ex10-3.htm


     

    Exhibit
10.3

     

     

    
      


       

      TAX
SHARING AGREEMENT

       

      This Tax Sharing Agreement (this “Agreement”) is
entered into as of May 13, 2009, by and among Verizon Communications Inc., a
Delaware corporation (“Verizon”), New
Communications Holdings Inc., a newly formed Delaware corporation and a wholly
owned subsidiary of Verizon (“Spinco”), Frontier
Communications Corporation, a Delaware corporation (the “Company”), and the
entities set forth on Schedule A hereto (the “ILEC Spinco
Subsidiaries”).  Capitalized terms used in this Agreement and
not otherwise defined herein shall have the meanings ascribed to such terms in
the Merger Agreement, dated as of the date hereof, by and among Verizon, the
Company and Spinco (the “Merger Agreement”) or
the Distribution Agreement, dated as of the date hereof, by and between Verizon
and Spinco (the “Distribution
Agreement”).

       

       

      RECITALS

       

       

      WHEREAS, Verizon is the common parent
corporation of an affiliated group of corporations within the meaning of Section
1504(a) of the Internal Revenue Code of 1986, as amended (the “Code”), that files a
consolidated U.S. federal income tax return;

       

      WHEREAS, pursuant to the Merger
Agreement and the Distribution Agreement, among other things, Verizon will
transfer or cause to be transferred to Spinco or one or more Subsidiaries of
Spinco (pursuant to certain preliminary restructuring transactions, including
Internal Spinoffs) all of the Spinco Assets, and Spinco and/or one or more
Subsidiaries of Spinco will assume or cause to be assumed all of the Spinco
Liabilities;

       

      WHEREAS, on the Distribution Date,
Verizon will distribute all of the issued and outstanding shares of Spinco
Common Stock on a pro rata basis to the holders of Verizon Common
Stock;

       

      WHEREAS, pursuant to the Merger
Agreement, immediately following the Distribution, Spinco will merge with and
into the Company pursuant to the Merger;

       

      WHEREAS, the parties to this Agreement
intend that (i)
each Internal Spinoff qualify as a distribution eligible for nonrecognition
under Sections 355(a), 355(c) and/or 361(c) of the Code, as applicable; (ii)
the Contribution, together with the Distribution, qualify as a tax-free
reorganization under Section 368(a)(1)(D) of the Code; (iii)
the Distribution qualify as a distribution of Spinco stock to Verizon
stockholders eligible for nonrecognition under Sections 355(a) and 361(c) of the
Code; (iv)
no gain or loss be recognized by Verizon for U.S. federal income tax purposes in
connection with the receipt of the Spinco Securities or the consummation of the
Debt Exchange; (v)
the Special Payment qualify as money transferred to creditors or distributed to
shareholders in connection with the reorganization within the meaning of Section
361(b)(1) of the Code, to the extent that Verizon distributes the Special
Payment to its creditors and/or shareholders in connection with the
transactions; (vi)
the Merger qualify as a tax-free reorganization pursuant to Section 368(a) of
the Code; and (vii)
no gain or loss be recognized as a result of such transactions for U.S. federal
income tax purposes by any of Verizon, Spinco, and their respective stockholders
and Subsidiaries (except to the extent of cash received in lieu of fractional
shares); and

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

       

      WHEREAS, Verizon, Spinco, the Company
and the ILEC Spinco Subsidiaries desire to set forth their rights and
obligations with respect to Taxes due for periods before and after the
Distribution Date and other Tax matters relating to the transactions
contemplated by the Merger Agreement and the Distribution
Agreement.

       

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

       

       

      ARTICLE
I

       

      DEFINITIONS

       

       

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

       

      “Applicable Federal
Rate” means the rate computed pursuant to Section 1274(d) of the Code,
compounded quarterly, with respect to the applicable period.

       

      “Code” has the meaning
set forth in the recitals.

       

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

       

      “Company Group” means
the Company and all entities that are Subsidiaries of the Company immediately
following the Merger.

       

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      “Distribution
Agreement” has the meaning set forth in the preamble.

       

      “Distribution
Disqualification” means that (i) either
the Contribution, taken together with the Distribution, or any Internal Spinoff
intended to so qualify, fails to qualify as a tax-free reorganization under
Section 368(a)(1)(D) of the Code pursuant to which no gain or loss is recognized
for U.S. federal income tax purposes by any of Verizon, Spinco or their
Subsidiaries; (ii) any
of the Distribution or the Internal Spinoffs fails to qualify as a distribution
eligible for nonrecognition under Section 355 of the Code, pursuant to which no
gain or loss is recognized for U.S. federal income tax purposes by any of
Verizon, Spinco, their Subsidiaries, or the stockholders of Verizon, except to
the extent of cash received in lieu of fractional shares; (iii) the
Debt Exchange (if consummated) fails to constitute a transfer of qualified
property to Verizon’s creditors in connection with the reorganization within the
meaning of Section 361(c)(3) of the Code; and/or (iv) the
Special Payment fails to qualify as money transferred to creditors or
distributed to shareholders in connection with the reorganization within the
meaning of Section 361(b)(1) of the Code, but only to the extent that Verizon
distributes the Special Payment to its creditors or shareholders.  For
the avoidance of doubt, a Distribution Disqualification shall occur if Verizon
or any of its Subsidiaries recognizes gain pursuant to Section 355(d), 355(e)
and/or 355(f) of the Code with respect to the Distribution and/or any Internal
Spinoff.

       

      “Final Determination”
means a determination within the meaning of Section 1313 of the Code or any
similar provision of state or local tax law.

       

      “Income Taxes” means
any and all Taxes based upon or measured by net or gross income (including
alternative minimum tax under Section 55 of the Code) and including any
liability described in clauses (ii) or (iii) of the definition of “Taxes” that
relates to any such Tax.

       

      “Indemnified Party”
has the meaning set forth in Section 5.01.

       

      “Indemnifying Party”
has the meaning set forth in Section 5.01.

       

      “Merger Agreement” has
the meaning set forth in the preamble.

       

      “Non-Preparer Party”
has the meaning set forth in Section 2.02.

       

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

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

       

      “Post-Distribution
Period” means any taxable year or other taxable period beginning after
the Distribution Date and, in the case of any taxable year or other taxable
period that begins before and ends after the Distribution Date, that part of the
taxable year or other taxable period that begins at the beginning of the day
after the Distribution Date.

       

      “Potential Disqualifying
Action” has the meaning set forth in Section 10.02(b).

       

      “Pre-Distribution
Period” means any taxable year or other taxable period that ends on or
before the Distribution Date and, in the case of any taxable year or other
taxable period that begins before and ends after the Distribution Date, that
part of the taxable year or other taxable period through the close of the
Distribution Date.

       

      “Spinco” has the
meaning set forth in the preamble.

       

      “Spinco Group” means
Spinco and all entities that are Subsidiaries of Spinco immediately following
the Contribution.  For the avoidance of doubt, any direct or indirect
predecessor by liquidation or merger as part of the Transactions of any such
entity shall also be considered to be part of the Spinco Group during the period
of its existence prior to the Contribution.

       

      “Spinco Return” has
the meaning set forth in Section 2.01(b).

       

      “Tax Attribute” means
any net operating loss carryover or carryback, net capital loss carryover or
carryback, investment tax credit carryover or carryback, foreign tax credit
carryover or carryback, charitable deduction carryover or carryback or other
similar item that could reduce Income Tax for a past or future taxable
period.

       

      “Tax Benefit” means,
(i) in
the case of a separate state, local or other Tax Return not described in clause
(ii), the sum of the amount by which the Tax liability (after giving effect to
any alternative minimum or similar Tax) of a corporation to the appropriate
Taxing Authority is reduced (including by deduction, entitlement to refund,
credit or otherwise, whether available in the current taxable year, as an
adjustment to taxable income in any other taxable year or as a carryforward or
carryback, as applicable) plus any interest from such government or jurisdiction
relating to such Tax liability, and (ii)
in the case of a consolidated federal Tax Return or combined, unitary or other
similar state, local or other Tax Return, the sum of the amount by which the Tax
liability of the affiliated group (within the meaning of Section 1504(a) of the
Code) or other relevant group of corporations to the appropriate government or
jurisdiction is reduced (including by deduction, entitlement to refund, credit
or otherwise, whether available in the current taxable year, as an adjustment to
taxable income in any other taxable year or as a carryforward or carryback, as
applicable) plus any interest from such government or jurisdiction relating to
such Tax liability, determined in the case of clauses (i) or (ii) by comparing
the Tax liability on the applicable Tax Return that would arise with and without
the item potentially giving rise to the Tax Benefit.

       

      
        
          
          

        

        
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      “Tax Contest” has the
meaning set forth in Section 5.01.

       

      “Tax Dispute” has the
meaning set forth in Article IX.

       

      “Tax Dispute
Arbitrator” has the meaning set forth in Article IX.

       

      “Tax Materials” has
the meaning set forth in Section 10.01(a).

       

      “Transactions” has the
meaning set forth in Section 2.04(a).

       

      “Verizon” has the
meaning set forth in the preamble.

       

      “Verizon Consolidated
Group” means any consolidated, combined or unitary group of which any
member of the Verizon Group is the common parent corporation at any
time.

       

      “Verizon Event” has
the meaning set forth in Section 2.04(a).

       

      “Verizon Group” means
Verizon and all Subsidiaries of Verizon at any time preceding, at or following
the Contribution, but shall not include any member of the Spinco
Group.

       

      “Verizon Return” has
the meaning set forth in Section 2.01(a).

       

      
        
          
          

        

        
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      ARTICLE
II

       

      TAX
RETURNS AND TAX PAYMENTS

       

       

      Section 2.01   Obligations to File Tax
Returns.

       

      (a)          Verizon
shall prepare and file or cause to be filed any Tax Return that is required to
be filed (whether before, on or after the Distribution Date) that includes both
(i)
one or more members of the Verizon Group and (ii)
one or more members of the Spinco Group (a “Verizon
Return”).  In the event that under applicable law any Verizon
Return must be filed by any member of the Company Group, the Company and Verizon
shall reasonably cooperate in filing such Verizon Return and, subject to Section
2.04, remitting any Taxes due in connection with such Verizon
Return.  All Verizon Returns shall be prepared on a basis that is
consistent with the Distribution Tax Opinion, the Merger Tax Opinions, the IRS
Ruling, and past practice.  Each member of the Spinco Group hereby
irrevocably authorizes and designates Verizon as its agent, coordinator and
administrator for the purpose of taking any and all actions necessary or
incidental to the filing of any such Verizon Return and, except as otherwise
provided herein, for the purpose of making payments to, or collecting refunds
from, any Taxing Authority in respect of a Verizon Return.  The
Company shall cause members of the Spinco Group to promptly prepare and deliver
to Verizon in a manner consistent with past practices pro forma Tax Returns and
tax information packages with respect to any Verizon Return.  Except
as otherwise provided herein, Verizon shall have the exclusive right to file,
prosecute, compromise or settle any claim for refund for Taxes in respect of a
Verizon Return for which Verizon bears responsibility hereunder and to determine
whether any refunds of such Taxes to which the Verizon Consolidated Group may be
entitled shall be received by way of refund or credit against the Tax liability
of the Verizon Consolidated Group, provided, however,
that the Company shall be entitled to participate in the pursuit of such Tax
refund claim at its own expense if the Company would receive such Tax refund
under the terms of this Agreement.

       

      (b)         The
Company shall prepare and file or cause to be filed any other Tax Return with
respect to one or more members of the Spinco Group that includes a portion of
the Pre-Distribution Period (a “Spinco Return”) that
is required to be filed after the Distribution Date.  For the
avoidance of doubt, the term “Spinco Return” includes any Tax Return (other than
a Verizon Return or a Tax Return described in Section 2.01(c)) for any taxable
period that includes a portion of the Pre-Distribution Period and relates to one
or more members of the Spinco Group.  In the event that under
applicable law any Spinco Return must be filed by any member of the Verizon
Group, the Company and Verizon shall reasonably cooperate in filing such Spinco
Return and, subject to Section 2.04, remitting any Taxes due in connection with
such Spinco Return.  All Spinco Returns shall be prepared on a basis
that is consistent with the Distribution Tax Opinion, the Merger Tax Opinions,
the IRS Ruling and past practice.  Except as otherwise provided
herein, the Company shall have the exclusive right to file, prosecute,
compromise or settle any claim for refund for Taxes in respect of a Spinco
Return for which the Company bears responsibility hereunder and to determine
whether any refunds of such Taxes to which members of the Spinco Group may be
entitled shall be received by way of refund or credit against the Tax liability
of such members, provided, however,
that Verizon shall be entitled to participate in the pursuit of such Tax refund
claim at its own expense if Verizon would receive such Tax refund under the
terms of this Agreement.

       

      
        
          
          

        

        
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      (c)          In
the event that any member of the Verizon Group conducts any portion of the
Spinco Business prior to the Distribution Date and is required to file any Tax
Return with respect to any item of income, loss, gain, deduction or credit
relating to the Spinco Business prior to the Distribution Date that is not a
Verizon Return or any member of the Spinco Group conducts any portion of the
Verizon Business prior to the Distribution Date and is required to file any Tax
Return with respect to any item of income, loss, gain, deduction or credit
relating to the Verizon Business prior to the Distribution Date that is not a
Verizon Return, the principles of this Agreement relating to Verizon Returns
shall apply to all such Tax Returns except as otherwise provided
herein.

       

      Section 2.02   Review of Tax
Returns.  No later than thirty (30) days prior to the date on
which any Verizon Return or Spinco Return is required to be filed (taking into
account any valid extensions), if the party that is not responsible for
preparing such Tax Return under Section 2.01 (the “Non-Preparer Party”)
is responsible for any portion of the Taxes reported on such Tax Return, the
party responsible for preparing such Tax Return under Section 2.01 shall (a)
submit or cause to be submitted to the Non-Preparer Party such Tax Return for
review and comment and (b)
shall consider in good faith any changes to such Tax
Return reasonably requested by the Non-Preparer Party, to the extent that such
changes relate to items for which the Non-Preparer Party has responsibility
hereunder.

       

      Section 2.03   Obligation to Remit
Taxes.  Verizon and the Company shall each timely remit or
cause to be timely remitted to the applicable Taxing Authority any Taxes due in
respect of any Tax Return that such party is required to file or cause to be
filed (or, in the case of a Tax for which no Tax Return is required to be filed,
which is otherwise payable by such party or a member of such party’s affiliated
group to any Taxing Authority) and shall be entitled to reimbursement for such
payments to the extent provided herein; provided, however,
that in the case of any Tax Return, the Non-Preparer Party shall remit to the
Party required to file such Tax Return in immediately available funds the amount
of any Taxes reflected on such Tax Return for which the Non-Preparer Party is
responsible hereunder at least two (2) Business Days before payment of the
relevant amount is due to a Taxing Authority.

       

      
        
          
          

        

        
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      Section 2.04   Tax Sharing and
Indemnification Obligations.

       

      (a)          Spinco
and, from and after the Effective Time, the Company and each ILEC Spinco
Subsidiary shall be jointly and severally liable for and shall indemnify and
hold the Verizon Group harmless against any Taxes

       

      (i)
resulting from the Internal Spinoffs, the Contribution, the Distribution, the
Debt Exchange or any transaction associated therewith (the “Transactions”),
including Taxes arising from any Distribution Disqualification, in each case to
the extent that such Taxes arise as a result of (A)
any action (or failure to take any reasonably required action to avoid a
Distribution Disqualification, so long as, with respect to any failure to take
such action, the Company or any of its Affiliates is aware of the need for such
action or has been notified by Verizon of the need for such action), whether or
not otherwise permitted under Section 10.02, by any member of the Spinco Group
following the Effective Time or by the Company or any of its Affiliates
(excluding the Spinco Group) at any time (other than the Merger and any action
which Spinco or the Company is specifically obligated or permitted to take under
the Transaction Agreements or the Tax Materials so long as any such permitted
action would not result in a breach of any representation, covenant or
obligation of Spinco, any member of the Spinco Group or the Company under this
Agreement or any Tax Material) or (B)
an issuance of stock by the Company or any of its Affiliates or any change in
the ownership (by vote or value, including as a result of any shift in voting
power) of any such entities that causes Section 355(d), Section 355(e) and/or
Section 355(f) of the Code to apply to the Distribution and/or any Internal
Spinoff,

       

      (ii)
resulting from any breach by the Company or, after the Effective Time, any
member of the Spinco Group of any representation, covenant or obligation of the
Company or Spinco under this Agreement, any other Transaction Agreement or any
Tax Material, to the extent that Taxes resulting from such breach are
attributable to (A)
a Distribution Disqualification or (B)
a breach of Section 6.02(a) hereof, or

       

      (iii)
of the Spinco Group or any member thereof and arising in the Post-Distribution
Period or otherwise payable with respect to a Spinco Return, or relating to the
income, employees, assets or transactions of the Spinco Business and payable
with respect to a Tax Return described in Section 2.01(c) that is not a Verizon
Return, but not including in each case any Taxes attributable to the income,
employees, assets or transactions of the Verizon Business or any Taxes
attributable to the Transactions.

       

       

      
        
          
          

        

        
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      Notwithstanding
anything herein to the contrary, Spinco, the Company and the ILEC Spinco
Subsidiaries shall not be required to indemnify the Verizon Group under Section
2.04(a)(i)(A) or Section 2.04(a)(ii) for any Taxes that would have been imposed
or incurred in the absence of any action, failure to act or breach of any
representation, covenant or obligation under any Transaction Agreement or any
Tax Material by the Company, Spinco and/or any of their
Affiliates.  In the event that any Taxes arise with respect to the
Transactions (except as a result of Section 355(d), Section 355(e) or Section
355(f) of the Code) as a result of both (and neither one alone) a fact or
circumstance described under Section 2.04(a)(i)(A) or Section 2.04(a)(ii) and
any action by Verizon or breach by Verizon of any representation, covenant or
obligation under any Transaction Agreement or any Tax Material, such Taxes shall
be borne equally by Verizon, on the one hand, and the Company, Spinco and the
ILEC Spinco Subsidiaries, on the other hand.

       

      Further
notwithstanding anything herein to the contrary, Spinco, the Company and the
ILEC Spinco Subsidiaries shall not be required to indemnify the Verizon Group
under Section 2.04(a)(i)(B) for any Taxes resulting from the application of
Section 355(d), Section 355(e) and/or Section 355(f) of the Code that would have
been imposed or incurred solely as a result of (x)
a breach by Verizon of the representation set forth in Section 10.01(a)(iii)
and/or (y)
an acquisition following the Distribution by any member of the Verizon Group of
stock of the Company or any of its Affiliates (clauses (x) and/or (y), a “Verizon
Event”).  In the event that any Taxes arise with respect to the
Transactions as a result of Section 355(d), Section 355(e) and/or Section 355(f)
of the Code, and such Taxes would not have been imposed or incurred but for
(i)
one or more issuances of stock or changes in ownership described in Section
2.04(a)(i)(B) that are not solely Verizon Events and (ii)
one or more Verizon Events, such Taxes shall be borne equally by Verizon, on the
one hand, and the Company, Spinco and the ILEC Spinco Subsidiaries, on the other
hand.

       

      (b)         Except
for Taxes for which Spinco, the Company or any of the ILEC Spinco Subsidiaries
is responsible under Section 2.04(a) or any other provision of this Agreement,
Verizon shall be liable for and shall indemnify and hold the Company and its
Subsidiaries and the Spinco Group harmless against any Taxes (i)
of the Verizon Group or any Verizon Consolidated Group or any member thereof or
attributable to the income, employees, assets or transactions of the Verizon
Business, (ii)
of the Spinco Group or any member thereof arising in any period, or portion
thereof, ending on or before the Effective Time or (iii)
resulting from the Transactions, including Taxes arising from any Distribution
Disqualification.

       

      
        
          
          

        

        
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      (c)         For
all purposes of this Agreement, Taxes shall be allocated to the Pre-Distribution
Period and the Post-Distribution Period based on an actual or hypothetical
closing of the books at the close of the Distribution Date, except that property
Taxes and similar Taxes shall be allocated on a daily pro rata basis between
such periods.

       

      (d)         The
parties’ responsibilities for Distribution/Merger Transfer Taxes shall be
governed by Section 11.1 of the Merger Agreement.

       

      (e)          Except
as set forth in this Agreement and in consideration of the mutual indemnities
and other obligations of this Agreement, any and all prior Tax sharing or
allocation agreements, arrangements or practices between any member of the
Verizon Group and any member of the Spinco Group shall be terminated as of the
Distribution Date, and no member of the Spinco Group shall have any continuing
rights or obligations thereunder.

       

      (f)          The
Company shall be entitled to any refund of or credit for Taxes for which the
Company is responsible under this Agreement, and Verizon shall be entitled to
any refund of or credit for Taxes for which Verizon is responsible under this
Agreement.  A party receiving a refund to which another party is
entitled pursuant to this Agreement shall pay the amount to which such other
party is entitled within five (5) days after the receipt of the
refund.  Each party shall be entitled to offset any amount which it is
owed under the Transaction Agreements by any amounts owed to it by the other
party under this Section 2.04(f) or any other provision of this
Agreement.

       

      (g)         All
indemnification obligations in respect of Taxes pursuant to this Agreement shall
be increased to
include (i)
all reasonable accounting, legal and other professional fees and court costs
incurred in connection with such Taxes, (ii)
with respect to Taxes related to the Transactions, all costs, damages or
settlement payments associated with any stockholders litigation in respect of
adverse Tax consequences of the Transactions, provided, in the case of settlement
payments, that any settlement of such litigation for an amount equal to or in
excess of $5 million shall not be made without the prior written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld, delayed or
conditioned, and (iii)
Taxes resulting from indemnification payments hereunder, and shall be reduced by any Tax
Benefit realized by the Indemnified Party in respect of Taxes or other losses
subject to indemnification under this Agreement.

       

      
        
          
          

        

        
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      (h)         The
parties agree that any payments made among the parties pursuant to this
Agreement or any other Transaction Agreement shall be treated, to the extent
permitted by law, for all Tax purposes as contributions to or distributions from
Spinco made immediately prior to the Distribution.

       

       

      ARTICLE
III

       

      CARRYBACKS;
AMENDED RETURNS; COMPENSATION DEDUCTIONS

       

      Section 3.01   Carrybacks.  Without
the consent of Verizon, no member of the Spinco Group shall carry back any Tax
Attribute (unless required to carry back such Tax Attribute by law) from a
Post-Distribution Period to a Pre-Distribution Period, provided that if the
carryback is required by law, Verizon (or any other member of the Verizon Group
receiving any Tax Benefit with respect to such carryback) shall promptly remit
to the Company any Tax Benefit it realizes with respect to any such
carryback.

       

      Section 3.02   Amended
Returns.  The Company shall not, and shall not permit any
member of the Spinco Group to, file any amended Spinco Return with respect to
which Verizon would have any increased liability for Taxes under Section
2.04(b), or any Verizon Return, without the prior written consent of Verizon,
which consent may be withheld in Verizon’s sole discretion.  Verizon
shall not, and shall not permit any member of the Verizon Group to, file any
amended Verizon Return with respect to which the Company or Spinco would have
any increased liability for Taxes under Section 2.04(a) without the prior
written consent of the Company, which consent may be withheld in the Company’s
sole discretion.

       

      Section 3.03   Tax Benefit
Realized.  For purposes of this Agreement, a Tax Benefit shall
be deemed to have been realized at the time any refund of Taxes is received or
applied against other Taxes due, or at the time of filing of a Tax Return
(including any relating to estimated Taxes) on which a loss, deduction or credit
is applied in reduction of Taxes which would otherwise be payable.  If
any Tax Benefit is subsequently reduced or disallowed as a result of an audit,
the party that had previously received a payment (or was entitled to reduce a
payment that such party was otherwise required to make) on account of such Tax
Benefit shall promptly pay an amount equal to the amount so reduced or
disallowed to the other party.

       

       

      
        
          
          

        

        
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        Section 3.04   Deductions with Respect to
Debt Exchange, Compensation, Etc.

         

      

      (a)         Verizon
and the other members of the Verizon Group shall be entitled to claim on their
Tax Returns all Tax Benefits resulting from any loss, deduction, credit or other
item which decreases Taxes paid or payable, or increases Tax basis, associated
with the Debt Exchange, but not including debt issuance costs, issuance expenses
or out-of-pocket expenses required to be amortized by Spinco.  For the
avoidance of doubt and notwithstanding anything to the contrary contained herein
or in any other Transaction Agreement, to the extent Verizon exchanges Spinco
Securities with an issue price in excess of the principal amount of the debt
retired in the Debt Exchange, Verizon shall be entitled to claim a Tax Benefit
associated with such excess, and no member of the Company Group shall claim or
be entitled to claim any portion of such excess as a Tax Benefit.

       

      (b)         All
deductions for United States federal, state and local Income Tax purposes
resulting from the exercise of compensatory options issued prior to the
Distribution Date with respect to stock of Verizon shall be taken by Verizon or
a member of the Verizon Group, and no party to this Agreement shall take any
position on any Tax Return which is inconsistent with such treatment, unless
required to do so pursuant to a Final Determination to such effect.

       

      (c)          If,
by reason of a subsequent Final Determination as to the treatment of any tax
deductions related to the compensatory options referred to in Section 3.04(b)
above, a Taxing Authority determines that a member of the Company Group is
entitled to such deduction, then the Company shall, and shall cause the Spinco
Group to, pay to Verizon the amount of any Tax Benefits that result therefrom
within ten (10) days of the date on which such Tax Benefits are
realized.

       

      (d)         The
principles of paragraphs (b) and (c) shall apply, mutatis mutandis, to other
items of compensation expense or transaction expense that are economically borne
by members of the Verizon Group, including, for the avoidance of doubt,
severance bonuses or other similar compensatory payments made by Verizon to
employees who are transferred to Spinco or its Subsidiaries in connection with
the Contribution and any Spinco transaction expenses paid by Verizon pursuant to
Section 11.1 of the Merger Agreement.

       

      
        
          
          

        

        
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      ARTICLE
IV

       

      PAYMENTS

       

      Section 4.01   Payments.  Except
as otherwise provided in Section 2.03 or Section 3.04, payments due under this
Agreement shall be made no later than thirty (30) days after the receipt or
crediting of a refund, the realization of a Tax Benefit for which the other
party is entitled to reimbursement, the delivery of notice of payment of a Tax
for which the other party is responsible under this Agreement, or the delivery
of notice of a Final Determination which results in such other party becoming
obligated to make a payment hereunder to the other party
hereto.  Payments due hereunder, but not made within such 30-day
period, shall be accompanied with interest at a rate equal to the Applicable
Federal Rate from the due date of such payment.

       

      Section 4.02   Notice.  Verizon
and the Company shall give each other prompt written notice of any payment that
may be due to the provider of such notice under this Agreement.

       

       

      ARTICLE
V

       

      TAX
CONTESTS

       

       

      Section 5.01   Notice.  Verizon
or the Company, as applicable (the “Indemnified Party”),
shall promptly notify the other party (the “Indemnifying Party”)
in writing upon receipt by the Indemnified Party or any Affiliate thereof of a
written communication from any Taxing Authority with respect to any pending or
threatened audit, dispute, suit, action, proposed assessment or other proceeding
(a “Tax
Contest”) concerning any Taxes for which the Indemnifying Party may be
liable under this Agreement.  The failure of the Indemnified Party to
promptly notify the Indemnifying Party shall only relieve the Indemnifying Party
from its obligation to indemnify for such Taxes to the extent that the
Indemnifying Party is materially prejudiced by such failure (whether as a result
of the forfeiture of substantive rights or defenses or otherwise).

       

      Section 5.02   Control of
Contests.  Verizon shall have sole control of any Tax Contest
related to (a)
any Verizon Return or (b)
the Tax-Free Status of the Transactions, including the exclusive right to
communicate with agents of the Taxing Authority and to control, resolve, settle
or agree to any deficiency, claim or adjustment proposed, asserted or assessed
in connection with or as a result of any such Tax Contest, provided, however,
that in the case of any such Tax Contest that may affect Taxes for which the
Company has responsibility hereunder, the Company may participate fully in the
Tax Contest at its own expense.  The Company shall have sole control
of any Tax Contest related to any Spinco Return, including the exclusive right
to communicate with agents of the Taxing Authority and to control, resolve,
settle or agree to any deficiency, claim or adjustment proposed, asserted or
assessed in connection with or as a result of any such Tax Contest, provided, however,
that in the case of any such Tax Contest that may affect Taxes for which Verizon
has responsibility hereunder, Verizon may participate fully in the Tax Contest
at its own expense.  In the case of any such Tax Contest relating to
Taxes for which the potential liability of the Indemnifying Party under this
Agreement equals or exceeds $1,000,000, (A)
the Indemnified Party shall not settle or concede any such Tax Contest without
the prior written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld, delayed or conditioned and (B)
absent a settlement of such Tax Contest pursuant to subclause (A) above, the
Indemnified Party shall be required to pursue, at the Indemnifying Party’s
expense, such Tax Contest through one level of appellate judicial review (it
being understood that the Indemnified Party shall have no obligation to pursue
such Tax Contest beyond one level of appellate judicial review).

       

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

       

      ARTICLE
VI

       

      COOPERATION

       

       

      Section 6.01   General.

       

      (a)         Verizon
and the Company shall cooperate with each other in the filing of any Tax Returns
and the conduct of any Tax Contest and each shall execute and deliver such
powers of attorney and make available such other documents as are reasonably
necessary to carry out the intent of this Agreement.  Each party
agrees to notify the other party in writing of any audit adjustments which do
not result in Tax liability but can be reasonably expected to affect Tax Returns
of the other party, or any of its Subsidiaries, for a Post-Distribution
Period.

       

                      (b)        
Verizon
shall, and shall cause the Verizon Subsidiaries to, make information in the
possession of the Verizon Group available to the Company for purposes of
preparation and compilation by the Company and the Company’s advisors of those
reports and studies necessary for the Company in order for it to comply with its
Tax reporting and filing obligations in Post-Distribution Periods, including but
not limited to studies related to the earnings and profits of Spinco as of the
Effective Time and the Tax basis in assets and the stock of corporate
subsidiaries.

       

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

       

      Section 6.02   Consistent
Treatment.

       

      (a)         Unless
and until there has been a Final Determination to the contrary, each party
agrees to treat (i)
each of (A)
the Contribution, together with the Distribution and (B)
each Internal Spinoff intended to so qualify, as a tax-free reorganization
qualifying under Section 368(a)(1)(D) of the Code, (ii)
each of the Internal Spinoffs and the Distribution as a transaction qualifying
under Sections 355 and 361 of the Code, (iii)
the Debt Exchange (if consummated) as a transfer of qualified property to
Verizon’s creditors in connection with the reorganization within the meaning of
Section 361(c)(3) of the Code; and (iv)
the Merger as a reorganization qualifying for nonrecognition under Section
368(a) of the Code, pursuant to each of which no gain or loss is recognized by
any of Verizon, Spinco, the Company and their respective shareholders and
Subsidiaries (except to the extent of cash received in lieu of fractional
shares).

       

      (b)         Unless
and until there has been a Final Determination to the contrary, or unless there
is manifest error, the Company shall file or cause to be filed all Tax Returns
of a member of the Spinco Group or relating to the Spinco Business and shall
conduct any Tax Contests in respect of a member of the Spinco Group or the
Spinco Business in a manner consistent with Verizon’s determination of the
adjusted Tax basis of any asset and the amount of any Tax Attribute or any
similar item held by the Spinco Group at the time of the
Distribution.

       

       

      ARTICLE
VII

       

      RETENTION
OF RECORDS; ACCESS

       

      The Verizon Group and the Company Group
shall (a)
subject to the provisions of the Transition Services Agreement, in accordance
with their respective then current record retention policies or for the period
required by applicable law, if longer, retain records, documents, accounting
data and other information (including computer data) necessary for the
preparation and filing of all Tax Returns in respect of Taxes of any member of
either the Verizon Group or the Spinco Group for any Pre-Distribution Period or
any Post-Distribution Period or for any Tax Contests relating to such Tax
Returns; and (b)
give to the other party reasonable access to such records, documents, accounting
data and other information (including computer data) and to its personnel
(insuring their cooperation) and premises, for the purpose of the review or
audit of such Tax Returns to the extent relevant to an obligation or liability
of a party under this Agreement or for purposes of the preparation or filing of
any such Tax Return, the conduct of any Tax Contest or any other matter
reasonably and in good faith related to the Tax affairs of the requesting
party.  Subject to the provisions of the Transition Services
Agreement, at any time after the Distribution Date that the Company Group or the
Verizon Group proposes to destroy such material or information, it shall first
notify the other group in writing and such other group shall be entitled to
receive at its cost and expense such materials or information proposed to be
destroyed.

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

       

       

      ARTICLE
VIII

       

      SURVIVAL

       

      Notwithstanding any other provision in
this Agreement, all representations under this Agreement shall survive until 30
days after the expiration of the statute of limitations period (giving effect to
any written waiver, mitigation or extension thereof) applicable to the matters
covered thereby and the resolution of all disputes under this Agreement with
respect to any such matter that arose during such period.  All
covenants and agreements contained in this Agreement shall survive
indefinitely.

       

       

      ARTICLE
IX

       

      DISPUTE
RESOLUTION

       

      Verizon and the Company shall attempt
in good faith to resolve any disagreement arising with respect to this
Agreement, including, but not limited to, any dispute in connection with a claim
by a third party (a “Tax
Dispute”).  Either party may give the other party written
notice of any Tax Dispute not resolved in the normal course of
business.  If the parties cannot agree by the tenth Business Day
following the date on which one party gives such notice, then the parties shall
promptly retain the services of a nationally recognized law or accounting firm
reasonably acceptable to the parties (the “Tax Dispute
Arbitrator”).  The Tax Dispute Arbitrator shall be instructed
to resolve the Tax Dispute and such resolution shall be (a)
set forth in writing and signed by the Tax Dispute Arbitrator, (b)
delivered to each party involved in the Tax Dispute as soon as practicable after
the Tax Dispute is submitted to the Tax Dispute Arbitrator but no later than the
15th
day after the Tax Dispute Arbitrator is instructed to resolve the Tax Dispute,
(c)
made in accordance with this Agreement, and (d)
final, binding and conclusive on the parties involved in the Tax Dispute on the
date of delivery of such resolution.  The Tax Dispute Arbitrator shall
only be authorized on any one issue to decide in favor of and choose the
position of either of the parties involved in the Tax Dispute or to decide upon
a compromise position between the ranges presented by the parties to the Tax
Dispute Arbitrator.  The Tax Dispute Arbitrator shall base its
decision solely upon the presentations of the parties to the Tax Dispute
Arbitrator at a hearing held before the Tax Dispute Arbitrator and upon any
materials made available by either party and not upon independent
review.  The fees and expenses of the Tax Dispute Arbitrator shall be
borne 50% by Verizon and 50% by the Company.  The Company and Verizon
shall keep the decision of the Tax Dispute Arbitrator confidential.

       

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

       

       

       

      ARTICLE
X

       

      REPRESENTATIONS,
WARRANTIES AND COVENANTS

       

            Section
10.01   Representations and
Warranties; Certain Procedures.

       

                 (a)              Verizon
hereby represents and warrants that (i) it
has examined (or upon receipt will examine) (A) the
IRS Ruling and any other rulings issued by the IRS in connection with the
Distribution, (B) the
Distribution Tax Opinion, (C) each
IRS Submission, (D) the
Distribution Tax Representations and (E) any
other materials delivered or deliverable by Verizon, Spinco and their Affiliates
in connection with the rendering by Verizon Tax Counsel of the Distribution Tax
Opinion and the issuance by the IRS of the IRS Ruling and such other rulings
(all of the foregoing, collectively, the “Tax Materials”),
(ii) the
facts presented and the representations made therein, to the extent descriptive
of or otherwise relating to Verizon, Spinco and their Affiliates, are or will be
true, correct and complete in all material respects from the time presented or
made through and including the Distribution Date and (iii)
except as set forth in a Schedule to this Agreement, or as provided for in a
“safe harbor” under Treasury Regulation Section 1.355-7(d), during the two years
preceding the date of this Agreement, and until the date of the Distribution,
there has been and will be no change in ownership of Verizon Common Stock as
part of the same plan as the Distribution, all within the meaning of Section
355(e) of the Code.  Verizon represents and warrants that the
representations and warranties set forth in this Section 10.01(a) shall be true
and correct as of the date of this Agreement and at all times through and
including the Distribution Date.

       

                 (b)              The
Company hereby agrees, represents and warrants that (i) upon
receipt, it shall promptly examine the Tax Materials and drafts thereof, (ii)
within (A)
ten (10) Business Days following such receipt, in the case of the initial draft
of the Ruling Request, (B)
five (5) Business Days following such receipt, in the case of any other Tax
Materials, or (C)
such other time period following such receipt as may be necessary to comply with
deadlines imposed by any Taxing Authority, to the extent that the Company does
not believe that the facts presented and the representations made therein which
are descriptive of or otherwise relating to the Company are accurate, the
Company shall inform Verizon of any items that it believes are inaccurate and
shall propose specific changes to the Tax Materials with respect to such items
so as to make them true, correct and complete in all material respects, and
(iii)
all other such facts and representations relating to the Company with respect to
which the Company proposes no specific changes pursuant to clause (ii) hereof
will be true, correct and complete in all material respects.  The
Company further represents and warrants that neither the Company nor any
Subsidiary of the Company owns any shares of Verizon Common Stock or any rights,
warrants or options to acquire, or securities convertible into or exchangeable
for, Verizon Common Stock.  The Company represents that the
representations and warranties set forth in this Section
10.01(b) shall be true and correct as of the date of this Agreement or,
with respect to the Tax Materials, as of the date immediately following the
deadline specified in clause (ii) above, and at all times through and including
the Distribution Date. Verizon hereby covenants that it shall provide the
Company with the Tax Materials promptly following Verizon’s receipt thereof,
and, in the case of any Tax Materials to be submitted by Verizon to a Taxing
Authority, shall coordinate with the Company to provide the Company with the
maximum feasible time to review and comment on such material prior to its
submission.

       

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

       

            Section
10.02   Covenants Relating to the
Distribution.

       

                 (a)              The
Company shall not, nor shall it permit any of its Subsidiaries to take any
action, including entering into any agreement, understanding or arrangement or
any substantial negotiations with respect to any transaction or series of
transactions that could (i)
reasonably be expected to cause a Distribution Disqualification to occur or
(ii)
jeopardize, directly or indirectly, the conclusions of any ruling received from
the IRS, or opinion of counsel received from Company Tax Counsel or Verizon Tax
Counsel, in connection with the Transactions; provided, however,
that the foregoing shall not prohibit the Merger.

       

                 (b)              Until
the first day after the second anniversary of the Distribution Date, the Company
shall not, nor shall it permit any of its Subsidiaries to, take any action
(including entering into any agreement, understanding or arrangement or any
substantial negotiations with respect to any transaction or series of
transactions) that might cause a Distribution Disqualification to occur,
including any action or failure to act that is inconsistent with any
representation made in the Tax Materials (any such action or failure to act, a
“Potential
Disqualifying Action”).

       

                 (c)               Until
the first day after the second anniversary of the Distribution Date, the Company
shall not enter into any agreement, understanding or arrangement or any
substantial negotiations with respect to any transaction (including a merger to
which the Company is a party) involving the acquisition (including by the
Company or any of its Subsidiaries) of stock of the Company or a shift of
ownership (by vote or value) of the Company, and shall not issue any additional
shares of capital stock, modify its certificate of incorporation (or other
organizational documents) so as to modify the terms or conditions of any class
of stock, or transfer or modify any option, warrant, convertible obligation or
other instrument that provides for the right or possibility to issue, redeem or
transfer any equity interest in the Company (or enter into any agreement,
understanding, arrangement or any substantial negotiations with respect to any
such issuance, transfer or modification).  Notwithstanding the
foregoing,

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

       

      (i)          The
Company may issue additional equity interests in the Company to a person in a
transaction to which Section 83 or Section 421(a) or (b) of the Code
applies in connection with the person’s performance of services as an employee,
director or independent contractor of (A)
the Company or its Subsidiaries, (B)
any other person that is related to the Company under Section 355(d)(7)(A) of
the Code or (C)
a corporation the assets of which the Company acquires in a reorganization under
Section 368 of the Code (including Spinco or any of its Subsidiaries), provided that such
stock is not excessive by reference to the services performed by such person and
such person or a coordinating group of which the person is a member will not be
a controlling shareholder or a ten-percent shareholder of the Company (within
the meaning of Treasury Regulations Section 1.355-7(h)(3) and (14)) immediately
after the issuance of such common stock;

       

      (ii)         The
Company may issue additional shares of common stock of the Company to a
retirement plan of the Company or any other person that is treated as the same
employer as the Company under Section 414(b), (c), (m), or (o) of the Code
that qualifies under Section 401(a) or 403(a) of the Code, provided that the
stock acquired by all of the qualified plans of the Company and such other
persons during the four-year period beginning two years before the Distribution
Date does not, in the aggregate, represent more than ten percent of the total
combined voting power of all classes of stock of the Company entitled to vote or
more than ten percent of the total value of shares of all classes of stock of
the Company; and

       

      (iii)        The
Company may issue additional shares of common stock of the Company (A)
in a pro rata stock split or reverse stock split or (B)
pursuant to a “poison pill” plan meeting the requirements of Revenue Ruling
90-11 through which all holders of common stock of the Company, except the
holder that is the subject of the poison pill, receive a pro rata distribution
of common stock of the Company with respect to their common stock of the
Company.

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

       

       

      The intent of the foregoing clauses
(i), (ii) and (iii) is to permit certain equity issuances by the Company, but
(in the case of clauses (i) and (ii)) solely to the extent such issuances would
comply with Safe Harbor 8 or 9 set forth in Treasury Regulations Section
1.355-7(d)(8) or (9), and in each case so that such issuances would not cause
Verizon or any of its Subsidiaries to recognize gain pursuant to Section 355(d),
355(e) and/or 355(f) of the Code with respect to the Distribution and/or any
Internal Spinoff.  To the extent the Treasury Regulations (or the
Code) are amended and such amendments could affect the Tax-Free Status of the
Transactions, such amendments shall automatically be incorporated by reference
into the requirements of the foregoing clauses (i), (ii) and (iii) and/or the
other relevant parts of this Section 10.02, if applicable.

       

      (d)         Until
the first day after the second anniversary of the Distribution Date, the Company
shall not, and shall not permit any of its Subsidiaries to, repurchase any
shares of stock of the Company except to the extent consistent with the
requirements of Section 4.05(1)(b) of Revenue Procedure 96-30, 1996-1 C.B. 696,
as the same may be modified or supplemented from time to time, and only to the
extent not revoked.

       

      (e)         Until
the first day after the second anniversary of the Distribution Date, the Company
shall (i)
cause its wholly owned Subsidiaries that were wholly owned Subsidiaries of
Spinco at the time of the Distribution to continue the active conduct of the
Spinco Business (determined in accordance with Section 355(b) of the Code) to
the extent so conducted by those Subsidiaries immediately prior to the
Distribution and (ii)
continue such active conduct of the Spinco Business to the extent the Company
directly holds any portion of the Spinco Business immediately after the
Merger.  The Company shall neither cause nor permit any such
Subsidiary of Spinco to dissolve, liquidate, merge or consolidate with any other
Person or to become a disregarded entity for U.S. federal income tax
purposes. 

       

         
           
(f)          Until the first
day after the second anniversary of the Distribution Date, the Company shall not
voluntarily dissolve, liquidate, merge or consolidate with any other person,
unless, in the case of a merger or consolidation, the Company is the survivor of
the merger or consolidation and the transaction otherwise complies with the
other provisions of this Section 10.02.

       

          
           (g)         Notwithstanding
the foregoing, the provisions of this Section
10.02 shall not prohibit the Company from implementing any Potential
Disqualifying Action or any other action described in Section 10.02(c), (d), (e)
or (f), subject to, and without limiting or modifying, the Company’s
indemnification obligations under Section 2.04(a), if (i)
the Company obtains the written consent of Verizon (which consent may be given
or withheld in Verizon's sole discretion), (ii)
the Company obtains a supplemental ruling from the IRS or an opinion of a
nationally recognized law firm, in form and substance reasonably satisfactory to
Verizon, that the taking of such action will not adversely affect, directly or
indirectly, the Tax-Free Status of the Transactions or result in a Distribution
Disqualification or (iii)
such action would be permitted under Section 10.02(c)(i), (ii), or
(iii).

       

       

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

       

       

      (h)         Notwithstanding
anything else to contrary contained in this Agreement or any other Transaction
Agreement, the Company hereby agrees that (i)
it will not, and will not permit any of its Subsidiaries to, directly or
indirectly, (A)
pre-pay, pay down, redeem, retire or otherwise acquire, however effected, any of
the Spinco Securities prior to their maturity, (B)
take any action that might result in any Person other than the Company being
treated after the Merger as the obligor for U.S. federal income tax purposes
under the Spinco Securities or any other debt obligations of Spinco incurred
pursuant to the Special Payment Financing, or (C)
take any action that might result in any “significant modification” of the
Spinco Securities within the meaning of Treasury Regulations Section 1.1001-3(e)
and (ii)
it will not take or permit to be taken any action at any time that could
jeopardize, directly or indirectly, the qualification, in whole or in part, of
any of the Spinco Securities as “securities” within the meaning of Section
361(a) of the Code; provided that, the
foregoing shall not prohibit the Company from implementing any of the above
actions, subject to, and without limiting or modifying, the Company’s
indemnification obligations under Section 2.04(a), if (x)
the Company complies with the requirements of Section 10.02(g) or (y)
failure to take such action would violate the credit agreements entered into in
connection with the Special Payment Financing (each as executed as of the
Distribution Date).

       

       

      ARTICLE
XI

       

      MISCELLANEOUS
PROVISIONS

       

      To the extent not inconsistent with any
specific term of this Agreement, the following sections of the Distribution
Agreement shall apply in relevant part to this Agreement: 9.7 (Entire
Agreement), 9.3 (Interpretation), 9.2 (Notices), 9.10 (Amendments; Waivers), 9.9
(Counterparts), 9.4 (Severability), 9.11 (Termination), 9.8 (Governing Law),
9.13 (Jurisdiction; Service of Process) and 9.12 (Waiver of Jury Trial). Except as provided in
the preceding sentence, and except as specifically provided in the Merger
Agreement and the Transition Services Agreement, this Agreement shall be the
exclusive agreement among the parties with respect to all Tax matters, including
indemnification in respect of Tax matters.  In the event of any
conflict between this Agreement and any other Transaction Agreement, this
Agreement shall control.

       

       

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

       

      ARTICLE
XII

       

      SUCCESSORS
AND ASSIGNS; NO THIRD-PARTY BENEFICIARIES

       

      This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their successors and permitted assigns, but neither this Agreement
nor any of the rights, interests and obligations hereunder shall be assigned by
any party hereto without the prior written consent of the other
parties.  This Agreement is solely for the benefit of Verizon, Spinco
and the Company and their respective Subsidiaries and Affiliates and is not
intended to confer upon any other Persons any rights or remedies
hereunder.  The obligations of Spinco and the Company under this
Agreement shall be binding upon any Person that acquires all or substantially
all the assets or stock of the Company, whether by merger, amalgamation or
consolidation, asset purchase, stock purchase or subscription or otherwise, and
the Company shall not enter into any agreement for any such transaction that
does not so expressly provide in writing.  The obligations of Verizon
under this Agreement shall be binding upon any Person that acquires all or
substantially all the assets or stock of Verizon, whether by merger,
amalgamation or consolidation, asset purchase, stock purchase or subscription or
otherwise, and Verizon shall not enter into any agreement for any such
transaction that does not so expressly provide in writing.  This
Agreement is being entered into by Verizon, the Company and Spinco on behalf of
themselves and the members of their respective affiliated
groups.  This Agreement shall constitute a direct obligation of each
member of the Verizon Group and each member of the Company Group and shall be
deemed to have been readopted and affirmed on behalf of any entity that becomes
a Subsidiary of Verizon or the Company in the future.

       

       

      ARTICLE
XIII

       

      EFFECTIVENESS

       

      All covenants and agreements of the
parties contained in this Agreement (except for the covenants and agreements
contained in Article X, which shall be effective immediately) shall be subject
to and conditioned upon the Merger becoming effective.

       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

      


       

       

                     
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first above written.

       

       

      
        
          	 	VERIZON
      COMMUNICATIONS INC.	 
	 	 	 	 
	
                   

                	
                  By:
      

                	 /s/  John
      W. Diercksen	 
	 	 	John
      W. Diercksen	 
	 	 	
                  Executive
      Vice President Strategy, Planning and
      Development

                	 
	 	 	 	 


        

      

                 

      
         

      

      
        
          
            	 	NEW
      COMMUNICATIONS HOLDINGS INC.	 
	 	 	 	 
	
                     

                  	
                    By:
      

                  	 /s/ 
      Stephen E. Smith	 
	 	 	Stephen
      E. Smith	 
	 	 	Vice
      President	 
	 	 	 	 


          

        

         

      

      
         

      

      
        
          
            	 	FRONTIER
      COMMUNICATIONS CORPORATION	 
	 	 	 	 
	
                     

                  	
                    By:
      

                  	 /s/  Donald R.
      Shassian	 
	 	 	Donald
      R. Shassian	 
	 	 	Executive
      Vice President and Chief Financial Officer	 
	 	 	 	 


          

        

         

        
           

          
            
              	 	CONTEL
      OF THE SOUTH, INC.	 
	 	 	 	 
	
                       

                    	
                      By:
      

                    	 /s/ 
      Daniel S. Meade	 
	 	 	Daniel
      S. Meade	 
	 	 	Chief
      Executive Officer	 
	 	 	 	 


            

          

           

           

           

          
            
              
              

            

            
              23

              
                

              

            

            
              
              

            

          

           

          
             

            
              
                	 	NEW
      COMMUNICATIONS OF THE CAROLINAS INC.	 
	 	 	 	 
	
                         

                      	
                        By:
      

                      	 /s/ 
      Stephen E. Smith	 
	 	 	Name:	 
	 	 	Title:	 
	 	 	 	 


              

            

             

            
               

              
                
                  	 	NEW
      COMMUNICATIONS ILEC HOLDINGS INC.	 
	 	 	 	 
	
                           

                        	
                          By:
      

                        	 /s/ 
      Stephen E. Smith	 
	 	 	Name:	 
	 	 	Title:	 
	 	 	 	 


                

              

               

              
                 

                
                  
                    	 	NEW
      COMMUNICATIONS ONLINE AND LONG DISTANCE INC.	 
	 	 	 	 
	
                             

                          	
                            By:
      

                          	 /s/ 
      Stephen E. Smith	 
	 	 	Name:	 
	 	 	Title:	 
	 	 	 	 


                  

                

                 

                
                   

                  
                    
                      	 	NEW
      COMMUNICATIONS OF THE SOUTHWEST INC.	 
	 	 	 	 
	
                               

                            	
                              By:
      

                            	 /s/ 
      Stephen E. Smith	 
	 	 	Name:	 
	 	 	Title:	 
	 	 	 	 


                    

                  

                   

                  
                     

                    
                      
                        
                        

                      

                      
                        24

                        
                          

                        

                      

                      
                        
                        

                      

                    

                     

                     

                     

                    
                      
                        	 	VERIZON
      NORTH INC.	 
	 	 	 	 
	
                                 

                              	
                                By:
      

                              	 /s/ 
      Daniel S. Meade	 
	 	 	Name: 
      Daniel S. Meade	 
	 	 	Title:   
      Chief Executive Officer	 
	 	 	 	 


                      

                    

                     

                    
                       

                      
                        
                          	 	VERIZON
      NORTHWEST INC.	 
	 	 	 	 
	
                                   

                                	
                                  By:
      

                                	 /s/ 
      Daniel S. Meade	 
	 	 	Name: 
      Daniel S. Meade	 
	 	 	Title:   
      Chief Executive Officer	 
	 	 	 	 


                        

                      

                       

                      
                         

                        
                          
                            	 	VERIZON
      WEST COAST INC.	 
	 	 	 	 
	
                                     

                                  	
                                    By:
      

                                  	 /s/  Daniel S.
      Meade	 
	 	 	Name: 
      Daniel S. Meade	 
	 	 	Title:   
      Chief Executive Officer	 
	 	 	 	 


                          

                        

                         

                        
                           

                          
                            
                              	 	VERIZON
      WEST VIRGINIA INC.	 
	 	 	 	 
	
                                       

                                    	
                                      By:
      

                                    	 /s/ Daniel S.
      Meade	 
	 	 	Name: 
      Daniel S. Meade	 
	 	 	Title:   
      Chief Executive Officer	 
	 	 	 	 


                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

       

       

       

      25