8-K

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FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)   April 10, 2007    

FairPoint Communications, Inc.

(Exact name of registrant as specified in its charter)

Delaware	333-56365	13-3725229
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

521 East Morehead Street, Suite 250, Charlotte, North Carolina	28202
(Address of principal executive offices)	(Zip Code)

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

N/A

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

ý Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.01 Completion of Acquisition or Disposition of Assets.

On January 15, 2007, Taconic Telephone Corp. (“Taconic”), a subsidiary of FairPoint Communications, Inc. (the “Company”), entered into a Partnership Interest Purchase Agreement (the “Interest Purchase Agreement”) with Cellco Partnership d/b/a Verizon Wireless and Verizon Wireless of the East LP pursuant to which Taconic agreed to sell its 7.5% limited partnership interest (the “Interest”) in Orange County-Poughkeepsie Limited Partnership (the “Partnership”) to Cellco Partnership (the “Disposition”). A copy of the Interest Purchase Agreement is filed as Exhibit 10.1 hereto.

Warwick Valley Telephone Company, which owns an interest in the Partnership (“Warwick”), exercised its right of first refusal pursuant to the partnership agreement governing the Partnership (the “Partnership Agreement”) to purchase its pro rata portion of the Interest. In connection with such exercise, Warwick and the parties to the Interest Purchase Agreement entered into a Joinder Agreement, dated as of April 5, 2007 (the “Joinder Agreement”), which provides for, amongother things, the purchase by Warwick of 8.108% of the Interest and Warwick to be bound by the terms and conditions of the Interest Purchase Agreement. A copy of the Joinder Agreement is filed as Exhibit 10.2 hereto.

Pursuant to an Assignment and Assumption Agreement, dated as of April 9, 2007, by and between Taconic and its parent, MJD Ventures, Inc. (“MJD”), Taconic assigned the Interest to MJD, subject to the Interest Purchase Agreement and the Joinder Agreement.

The Disposition closed on April 10, 2007. The purchase price is subject to downward adjustment from $55.0 million for distributions in excess of $1.0 million which Taconic received or which Taconic or MJD is entitled to receive from the Partnership for the period from January 1, 2007 through the closing date of the Disposition. For the period from January 1, 2007 through March 31, 2007, Taconic received distributions from the Partnership of approximately $2.025 million, which resulted in a downward adjustment to the purchase price of approximately $1.025 million. There will be a further downward adjustment for distributions received from the Partnership for the period from April 1, 2007 through the closing date of the Disposition. The Company will use the net proceeds from the Disposition to fund costs related to the Company’s pending acquisition of the local exchange business of Verizon Communications Inc. (“Verizon”) in Maine, New Hampshire and Vermont pursuant to the Agreement and Plan of Merger, dated as of January 15, 2007 (the “Merger Agreement”), by and among the Company, Verizon and Northern New England Spinco Inc. (“Spinco”) pursuant to which Spinco will merge with and into the Company (the “Merger”), with the Company continuing as the surviving corporation.

Taconic has historically received annual distributions of approximately $9 to $10 million as a result of its ownership of the Interest. As a result of the Disposition, neither the Company nor any of its subsidiaries will receive any further distributions from the Partnership.

Item 8.01 Other Events.

On April 10, 2007, the Company issued a press release announcing the Disposition (the “Release”). A copy of the Release is being furnished by being attached hereto as Exhibit 99.1. Such material may be deemed soliciting material in connection with the meeting of the Company’s stockholders to be held pursuant to the Merger Agreement and a prospectus in

connection with the issuance of common stock of the Company to stockholders of Spinco in the Merger.

The Company has filed a registration statement, including a proxy statement, and other materials with the Securities and Exchange Commission (“SEC”) in connection with the Merger. The Company urges investors to read these documents when they become available because they will contain important information. Investors will be able to obtain free copies of the registration statement and proxy statement, as well as other filed documents containing information about the Company and the Merger, at www.sec.gov, the SEC’s website, or www.fairpoint.com/investor, when they are available. Investors may also obtain free copies of these documents and the Company’s SEC filings at www.fairpoint.com under the Investor Relations section, or by written request to FairPoint Communications, Inc., 521 E. Morehead Street, Suite 250, Charlotte, NC 28202, Attention: Investor Relations.

The Company and the Company’s directors, executive officers and other employees may be deemed to be participants in the solicitation of proxies from Company stockholders with respect to the Merger and related transactions. Information about the Company’s directors and executive officers is available in FairPoint’s Annual Report on Form 10-K for the year ended December 31, 2006. Additional information regarding the interests of potential participants will be included in the registration statement and proxy statement and other materials to be filed by the Company with the SEC.

This communication shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

Item 9.01 Financial Statements and Exhibits.

(b) Pro Forma Financial Statements

The following unaudited pro forma financial statements have been prepared as if the Disposition had been completed as of January 1, 2006 for purposes of the condensed statement of operations and on December 31, 2006 for purposes of the condensed balance sheet.

The unaudited pro forma financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006.

THE FOLLOWING UNAUDITED PRO FORMA FINANCIAL STATEMENTS ARE PRESENTED FOR ILLUSTRATIVE PURPOSES ONLY AND ARE NOT NECESSARILY INDICATIVE OF FUTURE OPERATING RESULTS OR THE FINANCIAL CONDITION OF THE COMPANY.

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of December 31, 2006
(in thousands)
Assets					FairPoint As Reported December 31, 2006		Pro Forma add (deduct) adjustments			FairPoint Pro Forma
Current assets:
	Cash			$	3,805	$	55,000	(a)	$	58,805
	Accounts receivable, net				28,533		—			28,533
	Other				13,184		—			13,184
	Deferred income tax, net				33,648		(19,363)	(b)		14,285
		Total current assets			79,170		35,637			114,807
Property, plant, and equipment, net					246,264		—			246,264
Goodwill					499,184		—			499,184
Investments					12,057		(5,006)	(a)		7,051
Deferred income tax, net					23,830		565	(b)		24,395
Deferred charges and other assets					24,725		—			24,725
		Total assets	$		885,230	$	31,196		$	916,426
Liabilities and Stockholders’ Equity
Current liabilities:
	Accounts payable		$		14,337	$	—		$	14,337
	Dividend payable				13,908		—			13,908
	Current portion of long-term debt				714		—			714
	Demand notes payable				312		—			312
	Accrued interest payable				560		—			560
	Other accrued liabilities				16,017		3,618	(b)		19,635
	Liabilities of discontinued operations				486		—			486
		Total current liabilities			46,334		3,618			49,952
Long-term liabilities:
	Long-term debt, net of current portion				607,272		—			607,272
	Deferred credits and other long-term liabilities				6,897		—			6,897
		Total long-term liabilities			614,169		—			614,169
Minority interest					8		—			8
Stockholders’ equity:
	Common stock				352		—			352
	Additional paid-in capital				530,536		—			530,536
	Accumulated other comprehensive income, net				5,376		—			5,376
	Accumulated deficit				(311,545)		27,578	(a)		(283,967)
		Total stockholders’ equity			224,719		27,578			252,297

Total liabilities and stockholders’ equity $ 885,230 $ 31,196 $ 916,426

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES
Unaudited Proforma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 2006
(in thousands, except per share data)
						FairPoint As Reported December 31, 2006		Pro Forma add (deduct) adjustments			FairPoint Pro Forma
Revenues					$	270,069	$	—		$	270,069
Operating expenses:
	Operating expenses, excluding depreciation and
		amortization				155,463		—			155,463
	Depreciation and amortization					53,236		—			53,236
			Total operating expenses			208,699		—			208,699
			Income from operations			61,370		—			61,370
Other income (expense):
	Net gain (loss) on sale of investments
		and other assets				14,740		—			14,740
	Interest and dividend income					3,315		—			3,315
	Interest expense					(39,665)		—			(39,665)
	Impairment on investments					—		—			—
	Equity in net earnings of investees					10,616		(10,018)	(a)		598
			Total other expense			(10,994)		(10,018)			(21,012)
			Income (loss) from continuing operations
				before income taxes		50,376		(10,018)			40,358
Income tax (expense) benefit						(19,858)		3,947	(b)		(15,911)
Minority interest in income of subsidiaries						(2)		—			(2)
			Income (loss) from continuing operations			30,516		(6,071)			24,445
Discontinued operations:
	Income on disposal of assets of discontinued operations					574		—			574
			Income from discontinued operations			574		—			574
			Net income (loss)		$	31,090	$	(6,071)		$	25,019
Basic weighted average shares outstanding						34,629					34,629
Diluted weighted average shares outstanding						34,754					34,754
Basic earnings (loss) per common share:
	Continuing operations				$	0.88				$	0.70
	Discontinued operations					0.02					0.02
	Net income					0.90					0.72
Diluted earnings (loss) per common share:
	Continuing operations				$	0.88				$	0.70
	Discontinued operations					0.01					0.02
	Net income					0.89					0.72

(a) These adjustments reflect the elimination of the Company’s investment in and earnings from the Partnership to reflect the Disposition.

(b) This adjustment reflects the income tax impact of the adjustment described above.

(d) Exhibits

Exhibit Number	Description
10.1	Partnership Interest Purchase Agreement, dated as of January 15, 2007, by and among Taconic Telephone Corp., Cellco Partnership d/b/a Verizon Wireless and Verizon Wireless of the East LP*
10.2	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
99.1	Press Release dated April 10, 2007

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

The information in Item 8.01 of this Current Report, including the related exhibit attached hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of such section. Such information in this Current Report, including the exhibit, shall not be incorporated by reference into any filing under the Securities Act or the Exchange Act, regardless of any incorporation by reference language in any such filing.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

FAIRPOINT COMMUNICATIONS, INC.

By: /s/ John P. Crowley

Name: John P. Crowley

Title: Executive Vice President and

Chief Financial Officer

Date: April 10, 2007

 

EX-10

Exhibit 10.2

JOINDER AGREEMENT

This JOINDER AGREEMENT (this “Agreement”), dated as of April 5, 2007, is entered into by and among WARWICK VALLEY TELEPHONE COMPANY, a New York corporation (“Warwick”), CELLCO PARTNERSHIP D/B/A VERIZON WIRELESS, a Delaware general partnership (“Cellco”), VERIZON WIRELESS OF THE EAST LP, a Delaware limited partnership (“Verizon”), and TACONIC TELEPHONE CORP., a New York corporation (“Taconic”).

WHEREAS, reference is made to that certain Agreement Establishing Orange County – Poughkeepsie Limited Partnership (the “Partnership Agreement”), dated as of April 21, 1987, as amended, by and among Warwick, Taconic and each of the other parties from time to time party thereto, establishing Orange County – Poughkeepsie Limited Partnership, a New York limited partnership (the “Partnership”);

WHEREAS, Taconic owns all of the right, title and interest in and to a 7.5% limited partnership interest in the Partnership, and all associated assets, properties, and rights of every type and description (Taconic’s foregoing right, title, and interest shall be referred to herein collectively as the “Interest”);

WHEREAS, reference is made to that certain Partnership Interest Purchase Agreement (the “Purchase Agreement”), dated as of January 15, 2007, by and among Taconic, Verizon and Cellco, pursuant to which Taconic agreed to sell, and Cellco agreed to purchase, 100% of the Interest, subject to the terms and conditions set forth therein;

WHEREAS, pursuant to Section 11.1 of the Partnership Agreement and that certain letter addressed to Verizon, dated as of February 20, 2007, Warwick exercised its right to purchase its pro rata portion of the Interest for the same price and subject to the same terms and conditions set forth in the Purchase Agreement; and

WHEREAS, capitalized terms used herein but not otherwise defined herein shall have the meanings ascribed to them in the Purchase Agreement.

NOW, THEREFORE, in consideration of the premises, covenants and agreements contained herein, the parties hereto hereby agree as follows:

1.Joinder. Warwick hereby acknowledges that it has received and reviewed a copy of the Purchase Agreement, and, subject to the fact that it is purchasing 8.108% of the Interest, acknowledges and agrees (i) to be bound by the Purchase Agreement, as if it were a party to such agreement, on the same terms and subject to the same conditions as applicable to Buyer and, to the extent applicable, General Partner (including with respect to the release set forth in Section 6.1(c) thereof), (ii) to perform all of its obligations under the Purchase Agreement in an expeditious manner and (iii) to purchase from Taconic 8.108% of Taconic’s right, title and interest in and to the Interest for 8.108% of the Purchase Price. The parties acknowledge and agree that as a result of the exercise by Warwick of its right to purchase its pro rata portion of the Interest, Cellco will be purchasing 91.892% of Taconic’s right, title and interest in and to the Interest for 91.892% of the Purchase Price.

2.Representations and Warranties. Warwick acknowledges and agrees that Buyer’s representations and warranties contained in the Purchase Agreement shall be deemed to be made by Warwick as of the date hereof. Warwick represents and warrants to each of the other parties hereto that (i) it has the power and authority to execute and deliver this Agreement, (ii) the execution, delivery, and performance of this Agreement by Warwick have been duly authorized by all necessary corporate action on the part of Warwick, (iii) this Agreement has been duly executed and delivered by Warwick and (iv) this Agreement constitutes the legal, valid and binding obligation of Warwick, enforceable against Warwick in accordance with its terms, except as may be limited by bankruptcy laws and other similar laws affecting creditors’ rights generally and general principles of equity.

3.Notice. Any notice required or permitted by the Purchase Agreement shall be given to Warwick at the address listed beneath its signature below.

4.Governing Law. This Agreement and all rights and obligations arising hereunder shall be governed by, and construed in accordance with, the laws of the State of New York, without regard to conflict of law principles thereof.

5.Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which, taken together, shall constitute one and the same instrument.

[SIGNATURE PAGES FOLLOW]

 

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IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as of the date first above written.

WARWICK VALLEY TELEPHONE COMPANY

By:___/s/ Thomas H. Gray________________

Name:     Thomas H. Gray

Title: Interim President and Chief Executive Officer

Address: 47 Main Street

Warwick, New York 10990-0592

VERIZON WIRELESS OF THE EAST LP D/B/A VERIZON WIRELESS

By: Verizon Wireless of Georgia LLC, Its General Partner

By: Cellco Partnership d/b/a Verizon Wireless, Its Sole Member

By:___/s/ Karen M. Shipman ______________

Name:   Karen M. Shipman

Title:    Assistant Secretary

CELLCO PARTNERSHIP D/B/A VERIZON WIRELESS

By:___/s/ Karen M. Shipman_______________

Name:   Karen M. Shipman

Title:    Assistant Secretary

TACONIC TELEPHONE CORP.

By:___/s/ Peter G. Nixon_________________

Name:     Peter G. Nixon

Title: Chief Operating Officer

 

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EX-99

Exhibit 99.1

FOR IMMEDIATE RELEASE

FAIRPOINT COMMUNICATIONS COMPLETES SALE OF ITS
INVESTMENT IN ORANGE COUNTY-POUGHKEEPSIE LIMITED
PARTNERSHIP

Proceeds to fund transaction costs related to the pending merger with Verizon’s wireline
operations in Maine, New Hampshire and Vermont

CHARLOTTE, N.C. (PR NEWSWIRE) – April 11, 2007 –FairPoint Communications, Inc. (NYSE: FRP) today announced that it has completed the sale of its investment in Orange County-Poughkeepsie Limited Partnership. As previously disclosed, the sale is related to FairPoint’s pending merger with the wireline operations of Verizon in Maine, New Hampshire and Vermont.

FairPoint held a 7.5% stake in the Orange County-Poughkeepsie Limited Partnership. The Company will record a gain on the sale of approximately $48.3 million. Of the $55 million in total proceeds, approximately $1.0 million was paid to the Company in the form of a distribution from the partnership in the first quarter of 2007. The remaining proceeds of approximately $54.0 million were received today from the purchasers of FairPoint’s interest in the partnership. Under the terms of the fourth amendment to the Company’s credit facility, the gain on the sale will not be added to Cumulative Cash Available for Dividends under the Company’s credit facility. FairPoint intends to use the net proceeds to fund transaction related costs associated with the pending Verizon wireline merger.

FairPoint has historically received annual distributions of approximately $9 to $10 million from the Orange County-Poughkeepsie investment. Due to the sale, FairPoint will not receive any further distributions from the Orange County-Poughkeepsie Limited Partnership.

About FairPoint

FairPoint is a leading provider of communications services to rural and small urban communities across the country. Incorporated in 1991, FairPoint's mission is to acquire and operate communications companies that set the standard of excellence for the delivery of service to rural communities. Today, FairPoint owns and operates 31 local exchange companies located in 18 states offering an array of services, including local and long distance voice, data, Internet and broadband offerings.

 

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This press release may contain forward-looking statements that are not based on historical fact, including, without limitation, statements containing the words "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and similar expressions. 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. Such factors include those risks described from time to time in FairPoint's filings with the Securities and Exchange Commission, including, without limitation, the risks described in FairPoint’s most recent Annual Report on Form 10-K on file with the Securities and Exchange Commission. These factors should be considered carefully and readers are cautioned not to place undue reliance on such forward-looking statements. All information is current as of the date this press release is issued, and FairPoint undertakes no duty to update this information.

FairPoint has filed a registration statement, including a proxy statement, and other materials with the Securities and Exchange Commission (“SEC”) in connection with the proposed merger. FairPoint urges investors to read these documents when they become available because they will contain important information. Investors will be able to obtain copies of the registration statement and proxy statement, as well as other filed documents containing information about FairPoint and the merger, at www.sec.gov, the SEC’s website, or at www.fairpoint.com/investor, when they are available. Investors may also obtain free copies of these documents and the Company’s SEC filings at www.fairpoint.com under the Investor Relations section, or by written request to FairPoint Communications, Inc., 521 E. Morehead Street, Suite 250, Charlotte, NC 28202, Attention: Investor Relations.

FairPoint and FairPoint’s directors, executive officers, and other employees may be deemed to be participants in the solicitation of proxies from FairPoint stockholders with respect to the proposed transaction. Information about FairPoint’s directors and executive officers is available in FairPoint’s Annual Report on Form 10-K for the year ended December 31, 2006. Additional information about the interests of potential participants will be included in the registration statement and proxy statement and other materials to be filed by FairPoint with the SEC.

SOURCE: FairPoint Communications, Inc. (www.fairpoint.com)

CONTACTS: Investors - Brett Ellis, 866-377-3747; bellis@fairpoint.com or

Media - Rob Thompson, 704-227-3633; rjthompson@fairpoint.com

 

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