Exhibit 10.4

EXECUTION COPY

EMPLOYEE MATTERS AGREEMENT

by and between

Verizon Communications Inc.,

Northern New England Spinco, Inc.

and

FairPoint Communications, Inc.

dated as of January 15, 2007

--------------------------------------------------------------------------------

TABLE OF CONTENTS

 

 

Page

 

 

 

 

ARTICLE I.

Definitions

 

2

Section 1.1.

Definitions

 

2

Section 1.2.

Capitalized Terms

 

13

ARTICLE II.

Collective Bargaining Agreements and Obligations

 

14

Section 2.1.

Assumption and Continuation of Agreements

 

14

ARTICLE III.

Spinco Plans Generally

 

21

Section 3.1.

Establishment of Spinco Plans

 

21

Section 3.2.

Terms of Participation by Spinco Employees

 

21

ARTICLE IV.

Employees

 

22

Section 4.1.

Employees

 

22

Section 4.2.

No Solicitation of Employees

 

26

Section 4.3.

Unavailable Employees

 

28

ARTICLE V.

Pension Plans

 

29

Section 5.1.

Establishment of Pension Plans and Trusts

 

29

Section 5.2.

Assumption of Pension Plan Liabilities and Allocation of Interests in the
Verizon Pension Trusts

 

30

Section 5.3.

Continuation of Elections and Application to Spinco Dependents

 

35

ARTICLE VI.

Health and Welfare

 

36

Section 6.1.

Assumption of Health and Welfare

 

36

Section 6.2.

Adoption of Health and Welfare Plans

 

38

Section 6.3.

COBRA and HIPAA

 

40

Section 6.4.

Workers’ Compensation Claims

 

40

Section 6.5.

Leave of Absence Programs

 

41

Section 6.6.

Time-Off Benefits

 

41

ARTICLE VII.

Savings Plans

 

42

Section 7.1.

Establishment of the Spinco Savings Plan

 

42

Section 7.2.

Assumption of Liabilities and Transfer of Assets

 

42

ARTICLE VIII.

Equity Based Incentive Awards

 

44

Section 8.1.

General Treatment of Outstanding Awards

 

44

Section 8.2.

Outstanding Options

 

44

 

i

--------------------------------------------------------------------------------

 

 

 

Page

 

 

 

 

Section 8.3.

Treatment of Outstanding Verizon RSU and PSU Awards

 

45

Section 8.4

Treatment of Verizon Options outstanding as of the Record Date but Exercised
Prior to the Distribution Date47

 

47

Section 8.5

Treatment of Outstanding FairPoint Equity Awards47

 

47

ARTICLE IX.

Short Term Incentives and Sales Commission Programs

 

48

Section 9.1.

Incentive and Commission Plans

 

48

ARTICLE X.

Deferred Compensation Plans

 

49

Section 10.1.

Generally

 

49

Section 10.2.

Vesting and Payout of Balances

 

49

ARTICLE XI.

ASSUMPTION OF LIABILITIES

 

49

Section 11.1.

Assumption of Liabilities

 

49

Section 11.2.

Reimbursement

 

52

Section 11.3.

Indemnification

 

53

Section 11.4.

Procedures for Indemnification for Third-Party Claims

 

54

Section 11.5.

Reductions for Insurance Proceeds and Other Amounts

 

54

Section 11.6.

Contribution.

 

56

Section 11.7.

Consequential Damages

 

57

Section 11.8.

Joint Defense and Cooperation

 

57

ARTICLE XII.

General and Administrative

 

58

Section 12.1.

Cooperation

 

58

Section 12.2.

Consent of Third Parties

 

59

Section 12.3.

Survival

 

59

Section 12.4.

Interpretation

 

59

Section 12.5.

No Third Party Beneficiary

 

60

Section 12.6.

Notices

 

60

Section 12.7.

Governing Law; Jurisdiction

 

62

Section 12.8.

Waiver of Jury Trial

 

63

Section 12.9.

Specific Performance

 

63

Section 12.10.

No Assignment; No Amendment; Counterparts

 

63

 

ii

--------------------------------------------------------------------------------

 

 

 

Page

EXHIBITS

 

 

 

 

 

 

 

Exhibit A.

Actuarial Assumptions and Methods for Pension Asset Transfer

 

 

Exhibit B. Sales Commissions Programs

 

 

Exhibit C. Short Term Incentive Programs

 

 

Exhibit 2.1. Collective Bargaining Agreements

 

 

 

 

 

SCHEDULES

 

 

 

Schedule 4.1(d). Minimum Severance Benefits for Non-Union Employees

 

 

Schedule 4.1(e). Performance and Bonus Opportunities

 

 

 

iii

--------------------------------------------------------------------------------

Employee Matters Agreement

This Employee Matters Agreement (this “Agreement”), dated as of January 15, 2007
is by and among Verizon Communications Inc., a Delaware corporation (“Verizon”),
Northern New England Spinco, Inc.(“Spinco”), a Delaware corporation, and
FairPoint Communications, Inc., a Delaware corporation (“FairPoint”) (each a
“Party” and collectively, the “Parties”), and effective as of the Effective Time
of the Merger Agreement.

WHEREAS, the Board of Directors of Verizon has determined that it is in the best
interests of Verizon and its stockholders to contribute the Spinco Business (as
defined below) to a subsidiary of Spinco and to separate Spinco into an
independent company that will simultaneously merge with and into FairPoint, an
independent public company;

WHEREAS, in furtherance of the foregoing, Verizon and Spinco have entered into a
Distribution Agreement, dated as of January 15, 2007 (the “Distribution
Agreement”) that will govern the terms and conditions relating to the separation
between Verizon and Spinco; and

WHEREAS, in furtherance of the foregoing, Verizon, Spinco and FairPoint have
entered into a Merger Agreement, dated as of January 15, 2007 (the “Merger
Agreement”) that will govern the terms and conditions relating to the merger of
Spinco with and into FairPoint; and

WHEREAS, in connection with the foregoing, Verizon, Spinco and FairPoint have
agreed to enter into this Agreement for the purpose of allocating current and
former employees and employment related assets, liabilities, and
responsibilities with respect to

--------------------------------------------------------------------------------

employee compensation and benefits, collective bargaining and other employment
related matters; and

WHEREAS, the parties to this Agreement intend that, in accordance with the terms
and conditions set forth herein, the Spinco Employees (as defined below) shall
maintain uninterrupted continuity of employment, compensation and benefits and,
also, with respect to union represented employees, uninterrupted continuity of
representation for purposes of collective bargaining and uninterrupted
continuity of coverage under their collective bargaining agreements throughout
each of the internal restructurings and the merger as contemplated by the
Distribution Agreement and the Merger Agreement, including, but not limited to,
the Internal Spinoffs, the Internal Restructurings, the Contribution,
Distribution and Merger.

NOW, THEREFORE, in consideration of the mutual promises contained herein, the
Parties agree as follows:

ARTICLE I.

DEFINITIONS

SECTION 1.1.            DEFINITIONS

“Agreement” means this Employee Matters Agreement, and all exhibits, schedules,
appendices and annexes hereto.

“Benefit Payments” has the meaning ascribed to it in Section 5.3.

“COBRA” has the meaning ascribed to it in Section 6.3.

2

--------------------------------------------------------------------------------

“Code” means the United States Internal Revenue Code of 1986, as amended.

“Contributing Companies” has the meaning ascribed to it in the Distribution
Agreement.

“Contribution” has the meaning ascribed to it in the Distribution Agreement.

“Distribution” has the meaning ascribed to it in the Distribution Agreement.

“Distribution Agreement” has the meaning ascribed to it in the second recital to
this Agreement.

“Distribution Date” has the meaning ascribed to it in the Distribution
Agreement.

“EDP” means the Verizon Executive Deferral Plan.

“Effective Time” has the meaning ascribed thereto in the Merger Agreement.

“Excess Plan” has the meaning ascribed to it in Section 5.1.

“FairPoint” means FairPoint Communications, Inc.

“FairPoint Group” means FairPoint and the FairPoint Subsidiaries.

“FairPoint Indemnitees” means FairPoint and each Affiliate of FairPoint
immediately after the Effective Time and each of their respective present and
former

3

--------------------------------------------------------------------------------

Representatives and each of the heirs, executors, successors and assigns of any
of the foregoing.

“FairPoint Liabilities” means the liabilities assumed by FairPoint pursuant to
Section 11.1(b) hereof.

“FairPoint Subsidiaries” mean all direct and indirect Subsidiaries of FairPoint
immediately after the Effective Time.

“FairPoint Transition Employees and Contractors” has the meaning ascribed to it
in Section 4.2(d).

“Final Asset Transfer” has the meaning ascribed to it in Section 5.2.

“Former Spinco Employee” means any individual who had at any time provided
services in respect of the Spinco Business, but as of the Effective Time, is
neither then actively employed by the Spinco Business, nor then on an approved
Leave of Absence or Layoff with Right of Recall from any member of the Verizon
or Spinco Groups.

“FRP” means the Verizon Flexible Reimbursement Plan.

“FRP Participants” has the meaning set forth in Section 6.2(c).

“Governmental Authority” has the meaning set forth in the Distribution
Agreement.

“IDP” means the Verizon Income Deferral Plan.

4

--------------------------------------------------------------------------------

“Indemnifiable Losses” means all Losses, Liabilities, damages, claims, demands,
judgments or settlements of any nature or kind, including all costs and expenses
(legal, accounting or otherwise) that are reasonably incurred relating thereto,
suffered by an Indemnitee, including any costs or expenses of enforcing any
indemnity hereunder that are reasonably incurred and all Taxes resulting from
indemnification payments hereunder.

“Indemnifying Party” means a Person that is obligated under this Agreement to
provide indemnification.

“Indemnitee” means a Person that may seek indemnification under this Agreement.

“Initial Asset Transfer” has the meaning ascribed to it in Section 5.2.

“Internal Restructurings” has the meaning set forth in Section 2.1(a).

“Internal Spinoffs” has the meaning ascribed to it in the Merger Agreement.

“Layoff with Right of Recall” means any Represented Employee who has been
formally laid off by any member of the Verizon Group or the Spinco Group under
circumstances that entitle such Represented Employee to a right of recall by his
or her employer and whose period of eligibility for recall pursuant to the NNETO
CBAs has not expired as of the Effective Time.

“Leave of Absence” means a leave from active employment (i) granted in
accordance with the applicable policies and procedures (including, but not
limited to, any policy or procedures implemented to comply with the United
Services Employment and

5

--------------------------------------------------------------------------------

Reemployment Rights Act, the Family Medical Leave Act or similar state laws) of
a member of the Verizon Group or (ii) arising due to an illness or injury that
results in the individual being eligible for short term disability benefits,
accident benefits or workers’ compensation under the Verizon short-term
disability or accident plan or state law, which, in either case, is scheduled or
expected to end as of a date after the Effective Time.  For the avoidance of
doubt, any employee who is not at work on the day of the Effective Time due to
vacation, sickness or accident that is not expected to qualify the individual
for short-term disability or accident benefits, workers’ compensation or other
temporary absence, such as due to the use of personal days shall be considered
to be actively at work on the day of the Effective Time.  Any individual who is
receiving long term disability benefits at the Effective Time shall not be
considered to be on a “Leave of Absence” for purposes of this definition.

“Liabilities” means any and all obligations, benefit entitlements, losses,
claims, charges, debts, demands, actions, costs and expenses (including those
arising under any contract, collective bargaining agreement, or Plan, and
administrative and related costs and expenses of any plan, program, or
arrangement), of any nature whatsoever, whether absolute or contingent, vested
or unvested, matured or unmatured, liquidated or unliquidated, accrued or
unaccrued, known or unknown, whenever arising.

“Losses” has the meaning ascribed to it in the Distribution Agreement.

“Merger” has the meaning ascribed to it in the Merger Agreement.

“Merger Agreement” has the meaning ascribed to it in the third recital to this
Agreement.

“NNETO” means Northern New England Telephone Operations, Inc.

6

--------------------------------------------------------------------------------

“NNETO CBAs” means any and all collective bargaining agreements governing the
wages, hours, terms and conditions of employment of any Spinco Employee,
including MOAs and MOUs, each of which is listed on Exhibit 2.1 hereof, and all
collective bargaining practices of the Verizon Group with respect to such
employees.

“North Accrued Benefits” has the meaning ascribed to it in Section 5.2(b).

“Original Option” has the meaning ascribed to it in Section 8.2.

“Outstanding Awards” has the meaning ascribed to it in Section 8.1.

“Party” has the meaning ascribed to it in the preamble to this Agreement.

“Parties” has the meaning ascribed to it in the preamble to this Agreement.

“Pension Plan Asset Transfer Amount” means, in the case of a transfer of assets
and liabilities from a Verizon Pension Plan to a Spinco Pension Plan, the amount
required to be transferred pursuant to Section 5.2.

“Person” has the meaning ascribed to it in the Distribution Agreement.

“PSU” has the meaning ascribed to it in Section 8.3.

“Record Date” has the meaning ascribed to it in the Distribution Agreement.

“Record Date Option” has the meaning ascribed to it in Section 8.4.

7

--------------------------------------------------------------------------------

“Remaining Option” has the meaning ascribed to it in Section 8.2.

“Represented Employee” means any Spinco Employee whose wages, hours, terms and
conditions of employment are governed by a NNETO CBA.

“Retained Employee” means any individual who, as of the Effective Time, (i) is
actively employed by, or on an approved Leave of Absence or Lay-off with Right
of Recall from, a member of the Verizon Group or the Spinco Group, (ii) had been
primarily employed in the Spinco Business and (iii) whose employment a member of
the Verizon Group determines not to transfer to a member of the FairPoint Group.

“Representative” means, with respect to any Person, any of such Person’s
directors, managers or persons acting in a similar capacity, officers,
employees, agents, consultants, financial and other advisors, accountants,
attorneys and other representatives.

“RSU” has the meaning ascribed to it in Section 8.3.

“Sales Commission Program” means the programs listed on Exhibit B of this
Agreement.

“Short Term Incentive Plan” means the Plans listed on Exhibit C of this
Agreement.

“Spinco Business” has the meaning ascribed to it in the Distribution Agreement.

“Spinco Common Stock” has the meaning ascribed to it in the Distribution
Agreement.

8

--------------------------------------------------------------------------------

“Spinco Dependents” means, with respect to any Spinco Employee, any dependent of
such person who is eligible to receive benefits under the terms of any
applicable Spinco Plan.

“Spinco Employee” means any individual who (i) is either actively employed
(whether on a full or part-time basis) by, or is on a Leave of Absence or Layoff
with Right of Recall from, a member of the Spinco or Verizon Group, whose
primary duties at the Effective Time (or, in respect of an individual on a Leave
of Absence or Layoff with Right of Recall, on his or her last date of active
employment) were related to the Spinco Business, and (ii) is not a Retained
Employee.

“Spinco Excess Pension Plan” has the meaning given to it in Section 5.1.

“Spinco FSA” has the meaning ascribed to it in Section 6.2.

“Spinco Group” means Spinco and each entity that is one of its Subsidiaries
immediately prior to the Effective Time.

“Spinco Liabilities” means the liabilities assumed by Spinco pursuant to Section
11.1(a) hereof.

“Spinco Management Pension Plan” has the meaning ascribed to it in Section 5.1.

“Spinco Mirror Plans” means the Spinco Welfare Plans, the Spinco Union Pension
Plan, the Spinco Management Pension Plan, the Spinco Excess Pension Plan and,
the Spinco Savings Plans.

9

--------------------------------------------------------------------------------

“Spinco Pension Plans” mean the Spinco Management Pension Plan, the Spinco
Excess Pension Plan and the Spinco Union Pension Plan.

“Spinco Plan” means any plan, policy, program, payroll practice, on-going
arrangement, contract, trust, insurance policy or other agreement or funding
vehicle, whether written or unwritten, maintained or sponsored by any member of
the Spinco Group for the purpose of providing compensation or benefits to any
Spinco Employee or Spinco Dependent.

“Spinco Savings Plan” has the meaning ascribed to it in Section 7.1.

“Spinco Subsidiary” has the meaning set forth in the Distribution Agreement.

“Spinco Trust” has the meaning ascribed to it in Section 5.2.

“Spinco Union Pension Plan” has the meaning ascribed to it in Section 5.2.

“Spinco Welfare Plans” mean the Plans established by FairPoint pursuant to
Section 6.2 that correspond to the Verizon Welfare Plans.

“Subsidiary” has the meaning ascribed to it in the Distribution Agreement.

“Taxes” has the meaning ascribed to it in the Distribution Agreement.

“Territory” has the meaning ascribed to it in the Distribution Agreement.

“Third-Party Claim” has the meaning ascribed to it in the Distribution
Agreement.

10

--------------------------------------------------------------------------------

“Time-Off Benefits” has the meaning ascribed to it in Section 6.6.

“Transition Services Agreement” has the meaning ascribed to it in the
Distribution Agreement.

“Unavailable Employee” has the meaning ascribed to it in Section 4.3.

“Verizon” means Verizon Communications Inc.

“Verizon Common Stock” has the meaning ascribed to it in the Distribution
Agreement.

“Verizon Employee” means any individual who, at the relevant time, is actively
employed by, or on an approved leave of absence or lay-off with right of recall
from, a member of the Verizon Group.

“Verizon Group” means Verizon and the Verizon Subsidiaries.

“Verizon Indemnitees” means Verizon, each Affiliate of Verizon immediately after
the Contribution and each of their respective present and former Representatives
and each of the heirs, executors, successors and assigns of any of the
foregoing.

“Verizon Liabilities” means all Liabilities of Verizon or any of the Verizon
Subsidiaries.  In no event shall the term Verizon Liabilities include any
Liabilities that are transferred from or otherwise cease to be Liabilities of
any Verizon Group pursuant to this Agreement or that are to, or have become,
Spinco Liabilities.

11

--------------------------------------------------------------------------------

“Verizon Plan” means any plan, policy, program, payroll practice, on-going
arrangement, contract, trust, insurance policy or other agreement or funding
vehicle, whether written or unwritten, maintained or sponsored by Verizon or any
of its Subsidiaries or Affiliates (or any of their respective predecessors) at
any time on or prior to the Distribution Date for the purpose of providing
compensation or benefits to any current or former employee of any such person.

 “Verizon Pension Plans” mean the VMPP, the Verizon Excess Pension Plan, the
VEMPP, and the Verizon Pension Plan for New York and New England Associates, as
each such plan is amended from time to time.

“Verizon Pre-Distribution Stock Value” means the closing price per share of
Verizon Common Stock trading on the “regular way” basis (based on the reported
value inclusive of the right to participate in the Distribution) on the
Distribution Date.

“Verizon Post-Distribution Stock Value” means the opening price per share of
Verizon Common Stock on the first trading day following the Distribution Date;
provided that, in no event shall such Verizon Post-Distribution Stock Value be
less than the Verizon Pre-Distribution Stock Value.

“Verizon Savings Plans” mean the Verizon Savings Plan for Management Employees,
and the Verizon Savings and Security Plan for New York and New England
Associates, as each such plan is amended from time to time.

‘‘Verizon Share Ratio” means the quotient obtained by dividing the Verizon
Pre-Distribution Stock Value by the Verizon Post-Distribution Stock Value.

“Verizon Stock Option” has the meaning ascribed to it in Section 8.2.

12

--------------------------------------------------------------------------------

“Verizon Subsidiaries” mean all direct and indirect Subsidiaries that are, or
continue to be, Subsidiaries of Verizon immediately after the Distribution
Date.  For the avoidance of doubt, for purposes of this Agreement no member of
the Spinco Group or the FairPoint Group shall be a Verizon Subsidiary.

“Verizon Transition Employees and Contractors” has the meaning ascribed to it in
Section 4.2(c).

“Verizon Trust” has the meaning ascribed to it in Section 5.2(c).

“Verizon Welfare Plans” has the meaning ascribed to it in Section 6.1.

“VMPP” has the meaning ascribed to it in Section 5.1.

“VNE” means Verizon New England Inc.

SECTION 1.2.            CAPITALIZED TERMS.  ANY OTHER CAPITALIZED TERM USED, BUT
NOT DEFINED HEREIN, BUT DEFINED IN THE DISTRIBUTION AGREEMENT OR THE MERGER
AGREEMENT, SHALL HAVE THE MEANING ASCRIBED THERETO IN THE DISTRIBUTION AGREEMENT
OR THE MERGER AGREEMENT.

13

--------------------------------------------------------------------------------

ARTICLE II.

COLLECTIVE BARGAINING AGREEMENTS AND OBLIGATIONS

SECTION 2.1.            ASSUMPTION AND CONTINUATION OF AGREEMENTS

(A)           DISTRIBUTION

(I)            PRIOR TO THE DISTRIBUTION DATE, IN CONNECTION WITH EACH OF THE
INTERNAL RESTRUCTURINGS, INTERNAL SPINOFFS AND THE CONTRIBUTIONS UNDERTAKEN BY
VERIZON IN CONTEMPLATION OF, AND IN CONNECTION WITH, THE CONTRIBUTION,
DISTRIBUTION AND MERGER, INCLUDING THE INTERNAL SPINOFFS, INTERNAL
RESTRUCTURINGS AND CONTRIBUTIONS TO BE EFFECTED IN ACCORDANCE WITH THE
DISTRIBUTION AGREEMENT (THE “INTERNAL RESTRUCTURINGS”), VERIZON SHALL CAUSE ONE
OR MORE MEMBERS OF THE VERIZON GROUP TO TAKE ANY AND ALL ACTIONS NEEDED TO
EFFECTUATE: (1) THE CONTINUED UNINTERRUPTED EMPLOYMENT OF THE REPRESENTED
EMPLOYEES, IN ACCORDANCE WITH THE NNETO CBAS, BY THE APPROPRIATE MEMBER OF THE
VERIZON GROUP, AND (2) THE ASSUMPTION AND UNINTERRUPTED CONTINUATION OF THE
NNETO CBAS COVERING THE REPRESENTED EMPLOYEES BY THE APPROPRIATE MEMBER OF THE
VERIZON GROUP, INCLUDING BUT NOT LIMITED TO, (I) THE CONTINUED UNINTERRUPTED
REPRESENTATION FOR PURPOSES OF COLLECTIVE BARGAINING OF THOSE REPRESENTED
EMPLOYEES BY THEIR UNIONS, IN ACCORDANCE WITH THE NNETO CBAS, WITH THE
APPROPRIATE MEMBER OF THE VERIZON GROUP, (II) THE CONTINUED UNINTERRUPTED
COMPENSATION OF THE REPRESENTED EMPLOYEES IN ACCORDANCE WITH THE NNETO CBAS, AND
(III) THE CONTINUED UNINTERRUPTED BENEFIT COVERAGE OF THE REPRESENTED EMPLOYEES
UNDER THE APPROPRIATE VERIZON PLANS IN ACCORDANCE WITH THE NNETO CBAS.  WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, VERIZON SHALL CAUSE:

14

--------------------------------------------------------------------------------

(1)   VNE TO FORM NNETO AND AT AND FROM (X) THE TIME THAT VNE CONTRIBUTES TO
NNETO ITS ASSETS AND LIABILITIES ASSOCIATED WITH THE SPINCO BUSINESS AND ITS
SPINCO EMPLOYEES (INCLUDING, BUT NOT LIMITED TO, REPRESENTED EMPLOYEES) UNTIL
(Y) THE DISTRIBUTION DATE, VERIZON SHALL ADD AND MAINTAIN NNETO AS A
PARTICIPATING COMPANY IN THE VERIZON PLANS IN WHICH THE REPRESENTED EMPLOYEES
ARE ELIGIBLE TO PARTICIPATE AND SHALL ALSO CAUSE NNETO TO, AND NNETO SHALL,
(1) EMPLOY THE REPRESENTED EMPLOYEES IN ACCORDANCE WITH THE NNETO CBAS, AND
(2) ASSUME AND HONOR THE NNETO CBAS GOVERNING THE EMPLOYMENT OF SUCH REPRESENTED
EMPLOYEES, INCLUDING BUT NOT LIMITED TO, (I) RECOGNIZE THE UNIONS REPRESENTING
THOSE REPRESENTED EMPLOYEES AS THEIR COLLECTIVE BARGAINING REPRESENTATIVE IN
ACCORDANCE WITH THE NNETO CBAS, (II) CONTINUE UNINTERRUPTED THE COMPENSATION OF
THE REPRESENTED EMPLOYEES IN ACCORDANCE WITH THE NNETO CBAS, AND (III) BECOME A
PARTICIPATING COMPANY IN THE VERIZON PLANS IN WHICH SUCH REPRESENTED EMPLOYEES
ARE ELIGIBLE TO PARTICIPATE IN ACCORDANCE WITH THE NNETO CBAS; AND

(2)   at and from the time that each Contributing Company other than VNE
contributes to NNETO its assets and liabilities associated with the Spinco
Business and its Spinco Employees (including, but not limited to, Represented
Employees) until (y) the Distribution Date, NNETO shall, (1) employ the
Represented Employees in accordance with the NNETO CBAs, and (2) assume and
honor the NNETO CBAs governing the employment of such Represented Employees,
including, but not limited to, (i) recognize the unions representing those
Represented Employees as their collective bargaining representative in
accordance with the NNETO CBAs, (ii) continue uninterrupted the compensation of
such Represented Employees in accordance with NNETO CBAs, and (iii) acknowledge
that NNETO is the participating company in the Verizon Plans in which the
Represented

15

--------------------------------------------------------------------------------

Employees are eligible to participate in accordance with the NNETO CBAs; and,

(3)   Spinco to be formed, and at and from (x) the time that Verizon contributes
to Spinco the stock of NNETO until (y) the Distribution Date, Verizon and Spinco
shall cause NNETO to, and NNETO shall, (1) continue to employ the Represented
Employees in accordance with the NNETO CBAs, and (2) continue to honor the NNETO
CBAs governing the employment of the Represented Employees, including but not
limited to, (i) continue to recognize the unions representing those Represented
Employees as their collective bargaining representative in accordance with the
NNETO CBAs, (ii) continue uninterrupted the compensation of such Represented
Employees in accordance with NNETO CBAs, and (iii) acknowledge that NNETO is a
participating company in the Verizon Plans in which the Represented Employees
are eligible to participate in accordance with the NNETO CBAs.  Verizon shall
also cause Spinco to create and become the sponsor of, as of the Distribution
Date, mirror benefit plans identical in all material respects to the Verizon
Plans covering the Represented Employees prior to the Distribution Date and
provide funding, as of the Distribution Date, in accordance with the express
provisions of this Agreement, for the Spinco Pension Plan covering Represented
Employees.

(II)           AS OF AND AFTER THE DISTRIBUTION DATE, SPINCO SHALL:

(1)   adopt and sponsor, or cause to be adopted or sponsored by the appropriate
member of the Spinco Group, the Spinco Mirror Plans which, in respect of the
participation therein by the Represented Employees, are to be

16

--------------------------------------------------------------------------------

identical in all material respects to the Verizon Plans covering the Represented
Employees prior to the Distribution Date;

(2)   acknowledge that NNETO is the participating company in the Spinco Mirror
Plans in which such Represented Employees are eligible to participate;

(3)   provide funding, as of the Distribution Date, in accordance with the
express provisions of this Agreement, for the Spinco Pension Plan covering
Represented Employees, and,

(4)   cause the trustee of the Spinco Trust to accept and administer the Spinco
trust assets funding the Spinco Pension Plan covering the Represented Employees;
and,

(5)   cause NNETO and each other appropriate member of the Spinco Group to
(1) continue to employ the Represented Employees in accordance with the NNETO
CBAs, and (2) continue to honor the NNETO CBAs, including but not limited to,
(i) continue to recognize the unions representing those Represented Employees as
their collective bargaining representative in accordance with the NNETO CBAs,
(ii) continue uninterrupted the compensation of such Represented Employees in
accordance with the NNETO CBAs, and (iii) acknowledge that NNETO is the
participating company in the Spinco Plans in which the Represented Employees are
eligible to participate in accordance with the NNETO CBAs.

AS OF AND AFTER THE DISTRIBUTION DATE, ANY AND ALL OBLIGATIONS OF ANY MEMBER OF
THE VERIZON GROUP ARISING UNDER, RELATING TO OR RESULTING FROM THE

17

--------------------------------------------------------------------------------

NNETO CBAS, AND THE SPINCO MIRROR PLANS, SHALL BECOME AND BE SOLELY THE
OBLIGATIONS OF THE SPINCO GROUP AND SHALL BE PERFORMED BY SPINCO AND ITS
SUBSIDIARIES.  WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, AS OF THE
DISTRIBUTION DATE, THE APPROPRIATE MEMBER OF THE SPINCO GROUP SHALL HAVE ASSUMED
AND SHALL THEREAFTER HONOR THE NNETO CBAS.

(B)           MERGER

(I)            AS OF AND AFTER THE EFFECTIVE TIME, FAIRPOINT SHALL:

(1)   assume and become the sponsor of, or cause the appropriate member of the
FairPoint Group to assume and become the sponsor of, the Spinco Mirror Plans
covering Represented Employees;

(2)   cause the trustee of the Spinco Trust to accept and administer the Spinco
trust assets funding the pension plan covering the Represented Employees;

(3)   acknowledge that NNETO is the participating company in the Spinco Mirror
Plans in which such Represented Employees are eligible to participate; and

(4)   cause NNETO and each other appropriate member of the FairPoint Group to
(1) continue to employ the Represented Employees in accordance with the NNETO
CBAs, and (2) continue to honor the NNETO CBAs, including but not limited to,
(i) continue to recognize the unions representing those Represented Employees as
their collective bargaining representative in accordance with the NNETO CBAs,
(ii) continue uninterrupted the

18

--------------------------------------------------------------------------------

compensation of such Represented Employees in accordance with the NNETO CBAs,
and (iii) acknowledge that NNETO or such other member of the FairPoint Group is
the participating company in the Spinco Plans in which the Represented Employees
are eligible to participate in accordance with the NNETO CBAs.

(ii) As of and after the Effective Time, any and all obligations of any member
of the Verizon Group arising out of, relating to or resulting from the NNETO
CBAs, the Verizon Plans, and the Spinco Plans with respect to such Represented
Employees shall become and be solely the obligations of the FairPoint Group and
shall be performed by the FairPoint Group; provided that Verizon shall be
responsible for (1) all Liabilities attributable to any individual who is a
Former Spinco Employee and (2) all Liabilities relating to (A) medical or dental
insurance claims in respect of services that were performed or goods provided
and with respect to which the claim has been submittedprior to the Effective
Time and (B) life insurance and disability claims in respect of deaths or
disabilities occurring prior to the Effective Time.  For the avoidance of doubt,
with respect to any payments due to any Represented Employee under the terms of
the Verizon short term disability plan, the obligations to make payments with
respect to any period prior to the Effective Time shall remain with Verizon, and
the obligations to make any payments with respect to any period at or after the
Effective Time shall be the sole responsibility of FairPoint or a Spinco Plan. 
Without limiting the generality of the foregoing, as of the Effective Time, the
appropriate member of the FairPoint Group shall have assumed and shall
thereafter honor the NNETO CBAs, provided, however, that nothing in this section
2.1(b) or this Agreement shall preclude FairPoint or, as applicable, any member
of the FairPoint Group from bargaining in good faith, after the Effective Time,
with the unions representing those Represented Employees.

(C)           COMPENSATION AND BENEFITS OF REPRESENTED EMPLOYEES.  WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING,(I) FROM THE CONSUMMATION OF EACH OF
THE STEPS OF THE

19

--------------------------------------------------------------------------------

INTERNAL RESTRUCTURINGS AND PRIOR TO THE DISTRIBUTION DATE, VERIZON, AND (II) AS
OF THE DISTRIBUTION DATE, SPINCO AND (III) AS OF THE EFFECTIVE TIME, FAIRPOINT
SHALL EACH BE RESPONSIBLE TO, AND SHALL, ASSURE THAT THE COMPENSATION, BENEFITS,
HOURS, TERMS AND CONDITIONS OF EMPLOYMENT OF REPRESENTED EMPLOYEES SHALL
CONTINUE TO BE GOVERNED BY THE NNETO CBAS.

20

--------------------------------------------------------------------------------

ARTICLE III.

SPINCO PLANS GENERALLY

SECTION 3.1.            ESTABLISHMENT OF SPINCO PLANS

FairPoint shall have adopted, or shall have assumed, the following Spinco Mirror
Plans: the Spinco Welfare Plans, the Spinco Savings Plans, the Spinco Union
Pension Plan, the Spinco Management Pension Plan and the Spinco Excess Pension
Plan.  FairPoint or a member of the Spinco Group shall be or become the plan
sponsor of, and from and after the Effective Time shall have sole responsibility
for each Spinco Mirror Plan, except to the extent that Verizon is responsible
for certain pre-Effective Time liabilities as specified in Section 2(b)(ii) for
Represented Employees (and dependents) and Section 6.1(a) for all other Spinco
Employees and Spinco Dependents.  Each Spinco Mirror Plan shall be identical in
all material respects to the corresponding Verizon Plans as in effect
immediately prior to the Distribution Date.

SECTION 3.2.            TERMS OF PARTICIPATION BY SPINCO EMPLOYEES

Each of the Spinco Mirror Plans shall be, with respect to Spinco Employees who
are participants in such plan, in all respects the successors in interest to and
shall recognize all rights and entitlements as of the Effective Time under the
corresponding Verizon Plan in which such Spinco Employee participated prior to
the Effective Time.  Verizon and FairPoint agree that Spinco Employees are not
entitled to receive duplicative benefits from the Verizon Plans, the Spinco
Plans, and, if applicable, any collective bargaining agreements. 
Notwithstanding the immediately preceding sentence, a member of the Verizon
Group or, if applicable, the Verizon Welfare Plans shall assume and remain
responsible for payment of the Liabilities specified in Section 2.1(b)(ii)
hereof for

21

--------------------------------------------------------------------------------

Represented Employees (and dependents) and Section 6.1(a) for all other Spinco
Employees and Spinco Dependents.

With respect to Spinco Employees, each Spinco Mirror Plan shall provide that all
service, all compensation, and all other factors affecting benefit
determinations that, as of the Distribution Date, were recognized under the
corresponding Verizon Plan (for periods immediately before the Distribution
Date) shall receive full recognition, credit, and validity and be taken into
account under such Spinco Mirror Plan to the same extent as though arising under
such Spinco Mirror Plan, except to the extent that duplication of benefits would
result.  All beneficiary designations made by Spinco Employees under the
corresponding Verizon Plan shall be transferred to and be in full force and
effect under the corresponding Spinco Mirror Plans until such beneficiary
designations are replaced or revoked by the Spinco Employee who made the
beneficiary designation.

Notwithstanding the foregoing provisions of this Section 3.2 and subject to any
collective bargaining agreements and obligations, nothing in this Agreement
other than those provisions specifically set forth herein to the contrary shall
preclude FairPoint (or, as applicable, any member of the FairPoint Group) from
amending, merging, modifying, terminating, eliminating, reducing, or otherwise
altering in any respect after the Effective Time any Spinco Plan, any benefit
under any Plan or any trust, insurance policy or funding vehicle related to any
Spinco Plan.

ARTICLE IV.

EMPLOYEES

SECTION 4.1.            EMPLOYEES

(a)           General.  To the extent that any individual defined as a Spinco
Employee will not automatically become or continue to be an employee of the
FairPoint Group as of

22

--------------------------------------------------------------------------------

the Effective Time as a result of the internal restructuring undertaken by
Verizon in contemplation of, and in connection with, the Distribution and
Merger, and as a result of the Merger, Verizon agrees to cause the employment of
such Spinco Employees to be transferred to the appropriate member of the
FairPoint Group, and the appropriate member of the FairPoint Group agrees to
accept such transferred employee, as of the Effective Time.  To the extent that
any employees of a member of the Verizon Group working in the Territory, as of
the date of the execution of this Agreement, who support primarily the local
telephone operations of VNE in any New England state do not primarily support
the Spinco Business, except for employees performing services to be provided
pursuant to the Transition Services Agreement, or otherwise provided by Spinco
after the Effective Time, Verizon shall use commercially reasonable best efforts
to realign the work of such employees so that their work is primarily in support
of the Spinco Business as of the Effective Time.  Verizon shall provide Spinco
with a list of all Spinco Employees who are on Leave of Absence or Lay-off with
Right of Recall within 5 days of the Effective Time.  Notwithstanding the
foregoing, Retained Employees and all other individuals employed by the Verizon
Group at the Effective Time who are not Spinco Employees shall remain employees
of Verizon or another member of the Verizon Group immediately following such
Effective Time.  Verizon shall identify each Retained Employee by written notice
delivered to FairPoint promptly following the time at which such person has been
identified as a Retained Employee, but in all events not later than six calendar
months following the execution of the Merger Agreement.    In addition, not
later than six calendar months following the execution of the Merger Agreement,
Verizon shall identify by name each individual who is reasonably anticipated to
be a Spinco Employee, and shall periodically update this list as reasonably
requested by FairPoint during the period through the Effective Time.

(B)           COMPENSATION AND BENEFITS OF REPRESENTED EMPLOYEES.  WITHOUT
LIMITING THE GENERALITY OF ANYTHING IN THIS AGREEMENT, THE COMPENSATION,
BENEFITS, HOURS, TERMS

23

--------------------------------------------------------------------------------

AND CONDITIONS OF EMPLOYMENT OF REPRESENTED EMPLOYEES SHALL CONTINUE TO BE
DETERMINED IN ACCORDANCE WITH THE APPLICABLE NNETO CBAS.

(C)           NON-TERMINATION OF EMPLOYMENT OR BENEFITS.  EXCEPT AS OTHERWISE
EXPRESSLY AND SPECIFICALLY PROVIDED HEREIN, (I) NO PROVISION OF THIS AGREEMENT,
THE DISTRIBUTION AGREEMENT OR THE MERGER AGREEMENT, (II) NO ACTIONS OR
RESTRUCTURINGS INTERNAL TO THE VERIZON GROUP OR THE SPINCO GROUP TAKEN IN
CONTEMPLATION OF, OR IN CONNECTION WITH, THIS AGREEMENT, THE DISTRIBUTION
AGREEMENT OR THE MERGER AGREEMENT, (III) NO ACTIONS TAKEN BY OR BETWEEN THE
VERIZON GROUP AND THE SPINCO GROUP AT THE TIMES OF THE INTERNAL RESTRUCTURINGS
AND DISTRIBUTION, AND (IV) NO ACTIONS TAKEN BY OR BETWEEN THE VERIZON GROUP, THE
SPINCO GROUP AND THE FAIRPOINT GROUP AT THE TIMES OF THE DISTRIBUTION AND
MERGER, SHALL BE CONSTRUED TO CREATE ANY RIGHT, OR ACCELERATE ANY ENTITLEMENT,
TO ANY COMPENSATION OR BENEFIT WHATSOEVER ON THE PART OF ANY EMPLOYEE EMPLOYED
BY ANY MEMBER OF THE VERIZON GROUP OR THE FAIRPOINT GROUP, OR TO LIMIT THE
ABILITY OF THE FAIRPOINT GROUP TO ADMINISTER ANY SPINCO PLAN IN ACCORDANCE WITH
ITS TERMS (SUBJECT TO ANY APPLICABLE COLLECTIVE BARGAINING AGREEMENT).  WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, NOTHING DESCRIBED ABOVE IN 4.1(C)
SHALL CAUSE ANY EMPLOYEE OF ANY MEMBER OF THE VERIZON GROUP OR THE SPINCO GROUP,
OR ANY SPINCO EMPLOYEE EMPLOYED BY A MEMBER OF THE FAIRPOINT GROUP TO BE DEEMED
TO HAVE INCURRED A TERMINATION OF EMPLOYMENT OR TO HAVE CREATED ANY ENTITLEMENT
TO ANY SEVERANCE BENEFITS OR THE COMMENCEMENT OF ANY OTHER BENEFITS UNDER ANY
VERIZON PLAN OR ANY COLLECTIVE BARGAINING AGREEMENT.

(D)           NO RIGHT TO CONTINUED EMPLOYMENT.  SUBJECT TO THE NNETO CBAS,
NOTHING CONTAINED IN THIS AGREEMENT SHALL CONFER ON ANY EMPLOYEE OF ANY MEMBER
OF THE VERIZON GROUP OR ANY SPINCO EMPLOYEE ANY RIGHT TO CONTINUED EMPLOYMENT. 
EXCEPT AS SPECIFICALLY PROVIDED OTHERWISE HEREIN (INCLUDING, BUT NOT LIMITED TO,
SECTION 4.1(B) AND 4.1(E)), AND SUBJECT TO THE NNETO CBAS, THIS AGREEMENT SHALL
NOT LIMIT THE ABILITY OF FAIRPOINT TO CHANGE, AT ANY TIME AFTER THE EFFECTIVE
TIME AND IN ITS SOLE DISCRETION, A

24

--------------------------------------------------------------------------------

SPINCO EMPLOYEE’S POSITION, COMPENSATION OR BENEFITS FOR PERFORMANCE-RELATED,
BUSINESS OR ANY OTHER REASONS OR REQUIRE ANY MEMBER OF THE FAIRPOINT GROUP TO
CONTINUE THE EMPLOYMENT OF A SPINCO EMPLOYEE FOR ANY PARTICULAR PERIOD OF TIME
AFTER THE EFFECTIVE TIME, PROVIDED THAT FAIRPOINT SHALL BEAR ALL LIABILITY FOR
ANY SUCH TERMINATION OF EMPLOYMENT, AND, WITH RESPECT TO ANY SUCH TERMINATIONS
OF OR MODIFICATION OF THE TERMS AND CONDITIONS OF EMPLOYMENT OF ANY SPINCO
EMPLOYEE OCCURRING PRIOR TO THE FIRST ANNIVERSARY OF THE EFFECTIVE TIME, SHALL
PROVIDE TO ANY TERMINATED SPINCO EMPLOYEE (OTHER THAN A REPRESENTED EMPLOYEE)
SEVERANCE AND TERMINATION BENEFITS NO LESS FAVORABLE IN THE AGGREGATE THAN THE
SEVERANCE AND TERMINATION BENEFITS THAT ARE DESCRIBED ON SCHEDULE 4.1(D) TO THIS
AGREEMENT.

(E)           CONTINUATION OF COMPENSATION AND BENEFITS FOR SPINCO EMPLOYEES WHO
ARE NOT REPRESENTED EMPLOYEES.  WITH RESPECT TO SPINCO EMPLOYEES WHO ARE NOT
REPRESENTED EMPLOYEES, FOR A PERIOD OF ONE YEAR FOLLOWING THE EFFECTIVE TIME,
FAIRPOINT SHALL, OR SHALL CAUSE ANOTHER MEMBER OF THE FAIRPOINT GROUP, (I) TO
PAY ALL SUCH NON-REPRESENTED SPINCO EMPLOYEES AT LEAST THE SAME RATE OF BASE
SALARY AS WAS PAID TO EACH SUCH NON-REPRESENTED SPINCO EMPLOYEE BY THE VERIZON
GROUP IMMEDIATELY PRIOR TO THE EFFECTIVE TIME, (II) TO CONTINUE TO PROVIDE
PERFORMANCE AND OTHER BONUS OPPORTUNITIES TO EACH SUCH NON-REPRESENTED SPINCO
EMPLOYEE THAT ARE IDENTICAL IN ALL MATERIAL RESPECTS TO THE PERFORMANCE AND
OTHER BONUS OPPORTUNITIES DESCRIBED ON SCHEDULE 4.1(E) TO THIS AGREEMENT, WHICH
WERE MADE AVAILABLE TO SUCH NON-REPRESENTED SPINCO EMPLOYEE IMMEDIATELY PRIOR TO
THE EFFECTIVE TIME, AND (III) TO CONTINUE TO PROVIDE EACH SUCH NON-REPRESENTED
SPINCO EMPLOYEE BENEFITS, UNDER THE SPINCO MIRROR PLANS, WHICH ARE IDENTICAL IN
ALL MATERIAL RESPECTS TO THOSE MADE AVAILABLE TO SUCH NON-REPRESENTED SPINCO
EMPLOYEES UNDER THE VERIZON PLANS IMMEDIATELY PRIOR TO THE EFFECTIVE TIME.

(F)            CERTAIN TAX MATTERS.  VERIZON AND FAIRPOINT HEREBY AGREE THAT,
FOR PURPOSES OF SOCIAL SECURITY, UNEMPLOYMENT AND OTHER U.S. PAYROLL TAXES AND
TO THE EXTENT LEGALLY PERMISSIBLE, FAIRPOINT, SPINCO OR NNETO SHALL BE TREATED
AS A SUCCESSOR EMPLOYER

25

--------------------------------------------------------------------------------

WITH RESPECT TO EACH SPINCO EMPLOYEE IN THE CALENDAR YEAR THAT CONTAINS THE
EFFECTIVE TIME.  IN CONNECTION WITH THE FOREGOING, THE PARTIES AGREE TO FOLLOW
THE “ALTERNATIVE PROCEDURES” SET FORTH IN SECTION 5 OF REVENUE PROCEDURE
2004-53.  THE PARTIES UNDERSTAND AND AGREE THAT FAIRPOINT, SPINCO OR NNETO, AS
THE SUCCESSOR EMPLOYER, SHALL ASSUME THE ENTIRE FORM W-2 REPORTING OBLIGATIONS
FOR SUCH SPINCO EMPLOYEES FOR THE CALENDAR YEAR THAT CONTAINS THE EFFECTIVE
TIME, PROVIDED THAT VERIZON SHALL PROVIDE REASONABLE ASSISTANCE TO FAIRPOINT IN
COMPLETING SUCH REPORTING OBLIGATIONS.

SECTION 4.2.            NO SOLICITATION OF EMPLOYEES

(a)           Except as otherwise mutually agreed upon between the Parties, for
the period commencing on the execution of this Agreement and ending twelve
months from the Effective Time, in respect of Spinco Employees, neither Verizon
nor any member of the Verizon Group shall, directly or indirectly, induce or
attempt to induce any Spinco Employee to leave the employ of FairPoint or any
member of the FairPoint Group or violate the terms of their contracts or any
employment arrangements with FairPoint or any member of the FairPoint Group;
provided, however, that neither Verizon nor any member of the Verizon Group
shall be deemed to be in violation of this Section 4.2(a) solely by reason of a
general job posting internal to members of the Verizon Group or a general
solicitation to the public or general advertising.

(b)           Except as otherwise mutually agreed upon between the Parties, for
the period commencing on the execution of this Agreement and ending twelve
months from the Effective Time, in respect of Verizon Employees, neither
FairPoint nor any member of the FairPoint Group shall, directly or indirectly,
induce or attempt to induce any Verizon Employee to leave the employ of Verizon
or any member of the Verizon Group or violate the terms of their contracts or
any employment arrangements with Verizon or any member of the Verizon Group;
provided, however, that neither FairPoint nor any

26

--------------------------------------------------------------------------------

member of the FairPoint Group shall be deemed to be in violation of this Section
4.2(b) solely by reason of a general job posting internal to members of the
FairPoint Group or a general solicitation to the public or general advertising.

(c)           Except as otherwise mutually agreed upon between the Parties, for
the period commencing on the execution of this Agreement and ending twelve
months from the termination of the Transition Services Agreement with respect to
the services described in Schedule A thereto, in respect of Verizon Employees,
contractors or vendors who will be, are or were providing transition services to
FairPoint pursuant to the Transition Services Agreement (“Verizon Transition
Employees and Contractors”), neither FairPoint nor any member of the FairPoint
Group shall, directly or indirectly, induce or attempt to induce any Verizon
Transition Employee or Contractor to leave the employ of Verizon or any member
of the Verizon Group or violate the terms of their contracts or any employment
arrangements with Verizon or any member of the Verizon Group or any of its
contractors providing transition services; provided, however, that neither
FairPoint nor any member of the FairPoint Group shall be deemed to be in
violation of this Section 4.2(c) solely by reason of a general job posting
internal to members of the FairPoint Group or a general solicitation to the
public or general advertising.

(d)           Except as otherwise mutually agreed upon between the Parties, for
the period commencing on the execution of this Agreement and ending twelve
months from the termination of the Transition Services Agreement with respect to
the services described in Schedule A thereto, in respect of FairPoint Employees,
contractors or vendors engaged in, providing or receiving transition services
from Verizon pursuant to the Transition Services Agreement (“FairPoint
Transition Employees and Contractors”), neither Verizon nor any member of the
Verizon Group shall, directly or indirectly, induce or attempt to induce any
FairPoint Transition Employee or Contractor to leave the employ of FairPoint or
any member of the FairPoint Group or violate the terms of their

27

--------------------------------------------------------------------------------

contracts or any employment arrangements with FairPoint or any member of the
FairPoint Group or any of its contractors providing transition services;
provided, however, that neither Verizon nor any member of the Verizon Group
shall be deemed to be in violation of this Section 4.2(d) solely by reason of a
general job posting internal to members of the Verizon Group or a general
solicitation to the public or general advertising.

SECTION 4.3.            UNAVAILABLE EMPLOYEES.

(a)           Notwithstanding anything to the contrary in Section 4.2, except as
otherwise mutually agreed upon between the Parties, from the period beginning on
the date on which the Merger Agreement is executed and ending on the first
anniversary of the Effective Time, or, with respect to any Verizon and any
FairPoint Transition Employee (which for this Section 4.3(a) shall not include
employees of contractors providing transitions services to FairPoint), ending on
the first anniversary of the ending date specified in the Transition Services
Agreement with respect to the services described in Schedule A thereto; (i)
neither FairPoint nor any member of the FairPoint Group shall employ any Verizon
Employee, or Verizon Transition Employee or any employee of the Spinco Group
that has voluntarily separated from employment with Verizon or any member of the
Verizon Group within the immediately preceding six months; and, (ii) neither
Verizon nor any member of the Verizon Group shall employ any FairPoint Employee
or FairPoint Transition Employee that has voluntarily separated from employment
with FairPoint or any member of the FairPoint Group within the immediately
preceding six months, (each, an “Unavailable Employee”).  After the six month
anniversary of the voluntary separation of any Unavailable Employee, FairPoint
or any member of the FairPoint Group and Verizon or any member of the Verizon
Group, as the case may be, may offer employment to such individual in its sole
discretion.

28

--------------------------------------------------------------------------------

ARTICLE V.

PENSION PLANS

SECTION 5.1.            ESTABLISHMENT OF PENSION PLANS AND TRUSTS

(A)           SPINCO MANAGEMENT PENSION PLAN AND EXCESS PLAN.  EFFECTIVE AS OF
THE DISTRIBUTION DATE, SPINCO OR NNETO SHALL ESTABLISH TWO DEFINED BENEFIT
PENSION PLANS FOR THE BENEFIT OF EMPLOYEES WHO ARE NOT REPRESENTED EMPLOYEES. 
ONE SUCH PLAN WILL BE RESPONSIBLE FOR BENEFITS OF PARTICIPANTS AND BENEFICIARIES
IN THE VERIZON MANAGEMENT PENSION PLAN (THE “VMPP”) WHO ARE SPINCO EMPLOYEES OR
ARE ENTITLED TO RECEIVE A BENEFIT IN RESPECT OF A SPINCO EMPLOYEE (THE “SPINCO
MANAGEMENT PENSION PLAN”), AND THE OTHER SUCH PLAN WILL BE RESPONSIBLE FOR
BENEFITS OF PARTICIPANTS AND BENEFICIARIES IN THE VERIZON EXCESS PENSION PLAN
(THE “EXCESS PLAN”) WHO ARE SPINCO EMPLOYEES OR ARE ENTITLED TO RECEIVE A
BENEFIT IN RESPECT OF A SPINCO EMPLOYEE (THE “SPINCO EXCESS PENSION PLAN”). 
EFFECTIVE AS OF THE DISTRIBUTION DATE, SPINCO OR NNETO SHALL ESTABLISH THE
SPINCO TRUST.  SPINCO OR NNETO SHALL PROVIDE FAIRPOINT WITH A COPY OF THOSE
PLANS AND SUCH TRUST AT LEAST TWO MONTHS PRIOR TO THEIR ADOPTION IN ORDER TO
PROVIDE FAIRPOINT AN OPPORTUNITY TO COMMENT ON THEIR FORM.  SPINCO AND NNETO
AGREE TO CONSULT WITH FAIRPOINT AND, SUBJECT TO THE OBLIGATIONS OF THE PARTIES
UNDER THIS AGREEMENT, TO REASONABLY CONSIDER SUCH COMMENTS, BUT FAIRPOINT’S
COMMENTS SHALL BE ADVISORY ONLY AND SPINCO AND NNETO SHALL RETAIN FULL
DISCRETION AS TO THE FORM OF THE PLANS AND TRUSTS. 

AS OF AND FROM THE DISTRIBUTION DATE UNTIL THE MERGER DATE, SPINCO, AND, AS OF
AND FROM THE EFFECTIVE TIME, FAIRPOINT SHALL BE RESPONSIBLE FOR TAKING OR
CAUSING TO BE TAKEN ALL NECESSARY, REASONABLE, AND APPROPRIATE ACTION TO
ESTABLISH, MAINTAIN AND ADMINISTER THE SPINCO MANAGEMENT PENSION PLAN, SO THAT
IT QUALIFIES UNDER SECTION 401(A) OF THE CODE AND THE RELATED TRUST THEREUNDER
IS EXEMPT FROM FEDERAL INCOME TAXATION UNDER SECTION 501(A) OF THE CODE.

29

--------------------------------------------------------------------------------

(B)           SPINCO UNION PENSION PLAN AND TRUST.  EFFECTIVE AS OF THE
DISTRIBUTION DATE, SPINCO OR NNETO SHALL ESTABLISH A DEFINED BENEFIT PENSION
PLAN (THE “SPINCO UNION PENSION PLAN”) AND RELATED TRUST TO PROVIDE RETIREMENT
BENEFITS TO SPINCO EMPLOYEES WHO ARE REPRESENTED EMPLOYEES AND TO PERSONS
ENTITLED TO RECEIVE A BENEFIT IN RESPECT OF SUCH A SPINCO EMPLOYEE, AND WHO, IN
EITHER CASE, ARE PARTICIPANTS IN OR BENEFICIARIES UNDER THE VERIZON PENSION PLAN
FOR NEW YORK AND NEW ENGLAND ASSOCIATES AS OF THE DISTRIBUTION DATE.  SPINCO OR
NNETO SHALL PROVIDE FAIRPOINT WITH A COPY OF THE SPINCO UNION PENSION PLAN AT
LEAST TWO MONTHSPRIOR TO ITS ADOPTION IN ORDER TO PROVIDE FAIRPOINT AN
OPPORTUNITY TO COMMENT ON ITS FORM.  SPINCO AND NNETO AGREE TO CONSULT WITH
FAIRPOINT AND, SUBJECT TO THE OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT,
TO REASONABLY CONSIDER SUCH COMMENTS, BUT FAIRPOINT’S COMMENTS SHALL BE ADVISORY
ONLY AND SPINCO AND NNETO SHALL RETAIN FULL DISCRETION AS TO THE FORM OF THE
PLAN.

As of and from the Distribution Date, Spinco, and as of and from the Effective
Time, FairPoint shall be responsible for taking or causing to be taken all
necessary, reasonable, and appropriate action to establish, maintain and
administer the Spinco Union Pension Plan so that it qualifies under Section
401(a) of the Code and the related trust thereunder is exempt from Federal
income taxation under Section 501(a) of the Code.

SECTION 5.2.            ASSUMPTION OF PENSION PLAN LIABILITIES AND ALLOCATION OF
INTERESTS IN THE VERIZON PENSION TRUSTS

(A)           ASSUMPTION OF LIABILITIES BY SPINCO PENSION PLAN.  SUBJECT TO THE
PENSION PLAN ASSET ALLOCATION SPECIFIED BELOW, EFFECTIVE AS OF THE DISTRIBUTION
DATE, ALL LIABILITIES UNDER THE VERIZON PENSION PLANS TO PERSONS WHO ARE SPINCO
EMPLOYEES AND TO PERSONS WHO ARE ENTITLED TO RECEIVE A BENEFIT IN RESPECT OF
SUCH A SPINCO EMPLOYEE SHALL CEASE TO BE LIABILITIES OF THE VERIZON PENSION
PLANS AND SHALL BE ASSUMED IN FULL AND IN ALL RESPECTS BY THE CORRESPONDING
SPINCO PENSION PLAN.  THE “CORRESPONDING” PLAN SHALL BE:  (I) THE

30

--------------------------------------------------------------------------------

SPINCO MANAGEMENT PENSION PLAN WITH RESPECT TO PARTICIPANTS IN THE VMPP; AND
(II) THE SPINCO UNION PENSION PLAN WITH RESPECT TO PARTICIPANTS IN THE VERIZON
PENSION PLAN FOR NEW YORK AND NEW ENGLAND ASSOCIATES, WITH SUCH DETERMINATION
BEING BASED ON EMPLOYMENT STATUS (MANAGEMENT OR UNION-REPRESENTED) AS OF THE
DISTRIBUTION DATE.  EFFECTIVE AS OF THE DISTRIBUTION DATE, ALL LIABILITIES UNDER
THE EXCESS PLAN TO PERSONS WHO ARE SPINCO EMPLOYEES AND TO PERSONS WHO ARE
ENTITLED TO RECEIVE A BENEFIT IN RESPECT OF SUCH A SPINCO EMPLOYEE SHALL CEASE
TO BE LIABILITIES OF THE EXCESS PLAN AND SHALL BE ASSUMED IN FULL AND IN ALL
RESPECTS BY THE SPINCO EXCESS PENSION PLAN.  FAIRPOINT SHALL BE SOLELY
RESPONSIBLE FOR ALL ONGOING RIGHTS OF OR RELATING TO SPINCO EMPLOYEES FOR FUTURE
PARTICIPATION IN THE SPINCO PENSION PLANS AND THE SPINCO EXCESS PENSION PLAN.

(B)           CALCULATION OF PENSION PLAN ASSET ALLOCATION.  AS SOON AS
PRACTICABLE AFTER THE DISTRIBUTION DATE,VERIZON’S ACTUARY SHALL CALCULATE AND
CERTIFY THE PENSION PLAN ASSET TRANSFER AMOUNT FOR EACH SPINCO PENSION PLAN
(OTHER THAN THE SPINCO EXCESS PENSION PLAN) AS OF THE CLOSE OF BUSINESS OF THE
DAY IMMEDIATELY PRECEDING THE DISTRIBUTION DATE.  WITH RESPECT TO EACH SUCH
ASSET TRANSFER, THE ASSET TRANSFER AMOUNT SHALL BE EQUAL TO THE PRESENT VALUE OF
BENEFITS IN RESPECT OF SPINCO EMPLOYEES AND PERSONS ENTITLED TO RECEIVE A
BENEFIT IN RESPECT OF SUCH SPINCO EMPLOYEES ON A PLAN TERMINATION BASIS,
PROVIDED THAT THE PARTICULAR TRANSFER UNDER CONSIDERATION SATISFIES THE
APPLICABLE DE MINIMIS RULE UNDER THE IRS SECTION 414(L) REGULATIONS.  CONSISTENT
WITH THE DESIRE OF THE PARTIES THAT THE DE MINIMIS RULE BE SATISFIED, VERIZON’S
ACTUARY SHALL MAKE ITS DETERMINATION REGARDING SATISFACTION OF THE DE MINIMIS
RULE IN A MANNER THAT COMPORTS WITH ALL APPLICABLE LAW AND IS AIMED AT A RESULT
THAT SATISFIES THE APPLICABLE DE MINIMIS RULE, INCLUDING THE USE OF A
PERMISSIBLE DETERMINATION DATE THAT IS IN FURTHERANCE OF SUCH OBJECTIVE.  IN THE
EVENT A PARTICULAR TRANSFER DOES NOT SATISFY THE DE MINIMIS RULE, VERIZON’S
ACTUARY WILL PERFORM AN ALLOCATION UNDER SECTION 4044 OF ERISA TO DETERMINE THE
ASSETS FROM THE VERIZON PENSION PLAN IN QUESTION THAT MAY BE TRANSFERRED TO THE
APPLICABLE SPINCO PENSION PLAN.  IN THE EVENT THE AMOUNT OF ASSETS TO BE
TRANSFERRED FOLLOWING THE ERISA SECTION 4044 ANALYSIS IS LESS THAN THE PROJECTED
BENEFIT OBLIGATION (“PBO”) FOR THE SPINCO PARTICIPANTS UNDER

31

--------------------------------------------------------------------------------

CONSIDERATION, VERIZON WILL PROVIDE A SUPPLEMENTAL AMOUNT OF ASSETS SO THAT THE
FUNDING IN THE SPINCO PENSION PLAN UNDER CONSIDERATION IS EQUAL TO THE PBO
FUNDED-LEVEL.  THE ASSUMPTIONS TO BE USED WITH RESPECT TO THE FOREGOING ARE SET
FORTH IN EXHIBIT A HERETO ENTITLED ACTUARIAL ASSUMPTIONS AND METHODS FOR PENSION
ASSET TRANSFER.  NOTWITHSTANDING THE FOREGOING IN THIS SECTION 5.2(B), IN THE
EVENT THE PRESENT VALUE OF THE ACCRUED BENEFITS THAT ARE TO BE TRANSFERRED FROM
THE VERIZON PENSION PLAN FOR NEW YORK AND NEW ENGLAND ASSOCIATES (THE “NORTH
ACCRUED BENEFITS”) CAN NOT BE TRANSFERRED IN RELIANCE ON THE APPLICABLE DE
MINIMIS RULE UNDER THE IRS SECTION 414(L) REGULATIONS, AN ADDITIONAL CALCULATION
SHALL BE PERFORMED.  VERIZON’S ACTUARY SHALL SUBTRACT $11,700,000 FROM THE NORTH
ACCRUED BENEFITS AND RE-DETERMINE THE PERCENTAGE THAT SUCH ADJUSTED NORTH
ACCRUED BENEFITS WOULD BE OF THE ASSETS OF SUCH PLAN AS OF THE MOST FAVORABLE
PERMISSIBLE DETERMINATION DATE.  IF THE RESULTING PERCENTAGE IS EQUAL TO OR IN
EXCESS OF THREE PERCENT (3%), THEN THE PROVISIONS ABOVE THAT APPLY TO A TRANSFER
THAT DOES NOT SATISFY THE DE MINIMIS RULE SHALL BE FOLLOWED, I.E., THE
PROVISIONS RELATING TO FUNDING TO THE PBO FUNDED-LEVEL SHALL APPLY.  IF,
HOWEVER, THE RESULTING PERCENTAGE IS LESS THAN THREE PERCENT (3%), THEN VERIZON
WILL PROVIDE A SUPPLEMENTAL AMOUNT OF ASSETS SO THAT THE FUNDING IN THE SPINCO
UNION PENSION PLAN IS EQUAL TO THE ACCRUED PRESENT VALUE OF BENEFITS IN RESPECT
OF SPINCO EMPLOYEES AND PERSONS ENTITLED TO RECEIVE A BENEFIT IN RESPECT OF SUCH
SPINCO EMPLOYEES AS DETERMINED ON A PLAN TERMINATION BASIS USING THE PBGC PLAN
TERMINATION ASSUMPTIONS UNDER EXHIBIT A HERETO.

Within ten (10) days after the date Verizon certifies to FairPoint the Pension
Plan Asset Transfer Amount for each Spinco Pension Plan, Verizon’s actuary shall
provide FairPoint’s actuary with a complete computer file containing the
employee data and all other information used by Verizon’s actuary or otherwise
reasonably requested by FairPoint’s actuary asneeded to calculate the Pension
Plan Asset Transfer Amount (including related data and information related to
such calculation and otherwise appropriate for FairPoint’s actuary to consider,
and any other data and information reasonably requested by FairPoint’s
actuary).  If FairPoint’s actuary disagrees with the

32

--------------------------------------------------------------------------------

determination of a Pension Plan Asset Transfer Amount, FairPoint may, within
thirty (30) days after receipt from Verizon of such computer file and all other
reasonably requested information, deliver a written notice to Verizon
disagreeing with such calculation and setting forth FairPoint’s calculation of
the Pension Plan Asset Transfer Amount.  The Parties shall, during the fifteen
(15) days following such delivery, negotiate in good faith to reach an agreement
on the disputed items or amounts in order to determine, as may be required, the
amount of the Pension Plan Asset Transfer Amount, which amount shall not be more
than the amount thereof shown in the calculations of FairPoint’s actuary nor
less than the amount shown in the calculations of Verizon’s actuary.  If the two
actuaries are unable to agree on the amount of the Pension Plan Asset Transfer
Amount during such fifteen (15)-day period, the Parties shall jointly select an
independent third actuary with whom none of the parties have a material
relationship, whose determination shall be binding on the Parties.  The third
actuary shall be directed to render a calculation of the Pension Plan Asset
Transfer Amount in accordance with the provisions of this Agreement as promptly
as practicable.  Each of the Parties shall bear the fees, costs and expenses of
their respective actuaries, and the fees, costs and expense of the third actuary
shall be borne one-half by Verizon and one-half by FairPoint.

(C)           TRANSFER OF ASSETS TO SPINCO PENSION TRUST

(I)            AS SOON AS PRACTICABLE AFTER AND EFFECTIVE AS OF THE DISTRIBUTION
DATE, VERIZON SHALL CAUSE TO BE TRANSFERRED FROM THE MASTER TRUST ESTABLISHED
UNDER THE VERIZON PENSION PLANS (THE “VERIZON TRUST”) TO A MASTER TRUST
ESTABLISHED IN RESPECT OF THE SPINCO PENSION PLANS (THE “SPINCO TRUST”), AN
INITIAL AMOUNT OF ASSETS (THE “INITIAL ASSET TRANSFER”).  THE AMOUNT OF THE
INITIAL ASSET TRANSFER SHALL BE EQUAL TO 80% OF THE AMOUNT THE ENROLLED ACTUARY
FOR SUCH VERIZON PLAN DETERMINES IN GOOD FAITH TO BE THE APPROXIMATE PENSION
PLAN ASSET TRANSFER AMOUNT AS OF THE DATE OF THE INITIAL ASSET TRANSFER.

33

--------------------------------------------------------------------------------

(II)           AS SOON AS PRACTICABLE AFTER THE FINAL CALCULATION OF EACH SPINCO
PLAN’S PENSION PLAN ASSET TRANSFER AMOUNT PURSUANT TO SECTION 6.2(B), IF SUCH
AMOUNT EXCEEDS THE INITIAL ASSET TRANSFER, VERIZON WILL CAUSE THE APPLICABLE
VERIZON TRUST TO TRANSFER TO THE SPINCO TRUST (THE “FINAL ASSET TRANSFER”)
ASSETS IN AN AMOUNT EQUAL TO THE PENSION PLAN ASSET TRANSFER AMOUNT WITH RESPECT
TO EACH SPINCO PENSION PLAN LESS THE SUM OF (A) THE INITIAL ASSET TRANSFER AND
(B) THE AGGREGATE AMOUNT OF BENEFIT PAYMENTS (THE “BENEFIT PAYMENTS”) MADE BY
THE VERIZON PENSION PLAN IN RESPECT OF FAIRPOINT EMPLOYEES FROM AND AFTER THE
DISTRIBUTION DATE.  THE AMOUNT DETERMINED UNDER THE PRECEDING SENTENCE SHALL BE
INCREASED OR DECREASED, AS THE CASE MAY BE, BY THE INVESTMENT RETURN ON THE
APPLICABLE AMOUNT DETERMINED IN ACCORDANCE WITH THE LETTER OF DIRECTION AGREED
TO BY THE PARTIES PRIOR TO THE EFFECTIVE TIME (THE “LETTER OF DIRECTION”).  IF
THE SUM OF THE INITIAL ASSET TRANSFER PLUS THE BENEFIT PAYMENTS EXCEEDS THE
PENSION PLAN ASSET TRANSFER AMOUNT FOR A SPINCO PENSION PLAN, THEN THE PORTION
OF THE SPINCO TRUST RELATING TO SUCH PLAN SHALL RETURN SUCH EXCESS, INCREASED OR
DECREASED BY THE INVESTMENT RETURN DETERMINED IN ACCORDANCE WITH THE LETTER OF
DIRECTION FROM THE DATE OF THE INITIAL ASSET TRANSFER (OR THE DATE OF THE
BENEFIT PAYMENT, AS THE CASE MAY BE) TO THE DATE OF RETURN, TO THE PORTION OF
THE VERIZON TRUST RELATING TO THE CORRESPONDING VERIZON PENSION PLAN.

(III)          THE APPLICABLE INVESTMENT RETURN UNDER SUBSECTION (C)(II) ABOVE
AND THE IDENTIFICATION OF THE TYPES OF ASSETS (CASH AND/OR IN KIND ASSETS) TO BE
TRANSFERRED FROM THE VERIZON TRUST TO THE SPINCO TRUST IN EITHER THE INITIAL
ASSET TRANSFER OR THE FINAL ASSET TRANSFER SHALL BE DETERMINED IN ACCORDANCE
WITH THE LETTER OF DIRECTION, AS THE SAME MAY BE AMENDED BY MUTUAL AGREEMENT OF
VERIZON AND FAIRPOINT PRIOR TO THE DATE OF SUCH FINAL ASSETS TRANSFER.  VERIZON
AND FAIRPOINT SHALL COOPERATE IN DETERMINING WHAT ASSETS ARE TRANSFERRED IN KIND
AS PART OF THE INITIAL ASSET TRANSFER AND THE FINAL ASSET TRANSFERAND VERIZON
SHALL NOT TRANSFER ANY ASSET IN KIND WHICH FAIRPOINT REASONABLY DETERMINES IS
NOT READILY

34

--------------------------------------------------------------------------------

TRADABLE OR CAPABLE OF BEING VALUED ON A SUBSTANTIAL AND ESTABLISHED MARKET
(EXCEPT AS OTHERWISE AGREED BY THE PARTIES).

(iv)          Under no circumstances shall Verizon or any Verizon Pension Plan
be liable to transfer any additional amounts to FairPoint or any Spinco Pension
Plan or any other Person or Governmental Authority in respect of the Liabilities
transferred to the Spinco Pension Plans pursuant to Section 5.2(a), including,
but not limited to, any circumstance under which any Person or Governmental
Authority states a claim to any portion or all of any Pension Plan Asset
Transfer Amount.  To the extent Verizon voluntarily transfers any additional
amounts to FairPoint or any Spinco Pension Plan, FairPoint shall not be
responsible for reimbursing Verizon for such additional voluntary transfers.

SECTION 5.3.            CONTINUATION OF ELECTIONS AND APPLICATION TO SPINCO
DEPENDENTS

Spinco, as of the Distribution Date, and FairPoint, as of the Effective Time,
shall cause the Spinco Pension Plans and the Spinco Excess Pension Plan to
recognize and maintain all existing elections, including, but not limited to,
beneficiary designations, payment forms and other rights of alternate payees
under qualified domestic relation orders as were in effect under the
corresponding Verizon Pension Plan or Excess Plan, unless and until changed or
modified in accordance with the terms of the applicable plan or otherwise in
accordance with applicable law.  To the extent applicable, the provisions of
this Article V shall also apply to Spinco Dependents.

35

--------------------------------------------------------------------------------

ARTICLE VI.

HEALTH AND WELFARE

SECTION 6.1.            ASSUMPTION OF HEALTH AND WELFARE

(A)           VERIZON OR ONE OR MORE OF ITS SUBSIDIARIES MAINTAIN HEALTH AND
WELFARE PLANS, INCLUDING PLANS PROVIDING ACTIVE SEVERANCE AND ACTIVE
POST-RETIREMENT HEALTH, DENTAL AND LIFE INSURANCE BENEFITS, FOR THE BENEFIT OF
ELIGIBLE VERIZON EMPLOYEES AND CERTAIN FORMER EMPLOYEES, INCLUDING FORMER SPINCO
EMPLOYEES WHO HAVE RETIRED AS OF THE DATE THE MERGER AGREEMENT IS EXECUTED (THE
“VERIZON WELFARE PLANS”).  AS OF THE DISTRIBUTION DATE, EACH PERSON WHO IS A
SPINCO EMPLOYEE OR SPINCO DEPENDENT ON SUCH DATE SHALL CEASE TO BE COVERED UNDER
THE VERIZON WELFARE PLANS, EXCEPT THAT VERIZON AND THE VERIZON WELFARE PLANS
SHALL BE RESPONSIBLE FOR MEDICAL, DENTAL, DISABILITY OR LIFE INSURANCE CLAIMS OF
SUCH SPINCO EMPLOYEES AND SPINCO DEPENDENTS AS ARE SPECIFIED IN SECTION
2.1(B)(II) FOR REPRESENTED EMPLOYEES, AND ALSO FOR SUCH CLAIMS WITH RESPECT TO
ALL OTHER SPINCO EMPLOYEES AND SPINCO DEPENDENTS ON THE SAME BASIS AS DESCRIBED
IN SECTION 2.1(B)(II) WITH RESPECT TO CLAIMS INCURRED OR EVENTS THAT HAVE
OCCURRED PRIOR TO THE EFFECTIVE TIME.  FOR THE AVOIDANCE OF DOUBT, WITH RESPECT
TO ANY PAYMENTS DUE TO ANY SPINCO EMPLOYEE UNDER THE TERMS OF THE VERIZON SHORT
TERM DISABILITY PLAN, THE OBLIGATIONS TO MAKE PAYMENTS WITH RESPECT TO ANY
PERIOD PRIOR TO THE EFFECTIVE TIME SHALL REMAIN WITH VERIZON, AND THE
OBLIGATIONS TO MAKE ANY PAYMENTS WITH RESPECT TO ANY PERIOD AT OR AFTER THE
EFFECTIVE TIME SHALL BE THE SOLE RESPONSIBILITY OF FAIRPOINT OR A SPINCO PLAN.

(B)           PRIOR TO THE DISTRIBUTION DATE, VERIZON AND SPINCO SHALL TAKE
STEPS TO ESTABLISH SPINCO WELFARE PLANS, BASED ON THE CORRESPONDING VERIZON
WELFARE PLANS.  SPINCO OR NNETO SHALL PROVIDE FAIRPOINT WITH A COPY OF THE
SPINCO WELFARE PLANS AT LEAST FOUR MONTHS PRIOR TO THEIR ADOPTION IN ORDER TO
PROVIDE FAIRPOINT AN OPPORTUNITY TO

36

--------------------------------------------------------------------------------

COMMENT ON THEIR FORM AND FOR USE IN FAIRPOINT’S PREPARATIONS FOR ASSUMING THESE
PLAN.  SPINCO AND NNETO AGREE TO CONSULT WITH FAIRPOINT AND, SUBJECT TO THE
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT, TO REASONABLY CONSIDER SUCH
COMMENTS, BUT FAIRPOINT’S COMMENTS SHALL BE ADVISORY ONLY AND SPINCO AND NNETO
SHALL RETAIN FULL DISCRETION AS TO THE FORM OF THE PLANS.  VERIZON SHALL OR
SHALL CAUSE THE SPINCO GROUP TO PROVIDE FAIRPOINT WITH DEMOGRAPHIC AND CLAIMS
INFORMATION AND OTHER REASONABLY REQUESTED INFORMATION RELATED TO THE SPINCO
EMPLOYEE AND SPINCO DEPENDENTS THAT WILL ENABLE FAIRPOINT AND THE SPINCO GROUP
TO EFFECT THE OPERATION OF SUCH SPINCO WELFARE PLANS FOLLOWING THE EFFECTIVE
TIME.  AS OF AND IMMEDIATELY AFTER THE DISTRIBUTION DATE, ALL LIABILITIES IN
RESPECT OF OR RELATING TO SUCH SPINCO EMPLOYEES UNDER THE VERIZON WELFARE PLANS
SHALL CEASE TO BE LIABILITIES OF ANY MEMBER OF THE VERIZON GROUP OR THE VERIZON
WELFARE PLANS AND ANY AND ALL SUCH LIABILITIES SHALL BE ASSUMED AS OF THE
DISTRIBUTION DATE BY SPINCO OR NNETO, AND THE SPINCO WELFARE PLANS, AND AS OF
THE EFFECTIVE TIME, BY FAIRPOINT, SPINCO, NNETO AND THE SPINCO WELFARE PLANS. 
NOTWITHSTANDING THE FOREGOING, ALL LIABILITIES ASSOCIATED WITH FORMER SPINCO
EMPLOYEES UNDER THE VERIZON WELFARE PLANS, AND SUCH LIABILITIES THAT HAVE BEEN
RETAINED BY THE VERIZON PLANS UNDER SECTION 6.1(A) ABOVE, SHALL REMAIN WITH THE
VERIZON GROUP.

(C)           EXCEPT FOR THE FRP ACCOUNT BALANCES DESCRIBED IN SECTION 6.2(C),
NOTHING IN THIS AGREEMENT SHALL REQUIRE VERIZON, ANY VERIZON GROUP MEMBER OR ANY
VERIZON WELFARE PLAN TO TRANSFER ASSETS OR RESERVES WITH RESPECT TO THE VERIZON
WELFARE PLANS, INCLUDING, BUT NOT LIMITED TO, ANY PLAN PROVIDING SEVERANCE,
POST-RETIREMENT HEALTH, DENTAL OR LIFE INSURANCE BENEFITS, TO FAIRPOINT, ANY
FAIRPOINT GROUP MEMBER OR THE SPINCO WELFARE PLANS.

37

--------------------------------------------------------------------------------

SECTION 6.2.            ADOPTION OF HEALTH AND WELFARE PLANS

(A)           SPINCO, AS OF THE DISTRIBUTION DATE, AND FAIRPOINT, AS OF THE
EFFECTIVE TIME, SHALL MAINTAIN OR SHALL CAUSE TO BE MAINTAINED FOR THE BENEFIT
OF ELIGIBLE SPINCO EMPLOYEES AND SPINCO DEPENDENTS, HEALTH AND WELFARE PLANS,
INCLUDING PLANS PROVIDING ACTIVE SEVERANCE AND ACTIVE POST-RETIREMENT HEALTH,
DENTAL AND LIFE INSURANCE BENEFITS (THE “SPINCO WELFARE PLANS”) THAT ARE
IDENTICAL IN ALL MATERIAL RESPECTS TO THE BENEFITS PROVIDED UNDER THE
CORRESPONDING VERIZON WELFARE PLAN IN WHICH SUCH INDIVIDUALS PARTICIPATE
IMMEDIATELY PRIOR TO THE DISTRIBUTION DATE, AND THE TERMS OF WHICH HAVE BEEN
PROVIDED TO FAIRPOINT WITHIN FOUR MONTHSOF THE EXECUTION OF THE MERGER
AGREEMENT.

(B)           TERMS OF PARTICIPATION IN FAIRPOINT WELFARE PLANS.  FAIRPOINT
SHALL CAUSE THE SPINCO WELFARE PLANS TO (I) WAIVE ALL LIMITATIONS AS TO
PREEXISTING CONDITIONS, EXCLUSIONS, SERVICE CONDITIONS AND WAITING PERIOD
LIMITATIONS, AND ANY EVIDENCE OF INSURABILITY REQUIREMENTS APPLICABLE TO ANY
SUCH SPINCO EMPLOYEES AND SPINCO DEPENDENTS OTHER THAN SUCH LIMITATIONS,
EXCLUSIONS, AND CONDITIONS THAT WERE IN EFFECT WITH RESPECT TO SPINCO EMPLOYEES
AND SPINCO DEPENDENTS AS OF THE EFFECTIVE TIME, IN EACH CASE UNDER THE
CORRESPONDING VERIZON WELFARE PLAN AND (II) HONOR ANY DEDUCTIBLES, OUT-OF-POCKET
MAXIMUMS AND CO-PAYMENTS INCURRED BY SPINCO EMPLOYEES AND SPINCO DEPENDENTS
UNDER THE CORRESPONDING VERIZON WELFARE PLAN IN SATISFYING THE APPLICABLE
DEDUCTIBLES, OUT-OF-POCKET EXPENSES OR CO-PAYMENTS UNDER SUCH VERIZON WELFARE
PLAN FOR THE CALENDAR YEAR IN WHICH THE DISTRIBUTION DATE OCCURS.

(C)           TRANSFER OF FRP ASSETS.  VERIZON WILL MAKE AVAILABLE TO FAIRPOINT,
NOT LESS THAN FORTY-FIVE CALENDAR DAYS PRIOR TO THE DISTRIBUTION DATE, A LIST OF
INDIVIDUALS WHO WILL BECOME OR CONTINUE TO BE SPINCO EMPLOYEES AS OF THE
EFFECTIVE TIME AND WHO ARE PARTICIPANTS IN THE FRP (THE “FRP PARTICIPANTS”),
TOGETHER WITH THE ELECTIONS MADE PRIOR TO THE DISTRIBUTION DATE WITH RESPECT TO
SUCH ACCOUNTS THROUGH THE DISTRIBUTION DATE.

38

--------------------------------------------------------------------------------

(I)            FAIRPOINT SHALL TAKE ALL ACTIONS NECESSARY AND LEGALLY
PERMISSIBLE TO ENSURE THAT AS OF THE EFFECTIVE TIME, IT INCLUDES THE FRP
PARTICIPANTS IN THE SPINCO PLAN THAT CONSTITUTES A CODE SECTION 125 PLAN AND ANY
FLEXIBLE SPENDING ARRANGEMENTS THEREUNDER (“SPINCO’S FSA”).  FAIRPOINT SHALL
FURTHER TAKE ALL ACTIONS NECESSARY AND LEGALLY PERMISSIBLE TO AMEND SPINCO’S FSA
TO PROVIDE THAT AS OF THE EFFECTIVE TIME AND FOR THE PLAN YEAR IN WHICH THE
EFFECTIVE TIME OCCURS, BUT NOT FOR ANY SPECIFIC TIME THEREAFTER, SUBJECT TO ANY
COLLECTIVE BARGAINING OBLIGATIONS, (A) THE FRP PARTICIPANTS SHALL BECOME
PARTICIPANTS IN SPINCO’S FSA AS OF THE BEGINNING OF THE FRP’S PLAN YEAR AND AT
THE LEVEL OF COVERAGE PROVIDED UNDER THE FRP, (B) THE FRP PARTICIPANTS’ SALARY
REDUCTION ELECTIONS SHALL BE TAKEN INTO ACCOUNT FOR THE REMAINDER OF SPINCO’S
FSA PLAN YEAR AS IF MADE UNDER SPINCO’S FSA; AND (C) SPINCO’S FSA SHALL
REIMBURSE MEDICAL EXPENSES INCURRED BY THE FRP PARTICIPANTS AT ANY TIME DURING
THE FRP’S PLAN YEAR (INCLUDING CLAIMS INCURRED PRIOR TO THE EFFECTIVE TIME BUT
UNPAID PRIOR TO THE EFFECTIVE TIME), UP TO THE AMOUNT OF THE FRP PARTICIPANTS’
ELECTION AND REDUCED BY AMOUNTS PREVIOUSLY REIMBURSED BY THE FRP.

(II)           VERIZON SHALL TAKE ALL ACTIONS NECESSARY AND LEGALLY PERMISSIBLE
TO AMEND THE FRP TO PROVIDE THAT THE FRP PARTICIPANTS SHALL CEASE TO BE ELIGIBLE
FOR REIMBURSEMENTS FROM THE FRP AS OF THE EFFECTIVE TIME.

(III)          AS SOON AS PRACTICABLE FOLLOWING THE EFFECTIVE TIME, VERIZON
SHALL TRANSFER TO FAIRPOINT, AND FAIRPOINT AGREES TO ACCEPT, THOSE AMOUNTS (PLUS
ALL RELATED INDIVIDUAL PARTICIPANT RECORDS AND ACCOUNTINGS) WHICH REPRESENT THE
DEBIT AND CREDIT BALANCES UNDER THE FRP OF THE FRP PARTICIPANTS AND THE TRANSFER
OF SUCH AMOUNTS SHALL TAKE INTO ACCOUNT ON A NET BASIS PARTICIPANTS’ PAYROLL
DEDUCTIONS AND CLAIMS PAID THROUGH THE EFFECTIVE TIME.  VERIZON REPRESENTS AND
COVENANTS THAT AS OF THE EFFECTIVE TIME IT HAS OR SHALL HAVE PROPERLY WITHHELD
FROM THE PAY OF FRP PARTICIPANTS ALL AMOUNTS IN ACCORDANCE WITH THEIR FRP
ELECTIONS.

39

--------------------------------------------------------------------------------

SECTION 6.3.            COBRA AND HIPAA

As of the Effective Time, FairPoint shall be responsible for administering
compliance with the continuation coverage requirements for “group health plans”
under Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended (“COBRA”), and the portability requirements under the Health Insurance
Portability and Accountability Act of 1996 with respect to Spinco Employees and
any Spinco Dependents for the period after the Effective Time.  Verizon will
retain any Verizon Liabilities under the Verizon Plans to provide COBRA coverage
to any Former Spinco Employee and any of his or her eligible dependents who
incurred a qualifying event under COBRA at or prior to the Effective Time and
who is still eligible to receive such continuing coverage as of or after the
Effective Time.

SECTION 6.4.            WORKERS’ COMPENSATION CLAIMS

Effective as of the Effective Time, FairPoint shall assume all Liabilities
(other than any liabilities related to medical or other similar services
performed, as specified in Section 2.1(b)(ii), or compensation in respect of
lost work for periods prior to the Effective Time) for Spinco Employees related
to any and all workers’ compensation claims and coverage, whether arising under
any law of any state, territory, or possession of the U.S. or the District of
Columbia and FairPoint or otherwise, and shall be fully responsible for the
administration of all such claims; provided that Verizon shall either
(i) transfer to or cause to be transferred or allocated for the benefit of
FairPoint, a Subsidiary designated by FairPoint or Spinco Employees an amount
equal to the value of any assets set aside by Verizon prior to the Effective
Time (including any reserves established under any contract providing coverage
against any such claims) for the payment of, or to meet the obligations in
respect of, any such workers’ compensation benefits or obligations in respect of
such Spinco Employees or (ii) represent in writing to

40

--------------------------------------------------------------------------------

FairPoint that no such assets have been set aside.  If FairPoint is unable to
assume any such Liability or the administration of any such claim because of the
operation of applicable state law or for any other reason, Verizon shall retain
such Liabilities and FairPoint shall reimburse and otherwise fully indemnify
Verizon for all such Liabilities, including the costs of administering the
plans, programs or arrangements under which any such Liabilities have accrued or
otherwise arisen.  All reimbursement amounts shall be paid in accordance with
the procedure set forth in Section 11.2.

SECTION 6.5.            LEAVE OF ABSENCE PROGRAMS

FairPoint shall be responsible for the administration and compliance of all
leaves of absences and related programs (including compliance with the Family
and Medical Leave Act) affecting Spinco Employees for the period at and after
the Effective Time.

SECTION 6.6.            TIME-OFF BENEFITS

The FairPoint Group shall credit each Spinco Employee with the amount of accrued
but unused vacation time, sick time and other time-off benefits (together the
“Time-Off Benefits”) as such individual had with the Verizon Group or the Spinco
Group as of the Effective Time and shall provide such individuals with the same
rights, benefits, and entitlements in respect to such Time-Off Benefits as they
were entitled to from the Verizon Group or the Spinco Group as of the Effective
Time.  Verizon shall provide FairPoint with accurate data regarding accrued but
unused vacation time, sick time and other time-off benefits for all Spinco
Employees as of a current date not less than fifteen (15) days before the date
that Verizon reasonably estimates will be the Effective Time.

41

--------------------------------------------------------------------------------

ARTICLE VII.

SAVINGS PLANS

SECTION 7.1.              ESTABLISHMENT OF THE SPINCO SAVINGS PLAN

Prior to the Distribution Date, Verizon and Spinco shall take steps to establish
two defined contribution plans and trusts to be effective as of the Distribution
Date for the benefit of Spinco Employees (the “Spinco Savings Plans”) that are
identical in all material respects to the Verizon Savings Plans, such that each
Verizon Savings Plan shall have one and only one corresponding Spinco Savings
Plan.  Verizon or Spinco shall provide FairPoint with a copy of the Spinco
Savings Plans prior to their adoption in order to provide FairPoint an
opportunity to comment on their form.  Spinco and Verizon agree to consult with
FairPoint and, subject to the obligations of the Parties under this Agreement,
to reasonably consider such comments, but FairPoint’s comments shall be advisory
only and Verizon and Spinco shall retain full discretion as to the form of the
plans.  FairPoint shall be responsible for taking or causing to be taken all
necessary, reasonable, and appropriate action to establish, maintain, and
administer the Spinco Savings Plans so that each qualifies under Section 401(a)
of the Code and the related trusts thereunder are exempted from Federal income
taxation under Section 501(a)(1) of the Code.

SECTION 7.2.            ASSUMPTION OF LIABILITIES AND TRANSFER OF ASSETS

(A)           EFFECTIVE AS OF THE EFFECTIVE TIME, BUT SUBJECT TO THE ASSET
TRANSFER SPECIFIED IN SECTION 7.2(B) BELOW, EACH SPINCO SAVINGS PLAN SHALL
ASSUME AND BE SOLELY RESPONSIBLE FOR ALL LIABILITIES FOR OR RELATING TO SPINCO
EMPLOYEES UNDER THE APPLICABLE VERIZON SAVINGS PLAN.  FAIRPOINT SHALL BE SOLELY
RESPONSIBLE FOR ALL ONGOING RIGHTS OF OR

42

--------------------------------------------------------------------------------

RELATING TO SPINCO EMPLOYEES FOR FUTURE PARTICIPATION (INCLUDING THE RIGHT TO
MAKE CONTRIBUTIONS THROUGH PAYROLL DEDUCTIONS) IN THE SPINCO SAVINGS PLANS.

(b)           Effective as of the Distribution Date, Verizon shall cause the
account balances (including any outstanding loan balances) in the applicable
Verizon Savings Plan attributable to Spinco Employees to be transferred to the
corresponding Spinco Savings Plan in cash and in-kind (including, but not
limited to, participant loans), provided that, with respect to any in-kind
transfers other than participant loans, FairPoint shall receive 60 days notice
of such transfers and shall have an opportunity to comment on them.  FairPoint’s
comments shall be advisory only and Verizon shall retain full discretion as to
the type of transfers to be made but Verizon shall not transfer any asset in
kind which FairPoint reasonably determines is not readily tradable or capable of
being valued on a substantial and established market (except with respect to any
participant loans or any other transfers otherwise agreed to by the Parties). 
Subject to the immediately preceding sentence, FairPoint shall cause each Spinco
Savings Plan to accept such transfer or accounts and underlying assets and,
effective as of the date of such transfer, to assume and to fully perform pay or
discharge, all obligations of the Verizon Savings Plans relating to the accounts
of Spinco Employees (to the extent those assets related to those accounts are
actually transferred from a Verizon Savings Plan).  The transfer shall be
conducted in accordance with Section 414(l) of the Code, Treasury Regulation
Section 1.414(l)-1, and Section 208 of ERISA.

43

--------------------------------------------------------------------------------

ARTICLE VIII.

EQUITY BASED INCENTIVE AWARDS

SECTION 8.1.            GENERAL TREATMENT OF OUTSTANDING AWARDS

Generally, Verizon shall retain all Liabilities in respect of all stock based
incentive compensation awards granted to Spinco Employees and Former Spinco
Employees that are not part of any employee pension benefit plan within the
meaning of Section 3(3) of ERISA and that are outstanding as of the Effective
Time (the “Outstanding Awards”).

SECTION 8.2.            OUTSTANDING OPTIONS

Each Outstanding Award that is an option in respect of Verizon Common Stock
granted under a Verizon Plan that is held by a Spinco Employee as of the
Effective Time (each, an “Original Option”) shall remain an option in respect of
Verizon Common Stock subject to a Verizon Plan (each, a “Remaining Option”). 
Subject to any limitation required to comply with the provisions of Section 409A
of the Code, each Remaining Option held by any person who is or becomes a Spinco
Employee at the Effective Time shall vest and become immediately exercisable at
the Effective Time, and will remain exercisable until the earlier of (i) 5 years
following the Effective Time or (ii) the expiration of the stated term of the
Original Option.  The exercise price and number of shares subject to each
Remaining Option shall be adjusted pursuant to the terms of the applicable
Verizon Plan but in a manner consistent with the requirements of Section 424 of
the Code.  As a result, the Remaining Option shall be adjusted in accordance
with clauses (A) and (B) below (to be interpreted and applied in such a way as
to minimize any adverse consequences from any possible application of FAS 123R
and Section 409A of the Code to such conversions):

44

--------------------------------------------------------------------------------

(A)          the number of shares of Verizon Common Stock subject to such
Remaining Option shall be equal to the product of (x) the number of shares of
Verizon Common Stock subject to the corresponding Original Option immediately
prior to the Effective Time and (y) the Verizon Share Ratio, with fractional
shares rounded down to the nearest whole share and

(B)           the per-share exercise price of such Remaining Option shall be
equal to the quotient of (x) the per-share exercise price of the corresponding
Original Option immediately prior to the Effective Time and (y) the Verizon
Share Ratio, rounded up to the nearest whole cent.

SECTION 8.3.            TREATMENT OF OUTSTANDING VERIZON RSU AND PSU AWARDS

(A)           GENERALLY.  EACH INDIVIDUAL WHO HOLDS AN OUTSTANDING AWARD THAT IS
A RESTRICTED STOCK UNIT (EACH, AN “RSU”) OR A PERFORMANCE SHARE UNIT (EACH, A
“PSU”) THAT RELATES TO VERIZON COMMON STOCK AND THAT WAS GRANTED UNDER A VERIZON
PLAN, SHALL CONTINUE TO HOLD SUCH RSU OR PSU AFTER THE EFFECTIVE TIME UNDER SUCH
VERIZON PLAN, PROVIDED THAT WITH RESPECT TO EACH SUCH OUTSTANDING AWARD, THERE
SHALL BE CREDITED ON BEHALF OF EACH HOLDER THEREOF A DIVIDEND EQUIVALENT AMOUNT
EQUAL TO THE OPENING CASH VALUE ON THE DAY FOLLOWING THE COMPLETION OF THE
DISTRIBUTION, OF THE NUMBER OF SHARES OF SPINCO COMMON STOCK THAT WOULD HAVE
BEEN DISTRIBUTED TO SUCH HOLDERS HAD EACH SUCH RSU OR PSU AWARD BEEN OUTSTANDING
SHARES OF VERIZON COMMON STOCK.

(B)           DEFERRAL ELECTIONS.  EACH AND EVERY DEFERRAL ELECTION MADE BY ANY
SPINCO EMPLOYEE WITH RESPECT TO ANY RSU OR PSU SHALL BE CANCELLED IN ORDER TO
AVOID ANY POTENTIAL ADVERSE TAXATION TO THE RECIPIENT THEREOF UNDER SECTION 409A
OF THE CODE.

45

--------------------------------------------------------------------------------

(C)           PERFORMANCE CONDITIONS/BOARD APPROVAL.  NOTWITHSTANDING ANYTHING
ELSE CONTAINED HEREIN TO THE CONTRARY, NOTHING IN THIS SECTION 8 SHALL BE
CONSTRUED OR INTERPRETED TO MODIFY, WAIVE, ELIMINATE OR OTHERWISE ALTER ANY
PERFORMANCE CONDITIONS REQUIRED TO BE SATISFIED FOR A SPINCO EMPLOYEE OR
EMPLOYEE OF ANY MEMBER OF THE VERIZON GROUP TO BECOME VESTED IN ANY OUTSTANDING
AWARD (INCLUDING, BUT NOT LIMITED TO, ANY PSU).  MOREOVER, ANY REQUIREMENT FOR
APPROVAL BY THE VERIZON BOARD OR A DULY AUTHORIZED COMMITTEE THEREOF OF THE
LEVEL OF ACHIEVEMENT AGAINST ANY SUCH PERFORMANCE RESTRICTIONS APPLICABLE TO
SUCH OUTSTANDING AWARD SHALL CONTINUE TO APPLY ON THE SAME BASIS AS THEY DID
PRIOR TO THE EFFECTIVE TIME.

(D)           VESTING OF PSUS.  ANY PSU OR ANY RESTRICTED STOCK UNIT GRANTED BY
VERIZON IN THE 2005, 2006 OR 2007 CALENDAR YEAR THAT IS HELD BY A SPINCO
EMPLOYEE AT THE EFFECTIVE TIME SHALL IMMEDIATELY VEST IN FULL ON THE
DISTRIBUTION DATE, SUBJECT, IF APPLICABLE, TO THE ACHIEVEMENT OF ANY APPLICABLE
PERFORMANCE CRITERIA AND THE APPROVAL THEREOF BY THE VERIZON BOARD OR A DULY
AUTHORIZED COMMITTEE THEREOF.  EACH SUCH AWARD WILL BE PAID IN THE ORDINARY
COURSE DURING THE FIRST 75 DAYS OF THE FIRST QUARTER OF THE CALENDAR YEAR NEXT
FOLLOWING THE APPLICABLE PERFORMANCE PERIOD FOR WHICH, AND SUBJECT TO THE EXTENT
TO WHICH, IT BECOMES EARNED.

Any Outstanding Award that is a chairman’s award will be treated in
substantially the same manner and subject to substantially the same conditions
outlined above with respect to annual RSU grants, that is, each such chairman’s
award will be appropriately adjusted to reflect the distribution of Spinco, will
be deemed immediately vested on the Distribution Date and will be paid promptly
on the regularly scheduled payment date after the end of the applicable award
cycle.

46

--------------------------------------------------------------------------------

Section 8.4.            Treatment of Verizon Options Outstanding at the Record
Date, but Exercised Prior to the Distribution Date.

At the discretion of, and subject to such terms and conditions as shall be
established by the appropriate committee of its Board of Directors, Verizon may
provide that any stock option in respect of Verizon Common Stock granted under a
Verizon Plan that is (i) held as of the Record Date by either a Spinco Employee
or a Verizon Employee or a permitted transferee of any such employee, and (ii)
is exercised by such holder following the Record Date and prior to or on the
Distribution Date (each, a “Record Date Option”), shall be adjusted pursuant to
the terms of the plan document governing such Record Date Option to entitle such
holder to participate in the Distribution and to receive, as of the Distribution
Date and in addition to the number of shares of Verizon Common Stock deliverable
upon the exercise of such Record Date Options, the number of shares of Spinco
Common Stock which such person would have received had such person been a
Verizon stockholder on the Record Date.  If the appropriate committee of the
Verizon Board of Directors does not exercise its discretion to adjust any stock
options in respect of Verizon Common Stock in the manner permitted under the
immediately preceding sentence, the number of Record Date Options for purposes
of this Agreement and the Distribution Agreement shall be zero.

Section 8.5             Treatment of Outstanding FairPoint Equity Awards.

Prior to the Effective Time, the appropriate committee of the Board of Directors
of FairPoint shall take any and all actions that it shall deem necessary or
appropriate, in accordance with its authority under each of the equity incentive
plans of FairPoint (the “FairPoint Equity Plans”) under which there shall be
outstanding at the Effective Time any stock options, stock appreciation rights,
restricted stock or other forms of compensatory equity-based compensation awards
(the “FairPoint Equity Awards”), to

47

--------------------------------------------------------------------------------

prevent (i) the accelerated vesting or exercisability of, or the waiver of any
service or other conditions associated with, such FairPoint Equity Awards in
connection with, and (ii) the occurrence of any other enhancement (other than
any enhancement in the trading value of the FairPoint common stock that is
generally available to all shareholders of FairPoint)of the rights of the
holders of such FairPoint Equity Awards that would otherwise arise solely by
reason of, the consummation of the transactions contemplated in the Merger
Agreement.

ARTICLE IX.

SHORT TERM INCENTIVES AND SALES COMMISSION PROGRAMS

SECTION 9.1.            INCENTIVE AND COMMISSION PLANS

All Liabilities relating to Spinco Employees under each Short Term Incentive
Plan or Sales Commission Program shall cease to be Liabilities of the Verizon
Group and shall be assumed in full and in all respects by FairPoint, as of the
Effective Time.  The FairPoint Group shall continue each Short Term Incentive
Plan and each Sales Commission Program in effect as of the Effective Time until
December 31, 2008.

48

--------------------------------------------------------------------------------

ARTICLE X.

DEFERRED COMPENSATION PLANS

SECTION 10.1.          GENERALLY

Verizon shall retain all Liabilities for any benefits accrued by Spinco
Employees and Former Spinco Employees under the EDP and IDP.

SECTION 10.2.          VESTING AND PAYOUT OF BALANCES

All unvested account balances under the EDP and IDP shall vest at the Effective
Time.  For purposes of the EDP and IDP only, the Effective Time shall be
considered a separation event and a termination of employment from the Verizon
Group.  Any Spinco Employee who elected to receive a payout of an account
balance upon a termination of employment, shall be paid out such account in
accordance with the terms of the relevant plan.  Notwithstanding the foregoing,
any and all distributions from the EDP and IDP shall, to the extent applicable,
be administered in a manner consistent with the provisions of Section 409A of
the Code and the regulations promulgated thereunder.

ARTICLE XI.

ASSUMPTION OF LIABILITIES

SECTION 11.1.          ASSUMPTION OF LIABILITIES

(A)           BY SPINCO.  NOT LATER THAN THE DISTRIBUTION DATE, EXCEPT AS
OTHERWISE EXPRESSLY PROVIDED FOR IN THIS AGREEMENT, SPINCO SHALL OR SHALL CAUSE
A MEMBER OF THE SPINCO GROUP OR A SPINCO PLAN TO ASSUME, PERFORM, AND DISCHARGE
ALL OF THE FOLLOWING, REGARDLESS OF WHEN OR WHERE SUCH LIABILITIES AROSE OR
ARISE OR ARE INCURRED:

49

--------------------------------------------------------------------------------

(I)            ALL LIABILITIES TO OR RELATING TO SPINCO EMPLOYEES AND THEIR
DEPENDENTS AND BENEFICIARIES, TO THE EXTENT RELATING TO, ARISING OUT OF OR
RESULTING FROM EMPLOYMENT WITH ANY MEMBER OF THE VERIZON GROUP OR THE SPINCO
GROUP ON OR PRIOR TO THE DISTRIBUTION DATE, INCLUDING ALL LIABILITIES GOVERNED
BY THE NNETO CBAS; AND

(II)           ALL OTHER LIABILITIES RELATING TO, OR ARISING OUT OF, OR
RESULTING FROM OBLIGATIONS, LIABILITIES, AND RESPONSIBILITIES EXPRESSLY ASSUMED
OR RETAINED BY SPINCO OR A MEMBER OF THE SPINCO GROUP PURSUANT TO THIS AGREEMENT
OR THE NNETO CBAS.

(B)           BY FAIRPOINT.  AT THE EFFECTIVE TIME, FAIRPOINT SHALL OR SHALL
CAUSE A MEMBER OF THE FAIRPOINT GROUP OR A FAIRPOINT OR SPINCO PLAN TO ASSUME,
PERFORM, AND DISCHARGE ALL SPINCO LIABILITIES, REGARDLESS OF WHEN OR WHERE SUCH
LIABILITIES AROSE OR ARISE OR ARE INCURRED.  TO THE EXTENT THAT ANY FAIRPOINT
SUBSIDIARY IS RESPONSIBLE FOR ANY OF THE SPINCO LIABILITIES, FAIRPOINT SHALL BE
JOINTLY AND SEVERALLY LIABLE FOR THE PAYMENT OF SUCH LIABILITIES BY SUCH
FAIRPOINT SUBSIDIARY.

(C)           BY VERIZON.  VERIZON SHALL OR SHALL CAUSE THE APPLICABLE VERIZON
PLAN OR VERIZON GROUP MEMBER TO RETAIN AND DISCHARGE ALL OF THE FOLLOWING:

(I)            ALL LIABILITIES TO OR RELATING TO RETAINED EMPLOYEES AND FORMER
SPINCO EMPLOYEES, AND ANY INDIVIDUALS WHO ARE NOT SPINCO EMPLOYEES (AND THE
FOREGOING’S DEPENDENTS AND BENEFICIARIES), TO THE EXTENT RELATING TO, ARISING
OUT OF OR RESULTING FROM FORMER, PRESENT, OR FUTURE EMPLOYMENT WITH THE VERIZON
GROUP, INCLUDING ALL LIABILITIES GOVERNED BY THE COLLECTIVE BARGAINING
AGREEMENTS THAT COVER RETAINED EMPLOYEES, FORMER SPINCO EMPLOYEES, AND ANY
INDIVIDUALS WHO ARE NOT SPINCO EMPLOYEES (AND THE FOREGOING’S DEPENDENTS AND
BENEFICIARIES);

50

--------------------------------------------------------------------------------

(II)           ALL LIABILITIES WITH RESPECT TO OUTSTANDING AWARDS; AND

(III)          ALL LIABILITIES UNDER THE EDP OR IDP.

(iv)          all other Liabilities relating to, or arising out of, or resulting
from obligations, liabilities, and responsibilities expressly assumed or
retained by a member of the Verizon Group or a Verizon Plan pursuant to this
Agreement or the collective bargaining agreements that cover Retained Employees,
Former Spinco Employees, and any individuals who are not Spinco Employees (and
the foregoing’s dependents and beneficiaries);

(D)           ALLOCATION OF LIABILITIES AMONG VERIZON, SPINCO AND FAIRPOINT WITH
RESPECT TO GRIEVANCES AND DEMANDS FOR ARBITRATION PENDING AS OF THE EFFECTIVE
TIME SHALL BE AS SET FORTH IN SECTIONS 11.1(A), (B) AND (C).  VERIZON SHALL
RETAIN LIABILITY FOR SUCH CLAIMS RELATING SOLELY TO VERIZON EMPLOYEES OR THE
VERIZON BUSINESS AND FAIRPOINT SHALL ASSUME LIABILITY FOR SUCH CLAIMS RELATING
SOLELY TO SPINCO OR THE SPINCO BUSINESS.

(E)           WITH RESPECT TO GRIEVANCES AND DEMANDS FOR ARBITRATIONS PENDING AS
OF THE EFFECTIVE TIME THAT RELATE TO BOTH VERIZON EMPLOYEES AND SPINCO EMPLOYEES
OR TO BOTH THE SPINCO BUSINESS AND THE VERIZON BUSINESS OR TO BOTH VERIZON AND
FAIRPOINT, VERIZON AND FAIRPOINT, EACH ACTING REASONABLY, SHALL NEGOTIATE THE
TERMS OF A JOINT DEFENSE AGREEMENT IN A MANNER THAT IS CONSISTENT WITH THE TERMS
OF THE JOINT DEFENSE AGREEMENT TO BE NEGOTIATED PURSUANT TO SECTION 7.27 OF THE
MERGER AGREEMENT.  THE JOINT DEFENSE AGREEMENT WILL SET FORTH THE PROCEDURES FOR
DEFENDING AND RESOLVING SUCH GRIEVANCES AND DEMANDS FOR ARBITRATION ON A BASIS
THAT PROVIDES FOR THE ACTIVE INVOLVEMENT AND COOPERATION OF EACH OF VERIZON AND
FAIRPOINT, IT BEING UNDERSTOOD THAT LEAD COUNSEL DEFENDING SUCH LITIGATION SHALL
BE MUTUALLY AGREED TO BY VERIZON AND FAIRPOINT (IF SUCH COUNSEL WAS NOT SELECTED
PRIOR TO THE EFFECTIVE TIME) AND THAT NEITHER VERIZON NOR

51

--------------------------------------------------------------------------------

FAIRPOINT SHALL HAVE THE AUTHORITY TO BIND THE OTHER PARTY IN ANY SETTLEMENT OF
SUCH MATTERS WITHOUT THE WRITTEN CONSENT OF SUCH OTHER PARTY.  THE PARTIES AGREE
THAT SUCH AGREEMENT SHALL INCORPORATE AN EQUITABLE PROCEDURE FOR LIMITING THE
LIABILITY OF AN INDEMNITY PARTY IN THE EVENT A SETTLEMENT OFFER IS ACCEPTED BY
SUCH PARTY AND REJECTED BY THE COUNTERPARTY, TAKING INTO ACCOUNT THE PARTY THAT
IS MOST LIKELY TO SUFFER THE GREATER AMOUNT OF LOSSES (INCLUDING FOR SUCH
PURPOSES PAYMENTS HEREUNDER) OR INFRINGEMENT OF MANAGEMENT RIGHTS, AND A MORE
ADVERSE SETTLEMENT OR RESOLUTION RESULTS.  IN CONNECTION WITH THE NEGOTIATION OF
THE JOINT DEFENSE AGREEMENT, THE PARTIES ALSO AGREE TO ESTABLISH A REASONABLE
AND EQUITABLE BASIS FOR ALLOCATING ANY DETRIMENT IMPOSED BY ANY SUCH SETTLEMENT
OR ORDER THAT RELATES TO BOTH THE VERIZON EMPLOYEES AND THE SPINCO EMPLOYEES OR
TO BOTH THE VERIZON BUSINESS AND THE SPINCO BUSINESS OR TO BOTH THE VERIZON
GROUP AND THE FAIRPOINT GROUP.

To the extent that any Verizon Subsidiary is responsible for any of the
Liabilities listed above in Section 11.1(c), Verizon shall be jointly and
severally liable for the payment of such Liabilities by such Verizon
Subsidiary.  To the extent that any FairPoint Subsidiary is responsible for any
Liabilities listed above in Section 11.1(a) or (b), FairPoint shall be jointly
and severally liable for the payment of such Liabilities by a FairPoint
Subsidiary.

SECTION 11.2.          REIMBURSEMENT

(A)           BY FAIRPOINT.  FROM TIME TO TIME AFTER THE EFFECTIVE TIME,
FAIRPOINT SHALL PROMPTLY REIMBURSE VERIZON, BUT IN NO EVENT MORE THAN
FIFTEENBUSINESS DAYS AFTER DELIVERY BY VERIZON OF AN INVOICE THEREFOR CONTAINING
REASONABLE SUBSTANTIATING DOCUMENTATION OF SUCH COSTS AND EXPENSES, FOR THE COST
OF ANY OBLIGATIONS OR LIABILITIES THAT VERIZON OR A VERIZON PLAN ELECTS TO, OR
IS COMPELLED TO, PAY OR OTHERWISE SATISFY, THAT ARE OR THAT PURSUANT TO THIS
AGREEMENT HAVE BECOME, THE RESPONSIBILITY OF FAIRPOINT OR ANY FAIRPOINT
SUBSIDIARY; PROVIDED, HOWEVER, THAT IF PAYMENT IN RESPECT OF ANY SUCH LIABILITY

52

--------------------------------------------------------------------------------

IS MADE BY A VERIZON PLAN, FAIRPOINT OR THE APPROPRIATE FAIRPOINT PLAN SHALL
REIMBURSE THE VERIZON PLAN DIRECTLY.

(B)           BY VERIZON.  FROM TIME TO TIME AFTER THE EFFECTIVE TIME, VERIZON
SHALL PROMPTLY REIMBURSE FAIRPOINT, BUT IN NO EVENT MORE THAN FIFTEEN BUSINESS
DAYS AFTER DELIVERY BY FAIRPOINT OF AN INVOICE THEREFOR CONTAINING REASONABLE
SUBSTANTIATING DOCUMENTATION OF SUCH COSTS AND EXPENSES, FOR THE COST OF ANY
OBLIGATIONS OR LIABILITIES THAT FAIRPOINT OR A FAIRPOINT PLAN ELECTS TO, OR IS
COMPELLED TO, PAY OR OTHERWISE SATISFY, THAT ARE OR THAT PURSUANT TO THIS
AGREEMENT HAVE BECOME, THE RESPONSIBILITY OF VERIZON; PROVIDED, HOWEVER, THAT IF
PAYMENT IN RESPECT OF ANY SUCH LIABILITY IS MADE BY A FAIRPOINT PLAN, VERIZON OR
THE APPROPRIATE VERIZON PLAN SHALL REIMBURSE SUCH FAIRPOINT PLAN DIRECTLY.

SECTION 11.3.          INDEMNIFICATION

(A)           FAIRPOINT AND ANY MEMBER OF THE FAIRPOINT GROUP RESPONSIBLE FOR
OPERATING THE SPINCO BUSINESS, SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS THE
VERIZON INDEMNITEES FROM AND AGAINST ALL INDEMNIFIABLE LOSSES ARISING OUT OF OR
DUE TO (I) THE FAILURE OF ANY MEMBER OF THE FAIRPOINT GROUP TO PAY, PERFORM,
DISCHARGE OR SATISFY ANY LIABILITIES ASSUMED IN 11.1(A) AND (B) OF THIS
AGREEMENT (OTHER THAN ANY LIABILITIES WHICH ARISE DUE TO THE FAILURE OF VERIZON
TO SATISFY ITS OBLIGATIONS UNDER ARTICLE VIII HEREOF), AND (II) ANY OTHER BREACH
OF THE DUTIES OR OBLIGATIONS OF ANY MEMBER OF THE FAIRPOINT GROUP, AS SET FORTH
IN THIS AGREEMENT.  FAIRPOINT SHALL TAKE COMMERCIALLY REASONABLE EFFORTS TO
PROCURE INSURANCE AGAINST ANY INDEMNIFIABLE LOSSES ARISING FROM THE OBLIGATIONS
SET FORTH IN THIS AGREEMENT.

(B)           VERIZON SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS THE FAIRPOINT
INDEMNITEES FROM AND AGAINST ALL INDEMNIFIABLE LOSSES ARISING OUT OF OR DUE TO
(I) THE

53

--------------------------------------------------------------------------------

FAILURE OF ANY MEMBER OF THE VERIZON GROUP TO PAY, PERFORM, DISCHARGE OR SATISFY
ANY VERIZON LIABILITIES (OTHER THAN VERIZON LIABILITIES WHICH ARISE DUE TO THE
FAILURE OF ANY MEMBER OF THE FAIRPOINT GROUP OR ANY FAIRPOINT PLAN TO SATISFY
ANY LIABILITIES ASSUMED IN 11.1(A) AND (B) OF THIS AGREEMENT) AND (II) ANY OTHER
BREACH OF THE DUTIES AND OBLIGATIONS OF ANY MEMBER OF THE VERIZON GROUP, AS SET
FORTH IN THIS AGREEMENT.  VERIZON SHALL TAKE COMMERCIALLY REASONABLE EFFORTS TO
PROCURE INSURANCE AGAINST ANY INDEMNIFIABLE LOSSES ARISING FROM THE OBLIGATIONS
SET FORTH IN THIS AGREEMENT.

SECTION 11.4.          PROCEDURES FOR INDEMNIFICATION FOR THIRD-PARTY CLAIMS.

EXCEPT AS SPECIFICALLY SET FORTH IN THIS AGREEMENT, IN THE EVENT THAT VERIZON OR
ANY OTHER VERIZON INDEMNITEE SHALL SEEK INDEMNIFICATION IN RESPECT OF ANY
FAIRPOINT LIABILITIES, OR FAIRPOINT OR ANY FAIRPOINT INDEMNITEE SHALL SEEK
INDEMNIFICATION IN RESPECT OF ANY VERIZON LIABILITIES, SUCH PERSON SHALL COMPLY
WITH AND FOLLOW THE PROCEDURES REGARDING INDEMNIFICATION SET FORTH IN ARTICLE X
OF THE MERGER AGREEMENT, WHICH SHALL APPLY TO CLAIMS FOR INDEMNIFICATION
HEREUNDER IN THE SAME MANNER AS THOUGH SUCH CLAIMS WERE ELIGIBLE FOR
INDEMNIFICATION UNDER THE MERGER AGREEMENT, BUT ASSUMING THAT SUCH CLAIMS WERE
NOT SUBJECT TO ANY LIMITATION ON THE ABILITY TO CLAIM INDEMNIFICATION UNDER SUCH
MERGER AGREEMENT.

SECTION 11.5.          REDUCTIONS FOR INSURANCE PROCEEDS AND OTHER AMOUNTS.

(A)           THE AMOUNT THAT ANY INDEMNIFYING PARTY IS OR MAY BE REQUIRED TO
PAY TO ANY INDEMNITEE PURSUANT TO THIS ARTICLE XI SHALL BE REDUCED
(RETROACTIVELY OR PROSPECTIVELY) BY (I) ANY INSURANCE PROCEEDS OR OTHER AMOUNTS
ACTUALLY RECOVERED FROM THIRD PARTIES BY OR ON BEHALF OF SUCH INDEMNITEE IN
RESPECT OF THE RELATED INDEMNIFIABLE LOSSES ARISING FROM THE OBLIGATIONS SET
FORTH IN THIS AGREEMENT (NET OF ALL COSTS OF RECOVERY, INCLUDING DEDUCTIBLES,
CO-PAYMENTS OR OTHER PAYMENT OBLIGATIONS) AND (II) ANY

54

--------------------------------------------------------------------------------

TAX BENEFIT ACTUALLY REALIZED BY THE INDEMNITEE IN RESPECT OF THE RELATED
INDEMNIFIABLE LOSSES ARISING UNDER THE OBLIGATIONS SET FORTH IN THIS AGREEMENT. 
THE EXISTENCE OF A CLAIM BY AN INDEMNITEE FOR INSURANCE OR AGAINST A THIRD PARTY
IN RESPECT OF ANY INDEMNIFIABLE LOSS OR THE AVAILABILITY OF POTENTIAL TAX
BENEFITS SHALL NOT, HOWEVER, DELAY OR REDUCE ANY PAYMENT PURSUANT TO THE
INDEMNIFICATION PROVISIONS CONTAINED HEREIN AND OTHERWISE DETERMINED TO BE DUE
AND OWING BY AN INDEMNIFYING PARTY.  THE INDEMNIFYING PARTY SHALL MAKE PAYMENT
IN FULL OF SUCH AMOUNT SO DETERMINED TO BE DUE AND OWING BY IT AND, IF, AND TO
THE EXTENT THAT, THERE EXISTS A CLAIM AGAINST ANY THIRD PARTY (OTHER THAN AN
INSURER) IN RESPECT OF SUCH INDEMNIFIABLE LOSS, THE INDEMNITEE SHALL ASSIGN SUCH
CLAIM AGAINST SUCH THIRD PARTY TO THE INDEMNIFYING PARTY.  ANY TAX BENEFIT
ACTUALLY RECEIVED BY AN INDEMNIFIED PARTY SHALL BE PAID OVER TO THE INDEMNIFYING
PARTY TO THE EXTENT SUCH TAX BENEFIT RELATES TO AN INDEMNIFIABLE LOSS FOR WHICH
INDEMNIFICATION HAS ALREADY BEEN RECEIVED.  NOTWITHSTANDING ANY OTHER PROVISIONS
OF THIS AGREEMENT, IT IS THE INTENTION OF THE PARTIES HERETO THAT NO INSURER OR
ANY OTHER THIRD PARTY SHALL BE (I) ENTITLED TO A BENEFIT IT WOULD NOT BE
ENTITLED TO RECEIVE IN THE ABSENCE OF THE FOREGOING INDEMNIFICATION PROVISIONS
OR (II) RELIEVED OF THE RESPONSIBILITY TO PAY ANY CLAIMS FOR WHICH IT IS
OBLIGATED.  IF AN INDEMNITEE SHALL HAVE RECEIVED THE PAYMENT REQUIRED BY THIS
AGREEMENT FROM AN INDEMNIFYING PARTY IN RESPECT OF ANY INDEMNIFIABLE LOSSES AND
SHALL SUBSEQUENTLY ACTUALLY RECEIVE INSURANCE PROCEEDS, TAX BENEFITS OR OTHER
AMOUNTS IN RESPECT OF SUCH INDEMNIFIABLE LOSSES, THEN SUCH INDEMNITEE SHALL HOLD
SUCH INSURANCE PROCEEDS IN TRUST FOR THE BENEFIT OF SUCH INDEMNIFYING PARTY AND
SHALL PROMPTLY PAY TO SUCH INDEMNIFYING PARTY A SUM EQUAL TO THE AMOUNT OF SUCH
INSURANCE PROCEEDS, TAX BENEFITS OR OTHER AMOUNTS ACTUALLY RECEIVED, UP TO THE
AGGREGATE AMOUNT OF ANY PAYMENTS RECEIVED FROM SUCH INDEMNIFYING PARTY PURSUANT
TO THIS AGREEMENT IN RESPECT OF SUCH INDEMNIFIABLE LOSSES.

(b)           In the event that any claim is made by, on behalf of or in respect
to a Spinco Employee against any member of the FairPoint Group or the Spinco
Group, or in respect of any Spinco Plan for which insurance and/or insurance
reimbursement may be

55

--------------------------------------------------------------------------------

available under a Policy in accordance with the provisions of Section 7.5 of the
Distribution Agreement, then solely for purposes of Section 7.5 of the
Distribution Agreement, such claim shall be treated as a Spinco Liability under
the Distribution Agreement.  The purpose of this provision is to make available
to FairPoint the benefit of any Policy solely to the extent that benefits under
such Policy would be available to FairPoint were Liabilities addressed in this
Agreement not excluded from the definition of Spinco Liabilities under the
Distribution Agreement, and this provision shall not be construed to expand or
otherwise alter the terms of such Section 7.5 of the Distribution Agreement or
the definition of Liabilities in this Agreement. For purposes of this Section
11.5(b), the term “Policy” shall have the meaning ascribed to it in the
Distribution Agreement.

SECTION 11.6.          CONTRIBUTION

(a)           If the indemnification provided for in this Article XI is
unavailable to, or insufficient to hold harmless, any Indemnitee in respect of
any Losses for which indemnification is provided for herein, then the relevant
Indemnifying Party shall contribute to the Losses for which such indemnification
is unavailable or insufficient in such proportion as is appropriate to reflect
the relative fault of such Indemnifying Party and such Indemnitee in connection
with the circumstances which resulted in such Losses as well as any other
relevant equitable considerations.

(b)           The relative fault of Verizon and FairPoint shall be determined by
reference to, among other things, the parties’ relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission and whether any such untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact relates to
information supplied by Verizon or by FairPoint.

56

--------------------------------------------------------------------------------

(c)           Verizon and FairPoint agree that it would not be just and
equitable if contribution pursuant to this Section 11.6 were determined by any
method of allocation which does not take account of the equitable considerations
referred to in Section 11.6(b).  The aggregate amount of losses, liabilities,
claims, damages and expenses incurred by an Indemnitee shall be deemed to
include any legal or other expenses reasonably incurred by such Indemnitee in
investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.

SECTION 11.7.          CONSEQUENTIAL DAMAGES

In no event shall an Indemnifying Party be liable for any Indemnitee’s special,
punitive, exemplary, incidental, consequential or indirect damages, or lost
profits, whether based on contract, tort, strict liability, other law or
otherwise.

SECTION 11.8.          JOINT DEFENSE AND COOPERATION

With respect to any Third Party Claim, except those specified in Section 11.1(d)
and (e), but including, and not limited to, administrative proceedings,
governmental investigations, and lawsuits in which both a member of the Verizon
Group and a member of the FairPoint Group are, or reasonably may be expected to
be, named as parties, or that otherwise implicates both a member of the Verizon
Group and a member of the FairPoint Group to a material degree, the Parties
shall negotiate a joint defense agreement consistent with the terms of the joint
defense agreement to be negotiated between the Parties pursuant to Section 7.27
of the Merger Agreement.

57

--------------------------------------------------------------------------------

ARTICLE XII.

GENERAL AND ADMINISTRATIVE

SECTION 12.1.          COOPERATION

(A)           GENERAL.  EACH OF THE PARTIES HERETO WILL USE ITS COMMERCIALLY
REASONABLE EFFORTS TO PROMPTLY TAKE, OR CAUSE TO BE TAKEN, ANY AND ALL ACTIONS
AND TO DO, OR CAUSE TO BE DONE, ANY AND ALL THINGS NECESSARY PROPER AND
ADVISABLE UNDER APPLICABLE LAWS AND REGULATIONS TO CONSUMMATE THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT, INCLUDING WITHOUT LIMITATION, ADOPTING PLANS OR
PLAN AMENDMENTS.  EACH OF THE PARTIES HERETO SHALL COOPERATE FULLY ON ANY ISSUE
RELATING TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT FOR WHICH THE OTHER
PARTY SEEKS A DETERMINATION LETTER OR ANY OTHER FILING, CONSENT, OR APPROVAL
WITH RESPECT TO GOVERNMENTAL AUTHORITIES REGARDING A BENEFIT PLAN.

(B)           COOPERATION IN BENEFITS, PLAN, AND OTHER EMPLOYEE TRANSITION. 
WITHOUT LIMITATION, THE PARTIES’ COOPERATION UNDER THIS AGREEMENT SHALL INCLUDE
VERIZON (AND ITS EMPLOYEES AND AGENTS) ACTING TO PROVIDE FAIRPOINT (AND ITS
EMPLOYEES AND AGENTS) WITH ALL INFORMATION (INCLUDING, WITHOUT LIMITATION, PLAN
DOCUMENTATION, NAMES OF EMPLOYEES ANTICIPATED TO BE ASSIGNED TO SPINCO AND THEIR
RESPECTIVE WORK STATUS, DEMOGRAPHICS AND DATA, AND UNDERWRITING AND
RISK-ASSESSMENT INFORMATION AND PERIODIC UPDATES ON THE FOREGOING) THAT IS
REASONABLY REQUESTED BY FAIRPOINT IN CONNECTION WITH ESTABLISHING SPINCO’S
ONGOING BENEFIT PLANS AND ASSESSING APPROPRIATE INSURANCES FOR THE PERIOD ON AND
AFTER THE DISTRIBUTION DATE AND THAT IS REASONABLY AVAILABLE TO VERIZON AFTER
TAKING COMMERCIALLY REASONABLE EFFORTS TO OBTAIN SUCH INFORMATION. SUCH
INFORMATION MAY BE REQUESTED BY FAIRPOINT AT ANY TIME FOLLOWING THE DATE WHICH
IS SIX MONTHS PRIOR TO THE ANTICIPATED DISTRIBUTION DATE, AND SHALL BE PROVIDED
BY VERIZON OR A VERIZON AGENT AS SOON AS REASONABLY PRACTICABLE WITHOUT
INCURRING UNDUE EXPENSE AND IN A DE-IDENTIFIED

58

--------------------------------------------------------------------------------

FORMAT TO THE EXTENT NECESSARY TO COMPLY WITH PRIVACY PROVISIONS OF FEDERAL OR
APPLICABLE STATE LAW.

SECTION 12.2.          CONSENT OF THIRD PARTIES

If any provision of this Agreement is dependent on the consent of any third
party (such as a vendor) and such consent is withheld, the Parties shall use
their reasonable best efforts to implement the applicable provisions of this
Agreement to the full extent practicable.  If any provision of this Agreement
cannot be implemented due to the failure of such third party to consent, the
Parties shall negotiate in good faith to implement the provision in a mutually
satisfactory manner.  The phrase “reasonable best efforts” as used in this
Agreement shall not be construed to require the incurrence of any non-routine or
commercially unreasonable expense or liability or the waiver of any right.

SECTION 12.3.          SURVIVAL

This Agreement shall survive the Effective Time.

SECTION 12.4.          INTERPRETATION

Words in the singular shall be held to include the plural and vice versa and
words of one gender shall be held to include the other genders as the context
requires.  The terms “hereof,” “herein,” and “herewith” and words of similar
import shall, unless otherwise stated, be construed to refer to this Agreement
as a whole (including all Exhibits hereto) and not to any particular provision
of this Agreement.  The word “including” and words of similar import when used
in this Agreement shall mean “including, without limitation,” unless the context
otherwise requires or unless otherwise specified.  The word “or” shall not be
exclusive.

59

--------------------------------------------------------------------------------

SECTION 12.5.          NO THIRD PARTY BENEFICIARY

(A)           NOTHING IN THIS AGREEMENT SHALL CONFER UPON ANY PERSON (NOR ANY
BENEFICIARY THEREOF) ANY RIGHTS UNDER OR WITH RESPECT TO ANY PLAN, PROGRAM OR
ARRANGEMENT DESCRIBED IN OR CONTEMPLATED BY THIS AGREEMENT AND EACH PERSON (AND
ANY BENEFICIARY THEREOF) SHALL BE ENTITLED TO LOOK ONLY TO THE EXPRESS TERMS OF
ANY SUCH PLAN, PROGRAM OR ARRANGEMENT FOR HIS, HER OR ITS RIGHTS THEREUNDER.

(B)           NOTHING IN THIS AGREEMENT SHALL CREATE ANY RIGHT OF A PERSON TO
OBJECT OR TO REFUSE TO ASSENT TO THE ASSUMPTION OF OR SUCCESSION TO, BY ANY
MEMBER OF THE SPINCO GROUP OR THE FAIRPOINT GROUP, ANY BENEFIT PLAN, COLLECTIVE
BARGAINING AGREEMENT OR OTHER AGREEMENT RELATING TO CONDITIONS OF EMPLOYMENT,
TERMINATION OF EMPLOYMENT, SEVERANCE OR EMPLOYEE BENEFITS, NOR SHALL THIS
AGREEMENT BE CONSTRUED AS RECOGNIZING THAT ANY SUCH RIGHTS EXIST.

(C)           NOTHING IN THIS AGREEMENT SHALL AMEND OR SHALL BE CONSTRUED TO
AMEND ANY PLAN, PROGRAM OR ARRANGEMENT DESCRIBED IN OR CONTEMPLATED BY THIS
AGREEMENT (OTHER THAN TO CHANGE THE SPONSOR OF A PLAN IN ACCORDANCE WITH THE
EXPRESS TERMS HEREOF).

SECTION 12.6.          NOTICES

Any notice, demand, claim, or other communication under this Agreement shall be
in writing and shall be deemed given to a Party when (a) delivered to the
appropriate address by hand or by nationally recognized overnight courier
services (costs prepaid); (b) sent by facsimile with conformation or
transmission; (c) received or rejected by the addressee, if sent by certified
mail, return receipt requested, in each case to the following addresses and
facsimile numbers and marked to the attention of the person designated

60

--------------------------------------------------------------------------------

below (or to such other address, facsimile number or person as a party may
designate by notice to the other Parties:

(A)           IF TO SPINCO (PRIOR TO THE EFFECTIVE TIME) OR VERIZON, TO:

Verizon Communications Inc.

140 West Street

New York, NY 10007

Facsimile:  (908) 766-3813

Attn:  Marianne Drost, Esq.

Senior Vice President, Deputy General Counsel and

Corporate Secretary

and

Verizon Communications Inc.

One Verizon Way

Basking Ridge, NJ 07920-1097

Facsimile:  (908) 696-2068

Attn:  Dale Chamberlain, Esq.

With copies to:

Debevoise & Plimpton LLP

919 Third Avenue

New York, NY 10022

Attn:  Kevin M. Schmidt

(B)           IF TO FAIRPOINT, TO:

FairPoint Communications, Inc.

521 E. Morehead St., Ste. 250

Charlotte, NC 28202

Facsimile:  704.344.1594

Attn:  Peter G. Nixon

Chief Operating Officer

and

FairPoint Communications, Inc.

521 E. Morehead St., Ste. 250

Charlotte, NC 28202

Facsimile: 704.344.1594

Attn:  Shirley J. Linn

Executive Vice President and General Counsel

61

--------------------------------------------------------------------------------

With copies to (which shall not constitute notice):

Paul, Hastings, Janofsky & Walker LLP

75 East 55th Street

New York, New York 10022

Facsimile No.: (212) 230-7700

Attn:  Thomas E. Kruger

Parker, Poe, Adams & Bernstein L.L.P.

Three Wachovia Center

401 South Tryon Street, Suite 3000

Charlotte, NC 28202

Facsimile No.:

Attn:  Heloise C. Merrill

SECTION 12.7.          GOVERNING LAW; JURISDICTION.  THIS AGREEMENT AND THE
LEGAL RELATIONS BETWEEN THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAWS RULES THEREOF TO THE EXTENT SUCH RULES WOULD REQUIRE THE
APPLICATION OF THE LAW OF ANOTHER JURISDICTION.  THE STATE OR FEDERAL COURTS
LOCATED WITHIN THE CITY OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION OVER ANY
AND ALL DISPUTES BETWEEN THE PARTIES HERETO, WHETHER IN LAW OR EQUITY, ARISING
OUT OF OR RELATING TO THIS AGREEMENT AND THE AGREEMENTS, INSTRUMENTS AND
DOCUMENTS CONTEMPLATED HEREBY AND THE PARTIES CONSENT TO AND AGREE TO SUBMIT TO
THE EXCLUSIVE JURISDICTION OF SUCH COURTS.  EACH OF THE PARTIES HEREBY WAIVES
AND AGREES NOT TO ASSERT IN ANY SUCH DISPUTE, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY CLAIM THAT (I) SUCH PARTY IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF SUCH COURTS, (II) SUCH PARTY AND SUCH PARTY’S PROPERTY IS IMMUNE
FROM ANY LEGAL PROCESS ISSUED BY SUCH COURTS OR (III) ANY LITIGATION OR OTHER
PROCEEDING COMMENCED IN SUCH COURTS IS BROUGHT IN AN INCONVENIENT FORUM.

62

--------------------------------------------------------------------------------

SECTION 12.8.          WAIVER OF JURY TRIAL.

EACH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER RELATED
DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

SECTION 12.9.          SPECIFIC PERFORMANCE.

The parties hereto agree that irreparable damage would occur in the event any
provision of this Agreement was not performed in accordance with the terms
hereof and that, after the Distribution, the parties shall be entitled to
specific performance of the terms hereof to the extent such terms impose
obligations that are to be performed after the Distribution, in addition to any
other remedy at law or in equity.

SECTION 12.10.        NO ASSIGNMENT; NO AMENDMENT; COUNTERPARTS

This Agreement may not be assigned by either Party (except by operation of law)
without the written consent of the other, and shall bind and inure to the
benefit of the Parties hereto and their respective successors and permitted
assignees.  This Agreement may not be amended or supplemented except by an
agreement in writing signed by Verizon, Spinco, and FairPoint.  This Agreement
may be executed in counterparts, each of which shall be deemed an original and
all of which together shall constitute one and the same instrument.

63

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, each Party has caused its duly authorized officer to execute
this Agreement, as of the date first written above.

 

 

 

VERIZON COMMUNICATIONS INC.

 

 

/s/ John W. Diercksen

 

 

By:

John W. Diercksen

 

 

Its:

Executive Vice President—Strategy,

 

 

 

Development and Planning

 

 

 

 

 

 

 

NORTHERN NEW ENGLAND SPINCO,

 

 

 

INC.

 

 

/s/ Stephen E. Smith

 

 

By:

Stephen E. Smith

 

 

Its:

Vice President

 

 

 

 

 

 

 

FAIRPOINT COMMUNICATIONS, INC.

 

 

/s/ Eugene B. Johnson

 

 

By:

Eugene B. Johnson

 

 

Its:

Chief Executive Officer

 

64

--------------------------------------------------------------------------------