Item 1.01. Entry into a Material Definitive Agreement.
On December 3, 2016, Consolidated Communications Holdings, Inc.
(the “Company”), Falcon Merger Sub, Inc., a newly formed Delaware corporation and a wholly-owned subsidiary of the
Company (“Merger Sub”), and FairPoint Communications, Inc., a Delaware corporation (“FairPoint”), entered
into an Agreement and Plan of Merger (the “Merger Agreement”). The Merger Agreement provides for, among other things,
a business combination whereby Merger Sub will merge with and into FairPoint, with FairPoint as the surviving entity (the “Merger”).
As a result of the Merger, the separate corporate existence of Merger Sub will cease, and FairPoint will continue as the surviving
corporation and a wholly-owned subsidiary of the Company.
At the effective time of the Merger, each share of common stock,
par value $0.01 per share, of FairPoint issued and outstanding immediately prior to the effective time of the Merger (other than
(i) shares held in treasury or owned directly by the Company, any Subsidiary of the Company, Merger Sub or Parent (other than shares
in trust accounts, managed accounts and the like or shares held in satisfaction of a debt previously contracted), and (ii) shares
held by stockholders who have properly made and not withdrawn a demand for appraisal rights under Delaware law) will be converted
into and become the right to receive 0.7300 shares of common stock, par value $0.01 per share, of the Company and cash in lieu
of fractional shares, less any applicable taxes required to be withheld, all as set forth in the Merger Agreement.
The Merger is subject to various customary closing conditions, including,
but not limited to, (i) approval by the Company’s stockholders and FairPoint’s stockholders, (ii) the expiration or
termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (iii)
federal and state regulatory approvals, (iv) the absence of any order, injunction, statute, rule, regulation or decree prohibiting,
precluding, restraining, enjoining or making illegal the consummation of the Merger, (v) the accuracy of the representations and
warranties of each party, (vi) performance, in all material respects, of all obligations and compliance with, in all material respects,
agreements and covenants to be performed or complied with by each party, (vii) declaration of effectiveness of the Registration
Statement on Form S-4 to be filed by the Company, (viii) FairPoint holding a minimum cash amount as of the effective time of the
merger, and (ix) the approval of the listing of additional shares of Company common stock to be issued to FairPoint’s stockholders.
The Company, Merger Sub and FairPoint have made customary representations,
warranties and covenants in the Merger Agreement, including FairPoint agreeing not to solicit alternative transactions or, subject
to certain exceptions, to enter into discussions concerning, or provide confidential information in connection with, an alternative
transaction. The Merger Agreement contains certain termination rights for both the Company and FairPoint, and further provides
that, upon termination of the Merger Agreement under certain circumstances, FairPoint may be obligated to pay the Company a termination
fee of $18,900,000 and, upon termination of the Merger Agreement under certain other circumstances, the Company may be obligated
to pay FairPoint a termination fee of $18,900,000.
As of the effective time, each option to purchase shares of FairPoint
common stock or other right to purchase FairPoint common stock under any FairPoint stock plan (each, a “Company Option”),
to the extent outstanding and unexercised immediately prior thereto, shall become fully vested and shall, subject to certain conditions
set forth in the Merger Agreement, without any action on the part of any holder thereof, be automatically canceled in exchange
for the right to receive, as soon as reasonably practicable following the effective time, that number of shares of Company common
stock as is equal to the option consideration (as defined in the Merger Agreement).
As of the effective time, each performance award granted under any
FairPoint stock plan (each, a “Performance Award”), to the extent outstanding immediately prior thereto, shall become
fully vested (at the 100% level) and shall, without any action on the part of any holder thereof, be automatically canceled in
exchange for the right to receive, as soon as reasonably practicable following the effective time, the number of shares of Company
common stock equal to the performance award consideration (as defined in the Merger Agreement).
As of the effective time, each restricted share award granted under
any FairPoint stock plan, to the extent outstanding and subject to vesting or forfeiture conditions (whether time-based or performance-based),
shall become fully vested or released from such forfeiture conditions as of the effective time and shall be treated as a share
of FairPoint common stock for all purposes of the Merger Agreement.
In connection with the execution of the Merger Agreement, Consolidated
Communications, Inc., a wholly-owned subsidiary of the Company (“CCI”), entered into a Commitment Letter, dated December
3, 2016 (the “Commitment Letter”), from (i) Morgan Stanley Senior Funding, Inc., (ii) The Bank of Tokyo-Mitsubishi
UFJ, Ltd., MUFG Union Bank, N.A., MUFG Securities Americas Inc. (collectively, “MUFG”) and/or any other affiliates
or subsidiaries as MUFG collectively deems appropriate to provide the services referred to therein, (iii) TD Securities (USA) LLC,
(iv) The Toronto-Dominion Bank, New York Branch, and (v) Mizuho Bank, Ltd. (collectively, the “Lead Arrangers”). The
Commitment Letter provides for a senior secured incremental term loan facility in an aggregate principal amount that will yield
up to $865,000,000 in gross proceeds to CCI (the “Incremental Term Loan Facility”) and senior unsecured term loan facility
in an aggregate principal amount that will yield up to $70,000,000 in gross proceeds to CCI (the “Unsecured Term Loan Facility”,
together with the Incremental Term Loan Facility, collectively, the “Term Loan Facilities”). The Term Loan Facilities
can be used to finance, in part, and pay the fees and expenses in connection with, the transactions contemplated by the Merger
Agreement and to repay existing indebtedness of FairPoint, with any remaining portion expected to be financed with cash on-hand
or other sources of liquidity in an amount to be determined.
Pursuant to the terms of the Commitment Letter, the definitive agreement
to be entered into with respect to the Incremental Term Loan Facility will contain (a) representations and warranties applicable
to CCI and its subsidiaries that are the same as the representations and warranties in the Third Amended and Restated Credit Agreement,
dated as of October 5, 2016, among the Company, CCI, the lenders party thereto, Wells Fargo Bank, National Association, as Administrative
Agent and other agents party thereto (the “Credit Agreement”), and (b) covenants that are the same as those contained
in the Credit Agreement. The Incremental Term Loan Facility will mature on the date that is seven years after the effective date
of the Merger, provided that unless CCI’s 6.50% Senior Notes due 2022 (the “Senior Notes”) are repaid in full
or redeemed in full, in each case, in a manner permitted under the Credit Agreement and the Incremental Facility Amendment (as
defined in the Credit Agreement) pursuant to which the Incremental Term Loan Facility is effected (and, if repaid or redeemed with
proceeds of indebtedness such indebtedness shall have a maturity date on or after March 31, 2024) on or prior to March 31, 2022,
such maturity date of the Term Loan Facility shall be March 31, 2022. The Incremental Term Loan Facility will be secured on a
pari
passu
basis with the existing credit facilities under the Credit Agreement.
The definitive financing documentation for the Unsecured Term Loan
Facility shall contain the terms set forth in the Commitment Letter, subject to the right of the Lead Arrangers to exercise certain
market flex provisions as agreed by CCI and the Lead Arrangers and, to the extent any other terms are not expressly set forth in
the Commitment Letter, will (i) be negotiated in good faith within a reasonable time period to be determined based on the expected
effective date of the Merger taking into account the timing of the syndication of the Unsecured Term Loan Facility and the pre-closing
requirements of the Merger and (ii) contain such other terms as CCI and the Lead Arrangers shall reasonably agree, it being understood
and agreed that the Unsecured Term Loan Financing Documentation shall be substantially similar to the Credit Agreement, provided
that such terms shall be, among other things, subject to (i) modifications to take into account the unsecured nature of the Unsecured
Term Loan Facility, (ii) modifications to reflect changes in law or accounting standards since the date of the Credit Agreement
and (iii) modifications to reflect operational, agency and administrative requirements of the administrative agent under the Credit
Agreement. The Unsecured Term Loan Facility will mature on the date that is seven years and six months after the effective date
of the Merger. The Unsecured Term Loan Facility will be guaranteed on a senior basis by each entity that guarantees the indebtedness
the Credit Agreement, including FairPoint and its subsidiaries.
The commitments under the Unsecured Term Loan Facility shall be
automatically and permanently reduced to zero and cancelled if, within 90 days following the date of the Commitment Letter, CCI
obtains an amendment, reasonably satisfactory to the Lead Arrangers, to the terms of the Credit Agreement (and such amendment goes
effective within such period) (the “Amendment”) allowing for an additional aggregate amount of at least $70,000,000
to be incurred as a senior secured incremental term loan credit facility pursuant to Section 2.21 of the Credit Agreement and the
commitments to provide the Incremental Term Loan Facility shall be automatically and permanently increased, on a pro rata basis,
by an amount equal to $70,000,000 upon effectiveness of the Amendment. The Company expects to promptly seek the Amendment.
The closing of the Term Loan Facilities will be subject to the satisfaction
of certain conditions, the negotiation and execution and delivery of definitive loan documentation for the Term Loan Facilities,
all as more fully set forth in the Commitment Letter.
The foregoing descriptions of the Merger Agreement and the Commitment
Letter do not purport to be complete and are qualified in their entirety by reference to the full text of the Merger Agreement
and the Commitment Letter, respectively, copies of which will be submitted in a future filing.