A TAX
RETURN WITH RESPECT TO OTHER TAXES OF A MEMBER OF THE SPINCO GROUP THAT IS FILED
ON A COMBINED BASIS WITH A MEMBER OF THE VERIZON GROUP, IN EACH CASE WITH
RESPECT TO A PRE-DISTRIBUTION PERIOD WITHOUT THE PRIOR WRITTEN CONSENT OF
VERIZON, WHICH CONSENT MAY BE WITHHELD IN VERIZON'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; PROVIDED, HOWEVER, THAT WHERE A PARTY HAS OTHER
LOSSES, DEDUCTIONS, CREDITS OR SIMILAR ITEMS AVAILABLE TO IT, DEDUCTIONS,
CREDITS OR ITEMS FOR WHICH THE OTHER PARTY WOULD BE ENTITLED TO A PAYMENT UNDER
THIS AGREEMENT SHALL BE TREATED AS THE FIRST ITEMS UTILIZED TO PRODUCE A TAX
BENEFIT.
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.
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 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 INCLUDING, WITHOUT
LIMITATION, ANY TAX BENEFITS RESULTING FROM ANY ISSUANCE COSTS OR ISSUANCE
EXPENSES ASSOCIATED WITH ANY SPINCO SECURITIES OTHER THAN OUT-OF-POCKET COSTS
AND OUT-OF-POCKET EXPENSES BORNE BY SPINCO.
10
(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 FAIRPOINT GROUP IS ENTITLED TO SUCH DEDUCTION,
THEN FAIRPOINT 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