months ended September 30, 2010 was $66.1 million compared to net loss of $75.2 million for the same period in 2009. The difference in net loss between 2010 and 2009 is a result of the factors discussed above.

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Nine Months Ended September 30, 2010 Compared with Nine Months Ended September 30, 2009

        The following table sets forth the percentages of revenues represented by selected items reflected in the consolidated statements of operations. The year-to-year comparisons of financial results are not necessarily indicative of future results (in thousands, except percentage of revenues data):

		2010			% of Revenues			2009			% of Revenues
Revenues		$	806,870			100	%	$	848,900			100	%
Operating expenses
	Cost of services and sales		360,829			45			398,209			47
	Selling, general and administrative		292,460			36			303,905			36
	Depreciation and amortization		214,597			27			204,740			24
Total operating expenses			867,886			108			906,854			107
Loss from operations			(61,016	)		(8	)		(57,954	)		(7	)
Interest expense			(105,709	)		(13	)		(165,162	)		(19	)
Gain on derivative instruments			—			—			8,595			1
Gain on early retirement of debt			—			—			12,357			1
Other income (expense)			(905	)		—			6,433			1
Loss before reorganization items and income taxes			(167,630	)		(21	)		(195,731	)		(23	)
Reorganization items			(24,677	)		(3	)		—			—
Loss before income taxes			(192,307	)		(24	)		(195,731	)		(23	)
Income tax benefit			14,074			2			70,061			8
Net loss		$	(178,233	)		(22	)%	$	(125,670	)		(15	)%

        Revenues decreased $42.0 million to $806.9 million in the nine months ended September 30, 2010 compared to the same period in 2009. Revenues for the nine months ended September 30, 2010 include corrections in the August 2009 through December 2009 calculations of SQI penalties totaling $2.1 million. In total, we recorded $10.8 million in SQI penalties in the nine months ended September 30, 2010 compared to $21.0 million recorded in the same period in 2009. Also, we recorded $5.2 million in PAP penalties during the nine months ended September 30, 2010 compared to $16.1 million recorded in the same period in 2009. Excluding the impact of these penalties, revenues decreased $63.2 million which primarily reflects the adverse impact of competition and technology substitution. We derive our revenues from the following sources:

        Local calling services.    Local calling services revenues decreased $24.9 million to $307.4 million during the nine months ended September 30, 2010 compared to the same period in 2009. This decrease is primarily due to an 11.0% decline in total voice access lines in service at September 30, 2010 compared to September 30, 2009, largely offset by a $10.2 million decline in SQI penalties and an $11.0 million decline in PAP penalties recorded during the nine months ended September 30, 2010 as compared to the same period in 2009.

        Access.    Access revenues increased $9.4 million to $291.0 million during the nine months ended September 30, 2010 compared to the same period in 2009. Of this increase, $19.1 million is attributable to an increase in interstate access revenues, partially offset by a $9.7 million decrease in intrastate access revenues.

        Long distance services.    Long distance services revenues decreased $24.7 million to $91.2 million in the nine months ended September 30, 2010 compared to the same period in 2009. The decrease was

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primarily attributable to a 5.9% decrease in the number of subscribers from September 30, 2009 to September 30, 2010 coupled with a decrease in average revenue per subscriber ("ARPU").

        Data and Internet services.    Data and Internet services revenues decreased $1.2 million to $82.7 million in the first nine months of 2010 compared to the same period in 2009. The decrease was primarily attributable to a 1.7% decrease in the number of subscribers from September 30, 2009 to September 30, 2010.

        Other services.    Other services revenues decreased $0.7 million to $34.5 million during the nine months ended September 30, 2010 compared to the same period in 2009.

Operating Expenses

        Cost of services and sales.    Cost of services and sales decreased $37.4 million to $360.8 million during the nine months ended September 30, 2010 compared to the same period in 2009. This decrease is mainly attributable to significant reductions in access expenses associated with providing long distance and data and internet services and certain employee expenses.

        Selling, general and administrative.    Selling, general and administrative expenses decreased $11.4 million to $292.5 million during the nine months ended September 30, 2010 compared to the same period in 2009. The decrease is primarily attributable to a $7.2 million reduction in bad debt expense. Additionally, prior to the Petition Date, all expenses related to restructuring activities were classified as selling, general and administrative expenses. During the Chapter 11 Cases, such expenses have been classified as reorganization items. Accordingly, the nine months ended September 30, 2009 included $7.3 million in restructuring expenses as compared to zero in same period of 2010.

        Depreciation and amortization.    Depreciation and amortization expense increased $9.9 million to $214.6 million during the nine months ended September 30, 2010 compared to the same period in 2009, due primarily to higher gross plant asset balances, including capitalized software placed into service upon termination of the Transition Services Agreement.

Other Results

        Interest expense.    Interest expense decreased $59.5 million to $105.7 million during the nine months ended September 30, 2010 compared to the same period in 2009. Upon the filing of the Chapter 11 Cases, in accordance with the Reorganizations Topic of the ASC, we ceased the accrual of interest expense on the Notes and the Swaps in accordance with the Reorganizations Topic of the ASC as it is unlikely that such interest expense will be paid or will become an allowed priority secured or unsecured claim. We have continued to accrue interest expense on the Pre-petition Credit Facility, as such interest is considered an allowed claim pursuant to the Plan.

        Gain on derivative instruments.    Gain on derivative instruments represents net gains and losses recognized on the change in fair market value of interest rate swap derivatives. During the nine months ended September 30, 2009, we recognized non-cash gains of $8.6 million related to our derivative financial 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. Accordingly, we recognized no gain or loss on derivative instruments during the nine months ended September 30, 2010.

        Gain on early retirement of debt.    Gain on early retirement of debt represents a $13.2 million net gain recognized on the repurchase of $19.9 million aggregate principal amount of the Old Notes during the nine months ended September 30, 2009, partially offset by a loss of $0.8 million attributable to writing off a portion of the unamortized debt issue costs associated with our Pre-petition Credit

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Facility. We did not retire any debt during the nine months ended September 30, 2010 and thus did not recognize any gain or loss on early retirement of debt during such period.

        Other income (expense).    Other income (expense) includes non-operating gains and losses such as those incurred on sale or disposal of equipment. Other expense was ($0.9) million during the nine months ended September 30, 2010, compared with other income of $6.4 million during the nine months ended September 30, 2009. We recognized a one-time gain of $5.4 million during the nine months ended September 30, 2009 related to the settlement under a transition agreement (the "Transition Agreement") we entered into with Verizon on January 30, 2009, in connection with the Cutover, as contemplated by the Transition Services Agreement.

        Reorganization items.    Reorganization items represent expense or income amounts that have been recognized as a direct result of the Chapter 11 Cases. For more information, see note 2 to the Condensed Consolidated Financial Statements.

Income taxes. The effective income tax rate is the provision for income taxes stated as a percentage of income before the provision for income taxes. The effective income tax rate for the nine months ended September 30, 2010 and 2009 was 7.3% benefit and 35.8% benefit, respectively. The effective tax rate for the nine months ended September 30, 2010 was impacted by a one-time, non-cash income tax charge of $6.8 million, as a result of the enactment of the Health Care Act. The decrease in our income tax benefit was also impacted by non-deductible restructuring charges and post-petition interest.

        Net loss.    Net loss for the nine months ended September 30, 2010 was $178.2 million compared to net loss of $125.7 million for the same period in 2009. The difference in net loss between 2010 and 2009 is a result of the factors discussed above.

Off-Balance Sheet Arrangements

        We do not have any off-balance sheet arrangements.

Critical Accounting Policies

        Our critical accounting policies are as follows:

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Revenue recognition;

•

Allowance for doubtful accounts;

•

Accounting for pension and other post-retirement benefits;

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Accounting for income taxes;

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Depreciation of property, plant and equipment;

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Valuation of long-lived assets, including goodwill;

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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 local telephone, long distance, Internet services and certain other services are recognized in the month the service is provided. Revenue from other services that are not fixed fee or that exceed contracted amounts is recognized when those services are provided. Non-recurring customer activation fees, along with the related costs up to, but not exceeding, the activation fees, are deferred and amortized over the customer relationship period. We make estimated adjustments, as necessary, to revenue or accounts receivable for known billing errors. At

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September 30, 2010 and December 31, 2009, we recorded revenue reserves of $10.6 million and $22.6 million, respectively. The decrease in revenue reserves during the nine months ended September 30, 2010 is primarily the result of credits that have been issued to customers.

        Allowance for Doubtful Accounts.    In evaluating the collectability of our accounts receivable, we assess a number of factors, including a specific customer's or carrier's ability to meet its financial obligations to us, the length of time the receivable has been past due and historical collection experience. Based on these assessments, we record both specific and general reserves for uncollectible accounts receivable to reduce the related accounts receivable to the amount we ultimately expect to collect from customers and carriers. If circumstances change or economic conditions worsen such that our past collection experience is no longer relevant, our estimate of the recoverability of our accounts receivable could be further reduced from the levels reflected in our accompanying condensed consolidated balance sheet.

        Accounting for Pension and Other Post-retirement Benefits.    Some of our employees participate in our pension plans and other post-retirement benefit plans. In the aggregate, the pension plan benefit obligations exceed the fair value of pension plan assets, resulting in expense. Other post-retirement benefit plans have larger benefit obligations than plan assets, resulting in expense. Significant pension and 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 and deferred income taxes are affected by events and transactions arising in the normal course of business, as well as in connection with the adoption of new accounting standards and non-recurring items. Assessment of the appropriate amount and classification of income taxes is dependent on several factors, including estimates of the timing and realization of deferred income tax assets and the timing of income tax payments. Actual payments may differ from these estimates as a result of changes in tax laws, as well as unanticipated future transactions affecting related income tax balances. We account for tax benefits taken or expected to be taken in our tax returns in accordance with the Income Taxes Topic of the ASC, which requires the use of a two step approach for recognizing and measuring tax benefits taken or expected to be taken in a tax return and disclosures regarding uncertainties in income tax positions.

        Depreciation of Property, Plant and Equipment.    We recognize depreciation on property, plant and equipment principally on the composite group remaining life method and straight-line composite rates over estimated useful lives ranging from three to 50 years. This method provides for the recognition of the cost of the remaining net investment in telephone plant, less anticipated net salvage value (if any), over the remaining asset lives. This method requires the periodic revision of depreciation rates. Changes in the estimated useful lives of property, plant and equipment or depreciation methods could have a material effect on our results of operations.

        Valuation of Long-lived Assets, Including Goodwill.    We review our long-lived assets, including goodwill, for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. In addition, we review goodwill and non-amortizable intangible assets for impairment on an annual basis. Several factors could trigger an impairment review such as:

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significant underperformance relative to expected historical or projected future operating results;

•

significant regulatory changes that would impact future operating revenues;

•

significant negative industry or economic trends; and

•

significant changes in the overall strategy in which we operate our overall business.

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        Goodwill was $595.1 million at September 30, 2010. We have recorded intangible assets related to the acquired companies' customer relationships and trade names of $251.3 million as of September 30, 2010. As of September 30, 2010, there was $56.4 million of accumulated amortization recorded. The customer relationships are being amortized over a weighted average life of approximately 9.7 years. The trade name has an indefinite life and is, therefore, not amortized. The intangible assets are included in intangible assets on our condensed consolidated balance sheet.

        We are required to perform an impairment review of goodwill and non-amortizable intangible assets as required by the Intangibles-Goodwill and Other Topic of the ASC annually or when impairment indicators are noted. Goodwill impairment is determined using a two-step process. Step one compares the estimated fair value of our single wireline reporting unit (calculated using the market approach and the income approach) to its carrying amount, including goodwill. The market approach compares our fair value, as measured by our market capitalization, to our carrying amount, which represents our stockholders' equity balance. As of September 30, 2010, stockholders' deficit totaled $391.3 million. The income approach compares our fair value, as measured by discounted expected future cash flows, to our carrying amount. If our carrying amount exceeds our estimated fair value, there is a potential impairment and step two must be performed.

        Step two compares the implied fair value of our goodwill (i.e., our fair value less the fair value of our assets and liabilities, including identifiable intangible assets) to our goodwill carrying amount. If the carrying amount of our goodwill exceeds the implied fair value of our goodwill, the excess is required to be recorded as an impairment.

        We performed step one of our annual goodwill impairment assessment as of October 1, 2009 and concluded that there was no indication of impairment at that time. In light of the Chapter 11 Cases, we performed an interim goodwill impairment assessment as of December 31, 2009 and determined that goodwill was not impaired.

        Our only non-amortizable intangible asset is the trade name of Legacy FairPoint acquired in the Merger. Consistent with the valuation methodology used to value the trade name at the Merger, we assess the fair value of the trade name based on the relief from royalty method. If the carrying amount of our trade name exceeds its estimated fair value, the asset is considered impaired. We performed our annual non-amortizable intangible asset impairment assessment as of October 1, 2009 and concluded that there was no indication of impairment at that time. In light of the Chapter 11 Cases, we performed an interim non-amortizable intangible asset impairment assessment as of December 31, 2009 and determined that our trade name was not impaired.

        For our non-amortizable intangible asset impairment assessments at October 1, and December 31, 2009, we made certain assumptions including an estimated royalty rate, an effective tax rate and a discount rate, and applied these assumptions to projected future cash flows of our consolidated FairPoint Communications, Inc. business, exclusive of cash flows associated with wholesale revenues as these revenues are not generated through brand recognition. Changes in one or more of these assumptions may have resulted in the recognition of an impairment loss.

        We determined as of December 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 our common stock. In accordance with the Property, Plant, and Equipment Topic of the ASC, we performed a recoverability test, based on undiscounted projected future cash flows associated with our long-lived assets, and determined that long-lived assets were not impaired at that time.

        While no impairment charges resulted from the analyses performed at October 1, and December 31, 2009, asset values may be adjusted in the future due to the outcome of the Chapter 11 Cases or the application of "fresh start" accounting upon the Company's emergence from Chapter 11.

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        Accounting for Software Development Costs.    We capitalize certain costs incurred in connection with developing or obtaining internal use software in accordance with the Intangibles-Goodwill and Other Topic of the ASC. Capitalized costs include direct development costs associated with internal use software, including direct labor costs and external costs of materials and services. Costs incurred during the preliminary project stage, as well as maintenance and training costs, are expensed as incurred.

        Purchase Accounting.    Prior to the adoption of the ASC we recognized the acquisition of companies in accordance with SFAS 141. The cost of an acquisition is allocated to the assets acquired and liabilities assumed based on their fair values as of the close of the acquisition, with amounts exceeding the fair value being recorded as goodwill. All future business combinations will be recognized in accordance with the Business Combinations Topic of the ASC.

New Accounting Standards

        On January 1, 2010, we adopted the accounting standard update regarding fair value measurements and disclosures, which requires additional disclosures regarding assets and liabilities measured at fair value. The adoption of this accounting standard update had no impact on our consolidated results of operations and financial position.

        On June 15, 2009, we adopted the accounting standard relating to subsequent events. This standard establishes principles and requirements for identifying, recognizing and disclosing subsequent events. This standard requires that an entity identify the type of subsequent event as either recognized or unrecognized, and disclose the date through which the entity has evaluated subsequent events. This standard was revised by FASB Accounting Standard Update 2010-09, effective June 15, 2010, to remove the requirement to disclose the date through which subsequent events have been evaluated. This standard is effective for interim or annual financial periods ending after June 15, 2009. The adoption of this standard had no impact on the Company's consolidated results of operations and financial position.

Inflation

        We do not believe inflation has a significant effect on our operations.

Liquidity and Capital Resources

        On October 26, 2009, we filed the Chapter 11 Cases. The matters described herein, to the extent that they relate to future events or expectations, may be significantly affected by the Chapter 11 Cases. The Chapter 11 Cases involve various restrictions on our activities, limitations on financing, the need to obtain Bankruptcy Court approval for various matters and uncertainty as to relationships with others with whom we may conduct or seek to conduct business. As a result of the risks and uncertainties associated with the Chapter 11 Cases, the value of our securities and how our liabilities will ultimately be treated is highly speculative. We urge that appropriate caution be exercised with respect to existing and future investments in any of the liabilities and/or securities of the Company. See note 1 to the Condensed Consolidated Financial Statements for a further description of the Chapter 11 Cases, the impact of the Chapter 11 Cases, the proceedings in Bankruptcy Court and our status as a going concern. In addition, see "Part I—Item 1A. Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2009 and "Part II—Item 1A. Risk Factors" contained in our Quarterly Reports on Form 10-Q for the quarterly periods ended June 30, 2010 and March 31, 2010 and in this Quarterly Report.

        Our short term and long term liquidity needs arise primarily from: (i) interest and principal payments on our indebtedness; (ii) capital expenditures; and (iii) working capital requirements as may be needed to support and grow our business. Notwithstanding the direct impact of the Chapter 11 Cases on our liquidity, including the stay of payments on our indebtedness, our current and future

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liquidity is greatly dependent upon our operating results. We expect that our primary sources of liquidity during the pendency of the Chapter 11 Cases will be cash flow from operations, cash on hand and funds available under the DIP Credit Agreement. We expect that after the Effective Date, our short term and long term liquidity needs will continue to arise primarily from: (i) interest and principal payments on our indebtedness; (ii) capital expenditures; and (iii) working capital requirements as may be needed to support and grow our business. We expect that our primary sources of liquidity after the Effective Date will be cash flow from operations, cash on hand and funds available under the Exit Facility Loans.

        The Chapter 11 Cases were filed to gain liquidity for our continuing operations while we restructure our balance sheet to allow us to be a viable going concern. Our continuation as a going concern is contingent upon, among other things, our ability: (i) to comply with the DIP Credit Agreement; (ii) to obtain the necessary approvals of the Plan from the PUCs and the FCC; (iii) to obtain Bankruptcy Court approval of the Plan and to consummate the Plan; (iv) to generate sufficient cash flow from operations; and (v) to obtain financing sources to meet our future obligations. We believe the consummation of a successful restructuring under the Bankruptcy Code is critical to our continued viability and long-term liquidity. While we believe we will be able to achieve these objectives through the Chapter 11 reorganization process, there can be no certainty that we will be successful in doing so.

        In connection with the Chapter 11 Cases, the DIP Borrowers entered into the DIP Credit Agreement. The DIP Credit Agreement provides for a revolving facility in an aggregate principal amount of up to $75 million, of which up to $30 million is also available in the form of one or more letters of credit that may be issued to third parties for the account of the Company and its subsidiaries. Pursuant to the Interim Order, the DIP Borrowers were authorized to enter into and immediately draw upon the DIP Credit Agreement on an interim basis, pending a final hearing before the Bankruptcy Court on November 18, 2009, in an aggregate amount of $20 million. On March 11, 2010 the Bankruptcy Court entered a final order in connection with the DIP Credit Agreement, permitting the DIP Borrowers access to the total $75 million of the DIP Financing, subject to the terms and conditions of the DIP Credit Agreement and related orders of the Bankruptcy Court. For a further description of the DIP Credit Agreement and the terms thereof, see note 1 to the Condensed Consolidated Financial Statements. Upon satisfaction of certain conditions precedent, including the Company successfully exiting from the Chapter 11 Cases, the DIP Financing will roll into a new revolving credit facility with a five-year term. As of September 30, 2010, the Company had not borrowed any amounts under the DIP Credit Agreement and letters of credit totaling $18.6 million had been issued and were outstanding under the DIP Credit Agreement.

        Cash and cash equivalents at September 30, 2010 totaled $99.7 million compared to $109.4 million at December 31, 2009, excluding restricted cash of $4.1 million and $4.0 million, respectively.

        Net cash provided by operating activities was $159.5 million and $54.1 million for the nine months ended September 30, 2010 and 2009, respectively. The significant increase in net cash provided by operating activities is primarily attributable to the non-payment of interest and other pre-petition liabilities subject to compromise during the pendency of the Chapter 11 Cases.

        Net cash used in investing activities was $171.9 million and $128.9 million for the nine months ended September 30, 2010 and 2009, respectively. These cash flows primarily reflect capital expenditures of $172.4 million and $130.1 million for the nine months ended September 30, 2010 and 2009, respectively.

        Net cash provided by financing activities was $2.7 million and $68.0 million for the nine months ended September 30, 2010 and 2009, respectively. For the nine months ended September 30, 2010, we drew down $5.5 million on letters of credit under the Pre-petition Credit Facility and incurred $1.1 million of loan origination costs on the DIP Credit Agreement. For the nine months ended

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September 30, 2009, net proceeds from FairPoint's issuance of long-term debt were $50.0 million, repayment of long-term debt was $20.8 million and dividends paid to stockholders was $23.0 million.

        We applied for stimulus funding under the American Recovery and Reinvestment Act of 2009 (the "Recovery Act"), which, among other programs, provides funding for broadband development in unserved and underserved areas of the United States. We were not granted any such funding. There have recently been several grants of stimulus funding under the Recovery Act in our Northern New England and other service areas. Any networks built with these funds in such areas will at some point provide competition for our products and services.

        We expect our capital expenditures will be approximately $190 million to $210 million in 2010. However, this expectation does not take into account the effect that the filing of the Chapter 11 Cases will have on the capital expenditure requirements imposed by the PUCs in Maine and New Hampshire and by the Vermont Board as a condition to the approval of the Merger and whether such requirements will be enforceable against us in the future if the Plan is not consummated. We anticipate that we will fund these expenditures through cash flows from operations, cash on hand and funds available under the DIP Credit Agreement and, after the Effective Date, the Exit Facility.

        We expect our cash contributions to our Company sponsored employee pension plans and post-retirement medical plans will be approximately $1.9 million in 2010.

Our Pre-petition Credit Facility

        Our $2,030 million Pre-petition Credit Facility consists of the Revolving Credit Facility, the Term Loan and the Delayed Draw Term Loan. Spinco drew $1,160 million under the Term Loan immediately prior to being spun off by Verizon, and then FairPoint drew $470 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 for certain capital expenditures and other expenses associated with the Merger.

        On October 5, 2008, the administrative agent under our Pre-petition Credit Facility filed for bankruptcy. The administrative agent accounted for thirty percent of the loan commitments under the Revolving Credit Facility. On January 21, 2009, we entered into the Pre-petition Credit Facility Amendment under which, among other things, the administrative agent resigned and was replaced by a new Pre-petition Administrative Agent. In addition, the resigning administrative agent's undrawn commitments under the Revolving Credit Facility, totaling $30.0 million, were terminated and are no longer available to us.

        The Revolving Credit Facility has a swingline sub-facility in the amount of $10.0 million and a letter of credit sub-facility in the amount of $30.0 million, which allows for issuances of standby letters of credit for our account. Our Pre-petition Credit Facility also permits interest rate and currency exchange swaps and similar arrangements that we may enter into with the lenders under our Pre-petition Credit Facility and/or their affiliates.

        As of September 30, 2010, we had borrowed $155.5 million under the Revolving Credit Facility, including $5.5 million of funds drawn down under letters of credit during the nine months ended September 30, 2010, and there were no outstanding letters of credit. Upon the event of default under 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 September 30, 2010, no funds remained available under the Revolving Credit Facility.

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        The Term Loan B Facility and the Delayed Draw Term Loan will mature in March 2015 and the Revolving Credit Facility and the Term Loan A Facility will mature in March 2014. Each of the Term Loan A Facility, the Term Loan B Facility and the Delayed Draw Term Loan are repayable in quarterly installments in the manner set forth in our Pre-petition Credit Facility.

        Borrowings under our Pre-petition Credit Facility bear interest at variable interest rates. Interest rates for borrowings under our Pre-petition Credit Facility are, at our option, for the Revolving Credit Facility and for the Term Loans at either (i) the Eurodollar rate, as defined in the Pre-petition Credit Facility, plus an applicable margin or (ii) the base rate, as defined in the Pre-petition Credit Facility, plus an applicable margin.

        Our Pre-petition Credit Facility contains customary affirmative covenants and also contains negative covenants and restrictions, including, among others, with respect to the redemption or repurchase of our other indebtedness, loans and investments, additional indebtedness, liens, capital expenditures, changes in the nature of our business, mergers, acquisitions, asset sales and transactions with affiliates.

        Scheduled amortization payments on our Pre-petition Credit Facility began in 2009. No principal payments are due on the Notes prior to their maturity. As a result of the Chapter 11 Cases, we do not expect to make any additional principal or interest payments on our pre-petition debt.

        Following the filing of the Chapter 11 Cases, we have made no payments on our pre-petition debt. During the three months and nine months ended September 30, 2009, we repaid $2.2 million and $8.4 million, respectively, of principal under the Term Loan A Facility, and during the nine months ended September 30, 2009, we repaid $6.1 million of principal under the Term Loan B Facility.

        Prior to the filing of the Chapter 11 Cases, we failed to make principal and interest payments due under our Pre-petition Credit Facility on September 30, 2009. The failure to make the principal payment on the due date and failure to make the interest payment within five days of the due date constituted events of default under our Pre-petition Credit Facility. An event of default under our Pre-petition Credit Facility permits the lenders under our Pre-petition Credit Facility to accelerate the maturity of the loans outstanding thereunder, seek foreclosure upon any collateral securing such loans and terminate any remaining commitments to lend to us. The occurrence of an event of default under the Pre-petition Credit Facility constituted an event of default under the Swaps. In addition, we failed to make payments due under the Swaps on September 30, 2009, which failure resulted in an event of default under the Swaps upon the expiration of a three business day grace period.

        In addition, as a result of the Restatement, we determined that we were not in compliance with the interest coverage ratio maintenance covenant and the leverage ratio maintenance covenant under our Pre-petition Credit Facility for the measurement period ended June 30, 2009, which constituted an event of default under each of the Pre-petition Credit Facility and the Swaps, and may have constituted an event of default under the Notes, in each case at June 30, 2009.

Our Pre-petition Notes

        Spinco issued, and we assumed in the Merger, $551.0 million aggregate principal amount of the Old Notes. The Old Notes mature on April 1, 2018 and are not redeemable at our option prior to April 1, 2013. Interest is payable on the Old Notes semi-annually, in cash, on April 1 and October 1. The Old Notes bear interest at a fixed rate of 13¹/8% and principal is due at maturity. The Old Notes were issued at a discount and, accordingly, at the date of their distribution, the Old Notes had a carrying value of $539.8 million (principal amount at maturity of $551.0 million less discount of $11.2 million). Following the filing of the Chapter 11 Cases, the remaining $9.9 million of discount on the Notes was written off in order to adjust the carrying amount of our pre-petition debt to the Bankruptcy Court approved amount of the allowed claims for our pre-petition debt.

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        Upon the consummation of the Exchange Offer and the corresponding consent solicitation, substantially all of the restrictive covenants in the indenture governing the Old Notes were deleted or eliminated and certain of the events of default and various other provisions contained therein were modified.

        Pursuant to the Exchange Offer, on July 29, 2009, we exchanged $439.6 million in aggregate principal amount of the Old Notes (which amount was equal to approximately 83% of the then outstanding Old Notes) for $458.5 million in aggregate principal amount of the New Notes (which amount includes New Notes issued to tendering noteholders as payment for accrued and unpaid interest on the exchanged Old Notes up to, but not including, the Settlement Date). The New Notes mature on April 2, 2018 and bear interest at a fixed rate of 13¹/8%, payable in cash, except that the New Notes bore interest at a rate of 15% for the period from July 29, 2009 through and including September 30, 2009. In addition, we were permitted to pay the interest payable on the New Notes for the Initial Interest Payment Period in the form of cash, by capitalizing such interest and adding it to the principal amount of the New Notes or a combination of both cash and such capitalization of interest, at our option.

        In connection with the Exchange Offer and the corresponding consent solicitation, we also paid a cash consent fee of $1.6 million in the aggregate to holders of Old Notes who validly delivered and did not revoke consents in the consent solicitation prior to a specified early consent deadline.

        The New Indenture limits, among other things, our ability to incur additional indebtedness, issue certain preferred stock, repurchase our capital stock or subordinated debt, make certain investments, create certain liens, sell certain assets or merge or consolidate with or into other companies, incur restrictions on the ability of our subsidiaries to make distributions or transfer assets to us and enter into transactions with affiliates.

        The New Indenture also restricts our ability to pay dividends on or repurchase our common stock under certain circumstances.

        Following the filing of the Chapter 11 Cases, we have made no payments on our pre-petition debt. During the nine months ended September 30, 2009, we repurchased $19.9 million in aggregate principal amount of the Old Notes for an aggregate purchase price of $6.3 million in cash. In total, including amounts repaid under the Term Loan A Facility and Term Loan B Facility, we retired $2.2 million and $34.5 million of outstanding debt during the three months and nine months ended September 30, 2009, respectively.

        Prior to the filing of the Chapter 11 Cases, we failed to make the October 1, 2009 interest payment on the Notes. The failure to make the interest payment on the Notes constituted an event of default under the Notes upon the expiration of a thirty day grace period. An event of default under the Notes permits the holders of the Notes to accelerate the maturity of the Notes. In addition, the filing of the Chapter 11 Cases constituted an event of default under the New Notes. See note 1 to the Condensed Consolidated Financial Statements.

        In addition, as a result of the Restatement, we determined that we were not in compliance with the interest coverage ratio maintenance covenant and the leverage ratio maintenance covenant under our Pre-petition Credit Facility for the measurement period ended June 30, 2009, which constituted an event of default under each of the Pre-petition Credit Facility and the Swaps, and may have constituted an event of default under the Notes, in each case at June 30, 2009.

Other Pre-petition Agreements

        As a condition to the approval of the Merger and related transactions by state regulatory authorities, we agreed to make capital expenditures following the completion of the Merger. Pursuant to the Maine Merger Order, we agreed that, following the closing of the Merger, we will make capital

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expenditures in Maine during the first three years after the closing of $48 million in the first year and an average of $48 million in the first two years and an average of $47 million in the first three years. We are also required to expend over a five year period not less than $40 million on equipment and infrastructure to expand the availability of broadband services in Maine, which is expected to result in capital expenditures in Maine in excess of the minimum capital expenditure requirements described above.

        The Vermont Merger Order also requires us 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 Merger Order, we are 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 we have also agreed to certain broadband build-out milestones that require us to reach 100% broadband availability in 50% of our 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 as set forth above.

        Pursuant to the New Hampshire Merger Order, we are 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 we are 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 our assets. We are 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.

        We also had the availability of $49.2 million contributed to us 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 us 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 a January 23, 2008 settlement agreement among Verizon, us and the staff of the NHPUC. 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 our request, conditioned upon our 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. The NH Investment Commitment is inclusive of the $50 million previously required by the NHPUC.

        Additionally, the Merger Orders include a requirement that we pay the greater of $45 million or 90% of our free cash flow (defined as the cash flow remaining after all operating expenses, interest payments, tax payments, capital expenditures, dividends and other routine cash expenditures have occurred) annually to reduce the principal amount of our indebtedness, until certain financial ratio tests have been satisfied.

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        We expect that the Merger Orders will be amended by the Regulatory Settlements. For more information regarding the Regulatory Settlements, see "Part I—Item 1. Business—Regulatory Environment—State Regulation—Regulatory Conditions to the Merger, as Modified in Connection with the Plan" contained in our Annual Report on Form 10-K for the year ended December 31, 2009. In addition, for information regarding the impact of the Regulatory Settlements on the Merger Restricted Cash and certain SQI penalties, see notes 3(e) and 14(c), respectively, to the Condensed Consolidated Financial Statements.

        The MPUC and NHPUC have approved the Regulatory Settlements for Maine and New Hampshire. However, the Vermont Board has rejected the Regulatory Settlement for Vermont. As described in note 1 to the Condensed Consolidated Financial Statements, on October 20, 2010 we provided supplemental information to the Vermont Board. If we are unable to obtain the Vermont Board's approval of the Regulatory Settlement for Vermont, it is unclear what effect the filing of the Chapter 11 Cases will have on the requirements, including SQI penalties, imposed by the Vermont Merger Order and whether the requirements of the Vermont Merger Order would be enforceable against us in the future.

        On January 30, 2009, we entered into the Transition Agreement with Verizon. The Transition Services 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 forth in the Transition Agreement resulted in a $22.7 million improvement in our cash flow for the nine months ended September 30, 2009.

Summary of Contractual Obligations

        The tables set forth below contain information with regard to disclosures about contractual obligations and commercial commitments.

        The following table discloses aggregate information about our contractual obligations as of September 30, 2010 and the periods in which payments are due:

		Payments due by period
		Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
		(Dollars in thousands)
Contractual obligations:
Long-term debt, including current maturities(a)		$	2,520,959	$	54,150	$	276,600	$	1,640,213	$	549,996
Interest payments on long-term debt obligations(b)(c)			548,380		135,510		257,299		155,571		—
Capital lease obligations			7,733		2,305		3,405		2,023		—
Operating leases			40,068		10,145		16,875		8,794		4,254
	Total obligations	$	3,117,140	$	202,110	$	554,179	$	1,806,601	$	554,250

(a)

Includes $550.0 million of the Notes. Long-term debt maturities represent the normal contractual payment schedule. All payments have been stayed by the filing of the Chapter 11 Cases. All obligations under the Pre-petition Credit Facility, the Notes and the Swaps have been classified as liabilities subject to compromise in the Condensed Consolidated Financial Statements. See note 8 to the Condensed Consolidated Financial Statements for more information.

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(b)

Excludes amortization of estimated capitalized debt issuance costs.

(c)

Interest payments on long-term debt represent the normal contractual interest payment schedule, based on default rates as defined in the Pre-petition Credit Facility. All payments have been stayed by the filing of the Chapter 11 Cases.

        The following table discloses aggregate information about our derivative financial instruments as of September 30, 2010, the source of carrying value of these instruments and their maturities.

		Carrying Value of Contracts at Period End
		Total			Less than 1 year			1-3 years		3-5 years		More than 5 years
		(Dollars in thousands)
Source of fair value:
	Derivative financial instruments(1)(2)	$	(98,833	)		(98,833	)		—		—		—

(1)

In connection with the filing of the Chapter 11 Cases, the derivative financial instruments were terminated by the counterparties. Accordingly, the carrying value of the Swaps at September 30, 2010 represents the termination value of the Swaps as determined by the respective counterparties following the event of default described herein. See note 7 to the Condensed Consolidated Financial Statements for more information.

(2)

The Swaps have been classified as liabilities subject to compromise in the Condensed Consolidated Financial Statements. See note 7 to the Condensed Consolidated Financial Statements for more information.

Item 3.    Quantitative and Qualitative Disclosures about Market Risk.

        As of September 30, 2010, we had total debt of $2,521.0 million, consisting of both fixed rate and variable rate debt with interest rates ranging from 6.750% to 13.125% per annum, including applicable margins. As of September 30, 2010, the fair value of our debt was approximately $1,365.0 million. Our Term Loan A Facility and Revolving Credit Facility mature in 2014, our Term Loan B Facility and Delayed Draw Term Loan mature in 2015 and the Notes mature in 2018.

        We use variable and fixed rate debt to finance our operations, capital expenditures and acquisitions. The variable rate debt obligations expose us to variability in interest payments due to changes in interest rates. We believe it is prudent to limit the variability of a portion of our interest payments. To meet this objective, from time to time, we entered into interest rate swap agreements to manage fluctuations in cash flows resulting from interest rate risk. These Swaps effectively changed the variable rate on the debt obligations to a fixed rate. Under the terms of the Swaps, we made a payment if the variable rate was below the fixed rate, or we received 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 by the respective counterparties thereto.

        We do not hold or issue derivative financial instruments for trading or speculative purposes.

        We are also exposed to market risk from changes in the fair value of our pension plan assets. For the three months and nine months ended September 30, 2010, the actual gain on the pension plan assets has been approximately 6.5% and 6.0%, respectively. Net periodic benefit cost for 2010 assumes a weighted average annualized expected return on plan assets of approximately 8.3%. Should our actual return on plan assets continue to be significantly lower than our expected return assumption, our net

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periodic benefit cost will increase in future periods and we may be required to contribute additional funds to our pension plans after 2010.

Item 4.    Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

        As of the end of the period covered by this Quarterly Report, we carried out an evaluation under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our "disclosure controls and procedures" (as defined in Rule 13a-15(e) of the Exchange Act). Disclosure controls and procedures are controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC.

        Based upon this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were not effective due to the following material weaknesses which were identified in our Annual Report on Form 10-K for the year ended December 31, 2009 and which remain in existence as of the date of this report:

1.

Our information technology controls were not adequate. Adequate testing was not performed to ensure that certain revenue transactions were properly accounted for and transferred from our billing system to our general ledger. Also, access to our information systems was not appropriately restricted.



2.

Our management oversight and review procedures designed to monitor the accuracy of period-end accounting activities were ineffective. Specifically, our account reconciliation processes were not adequate to properly identify and resolve discrepancies between our billing system and our general ledger in a timely manner. In addition, control weaknesses existed relating to revenue, operating expenses, accounts receivable, fixed assets and income taxes.

        As of February of 2010, our management believes that it has corrected the primary issues that led to the Restatement. Specifically, we have:

1.

Corrected the billing system settings so that they properly transfer the identified transactions to the general ledger; and



2.

Enhanced our account reconciliation and review procedures to detect this type of error on a timely basis in the future.

        In addition, we have:

1.

Enhanced our controls surrounding our general ledger and the recording of revenue transactions to the general ledger by completing:

•

a review of the initial configuration of our billing system and correcting certain configuration errors that were identified; and

•

a detailed review of the journal entries and posting results for all new products to ensure that all such entries were posting accurately to the general ledger.



2.

Implemented tax management software which automated more of our tax computations related to income and property taxes.

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        Furthermore, the following actions are underway:

1.

Modification of certain Oracle responsibilities to address issues relating to access to our information systems;



2.

Development of improved termination communication processes to improve timeliness of removal of employees from our information systems upon termination; and



3.

Further improvement of our account reconciliation procedures, including review of reconciliations, to help identify potential errors.

        However, certain of the issues that led to the identified material weaknesses remain open at this time. We believe these measures and other planned process improvements will adequately remediate the material weaknesses described above and will strengthen our internal controls over financial reporting. We are committed to continuing to improve our internal control processes and will continue to review our financial reporting controls and procedures. As we continue to evaluate and work to improve our internal control over financial reporting, we may identify additional measures to address these material weaknesses or determine to modify certain of the remediation procedures described above. Our management, with the oversight of the audit committee of our board of directors, will continue to assess and take steps to enhance the overall design and capability of our control environment in the future.

Changes in Internal Control Over Financial Reporting

        Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(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, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.

        As indicated above, we continue to significantly expand our internal control over financial reporting in order to encompass the new internal control structure associated with our Northern New England operations and remediate the identified control deficiencies. Accordingly, we continue to develop a significant number of new processes, systems and related controls governing various aspects of our financial reporting process, particularly relating to our Northern New England operations and the consolidation of our Northern New England operations with Legacy FairPoint's operations. The processes we have developed include, but are not limited to, information technology, order provisioning, customer billing, payment processing, credit and collections, inventory management, accounts payable, payroll, human resource administration, tax, general ledger accounting and external reporting.

        With the exception of the foregoing, there have been no changes in our internal control over financial reporting during the quarter ended September 30, 2010 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1.    Legal Proceedings.

        From time to time, we are involved in litigation and regulatory proceedings arising out of our operations. With the exception of the Chapter 11 Cases, management believes that we are not currently a party to any legal or regulatory proceedings, the adverse outcome of which, individually or in the aggregate, would have a material adverse effect on our financial position or results of operations. To the extent that we are currently involved in any litigation and/or regulatory proceedings, such proceedings have been stayed as a result of the filing of the Chapter 11 Cases. For a discussion of the Chapter 11 Cases, see note 1 to the Condensed Consolidated Financial Statements.

        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 states may result in penalties being assessed by the appropriate state regulatory body. As of September 30, 2010, we have recognized an estimated liability of $34.4 million for SQI penalties based on metrics defined by PUCs in Maine and New Hampshire and by the Vermont Board. However, during February 2010, we reached agreements with the state regulatory authorities in each of Maine, New Hampshire and Vermont, which, among other things, related to the payment of SQI penalties. Term sheets executed with the state regulatory authorities of New Hampshire and Vermont defer fiscal 2008 and 2009 SQI penalties until December 31, 2010 and include a clause whereby such penalties may be forgiven in part or in whole if we meet certain metrics for the twelve-month period ending December 31, 2010. In addition, the term sheet executed with the state regulatory authority in Maine deferred our fiscal 2008 and 2009 SQI penalties until March 2010. The MPUC and NHPUC have approved the Regulatory Settlements for Maine and New Hampshire. However, the Vermont Board has rejected the Regulatory Settlement for Vermont. As described in note 1 to the Condensed Consolidated Financial Statements, on October 20, 2010 we provided supplemental information to the Vermont Board. If we are unable to obtain the Vermont Board's approval of the Regulatory Settlement for Vermont, it is unclear what effect the filing of the Chapter 11 Cases will have on the requirements, including SQI penalties, imposed by the Vermont Merger Order and whether the requirements of the Vermont Merger Order would be enforceable against us in the future.

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Item 1A.    Risk Factors.

        The risk factors presented below amend and restate the corresponding risk factors previously disclosed in "Part I—Item 1A. Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2009, as supplemented by "Part II—Item 1A. Risk Factors" of our Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2010 and June 30, 2010.

We may not be able to obtain confirmation of the Plan.

        Even though the requisite majorities of impaired creditors have voted to accept the Plan, it is possible that the Bankruptcy Court will not confirm the Plan or that other conditions to the confirmation of the Plan, including, without limitation, obtaining the requisite approval from the Vermont Board, will not be met.

        Pursuant to the Plan Support Agreement, we committed to the achievement of certain milestones, including obtaining an order by the Bankruptcy Court confirming a Chapter 11 plan of reorganization reflecting the proposed financial restructuring described in the Plan Term Sheet on or before 5:00 P.M. Eastern Time on July 8, 2010. We did not obtain such an order before this deadline and accordingly the Plan Support Agreement, by its terms, expired on July 8, 2010 and was not renewed or extended. However, pursuant to the Letter Agreement the Company and the New Consenting Lenders entered into on October 13, 2010, the New Consenting Lenders have agreed, subject to the terms and conditions contained in the Letter Agreement, to support the Plan and any supplemental documents, all as modified by and incorporating terms consistent with, the terms contained in the Term Sheet.

        In addition, the Plan was filed and accepted within the period in which we hold the exclusive right to file and seek confirmation of a plan of reorganization. Accordingly, no party in interest may file or solicit acceptances of a competing plan at this time. We also had the exclusive right to file a new plan until October 22, 2010 and have filed a motion with the Bankruptcy Court to extend the Exclusivity Period Expiration Date to a later date in light of the fact that the Bankruptcy Court did not confirm the Plan prior to the Exclusivity Period Expiration Date. However, we cannot make any assurances as to whether the Bankruptcy Court will grant our motion to extend the Exclusivity Period Expiration Date, or, if the Exclusivity Period Expiration Date is extended, whether we will be able to obtain confirmation of the Plan prior to the ultimate expiration of the Exclusivity Period Expiration Date. If we do not have the exclusive right to file and seek confirmation of a plan of reorganization, any party in interest would be able to file or support a competing plan of reorganization.

        If the Plan is not confirmed by the Bankruptcy Court and certain other conditions precedent to the Plan are not met and/or waived, it is unclear whether we would be able to reorganize our business and what, if anything, holders of claims against us would ultimately receive with respect to their claims.

The DIP Credit Agreement contains restrictions that could significantly restrict our ability to operate our business.

        The DIP Credit Agreement contains a number of covenants which, among other things, limit the incurrence of additional debt, capitalized leases, issuance of capital stock, issuance of guarantees, liens, investments, disposition of assets, dividends, certain payments, mergers, change of business, transactions with affiliates, prepayments of debt, repurchases of stock and redemptions of certain other indebtedness and other matters customarily restricted in such agreements. Our ability to comply with the covenants, agreements and restrictions contained in the DIP Credit Agreement may be affected by events beyond our control, including prevailing economic, financial and industry conditions. There can be no assurance that we will be able to comply with such covenants, agreements or restrictions in the future. Additionally, breach of any of the covenants imposed on us by the terms of the DIP Credit Agreement could result in a default under the DIP Credit Agreement. In the event of a default, the

84

DIP Lenders could terminate their commitments to us and could accelerate the repayment of all of our indebtedness under the DIP Credit Agreement, if any. In such case, we may not have sufficient funds to pay the total amount of accelerated obligations, if any, and our DIP Lenders under the DIP Credit Agreement could proceed against the collateral securing the DIP Credit Agreement. Any acceleration in the repayment of our outstanding indebtedness, if any, or related foreclosure could adversely affect our business.

We are subject to competition that may adversely impact our business, financial condition, results of operations and liquidity.

        We face intense competition from a variety of sources for our local calling, long distance and Internet services in a majority of the areas we now serve. Regulations and technology change quickly in the communications industry, and changes in these factors historically have had, and may in the future have, a significant impact on competitive dynamics. In most of our services areas, we face competition from wireless carriers for both local calling and long distance services. As technology and economies of scale improve, competition from wireless carriers is expected to increase. We also face increasing competition from wireline and cable television companies for our local calling, long distance and Internet services. For example, we estimate that as of December 31, 2009, a majority of the customers that we serve had access to local calling, long distance and Internet services through a cable television company. Wireline and cable television companies have the ability to bundle their services, which has and is expected to continue to intensify the competition we face from these providers. VoIP providers, Internet service providers, satellite companies and electric utilities also compete with our services, and such competition is expected to continue to increase in the future. In addition, many of our competitors have access to a larger workforce and have substantially greater name-brand recognition and financial, technological and other resources than we do.

        In addition, consolidation and strategic alliances within the communications industry or the development of new technologies have had and may continue to have an effect on our competitive position. We cannot predict the number of competitors that will emerge, particularly in light of possible regulatory or legislative actions that could facilitate or impede market entry, but increased competition from existing and new entities could have a material adverse effect on our business, financial condition, results of operations and liquidity.

        Competition may lead to loss of revenues and profitability as a result of numerous factors, including:

•

loss of customers (given the likelihood that when we lose customers for local service, we will also lose them for all related services);

•

reduced network usage by existing customers who may use alternative providers for long distance and data services;

•

reductions in the service prices that may be necessary to meet competition; and

•

increases in marketing expenditures and discount and promotional campaigns.

        There have recently been several grants of stimulus funding under the American Recovery and Reinvestment Act of 2009 in our Northern New England and other service areas. Any networks built with these funds in such areas will at some point provide competition for our products and services.

85

A network or data center disruption could cause delays or interruptions of service, which could cause us to lose customers or suffer other damages.

        To be successful, we will need to continue to provide our customers reliable service over our expanded network. Some of the risks to our network and infrastructure include:

•

physical damage to access lines;

•

widespread power surges or outages;

•

software defects in critical systems;

•

a catastrophic loss of our data center; and

•

disruptions beyond our control.

        Disruptions may cause interruptions in service or reduced capacity for customers, either of which could cause us to lose customers and incur expenses.

        There have been no other material changes to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2009, as supplemented by our Quarterly Reports on Form 10-Q for the quarterly periods ending March 31, 2010 and June 30, 2010.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds.

        We did not sell any unregistered equity securities during the quarter ended September 30, 2010.

Item 3.    Defaults Upon Senior Securities.

        For a discussion of certain events of default that occurred during the year ended December 31, 2009, see note 1 to the Condensed Consolidated Financial Statements.

Item 4.    (Removed and Reserved).

Item 5.    Other Information.

        Not applicable.

Item 6.    Exhibits.

        The exhibits filed as part of this Quarterly Report are listed in the index to exhibits immediately preceding such exhibits, which index to exhibits is incorporated herein by reference.

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SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned, thereunto duly authorized, and the undersigned also has signed this Quarterly Report in his capacity as the Registrant's Executive Vice President and Chief Financial Officer (Principal Financial Officer).

	FAIRPOINT COMMUNICATIONS, INC.
Date: November 9, 2010	By:	/s/ AJAY SABHERWAL
		Name:	Ajay Sabherwal
		Title:	Executive Vice President and Chief Financial Officer

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Exhibit Index

Exhibit No.		Description
	2.1	Agreement and Plan of Merger, dated as of January 15, 2007, by and among Verizon Communications Inc., Northern New England Spinco Inc. and FairPoint.(1)
	2.2	Amendment No. 1 to the Agreement and Plan of Merger, dated as of April 20, 2007, by and among Verizon Communications Inc., Northern New England Spinco Inc. and FairPoint.(1)
	2.3	Amendment No. 2 to the Agreement and Plan of Merger, dated as of June 28, 2007, by and among Verizon Communications Inc., Northern New England Spinco Inc. and FairPoint.(2)
	2.4	Amendment No. 3 to the Agreement and Plan of Merger, dated as of July 3, 2007, by and among Verizon Communications Inc., Northern New England Spinco Inc. and FairPoint.(3)
	2.5	Amendment No. 4 to the Agreement and Plan of Merger, dated as of November 16, 2007, by and among Verizon Communications Inc., Northern New England Spinco Inc. and FairPoint.(4)
	2.6	Amendment No. 5 to the Agreement and Plan of Merger, dated as of February 25, 2008, by and among Verizon Communications Inc., Northern New England Spinco Inc. and FairPoint.(5)
	2.7	Distribution Agreement, dated as of January 15, 2007, by and between Verizon Communications Inc. and Northern New England Spinco Inc.(1)
	2.8	Amendment No. 1 to Distribution Agreement, dated as of March 30, 2007, by and between Verizon Communications Inc. and Northern New England Spinco Inc.(1)
	2.9	Amendment No. 2 to Distribution Agreement, dated as of June 28, 2007, by and between Verizon Communications Inc. and Northern New England Spinco Inc.(1)
	2.10	Amendment No. 3 to Distribution Agreement, dated as of July 3, 2007, by and between Verizon Communications Inc. and Northern New England Spinco Inc.(1)
	2.11	Amendment No. 4 to Distribution Agreement, dated as of February 25, 2008, by and between Verizon Communications Inc. and Northern New England Spinco Inc.(5)
	2.12	Amendment No. 5 to the Distribution Agreement, dated as of March 31, 2008, by and between Verizon Communications Inc. and Northern New England Spinco Inc.(6)
	2.13	Transition Services Agreement, dated as of January 15, 2007, by and among Verizon Information Technologies LLC, Northern New England Telephone Operations Inc., Enhanced Communications of Northern New England Inc. and FairPoint.(1)
	2.14	Amendment No. 1 to the Transition Services Agreement, dated as of March 31, 2008, by and among FairPoint, Northern New England Telephone Operations LLC, Enhanced Communications of Northern New England Inc. and Verizon Information Technologies LLC.(6)
	2.15	Master Services Agreement, dated as of January 15, 2007, by and between FairPoint and Capgemini U.S. LLC.(1)
	2.16	First Amendment to Master Services Agreement, dated as of July 6, 2007, by and between FairPoint and Capgemini U.S. LLC.(3)

88

Exhibit No.		Description
	2.17	Second Amendment to Master Services Agreement, dated as of February 25, 2008, by and between FairPoint and Capgemini U.S. LLC.(5)
	2.18	Letter Agreement, dated as of January 17, 2008, by and between FairPoint and Capgemini U.S. LLC.(7)
	2.19	Amendment to Letter Agreement, dated as of February 28, 2008, by and between FairPoint and Capgemini U.S. LLC.(8)
	2.20	Employee Matters Agreement, dated as of January 15, 2007, by and among Verizon Communications Inc., Northern New England Spinco Inc. and FairPoint.(1)
	2.21	Tax Sharing Agreement, dated as of January 15, 2007, by and among FairPoint, Verizon Communications Inc. and Northern New England Spinco Inc.(9)
	2.22	Partnership Interest Purchase Agreement, dated as of January 15, 2007, by and among Verizon Wireless of the East LP, Cellco Partnership d/b/a Verizon Wireless and Taconic Telephone Corp.(9)
	2.23	Joinder Agreement, dated as of April 5, 2007, by and among Warwick Valley Telephone Company, Taconic Telephone Corp., Cellco Partnership d/b/a Verizon Wireless and Verizon Wireless of the East LP.(10)
	2.24	Publishing Agreement, dated as of March 31, 2008, by and between FairPoint and Idearc Media Corp.(6)
	2.25	Branding Agreement, dated as of March 31, 2008, by and between FairPoint and Idearc Media Corp.(6)
	2.26	Non-Competition Agreement, dated as of March 31, 2008, by and between FairPoint and Idearc Media Corp.(6)
	2.27	Listing License Agreement, dated as of March 31, 2008, by and between FairPoint and Idearc Media Corp.(6)
	2.28	Intellectual Property Agreement, dated as of March 31, 2008, by and between FairPoint and Verizon Communications Inc.(6)
	2.29	Transition Period Trademark License Agreement, dated as of March 31, 2008, by and between FairPoint and Verizon Communications Inc.(6)
	2.30	Transition Agreement, dated as of January 30, 2009, by and among Verizon Communications Inc., Verizon New England Inc., Verizon Information Technologies LLC, FairPoint, Northern New England Telephone Operations LLC, Telephone Operating Company of Vermont LLC and Enhanced Communications of Northern New England Inc.(11)
	3.1	Eighth Amended and Restated Certificate of Incorporation of FairPoint.(12)
	3.2	Amended and Restated By Laws of FairPoint.(12)
	4.1	Indenture, dated as of March 31, 2008, by and between Northern New England Spinco Inc. and U.S. Bank National Association.(6)
	4.2	Second Supplemental Indenture, dated as of July 17, 2009, by and between FairPoint Communications, Inc. and U.S. Bank National Association.(13)

89

Exhibit No.		Description
	4.3	Registration Rights Agreement, dated as of March 31, 2008, by and among FairPoint Communications, Inc., Banc of America Securities LLC, Lehman Brothers Inc. and Morgan Stanley & Co. Incorporated.(6)
	4.4	Form of 131/8% Senior Note due 2018 (included in Exhibit 4.1).(6)
	4.5	Indenture, dated as of July 29, 2009, by and between FairPoint Communications, Inc. and U.S. Bank National Association.(13)
	4.6	Form of 131/8% Senior Note due 2018 (included in Exhibit 4.6).(13)
	10.1	Credit Agreement, dated as of March 31, 2008, by and among FairPoint, Northern New England Spinco Inc., Bank of America, N.A, as syndication agent, Morgan Stanley Senior Funding, Inc. and Deutsche Bank Securities Inc., as co-documentation agents, and Lehman Commercial Paper Inc., as administrative agent and Lenders party thereto.(6)
	10.2	Amendment, Waiver, Resignation and Appointment Agreement, dated as of January 21, 2009, by and among FairPoint, Lenders party thereto, Lehman Commercial Paper Inc. and Bank of America, N.A.(14)
	10.3	Subsidiary Guaranty, dated as of March 31, 2008, by and among FairPoint Broadband, Inc., MJD Ventures, Inc., MJD Services Corp., S T Enterprises, Ltd., FairPoint Carrier Services, Inc., FairPoint Logistics, Inc. and Lehman Commercial Paper Inc.(6)
	10.4	Pledge Agreement, dated as of March 31, 2008, by and among FairPoint, MJD Ventures, Inc., MJD Services Corp., S T Enterprises, Ltd., FairPoint Carrier Services, Inc., FairPoint Broadband, Inc., FairPoint Logistics, Inc., Enhanced Communications of Northern New England, Inc., Utilities, Inc., C-R Communications, Inc., Comerco, Inc., GTC Communications, Inc., St. Joe Communications, Inc., Ravenswood Communications, Inc., Unite Communications Systems, Inc. and Lehman Commercial Paper Inc.(6)
	10.5	Deposit Agreement, dated as of March 31, 2008, by and among Northern New England Telephone Operations LLC, Telephone Operating Company of Vermont LLC and Lehman Commercial Paper Inc.(6)
	10.6	Letter Agreement, dated as of October 13, 2010, by and among FairPoint and certain secured lenders under the Pre-petition Credit Facility.(15)
	10.7	Debtor-in-Possession Credit Agreement, dated as of October 27, 2009, by and among FairPoint Communications, Inc., FairPoint Logistics, Inc., Bank of America, N.A., as administrative agent, and lenders party thereto.(16)
	10.8	First Amendment to Debtor-in-Possession Credit Agreement, dated as of December 1, 2010, by and among FairPoint Communications, Inc., FairPoint Logistics, Inc., Bank of America N.A., as administrative agent, and the lenders party thereto.(17)
	10.9	Second Amendment to Debtor-in-Possession Credit Agreement, dated as of December 10, 2010, by and among FairPoint Communications, Inc., FairPoint Logistics, Inc., Bank of America N.A., as administrative agent, and the lenders party thereto.(17)
	10.10	Third Amendment to Debtor-in-Possession Credit Agreement, dated as of December 15, 2009, by and among FairPoint Communications, Inc., FairPoint Logistics, Inc., Bank of America N.A., as administrative agent, and the lenders party thereto.(17)
	10.11	Fourth Amendment to Debtor-in-Possession Credit Agreement, dated as of January 13, 2010, by and among FairPoint Communications, Inc., FairPoint Logistics, Inc., Bank of America N.A., as administrative agent, and the lenders party thereto.(17)

90

Exhibit No.		Description
	10.12	Fifth Amendment to Debtor-in-Possession Credit Agreement, dated as of January 28, 2010, by and among FairPoint Communications, Inc., FairPoint Logistics, Inc., Bank of America N.A., as administrative agent, and the lenders party thereto.(17)
	10.13	Sixth Amendment to Debtor-in-Possession Credit Agreement, dated as of January 29, 2010, by and among FairPoint Communications, Inc., FairPoint Logistics, Inc., Bank of America N.A., as administrative agent, and the lenders party thereto.(17)
	10.14	Seventh Amendment to Debtor-in-Possession Credit Agreement, dated as of February 8, 2010, by and among FairPoint Communications, Inc., FairPoint Logistics, Inc., Bank of America N.A., as administrative agent, and the lenders party thereto.(17)
	10.15	Eighth Amendment to Debtor-in-Possession Credit Agreement, dated as of February 24, 2010, by and among FairPoint Communications, Inc., FairPoint Logistics, Inc., Bank of America N.A., as administrative agent, and the lenders party thereto.(17)
	10.16	Ninth Amendment to Debtor-in-Possession Credit Agreement, dated as of February 26, 2010, by and among FairPoint Communications, Inc., FairPoint Logistics, Inc., Bank of America N.A., as administrative agent, and the lenders party thereto.(17)
	10.17	Tenth Amendment to Debtor-in-Possession Credit Agreement, dated as of March 9, 2010, by and among FairPoint Communications, Inc., FairPoint Logistics, Inc., Bank of America N.A., as administrative agent, and the lenders party thereto.(17)
	10.18	Eleventh Amendment to Debtor-in-Possession Credit Agreement, dated as of April 30, 2010, by and among FairPoint Communications, Inc., FairPoint Logistics, Inc., Bank of America N.A., as administrative agent, and the lenders party thereto.(17)
	10.19	Twelfth Amendment to Debtor-in-Possession Credit Agreement, dated as of May 21, 2010, by and among FairPoint Communications, Inc., FairPoint Logistics, Inc., Bank of America N.A., as administrative agent, and the lenders party thereto.(18)
	10.20	Thirteenth Amendment to Debtor-in-Possession Credit Agreement, dated as of July 26, 2010, by and among FairPoint Communications, Inc., FairPoint Logistics, Inc., Bank of America N.A., as administrative agent, and the lenders party thereto.*
	10.21	Fourteenth Amendment to Debtor-in-Possession Credit Agreement, dated as of August 30, 2010, by and among FairPoint Communications, Inc., FairPoint Logistics, Inc., Bank of America N.A., as administrative agent, and the lenders party thereto.*
	10.22	Fifteenth Amendment to Debtor-in-Possession Credit Agreement, dated as of October 22, 2010, by and among FairPoint Communications, Inc., FairPoint Logistics, Inc., Bank of America N.A., as administrative agent, and the lenders party thereto.*
	10.23	Debtor-in-Possession Subsidiary Guaranty, dated as of October 30, 2009, by and among certain subsidiaries of FairPoint Communications, Inc. and Bank of America, N.A.(16)
	10.24	Debtor-in-Possession Pledge Agreement, dated as of October 30, 2009, by and among FairPoint Communications, Inc., FairPoint Logistics, Inc., certain subsidiaries of FairPoint Communications, Inc. and Bank of America, N.A.(16)
	10.25	Debtor-in-Possession Security Agreement, dated as of October 30, 2009, by and among FairPoint Communications, Inc., FairPoint Logistics, Inc., certain subsidiaries of FairPoint Communications, Inc. and Bank of America, Inc.(16)
	10.26	Amended and Restated Tax Sharing Agreement, dated as of November 9, 2000, by and among FairPoint and its Subsidiaries.(19)

91

Exhibit No.		Description
	10.27	Employment Agreement, dated as of August 16, 2010, by and between FairPoint and Paul H. Sunu.*
	10.28	Consulting Agreement, dated as of August 16, 2010, by and between FairPoint and David L. Hauser.*
	10.29	Change in Control and Severance Agreement, dated as of March 14, 2007, by and between FairPoint and Peter G. Nixon.(20)
	10.30	Change in Control and Severance Agreement, dated as of March 14, 2007, by and between FairPoint and Shirley J. Linn.(20)
	10.31	Change in Control and Severance Agreement, dated as of July 19, 2010, by and between FairPoint and Ajay Sabherwal.*
	10.32	FairPoint Amended and Restated 1998 Stock Incentive Plan.(21)
	10.33	FairPoint Amended and Restated 2000 Employee Stock Incentive Plan.(22)
	10.34	FairPoint 2005 Stock Incentive Plan.(12)
	10.35	FairPoint Communications, Inc. 2008 Annual Incentive Plan.(22)
	10.36	FairPoint Communications, Inc. 2008 Long Term Incentive Plan.(23)
	10.37	Nonqualified Deferred Compensation Adoption Agreement.(11)
	10.38	Nonqualified Deferred Compensation Plan Document.(11)
	10.39	Form of February 2005 Restricted Stock Agreement.(24)
	10.40	Form of Director Restricted Stock Agreement—FairPoint Communications, Inc. 2005 Stock Incentive Plan.(25)
	10.41	Form of Director Restricted Unit Agreement—FairPoint Communications, Inc. 2005 Stock Incentive Plan.(25)
	10.42	Form of Non-Director Restricted Stock Agreement—FairPoint Communications, Inc. 2005 Stock Incentive Plan.(26)
	10.43	Form of Non-Director Restricted Stock Agreement—FairPoint Communications, Inc. 2008 Long Term Incentive Plan.(21)
	10.44	Form of Performance Unit Award Agreement 2008-2009 Award (Performance Unit Award, dated as of April 1, 2008, by and between FairPoint and Eugene B. Johnson).(27)
	10.45	Form of Performance Unit Award Agreement 2008-2010 Award.(23)
	10.46	Form of Performance Unit Award Agreement 2009-2011 Award.(28)
	10.47	Form of Director Restricted Unit Agreement—FairPoint Communications, Inc. 2008 Long Term Incentive Plan.(28)
	10.48	Stipulation filed with the Maine Public Utilities Commission, dated December 12, 2007.(29)
	10.49	Amended Stipulation filed with the Maine Public Utilities Commission dated December 21, 2007(6)
	10.50	Stipulation filed with the Vermont Public Service Board, dated January 8, 2008.(30)
	10.51	Stipulation filed with the New Hampshire Public Utilities Commission, dated January 23, 2008.(7)

92

Exhibit No.		Description
	10.52	Letter Agreement, dated as of March 30, 2008, by and between the Staff of the New Hampshire Public Utilities Commission and Verizon Communications Inc.(6)
	10.53	Letter, dated as of May 12, 2009, from the Staff of the New Hampshire Public Utilities Commission to FairPoint.(31)
	11	Statement Regarding Computation of Per Share Earnings (included in the financial statements contained in this Quarterly Report).
	31.1	Certification as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
	31.2	Certification as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
	32.1	Certification required by 18 United States Code Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*†
	32.2	Certification required by 18 United States Code Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*†
	99.1	Order of the Maine Public Utilities Commission, dated February 1, 2008.(32)
	99.2	Order of the Vermont Public Service Board, dated February 15, 2008.(33)
	99.3	Order of the New Hampshire Public Utilities Commission, dated February 25, 2008.(5)

*

Filed herewith.

†

Pursuant to SEC Release No. 33-8238, this certification will be treated as "accompanying" this Quarterly Report on Form 10-Q and not "filed" as part of such report for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of Section 18 of the Exchange Act and this certification will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

(1)

Incorporated by reference to the Registration Statement on Form S-4 of FairPoint, declared effective as of July 16, 2007.

(2)

Incorporated by reference to the Current Report on Form 8-K of FairPoint filed on June 28, 2007.

(3)

Incorporated by reference to the Current Report on Form 8-K of FairPoint filed on July 9, 2007.

(4)

Incorporated by reference to the Current Report on Form 8-K of FairPoint filed on November 16, 2007.

(5)

Incorporated by reference to the Current Report on Form 8-K of FairPoint filed on February 27, 2008.

(6)

Incorporated by reference to the Current Report on Form 8-K of FairPoint filed on April 3, 2008.

(7)

Incorporated by reference to the Current Report on Form 8-K of FairPoint filed on January 24, 2008.

(8)

Incorporated by reference to the Annual Report on Form 10-K of FairPoint for the year ended December 31, 2007.

(9)

Incorporated by reference to the Current Report on Form 8-K of FairPoint filed on January 19, 2007.

(10)

Incorporated by reference to the Current Report on Form 8-K of FairPoint filed on April 10, 2007.

93

(11)

Incorporated by reference to the Annual Report on Form 10-K of FairPoint for the year ended December 31, 2008.

(12)

Incorporated by reference to the Annual Report on Form 10-K of FairPoint for the year ended December 31, 2004.

(13)

Incorporated by reference to the Current Report on Form 8-K of FairPoint filed on August 3, 2009.

(14)

Incorporated by reference to the Current Report on Form 8-K of FairPoint filed on January 22, 2009.

(15)

Incorporated by reference to the Current Report on Form 8-K of FairPoint filed on October 19, 2010.

(16)

Incorporated by reference to the Quarterly Report on Form 10-Q of FairPoint for the period ended September 30, 2009.

(17)

Incorporated by referenced to the Annual Report on Form 10-K of FairPoint for the year ended December 31, 2009.

(18)

Incorporated by reference to the Quarterly Report on Form 10-Q of FairPoint for the period ended June 30, 2010.

(19)

Incorporated by reference to the Quarterly Report on Form 10-Q of FairPoint for the period ended September 30, 2000.

(20)

Incorporated by reference to the Current Report on Form 8-K of FairPoint filed on March 19, 2007.

(21)

Incorporated by reference to the Registration Statement on Form S-4 of FairPoint, declared effective as of August 9, 2000.

(22)

Incorporated by reference to the Annual Report on Form 10-K of FairPoint for the year ended December 31, 2003.

(23)

Incorporated by reference to the Current Report on Form 8-K of FairPoint filed on June 23, 2008.

(24)

Incorporated by reference to the Registration Statement on Form S-1 of FairPoint, declared effective as of February 3, 2005.

(25)

Incorporated by reference to the Current Report on Form 8-K of FairPoint filed on June 20, 2005.

(26)

Incorporated by reference to the Current Report on Form 8-K of FairPoint filed on September 23, 2005.

(27)

Incorporated by reference to the Current Report on Form 8-K of FairPoint filed on April 1, 2008.

(28)

Incorporated by reference to the Current Report on Form 8-K of FairPoint filed on March 9, 2009.

(29)

Incorporated by reference to the Current Report on Form 8-K of FairPoint filed on December 13, 2007.

(30)

Incorporated by reference to the Current Report on Form 8-K of FairPoint filed on January 8, 2008.

(31)

Incorporated by reference to the Quarterly Report on Form 10-Q of FairPoint for the period ended June 30, 2009.

(32)

Incorporated by reference to the Current Report on Form 8-K of FairPoint filed on February 6, 2008.

(33)

Incorporated by reference to the Current Report on Form 8-K of FairPoint filed on February 21, 2008.

94

EX-10.20

Exhibit 10.20

THIRTEENTH AMENDMENT

This THIRTEENTH AMENDMENT, dated as of July 26, 2010 (this “Agreement”), to the Debtor-in-Possession Credit Agreement, dated as of October 27, 2009 (as amended prior to the date hereof, the “Credit Agreement”), by and among FAIRPOINT COMMUNICATIONS, INC., a Delaware corporation and a debtor and debtor-in-possession under Chapter 11 of the Bankruptcy Code (as hereinafter defined) (“FairPoint”), FAIRPOINT LOGISTICS, INC., a South Dakota corporation and a debtor and debtor-in-possession under Chapter 11 of the Bankruptcy Code (“Logistics”; Logistics, together with FairPoint, each a “Borrower” and, collectively, the “Borrowers”), the lenders from time to time party thereto (the “Lenders”), and BANK OF AMERICA, N.A., as Administrative Agent (in such capacity, together with any successor administrative agent, the “Administrative Agent”).  Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement.

WHEREAS, the Borrowers have requested that the Administrative Agent and the Required Lenders extend the Maturity Date.

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

SECTION 1.   Amendments.  Subject to all of the terms and conditions set forth herein,

1.1   Section 6.01 of the Credit Agreement is hereby amended by adding a new clause (l) at the end thereof which reads as follows:

“(l)          Reforecast.  On or prior to August 31, 2010, a reforecast for submission to the Vermont Public Service Board in form and detail reasonably satisfactory to the Administrative Agent.”

1.2   The definition of “Maturity Date” set forth in Section 9 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

“Maturity Date” shall mean September 8, 2010, which date may, at the request of the Borrowers and subject to the prior written consent of the Required Lenders, be extended until a date not later than October 26, 2010 (provided that the Credit Parties shall not be required to pay a fee to the Lenders in connection with any such extension).

SECTION 2.   Conditions Precedent.  This Agreement shall become effective on the date (the “Effective Date”) upon which the Administrative Agent has received executed counterparts of this Agreement duly executed by the Credit Parties, the Administrative Agent and the Required Lenders.

SECTION 3.   Representations and Warranties.  After giving effect to this Agreement, the Credit Parties, jointly and severally, reaffirm and restate the representations and warranties set forth in the Credit Agreement and in the other Credit Documents (except to the

extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date) and all such representations and warranties shall be true and correct on the date hereof with the same force and effect as if made on such date.  Each of the Credit Parties represents and warrants (which representations and warranties shall survive the execution and delivery hereof) to the Administrative Agent and the Lenders that:

(a)           it has the company power and authority to execute, deliver and carry out the terms and provisions of this Agreement and the transactions contemplated hereby and has taken or caused to be taken all necessary action to authorize the execution, delivery and performance of this Agreement and the transactions contemplated hereby;

(b)          no consent of any Person (including, without limitation, any of its equity holders or creditors), and no action of, or filing with, any governmental or public body or authority is required to authorize, or is otherwise required in connection with, the execution, delivery and performance of this Agreement;

(c)           this Agreement has been duly executed and delivered on its behalf by a duly authorized officer, and constitutes its legal, valid and binding obligation enforceable in accordance with its terms, subject to bankruptcy, reorganization, insolvency, moratorium and other similar laws affecting the enforcement of creditors’ rights generally and the exercise of judicial discretion in accordance with general principles of equity;

(d)           no Default or Event of Default shall have occurred and be continuing; and

(e)           the execution, delivery and performance of this Agreement will not violate any law, statute or regulation, or any order or decree of any court or governmental instrumentality, or conflict with, or result in the breach of, or constitute a default under, any contractual obligation of any Credit Party or any of its Subsidiaries.

SECTION 4.   Affirmation of Credit Parties.  Each Credit Party hereby approves and consents to this Agreement and the transactions contemplated by this Agreement, and affirms its obligations under the Credit Documents to which it is a party.  Each Subsidiary Guarantor agrees and affirms that its guarantee of the Obligations continues to be in full force and effect and is hereby ratified and confirmed in all respects and shall apply to (i) the Credit Agreement and (ii) all of the other Credit Documents, as such are amended, restated, supplemented or otherwise modified from time to time in accordance with their terms.

SECTION 5.   Ratification.

(a)           Except as herein agreed, the Credit Agreement and the other Credit Documents remain in full force and effect and are hereby ratified and affirmed by the Credit Parties.  Each of the Credit Parties hereby (i) confirms and agrees that the Borrowers are truly and justly indebted to the Administrative Agent and the Lenders in the aggregate amount of the Obligations without defense, counterclaim or offset of any kind whatsoever, and (ii) reaffirms and admits the validity and enforceability of the Credit Agreement and the other Credit Documents.

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(b)                   This Agreement shall be limited precisely as written and, except as expressly provided herein, shall not be deemed (i) to be a consent granted pursuant to, or a waiver, modification or forbearance of, any term or condition of the Credit Agreement or any of the instruments or agreements referred to therein or a waiver of any Default or Event of Default under the Credit Agreement, whether or not known to the Administrative Agent or any of the Lenders, or (ii) to prejudice any right or remedy which the Administrative Agent or any of the Lenders may now have or have in the future against any Person under or in connection with the Credit Agreement, any of the instruments or agreements referred to therein or any of the transactions contemplated thereby.

SECTION 6.   Waivers; Amendments.  Neither this Agreement, nor any provision hereof, may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Administrative Agent and the Required Lenders.

SECTION 7.   References.  All references to the “Credit Agreement”, “thereunder”, “thereof” or words of like import in the Credit Agreement or any other Credit Document and the other documents and instruments delivered pursuant to or in connection therewith shall mean and be a reference to the Credit Agreement as modified hereby and as each may in the future be amended, restated, supplemented or modified from time to time.

SECTION 8.   Counterparts.  This Agreement may be executed by the parties hereto individually or in combination, in one or more counterparts, each of which shall be an original and all of which shall constitute one and the same agreement.  Delivery of an executed counterpart of a signature page by telecopier shall be effective as delivery of a manually executed counterpart.

SECTION 9.   Successors and Assigns.  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

SECTION 10.   Severability.  If any provision of this Agreement shall be held invalid or unenforceable in whole or in part in any jurisdiction, such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or enforceability without in any manner affecting the validity or enforceability of such provision in any other jurisdiction or the remaining provisions of this Agreement in any jurisdiction.

SECTION 11.   Governing Law.  THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK.

SECTION 12.   Miscellaneous.

(a)   The parties hereto shall, at any time from time to time following the execution of this Agreement, execute and deliver all such further instruments and take all such further action as may be reasonably necessary or appropriate in order to carry out the provisions of this Agreement.

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(b)   The Credit Parties acknowledge and agree that this Agreement constitutes a Credit Document and that the failure of any of the Credit Parties to comply with the provisions of this Agreement shall constitute an Event of Default.

SECTION 13.   Headings.  Section headings in this Agreement are included for convenience of reference only and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.

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[Signature Pages Omitted]

EX-10.21

Exhibit 10.21

FOURTEENTH AMENDMENT

This FOURTEENTH AMENDMENT, dated as of August 30, 2010 (this “Agreement”), to the Debtor-in-Possession Credit Agreement, dated as of October 27, 2009 (as amended prior to the date hereof, the “Credit Agreement”), by and among FAIRPOINT COMMUNICATIONS, INC., a Delaware corporation and a debtor and debtor-in-possession under Chapter 11 of the Bankruptcy Code (as hereinafter defined) (“FairPoint”), FAIRPOINT LOGISTICS, INC., a South Dakota corporation and a debtor and debtor-in-possession under Chapter 11 of the Bankruptcy Code (“Logistics”; Logistics, together with FairPoint, each a “Borrower” and, collectively, the “Borrowers”), the lenders from time to time party thereto (the “Lenders”), and BANK OF AMERICA, N.A., as Administrative Agent (in such capacity, together with any successor administrative agent, the “Administrative Agent”).  Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement.

WHEREAS, the Borrowers have requested that the Administrative Agent and the Required Lenders extend the Maturity Date.

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

SECTION 1.   Amendments.  Subject to all of the terms and conditions set forth herein,

1.1   Subsection 6.01(l) of the Credit Agreement is hereby deleted and replaced with “[Reserved].”

1.2   The definition of “Maturity Date” set forth in Section 9 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

“Maturity Date” shall mean October 26, 2010.

SECTION 2.   Conditions Precedent.  This Agreement shall become effective on the date (the “Effective Date”) upon which the Administrative Agent has received executed counterparts of this Agreement duly executed by the Credit Parties, the Administrative Agent and the Required Lenders.

SECTION 3.   Representations and Warranties.  After giving effect to this Agreement, the Credit Parties, jointly and severally, reaffirm and restate the representations and warranties set forth in the Credit Agreement and in the other Credit Documents (except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date) and all such representations and warranties shall be true and correct on the date hereof with the same force and effect as if made on such date.  Each of the Credit Parties represents and warrants (which representations and warranties shall survive the execution and delivery hereof) to the Administrative Agent and the Lenders that:

(a)           it has the company power and authority to execute, deliver and carry out the terms and provisions of this Agreement and the transactions contemplated hereby and has taken or caused to be taken all necessary action to authorize the execution, delivery and performance of this Agreement and the transactions contemplated hereby;

(b)          no consent of any Person (including, without limitation, any of its equity holders or creditors), and no action of, or filing with, any governmental or public body or authority is required to authorize, or is otherwise required in connection with, the execution, delivery and performance of this Agreement;

(c)           this Agreement has been duly executed and delivered on its behalf by a duly authorized officer, and constitutes its legal, valid and binding obligation enforceable in accordance with its terms, subject to bankruptcy, reorganization, insolvency, moratorium and other similar laws affecting the enforcement of creditors’ rights generally and the exercise of judicial discretion in accordance with general principles of equity;

(d)           no Default or Event of Default shall have occurred and be continuing; and

(e)           the execution, delivery and performance of this Agreement will not violate any law, statute or regulation, or any order or decree of any court or governmental instrumentality, or conflict with, or result in the breach of, or constitute a default under, any contractual obligation of any Credit Party or any of its Subsidiaries.

SECTION 4.   Affirmation of Credit Parties.  Each Credit Party hereby approves and consents to this Agreement and the transactions contemplated by this Agreement, and affirms its obligations under the Credit Documents to which it is a party.  Each Subsidiary Guarantor agrees and affirms that its guarantee of the Obligations continues to be in full force and effect and is hereby ratified and confirmed in all respects and shall apply to (i) the Credit Agreement and (ii) all of the other Credit Documents, as each of such are amended (including this Agreement), restated, supplemented or otherwise modified from time to time in accordance with their terms.  Each Credit Party acknowledges and agrees that further extensions, if any, of the Maturity Date are subject to the discretion of and require the consent of all Lenders and, in any event, would be subject to such terms and conditions (including, without limitation, the payment of fees) as the Lenders may deem appropriate under the circumstances.

SECTION 5.   Ratification.

(a)           Except as herein agreed, the Credit Agreement and the other Credit Documents remain in full force and effect and are hereby ratified and affirmed by the Credit Parties.  Each of the Credit Parties hereby (i) confirms and agrees that the Borrowers are truly and justly indebted to the Administrative Agent and the Lenders in the aggregate amount of the Obligations without defense, counterclaim or offset of any kind whatsoever, and (ii) reaffirms and admits the validity and enforceability of the Credit Agreement and the other Credit Documents.

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(b)                   This Agreement shall be limited precisely as written and, except as expressly provided herein, shall not be deemed (i) to be a consent granted pursuant to, or a waiver, modification or forbearance of, any term or condition of the Credit Agreement or any of the instruments or agreements referred to therein or a waiver of any Default or Event of Default under the Credit Agreement, whether or not known to the Administrative Agent or any of the Lenders, or (ii) to prejudice any right or remedy which the Administrative Agent or any of the Lenders may now have or have in the future against any Person under or in connection with the Credit Agreement, any of the instruments or agreements referred to therein or any of the transactions contemplated thereby.

SECTION 6.   Waivers; Amendments.  Neither this Agreement, nor any provision hereof, may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Administrative Agent and the Required Lenders.

SECTION 7.   References.  All references to the “Credit Agreement”, “thereunder”, “thereof” or words of like import in the Credit Agreement or any other Credit Document and the other documents and instruments delivered pursuant to or in connection therewith shall mean and be a reference to the Credit Agreement as modified hereby and as each may in the future be amended, restated, supplemented or modified from time to time.

SECTION 8.   Counterparts.  This Agreement may be executed by the parties hereto individually or in combination, in one or more counterparts, each of which shall be an original and all of which shall constitute one and the same agreement.  Delivery of an executed counterpart of a signature page by telecopier shall be effective as delivery of a manually executed counterpart.

SECTION 9.   Successors and Assigns.  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

SECTION 10.   Severability.  If any provision of this Agreement shall be held invalid or unenforceable in whole or in part in any jurisdiction, such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or enforceability without in any manner affecting the validity or enforceability of such provision in any other jurisdiction or the remaining provisions of this Agreement in any jurisdiction.

SECTION 11.   Governing Law.  THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK.

SECTION 12.   Miscellaneous.

(a)   The parties hereto shall, at any time from time to time following the execution of this Agreement, execute and deliver all such further instruments and take all such further action as may be reasonably necessary or appropriate in order to carry out the provisions of this Agreement.

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(b)   The Credit Parties acknowledge and agree that this Agreement constitutes a Credit Document and that the failure of any of the Credit Parties to comply with the provisions of this Agreement shall constitute an Event of Default.

SECTION 13.   Headings.  Section headings in this Agreement are included for convenience of reference only and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.

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[Signature Pages Omitted]

EX-10.22

Exhibit 10.22

FIFTEENTH AMENDMENT

This FIFTEENTH AMENDMENT, dated as of October 22, 2010 (this “Agreement”), to the Debtor-in-Possession Credit Agreement, dated as of October 27, 2009 (as amended prior to the date hereof, the “Credit Agreement”), by and among FAIRPOINT COMMUNICATIONS, INC., a Delaware corporation and a debtor and debtor-in-possession under Chapter 11 of the Bankruptcy Code (as hereinafter defined) (“FairPoint”), FAIRPOINT LOGISTICS, INC., a South Dakota corporation and a debtor and debtor-in-possession under Chapter 11 of the Bankruptcy Code (“Logistics”; Logistics, together with FairPoint, each a “Borrower” and, collectively, the “Borrowers”), the lenders from time to time party thereto (the “Lenders”), and BANK OF AMERICA, N.A., as Administrative Agent (in such capacity, together with any successor administrative agent, the “Administrative Agent”).  Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement.

WHEREAS, the Borrowers have requested that the Administrative Agent and the Lenders extend the Maturity Date.

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

SECTION 1.   Amendments.  Subject to all of the terms and conditions set forth herein (including the occurrence of the Effective Date referred to below), and from and after such Effective Date:

1.1   Section 5.05(a)(i) of the Credit Agreement is hereby amended by deleting the words “in compliance with Section 7.05” where they appear in the parenthetical in such Section 5.05(a)(i).

1.2   Section 6.01(e) of the Credit Agreement is hereby amended by deleting such Section 6.01(e) in its entirety and substituting in lieu thereof the following new Section 6.01(e):

“(e)         Compliance Certificates.  At the time of the delivery of the financial statements provided for in Sections 6.01(b) or (c), a certificate (“Compliance Certificate”) of the chief financial officer or other Authorized Officer of FairPoint to the effect that no Default or Event of Default exists or, if any Default or Event of Default does exist, specifying the nature and extent thereof.”

1.3   Section 6.08 of the Credit Agreement is hereby amended by deleting the words “, subject to Section 7.05,” where they appear in such Section 6.08.

1.4   Section 7.02(b) of the Credit Agreement is hereby amended by deleting the words “to the extent within the limitations set forth in Section 7.05” where they appear in such Section 7.02(b).

1.5   Section 7.04(c) of the Credit Agreement is hereby amended by deleting the words “; provided that Borrowers are in compliance with Section 7.05” where they appear in such Section 7.04(c).

1.6   Each of Sections 7.05 and 7.12 of the Credit Agreement are hereby deleted and replaced with “[Reserved].”

1.7   Section 8.22(b) of the Credit Agreement is hereby amended by deleting the reference to “July 31, 2010” appearing therein and substituting “January 31, 2011” therefor.

1.8   The definition of “Maturity Date” set forth in Section 9 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

“Maturity Date” shall mean January 31, 2011, which date may, at the request of the Borrowers and subject to the prior written consent of the Required Lenders, be extended from time to time by up to two months in the aggregate (provided that the Credit Parties shall not be required to pay a fee to the Lenders in connection with any extensions for such up to two months in the aggregate).

SECTION 2.   Conditions Precedent.  This Agreement shall become effective on the date (the “Effective Date”) upon which the following conditions have been satisfied:

(a)           The Administrative Agent shall have received executed counterparts of this Agreement duly executed by the Credit Parties, the Administrative Agent and each of the Lenders; and

(b)           The Administrative Agent shall have received (i) for the ratable benefit of the Lenders, a fee in immediately available funds in an amount equal to 0.50% of the Total Revolving Commitment, (ii) for its own account, in immediately available funds (x) the full amount of its annual administrative fee as if the anniversary of the date that the Interim Order was entered by the Bankruptcy Court was the Effective Date and (y) payment in full of all invoices heretofore submitted to FairPoint, and (iii) payment, or counsel to the Administrative Agent shall have received payment, in full in immediately available funds of all fees and expenses of counsel to the Administrative Agent with respect to invoices heretofore submitted to FairPoint.

SECTION 3.   Representations and Warranties.  After giving effect to this Agreement, the Credit Parties, jointly and severally, reaffirm and restate the representations and warranties set forth in the Credit Agreement and in the other Credit Documents (except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date) and all such representations and warranties shall be true and correct on the date hereof with the same force and effect as if made on such date.  Each of the Credit Parties represents and warrants (which representations and warranties shall survive the execution and delivery hereof) to the Administrative Agent and the Lenders that:

(a)           it has the company power and authority to execute, deliver and carry out the terms and provisions of this Agreement and the transactions contemplated hereby and

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has taken or caused to be taken all necessary action to authorize the execution, delivery and performance of this Agreement and the transactions contemplated hereby;

(b)          no consent of any Person (including, without limitation, any of its equity holders or creditors), and no action of, or filing with, any governmental or public body or authority is required to authorize, or is otherwise required in connection with, the execution, delivery and performance of this Agreement;

(c)           this Agreement has been duly executed and delivered on its behalf by a duly authorized officer, and constitutes its legal, valid and binding obligation enforceable in accordance with its terms, subject to bankruptcy, reorganization, insolvency, moratorium and other similar laws affecting the enforcement of creditors’ rights generally and the exercise of judicial discretion in accordance with general principles of equity;

(d)           no Default or Event of Default shall have occurred and be continuing; and

(e)           the execution, delivery and performance of this Agreement will not violate any law, statute or regulation, or any order or decree of any court or governmental instrumentality, or conflict with, or result in the breach of, or constitute a default under, any contractual obligation of any Credit Party or any of its Subsidiaries.

SECTION 4.   Affirmation of Credit Parties.  Each Credit Party hereby approves and consents to this Agreement and the transactions contemplated by this Agreement, and affirms its obligations under the Credit Documents to which it is a party.  Each Subsidiary Guarantor agrees and affirms that its guarantee of the Obligations continues to be in full force and effect and is hereby ratified and confirmed in all respects and shall apply to (i) the Credit Agreement and (ii) all of the other Credit Documents, as each of such are amended (including by this Agreement), restated, supplemented or otherwise modified from time to time in accordance with their terms.  Each Credit Party expressly acknowledges and agrees that further extensions, if any, of the Maturity Date (i) beyond January 31, 2011 may be subject to the inclusion of financial covenants and (ii) beyond March 31, 2011 are subject to the discretion of and require the consent of all Lenders and, in any event, would be subject to such terms and conditions (including, without limitation, the payment of fees) as the Lenders may deem appropriate under the circumstances.

SECTION 5.   Ratification.

(a)           Except as herein agreed, the Credit Agreement and the other Credit Documents remain in full force and effect and are hereby ratified and affirmed by the Credit Parties.  Each of the Credit Parties hereby (i) confirms and agrees that the Borrowers are truly and justly indebted to the Administrative Agent and the Lenders in the aggregate amount of the Obligations without defense, counterclaim or offset of any kind whatsoever, and (ii) reaffirms and admits the validity and enforceability of the Credit Agreement and the other Credit Documents.

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(b)           This Agreement shall be limited precisely as written and, except as expressly provided herein, shall not be deemed (i) to be a consent granted pursuant to, or a waiver, modification or forbearance of, any term or condition of the Credit Agreement or any of the instruments or agreements referred to therein or a waiver of any Default or Event of Default under the Credit Agreement, whether or not known to the Administrative Agent or any of the Lenders, or (ii) to prejudice any right or remedy which the Administrative Agent or any of the Lenders may now have or have in the future against any Person under or in connection with the Credit Agreement, any of the instruments or agreements referred to therein or any of the transactions contemplated thereby.

SECTION 6.   Waivers; Amendments.  Neither this Agreement, nor any provision hereof, may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Administrative Agent and the Required Lenders.

SECTION 7.   References.  All references to the “Credit Agreement”, “thereunder”, “thereof” or words of like import in the Credit Agreement or any other Credit Document and the other documents and instruments delivered pursuant to or in connection therewith shall mean and be a reference to the Credit Agreement as modified hereby and as each may in the future be amended, restated, supplemented or modified from time to time.

SECTION 8.   Counterparts.  This Agreement may be executed by the parties hereto individually or in combination, in one or more counterparts, each of which shall be an original and all of which shall constitute one and the same agreement.  Delivery of an executed counterpart of a signature page by telecopier shall be effective as delivery of a manually executed counterpart.

SECTION 9.   Successors and Assigns.  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

SECTION 10.   Severability.  If any provision of this Agreement shall be held invalid or unenforceable in whole or in part in any jurisdiction, such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or enforceability without in any manner affecting the validity or enforceability of such provision in any other jurisdiction or the remaining provisions of this Agreement in any jurisdiction.

SECTION 11.   Governing Law.  THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK.

SECTION 12.   Miscellaneous.

(a)   The parties hereto shall, at any time from time to time following the execution of this Agreement, execute and deliver all such further instruments and take all such further action as may be reasonably necessary or appropriate in order to carry out the provisions of this Agreement.

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(b)   The Credit Parties acknowledge and agree that this Agreement constitutes a Credit Document and that the failure of any of the Credit Parties to comply with the provisions of this Agreement shall constitute an Event of Default.

SECTION 13.   Headings.  Section headings in this Agreement are included for convenience of reference only and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.

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[Signature Pages Omitted]

EX-10.27

Exhibit 10.27

Execution Copy

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of this 16th day of August 2010, by and between FairPoint Communications, Inc., a Delaware corporation, and Paul H. Sunu (the “Employee”).

W I T N E S S E T H :

WHEREAS, the Company desires to employ Employee and to enter into this Agreement embodying the terms of such employment, and Employee desires to enter into this Agreement and to accept such employment, subject to the terms and provisions of this Agreement.

NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are mutually acknowledged, the Company and Employee hereby agree as follows:

Section 1.Definitions.

(a)“Accrued Obligations” shall mean (i) all accrued but unpaid Base Salary through the date of termination of Employee’s employment, (ii) any unpaid or unreimbursed expenses incurred in accordance with Section 7 hereof, and (iii) any benefits provided under the Company’s employee benefit plans upon a termination of employment, in accordance with the terms contained therein.

(b)“Agreement” shall have the meaning set forth in the preamble hereto.

(c)“Annual Bonus” shall have the meaning set forth in Section 4(b) hereof.

(d)“Bankruptcy Court” shall mean the United States Bankruptcy Court for the Southern District of New York.

(e)“Base Salary” shall mean the salary provided for in Section 4(a) hereof or any increased salary granted to Employee pursuant to Section 4(a) hereof.

(f)“Board” shall mean the Board of Directors of the Company or the Board of Directors of Reorganized FairPoint, as defined in the Plan, as applicable.

(g)“Cause” shall mean (i) Employee’s act(s) of gross negligence or willful misconduct in the course of Employee’s employment hereunder, including a failure to follow a material lawful directive from the Board, (ii) willful failure or refusal by Employee to perform in any material respect his duties or responsibilities, (iii) misappropriation (or attempted misappropriation) by Employee of any assets or business opportunities of the Company or any other member of the Company Group, (iv) embezzlement or fraud committed (or attempted) by Employee, or at his direction, (v) Employee’s conviction of, indictment for, or pleading “guilty” or “ no contest” to, (x) a felony or (y) any other criminal charge that has, or could be reasonably expected to have, an adverse impact on the performance of Employee’s duties to the Company or any other member of the Company Group or otherwise result in material injury to the reputation

or business of the Company or any other member of the Company Group, (vi) any material violation by Employee of the policies of the Company, including but not limited to those relating to sexual harassment or business conduct, and those otherwise set forth in the manuals or statements of policy of the Company, which violation has a material adverse effect on the Company, or (vii) Employee’s material breach of this Agreement or material breach of the Non-Interference Agreement.

(h)“Change in Control” shall mean

(i)a change in ownership or control of the Company effected through a transaction or series of transactions (other than an offering of Stock to the general public through a registration statement filed with the Securities and Exchange Commission) whereby any “person” (as defined in Section 3(a)(9) of the Exchange Act) or any two or more persons deemed to be one “person” (as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act), other than the Company or any of its affiliates, or an employee benefit plan maintained by the Company or any of its affiliates, directly or indirectly acquire “beneficial ownership” (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company possessing more than fifty percent (50%) of the total combined voting power of the Company’s securities outstanding immediately after such acquisition;

(ii)at any time following the Effective Date, the date upon which less than a majority of the Board is made up of the initial members of the Board of Reorganized FairPoint; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then constituting the Board shall be considered as though such individual were an initial member of the Board of Reorganized FairPoint, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board; or

(iii)the sale or disposition, in one or a series of related transactions, of all or substantially all of the assets of the Company to any “person” (as defined in Section 3(a)(9) of the Exchange Act) or to any two or more persons deemed to be one “person” (as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) other than the Company’s affiliates.

For purposes of clarification, the Company’s emergence from bankruptcy pursuant to the Plan shall not constitute a Change in Control under this Agreement.

(i)“Code” shall mean the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.

(j)“Commencement Date” shall mean the date Employee commences his employment with the Company, such date to be mutually agreed upon by the parties hereto,

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provided that such date shall be not earlier than the date on which Bankruptcy Court approval is received for both this agreement and the consulting agreement being proposed between the Company and Mr. David Hauser.

(k)“Company” shall mean FairPoint Communications, Inc., a Delaware corporation, and provided that the Effective Date occurs, Reorganized FairPoint.

(l)“Company Group” shall mean the Company together with any direct or indirect subsidiaries of the Company.

(m)“Compensation Committee” shall mean the committee of the Board designated to make compensation decisions relating to senior executive officers of the Company Group.  Prior to any time that such a committee has been designated, the Board shall be deemed the Compensation Committee for purposes of this Agreement.

(n)“Delay Period” shall have the meaning set forth in Section 13(a) hereof.

(o)“Disability” shall mean any physical or mental disability or infirmity of Employee that prevents the performance of Employee’s duties for a period of (i) ninety (90) consecutive days or (ii) one hundred twenty (120) non-consecutive days during any twelve (12) month period.  Any question as to the existence, extent, or potentiality of Employee’s Disability upon which Employee and the Company cannot agree shall be determined by a qualified, independent physician selected by the Company and approved by Employee (which approval shall not be unreasonably withheld).  The determination of any such physician shall be final and conclusive for all purposes of this Agreement.

(p)“Effective Date” shall have the meaning given to it in the Plan.

(q)“Employee” shall have the meaning set forth in the preamble hereto.

(r)“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time, including rules thereunder and successor provisions and rules thereto.

(s)“Good Reason” shall mean, without Employee’s consent, (i) a material diminution in Employee’s title, duties, or responsibilities as set forth in Section 3 hereof, (ii) a material reduction in Base Salary set forth in Section 4(a) hereof or Annual Bonus opportunity set forth in Section 4(b) hereof, (iii) the relocation of Employee’s principal place of employment (as provided in Section 3(c) hereof) more than fifty (50) miles from its current location, or (iv) any other material breach of a provision of this Agreement by the Company (other than a provision that is covered by clause (i), (ii), or (iii) above).  Employee acknowledges and agrees that his exclusive remedy in the event of any breach of this Agreement shall be to assert Good Reason pursuant to the terms and conditions of Section 8(e) hereof. Notwithstanding the foregoing, during the Term of Employment, in the event that the Board reasonably believes that Employee may have engaged in conduct that could constitute Cause hereunder, the Board may, in its sole and absolute discretion, suspend Employee from performing his duties hereunder, and in no event shall any such suspension constitute an event pursuant to which Employee may terminate employment with Good Reason or otherwise constitute a breach hereunder; provided,

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that no such suspension shall alter the Company’s obligations under this Agreement during such period of suspension.

(t)“Non-Extension Notice” shall have the meaning set forth in Section 2 hereof.

(u)“Non-Interference Agreement” shall mean the Confidentiality, Non-Interference, and Invention Assignment Agreement attached hereto as Exhibit A.

(v)“Option” shall have the meaning set forth in Section 4(d) hereof.

(w)“Person” shall mean any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust (charitable or non-charitable), unincorporated organization, or other form of business entity.

(x)“Plan” shall mean the Debtors’ Modified Second Amended Joint Plan of Reorganization filed in the Bankruptcy Court.

(y)“Release of Claims” shall mean the Release of Claims in substantially the same form attached hereto as Exhibit B (as the same may be revised from time to time by the Company upon the advice of counsel).

(z)“Reorganized FairPoint” shall have the meaning set forth in the Plan.

(aa)“Restricted Shares” shall have the meaning set forth in Section 4(d) hereof.

(bb)“Severance Benefits” shall have the meaning set forth in Section 8(g) hereof.

(cc)“Severance Term” shall mean the twelve (12) month period following Employee’s death or termination due to Disability, or the twenty-four (24) month period following Employee’s termination by the Company without Cause (other than by reason of death or Disability) or by Employee for Good Reason, as applicable.

(dd)“Stock” shall mean the New Common Stock, as defined in the Plan.

(ee)“Term of Employment” shall mean the period specified in Section 2 hereof.

Section 2.Acceptance and Term of Employment.

The Company agrees to employ Employee, and Employee agrees to serve the Company, on the terms and conditions set forth herein.  The Term of Employment shall commence on the Commencement Date and, subject to the approval of this Agreement by the Bankruptcy Court, shall continue during the period ending on the close of business of the three (3) year anniversary of the Effective Date, unless terminated sooner as provided in Section 8; provided, however, that the Term of Employment shall be extended automatically for successive

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one (1) year terms, without the requirement of any action on the part of either party unless notice of termination (a “Non-Extension Notice”) is given by either the Company or Employee not less than ninety (90) days prior to the expiration of the Term of Employment (including any extension thereof).

Section 3.Position, Duties, and Responsibilities; Place of Performance.

(a)Position, Duties, and Responsibilities.  During the Term of Employment, Employee shall be employed and serve as the Chief Executive Officer of the Company (together with such other position or positions consistent with Employee’s title as the Board shall specify from time to time), shall be elected to and shall serve as a member of the Board, and shall have such duties and responsibilities commensurate with such title.  Employee also agrees to serve as an officer and/or director of any other member of the Company Group, in each case without additional compensation.

(b)Performance.  Employee shall devote his full business time, attention, skill, and best efforts to the performance of his duties under this Agreement and shall not engage in any other business or occupation during the Term of Employment, including, without limitation, any activity that (x) conflicts with the interests of the Company or any other member of the Company Group, (y) interferes with the proper and efficient performance of Employee’s duties for the Company, or (z) interferes with Employee’s exercise of judgment in the Company’s best interests.  Notwithstanding the foregoing, nothing herein shall preclude Employee from (i) continuing to serve until either (I) the Effective Date or (II) the effective date of a plan of reorganization of the Company under the Bankruptcy Code on one board of directors other than the Company’s Board (each such board that is not the Company’s Board, an “Outside Board”), except that during the 30 day period from the date of Employee’s appointment to an Outside Board which results in Employee serving on more than one Outside Board, Employee will be permitted to serve on more than one Outside Board but will be required to resign from the requisite number of Outside Boards such that he is only serving on one Outside Board within 30 days of his appointment to the Outside Board that results in his violation of the foregoing restriction, or otherwise serving, with the prior written consent of the Board, as a member of the boards of directors or advisory boards (or their equivalents in the case of a non-corporate entity) of non-competing businesses and charitable organizations, (ii) finalizing transition services with Hargray Communications Group, Inc. prior to initiation of full time employment with the Company, (iii) engaging in charitable activities and community affairs, and (iv) managing his personal investments and affairs; provided, however, that the activities set out in clauses (i), (iii) and (iv) shall be limited by Employee so as not to materially interfere, individually or in the aggregate, with the performance of his duties and responsibilities hereunder.

(c)Principal Place of Employment.  Employee’s principal place of employment shall be in Charlotte, North Carolina, although Employee understands and agrees that he may be required to travel from time to time for business reasons.

Section 4.Compensation.

During the Term of Employment, Employee shall be entitled to the following compensation:

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(a)Base Salary.  Employee shall be paid an annualized Base Salary, payable in accordance with the regular payroll practices of the Company, of not less than $750,000, with increases, if any, as may be approved in writing by the Compensation Committee.

(b)Annual Bonus.  Beginning with calendar year 2011, Employee shall be eligible for an annual incentive bonus award (the “Annual Bonus”) through participation in the Company’s Annual Incentive Plan in respect of each fiscal year during the Term of Employment (at the maximum level, up to 150% of Base Salary), with the actual Annual Bonus payable being based upon the level of achievement of annual Company and individual performance objectives for such fiscal year, as determined by the Compensation Committee and communicated to Employee.  The Annual Bonus shall be paid to Employee at the same time as annual bonuses are generally payable to other senior executives of the Company subject to Employee’s continuous employment through the payment date.

(c)Signing Bonus; Relocation Expenses.

(i)In connection with the commencement of Employee’s employment with the Company, the Company shall pay to Employee a one-time signing bonus equal to $500,000.  The signing bonus shall be paid no later than the Company’s first regular payroll date following the Commencement Date.

(ii)In connection with the relocation of Employee’s principal residence in Chapel Hill, North Carolina, the Company will reimburse Employee for reasonable relocation expenses (including any travel expenses incurred by Employee in connection with, but prior to, the commencement of his employment).  To the extent the reimbursement provided under this Section 4(c)(i) is considered income and increases Employee’s income tax liability, the Company shall pay Employee a tax reimbursement payment in an amount such that, after deduction for all income taxes payable with respect to such tax reimbursement benefit, the amount retained by Employee will be equal to the amount of such increased income tax liability; provided, that in no event shall the aggregate amount of any reimbursed income tax liability exceed $100,000.  Such expenses will be reimbursed in accordance with the Company’s regular reimbursement policies, and any related tax reimbursement shall be made no later than the last day of the calendar year next following the calendar year in which Employee remits to the applicable taxing authority such taxes being reimbursed.

(d)Equity.  Following the Effective Date, Employee shall be granted 240,000 shares of Stock (the “Restricted Shares”) and options to purchase 250,000 shares of Stock (the “Options”).  The Restricted Shares and the Options shall be adjusted on the date of grant to reflect the percentage of the Company such amounts reflect as of the Commencement Date, on a fully diluted basis, and shall be subject to such terms and conditions as determined by the Company, as set forth in the Company’s final Long-Term Incentive Plan (“LTIP”) that shall be in effect upon the Effective Date or immediately thereafter (which for purposes of clarification, may contain revisions, approved by the Company’s Board, as compared to the Company’s 2010 Long-Term Incentive Plan that was filed with the Bankruptcy Court).  Twenty-five percent (25%) of each of the Restricted Shares and the Options shall be vested as of the date of grant, and the remaining Restricted Shares and Options shall vest thereafter in three (3) substantially

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equal vesting tranches on each of the first three (3) anniversaries of the Effective Date, subject to Employee’s continued employment with the Company through each such vesting date.  The strike price of the Options shall be set by the LTIP but shall be no less than the fair market value of the Stock on the date of grant, as determined by the Compensation Committee in good faith in a manner consistent with the exemption from Section 409A of the Code provided under Treasury Regulation 1.409A-1(b)(5) with respect to “stock rights.”  Notwithstanding anything to the contrary in the LTIP or award agreement relating to the Restricted Shares or the Options, 100% of the available unvested Restricted Shares and the Options shall vest, to the extent not yet vested or expired, upon the consummation of a Change in Control so long as Employee remains employed by the Company at the time of execution of a definitive agreement with respect to such Change in Control.

(e)Success Bonus Plan.  Employee shall participate in the Company’s 2010 Success Bonus Plan, pursuant to the terms thereof, with a success bonus equal to fifty percent (50%) of Employee’s annual Base Salary if the Company performs at Target performance levels, as such Target is defined under the 2010 Success Bonus Plan approved by the Bankruptcy Court.

(f)Indemnification.  The Company shall indemnify Employee and hold Employee harmless in connection with the defense of any lawsuit or other claim to which he is made a party by reason of being an officer or employee of the Company, to the fullest extent permitted by the laws of the State of Delaware, as in effect at the time of the subject act or omission; provided that any settlement, consent to judgment, or similar action taken by Employee without the prior written consent of the Company in respect of any such lawsuit or other claim shall not be subject to indemnification hereunder.  In addition, the Company shall provide Employee with evidence of Directors and Officers insurance covering Employee at all times beginning with the date upon which Employee first provides services to the Company, whether such services are performed under this Agreement or in preparation for Employee’s service to the Company under this Agreement, and such insurance coverage shall remain in force for not less than six (6) years subsequent to the termination of Employee’s employment with the Company.

Section 5.Employee Benefits.

During the Term of Employment, Employee shall be entitled to participate in health, insurance, retirement, and other benefits provided generally to similarly situated employees of the Company.  Employee shall also be entitled to the same number of holidays, vacation days, and sick days, as well as any other benefits, in each case as are generally allowed to similarly situated employees of the Company in accordance with the Company policy as in effect from time to time.  Nothing contained herein shall be construed to limit the Company’s ability to amend, suspend, or terminate any employee benefit plan or policy at any time without providing Employee notice, and the right to do so is expressly reserved.

Section 6.Key-Man Insurance.

At any time during the Term of Employment, the Company shall have the right to insure the life of Employee for the sole benefit of the Company, in such amounts, and with such terms, as it may determine.  All premiums payable thereon shall be the obligation of the

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Company.  Employee shall have no interest in any such policy, but agrees to cooperate with the Company in procuring such insurance by submitting to physical examinations, supplying all information required by the insurance company, and executing all necessary documents, provided that no financial obligation is imposed on Employee by any such documents.

Section 7.Reimbursement of Business Expenses.

Employee is authorized to incur reasonable business expenses in carrying out his duties and responsibilities under this Agreement, and the Company shall promptly reimburse him for all such reasonable business expenses, subject to documentation in accordance with the Company’s policy, as in effect from time to time.

Section 8.Termination of Employment.

(a)General.  The Term of Employment shall terminate upon the earliest to occur of (i) Employee’s death, (ii) a termination by reason of a Disability, (iii) a termination by the Company with Cause or by Reorganized FairPoint with or without Cause, (iv) a termination by Employee with or without Good Reason, and (v) the close of business on the last day of the Term of Employment following delivery of a Non-Extension Notice.  Upon any termination of Employee’s employment for any reason, except as may otherwise be requested by the Company in writing and agreed upon in writing by Employee, Employee shall resign from any and all directorships, committee memberships, and any other positions Employee holds with the Company or any other member of the Company Group.  Notwithstanding anything herein to the contrary, the payment (or commencement of a series of payments) hereunder of any nonqualified deferred compensation (within the meaning of Section 409A of the Code) upon a termination of employment shall be delayed until such time as Employee has also undergone a “separation from service” as defined in Treas. Reg. 1.409A-1(h), at which time such nonqualified deferred compensation (calculated as of the date of Employee’s termination of employment hereunder) shall be paid (or commence to be paid) to Employee on the schedule set forth in this Section 8 as if Employee had undergone such termination of employment (under the same circumstances) on the date of his ultimate “separation from service.”

(b)Termination Due to Death or Disability.  Employee’s employment shall terminate automatically upon his death.  The Company may terminate Employee’s employment immediately upon the occurrence of a Disability, such termination to be effective upon Employee’s receipt of written notice of such termination.  Upon Employee’s death or in the event that Employee’s employment is terminated due to his Disability, Employee or his estate or his beneficiaries, as the case may be, shall be entitled to:

(i)The Accrued Obligations;

(ii)Any unpaid Annual Bonus in respect of any completed fiscal year that has ended prior to the date of such termination, which amount shall be paid at such time annual bonuses are paid to other senior executives of the Company, but in no event later than the date that is 2½ months following the last day of the fiscal year in which such termination occurred; and

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(iii)An amount equal to the sum of (x) Employee’s then-current Base Salary, (y) Employee’s Annual Bonus for the immediately preceding fiscal year (or in the event such termination occurs prior to the payment of Employee’s Annual Bonus for 2011, if any, an amount equal to $750,000), and (z) the cost of continued health and disability insurance coverage for Employee and his covered dependents during the Severance Term, based on the monthly cost of continuation coverage under COBRA as of the date of termination, as applicable, under the applicable Company benefit plans, such amount to be paid in substantially equal installments during the Severance Term in accordance with Reorganized FairPoint’s regular payroll practices.

Following Employee’s death or a termination of Employee’s employment by reason of a Disability, except as set forth in this Section 8(b), Employee shall have no further rights to any compensation or any other benefits under this Agreement.

(c)Termination by the Company with Cause.

(i)The Company may terminate Employee’s employment at any time with Cause, effective upon Employee’s receipt of written notice of such termination; provided, however, that (x) with respect to any Cause termination relying on clause (i) of the definition of Cause set forth in Section 1(g) hereof, to the extent that such act or acts or failure or failures to act are curable, Employee shall be given not less than three (3) days’ written notice by the Board of its intention to terminate him with Cause, or (y) with respect to any Cause termination relying on clause (ii) or (vii) of the definition of Cause set forth in Section 1(g) hereof, to the extent that such act or acts or failure or failures to act are curable, Employee shall be given not less than ten (10) days’ written notice by the Board of its intention to terminate him with Cause, and with respect to each of clauses (x) and (y) hereof such notice to state in detail the particular act or acts or failure or failures to act that constitute the grounds on which the proposed termination with Cause is based, and such termination shall be effective at the expiration of such three (3) day or ten (10) day notice period, as the case may be under clause (x) or (y) respectively, unless Employee has fully cured such act or acts or failure or failures to act that give rise to Cause during such period.

(ii)In the event that the Company terminates Employee’s employment with Cause, he shall be entitled only to the Accrued Obligations.  Following such termination of Employee’s employment with Cause, except as set forth in this Section 8(c)(ii), Employee shall have no further rights to any compensation or any other benefits under this Agreement.

(d)Termination by Reorganized FairPoint without Cause or upon Expiration of the Term of Employment Following the Company’s Delivery of a Non-Extension Notice.  Reorganized FairPoint may terminate Employee’s employment at any time without Cause, effective upon Employee’s receipt of written notice of such termination, or by delivery to Employee of a Non-Extension Notice in accordance with the provisions of Section 2 above.  In the event that Employee’s employment is terminated by Reorganized FairPoint without Cause

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(other than due to death or Disability) or upon the expiration of the Term of Employment following the Company’s delivery of a Non-Extension Notice, Employee shall be entitled to:

(i)The Accrued Obligations;

(ii)Any unpaid Annual Bonus in respect of any completed fiscal year that has ended prior to the date of such termination, which amount shall be paid at such time annual bonuses are paid to other senior executives of Reorganized FairPoint, but in no event later than the date that is 2½ months following the last day of the fiscal year in which such termination occurred; and

(iii)An amount equal to the sum of (x) two times the amount of Employee’s then-current Base Salary, (y) two times the amount of Employee’s Annual Bonus for the immediately preceding fiscal year (or in the event such termination occurs prior to the payment of Employee’s Annual Bonus for 2011, if any, an amount equal to $1,500,000), and (z) the cost of continued health and disability insurance coverage for Employee and his covered dependents during the Severance Term, based on the monthly cost of continuation coverage under COBRA as of the date of termination, as applicable, under the applicable Company benefit plans, such amount to be paid in substantially equal installments during the Severance Term in accordance with Reorganized FairPoint’s regular payroll practices.

Notwithstanding the foregoing, the payments and benefits described in clauses (ii) and (iii) above shall immediately terminate, and Reorganized FairPoint shall have no further obligations to Employee with respect thereto, in the event that Employee breaches any material provision of the Non-Interference Agreement.  Following such termination of Employee’s employment by Reorganized FairPoint without Cause or upon the expiration of the Term of Employment following the Company’s delivery of a Non-Extension Notice, except as set forth in this Section 8(d), Employee shall have no further rights to any compensation or any other benefits under this Agreement.  For the avoidance of doubt, Employee’s sole and exclusive remedy upon a termination of employment by Reorganized FairPoint without Cause or upon the expiration of the Term of Employment following the Company’s delivery of a Non-Extension Notice shall be receipt of the Severance Benefits.

(e)Termination by Employee with Good Reason.  Employee may terminate his employment with Good Reason by providing the Company ten (10) days’ written notice setting forth in reasonable specificity the event that constitutes Good Reason, which written notice, to be effective, must be provided to the Company within sixty (60) days of the occurrence of such event.  During such ten (10) day notice period, the Company shall have a cure right (if curable), and if not cured within such period, Employee’s termination will be effective upon the expiration of such cure period, and Employee shall be entitled to the same payments and benefits as provided in Section 8(d) hereof for a termination by the Company without Cause, subject to the same conditions on payment and benefits as described in Section 8(d) hereof.  Following such termination of Employee’s employment by Employee with Good Reason, except as set forth in this Section 8(e), Employee shall have no further rights to any compensation or any other benefits under this Agreement.  For the avoidance of doubt, Employee’s sole and exclusive

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remedy upon a termination of employment with Good Reason shall be receipt of the Severance Benefits.

(f)Termination by Employee without Good Reason or upon the Expiration of the Term of Employment following Employee’s Delivery of a Non-Extension Notice.  Employee may terminate his employment without Good Reason by providing the Company thirty (30) days’ written notice of such termination or by delivery of a Non-Extension Notice in accordance with the provisions of Section 2 above.  In the event of a termination of employment by Employee under this Section 8(f), Employee shall be entitled only to the Accrued Obligations.  In the event of termination of Employee’s employment without Good Reason, the Company may, in its sole and absolute discretion, by written notice accelerate such date of termination without changing the characterization of such termination as a termination by Employee without Good Reason.  Following such termination of Employee’s employment by Employee without Good Reason or upon the expiration of the Term of Employment following Employee’s delivery of a Non-Extension Notice, except as set forth in this Section 8(f), Employee shall have no further rights to any compensation or any other benefits under this Agreement.  Notwithstanding anything in this Section 8(f) to the contrary, in the event Employee provides the Company with notice of his termination of employment without Good Reason during the thirteenth (13th) calendar month following the consummation of a Change in Control, such termination shall be deemed a termination with Good Reason for all purposes of this Agreement, and Employee shall be entitled to receive the payments and benefits as provided in Section 8(e) hereof for a termination by Employee with Good Reason, subject to the same conditions on payment and benefits as described in Section 8(e) hereof.

(g)Release.  Notwithstanding any provision herein to the contrary, the payment of any amount or provision of any benefit pursuant to subsection (b), (d), or (e) of this Section 8 (other than the Accrued Obligations) (collectively, the “Severance Benefits”) shall be conditioned upon Employee’s execution, delivery to the Company, and non-revocation of the Release of Claims (and the expiration of any revocation period contained in such Release of Claims) within sixty (60) days following the date of Employee’s termination of employment hereunder.  If Employee fails to execute the Release of Claims in such a timely manner so as to permit any revocation period to expire prior to the end of such sixty (60) day period, or timely revokes his acceptance of such release following its execution, Employee shall not be entitled to any of the Severance Benefits.  Further, to the extent that any of the Severance Benefits constitutes “nonqualified deferred compensation” for purposes of Section 409A of the Code, any payment of any amount or provision of any benefit otherwise scheduled to occur prior to the sixtieth (60th) day following the date of Employee’s termination of employment hereunder, but for the condition on executing the Release of Claims as set forth herein, shall not be made until the first regularly scheduled payroll date following such sixtieth (60th) day, after which any remaining Severance Benefits shall thereafter be provided to Employee according to the applicable schedule set forth herein.  For the avoidance of doubt, in the event of a termination due to Employee’s death or Disability, Employee’s obligations herein to execute and not revoke the Release of Claims may be satisfied on his behalf by his estate or a person having legal power of attorney over his affairs.

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Section 9.Non-Interference Agreement.

As a condition of, and prior to commencement of, Employee’s employment with the Company, Employee shall have executed and delivered to the Company the Non-Interference Agreement.  The parties hereto acknowledge and agree that this Agreement and the Non-Interference Agreement shall be considered separate contracts.

Section 10.Representations and Warranties of Employee.

Employee represents and warrants to the Company that—

(a)Employee is entering into this Agreement voluntarily and that his employment hereunder and compliance with the terms and conditions hereof will not conflict with or result in the breach by him of any agreement to which he is a party or by which he may be bound;

(b)Employee has not violated, and in connection with his employment with the Company will not violate, any non-solicitation, non-competition, or other similar covenant or agreement of a prior employer by which he is or may be bound; and

(c)in connection with his employment with the Company, Employee will not use any confidential or proprietary information he may have obtained in connection with employment with any prior employer.

Section 11.Taxes.

The Company may withhold from any payments made under this Agreement all applicable taxes, including but not limited to income, employment, and social insurance taxes, as shall be required by law.  Employee acknowledges and represents that the Company has not provided any tax advice to him in connection with this Agreement and that he has been advised by the Company to seek tax advice from his own tax advisors regarding this Agreement and payments that may be made to him pursuant to this Agreement, including specifically, the application of the provisions of Section 409A of the Code to such payments.

Section 12.Mitigation; Company Recovery Rights.

Employee shall not be required to mitigate the amount of any payment provided pursuant to this Agreement by seeking other employment or otherwise, and the amount of any payment provided for pursuant to this Agreement shall not be reduced by any compensation earned as a result of Employee’s other employment or otherwise.  Any payment pursuant to this Agreement shall, however, be subject to any rights that the Company may have under Section 304(b) of the Sarbanes-Oxley Act of 2002, and Section 957 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Section 13.Additional Section 409A Provisions.

Notwithstanding any provision in this Agreement to the contrary—

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(a)Any payment otherwise required to be made hereunder to Employee at any date as a result of the termination of Employee’s employment shall be delayed for such period of time as may be necessary to meet the requirements of Section 409A(a)(2)(B)(i) of the Code (the “Delay Period”).  On the first business day following the expiration of the Delay Period, Employee shall be paid, in a single cash lump sum, an amount equal to the aggregate amount of all payments delayed pursuant to the preceding sentence, and any remaining payments not so delayed shall continue to be paid pursuant to the payment schedule set forth herein.

(b)Each payment in a series of payments hereunder shall be deemed to be a separate payment for purposes of Section 409A of the Code.

(c)To the extent that any right to reimbursement of expenses or payment of any benefit in-kind under this Agreement constitutes nonqualified deferred compensation (within the meaning of Section 409A of the Code), (i) any such expense reimbursement shall be made by the Company no later than the last day of the taxable year following the taxable year in which such expense was incurred by Employee, (ii) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, and (iii) the amount of expenses eligible for reimbursement or in-kind benefits provided during any taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other taxable year; provided, that the foregoing clause shall not be violated with regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Code solely because such expenses are subject to a limit related to the period the arrangement is in effect.

(d)While the payments and benefits provided hereunder are intended to be structured in a manner to avoid the implication of any penalty taxes under Section 409A of the Code, in no event whatsoever shall the Company or any member of the Company Group be liable for any additional tax, interest, or penalties that may be imposed on Employee as a result of Section 409A of the Code or any damages for failing to comply with Section 409A of the Code (other than for withholding obligations or other obligations applicable to employers, if any, under Section 409A of the Code).

Section 14.Successors and Assigns; No Third-Party Beneficiaries.

(a)The Company.  This Agreement shall inure to the benefit of the Company and its respective successors and assigns.  Neither this Agreement nor any of the rights, obligations, or interests arising hereunder may be assigned by the Company to a Person (other than another member of the Company Group, or its or their respective successors) without Employee’s prior written consent (which shall not be unreasonably withheld, delayed, or conditioned); provided, however, that in the event of a sale of all or substantially all of the assets of the Company, the Company may provide that this Agreement will be assigned to, and assumed by, the acquiror of such assets, it being agreed that in such circumstances, Employee’s consent will not be required in connection therewith.

(b)Employee.  Employee’s rights and obligations under this Agreement shall not be transferable by Employee by assignment or otherwise, without the prior written consent of the Company; provided, however, that if Employee shall die, all amounts then payable to

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Employee hereunder shall be paid in accordance with the terms of this Agreement to Employee’s devisee, legatee, or other designee, or if there be no such designee, to Employee’s estate.

(c)No Third-Party Beneficiaries.  Except as otherwise set forth in Section 8(b) or Section 14(b) hereof, nothing expressed or referred to in this Agreement will be construed to give any Person other than the Company, the other members of the Company Group, and Employee any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement.

Section 15.Waiver and Amendments.

Any waiver, alteration, amendment, or modification of any of the terms of this Agreement shall be valid only if made in writing and signed by each of the parties hereto; provided, however, that any such waiver, alteration, amendment, or modification must be consented to on the Company’s behalf by the Board.  No waiver by either of the parties hereto of their rights hereunder shall be deemed to constitute a waiver with respect to any subsequent occurrences or transactions hereunder unless such waiver specifically states that it is to be construed as a continuing waiver.

Section 16.Severability.

If any covenants or such other provisions of this Agreement are found to be invalid or unenforceable by a final determination of a court of competent jurisdiction, (a) the remaining terms and provisions hereof shall be unimpaired, and (b) the invalid or unenforceable term or provision hereof shall be deemed replaced by a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision hereof.

Section 17.Governing Law and Jurisdiction.

THIS AGREEMENT IS GOVERNED BY AND IS TO BE CONSTRUED UNDER THE LAWS OF THE STATE OF NORTH CAROLINA, WITHOUT REGARD TO CONFLICT OF LAWS RULES.  ANY DISPUTE OR CLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR CLAIM OF BREACH HEREOF SHALL BE BROUGHT EXCLUSIVELY IN FEDERAL COURT IN THE STATE OF NORTH CAROLINA.  BY EXECUTION OF THE AGREEMENT, THE PARTIES HERETO, AND THEIR RESPECTIVE AFFILIATES, CONSENT TO THE EXCLUSIVE JURISDICTION OF SUCH COURT, AND WAIVE ANY RIGHT TO CHALLENGE JURISDICTION OR VENUE IN SUCH COURT WITH REGARD TO ANY SUIT, ACTION, OR PROCEEDING UNDER OR IN CONNECTION WITH THE AGREEMENT.  EACH PARTY TO THIS AGREEMENT ALSO HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN CONNECTION WITH ANY SUIT, ACTION, OR PROCEEDING UNDER OR IN CONNECTION WITH THIS AGREEMENT.

Section 18.Notices.

(a)Place of Delivery.  Every notice or other communication relating to this Agreement shall be in writing, and shall be mailed to or delivered to the party for whom or

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which it is intended at such address as may from time to time be designated by it in a notice mailed or delivered to the other party as herein provided; provided, that unless and until some other address be so designated, all notices and communications by Employee to the Company shall be mailed or delivered to the Company at its principal executive office, attention: General Counsel, and all notices and communications by the Company to Employee may be given to Employee personally or may be mailed to Employee at Employee’s last known address, as reflected in the Company’s records.

(b)Date of Delivery.  Any notice so addressed shall be deemed to be given (i) if delivered by hand, on the date of such delivery, (ii) if mailed by courier or by overnight mail, on the first business day following the date of such mailing, and (iii) if mailed by registered or certified mail, on the third business day after the date of such mailing.

Section 19.Section Headings.

The headings of the sections and subsections of this Agreement are inserted for convenience only and shall not be deemed to constitute a part thereof or affect the meaning or interpretation of this Agreement or of any term or provision hereof.

Section 20.Entire Agreement.

This Agreement, together with any exhibits attached hereto, constitutes the entire understanding and agreement of the parties hereto regarding the employment of Employee.  This Agreement supersedes all prior negotiations, discussions, correspondence, communications, understandings, and agreements between the parties relating to the subject matter of this Agreement.

Section 21.Survival of Operative Sections.

Upon any termination of Employee’s employment, the provisions of Section 8 through Section 22 of this Agreement (together with any related definitions set forth in Section 1 hereof) shall survive to the extent necessary to give effect to the provisions thereof.

Section 22.Counterparts.

This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.  The execution of this Agreement may be by actual or facsimile signature.

15

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.

FAIRPOINT COMMUNICATIONS, INC.

/s/ Shirley J. Linn

By: Shirley J. Linn

Title: Executive Vice President

EMPLOYEE

/s/ Paul H. Sunu

Paul H. Sunu

Exhibit A

CONFIDENTIALITY, NON-INTERFERENCE, AND INVENTION ASSIGNMENT AGREEMENT

As a condition of my becoming employed by FairPoint Communications, Inc., a Delaware corporation (the “Company”), and in consideration of my employment with the Company and my receipt of the compensation now and hereafter paid to me by the Company, I agree to the following:

Section 1.Confidential Information.

(a)Company Group Information.  I acknowledge that, during the course of my employment, I will have access to information about the Company and its direct and indirect subsidiaries and affiliates (collectively, the “Company Group”) and that my employment with the Company shall bring me into close contact with confidential and proprietary information of the Company Group.  In recognition of the foregoing, I agree, at all times during the term of my employment with the Company and for the three (3) year period following my termination of my employment for any reason, to hold in confidence, and not to use, except for the benefit of the Company Group, or to disclose to any person, firm, corporation, or other entity without written authorization of the Company, any Confidential Information that I obtain or create.  I understand that “Confidential Information” means information that the Company Group has developed, acquired, created, compiled, discovered, or owned or will develop, acquire, create, compile, discover, or own, that has value in or to the business of the Company Group that is not generally known and that the Company wishes to maintain as confidential.  I understand that Confidential Information includes, but is not limited to, any and all non-public information that relates to the actual or anticipated business and/or products, research, or development of the Company, or to the Company’s technical data, trade secrets, or know-how, including, but not limited to, research, product plans, or other information regarding the Company’s products or services and markets, customer lists, and customers (including, but not limited to, customers of the Company on whom I called or with whom I may become acquainted during the term of my employment), software, developments, inventions, processes, formulas, technology, designs, drawings, engineering, hardware configuration information, marketing, finances, and other business information disclosed by the Company either directly or indirectly in writing, orally, or by drawings or inspection of premises, parts, equipment, or other Company property.  Notwithstanding the foregoing, Confidential Information shall not include (i) any of the foregoing items that have become publicly known through no unauthorized disclosure by me or others who were under confidentiality obligations as to the item or items involved, (ii) any information that I am required to disclose to, or by, any governmental or judicial authority, (iii) any information known to me prior to signing this Confidentiality, Non-Interference, and Invention Assignment Agreement (the “Non-Interference Agreement”) other than information acquired in preparation for my service to the Company, or (iv) any information developed independently by me that does not relate to the business of the Company Group; provided, however, that in the event of such requirement to disclose I will give the Company prompt written notice thereof so that the Company Group may seek an appropriate protective order and/or waive in writing compliance with the confidentiality provisions of this Non-Interference Agreement.

(b)Former Employer Information.  I represent that my performance of all of the terms of this Non-Interference Agreement as an employee of the Company has not breached

and will not breach any agreement to keep in confidence proprietary information, knowledge, or data acquired by me in confidence or trust prior or subsequent to the commencement of my employment with the Company, and I will not disclose to any member of the Company Group, or induce any member of the Company Group to use, any developments, or confidential or proprietary information or material I may have obtained in connection with employment with any prior employer in violation of a confidentiality agreement, nondisclosure agreement, or similar agreement with such prior employer.

Section 2.Developments.

(a)Developments Retained and Licensed.  If, during any period during which I perform or performed services for the Company Group (the “Assignment Period”), whether as an officer, employee, director, independent contractor, consultant, or agent, or in any other capacity, I incorporate (or have incorporated) into a Company Group product or process any development, original work of authorship, improvement, or trade secret that I created or owned prior to the commencement of my employment or in which I have an interest (collectively referred to as “Prior Developments”), I hereby grant the Company, and the Company Group shall have, a non-exclusive, royalty-free, irrevocable, perpetual, transferable worldwide license (with the right to sublicense) to make, have made, copy, modify, make derivative works of, use, sell, and otherwise distribute such Prior Development as part of or in connection with such product or process.

(b)Assignment of Developments.  I agree that I will, without additional compensation, promptly make full written disclosure to the Company, and will hold in trust for the sole right and benefit of the Company all developments, original works of authorship, inventions, concepts, know-how, improvements, trade secrets, and similar proprietary rights, whether or not patentable or registrable under copyright or similar laws, which I may solely or jointly conceive or develop or reduce to practice, or have solely or jointly conceived or developed or reduced to practice, or have caused or may cause to be conceived or developed or reduced to practice, during the Assignment Period, whether or not during regular working hours, provided they either (i) relate at the time of conception, development or reduction to practice to the business of any member of the Company Group, or the actual or anticipated research or development of any member of the Company Group; (ii) result from or relate to any work performed for any member of the Company Group; or (iii) are developed through the use of equipment, supplies, or facilities of any member of the Company Group, or any Confidential Information, or in consultation with personnel of any member of the Company Group (collectively referred to as “Developments”).  I further acknowledge that all Developments made by me (solely or jointly with others) within the scope of and during the Assignment Period are “works made for hire” (to the greatest extent permitted by applicable law) for which I am, in part, compensated by my salary, unless regulated otherwise by law, but that, in the event any such Development is deemed not to be a work made for hire, I hereby assign to the Company, or its designee, all my right, title, and interest throughout the world in and to any such Development.

(c)Maintenance of Records.  I agree to keep and maintain adequate and current written records of all Developments made by me (solely or jointly with others) during the Assignment Period. The records may be in the form of notes, sketches, drawings, flow charts,

electronic data or recordings, and any other format.  The records will be available to and remain the sole property of the Company Group at all times.  I agree not to remove such records from the Company’s place of business except as expressly permitted by Company Group policy, which may, from time to time, be revised at the sole election of the Company Group for the purpose of furthering the business of the Company Group.

(d)Intellectual Property Rights.  I agree to assist the Company, or its designee, at the Company’s expense, in every way to secure the rights of the Company Group in the Developments and any copyrights, patents, trademarks, service marks, database rights, domain names, mask work rights, moral rights, and other intellectual property rights relating thereto in any and all countries, including the disclosure to the Company of all pertinent information and data with respect thereto, the execution of all applications, specifications, oaths, assignments, recordations, and all other instruments that the Company shall deem necessary in order to apply for, obtain, maintain, and transfer such rights and in order to assign and convey to the Company Group the sole and exclusive right, title, and interest in and to such Developments, and any intellectual property and other proprietary rights relating thereto.  I further agree that my obligation to execute or cause to be executed, when it is in my power to do so, any such instrument or papers shall continue after the termination of the Assignment Period until the expiration of the last such intellectual property right to expire in any country of the world; provided, however, the Company shall reimburse me for my reasonable expenses incurred in connection with carrying out the foregoing obligation.  If the Company is unable because of my mental or physical incapacity or unavailability for any other reason to secure my signature to apply for or to pursue any application for any United States or foreign patents or copyright registrations covering Developments or original works of authorship assigned to the Company as above, then I hereby irrevocably designate and appoint the Company and its duly authorized officers and agents as my agent and attorney in fact to act for and in my behalf and stead to execute and file any such applications or records and to do all other lawfully permitted acts to further the application for, prosecution, issuance, maintenance, and transfer of letters patent or registrations thereon with the same legal force and effect as if originally executed by me.  I hereby waive and irrevocably quitclaim to the Company any and all claims, of any nature whatsoever, that I now or hereafter have for past, present, or future infringement of any and all proprietary rights assigned to the Company.

Section 3.Returning Company Group Documents.

I agree that, at the time of termination of my employment with the Company for any reason, I will deliver to the Company (and will not keep in my possession, recreate, or deliver to anyone else) any and all Confidential Information and all other documents, materials, information, and property developed by me pursuant to my employment or otherwise belonging to the Company. I agree further that any property situated on the Company’s premises and owned by the Company (or any other member of the Company Group), including disks and other storage media, filing cabinets, and other work areas, is subject to inspection by personnel of any member of the Company Group at any time with or without notice.

Section 4.Disclosure of Agreement.

As long as it remains in effect, I will disclose the existence of this Non-Interference Agreement to any prospective employer, partner, co-venturer, investor, or lender prior to entering into an employment, partnership, or other business relationship with such person or entity.

Section 5.Restrictions on Interfering.

(a)Non-Competition.  During the period of my employment with the Company (the “Employment Period”) and the Post-Termination Non-Compete Period, I shall not, directly or indirectly, individually or on behalf of any person, company, enterprise, or entity, or as a sole proprietor, partner, stockholder, director, officer, principal, agent, or executive, or in any other capacity or relationship, engage in any Competitive Activities.

(b)Non-Interference.  During the Employment Period and the Post-Termination Non-Interference Period, I shall not, directly or indirectly for my own account or for the account of any other individual or entity, engage in Interfering Activities; provided, however, that I shall not be deemed to violate this subsection (b) to the extent that any employee of any subsequent employer of mine, in the ordinary course of business, conducts any activity described in subsection (c)(iii)(C) below as to any Business Relation, provided that I have not directed or instructed any such employee (either personally or through another) to contact any such Business Relation.

(c)Definitions.  For purposes of this Non-Interference Agreement :

(i)“Business Relation” shall mean any current or prospective client, customer, licensee, or other business relation of the Company Group, or any such relation that was a client, customer, licensee, or other business relation within the six (6) month period prior to the expiration of the Employment Period, in each case, to whom I provided services, or with whom I transacted business, or whose identity became known to me in connection with my relationship with or employment by the Company and is not publicly known.

(ii)“Competitive Activities” shall mean telecommunication services provided by a local exchange carrier business which has substantial business operations in the states of Florida, Georgia, North Carolina, South Carolina, Maine, New Hampshire or Vermont.

(iii)“Interfering Activities” shall mean (A) encouraging, soliciting, or inducing, or in any manner attempting to encourage, solicit, or induce, any Person employed by, or providing consulting services to, any member of the Company Group to terminate such Person’s employment or services (or in the case of a consultant, materially reducing such services) with the Company Group; (B) hiring any individual who was employed by the Company Group within the six (6) month period prior to the date of such hiring; or (C) encouraging, soliciting, or inducing, or in any manner attempting to encourage, solicit, or induce, any Business Relation to cease doing business with or reduce the amount of business conducted with the Company Group, or in any way

interfering with the relationship between any such Business Relation and the Company Group.

(iv)“Person” shall mean any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust (charitable or non-charitable), unincorporated organization, or other form of business entity.

(v)“Post-Termination Non-Compete Period” shall mean the period commencing on the date of the termination of the Employment Period for any reason and ending on the twenty-four (24) month anniversary of such date of termination.

(vi)“Post-Termination Non-Interference Period” shall mean the period commencing on the date of the termination of the Employment Period for any reason and ending on the twenty-four (24) month anniversary of such date of termination.

(d)Non-Disparagement.  I agree that during the Employment Period, and at all times thereafter, I will not make any disparaging or defamatory comments regarding any member of the Company Group or its respective current or former directors, officers, or employees in any respect or make any comments concerning any aspect of my relationship with any member of the Company Group or any conduct or events which precipitated any termination of my employment from any member of the Company Group.  However, my obligations under this subparagraph (d) shall not apply to disclosures required by applicable law, regulation, or order of a court or governmental agency.

Section 6.Reasonableness of Restrictions.

I acknowledge and recognize the highly competitive nature of the Company’s business, that access to Confidential Information renders me special and unique within the Company’s industry, and that I will have the opportunity to develop substantial relationships with existing and prospective clients, accounts, customers, consultants, contractors, investors, and strategic partners of the Company Group during the course of and as a result of my employment with the Company.  In light of the foregoing, I recognize and acknowledge that the restrictions and limitations set forth in this Non-Interference Agreement are reasonable and valid in geographical and temporal scope and in all other respects and are essential to protect the value of the business and assets of the Company Group.  I acknowledge further that the restrictions and limitations set forth in this Non-Interference Agreement will not materially interfere with my ability to earn a living following the termination of my employment with the Company and that my ability to earn a livelihood without violating such restrictions is a material condition to my employment with the Company.

Section 7.Independence; Severability; Blue Pencil.

Each of the rights enumerated in this Non-Interference Agreement shall be independent of the others and shall be in addition to and not in lieu of any other rights and remedies available to the Company Group at law or in equity.  If any of the provisions of this Non-Interference Agreement or any part of any of them is hereafter construed or adjudicated to be invalid or unenforceable, the same shall not affect the remainder of this Non-Interference

Agreement, which shall be given full effect without regard to the invalid portions.  If any of the covenants contained herein are held to be invalid or unenforceable because of the duration of such provisions or the area or scope covered thereby, I agree that the court making such determination shall have the power to reduce the duration, scope, and/or area of such provision to the maximum and/or broadest duration, scope, and/or area permissible by law, and in its reduced form said provision shall then be enforceable.

Section 8.Injunctive Relief.

I expressly acknowledge that any breach or threatened breach of any of the terms and/or conditions set forth in this Non-Interference Agreement may result in irreparable injury to the members of the Company Group.  Therefore, I hereby agree that, in addition to any other remedy that may be available to the Company, any member of the Company Group shall be entitled to seek injunctive relief, specific performance, or other equitable relief by a court of appropriate jurisdiction in the event of any breach or threatened breach of the terms of this Non-Interference Agreement without the necessity of proving irreparable harm or injury as a result of such breach or threatened breach.  Notwithstanding any other provision to the contrary, I acknowledge and agree that the Post-Termination Non-Compete Period, or Post-Termination Non-Interference Period, as applicable, shall be tolled during any period of violation of any of the covenants in Section 5 hereof.

Section 9.Cooperation.

I agree that, following any termination of my employment, I will continue to provide reasonable cooperation to the Company and/or any other member of the Company Group and its or their respective counsel in connection with any investigation, administrative proceeding, or litigation relating to any matter that occurred during my employment in which I was involved or of which I have knowledge.  As a condition of such cooperation, the Company shall reimburse me for reasonable out-of-pocket expenses incurred at the request of the Company with respect to my compliance with this paragraph.  I also agree that, in the event that I am subpoenaed by any person or entity (including, but not limited to, any government agency) to give testimony or provide documents (in a deposition, court proceeding, or otherwise) that in any way relates to my employment by the Company and/or any other member of the Company Group, I will give prompt notice of such request to the Company and will make no disclosure until the Company and/or the other member of the Company Group has had a reasonable opportunity to contest the right of the requesting person or entity to such disclosure.

Section 10.General Provisions.

(a)Governing Law and Jurisdiction.  THIS NON-INTERFERENCE AGREEMENT IS GOVERNED BY AND IS TO BE CONSTRUED UNDER THE LAWS OF THE STATE OF NORTH CAROLINA, WITHOUT REGARD TO CONFLICT OF LAWS RULES.  ANY DISPUTE OR CLAIM ARISING OUT OF OR RELATING TO THIS NON-INTERFERENCE AGREEMENT OR CLAIM OF BREACH HEREOF SHALL BE BROUGHT EXCLUSIVELY IN FEDERAL COURT IN THE STATE OF NORTH CAROLINA.  BY EXECUTION OF THE NON-INTERFERENCE AGREEMENT, THE PARTIES HERETO, AND THEIR RESPECTIVE AFFILIATES, CONSENT TO THE EXCLUSIVE

JURISDICTION OF SUCH COURT, AND WAIVE ANY RIGHT TO CHALLENGE JURISDICTION OR VENUE IN SUCH COURT WITH REGARD TO ANY SUIT, ACTION, OR PROCEEDING UNDER OR IN CONNECTION WITH THE NON-INTERFERENCE AGREEMENT.  EACH PARTY TO THIS NON-INTERFERENCE AGREEMENT ALSO HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN CONNECTION WITH ANY SUIT, ACTION, OR PROCEEDING UNDER OR IN CONNECTION WITH THIS NON-INTERFERENCE AGREEMENT.

(b)Entire Agreement.  This Non-Interference Agreement sets forth the entire agreement and understanding between the Company and me relating to the subject matter herein and merges all prior discussions between us.  No modification or amendment to this Non-Interference Agreement, nor any waiver of any rights under this Non-Interference Agreement, will be effective unless in writing signed by the party to be charged.  Any subsequent change or changes in my duties, obligations, rights, or compensation will not affect the validity or scope of this Non-Interference Agreement.

(c)No Right of Continued Employment.  I acknowledge and agree that nothing contained herein shall be construed as granting me any right to continued employment by the Company, and the right of the Company to terminate my employment at any time and for any reason, with or without cause, is specifically reserved.

(d)Successors and Assigns.  This Non-Interference Agreement will be binding upon my heirs, executors, administrators, and other legal representatives and will be for the benefit of the Company, its successors, and its assigns.  I expressly acknowledge and agree that this Non-Interference Agreement may be assigned by the Company without my consent to any other member of the Company Group as well as any purchaser of all or substantially all of the assets or stock of the Company, whether by purchase, merger, or other similar corporate transaction, provided that the license granted pursuant to Section 2(a) may be assigned to any third party by the Company without my consent.

(e)Survival.  The provisions of this Non-Interference Agreement shall survive the termination of my employment with the Company and/or the assignment of this Non-Interference Agreement by the Company to any successor in interest or other assignee.

***

I, Paul H. Sunu, have executed this Confidentiality, Non-Interference, and Invention Assignment Agreement on the respective date set forth below:

Date:	August 16, 2010	/s/ Paul H. Sunu
		(Signature)

Exhibit B

RELEASE OF CLAIMS

As used in this Release of Claims (this “Release”), the term “claims” will include all claims, covenants, warranties, promises, undertakings, actions, suits, causes of action, obligations, debts, accounts, attorneys’ fees, judgments, losses, and liabilities, of whatsoever kind or nature, in law, in equity, or otherwise.

For and in consideration of the Severance Benefits (as defined in my Employment Agreement, dated July 20, 2010, with FairPoint Communications, Inc. (the “Employment Agreement”)), and other good and valuable consideration, I, Paul H. Sunu, for and on behalf of myself and my heirs, administrators, executors, and assigns, effective as of the date on which this release becomes effective pursuant to its terms, do fully and forever release, remise, and discharge each of the Company and each of its direct and indirect subsidiaries and affiliates, together with their respective officers, directors, partners, shareholders, employees, and agents (collectively, the “Group”), from any and all claims whatsoever up to the date hereof that I had, may have had, or now have against the Group, whether known or unknown, for or by reason of any matter, cause, or thing whatsoever, including any claim arising out of or attributable to my employment or the termination of my employment with the Company, whether for tort, breach of express or implied employment contract, intentional infliction of emotional distress, wrongful termination, unjust dismissal, defamation, libel, or slander, or under any federal, state, or local law dealing with discrimination based on age, race, sex, national origin, handicap, religion, disability, or sexual orientation.  This release of claims includes, but is not limited to, all claims arising under the Age Discrimination in Employment Act (“ADEA”), Title VII of the Civil Rights Act, the Americans with Disabilities Act, the Civil Rights Act of 1991, the Family Medical Leave Act, the Equal Pay Act, the Genetic Information Nondiscrimination Act, the North Carolina Equal Employment Practices Act, and the North Carolina Persons with Disabilities Act, each as may be amended from time to time, and all other federal, state, and local laws, the common law, and any other purported restriction on an employer’s right to terminate the employment of employees.  The release contained herein is intended to be a general release of any and all claims to the fullest extent permissible by law.

I acknowledge and agree that as of the date I execute this Release, I have no knowledge of any facts or circumstances that give rise or could give rise to any claims under any of the laws listed in the preceding paragraph.

By executing this Release, I specifically release all claims relating to my employment and its termination under ADEA, a United States federal statute that, among other things, prohibits discrimination on the basis of age in employment and employee benefit plans.

Notwithstanding any provision of this Release to the contrary, by executing this Release, I am not releasing (i) any claims relating to my rights under Sections 4(f) and 8 of the Employment Agreement, (ii) any claims that cannot be waived by law, or (iii) my right of indemnification as provided by, and in accordance with the terms of, the Company’s by-laws or a Company insurance policy providing such coverage, as any of such may be amended from time to time.

I expressly acknowledge and agree that I —

·Am able to read the language, and understand the meaning and effect, of this Release;

·Have no physical or mental impairment of any kind that has interfered with my ability to read and understand the meaning of this Release or its terms, and that I am not acting under the influence of any medication, drug, or chemical of any type in entering into this Release;

·Am specifically agreeing to the terms of the release contained in this Release because the Company has agreed to pay me the Severance Benefits in consideration for my agreement to accept it in full settlement of all possible claims I might have or ever have had, and because of my execution of this Release;

·Acknowledge that, but for my execution of this Release, I would not be entitled to the Severance Benefits;

·Understand that, by entering into this Release, I do not waive rights or claims under ADEA that may arise after the date I execute this Release;

·Had or could have had [twenty-one (21)][forty-five (45)](1) days from the date of my termination of employment (the “Release Expiration Date”) in which to review and consider this Release, and that if I execute this Release prior to the Release Expiration Date, I have voluntarily and knowingly waived the remainder of the review period;

·Have not relied upon any representation or statement not set forth in this Release or my Employment Agreement made by the Company or any of its representatives;

·Was advised to consult with my attorney regarding the terms and effect of this Release; and

·Have signed this Release knowingly and voluntarily.

I hereby agree to waive any and all claims to re-employment with the Company or any other member of the Company Group (as defined in my Employment Agreement) and affirmatively agree not to seek further employment with the Company or any other member of the Company Group.

Notwithstanding anything contained herein to the contrary, this Release will not become effective or enforceable prior to the expiration of the period of seven (7) calendar days following the date of its execution by me (the “Revocation Period”), during which time I may

(1)To be selected based on whether applicable termination was “in connection with an exit incentive or other employment termination program” (as such phrase is defined in the Age Discrimination in Employment Act of 1967).

revoke my acceptance of this Release by notifying the Company and the Board of Directors of the Company, in writing, delivered to the Company at its principal executive office, marked for the attention of its [General Counsel].  To be effective, such revocation must be received by the Company no later than 11:59 p.m. on the seventh (7th) calendar day following the execution of this Release.  Provided that the Release is executed and I do not revoke it during the Revocation Period, the eighth (8th) day following the date on which this Release is executed shall be its effective date.  I acknowledge and agree that if I revoke this Release during the Revocation Period, this Release will be null and void and of no effect, and neither the Company nor any other member of the Company Group will have any obligations to pay me the Severance Benefits.

The provisions of this Release shall be binding upon my heirs, executors, administrators, legal personal representatives, and assigns.  If any provision of this Release shall be held by any court of competent jurisdiction to be illegal, void, or unenforceable, such provision shall be of no force or effect.  The illegality or unenforceability of such provision, however, shall have no effect upon and shall not impair the enforceability of any other provision of this Release.

EXCEPT WHERE PREEMPTED BY FEDERAL LAW, THIS RELEASE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH FEDERAL LAW AND THE LAWS OF THE STATE OF NORTH CAROLINA, APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN THAT STATE WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS.  I HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN CONNECTION WITH ANY SUIT, ACTION, OR PROCEEDING UNDER OR IN CONNECTION WITH THIS RELEASE.

Capitalized terms used, but not defined herein, shall have the meanings ascribed to such terms in my Employment Agreement.

/s/ Paul H. Sunu

Paul H. Sunu

Date: August 16, 2010

EX-10.28

Exhibit 10.28

EXECUTION VERSION

CONSULTING AGREEMENT AND GENERAL RELEASE

This CONSULTING AGREEMENT AND GENERAL RELEASE (this “Agreement”), by and between FairPoint Communications, Inc. (the “Company”), and David L. Hauser (“Hauser”), is being offered to Hauser on August 16, 2010, and may be accepted by Hauser by signing the Agreement without change and returning it by mail to the Company at 521 East Morehead Street, Suite 500, Charlotte, North Carolina 28202, Attn: General Counsel, or by telecopy to (704) 344-1594, Attn: General Counsel, with a copy by mail, so that it is received by no later than the close of business on September 6, 2010 (the “Release Expiration Date”).

RECITALS

WHEREAS, Hauser and the Company are parties to an employment agreement dated June 11, 2009, pursuant to which Hauser has served as Chairman and Chief Executive Officer of the Company, as well as the Restricted Stock Award Agreement, the Non-Qualified Stock Option Award Agreement, the Performance Unit Award Agreement for Performance Period Beginning July 1, 2009 and Ending December 31, 2010, and the Performance Unit Award Agreement for Performance Period Beginning July 1, 2009 and Ending December 31, 2011, in each case dated July 1, 2009, pursuant to which Hauser was granted equity-based incentive awards (collectively, the “Employment Agreement”);

WHEREAS, subject to Section 3(a) below, Hauser and the Company desire to enter into a mutually satisfactory arrangement concerning Hauser’s separation from service as an employee and director of the Company and his commencement of a consulting arrangement with the Company;

WHEREAS, this Agreement contains a mutual general release of claims, and by delivery hereof, Hauser is hereby notified and acknowledges his understanding that Hauser’s execution of this Agreement is required for Hauser to receive any of the payments and benefits set forth herein; and

WHEREAS, the parties intend for this Agreement to supersede all prior agreements that Hauser has with the Company, including without limitation the Employment Agreement.

NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are mutually acknowledged, Hauser and the Company hereby agree as follows:

Section 1.Conditions to Agreement.  The terms, conditions and obligations set forth in this Agreement shall be subject to the approval of the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”).  The date of such approval is referred to herein as the “Approval Date”.

Section 2.Opportunity for Review; Acceptance.  Hauser shall have until the Release Expiration Date to review and consider this Agreement.  Should Hauser execute this Agreement and deliver it to the Company prior to the Release Expiration Date (the date on which

this Agreement is executed and delivered to the Company being the “Execution Date”), he shall have an additional seven (7) days from the Execution Date to revoke this Agreement by providing written notice to the Company’s General Counsel prior to the expiration of such seven (7) day period.  Absent any such revocation, this Agreement shall become effective on the later of the Approval Date and the eighth (8th) day following the Execution Date (the “Release Effective Date”).  In the event of Hauser’s failure to execute and deliver this Agreement prior to the Release Expiration Date, or his revocation of this Agreement during the applicable revocation period, this Agreement will be null and void and of no effect, neither the Company nor Hauser will have any further obligations under this Agreement, Hauser shall not be entitled to the Consideration (as defined below), and Hauser’s and the Company’s rights vis-à-vis Hauser’s employment with the Company and any termination thereof shall be governed by the terms of the Employment Agreement and the Bankruptcy Code.

Section 3.Consulting Arrangement.

(a)Termination of Employment; Commencement of Consulting Services.  Hauser hereby acknowledges the mutually agreed termination of his employment with the Company and each other subsidiary and affiliate thereof (collectively, the “Company Group”) in all capacities, including without limitation as Chief Executive Officer of the Company, and the commencement of his services as a consultant, in each case effective as of the Release Effective Date.  Hauser also hereby agrees to take all necessary action pursuant to the Company’s Amended and Restated By-Laws to resign, effective as of the Release Effective Date, as Chairman and a member of the Company’s Board of Directors and to withdraw his name from the slate of directors to be considered for election to the Company’s Board of Directors and from the Board of Directors of Reorganized FairPoint (as such term is defined in the Debtors’ Modified Second Amended Joint Plan of Reorganization filed in the Bankruptcy Court (together with any further amended Joint Plan of Reorganization confirmed by the Bankruptcy Court, the “Plan”)).  Except as specifically set forth herein, the Release Effective Date shall be the termination date of Hauser’s employment for purposes of determining participation in and coverage under all equity and option vesting and other benefit plans and programs sponsored by or through the Company or any other member of the Company Group.  Within ten (10) days following the Release Effective Date, Hauser shall be paid any unpaid annual base salary for days worked through the Release Effective Date and any reimbursements for business expenses incurred and submitted to the Company prior to the Release Effective Date in accordance with the Company’s expense reimbursement policies (collectively, the “Accrued Obligations”).

(b)Consulting Period.  The “Consulting Period” shall mean the period commencing on the Release Effective Date and expiring on the earlier of (i) March 31, 2011, and (ii) the effective date of the Plan (the “Plan Effective Date”).

(c)Consulting Services.  During the Consulting Period, Hauser shall render such assistance to the Company as a consultant as requested by the Company’s Chief Executive Officer, being available on a full-time basis and giving at all times the full benefit of his knowledge, expertise, technical skill, and ingenuity, in all matters involved in or relating to the business of the Company (the “Consulting Services”).

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(d)Consideration.  In consideration of the Consulting Services, Hauser’s release and waiver of claims set forth in Section 4(b) below, and Hauser’s agreement to comply with the restrictions set forth in Section 6 below, and subject to both Hauser’s compliance with the other provisions of this Agreement and to any tax withholding that the Company determines to be appropriate, as well as the occurrence of the Approval Date, the Company will pay Hauser consideration consisting of:

(i)Cash consulting fees in the amount of $3,450,000, which shall be paid in monthly installments as of the first day of the month in the amount of $300,000 until, and with the remaining balance, if any, to be paid upon, the later of (i) March 31, 2011, and (ii) the Plan Effective Date (the later of (i) and (ii) being the “Final Payment Date”); provided, however, that if the Release Effective Date is not the first day of a calendar month, then a proportional payment shall be due on the Release Effective Date in an amount equal to $300,000 times the number of days after the Release Effective Date to the last day of the month in which the Release Effective Date occurs, divided by the number of days in such calendar month; provided further, however, that in no event shall the sum of such monthly installments exceed $3,450,000, and in the event that the Final Payment Date has not occurred prior to the payment of the final installment, such installment shall be reduced from $300,000 as necessary such that Hauser shall have received $3,450,000 in the aggregate as of the payment of such final installment pursuant to this Section 3(d)(i).

(ii)Pursuant to the 2010 Long Term Incentive Plan of Reorganized FairPoint (the “LTIP”), a one-time issuance of 133,588 Shares (as such term is defined in the LTIP), granted as soon as practicable following the Plan Effective Date, which Shares shall be fully vested as of the date of grant and shall be otherwise subject to the terms and conditions of the LTIP; provided, that if the Board decides to change the number of Shares to be issued pursuant to the Plan on the Plan Effective Date to some amount other than the 51,444,788 contained in the Plan dated March 10, 2010, Hauser shall, in lieu of the number of Shares set forth above, be issued one Share for every 385.10 shares to be issued to the holders of Allowed Claims under Sections 5.4 and 5.7 of the Plan;

(iii)Continued participation in the Company’s health insurance plan on the same basis as active employees of the Company for ninety (90) days following the Release Effective Date, or until such earlier time as his participation is no longer permitted by the terms of such plan (the “Participation End Date”), and thereafter an additional amount in cash equal to $31,131.84, representing Hauser’s cost of COBRA medical insurance, group life insurance, and long-term disability insurance coverage during the period commencing upon the Participation End Date and ending upon the second (2nd) anniversary of the Participation End Date, such amount to be payable together with the first monthly installment of the cash consulting fees set forth in Section 3(d)(i) above; and

(iv)Reimbursement, in an amount not to exceed $30,000, for his professional fees and expenses incurred in the negotiation and preparation of this Agreement, payable within 60 days after Hauser submits reasonable documentation thereof (which documentation shall be submitted within 90 days after the Release Effective Date).

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The consideration payable pursuant to this Section 3(d) shall be referred to herein as the “Consideration”.  During the Consulting Period, Hauser will also be entitled to reimbursement for reasonable expenses incurred in connection with providing the Consulting Services, subject to timely submission for reimbursement in accordance with the Company’s expense reimbursement policies.

(e)Status as Consultant.  Hauser agrees to perform the Consulting Services as an independent contractor, and not as an employee, agent, or representative of the Company or any other member of the Company Group, and unless authorized in writing by the Company, Hauser shall not have the power or authority to act on behalf of, or bind in any way, the Company or any other member of the Company Group.  As an independent contractor, Hauser will be solely responsible for payment of all applicable taxes payable in respect of amounts payable to him under this Agreement, and neither the Company nor any other member of the Company Group will withhold for taxes from any such amounts.

(f)No Further Entitlements.  Hauser acknowledges and agrees that the payment of the Accrued Obligations and the Consideration is in full discharge of any and all liabilities and obligations of the Company Group, monetarily or with respect to employee benefits or otherwise, including but not limited to any and all obligations arising under any alleged written or oral employment agreement, arrangement, policy, plan, or procedure of any member of the Company Group, including without limitation the Employment Agreement.  Further, Hauser acknowledges and agrees that in no event shall any member of the Company Group have any further obligations under the Employment Agreement after the Release Effective Date.

(g)Indemnification.  Notwithstanding anything in paragraph (f) above to the contrary, Hauser will continue to be eligible after the Release Effective Date to the same indemnification rights as any former officer or director of the Company; provided, however, that such indemnification rights shall be not less than those rights provided to former officers and directors of the Company pursuant to the Plan dated March 10, 2010.

Section 4.Release and Waiver of Claims.

(a)Definition.  As used in this Agreement, the term “claims” will include all claims, covenants, warranties, promises, undertakings, actions, suits, causes of action, obligations, debts, accounts, attorneys’ fees, judgments, losses, and liabilities, of whatsoever kind or nature, in law, equity, or otherwise.

(b)Hauser’s Release and Waiver of Claims.

(i)For and in consideration of good and valuable consideration, including the Company’s release and waiver of claims described in Section 4(c) below and the Consideration described in Section 3(a) above, Hauser, for and on behalf of Hauser and Hauser’s heirs, administrators, executors, and assigns, effective as of the Release Effective Date, does fully and forever release, remise, and discharge the members of the Company Group, together with each of their respective officers, directors, partners, shareholders, employees, agents, attorneys, and advisors (collectively, the “Company Released Parties”), and the Lender Steering Committee (as defined in the Plan), the DIP Lenders (as defined in the Plan),

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the Prepetition Credit Agreement Lenders (as defined in the Plan), the DIP Agent (as defined in the Plan), and the Prepetition Credit Agreement Agent (as defined in the Plan), together with each of their respective officers, directors, partners, shareholders, employees, agents, attorneys, and advisors (collectively, the “Lender Released Parties”), from any and all claims whatsoever up to and including the Execution Date that Hauser had, may have had, or now has against any of the Company Released Parties or the Lender Released Parties, for or by reason of any matter, cause, or thing whatsoever arising out of or attributable to Hauser’s employment or the termination of Hauser’s employment with the Company, whether for tort, breach of express or implied employment contract, intentional infliction of emotional distress, wrongful termination, unjust dismissal, defamation, libel, or slander, or under any federal, state, or local law or regulation dealing with discrimination based on race, sex, national origin, handicap, religion, disability, or sexual orientation.  This release of claims includes, but is not limited to, all claims arising under any applicable law or regulation, including under the following statutes:  the Age Discrimination in Employment Act (“ADEA”), the Employee Retirement Income Security Act of 1974, as amended, Title VII of the Civil Rights Act, the Americans with Disabilities Act, the Civil Rights Act of 1991, the Family Medical Leave Act, the Equal Pay Act, the Genetic Information Nondiscrimination Act, the North Carolina Equal Employment Practices Act, and the North Carolina Persons with Disabilities Act, each as may be amended from time to time, and all other United States federal, state, and local laws, the common law, and any other purported restriction on an employer’s right to terminate the employment of an employee.  The parties intend the release contained herein to be a general release of any and all claims to the fullest extent permissible by law.

(ii)Hauser acknowledges and agrees that as of the Execution Date, Hauser has no knowledge of any facts or circumstances that give rise or could give rise to any claims under any of the laws listed in the preceding paragraph.

(iii)By executing this Agreement, Hauser is specifically releasing all claims relating to his employment and its termination under ADEA, a federal statute that, among other things, prohibits discrimination on the basis of age in employment and employee benefit plans.

(iv)Notwithstanding the foregoing, nothing in this Agreement shall be a waiver of Hauser’s claims for indemnification as a former officer or director of the Company as stated in Section 3(g) above or Hauser’s rights with respect to payment of amounts and other benefits under this Agreement or any claims that cannot be waived by law.

(c)The Company’s and Lenders’ Release and Waiver of Claims.  For and in consideration of Hauser’s continuing obligations to the Company pursuant to this Agreement, as well as Hauser’s waiver and release of claims described in Section 4(b) above, the Company, on behalf of itself and the other Company Released Parties, and Bank of America, N.A., as Administrative Agent for the Pre-Petition and Post-Petition Lenders (the “Agent”), on behalf of the Lender Released Parties, hereby release and forever discharge Hauser from any and all claims whatsoever up to and including the Execution Date that the Company Released Parties or the Lender Released Parties had, may have had, or now have for or by reason of any claim arising out of or attributable to Hauser’s employment, or the termination of Hauser’s employment, with the Company, or pursuant to any federal, state, or local law or regulation

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(excluding in all events any claims that any of the Company Released Parties or the Lender Released Parties may have in the future for a breach of this Agreement or the Employment Agreement, or based on any criminal actions by Hauser).

Section 5.Knowing and Voluntary Waiver.  Hauser expressly acknowledges and agrees that Hauser:

(a)Is able to read the language, and understand the meaning and effect, of this Agreement;

(b)Has no physical or mental impairment of any kind that has interfered with Hauser’s ability to read or understand the meaning of this Agreement or its terms, and that Hauser is not acting under the influence of any medication, drug, or chemical of any type in entering into this Agreement;

(c)Is specifically agreeing to the terms of the release contained in this Agreement because the Company has agreed to provide Hauser with the Consideration and because of the Company Released Parties’ and the Lender Released Parties’ agreement to waive and release Hauser from claims as set forth in Section 4(c) above, which the Company Released Parties and the Lender Released Parties have agreed to provide because of Hauser’s agreement to accept it in full settlement of all possible claims Hauser might have or ever had that are released hereunder, and because of Hauser’s execution of this Agreement;

(d)Acknowledges that but for Hauser’s execution of this Agreement, Hauser would not be entitled to the Consideration, which is conditioned upon the execution of a release, or the Company Released Parties’ and the Lender Released Parties’ waiver and release of claims described in Section 4(c) above;

(e)Understands that, by entering into this Agreement, Hauser does not waive rights or claims under ADEA that may arise after the Execution Date;

(f)Had or could have had until the Release Expiration Date in which to review and consider this Agreement, and that if Hauser executes this Agreement prior to the Release Expiration Date, Hauser has voluntarily and knowingly waived the remainder of the period for review ending on the Release Expiration Date;

(g)Was advised to consult, and has consulted, with Hauser’s attorney regarding the terms and effect of this Agreement; and

(h)Has signed this Agreement knowingly and voluntarily.

Section 6.Restrictions.

(a)Confidential Information.  Hauser acknowledges that by reason of his position with the Company, he has had complete access to and knowledge of the Company’s Confidential Information.  The Company’s “Confidential Information,” as used in this Agreement, means any form of data or information in the possession or control of the Company that relates to its business affairs, including but not limited to trade secrets, proprietary

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information, and other information not in the public domain.  Confidential Information includes, but is not limited to, product or service concepts and designs, marketing insights, technology related to the Company’s business, business methods and strategies, all financial information and plans of the Company, acquisition targets and potential targets, strategic business plans, pricing terms and methods, growth, expansion, and acquisition plans, financing and venture capital sources and plans, and all similar information that the Company holds in confidence or that competitors of the Company would be desirous of obtaining.  Hauser agrees to use the Confidential Information only for the purpose of or in connection with the Consulting Services and to keep the Company’s Confidential Information in strictest confidence and secrecy and not to use or disclose Confidential Information to any person or entity except for purposes of performing the Consulting Services and thereafter for a period of five (5) years.  Hauser will return all Confidential Information to the Company promptly upon the expiration of the Consulting Period.

(b)Non-Compete.  Hauser agrees that, without the prior written consent of the Board, from the Release Effective Date until the Final Payment Date, he will not “Compete” with the Company in the “Prohibited Territory.”  For purposes of this Agreement, the term “Compete” means to be employed or engaged in any capacity, whether as an employee, as a consultant, or by self-employment, individually or on behalf of others, or to have any ownership interest in, any business or entity engaged in business in the “Communications Industry”; provided, however, that the purchase and ownership of capital stock of less than two percent (2%) in a publicly traded entity within the Communications Industry shall not constitute competing.  As used herein, the term “Communications Industry” shall have its broadest definition, as generally understood by the investing public, and includes, but is not necessarily limited to, the ownership, acquisition, and operation of, investment in, and the provision of services and technology related to Rural Local Exchange Carriers (RLECs), Incumbent Local Exchange Carriers (ILECs), Competitive Local Exchange Carriers (CLECs), Internet Service Providers (ISPs), cable television services, retail and wholesale distribution of long distance services, Internet portal services, web casting and web hosting, dedicated service lines (DSL), broadband, voice and video conferencing, voice mail services, voice, data, and video transmissions, cellular and wireless telephone, data, paging, and Internet access services, prepaid calling cards and other prepaid communication services, electronic mail services, directory and operator assistance services, facsimile and data services, and other similar and related services and products.  For purposes of this Agreement, the term “Prohibited Territory” shall mean and include any State within the United States where the Company is engaged in business in the Communications Industry.  For purposes of this Agreement, a person or entity is considered to be Competing in the Prohibited Territory if he or it is engaged in offering or providing products or services related to the Communications Industry within the Prohibited Territory, regardless of the geographic location of the Competing individual or entity.

(c)Acknowledgement.  Hauser acknowledges that the terms of this Section 6, including the definitions of Compete, Communications Industry, and Prohibited Territory, and the restricted period set forth in Section 6(b) above (which may extend beyond the Consulting Period) are reasonable, and are no broader than necessary to protect the Company’s legitimate business interests.  Hauser specifically acknowledges and agrees that (i) he has received adequate and valuable consideration for entering into this Agreement, (ii) the Company is currently engaged in business in the Communications Industry, (iii) the nature of the

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Communications Industry is such that the range of business and competition is not necessarily contained within easily definable geographic territories, and that, in many respects, otherwise unrelated aspects of the Communications Industry are competitive with each other (for example, cable television providers, telephone companies, wireless providers, and ISPs all compete with each other to provide Internet access and services to consumers and businesses), (iv) the business of investing in and operating RLECs, ILECs, CLECs, and ISPs is highly competitive, and (v) by reason of his responsibilities as Chairman and Chief Executive Officer of the Company, Hauser was intimately familiar with and engaged in developing the Company’s business, financial, strategic, and growth plans and other Confidential Information, and that if he engages in any of the activity prohibited by this Section 6, it is inevitable that he would use or disclose Confidential Information of the Company.

(d)Enforcement.  Hauser agrees that the Company would suffer irreparable harm in the event of any violation of this Section 6, and the Company is therefore entitled to injunctive relief to enforce the provisions hereof.  The provisions of Section 6 shall survive the termination of this Agreement in accordance with their terms, and shall inure to the benefit of the Company and its affiliates, and each of their successors and assigns.

Section 7.Other Obligations, Commitments, and Representations of Hauser.

(a)No Suit.  Hauser, the Company, on behalf of itself and the Company Released Parties, and the Agent, on behalf of the Lender Released Parties, represent and warrant that they have not previously filed, and to the maximum extent permitted by law agree not to file, a claim against the other party, respectively, regarding any of the claims respectively released herein.  If, notwithstanding this representation and warranty, either Hauser or any of the Company Released Parties or the Lender Released Parties has filed or files such a claim, the filing party agrees to cause such claim to be dismissed with prejudice and shall pay any and all costs required in obtaining dismissal of such claim, including without limitation the attorneys’ fees and expenses of any of the parties against whom such a claim has been filed.

(b)Cooperation.

(i)Hauser agrees to provide reasonable cooperation to the Company and/or any other member of the Company Group and its or their respective counsel in connection with any investigation, administrative proceeding, or litigation relating to any matter that occurred during his employment in which he was involved or of which he has knowledge.  The Company agrees to reimburse Hauser for reasonable out-of-pocket expenses incurred at the request of the Company with respect to his compliance with this paragraph.

(ii)Hauser agrees that, in the event he is subpoenaed by any person or entity (including, but not limited to, any government agency) to give testimony or provide documents (in a deposition, court proceeding or otherwise) which in any way relates to his employment by the Company and/or any other member of the Company Group, he will give prompt notice of such request to the Company’s General Counsel and will make no disclosure until the Company and/or the other member of the Company Group has had a reasonable opportunity to contest the right of the requesting person or entity to such disclosure.

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(c)No Violations.  Hauser represents that he has not informed any member of the Company Group of, and that he is unaware of, any alleged violations of law or other misconduct by any member of the Company Group.

(d)Return of Property.  Hauser agrees that he will promptly return to the Company on or within five (5) days after the Release Effective Date all property belonging to the Company and/or any other member of the Company Group, including but not limited to all proprietary and/or confidential information and documents (including any copies thereof) in any form belonging to the Company, cell phone, Blackberry, beeper, keys, card access to the building and office floors, phone card, computer user name and password, disks, and/or voicemail code.  Hauser further acknowledges and agrees that the Company shall have no obligation to provide the Consideration unless and until he has satisfied all of his obligations pursuant to this paragraph.

(e)Non-Disparagement.  Hauser agrees that he will make no disparaging or defamatory comments regarding the Company in any respect, any aspect of his relationship with the Company, or the conduct or events that precipitated his termination of employment.  Similarly, the Company shall instruct its executive officers and directors to refrain from making any disparaging or defamatory comments regarding Hauser in any respect, any aspect of Hauser’s relationship with any member of the Company Group, or the conduct or events that precipitated Hauser’s termination of employment from any member of the Company Group (it being understood that the foregoing shall not prevent any representative of the Company Group from verifying Hauser’s employment to any potential subsequent employer).  The obligations of Hauser and the Company under this Agreement shall not apply to disclosures required by applicable law, regulation, or order of a court or governmental agency.

Section 8.Employee Charges.  Subject to the conditions of this section, Hauser authorizes the Company to deduct from Hauser’s pay or business expense reimbursements and to reduce any payments and benefits owing to Hauser by the amount of any outstanding and unpaid Employee Charges (as defined below), except to the extent such offset is not permitted under Section 409A of the Internal Revenue Code without the imposition of additional taxes or penalties on Hauser.  Hauser further agrees that if any Employee Charges remain outstanding and unpaid after such deduction or reduction, Hauser shall be indebted to the Company for such amount and shall promptly repay such amount.  “Employee Charges” are any amounts Hauser owes to the Company for advances, overpayments, and any other charges due from Hauser to the Company, including without limitation charges for personal telephone calls or travel or entertainment expenses, travel or entertainment advances, personal courier and postal charges, personal copying charges, and other charges that may arise out of the application of Company policies.  Notwithstanding the foregoing, no such deduction or reduction shall be made and no such indebtedness shall be created with respect to items (i) not identified by the Company to Hauser in writing prior to the date that is thirty (30) days prior to the Final Payment Date; (ii) for which Hauser was not given a minimum of fourteen (14) days after receipt of the writing identifying the items to respond; and (iii) that Hauser was not given a substantive opportunity to reasonably contest, provided that any final determination as to the imposition of Employee Charges shall be made by the Board, in good faith, after taking into account Hauser’s arguments.  Any dispute arising out of or relating to this Section 8 that is not resolved by Hauser and the Company shall be submitted to arbitration in Charlotte, North Carolina in accordance with North

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Carolina law and the procedures of the American Arbitration Association with a single arbitrator, but only to the extent that the aggregate amount in dispute exceeds $100,000.  The determination of the arbitrator shall be conclusive and binding on the Company and Hauser and judgment may be entered on the arbitrator’s awards in any court having competent jurisdiction.

Section 9.No Admission of Liability.  Hauser understands and agrees that this Agreement does not in any manner constitute an admission of liability or wrongdoing by any member of the Company Group, but that any such liability or wrongdoing is expressly denied, and that, except to the extent necessary to enforce this Agreement, neither the Agreement nor any part of it may be construed as, used, or admitted into evidence in any judicial, administrative, or arbitral proceeding, as an admission of any kind by any of the parties.

Section 10.Notices.  Unless otherwise provided in this Agreement, any notices required or permitted under this Agreement shall be in writing and delivered by hand, messenger, courier, or by registered or certified mail:

(a)if to Hauser, at Hauser’s last address on record with the Company;

(b)if to any member of the Company Group, to FairPoint Communications, Ltd., 521 East Morehead Street, Suite 500, Charlotte, North Carolina 28202, Attn: General Counsel.

Section 11.Assignment; Binding Obligations.  Hauser’s obligations, rights, and benefits under this Agreement are personal to Hauser and shall not be assigned to any person or entity without written consent from the Company.  The parties acknowledge and agree that this Agreement shall be binding upon and inure to the benefit of the parties and their respective heirs, legal representatives, successors, and permitted assigns.

Section 12.Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall be considered one and the same agreement.

Section 13.Entire Agreement.  This Agreement constitutes the entire understanding and agreement of the parties hereto regarding Hauser’s separation from service.  This Agreement supersedes all prior negotiations, discussions, correspondence, communications, understandings, and agreements between the parties relating to the subject matter of this Agreement, including without limitation the Employment Agreement.

Section 14.Governing Law; Jurisdiction.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH NORTH CAROLINA LAW (WITHOUT GIVING EFFECT TO THE CHOICE OF LAW PRINCIPLES THEREOF) APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN THAT STATE.  EACH PARTY TO THIS AGREEMENT HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN CONNECTION WITH ANY SUIT, ACTION, OR PROCEEDING UNDER OR IN CONNECTION WITH THIS AGREEMENT.

(Signature Page to Follow)

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date set forth below.

		FAIRPOINT COMMUNICATIONS, INC.
		By:	/s/ Shirley J. Linn
			Name: Shirley J. Linn
			Title: Executive Vice President
			Date: August 16, 2010
			/s/ David L. Hauser
			David L. Hauser
			Date: August 16, 2010
Acknowledged and agreed, solely in respect of Section 4(c) and Section 7(a) of this Agreement:
BANK OF AMERICA, N.A., as Administrative Agent for the Pre-Petition and Post-Petition Lenders
By:	/s/ Christopher Post
	Name: Christopher Post
	Title: Vice President

[Signature Page to Hauser Consulting Agreement and General Release]

EX-10.31

Exhibit 10.31

	July 19, 2010
521 East Morehead Street
Suite 500
Charlotte, NC 28202
704.227.3612 Direct Line
704.344.1594 Fax

Ajay Sabherwal

5105 N. Primrose Court

Peoria, IL  61615

Re:Change in Control and Severance Agreement

Dear Ajay:

This letter agreement (the “Agreement”) between you and FairPoint Communications, Inc. (the “Company”) sets forth certain rights and obligations with respect to the payment of severance and receipt of certain benefits (the “Severance Benefits”) in the event of the termination of your employment for any of the circumstances described in Paragraph 1, below.  This Agreement shall supersede any other arrangements between you and the Company or its affiliates concerning the receipt of payment or benefits upon your employment termination or in accordance with the Company’s published or unpublished policies.

1.Events That Trigger Severance Benefits.

(a)           Termination After a Change in Control.  You will receive Severance Benefits under this Agreement if, within two years after a Change in Control has occurred, the Company terminates your employment without Cause.

(b)TerminationWithout Cause.  You will receive Severance Benefits under this Agreement if the Company terminates your employment without Cause (as defined herein below) from and after the date hereof but prior to a Change in Control or after the second anniversary of a Change in Control.

(c)Resignation for Good Reason After a Change in Control.  You will receive Severance Benefits under this Agreement if, within two years after a Change in Control has occurred, you resign your employment for Good Reason (as defined herein below).

(d)Alternative Source for Payments.  Notwithstanding the foregoing, you shall participate in the Company’s principal severance plan for employees for any period during which the Company’s payment of severance benefits under this Agreement is restricted or prohibited by applicable law. Any severance benefits that you collect in cash or in kind under said Company severance plan shall offset and reduce, on a dollar-for-dollar basis, any and all benefits that you are or become entitled to collect under this Agreement.

2.Events That Do Not Trigger Severance Benefits

You shall not be entitled to receive Severance Benefits under this Agreement if the Company terminates your employment for Cause or your employment terminates on account of death or Disability (as defined herein below), or if you resign without Good Reason.

3.Obligations of the Company Upon Termination

(a)Severance Benefits Following a Change in Control.  Subject to the provisions of Paragraphs 5 and 6 below, if you become entitled to Severance Benefits under Paragraph 1(a) or 1(c) of this Agreement, the Company will provide you the following:

(i)any unpaid base salary as of the date of separation, expense reimbursements, accrued benefits, and any earned but unpaid bonus or incentive payment for the fiscal year before the year of termination, provided that any unpaid vested amounts or benefits under the Company’s compensation, incentive or benefits plans will be paid in accordance with the terms of those plans;

(ii)a lump sum cash payment of two times your Annual Base Salary (as defined herein below) in effect as of the termination date;

(iii)a lump sum cash payment of two times your Annual Incentive Payment (as defined herein below);

(iv)a lump sum cash payment equivalent to twenty-four (24) months of COBRA premiums (as customarily charged to other individuals who have terminated from the Company), grossed up for applicable federal and state taxes.  The COBRA premiums shall be based on your coverage election in effect as of the date of termination.  If you elect to continue coverage under the Company’s health care plans pursuant to COBRA, you hereby agree that such coverage will continue only for so long as allowed under COBRA or until you become eligible for another group health plan by virtue of employment; and you shall notify the Company as soon as you become eligible for coverage under another group health plan;

(v)a lump sum cash payment equivalent to twenty-four (24) months of LTD and Group Term Life Insurance and any other benefit plan premiums, grossed up for applicable federal and state taxes.  The LTD and Group Term Life Insurance and other benefit plan premiums shall be based on your coverage election in effect as of the date of termination; and

(vi)all non-vested and/or unearned long-term incentive awards previously granted to you, including but not limited to restricted stock units, deferred share awards, and stock options shall fully vest and become nonforfeitable; provided, however, that any applicable performance requirement under any long-term incentive awards must be satisfied and will not be deemed waived as a result of this provision.

(b)Severance Benefits Prior to or Two Years after a Change in Control.  Subject to the provisions of Paragraphs 5 and 6 below, if you become entitled to Severance

Benefits under Paragraph 1(b) of this Agreement, the Company will provide you with all of the same Severance Benefits as described in Paragraph 3(a) above.

(c)Timing of Payment.  The payment of the Severance Benefits will occur no later than ten (10) days after the effective date of the Release (as specified therein), unless the Company institutes a 409A Suspension Period (as defined below).

(d)Release.  The Severance Benefits are conditioned upon your signing and making effective a general release of claims in a form designated by the Company in its sole discretion (the “Release”).  The Company shall not have any obligation to provide the Severance Benefits in the event you do not sign and make effective the Release.

(e)Other Amounts.  Regardless of whether you sign and make effective the Release, the Company shall pay you any unpaid base salary, expense reimbursements, and any earned but unpaid bonus or incentive payment for the fiscal year before the year of termination within ten (10) days of your termination date.  Any unpaid vested amounts or benefits under the Company’s compensation, incentive or benefits plans will be paid in accordance with the terms of those plans.

4.Definitions

(a)“Annual Base Salary” shall mean the average monthly salary in effect during the twelve (12) months immediately preceding the date of termination, multiplied by a factor of twelve (12).

(b)“Cause” shall mean, as reasonably and in good faith determined by the Company’s Board of Directors, (i) misappropriating any funds or any material property of the Company; (ii) obtaining or attempting to obtain any material personal profit from any transaction in which you have an interest which is adverse to the interest of the Company unless the Company shall first give its consent to such transaction; (iii)(x) the willful taking of actions which directly impair your ability to perform the duties required by the terms of your employment; or (y) taking any action detrimental to the Company’s goodwill or damaging to the Company’s relationships with its customers, suppliers or employees; provided that such neglect or refusal, action or breach shall have continued for a period of twenty (20) days following written notice thereof; (iv) being convicted of or pleading nolo contendere to any crime or offense constituting a felony under applicable law or any crime or offense involving fraud or moral turpitude; or (v) any material failure to comply with applicable laws or governmental regulations within the scope of your employment or any material breach of Company policies and procedures, including a material breach of the Company’s Code of Business Conduct and Ethics.

(c)“Change in Control” shall have the same meaning as in section 14.1 of the FairPoint Communications, Inc. 2008 Long Term Incentive Plan as in effect on the date hereof; provided, however, that there shall be no provision for any threatened or anticipated Change in Control that does not actually occur.

(d)“Disability” shall mean a long-term disability within the meaning of the long-term disability or other similar program applicable to employees at the Company.  At any

time the Company does not sponsor a long-term disability plan for its employees, “Disability” shall mean your inability to perform, with reasonable accommodation, the essential functions of your position for a period of 180 days in any 360 consecutive day period due to mental or physical incapacity, and determined by an independent physician, selected by joint agreement by you and the Company.

(e)“Good Reason” means your resignation from employment within forty-five days after notice of the occurrence of any of the following without your express written consent:

(i)Your key responsibilities or duties as Executive Vice President and Chief Financial Officer (and ignoring for such purpose any temporary responsibilities) are significantly and materially reduced or if you are downgraded to a career band level that is lower than the career band level you are currently in; provided, however, that a “Good Reason” shall not occur merely because of a change in the individual (or position) to whom (or to which) you report;

(ii)A reduction in your overall compensation opportunities (as contrasted with overall compensation actually paid or awarded), other than if the Company for business reasons has to reduce bonus opportunities or base salaries of all executives;

(iii)The diminishment or elimination of your rights hereunder to the Severance Benefits; or

(iv)any material breach by the Company of this Agreement.

You may resign from your employment for Good Reason so long as you tender your written resignation to the CEO or to the Board of Directors within forty-five (45) days after the occurrence of the event that forms the basis for your resignation for Good Reason, and as long as your resignation describes in reasonable detail your objection to any of the matters described in this paragraph 4(e) and provides the Company an opportunity to cure such action or breach within fourteen (14) calendar days after receiving your written resignation.

(f)“Annual Incentive Payment” shall mean your target annual incentive award for the calendar year of your termination.

5.Golden Parachute

Your total payments and benefits under this Agreement may exceed the relevant limitations under the “golden parachute” provisions of Code Section 280G.  However, nothing in this Agreement will cause the Company to be required to pay to you any amount in excess of the Severance Benefits provided for in this Agreement.  Notwithstanding the foregoing, in the event any payment or benefit to you under this Agreement or otherwise would (a) constitute a “parachute payment” within the meaning of Code Section 280G and (b) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (or any comparable successor or state law provision) and any related interest or penalties (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then you shall receive either (i) the largest portion of such payments and benefits that would result in no portion

of such payments and benefits being subject to the Excise Tax or (ii) the full amount of such payments and benefits; whichever of the amounts under (i) and (ii), when taking into account all applicable federal, state, local and foreign income and employment taxes, the Excise Tax and any other applicable taxes (all computed at the highest applicable marginal rate), results in your receipt, on an after-tax basis, of the greatest amount of payments and benefits, notwithstanding that all or some portion thereof may be subject to the Excise Tax.  In the event of a reduction hereunder, you will be given the choice of which payments or benefits to reduce to the extent practicable for the Company.  The foregoing calculations shall be made at the Company’s expense by an accounting firm selected by the Company.  You shall remain solely liable for all income taxes, Excise Taxes, or other amounts assessed on any payments or benefits to which you are entitled and nothing in this Agreement or otherwise shall be interpreted as obligating the Company to pay (or reimburse you for) any income taxes, Excise Taxes, or other taxes or amounts assessed against or incurred by you in connection with your receipt of such payments and benefits.

6.409A

The terms of this Agreement (and the terms of any and all other agreements which cover you and are deferred compensation plans subject to Code Section 409A) are intended to comply, and shall be interpreted so as to comply, with Code Section 409A so as to not subject you to any excise tax or penalty under Code Section 409A by virtue of any payment or benefit related to that agreement.  In the event it is determined that any term or provision of this Agreement (and/or of any other agreements covering you which are subject to Code Section 409A) does not so comply with Code Section 409A, then any and all such non-compliant terms or provisions are amended so as to delay payments and benefits (of whatever kind, including stock options, dividends and any other equity-related payments that may be subject to Code Section 409A) in a manner that will comply with all of the following three requirements: (1) conform to Section 409A of the Code; (2) to the extent possible under Code Section 409A, preserve the original intent of that provision; and (3) otherwise be without any reduction in the amount of such payments or benefits ultimately paid or provided to you.  Without limitation of the foregoing, if you are a “specified employee” under Code Section 409A(a)(2)(B), then, except as permitted by Code Section 409A, any payments subject to Code Section 409A will be delayed until the date that is six months after your separation from service (the “409A Suspension Period”), and any such payments or benefits to which you would otherwise be entitled during the first six months after your separation from service will be accumulated and paid or provided on the date that is six months after such separation form service.

7.Non-Competition/Non-Solicitation

(a)Acknowledgements.  You acknowledge and agree that in the course of your employment with the Company, you have been and will be given access to, become familiar with, develop, maintain, and acquire knowledge of the Company’s client, employment and other relationships and confidential information relating to those relationships.  You acknowledge and agree that you will comply with the Company’s confidentiality policies.

(b)Non-competition.  You agree that for a period of twelve (12) months after you leave the employ of the Company for any reason, you shall not, directly or indirectly, for

your own benefit or for the benefit of any other person or entity, whether as an owner, director, officer, partner, employee, agent, consultant, for pay or otherwise, perform any supervisory, managerial, marketing, sales, administrative, executive, financial, or research and development or similar services for a rural local exchange carrier business which is headquartered in the Southeastern United States, which shall mean the states of Florida, Georgia, North Carolina and South Carolina or which has substantial business operations in the states of Maine, New Hampshire or Vermont.

(c)Non-solicitation.  You agree that for a period of twelve (12) months after you leave the employ of the Company for any reason, you shall not, directly or indirectly, for your own benefit or for the benefit of any other person or entity, whether as an owner, director, officer, partner, employee, agent, consultant, for pay or otherwise solicit the service of or solicit, induce, encourage, identify or target any person who was employed by the Company during the last year of your employment with the Company, to terminate his or her employment with the Company.

(d)Injunctive Relief.  You recognize that breach of this paragraph 7 may severely and irreparably injure the Company in an amount that cannot be readily calculated.  Therefore, you agree that the Company may, in addition to all other remedies to which it is entitled (including recovery of attorneys’ fees), obtain equitable relief, including a temporary restraining order and/or preliminary injunction, from any court having personal jurisdiction over you.

(e)Reasonable Restrictions.  You acknowledge and agree that the restrictions and covenants contained in this paragraph 7 are reasonably necessary to protect the goodwill and legitimate business interests of the Company, including without limitation the Company’s confidential information and customer, employment and other relationships and that the restrictions are not overbroad, overlong, or unfair (including in duration or scope).

(f)Reformation.  Whenever possible, each provision of this paragraph 7 will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this paragraph 7 is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this paragraph 7 or this Agreement.  If a court determines that at the time this Agreement is presented for enforcement any provisions are overly broad or unenforceable, the parties agree that the court shall reform paragraph 7 to make it enforceable to the maximum extent possible and shall enforce the other terms as written.

8.Severability

If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable, this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part of this Agreement, and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement.

9.Entire Agreement

This Agreement is the entire agreement between you and the Company and its affiliates with respect to any payments or benefits upon termination of employment.  This Agreement supersedes any prior or contemporaneous oral or written agreements or understandings on the subject.  No party is relying on any representations, oral or written, on the subject of the effect, enforceability or meaning of this Agreement, except as specifically set forth in this Agreement.

10.Governing Law

The statutes and common law of the State of North Carolina (excluding its choice of laws provisions) will apply to this Agreement, its interpretation and enforceability, except as provided by the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).

We look forward to your and the Company’s continued success.

Sincerely,
/s/ David L. Hauser
David L. Hauser
Chairman and Chief Executive Officer
Agreed:	/s/ Ajay Sabherwal
	Ajay Sabherwal

EX-31.1

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Exhibit 31.1

CERTIFICATION
PURSUANT TO 17 CFR 240.13a-14
PROMULGATED UNDER
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Paul H. Sunu, certify that:

1.

I have reviewed this Quarterly Report on Form 10-Q of FairPoint Communications, Inc. (the "Company");

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Quarterly Report;

3.

Based on my knowledge, the financial statements, and other financial information included in this Quarterly Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this Quarterly Report;

4.

The Company's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in the Securities Exchange Act of 1934, as amended (the "Exchange Act") Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

(i)

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(ii)

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(iii)

evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this Quarterly Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Quarterly Report based on such evaluation; and

(iv)

disclosed in this Quarterly Report any change in the Company's internal control over financial reporting that occurred during the Company's most recent fiscal quarter (the Company's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting;

5.

The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the audit committee of the Company's board of directors (or persons performing the equivalent functions):

(i)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, 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: November 9, 2010

/s/ PAUL H. SUNU
Paul H. Sunu
Chief Executive Officer

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Exhibit 31.1

CERTIFICATION PURSUANT TO 17 CFR 240.13a-14 PROMULGATED UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

EX-31.2

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Exhibit 31.2

CERTIFICATION
PURSUANT TO 17 CFR 240.13a-14
PROMULGATED UNDER
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Ajay Sabherwal, certify that:

1.

I have reviewed this Quarterly Report on Form 10-Q of FairPoint Communications, Inc. (the "Company");

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Quarterly Report;

3.

Based on my knowledge, the financial statements, and other financial information included in this Quarterly Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this Quarterly Report;

4.

The Company's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in the Securities Exchange Act of 1934, as amended (the "Exchange Act") Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

(i)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(ii)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(iii)

Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this Quarterly Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Quarterly Report based on such evaluation; and

(iv)

disclosed in this Quarterly Report any change in the Company's internal control over financial reporting that occurred during the Company's most recent fiscal quarter (the Company's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting;

5.

The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the audit committee of the Company's board of directors (or persons performing the equivalent functions):

(i)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, 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: November 9, 2010

/s/ AJAY SABHERWAL
Ajay Sabherwal
Chief Financial Officer

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Exhibit 31.2

CERTIFICATION PURSUANT TO 17 CFR 240.13a-14 PROMULGATED UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

EX-32.1

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Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

        In connection with the Quarterly Report on Form 10-Q of FairPoint Communications, Inc. (the "Company") for the quarter ended September 30, 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, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1.

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ PAUL H. SUNU
Paul H. Sunu
Chief Executive Officer

November 9, 2010

        A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

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Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

EX-32.2

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Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

        In connection with the Quarterly Report on Form 10-Q of FairPoint Communications, Inc. (the "Company") for the quarter ended September 30, 2010 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Ajay Sabherwal, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1.

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ AJAY SABHERWAL
Ajay Sabherwal
Chief Financial Officer

November 9, 2010

        A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

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Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002