Document:

Exhibit 10.5

 

REGISTRATION RIGHTS AGREEMENT

 

This REGISTRATION RIGHTS AGREEMENT, dated as of January 24, 2011 (this “Agreement”) is made between (i) FairPoint Communications, Inc., a Delaware corporation (the “Company”), and (ii) Angelo, Gordon & Co., L.P. (“Angelo Gordon”), on behalf of and as investment manager of the Persons set forth on Schedule I hereto (together with Angelo Gordon, the “Ten Percent Holders”).  Capitalized terms used herein without definition shall have the meanings set forth in Section 10.

 

Pursuant to the Plan of Reorganization, as approved by the Bankruptcy Court, the Company has agreed to grant the Ten Percent Holders certain registration rights with respect to the Registrable Securities held by such Ten Percent Holders.

 

NOW, THEREFORE, the parties hereto agree as follows:

 

1.             Demand Registrations.

 

(a)           Requests for Registration.  At any time following the date that is one hundred eighty (180) days after the date hereof, the Required Holders may request in writing that the Company effect the registration of all or any part of the Registrable Securities held by such Required Holders (a “Registration Request”); provided, however, that each such Ten Percent Holder must confirm to the Company that such Ten Percent Holder (together with its affiliates) is the beneficial holder of an aggregate of at least 7.5% of the then outstanding Common Stock, and that such Ten Percent Holder (together with its affiliates) has beneficially held an aggregate of at least 7.5% of the then outstanding Common Stock, continuously since the date hereof.  (For purposes of this paragraph, and for Sections 1(c) and 9(b) and the definition of “Registrable Securities”, and without limiting whether other Persons may be affiliates, each of the Ten Percent Holders listed on Schedule I are deemed to be affiliates of each other.) Promptly after its receipt of any Registration Request, but in any event within five business days, the Company will give written notice of such request to all other Ten Percent Holders, and will use its reasonable best efforts to register, in accordance with the provisions of this Agreement, all Registrable Securities that have been requested to be registered by the Required Holders in the Registration Request or by any other Ten Percent Holders by written notice to the Company, which notice (i) is received within 30 days after the date the Company has given such Ten Percent Holders notice of the Registration Request and (ii) is accompanied by a statement confirming that such Ten Percent Holder (together with its affiliates) is the beneficial holder of an aggregate of at least 7.5% of the then outstanding Common Stock, and that such Ten Percent Holder (together with its affiliates) has beneficially held an aggregate of at least 7.5% of the then outstanding Common Stock, continuously since the date hereof.  The Company will pay all Registration Expenses incurred in connection with any registration pursuant to this Section 1, including with respect to any underwritten takedown from a Shelf Registration, whether or not such registration becomes effective.

 

 

(b)           Limitation on Demand Registrations.  The Company will not be obligated to effect more than two (2) registrations pursuant to Section 1(a) or underwritten takedowns under a Shelf Registration Statement pursuant to Section 1(c) (each, a “Demand Registration”); provided, however, that a request for registration will not count for the purposes of this limitation if (i) the Required Holders determine in good faith to withdraw (prior to the effective date of the Registration Statement relating to such request) the proposed registration, (ii) the Registration Statement relating to such request is not declared effective within the earlier of (x) 130 days of the receipt by the Company of the related Registration Request and (y) 90 days of the date such registration statement is first filed with the Commission, (iii) prior to the sale of all of the Registrable Securities included in the registration relating to such request, such registration is adversely affected by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason, (iv) any  of the Registrable Securities requested by the Required Holders to be included in the registration are not so included pursuant to Section 1(f), (v) the conditions to closing specified in any underwriting agreement entered into in connection with the registration relating to such request are not satisfied (other than as a result of a material default or breach thereunder by the Required Holders), or (vi) the Company has breached any of its obligations hereunder with respect to such Demand Registration.  Notwithstanding the foregoing, the Company will pay all Registration Expenses in connection with any request for registration pursuant to Section 1(a) regardless of whether or not such request counts toward the limitations set forth in this paragraph.

 

(c)           Shelf Registration.  The Required Holders will be entitled to request the Company to file and thereafter use its reasonable efforts to continuously maintain a Registration Statement relating to the resale of any Registrable Securities pursuant to Rule 415 under the Securities Act (the “Shelf Registration Statement”), if and to the extent the Company is qualified to file a registration statement on Form S-3 (a “Shelf Registration”); provided, however, that each such Ten Percent Holder must confirm to the Company that such Ten Percent Holder (together with its affiliates) is the beneficial holder of an aggregate of at least 7.5% of the then outstanding Common Stock, and that such Ten Percent Holder (together with its affiliates) has beneficially held an aggregate of at least 7.5% of the then outstanding Common Stock, continuously since the date hereof.  Promptly after its receipt of a request to file the Shelf Registration Statement, but in any event within five business days, the Company will give written notice of such request to all other Ten Percent Holders, and will use its reasonable best efforts to register pursuant to the Shelf Registration Statement, in accordance with the provisions of this Agreement, all Registrable Securities that have been requested to be registered by the Required Holders in the Registration Request made pursuant to this Section 1(c) or by any other Ten Percent Holders by written notice to the Company, which notice (i) is received within 30 days after the date the Company has given such Ten Percent Holders notice of the Registration Request made pursuant to this Section 1(c) and (ii) is accompanied by a statement confirming that such Ten Percent Holder (together with its

 

 

affiliates) is the beneficial holder of an aggregate of at least 7.5% of the then outstanding Common Stock, and that such Ten Percent Holder (together with its affiliates) has beneficially held an aggregate of at least 7.5% of the then outstanding Common Stock, continuously since the date hereof.  The Company will pay all Registration Expenses incurred in connection with a Shelf Registration Statement, whether or not such registration becomes effective.  A Registration Request made pursuant to this Section 1(c) will not count for the purposes of the limitation set forth in Section 1(b) until such time as an underwritten takedown is effected pursuant to the applicable Shelf Registration Statement and at least 50% of the Registrable Securities contemplated to be sold by the Ten Percent Holder pursuant to such underwritten offering have been sold pursuant to such offering.

 

(d)           Restrictions on Demand Registrations.  The Company may postpone for a reasonable period of time, not to exceed 60 days, the filing of a prospectus or the effectiveness of a Registration Statement for a Demand Registration or the use of a prospectus relating to a Shelf Registration Statement if the Company furnishes to the Ten Percent Holders covered by such prospectus or Registration Statement a certificate signed by the Chief Executive Officer, Chief Financial Officer or President of the Company stating that such officers, in their good faith judgment, have determined that any registration of Registrable Securities should not be made or continued because it would materially interfere with any bona fide and reasonably imminent material financing, acquisition, corporate reorganization or other transaction involving the Company; provided, however, that the Company may not effect such a postponement more than once in any 365 day period.  If the Company so postpones the filing of a prospectus or the effectiveness of a Registration Statement relating to a Demand Registration, the Required Holders will be entitled to withdraw the applicable Registration Request and, if such request is withdrawn, such Registration Request will not count for the purposes of the limitation set forth in Section 1(b).  The Company will pay all Registration Expenses incurred in connection with any such aborted registration or prospectus.

 

(e)           Selection of Underwriters.  If the Required Holders intend to distribute the Registrable Securities covered by their Registration Request by means of an underwritten offering, they will so advise the Company as a part of the Registration Request (or as part of a request for an underwritten takedown from a Shelf Registration), and the Company will include such information in the notice sent by the Company to the other Ten Percent Holders with respect to such Registration Request.  In such event, the Required Holders will have the right to select the investment banker(s) and manager(s) to administer the offering, which shall be reasonably satisfactory to the Company.  If the offering is underwritten, the right of any Ten Percent Holder to registration pursuant to this Section 1 will be conditioned upon such Ten Percent Holder’s participation in such underwriting and the inclusion of the Ten Percent Holder’s Registrable Securities that it wishes to sell in the underwriting (unless otherwise agreed by the Required Holders), and the Company and each such Ten Percent Holder, as applicable, will (together with the other Ten

 

 

Percent Holders distributing their securities through such underwriting) enter into an underwriting agreement, in a customary form satisfactory to the Required Holders, with the underwriter or underwriters selected for such underwriting.  If any Ten Percent Holder disapproves of the terms of the underwriting, such Ten Percent Holder may elect to withdraw therefrom by written notice to the Company, the managing underwriter and the Required Holders.

 

(f)            Priority on Demand Registrations.  The Company will not include in any underwritten registration pursuant to Sections 1(a) or 1(c) any securities that are not Registrable Securities without the prior written consent of the Required Holders.  If the managing underwriter advises the Company in writing that in its opinion the number of Registrable Securities (and, if permitted hereunder, other securities requested to be included in such offering) exceeds the number of securities that can be sold in such offering without adversely affecting the marketability of the offering, the Company will include in such offering only such number of securities that in the opinion of such underwriters can be sold without adversely affecting the marketability of the offering, which securities will be so included in the following order of priority: (i) first, Registrable Securities, pro rata among the respective Ten Percent Holders thereof on the basis of the aggregate number of Registrable Securities owned by each such Holder, and (ii) second, any other securities of the Company that have been requested to be so included.

 

(g)           Method of Distribution.  Any registration pursuant to this Section 1 shall be effected by means of a Registration Statement in accordance with the plan of distribution set forth therein and in the prospectus and prospectus supplement related thereto, as applicable.  The Registration Statement shall specify the types of sale or distribution transactions pursuant to which the Ten Percent Holders may from time to time sell Registrable Securities, which shall include, without limitation, sales to underwriters for resale to the public or to institutional investors, sales on stock exchanges or in the over-the-counter market (at prevailing market prices, at prices related to such prevailing market prices or at negotiated prices), block trades, purchases by a broker or dealer as principal and resale by that broker or dealer for its own account, ordinary broker’s transactions and transactions in which the broker solicits purchasers, privately negotiated transactions and such other methods of sale by the Ten Percent Holders as the Required Holders may (but shall not be required to) elect and specify in their Registration Request.

 

2.             Piggyback Registrations.

 

(a)           Right to Piggyback.  Whenever the Company proposes to register any of its securities, whether for the Company’s own account or for the account of any stockholders of the Company, other than, without limitation, pursuant to Section 1 (other than a registration on Form S-4 or a registration relating to (x) any employee stock options or other employee benefit plans or (y) the sale of debt or convertible debt

 

 

instruments (“Exempted Securities”)), the Company shall give prompt written notice, but in any event within five business days, to all Ten Percent Holders of its intention to effect such a registration and shall include in such registration all Registrable Securities with respect to which the Company has received written requests for inclusion therein, which request is received within 30 days after the date of the Company’s notice (a “Piggyback Registration”).  Any Ten Percent Holder that has made such a written request may withdraw its Registrable Securities from such Piggyback Registration by giving written notice to the Company and the managing underwriter, if any, on or before the 30th day prior to the planned effective date of such Piggyback Registration.  The Company may terminate or withdraw any registration under this Section 2 prior to the effectiveness of such registration, whether or not any Ten Percent Holder has elected to include Registrable Securities in such registration, and except for the obligation to pay Registration Expenses pursuant to Section 2(c), the Company will have no liability to any Ten Percent Holder in connection with such termination or withdrawal.

 

(b)           Underwritten Registration.  If the registration referred to in Section 2(a) is proposed to be underwritten, the Company will so advise the Ten Percent Holders as a part of the written notice given pursuant to Section 2(a), and the Ten Percent Holders shall be permitted to include all Registrable Securities requested to be included in such registration in such offering on the same terms and conditions as any other securities of the Company included therein.  In such event, the right of any Ten Percent Holder to registration pursuant to this Section 2 will be conditioned upon such Ten Percent Holder’s participation in such underwriting and the inclusion of such Ten Percent Holder’s Registrable Securities in the underwriting, and each such Ten Percent Holder will (together with the Company and the other Ten Percent Holders distributing their securities through such underwriting) enter into an underwriting agreement, in customary form, with the underwriter or underwriters selected for such underwriting by the Company.  If any Ten Percent Holder disapproves of the terms of the underwriting, such Ten Percent Holder may elect to withdraw therefrom by written notice to the Company and the managing underwriter.

 

(c)           Piggyback Registration Expenses.  The Company will pay all Registration Expenses in connection with any Piggyback Registration, whether or not any registration or prospectus becomes effective.

 

(d)           Priority on Registrations.  If a Piggyback Registration relates to an underwritten offering that is not a Demand Registration pursuant to Section 1 hereof, and the managing underwriters advise the Company in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold without adversely affecting the marketability of such offering, the Company will include in such registration or prospectus only such number of securities that in the opinion of such underwriters can be sold without adversely affecting the marketability of the offering, which securities will be so included in the following order of priority: (i) first, the securities the Company proposes to sell, (ii) second, the

 

 

Registrable Securities requested to be included in such registration, pro rata among the Ten Percent Holders of such Registrable Securities on the basis of the number of Registrable Securities so requested to be included therein by each such Ten Percent Holder, and (iii) third, any other securities requested to be included in such registration.

 

3.             Registration Procedures.

 

(a)           Subject to Section 1(d), whenever the Required Holders have requested that any Registrable Securities be registered (or an underwritten takedown from a Shelf Registration be effected) pursuant to this Agreement, the Company will use its reasonable best efforts to effect the registration and sale of such Registrable Securities in accordance with the intended method of disposition thereof.  Without limiting the generality of the foregoing, the Company will:

 

(i)            prepare and as soon as practicable (and in any event within ten days after the end of the thirty-day period within which requests for registration may be given to the Company pursuant hereto (for avoidance of doubt, such ten-day period shall begin to run on the thirtieth day following the applicable notice sent by the Company pursuant to Section 1(a), 1(c) or 2(a))) file with the Commission a Registration Statement with respect to such Registrable Securities on any form for which the Company then qualifies or which counsel for the Company shall deem appropriate and which form shall be available for the sale of such Registrable Securities in accordance with the intended method of distribution thereof, make all required filings with FINRA and thereafter use its reasonable best efforts to cause such Registration Statement to become effective as promptly as practicable but in any event within the earlier of (x) 130 days of the receipt by the Company of the related Registration Request and (y) 90 days of the date such registration statement is first filed with the Commission; provided, however, that (A) before filing a Registration Statement or any amendments or supplements thereto (including any documents incorporated by reference therein, or any prospectuses or prospectus supplements), or before using any Free Writing Prospectus, the Company will furnish to Holders’ Counsel copies of all such documents proposed to be filed, which documents will be subject to review and comment of Holders’ Counsel at the Company’s expense, (B) the Company will not file such Registration Statement, amendment or supplement, prospectus or prospectus supplement, or use such Free Writing Prospectus, prior to the date that is five business days from the date that Holders’ Counsel received such document unless such counsel earlier informs the Company that it has no objections to the filing of such Registration Statement, amendment or supplement, prospectus or prospectus supplement, or the use of such Free Writing Prospectus, and (C) the Company will not file any Registration Statement, amendment or supplement to such Registration Statement, or any prospectuses or prospectus supplements, or use any Free Writing Prospectus, to which Holders’ Counsel will have reasonably objected in writing on the grounds that (and explaining why) such Registration

 

 

Statement, amendment or supplement, prospectus or prospectus supplement or Free Writing Prospectus does not comply in all material respects with the requirements of the Securities Act or of the rules or regulations thereunder;

 

(ii)           prepare and file with the Commission such amendments and supplements to such Registration Statement as may be necessary to keep such Registration Statement and the prospectus used in connection therewith effective for a period of either (A) not less than 12 months (plus the period of any postponement under Section 1(d)) or, if such Registration Statement relates to an underwritten offering, such longer period as in the reasonable opinion of counsel for the underwriters a prospectus is required by law to be delivered in connection with sales of Registrable Securities by an underwriter or dealer or (B) such period as will terminate when all of the securities covered by such Registration Statement have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof set forth in such Registration Statement (as between the time periods in clauses (A) or (B), whichever is the shorter for a Demand Registration under Section 1(a) or a Piggyback Registration, and whichever is the longer for a Shelf Registration, but in any event not before the expiration of any longer period required under the Securities Act), and to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement until such time as all of such securities have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof set forth in such Registration Statement;

 

(iii)          furnish to each seller of Registrable Securities such number of copies, without charge, of such Registration Statement, each amendment and supplement thereto, including each preliminary prospectus, final prospectus, Free Writing Prospectus, all exhibits and other documents filed therewith and such other documents as such seller may reasonably request, including in order to facilitate the disposition of the Registrable Securities owned by such seller; the Company hereby consents to the use of the final prospectus and each preliminary prospectus by seller or sellers of Registrable Securities, and each underwriter of an underwritten offering of Registrable Securities;

 

(iv)          use its reasonable best efforts to register or qualify such Registrable Securities, no later than the time the applicable Registration Statement is declared effective by the Commission, under such other securities or blue sky laws of such jurisdictions as any seller requests, use its reasonable best efforts to keep each such registration or qualification effective during the period such Registration Statement is required to be kept effective, and do any and all other acts and things that may be necessary or reasonably advisable to enable such seller to consummate the disposition in such jurisdictions of the Registrable Securities owned by such seller (provided that the Company will not be required to (A) qualify generally to do business in any jurisdiction where it would not

 

 

otherwise be required to qualify but for this subsection, (B) subject itself to taxation in any such jurisdiction or (C) consent to general service of process in any such jurisdiction);

 

(v)           use its reasonable best efforts to cause all Registrable Securities covered by such Registration Statement to be registered with or approved by such other governmental agencies, authorities or self-regulatory bodies as may be necessary or reasonably advisable in light of the business and operations of the Company to enable the seller or sellers thereof to consummate the disposition of such Registrable Securities in accordance with the intended method or methods of disposition thereof;

 

(vi)          promptly notify each seller of such Registrable Securities, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, upon discovery that, or upon the discovery of the happening of any event as a result of which, the Registration Statement, prospectus or Free Writing Prospectus or any document incorporated or deemed to be incorporated therein by reference contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading (in the case of the Registration Statement) or not misleading in the light of the circumstances under which they were made (in the case of a prospectus or Free Writing Prospectus), and, as promptly as practicable, prepare and furnish to such seller a reasonable number of copies of a supplement or amendment to such Registration Statement, related prospectus or Free Writing Prospectus as may be necessary so that, as thereafter delivered to the purchasers of such Registrable Securities, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of such prospectus or Free Writing Prospectus, it will not contain an untrue statement of a material fact or omit to state any fact necessary to make the statements therein not misleading in the light of the circumstances under which they were made;

 

(vii)         notify each seller of any Registrable Securities covered by such Registration Statement (A) when the prospectus, any prospectus supplement, any Free Writing Prospectus or post-effective amendment has been filed and, with respect to such Registration Statement or any post-effective amendment, when the same has become effective, (B) of any request by the Commission or any other federal or state governmental authority for amendments or supplements to such Registration Statement or to amend or to supplement such prospectus or Free Writing Prospectus or for additional information, (C) of the issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness of such Registration Statement or the initiation or threatening of any proceedings for any of such purposes; (D) the receipt by the Company of any notification with respect to the suspension of the qualification or

 

 

exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceedings for such purpose; and (E) of the determination by counsel of the Company that a post-effective amendment to a Registration Statement is advisable, including, for purposes of clauses (B), (C) and (D) above, by furnishing each seller of any Registrable Securities covered by such Registration Statement a copy of any such request or notification;

 

(viii)        cause all such Registrable Securities to be listed on each securities exchange on which the same class of securities issued by the Company are then listed, if any;

 

(ix)          provide a transfer agent and registrar for all such Registrable Securities not later than the effective date of such Registration Statement;

 

(x)           enter into and perform such customary agreements, including underwriting agreements with customary provisions (including, but not limited to, customary indemnification and contribution agreements with the underwriter, provisions for the delivery of officer’s certificates, opinions of counsel, Rule 10b-5 negative assurance letters and accountants’ “comfort” letters) and take all such other actions as the Required Holders or the underwriters, if any, reasonably request in order to expedite or facilitate the disposition of such Registrable Securities;

 

(xi)          furnish or make available (and cause the Company’s officers, directors, employees and independent public accountants to furnish or make available) for inspection by any seller of Registrable Securities, any underwriter participating in any disposition pursuant to such Registration Statement and any attorney, accountant or other agent retained by any such seller or underwriter (collectively the “Inspectors”), such information and assistance as such Inspector may reasonably request in connection with any “due diligence” effort that such Inspector deems appropriate in connection with such Registration Statement, including, but not limited to, all financial and other records, pertinent corporate documents and documents relating to the business of the Company.  Records that the Company determines, in good faith, to be confidential and which it notifies the Inspectors are confidential shall not be disclosed by the Inspectors (and the Inspectors shall confirm their agreement in writing in advance to the Company if the Company shall so request) unless (A) the disclosure of such Records is necessary, in the Inspector’s judgment, to avoid or correct a misstatement or omission in the Registration Statement, (B) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction after compliance with the last sentence of this clause (xi) or (C) the information in such Records was known to the Inspectors on a non-confidential basis prior to its disclosure by the Company or has been made generally available to the public.

 

 

Each seller of Registrable Securities agrees that it shall, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to the Company and allow the Company, at the Company’s expense, to undertake appropriate action to prevent disclosure of the Records deemed confidential;

 

(xii)         otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months beginning with the first day of the Company’s first full calendar quarter after the effective date of the Registration Statement, which earnings statement will satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;

 

(xiii)        in the event any stop order suspending the effectiveness of a Registration Statement is threatened or issued, or any order suspending or preventing the use of any related prospectus or Free Writing Prospectus or ceasing trading of any securities included in such Registration Statement for sale in any jurisdiction is threatened or issued, promptly give notice to each seller of Registrable Securities pursuant to such Registration Statement and Holders’ Counsel and use its reasonable best efforts promptly to prevent the entry of such order or to obtain the withdrawal of such order;

 

(xiv)        enter into and perform such agreements and take such other actions as the sellers of Registrable Securities or the underwriters reasonably request in order to expedite or facilitate the disposition of such Registrable Securities, including, without limitation, preparing for and participating in such number of “road shows” and all such other customary selling efforts as the underwriters reasonably request in order to expedite or facilitate such disposition;

 

(xv)         in connection with any underwritten offering, make such representations and warranties to the underwriters in form, substance, and scope as are customarily made by issuers to underwriters in similar underwritten offerings;

 

(xvi)        in connection with any underwritten offering, obtain one or more comfort letters, addressed to underwriters in any underwritten offering, dated the date of the closing under the underwriting agreement for such offering (and to the extent permitted by accounting rules and guidance, the sellers of Registrable Securities, dated the effective date of such Registration Statement), signed by the Company’s independent public accountants in customary form and covering such matters of the type customarily covered by comfort letters as underwriters reasonably request;

 

 

(xvii)       provide legal opinions and negative assurance letters of the Company’s outside counsel, addressed to underwriters in connection with any underwritten offering, dated the effective date of such Registration Statement, each amendment and supplement thereto (and, if such registration includes an underwritten public offering, dated the date of the closing under the underwriting agreement), with respect to the Registration Statement, as amended and supplemented, and such other documents relating thereto, in each case that are customary for the applicable transaction, in customary form and covering such matters as sellers may reasonably request and are customarily covered by legal opinions and negative assurance letters of such nature;

 

(xviii)      with respect to each Free Writing Prospectus or other materials deemed, under Rule 159 promulgated under the Securities Act, to have been conveyed to purchase securities at the time of sale of such securities (including a contract of sale) ensure that no Registrable Securities be sold “by means of” (as defined in Rule 159A(b), promulgated under the Securities Act) such Free Writing Prospectus or other materials without the prior written consent of the Holders of the Registrable Securities covered by such Registration Statement, which Free Writing Prospectuses or other materials shall be subject to the review of Holders’ Counsel;

 

(xix)        within the deadlines specified by the Securities Act, make all required filings of all prospectuses and Free Writing Prospectuses with the Commission;

 

(xx)         within the deadlines specified by the Securities Act, make all required filing fee payments in respect of any Registration Statement or prospectus used under this Agreement (and any offering covered thereby);

 

(xxi)        keep Holders’ Counsel advised in writing as to the initiation and, as appropriate, of the progress of any registration under Section 1 or Section 2 and provide Holders’ Counsel with all correspondence with the Commission in connection with any such Registration Statement;

 

(xxii)       cooperate with each seller of Registrable Securities and each underwriter participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with FINRA;

 

(xxiii)      if such registration is pursuant to a Shelf Registration Statement, include in the body of the prospectus included in such Registration Statement such additional information for marketing purposes as any applicable managing underwriter reasonably requests;

 

 

(xxiv)     cooperate with the sellers of Registrable Securities and the underwriters of an underwritten offering of Registrable Securities, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends; and enable such Registrable Securities to be in such denominations (consistent with the provisions of the governing documents thereof) and registered in such names as the sellers of Registrable Securities or the underwriters of an underwritten offering of Registrable Securities, if any, may reasonably request at least three business days prior to any sale of Registrable Securities; and

 

(xxv)      use its reasonable best efforts to take or cause to be taken all other actions, and do and cause to be done all other things, necessary or reasonably advisable in the opinion of any seller of Registrable Securities to effect the registration of such Registrable Securities contemplated hereby.

 

(b)           The Company may require each Ten Percent Holder of Registrable Securities as to which any registration is being effected to furnish the Company with such information regarding such Ten Percent Holder and pertinent to the disclosure requirements relating to the registration and the distribution of such securities as the Company may from time to time reasonably request in writing.

 

4.             Registration Expenses.

 

(a)           Except with respect to the Selling Expenses, all expenses incidental to the Company’s performance of or compliance with this Agreement, including, without limitation, (i) all Commission, stock exchange, FINRA and other registration and filing fees, (ii) all fees and expenses of compliance with securities or blue sky laws (including reasonable fees, charges and disbursements of counsel to any underwriter incurred in connection with blue sky qualifications of Registrable Securities as may be set forth in any underwriting agreement), (iii) all word processing, duplicating and printing expenses, messenger and delivery expenses, (iv) fees and disbursements of counsel for the Company and all independent public accountants, (v) fees paid to other Persons retained by the Company, (vi) the Company’s internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), (vii) the expenses of any annual audit or quarterly review, (viii) the expenses (including premiums) of any liability or other insurance, and (ix) the expenses and fees for listing the securities to be registered on each securities exchange on which the same class of securities issued by the Company are then listed (all such expenses, “Registration Expenses”), will be borne by Company.  All Selling Expenses will be borne by the holders of the securities so registered pro rata on the basis of the number of their shares so registered.

 

(b)           In connection with each registration pursuant to Section 1, the Company will reimburse the Ten Percent Holders covered by such registration or qualification

 

 

(including each aborted or terminated registration) for the reasonable fees and disbursements of one United States counsel, who will be chosen by the Ten Percent Holders of a majority of the Registrable Securities covered by the applicable Registration Request (“Holders’ Counsel”).

 

5.             Indemnification.

 

(a)           The Company agrees to indemnify and hold harmless, and hereby does indemnify and hold harmless, each Ten Percent Holder participating in a registration, its affiliates, each Person that controls such Ten Percent Holder (within the meaning of the Securities Act), and their respective officers and directors, partners, members, managers, employees, agents and trustees (collectively, “Holder Indemnified Parties”), against, and shall pay and reimburse such Holder Indemnified Party for, any losses, claims, damages, liabilities and expenses, joint or several, to which such Person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon (i) any untrue or alleged untrue statement of material fact contained in any Registration Statement, prospectus or preliminary prospectus, or any Free Writing Prospectus, or any amendment thereof or supplement thereto, (ii) any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any prospectus or Free Writing Prospectus, in light of the circumstances under which they were made), not misleading, or (iii) any violation by the Company of any rule or regulation promulgated under the Securities Act or any state securities laws applicable to the Company and relating to action or inaction required of the Company in connection with any such registration, and the Company will pay and reimburse such Holder Indemnified Party for any reasonable legal or any other out of pocket fees and expenses actually and reasonably incurred by them in connection with investigating, defending or settling any such loss, claim, liability, action or proceeding; provided, however, that the Company will not be liable in any such case (i) to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement, or omission or alleged omission, made in such Registration Statement, any such prospectus or preliminary prospectus or any amendment or supplement thereto, or any Free Writing Prospectus, or in any application, in each case in reliance upon, and in conformity with, written information prepared and furnished to the Company by such Ten Percent Holder expressly for use therein, or (ii) if (A) such untrue statement or alleged untrue statement, or omission or alleged omission, is corrected in an amendment or supplement to such Registration Statement or prospectus and (B) such Ten Percent Holder thereafter fails to deliver such Registration Statement or prospectus, as so amended or supplemented, after the Company has furnished such Ten Percent Holder with a copy of such amendment or supplement in a manner and within a reasonable time to permit delivery of such amendment or supplement to the Person or Persons asserting such loss, claim, damage, liability or expense.  In connection with an

 

 

underwritten offering, the Company, if requested, will indemnify such underwriters, as reasonably requested by such underwriters.

 

(b)           In connection with any Registration Statement in which a Ten Percent Holder is participating, each such Ten Percent Holder will furnish to the Company in writing such information as the Company reasonably requests for use in connection with any such Registration Statement or prospectus and, will indemnify and hold harmless the Company, its directors and officers, each underwriter and each other Person who controls the Company (within the meaning of the Securities Act) and each such underwriter against any losses, claims, damages, liabilities, joint or several, to which the Company or any such director or officer, any such underwriter or controlling person (within the meaning of the Securities Act) may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon (i) any untrue or alleged untrue statement of material fact contained in the Registration Statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto, or any Free Writing Prospectus, or in any application or (ii) any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any prospectus, in light of the circumstances under which they were made), not misleading, but only to the extent that such untrue statement or omission is made in such Registration Statement, any such prospectus or preliminary prospectus or any amendment or supplement thereto, or any Free Writing Prospectus, or in any application, in reliance upon and in conformity with written information prepared and furnished to the Company by such Ten Percent Holder expressly for use therein, and such Ten Percent Holder will reimburse the Company and each such director, officer, underwriter and controlling Person for any reasonable legal or any other expenses actually and reasonably incurred by them in connection with investigating, defending or settling any such loss, claim, liability, action or proceeding; provided, however, that the obligation to indemnify and hold harmless will be individual and several and not joint to each Ten Percent Holder and will be limited to the net amount of proceeds (after deducting Selling Expenses) received by such Ten Percent Holder from the sale of Registrable Securities pursuant to such Registration Statement.

 

(c)           Any Person entitled to indemnification hereunder will (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party.  If such defense is assumed, the indemnifying party will not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent will not be unreasonably withheld or delayed) or for any fees or expenses of counsel of the indemnified party.  An indemnifying party who is not entitled to, or elects not to, assume

 

 

the defense of a claim will be obligated to pay the fees and expenses of one (but no more than one) firm of attorneys (in addition to any local counsel) for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim, in which case the indemnifying party shall be obligated to pay the fees and expenses of each party for whom such conflict exists.

 

(d)           No indemnifying party shall, without the written consent of such indemnified party, effect any settlement of any pending or threatened proceeding in respect of which such indemnified party is a party and indemnity has been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability for claims that are the subject matter of such proceeding.

 

(e)           The indemnification provided for under this Agreement will remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director or controlling Person of such indemnified party and will survive the registration and sale of any securities by any Person entitled to any indemnification hereunder and the expiration or termination of this Agreement.

 

(f)            If the indemnification provided for in this Section 5 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party thereunder, will contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other hand in connection with the statements or omissions which resulted in such loss, liability, claim, damage or expense as well as any other relevant equitable considerations. The relevant fault of the indemnifying party and the indemnified party will be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. Notwithstanding the foregoing, the amount any Ten Percent Holder will be obligated to contribute pursuant to this Section 5(e) will be limited to an amount equal to the net proceeds (after deducting Selling Expenses) to such Ten Percent Holder of the Restricted Securities sold pursuant to the Registration Statement which gives rise to such obligation to contribute (less the aggregate amount of any damages and expenses (including legal or other fees incurred in connection with any investigation or proceeding) which the Ten Percent Holder has incurred or otherwise been required to pay in respect of such loss, claim, damage, liability or action or any substantially similar loss, claim, damage, liability or action arising from the sale of such Restricted Securities).

 

 

(g)           The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in Section 5(f).  No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

 

6.             Participation in Registrations.

 

(a)           No Ten Percent Holder may participate in any registration hereunder that is underwritten unless such Ten Percent Holder (i) agrees to sell its Registrable Securities on the basis provided in any underwriting arrangements approved by the Person or Persons entitled hereunder to approve such arrangements (including, without limitation, pursuant to the terms of any over-allotment or “green shoe” option requested by the managing underwriter(s); provided, however, that no Ten Percent Holder will be required to sell more than the number of Registrable Securities that such Ten Percent Holder has requested the Company to include in any registration), (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements, and (iii) cooperates with the Company’s reasonable requests in connection with such registration or qualification (it being understood that the Company’s failure to perform its obligations hereunder, which failure is caused by such Ten Percent Holder’s failure to cooperate, will not constitute a breach by the Company of this Agreement).  Notwithstanding the foregoing, no Ten Percent Holder will be required to agree to any indemnification obligations on the part of such Ten Percent Holder that are greater than its obligations pursuant to Section 5(b).

 

(b)           Each Ten Percent Holder that is participating in any registration hereunder agrees that, upon receipt of any notice from the Company of the happening of any event described in Section 1(d), subsection (vi) of Section 3(a) or subsection (xiii) of Section 3(a) (each, a “Suspension Event”), such Ten Percent Holder will forthwith discontinue the disposition of its Registrable Securities pursuant to the Registration Statement until the date such Ten Percent Holder receives, as applicable, (i) copies of a supplemented or amended prospectus as contemplated by subsection (vi) or (vii) of Section 3(a) or (ii) a notice stating that the applicable Suspension Event is no longer in effect (such date, the “Suspension Termination Date”).  In the event the Company gives notice of a Suspension Event, the applicable time period during which a Registration Statement is to remain effective pursuant to this Agreement will be extended by the number of days during the period from and including the date of the giving of such notice to and including the Suspension Termination Date.

 

 

7.             Rule 144 and 144A Reporting.

 

(a)           With a view to making available the benefits of certain rules and regulations of the Commission which may permit the sale of the Restricted Securities to the public without registration, the Company agrees to:

 

(i)            make and keep current public information available as those terms are understood and defined in Rule 144 under the Securities Act, and

 

(ii)           file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange.

 

(b)           For purposes of facilitating sales pursuant to Rule 144A, so long as the Company is not subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, each Ten Percent Holder and any prospective purchaser of such Ten Percent Holder’s securities will have the right to obtain from the Company, upon request of the Ten Percent Holder prior to the time of sale, a copy of the documents and information described in Rule 144A(d)(4) of the Securities Act.

 

8.             Lock-Up Agreements.

 

(a)           Demand Registration.  With respect to any Demand Registration, the Company shall not (except as part of such Demand Registration) effect any transfer of Common Stock, or any securities convertible into or exchangeable or exercisable for Common Stock (except Exempted Securities), during the period beginning on the date that is seven days prior to and ending 180 days after the effective date of any Registration Statement (or in the case of an underwritten takedown from a Shelf Registration, the effective date of the relevant prospectus supplement) in which the Ten Percent Holders are participating.  In connection with any underwritten offering, upon request by the underwriters, the Company shall, from time to time, enter into customary lock-up agreements (“Lock-Up Agreements”) on terms consistent with the preceding sentence.

 

(b)           Additional Lock-Up Agreements.  With respect to each relevant offering pursuant to a Demand Registration, each Ten Percent Holder who is not participating in such offering shall, and the Company shall use its reasonable best efforts to cause all of its executive officers and directors to, execute lock-up agreements that contain restrictions that are consistent with the restrictions contained in the Lock-Up Agreement executed by the Company; provided, however, that nothing herein will prevent any Ten Percent Holder that is a partnership, limited liability company or corporation from making a distribution of Registrable Securities to the partners, members or shareholders thereof that is otherwise in compliance with applicable securities laws, so long as such distributees agree to be so bound.

 

(c)           Third Party Beneficiaries in Lock-Up Agreements.  Any Lock-Up Agreements executed by the Company, its executive officers, its directors or Ten Percent Holders pursuant to this Section 8 shall contain provisions naming the selling

 

 

stockholders in the relevant offering that are Ten Percent Holders as intended third-party beneficiaries thereof and requiring the prior written consent of such stockholders holding a majority of the Registrable Securities for any amendments thereto or waivers thereof.

 

(d)           Ten Percent Holders.  In consideration for the Company agreeing to its obligations under this Agreement, each Ten Percent Holder agrees in connection with any underwritten registration of the Company’s securities in which such Ten Percent Holder is participating upon the reasonable request of the Company and the underwriters managing any underwritten offering of the Company’s securities, not to effect (other than pursuant to such registration) any public sale or distribution of Registrable Securities, including, but not limited to, any sale pursuant to Rule 144 or Rule 144A, or make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any Registrable Securities, any other equity securities of the Company or any securities convertible into or exchangeable or exercisable for any equity securities of the Company without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not to exceed 180 days) from the effective date of such registration as the Company and the underwriters may reasonably request; provided, however, that nothing herein will prevent any Ten Percent Holder that is a partnership, limited liability company or corporation from making a distribution of Registrable Securities to the partners, members or shareholders thereof that is otherwise in compliance with applicable securities laws, so long as such distributees agree to be so bound; provided, further, that the obligations of each Ten Percent Holder under this Section 8(d)  shall apply only to the extent that each of the Company’s executive officers, directors and other Ten Percent Holders agree to enter into Lock-Up Agreements with restrictions that are no more favorable to such executive officers, directors or Ten Percent Holders than those contained in this Section 8(d).

 

9.             Term/Termination.

 

(a)           Term.  This Agreement will be effective as of the date hereof and will continue in effect thereafter until the earliest of (a) its termination by the consent of each of the parties hereto or their respective successors in interest, (b) the date on which no Registrable Securities remain outstanding, and (c) following the dissolution, liquidation or winding up of the Company, provided that there are no Successor Securities outstanding.

 

(b)           Termination.  If a Ten Percent Holder is no longer (together with its affiliates) the beneficial holder of Registrable Securities, such Ten Percent Holder’s rights and obligations under this Agreement  shall terminate automatically and such rights and obligations shall be of no further force or effect, without any further action by any of the parties hereto; provided however, that Section 5 and Section 11 of this Agreement shall survive such termination and shall remain in full force and effect and, in the case of Section 5, such survival shall be solely with respect to any Registration Statement, prospectus, preliminary prospectus, Free Writing Prospectus (or, in each case, any

 

 

amendment or supplement thereto) or registration covered or contemplated by the terms of this Agreement.

 

10.          Defined Terms.  Capitalized terms when used in this Agreement have the following meanings:

 

“Angelo Gordon” has the meaning set forth in the Preamble.

 

“Agreement” has the meaning set forth in the Preamble.

 

“Bankruptcy Court” means the United States Bankruptcy Court for the Southern District of New York having jurisdiction over the Chapter 11 Cases.

 

“Chapter 11 Cases” means the cases commenced under title 11 of the United States Code, as amended from time to time, by the Company and all of its direct and indirect subsidiaries before the Bankruptcy Court, as referenced by lead Case No. 09-16335 (BRL).

 

“Commission” means the Securities and Exchange Commission or any other federal agency administering the Securities Act.

 

“Common Stock” means the common stock, par value $0.01 per share, of the Company, after giving effect to the Company’s chapter 11 reorganization, which the Company is authorized to issue pursuant to the Plan of Reorganization, and any securities issued in respect thereof, or in substitution therefor, in connection with any stock split, dividend or combination, or any reclassification, recapitalization, merger, consolidation, exchange or other similar reorganization.

 

“Company” has the meaning set forth in the Preamble.

 

“Demand Registration” has the meaning set forth in Section 1(b).

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any similar federal statute and the rules and regulations thereunder, as in effect from time to time.

 

“Exempted Securities” has the meaning set forth in Section 2(a).

 

“Free Writing Prospectus” means any “free writing prospectus” as defined in Rule 405 promulgated under the Securities Act.

 

“Holders’ Counsel” has the meaning set forth in Section 4(b).

 

“Inspectors” has the meaning set forth in Section 3(a)(xi).

 

 

“Lock-Up Agreements” has the meaning set forth in Section 8(a).

 

“Person” means an individual, a partnership, a joint venture, a corporation, a limited liability company, a trust, an unincorporated organization or a government or department or agency thereof.

 

“Plan of Reorganization” means the Third Amended Joint Plan of Reorganization of FairPoint Communications, Inc. and its Subsidiaries under Chapter 11 of the Bankruptcy Code, filed on December 29, 2010 (as may be amended from time to time).

 

“Register,” “registered” and “registration” refers to a registration effected by preparing and filing a Registration Statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such Registration Statement, and compliance with applicable state securities laws of such states in which Ten Percent Holders notify the Company of their intention to offer Registrable Securities.

 

“Registrable Securities” means any shares of Common Stock beneficially held by a Ten Percent Holder or any of its affiliates owned on or after the date of this Agreement (irrespective of when acquired); provided, however, that as to any shares of Common Stock constituting Registrable Securities, such securities will cease to be Registrable Securities when (i) they have been effectively registered or qualified for sale by a prospectus filed under the Securities Act and disposed of in accordance with the Registration Statement covering them; or (ii) the Ten Percent Holder of such Registrable Securities ceases to beneficially hold (together with its affiliates) an aggregate of at least 7.5% of the then outstanding Common Stock.

 

“Registration Expenses” has the meaning set forth in Section 4.

 

“Registration Request” has the meaning set forth in Section 1(a) and includes, where appropriate, a Shelf Registration Statement request made pursuant to Section 1(c).

 

“Registration Statement” means a registration statement (including the prospectus and other documents filed with the Commission) pursuant to the Securities Act to effect a registration under the Securities Act.

 

“Required Holders” means Ten Percent Holders beneficially holding in the aggregate more than 50% of the outstanding Registrable Securities at any time of determination.

 

“Rule 144” means Rule 144 under the Securities Act or any successor or similar rule as may be enacted by the Commission from time to time, as in effect from time to time.

 

 

“Rule 144A” means Rule 144A under the Securities Act or any successor or similar rule as may be enacted by the Commission from time to time, as in effect from time to time.

 

“Securities Act” means the Securities Act of 1933, as amended, or any similar federal statute and the rules and regulations thereunder, as in effect from time to time.

 

“Selling Expenses” means all underwriting discounts, selling commissions and transfer taxes applicable to the sale of Registrable Securities hereunder.

 

“Shelf Registration” has the meaning set forth in Section 1(c).

 

“Shelf Registration Statement” has the meaning set forth in Section 1(c).

 

“Successor Securities” has the meaning set forth in Section 11(b).

 

“Suspension Event” has the meaning set forth in Section 6(b).

 

“Suspension Termination Date” has the meaning set forth in Section 6(b).

 

“Ten Percent Holders” has the meaning set forth in the Preamble.  For the avoidance of doubt, each Person listed on Schedule I hereto is deemed to be a Ten Percent Holder, regardless of whether such Person individually holds at least 10% of the Common Stock.

 

11.                                 Miscellaneous.

 

(a)                                  No Inconsistent Agreements.  As of the date hereof, the Company represents and warrants that is not a party to any agreement with respect to its securities that is inconsistent with or would violate the rights granted to the Ten Percent Holders under this Agreement.  The Company will not hereafter enter into any such agreement with respect to its securities that is inconsistent with or would violate the rights granted to the Ten Percent Holders in this Agreement or grant any additional registration rights to any Person or with respect to any securities which are not Registrable Securities which are prior in right to or inconsistent with the rights granted in this Agreement.

 

(b)                                 Representation of Angelo Gordon.  As of the date hereof, Angelo Gordon represents and warrants that Angelo Gordon is the investment manager of the Persons set forth on Schedule I hereto.

 

(c)                                  Recapitalizations, Exchanges, etc.  The provisions of this Agreement shall apply to the full extent set forth herein with respect to (i) the shares of Common Stock and (ii) any and all securities of the Company or any successor or assign of the Company (whether by merger, consolidation, sale of assets, recapitalization, reorganization or otherwise) which may be issued in respect of, in conversion of, in exchange for or in substitution of, the shares of Common Stock and shall be appropriately adjusted for any stock dividends, splits, reverse splits, combinations, recapitalizations and the like occurring after the date hereof (“Successor Securities”).  The Company shall cause any

 

 

successor or assign (whether by merger, consolidation, sale of assets, recapitalization, reorganization or otherwise, including the issuer(s) of any such Successor Securities) to assume this Agreement or enter into a new registration rights agreement with the Ten Percent Holders on terms substantially the same as this Agreement as a condition of any such transaction.

 

(d)                                 Enforcement.  Each party hereto acknowledges that money damages would not be an adequate remedy in the event that any of the covenants or agreements in this Agreement are not performed in accordance with its terms, and it is therefore agreed that in addition to and without limiting any other remedy or right it may have, the non-breaching party will have the right to an injunction, temporary restraining order or other equitable relief in any court of competent jurisdiction enjoining any such breach and enforcing specifically the terms and provisions hereof.

 

(e)                                  Amendment; Waivers, etc.  No modification or amendment of any provision of this Agreement shall be effective without the consent in writing of the Company and each Ten Percent Holder.  The failure of any party to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of such party thereafter to enforce each and every provision of this Agreement in accordance with its terms.  No waiver by any Ten Percent Holder shall be effective against such Ten Percent Holder unless set forth in a writing executed by such Ten Percent Holder referring to the provision alleged to have been waived.

 

(f)                                    Successors and Assigns.  This Agreement will be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns.  In addition, and whether or not any express assignment will have been made, the provisions of this Agreement which are for the benefit of the Ten Percent Holders of the Registrable Securities (or any portion thereof) as such will be for the benefit of and enforceable by any subsequent holder of any Registrable Securities (or of such portion thereof), subject to the provisions respecting the minimum numbers or percentages of shares of Registrable Securities (or of such portion thereof) required in order to be entitled to certain rights, or take certain actions, contained herein, and the other terms and conditions set forth herein.

 

(g)                                 Severability.  Any term or provision of this Agreement which is invalid, illegal or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without rendering invalid, illegal or unenforceable the remaining terms and provisions of this Agreement or affecting the validity, illegality or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction.  If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable.  Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable

 

 

manner in order that the transactions contemplated herein are consummated as originally contemplated to the fullest extent possible.

 

(h)                                 Headings.  The headings contained in this Agreement are for purposes of convenience only and shall not affect the meaning or interpretation of this Agreement.

 

(i)                                     Governing Law.  This Agreement will be governed by and construed in accordance with the laws of the State of New York (regardless of the laws that might otherwise govern under applicable principles or rules of conflicts of law to the extent such principles or rules are not mandatorily applicable by statute and would require the application of the laws of another jurisdiction).

 

(j)                                     Certain Disputes.

 

(i)                                     Notwithstanding anything to the contrary in this Agreement, any suit, action or other proceeding with respect to the interpretation or enforcement of the provisions of Section 5 shall be brought in the Supreme Court of the State of New York, New York County, or the United States District Court for the Southern District of New York.  Each party hereby irrevocably submits to the exclusive jurisdiction of the Supreme Court of the State of New York, New York County, and the United States District Court for the Southern District of New York for the purposes of any such suit, action or other proceeding, agrees not to commence any such suit, action or other proceeding other than in such courts and irrevocably and unconditionally waives any objection to the laying of venue of any such suit, action or other proceeding in the Supreme Court of the State of New York, New York County, and the United States District Court for the Southern District of New York, or that any such suit, action or other proceeding brought in any such court has been brought in an inconvenient forum.  Each party further agrees that service of any process, summons, notice or document by U.S. registered mail to such party’s respective address set forth or referred to in Section 11(j) shall be effective service of process for any such suit, action or other proceeding.

 

(ii)                                  Each party hereby waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect of any suit, action or other proceeding with respect to the interpretation or enforcement of the provisions of Section 5.  Each party hereby (A) certifies and acknowledges that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce the foregoing waiver, and (B) acknowledges that it understands and has considered the implications of this waiver and makes this waiver voluntarily, and that it and the other parties have been induced to enter into the Agreement by, among other things, the mutual waivers and certifications in this Section 11(i).

 

 

(k)                                  Notices.  Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number provided for below prior to 5:00 p.m. (New York City time) on a trading day, (ii) the trading day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number provided for below later than 5:00 p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York City time) on such date, (iii) the trading day following the date of mailing, if sent by nationally recognized overnight courier service or (iv) upon actual receipt by the party to whom such notice is required to be given.  The address and facsimile number for such notices and communications shall be as forth on the signature pages attached hereto for each of the Ten Percent Holders.  If to the Company, such notices and communications shall be delivered to the following:

 

FairPoint Communications, Inc.

521 East Morehead Street, Suite 500

Charlotte, North Carolina 28202

Attention: General Counsel

Facsimile: (704) 344-1594

 

(l)                                     Counterparts; Facsimile Signatures.  This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.  This Agreement may be executed by facsimile signature(s) or via electronic transmission in PDF format.

 

[Signature pages follow]

 

 

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement by their authorized representatives as of the date first above written.

 

	
 
    	
FAIRPOINT   COMMUNICATIONS, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Shirley J. Linn
    
	
 
    	
 
    	
Name:   
    	
Shirley   J. Linn
    
	
 
    	
 
    	
Title:   
    	
Executive   Vice President, Secretary and General Counsel
    

 

[Signature Page to Registration Rights Agreement]

 

 

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement by their authorized representatives as of the date first above written.

 

 

	
 
    	
TEN   PERCENT HOLDER:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
ANGELO,   GORDON & CO., L.P.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Thomas M. Fuller
    
	
 
    	
Name:   Thomas M. Fuller
    
	
 
    	
Title:   Authorized Signatory
    
	
 
    	
 
    
	
 
    	
Address   for Notices:
    
	
 
    	
Angelo   Gordon & Co.
    
	
 
    	
245   Park Avenue
    
	
 
    	
16th   Floor
    
	
 
    	
New   York, New York 10167
    
	
 
    	
Facsimile   Number: (212) 867-6395
    

 

[Signature Page to Registration Rights Agreement]

 

 

Schedule I

 

Ten Percent Holders

 

	
 
    	
 
    	
Shares
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
AG CNG Fund L.P.
    	
 
    	
81,086
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
AG MM, L.P.
    	
 
    	
48,464
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
AGCR V Master Account LP
    	
 
    	
160,760
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
AG Capital Recovery Partners VI, LP
    	
 
    	
1,441,250
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
AG Capital Recovery Partners VII, LP
    	
 
    	
493,693
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
AG Eleven Partners, L.P.
    	
 
    	
129,434
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
AG Garden Partners, LP
    	
 
    	
88,201
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
AG Super Fund International Partners, L.P.
    	
 
    	
390,089
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Nutmeg Partners, L.P.
    	
 
    	
89,090
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
PHS Patriot Fund, L.P.
    	
 
    	
17,251
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
AG Princess, LP
    	
 
    	
37,061
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
AG Super Fund, L.P.
    	
 
    	
1,088,399
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Total Angelo, Gordon &   Co.
    	
 
    	
4,064,778Exhibit 10.6

 

FAIRPOINT LITIGATION TRUST AGREEMENT

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
ARTICLE I
    	
ESTABLISHMENT OF THE LITIGATION TRUST
    	
2
    
	
 
    	
1.1
    	
Establishment   of Litigation Trust and Appointment of Original Trustee
    	
2
    
	
 
    	
1.2
    	
Transfer   of Assets and Rights to the Litigation Trust
    	
2
    
	
 
    	
1.3
    	
Title   to Litigation Trust Claims
    	
5
    
	
 
    	
1.4
    	
Nature   and Purpose of the Litigation Trust
    	
6
    
	
 
    	
1.5
    	
Incorporation   of Plan
    	
7
    
	
 
    	
1.6
    	
Funding   Expenses of the Litigation Trust
    	
7
    
	
 
    	
1.7
    	
Appointment   as Representative
    	
8
    
	
 
    	
1.8
    	
Barred   Claims; Contribution Claims
    	
8
    
	
ARTICLE II
    	
LITIGATION TRUST INTERESTS
    	
9
    
	
 
    	
2.1
    	
Allocation   of Litigation Trust Interests
    	
9
    
	
 
    	
2.2
    	
Interests   Beneficial Only
    	
9
    
	
 
    	
2.3
    	
Evidence   of Beneficial Interests
    	
9
    
	
 
    	
2.4
    	
Securities   Law Registration
    	
9
    
	
 
    	
2.5
    	
No   Transfers
    	
10
    
	
 
    	
2.6
    	
Access   to the Trust Register by the Litigation Trust Beneficiaries
    	
10
    
	
 
    	
2.7
    	
Absolute   Owners
    	
10
    
	
ARTICLE III
    	
THE LITIGATION TRUSTEE
    	
11
    
	
 
    	
3.1
    	
Litigation   Trust Proceeds
    	
11
    
	
 
    	
3.2
    	
Collection   of Income
    	
11
    
	
 
    	
3.3
    	
Payment   of Litigation Trust Expenses
    	
11
    
	
 
    	
3.4
    	
Distributions
    	
11
    
	
 
    	
3.5
    	
Tenure,   Removal, and Replacement of the Litigation Trustee
    	
11
    
	
 
    	
3.6
    	
Acceptance   of Appointment by Successor Litigation Trustee
    	
13
    
	
 
    	
3.7
    	
[Intentionally   Omitted]
    	
13
    
	
 
    	
3.8
    	
[Intentionally   Omitted]
    	
13
    
	
 
    	
3.9
    	
[Intentionally   Omitted]
    	
13
    
	
 
    	
3.10
    	
[Intentionally   Omitted]
    	
13
    
	
 
    	
3.11
    	
Role   of the Litigation Trustee
    	
13
    
	
 
    	
3.12
    	
Authority   of Litigation Trustee
    	
13
    

 

i

 

	
 
    	
3.13
    	
Limitation   of Litigation Trustee’s Authority
    	
15
    
	
 
    	
3.14
    	
Books   and Records
    	
16
    
	
 
    	
3.15
    	
Inquiries   into Trustee’s Authority
    	
16
    
	
 
    	
3.16
    	
Compliance   with Laws
    	
16
    
	
 
    	
3.17
    	
Compensation   of the Litigation Trustee
    	
16
    
	
 
    	
3.18
    	
Reliance   by Litigation Trustee
    	
16
    
	
 
    	
3.19
    	
Investment   and Safekeeping of Litigation Trust Assets
    	
17
    
	
 
    	
3.20
    	
Standard   of Care; Exculpation
    	
17
    
	
ARTICLE IV
    	
[INTENTIONALLY OMITTED]
    	
17
    
	
ARTICLE V
    	
TAX MATTERS
    	
18
    
	
 
    	
5.1
    	
Federal   Income Tax Treatment of the Litigation Trust
    	
18
    
	
 
    	
5.2
    	
Allocations   of Litigation Trust Taxable Income
    	
19
    
	
ARTICLE VI
    	
DISTRIBUTIONS
    	
19
    
	
 
    	
6.1
    	
Distributions;   Withholding
    	
19
    
	
 
    	
6.2
    	
Manner   of Payment or Distribution
    	
20
    
	
 
    	
6.3
    	
Cash   Distributions
    	
20
    
	
ARTICLE VII
    	
INDEMNIFICATION
    	
21
    
	
 
    	
7.1
    	
Indemnification   of Litigation Trustee
    	
21
    
	
ARTICLE VIII
    	
NET LITIGATION TRUST RECOVERY
    	
21
    
	
 
    	
8.1
    	
No   Effect on Mutuality
    	
21
    
	
 
    	
8.2
    	
Section 502(h)
    	
22
    
	
 
    	
8.3
    	
Net   Litigation Trust Recovery
    	
22
    
	
ARTICLE IX
    	
REPORTING OBLIGATIONS OF LITIGATION TRUSTEE
    	
22
    
	
 
    	
9.1
    	
Reports
    	
22
    
	
ARTICLE X
    	
TERM; TERMINATION OF THE LITIGATION TRUST
    	
23
    
	
 
    	
10.1
    	
Term;   Termination of the Litigation Trust
    	
23
    
	
 
    	
10.2
    	
Continuance   of Trust for Winding Up
    	
23
    
	
ARTICLE XI
    	
AMENDMENT AND WAIVER
    	
23
    
	
 
    	
11.1
    	
Amendment   and Waiver
    	
23
    
	
ARTICLE XII
    	
MISCELLANEOUS PROVISIONS
    	
24
    
	
 
    	
12.1
    	
Intention   of Parties to Establish the Litigation Trust
    	
24
    
	
 
    	
12.2
    	
Litigation   Costs
    	
25
    
	
 
    	
12.3
    	
Laws   as to Construction
    	
25
    

 

ii

 

	
 
    	
12.4
    	
Jurisdiction
    	
25
    
	
 
    	
12.5
    	
Severability
    	
25
    
	
 
    	
12.6
    	
Notices
    	
25
    
	
 
    	
12.7
    	
Fiscal   Year
    	
27
    
	
 
    	
12.8
    	
Construction;   Usage
    	
27
    
	
 
    	
12.9
    	
Counterparts;   Facsimile; PDF
    	
28
    
	
 
    	
12.10
    	
Confidentiality
    	
28
    
	
 
    	
12.11
    	
Entire   Agreement
    	
29
    
	
 
    	
12.12
    	
No   Bond
    	
29
    
	
 
    	
12.13
    	
Effectiveness
    	
29
    
	
 
    	
12.14
    	
Investment   Company Act
    	
29
    
	
 
    	
12.15
    	
Successor   and Assigns
    	
29
    
	
 
    	
12.16
    	
Particular   Words
    	
29
    
	
 
    	
12.17
    	
No   Execution
    	
29
    
	
 
    	
12.18
    	
Irrevocability
    	
30
    
	
ARTICLE XIII
    	
LITIGATION TRUST FUNDS OBLIGATIONS
    	
30
    
	
 
    	
13.1
    	
Grant   of Lien
    	
30
    
	
 
    	
13.2
    	
Perfection   of Lien
    	
30
    
	
 
    	
13.3
    	
Remedies
    	
31
    
	
 
    	
13.4
    	
Termination   of Lien
    	
31
    

 

iii

 

THIS LITIGATION TRUST AGREEMENT (this “Agreement”), dated as of January 24, 2011, is entered into by and among:

 

1.                                       FairPoint Communications, Inc. (“FairPoint Communications”);

 

2.                                       FairPoint Communications’ direct and indirect subsidiaries set forth on Schedule A (and, together with FairPoint Communications, “FairPoint” or “Reorganized FairPoint”);

 

3.                                       Mark E. Holliday, as trustee (the “Original Trustee”); and

 

4.                                       the Creditors’ Committee (solely with respect to Section 1.2 of this Agreement).

 

PRELIMINARY STATEMENT

 

This Agreement is executed in order to establish a litigation trust (the “Litigation Trust”)  in connection with FairPoint’s Third Amended Joint Plan of Reorganization, dated December 29, 2010, filed in the United States Bankruptcy Court for the Southern District of New York pursuant to the provisions of chapter 11 of the Bankruptcy Code (Case No. 09-16335 (BRL)), including any supplement to such Plan and the exhibits and schedules thereto (as the same may be amended, modified or supplemented from time to time in accordance with the terms and provisions thereof, the “Plan”).

 

On the Petition Date, and continuing thereafter, FairPoint filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code with the Bankruptcy Court.

 

On January 13, 2011, the Bankruptcy Court entered the Confirmation Order approving the Plan.

 

The Litigation Trust is created pursuant to, and to effectuate certain provisions of, the Plan and the Confirmation Order, pursuant to which the Litigation Trustee will hold the Litigation Trust Claims and the other Litigation Trust Assets (which Litigation Trust Assets, prior to the transfer to the Litigation Trust, are held by FairPoint on behalf of the Litigation Trust Beneficiaries pursuant to the terms of the Plan) as contemplated by the Confirmation Order.

 

The Litigation Trust is established for the sole purpose of liquidating and distributing the Litigation Trust Assets pursuant to the Plan and this Agreement with no objective to continue or engage in the conduct of a trade or business, except to the extent reasonably necessary to, and consistent with, the liquidating purpose of the Litigation Trust.

 

The Litigation Trust is established (i) for the benefit of the holders of Allowed Prepetition Credit Agreement Claims and Allowed FairPoint Communications Unsecured Claims (individually, a “Litigation Trust Beneficiary” and collectively, the “Litigation Trust Beneficiaries”) and (ii) to pursue all Litigation Trust Claims.

 

The Litigation Trustee was duly appointed as a representative of FairPoint’s Estates pursuant to section 1123(a)(5), (a)(7) and (b)(3)(B) of the Bankruptcy Code.

 

1

 

The Litigation Trust is intended to qualify as a liquidating trust within the meaning of Treasury Regulation section 301.7701-4(d).

 

Unless the context otherwise requires, capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings ascribed to them in the Plan.  Schedule B to this Agreement sets forth an index of terms that are defined in this Agreement.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein and in the Plan and the Confirmation Order, FairPoint, Reorganized FairPoint, the Litigation Trustee, and the Creditors’ Committee, intending to be legally bound, agree as follows:

 

ARTICLE I

 

ESTABLISHMENT OF THE LITIGATION TRUST

 

1.1           Establishment of Litigation Trust and Appointment of Original Trustee.

 

(a)           Pursuant to the Plan and the Confirmation Order, FairPoint, Reorganized FairPoint and the Original Trustee hereby establish a trust which shall be known as the “FairPoint Litigation Trust” on behalf of and for the benefit of the Litigation Trust Beneficiaries.

 

(b)           The Original Trustee is hereby appointed as trustee of the Litigation Trust effective as of the Effective Date of the Plan (the “Effective Date”) and agrees to accept and hold the Litigation Trust Claims, the Litigation Trust Funds and any other assets acquired by the Litigation Trust on or after the Effective Date pursuant to this Agreement or the Plan (the “Litigation Trust Assets”), in trust for the Litigation Trust Beneficiaries subject to the terms of the Plan, the Confirmation Order and this Agreement.  The Original Trustee and each successor trustee serving from time to time hereunder (the “Litigation Trustee”) shall have all the rights, powers and duties set forth herein and pursuant to applicable law for accomplishing the purposes of the Litigation Trust.

 

1.2           Transfer of Assets and Rights to the Litigation Trust.

 

(a)           As of the Effective Date, (i) FairPoint or Reorganized FairPoint, as applicable, hereby irrevocably transfers, assigns and delivers to the Litigation Trust all of its respective right, title and interest in and to the Litigation Trust Claims (as defined below), free and clear of any and all Liens, Claims (other than Claims in the nature of setoff or recoupment), encumbrances or interests of any kind in such property of any other Person.  The Litigation Trustee agrees to accept and hold the Litigation Trust Claims in trust for the Litigation Trust Beneficiaries, subject to the terms of this Agreement.  In no event shall any part of the Litigation Trust Claims (including Litigation Trust Proceeds (as defined below)) revert to or be distributed to FairPoint or Reorganized FairPoint except as provided in Section 8.17(c) of the Plan and as provided in Sections 1.3(a), 3.3, 6.2, and 13.1 herein.  None of the foregoing transfers to the Litigation Trust shall constitute a merger or consolidation of the Estates or any of the respective Litigation Trust

 

2

 

Claims, each of which shall retain its separateness following the transfer for all purposes relevant to the prosecution thereof.

 

In this Agreement, “Litigation Trust Claims” means all Causes of Action which may be asserted, by or on behalf of FairPoint or FairPoint’s Estates against Verizon Communications Inc. (“Verizon”) and its affiliates in respect of matters arising in connection with that certain Agreement and Plan of Merger (the “Spinco Merger”), by and between Verizon, Northern New England Spinco, Inc. and FairPoint Communications; provided, however, that in no event shall such Causes of Action include:

 

(i)            any Claim or Cause of Action against a Released Party or any Claim or Cause of Action that is released pursuant to Section 14.2 of the Plan;

 

(ii)           any Claim or Cause of Action held by FairPoint with respect to the Pension Plan Asset Transfer Amount, as defined in that certain Employee Matters Agreement (the “EMA”) by and between Verizon, Northern New England Spinco Inc., and FairPoint Communications dated as of January 15, 2007;

 

(iii)          any Claim or Cause of Action held by FairPoint with respect to the receipt by Verizon of customer payments in January 2009 and thereafter for services provided in connection with operations of the Spinco Business (as that term is defined in that certain Transition Services Agreement, dated January 15, 2007 (“TSA”)), that were to be remitted to FairPoint pursuant to the Cutover Plan provided for in the TSA;

 

(iv)          any Claim or Cause of Action held by FairPoint for tax benefits arising out of the operations of Northern New England Spinco Inc. prior to consummation of the Spinco Merger pursuant to the Tax Sharing Agreement, dated January 15, 2007, between FairPoint, Verizon, and Northern New England Spinco Inc;

 

(v)           any Claim or Cause of Action held by FairPoint against RCC Atlantic, Inc. d/b/a Verizon Wireless (“RCC”) for RCC’s non-payment of E-911 DS1 facility charges for Type 2C facilities/trunking provided by FairPoint in the States of Maine, New Hampshire and Vermont with respect to all such services rendered on or prior to the services invoiced through and including December 31, 2009;

 

(vi)          any and all requests for “all information” required to be provided by Verizon pursuant to Section 12.1(b) of the EMA; and

 

(vii)         any Claim or Cause of Action held by FairPoint with respect to services performed by FairPoint to Verizon after the Spinco Merger.

 

The Claims and Causes of Action in subparagraphs (ii) — (vii) above are being pursued by FairPoint and will continue to be pursued by Reorganized FairPoint after the Effective Date.  To the extent there is factual overlap between such Claims and Causes of Action and the Litigation Trust Claims, Reorganized FairPoint and the Litigation Trustee shall coordinate with each other. To the extent there is overlap of legal theories and analyses between such Claims and Causes of Action and the Litigation Trust Claims, Reorganized FairPoint and the Litigation Trustee shall cooperate with each other pursuant to principles of common interest with respect to privileges.

 

3

 

To the extent that (a) settling any of the Claims and Causes of Action in subparagraphs (ii) — (vii) above will have a compromising effect on the Litigation Trust Claims, or (b) settling the Litigation Trust Claims will have a compromising effect on any of the Claims and Causes of Action in subparagraphs (i) — (vii) above, then Reorganized FairPoint and the Litigation Trustee agree to consult with each other with respect thereto; provided, however, that in the event Reorganized FairPoint and the Litigation Trustee cannot reach an agreement, in accordance with Section 12.4 of this Agreement, their dispute shall be resolved by the Bankruptcy Court.  Reorganized FairPoint and the Litigation Trustee shall coordinate and work together in good faith to maximize the value of all Claims.  Notwithstanding anything in this Agreement to the contrary, the Litigation Trustee shall have the right to challenge and/or seek to avoid any purported pre-petition release of Verizon (other than any affiliate that was merged into FairPoint Communications) or any of its affiliates for any transfer of value or assumption of obligation in connection with the Spin-off by FairPoint Communications or any of its affiliates to the extent such purported release relates to or affects the Litigation Trust Claims.

 

(b)           In connection with Litigation Trust Claims, any attorney-client privilege, work-product privilege, joint interest privilege or other privilege or immunity (collectively, the “Privileges”) attaching to any documents or communications (whether written or oral) shall vest in the Litigation Trustee and his representatives, and Reorganized FairPoint and the Litigation Trustee are authorized to take all necessary actions to effectuate the transfer of such privileges and available defenses.  The Litigation Trust’s receipt of the Privileges associated with the Litigation Trust Claims shall not operate as a waiver of other privileges possessed or retained by FairPoint or Reorganized FairPoint.

 

(c)           After the Effective Date, Reorganized FairPoint shall (i) deliver or cause to be delivered to the Litigation Trust any and all documents reasonably requested by the Litigation Trustee and related to the Litigation Trust Claims (including those maintained in electronic format and original documents; provided that with respect to original documents that are proprietary to Reorganized FairPoint and that Reorganized FairPoint requires in the operation of its businesses, Reorganized FairPoint may provide copies in lieu of originals), whether held by FairPoint or Reorganized FairPoint or the Creditors’ Committee, their respective employees, agents, advisors, attorneys, accountants, or any other professionals and (ii) provide reasonable access to such employees of FairPoint or Reorganized FairPoint, their agents, advisors, attorneys, accountants or any other professionals hired by FairPoint or Reorganized FairPoint with knowledge of matters relevant to the Litigation Trust Claims.  Upon the reasonable request of the Litigation Trustee, to the extent permitted by law, Reorganized FairPoint shall provide the Litigation Trustee with a list of all documents in connection with the Litigation Trust Claims known to it but not held by it or any of its employees, agents, advisors, attorneys, accountants or any other professionals.  Such list shall contain a description of each document, to the extent feasible and permitted by law, as well as the name of the Person holding such document.

 

(d)           As promptly as practicable after the Effective Date, Reorganized FairPoint agrees (i) at the reasonable request of the Litigation Trustee to execute and/or deliver any instruments, documents, books, and records (including those maintained in electronic format and original documents as may be needed), (ii) to take, or cause to be taken, all such further actions as the Litigation Trustee may reasonably request in order to evidence or

 

4

 

effectuate the transfer of the Litigation Trust Claims and the Privileges to the Litigation Trustee and the consummation of the transactions contemplated hereby and by the Plan and to otherwise carry out the intent of the parties hereunder and under the Plan, and (iii) to cooperate with the Litigation Trustee in the prosecution of the Litigation Trust Claims to the extent reasonable. Notwithstanding anything contained herein, without the express written consent of the Litigation Trustee, no Person or creditor of FairPoint or Reorganized FairPoint shall be permitted to assert, bring, institute, or commence any Claim or Cause of Action that is transferred to the Litigation Trust pursuant to the Plan.

 

(e)                                  The Creditors’ Committee shall be permitted to share any discovery obtained relating to the Litigation Trust Claims with the Litigation Trustee without waiver of any Privileges.

 

(f)                                    All rights of the Creditors’ Committee in connection with the following Rule 2004 examinations, orders, and agreements related thereto shall vest in the Litigation Trustee and his representatives, and Reorganized FairPoint and the Litigation Trustee are authorized to take all necessary actions to effectuate the transfer of such rights and privileges.

 

(i)            The Official Committee of Unsecured Creditors’ Motion Pursuant to Fed. R. Bankr. P. 2004 For an Order Directing the Expeditious Production of Certain Documents by Verizon Communications, Inc. [Docket No. 987];

 

(ii)           The Official Committee of Unsecured Creditors’ Motion Pursuant to Fed. R. Bankr. P. 2004 For An Order Directing The Expeditious Production of Certain Documents By Merrill Lynch & Co., Inc. [Docket No. 1856];

 

(iii)          Order Granting The Official Committee Of Unsecured Creditors Motion Pursuant To Fed. R. Bankr. P. 2004 For an Order Directing The Expeditious Production of Certain Documents by Deutsche Bank AG [Docket No. 1917];

 

(iv)          Order Granting The Official Committee Of Unsecured Creditors Motion Pursuant To Fed. R. Bankr. P. 2004 For an Order Directing The Expeditious Production of Certain Documents by Morgan Stanley [Docket No. 1918];

 

(v)           Order Granting The Official Committee Of Unsecured Creditors Motion Pursuant To Fed. R. Bankr. P. 2004 For an Order Directing The Expeditious Production of Certain Documents by Houlihan Lokey, Inc. [Docket No. 1919]; and

 

(vi)          Motion to Compel Verizon Communications, Inc. and its Subsidiaries to Comply with Terms of May 18, 2010 Letter Agreement Relating to Official Committee of Unsecured Creditors’ Rule 2004 Motion [Docket No. 1920].

 

1.3           Title to Litigation Trust Claims.  The transfer of the Litigation Trust Assets to the Litigation Trust shall be made, as provided in the Plan and this Agreement, for the benefit of the Litigation Trust Beneficiaries. In accordance with the Plan and this Agreement, FairPoint or Reorganized FairPoint, as applicable, shall transfer, on behalf of the Litigation Trust Beneficiaries, the Litigation Trust Claims to the Litigation Trust in exchange for the Litigation Trust Interests for the benefit of the Litigation Trust Beneficiaries.  Upon the transfer of the Litigation Trust Assets, FairPoint or Reorganized FairPoint, as the case may be, shall have no interest in or claim to the Litigation Trust Assets (except to the extent that Reorganized FairPoint is granted a lien, if any, on the Litigation Trust Assets in respect of the Litigation Trust Funds) or the Litigation Trust, and the Litigation Trust shall succeed to all of FairPoint’s and Reorganized FairPoint’s, as the case may be, right, title and interest in and to the Litigation Trust Assets.  The Litigation Trustee shall have no authority to bind FairPoint or Reorganized FairPoint in any manner except with respect to a Litigation Trust Claim.  Notwithstanding the foregoing, for purposes of section 553 of the Bankruptcy Code, the transfer of the Litigation Trust Assets to the Litigation Trust shall not affect the mutuality of obligations which otherwise may have existed prior to the effectuation of such transfer.  Notwithstanding anything in this Agreement to the contrary, the transfer of the Litigation Trust Assets to the Litigation Trust does not diminish, and fully preserves, any defenses a defendant would have if such Litigation Trust Assets had been retained by FairPoint. To the extent that any Litigation Trust Assets cannot be transferred to the Litigation Trust because of a restriction on transferability under applicable non-bankruptcy law that is not superseded or preempted by section 1123 of the Bankruptcy Code or any other provision of the Bankruptcy Code, such Litigation Trust Assets shall be deemed to have been retained by Reorganized FairPoint, and the Litigation Trustee shall be deemed to have been designated as a representative of Reorganized FairPoint pursuant to section 1123(b)(3)(B) of the Bankruptcy Code to enforce and pursue such Litigation Trust Assets on behalf of Reorganized FairPoint, and all proceeds, income and recoveries on account of any such Litigation Trust Assets shall be assets of the Litigation Trust and paid over thereto immediately upon receipt by Reorganized FairPoint, or any other Person.  Notwithstanding the foregoing, but subject to Sections 1.6, 3.4 and 6.2(b) of this Agreement, all net proceeds, income, and recoveries of or on account of such Litigation Trust Assets shall be transferred to the Litigation Trust to be distributed to the Litigation Trust Beneficiaries consistent with the terms of the Plan and this Agreement.

 

5

 

1.4          Nature and Purpose of the Litigation Trust.

 

(a)           Purpose.  The Litigation Trust is organized and established as a trust pursuant to which the Litigation Trustee, subject to the terms and conditions contained herein and in the Plan, is to (i) hold the Litigation Trust Assets and dispose of the same in accordance with this Agreement and the Plan in accordance with Treasury Regulation section 301.7701-4(d) and (ii) oversee and direct the expeditious but orderly liquidation of the Litigation Trust Assets.  Accordingly, the sole purpose of the Litigation Trust is to liquidate the Litigation Trust Assets with no objective to continue or engage in the conduct of a trade or business, except to the extent reasonably necessary to preserve or enhance the liquidation value of the Litigation Trust Assets, and consistent with, the liquidating purpose of the Litigation Trust.

 

(b)           Actions of the Litigation Trustee.  Subject to the terms of this Agreement, the Litigation Trustee shall, in an expeditious but orderly manner, liquidate and convert to Cash the Litigation Trust Assets, which includes, without limitation, pursuing recovery on the Litigation Trust Claims, making timely distributions and not unduly prolonging the duration of the Litigation Trust. The liquidation of the Litigation Trust Claims may be accomplished either through the prosecution, compromise and settlement, abandonment or dismissal of any or all claims, rights or causes of action, or otherwise.  The Litigation Trustee, except as set forth in Section 3.12 herein, shall have the absolute right to pursue, settle and compromise or not pursue any and all Litigation Trust Claims as it determines is in the best interests of the Litigation Trust Beneficiaries, and consistent with the purposes of the Litigation Trust.  The Litigation Trustee shall have no liability for the outcome of any such decision except for any damages caused by gross negligence, bad faith, willful misconduct or knowing violation of law.

 

(c)           Relationship. This Agreement is intended to create a trust and a trust relationship and the Litigation Trust is to be governed and construed in all respects as a trust.  The Litigation Trust is not intended to be, and shall not be deemed to be or treated as, a general partnership, limited partnership, joint venture, corporation, joint stock company or association, nor shall the Litigation Trustee, or the Litigation Trust Beneficiaries, or any of them, for any purpose be, or be deemed to be or treated in any way whatsoever to be, liable or responsible hereunder as partners or joint venturers.  The relationship of the Litigation Trust Beneficiaries, on the one hand, to the Litigation Trust and the Litigation Trustee, on the other, shall not be deemed a principal or agency relationship, and their rights shall be limited to those conferred upon them by this Agreement and the Plan.

 

(d)           No Waiver of Claims.  In accordance with section 1123(d) of the Bankruptcy Code, the Litigation Trustee may enforce all rights to commence and pursue, as appropriate, any and all Litigation Trust Claims after the Effective Date.  No Person may rely on the absence of a specific reference in the Plan to any Cause of Action against such Person as any indication that the Litigation Trustee will not pursue any and all available Causes of Action against such Person.  Unless any Causes of Action against a Person are expressly waived, relinquished, exculpated, released, compromised, or settled in the Plan or a Bankruptcy Court order, the Litigation Trustee expressly reserves all Causes of Action, for later adjudication, and, therefore, no preclusion doctrine, including the doctrines of res judicata, collateral estoppel, issue preclusion, claim preclusion, estoppel (judicial, equitable, or otherwise) or laches, shall apply to such Causes of Action upon, after, or as a consequence of the Confirmation Order.  Reorganized FairPoint’s objection to the allowance of any Claims or Equity Interests filed with the Bankruptcy Court with respect to which they dispute liability, priority, and/or amount (or any objections,

 

6

 

affirmative defenses and/or counterclaims, whether or not litigated to Final Order) shall not in any way limit the ability or the right of the Litigation Trustee to assert, commence or prosecute any Cause of Action that is a Litigation Trust Claim against the holder of such Claim or Equity Interest. Nothing contained in the Plan, the Confirmation Order or this Agreement shall be deemed to be a waiver, release, or relinquishment of any Cause of Action, right of setoff, or other legal or equitable defense which FairPoint had immediately prior to the Petition Date, against or with respect to any Claim left unimpaired by the Plan.  The Litigation Trustee shall have, retain, reserve, and be entitled to assert all such Claims, Causes of Action, rights of setoff, and other legal or equitable defenses which FairPoint had immediately prior to the Petition Date fully as if the Chapter 11 Cases had not been commenced or the Litigation Trust Claims had not been transferred to the Litigation Trust in accordance with the Plan, the Confirmation Order and this Agreement, and all of Reorganized FairPoint’s legal and equitable rights respecting any Claim left unimpaired by the Plan may be asserted after the Confirmation Date to the same extent as if the Chapter 11 Cases had not been commenced.  Nothing in this Agreement shall be construed in a manner that is inconsistent with the Plan or the Confirmation Order.

 

1.5          Incorporation of Plan.  The Plan and the Confirmation Order are each hereby incorporated into this Agreement and made a part hereof by this reference; provided, however, unless otherwise specified herein, to the extent that there is conflict between the provisions of this Agreement, the provisions of the Plan, and/or the Confirmation Order, each such document shall have controlling effect in the following rank order: (1) the Confirmation Order; (2) the Plan; and (3) this Agreement.

 

1.6          Funding Expenses of the Litigation Trust.  On the Effective Date, FairPoint or Reorganized FairPoint, as the case may be, shall transfer the Initial Litigation Trust Funds to the Litigation Trust to finance the operations of the Litigation Trust.  If a Cash Payment is made on the Effective Date to the holders of Allowed Prepetition Credit Agreement Claims under Section 5.4.2(c) of the Plan, then (i) the Initial Litigation Trust Funds shall be repaid to the holders of Allowed Prepetition Credit Agreement Claims in accordance with Section 6.1 hereof before the Litigation Trust Beneficiaries receive any distributions on account of their Litigation Trust Interests; and (ii) the Prepetition Credit Agreement Agent shall be granted a security interest in the Litigation Trust Assets for the benefit of the holders of Allowed Prepetition Credit Agreement Claims in accordance with Section 13.1 hereof until the Initial Litigation Trust Funds have been repaid to the holders of Allowed Prepetition Credit Agreement Claims.  If a Cash Payment is not made on the Effective Date to holders of Allowed Prepetition Credit Agreement Claims under Section 5.4.2(c) of the Plan, then (i) the Initial Litigation Trust Funds shall be repaid to Reorganized FairPoint in accordance with Section 6.2(c) hereof before the Litigation Trust Beneficiaries receive any distributions on account of their Litigation Trust Interests; and (ii) Reorganized FairPoint shall be granted a security interest in the Litigation Trust Assets in accordance with Section 13.1 hereof until the Initial Litigation Trust Funds have been repaid to Reorganized FairPoint.  After the Effective Date, the Litigation Trustee may request additional funding (“Additional Funding”) of the Litigation Trust from Reorganized FairPoint; provided that (i) any such Additional Funding shall be subject to the approval of the New Board in its sole discretion, (ii) after giving effect to such Additional Funding, Reorganized FairPoint’s cash on hand shall not be less than $20,000,000 (after taking into account the cash distributions to be made pursuant to the Plan) and (iii) no proceeds of any borrowing under the New Revolver may be used to fund such Additional Funding.  If Reorganized FairPoint provides Additional Funding

 

7

 

to the Litigation Trust, then (i) the Additional Funding shall be repaid to Reorganized FairPoint in accordance with Section 6.2(c) hereof before the Litigation Trust Beneficiaries receive any distributions on account of their Litigation Trust Interests; and (ii) Reorganized FairPoint shall be granted a security interest in the Litigation Trust Assets in accordance with Section 13.1 hereof until the Additional Funding has been repaid to Reorganized FairPoint.

 

1.7          Appointment as Representative.  Pursuant to sections 1123(a)(5)(B) and 1123(b)(3) of the Bankruptcy Code, the Plan provides for the appointment of a Litigation Trustee as the duly appointed representative of FairPoint with respect to the Litigation Trust Claims, and, as such, the Litigation Trustee succeeds to all of the rights and powers of a trustee in bankruptcy with respect to prosecution of the Litigation Trust Claims for the benefit of the Litigation Trust Beneficiaries in accordance with the terms of this Agreement, the Plan, and the Confirmation Order.

 

1.8          Barred Claims; Contribution Claims.  It is the intention of the parties to this Agreement that (i) the liquidation of the Litigation Trust Assets not cause FairPoint or Reorganized FairPoint (for purposes of this Section 1.8, the “Protected Parties”), as the case may be, to incur liability with respect to Litigation Trust Claims in the nature of contribution, reimbursement or indemnification, however denominated or described, in connection with, arising out of or in any way related to the Litigation Trust Claims and (ii) any such claims-over shall be satisfied as provided herein.

 

(a)           Any Person against whom a Litigation Trust Claim has been brought (a “Litigation Trust Defendant”) shall be permanently barred, enjoined and restrained from commencing, prosecuting or asserting any Claim for contribution, reimbursement or indemnification or any Claim related thereto (a “Covered Claim”) based upon, related to, or arising out of the prosecution of Litigation Trust Claims against that Litigation Trust Defendant, whether such Covered Claim is asserted in a court, an arbitration, an administrative agency or forum, or in any other manner, if the Covered Claim is against FairPoint or Reorganized FairPoint, or if against a third party would, in turn, give rise to an Administrative Expense Claim, a Class 5 Legacy Subsidiary Unsecured Claim, a Class 6 NNE Subsidiary Unsecured Claim, or a Class 8 Convenience Claim under the Plan against FairPoint or a claim against Reorganized FairPoint; provided, however, that the Litigation Trust shall reduce and credit against any judgment it may obtain against the Litigation Trust Defendant the amount of any Covered Claim which is determined by a court of competent jurisdiction in any action involving the prosecution of Litigation Trust Claims against that Litigation Trust Defendant.

 

(b)           No Protected Party shall have any liability to any Person for an asserted or threatened Covered Claim that would be treated as a Class 7 FairPoint Communications Unsecured Claim under the Plan based upon, relating to, or arising out of the prosecution of Litigation Trust Claims, and any distributions to be made on account of a Covered Claim pursuant to the Plan shall be funded by the Litigation Trust, in the amount(s), from time to time, that all similarly situated holders of Claims are entitled to receive hereunder.

 

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ARTICLE II

 

LITIGATION TRUST INTERESTS

 

2.1          Allocation of Litigation Trust Interests.  The allocation and distribution of the Litigation Trust Interests shall be accomplished as set forth in the Plan and the Confirmation Order.  The aggregate number and face value of Litigation Trust Interests to be distributed pursuant to the Plan shall be determined by the Litigation Trustee, consistent with the intent and purposes of the Plan, subject, however, to the approval of the Bankruptcy Court, upon notice to the Litigation Trust Beneficiaries.  The Litigation Trust Interests distributed to the holders of Allowed Prepetition Credit Agreement Claims shall be referred to herein as the “Class A Interests” and all other Litigation Trust Interests shall be referred to herein as the “Class B Interests.”

 

2.2          Interests Beneficial Only.  The ownership of a Litigation Trust Interest shall not entitle any Litigation Trust Beneficiary to any title in the Litigation Trust Assets as such (which title shall be vested in the Litigation Trustee) or to any right to call for a partition or division of the Litigation Trust Assets or to require an accounting.

 

2.3          Evidence of Beneficial Interests.  The Litigation Trust Interests will not be represented by certificates, securities, receipts or in any other form or manner whatsoever, except as maintained on the books and records of the Litigation Trust by the Litigation Trustee or the Registrar.  The death, incapacity or bankruptcy of any Litigation Trust Beneficiary during the term of the Litigation Trust shall not (i) operate to terminate the Litigation Trust, (ii) entitle the representatives or creditors of the deceased party to an accounting, (iii) entitle the representatives or creditors of the deceased party to take any action in the Bankruptcy Court or elsewhere for the distribution of the Litigation Trust Assets or for a partition thereof or (iv) otherwise affect the rights and obligations of any of the Litigation Trust Beneficiaries hereunder.

 

2.4          Securities Law Registration.  It is intended that the Litigation Trust Interests and the entitlements hereunder, if any, of the holders of Allowed Prepetition Credit Agreement Claims with respect to the Initial Litigation Trust Funds, shall not constitute “securities.” To the extent the Litigation Trust Interests or the entitlements of the holders of Allowed Prepetition Credit Agreement Claims are deemed to be “securities,” the issuance of Litigation Trust Interests to holders of Allowed Prepetition Credit Agreement Claims and Allowed FairPoint Communications Unsecured Claims or the issuance to the holders of Allowed Prepetition Credit Agreement Claims of any entitlements hereunder or under the Plan (and any redistribution of any of the foregoing pursuant to the Plan or otherwise) shall be exempt, pursuant to section 1145 of the Bankruptcy Code, from registration under the Securities Act of 1933, as amended (the “Securities Act”), and any applicable state and local laws requiring registration of securities. If the Litigation Trustee determines, with the advice of counsel, that the Litigation Trust is required to comply with registration and/or reporting requirements of the Securities Act, the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Trust Indenture Act of 1939, as amended (the “Trust Indenture Act”), or the Investment Company Act of 1940, as amended (the “Investment Company Act”), then the Litigation Trustee shall take any and all actions to comply with such registration and reporting requirements, if any, and file reports with the Securities and Exchange Commission (the “SEC”) to the extent required by applicable law.  Notwithstanding the foregoing procedure, nothing herein shall be deemed to preclude the Litigation Trustee from

 

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amending this Agreement to make such changes as are deemed necessary or appropriate by the Litigation Trustee, with the advice of counsel, to ensure that the Litigation Trust is not subject to registration and/or reporting requirements of the Securities Act, the Exchange Act, the Trust Indenture Act or the Investment Company Act, except that no amendment to this Agreement may be made which would not be permitted by Article 11 of this Agreement.

 

2.5          No Transfers.

 

(a)           No transfer, sale assignment, distribution, exchange, pledge, hypothecation, mortgage or other disposition (a “Transfer”) of a Litigation Trust Interest or any entitlement hereunder of a holder of a Prepetition Credit Agreement Claim may be effected or made; provided, however, that, Transfers of Litigation Trust Interests or entitlements hereunder of a holder of a Prepetition Credit Agreement Claim and/or under the Plan may be made (i) by operation of law or by will or the laws of descent and distribution, (ii) if the Litigation Trustee has received such legal advice or other information that it, in its sole discretion, deems necessary or appropriate to assure that any such disposition shall not require the Litigation Trust to comply with the registration and reporting requirements of the Exchange Act or the Investment Company Act, or (iii) if the Litigation Trustee has determined to register under such Acts, as necessary, and/or make periodic reports in order to enable such disposition to be made. In the event that any such disposition is allowed, the Litigation Trustee may add such restrictions upon transfer and other terms to this Agreement as are deemed necessary or appropriate by the Litigation Trustee, with the advice of counsel, to permit or facilitate such disposition under applicable securities and other laws.

 

(b)           The Litigation Trustee shall appoint a registrar, which may be the Litigation Trustee (the “Registrar”), for the purpose of recording ownership of the Litigation Trust Interests as provided for in this Agreement.  The Registrar, if other than the Litigation Trustee, may be such other institution acceptable to the Litigation Trustee.  For its services hereunder, the Registrar, unless it is the Litigation Trustee, shall be entitled to receive reasonable compensation from the Litigation Trust as an expense of the Litigation Trust.

 

(c)           The Litigation Trustee shall cause to be kept at the office of the Registrar or at such other place or places as shall be designated by them from time to time, a registry of the Litigation Trust Beneficiaries (the “Trust Register”) which shall be maintained pursuant to such reasonable regulations as the Litigation Trustee and the Registrar may prescribe.

 

2.6          Access to the Trust Register by the Litigation Trust Beneficiaries.  Litigation Trust Beneficiaries and their duly authorized representatives shall have the right, upon reasonable prior written notice to the Registrar and the Litigation Trustee and in accordance with the reasonable regulations prescribed by the Registrar and the Litigation Trustee, to inspect and, at the sole expense of the Litigation Trust Beneficiaries seeking the same, make copies of the Trust Register, in each case for a purpose reasonably related to such holder’s interest in the Litigation Trust.

 

2.7          Absolute Owners.  The Litigation Trustee may deem and treat the holder of a Litigation Trust Interest of record in the Trust Register as the absolute owner of such Litigation Trust Interests for the purpose of receiving distributions and payment thereon or on account thereof

 

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and for all other purposes whatsoever and the Litigation Trustee shall not be charged with having received notice of any claim or demand to such Litigation Trust Interests or the interest therein of any other Person.

 

ARTICLE III

 

THE LITIGATION TRUSTEE

 

3.1          Litigation Trust Proceeds.  Any and all proceeds, income and/or recoveries obtained on account of or from the Litigation Trust Claims, after payment of any and all expenses of the Litigation Trust, shall be added to the Litigation Trust Assets (the “Litigation Trust Proceeds”), held as a part thereof (and title therein shall be vested in the Litigation Trustee) and dealt with in accordance with the terms of this Agreement.

 

3.2          Collection of Income.  The Litigation Trustee shall collect all income earned with respect to the Litigation Trust Assets, which shall thereupon be added to the Litigation Trust Assets, held as a part thereof (and title therein shall be vested in the Litigation Trustee) and dealt with in accordance with the terms of this Agreement.

 

3.3          Payment of Litigation Trust Expenses.  Subject to Section 3.12 of this Agreement and the obligations of the Litigation Trust (and/or the Litigation Trustee) under Sections 1.6, 3.4, and 6.2(b) of this Agreement, the Litigation Trustee shall maintain the Litigation Trust Assets, and expend the Litigation Trust Funds or the Litigation Trust Proceeds (i) as is reasonably necessary to meet contingent liabilities and to maintain the value of the Litigation Trust Assets during liquidation, (ii) to pay reasonable and necessary expenses (including but not limited to, the reasonable costs and expenses of the Litigation Trustee (including reasonable fees, costs, and expenses of professionals retained thereby), any taxes imposed on the Litigation Trust or in respect of the Litigation Trust Assets or reasonable fees and expenses in connection with, arising out of, or related to, the Litigation Trust Assets and litigations associated therewith), (iii) to pay the costs and expenses of the valuations of the Litigation Trust Assets incurred by the Litigation Trustee in accordance with Section 5.1(c) of this Agreement, (iv) to pay or reimburse amounts in accordance with Article 7 hereof and (v) to satisfy other liabilities incurred or assumed by the Litigation Trust (or to which the Litigation Trust Assets are otherwise subject) in accordance with the Plan, the Confirmation Order and this Agreement.

 

3.4          Distributions.  The Litigation Trustee shall make distributions of Litigation Trust Proceeds in accordance with the provisions of Article 6 of this Agreement and the Plan.

 

3.5          Tenure, Removal, and Replacement of the Litigation Trustee.

 

(a)           The Litigation Trustee will serve until the earliest of (i) the completion of all the Litigation Trustee’s duties, responsibilities and obligations under this Agreement and the Plan, (ii) the Litigation Trustee’s resignation and the appointment of a successor pursuant to Section 3.5(b) of this Agreement, (iii) the Litigation Trustee’s removal pursuant to Section 3.5(c) of this Agreement, (iv) the Litigation Trustee’s death (if applicable) and (v) the termination of the Litigation Trust in accordance with this Agreement, the Confirmation Order and the Plan.

 

(b)           The Litigation Trustee may resign by filing a notice with the Bankruptcy Court (the “Resignation Notice”).  Such resignation will become effective on the later to occur of:

 

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(i) the day specified in such written notice and (ii) the appointment of a successor litigation trustee as provided in Section 3.5(d) and the acceptance by such successor litigation trustee of such appointment in accordance with Section 3.6 of this Agreement. If a successor litigation trustee is not appointed or does not accept its appointment within ninety (90) days following the filing of the Resignation Notice, the Litigation Trustee shall file a motion with the Bankruptcy Court, upon notice and a hearing, for the appointment of a successor litigation trustee.

 

(c)           The Litigation Trustee may be removed for any reason by the affirmative vote of (i) the Disinterested holders of a majority in amount of the Class A Interests that have been distributed and the Disinterested holders of a majority in amount of the Class B Interests that have been distributed, by written consent (which shall include electronic mail) or (ii) the Disinterested holders of a majority in amount of the Class A Interests that have been distributed and the Disinterested holders of a majority in amount of the Class B Interests that have been distributed, in attendance at a meeting of Litigation Trust Beneficiaries called for the purpose of voting on the removal of the Litigation Trustee (the alternative actions referred to in clauses (i) and (ii) of this Section 3.5(c), each an “Interest Action”); provided, however, the Litigation Trustee’s compensation prior to such Interest Action will be in accordance with his agreement with the Litigation Trust.  Such removal shall become effective on the date action is taken by the Litigation Trust Beneficiaries.  For purposes of this Section 3.5, “Disinterested” means disinterested with respect to all Claims or Causes of Action that have been or may be asserted by the Litigation Trust.

 

(d)           In the event of a vacancy in the position of the Litigation Trustee (whether by removal, resignation, or death, if applicable), the Disinterested holders of a majority of the Class A Interests and the Disinterested holders of a majority of the Class B Interests may appoint a successor litigation trustee by an Interest Action.

 

(e)           Immediately upon the appointment of any successor litigation trustee, all rights, powers, duties, authority, and privileges of the predecessor Litigation Trustee hereunder will be vested in and undertaken by the successor litigation trustee without any further act; and the successor litigation trustee will not be liable personally for any act or omission of the predecessor Litigation Trustee.  A successor litigation trustee shall have all the rights, privileges, powers, and duties of the predecessor Litigation Trustee under this Agreement, the Confirmation Order and the Plan.

 

(f)            Upon the appointment of a successor litigation trustee, the predecessor Litigation Trustee (or the duly appointed legal representative of a deceased Litigation Trustee) shall, if applicable, when requested in writing by the successor litigation trustee or the Bankruptcy Court, execute and deliver an instrument or instruments conveying and transferring to such successor litigation trustee upon the trust herein expressed all the estates, properties, rights, powers and trusts of such predecessor Litigation Trustee, and shall duly assign, transfer, and deliver to such successor litigation trustee all property and money held hereunder, and all other assets, documents, instruments, records and other writings relating to the Litigation Trust, the Litigation Trust Assets, the Litigation Trust Proceeds, the Litigation Trust Funds, the Litigation Trust Interests, and the entitlements of the holders of Allowed Prepetition Credit Agreement Claims hereunder, then in its possession and held hereunder, and shall execute and deliver such documents, instruments and other writings as may be requested by the Bankruptcy Court or a successor litigation trustee to effect the termination of such predecessor Litigation Trustee’s capacity under the Litigation Trust, this Agreement and the Plan and otherwise assist and cooperate, without cost or expense to the predecessor Litigation Trustee, in effectuating the assumption of its obligations and functions by the successor litigation trustee.

 

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(g)           The death, resignation or removal of the Litigation Trustee shall not terminate the Litigation Trust or revoke any existing agency created pursuant to this Agreement or invalidate any action theretofore taken by the Litigation Trustee.

 

3.6          Acceptance of Appointment by Successor Litigation Trustee.  Any successor litigation trustee appointed hereunder shall execute an instrument accepting such appointment and assuming all of the obligations and duties of the predecessor Litigation Trustee on the same terms and conditions hereunder and accepting the terms of this Agreement and agreeing that the provisions of this Agreement shall be binding upon and inure to the benefit of the successor trustee and all of its heirs, and legal and personal representatives, successors and assigns, and thereupon the successor litigation trustee shall, without any further act, become vested with all the estates, properties, rights, powers, trusts, and duties of the predecessor Litigation Trustee hereunder with like effect as if originally named herein.

 

3.7          [Intentionally Omitted].

 

3.8          [Intentionally Omitted].

 

3.9          [Intentionally Omitted].

 

3.10        [Intentionally Omitted].

 

3.11        Role of the Litigation Trustee.  In furtherance of and consistent with the purpose of the Litigation Trust and the Plan, the Litigation Trustee, subject to the terms and conditions contained in this Agreement, in the Plan and in the Confirmation Order, shall have the power to (i) prosecute, compromise and settle, abandon or dismiss for the benefit of the Litigation Trust all claims, rights and Causes of Action transferred to the Litigation Trust (whether such suits are brought in the name of the Litigation Trust, the Litigation Trustee or otherwise), and (ii) otherwise perform the functions and take the actions provided for or permitted in the Plan, in the Confirmation Order or in this Agreement.  In all circumstances, the Litigation Trustee shall act in the best interests of the Litigation Trust Beneficiaries and in furtherance of the purpose of the Litigation Trust.

 

3.12        Authority of Litigation Trustee.  Subject only to any limitations contained herein (including Sections 1.6, 3.4, and 6.2(b) of this Agreement), the Litigation Trustee is authorized to perform any and all acts necessary or desirable to accomplish the purposes of the Litigation Trust and is expressly authorized, to:

 

(a)           hold legal title to any and all rights of the holders of Litigation Trust Interests in or arising from the Litigation Trust Assets, including collecting, receiving any and all money and other property belonging to the Litigation Trust (including any Litigation Trust Proceeds) and the right to vote any claim or interest relating to a Litigation Trust Claim in a case under the Bankruptcy Code and receive any distribution thereon;

 

(b)           perform the duties, exercise the powers, and assert the rights of a trustee under sections 704 and 1106 of the Bankruptcy Code, including commencing, prosecuting or settling causes of action, enforcing contracts or asserting claims, defenses, offsets and privileges;

 

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(c)           take possession and control, administer, maintain and dispose of documents, books and records related to the Litigation Trust Claims other than original documents, books and records that are proprietary to FairPoint and that FairPoint requires in the operation of its businesses;

 

(d)           protect and enforce the rights to the Litigation Trust Claims by any method deemed appropriate including by judicial proceedings or pursuant to any applicable bankruptcy, insolvency, moratorium or similar law and general principles of equity;

 

(e)           obtain reasonable insurance coverage with respect to the liabilities and obligations of the Litigation Trustee under this Agreement (in the form of an errors and omissions policy or otherwise);

 

(f)            obtain insurance coverage with respect to real and personal property that may become assets of the Litigation Trust, if any;

 

(g)           subject to the consent of a majority of a Litigation Trust committee comprised of Bank of America, N.A., Paulson Credit Opportunities Master Ltd. and a representative appointed by the Creditors’ Committee (the “Litigation Trust Committee”), retain and pay such counsel and other professionals, including any professionals previously retained by the Prepetition Credit Agreement Agent, the Ad Hoc Committee of certain holders of the 131/8% Senior Notes due April 1, 2018 and 131/8% Senior Notes due April 12, 2018 issued by FairPoint Communications, Inc., the Creditors’ Committee, FairPoint or Reorganized FairPoint, as the Litigation Trustee shall select to assist the Litigation Trustee in its duties, on such terms as the Litigation Trustee deems reasonable and appropriate, without Bankruptcy Court approval; the Litigation Trustee may commit the Litigation Trust to and shall pay such counsel, experts, litigation consultants, and other professionals reasonable compensation for services rendered (including on an hourly, contingency, or modified contingency basis) and reasonable and documented out-of-pocket expenses incurred;

 

(h)           subject to the consent of a majority of the Litigation Trust Committee, retain and pay an accounting firm to perform such reviews and/or audits of the financial books and records of the Litigation Trust as may be required by applicable laws (including, if applicable, securities laws) and/or this Agreement, and to prepare and file any tax returns, informational returns or periodic and current reports for the Litigation Trust as required by applicable laws (including, if applicable, securities laws) and/or by this Agreement; the Litigation Trustee may commit the Litigation Trust to and shall pay such accounting firm reasonable compensation for services rendered and reasonable and documented out-of-pocket expenses incurred;

 

(i)            subject to the consent of a majority of the Litigation Trust Committee, retain, enter into fee arrangements with and pay such third parties to assist the Litigation Trustee in carrying out its powers, authorities and duties under this Agreement; the Litigation Trustee may commit the Litigation Trust to and shall pay all such Persons reasonable compensation for services rendered and reasonable and documented out-of-pocket expenses incurred, as well as commit the Litigation Trust to indemnify any such Persons in connection with the performance of services (provided that such indemnity shall not cover any losses, costs, damages, expenses or

 

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liabilities that result from the gross negligence, bad faith, willful misconduct or knowing violation of law by such Persons);

 

(j)            in the exercise of its reasonable discretion, waive any privilege (including the Privileges) or any defense on behalf of the Litigation Trust or, with respect to the Litigation Trust Claims;

 

(k)           investigate, analyze, compromise, adjust, arbitrate, mediate, sue on or defend, pursue; prosecute, abandon, dismiss, exercise rights, powers, and privileges with respect to, or otherwise deal with and settle, in accordance with the terms set forth herein, all causes of action in favor of or against the Litigation Trust; provided, however, that any settlement of a Litigation Trust Claim shall be subject to approval by the Bankruptcy Court, upon notice to the Litigation Trust Beneficiaries and Reorganized FairPoint;

 

(l)            solely with respect to Litigation Trust Claims, to avoid and recover transfers of FairPoint’s or Reorganized FairPoint’s property as provided for in the Plan as may be permitted by the Bankruptcy Code or applicable state law;

 

(m)          invest any moneys held as part of the Litigation Trust in accordance with the terms of Section 3.19 of this Agreement, limited, however, to such investments that are consistent with the Litigation Trust’s status as a liquidating trust within the meaning of Treasury Regulation section 301.7701-4(d) and in accordance with Rev. Proc 94-45, 1994-2 C.B. 684;

 

(n)           request any appropriate tax determination with respect to the Litigation Trust, including a determination pursuant to section 505 of the Bankruptcy Code;

 

(o)           seek the examination of any Person, subject to the provisions of Bankruptcy Rule 2004 or any other applicable law or rule;

 

(p)           make distributions in accordance with Article 6 of this Agreement; and

 

(q)           take or refrain from taking any and all other actions that the Litigation Trustee reasonably deems necessary or convenient for the continuation, protection and maximization of the Litigation Trust Claims or to carry out the purposes hereof.

 

3.13        Limitation of Litigation Trustee’s Authority.

 

(a)           Notwithstanding anything herein to the contrary, the Litigation Trustee shall not (i) be authorized to engage in any trade or business, (ii) take such actions inconsistent with the orderly liquidation of Litigation Trust Assets as are required or contemplated by applicable law, the Plan, the Confirmation Order, or this Agreement, or (iii) be authorized to engage in any investments or activities inconsistent with the treatment of the Litigation Trust as a liquidating trust within the meaning of Treasury Regulation section 301.7701-4(d) and in accordance with Rev. Proc. 94-45, 1994-2 C.B. 684.

 

(b)           The Litigation Trust shall not hold 50% or more of the stock (in either vote or value) of any Person that is treated as a corporation for federal income tax purposes, nor be the sole member of a limited liability company, nor have any interest in a Person that is treated as a

 

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partnership for federal income tax purposes, unless such stock, membership interest, or partnership interest was obtained involuntarily or as a matter of practical economic necessity in order to preserve the value of the Litigation Trust Assets.

 

3.14        Books and Records.

 

(a)           The Litigation Trustee shall maintain books and records relating to the Litigation Trust Assets and income of the Litigation Trust and the payment of expenses of, and liabilities of, claims against or assumed by, the Litigation Trust in such detail and for such period of time as may be necessary to enable it to make full and proper accounting in respect thereof. Such books and records shall be maintained on a modified cash or other comprehensive basis of accounting necessary to facilitate compliance with the tax reporting and securities law requirements, if any, of the Litigation Trust as well as the reporting requirements set forth in Article 9 of and elsewhere in this Agreement.

 

(b)           Litigation Trust Beneficiaries and their duly authorized representatives shall have the right, upon reasonable prior written notice to the Litigation Trustee, and in accordance with the reasonable regulations prescribed by the Litigation Trustee, to inspect and, at the sole expense of such holder seeking the same, make copies of the books and records relating to the Litigation Trust on any Business Day and as often as may be reasonably be desired, in each case for a purpose reasonably related to such holder’s interest in the Litigation Trust.

 

3.15        Inquiries into Trustee’s Authority.  Except as otherwise set forth in this Agreement, the Confirmation Order or the Plan, no Person dealing with the Litigation Trust shall be obligated to inquire into the authority of the Litigation Trustee in connection with the protection, conservation or disposition of the Litigation Trust Claims.

 

3.16        Compliance with Laws.  Any and all distributions of Litigation Trust Assets shall be in compliance with applicable laws, including applicable federal and state securities laws.

 

3.17        Compensation of the Litigation Trustee.  Notwithstanding anything to the contrary contained herein, the Litigation Trustee shall be compensated for its services, and reimbursed for its expenses, in accordance with, and pursuant to the terms of, a separate agreement to be negotiated prior to the Effective Date by the Litigation Trust Committee, which agreement shall not be subject to any third-party notice or approval; provided, however, that after such compensation arrangement is agreed, it will be filed with the Bankruptcy Court under seal.

 

3.18        Reliance by Litigation Trustee.  Except as otherwise provided herein:

 

(a)           the Litigation Trustee may rely, and shall be protected in acting upon, any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order or other paper or document reasonably believed by the Litigation Trustee to be genuine and to have been signed or presented by the proper party or parties; and

 

(b)           Persons dealing with the Litigation Trustee shall look only to the Litigation Trust Assets to satisfy any liability incurred by the Litigation Trustee to such Person in carrying out the terms of this Agreement, and the Litigation Trustee shall not have any personal obligation to satisfy any such liability except as set forth in Section 1.4(b) of this Agreement.

 

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3.19                           Investment and Safekeeping of Litigation Trust Assets.  Subject to Sections 1.6, 3.4, and 6.2(b) of this Agreement, the Litigation Trustee shall invest all Litigation Trust Assets (pending distribution in accordance with Article 6 of this Agreement) only in Cash and Government securities as defined in section 2(a)(16) of the Investment Company Act; provided, however, that (a) the scope of any such permissible investments shall be further limited to include only those investments that a liquidating trust, within the meaning of Treasury Regulation section 301.7701-4(d), may be permitted to hold, pursuant to the Treasury Regulations, or any modification in the IRS guidelines, whether set forth in IRS rulings, other IRS pronouncements, or otherwise, (b) the Litigation Trustee may retain any Litigation Trust Proceeds received that are not Cash only for so long as may be required for the prompt and orderly liquidation of such assets in Cash, and (c) under no circumstances, shall the Litigation Trustee segregate the Litigation Trust Assets on the basis of classification of the Litigation Trust Beneficiaries, except as necessary to give effect to the security interest and Liens established in accordance with Article 13 hereof on the Litigation Trust Assets and proceeds and income thereon to secure the payment of the Initial Litigation Trust Funds and/or any Additional Funding (including any fees, costs or interest incurred therewith) to the holders of Allowed Prepetition Credit Agreement Claims in accordance with Section 6.1 hereof, or Reorganized FairPoint in accordance with Section 6.2(c), as the case may be.

 

3.20                           Standard of Care; Exculpation.  Neither the Litigation Trustee nor any of its duly designated agents or representatives or professionals shall be liable for any act or omission taken or omitted to be taken by the Litigation Trustee in good faith, other than (i) acts or omissions resulting from the Litigation Trustee’s or any such agent’s, representative’s or professional’s gross negligence, bad faith, willful misconduct or knowing violation of law or (ii) acts or omissions from which the Litigation Trustee or any such agent, representative or professional derived an improper personal benefit.  The Litigation Trustee may, in connection with the performance of its functions, and in its sole and absolute discretion, consult with its attorneys, accountants, financial advisors and agents, and shall not be liable for any act taken, omitted to be taken, or suffered to be done in accordance with advice or opinions rendered by such Persons. Notwithstanding such authority, the Litigation Trustee shall be under no obligation to consult with its attorneys, accountants, financial advisors or agents, and its good faith determination not to do so shall not result in the imposition of liability on the Litigation Trustee, unless such determination is based on gross negligence, bad faith, willful misconduct or knowing violation of law.  No amendment, modification or repeal of this Section 3.20 shall adversely affect any right or protection of the Litigation Trustee or any of its agents, representatives or professionals that exists at the time of such amendment, modification or repeal.

 

ARTICLE IV

 

[INTENTIONALLY OMITTED]

 

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ARTICLE V

 

TAX MATTERS

 

5.1                                 Federal Income Tax Treatment of the Litigation Trust.

 

(a)                                  For all federal income tax purposes, all parties (including FairPoint, Reorganized FairPoint, the Litigation Trust, the Litigation Trustee and the Litigation Trust Beneficiaries) shall treat the transfer of the Litigation Trust Assets to the Litigation Trust for the benefit of the Litigation Trust Beneficiaries, whether their Claims are Allowed on or after the Effective Date, as (a) a transfer of the Litigation Trust Assets directly to those holders of Allowed Claims receiving Litigation Trust Interests (other than to the extent allocable to Disputed Claims), followed by (b) the transfer by such Persons to the Litigation Trust of the Litigation Trust Assets in exchange for beneficial interests in the Litigation Trust (and in respect of the Litigation Trust Assets allocable to the Disputed Claims Reserve, as a transfer to the Disputed Claims Reserve by FairPoint or Reorganized FairPoint, as the case may be). Accordingly, those holders of Allowed Claims receiving Litigation Trust Interests shall be treated for federal income tax purposes as the grantors and owners of their respective shares of the Litigation Trust Assets. The foregoing treatment also shall apply, to the extent permitted by applicable law, for state and local income tax purposes.

 

(b)                                 Subject to definitive guidance from the IRS or a court of competent jurisdiction to the contrary (including receipt by the Litigation Trustee of a private letter ruling if the Litigation Trustee so requests one, or the receipt of an adverse determination by the IRS, upon audit, or otherwise if not contested by the Litigation Trustee), the Litigation Trustee shall (i) file returns for the Litigation Trust as a grantor trust pursuant to Treasury Regulation section 1.671-4(a) and in accordance with this Article 5 and Section 11.9(a)(ii) of the Plan and (ii) annually send to each holder of a Litigation Trust Interest and each holder of an Allowed Prepetition Credit Agreement Claim a separate statement setting forth such holder’s share of items of income, gain, loss, deduction, or credit and will instruct all such holders and parties to report such items on their federal income tax returns.  The Litigation Trustee also shall file (or cause to be filed) any other statements, returns or disclosures relating to the Litigation Trust that are required by any governmental unit.

 

(c)                                  As soon as possible after the Effective Date, but in no event later than sixty (60) days thereafter, (i) the Litigation Trustee, in consultation with Reorganized FairPoint, will determine the fair market value as of the Effective Date of all assets transferred to the Litigation Trust and (ii) the Litigation Trustee shall apprise, in writing, the Litigation Trust Beneficiaries of such valuation.  In connection with the preparation of the valuation contemplated hereby, the Litigation Trustee shall be entitled to retain such professionals and advisers as the Litigation Trustee shall determine to be appropriate or necessary, and the Litigation Trustee shall take such other actions in connection therewith as it determines to be appropriate or necessary in connection therewith.  The Litigation Trust shall bear all of the reasonable costs and expenses incurred in connection with determining such value, including the fees and expenses of any Persons retained by the Litigation Trustee in connection therewith.

 

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(d)                                 The Litigation Trustee may request an expedited determination of taxes of the Litigation Trust under section 505(b) of the Bankruptcy Code for all returns filed for, or on behalf of, the Litigation Trust for all taxable periods through the dissolution of the Litigation Trust.

 

(e)                                  The Litigation Trustee shall be responsible for payments, out of the Litigation Trust Assets and Litigation Trust Proceeds, of any taxes imposed on the Litigation Trust or the Litigation Trust Assets.

 

(f)                                    The Litigation Trustee may require any of the Litigation Trust Beneficiaries to furnish to the Litigation Trustee its Employer or Taxpayer Identification Number as assigned by the IRS and the Litigation Trustee may condition any distribution or payment to any of them upon receipt of such identification number.

 

5.2                                 Allocations of Litigation Trust Taxable Income.  Allocations of Litigation Trust taxable income among the Litigation Trust Beneficiaries shall be determined by reference to the manner in which an amount of Cash equal to such taxable income would be distributed (without regard to any restrictions on distributions described in the Plan or herein) if, immediately prior to such deemed distribution, the Litigation Trust had distributed all of its other assets (valued at their tax book value) to the Litigation Trust Beneficiaries, in each case up to the tax book value of the assets treated as contributed by such holders, adjusted for prior taxable income and loss and taking into account all prior and concurrent distributions from the Litigation Trust (including all distributions held in escrow pending the resolution of Disputed Claims). Similarly, taxable loss of the Litigation Trust shall be allocated by reference to the manner in which an economic loss would be borne immediately after a liquidating distribution of the remaining Litigation Trust Assets. The tax book value of the Litigation Trust Assets for this purpose shall equal their fair market value on the Effective Date as determined under Section 5.1(c) above, adjusted in either case in accordance with tax accounting principles prescribed by the Tax Code, and applicable tax regulations, and other applicable administrative and judicial authorities and pronouncements.

 

ARTICLE VI

 

DISTRIBUTIONS

 

6.1                                 Distributions; Withholding.  Subject to Section 8.17 of the Plan and Sections 1.6, 3.3 and 6.2(b) of this Agreement, the Litigation Trustee shall distribute, in accordance with this Article 6, to the Litigation Trust Beneficiaries, all net Cash income plus all net Cash proceeds from the liquidation of Litigation Trust Assets (including as Cash, for this purpose, all Cash Equivalents); provided, however, that, subject to Section 6.2(b) of this Agreement, the Litigation Trust may retain and not distribute to the Litigation Trust Beneficiaries such amounts as determined by the Litigation Trustee (i) as are reasonably necessary to meet contingent liabilities of the Litigation Trust during liquidation, (ii) to pay reasonable and necessary expenses incurred in connection with liquidation and any taxes imposed on the Litigation Trust or in respect of the Litigation Trust Assets, and (iii) as are reasonably necessary to establish and maintain a separate reserve for the Litigation Trust Interests to be distributed to holders of unliquidated or disputed FairPoint Communications Unsecured Claims.  Reorganized FairPoint (or, as the case may be, the court-appointed claims agent) shall provide the Litigation Trustee with such information as may be

 

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reasonably requested by the Litigation Trustee regarding the claims register for purposes of maintaining and establishing the reserve set forth in clause (iii) of the preceding sentence.  To the extent that any distributions and/or payments are required to be made pursuant to this Agreement to repay the Initial Litigation Trust Funds to the holders of Allowed Prepetition Credit Agreement Claims, such repayment shall be made to the Prepetition Credit Agreement Agent for the account and on behalf of the holders of Allowed Prepetition Credit Agreement Claims, which shall distribute the same to the holders of Allowed Prepetition Credit Agreement Claims in accordance with the Plan.  All distributions and/or payments to be made to the holders of Litigation Trust Interests pursuant to this Agreement shall be made to each holder of Litigation Trust Interests pro rata based on the amount of Litigation Trust Interests held by such holder of Litigation Trust Interests compared with the aggregate amount of the Litigation Trust Interests outstanding, subject, in each case, to the terms of the Confirmation Order, the Plan and this Agreement. The Litigation Trustee may withhold from amounts distributable to any Person any and all amounts, determined in the Litigation Trustee’s reasonable sole discretion, to be required by any law, regulation, rule, ruling, directive or other governmental requirement.

 

6.2                                 Manner of Payment or Distribution.

 

(a)                                  Subject to Section 1.6 of this Agreement, all distributions to be made by the Litigation Trustee to the Litigation Trust Beneficiaries shall be payable to the holders of Litigation Trust Beneficiaries of record as of the 20th day prior to the date scheduled for the distribution, unless such day is not a Business Day, then such day shall be the following Business Day. If the distribution shall be in Cash, the Litigation Trustee shall distribute such Cash by wire, check, or such other method as the Litigation Trustee deems appropriate under the circumstances.

 

(b)                                 To the extent that Reorganized FairPoint becomes liable for the payment of any Claims arising under section 502(h) of the Bankruptcy Code on account of recoveries obtained with respect to the Litigation Trust Claims, the Litigation Trustee will be responsible for making distributions on account of such Claims pursuant to Section 8.2 of this Agreement.

 

(c)                                  To the extent that the Litigation Trust is required to repay the Initial Litigation Trust Funds and/or any Additional Funding to Reorganized FairPoint, (i) such amounts shall bear simple interest at a rate per annum equal to the prime lending rate as announced from time to time by Bank of America, N.A., and (ii) any interest shall be due and payable in arrears on the date that the Litigation Trust Funds are repaid to Reorganized FairPoint.

 

6.3                                 Cash Distributions.  No Cash distributions shall be required to be made to any Litigation Trust Beneficiary in an amount less than $100.00. Any funds so withheld and not distributed shall be held in reserve and distributed in subsequent distributions. The foregoing shall not apply to the final distribution made to the Litigation Trust Beneficiaries.

 

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ARTICLE VII

 

INDEMNIFICATION

 

7.1                                 Indemnification of Litigation Trustee.

 

(a)                                  To the fullest extent permitted by law, the Litigation Trust, to the extent of its assets legally available for that purpose, shall indemnify and hold harmless the Litigation Trustee, and each of its respective directors, members, shareholders, partners, officers, agents, employees, attorneys and other professionals (collectively, the “Indemnified Persons”) from and against any and all losses, costs, damages, reasonable and documented out-of-pocket expenses (including reasonable fees and expenses of attorneys and other advisors and any court costs incurred by any Indemnified Person) or liability by reason of anything any Indemnified Person did, does, or refrains from doing for the business or affairs of the Litigation Trust, except to the extent that the loss, cost, damage, expense or liability resulted (x) from the Indemnified Person’s gross negligence, bad faith, willful misconduct or knowing violation of law or (y) from an act or omission from which the Indemnified Person derived an improper personal benefit. To the extent reasonable, the Litigation Trust shall pay in advance or reimburse reasonable and documented out-of-pocket expenses (including advancing reasonable costs of defense) incurred by the Indemnified Person who is or is threatened to be named or made a defendant or a respondent in a proceeding concerning the business and affairs of the Litigation Trust.  The indemnification provided under this Section 7.1 shall survive the death, dissolution, resignation or removal, as may be applicable, of the Litigation Trustee and/or any other Indemnified Person, and shall inure to the benefit of the Litigation Trustee’s and each other Indemnified Person’s heirs, successors and assigns.

 

(b)                                 Any Indemnified Person may waive the benefits of indemnification under this Section 7.1, but only by an instrument in writing executed by such Indemnified Person.

 

(c)                                  The rights to indemnification under this Section 7.1 are not exclusive of other rights which any Indemnified Person may otherwise have at law or in equity, including without limitation common law rights to indemnification or contribution. Nothing in this Section 7.1 will affect the rights or obligations of any Person (or the limitations on those rights or obligations) under this Agreement, or any other agreement or instrument to which that Person is a party.

 

ARTICLE VIII

 

NET LITIGATION TRUST RECOVERY

 

8.1                                 No Effect on Mutuality.  Notwithstanding anything contained in this Agreement to the contrary, nothing herein shall affect the mutuality of obligations, if any, of any holder of any Claim under section 553 of the Bankruptcy Code.  Notwithstanding anything in this Agreement to the contrary, the transfer of the Litigation Trust Claims to the Litigation Trust does not diminish, and fully preserves, any defenses a defendant would have if such Litigation Trust Claims had been retained by FairPoint.

 

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8.2                                 Section 502(h).  Notwithstanding anything contained this Agreement to the contrary, in the event that a compromise and settlement of a Litigation Trust Claim or a Final Order with respect to a Litigation Trust Claim provides for the allowance of a Claim pursuant to section 502(h) of the Bankruptcy Code against one or more of FairPoint, the distributions to be made hereunder on account of such Claim pursuant to the Plan shall be funded by the Litigation Trust, in the amount(s), from time to time, that all similarly situated holders of Claims are entitled to receive hereunder.

 

8.3                                 Net Litigation Trust Recovery.  Notwithstanding anything contained in this Agreement to the contrary, in the event that a defendant in a litigation brought by the Litigation Trustee for and on behalf of the Litigation Trust (i) is required by a Final Order to make payment to the Litigation Trust (the “Judgment Amount”) and (ii) is permitted by a Final Order to assert a right of setoff under sections 553, 555, 556, 559, 560 and 561 of the Bankruptcy Code or applicable non-bankruptcy law against the Judgment Amount (a “Valid Setoff”), (y) such defendant shall be obligated to pay only the excess, if any, of the Judgment Amount over the Valid Setoff and (z) none of the Litigation Trust or the Litigation Trust Beneficiaries shall be entitled to assert a claim against FairPoint or Reorganized FairPoint with respect to the Valid Setoff.

 

ARTICLE IX

 

REPORTING OBLIGATIONS OF LITIGATION TRUSTEE

 

9.1                                 Reports.

 

(a)                                  The Litigation Trustee shall cause to be prepared, (i) not less than annually, financial statements of the Litigation Trust and (ii) annual income tax reporting of the Litigation Trust.  The Litigation Trustee shall cause such financial statements and tax reporting to be delivered to Reorganized FairPoint and the Litigation Trust Committee within ten (10) Business Days after the end of the relevant report preparation period.

 

(b)                                 The Litigation Trustee shall timely prepare, file and distribute such statements, reports and submissions as may be necessary to cause the Litigation Trust and the Litigation Trustee to be in compliance with all applicable laws (including all quarterly and annual reports shall be filed with the SEC to the extent required by applicable law or in order to gain an exemption from compliance with applicable law).

 

(c)                                  Notwithstanding anything in this Agreement to the contrary, no reporting requirements contained in this Agreement shall be undertaken by the Litigation Trustee if they would result in a waiver of the Privileges.

 

(d)                                 Notwithstanding anything in this Agreement to the contrary, the Litigation Trustee may post any report or notice required to be provided under this Agreement on a secure website maintained by the Litigation Trustee (the “Litigation Trust Website”) in lieu of actual delivery to any Litigation Trust Beneficiary that elects to receive such reports and notices electronically.

 

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ARTICLE X

 

TERM; TERMINATION OF THE LITIGATION TRUST

 

10.1                           Term; Termination of the Litigation Trust.

 

(a)                                  The Litigation Trust shall commence on the date hereof and terminate no later than the fifth anniversary of the Effective Date; provided, however, that, on or prior to the date that is ninety (90) days prior to such termination, the Bankruptcy Court, upon motion by a party in interest, may extend the term of the Litigation Trust if it is necessary to the liquidation of the Litigation Trust Assets. Notwithstanding the foregoing, multiple extensions can be obtained so long as Bankruptcy Court approval is obtained not less than ninety (90) days prior to the expiration of each extended term; provided, however, that in no event shall the term of the Litigation Trust extend past the tenth anniversary of the Effective Date; provided further that neither this Agreement nor the continued existence of the Litigation Trust shall prevent FairPoint from closing the Chapter 11 Cases pursuant to section 350 of the Bankruptcy Code and obtaining a final decree pursuant to Bankruptcy Rule 3022.

 

(b)                                 The Litigation Trust may be terminated earlier than its scheduled termination if (i) the Bankruptcy Court has entered a Final Order closing all of or the last of the Chapter 11 Cases pursuant to section 350(a) of the Bankruptcy Code; and (ii) the Litigation Trustee has administered all Litigation Trust Assets and performed all other duties required by the Plan, the Confirmation Order, this Agreement and the Litigation Trust.

 

10.2                           Continuance of Trust for Winding Up.  After the termination of the Litigation Trust and for the purpose of liquidating and winding up the affairs of the Litigation Trust, the Litigation Trustee shall continue to act as such until its duties have been fully performed. Prior to the final distribution of all of the remaining Litigation Trust Assets, the Litigation Trustee shall be entitled to reserve from such assets any and all amounts required to provide for its own reasonable costs and expenses, in accordance with Section 3.17, until such time as the winding up of the Litigation Trust is completed.  Upon termination of the Litigation Trust, the Litigation Trustee shall retain for a period of three years the books, records, lists of the Litigation Trust Beneficiaries, the Trust Register, and other documents and files that have been delivered to or created by the Litigation Trustee.  At the Litigation Trustee’s discretion, all of such records and documents may, but need not, be destroyed at any time after two years from the completion and winding up of the affairs of the Litigation Trust. Except as otherwise specifically provided herein, upon the termination of the Litigation Trust, the Litigation Trustee shall have no further duties or obligations hereunder.

 

ARTICLE XI

 

AMENDMENT AND WAIVER

 

11.1                           Amendment and Waiver.

 

(a)                                  The Litigation Trustee may amend, supplement or waive any provision of, this Agreement, without notice to or the consent of the Litigation Trust Beneficiaries or the approval

 

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of the Bankruptcy Court: (i) to cure any ambiguity, omission, defect or inconsistency in this Agreement; (ii) to comply with any requirements in connection with the U.S. Federal income tax status of the Litigation Trust as a “liquidating trust”; (iii) to comply with any requirements in connection with maintaining that the Litigation Trust is not subject to registration or reporting requirements of the Exchange Act, the Trust Indenture Act or the Investment Company Act; (iv) to make the Litigation Trust a reporting entity and, in such event, to comply with any requirements in connection with satisfying the registration or reporting requirements of the Exchange Act, the Trust Indenture Act or the Investment Company Act; and (v) to evidence and provide for the acceptance of appointment hereunder by a successor trustee in accordance with the terms of this Agreement and the Plan; provided, however, that notice shall be given to the Litigation Trust Beneficiaries and Reorganized FairPoint promptly after such amendment, supplement or waiver is effective.

 

(b)                                 Any provision of this Agreement that the Litigation Trustee cannot amend pursuant to Section 11.1(a) of this Agreement may be amended or waived by the Litigation Trustee, subject to the prior approval of the holders of a majority of the Class A Interests and the holders of a majority of the Class B Interests by an Interest Action, with the approval of the Bankruptcy Court upon notice and an opportunity for a hearing.

 

(c)                                  Notwithstanding paragraphs (a) and (b) above, if any proposed amendment, supplement or waiver of a provision of this Agreement will materially and adversely affect the rights of FairPoint or Reorganized FairPoint under this Agreement, then FairPoint’s or Reorganized FairPoint’s prior written consent to such amendment, supplement or waiver shall be required; provided that, the Litigation Trustee may seek an order of the Bankruptcy Court determining that a proposed amendment, supplement or waiver of a provision of this Agreement is not material and adverse to FairPoint or Reorganized FairPoint.

 

(d)                                 Notwithstanding anything contained in this Section 11.1, no amendment, supplement, or waiver may be made to this Agreement that (i) would adversely affect the payments and/or distributions to be made under this Agreement to (or on behalf or for the account of) any Litigation Trust Beneficiary; or (ii) is inconsistent with the purpose and intention of the Litigation Trust to liquidate in an expeditious but orderly manner the Litigation Trust Assets in accordance with Treasury Regulation section 301.7701-4(d).

 

ARTICLE XII

 

MISCELLANEOUS PROVISIONS

 

12.1                           Intention of Parties to Establish the Litigation Trust.  This Agreement is intended to create a liquidating trust for federal income tax purposes and, to the extent provided by law, shall be governed and construed in all respects as such a trust and any ambiguity herein shall be construed consistent herewith and, if necessary, this Agreement may be amended in accordance with Section 11.1 to comply with such federal income tax laws, which amendments may apply retroactively.

 

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12.2                           Litigation Costs.  If, during the term of this Agreement, any dispute arises among the parties to this Agreement regarding the provisions of this Agreement or the enforcement thereof, each party shall bear its own costs and expenses, including attorneys’ fees.

 

12.3                           Laws as to Construction.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to whether any conflicts of law would require the application of the law of another jurisdiction.

 

12.4                           Jurisdiction.  Without limiting any Person’s right to appeal any order of the Bankruptcy Court or to seek withdrawal of the reference with regard to any matter, (i) the Bankruptcy Court shall retain exclusive jurisdiction to enforce the terms of this Agreement and to decide any claims or disputes which may arise or result from, or be connected with, this Agreement, any breach or default hereunder, or the transactions contemplated hereby, and (ii) any and all actions related to the foregoing shall be filed and maintained only in the Bankruptcy Court, and the parties, including the Litigation Trust Beneficiaries, hereby consent to and submit to the jurisdiction and venue of the Bankruptcy Court.

 

12.5                           Severability.  If any provision of this Agreement or the application thereof to any Person or circumstance shall be finally determined by a court of competent jurisdiction to be invalid or unenforceable to any extent, the remainder of this Agreement, or the application of such provision to Persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and such provision of this Agreement shall be valid and enforced to the fullest extent permitted by law.

 

12.6                           Notices.  All notices, requests or other communications to the parties hereto shall be in writing and shall be sufficiently given only if (i) delivered in person; (ii) sent by electronic mail or facsimile communication (as evidenced by a confirmed fax transmission report); (iii) sent by registered or certified mail, return receipt requested; (iv) sent by commercial delivery service or courier; or (v) with respect to notices to any Litigation Trust Beneficiary that has elected to receive notices electronically, by posting to the Litigation Trust Website.  Until a change of address is communicated, as provided below, all notices, requests and other communications shall be sent to the parties at the following addresses or facsimile numbers:

 

	
If to   the Trustee:
    	
 
    	
Mark   E. Holliday

1211   NW Glisan Street, Suite 202

Portland,   Oregon 97209

Telephone:   (503) 243-5000

Facsimile:   (503) 296-5300
    
	
 
    	
 
    	
 
    
	
If to   FairPoint or Reorganized FairPoint:

 
    	
 
    	
FairPoint   Communications, Inc.

521   E. Morehead Street, Ste. 250

Charlotte,   NC 28202
    

 

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Telephone:   (704) 344-8150

Facsimile:   (704) 344-1594

Attn:   Susan L. Sowell, Esq.
    
	
 
    	
 
    	
 
    
	
(with   a copy to)

 
    	
 
    	
Paul,   Hastings, Janofsky & Walker LLP

75   East 55th Street

New   York, New York 10022

Telephone:   (212) 318-6000

Facsimile:   (212) 319-4090

Attn:   Luc A.   Despins, Esq.

Attn: James T. Grogan, Esq.

 

-and-

 

Quinn Emanuel Urquhart & Sullivan, LLP

51 Madison Avenue,   22nd Floor

New York, NY 10010

Telephone: (212)   849-7000

Facsimile: (212)   849-7100

Attn: Susheel   Kirpalani, Esq.

Attn: Benjamin   Finestone, Esq.
    
	
 
    	
 
    	
 
    
	
If to   the Litigation Trust Committee:

 
    	
 
    	
Bank   of America, N.A.

Bank   of America Plaza 

901   Main Street, 66th Floor

Dallas,   Texas 75202 

Telephone:   (214) 209-0928

Facsimile:   (972) 728-4449

Attn:   Jack Woodiel

Attn:   Christopher D. Post

 

-   and -

 

Paulson   & Co. Inc.

1251   Avenue of the Americas, 50th Floor

New   York, NY 10020

Telephone:   (212) 599-6622

Attn:   Daniel B. Kamensky

 

-   and -

 

Jefferies   & Company, Inc.

520   Madison Avenue

New   York, NY 10022 

Telephone:   (212) 284-1746

Attn:   Richard W. Morgner
    

 

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If to   the Litigation Trust Beneficiaries:
    	
 
    	
To   the name and address set forth on the registry maintained by the Trustee or   by posting to the Litigation Trust Website, as applicable.
    

 

All notices shall be effective and shall be deemed delivered (i) if by personal delivery, delivery service or courier, on the date of delivery; (ii) if by electronic mail or facsimile communication, on the date of receipt or confirmed transmission of the communication; (iii) if by mail, on the date of receipt; and (iv) if by posting to the Litigation Trust Website, on the day following such posting. Any Person from time to time may change his, her or its address, facsimile number, or other information for the purpose of notices to that Person by giving notice specifying such change to the Litigation Trustee, Reorganized FairPoint and the Prepetition Credit Agreement Agent.

 

12.7                           Fiscal Year.  The fiscal year of the Litigation Trust will begin on the first day of the month following the Effective Date and end on the last day of the month on which the Effective Date occurred of each calendar year.

 

12.8                           Construction; Usage.

 

(a)                                  Interpretation.  In this Agreement, unless a clear contrary intention appears:

 

(i)                                     the singular number includes the plural number and vice versa;

 

(ii)                                  reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are not prohibited by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually;

 

(iii)                               reference to any gender includes each other gender;

 

(iv)                              reference to any agreement, document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof;

 

(v)                                 reference to any Applicable Law means such Applicable Law as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder, and reference to any section or other provision of any Applicable Law means that provision of such Applicable Law from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision;

 

(vi)                              “hereunder,” “hereof,” “hereto,” and words of similar import shall be deemed references to this Agreement as a whole and not to any particular Article, Section or other provision hereof;

 

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(vii)                           reference to Articles, Sections, Schedules or Exhibits herein shall be deemed to be references to the Articles, Sections, Schedules and Exhibits to this Agreement unless otherwise specified;

 

(viii)                        “including” means including without limiting the generality of any description preceding such term; and

 

(ix)                                references to documents, instruments or agreements shall be deemed to refer as well to all addenda, exhibits, schedules or amendments thereto.

 

(b)                                 Legal Representation of the Parties.  This Agreement was negotiated by the parties hereto with the benefit of legal representation and any rule of construction or interpretation otherwise requiring this Agreement to be construed or interpreted against any party hereto shall not apply to any construction or interpretation hereof.

 

(c)                                  Headings.  The headings contained in this Agreement are for the convenience of reference only, shall not be deemed to be a part of this Agreement and shall not be referred to in connection with the construction or interpretation of this Agreement.

 

12.9                           Counterparts; Facsimile; PDF.  This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument.  Any facsimile or portable document format copies hereof or signature hereon shall, for all purposes, be deemed originals.

 

12.10                     Confidentiality.  The Litigation Trustee and each successor litigation trustee (each a “Covered Person”) shall, during the period that they serve in such capacity under this Agreement and following either the termination of this Agreement or such individual’s removal, incapacity, or resignation hereunder, hold strictly confidential and not use for personal gain any material, non-public information of or pertaining to any Entity to which any of the Litigation Trust Assets relate or of which it has become aware in its capacity (the “Information”), except to the extent disclosure is required by applicable law, order, regulation or legal process. In the event that any Covered Person is requested or required (by oral questions, interrogatories, requests for information or documents, subpoena, civil investigation, demand or similar legal process) to disclose any Information, such Covered Person shall notify Reorganized FairPoint  reasonably promptly (unless prohibited by law) so that Reorganized FairPoint  may seek an appropriate protective order or other appropriate remedy or, in its discretion, waive compliance with the terms of this Section 12.10 (and if Reorganized FairPoint  seeks such an order, the relevant Covered Person will provide cooperation as Reorganized FairPoint  shall reasonably request). In the event that no such protective order or other remedy is obtained, or that Reorganized FairPoint  waives compliance with the terms of this Section 12.10 and any Covered Person is nonetheless legally compelled to disclose the Information, the Covered Person will furnish only that portion of the Information, which the Covered Person, advised by counsel, is legally required and will give Reorganized FairPoint  written notice (unless prohibited by law) of the Information to be disclosed and exercise all reasonable efforts to obtain reliable assurance that confidential treatment will be accorded the Information.

 

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12.11                     Entire Agreement.  This Agreement (including the Recitals), the Plan, and the Confirmation Order constitute the entire agreement by and among the parties hereto and there are no representations, warranties, covenants or obligations except as set forth herein or therein. This Agreement, the Plan and the Confirmation Order supersede all prior and contemporaneous agreements, understandings, negotiations, discussions, written or oral, of the parties hereto, relating to any transaction contemplated hereunder. Except as otherwise specifically provided herein, in the Plan or in the Confirmation Order, nothing in this Agreement is intended or shall be construed to confer upon or to give any Entity or Person other than the parties hereto and their respective heirs, administrators, executors, permitted successors, or permitted assigns any right to remedies under or by reason of this Agreement, except that (i) the Prepetition Credit Agreement Agent, the holders of Allowed Prepetition Credit Agreement Claims are intended third party beneficiaries hereof and shall be entitled to enforce the provisions hereof relating to the Initial Litigation Trust Funds, the payment of the amount of the Initial Litigation Trust Funds to the holders of Allowed Prepetition Credit Agreement Claims (and to the Prepetition Credit Agreement Agent on their behalf) and the provisions of Article 13 hereof as if they were parties hereto and (ii) the Persons identified in Article 7 hereof are intended third party beneficiaries of Article 7 hereof and shall be entitled to enforce the provisions thereof as if they were parties hereto.

 

12.12                     No Bond.  Notwithstanding any state or federal law to the contrary, the Litigation Trustee (including any successor trustee) shall be exempt from giving any bond or other security in any jurisdiction.

 

12.13                     Effectiveness.  This Agreement shall become effective on the Effective Date.

 

12.14                     Investment Company Act.  This Litigation Trust is organized as a liquidating entity in the process of liquidation, and therefore should not be considered, and the Litigation Trust does not and will not hold itself out as, an “investment company” or an entity “controlled” by an “investment company” as such terms are defined in the Investment Company Act.

 

12.15                     Successor and Assigns.  This Agreement shall inure to the benefit of the parties hereto and the intended third party beneficiaries identified in Section 12.11 hereof (to the extent specified therein), and shall be binding upon the parties hereto, and each of their respective successors and assigns to the extent permitted by this Agreement and applicable law.

 

12.16                     Particular Words.  Reference in this Agreement to any Section or Article is, unless otherwise specified, to that such Section or Article under this Agreement. The words “hereof,” “herein,” “herein,” and similar terms shall refer to this Agreement and not to any particular Section or Article of this Agreement.

 

12.17                     No Execution.  All funds in the Litigation Trust shall be deemed in custodia legis until such times as the funds have actually been paid to or for the benefit of a holder of a Prepetition Credit Agreement Claim or a holder of a Litigation Trust Interest, and no holder of a Prepetition Credit Agreement Claim or holder of a Litigation Trust Interest or any other Person can execute upon, garnish or attach the Litigation Trust Assets in any manner or compel payment from the Litigation Trust except by an order of the Bankruptcy Court. Distributions from the Litigation Trust will be governed solely by the Plan and this Agreement.

 

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12.18                     Irrevocability.  The Litigation Trust is irrevocable but is subject to amendment and waiver as provided for in this Agreement.

 

ARTICLE XIII

 

LITIGATION TRUST FUNDS OBLIGATIONS

 

13.1                           Grant of Lien.

 

(a)                                  As security for the obligation of the Litigation Trust (and the Litigation Trustee) to pay the Initial Litigation Trust Funds (including any fees, costs or interest incurred in connection therewith, collectively, the “Initial Litigation Trust Funds Obligations”), subject to Section 13.1(b) herein, the Litigation Trust (and the Litigation Trustee) hereby grants to either (i) the Prepetition Credit Agreement Agent, for the benefit of the holders of Allowed Prepetition Credit Agreement Claims (if a Cash Payment is made on the Effective Date to holders of Allowed Prepetition Credit Agreement Claims under Section 5.4.2(c) of the Plan) or (ii) Reorganized FairPoint (if a Cash Payment is not made on the Effective Date to holders of Allowed Prepetition Credit Agreement Claims under Section 5.4.2(c) of the Plan), a continuing first priority security interest in and senior lien on, pledge of, collateral assignment of, and right of setoff against, all of the following property and assets of the Litigation Trust, whether now owned or existing or hereafter acquired or arising, regardless of where located (collectively, the “Litigation Trust Funds Collateral”): (x) all of the Litigation Trust Assets, (y) any Litigation Trust Proceeds and (z) to the extent not included in the foregoing, all income and proceeds of any and all of the foregoing.

 

(b)                                 If any Additional Funding is provided to the Litigation Trust, then as security for the obligation of the Litigation Trust (and the Litigation Trustee) to pay the Additional Funding (including any fees, costs or interest incurred in connection therewith, collectively, the “Additional Funding Obligations”, and together with the Initial Litigation Trust Funds Obligations, the “Litigation Trust Funds Obligations”), the Litigation Trustee hereby grants to Reorganized FairPoint, a continuing first priority security interest in and senior lien on, pledge of, collateral assignment of, and right of setoff against, the Litigation Trust Funds Collateral; provided, however, that the liens and security interests, if any, granted in this Section 13.1(b) shall be senior to any liens and security interests granted under Section 13.1(a).

 

(c)                                   The parties hereto agree and acknowledge that the Prepetition Credit Agreement Agent shall be entitled to all of the rights afforded the “Administrative Agent” under and pursuant to the terms of the Prepetition Credit Agreement, including the right to withhold from any Initial Litigation Trust Funds Obligations paid to it hereunder that portion of the Initial Litigation Trust Funds Obligations constituting fees, indemnities, expenses and other amounts payable (at the time any such Initial Litigation Trust Fund Obligations are received by the Prepetition Credit Agreement Agent) to the Prepetition Credit Agreement Agent in its capacity as such.

 

13.2                           Perfection of Lien.  The Litigation Trust (and the Litigation Trustee) agrees from time to time, at the expense of the Litigation Trust, promptly to execute and deliver all further instruments and documents, and to take all further actions, that may be necessary or desirable, or 

 

30

 

that the Prepetition Credit Agreement Agent or Reorganized FairPoint, as applicable, may reasonably request, to perfect, protect or more fully evidence the security interest, Lien, pledge, collateral assignment and right of setoff granted under Section 13.1 of this Agreement, or to enable the holders of Allowed Prepetition Credit Agreement Claims or the Prepetition Credit Agreement Agent or Reorganized FairPoint, as applicable, to exercise and enforce their respective rights and remedies under this Agreement. The Litigation Trust (and the Litigation Trustee) authorizes the Prepetition Credit Agreement Agent or Reorganized FairPoint, as applicable, to file financing or continuation statements, and amendments thereto and assignments thereof, relating to the Litigation Trust Funds Collateral.

 

13.3                           Remedies.  Upon the failure of the Litigation Trust (and/or the Litigation Trustee) to pay the Litigation Trust Funds Obligations to the holders of Allowed Prepetition Credit Agreement Claims or Reorganized FairPoint, as applicable, when the same shall be due and payable hereunder, the Prepetition Credit Agreement Agent or Reorganized FairPoint, as applicable, in addition to the other rights and remedies which it may have under this Agreement, may file a motion with the Bankruptcy Court, upon notice and hearing, to enforce the provisions of this Agreement.

 

13.4                           Termination of Lien.  At the time that the Litigation Trust Funds Obligations shall have been paid in full to the holders of Allowed Prepetition Credit Agreement Claims or Reorganized FairPoint, as applicable, the Litigation Trust Funds Collateral shall be released from the security interest and Lien created hereby and all obligations with respect thereto shall terminate, all without delivery of any instrument or performance of any act by any party, and all rights to the Litigation Trust Funds Collateral shall, subject to the terms of this Agreement, revert to the Litigation Trust. The Litigation Trust is hereby authorized to file amendments pursuant to the Uniform Commercial Code as from time to time in effect in the State of New York at such time evidencing the termination of the security interest and Lien so released. At the request of the Litigation Trust following any such termination, the Prepetition Credit Agreement Agent or Reorganized FairPoint, as applicable, shall deliver to the Litigation Trust without recourse and without representation or warranty any Litigation Trust Funds Collateral held by the Prepetition Credit Agreement Agent or Reorganized FairPoint, as applicable, hereunder and execute and deliver to the Litigation Trust, at the Litigation Trust’s expense, such documents as the Litigation Trust shall reasonably request to evidence such termination.

 

[SIGNATURE PAGE FOLLOWS]

 

31

 

IN WITNESS WHEREOF, the parties hereto have either executed and acknowledged this Agreement, or caused it to be executed and acknowledged on their behalf by their duly authorized officers all as of the date first above written.

 

	
 
    	
FAIRPOINT   AND REORGANIZED FAIRPOINT:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
FAIRPOINT   COMMUNICATIONS, INC.
    
	
 
    	
(on   behalf of itself and the other debtors and debtors-in-possession)
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Shirley J. Linn
    
	
 
    	
Name:   
    	
Shirley   J. Linn, Esq.
    
	
 
    	
Title:   
    	
Executive   Vice President and General Counsel
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
ORIGINAL   TRUSTEE:
    
	
 
    	
 
    
	
 
    	
MARK   E. HOLLIDAY
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Mark E. Holliday
    
	
 
    	
Name:   
    	
Mark   E. Holliday
    
	
 
    	
Title:
    	
Litigation   Trustee
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
CREDITORS’   COMMITTEE: Only with respect to Section 1.2
    
	
 
    	
 
    
	
 
    	
By:   Andrews Kurth LLP,  counsel to the   Creditors’ Committee
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Jonathan I. Levine
    
	
 
    	
Name:   
    	
Jonathan   I. Levine
    
	
 
    	
Title:   
    	
Partner
    

 

[Signature Page to Litigation Trust Agreement]

 

 

Schedule A

 

Direct and Indirect Subsidiaries of FairPoint Communications, Inc.

 

	
1.   BE Mobile Communications, Incorporated
    	
41.   GTC Finance Corporation*
    
	
2.   Bentleyville Communications Corporation
    	
42.   GTC, Inc.
    
	
3.   Berkshire Cable Corp.
    	
43.   Maine Telephone Company
    
	
4.   Berkshire Cellular, Inc.
    	
44.   Marianna and Scenery Hill Telephone Company
    
	
5.   Berkshire Net, Inc.*
    	
45.   Marianna Tel, Inc.
    
	
6.   Berkshire New York Access, Inc.
    	
46.   MJD Services Corp.
    
	
7.   Berkshire Telephone Corporation
    	
47.   MJD Ventures, Inc.
    
	
8.   Big Sandy Telecom, Inc.
    	
48.   Northern New England Telephone Operations LLC
    
	
9.   Bluestem Telephone Company
    	
49.   Northland Telephone Company of Maine, Inc.
    
	
10.   C & E Communications, Ltd.
    	
50.   Odin Telephone Exchange, Inc.
    
	
11.   Chautauqua & Erie Communications, Inc.
    	
51.   Orwell Communications, Inc.
    
	
12.   Chautauqua and Erie Telephone Corporation
    	
52.   Peoples Mutual Long Distance Company
    
	
13.   China Telephone Company
    	
53.   Peoples Mutual Services Company*
    
	
14.   Chouteau Telephone Company
    	
54.   Peoples Mutual Telephone Company
    
	
15.   Columbine Telecom Company
    	
55.   Quality One Technologies, Inc.
    
	
16.   Comerco, Inc.
    	
56.   Ravenswood Communications, Inc.
    
	
17.   Commtel Communications Inc.*
    	
57.   Sidney Telephone Company
    
	
18.   Community Service Telephone Co.
    	
58.   ST Computer Resources, Inc.*
    
	
19.   C-R Communications, Inc.
    	
59.   S T Enterprises, Ltd.
    
	
20.   C-R Long Distance, Inc.
    	
60.   ST Long Distance, Inc.
    
	
21.   C-R Telephone Company
    	
61.   St. Joe Communications, Inc.
    
	
22.   El Paso Long Distance Company
    	
62.   Standish Telephone Company
    
	
23.   Ellensburg Telephone Company
    	
63.   Sunflower Telephone Company, Inc.
    
	
24.   EllTel Long Distance Corp.
    	
64.   Taconic Technology Corp.
    
	
25.   Enhanced Communications of Northern New England Inc.
    	
65.   Taconic TelCom Corp.
    
	
26.   ExOp of Missouri, Inc.
    	
66.   Taconic Telephone Corp.
    
	
27.   FairPoint Broadband, Inc.
    	
67.   Telephone Operating Company of Vermont LLC
    
	
28.   FairPoint Carrier Services, Inc.
    	
68.   Telephone Service Company*
    
	
29.   FairPoint Communications Missouri, Inc.
    	
69.   The Columbus Grove Telephone Company
    
	
30.   FairPoint Communications Solutions Corp. — New York*
    	
70.   The El Paso Telephone Company
    
	
31. FairPoint Communications Solutions Corp. —   Virginia*
    	
71.   The Germantown Independent Telephone Company
    
	
32.   FairPoint Logistics, Inc.
    	
72.   The Orwell Telephone Company
    
	
33.   FairPoint Vermont, Inc.
    	
73.   UI Communications, Inc.*
    

 

*              Entity to be dissolved on the Effective Date.

 

[Schedule A to Litigation Trust Agreement]

 

 

	
34.   Fremont Broadband, LLC*
    	
74.   UI Long Distance, Inc.
    
	
35.   Fremont Telcom Co.
    	
75.   UI Telecom, Inc.*
    
	
36.   Fretel Communications, LLC
    	
76.   Unite Communications Systems, Inc.
    
	
37.   Germantown Long Distance Company
    	
77.   Utilities, Inc.
    
	
38.   GIT-CELL, Inc.*
    	
78.   Yates City Telephone Company*
    
	
39.   GITCO Sales, Inc.*
    	
79.   YCOM Networks, Inc
    
	
40.   GTC Communications, Inc.
    	
 
    

 

*              Entity to be dissolved on the Effective Date.

 

[Schedule A to Litigation Trust Agreement]

 

 

Schedule B

 

Index of Defined Terms

 

	
Term
    	
 
    	
Location
    
	
 
    	
 
    	
 
    
	
Additional   Funding
    	
 
    	
Section 1.6
    
	
Additional   Funding Obligations
    	
 
    	
Section 13.1(b)
    
	
Agreement
    	
 
    	
Introduction
    
	
Class A   Interests
    	
 
    	
Section 2.1
    
	
Class B   Interests
    	
 
    	
Section 2.1
    
	
Covered   Claim
    	
 
    	
Section 1.8(a)
    
	
Covered   Person
    	
 
    	
Section 12.10
    
	
Effective   Date
    	
 
    	
Section 1.1(b)
    
	
EMA
    	
 
    	
Section 1.2(a)(ii)
    
	
Exchange   Act
    	
 
    	
Section 2.4
    
	
FairPoint
    	
 
    	
Introduction
    
	
FairPoint   Communications
    	
 
    	
Introduction
    
	
FairPoint   Litigation Trust
    	
 
    	
Section 1.1(a)
    
	
Indemnified   Persons
    	
 
    	
Section 7.1(a)
    
	
Information
    	
 
    	
Section 12.10
    
	
Initial   Litigation Trust Fund Obligations
    	
 
    	
Section 13.1(a)
    
	
Interest   Action
    	
 
    	
Section 3.5(c)
    
	
Investment   Company Act
    	
 
    	
Section 2.4
    
	
Judgment   Amount
    	
 
    	
Section 8.3
    
	
Litigation   Trust
    	
 
    	
Introduction
    
	
Litigation   Trust Assets
    	
 
    	
Section 1.1(b)
    
	
Litigation   Trust Beneficiary
    	
 
    	
Introduction
    
	
Litigation   Trust Claims
    	
 
    	
Section 1.2(a)
    
	
Litigation   Trust Committee
    	
 
    	
Section 3.12(g)
    
	
Litigation   Trust Defendant
    	
 
    	
Section 1.8(a)
    
	
Litigation   Trust Funds Collateral
    	
 
    	
Section 13.1(a)
    
	
Litigation   Trust Funds Obligations
    	
 
    	
Section 13.1(b)
    
	
Litigation   Trust Proceeds
    	
 
    	
Section 3.1
    
	
Litigation   Trust Website
    	
 
    	
Section 9.1(d)
    
	
Litigation   Trustee
    	
 
    	
Section 1.1(b)
    
	
Original   Trustee
    	
 
    	
Introduction
    
	
Plan
    	
 
    	
Introduction
    
	
Privileges
    	
 
    	
Section 1.2(b)
    
	
Protected   Parties
    	
 
    	
Section 1.8
    
	
Registrar
    	
 
    	
Section 2.5(b)
    
	
Reorganized   FairPoint
    	
 
    	
Introduction
    
	
Resignation   Notice
    	
 
    	
Section 3.5(b)
    
	
RCC
    	
 
    	
Section 1.2(a)(v)
    
	
SEC
    	
 
    	
Section 2.4
    
	
Securities   Act
    	
 
    	
Section 2.4
    
	
Spinco   Merger
    	
 
    	
Section 1.2(a)
    

 

[Schedule B to Litigation Trust Agreement]

 

 

	
Transfer
    	
 
    	
Section 2.5(a)
    
	
Trust   Indenture Act
    	
 
    	
Section 2.4
    
	
Trust   Register
    	
 
    	
Section 2.5(c)
    
	
TSA
    	
 
    	
Section 1.2(a)(iii)
    
	
Valid   Setoff
    	
 
    	
Section 8.3
    
	
Verizon
    	
 
    	
Section 1.2(a)
    

 

[Schedule B to Litigation Trust Agreement]

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