Document:

ex10-1.htm

     

    Exhibit
10.1

     

     

     

     

     

     

     

     

     

     

     

    
      

       

      DISTRIBUTION
AGREEMENT

       

       

      BY AND
BETWEEN

       

       

      VERIZON
COMMUNICATIONS INC.

       

       

      AND

       

       

      NEW
COMMUNICATIONS HOLDINGS INC.

       

       

      DATED AS
OF May 13, 2009

       

      
         

         

         

         

         

         

         

         

         

         

         

        
          

           

          
            
              
              

            

            
              
              

              
                

              

            

            
              
              

            

          

      

       

      Table of
Contents

       

      Page

       

      ARTICLE I

      

      DEFINITIONS

      

      
        	
                Section 1.1

              	
                General

              	
                3

              
	
                Section 1.2

              	
                Interpretation

              	
                25

              
	
                Section 1.3

              	
                References to Time

              	
                25

              

      

      

      ARTICLE II

      

      THE CONTRIBUTION

      

      
        	
                Section 2.1

              	
                Transfers of Spinco Assets and Spinco
      Liabilities.

              	
                25

              
	
                Section 2.2

              	
                Conveyancing and Assumption
    Agreements

              	
                27

              
	
                Section 2.3

              	
                Certain Resignations

              	
                27

              
	
                Section 2.4

              	
                Special Payment Financing; Debt
      Exchange.

              	
                27

              

      

      

      ARTICLE III

      

      CONDITIONS

      

      
        	
                Section 3.1

              	
                Conditions to the Distribution

              	
                29

              
	
                Section 3.2

              	
                Waiver of Conditions

              	
                30

              

      

      

      ARTICLE IV

      

      THE DISTRIBUTION

      

      
        	
                Section 4.1

              	
                Record Date and Distribution Date

              	
                30

              
	
                Section 4.2

              	
                Spinco Reclassification

              	
                30

              
	
                Section 4.3

              	
                The Agent

              	
                30

              
	
                Section 4.4

              	
                Delivery of Shares to the Agent

              	
                30

              
	
                Section 4.5

              	
                The Distribution

              	
                31

              

      

       

       

      
        
          
          

        

        
          i

          
            

          

        

        
          
          

        

      

       

      
        Table of
Contents

        (continued)

        Page

      

      ARTICLE V

      

      POST CLOSING ADJUSTMENTS

      

      
        	
                Section 5.1

              	
                Post-Closing Adjustments.

              	
                32

              

      

      

      ARTICLE VI

      

      ADDITIONAL COVENANTS

      

      
        	
                Section 6.1

              	
                Survival; Exclusive Remedy

              	
                34

              
	
                Section 6.2

              	
                Mutual Release

              	
                34

              
	
                Section 6.3

              	
                Intercompany Agreements

              	
                35

              
	
                Section 6.4

              	
                Guarantee Obligations and Liens.

              	
                35

              
	
                Section 6.5

              	
                Insurance.

              	
                36

              
	
                Section 6.6

              	
                Subsequent Transfers

              	
                38

              
	
                Section 6.7

              	
                Further Assurances

              	
                38

              
	
                Section 6.8

              	
                Use of Names.

              	
                38

              

      

      

      ARTICLE VII

      

      ACCESS TO INFORMATION

      

      
        	
                Section 7.1

              	
                Provision of Information

              	
                39

              
	
                Section 7.2

              	
                Privileged Information.

              	
                41

              
	
                Section 7.3

              	
                Production of Witnesses

              	
                42

              
	
                Section 7.4

              	
                Retention of Information

              	
                42

              
	
                Section 7.5

              	
                Confidentiality

              	
                43

              
	
                Section 7.6

              	
                Cooperation with Respect to Government Reports and
      Filings

              	
                43

              

      

      

      ARTICLE VIII

      

      NO REPRESENTATIONS OR WARRANTIES

      

      
        	
                Section 8.1

              	
                No Representations or Warranties

              	
                44

              

      

      

      ARTICLE IX

      

      MISCELLANEOUS

       

      
        
          	
                  Section 9.1

                	
                  Expenses

                	
                  44

                
	
                  Section 9.2

                	
                  Notices

                	
                  45

                
	
                  Section 9.3

                	
                  Interpretation

                	
                  45

                
	
                  Section 9.4

                	
                  Severability

                	
                  45

                
	
                  Section 9.5

                	
                  Assignment; Binding Effect

                	
                  45

                
	
                  Section 9.6

                	
                  No Third Party Beneficiaries

                	
                  45

                
	
                  Section 9.7

                	
                  Entire Agreement

                	
                  46

                

        

         

         

        
          
            
            

          

          
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            Table of
Contents

            (continued)

            Page

          

        

        
          	
                  Section 9.8

                	
                  Governing Law

                	
                  46

                
	
                  Section 9.9

                	
                  Counterparts

                	
                  46

                
	
                  Section 9.10

                	
                  Amendments; Waivers

                	
                  46

                
	
                  Section 9.11

                	
                  Termination

                	
                  46

                
	
                  Section 9.12

                	
                  Waiver of Jury Trial

                	
                  47

                
	
                  Section 9.13

                	
                  Jurisdiction; Service of Process

                	
                  47

                

        

        
 

      

      Exhibit
A                      Disclosure
Letter

      Exhibit
B                      Form
of FiOS Intellectual Property Agreement

      Exhibit
C                      Form
of FiOS Software License Agreement

      Exhibit
D                      Form
of FiOS Trademark License Agreement

      Exhibit
E                      Form
of Intellectual Property Agreement

      Exhibit
F                      Form
of Software License Agreement

      Exhibit
G                      Terms
of Spinco Securities

       

       

       

       

       

       

       

       

       

       

      
 

      
        
          
          

        

        
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      DISTRIBUTION
AGREEMENT

       

      This
DISTRIBUTION AGREEMENT (this “Agreement”), dated as
of May 13, 2009, by and between Verizon Communications Inc., a Delaware
corporation (“Verizon”), and New
Communications Holdings Inc., a Delaware corporation and a wholly-owned
subsidiary of Verizon (“Spinco” and, together
with Verizon, the “Parties”).

       

      RECITALS

       

      WHEREAS,
Spinco is a newly-formed, wholly-owned, direct Subsidiary of
Verizon;

       

      WHEREAS,
Verizon, Spinco and Frontier Communications Corporation, a Delaware corporation
(the “Company”), have
entered into an Agreement and Plan of Merger, of even date herewith (as such
agreement may be amended from time to time, the “Merger Agreement”),
pursuant to which, at the Effective Time, Spinco will merge with and into the
Company, with the Company continuing as the surviving corporation (the “Merger”);

       

      WHEREAS,
this Agreement and the other Transaction Agreements (as defined herein) set
forth certain transactions that are conditions to consummation of the
Merger;

       

      WHEREAS,
prior to the Distribution (as defined herein) upon the terms and subject to the
conditions set forth in this Agreement, Verizon will, pursuant to a series of
restructuring transactions that will occur prior to the Distribution, (a) transfer or cause
to be transferred (i) to Spinco and
(ii) by Spinco
to the Non-ILEC Spinco Subsidiary (as defined herein) and to one or more
wholly-owned Subsidiaries of the Non-ILEC Spinco Subsidiary (as may be
designated by the Non-ILEC Spinco Subsidiary) all of the Non-ILEC Spinco Assets
(as defined herein), each such transfer to be subject to the assumption by such
entity or entities of the Non-ILEC Spinco Liabilities (as defined herein),
(b) to the
extent the ILEC Spinco Assets and the ILEC Spinco Liabilities are not currently
located within an ILEC Spinco Subsidiary, transfer or cause to be transferred,
including by one or more of its Subsidiaries, to the ILEC Spinco Subsidiaries
(as defined herein) all of the ILEC Spinco Assets (as defined herein), subject
to the assumption by such entities of the ILEC Spinco Liabilities (as defined
herein), and shall directly or indirectly transfer the ILEC Spinco Subsidiaries
(after receiving the stock of a Subsidiary holding certain ILEC Spinco
Subsidiaries from its Subsidiaries in a series of internal distributions) to
Spinco and (c)
to the extent any Assets that are not Spinco Assets and any Liabilities that are
not Spinco Liabilities are currently located within an ILEC Spinco Subsidiary,
transfer or cause to be transferred by any such ILEC Spinco Subsidiary such
Assets or Liabilities to Verizon or an Affiliate of Verizon;

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

       

      WHEREAS,
in exchange for the transfers contemplated by the immediately preceding recital,
Spinco will (a)
pay to Verizon the Special Payment (as defined herein) and (b) if applicable,
distribute to Verizon the Spinco Securities (as defined herein), all upon the
terms and subject to the conditions set forth in this Agreement (the
transactions described in this recital and in the immediately preceding recital,
collectively, the “Contribution”);

       

      WHEREAS,
upon the terms and subject to the conditions set forth in this Agreement,
Verizon will distribute (the “Distribution”) all of
the issued and outstanding shares of common stock, par value $.01 per share, of Spinco
(“Spinco Common
Stock”) to the holders as of the Record Date (as defined herein) of the
outstanding shares of common stock, par value $.10 per share, of Verizon (“Verizon Common
Stock”) and, to the extent applicable, to such persons who received
Verizon Common Stock pursuant to the exercise of Record Date Options (as defined
below);

       

      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) 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 federal income tax purposes in connection with the
receipt of the Spinco Securities (as defined herein) or the consummation of the
Debt Exchange (as defined herein); (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 or shareholders in connection with the Contribution; (vi) the Merger
qualify as a tax-free reorganization pursuant to Section 368 of the Code; and
(vii) no gain
or loss be recognized as a result of such transactions for federal income tax
purposes by any of Verizon, Spinco, the Company and their respective
stockholders and Subsidiaries (except to the extent of cash received in lieu of
fractional shares); and

       

      WHEREAS,
the Parties to this Agreement intend that, except as set forth in Section 2.3
hereof, throughout the internal restructurings taken in contemplation of this
Agreement, including the Internal Spinoffs, the Internal Restructurings, the
Contribution, and the Distribution, the Spinco Employees shall maintain
uninterrupted continuity of employment, compensation and benefits, and also for
union-represented employees, uninterrupted continuity of representation for
purposes of collective bargaining and uninterrupted continuity of coverage under
their collective bargaining agreements, as contemplated by and provided in the
Employee Matters Agreement.

       

       

      
        
          
          

        

        
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      NOW,
THEREFORE, in consideration of these premises, and of the representations,
warranties, covenants and agreements set forth herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereby agree as follows:

       

      ARTICLE I

       

      Definitions

       

      Section 1.1    General.  As
used in this Agreement, the following terms shall have the following meanings
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined):

       

      “Affiliate” means a
Person that, directly or indirectly, through one or more intermediaries,
controls or is controlled by, or is under common control with, a specified
Person.  The term “control” (including, with correlative meanings, the
terms “controlled by” and “under common control with”), as applied to any
Person, means the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities or other ownership interest, by
contract or otherwise; provided, however, that for
purposes of this Agreement, (i) from and after the
Distribution Date, no member of either Group shall be deemed an Affiliate of any
member of the other Group and (ii) none of Cellco
Partnership (d/b/a Verizon Wireless) or any of its Subsidiaries shall be deemed
Affiliates or Subsidiaries of Verizon.

       

      “Agent” means the
distribution agent agreed upon by Verizon and the Company, to be appointed by
Verizon to distribute the shares of Spinco Common Stock pursuant to the
Distribution.

       

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

       

       

      
        
          
          

        

        
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          Table of Contents

        

      

       

       

      “Applicable Rate”
means the three-month LIBOR rate published by Bloomberg as “Ticker US001M” (or
any successor page) at approximately 11:00 a.m. London time on the date
which is two days prior to the date such rate is determined plus 200 basis
points, such rate to be reset every 90 days.

       

      “Asset” means any and
all assets, properties and rights, wherever located, whether real, personal or
mixed, tangible or intangible, including the following (in each case, whether or
not recorded or reflected or required to be recorded or reflected on the books
and records or financial statements of any Person):  (i) accounts
and notes receivable (whether current or non-current); (ii) Cash and Cash
Equivalents, debentures, bonds, notes, evidences of indebtedness, certificates
of interest or participation in profit-sharing agreements, collateral-trust
certificates, preorganization certificates or subscriptions, transferable
shares, investment contracts, letters of credit and performance and surety
bonds, voting-trust certificates, puts, calls, straddles, options and other
securities of any kind, and all loans, advances or other extensions of credit or
capital contributions to any other Person; (iii)  rights under leases
(including real property leases), contracts, licenses, permits, distribution
arrangements, sales and purchase agreements, joint operating agreements, other
agreements and business arrangements; (iv) owned real property; (v) leased real
property, fixtures, trade fixtures, machinery, equipment (including oil and gas,
transportation and office equipment), tools, dies and furniture; (vi) office
supplies, production supplies, spare parts, other miscellaneous supplies and
other tangible property of any kind, including all antennas, apparatus, cables,
electrical devices, fixtures, equipment, furniture, office equipment, broadcast
towers, motor vehicles and other transportation equipment, special and general
tools, test devices, transmitters and other tangible personal property; (vii)
computers and other data processing equipment and software; (viii) raw
materials, work-in-process, finished goods, consigned goods and other
inventories; (ix) prepayments or prepaid expenses; (x) claims, causes of action,
rights under express or implied warranties, rights of recovery and rights of
setoff of any kind; (xi) Information; (xii) advertising materials and other
printed or written materials; (xiii) goodwill as a going concern and other
intangible properties; and (xiv) licenses and authorizations issued by any
Governmental Authority.  “Assets” shall not include any Excluded
Assets.

       

      “Blended Customer
Contracts” means Contracts with customers of Verizon or one of its
Subsidiaries, in each case to which Verizon, one of the Contributing Companies
or another Subsidiary of Verizon is a party, and in each case which provide for
such customers to receive one or more products or services that are offered by
the Spinco Business as well as one or more products or services that are offered
by the Verizon Business, other than Contracts relating to Retained Customer
Accounts listed on Section 1.1(a) of the Disclosure Letter.

       

       

      
        
          
          

        

        
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      “Business Day” means a
day, other than Saturday, Sunday or other day on which commercial banks in New
York, New York are authorized or required by applicable Law to
close.

       

      “Cash and Cash
Equivalents” means, as of any date of determination, all cash and cash
equivalents, including certificates of deposit or bankers’ acceptances maturing
within one year from the date of acquisition thereof, and marketable direct
obligations issued by, or unconditionally guaranteed by, the United States
government or an agency thereof, and investments in money market funds and other
liquid investments, including all deposited but uncleared bank
deposits.

       

      “Claims Made Policies”
has the meaning set forth in Section 6.5(a).

       

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

       

      “Closing Date” has the
meaning set forth in the Merger Agreement.

       

      “Closing Statement”
has the meaning set forth in Section 5.1(a).

       

      “Code” means the
Internal Revenue Code of 1986, as amended from time to time.

       

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

       

      “Company Common Stock”
has the meaning set forth in the Merger Agreement.

       

      “Company Third Party
Intellectual Property” has the meaning set forth in the Merger
Agreement.

       

      “Contract” means any
contract, agreement or binding arrangement or understanding, whether written or
oral and whether express or implied.

       

       

      
        
          
          

        

        
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      “Contributing
Companies” means Verizon North Inc., a Wisconsin corporation, Verizon
Northwest Inc., a Washington corporation, Verizon West Coast Inc., a California
corporation, Contel of the South, Inc., a Georgia corporation, Verizon
California Inc., a California corporation, Verizon South Inc., a Virginia
corporation, Verizon West Virginia Inc., a West Virginia corporation, Verizon
Enterprise Solutions LLC, a Delaware limited liability company, Verizon Long
Distance LLC, a Delaware limited liability company, Verizon Online LLC, a
Delaware limited liability company, and Verizon Credit Inc., a Delaware
corporation, and any other Subsidiary of Verizon that employs Spinco Business
Employees (as defined in the Merger Agreement) as of the Closing
Date.

       

      “Contribution” has the
meaning set forth in the Recitals.

       

      “Current Assets” means
total current assets of the Spinco Business, determined in accordance with the
last sentence of Section 5.1(a), as of the opening of business on the
Distribution Date.

       

      “Current Liabilities”
means the total current liabilities of the Spinco Business, determined in
accordance with the last sentence of Section 5.1(a) as of the opening of
business on the Distribution Date.

       

      “Cutover Plan Support
Agreement” means the Cutover Plan Support Agreement entered into on the
date hereof, between Verizon Information Technologies LLC and the Company as such
agreement may be amended from time to time.

       

      “Debt Exchange” has
the meaning set forth in Section 2.4(c).

       

      “Disclosure Letter”
means the schedule prepared and delivered by Verizon to Spinco as of the date of
this Agreement.

       

      “Dispute Resolution
Request” has the meaning set forth in Section 5.1(c).

       

      “Distribution” has the
meaning set forth in the Recitals.

       

       

      
        
          
          

        

        
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      “Distribution Date”
means the date that the Distribution shall become effective.

       

      “Distribution Date Spinco
Indebtedness” has the meaning set forth in the Merger
Agreement.

       

       “Distribution Date Working
Capital” means the amount, if any, by which Current Assets exceeds
Current Liabilities (or, if Current Liabilities exceeds Current Assets, the
amount of such excess expressed as a negative number) as of the opening of
business on the Distribution Date prior to the application of purchase
accounting entries to the Surviving Corporation’s opening balance
sheet.

       

      “Effective Time” has
the meaning set forth in the Merger Agreement.

       

      “Election” has the
meaning set forth in Section 2.4(d).

       

      “Employee Matters
Agreement” means the Employee Matters Agreement entered into among
Verizon, Spinco and the Company on the date hereof, as such agreement may be
hereafter amended from time to time.

       

      “Excluded Assets”
means (i) all
Intellectual Property Assets, which shall be governed exclusively by the
Intellectual Property Agreement, (ii) all assets
relating to Taxes (except to the extent included in Current Assets), and (iii) all assets
consisting of or relating to any benefits or any benefit plans, programs,
agreements or arrangements, which shall be governed exclusively by the Employee
Matters Agreement and, to the extent applicable, the Merger
Agreement.

       

      “Excluded Liabilities”
means (i) all
liabilities for or in respect of any Intellectual Property Assets, (ii) all liabilities
for or in respect of Taxes (except to the extent included in Current
Liabilities) and (iii) all liabilities
for or in respect of any benefits or any benefit plans, programs, agreements or
arrangements, which shall be governed exclusively by the Employee Matters
Agreement and, to the extent applicable, the Merger Agreement.

       

      “Final Closing
Statement” has the meaning set forth in Section 5.1(c).

       

       

      
        
          
          

        

        
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      “Final Distribution Date
Working Capital” has the meaning set forth in Section
5.1(d).

       

      “Financial
Instruments” means credit facilities, guarantees, commercial paper,
interest rate swap agreements, foreign currency forward exchange contracts,
letters of credit, surety bonds and similar instruments.

       

      “FiOS Intellectual Property
Agreement” means the FS Intellectual Property Agreement to be entered
into among Verizon Patent and Licensing Inc., Spinco and the Company,
substantially in the form of Exhibit B hereto.

       

      “FiOS Software License
Agreement” means the FS Software License Agreement to be
entered into among Verizon Information Technologies LLC, Spinco and the Company,
substantially in the form of Exhibit C hereto.

       

      “FiOS Trademark License
Agreement” means the FS Trademark License Agreement to be
entered into between Verizon Licensing Company and the Company, substantially in
the form of Exhibit D hereto.

       

      “GAAP” means United
States generally accepted accounting principles.

       

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

       

      “Group” means the
Verizon Group or the Spinco Group, as the case may be.

       

      “GTE” means GTE
Corporation, a New York corporation.

       

      “ILEC” means an
incumbent local exchange carrier, as defined in 47 U.S.C.
§ 251(h).

       

      “ILEC Spinco Assets”
means Spinco Assets which are subject to regulations applicable to ILECs
promulgated by one or more of the public utility commissions in the states of
Arizona, California, Idaho, Illinois, Indiana, Michigan, Nevada, North Carolina,
Ohio, Oregon, South Carolina, Washington, West Virginia and
Wisconsin.

       

       

      
        
          
          

        

        
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      “ILEC Spinco
Liabilities” means Spinco Liabilities to the extent arising from or
relating to ILEC Spinco Assets.

       

      “ILEC Spinco
Subsidiaries” means Verizon North Inc., a Wisconsin corporation, Verizon
Northwest Inc., a Washington corporation, Verizon West Coast Inc., a California
corporation, Contel of the South, Inc., a Georgia corporation, New
Communications of the Southwest Inc., a newly formed Delaware corporation, New
Communications of the Carolinas Inc., a newly formed Delaware corporation, and
Verizon West Virginia Inc., a West Virginia corporation.

       

      “Indebtedness” means,
with respect to Spinco and the Spinco Subsidiaries, all indebtedness for
borrowed money, including the aggregate principal amount thereof, and any
accrued interest thereon.

       

      “Information” means
all lists of customers, records pertaining to customers and accounts, copies of
Contracts, personnel records, lists and records pertaining to customers,
suppliers and agents, and all accounting and other books, records, ledgers,
files and business records, data and other information of every kind (whether in
paper, microfilm, computer tape or disc, magnetic tape or any other
form).

       

      “Information
Statement” means the information statement forming part of Spinco’s
Registration Statement on Form 10.

       

      “Intellectual Property
Agreement” means the Intellectual Property Agreement to be entered into
among Verizon Patent and Licensing Inc., Spinco and the Company in the form of
Exhibit E hereto.

       

      “Intellectual Property
Assets” means all Statutory Intellectual Property and Non-Statutory
Intellectual Property.

       

      “Internal
Restructurings” has the meaning set forth in the Merger
Agreement.

       

       

      
        
          
          

        

        
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      “Internal Spinoffs”
has the meaning set forth in the Merger Agreement.

       

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

       

      “Leased Real Property”
means all leasehold or subleasehold estates and other rights of Verizon or its
Affiliates to use or occupy any land, buildings or structures located in the
Territory that are used primarily in the conduct of the Spinco Business,
including those listed in Section 1.1(b) of the Disclosure Letter.

       

      “Liability” or “Liabilities” means
all debts, liabilities and obligations (including those arising under Contracts)
whether absolute or contingent, matured or unmatured, liquidated or
unliquidated, accrued or unaccrued, known or unknown, whenever arising, and
whether or not the same would properly be reflected on a balance
sheet.  “Liabilities” shall not include any Excluded
Liabilities.

       

      “Litigation Matters”
means all pending or threatened litigation, investigations, claims or other
legal matters that have been or may be asserted against, or otherwise adversely
affect, Verizon or Spinco (or members of either Group).

       

      “Merger” has the
meaning set forth in the Recitals.

       

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

       

      “Non-ILEC Spinco
Assets” means Spinco Assets other than ILEC Spinco Assets.

       

      “Non-ILEC Spinco
Liabilities” means Spinco Liabilities other than ILEC Spinco
Liabilities.

       

      “Non-ILEC Spinco
Subsidiary” means New Communications
Online and Long Distance Inc., a newly formed Delaware corporation and a
wholly-owned Subsidiary of Spinco.

       

       

      
        
          
          

        

        
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      “Non-Statutory Intellectual
Property” means all unpatented inventions (whether or not patentable),
trade secrets, know-how and proprietary information, including but not limited
to (in whatever form or medium), discoveries, ideas, compositions, formulas,
computer programs (including source and object codes), computer software
documentation, database, drawings, designs, plans, proposals, specifications,
photographs, samples, models, processes, procedures, data, information, manuals,
reports, financial, marketing and business data, information, manuals, reports
and pricing and cost information, correspondence and notes, and any rights or
licenses in the foregoing which may be granted without the payment of
compensation or other consideration to any Person; provided, however, that,
notwithstanding anything to the contrary, the definition of “Non-Statutory
Intellectual Property” shall not include any Statutory Intellectual
Property.

       

      “Occurrence Basis
Policies” has the meaning set forth in Section 6.5(a).

       

      “Owned Real Property”
means all land in the Territory that is owned by Verizon or its Affiliates and
used primarily in the conduct of the Spinco Business, together with all
buildings, structures, improvements and fixtures located thereon, subject to all
easements and other rights and interests appurtenant thereto, including existing
third party rights and interests.

       

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

       

      “Person” or “person” means a
natural person, corporation, company, joint venture, individual business trust,
trust association, partnership, limited partnership, limited liability company
or other entity, including a Governmental Authority.

       

      “Policies” means all
insurance policies, insurance contracts and claim administration contracts of
any kind of Verizon and its Subsidiaries (including members of the Spinco Group)
and their predecessors which were or are in effect at any time at or prior to
the Distribution Date, including commercial general liability, automobile,
workers’ compensation, excess and umbrella, aircraft, crime, property and
business interruption, directors’ and officers’ liability, fiduciary liability,
employment practices liability, errors and omissions, special accident,
environmental, inland and marine, and captive insurance company arrangements,
together with all rights, benefits and privileges thereunder.

       

       

      
        
          
          

        

        
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      “Privileged
Information” means with respect to either Group, Information regarding a
member of such Group or any of its operations, Assets or Liabilities (whether in
documents or stored in any other form or known to its employees or agents) that
is or may be protected from disclosure pursuant to the attorney-client
privilege, the work product doctrine or another applicable privilege, that a
member of the other Group may come into possession of or obtain access to
pursuant to this Agreement or otherwise.

       

      “Real Property
Interests” means all easements, rights of way, and licenses (whether as
licensee or licensor) in real property that are used primarily in the conduct of
the Spinco Business, and excluding all Owned Real Property and property and
interests subject to Real Property Leases.

       

      “Real Property Leases”
means all leases, subleases, concessions and other agreements (written or oral)
pursuant to which any Leased Real Property is held, including the right to all
security deposits and other amounts and instruments deposited
thereunder.

       

      “Reclassification” has
the meaning set forth in Section 4.2.

       

      “Record Date” means
the close of business on the date to be determined by the Board of Directors of
Verizon as the record date for determining stockholders of Verizon entitled to
participate in the Distribution, which date shall be a Business Day preceding
the Distribution Date.

       

      “Record Date Options”
has the meaning set forth in the Employee Matters Agreement.

       

      “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.

       

      “Retained Contract”
means (i) any Contract entered into by Verizon or any Subsidiary of Verizon
(other than Spinco or a Spinco Subsidiary), on the one hand, with a
non-Affiliate of Verizon, on the other hand, which is used or held for use in
the conduct of the Spinco Business as well as the Verizon Business, other than
any Blended Customer Contract; and (ii) any Contract entered into solely between
or among Verizon and/or Affiliates of Verizon, other than (a) Transferred
Affiliate Arrangements, including, in each case, those Contracts listed in
Section 1.1(c) of the Disclosure Letter and (b) Contracts governing Retained
Customer Accounts.

       

       

      
        
          
          

        

        
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      “Retained Customer
Accounts” means those customer accounts identified on Section 1.1(a) of
the Disclosure Letter.

       

      “Software License
Agreement” means the Verizon Software License Agreement to be entered
into among Verizon Information Technologies LLC, Spinco and the Company, in the
form of Exhibit F hereto.

       

      “Special Payment”
means a payment made by Spinco to West in an amount which shall not exceed (i)
the lesser of (x) $3.333 billion and (y) West’s
estimate of its tax basis in Spinco minus (ii) the amount
of Distribution Date Spinco Indebtedness, such amount to be set forth in a
certificate delivered pursuant to Section 7.18(g) of the Merger Agreement (as
updated in accordance with such section).

       

      “Special Payment
Financing” has the meaning set forth in the Merger
Agreement.

       

      “Spinco” has the
meaning set forth in the Preamble; provided that, with respect to any period
following the Effective Time, all references to Spinco herein shall be deemed to
be references to the Surviving Corporation.

       

      “Spinco Assets” means,
subject to Section 2.1(c), collectively:

       

      (i)           all
of the right, title and interest of Verizon and its Affiliates in all Assets
that are primarily used or held for use in, or that primarily arise from, the
conduct of the Spinco Business, including:

       

      (A)           those
set forth on the Spinco Audited Balance Sheet to the extent held on the
Distribution Date;

       

      (B)           the
Current Assets;

       

       

      
        
          
          

        

        
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      (C)           all
Owned Real Property and all Leased Real Property, together with all buildings,
towers, facilities and other structures and improvements located
thereon;

       

      (D)           all
Real Property Interests;

       

      (E)           all
Telephone Plant;

       

      (F)           all
Contracts;

       

      (G)           all
existing fiber-to-the-premises (“FiOS”) network
elements from and including the video hub office(s) (“VHO”) to the end-user
customers consisting primarily of elements of the VHO, trunks and other
connecting facilities from the VHO to the serving offices and all connections
from serving offices to end-user customers in the states of Indiana, Oregon and
Washington;

       

      (ii)     
      all other Assets of Spinco and the Spinco
Subsidiaries to the extent specifically assigned to any member of the Spinco
Group pursuant to this Agreement or any other Transaction
Agreement;

       

      (iii)           the
capital stock of each Spinco Subsidiary (it being agreed that the physical
certificates representing such capital stock shall be delivered to Spinco by
Verizon no later than the Distribution Date);

       

      (iv)           all
rights of the Contributing Companies in respect of the Transferred Affiliate
Arrangements;

       

      (v)          
 those rights in the Blended Customer Contracts as are allocated to Spinco
as contemplated by Section 7.8(e) of the Merger Agreement and the obligations of
Verizon described in Section 7.8(f) of the Merger Agreement;

       

      (vi)           all
claims, causes of action and rights (or any share thereof) to the extent related
to or arising from any other Spinco Asset or Spinco Liability; and

       

       

      
        
          
          

        

        
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      (vii)           any
additional Assets set forth on Section 1.1(d) of the Disclosure
Letter;

       

      provided that,
notwithstanding the foregoing, in no event will the Spinco Assets
include:

       

      I.            any
Excluded Assets and Verizon Third Party Intellectual Property or Company Third
Party Intellectual Property;

       

      II.          any
Verizon Assets;

       

      III.         any
Retained Contracts and any Contracts governing Retained Customer
Accounts;

       

      IV.         any
Cash and Cash Equivalents or short-term investments;

       

      V.          any
Assets of Verizon Business Global LLC, f/k/a MCI, LLC, which is the successor to
the business of MCI, Inc., and direct and indirect Subsidiaries of Verizon
Business Global LLC;

       

      VI.         any
Assets of Verizon Network Integration Corp.;

       

      VII.        any
Assets of Verizon Federal Inc.;

       

      VIII.       any
Assets of Federal Network Systems LLC;

       

      IX.         any
Assets of Verizon Global Networks Inc.;

       

      X.          any
Assets of Verizon Select Services Inc.; and

       

      XI.         any
Assets of Cellco Partnership (d/b/a Verizon Wireless).

       

       

      
        
          
          

        

        
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      “Spinco Audited Balance
Sheet” means the audited Combined Statements of Selected Assets, Selected
Liabilities and Parent Funding as of December 31, 2008 for the local exchange
businesses and related landline activities of Verizon in the Territory
(including Internet access and certain long distance services provided to
customers in those states).

       

      “Spinco Business”
means:

       

      (i)           all
of the incumbent local exchange carrier business activities and operations of
Verizon and its Affiliates in the Territory (consisting of local exchange
service, “intraLATA” toll service, network access service, enhanced voice and
data services, digital subscriber line (“DSL”) services,
wholesale services, operator services, directory assistance services, customer
service to end users, and, in connection with any of the foregoing, repairs,
billing and collections); and

       

      (ii)           all
of the following activities of Verizon and its Affiliates in the
Territory:

       

      (A)           originating
central office voice switched Long Distance (“LD”) services in the
Territory switched by wire centers that are otherwise Spinco Assets;
and

       

      (B)           the
provision by Verizon Online LLC of dial-up, DSL and dedicated Internet access
services and related value added services taken by DSL customers located in the
Territory;

       

      (C)           the
resale of satellite to terrestrial video services, but only to the extent of the
assets described in clause (i)(G) of the definition of Spinco
Assets.

       

       

      
        
          
          

        

        
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      provided that, for
the avoidance of doubt, “Spinco Business” shall not include any other business
activities or operations of Verizon or its Affiliates whether or
not conducted in the Territory, including:

       

      (A)          the
offering of wireless voice, data and other services by Cellco Partnership (d/b/a
Verizon Wireless) and its Affiliates;

       

      (B)           publishing
and printing telephone directories and publishing electronic
directories;

       

      (C)           monitoring,
installation, maintenance and repair of customer premises equipment and
software, structured cabling, call center solutions and professional and other
services as provided by Verizon Network Integration Corp. or Verizon Select
Services Corp.;

       

      (D)    
       multi-dwelling unit voice, data and
video services as provided generally by Verizon Avenue Corp., other than
services provided pursuant to contracts entered into by Verizon Avenue Corp. as
agent for, or on behalf of, a Contributing Company;

       

      (E)       
    wireless telecommunications services, customer premises
equipment, inside wiring and cabling, and consulting services to or for federal
government agencies offered by Federal Network Systems LLC, and customer
premises inside wiring and cabling, and consulting services to or for federal
government agencies offered by Verizon Federal Inc.;

       

      (F)     
      interstate, intrastate and local exchange
services offered by Verizon or its Affiliates (other than the Contributing
Companies) consisting primarily of those services conducted by them as
successors to the business of MCI, Inc.;

       

      (G)     
      monitoring, provision, maintenance and
repair of intrastate, interstate and international telecommunications and
information services, managed services, internet protocol services, data center
services, professional services, hosting services, web infrastructure and
application management and other products, services and software as provided
generally by Verizon Business Global LLC, f/k/a MCI, LLC, which is the successor
to the business of MCI, Inc., or direct and indirect Subsidiaries of Verizon
Business Global LLC;

       

       

      
        
          
          

        

        
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      (H)       
   consumer and small business customer premises equipment sales and
services;

       

      (I)         
   long haul switching, routing and transmission and other carrier
services as provided generally by Verizon Global Networks Inc.;

       

      (J)             prepaid
card products, payphone dial around services (VSSI-CARD) and dedicated Internet
access services as provided generally by Verizon Select Services
Inc.;

       

      (K)       
    Verizon “Voice Over Internet Protocol” service, “iobi”
service and smart touch service as provided generally by Verizon Long Distance
LLC and Verizon Enterprise Solutions LLC;

       

      (L)         
  security services as provided generally by Cybertrust, Inc. and its
Affiliates;

       

      (M)      
    any former MCI or Verizon Select Services Inc.
business;

       

      (N)       
   operator services and directory assistance services to
wireless carriers, including Cellco Partnership (d/b/a Verizon Wireless) and any
third-party wireless carrier;

       

      (O)       
    Verizon Smart Phone service as provided generally by Verizon
Online LLC;

       

       

      
        
          
          

        

        
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      (P)     
      any “interLATA” non-ILEC switched or data
services provided by Verizon Long Distance LLC and Verizon Enterprise Solutions
LLC, which includes private line, asynchronous transfer mode (“ATM”), frame relay,
Ethernet and dedicated access voice services or any services that Verizon Long
Distance LLC and Verizon Enterprise Solutions LLC provide through separate third
party Agreements; or

       

      (Q)     
     similar activities conducted by successors to any
of the foregoing named entities.

       

      “Spinco Common Stock”
has the meaning set forth in the Recitals.

       

      “Spinco Debt Expenses”
means the aggregate amount of all fees and expenses payable to lenders or
lenders’ advisors by Spinco or the Surviving Corporation pursuant to the terms
of the Special Payment Financing or otherwise arising directly from the
consummation of the Special Payment Financing.

       

      “Spinco Employees” has
the meaning set forth in the Employee Matters Agreement.

       

      “Spinco Group” means
Spinco and the Spinco Subsidiaries.

       

      “Spinco Guarantees”
has the meaning set forth in Section 6.4(b).

       

      “Spinco Liabilities”
means, subject to Section 2.1(c), collectively:

       

      (i)      all
Liabilities of Verizon or any of its Subsidiaries (including Spinco and the
Spinco Subsidiaries) to the extent relating to or arising from the Spinco
Business, including the Liabilities set forth on the Spinco Audited Balance
Sheet and the
Liabilities of Spinco under the Transaction Agreements;

       

      (ii)     all
Liabilities to the extent relating to or arising from any Spinco
Assets;

       

       

      
        
          
          

        

        
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      (iii)    all
Liabilities of the Spinco Business in respect of the Transferred Affiliate
Arrangements;

       

      (iv)    all Current
Liabilities;

       

      (v)     those
Liabilities under the Blended Customer Contracts that are assigned to and
assumed by the Company pursuant to Section 7.8(e) or described in Section 7.8(f)
of the Merger Agreement;

       

      (vi)    all
Liabilities relating to or arising from any Verizon Guarantee;

       

      (vii)   all Distribution
Date Spinco Indebtedness; and

       

      (viii)   
      all Liabilities set forth in Section 1.1(e) of
the Disclosure Letter.

       

      Notwithstanding
the foregoing, the Spinco Liabilities shall not include any Liabilities
specifically agreed not to be assumed by Spinco under any other Transaction
Agreement.  For the avoidance of doubt, Spinco Liabilities shall not
include any Verizon Liabilities or Excluded Liabilities.

       

      “Spinco Securities”
means any notes issued by Spinco to Verizon, as contemplated in Section 2.4
hereof and having the principal terms set forth on Exhibit G hereto and
other terms determined in accordance with Section 7.18 of the Merger
Agreement.

       

      “Spinco Subsidiaries”
means, collectively, the Non-ILEC Spinco Subsidiary and the ILEC Spinco
Subsidiaries.

       

      “Statutory Intellectual
Property” means all (i) United States patents and patent applications of
any kind, (ii) United States works of authorship, mask-works, copyrights, and
copyright and mask work registrations and applications for registration, (iii)
Trademarks, and (iv) any rights or licenses in the foregoing.

       

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

       

       

      
        
          
          

        

        
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      “Surviving
Corporation” has the meaning set forth in the Merger
Agreement.

       

      “Target Working
Capital” means $0.

       

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

       

      “Tax Sharing
Agreement” means the Tax Sharing Agreement entered into on the date
hereof, among Verizon, the Company, Spinco and the ILEC Spinco Subsidiaries, as
such agreement may be amended from time to time.

       

      “Telephone Plant”
means all plant, systems, structures, regulated construction work in progress,
telephone cable (whether in service or under construction), microwave facilities
(including frequency spectrum assignment), telephone line facilities, machinery,
furniture, fixtures, tools, implements, conduits, stations, substations,
equipment (excluding customer premises equipment, but including all local
exchange equipment that serves (i) cell towers, (ii) data equipment (excluding
customer premises equipment, but including all equipment necessary to provide
data services (including dial-up, digital subscriber line and dedicated Internet
access services and related value-added services)), including the broadband
router aggregation system, (iii) ATM switch routers and (iv) network facilities
located in the Territory), central office equipment and other equipment in
general other than customer premises equipment, instruments and house wiring
connections located in the Territory used in the Spinco Business (to the extent
not transferred to customers as inside wiring), other than the portion thereof
relating to the FiOS network.

       

      “Territory” means the
local franchise area of the Contributing Companies in the states of Arizona,
Idaho, Illinois, Indiana, Michigan, Nevada, North Carolina, Ohio, Oregon, South
Carolina, Washington, West Virginia and Wisconsin, the franchise area of Verizon
West Coast Inc. and the franchise areas in California covered by the following
wirecenters:

       

      (i)           bordering
Nevada:

       

      WDFRCAXFRS1                     WDFRAXF

      PYVLCAAARLO                     PYVLCAAA

      WDFRCAAARLO                   WDFRCAAA

      CEVLLAFRS6                           CEVLCAXF

       

       

      
        
          
          

        

        
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      (ii)           bordering
Arizona:

       

      BGRVLAFRLO                          BGRVCAXF

      HVSUCAXFRS1                        HVSUCAXF

      BLTLAXF9ZK                           BLYTLAXF

       

      “Total Verizon Shares”
means (i) the
total number of shares of Verizon Common Stock as of the Record Date plus (ii) the total number
of shares of Verizon Common Stock issued to all persons who acquired such
Verizon Common Stock pursuant to the exercise of Record Date Options on or prior
to the Distribution Date.

       

      “Trademarks” means
trademarks, tradenames, applications for trademark registration, service marks,
applications for service mark registration, domain names, registrations and
applications for registrations pertaining thereto, and all goodwill associated
therewith.

       

      “Transaction
Agreements” has the meaning set forth in the Merger
Agreement.

       

      “Transferred Affiliate
Arrangements” means (i) all
Transaction Agreements and all arrangements expressly contemplated by a
Transaction Agreement, (ii) all Affiliate
interconnection Contracts and (iii) all Contracts
listed on Section 1.1(f) of the Disclosure Letter.

       

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

       

      “Verizon Assets”
means, subject to Section 2.1(c), collectively,

       

      (i)           all
of the right, title and interest of Verizon and its Subsidiaries in all Assets
held by them other than those identified in clauses (i) through (vii) of the
definition of Spinco Assets, it being acknowledged that Verizon Assets
include:

       

      (A)           all
Retained Contracts (it being agreed that Spinco and the Spinco Subsidiaries
shall be permitted to (x) retain any product or license under a Retained
Contract delivered and paid for prior to the Closing in the conduct of the
Spinco Business and (y) receive any product or license under a Retained Contract
that was ordered and paid for prior to the Closing in the conduct of the Spinco
Business but which shall be delivered after the Closing);

       

       

      
        
          
          

        

        
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      (B)           all
Contracts between Verizon and the Verizon Subsidiaries on one hand and Spinco
and the Spinco Subsidiaries on the other hand (other than to the extent they
constitute Transferred Affiliate Arrangements);

       

      (C)           any
Asset, other than any customer relationships, of the dial-up, DSL, and dedicated
Internet access, related DSL value added services and LD portions of the Spinco
Business;

       

      (D)           all
FiOS network assets not specifically described as a Spinco Asset, including the
Satellite Head End located in Illinois; and

       

      (E)           tangible
Assets used exclusively by personnel who are retained by Verizon but who work in
one of the work centers or other locations located in the Territory which serve
both the Spinco Business and the Verizon Business, which locations are set forth
in Section 1.1(g) of the Disclosure Letter;

       

      (ii)          
all other Assets of Verizon and Verizon Subsidiaries to the extent specifically
assigned to or retained by any member of the Verizon Group pursuant to this
Agreement or any other Transaction Agreement;

       

      (iii)          the
capital stock of each Verizon Subsidiary;

       

      (iv)          all
rights of Verizon under the Transaction Agreements;

       

      (v)          
all defenses and counterclaims relating to any Liability retained by Verizon or
its Affiliates;

       

       

      
        
          
          

        

        
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      (vi)          all
claims, causes of action and rights (or any share thereof) to the extent related
to or arising from any other Verizon Asset or Verizon Liability;
and

       

      (vii)         any
additional Assets set forth on Section 1.1(h) of the Disclosure
Letter;

       

      provided
that, notwithstanding the foregoing, in no event will the Verizon Assets include
any Spinco Assets.

       

      “Verizon Business”
means all of the businesses and operations conducted by Verizon and the Verizon
Subsidiaries (other than the Spinco Business) at any time, whether prior to, on
or after the Distribution Date.

       

      “Verizon Common Stock”
has the meaning set forth in the Recitals.

       

      “Verizon Group” means
Verizon and the Verizon Subsidiaries.

       

      “Verizon Guarantees”
has the meaning set forth in Section 6.4(a).

       

      “Verizon Liabilities”
means, subject to Section 2.1(c) collectively, (i) all Liabilities of Verizon or
any of its Subsidiaries (including Spinco and the Spinco Subsidiaries) relating
to or arising from the Verizon Business, including the Liabilities of Verizon
under the Transaction Agreements, in each case other than the Spinco
Liabilities, (ii) all Liabilities in respect of the Transferred Affiliate
Arrangements other than the Spinco Liabilities related thereto, (iii) all
Liabilities under the Blended Customer Contracts except to the extent assumed by
the Company pursuant to Section 7.8(e) of the Merger Agreement, (iv) all
Liabilities in respect of Retained Contracts, (v) all Liabilities relating
to or arising from any Spinco Guarantee, (vi) all expenses allocated to
Verizon pursuant to Section 11.1 of the Merger Agreement and (vii) all
Liabilities listed in Section 1.1(i) of the Disclosure Letter.  For
the avoidance of doubt, the Verizon Liabilities shall not include any Spinco
Liabilities.

       

      “Verizon Subsidiaries”
means all direct and indirect Subsidiaries of Verizon immediately after the
Distribution Date, assuming that the Distribution has occurred in accordance
with the terms hereof.

       

       

      
        
          
          

        

        
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      “Verizon Third Party
Intellectual Property” has the meaning set forth in the Merger
Agreement.

       

      Section 1.2    Interpretation.  When
a reference is made in this Agreement to an Article or Section, such reference
shall be to an Article or Section of this Agreement unless otherwise
indicated.  The table of contents to this Agreement, and the Article
and Section headings contained in this Agreement, are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.  Whenever the words “include,” “includes” or “including”
are used in this Agreement, they shall be deemed to be followed by the words
“without limitation.”  The words “hereof,” “herein” and “hereunder”
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement.  The term “or” is not exclusive.  All terms
defined in this Agreement shall have the defined meanings when used in any
certificate or other document made or delivered pursuant hereto unless otherwise
defined herein.  The definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such terms and to the
masculine as well as to the feminine and neuter genders of such
terms.  Unless otherwise specified, any agreement, instrument or
statute defined or referred to herein or in any agreement or instrument that is
referred to herein means such agreement, instrument or statute as from time to
time amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes) by succession of
comparable successor statutes, and including all attachments thereto and
instruments incorporated therein.  References to a person are also to
its permitted successors and assigns.

       

      Section 1.3    References to
Time.  All references in this Agreement to times of the day
shall be to New York City time.

       

      ARTICLE II

       

      The
Contribution

       

      Section 2.1    Transfers of Spinco Assets
and Spinco Liabilities.

       

      (a)           Subject
to Section 2.1(b) and, in the case of Information, Article VII, on or prior to
the Distribution Date, Verizon shall take or cause to be taken all actions
necessary to cause the transfer, assignment, delivery and conveyance of (i) the Non-ILEC
Spinco Assets and the Non-ILEC Spinco Liabilities to the Non-ILEC Spinco
Subsidiary, (ii) the ILEC
Spinco Assets and the ILEC Spinco Liabilities to the ILEC Spinco Subsidiaries
and (iii) the ILEC
Spinco Subsidiaries to Spinco (including by contributing stock of an entity
holding one or more ILEC Spinco Subsidiaries).  Spinco shall assume or
cause the applicable Spinco Subsidiaries to assume, and thereafter timely pay,
perform and discharge, when and as due, or cause the applicable Spinco
Subsidiaries to thereafter timely pay, perform and discharge, when and as due,
all of the Spinco Liabilities.

       

       

      
        
          
          

        

        
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      (b)           Nothing
in this Agreement (including, for the avoidance of doubt, Section 6.6) shall be
deemed to require the transfer of any Assets or the assumption of any
Liabilities which by their terms or operation of law cannot be transferred or
assumed until such time as all legal impediments to such transfer or assumption
have been removed.  The rights and obligations of the Parties in
respect of removing such impediments (including pursuing and obtaining all
applicable consents, waivers and approvals in connection with the Contribution)
and in respect of such Assets and Liabilities to the extent not transferred on
the Distribution Date are set forth in the Merger Agreement and no additional
rights or obligations shall be deemed to arise under this Agreement in
connection therewith.

       

      (c)           The
rights and obligations of the Parties with respect to Intellectual Property
Assets shall be governed exclusively by the Intellectual Property
Agreement.  Accordingly, Intellectual Property Assets and liabilities
relating to Intellectual Property Assets shall not be treated as Assets or
Liabilities for purposes of, or otherwise be governed by, this
Agreement.  In the event of any inconsistency between this Agreement
and the Intellectual Property Agreement, the terms of the Intellectual Property
Agreement shall control.  The rights and obligations of the Parties
with respect to Taxes shall be governed exclusively by the Tax Sharing Agreement
and, to the extent applicable, the Merger Agreement.  Accordingly,
assets and liabilities relating to Taxes shall not be treated as Assets or
Liabilities for purposes of, or otherwise be governed by, this Agreement (except
to the extent included in Current Assets or Current Liabilities as provided
herein).  In the event of any inconsistency between this Agreement and
the Tax Sharing Agreement or the Merger Agreement, the terms of the Tax Sharing
Agreement or the Merger Agreement, as the case may be, shall
control.  Except in the case of Section 2.3 of this Agreement, the
rights and obligations of the Parties with respect to any current or former
directors, officers or employees, any compensation or benefits and any benefit
plans, programs, agreements or arrangements shall be governed exclusively by the
Employee Matters Agreement and, to the extent applicable, the Merger Agreement.
Accordingly, assets and liabilities relating to current or former directors,
officers or employees, and compensation or benefits and any benefit plans,
programs, agreements and arrangements shall not be treated as Assets or
Liabilities for purposes of, or otherwise be governed by, this
Agreement.  The rights and obligations of the Parties with respect to
collective bargaining agreements and practices, including collective bargaining
agreements of the Spinco Business, memoranda of agreement and memoranda of
understanding, and the rights and obligations arising under those contracts and
practices on benefit plans, programs, agreements and arrangements shall not be
treated as Assets or Liabilities for purposes of, or otherwise be governed by,
this Agreement, and shall be governed exclusively by the Employee Matters
Agreement and, to the extent applicable, the Merger Agreement.  In the
event of any inconsistency between this Agreement and the Employee Matters
Agreement or the Merger Agreement, the Employee Matters Agreement or the Merger
Agreement, as the case may be, shall control.

       

       

      
        
          
          

        

        
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      Section 2.2    Conveyancing and Assumption
Agreements.  In connection with the transfer of the Spinco
Assets and the assumption of the Spinco Liabilities contemplated by this Article
II, Verizon and Spinco shall execute, or cause to be executed by the appropriate
entities, conveyancing and assumption instruments, including quit claim deeds,
as Verizon may deem necessary or desirable (provided that such
instruments shall not impose obligations on either Party or grant rights,
through representations or otherwise, beyond those set forth in this
Agreement).

       

      Section 2.3    Certain
Resignations.  At or prior to the Distribution Date, Verizon
shall cause each employee and director of Verizon and its Subsidiaries who will
not be employed by Spinco or a Spinco Subsidiary after the Distribution Date to
resign, effective not later than the Distribution Date, from all boards of
directors or similar governing bodies of Spinco or any Spinco Subsidiary on
which they serve, and from all positions as officers of Spinco or any Spinco
Subsidiary in which they serve.  At or prior to the Distribution Date,
Spinco will cause each employee and director of Spinco and its Subsidiaries who
will not be employed by Verizon or any Verizon Subsidiary after the Distribution
Date to resign, effective not later than the Distribution Date, from all boards
of directors or similar governing bodies of Verizon or any Verizon Subsidiary on
which they serve, and from all positions as officers of Verizon or any Verizon
Subsidiary in which they serve.

       

      Section 2.4    Special Payment Financing;
Debt Exchange.

       

      (a)           At
or prior to the Distribution Date, Spinco will, in exchange for Verizon causing
the transfer to Spinco of the ILEC Spinco Subsidiaries and the Non-ILEC Spinco
Assets, (i) enter into
the agreements associated with the Special Payment Financing (in accordance with
Section 7.18 of the Merger Agreement) and use the proceeds thereof to pay
the Special Payment and (ii) if the total
amount of the Special Payment is less than (w) $3.333
billion minus
(x) the
amount of Distribution Date Spinco Indebtedness, distribute Spinco Securities to
Verizon having a principal amount equal to (y) $3.333
billion minus
(z) the
sum of (A) the total
amount of the Special Payment and (B) the amount of
Distribution Date Spinco Indebtedness.  Verizon shall not be obligated
to consummate the Distribution unless Verizon shall receive in connection
therewith the Special Payment and a principal amount of Spinco Securities that
together total $3.333 billion minus the amount of
Distribution Date Spinco Indebtedness.

       

       

      
        
          
          

        

        
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      (b)           The
rights and obligations of the Parties in respect of pursuing and obtaining the
Special Payment Financing are set forth in the Merger Agreement, and no
additional rights or obligations shall be deemed to arise under this Agreement
in connection therewith.

       

      (c)           The
Parties acknowledge that Verizon reserves the right (in accordance with
Section 7.18 of the Merger Agreement) to enter into arrangements prior to
or following the Distribution Date providing for the exchange of Spinco
Securities held by Verizon for debt obligations of Verizon or its Affiliates, or
for the transfer of Spinco Securities to other Verizon creditors or stockholders
(the “Debt
Exchange”), provided that, the
parties further acknowledge that (i) if Verizon desires
to consummate the Debt Exchange concurrently with the Distribution, Verizon
shall not be obligated to consummate the Distribution unless the Debt Exchange
shall be consummated concurrently with the Distribution with respect to a
principal amount of Spinco Securities equal to (x) $3.333
billion minus
(y) the
sum of (A) the total
amount of the Special Payment and (B) the amount of
Distribution Date Spinco Indebtedness and (ii) if Verizon
elects not to pursue the Debt Exchange at the time of the Distribution or
thereafter, Verizon may dispose of Spinco Securities in another manner, but will
in any event dispose of all of its interest in any Spinco Securities within 360
days following the Distribution Date.

       

      (d)           At
Verizon’s election (the “Election”), to be
exercised by Verizon no later than 15 days prior to the Distribution Date (provided that Verizon
shall have provided the Company no less than 15 days’ prior written notice of
its intention to make the Election), notwithstanding any other provision of the
Transaction Agreements, the following alternative transaction structure may be
adopted in lieu of the transaction steps currently described in the Transaction
Documents to the extent that such alternative transaction structure does not
result in Spinco or the Surviving Corporation incurring incremental costs or
liabilities that are not reimbursed by Verizon:

       

      (i)           the
entity referred to as Spinco shall be formed by GTE, instead of by
Verizon;

       

      (ii)          the
Special Payment shall be an amount paid by Spinco to GTE, instead of being paid
by Spinco to Verizon;

       

       

      
        
          
          

        

        
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      (iii)         Spinco
Securities shall be notes issued by Spinco to GTE, instead of being issued by
Spinco to Verizon;

       

      (iv)         the
Debt Exchange may be undertaken by GTE with its creditors or stockholders,
instead of being undertaken by Verizon with Verizon’s creditors or
stockholders;

       

      (v)          Verizon
and GTE shall transfer or cause to be transferred to Spinco (or to Subsidiaries
thereof) all of the Spinco Assets and Liabilities in such a manner that,
immediately prior to the Merger, no assets or liabilities (other than stock or
other equity interests in Subsidiaries) shall be held directly by Spinco;
and

       

      (vi)         Spinco
shall be distributed in the Internal Spinoffs and in the Distribution and shall
participate in the Merger.

       

      (e)           If
Verizon makes the Election, all applicable provisions of this Agreement and the
other Transaction Agreements shall be amended by the parties thereto as
appropriate to reflect the Election.  For example, the definition of
the Special Payment shall be revised to refer to GTE’s estimate of its tax basis
in Spinco, instead of Verizon’s estimate of its tax basis in
Spinco.

       

      (f)           Verizon
shall pay all Spinco Debt Expenses (i) on the Closing
Date or (ii) on
such subsequent date when the fees and expenses are payable to lenders or the
lenders’ advisors pursuant to the terms of, or otherwise in connection with, the
Special Payment Financing.

       

      ARTICLE III

       

      Conditions

       

      Section 3.1    Conditions to the
Distribution.  The obligations of Verizon pursuant to this
Agreement to effect the Distribution shall be subject to the fulfillment (or
waiver by Verizon) on or prior to the Distribution Date (provided that certain
of such conditions will occur substantially contemporaneously with the
Distribution) of each of the conditions set forth in Section 2.4 hereof and in
Section 8.1 and Section 8.2 of the Merger Agreement (except the consummation of
the Contribution and the Distribution).

       

       

      
        
          
          

        

        
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      Section 3.2    Waiver of
Conditions.  To the extent permitted by applicable Law, the
condition set forth in Section 3.1 hereof may be waived in the sole discretion
of Verizon.  The condition set forth in Section 3.1 is for the sole
benefit of Verizon and shall not give rise to or create any duty on the part of
Verizon to waive or not waive such condition.

       

      ARTICLE IV

       

      The
Distribution

       

      Section 4.1    Record Date and Distribution
Date.  Subject to the satisfaction, or to the extent permitted
by applicable Law, waiver, of the conditions set forth in Section 3.1, the Board
of Directors of Verizon, consistent with the Merger Agreement and Delaware law,
shall establish the Record Date and the Distribution Date and any necessary or
appropriate procedures in connection with the Distribution.

       

      Section 4.2    Spinco
Reclassification.  Immediately prior to the Distribution Date,
Verizon and Spinco shall take all actions necessary to issue to Verizon such
number of shares of Spinco Common Stock, including, if applicable, by
reclassifying the outstanding shares of Spinco Common Stock or by declaring a
dividend payable to Verizon in shares of Spinco Common Stock (the “Reclassification”),
for the purpose of increasing the outstanding shares of Spinco Common Stock such
that, immediately prior to the Distribution Date, Spinco will have an aggregate
number of shares of Spinco Common Stock to be determined by Verizon and Spinco
prior to the Distribution Date, all of which will be held by
Verizon.

       

      Section 4.3    The
Agent.  Prior to the Distribution Date, Verizon shall enter
into an agreement with the Agent on terms reasonably satisfactory to Spinco and
the Company providing for, among other things, the distribution to the holders
of Verizon Common Stock in accordance with this Article IV of the shares of
Company Common Stock into which the shares of Spinco Common Stock that would
otherwise be distributed in the Distribution will be converted pursuant to the
Merger.

       

      Section 4.4    Delivery of Shares to the
Agent.  At or prior to the Distribution Date, Verizon shall
authorize the book-entry transfer by the Agent of all of the outstanding shares
of Spinco Common Stock to be distributed in connection with the
Distribution.  After the Distribution Date, upon the request of the
Agent, Spinco shall provide all book-entry transfer authorizations that the
Agent shall require in order to effect the distribution of the shares of Company
Common Stock into which the shares of Spinco Common Stock that would otherwise
be distributed in the Distribution will be converted pursuant to the
Merger.

       

       

      
        
          
          

        

        
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      Section 4.5    The
Distribution.  Upon the terms and subject to the conditions of
this Agreement, following consummation of the Reclassification, Verizon shall
declare and pay the Distribution consisting of:

       

      (i)           to
the holders of shares of Verizon Common Stock as of the Record Date, such
percentage of the total number of shares of Spinco Common Stock held by Verizon
as of the time of the Distribution as is equal to a fraction, the numerator of
which is the total number of shares of Verizon Common Stock held by such holders
as of the Record Date and the denominator of which is the number of Total
Verizon Shares; and

       

      (ii)          to
the holders of shares of Verizon Common Stock who acquired such Verizon Common
Stock pursuant to the exercise of Record Date Options, such percentage of the
total number of shares of Spinco Common Stock held by Verizon as of the time of
the Distribution as is equal to a fraction, the numerator of which is the total
number of shares of Verizon Common Stock held by such holders that were acquired
pursuant to the exercise of Record Date Options on or prior to the Distribution
Date and the denominator of which is the number of Total Verizon
Shares.

       

      Immediately
after the Distribution, at the Effective Time, all such shares of Spinco Common
Stock shall be converted into the right to receive shares of Company Common
Stock pursuant to, and in accordance with the terms of, the Merger Agreement,
immediately following which the Agent shall distribute by book-entry transfer in
respect of the outstanding shares of Verizon Common Stock held by (x) holders of record
of Verizon Common Stock on the Record Date and (y) persons who
acquired Verizon Common Stock pursuant to the exercise of Record Date Options,
all of the shares of Company Common Stock into which the shares of Spinco Common
Stock that would otherwise be distributed in the Distribution have been
converted pursuant to the Merger.  The Agent shall make cash payments
in lieu of any fractional shares resulting from the conversion of Spinco Common
Stock into Company Common Stock in the Merger pursuant to, and in accordance
with, the terms of the Merger Agreement.

       

       

      
        
          
          

        

        
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      ARTICLE V

       

      Post Closing
Adjustments

       

      Section 5.1    Post-Closing
Adjustments.

       

      (a)           Within
90 days after the Closing Date, Verizon shall cause to be prepared and delivered
to the Surviving Corporation a statement derived from the books and records of
Verizon and its Affiliates (the “Closing Statement”),
setting forth Distribution Date Working Capital, including reasonable detail
regarding the calculation thereof.  The Distribution Date Working
Capital shall be calculated in accordance with GAAP, consistently applied, using
the same accounting principles, methodologies and policies used in the
preparation of the Spinco Audited Balance Sheet, pro forma for the completion of
the Contribution, as modified by the principles, methodologies and policies set
forth in Section 5.1 of the Disclosure Letter.

       

      (b)           Verizon
shall give the Surviving Corporation and each of its Representatives access at
all reasonable times and on reasonable advance notice to Verizon’s books and
records to the extent reasonably required to permit the Surviving Corporation to
review the Closing Statement.  Within 60 days after receipt of the
Closing Statement, the Surviving Corporation shall, in a written notice to
Verizon, describe in reasonable detail any proposed adjustments to the items set
forth on the Closing Statement and the reasons therefor (it being agreed that
the only permitted reasons for such adjustments shall be mathematical error or
the failure to compute items set forth therein in accordance with this Article
V).  The Surviving Corporation shall have the right to discuss the
Closing Statement with Verizon’s accountants, it being understood that in
connection with such discussion, the Surviving Corporation will not have access
to the work papers of such accountants.  If Verizon shall not have
received a notice of proposed adjustments (provided that any and all proposed
adjustments to the calculation of Distribution Date Working Capital must in the
aggregate exceed two hundred fifty thousand dollars ($250,000) or more) within
such 60-day period, the Surviving Corporation will be deemed to have accepted
irrevocably such Closing Statement.

       

      (c)           Verizon
and the Surviving Corporation shall negotiate in good faith to resolve any
disputes over any proposed adjustments to the Closing Statement, during the 30
days following Verizon’s receipt of the proposed adjustments.  If the
parties are unable to resolve such dispute within such 30-day period, then, at
the written request of either party (the “Dispute Resolution
Request”), each party shall appoint a knowledgeable, responsible
representative to meet in person and negotiate in good faith to resolve the
disputed matters.  The parties intend that these negotiations be
conducted by experienced business representatives empowered to decide the
issues.  Such negotiations shall take place during the 15-day period
following the date of the Dispute Resolution Request.  If the business
representatives resolve the dispute, such resolution shall be memorialized in a
written agreement (the Closing Statement, as revised by such negotiations,
written agreement or the final decision of the accounting firm referred to
below, the “Final
Closing Statement”), executed within five days thereafter.  If
the business representatives do not resolve the dispute, within five days the
Surviving Corporation and Verizon shall jointly select a nationally recognized

       

       

      
        
          
          

        

        
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      independent
public accounting firm (which is not the regular independent public accounting
firm of either Verizon or the Surviving Corporation) to arbitrate and resolve
such disputes, which resolution shall be final, binding and enforceable in
accordance with Section 9.13.  If the Surviving Corporation and
Verizon do not jointly select such firm within five days, a nationally
recognized accounting firm shall be selected by lot from among those nationally
recognized firms which are not the regular firm of either Verizon or the
Surviving Corporation.  Such accounting firm shall arbitrate and
resolve such dispute based solely on the written submission forwarded by Verizon
and the Surviving Corporation and shall only consider whether the Closing
Statement was prepared in accordance with this Article V and (only with
respect to disputed matters submitted to the accounting firm) whether and to
what extent the Closing Statement requires adjustment.  The fees and
expenses of such accounting firm shall be shared by the Surviving Corporation
and Verizon in inverse proportion to the relative amounts of the disputed amount
determined to be for the account of the Surviving Corporation and Verizon,
respectively.

       

      (d)           If
the amount of the Distribution Date Working Capital, as set forth in the Final
Closing Statement (the “Final
Distribution Date Working Capital”) exceeds the Target Working Capital,
no payment shall be made by either party with respect thereto and, if the amount
of the Final Distribution Date Working Capital is less than the Target Working
Capital, Verizon shall pay to the Surviving Corporation an amount equal to such
deficit.  All such amounts shall bear interest from the Distribution
Date through but excluding the date of payment at the Applicable Rate; such
interest shall accrue daily on the basis of a 365 day year calculated for the
actual number of days for which payment is due and such payment shall be payable
together with the amount payable pursuant to the foregoing
sentence.  Any amounts payable pursuant to this Section 5.1(d) shall
be made via wire transfer of immediately available funds within five Business
Days after the date upon which the Closing Statement becomes a Final Closing
Statement.

       

      (e)           To
the extent that Verizon makes any payment of an amount which constitutes a
Current Liability between the Closing Date and the date any payment is due under
Section 5.1(d), then Verizon shall have a right to offset the aggregate of all
such amounts against the amount, if any, payable to the Surviving Corporation
under Section 5.1(d); provided that Verizon has provided evidence of the
payment of such amounts prior to making any offset.

       

       

      
        
          
          

        

        
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      ARTICLE VI

       

      Additional
Covenants

       

      Section 6.1    Survival; Exclusive
Remedy.  The covenants and agreements contained herein to be
performed following the Closing shall survive the Effective Time in accordance
with their respective terms and all other terms shall expire as of the Effective
Time (other than the obligation to convey the Spinco Assets and the Spinco
Liabilities in accordance with Section 2.1).  The Parties hereby agree
that the sole and exclusive remedy for any claim (whether such claim is framed
in tort, contract or otherwise), arising out of a breach of this Agreement shall
be asserted pursuant to Section 10.2 of the Merger Agreement (or if this
Agreement and the Merger Agreement are terminated, Section 9.3 of the
Merger Agreement) and only to the extent expressly contemplated
therein.

       

      Section 6.2    Mutual
Release.  Effective as of the Distribution Date and except as
otherwise specifically set forth in the other Transaction Agreements or the
Transferred Affiliate Arrangements, each of Verizon, on behalf of itself and
each of the Verizon Subsidiaries, on the one hand, and Spinco, on behalf of
itself and each of the Spinco Subsidiaries, on the other hand, hereby releases
and forever discharges the other Party and its Subsidiaries, and its and their
respective officers, directors, managers or other persons acting in a similar
capacity, agents, record and beneficial security holders (including trustees and
beneficiaries of trusts holding such securities), advisors and Representatives
(in each case, in their respective capacities as such) and their respective
heirs, executors, administrators, successors and assigns, of and from all debts
(including intercompany cash balances and accounts and notes payable), demands,
actions, causes of action, suits, accounts, covenants, contracts, agreements,
damages, claims and other Liabilities whatsoever of every name and nature, both
in law and in equity, which the releasing Party has or ever had or ever will
have, which exist or arise out of or relate to events, circumstances or actions
taken by such other Party occurring or failing to occur or any conditions
existing at or prior to the Distribution Date whether or not known on the
Distribution Date, including in connection with the transactions and all other
activities to implement the Contribution and the Distribution; provided, however, that the
foregoing general release shall not apply to (i) any
Liabilities or other obligations (including Liabilities with respect to payment,
reimbursement, indemnification or contribution) under this Agreement or the
other Transaction Agreements or Transferred Affiliate Arrangements or any
Contracts (as defined therein) contemplated thereby, or assumed, transferred,
assigned, allocated or arising under any of this Agreement or the other
Transaction Agreements or Transferred Affiliate Arrangements or any Contract
contemplated thereby, in each case subject to the terms thereof, or any Person’s
right to enforce this Agreement or the other Transaction Agreements, Transferred
Affiliate Arrangements or the Contracts contemplated thereby in accordance with
their terms, or (ii) any Liability the
release of which would result in the release of any Person other than a Person
released pursuant to this Section 6.2.  Each Party agrees, for itself
and each member of its Group, not to make any claim or demand or commence any
action or assert any claim against any member of the other Party’s Group with
respect to the Liabilities released pursuant to this Section 6.2.

       

       

      
        
          
          

        

        
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      Section 6.3    Intercompany
Agreements.  Except for the Transaction Agreements, any
agreements entered into pursuant to the Merger Agreement (including pursuant to
Sections 7.8 and 7.24 thereof) and the other Transferred Affiliate
Arrangements, and except as contemplated by paragraph (iv) of
Section 5.17 of the Merger Agreement, all contracts, licenses, agreements,
commitments and other arrangements, formal and informal (including with respect
to intercompany cash balances and accounts and notes payable), (x) between any member
of the Verizon Group, on the one hand, and any member of the Spinco Group, on
the other hand, or (y) between Cellco
Partnership (d/b/a Verizon Wireless) or any of its Subsidiaries, on the one
hand, and any member of Spinco Group, on the other hand, in each case in
existence as of the Distribution Date, shall terminate as of the close of
business on the day prior to the Distribution Date.  No such
terminated agreement (including any provision thereof that purports to survive
termination) shall be of any further force or effect after the Distribution Date
and all parties thereto shall be released from all obligations
thereunder.  From and after the Distribution Date, no member of either
Group shall have any rights or obligations under any such terminated agreement
with any member of the other Group, except as specifically provided herein or in
the other Transaction Agreements.

       

      Section 6.4    Guarantee Obligations and
Liens.

       

      (a)           Verizon
and Spinco shall, upon Verizon’s request, cooperate, and shall cause their
respective Groups to cooperate and use their respective commercially reasonable
efforts to:  (x) terminate, or
to cause Spinco, as the appropriate member of the Spinco Group, to be
substituted in all respects for Verizon or the applicable member of the Verizon
Group in respect of, all obligations of any member of the Verizon Group under
any Spinco Liabilities identified by Verizon for which such member of the
Verizon Group may be liable, as guarantor, original tenant, primary obligor or
otherwise (including Spinco Liabilities under any Financial Instrument) (“Verizon Guarantees”),
and (y)
terminate, or to cause Spinco Assets to be substituted in all respects for any
Verizon Assets in respect of, any liens or encumbrances identified by Verizon on
Verizon Assets which are securing any Spinco Liabilities.  If such a
termination or substitution is not effected by the Distribution Date, without
the prior written consent of Verizon, from and after the Distribution Date,
Spinco shall not, and shall not permit any member of the Spinco Group to, renew
or extend the term of, increase its obligations under, or transfer to a third
party, any loan, lease, contract or other obligation for which a member of the
Verizon Group is or may be liable or for which any Verizon Asset is or may be
encumbered unless all obligations of the Verizon Group and all liens and
encumbrances on any Verizon Asset with respect thereto are thereupon terminated
by documentation reasonably satisfactory in form and substance to
Verizon.

       

       

      
        
          
          

        

        
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      (b)           Verizon
and Spinco shall, upon Spinco’s request, cooperate, and shall cause their
respective Groups to cooperate and use their respective commercially reasonable
efforts to:  (x) terminate, or to
cause a member of the Verizon Group to be substituted in all respects for any
member of Spinco Group in respect of, all obligations of any member of the
Spinco Group under any Verizon Liabilities for which such member of the Spinco
Group may be liable, as guarantor, original tenant, primary obligor or otherwise
(including Verizon Liabilities under any Financial Instrument) (“Spinco Guarantees”),
and (y)
terminate, or to cause Verizon Assets to be substituted in all respects for any
Spinco Assets in respect of, any liens or encumbrances on Spinco Assets which
are securing any Verizon Liabilities.  If such a termination or
substitution is not effected by the Distribution Date, without the prior written
consent of Spinco, from and after the Distribution Date, Verizon shall not, and
shall not permit any member of the Verizon Group to, renew or extend the term
of, increase its obligations under, or transfer to a third party, any loan,
lease, contract or other obligation for which a member of the Spinco Group is or
may be liable or for which any Spinco Asset is or may be encumbered unless all
obligations of the Spinco Group and all liens and encumbrances on any Spinco
Asset with respect thereto are thereupon terminated by documentation reasonably
satisfactory in form and substance to Spinco.

       

      Section 6.5    Insurance.

       

      (a)           Notwithstanding
any other provision of this Agreement, from and after the Distribution Date,
Spinco and the Spinco Subsidiaries will have no rights with respect to any
Policies, except that (i) Verizon will use
its commercially reasonable efforts, at Spinco’s request, to assert claims on
behalf of Spinco and the Spinco Subsidiaries for any loss, liability or damage
identified by Spinco with respect to the Spinco Assets or Spinco Liabilities
under Policies with third-party insurers which are “occurrence basis” insurance
policies (“Occurrence
Basis Policies”) arising out of insured incidents occurring from the date
coverage thereunder first commenced until the Distribution Date to the extent
that the terms and conditions of any such Occurrence Basis Policies and
agreements relating thereto so allow and (ii) Verizon will use
its commercially reasonable efforts to obtain from the relevant third-party
insurer an assignment to Spinco of any rights to prosecute claims identified by
Spinco properly asserted with respect to the Spinco Assets or Spinco Liabilities
with an insurer prior to the Distribution Date under Policies with third-party
insurers which are insurance policies written on a “claims made” basis (“Claims Made
Policies”) arising out of insured incidents occurring from the date
coverage thereunder first commenced until the Distribution Date to the extent
that the terms and conditions of any such Claims Made Policies and agreements
relating thereto so allow; provided that, in the
case of both clauses (i) and (ii) above, (A) all of Verizon’s
and each Verizon Subsidiary’s reasonable out-of-pocket costs and expenses
incurred in connection with the foregoing are promptly paid by Spinco (it being
agreed that Verizon will not incur material expenditures above reasonable
amounts specified by Spinco unless authorized by Spinco), (B) Verizon and the
Verizon Subsidiaries may, at any time, without liability or obligation to Spinco
or any Spinco Subsidiary (other than as set forth in Section 6.5(c)), amend,
commute, terminate, buy out, extinguish liability under or otherwise modify any
Occurrence Basis Policies or Claims Made Policies (and such claims shall be
subject to any such amendments, commutations, terminations, buy-outs,
extinguishments and modifications), in each case to the extent that such
modifications do not disproportionately adversely affect any claim subject to
clause (i) or (ii) with respect to the Spinco Assets or Spinco Liabilities
relative to a comparable claim with respect to the Verizon Assets or Verizon
Liabilities and (C) any such claim
will be subject to all of the terms and conditions of the applicable
Policy.

       

       

      
        
          
          

        

        
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      (b)           Nothing
in this Section 6.5 will be construed to limit or otherwise alter in any way the
indemnity obligations of the Parties, including those created by this Agreement,
by operation of law or otherwise.

       

      (c)           This
Agreement is not intended as an attempted assignment of any policy of insurance
or as a contract of insurance and shall not be construed to waive any right or
remedy of any member of the Verizon Group in respect of any insurance policy or
any other contract or policy of insurance.

       

      (d)           Verizon
agrees to use its commercially reasonable efforts to recover damages or to
assist Spinco in connection with any efforts by Spinco to recover damages, as
the case may be, under any Policy with respect to the Spinco Business for
incidents occurring prior to the Distribution Date; provided that all of
Verizon’s reasonable out-of-pocket costs and expenses incurred in connection
with the foregoing are promptly paid by Spinco (it being agreed that Verizon
will not incur material expenditures above reasonable amounts specified by
Spinco unless authorized by Spinco).

       

      (e)    
       If an extended reporting period for
Claims Made Policies is available for Verizon to purchase, if the Surviving
Corporation requests following the Closing Date, Verizon shall cause to be
purchased at the Surviving Corporation’s expense (using funds provided by the
Surviving Corporation) an extended reporting period with respect to such
insurance for the benefit of Spinco and the Spinco Subsidiaries as
insureds.

       

       

      
        
          
          

        

        
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      (f)         
  In the event that a Policy provides coverage for both Verizon or a
Verizon Subsidiary, on the one hand, and the Spinco Business, Spinco Assets and
Spinco Liabilities, on the other hand, relating to the same
occurrence:  (i) Verizon agrees, to
the extent requested by Spinco, to jointly defend Spinco or any applicable
Spinco Subsidiaries where no conflicts exist between the Parties; and (ii) Spinco shall pay
that portion of all out-of-pocket fees and expenses, in excess of any insurance
or insurance reimbursement, attributable to the Spinco Assets and Spinco
Liabilities.

       

      (g)           The
obligations of Verizon and its Subsidiaries under this Section 6.5 shall
terminate on the seventh anniversary of
the Effective Time.

       

      Section 6.6    Subsequent
Transfers.  In the event that at any time during the 18-month
period following the Distribution Date a member of the Verizon Group becomes
aware that it possesses any Spinco Assets (except (i) for assets, rights
and properties provided by members of the Verizon Group pursuant to the Cutover
Plan Support Agreement or (ii) as otherwise
contemplated by the Transaction Agreements), Verizon shall cause the prompt
transfer of such Spinco Assets to Spinco.  Prior to any such transfer,
Verizon shall hold such Spinco Assets in trust for Spinco.  In the
event that at any time during the 18-month period following the Distribution
Date, a member of the Spinco Group becomes aware that it possesses any Verizon
Assets (except as otherwise contemplated by the Transaction Agreements), the
Spinco Group shall cause the prompt transfer of such Verizon Assets to Verizon
or a member of the Verizon Group.  Prior to any such transfer, the
Spinco Group shall hold such Verizon Assets in trust for Verizon.

       

      Section 6.7    Further
Assurances.  From time to time after the Distribution Date, and
for no further consideration, each of the Parties shall execute, acknowledge and
deliver such assignments, transfers, consents, assumptions and other documents
and instruments and take such other actions as may be necessary to consummate
and make effective the transactions contemplated by this Agreement; provided that no such
documents or instruments shall impose obligations on any Party broader than or
additive to those in any Transaction Agreement.

       

       

      
        
          
          

        

        
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      Section 6.8    Use of
Names.

       

      (a)           Except
as otherwise provided in any of the other Transaction Agreements, after the
Distribution Date, neither Verizon nor any Subsidiary of Verizon (i) shall use any
material showing any affiliation or connection of Verizon or any member of the
Verizon Group with Spinco or any member of the Spinco Group or (ii) shall
represent to third parties that any of them is affiliated or connected with
Spinco or any member of the Spinco Group.  The restrictions contained
in this Section 6.8(a) shall not apply to filings, reports and other documents
required by applicable Law or regulations of securities exchanges to be filed or
made publicly available.

       

      (b)           Except
as otherwise provided in any of the other Transaction Agreements, after the
Distribution Date, neither Spinco nor any Subsidiary of Spinco (i) shall use any
material showing any affiliation of Spinco or any member of the Spinco Group
with Verizon or any member of the Verizon Group or (ii) shall
represent to third parties that any of them is affiliated with Verizon or any
member of the Verizon Group.  The restrictions contained in this
Section 6.8(b) shall not apply to filings, reports and other documents required
by applicable Law or regulations of securities exchanges to be filed or made
publicly available.  Without limiting the generality of the foregoing,
prior to the Distribution Date, Verizon shall have the right to change the names
of all of the Spinco Subsidiaries to remove the name Verizon.  The
Surviving Corporation shall undertake such name changes promptly following the
Merger to the extent such changes are not completed prior to such
time.

       

      ARTICLE VII

       

      Access to
Information

       

      Section 7.1    Provision of
Information.  Notwithstanding anything herein to the contrary,
the Parties agree that the obligation of Verizon to deliver Information that is
part of the Spinco Assets to Spinco from and after the Distribution will be
governed by this Article VII.  Subject to the terms of this Article
VII:

       

      (a)           No
later than five Business Days following the Closing Date, Verizon shall deliver
to Spinco at the address specified for notices to the Company in the Merger
Agreement (or to such other address in the continental United States as may be
designated by the Company to Verizon no less than 10 days prior to the
Distribution Date), (i) copies of the
Information constituting Spinco Assets that are continuing property records,
(ii) copies of
the Information constituting Spinco Assets that is contained in the electronic
data room provided by Intralinks and which the Company has had access prior to
the date hereof, together with such other information to be made available
between the date hereof and the Distribution Date in the data room located in
Irving, Texas, and such additional Information constituting Spinco Assets that
is in the same general categories as the existing Information in such data room
and is added to the data room by Verizon (using reasonable commercial efforts to
do so) immediately prior to the Closing Date and (iii) minute
books and organizational documents of Spinco and the Spinco
Subsidiaries.

       

       

      
        
          
          

        

        
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      (b)           Following
the Distribution Date, Verizon shall deliver or make available to Spinco from
time to time, upon the request of Spinco, Information in Verizon’s possession
and not provided pursuant to Section 7.1(a) relating directly to the Spinco
Assets, the Spinco Business, or the Spinco Liabilities that consist of: (i) active
Contracts, (ii)
active litigation files and (iii) all other
Information that constitutes Spinco Assets or relates directly to any Spinco
Liability, in each case to the extent they are material to the conduct of the
Spinco Business following the Distribution Date.  Verizon also will
cooperate with Spinco to accommodate Spinco’s reasonable requests from time to
time following the Distribution Date for other Information relating directly to
the Spinco Assets, the Spinco Business or the Spinco
Liabilities.  Subject to Section 7.5, Verizon may retain complete and
accurate copies of such Information.  Verizon shall maintain all such
Information consistently with Verizon’s standard retention policies except to
the extent that any such Information has already been provided to the Surviving
Corporation or has been offered to and declined by the Surviving
Corporation.  The out of pocket costs and expenses incurred in the
identification, isolation and provision of Information to the Spinco Group (and
in the case of any Information provided pursuant to the second sentence of this
paragraph, a reasonable internal cost allocation) shall be paid for by the
Spinco Group.  Information shall be provided as promptly as
practicable upon request, with due regard for other commitments of Verizon
personnel and the materiality of the information to Spinco (including the need
to comply with any legal or regulatory requirement of any Governmental
Authority).

       

      (c)           Notwithstanding
anything in this Agreement to the contrary, (x) the provision
of returns and other Information relating to Tax matters shall be governed by
the Tax Sharing Agreement and to the extent applicable, the Merger Agreement,
and not this Agreement, (y) the provision of
Information relating to personnel and personnel maters will be governed by the
Employee Matters Agreement and, to the extent applicable, the Merger Agreement,
and not this Agreement and (z) the ownership and
use of any Information that constitutes an Intellectual Property Asset shall be
governed by the Intellectual Property Agreement.

       

       

      
        
          
          

        

        
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      Section 7.2    Privileged
Information.

       

      (a)           Each
Party acknowledges that:  (i) each of Verizon
and Spinco (and the members of the Verizon Group and the Spinco Group,
respectively) has or may obtain Privileged Information; (ii) there are or may
be a number of Litigation Matters affecting each or both of Verizon and Spinco;
(iii) both
Verizon and Spinco have a common legal interest in Litigation Matters, in the
Privileged Information and in the preservation of the confidential status of the
Privileged Information, in each case relating to the pre-Distribution Spinco
Business or Verizon Business or, in the case of the Spinco Group, relating to or
arising in connection with the relationship among Verizon and its Subsidiaries
on or prior to the Distribution Date; and (iv) both Verizon
and Spinco intend that the transactions contemplated hereby and by the Merger
Agreement and the other Transaction Agreements and any transfer of Privileged
Information in connection therewith shall not operate as a waiver of any
potentially applicable privilege.

       

      (b)           Each
of Verizon and Spinco agrees, on behalf of itself and each member of the Group
of which it is a member, not to disclose or otherwise waive any privilege
attaching to any Privileged Information relating to the pre-Distribution Spinco
Business or Verizon Business, as applicable, or, in the case of the Spinco
Group, relating to or arising in connection with the relationship among Verizon
and its Subsidiaries on or prior to the Distribution Date, without providing
prompt written notice to and obtaining the prior written consent of the other
Party, which consent shall not be unreasonably withheld, conditioned or delayed
and shall not be withheld, conditioned or delayed if the other Party certifies
that such disclosure is to be made in response to a likely threat of suspension
or debarment or similar action; provided, however, that Verizon
and Spinco shall not be required to give any such notice or obtain any such
consent and may make such disclosure or waiver with respect to Privileged
Information if such Privileged Information relates solely to the
pre-Distribution Spinco Business or Verizon Business, as
applicable.  In the event of a disagreement between any member of the
Verizon Group and any member of the Spinco Group concerning the reasonableness
of withholding such consent, no disclosure shall be made prior to a resolution
of such disagreement by a court of competent jurisdiction, provided that the
limitations in this sentence shall not apply in the case of disclosure required
by Law and so certified as provided in the first sentence of this
paragraph.

       

      (c)           Upon
any member of the Verizon Group or any member of the Spinco Group receiving any
subpoena or other compulsory disclosure notice from a court or other
Governmental Authority which requests disclosure of Privileged Information, in
each case relating to pre-Distribution Spinco Business or Verizon Business, as
applicable, or, in the case of the Spinco Group, relating to or arising in
connection with the relationship among Verizon and its Subsidiaries on or prior
to the Distribution Date, the recipient of the notice shall (to the extent
consent is required in connection with the disclosure of such Privileged
Information under paragraph (b) of this Section) as promptly as practicable
provide to the other Group (following the notice provisions set forth herein) a
copy of such notice, the intended response, and all materials or information
relating to the other Group that might be disclosed and the proposed date of
disclosure.  In the event of a disagreement as to the intended
response or disclosure, unless and until the disagreement is resolved as
provided in paragraph (b) of this Section, the Parties shall cooperate to assert
all defenses to disclosure claimed by either Party’s Group, and shall not
disclose any disputed documents or information until all legal defenses and
claims of privilege have been finally determined, except as otherwise required
by a court order requiring such disclosure.

       

       

      
        
          
          

        

        
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      Section 7.3    Production of
Witnesses.  Subject to Section 7.2, after the Distribution
Date, each of Verizon and Spinco shall, and shall cause each member of its Group
to, make available to Spinco or Verizon or any member of the Spinco Group or of
the Verizon Group, as the case may be, upon reasonable prior written request,
such Group’s directors, managers or other persons acting in a similar capacity,
officers, employees and agents as witnesses to the extent that any such Person
may reasonably be required in connection with any Litigation Matters,
administrative or other proceedings in which the requesting Party may from time
to time be involved and relating to the pre-Distribution Spinco Business or the
Verizon Business, as applicable, or, in the case of the Spinco Group, relating
to or in connection with the relationship among Verizon and its Subsidiaries on
or prior to the Distribution Date.  The out-of-pocket costs and
expenses incurred in the provision of such witnesses shall be paid by the Party
requesting the availability of such persons.

       

      Section 7.4    Retention of
Information.  Except as otherwise agreed in writing, or as
otherwise provided in the other Transaction Agreements, each of Verizon and
Spinco shall, and shall cause each member of its Group to, retain all
Information in such Party’s Group’s possession or under its control, relating
directly and primarily to the pre-Distribution business, Assets or Liabilities
of the other Party’s Group for so long as such Information is retained pursuant
to such Party’s general document retention policies as of such time or such
later date as may be required by Law, except that if, prior to the expiration of
such period, any member of either Party’s Group wishes to destroy or dispose of
any such Information that is at least three years old, prior to destroying or
disposing of any of such Information, (a) the Party whose
Group is proposing to dispose of or destroy any such Information shall provide
no less than 30 days’ prior written notice to the other Party, specifying the
Information proposed to be destroyed or disposed of, and (b) if, prior to the
scheduled date for such destruction or disposal, the other Party requests in
writing that any of the Information proposed to be destroyed or disposed of be
delivered to such other Party, the Party whose Group is proposing to dispose of
or destroy such Information promptly shall arrange for the delivery of the
requested Information to a location specified by, and at the expense of, the
requesting Party.  This Section 7.4 shall not apply to Information
referred to in clauses (x) and (y) of Section 7.1(c).

       

       

      
        
          
          

        

        
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      Section 7.5    Confidentiality.  Subject
to Section 7.2, which shall govern Privileged Information, from and after the
Distribution Date, each of Verizon and Spinco shall hold, and shall use
commercially reasonable efforts to cause its Affiliates and Representatives to
hold, in strict confidence all Information concerning the other Party’s Group
obtained by it or furnished to it by such other Party’s Group pursuant to this
Agreement or the other Transaction Agreements and shall not release or disclose
such Information to any other Person, except its Affiliates and Representatives,
who shall be advised of the provisions of this Section 7.5, and each Party shall
be responsible for a breach by any of its Affiliates or Representatives; provided, however, that any
member of the Verizon Group or the Spinco Group may disclose such Information to
the extent that (a) disclosure is
compelled by judicial or administrative process or, based on advice of such
Person’s counsel, by other requirements of Law, including filing requirements
with the U.S. Securities and Exchange Commission, or (b) such Party
can show that such Information was (i) in the public
domain through no fault of such Person or (ii) lawfully acquired
by such Person from another source after the time that it was furnished to such
Person by the other Party’s Group, and not acquired from such source subject to
any confidentiality obligation on the part of such source known to the
acquiror.  Notwithstanding the foregoing, each of Verizon and Spinco
shall be deemed to have satisfied its obligations under this Section 7.5 with
respect to any Information (other than Privileged Information) if it exercises
the same care with regard to such Information as it takes to preserve
confidentiality for its own similar Information.

       

      Section 7.6    Cooperation with Respect to
Government Reports and Filings.  Verizon, on behalf of itself
and each member of the Verizon Group, agrees to provide any member of the Spinco
Group, and Spinco, on behalf of itself and each member of the Spinco Group,
agrees to provide any member of the Verizon Group, with such cooperation and
Information (in each case, with respect to the Spinco Business only) as may be
reasonably requested by the other in connection with the preparation or filing
of any government report or other government filing contemplated by this
Agreement or in conducting or responding to any other government proceeding
relating to the pre-Distribution business of the Verizon Group or the Spinco
Group, Assets or Liabilities of either Group or relating to or in connection
with the relationship between the Groups on or prior to the Distribution
Date.  Such cooperation and Information shall include promptly
forwarding copies of appropriate notices, forms and other communications
received from or sent to any Governmental Authority that relate to the Verizon
Group, in the case of the Spinco Group, or the Spinco Group, in the case of the
Verizon Group.  All cooperation provided under this section shall be
provided at the expense of the Party requesting such
cooperation.  Each Party shall make its employees and facilities
available during normal business hours and on reasonable prior notice to provide
explanation of any documents or Information provided hereunder.

       

       

      
        
          
          

        

        
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      ARTICLE VIII

       

      No Representations or
Warranties

       

      Section 8.1    No Representations or
Warranties.  Except as expressly set forth in any Transaction
Agreement, Spinco and Verizon understand and agree that no member of the Verizon
Group is representing or warranting to Spinco or any member of the Spinco Group
in any way as to the Spinco Assets, the Spinco Business or the Spinco
Liabilities.  Except as expressly set forth in the Merger Agreement,
Verizon and Spinco understand and agree that no member of the Spinco Group is
representing or warranting to Verizon or any member of the Verizon Group in any
way as to the Verizon Assets, the Verizon Business or the Verizon
Liabilities.

       

      ARTICLE IX

       

      Miscellaneous

       

      Section 9.1    Expenses.  All
fees and expenses and any other costs incurred by the Parties in connection with
the transactions contemplated hereby and by the Transaction Agreements shall be
paid as set forth in Section 11.1 of the Merger Agreement, provided, however, that (i)
Spinco shall reimburse Verizon for and indemnify Verizon against, all costs
invoiced by a financial printer in connection with the preparation and filing of
the Information Statement, including all amendments thereto and any Current
Report on Form 8-K that shall be filed by Spinco which shall include the
Information Statement as an exhibit thereto, and all costs of preparing,
printing and delivering the Information Statement to Verizon’s record and
beneficial stockholders (other than attorneys’ fees and fees of other advisors
to Verizon) and (ii) Spinco shall pay all Spinco Debt Expenses.  If
the Distribution occurs, (i) to the extent that
invoices from Verizon for such costs, fees and expenses shall be available and
furnished to Spinco and the Company no later than 10 Business Days prior to the
Closing Date, Spinco or the Surviving Corporation shall reimburse Verizon for
such costs on the Closing Date, and (ii) to the extent
that invoices from Verizon for such costs, fees and expenses are provided by
Verizon to the Surviving Corporation following the Closing Date, the Surviving
Corporation shall reimburse Verizon for such costs within 10 Business Days
following receipt of such invoices from Verizon.

       

       

      
        
          
          

        

        
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      Section 9.2    Notices.  Prior
to Closing under the Merger Agreement, all notices and other communications
required or permitted to be given hereunder shall be in writing and shall be
deemed given upon (a) a transmitter’s
confirmation of a receipt of a facsimile transmission (but only if followed by
confirmed delivery of a standard overnight courier the following Business Day or
if delivered by hand the following Business Day), (b) confirmed delivery
of a standard overnight courier or when delivered by hand or (c) the expiration of
five Business Days after the date mailed by certified or registered mail (return
receipt requested), postage prepaid, to the Parties at such addresses as may be
specified by the Parties from time to time.  Following the Closing,
notices shall be sent to Verizon and the Surviving Corporation (as successor by
merger to Spinco) in accordance with Section 11.2 of the Merger Agreement,
or to such other address as either Party may have furnished to the other Party
by a notice in writing in accordance with this Section.

       

      Section 9.3    Interpretation.  Each
Party has participated in the drafting and negotiation of this
Agreement.  If an ambiguity or question of intent or interpretation
arises, this Agreement must be construed as if it is drafted by both Parties and
no presumption or burden of proof shall arise favoring or disfavoring any party
by virtue of authorship of any of the provisions of this Agreement.

       

      Section 9.4    Severability.  If
any provision of this Agreement or the application of any such provision to any
Person or circumstance shall be declared judicially to be invalid, unenforceable
or void, such decision shall not have the effect of invalidating or voiding the
remainder of this Agreement, it being the intent and agreement of the Parties
that this Agreement shall be deemed amended by modifying such provision to the
extent necessary to render it valid, legal and enforceable while preserving its
intent or, if such modification is not possible, by substituting therefor
another provision that is valid, legal and enforceable and that achieves the
original intent of the Parties.

       

      Section 9.5    Assignment; Binding
Effect.  Neither this Agreement nor any of the rights, benefits
or obligations hereunder may be assigned by either of the Parties (whether by
operation of law or otherwise) without the prior written consent of the other
Party and the prior written consent of the Company, not to be unreasonably
withheld, delayed or conditioned, and any purported assignment without such
consent shall be null and void.  Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the Parties and their respective successors and
permitted assigns.

       

      Section 9.6    No Third Party
Beneficiaries.  Nothing in this Agreement, express or implied,
is intended to or shall confer upon any Person (other than Verizon, Spinco and
the Company and their respective successors and permitted assigns) any legal or
equitable right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, and, except as provided in Section 6.2 with respect to the
release of certain Liabilities, no Person shall be deemed a third party
beneficiary under or by reason of this Agreement.

       

       

      
        
          
          

        

        
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      Section 9.7    Entire
Agreement.  This Agreement, the Exhibits and the Disclosure
Letter hereto, the other Transaction Agreements and other documents referred to
herein shall constitute the entire agreement between the Parties with respect to
the subject matter hereof and shall supersede all previous negotiations,
commitments and writings with respect to such subject matter.  In the
case of any conflict between the terms of this Agreement and the terms of any
other Transaction Agreement, the terms of such other Transaction Agreement shall
control.

       

      Section 9.8    Governing
Law.  This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York without giving effect to the
conflicts of law principles thereof.

       

      Section 9.9    Counterparts.  This
Agreement may be executed in two or more counterparts, each of which shall be
deemed to be an original, but all of which together shall constitute one
agreement binding on the Parties, notwithstanding that not all Parties are
signatories to the original or the same counterpart.

       

      Section 9.10   Amendments;
Waivers.  This Agreement may not be amended except by an
instrument in writing signed by Verizon and Spinco.  No failure or
delay by Verizon or Spinco in exercising any right hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right
hereunder.  Any agreement on the part of Verizon or Spinco to any such
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such Party.

       

      Section 9.11   Termination.  Notwithstanding
any provision hereof, in the event of termination of the Merger Agreement, this
Agreement may be terminated and the Distribution abandoned at any time prior to
the Distribution by and in the sole discretion of Verizon.  In the
event of such termination, no Party or any party to any other Transaction
Agreement (other than the Merger Agreement to the extent provided therein) shall
have any Liability to any Person by reason of this Agreement or any other
Transaction Agreement (other than the Merger Agreement to the extent provided
therein).

       

       

      
        
          
          

        

        
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      Section 9.12   Waiver of Jury
Trial.  EACH OF THE PARTIES IRREVOCABLY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON
CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
ACTIONS OF THE PARTIES IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND
ENFORCEMENT HEREOF.

       

      Section 9.13   Jurisdiction; Service of
Process.  EACH OF THE PARTIES (A) CONSENTS TO
SUBMIT ITSELF TO THE PERSONAL JURISDICTION OF ANY FEDERAL COURT LOCATED IN THE
STATE OF NEW YORK OR, IF SUCH FEDERAL COURTS DO NOT HAVE SUBJECT MATTER
JURISDICTION, OF ANY NEW YORK STATE COURT IN THE EVENT ANY DISPUTE ARISES OUT OF
THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (B) AGREES THAT
IT WILL NOT ATTEMPT TO DENY OR DEFEAT SUCH PERSONAL JURISDICTION BY MOTION OR
OTHER REQUEST FOR LEAVE FROM ANY SUCH COURT AND (C) AGREES THAT
IT WILL NOT BRING ANY ACTION RELATING TO THIS AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT IN ANY COURT OTHER THAN A FEDERAL
COURT SITTING IN THE STATE OF NEW YORK OR, IF SUCH FEDERAL COURTS DO NOT HAVE
SUBJECT MATTER JURISDICTION, A NEW YORK STATE COURT.  THE PARTIES HEREBY AGREE
THAT MAILING OF PROCESS OR OTHER PAPERS IN CONNECTION WITH ANY SUCH ACTION OR
PROCEEDING IN THE MANNER PROVIDED IN SECTION 9.2, OR IN SUCH OTHER MANNER AS MAY
BE PERMITTED BY LAW, SHALL BE VALID AND SUFFICIENT SERVICE THEREOF AND HEREBY
WAIVE ANY OBJECTIONS TO SERVICE ACCOMPLISHED IN THE MANNER HEREIN
PROVIDED.  NOTWITHSTANDING
THIS SECTION 9.13, ANY DISPUTE REGARDING THE CLOSING STATEMENT SHALL BE RESOLVED
IN ACCORDANCE WITH ARTICLE V; PROVIDED THAT THE TERMS OF
ARTICLE V MAY BE ENFORCED BY EITHER PARTY IN ACCORDANCE WITH THE TERMS OF
THIS SECTION 9.13.

       

       

      [SIGNATURE
PAGE FOLLOWS]

       

       

       

       

       

      
        
          
          

        

        
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      IN
WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as
of the date 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
      Presidentex10-2.htm

     

    Exhibit
10.2

     

    
      

      
        

        

         

        

        

        

        EMPLOYEE
MATTERS AGREEMENT

        

        by and
among

        

        Verizon
Communications Inc.,

        

        New
Communications Holdings Inc.

        

        and

        

        Frontier
Communications Corporation

        

        dated as
of May 13, 2009

         

         

         

         

         

         

         

         

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

         

        TABLE OF CONTENTS

         

        
          Page

          
            
              
                
                  
                    
                      	
                              ARTICLE I.

                            	
                              Definitions

                            	
                              2

                            
	 
      	 
      	 
      
	
                              Section
      1.1.

                            	
                              Definitions

                            	
                              2

                            
	
                              Section
      1.2.

                            	
                              Capitalized Terms

                            	
                              15

                            
	 
      	 
      	 
      
	
                              ARTICLE II.

                            	
                              Collective Bargaining Agreements and
      Obligations

                            	
                              15

                            
	
                              Section
      2.1.

                            	
                              Assumption and Continuation of
      Agreements

                            	
                              15

                            
	 
      	 
      	 
      
	
                              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

                            	
                              23

                            
	
                              Section
      4.1.

                            	
                              Employees

                            	
                              23

                            
	
                              Section
      4.2.

                            	
                              No
      Solicitation of Employees

                            	
                              27

                            
	
                              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

                            	
                              31

                            
	
                              Section
      5.3.

                            	
                              Continuation of Elections and Application to Spinco
      Dependents

                            	
                              37

                            
	
                              Section
      5.4.

                            	
                              Verizon
      Business Plans

                            	
                              37

                            
	 
      	 
      	 
      
	
                              ARTICLE VI.

                            	
                              Health and Welfare

                            	
                              38

                            
	
                              Section
      6.1.

                            	
                              Assumption
      of Health and Welfare

                            	
                              38

                            
	
                              Section
      6.2.

                            	
                              Adoption
      of Health and Welfare Plans

                            	
                              40

                            
	
                              Section
      6.3.

                            	
                              COBRA and
      HIPAA

                            	
                              42

                            
	
                              Section
      6.4.

                            	
                              Workers’
      Compensation Claims

                            	
                              42

                            
	
                              Section
      6.5.

                            	
                              Leave of
      Absence Programs

                            	
                              43

                            
	
                              Section
      6.6.

                            	
                              Time-Off
      Benefits

                            	
                              43

                            

                    

                  

                

              

            

             

             

            
              
                
                

              

              
                
                

                
                  

                

              

              
                
                

              

            

             

            
              TABLE
OF CONTENTS

              (continued)

               

              
                Page

              

            

            
              
                	
                        ARTICLE VII.

                      	
                        Savings Plans

                      	
                        43

                      
	
                        Section
      7.1.

                      	
                        Treatment
      of Savings Plan Accounts

                      	
                        43

                      
	
                        Section
      7.2.

                      	
                        Assumption
      of Liabilities and Transfer of Assets of the Verizon Union Savings
      Plan

                      	
                        44

                      
	 
      	 
      	 
      
	
                        ARTICLE VIII.

                      	
                        Equity Based Incentive Awards

                      	
                        45

                      
	
                        Section
      8.1.

                      	
                        General
      Treatment of Outstanding Awards

                      	
                        45

                      
	
                        Section
      8.2.

                      	
                        Outstanding Options

                      	
                        45

                      
	
                        Section
      8.3.

                      	
                        Treatment
      of Outstanding Verizon RSU and PSU Awards

                      	
                        46

                      
	
                        Section
      8.4

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

                      	
                        48

                      
	
                        Section
      8.5

                      	
                        Treatment
      of Outstanding Frontier Equity Awards

                      	
                        48

                      
	 
      	 
      	 
      
	
                        ARTICLE IX.

                      	
                        Short Term Incentives and Sales Commission
      Programs

                      	
                        49

                      
	
                        Section
      9.1.

                      	
                        Incentive
      and Commission Plans

                      	
                        49

                      
	 
      	 
      	 
      
	
                        ARTICLE X.

                      	
                        Deferred Compensation Plans

                      	
                        50

                      
	
                        Section
      10.1.

                      	
                        Generally

                      	
                        50

                      
	
                        Section
      10.2.

                      	
                        Treatment
      of Balances

                      	
                        50

                      
	 
      	 
      	 
      
	
                        ARTICLE XI.

                      	
                        ASSUMPTION OF LIABILITIES

                      	
                        50

                      
	
                        Section
      11.1.

                      	
                        Assumption of Liabilities

                      	
                        50

                      
	
                        Section
      11.2.

                      	
                        Reimbursement

                      	
                        53

                      
	
                        Section
      11.3.

                      	
                        Indemnification

                      	
                        54

                      
	
                        Section
      11.4.

                      	
                        Procedures for Indemnification for Third-Party
      Claims

                      	
                        55

                      
	
                        Section
      11.5.

                      	
                        Reductions for Insurance Proceeds and Other
      Amounts

                      	
                        55

                      
	
                        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

                      	
                        61

                      
	
                        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-

                
                  

                

              

              
                
                

              

            

            
              
                 

                TABLE
OF CONTENTS

                (continued)

                 

              

            

            
              
                
                  	
                          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

                        
	
                          Schedule
      5.2(c)(ii).

                        	
                          Letter
      of Direction

                        

                

              

              

               

            

             

          

        

        
          
            
            

          

          
            -iii-

            
              

            

          

          
            Table of Contents

          

        

        

          Employee
Matters Agreement

          

          This Employee Matters Agreement (this
“Agreement”),
dated as of May 13, 2009 is by and among Verizon Communications Inc., a Delaware
corporation (“Verizon”), New
Communications Holdings Inc. (“Spinco”), a Delaware
corporation, and Frontier Communications Corporation, a Delaware corporation
(“Frontier”)
(each a “Party”
and collectively, the “Parties”), and
effective as of the Effective Time of the Merger Agreement (except that certain
obligations under this Agreement, which apply by their express terms before the
Effective Time, shall be effective as of the first date the obligation applies
under the terms of this Agreement).

          

          WHEREAS, the Board of Directors of
Verizon has determined that it is in the best interests of Verizon and its
stockholders to reorganize the Spinco Business (as defined below) such that such
business will be owned or operated by one or more subsidiaries of ILEC Spinco
Holdings Inc. and the Non-ILEC Spinco Subsidiary and to separate Spinco into an
independent company that will simultaneously merge with and into Frontier, an
independent public company;

          

          WHEREAS, in furtherance of the
foregoing, Verizon and Spinco have entered into a Distribution Agreement, dated
as of May 13, 2009 (the “Distribution Agreement”) that will
govern the terms and conditions relating to the separation between Verizon and
Spinco;

          

          WHEREAS, in furtherance of the
foregoing, Verizon, Spinco and Frontier have entered into a Merger Agreement,
dated as of May 13, 2009 (the “Merger Agreement”)
that will govern the terms and conditions relating to the merger of Spinco with
and into Frontier;

           

          
            
              
              

            

            
              
              

              
                

              

            

            
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          WHEREAS, in connection with the
foregoing, Verizon, Spinco and Frontier 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, the Distribution and the
Merger.

          

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

          
 

          ARTICLE I.

          DEFINITIONS

           

                         
Section 1.1.    Definitions

          

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

          

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

           

           

          
            
              
              

            

            
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          “Benefit Payments” has
the meaning ascribed to it in Section 5.2(c).

          

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

          

          “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.

          

          “ESP” means the
Verizon Excess Savings Plan.

          

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

           

           

          
            
              
              

            

            
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          “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, (i) is receiving
long-term disability benefits, or (ii) 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.

          

          “Former Verizon Business
Employees” means any Spinco Employee who was at any time employed in the
Verizon Business Operations and participated in a Verizon Business
Plan.

          

          “Frontier” means
Frontier Communications Corporation.

          

          “Frontier FSA” has the
meaning ascribed to it in Section 6.2(c).

          

          “Frontier Group” means
Frontier and the Frontier Subsidiaries.

          

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

          

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

          

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

          

          “FRP” means the
Verizon Flexible Reimbursement Plan.

           

           

          
            
              
              

            

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

          

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

          

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

          

          “IDP” means the
Verizon Income Deferral Plan.

          

          “ILEC Holdings” means
ILEC Spinco Holdings, Inc.

          

          “ILEC CBAs” means any
and all collective bargaining agreements in effect on the date hereof governing
the wages, hours, terms and conditions of employment of any Spinco Employee,
including, but not limited to, MOAs, MOUs, letters of agreement and letters of
understanding, and any extensions or replacements thereof, each of which is
listed on Exhibit 2.1 hereof and all collective bargaining practices of the
applicable member of the Verizon Group to the extent said collective bargaining
practices are binding on the applicable member of the Verizon
Group.

          

          “Indemnifiable Losses”
means all Losses, Liabilities, damages, claims, demands, judgments or
settlements of any nature or kind, including, but not limited to, all costs and
expenses (legal, accounting or otherwise) that are reasonably incurred relating
thereto, suffered by an Indemnitee, including, but not limited to, 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.

           

           

          
            
              
              

            

            
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              Table of Contents

            

          

          
 

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

          

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

          

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

          

          “Internal Spinoffs”
have the meaning set forth 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 ILEC CBAs has not
expired as of the Effective Time.

          

          “Leave of Absence”
means a leave from active employment that is expected to continue following the
Effective Time and that (i) was 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 Reemployment
Rights Act, the Family Medical Leave Act or similar state laws) of a member of
the Verizon Group or (ii) arose 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.  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 has not qualified the individual for short-term disability or
accident benefits, workers’ compensation or other temporary absence, but whose
employment continues in accordance with the Verizon Group’s employment policies
(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.

           

           

          
            
              
              

            

            
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              Table of Contents

            

          

           

          “Liabilities” means
any and all obligations, benefit entitlements, losses, claims, charges, debts,
demands, actions, costs and expenses (including, but not limited to, 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 Merger 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.

          

          “Mid-Atlantic Associates
Plan” means the Verizon Pension Plan for Mid-Atlantic
Associates.

          

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

          

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

          

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

           

           

          
            
              
              

            

            
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              Table of Contents

            

          

          
 

          “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.

          

          “PBO” has the meaning
ascribed to it in Section 5.2(b).

          

          “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.

          

          “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 an ILEC 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
Frontier Group.

           

           

          
            
              
              

            

            
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              Table of Contents

            

          

           

          “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.

          

          “Spinco Dependents”
means, with respect to any Spinco Employee, any individual who, by virtue of a
relationship with a Spinco Employee, is eligible to receive benefits under the
terms of any applicable Verizon Pension Plan, Verizon Savings Plan, or Verizon
Welfare Plan immediately prior to the Effective Time.  For the
avoidance of doubt, a Spinco Dependent only includes those persons who actually
meet the relevant plan’s requirements to be a dependent as of an applicable
time.

           

           

          
            
              
              

            

            
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              Table of Contents

            

          

           

          “Spinco Employee”
means any individual who at the Distribution Date (i) is either (A)
actively employed (whether on a full or part-time basis) by, or (B) on a Leave
of Absence or Layoff with Right of Recall from, a member of the Spinco or
Verizon Group, and 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 Group” has the
meaning set forth in the Distribution Agreement.

          

          “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 Management Savings
Plan” has the meaning ascribed to it in Section 7.1(a).

          

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

          

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

          

          “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 or
Frontier Group that will provide compensation or benefits to any Spinco Employee
or Spinco Dependent.

           

           

          
            
              
              

            

            
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              Table of Contents

            

          

           

          “Spinco Savings Plans”
has the meaning ascribed to it in Section 7.1(a).

          

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

          

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

          

          “Spinco Union Pension
Plans” has the meaning ascribed to it in Section 5.1(b).

          

          “Spinco Union Savings
Plans” has the meaning ascribed to it in Section 7.1(a).

          

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

          

          “Stand-Alone Plan”
means each of the GTE California Incorporated Plan for Hourly-Paid Employees’
Pensions, the GTE Florida Incorporated Plan for Hourly-Paid Employees’ Pensions,
the GTE North Incorporated Pension Plan for Hourly-Paid Employees of Wisconsin,
the GTE North Incorporated Pension Plan for Hourly-Paid Employees of Ohio, the
GTE North Incorporated Pension Plan for Hourly-Paid Employees of Michigan, the
GTE North Incorporated Pension Plan for Hourly-Paid Employees of Illinois, the
GTE Northwest Incorporated Plan for Hourly-Paid Employees’ Pension (Washington,
Oregon and Idaho), the GTE South Incorporated (Southeast) Plan for Hourly-Paid
Employees’ Pensions (North Carolina and South Carolina), the GTE Southwest
Incorporated Plan for Hourly-Paid Employees’ Pensions (Arizona and Nevada), and
the GTE Supply Pension Plan for Union Represented Employees (including as
components the GTE Midwest Incorporated Plan for Hourly-Paid Employees’ Pensions
and the GTE North Incorporated Pension Plan for Hourly-Paid Employees of Indiana
(Indiana, Illinois, Michigan, Ohio and Wisconsin)).

           

           

          
            
              
              

            

            
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              Table of Contents

            

          

           

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

          

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

          

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

          

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

          

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

          

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

          

          “Verizon” means
Verizon Communications Inc.

          

          “Verizon Business
Operations” means the operations of Verizon Business, a division of
Verizon.

          

          “Verizon Business
Plans” means the Pension Plan for Employees of MCI Communications
Corporation and Subsidiaries and the Western Union (WIDS) Pension
Plan.

          

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

           

           

          
            
              
              

            

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

          

          “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 member of the Verizon Group pursuant to this Agreement or that are to, or
have become, Spinco Liabilities.

          

          “Verizon Management Savings
Plan(s)” means the Verizon Savings Plan for Management Employees and the
Verizon Business Savings Plan.

          

          “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.

           

           

          
            
              
              

            

            
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          “Verizon Pension
Plans” mean the VMPP, the Verizon Excess Plan, the Mid-Atlantic
Associates Plan and each of the Stand Alone Plans.

          

          “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.

          

          “Verizon Savings
Plans” mean the Verizon Management Savings Plan and the Verizon Union
Savings Plans.

          

          ‘‘Verizon Share Ratio”
means the quotient obtained by dividing the Verizon Pre-Distribution Stock Value
by the Verizon Post-Distribution Stock Value; provided, however, that in no
event shall the Verizon Share Ratio be less than one.

          

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

          

          “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 Frontier Group shall be a Verizon Subsidiary.

          

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

           

           

          
            
              
              

            

            
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          “Verizon Union Savings
Plans” means the Verizon Savings and Security Plan for Mid-Atlantic
Associates and the Verizon Savings and Security Plan for West Region Hourly
Employees.

          

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

          

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

          

                         
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.

          

          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, but not limited to, the Internal Spinoffs, Internal
Restructurings and Contribution 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
ILEC CBAs, by the appropriate member of the Verizon Group, and (2) the
assumption and uninterrupted continuation of the ILEC 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 ILEC CBAs, with the appropriate member of the Verizon Group,
(ii) the continued uninterrupted compensation of the Represented Employees in
accordance with the ILEC CBAs, and (iii) the continued uninterrupted benefit
coverage of the Represented Employees under the appropriate Verizon Plans in
accordance with the ILEC CBAs.  In addition, from and after the
Distribution Date and until the Effective Time, Verizon shall allow ILEC
Holdings to be a participating employer in the Verizon Plans to the extent
necessary to allow ILEC Holdings to meet its obligations under Section
2.1(a)(ii)(1) below.  Without limiting the generality of the
foregoing, Verizon shall cause:

           

           

          
            
              
              

            

            
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          (1)  ILEC Holdings and the
Non-ILEC Spinco Subsidiary to be formed and at and from (x) the time that GTE
or Verizon contributes or causes to be contributed to ILEC Holdings the stock of
certain entities that will be Spinco Subsidiaries and certain assets and
liabilities associated with the Spinco Business until (y) the Distribution
Date, and as and to the extent applicable, Verizon shall add and maintain one or
more Spinco Subsidiaries as participating companies in the applicable Verizon
Plans in which the Represented Employees are eligible to participate and shall
also cause the appropriate Spinco Subsidiary to, and such appropriate Spinco
Subsidiary shall, (1) employ the Represented Employees in accordance with
the ILEC CBAs, and (2) assume (if and to the extent necessary) and honor
the ILEC 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
ILEC CBAs, (ii) continue uninterrupted the compensation of the Represented
Employees in accordance with the ILEC CBAs, and (iii) become a
participating company in the Verizon Plans in which such Represented Employees
are eligible to participate in accordance with the ILEC CBAs;

           

           

          
            
              
              

            

            
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          (2)  at and from the time
that each Contributing Company other than GTE contributes to ILEC Holdings or
the Non-ILEC Spinco Subsidiary or to another entity that, following the Internal
Spinoffs, the Internal Restructuring and the Contribution will be a Spinco
Subsidiary, 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, ILEC Holdings or the Non-ILEC Spinco Subsidiary
shall or shall cause the appropriate member of the Spinco Group, (1) to employ the
Represented Employees in accordance with the ILEC CBAs, and (2) to assume (if
and to the extent necessary) and honor the ILEC 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 ILEC CBAs, (ii) continue uninterrupted the
compensation of such Represented Employees in accordance with ILEC CBAs, and
(iii) cause the appropriate member of the Spinco Group to be a participating
company in the Verizon Plans in which the Represented Employees are eligible to
participate in accordance with the ILEC CBAs; and

          

          (3)  sponsorship of the
Stand-Alone Plans to be transferred to a member of the Verizon Group (other than
Spinco or any Subsidiary thereof) prior to the Distribution Date.

           

           

          
            
              
              

            

            
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          (ii)           On
or before and effective as of the Distribution Date, Spinco shall:

          

          (1)  adopt and sponsor, or
cause to be adopted and 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 identical in all material respects to the
corresponding Verizon Plans that covered the Represented Employees prior to the
Distribution Date; and

          

          (2)  acknowledge that ILEC
Holdings and each other appropriate member of the Spinco Group is a
participating company in the Spinco Mirror Plans in which the Represented
Employees are eligible to participate in accordance with the ILEC CBAs;
and

          

          (3)  cause ILEC Holdings and
the Non-ILEC Spinco Subsidiary, as the case may be, and each appropriate member
of the Spinco Group to (1) continue to
employ the Represented Employees in accordance with the ILEC CBAs, and (2) continue to
honor the ILEC CBAs, including but not limited to, (i) continuing to recognize
the unions representing those Represented Employees as their collective
bargaining representative in accordance with the ILEC CBAs, and (ii) continuing
uninterrupted the compensation of such Represented Employees in accordance with
the ILEC CBAs.

          

          (b)           Merger

          

          (i)           As
of the Effective Time, Frontier shall:

           

          
            
              
              

            

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

          

          (2)  cause the trustee of the
Spinco Trust to accept the asset transfer described in Section 5.2(c) and
administer the Spinco Trust assets funding the pension plans covering the
Represented Employees;

          

          (3)  acknowledge that the
appropriate member of the Frontier Group is a participating company in the
Spinco Mirror Plans in which such Represented Employees are eligible to
participate in accordance with the ILEC CBAs; and

          

          (4)  cause the appropriate
member of the Frontier Group to (1) continue to
employ the Represented Employees in accordance with the ILEC CBAs, and (2) continue to
honor the ILEC CBAs, including but not limited to, (i) continuing to recognize
the unions representing those Represented Employees as their collective
bargaining representative in accordance with the ILEC CBAs and (ii) continuing
uninterrupted the compensation of such Represented Employees in accordance with
the ILEC CBAs.

           

          
            
              
              

            

            
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          (ii)           As
of the Effective Time, any and all binding obligations of any member of the
Verizon Group arising out of, relating to or resulting from the ILEC CBAs or the
Verizon Plans with respect to Represented Employees shall become and be solely
the obligations of the Frontier Group and shall be performed by the Frontier
Group; provided
that Verizon or a Verizon Plan 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, vision, or dental plan claims in
respect of services that were performed or goods provided prior to the Effective
Time, (B) life insurance claims in respect of deaths occurring on or prior to
the Effective Time, and (C) any payments due to any Represented Employee
under the terms of a Verizon short-term disability plan with respect to any
period prior to the Effective Time; and, provided, further, that Frontier shall
have no responsibility for claims that were incurred prior to the Effective Time
under any long term care plans.  For the avoidance of doubt, with
respect to any payments due to any Represented Employee for short-term
disability, the obligations to make payments with respect to any period at or
after the Effective Time shall be the sole responsibility of Frontier or a
Frontier Mirror Plan.  Nothing in this section 2.1(b) or this
Agreement shall preclude Frontier or, as applicable, any member of the Frontier
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 Internal
Restructurings and prior to the Distribution Date, Verizon, and (ii) as of
the Distribution Date, Spinco and (iii) as of the Effective Time, Frontier
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 ILEC CBAs.

           

          
            
              
              

            

            
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          ARTICLE III.

          SPINCO
PLANS GENERALLY

          

                     Section 3.1.        
Establishment of Spinco Plans for
Spinco Employees that are not Represented Employees

          

          On or before, and effective as of, the
Distribution Date, Spinco shall have adopted the Spinco Mirror Plans for the
Spinco Employees that are not Represented Employees.  As of the
Distribution Date, each Spinco Mirror Plan shall provide benefits that are
identical in all material respects to the corresponding Verizon Plan as in
effect immediately prior to the Distribution Date.  Immediately after
the Effective Time, the terms of the Spinco Mirror Plans, as they relate to
Spinco Employees that are not Represented Employees, shall be governed by
Section 4.1(e), and Frontier shall have all rights described under the last
sentence in Section 3.2.

          

                     Section 3.2.        
Terms of Participation by Spinco
Employees

          

          Except as otherwise expressly provided
herein with respect to the EDP, ESP and IDP, each of the Spinco Plans shall be,
with respect to Spinco Employees who are participants in such plan, in all
respects, the successor in interest to and shall recognize all rights and
entitlements that are accrued as of the Distribution Date under the
corresponding Verizon Pension Plan or Verizon Savings Plan in which such Spinco
Employee participated prior to the Distribution Date.  Verizon, Spinco
and Frontier 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.  Prior to and after the Effective
Time, Verizon and Frontier agree to cooperate with each other and to provide, or
cause to be provided, all reasonably requested data, documents, or other
information necessary to avoid such duplication of benefits.

          
 

          
            
              
              

            

            
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With respect to Spinco Employees, each Spinco 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 and credit and be taken into account under
such Spinco Plan to the same extent as though arising under such Spinco Plan,
except to the extent that duplication of benefits would result.  All
beneficiary designations made by Spinco Employees under the corresponding
Verizon Plans shall be transferred to and be in full force and effect under the
corresponding Spinco Plans until such beneficiary designations are replaced or
revoked by the Spinco Employee who made the beneficiary
designation.  As soon as administratively practicable, but in no event
later than sixty (60) days, following the Effective Time, Verizon shall provide
Frontier with copies of all documents containing such beneficiary designations;
provided that following the Effective Time, Verizon shall promptly provide
Frontier any information regarding beneficiary designations that is reasonably
required in the administration of the Spinco Plans for the Spinco
Employees.

          

          Notwithstanding the foregoing
provisions of this Section 3.2 and subject to any collective bargaining
agreements and obligations, nothing in this Agreement to the contrary, other
than those provisions specifically set forth herein, shall preclude Frontier
(or, as applicable, any member of the Frontier 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 Spinco
Plan or any trust, insurance policy or funding vehicle related to any Spinco
Plan.

           

          
            
              
              

            

            
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          ARTICLE IV.

          EMPLOYEES

          

                         
Section 4.1.    Employees

          

          (a)           General.  In
the event that any individual defined as a Spinco Employee will not
automatically become or continue to be an employee of the Spinco Group as of the
Distribution Date 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
Frontier Group, and the appropriate member of the Frontier Group agrees to
accept such transferred employee, as 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 the Effective Time.  Within five
(5) business days before the Effective Time, Verizon shall provide Frontier with
a list of all Spinco Employees who, as of a reasonably practicable prior date,
were on Leave of Absence or Lay-off with Right of Recall.  No later
than ten (10) business days after the Effective Time, Verizon shall provide
Frontier a final list of Spinco Employees on Leave of Absence or Lay-off with
Right of Recall at the Effective Time.  Verizon shall also identify
each Retained Employee by written notice delivered to Frontier 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, except to the extent that Frontier provides
its written consent with respect to one or more persons.  In addition,
not later than three 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 Frontier during the period through the Effective Time,
with a final list provided to Frontier no later than the Effective
Time.

           

           

          
            
              
              

            

            
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          (b)           Compensation and Benefits of
Represented Employees.  Without limiting the generality of
anything in this Agreement, the compensation, benefits, hours, terms and
conditions of employment of Represented Employees shall continue to be
determined in accordance with the applicable ILEC 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 Internal
Restructurings by 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
Frontier 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 Spinco Employee or any employee employed
by any member of the Verizon Group or (except to the extent disclosed in Section
6.12(f) of the Company Disclosure Letter to the Merger Agreement) the Frontier
Group, or to limit the
ability of the Frontier 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 this Section 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 Frontier 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, other than a Verizon Business Plan, and as applicable, the
EDP, IDP, and ESP.

           

          
            
              
              

            

            
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          (d)           No Right to Continued
Employment.  Subject to the ILEC 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.  Notwithstanding the foregoing or the provisions of any
ILEC CBA, during the first 18 months after the Effective Time, Frontier shall
not, and shall not permit any Subsidiary of ILEC Holdings to, terminate the
employment, other than for cause, of any of the employees who, as of the
Effective Time, are actively employed as installers or technicians or who, as of
the Effective Time, are on a Leave of Absence or other authorized absence with a
right to reinstatement.  For purposes of this provision, “cause” shall
be determined by Frontier or the applicable member of the Frontier Group and
shall include, without limitation, any misconduct or failure to follow
Frontier’s policies and procedures; provided, however, that with respect to any
Represented Employee, any termination of employment for cause must comply with
the terms of the applicable collective bargaining agreement.  Except
as specifically provided in this Section 4.1(d), as well as Sections 4.1(b) and
4.1(e), and subject to the ILEC CBAs, this Agreement shall not limit the ability
of Frontier to change, at any time after the Effective Time and in its sole
discretion, a Spinco Employee’s position, compensation or benefits for
performance-related, business or any other reasons or require any member of the
Frontier Group to continue the employment of a Spinco Employee for any
particular period of time after the Effective Time, provided that Frontier shall
bear all liability for any such termination of employment, and, with respect to
any such terminations 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.

           

           

          
            
              
              

            

            
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          (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,
Frontier shall, or shall cause another member of the Frontier Group to,
(i)  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
Spinco or the Verizon Group immediately prior to the Effective Time, and
(ii) continue to provide annual bonus opportunities to each such
non-represented Spinco Employee at the same target level as annual 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, provided, however, that, for periods after the Effective Time,
Frontier shall use Frontier performance metrics similar to the metrics used for
other similarly situated Frontier employees.  With respect to Spinco
Employees who are not Represented Employees, for the remainder of the calendar
year in which the Effective Time occurs, Frontier shall, or shall cause another
member of the Frontier Group to continue to provide each such non-represented
Spinco Employee and, if and to the extent applicable, Spinco Dependents benefits
under the Spinco Mirror Plans which are substantially comparable in the
aggregate to those made available to such non-represented Spinco Employees and,
if and to the extent applicable, Spinco Dependents under the Verizon Pension
Plans, the Verizon Savings Plans and the Verizon Welfare Plans immediately prior
to the Effective Time.  Notwithstanding the foregoing, Frontier shall
(i) provide to each Spinco Employee who was employed by GTE or one of its
affiliates at May 18, 1999 and who, at such date, either was (A) eligible to
retire and receive retiree welfare benefits or (B) within five years of
eligibility for such retiree welfare benefits, retiree welfare benefits for such
individual’s lifetime that are identical in all material respects to the
benefits provided under the applicable Verizon Welfare Plan at May 18, 1999;
provided, however, that Frontier shall be afforded the same reservation of
rights afforded to Verizon in respect of such benefits and (ii) provide to each
applicable Spinco Employee the severance benefits described in Section
4.1(d).

           

          
            (f)           Certain Tax
Matters.  Verizon and Frontier hereby agree that, for purposes
of social security, unemployment and other U.S. payroll taxes and to the extent
legally permissible, Frontier, Spinco or ILEC Holdings shall be treated as a
successor employer 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
Frontier, Spinco or ILEC Holdings, 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 Frontier in completing such reporting
obligations.

          

           

          
            
              
              

            

            
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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 employees of the Frontier Group, neither Verizon nor any
member of the Verizon Group shall, directly or indirectly, induce or attempt to
induce any employee of the Frontier Group to leave the employ of Frontier or any
member of the Frontier Group or violate the terms of their contracts or any
employment arrangements with Frontier or any member of the Frontier 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 Frontier nor any member of the
Frontier 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
Frontier nor any member of the Frontier 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 Frontier Group or a general solicitation to the public or general
advertising.

           

          
            
              
              

            

            
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Section
4.3.            Unavailable
Employees.

          

          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: (i) neither
Frontier nor any member of the Frontier Group shall employ (directly or
indirectly as a contractor) any Verizon Employee or any employee of the Verizon
Group who 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
(directly or indirectly as a contractor) any employee of the Frontier Group who
has voluntarily separated from employment with Frontier or any member of the
Frontier Group within the immediately preceding six months (each, an “Unavailable
Employee”).  After the six month anniversary of the voluntary
separation of any Unavailable Employee, Frontier or any member of the Frontier
Group and Verizon or any member of the Verizon Group, as the case may be, may
employ or retain as a contractor such individual in its sole
discretion.

           

           

          
            
              
              

            

            
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          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 a member of the Spinco Group shall establish defined benefit pension
plans to facilitate the benefit transfers contemplated herein for employees who
are not Represented Employees.  One such plan, which shall be
qualified under Section 401(a) of the Code, 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”).  The other such plan, which shall
not be qualified under Section 401(a) of the Code, will be responsible for
benefits of participants and beneficiaries in the Verizon Excess Pension Plan
(the “Verizon 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 a
member of the Spinco Group shall establish (or identify an existing trust as)
the Spinco Trust.  Each Spinco Management Pension Plan shall be
identical in all material respects to the corresponding Verizon Pension Plan in
which the applicable Spinco Employees participated immediately prior to the
Distribution Date.  Spinco shall provide Frontier with a copy of those
plans and such trust prior to their adoption in order to provide Frontier an
opportunity to comment on their form.  Spinco agrees to consult with
Frontier and, subject to the obligations of the Parties under this Agreement, to
reasonably consider such comments, but Frontier’s comments shall be advisory
only and Spinco shall retain full discretion as to the form of the plans and
trusts.

           

          
            
              
              

            

            
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          As of and from the Distribution Date
and until the Effective Time, Spinco, and as of and from the Effective Time,
Frontier 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.  For the avoidance of doubt, prior
to and following the Effective Time, Verizon shall provide Frontier all
reasonably requested information, files, and documents necessary for Frontier to
so maintain and administer the Spinco Management Pension Plan.

          

          (b)           Spinco Union Pension Plans
and Trust.  Effective as of the Distribution Date, Spinco or a
member of the Spinco Group shall establish one or more pension plans qualified
under Section 401(a) of the Code (the “Spinco Union Pension
Plans”) and one or more related trusts to provide retirement benefits to
Spinco Employees who are Represented Employees and to persons entitled to
receive a benefit in respect of such a Represented Employee, and who, in either
case, are participants in or beneficiaries under one of the Stand Alone Plans or
the Mid-Atlantic Associates Plan.  Each Spinco Union Pension Plan
shall be identical in all material respects to the corresponding Verizon Pension
Plan in which the applicable Represented Employees participated immediately
prior to the Distribution Date.  Spinco shall provide Frontier with a
copy of those plans and such trust prior to their adoption in order to provide
Frontier an opportunity to comment on their form.  Spinco agrees to
consult with Frontier and, subject to the obligations of the Parties under this
Agreement, to reasonably consider such comments, but Frontier’s comments shall
be advisory only and Spinco shall retain full discretion as to the form of the
plans and trusts.

          

          As of and from the Distribution Date
and until the Effective Time, Spinco, and as of and from the Effective Time,
Frontier, 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 Plans so that they qualify 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.  For the avoidance of doubt, prior to and
following the Effective Time, Verizon shall provide Frontier all reasonably
requested information, files, and documents necessary for Frontier to so
maintain and administer the Spinco Union Pension Plans.

           

          
            
              
              

            

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

          

          (a)           Assumption of Liabilities by
Spinco Pension Plans.  Subject to the Pension Plan Asset
Allocation specified below, effective as of the Distribution Date, all
Liabilities under the Verizon Pension Plans relating 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 Spinco Management Pension Plan with respect to
participants in the VMPP; and (ii) the applicable Spinco Union Pension Plan
with respect to participants in the Stand-Alone Plans and the Mid-Atlantic
Associates Plan.  Effective as of the Distribution Date, all
Liabilities under the Verizon Excess Plan relating 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 Excess Plan
and shall be assumed in full and in all respects by the Spinco Excess Pension
Plan.  Frontier shall be solely responsible for all ongoing rights of
or relating to Spinco Employees for future participation in the Spinco Pension
Plans.

           

           

          
            
              
              

            

            
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          (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 that is to be transferred to each Spinco Pension Plan
(other than the Spinco Excess Pension Plan) as of the Distribution
Date.  With respect to each such asset transfer from each Verizon
Pension Plan, the Pension Plan Asset Transfer Amount shall be equal (subject to the subsequent provisions of
this Section 5.2(b)) to the amount determined in accordance with the
requirements of Section 414(l) of the Code and the regulations thereunder, based
on the present value of benefits in respect of Spinco Employees and persons
entitled to receive a benefit in respect of such Spinco Employees, calculated on
a plan termination basis, and, where applicable, giving effect to the allocation
of assets under Section 4044 of ERISA, but without regard to the de minimis rule
available under the regulations promulgated under Section 414(l).  For
the avoidance of doubt, in no event shall any Verizon Pension Plan transfer to
any Spinco Pension Plan assets in excess of the amount required to be
transferred based on the present value of the accrued benefits of participants,
as determined in accordance with Section 414(l).  In the event that
the aggregate of the Pension Plan Asset Transfer Amounts for all of the Verizon
Pension Plans that are qualified under Section 401(a) of the Code (the “Aggregate Assets”)
has a value which is less than the aggregate Projected Benefit Obligations
(“PBO”) for all
the Spinco participants under all such qualified Verizon Pension Plans (the
“Aggregate
PBO”), Verizon will be responsible for the differential between the
Aggregate PBO and the Aggregate Assets (the “Differential”) as
described in the next sentence.  Verizon will pay the Differential to
either Frontier or an underfunded Spinco Pension Plan (or Plans) identified by
Frontier; provided, however, that if the Differential is paid directly to
Frontier, Frontier shall contribute the entire amount to one or more of the
underfunded Spinco Pension Plans as soon as practicable.  The
assumptions to be used with respect to the determination of the amount of assets
to be transferred from any Verizon Pension Plan and in determining the PBO in
respect of any Pension Plan and the Aggregate PBO are set forth in Exhibit A
hereto entitled Actuarial Assumptions and Methods for Pension Asset
Transfer.

           

           

          
            
              
              

            

            
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          Within ten (10) days after the date
Verizon certifies to Frontier the Pension Plan Asset Transfer Amount to be
transferred to each Spinco Pension Plan, Verizon’s actuary shall provide
Frontier’s actuary with a complete computer file containing the employee data
and all other relevant information used by Verizon’s actuary or otherwise
reasonably requested by Frontier’s actuary as needed to calculate the Pension
Plan Asset Transfer Amount (including data and information related to such
calculation and otherwise appropriate for Frontier’s actuary to consider, and
any other data and information reasonably requested by Frontier’s
actuary).  The Pension Plan Asset Transfer Amount shall become final
and binding upon the Parties at the close of business on the 30th day
following Frontier’s receipt of such computer file and any such additional data
used by Verizon’s actuary to make its determination and any additional
information reasonably requested by Frontier’s actuary, unless prior to such
30th
day Frontier delivers a written notice to Verizon stating that Frontier believes
that the calculation of the Pension Plan Asset Transfer Amount contains factual
or mathematical errors or otherwise fails to comport with the actuarial
assumptions expressly set forth in Exhibit A and states in reasonable detail the
basis for such belief.  Should Frontier timely provide such notice,
the Parties shall use their reasonable best efforts to resolve promptly any
disagreements regarding such calculations.  In the event that the
Parties cannot resolve such disagreements, the Parties shall jointly select an
independent third actuary with whom none of the Parties have a material
relationship, who shall render its determination promptly in accordance with the
requirements of this Section 5.2(b) and whose determination shall be binding on
the Parties.  The third actuary shall be required to confirm the
determination of the Verizon actuary unless, and solely to the extent that, the
third actuary determines that such determination (i) contains factual or
mathematical errors or (ii) applying an abuse of discretion standard such that
the determination of the Verizon actuary shall be confirmed unless it has no
reasonable basis, otherwise fails to comport with the actuarial assumptions set
forth in Exhibit A.  In no event (except for inaccuracy of the data
provided) shall the amount determined by the third actuary be more than the
amount claimed by Frontier or less than the amount shown in the calculations of
Verizon’s actuary.  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
Frontier.  Any decision by the third actuary shall be treated as
Confidential Information by the parties, except as may be required to obtain
judgment on the award or enforce performance thereof or except as disclosure may
be required by law.

           

          
            
              
              

            

            
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          (c)           Transfer of Assets to Spinco
Pension Trust

          

          (i)           As
soon as practicable and no more than ten (10) (or, with respect to any Verizon
Pension Plan in respect of which a Section 4044 allocation may be required,
sixty (60)) days 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 other than the
Spinco Excess Pension Plan (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.

          

          (ii)           As
soon as practicable and no more than ten (10) days after the final calculation
of each Verizon Plan’s Pension Plan Asset Transfer Amount pursuant to Section
5.2(b), if such amount exceeds the Initial Asset Transfer plus the Benefit
Payments (as described below), 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 Verizon 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 applicable Verizon Pension Plan in respect of
Spinco 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 and attached
hereto as Schedule 5.2(c)(ii) (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.

           

          
            
              
              

            

            
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          (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 Frontier prior to the date of such Final Asset
Transfer.  Verizon and Frontier shall cooperate in determining what
assets are transferred in kind (if any) as part of the Initial Asset Transfer
and the Final Asset Transfer and Verizon shall not
transfer any asset in kind which Frontier reasonably determines is not readily
tradable or capable of being valued on a substantial and established market
(except as otherwise agreed by the Parties).

          

          (iv)           For
the avoidance of doubt, the calculation and the potential payment of the
Differential shall not be taken into account in determining the Initial Asset
Transfer and the Final Asset Transfer.  The Differential shall be
calculated as soon as administratively practicable and no later than twenty (20)
days following the determination of the Final Asset Transfer and shall be paid
no later than ten (10) days following such calculation.

           

           

          
            
              
              

            

            
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          (v)           Unless
Verizon shall otherwise agree in writing, under no circumstances shall Verizon
or any Verizon Pension Plan be obligated, whether under this Agreement or
otherwise, to transfer any additional amounts to Frontier or any Spinco Pension
Plans 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.

          

          (vi)           Young Litigation
Exception.  Verizon has disclosed to Frontier that it is party
to litigation pending in the District Court for the Northern District of
Illinois entitled, Young v. Verizon’s Bell Atlantic Cash Balance Pension Plan
(the “Young
Litigation”) that pertains to claims relating to the Bell Atlantic Cash
Balance Pension Plan, which has been merged into the VMPP.  Verizon
represents that the plan administrator of the VMPP has determined that no
additional benefits are due and owing under the VMPP based on the claims
asserted in the Young Litigation and that such determination was made in
accordance with the VMPP’s claims procedure.  Notwithstanding anything
else to the contrary in this Agreement, including, but not limited to, this
Section 5.2, Verizon shall retain any and all obligations for benefits that may
be determined to be due and owing to any Spinco Employees solely by reason of
the adjudication or settlement of the Young Litigation and any other Liabilities
directly related to the Young Litigation and no assets will be transferred to
any Spinco Plans with respect to any additional benefits determined to be
payable by reason of the adjudication or settlement of the Young Litigation, in
each case, unless otherwise required (i) pursuant to the adjudication or
settlement of the Young Litigation or other binding resolution of the claims
made thereunder or (ii) by the Internal Revenue Service or the Department of
Labor.

           

           

          
            
              
              

            

            
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          Section
5.3.            Continuation of Elections and Application to
Spinco Dependents

          

          Between the Distribution Date and the
Effective Time, Spinco, and as of the Effective Time, Frontier 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 Verizon 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.  As soon as
administratively practicable, but in no event later than sixty (60) days,
following the Effective Time, Verizon or a member of the Verizon Group shall
provide to Frontier copies of all such beneficiary designations, payments forms,
and all other documents, files and other information that Frontier may need to
administer the Spinco Pension Plans and the Spinco Excess Pension Plan in
accordance with the terms of this Agreement.  No later than thirty
(30) days prior to the Effective Time, Verizon shall provide Frontier with a
list of all qualified domestic relations orders as in effect as of a reasonably
practicable prior date, and within ten business (10) days after the Effective
Time, a final list of all qualified domestic relations orders in effects at the
Effective Time.  From the Effective Time, Verizon shall cooperate with
Frontier to provide any reasonably requested information regarding such
administrative matters that has not yet been provided.

          

          Section
5.4.            Verizon Business
Plans.  Notwithstanding anything else contained in this
Agreement to the contrary, Verizon or a member of the Verizon Group shall retain
all Liabilities in respect of or relating to any Former Verizon Business
Employees under any Verizon Business Plan.

           

           

          
            
              
              

            

            
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          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,
but not limited to, 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 or will retire
prior to the Effective Time (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 and, except as provided below, all Liabilities in
respect of or relating to such Spinco Employees or Spinco Dependents 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 by Spinco and the Spinco Welfare Plans.  Notwithstanding the
foregoing, Verizon and the Verizon Welfare Plans shall be responsible for all
Liabilities relating to (i) Former Spinco Employees and (ii) Spinco Employees or
Spinco Dependents with respect to (A) medical, vision, or dental plan claims in
respect of services that were performed or goods provided prior to the Effective
Time, (B) life insurance claims in respect of deaths occurring on or prior to
the Effective Time, and (C) any payments due any Spinco Employees under the
terms of a Verizon short-term disability plan with respect to any period prior
to the Effective Time; provided, that, Frontier shall not be responsible for any
claims that were incurred prior to the Effective Time under any long term care
plans.  For the avoidance of doubt, with respect to any payments due
to any Spinco Employee for short-term disability, the obligations to make
payments with respect to any period at or after the Effective Time shall be the
sole responsibility of Frontier or a Spinco Plan.

           

          
            
              
              

            

            
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          (b)           Prior
to, and effective as of, the Distribution Date, Verizon and Spinco shall
establish welfare benefit plans for the benefit of Spinco Employees (the “Spinco Welfare
Plans”), based on the corresponding Verizon Welfare
Plans.  Spinco or Verizon shall provide Frontier with a copy of the
Spinco Welfare Plans prior to their adoption in order to provide Frontier an
opportunity to comment on their form and for use in Frontier’s preparations for
assuming these plans.  Spinco agrees to consult with Frontier and,
subject to the obligations of the Parties under this Agreement, to reasonably
consider such comments, but Frontier’s comments shall be advisory only and
Spinco shall retain full discretion as to the form of the plans.  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 and the Spinco Welfare Plans, and as of the Effective Time, by Frontier,
Spinco and the Spinco Welfare Plans.  Notwithstanding the foregoing,
all Liabilities associated with Former Spinco Employees under Verizon Welfare
Plans and such Liabilities that have been expressly retained by Verizon or the
Verizon Plans under Sections 2.1(b)(ii) and 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 Frontier, any member of the
Frontier Group, or the Spinco Welfare Plans.

           

           

          
            
              
              

            

            
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                         Section
6.2.             Adoption of Health and Welfare
Plans

          

          (a)           As
of the Distribution Date, Spinco shall maintain or cause to be maintained for
the benefit of eligible Spinco Employees and, to the extent applicable, of
eligible Spinco Dependents of such employees, health and welfare plans,
including, but not limited to, plans providing active severance and active
post-retirement health, dental and life insurance benefits that provide benefits
that are identical in all material respects to the corresponding Verizon Welfare
Plans in which Spinco Employees and Spinco Dependents of such employees
participated immediately prior to the Distribution Date.  Immediately
after the Effective Time, the terms of the Spinco Welfare Plans, as they relate
to Spinco Employees that are not Represented Employees, shall be governed by
Section 4.1(e) and Frontier shall have all rights described under the last
sentence of Section 3.2.

          

          (b)           Terms of Participation in
Spinco Welfare Plans.  Spinco 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
Distribution Date, 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
Effective Time occurs.

           

          (c)           Transfer of FRP Assets.  Verizon
will make available to Frontier, not less than 30 business days prior to the
Effective Time, 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 Effective
Time with respect to such accounts through the Effective Time.

           

          
            
              
              

            

            
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          (i)           
 Frontier 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
FSA”).  Frontier 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
Frontier’s FSA; and (C) Frontier’s FSA shall reimburse medical expenses
incurred by the FRP Participants at any time during the FRP’s plan year
(including, but not limited to, 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
Frontier, and Frontier 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.

           

           

          
            
              
              

            

            
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Section
6.3.            COBRA and HIPAA

          

          As of the Effective Time, Frontier
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.  For the avoidance of doubt, no provision of this
Agreement, the Distribution Agreement or the Merger Agreement and no actions
taken by any member of the Verizon Group, the Frontier Group or the Spinco Group
in connection with the Internal Restructuring, Distribution, or Merger shall
cause a termination of employment of any Spinco Employee or shall cause any
Spinco Employee to be entitled to COBRA coverage as of the Effective
Time.

          

                        
Section
6.4.             Workers’ Compensation
Claims

          

          Effective as of the Effective Time,
Frontier 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 or otherwise, and Frontier shall be
fully responsible for the administration of all such claims; provided, however,
that to the extent that any Spinco Employee workers’ compensation claims related
to periods after the Effective Time are covered by workers compensation
insurance policies owned by a member of Verizon Group at the Effective Time, any
benefits payable under any such insurance policy in respect of any such Spinco
Employee shall reduce the obligations of Frontier and the members of the
Frontier Group to such Spinco Employee.  No later than thirty (30)
days prior to the expected Effective Time (with updated information provided no
later than ten (10) days after the Effective Time), Verizon shall provide to
Frontier all information, data, records and documents that are related to any
such workers’ compensation claims and Liabilities or that are necessary for
Frontier to efficiently administer all such claims.  As requested by
Frontier (before or after the Effective Time), Verizon shall also make available
to Frontier for reasonable consultation such Verizon personnel who may have
knowledge that could assist’s Frontier efficient administration of such claims
and Liabilities.  If Frontier 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
Frontier shall reimburse and otherwise fully indemnify Verizon for all such
Liabilities (subject to reduction for any amounts payable from insurance),
including, but not limited to, the costs of administering the plans, programs or
arrangements under which any such Liabilities have accrued or otherwise arisen,
provided, that Frontier shall
enter into reasonable arrangements acceptable to Verizon (such acceptance not to
be unreasonably withheld) to secure the payment of such
Liabilities.  All reimbursement amounts shall be paid in
accordance with the procedure set forth in Section 11.2.

          

          
            
              
              

            

            
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Section
6.5.            Leave of Absence
Programs

          

          Frontier shall be responsible for the
administration and compliance of all leaves of absences and related programs
(including, but not limited to, compliance with the United Services Employment
and Reemployment Rights Act, the Family and Medical Leave Act or similar state
laws) affecting Spinco Employees for the period at and after the Effective
Time.

          

                        
Section
6.6.             Time-Off Benefits

          

          The Frontier 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 Frontier 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.

          

          ARTICLE VII.

          SAVINGS
PLANS

          

          Section
7.1.            Treatment of Savings Plan
Accounts

          

          (a)           Verizon
shall cause the appropriate member of the Spinco Group to establish three
defined contribution plans and trusts to be effective as of the Distribution
Date for the benefit of Spinco Employees who participate in a Verizon Savings
Plan immediately prior to the Distribution Date (the “Spinco Savings
Plans”).  Two of the Spinco Savings Plans (the “Spinco Union Savings
Plans”) shall be identical in all material respects to the Verizon Union
Savings Plans, such that each Verizon Union Savings Plan shall have one and only
one corresponding Spinco Union Savings Plan.  The third Spinco Savings
Plan (the “Spinco
Management Savings Plan”) shall be identical in all material respects to
a combined version of the Verizon Management Savings Plans (which themselves are
identical in all material respects).  Verizon shall provide Frontier
with a copy of the Spinco Savings Plans prior to their adoption in order to
provide Frontier an opportunity to comment on their form.  Verizon
agrees to consult with Frontier and, subject to the obligations of the Parties
under this Agreement, to reasonably consider such comments, but Frontier’s
comments shall be advisory only and Verizon shall retain full discretion as to
the form of the plans.  As of and from the Distribution Date and until
the consummation of the Merger, Spinco and, as of and from the Effective Time,
Frontier 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 they qualify 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.

           

           

          
            
              
              

            

            
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                          Section
7.2.            Assumption of Liabilities and Transfer of
Assets.

          

          (a)           Effective
as of the Distribution Date, but subject to the asset transfer specified in
Section 7.2(b) below, each Spinco Union Savings Plan shall assume and be
solely responsible for all Liabilities for or relating to Spinco Employees under
the applicable Verizon Union Savings Plan.  Effective as of the
Distribution Date, but subject to the asset transfer specified in
Section 7.2(b) below, the Spinco Management Savings Plan shall assume and
be solely responsible for all Liabilities for or relating to Spinco Employees
under the Verizon Management Savings Plans.  Frontier shall be solely
responsible for all ongoing rights of or relating to Spinco Employees for future
participation (including, but not limited to, the right to make contributions
through payroll deductions) in the Spinco Savings Plans.

          

          (b)           Effective
as of or as soon as administratively practicable after the Distribution Date,
Verizon shall cause the account balances (including, but not limited to, 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,
Frontier shall receive sixty (60) days notice of such transfers and shall have
an opportunity to comment on them.  Frontier’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
Frontier 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, if prior to
the Effective Time, Spinco, and if after the Effective Time, Frontier shall
cause each Spinco Savings Plan to accept such transfer of 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 transfers shall be conducted in accordance with Section
414(l) of the Code, Treasury Regulation Section 1.414(l)-1, and Section 208 of
ERISA.

           

           

          
            
              
              

            

            
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          ARTICLE VIII.

          EQUITY
BASED INCENTIVE AWARDS

          

                        
Section
8.1.             General Treatment of Outstanding
Awards

          

          Verizon shall retain all Liabilities in
respect of all stock based incentive compensation awards granted to Spinco
Employees and Former Spinco Employees that are outstanding as of the Effective
Time, whether or not such awards would be settled in stock or cash (the “Outstanding Awards”),
and Frontier shall assume no Liabilities with respect to such Outstanding
Awards.  In addition, Verizon shall retain all other obligations
related to the Outstanding Awards, including, but not limited to, all
responsibility for the administration and settlement of such 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 remain
exercisable until the expiration of the stated term of the Original
Option.  In the event that the fair market value of the Verizon Common
Stock decreases at the Effective Time, 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):

           

          
            
              
              

            

            
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          (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 by Verizon 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.  For the avoidance of doubt, Verizon
shall remain liable for all outstanding RSUs and PSUs, and Frontier shall have
no Liability with respect to any RSU or PSU.

           

          
            
              
              

            

            
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          (b)           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.

          

          (c)           Vesting of PSUs and
RSUs.  Any outstanding PSU or RSU awards granted by Verizon
that are 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 by Verizon in the ordinary course during the first seventy-five (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
payable.

          

          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 by Verizon promptly on the regularly
scheduled payment date after the end of the applicable award cycle.

           

          
            
              
              

            

            
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          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 Frontier Equity
Awards.

          

          Prior to the Effective Time, the
appropriate committee of the Board of Directors of Frontier 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 Frontier (the “Frontier 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 “Frontier Equity
Awards”), to prevent the accelerated vesting or exercisability of, or the
waiver of any service or other conditions associated with, such Frontier Equity
Awards solely in connection with the consummation of the transactions
contemplated in the Merger Agreement.

          

          
            
              
              

            

            
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          ARTICLE IX.

          SHORT
TERM INCENTIVES AND SALES COMMISSION PROGRAMS

          

                         
Section
9.1.            Incentive and Commission
Plans

          

          Verizon or a member of the Verizon
Group shall pay any amounts that are due and payable under the Sales Commission
Programs to Spinco Employees prior to the Effective Time.  The
Frontier Group shall be responsible for all Liabilities under each Short Term
Incentive Plan and each Sales Commission Program for amounts that become due and
payable in accordance with the terms of such plans and programs on or after the
Effective Time.  The Frontier Group shall maintain in effect the Short
Term Incentive Plans and each Sales Commission Program until the end of the
calendar year in which the Effective Time occurs; provided, however, Frontier
shall have the right to amend each such Short Term Incentive Plan and Sales
Commission Program as necessary to reflect the changes resulting from the
Merger, including, without limitation, changes to the performance metrics under
such plans and programs to use Frontier performance metrics similar to the
metrics used for other similarly situated Frontier employees.

           

          
            
              
              

            

            
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          ARTICLE X.

          DEFERRED
COMPENSATION PLANS

          

                          Section
10.1.          Generally

          

          Verizon shall retain all Liabilities
for, and all responsibility related to the administration and distribution of,
any benefits accrued by Spinco Employees and Former Spinco Employees under the
EDP, ESP and IDP.

          

                        
Section
10.2.           Treatment of Balances

          

          All unvested account balances under the
EDP and ESP shall vest at the Effective Time.  Any Spinco Employee who
is a participant in the EDP, ESP or IDP, shall be paid out at such time and in
such manner as determined in accordance with the terms of the relevant
plan.  Notwithstanding the foregoing, any and all distributions from
the EDP, ESP 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.  Except as otherwise expressly provided for in this
Agreement, not later than the Distribution Date, Spinco shall or shall cause a
member of the Spinco Group to assume, perform, and discharge all of the
following, regardless of when or where such Liabilities arose or arise or are
incurred:

           

          
            
              
              

            

            
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          (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, but not limited to, all
Liabilities governed by the ILEC CBAs or any Spinco Benefit Agreement identified
on Schedule 5.12(a)(ii) of the Spinco Disclosure Letter, but excluding all
Liabilities retained by Verizon as provided in this Agreement including, but not
limited to, the Liabilities retained by Verizon pursuant to Section 11.1(c)
below; 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 ILEC CBAs.

          

          (b)           By
Frontier.  At the Effective Time, Frontier shall or shall cause
a member of the Frontier Group or a 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 Frontier
Subsidiary is responsible for any of the Spinco Liabilities, each member of the
Frontier Group shall be jointly and severally liable for the payment of such
Liabilities by such Frontier 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, but not
limited to, 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);

           

          
            
              
              

            

            
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          (ii)           all
Liabilities arising under the Verizon Business Plans;

          

          (iii)           all
Liabilities with respect to Outstanding Awards;

          

          (iv)           all
Liabilities under the EDP, ESP or IDP;

          

          (v)           all
Liabilities expressly assumed or retained under Sections 2.1(b)(ii), 5.2(c)(vi)
and 6.1(a);

          

          (vi)           all
Liabilities under the Sales Commission Programs for amounts that become due and
payable under the terms of such programs prior to the Effective Time;
and

          

          (vii)          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).

          

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

          

          
            
              
              

            

            
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          (d)           Allocation
of Liabilities among Verizon, Spinco and Frontier 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,
except as provided in Section 11.1(c), Frontier shall assume liability for such
claims relating solely to the Spinco Employees or the Spinco
Business.

          

          (e)           The
procedures for resolving and defending any 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 Frontier, shall be set forth in the Joint
Defense Agreement, as defined in the Merger Agreement.

          

                         
Section
11.2.          Reimbursement

          

          (a)           By
Frontier.  From time to time after the Effective Time, Frontier
shall promptly reimburse Verizon, but in no event more than fifteen (15) business 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 Frontier or any Frontier Subsidiary; provided, however, that if
payment in respect of any such Liability is made by a Verizon Plan, Frontier or
the appropriate Spinco Plan shall reimburse the Verizon Plan
directly.

          

          
            
              
              

            

            
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          (b)           By
Verizon.  From time to time after the Effective Time, Verizon
shall promptly reimburse Frontier, but in no event more than fifteen (15)
business days after delivery by Frontier of an invoice therefor containing
reasonable substantiating documentation of such costs and expenses, for the cost
of any obligations or Liabilities that Frontier or a Spinco 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 Spinco Plan, Verizon or
the appropriate Verizon Plan shall reimburse such Spinco Plan
directly.

          

                         
Section
11.3.          Indemnification

          

          (a)           Frontier
and any member of the Frontier Group responsible for operating the Spinco
Business after the Effective Time, 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 Frontier Group to pay, perform, discharge or satisfy any
Liabilities assumed in Section 11.1(b) of this Agreement (other than any
Liabilities which arise due to the failure of Verizon to satisfy its obligations
under Article VIII hereof or to satisfy any Liability assumed in Section 11.1(a)
and (c) hereof), and (ii) any other breach of the duties or obligations of
any member of the Frontier Group, as set forth in this
Agreement.  Frontier 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 Frontier Indemnitees from and
against all Indemnifiable Losses arising out of or due to (i) the matters
discussed in Section 5.2(c)(vi) hereof, (ii) the 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 Frontier Group or any Spinco Plans to satisfy any liabilities assumed by
Frontier in Section 11.1(b) hereof) and (iii) 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.

           

          
            
              
              

            

            
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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 Frontier Liabilities, or Frontier or any
Frontier 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, but not limited to,
deductibles, co-payments or other payment obligations) and (ii) any 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.

          
 

          
            
              
              

            

            
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          (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 Frontier Group or the Spinco Group, or
in respect of any Spinco Plans for which insurance and/or insurance
reimbursement may be available under a Policy in accordance with the provisions
of Section 6.5 of the Distribution Agreement, then solely for purposes of
Section 6.5 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 Frontier the benefit of any Policy solely
to the extent that benefits under such Policy would be available to Frontier
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 6.5 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 Frontier shall be determined by reference to,
among other things, the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent the applicable act, failure to
act, statement or omission that is the basis for the Liability (the “Liability Event”),
and whether the Liability event occurred because of one Party’s reasonable
reliance on the other.

          

          (c)           Verizon
and Frontier 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.

          

          
            
              
              

            

            
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          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

          

          Any Third Party Claim, including, but
not limited to, administrative proceedings, governmental investigations, and
lawsuits in which both a member of the Verizon Group and a member of the
Frontier 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
Frontier Group to a material degree, shall be handled by the Parties in
accordance with the terms of the Joint Defense Agreement, as defined in the
Merger Agreement.

           

          
            
              
              

            

            
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          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 Frontier (and its employees and agents)
with all information that is reasonably requested by Frontier in connection with
meeting, and reasonably necessary for Frontier to comply with, its obligations
under this Agreement, including but not limited to, in connection with providing
compensation, benefits, hours and terms and conditions of employment of
Represented Employees that are governed by the ILEC CBAs, establishing and
administering Frontier’s ongoing benefit plans for Spinco Employees, and
assessing appropriate insurances for the period on and after the Effective
Time.  The information to be provided to Frontier (and its employees
and agents) shall include, without limitation, names of employees anticipated to
be assigned to Spinco and their respective work status, demographics and data;
plan records; underwriting and risk assessment information; records relating to
worker’s compensation claims; records related to collective bargaining and the
processing of grievances (including, but not limited to all transcripts of
negotiations, written proposals and negotiation binders); access to any
information related to prior events and past practice that become relevant in
future arbitrations; and periodic updates on the foregoing; in each case, so
long as such information is reasonably necessary for Frontier to comply with its
obligations under this Agreement.  Such information may be requested
by Frontier at any time following the date the Merger Agreement is executed and
extending following the Effective Time as long as Frontier reasonably has a need
for such information, and shall be provided by Verizon or a Verizon agent as
soon as reasonably practicable without incurring undue expense (with any
increased third party cost being borne by Frontier) and in a de-identified
format to the extent necessary to comply with privacy provisions of federal or
applicable state law.  With respect to any proposed changes to the
Verizon Plans applicable to Spinco Employees following the date the Merger
Agreement is executed (such as benefit changes for 2010), Verizon shall provide
Frontier information regarding such proposed changes prior to implementation of
such changes for informational purposes only.  After the date the Merger Agreement is
executed, Verizon shall provide or cause to be provided to Frontier, copies of
all summary plan descriptions, summaries of material modification, and
enrollment materials from Verizon or a third party on behalf of Verizon or a
Verizon Plan to employees who are likely to be Spinco Employees, at the same
time such communications are given to the employees.  The
Parties’ cooperation under this Agreement shall also include, without
limitation, Frontier (and its employees and agents) acting to provide Verizon
(and its employees and agents) with all information that is reasonably requested
and necessary for Verizon to administer the EDP, ESP and IDP with respect to
Spinco Employees that are participants in such plans.

           

          
            
              
              

            

            
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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

          

          (a)           Nothing
in this Agreement shall in any way limit the rights of Frontier under Section
7.24 of the Merger Agreement.

          

          (b)           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.

           

          
            
              
              

            

            
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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, agreement 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, agreement or arrangement for his, her or its rights
thereunder.  The purpose of this Agreement is to specify the
respective potential responsibilities and obligations of Verizon and Frontier
(and their respective affiliates) as between each other, but it does not affect,
impair, enhance, modify, construe or interpret the rights of any Verizon
Employee or Spinco Employee under or in respect of any such plan, program,
agreement or arrangement.

          

          (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 Frontier 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, or interpret the
terms of, any plan, program, agreement 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).

           

          
            
              
              

            

            
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 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 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
Verizon Street

          New York,
NY 10007

          Facsimile:

          Attn: 
Marianne Drost

              Senior Vice
President, Deputy General Counsel and

              Corporate
Secretary

          

          With
copies to:

          

          Debevoise & Plimpton
LLP

          919 Third Avenue

          New York, NY 10022

          

          Facsimile: (212) 909-6836

          Attn:  Jeffrey J.
Rosen

            
Kevin M. Schmidt

          

          
            
              
              

            

            
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          (b)           If
to Frontier, to:

          

          Frontier Communications
Corporation

          3 High Ridge Park

          Stamford, CT 06905

          Facsimile: 203-614-4661

          Attn: Donald R. Shassian

          Executive Vice President and Chief
Financial Officer

          and

          Frontier Communications
Corporation

          3 High Ridge Park

          Stamford, CT 06905

          Facsimile: 203-614-4651

          Attn:  Hilary E.
Glassman

                    
Senior Vice President, General Counsel and Secretary

          

          With
copies to (which shall not constitute notice):

          

          Kilpatrick Stockton LLP

          Suite 900

          607 14th Street,
NW

          Washington,
DC  20005-2018

          Attn:  Mark D. Wincek

          

          and

          

          Cravath, Swaine & Moore
LLP

          825 Eighth Avenue

          New York,
NY  10019

          Facsimile:  (212)
474-3700

          Attn:  Robert I. Townsend,
III

                    
Craig F. Arcella

          

          

          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.  Except as provided in Section 5.2(b) with
respect to any disagreement regarding the calculation of any Pension Plan Asset
Transfer Amount, 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.

           

          
            
              
              

            

            
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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 Frontier.  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.

          

          
            
              
              

            

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

          
             

             

          

          
            
              
                
                  
                    
                      	Date:	 May
      13, 2009	 	VERIZON
      COMMUNICATIONS INC. 	 
	
                               

                            	 	 	
                               /s/  John
      W. Diercksen

                            	 
	
                               

                            	 	 	
                              John
      W. Diercksen

                            	 
	
                               

                            	 	 	
                              Executive
      Vice President Strategy, 

                              Planning
      and Development

                            	 

                    

                  

                

              

            

          

          
             

             

            
              
                
                  
                    
                      
                        	Date:	 May
      13, 2009	 	NEW
      COMMUNICATIONS HOLDINGS INC.	 
	
                                 

                              	 	 	
                                 /s/ 
      Stephen E. Smith

                              	 
	
                                 

                              	 	 	
                                Stephen
      E. Smith

                              	 
	
                                 

                              	 	 	
                                Vice
      President

                              	 

                      

                    

                  

                

              

            

            
               

               

              
                
                  
                    
                      
                        
                          	Date:	 May
      13, 2009	 	FRONTIER
      COMMUNICATIONS CORPORATION	 
	
                                   

                                	 	 	
                                   /s/ 
      Donald R. Shassian

                                	 
	
                                   

                                	 	 	
                                  Donald
      R. Shassian

                                	 
	
                                   

                                	 	 	
                                  Executive
      Vice President and Chief Financial Officer

                                	 

                        

                      

                    

                  

                

              

               

            

          

           

          
            
              
              

            

            
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          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

          

          SCHEDULE 4.1 (d) – MINIMUM SEVERANCE BENEFITS FOR
NON-UNION EMPLOYEES

          

          SCHEDULE
4.1.(e) – PERFORMANCE AND BONUS OPPORTUNITIES

          

          SCHEDULE
5.2(c)(ii) – LETTER OF DIRECTION

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