Document:

Exhibit
10.3

Master Services Agreement

Capgemini
Confidential

MASTER
SERVICES AGREEMENT

This
Master Services Agreement (this “Agreement”)
is entered into as of January __, 2007 between Capgemini U.S. LLC, a Delaware
limited liability company with offices located at 750 Seventh Avenue, New York,
NY 10019 (“Capgemini”), and FairPoint Communications, Inc., a Delaware corporation,
with its principal office located at 521 East Morehead Street, Suite 250,
Charlotte, NC 28202 (“Client” or “FairPoint”).

WHEREAS, Client desires to
engage Capgemini  to perform professional
services for Client as may be requested from time to time by Client and hereafter
agreed upon in writing by Capgemini (the “Services”), including Services in
connection with the transition by Client of certain business operations
pursuant to a Transition Services Agreement, of even date herewith (the “TSA”),
by and among Client, Verizon Information Technologies LLC, Enhanced
Communications of Northern New England, Inc. and Northern New England Telephone
Operations Inc. (the “Transition Services Agreement”), and any other Services
mutually agreed to by the parties; and

WHEREAS, Capgemini agrees to
provide the Services to Client in accordance with the terms and conditions of
this Agreement.

NOW, THEREFORE, in consideration
of the foregoing and of the mutual promises and covenants hereinafter
expressed, the parties hereby mutually agree as follows:

1.             TERM

This
Agreement shall be effective as of the date hereof and, unless sooner
terminated in accordance with its terms, shall continue in effect for an
initial term ending December 31, 2009, and shall thereafter continue in effect
for successive one-year terms, unless not later than thirty (30) days prior to
the end of the then-current term, either party shall notify the other that this
Agreement will expire, in which event this Agreement shall expire on the last
day of the then-current term (except with respect to any Work Order (as defined
herein) for which the Services have not been completed on such date, as to
which this Agreement will terminate on completion thereof).  The term of any Work Order shall be as set
forth in the Work Order.

2.             SCOPE

(a)           Services.  The Services provided will be authorized on a
project-by-project basis pursuant to a Work Order.

(b)           Work Orders.  Client shall, from time to time, identify any
Services which Client desires to be performed by Capgemini.  Following consultation between Client and
Capgemini and the decision by  Capgemini
to provide the identified Services, 
Capgemini shall prepare a proposed work order which shall include, to
the extent applicable:

(i)            Project identification, approach and
objectives, the agreed upon scope of the Services and the location where the
Services will be performed;

(ii)           The Deliverables (as defined herein)
to be provided under such Work Order, if any;

(iii)          The fees for the Services under such
Work Order;

(iv)          The period of performance for the
Services under such Work Order;

(v)           Any assumptions upon which such Work
Order is based;

(vi)          Staffing by the parties and any Client
resource commitments and responsibilities in addition to those set forth in
this Agreement; and

(vii)         Any other information or agreements
deemed relevant by the parties.

Each
proposed work order shall be approved by Client and, when acceptable to both
parties, shall be executed by both parties (upon such execution, and as may be
modified from time to time in accordance herewith, a “Work Order”).  Each Work Order is incorporated by reference
into, and shall be deemed a part of, this Agreement.   Capgemini will perform the Services
specified in each Work Order.  Except as
may be expressly provided in this Agreement, nothing in this Agreement shall
constitute a commitment of either party to enter any particular Work
Order.  To the extent set forth in an
applicable Work Order,  Capgemini shall
be compensated in preparing any proposed Work Order, or any proposed addendum
or change order to a Work Order, which is prepared at the request of Client.

(c)           Capgemini shall not voluntarily withhold
the provision of any significant or material aspect of the Services for any
reason during the term of this Agreement. 
If Capgemini breaches or threatens to breach the provisions of this
Section, Client shall promptly provide written notice to Capgemini. Capgemini
agrees that Client will be irreparably harmed, and, without any additional
findings of irreparable injury or harm or other considerations of public
policy, Client shall be entitled to apply to a court of competent jurisdiction
for and, provided Client follows the appropriate procedural requirements (e.g.
notice), Capgemini shall not oppose the granting of an injunction compelling
specific performance by Capgemini of its obligations under this Agreement
without the necessity of posting any bond or other security; provided, however,
in the event a dispute arises in connection with the scope of a particular Work
Order, Capgemini shall be limited in opposing the granting of an injunction
compelling specific performance by Capgemini of its obligations under this
Agreement only for a period of one hundred twenty (120) days from notice by
Client of Capgemini’s alleged breach of this subsection 2(c).  This Section 2(c) is subject, in its
entirety, to the termination rights of Capgemini pursuant to Section 11(b)
hereunder.

3.             CHANGES AND DELAYS

(a)           Changes. Except as
specifically provided in an applicable Work Order:

(i)            The parties acknowledge and agree
that the occurrence of the following events (each, an “Adjustment Event”) may
require an extension in the schedule and/or an increase in the fees and
expenses and/or an increase in the work Capgemini is to perform: (A) a material
change to or deficiency in the information which Client has supplied to
Capgemini; (B) a material failure by Client to perform any of its
responsibilities under this Agreement in a timely manner; (C) an unanticipated
event that materially changes the service needs or requirements of Client; (D)
material and adverse circumstances beyond the reasonable control of either of
the parties, including  acts of God or
other Force Majeure Events (as defined herein); (E) a material change in law
which substantially increases or modifies the responsibilities of Capgemini
under this Agreement; or (F) any assumption in a Work Order not being realized.

(ii)           The
parties also agree that from time to time during the term of this Agreement,
Client may request, or Capgemini may propose, that Capgemini implement a change
to the

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Services which, if material, may require an extension in the schedule and/or
an increase or decrease in the fees and expenses and/or an increase or decrease
in the work  Capgemini is to perform
(each, a “Change”), including: (A) a change to the scope or functionality of
the Deliverables; (B) a change in the prioritization or manner in which
Capgemini is performing the Services; or (C) a change to the scope of the
Services.

(iii)          In
the event an Adjustment Event occurs or the parties agree on a Change, Capgemini
may prepare and provide to Client a proposed change order identifying the
impact and setting forth any proposed adjustments in the schedule and/or
payments to Capgemini.

(iv)          An
authorized representative of each party shall promptly sign each agreed upon proposed
change order to acknowledge the impact and to indicate that party’s agreement
to the adjustments.  In the event the
parties’ respective authorized representatives reach agreement, the agreed upon
adjustments shall constitute Services. 
In the event that the parties’ respective authorized representatives
disagree in this regard, they shall promptly negotiate the same in good
faith.  If they are unable to reach an
agreement, they shall refer that matter to the parties’ respective executive
management representatives, who will meet or confer by telephone conference as
promptly as practical and in any event within two business days to negotiate
the same in good faith in an attempt to reach an agreement.  Until such time as the parties agree on the
scope and pricing for any Change to the Services, Capgemini shall continue to
provide existing Services related to the functional scope set forth in Section
1 of Work Order number 1 attached hereto. 
If the parties dispute that the proposed change is within the scope set
forth in Work Order number 1 attached hereto, Capgemini shall nonetheless work
in good faith for a period of at least 30calendar days in an attempt to
incorporate the proposed Change, pending the parties’ agreement upon pricing
and any other unresolved matters associated with the proposed Change.  Subject to Client’s rights under Section 2(c)
above, Capgemini shall not thereafter be obligated to continue such Services, unless
and until the parties reach agreement upon any unresolved matters related
thereto.

(b)           Delays.  Notwithstanding Paragraph (a) of this Section
3, if any delays or deficiencies in the Services or Deliverables occur as a direct,
proximate result of Adjustment Events or Changes, the scheduled completion date
for the affected Services and/or Deliverables for the applicable Work Order
shall be extended to the extent of any such delays, and Capgemini shall not
incur any liability to Client as a result of such delays or deficiencies.

4.             COMPENSATION

(a)           General.  Compensation for Capgemini’s Services and/or
Deliverables shall be outlined in each Work Order.  Such fees shall be payable to Capgemini’s
account within thirty (30) days after the receipt of an invoice covering
Services rendered hereunder not previously invoiced; provided, that Services
shall not be invoiced prior to performance thereof.  The invoice shall include a detailed description
of the Services which were performed or Deliverables provided during the
covered period.   Except as specifically
set forth in a Work Order, compensation for Services and Deliverables shall be
the complete and total compensation payable to Capgemini pursuant to such Work
Order and shall include all programming fees, taxes, maintenance fees,
initiation and set-up costs and license fees and costs associated with any
obtaining licenses, approvals, waivers or rights relating to any third party
intellectual property to the extent any such items are applicable to the scope
of a Work Order.  Capgemini may change
the address to which payments are to be sent by Client at any time by giving
Client written notice of such change.  If
any amount is not paid within thirty (30) days after it becomes due, Client
shall also pay Capgemini interest on that amount for the period from its due
date until it is paid in full.  That

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interest shall be calculated at a rate equal to twelve
percent (12%) per annum (or the maximum rate permitted by applicable law, if
lower), and shall be payable on demand.

(b)           Taxes.  Except as specifically set forth in a Work
Order, applicable taxes incurred in connection with the Services and
Deliverables are included in the fees and expenses payable pursuant to Section
4. In addition, under no circumstances shall the Client be obligated for, and
Capgemini shall in all circumstances pay, any and all taxes on the income of
Capgemini, and each party shall bear sole responsibility for all real or
personal property-related taxes on its owned or leased real or personal
property (including sales and use taxes on such property acquired in order to
provide the Services), for franchise or similar taxes on its business, for
employment taxes on its employees, and for intangible taxes on property it owns
or licenses.

5.             CONFIDENTIALITY

Neither
party shall disclose to a third party Confidential Information (as defined
below) of the other party.  The receiving
party shall use the same degree of care as it uses to protect the
confidentiality of its own confidential information of like nature, but no less
than a reasonable degree of care, to maintain in confidence the Confidential
Information of the disclosing party.  The
foregoing obligations shall not apply to any information that (a) is required
to be disclosed by law, subpoena or other process, (b) is disclosed to a Capgemini
Entity or any subcontractor of a Capgemini Entity (as defined below) in
connection with its performance of the Services; provided, that, such entity or
subcontractor has agreed to be bound by confidentiality provisions at least as
restrictive as those set forth herein, or (c) is required to be disclosed in
connection with any dispute, claim or action between the parties.  “Confidential Information” means information
related to the subject matter of a Work Order and any of the projects
thereunder (including any third party information), and the business of the
disclosing party, which (i) derives economic value, actual or potential, from
not being generally known to or readily ascertainable by other persons who can
obtain economic value from the disclosure or use of the information, (ii) is
the subject of efforts by the disclosing party or owner of the third party
Confidential Information that are reasonable under the circumstances to
maintain the secrecy of the information, (iii) is identified by either party as
“Confidential” and/or “Proprietary”, or (iv) which, under all circumstances,
ought reasonably to be treated as confidential and/or proprietary, including
this Agreement.  Confidential Information
shall not include any information that (1) is at the time of disclosure, or
thereafter becomes, through a source other than the receiving party, publicly
known, (2) is subsequently learned from a third party that does not impose an
obligation of confidentiality on the receiving party, (3) was known to the
receiving party at the time of disclosure, or (4) is developed independently by
the receiving party.  The obligations of
confidentiality hereunder with respect to any Confidential Information shall
continue for a period of four years from the date of the last disclosure of
Confidential Information under the Work Order under which such Confidential
Information was disclosed; provided, that, any personally identifiable
information (e.g. customer data) shall be held in confidence by the receiving
party in perpetuity

6.             DELIVERABLES

Upon
full payment of any amount attributable to a Deliverable as set forth in a Work
Order,  Capgemini hereby assigns to
Client any and all rights, title and interest, including, without limitation,
copyrights, trade secrets and proprietary rights, to the materials created by  Capgemini specifically for Client hereunder
and required to be delivered to Client by virtue of their description or
specification as a deliverable in an applicable Work Order (the “Deliverables”).  The Deliverables exclude all third party
works and products whether or not included or embedded in the Deliverables.  The Deliverables shall be deemed to be “works
made for hire” under the federal copyright laws.   Capgemini agrees to give Client reasonable
assistance, at Client’s expense, to perfect such assignment of such rights,
title and interest.  However, the Deliverables
may include data, modules, components, designs, processes, utilities, subsets,

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objects, program
listings, tools, models, methodologies, programs, systems, analysis frameworks,
leading practices, and specifications (collectively, “Technical Elements”)
owned or developed by Capgemini prior to, or independently from, its engagement
hereunder (and any modifications or enhancements to  Capgemini’s Technical Elements developed in
the course of performing the Services) (collectively, “Capgemini Technical Elements”)
and  Capgemini retains exclusive
ownership rights to all Capgemini Technical Elements.  Accordingly, to the extent that any such Capgemini
Technical Elements are integrated into any Deliverables, Capgemini hereby
grants to Client a perpetual, worldwide, non-exclusive, paid-up, limited
license to use, copy and modify such 
Capgemini Technical Elements as integrated into such Deliverables for the
operation of its business in the ordinary course as a provider of communications
services to its customers. 
Notwithstanding anything to the contrary in this Section, where Capgemini
utilizes as a subcontractor a third party software vendor to provide Services
with respect to software under license to Client from such subcontractor,
Client’s rights to any materials developed by such subcontractor, to the extent
they would constitute a Deliverable if developed by Capgemini, shall be subject
to the terms of the software license agreement between Client and such
subcontractor.  Notwithstanding anything
to the contrary contained herein, Capgemini retains all rights to its general
ideas, concepts, methodologies, processes, techniques, knowledge, experience
and know-how acquired in the course of performing the Services, including to
the extent such items may constitute Technical Elements hereunder.

7.             ACCEPTANCE

If
Client reasonably determines that a Deliverable fails: (i) in any material respect
to meet the specifications and/or other acceptance criteria mutually agreed
upon by the parties, or (ii) in any respect to achieve the full features,
functionality, scalability and performance set forth in a Work Order, then, Client
shall (a) promptly, after the delivery by Capgemini of such Deliverable, notify
Capgemini in writing of such failure, and (b) specify in reasonable detail the
nature and extent of such failure.  Upon
receipt of such notice, Capgemini shall, through the performance of additional
Services, make such adjustments, modifications or revisions as are necessary to
cause such Deliverable to so meet the specifications and/or other acceptance
criteria, and achieve the full features, functionality, scalability and
performance mutually agreed upon by the parties (a “Conforming Deliverable”),
and either: (i) in the case of a non-software Deliverable, re-submit such
Deliverable to Client for Client’s review; or (ii) in the case of a Deliverable
that comprises software, notify Client that such Deliverable is ready for
re-testing.  Capgemini shall continue the
process of adjusting and modifying such Deliverable and resubmitting such
Deliverable to Client for review in accordance with the preceding sentence
until such time as the Deliverable is a Conforming Deliverable.  Acceptance criteria will be agreed to by the
parties in each applicable Work Order.  At
such time as a Deliverable is a Conforming Deliverable, Client shall issue a
writing indicating its acceptance of such Deliverable.  In any case, each such Deliverable shall be
deemed accepted unless rejected in writing within ten (10) calendar days of the
delivery by Capgemini of such Deliverable. 
Notwithstanding the rejection of any Deliverable by Client, operational
use of such Deliverable in a production environment shall be deemed to
constitute acceptance thereof.  Once
accepted, Client may not thereafter reject any interim Deliverable, provided
that acceptance of a composite Deliverable may be conditioned upon the
appropriate integration and operation of such previously accepted interim
Deliverable into such composite Deliverable, to the extent required by the applicable
specifications or acceptance criteria. Accepted Deliverables shall remain
subject to the warranty provided in Section 10 for the duration of the Warranty
Period (as defined below).

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8.             RELATIONSHIP
OF PARTIES

(a)           No Special Relationship.  Nothing contained herein or relating to the
subject matter hereof shall be construed to create an employment,
principal-agent, or fiduciary relationship, or a partnership or joint venture,
or any relationship other than a contractual relationship, between Client and Capgemini,
and neither party shall have the right, power or authority to obligate or bind
the other in any manner whatsoever absent written consent. Capgemini will
provide Services as an independent contractor. Capgemini does not undertake by
this Agreement or otherwise to perform any obligation of Client, whether
regulatory or contractual, or to assume any responsibility for Client’s
business or operations.

(b)           Concerning Employees of Client and
Capgemini.  Personnel supplied by
either party will be deemed employees of such party and will not for any
purpose be considered employees or agents of the other party.  Except as may otherwise be provided in this
Agreement, each party shall be solely responsible for the supervision, daily
direction and control of its employees and payment of their salaries (including
withholding of appropriate payroll taxes), workers’ compensation, disability
and other benefits.

(c)           Client-specific Responsibilities.  Client shall: (i) make all necessary
decisions and determinations in a reasonably timely manner; (ii) provide Capgemini,
in a reasonably timely fashion, with all information reasonably required for
the performance of the Services to extent practicable in light of Client’s
dependence on performance by Verizon Information Technologies LLC; (iii)
provide Capgemini with reasonable access to Client premises necessary for the
performance of the Services and Client will use commercially reasonable efforts
to obtain for Capgemini the right to access Verizon Information Technologies’
premises; (iv) cooperate with Capgemini in the providing of Services; (v) retain
personnel in accordance with the applicable Work Order to participate in or
facilitate the performance of the Services; (vi) participate in the conduct of
training sessions; (vii) timely participate in meetings and make its personnel
readily available for such meetings; and (viii) assign Client personnel with
relevant training and experience to work as part of a project team with Capgemini
or in consultation with Capgemini’s personnel.

9.             CONTRACT
PERFORMANCE

(a)           Client Sponsor.  A management official designated by Client
(the “Client Sponsor”) shall have overall responsibility for the performance of
each Work Order by Client, for coordinating the performance of the Services
with  Capgemini, for acting as a
day-to-day contact with the Capgemini Executive (as defined below) and for
making available to  Capgemini the data,
facilities, resources and other support services from Client required for Capgemini
to be able to perform the Services in a timely and accurate manner, except to
the extent such responsibilities are allocated to Capgemini under a particular
Work Order

(b)           Capgemini Executive.  Dee Burger, or such other person as may be
designated by  Capgemini (the “Capgemini
Executive”) shall have primary operational responsibility for Capgemini’s
performance of each Work Order, including all Capgemini personnel and other
technical resources used in performing the Services, and will serve as
day-to-day contact with the Client Sponsor.

(c)           Authority To Make Changes.  The Client Sponsor and the  Capgemini Executive may propose, accept and
implement changes to technical aspects of any Work Order by signing amendments
thereto setting forth such changes, provided such changes do not affect the
fees or reimbursements agreed upon under any Work Order or materially change
the Services.  Any material change to the
Services

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under any Work Order must
be agreed to by the parties and set forth in writing in an addendum or change
order to the relevant Work Order executed by the parties.

10.          WARRANTY AND LIABILITY

(a)            Capgemini warrants (the “Warranty”)
that: (i) it will exercise due professional care and competence in the
performance of the Services (ii) it shall meet any and all material
specifications (including Deliverable specifications), and any and all
functionality and operability requirements, set forth in any Work Order and
applicable to the Services, and (iii) it will comply with applicable laws,
ordinances, rules and regulations pertaining to the Services or this Agreement
which apply to Capgemini’s performance of Services hereunder; provided, that,
the parties acknowledge that Client remains solely responsible for compliance
with laws, ordinances, rules, regulations or orders issued by any public
authority as such relate specifically to Client’s industry or operation of its
business.

(b)           Capgemini shall, for 120 calendar days following acceptance and
utilization of each Deliverable into a production environment (the “Warranty Period”),
fix any defects in the Services or Deliverables that are identified to
Capgemini in writing during the Warranty Period and which are not Out of Scope
Defects (“In-Scope Defects”).  Notwithstanding the foregoing, to the extent
that the features, functionality, scalability and performance of a Deliverable are
adversely impacted by any subsequent Deliverable, correction of the original
Deliverable and interoperability with the subsequent Deliverable shall be
subject to the Warranty for the Warranty Period applicable to the subsequent Deliverable,
irrespective of whether the Warranty Period as to the original Deliverable has
otherwise expired.  The following defects
shall be considered out of scope defects and will not be covered by the
Warranty (“Out of Scope Defects”):

(i) 
The issue relates to enhancements or any other changes that require the
system to operate in a manner not specified in the applicable Work Order and
not agreed upon by the parties pursuant to a Change Order; or,

(ii) 
The issue is an environmental issue, data issue, operational issue, user
issue, or any other issues in which the system works as specified in the
applicable Work Order when operated correctly with correct data; or,

(iii) 
The issue results in any module that is modified by Client or any third
party prior to the end of the warranty period; or,

(iv) 
The issue relates to software code that was included in a prior release
of the system that was not changed during the most recent release.

In
addition, the Warranty does not include support for enhancements, maintenance
and technical support, user support, or the cleaning-up of data.

(c)           For any breach of
the Warranty, Capgemini shall re-perform and correct such Services.  If Capgemini does not resolve the In-Scope
Defects to Client’s reasonable satisfaction consistent with the Work Order
requirements, Client shall be entitled, in addition to any other right or
remedy at law, to recover the fees paid to Capgemini for such deficient
Services.  Any claim for breach of the Warranty
with respect to any of the Services shall be made by written notice to
Capgemini.  The time period permitted for response and resolution of In-Scope
Defects after delivery of written notice to Capgemini shall depend upon the
severity level of such defects.  The
definitions and applicable response and resolution times for each severity
level are as set forth below:

·                  Severity
1 – System Inoperable – No work can be performed or processing capacity is so
limited that the probability of a serious operational backlog is imminent. This
also includes instances

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which stop the business from
performing critical detail work and a manual workaround is not feasible. 
 Typically, Severity 1 Defects require an emergency fix.

·                  Severity
2 – Module Is Inoperable/Data Corrupted – Either processing capability is
limited and the defect has significant adverse impact on end customer or data
is being corrupted and work must be stopped to avoid further corruption/loss of
data and a manual workaround is not feasible.   Typically, Severity 2
Defects require an emergency fix.

·                  Severity
3 – Feature inoperable/not working as documented.  This includes program
defects that affects system users but do not stop end customers from performing
daily business or for which there is a reasonable workaround.  After fixes
for higher rated Defects are placed into production, fixes for Severity 3
Defects should be considered for inclusion in the next available release.

·                  Severity
4 – Operational Question/Cosmetic Issue – Defects/questions with day-to-day
operational issues, cosmetic Defects with user interface; problem in or issue
with documentation.  These defects should be resolved after more serious
Defects have been fixed and scheduled for release accordingly.

Defect response times will
be as follows:

·                  For
a Severity Level 1 defect,
Capgemini will: 1) respond within one hour acknowledging Client’s report of the
defect and provide Client with a tracking number; 2) use diligent efforts to provide
a defect analysis within 3 hours of receipt of Client’s report of the defect;
3). provide an interim resolution for the defect as soon as reasonably possible
using continuous efforts, 24 hours a day, 7 days a week, 4) use diligent
efforts to provide a final resolution within 5 calendar days after receipt of
Client’s report of the Defect.

·                  For
a Severity Level 2 defect,
Capgemini will: 1) respond within 2 hours acknowledging Client’s report of the defect
and provide Client with a tracking number; 2) use diligent efforts to provide a
defect analysis within 6 hours of receipt of Client’s report of the defect; 3) use
diligent efforts to provide an interim resolution for the defect within 48
hours of receipt of Customer’s report of the Defect; and 4) use diligent efforts
to provide a final resolution within 10 days after receipt of Customer’s report
of the Defect.

·                  For
a Severity Level 3 defect,
Capgemini will: 1) provide a defect analysis within 72 hours of receipt of
Client’s report of the defect; 2) use diligent efforts to provide an interim resolution
within 20 days of receipt of Client’s report of the defect; and 3) provide a
final resolution within 60 days of receipt of Client’s report of the defect.

·                  For
a Severity Level 4 defect,
Capgemini shall review with Client the operational implications of the defect
and, upon agreement, determine what actions may be reasonable given the
circumstances and operational implications that the defect creates.

(d)           The
Warranty Period shall begin once a given release is accepted in accordance
herewith or the applicable Work Order. 
Once all In-Scope Defects identified in writing to Capgemini during the
Warranty Period have been resolved and retested, and the Warranty Period itself
has elapsed, the warranty will expire. This Warranty Period will only pertain
to each code release.  The Warranty
Period for a given release will only pertain to In-Scope Defects caused by
changes made during that release.  The Warranty Period will not pertain to
any areas of the software or configuration that have not changed across the
releases and that continue to function as they did in the prior release.

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(e)           To the fullest
extent permitted by applicable law, for each Work Order under which liability
principally arises, the total aggregate liability of either party under
this Agreement or with respect to the Services, and regardless of the form of
action (including, but not limited to, breach of contract, tort, strict
liability, breach of warranties, failure of essential services or otherwise,
but excluding liability for fees owed by Client for Services rendered), will
not exceed an amount equal to: (i) in the first three months after the
execution thereof, liability shall be limited to two (2) times total fees paid
to date to Capgemini (and not refunded to Client) thereunder, (ii) in months four
(4) through six (6) after the execution thereof, liability shall be limited to
one and one-half (1.5) times total fees paid to date to Capgemini (and not
refunded to Client) thereunder, (iii) in months seven (7) through twelve (12)
after the execution thereof, liability shall be limited to total fees paid to
date to Capgemini (and not refunded to Client) 
thereunder, and (iv) thereafter, an amount equal to total fees paid to
Capgemini (and not refunded to Client) under such Work Order during the twelve
(12) month period immediately preceding the event giving rise to the claim.

(f)            In no event will Capgemini or Client
be liable for consequential, incidental, indirect, punitive or special damages
(including loss of profits, data, business or goodwill), regardless of whether
such liability is based on breach of contract, tort, strict liability, breach
of warranties, failure of essential purpose or otherwise, and even if advised
of the likelihood of such damages. Notwithstanding subsection (e) above and the
preceding sentence of this subsection (f), the caps on the amount of liability
and the limitations on type of liability described herein and therein shall not
apply to: (i) the gross negligence or willful misconduct of a party, (ii) any
violation by Capgemini of Section 2(c) other than a dispute regarding the scope
of the Services provided in a Work Order, (iii) third party indemnity
obligations pursuant to Section 12 below, or (iv) any violation of Section 5.

(g)           CLIENT UNDERSTANDS THAT CAPGEMINI IS
PERFORMING THE SERVICES HEREUNDER IN PART IN RELATION TO SYSTEMS AND DATA THAT
HAVE BEEN PRODUCED BY CLIENT OR THAT HAVE BEEN PROCURED FROM THIRD PARTIES
OTHER THAN BY CAPGEMINI (COLLECTIVELY, “NON-CAPGEMINI SYSTEMS AND DATA”).  EXCEPT AS OTHERWISE STATED IN THIS SECTION 10
AND IN ANY WORK ORDER,  CAPGEMINI MAKES
NO WARRANTIES OF ANY KIND OR NATURE REGARDING THE NON-CAPGEMINI SYSTEMS AND
DATA, WHETHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, OR WARRANTIES OF
ANY PRODUCTS OR SERVICES, OR THE APPROPRIATENESS OF CLIENT OR THIRD-PARTY
SPECIFICATIONS. Client acknowledges that it
is a sophisticated party to this Agreement and recognizes and agrees that the
terms of this Section 10 are an integral part of Capgemini’s pricing and an
important factor in Capgemini’s willingness to enter into this Agreement and to
agree to perform Services hereunder. Capgemini expressly disclaims any warranty
or liability with respect to laws, ordinances, rules and regulations issued by
any public authority as such relate specifically to Client’s industry or
operation of it business.

(h)           The Services may include providing assistance to Client with Client’s
procurement of third-party hardware, software or other items (“Third Party
Materials”).  Unless otherwise expressly
stated in the Work Order, Client will license or purchase such Third Party
Materials directly from the vendor or reseller (which may be an affiliate of Capgemini).  Except as set forth in an applicable Work
Order, Client retains sole responsibility for the selection of such Third Party
Materials.  Capgemini shall pay all
license or other fees for the right to use Third Party Materials to deliver
Services, unless otherwise specifically set forth in a Work Order as a
pass-through cost to be borne by Client, or separately agreed between the
parties pursuant to a software purchase or procurement agreement. Capgemini will
specify in Work Orders any assistance it will provide in relation to Third
Party Materials.  Capgemini, its
affiliates, and subcontractors, reserve the right to retain ancillary benefits,
including

 9
 

credits,
rebates or referral fees, they may receive relating to such Third Party
Materials, regardless of whether Client pays for such Third Party Materials
directly, on a pass-through basis, or otherwise.  The retention of such benefits shall not
constitute a conflict of interest.

(i)            Capgemini will
perform the Services under this Agreement in a manner that does not, and the
Deliverables will not, (i) infringe, or constitute an infringement or
misappropriation of, any patent, or patent rights of any third party, or (ii)
infringe, or constitute an infringement or misappropriation of, any trade
secret, copyright, trademark or other proprietary or intellectual property
right of any third party. In the event any Services or Deliverables violate the
preceding sentence, Capgemini shall, at its election, (a) procure the continued
right to use the infringing Service or Deliverable, at its sole cost and expense,
or (b) modify the Service or Deliverable in a manner that makes it
non-infringing, which may include procurement of an alternative software
product; provided, that, such modification does not diminish the features,
functionality, scalability or performance of the infringing Service or
Deliverable. Capgemini’s failure to comply with the preceding sentence shall
constitute a violation of Section 2(c).

(j)            Capgemini may
perform the Services with personnel of Capgemini or any of its affiliates
(each, a “Capgemini Entity” and, collectively, “Capgemini Entities”) or with
subcontractors of Capgemini Entities.   Capgemini shall be
solely responsible for the performance of the Services and all of the other liabilities
and obligations of Capgemini under this Agreement, whether or not performed, in
whole or part, by Capgemini, any other Capgemini Entity, or any subcontractor
of any Capgemini Entity.  Client shall
have no recourse against, and shall bring no claim against, any other Capgemini
Entity or any subcontractor of any Capgemini Entity or any member, shareholder,
director, officer, manager or employee of any Capgemini Entity or any
subcontractor of any Capgemini Entity with respect to any liability or
obligations herein or in connection with the Services.

11.          TERMINATION

(a)           Breach.  Client may terminate this Agreement or any
Work Order, by written notice to Capgemini:

(i) in the event
of a material breach of this Agreement or such Work Order by Capgemini, which
breach is not cured within 30 days after receipt of written notice by Capgemini;

(ii) upon thirty (30) days written notice to
Capgemini in the event the Acquisition (as defined in Work Order 1) is
terminated; provided that if the Acquisition is reinstated within one hundred
twenty (120) days, this termination shall be considered a termination for
convenience pursuant to Section 11(a)(iii) hereunder.  Termination of this
Agreement hereunder shall not become effective until the thirtieth (30th) day
after Capgemini receives the termination notice and Client will pay Capgemini’s
fees for: (A) previously invoiced and past due amounts (B) previously invoiced
and not yet past due amounts, (C) work in progress to date which has not yet
been invoiced, and (D) in progress deliverables for the next 30 days.

In calculating the aforementioned monthly fees, Capgemini has placed
$15,000,000 of fees at risk during the first twelve (12) months of this
Agreement (spreading the $15,000,000 across 12 months at $1,250,000 per month),
which is reflected in the fees set forth in Work Order 1.  Client may deduct the First Credit Amount (as
defined below) from the amount otherwise owed to Capgemini pursuant to Section
11(a)(ii)(B) .  For purposes hereof, the “First
Credit Amount” means an amount equal to $1,250,000, multiplied by the number of
remaining full months through the end of the twelfth month following the
execution of this Agreement, less the applicable Infrastructure Amount.  Client may deduct the Second Credit Amount
from the amounts otherwise owed to Capgemini pursuant to Sections 11(a)(ii)(C)
and (D).  The “Second Credit Amount”
means an amount equal to $1,250,000, multiplied by

 10
 

the number of remaining full months through the end of the twelfth
month following the execution of this Agreement, less any First Credit Amount
actually realized as an offset to amounts owed to Capgemini.  The “Infrastructure Amount” shall be an
amount set forth in the table attached hereto as Attachment A, as applicable to
the month in which such termination notice is provided. Under no circumstances
shall Capgemini be obligated to pay Client any amount under this Section as a
result of any credit hereunder exceeding the amount owed to Capgemini; or

(iii) for convenience, at any time upon 30 days prior written notice.

(b)           (i) 
Capgemini may terminate this Agreement for any failure by Client to make
timely payment of any undisputed fees or reimbursement of undisputed expenses
due under this Agreement, which breach is not cured within thirty (30) days
after receipt of written notice by Client. (ii) If a dispute or disputes
related to fees and expenses equals an aggregate of $15,000,000 and continues
for longer than 90 days, Capgemini shall have the right to terminate the
Agreement or applicable Work Order without penalty or liability to Client.

(c)           Client shall pay Capgemini for all undisputed
fees and expenses incurred through the effective date of termination (except in
the case of Section 11(a)(ii) above which shall be governed by the terms of
such subsection), provided that such payment shall not affect any other rights
and remedies a party may have under this Agreement.  In the event that Capgemini terminates this
Agreement or a Work Order pursuant to Section 11(b) above, or Client terminates
this Agreement pursuant to Section 11(a)(iii) above, then Capgemini shall also
be entitled to be paid the fees specified in Attachment B, which Attachment is
incorporated herein by this reference; provided, however, that if Capgemini’s
termination is for disputed fees pursuant to Section 11(b)(ii), Client shall
only be obligated to pay the applicable amount set forth on Attachment B if
Capgemini subsequently prevails on the merits in any dispute over whether such
fees are actually owed.    Any such payments shall not affect any other
rights or remedies Capgemini may have under this Agreement.  The provisions of this Agreement which give
the parties rights beyond termination of this Agreement will survive any
termination of this Agreement, including, without limitation, Section 4
(Compensation), Section 5 (Confidentiality), Section 6 (Deliverables), Section
10 (Warranty and Liability), Section 11 (Termination), Section 12 (Indemnity)
and Section 13 (Further Understandings).

(d)           Bankruptcy.  Either party may terminate this Agreement and
all Work Orders hereunder effective immediately upon giving notification
thereof in the event the other party is adjudged insolvent or bankrupt, or upon
the institution of any proceeding against the other party seeking relief,
reorganization or arrangement under any laws relating to insolvency, or for the
making of any assignment for the benefit of creditors, or upon the appointment
of a receiver, liquidator or trustee of any of the other party’s property or
assets, or upon liquidation, dissolution or winding up of the other party’s
business.

(e)           Additional Termination Rights.  The parties may agree to additional
termination rights and provisions in each Work Order.

12.          INDEMNITY

(a)  Indemnification by Client. Client shall
indemnify and hold harmless Capgemini, its officers, directors, employees,
successors and assigns (collectively, the “Capgemini Indemnitees”) from and
against any expense, claim, loss or damage (including court costs and
reasonable attorney’s fees) (“Losses”) suffered or incurred by any Capgemini
Indemnitees in connection with any third-party claims against Capgemini
Indemnitees arising from or relating to:

 11
 

(i)            all claims for bodily injury to
persons or physical damage to tangible personal or real property (excluding
software, hardware and data) for which Client is legally liable to that third
party, except to the extent caused by the negligence or intentional misconduct
of Capgemini Indemnitees;

(ii)           all claims arising from Client’s violation
of any law, ordinance, rule, regulation or order applicable to Client;

(iii)          all claims arising from fraud
committed by, or the intentional misconduct of Client; and

(iv)          all claims for any taxes owed by Client
pursuant to this Agreement.

(b)  Indemnification
by Capgemini.  Capgemini shall
indemnify and hold harmless Client, and its Subsidiaries (as defined below)officers, directors, employees, successors and assigns
(collectively, the “Client Indemnitees”) 
from and against any Losses suffered or incurred by the Client
Indemnitees in connection with any third-party claims against Client
Indemnitees, arising from or relating to:

(i)            all claims that a Service (including
any Deliverable) violates Section 10(i) of this Agreement;

(ii)           all claims for bodily injury to
persons or physical damage to tangible personal property or real property (excluding
hardware, software and data) for which Capgemini is legally liable to that
third party, except to the extent caused by the negligence or intentional
misconduct of Client Indemnitees;

(iii)          all claims arising from a violation of
any applicable laws, ordinances, rules and regulations pertaining to the
Services or this Agreement which apply to Capgemini’s performance of Services
hereunder, excluding laws, ordinances, rules, regulations or orders issued by
any public authority as such relate specifically to Client’s industry or
operation of its business;

(iv)          all claims arising out of Capgemini’s
use in performing and/or providing the Services of products, services or
license rights from third parties, to the extent due to Capgemini’s breach of
its agreement with such third parties for such products, services or license
rights;

(v)           all claims arising from fraud
committed by, or the intentional misconduct of Capgemini;

(vi)          all claims arising out of the failure
of Capgemini to obtain, or cause to be obtained, any consent or approval
required for Client to receive and use the Services, or any component thereof,
to the extent specified in this Agreement;

(vii)         all claims for any tax owed by Capgemini
pursuant to this Agreement; and

(viii)        all claims arising from a breach by Capgemini
of Section 5 of this Agreement.

Capgemini shall not be
required to indemnify Client Indemnitees in accordance with (b)(i) in the event
the alleged infringement is caused by (i) Client or third party modification of
any Deliverable, where such modification causes the infringement, (ii) use of a
Deliverable in connection with a product or service (the combination of which
causes the infringement) if Capgemini did not approve of such use; provided,
that, Capgemini shall be deemed to have approved any use contemplated in  Work Order 1 or the TSA, or (iii) Capgemini’s
actions outside the scope of any Work Order or the TSA or at the specific
direction of Client.

(c)           Indemnification Procedure.  An indemnified party under this Section 12
shall promptly notify the indemnifying party of any claim with respect to which
it seeks indemnity hereunder.  In the
case of Client and its subsidiaries, Client, solely, shall provide to Capgemini
any and all notices, and shall be the sole party to bring any and all claims on
behalf of its Subsidiaries, with respect to indemnification hereunder. An
indemnified party may participate, at its own expense, in the defense of such claim.  An indemnifying party shall, except as
provided below, assume the defense of such claim, and shall pay the fees and
disbursements of counsel

 12
 

related to such
proceeding.  In any such proceeding, any
indemnified party shall have the right to retain its own counsel, but the fees
and expense of such counsel shall be at the expense of such indemnified party
unless the indemnifying party and the indemnified party shall have mutually
agreed to the retention of such counsel. 
An indemnifying party may, without the prior written consent of the
indemnified party, effect a settlement of a pending or threatened proceeding in
respect of which any indemnified party is or could have been a party and
indemnity could have been sought hereunder by such indemnified party only if
such settlement does not include a finding or admission of any violation of any
law or regulation, and (i) the only form of relief in such settlement is the
payment of money which is paid in full by the indemnifying party, (ii) such
settlement will not have any adverse effect on any other claims that have been or
may be made against the indemnified party, and (iii) such settlement includes
an unconditional release of such indemnified party of all liability on claims
that are the subject of such proceeding. 
An indemnified party may assume control of the defense of any claim: (i)
if it irrevocably waives its right to indemnity under this Section 12, or (ii)
if the indemnifying party fails or refuses to timely assume the defense of such
claim (in which case the indemnifying party shall be liable for all costs and
expenses incurred by the indemnified party in the defense of such claim). An
indemnifying party required to provide an indemnity to an indemnified party
under this Section 12 shall have no obligation for any claim under this Section
12 if the indemnified party fails to notify the indemnifying party of such
claim as provided above, but only to the extent that the defense of such claim
is actually prejudiced by such failure. For purposes of this Section 12, a “Subsidiary”
of Client is an entity in which Client owns at least a 50% voting stake.

13.  FURTHER
UNDERSTANDINGS

(a)           Notices.  Except as otherwise specifically provided in
this Agreement or in a Work Order, all notices required under this
Agreement  will be in writing.  Notices will be deemed given when actually
received.  All communications will be
sent to the receiving party’s address as set forth below or to such other
address that the receiving party may have provided for purposes of receiving
notices as provided in this Section 13.

	
  To Capgemini:

  	
   

  	
  Capgemini U.S. LLC

  
	
   

  	
   

  	
  600 Peachtree
  Street

  
	
   

  	
   

  	
  Suite 3600

  
	
   

  	
   

  	
  Atlanta, GA
  30308

  
	
   

  	
   

  	
  Attention: Dee
  Burger

  
	
  With a copy to:

  	
   

  	
  Capgemini U.S. LLC

  
	
   

  	
   

  	
  750 Seventh
  Avenue

  
	
   

  	
   

  	
  New York, NY
  10019

  
	
   

  	
   

  	
  Attention:
  General Counsel

  
	
   

  	
   

  	
   

  
	
  To Client:

  	
   

  	
  Michael Haga

  
	
   

  	
   

  	
  PO Box 398

  
	
   

  	
   

  	
  192 W. Broadway

  
	
   

  	
   

  	
  Peculiar, MO
  64078

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Peter G. Nixon, COO

  
	
   

  	
   

  	
  FairPoint
  Communications, Inc.

  
	
   

  	
   

  	
  521 East
  Morehead Street

  
	
   

  	
   

  	
  Suite 250

  
	
   

  	
   

  	
  Charlotte, NC
  28202

  

 

 13
 

 

	
  

  	
  Shirley J. Linn

  Executive Vice President and General Counsel

  FairPoint Communications, Inc.

  521 East Morehead Street

  Suite 250

  Charlotte, NC 28202

  
	
   

  	
   

  
	
   

  	
  Susan L. Sowell

  Vice President and Assistant General Counsel

  FairPoint Communications, Inc.

  521 East Morehead Street

  Suite 250

  Charlotte, NC 28202

  

(b)           Binding Nature.  This Agreement shall be binding on and inure
to the benefit of the parties and their respective successors and permitted
assigns.

(c)           Severability.  If any provision of this Agreement, or the
application thereof, shall for any reason and to any extent be determined by a
court of competent jurisdiction to be invalid or unenforceable, such provision
shall be modified or interpreted by the court so as to reasonably effect the
intent of the parties and the parties shall replace any such invalid or
unenforceable provision with valid and enforceable provision(s) that are
consistent with the modification or interpretation made by the court.  All other provisions of this Agreement shall
remain in full force and effect.

(d)           Entire Agreement.  This Agreement and any Work Orders hereunder
constitute the entire agreement between the parties with respect to the subject
matter hereof, and supersede any and all prior or contemporaneous written or
oral communications between the parties. 
Except as expressly set forth herein, no other prior or contemporaneous
covenants, promises, representations or warranties of any kind, whether written
or oral, have been made or can be relied on by either party as an inducement to
enter into this Agreement, whether relating to the tools, resources, practices
or otherwise of any party hereto.

(e)           No Oral Modification.  This Agreement shall not be amended or
otherwise modified, except by a later written agreement that expressly states
that it is an amendment or modification and that is signed by both parties.  Except as set forth in such amendment or
modification, no provision or statement in any document delivered in connection
with this Agreement shall impose any additional obligation on Capgemini.

(f)            Governing Law.  This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
reference to its choice of law principles.

(g)           No Waiver.  No waiver or failure to exercise any option,
right or privilege under the terms of this Agreement by either of the parties
hereto on any occasion or occasions shall be construed to be a waiver of the
same on any other occasion or of any other option, right or privilege.

(h)           Headings and References.  The headings and captions used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement. 
All references in this Agreement to Sections shall, unless otherwise
provided, refer to Sections hereof.

 14
 

(i)            Assignment.  Neither this Agreement nor any of the rights
or duties hereunder may be assigned or otherwise transferred by either party
without the other party’s prior written consent; provided, however, that Capgemini
may assign or otherwise transfer its rights or duties under this Agreement to
another member of the Capgemini S.A. group, and Client may assign or otherwise
transfer its rights or duties under this Agreement to any Subsidiary thereof.  Any act which is inconsistent with the terms
of this Section shall be null and void ab initio.

(j)            Non-Solicitation.  During the term of a Work Order and for a
period of one (1) year following its termination, neither party shall, as a
result of becoming aware of any employee of the other party or its
subcontractors who is connected with the performance of such Work Order,
directly or indirectly solicit or hire (or utilize as an independent
contractor) such employee.

(k)           Order of Precedence.  In the event of any inconsistency between or
among the documents listed below, the following order of precedence shall
govern:

(i)            Work Orders; and

(ii)           this Agreement

(l)            Dispute Resolution; Equitable
Relief.

(i)            The parties will attempt in good
faith to resolve any controversy or claim arising out of or relating to this
Agreement or the Services through discussions between the Capgemini Vice
President and the Client executive responsible for providing and accepting the
Services.  If these discussions are
unsuccessful, the parties agree that any action asserting a claim by one party
against the other party hereto arising out of or relating to this Agreement or
the Services must be brought in the state or federal court for the county or
district wherein the party against which the claim is brought has its principal
place of business.  Notwithstanding the
foregoing, any action asserting a claim for collection of fees, expenses and/or
other compensation due or owing to Capgemini under this Agreement may be
brought in a state or federal court in New York, New York, which, for purposes
of this Agreement, is Capgemini’s principal place of business.  If an action is pending on any claims between
the parties, any claim which could be brought as a counterclaim must be brought
in the pending action, if at all.

(ii)           The parties acknowledge that the
breach of Section 5 (Confidentiality), Section 6 (Deliverables) or Section 12(j)
(Non-Solicitation) by one party will give rise to irreparable injury to the
other party which is not adequately compensable in damages or at law.  Accordingly, the parties agree that
injunctive relief will be an appropriate remedy to prevent violation of either
party’s respective rights and/or obligations thereunder.  However, subject to Section 10 (Warranty and
Liability), nothing in this Section 12(l) (ii) shall limit a party’s right to
any other remedies in equity or at law, including the recovery of damages.

(m)          Trademarks.  This Agreement and any Work Order does not
give either party ownership rights or interests in the other party’s trade name
or trademarks.

(n)           No Third Party Beneficiaries.  This Agreement is entered into solely by and
between, and may be enforced only by, Capgemini and Client.  Except as set forth in Section 10(j), this
Agreement shall not be deemed to create any rights in or obligations to any
third parties.

(o)           Force Majeure.  Neither party shall be liable for failure to
fulfill its obligations under this Agreement (other than a failure to pay
money) only to the extent that failure is caused, directly or indirectly, by
flood, communications failure, extreme weather, fire, mud slide, earthquake, or
other

 15
 

natural calamity or act
of God, interruption in water, electricity, acts of terrorism, riots, civil
disorders, rebellions or revolutions, acts of governmental agencies,
quarantines, embargoes, malicious acts of third parties, labor disputes
affecting vendors or subcontractors and for which the party claiming force
majeure is not responsible, or any other similar cause beyond the reasonable
control of that party; provided, however, that the affected party shall use its
commercially reasonable efforts to avoid or remove such causes of
nonperformance and shall proceed immediately with the performance of its
obligations under this Agreement whenever reasonably possible (each, a “Force
Majeure Event”).  If Capgemini’s
performance is excused by a Force Majeure Event, and it fails to resume full
performance of all its obligations hereunder within 20 business days of the
onset of the Force Majeure Event, Client may terminate this Agreement or any
affected sub-component of the Services without penalty or other liability
whatsoever (other than payment for Services previously rendered), in whole or
in part, immediately upon written notice to Capgemini.

(p)           Publicity.  Except with Client’s prior written consent, Capgemini
shall not make public reference to Client’s selection of the Capgemini service
line(s) and the nature of the Services provided.  Except with Client’s prior written consent, Capgemini
may not publicly refer to the solution implemented or to be implemented by Capgemini
and may write and publish a high-level profile discussing the reasons
supporting Client’s choice of the Capgemini solution and the benefits gained by
Client.  Moreover, Capgemini may, from
time to time, request Client’s assistance in complying with the process
employed by Capgemini to measure client satisfaction, as may be stated in an
applicable Work Order.

(q)           Insurance.  During the term of this Agreement, each party
shall obtain and maintain the following insurance:

(i) Commercial General Liability, including coverage
for (A) premises/operations, (B) independent contractors, (C)
products/completed operations, (D) personal and advertising injury, and (E)
contractual liability, with  limits of
not less than  an Each Occurrence Limit
of $5,000,000, Products/Completed Operations Aggregate Limit of $5,000,000,
Advertising Injury and Personal Injury aggregate Limit of $5,000,000 and a
General aggregate of $5,000,000; the per occurrence and aggregate limits may be
met through both primary General Liability and excess umbrella limits.

(ii) Worker’s Compensation in amounts required by
applicable law and Employer’s Liability with a limit of at least  bodily injury by accident of $1,000,000 each
accident, bodily injury by disease, $1,000,000 policy limit and bodily injury
by disease, $1,000,000 each employee; and

(iii) Automobile Liability including coverage for
owned/leased, non-owned or hired automobiles with combined single limit of not
less than $1,000,000 each accident.

In addition, Capgemini shall maintain during the term
of this Agreement:

(i) errors and omissions insurance, with a limit of
$5,000,000 per claim and $5,000,000 in the policy term aggregate; and

(ii) commercial crime insurance covering dishonest
acts of employees; such insurance shall also include third party liability
coverage and be written for limits not less than $10,000,000.

Unless otherwise agreed, all insurance policies shall
be obtained and maintained with companies rated A- or better by Best’s Key
Rating Guide, and each party shall, upon execution of this Agreement, provide
the other party with an insurance certificate confirming compliance with the
requirements of this Section. Each party shall name the other as an additional
insured on the policies identified in above (excluding Worker’s Compensation
and Errors and Omissions) and Client shall be named as loss payee as their

 16
 

interests may appear, on the Commercial Crime
insurance identified above. Except with respect to the Commercial General
liability, Errors and Omissions and Commercial Crime insurance, the parties
shall each further obtain from their insurance companies providing the coverage
required by this Agreement the permission of such insurers to allow such party
to waive all rights of subrogation, and such party does hereby waive all rights
of said insurance companies to subrogation against the other party, its
affiliates, subsidiaries, assignees, officers, directors and employees.

[SIGNATURES ON
NEXT PAGE]

 17
 

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

	
  CAPGEMINI U.S. LLC

  	
   

  	
  FAIRPOINT COMMUNICATIONS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ illegible

  	
   

  	
  By:

  	
  /s/ Eugene B. Johnson

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  Vice President

  	
   

  	
  Title:

  	
  Chief Executive Officer

  

 

 18Exhibit
10.4

EXECUTION COPY

EMPLOYEE MATTERS AGREEMENT

by and between

Verizon Communications Inc.,

Northern New England Spinco, Inc.

and

FairPoint Communications, Inc.

dated as of January 15, 2007

TABLE OF CONTENTS

	
  

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE I.

  	
  Definitions

  	
   

  	
  2

  
	
  Section 1.1.

  	
  Definitions

  	
   

  	
  2

  
	
  Section 1.2.

  	
  Capitalized Terms

  	
   

  	
  13

  
	
  ARTICLE II.

  	
  Collective Bargaining Agreements and Obligations

  	
   

  	
  14

  
	
  Section 2.1.

  	
  Assumption and Continuation of Agreements

  	
   

  	
  14

  
	
  ARTICLE III.

  	
  Spinco Plans Generally

  	
   

  	
  21

  
	
  Section 3.1.

  	
  Establishment of Spinco Plans

  	
   

  	
  21

  
	
  Section 3.2.

  	
  Terms of Participation by Spinco Employees

  	
   

  	
  21

  
	
  ARTICLE IV.

  	
  Employees

  	
   

  	
  22

  
	
  Section 4.1.

  	
  Employees

  	
   

  	
  22

  
	
  Section 4.2.

  	
  No Solicitation of Employees

  	
   

  	
  26

  
	
  Section 4.3.

  	
  Unavailable Employees

  	
   

  	
  28

  
	
  ARTICLE V.

  	
  Pension Plans

  	
   

  	
  29

  
	
  Section 5.1.

  	
  Establishment of Pension Plans and Trusts

  	
   

  	
  29

  
	
  Section 5.2.

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

  	
   

  	
  30

  
	
  Section 5.3.

  	
  Continuation of Elections and Application to Spinco
  Dependents

  	
   

  	
  35

  
	
  ARTICLE VI.

  	
  Health and Welfare

  	
   

  	
  36

  
	
  Section 6.1.

  	
  Assumption of Health and Welfare

  	
   

  	
  36

  
	
  Section 6.2.

  	
  Adoption of Health and Welfare Plans

  	
   

  	
  38

  
	
  Section 6.3.

  	
  COBRA and HIPAA

  	
   

  	
  40

  
	
  Section 6.4.

  	
  Workers’ Compensation Claims

  	
   

  	
  40

  
	
  Section 6.5.

  	
  Leave of Absence Programs

  	
   

  	
  41

  
	
  Section 6.6.

  	
  Time-Off Benefits

  	
   

  	
  41

  
	
  ARTICLE VII.

  	
  Savings Plans

  	
   

  	
  42

  
	
  Section 7.1.

  	
  Establishment of the Spinco Savings Plan

  	
   

  	
  42

  
	
  Section 7.2.

  	
  Assumption of Liabilities and Transfer of Assets

  	
   

  	
  42

  
	
  ARTICLE VIII.

  	
  Equity Based Incentive Awards

  	
   

  	
  44

  
	
  Section 8.1.

  	
  General Treatment of Outstanding Awards

  	
   

  	
  44

  
	
  Section 8.2.

  	
  Outstanding Options

  	
   

  	
  44

  
						

 

 i
 

 

	
  

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 8.3.

  	
  Treatment of Outstanding Verizon RSU and PSU Awards

  	
   

  	
  45

  
	
  Section 8.4

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

  	
   

  	
  47

  
	
  Section 8.5

  	
  Treatment of
  Outstanding FairPoint Equity Awards47

  	
   

  	
  47

  
	
  ARTICLE IX.

  	
  Short Term Incentives and Sales Commission Programs

  	
   

  	
  48

  
	
  Section 9.1.

  	
  Incentive and Commission Plans

  	
   

  	
  48

  
	
  ARTICLE X.

  	
  Deferred Compensation Plans

  	
   

  	
  49

  
	
  Section 10.1.

  	
  Generally

  	
   

  	
  49

  
	
  Section 10.2.

  	
  Vesting and Payout of Balances

  	
   

  	
  49

  
	
  ARTICLE XI.

  	
  ASSUMPTION OF LIABILITIES

  	
   

  	
  49

  
	
  Section 11.1.

  	
  Assumption of Liabilities

  	
   

  	
  49

  
	
  Section 11.2.

  	
  Reimbursement

  	
   

  	
  52

  
	
  Section 11.3.

  	
  Indemnification

  	
   

  	
  53

  
	
  Section 11.4.

  	
  Procedures for Indemnification for Third-Party
  Claims

  	
   

  	
  54

  
	
  Section 11.5.

  	
  Reductions for Insurance Proceeds and Other Amounts

  	
   

  	
  54

  
	
  Section 11.6.

  	
  Contribution.

  	
   

  	
  56

  
	
  Section 11.7.

  	
  Consequential Damages

  	
   

  	
  57

  
	
  Section 11.8.

  	
  Joint Defense and Cooperation

  	
   

  	
  57

  
	
  ARTICLE XII.

  	
  General and Administrative

  	
   

  	
  58

  
	
  Section 12.1.

  	
  Cooperation

  	
   

  	
  58

  
	
  Section 12.2.

  	
  Consent of Third Parties

  	
   

  	
  59

  
	
  Section 12.3.

  	
  Survival

  	
   

  	
  59

  
	
  Section 12.4.

  	
  Interpretation

  	
   

  	
  59

  
	
  Section 12.5.

  	
  No Third Party Beneficiary

  	
   

  	
  60

  
	
  Section 12.6.

  	
  Notices

  	
   

  	
  60

  
	
  Section 12.7.

  	
  Governing Law; Jurisdiction

  	
   

  	
  62

  
	
  Section 12.8.

  	
  Waiver of Jury Trial

  	
   

  	
  63

  
	
  Section 12.9.

  	
  Specific Performance

  	
   

  	
  63

  
	
  Section 12.10.

  	
  No Assignment; No Amendment; Counterparts

  	
   

  	
  63

  
						

 

 ii
 

 

	
  

  	
   

  	
   

  	
  Page

  
	
  EXHIBITS

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Exhibit A.

  	
  Actuarial Assumptions and Methods for Pension Asset
  Transfer

  	
   

  	
   

  
	
  Exhibit B. Sales
  Commissions Programs

  	
   

  	
   

  
	
  Exhibit C. Short Term
  Incentive Programs

  	
   

  	
   

  
	
  Exhibit 2.1.
  Collective Bargaining Agreements

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULES

  	
   

  	
   

  	
   

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

  	
   

  	
   

  
	
  Schedule 4.1(e).
  Performance and Bonus Opportunities

  	
   

  	
   

  

 

 iii

 

Employee Matters
Agreement

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

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

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

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

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

 

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

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

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

ARTICLE I.

DEFINITIONS

Section 1.1.            Definitions

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

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

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

 2
 

 

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

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

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

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

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

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

“EDP” means the
Verizon Executive Deferral Plan.

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

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

“FairPoint” means
FairPoint Communications, Inc.

“FairPoint Group”
means FairPoint and the FairPoint Subsidiaries.

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

 3
 

 

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

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

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

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

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

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

“FRP” means the
Verizon Flexible Reimbursement Plan.

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

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

“IDP” means the
Verizon Income Deferral Plan.

 4
 

 

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

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

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

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

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

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

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

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

 5
 

 

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

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

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

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

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

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

 6
 

 

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

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

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

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

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

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

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

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

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

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

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

 7
 

 

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

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

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

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

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

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

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

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

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

 8
 

 

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

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

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

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

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

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

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

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

 9
 

 

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

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

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

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

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

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

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

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

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

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

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

 10
 

 

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

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

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

“Verizon” means
Verizon Communications Inc.

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

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

“Verizon Group”
means Verizon and the Verizon Subsidiaries.

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

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

 11
 

 

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

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

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

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

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

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

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

 12
 

 

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

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

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

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

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

“VNE” means
Verizon New England Inc.

Section 1.2.            Capitalized
Terms.  Any other capitalized term
used, but not defined herein, but defined in the Distribution Agreement or the
Merger Agreement, shall have the meaning ascribed thereto in the Distribution
Agreement or the Merger Agreement.

 13
 

 

ARTICLE II.

COLLECTIVE BARGAINING
AGREEMENTS AND OBLIGATIONS

Section 2.1.            Assumption
and Continuation of Agreements

(a)           Distribution

(i)            Prior to the Distribution Date, in
connection with each of the internal restructurings, Internal Spinoffs and the
contributions undertaken by Verizon in contemplation of, and in connection
with, the Contribution, Distribution and Merger, including the Internal
Spinoffs, Internal Restructurings and Contributions to be effected in
accordance with the Distribution Agreement (the “Internal Restructurings”),
Verizon shall cause one or more members of the Verizon Group to take any and
all actions needed to effectuate: (1) the continued uninterrupted
employment of the Represented Employees, in accordance with the NNETO CBAs, by
the appropriate member of the Verizon Group, and (2) the assumption
and uninterrupted continuation of the NNETO CBAs covering the Represented
Employees by the appropriate member of the Verizon Group, including but not
limited to, (i) the continued uninterrupted representation for purposes of
collective bargaining of those Represented Employees by their unions, in
accordance with the NNETO CBAs, with the appropriate member of the Verizon
Group, (ii) the continued uninterrupted compensation of the Represented
Employees in accordance with the NNETO CBAs, and (iii) the continued
uninterrupted benefit coverage of the Represented Employees under the
appropriate Verizon Plans in accordance with the NNETO CBAs.  Without limiting the generality of the
foregoing, Verizon shall cause:

 14
 

 

(1)   VNE to form NNETO and at and from (x)
the time that VNE contributes to NNETO its assets and liabilities associated
with the Spinco Business and its Spinco Employees (including, but not limited
to, Represented Employees) until (y) the Distribution Date, Verizon
shall add and maintain NNETO as a participating company in the Verizon Plans in
which the Represented Employees are eligible to participate and shall also
cause NNETO to, and NNETO shall, (1) employ the Represented
Employees in accordance with the NNETO CBAs, and (2) assume and
honor the NNETO CBAs governing the employment of such Represented Employees,
including but not limited to, (i) recognize the unions representing those
Represented Employees as their collective bargaining representative in
accordance with the NNETO CBAs, (ii) continue uninterrupted the compensation of
the Represented Employees in accordance with the NNETO CBAs, and
(iii) become a participating company in the Verizon Plans in which such
Represented Employees are eligible to participate in accordance with the NNETO CBAs;
and

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

 15
 

 

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

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

(ii)           As of and after the
Distribution Date, Spinco shall:

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

 16
 

 

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

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

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

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

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

As of and
after the Distribution Date, any and all obligations of any member of the
Verizon Group arising under, relating to or resulting from the 

 17
 

 

NNETO CBAs, and the Spinco Mirror Plans,
shall become and be solely the obligations of the Spinco Group and shall be
performed by Spinco and its Subsidiaries. 
Without limiting the generality of the foregoing, as of the Distribution
Date, the appropriate member of the Spinco Group shall have assumed and shall
thereafter honor the NNETO CBAs.

(b)           Merger

(i)            As of and after the
Effective Time, FairPoint shall:

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

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

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

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

 18
 

 

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

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

(c)           Compensation and Benefits
of Represented Employees.  Without limiting the generality of the
foregoing,(i) from
the consummation of each of the steps of the 

 19
 

 

Internal Restructurings
and prior to the
Distribution Date, Verizon, and (ii) as of the Distribution Date,
Spinco and (iii) as of the Effective Time, FairPoint shall each be
responsible to, and shall, assure that the compensation, benefits, hours, terms
and conditions of employment of Represented Employees shall continue to be
governed by the NNETO CBAs.

 20

 

ARTICLE III.

SPINCO PLANS GENERALLY

Section 3.1.            Establishment
of Spinco Plans

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

Section 3.2.            Terms
of Participation by Spinco Employees

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

 21
 

 

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

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

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

ARTICLE IV.

EMPLOYEES

Section 4.1.            Employees

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

 22
 

 

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

(b)           Compensation and
Benefits of Represented Employees. 
Without limiting the generality of anything in this Agreement, the
compensation, benefits, hours, terms 

 23
 

 

and conditions
of employment of Represented Employees shall continue to be determined in
accordance with the applicable NNETO CBAs.

(c)           Non-Termination
of Employment or Benefits.  Except as
otherwise expressly and specifically provided herein, (i) no provision of this
Agreement, the Distribution Agreement or the Merger Agreement, (ii) no actions
or restructurings internal to the Verizon Group or the Spinco Group taken in
contemplation of, or in connection with, this Agreement, the Distribution
Agreement or the Merger Agreement, (iii) no actions taken by or between the
Verizon Group and the Spinco Group at the times of the Internal Restructurings
and Distribution, and (iv) no actions taken by or between the Verizon Group,
the Spinco Group and the FairPoint Group at the times of the Distribution and
Merger, shall be construed to create any right, or accelerate any entitlement,
to any compensation or benefit whatsoever on the part of any employee employed
by any member of the Verizon Group or the FairPoint Group, or to limit the ability of the FairPoint
Group to administer any Spinco Plan in accordance with its terms (subject to
any applicable collective bargaining agreement).  Without limiting the generality of the
foregoing, nothing described above in 4.1(c) shall cause any employee of any
member of the Verizon Group or the Spinco Group, or any Spinco Employee
employed by a member of the FairPoint Group to be deemed to have incurred a
termination of employment or to have created any entitlement to any severance
benefits or the commencement of any other benefits under any Verizon Plan or
any collective bargaining agreement.

(d)           No Right to Continued
Employment.  Subject to the NNETO
CBAs, nothing contained in this Agreement shall confer on any employee of any
member of the Verizon Group or any Spinco Employee any right to continued
employment.  Except as specifically
provided otherwise herein (including, but not limited to, Section 4.1(b) and
4.1(e)), and subject to the NNETO CBAs, this Agreement shall not limit the
ability of FairPoint to change, at any time after the Effective Time and in its
sole discretion, a 

 24
 

 

Spinco
Employee’s position, compensation or benefits for performance-related, business
or any other reasons or require any member of the FairPoint Group to continue
the employment of a Spinco Employee for any particular period of time after the
Effective Time, provided that FairPoint shall bear all liability for any such
termination of employment, and, with respect to any such terminations of or
modification of the terms and conditions of employment of any Spinco Employee
occurring prior to the first anniversary of the Effective Time, shall provide
to any terminated Spinco Employee (other than a Represented Employee) severance
and termination benefits no less favorable in the aggregate than the severance
and termination benefits that are described on Schedule 4.1(d) to this
Agreement.

(e)           Continuation of
Compensation and Benefits for Spinco Employees who Are Not Represented
Employees.  With respect to Spinco
Employees who are not Represented Employees, for a period of one year following
the Effective Time, FairPoint shall, or shall cause another member of the
FairPoint Group, (i) to pay all such non-represented Spinco
Employees at least the same rate of base salary as was paid to each such
non-represented Spinco Employee by the Verizon Group immediately prior to the
Effective Time, (ii) to continue to provide performance and other
bonus opportunities to each such non-represented Spinco Employee that are
identical in all material respects to the performance and other bonus
opportunities described on Schedule 4.1(e) to this Agreement, which were made
available to such non-represented Spinco Employee immediately prior to the
Effective Time, and (iii) to continue to provide each such
non-represented Spinco Employee benefits, under the Spinco Mirror Plans, which
are identical in all material respects to those made available to such
non-represented Spinco Employees under the Verizon Plans immediately prior to
the Effective Time.

(f)            Certain Tax
Matters.  Verizon and FairPoint
hereby agree that, for purposes of social security, unemployment and other U.S.
payroll taxes and to the extent legally permissible, FairPoint, Spinco or NNETO
shall be treated as a successor employer 

 25
 

 

with respect
to each Spinco Employee in the calendar year that contains the Effective
Time.  In connection with the foregoing,
the parties agree to follow the “Alternative Procedures” set forth in Section 5
of Revenue Procedure 2004-53.  The
parties understand and agree that FairPoint, Spinco or NNETO, as the successor
employer, shall assume the entire Form W-2 reporting obligations for such
Spinco Employees for the calendar year that contains the Effective Time,
provided that Verizon shall provide reasonable assistance to FairPoint in
completing such reporting obligations.

Section 4.2.            No
Solicitation of Employees

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

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

 26
 

 

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

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

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

 27
 

 

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

Section 4.3.            Unavailable
Employees.

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

 28
 

 

ARTICLE V.

PENSION PLANS

Section 5.1.            Establishment
of Pension Plans and Trusts

(a)           Spinco Management
Pension Plan and Excess Plan. 
Effective as of the Distribution Date, Spinco or NNETO shall establish
two defined benefit pension plans for the benefit of employees who are not
Represented Employees.  One such plan
will be responsible for benefits of participants and beneficiaries in the
Verizon Management Pension Plan (the “VMPP”) who are Spinco Employees or
are entitled to receive a benefit in respect of a Spinco Employee (the “Spinco
Management Pension Plan”), and the other such plan will be responsible for
benefits of participants and beneficiaries in the Verizon Excess Pension Plan
(the “Excess Plan”) who are Spinco Employees or are entitled to receive
a benefit in respect of a Spinco Employee (the “Spinco Excess Pension Plan”).  Effective as of the Distribution Date, Spinco
or NNETO shall establish the Spinco Trust. 
Spinco or NNETO shall provide FairPoint with a copy of those plans and
such trust at least two months prior to their adoption in order to provide
FairPoint an opportunity to comment on their form.  Spinco and NNETO agree to consult with
FairPoint and, subject to the obligations of the Parties under this Agreement,
to reasonably consider such comments, but FairPoint’s comments shall be
advisory only and Spinco and NNETO shall retain full discretion as to the form
of the plans and trusts.  

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

 29
 

 

(b)           Spinco Union
Pension Plan and Trust.  Effective as
of the Distribution Date, Spinco or NNETO shall establish a defined benefit
pension plan (the “Spinco Union Pension Plan”) and related trust
to provide retirement benefits to Spinco Employees who are Represented Employees
and to persons entitled to receive a benefit in respect of such a Spinco
Employee, and who, in either case, are participants in or beneficiaries under
the Verizon Pension Plan for New York and New England Associates as of the
Distribution Date.  Spinco or NNETO shall
provide FairPoint with a copy of the Spinco Union Pension Plan at least two
monthsprior to its adoption in
order to provide FairPoint an opportunity to comment on its form.  Spinco and NNETO agree to consult with
FairPoint and, subject to the obligations of the Parties under this Agreement,
to reasonably consider such comments, but FairPoint’s comments shall be
advisory only and Spinco and NNETO shall retain full discretion as to the form
of the plan.

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

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

(a)           Assumption of
Liabilities by Spinco Pension Plan. 
Subject to the Pension Plan Asset Allocation specified below, effective
as of the Distribution Date, all Liabilities under the Verizon Pension Plans to
persons who are Spinco Employees and to persons who are entitled to receive a
benefit in respect of such a Spinco Employee shall cease to be Liabilities of
the Verizon Pension Plans and shall be assumed in full and in all respects by
the corresponding Spinco Pension Plan. 
The “corresponding” plan shall be: 
(i) the 

 30
 

 

Spinco
Management Pension Plan with respect to participants in the VMPP; and (ii) the
Spinco Union Pension Plan with respect to participants in the Verizon Pension
Plan for New York and New England Associates, with such determination being
based on employment status (management or union-represented) as of the
Distribution Date.  Effective as of the
Distribution Date, all Liabilities under the Excess Plan to persons who are
Spinco Employees and to persons who are entitled to receive a benefit in respect
of such a Spinco Employee shall cease to be Liabilities of the Excess Plan and
shall be assumed in full and in all respects by the Spinco Excess Pension
Plan.  FairPoint shall be solely
responsible for all ongoing rights of or relating to Spinco Employees for
future participation in the Spinco Pension Plans and the Spinco Excess Pension
Plan.

(b)           Calculation of
Pension Plan Asset Allocation.  As
soon as practicable after the Distribution Date,Verizon’s actuary shall calculate and certify the Pension Plan
Asset Transfer Amount for each Spinco Pension Plan (other than the Spinco
Excess Pension Plan) as of the close of business of the day immediately
preceding the Distribution Date.  With
respect to each such asset transfer, the asset transfer amount shall be equal
to the present value of benefits in respect of Spinco Employees and persons
entitled to receive a benefit in respect of such Spinco Employees on a plan
termination basis, provided that the particular transfer under consideration
satisfies the applicable de minimis rule under the IRS section 414(l)
regulations.  Consistent with the desire
of the Parties that the de minimis rule be satisfied, Verizon’s actuary shall
make its determination regarding satisfaction of the de minimis rule in a
manner that comports with all applicable law and is aimed at a result that
satisfies the applicable de minimis rule, including the use of a permissible
determination date that is in furtherance of such objective.  In the event a particular transfer does not
satisfy the de minimis rule, Verizon’s actuary will perform an allocation under
section 4044 of ERISA to determine the assets from the Verizon Pension Plan in
question that may be transferred to the applicable Spinco Pension Plan.  In the event the amount of assets to be
transferred following the ERISA section 4044 analysis is less than the
Projected Benefit Obligation (“PBO”) for the Spinco participants under 

 31
 

 

consideration,
Verizon will provide a supplemental amount of assets so that the funding in the
Spinco Pension Plan under consideration is equal to the PBO funded-level.  The assumptions to be used with respect to
the foregoing are set forth in Exhibit A hereto entitled Actuarial Assumptions
and Methods for Pension Asset Transfer. 
Notwithstanding the foregoing in this Section 5.2(b), in the event the
present value of the accrued benefits that are to be transferred from the
Verizon Pension Plan for New York and New England Associates (the “North
Accrued Benefits”) can not be transferred in reliance on the applicable de
minimis rule under the IRS section 414(l) regulations, an additional
calculation shall be performed.  Verizon’s
actuary shall subtract $11,700,000 from the North Accrued Benefits and
re-determine the percentage that such adjusted North Accrued Benefits would be
of the assets of such Plan as of the most favorable permissible determination
date.  If the resulting percentage is
equal to or in excess of three percent (3%), then the provisions above that
apply to a transfer that does not satisfy the de minimis rule shall be
followed, i.e., the provisions relating to funding to the PBO funded-level
shall apply.  If, however, the resulting
percentage is less than three percent (3%), then Verizon will provide a supplemental
amount of assets so that the funding in the Spinco Union Pension Plan is equal
to the accrued present value of benefits in respect of Spinco Employees and
persons entitled to receive a benefit in respect of such Spinco Employees as
determined on a plan termination basis using the PBGC Plan Termination
Assumptions under Exhibit A hereto.

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

 32
 

 

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

(c)           Transfer of
Assets to Spinco Pension Trust

(i)            As soon as
practicable after and effective as of the Distribution Date, Verizon shall
cause to be transferred from the master trust established under the Verizon
Pension Plans (the “Verizon Trust”) to a master trust established
in respect of the Spinco Pension Plans (the “Spinco Trust”), an initial
amount of assets (the “Initial Asset Transfer”).  The amount of the Initial Asset
Transfer shall be equal to 80% of the amount the enrolled actuary for such
Verizon Plan determines in good faith to be the approximate Pension Plan Asset
Transfer Amount as of the date of the Initial Asset Transfer.

 33
 

 

(ii)           As soon as practicable after the
final calculation of each Spinco Plan’s Pension Plan Asset Transfer Amount
pursuant to Section 6.2(b), if such amount exceeds the Initial Asset Transfer,
Verizon will cause the applicable Verizon Trust to transfer to the Spinco Trust
(the “Final Asset Transfer”) assets in an amount equal to the Pension
Plan Asset Transfer Amount with respect to each Spinco Pension Plan less the
sum of (A) the Initial Asset Transfer and (B) the
aggregate amount of benefit payments (the “Benefit Payments”) made by
the Verizon Pension Plan in respect of FairPoint Employees from and after the
Distribution Date.  The amount determined
under the preceding sentence shall be increased or decreased, as the case may
be, by the investment return on the applicable amount determined in accordance
with the letter of direction agreed to by the Parties prior to the Effective
Time (the “Letter of Direction”). 
If the sum of the Initial Asset Transfer plus the Benefit Payments
exceeds the Pension Plan Asset Transfer Amount for a Spinco Pension Plan, then
the portion of the Spinco Trust relating to such plan shall return such excess,
increased or decreased by the investment return determined in accordance with
the Letter of Direction from the date of the Initial Asset Transfer (or the
date of the Benefit Payment, as the case may be) to the date of return, to the
portion of the Verizon Trust relating to the corresponding Verizon Pension
Plan.

(iii)          The applicable investment return under
subsection (c)(ii) above and the identification of the types of assets (cash
and/or in kind assets) to be transferred from the Verizon Trust to the Spinco
Trust in either the Initial Asset Transfer or the Final Asset Transfer shall be
determined in accordance with the Letter of Direction, as the same may be
amended by mutual agreement of Verizon and FairPoint prior to the date of such
Final Assets Transfer.  Verizon and
FairPoint shall cooperate in determining what assets are transferred in kind as
part of the Initial Asset Transfer and the Final Asset Transferand Verizon shall not transfer any asset
in kind which FairPoint reasonably determines is not readily 

 34
 

 

tradable or capable of being valued on a
substantial and established market (except as otherwise agreed by the Parties).

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

Section 5.3.            Continuation
of Elections and Application to Spinco Dependents

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

 35
 

 

ARTICLE
VI.

HEALTH
AND WELFARE

Section 6.1.            Assumption
of Health and Welfare

(a)           Verizon
or one or more of its subsidiaries maintain health and welfare plans, including
plans providing active severance and active post-retirement health, dental and
life insurance benefits, for the benefit of eligible Verizon Employees and
certain former employees, including Former Spinco Employees who have retired as
of the date the Merger Agreement is executed (the “Verizon Welfare Plans”).  As of the Distribution Date, each person who
is a Spinco Employee or Spinco Dependent on such date shall cease to be covered
under the Verizon Welfare Plans, except that Verizon and the Verizon Welfare
Plans shall be responsible for medical, dental, disability or life insurance
claims of such Spinco Employees and Spinco Dependents as are specified in
Section 2.1(b)(ii) for Represented Employees, and also for such claims with
respect to all other Spinco Employees and Spinco Dependents on the same basis
as described in Section 2.1(b)(ii) with respect to claims incurred or events
that have occurred prior to the Effective Time. 
For the avoidance of doubt, with respect to any payments due to any
Spinco Employee under the terms of the Verizon short term disability plan, the
obligations to make payments with respect to any period prior to the Effective
Time shall remain with Verizon, and the obligations to make any payments with
respect to any period at or after the Effective Time shall be the sole
responsibility of FairPoint or a Spinco Plan.

(b)           Prior
to the Distribution Date, Verizon and Spinco shall take steps to establish
Spinco Welfare Plans, based on the corresponding Verizon Welfare Plans.  Spinco or NNETO shall provide FairPoint with
a copy of the Spinco Welfare Plans at least four months prior to their adoption
in order to provide FairPoint an opportunity to 

 36
 

 

comment on their form and for use in FairPoint’s preparations for
assuming these plan.  Spinco and NNETO
agree to consult with FairPoint and, subject to the obligations of the Parties
under this Agreement, to reasonably consider such comments, but FairPoint’s
comments shall be advisory only and Spinco and NNETO shall retain full
discretion as to the form of the plans.  Verizon shall or shall cause the
Spinco Group to provide FairPoint with demographic and claims information and
other reasonably requested information related to the Spinco Employee and
Spinco Dependents that will enable FairPoint and the Spinco Group to effect the
operation of such Spinco Welfare Plans following the Effective Time.  As of and immediately after the Distribution
Date, all Liabilities in respect of or relating to such Spinco Employees under
the Verizon Welfare Plans shall cease to be Liabilities of any member of the
Verizon Group or the Verizon Welfare Plans and any and all such Liabilities
shall be assumed as of the Distribution Date by Spinco or NNETO, and the Spinco
Welfare Plans, and as of the Effective Time, by FairPoint, Spinco, NNETO and
the Spinco Welfare Plans. 
Notwithstanding the foregoing, all liabilities associated with Former
Spinco Employees under the Verizon Welfare Plans, and such liabilities that have been retained by the Verizon
plans under Section 6.1(a) above, shall remain with the Verizon Group.

(c)           Except
for the FRP account balances described in Section 6.2(c), nothing in this
Agreement shall require Verizon, any Verizon Group member or any Verizon
Welfare Plan to transfer assets or reserves with respect to the Verizon Welfare
Plans, including, but not limited to, any plan providing severance,
post-retirement health, dental or life insurance benefits, to FairPoint, any
FairPoint Group member or the Spinco Welfare Plans.

 37
 

 

Section 6.2.            Adoption
of Health and Welfare Plans

(a)           Spinco,
as of the Distribution Date, and FairPoint, as of the Effective Time, shall
maintain or shall cause to be maintained for the benefit of eligible Spinco
Employees and Spinco Dependents, health and welfare plans, including plans
providing active severance and active post-retirement health, dental and life
insurance benefits (the “Spinco Welfare Plans”) that are identical in
all material respects to the benefits provided under the corresponding Verizon
Welfare Plan in which such individuals participate immediately prior to the
Distribution Date, and the terms of which have been provided to FairPoint
within four monthsof the
execution of the Merger Agreement.

(b)           Terms
of Participation in FairPoint Welfare Plans.  FairPoint shall cause the Spinco Welfare
Plans to (i) waive all limitations as to preexisting conditions,
exclusions, service conditions and waiting period limitations, and any evidence
of insurability requirements applicable to any such Spinco Employees and Spinco
Dependents other than such limitations, exclusions, and conditions that were in
effect with respect to Spinco Employees and Spinco Dependents as of the
Effective Time, in each case under the corresponding Verizon Welfare Plan and (ii) honor
any deductibles, out-of-pocket maximums and co-payments incurred by Spinco
Employees and Spinco Dependents under the corresponding Verizon Welfare Plan in
satisfying the applicable deductibles, out-of-pocket expenses or co-payments
under such Verizon Welfare Plan for the calendar year in which the Distribution
Date occurs.

(c)           Transfer
of FRP Assets.  Verizon
will make available to FairPoint, not less than forty-five calendar days prior
to the Distribution Date, a list of individuals who will become or continue to
be Spinco Employees as of the Effective Time and who are participants in the
FRP (the “FRP Participants”), together with the elections made prior to
the Distribution Date with respect to such accounts through the Distribution
Date.

 38
 

 

(i)            FairPoint shall
take all actions necessary and legally permissible to ensure that as of the
Effective Time, it includes the FRP Participants in the Spinco Plan that
constitutes a Code Section 125 plan and any flexible spending arrangements
thereunder (“Spinco’s
FSA”).  FairPoint shall
further take all actions necessary and legally permissible to amend Spinco’s
FSA to provide that as of the Effective Time and for the plan year in which the
Effective Time occurs, but not for any specific time thereafter, subject to any
collective bargaining obligations, (A) the FRP Participants shall
become participants in Spinco’s FSA as of the beginning of the FRP’s plan year
and at the level of coverage provided under the FRP, (B) the FRP
Participants’ salary reduction elections shall be taken into account for the
remainder of Spinco’s FSA plan year as if made under Spinco’s FSA; and (C) Spinco’s
FSA shall reimburse medical expenses incurred by the FRP Participants at any
time during the FRP’s plan year (including claims incurred prior to the
Effective Time but unpaid prior to the Effective Time), up to the amount of the
FRP Participants’ election and reduced by amounts previously reimbursed by the
FRP.

(ii)           Verizon shall take
all actions necessary and legally permissible to amend the FRP to provide that
the FRP Participants shall cease to be eligible for reimbursements from the FRP
as of the Effective Time.

(iii)          As soon as
practicable following the Effective Time, Verizon shall transfer to FairPoint,
and FairPoint agrees to accept, those amounts (plus all related individual
participant records and accountings) which represent the debit and credit
balances under the FRP of the FRP Participants and the transfer of such amounts
shall take into account on a net basis participants’ payroll deductions and
claims paid through the Effective Time. 
Verizon represents and covenants that as of the Effective Time it has or
shall have properly withheld from the pay of FRP Participants all amounts in
accordance with their FRP elections.

 39
 

 

Section 6.3.            COBRA
and HIPAA

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

Section 6.4.            Workers’
Compensation Claims

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

 40

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

Section 6.5.            Leave
of Absence Programs

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

Section 6.6.            Time-Off
Benefits

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

 41
 

ARTICLE VII.

Savings
Plans

Section 7.1.              Establishment of the Spinco
Savings Plan

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

Section 7.2.            Assumption
of Liabilities and Transfer of Assets

(a)           Effective as of the
Effective Time, but subject to the asset transfer specified in
Section 7.2(b) below, each Spinco Savings Plan shall assume and be solely
responsible for all Liabilities for or relating to Spinco Employees under the
applicable Verizon Savings Plan.  FairPoint
shall be solely responsible for all ongoing rights of or

 42
 

relating to
Spinco Employees for future participation (including the right to make
contributions through payroll deductions) in the Spinco Savings Plans.

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

 43
 

ARTICLE VIII.

Equity
Based Incentive Awards

Section 8.1.            General
Treatment of Outstanding Awards

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

Section 8.2.            Outstanding
Options

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

 44
 

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

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

Section 8.3.            Treatment
of Outstanding Verizon RSU and PSU Awards

(a)           Generally.  Each individual who holds an Outstanding
Award that is a restricted stock unit (each, an “RSU”) or a Performance
Share Unit (each, a “PSU”) that relates to Verizon Common Stock and that
was granted under a Verizon Plan, shall continue to hold such RSU or PSU after
the Effective Time under such Verizon Plan, provided that with respect to each
such outstanding award, there shall be credited on behalf of each holder
thereof a dividend equivalent amount equal to the opening cash value on the day
following the completion of the Distribution, of the number of shares of Spinco
Common Stock that would have been distributed to such holders had each such RSU
or PSU award been outstanding shares of Verizon Common Stock.

(b)           Deferral
Elections.  Each and every deferral
election made by any Spinco Employee with respect to any RSU or PSU shall be
cancelled in order to avoid any potential adverse taxation to the recipient
thereof under Section 409A of the Code.

 45
 

(c)           Performance
Conditions/Board Approval. 
Notwithstanding anything else contained herein to the contrary, nothing
in this Section 8 shall be construed or interpreted to modify, waive, eliminate
or otherwise alter any performance conditions required to be satisfied for a
Spinco Employee or employee of any member of the Verizon Group to become vested
in any Outstanding Award (including, but not limited to, any PSU).  Moreover, any requirement for approval by the
Verizon Board or a duly authorized committee thereof of the level of
achievement against any such performance restrictions applicable to such
Outstanding Award shall continue to apply on the same basis as they did prior
to the Effective Time.

(d)           Vesting of PSUs.  Any PSU or any Restricted Stock Unit granted
by Verizon in the 2005, 2006 or 2007 calendar year that is held by a Spinco
Employee at the Effective Time shall immediately vest in full on the
Distribution Date, subject, if applicable, to the achievement of any applicable
performance criteria and the approval thereof by the Verizon Board or a duly
authorized committee thereof.  Each such
award will be paid in the ordinary course during the first 75 days of the first
quarter of the calendar year next following the applicable performance period
for which, and subject to the extent to which, it becomes earned.

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

 46
 

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

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

Section 8.5             Treatment of Outstanding
FairPoint Equity Awards.

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

 47
 

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

ARTICLE IX.

Short
Term Incentives and Sales Commission Programs

Section 9.1.            Incentive
and Commission Plans

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

 48
 

ARTICLE X.

Deferred
Compensation Plans

Section 10.1.          Generally

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

Section 10.2.          Vesting
and Payout of Balances

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

ARTICLE XI.

ASSUMPTION OF LIABILITIES

Section 11.1.          Assumption
of Liabilities

(a)           By Spinco.  Not later than the Distribution Date, except
as otherwise expressly provided for in this Agreement, Spinco shall or shall
cause a member of the Spinco Group or a Spinco Plan to assume, perform, and
discharge all of the following, regardless of when or where such Liabilities
arose or arise or are incurred:

 49
 

(i)            all Liabilities to or relating to
Spinco Employees and their dependents and beneficiaries, to the extent relating
to, arising out of or resulting from employment with any member of the Verizon
Group or the Spinco Group on or prior to the Distribution Date, including all
liabilities governed by the NNETO CBAs; and

(ii)           all other Liabilities relating to, or
arising out of, or resulting from obligations, liabilities, and
responsibilities expressly assumed or retained by Spinco or a member of the
Spinco Group pursuant to this Agreement or the NNETO CBAs.

(b)           By FairPoint.  At the Effective Time, FairPoint shall or
shall cause a member of the FairPoint Group or a FairPoint or Spinco Plan to
assume, perform, and discharge all Spinco Liabilities, regardless of when or
where such Liabilities arose or arise or are incurred.  To the extent that any FairPoint Subsidiary
is responsible for any of the Spinco Liabilities, FairPoint shall be jointly
and severally liable for the payment of such Liabilities by such FairPoint
Subsidiary.

(c)           By Verizon.  Verizon shall or shall cause the applicable
Verizon Plan or Verizon Group member to retain and discharge all of the
following:

(i)            all Liabilities to or relating to
Retained Employees and Former Spinco Employees, and any individuals who are not
Spinco Employees (and the foregoing’s dependents and beneficiaries), to the
extent relating to, arising out of or resulting from former, present, or future
employment with the Verizon Group, including all liabilities governed by the
collective bargaining agreements that cover Retained Employees, Former Spinco
Employees, and any individuals who are not Spinco Employees (and the foregoing’s
dependents and beneficiaries);

 50
 

(ii)           all Liabilities with respect to
Outstanding Awards; and

(iii)          all Liabilities under the EDP or IDP.

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

(d)           Allocation of
Liabilities among Verizon, Spinco and FairPoint with respect to grievances and
demands for arbitration pending as of the Effective Time shall be as set forth
in Sections 11.1(a), (b) and (c). 
Verizon shall retain liability for such claims relating solely to
Verizon Employees or the Verizon Business and FairPoint shall assume liability
for such claims relating solely to Spinco or the Spinco Business.

(e)           With respect to
grievances and demands for arbitrations pending as of the Effective Time that
relate to both Verizon Employees and Spinco Employees or to both the Spinco
Business and the Verizon Business or to both Verizon and FairPoint, Verizon and
FairPoint, each acting reasonably, shall negotiate the terms of a joint defense
agreement in a manner that is consistent with the terms of the joint defense
agreement to be negotiated pursuant to Section 7.27 of the Merger
Agreement.  The joint defense agreement
will set forth the procedures for defending and resolving such grievances and
demands for arbitration on a basis that provides for the active involvement and
cooperation of each of Verizon and FairPoint, it being understood that lead
counsel defending such litigation shall be mutually agreed to by Verizon and
FairPoint (if such counsel was not selected prior to the Effective Time) and
that neither Verizon nor

 51
 

FairPoint
shall have the authority to bind the other party in any settlement of such
matters without the written consent of such other party.  The Parties agree that such agreement shall
incorporate an equitable procedure for limiting the liability of an indemnity
Party in the event a settlement offer is accepted by such Party and rejected by
the counterparty, taking into account the Party that is most likely to suffer the
greater amount of Losses (including for such purposes payments hereunder) or
infringement of management rights, and a more adverse settlement or resolution
results.  In connection with the
negotiation of the joint defense agreement, the Parties also agree to establish
a reasonable and equitable basis for allocating any detriment imposed by any
such settlement or order that relates to both the Verizon Employees and the
Spinco Employees or to both the Verizon Business and the Spinco Business or to
both the Verizon Group and the FairPoint Group.

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

Section 11.2.          Reimbursement

(a)           By FairPoint.  From time to time after the Effective Time,
FairPoint shall promptly reimburse Verizon, but in no event more than fifteenbusiness days after delivery by Verizon of
an invoice therefor containing reasonable substantiating documentation of such
costs and expenses, for the cost of any obligations or Liabilities that Verizon
or a Verizon Plan elects to, or is compelled to, pay or otherwise satisfy, that
are or that pursuant to this Agreement have become, the responsibility of FairPoint
or any FairPoint Subsidiary; provided, however, that if payment
in respect of any such Liability

 52
 

is made by a
Verizon Plan, FairPoint or the appropriate FairPoint Plan shall reimburse the
Verizon Plan directly.

(b)           By Verizon.  From time to time after the Effective Time,
Verizon shall promptly reimburse FairPoint, but in no event more than fifteen
business days after delivery by FairPoint of an invoice therefor containing
reasonable substantiating documentation of such costs and expenses, for the
cost of any obligations or Liabilities that FairPoint or a FairPoint Plan
elects to, or is compelled to, pay or otherwise satisfy, that are or that
pursuant to this Agreement have become, the responsibility of Verizon; provided,
however, that if payment in respect of any such Liability is made by a
FairPoint Plan, Verizon or the appropriate Verizon Plan shall reimburse such
FairPoint Plan directly.

Section 11.3.          Indemnification

(a)           FairPoint and any
member of the FairPoint Group responsible for operating the Spinco Business,
shall indemnify, defend and hold harmless the Verizon Indemnitees from and
against all Indemnifiable Losses arising out of or due to (i) the
failure of any member of the FairPoint Group to pay, perform, discharge or
satisfy any liabilities assumed in 11.1(a) and (b) of this Agreement (other
than any Liabilities which arise due to the failure of Verizon to satisfy its
obligations under Article VIII hereof), and (ii) any other breach
of the duties or obligations of any member of the FairPoint Group, as set forth
in this Agreement.  FairPoint shall take
commercially reasonable efforts to procure insurance against any Indemnifiable
Losses arising from the obligations set forth in this Agreement.

(b)           Verizon shall
indemnify, defend and hold harmless the FairPoint Indemnitees from and against
all Indemnifiable Losses arising out of or due to (i) the

 53
 

failure of any
member of the Verizon Group to pay, perform, discharge or satisfy any Verizon
Liabilities (other than Verizon Liabilities which arise due to the failure of
any member of the FairPoint Group or any FairPoint Plan to satisfy any
liabilities assumed in 11.1(a) and (b) of this Agreement) and (ii) any
other breach of the duties and obligations of any member of the Verizon Group,
as set forth in this Agreement.  Verizon
shall take commercially reasonable efforts to procure insurance against any
Indemnifiable Losses arising from the obligations set forth in this Agreement.

Section 11.4.          Procedures
for Indemnification for Third-Party Claims.

Except
as specifically set forth in this Agreement, in the event that Verizon or any
other Verizon Indemnitee shall seek indemnification in respect of any FairPoint
Liabilities, or FairPoint or any FairPoint Indemnitee shall seek
indemnification in respect of any Verizon Liabilities, such person shall comply
with and follow the procedures regarding indemnification set forth in Article X
of the Merger Agreement, which shall apply to claims for indemnification
hereunder in the same manner as though such claims were eligible for
indemnification under the Merger Agreement, but assuming that such claims were
not subject to any limitation on the ability to claim indemnification under
such Merger Agreement.

Section 11.5.          Reductions
for Insurance Proceeds and Other Amounts.

(a)           The amount that any
Indemnifying Party is or may be required to pay to any Indemnitee pursuant to
this Article XI shall be reduced (retroactively or prospectively) by (i) any
insurance proceeds or other amounts actually recovered from third parties by or
on behalf of such Indemnitee in respect of the related Indemnifiable Losses
arising from the obligations set forth in this Agreement (net of all costs of
recovery, including deductibles, co-payments or other payment obligations) and
(ii) any

 54
 

tax benefit
actually realized by the Indemnitee in respect of the related Indemnifiable
Losses arising under the obligations set forth in this Agreement.  The existence of a claim by an Indemnitee for
insurance or against a third party in respect of any Indemnifiable Loss or the
availability of potential tax benefits shall not, however, delay or reduce any
payment pursuant to the indemnification provisions contained herein and
otherwise determined to be due and owing by an Indemnifying Party.  The Indemnifying Party shall make payment in
full of such amount so determined to be due and owing by it and, if, and to the
extent that, there exists a claim against any third party (other than an
insurer) in respect of such Indemnifiable Loss, the Indemnitee shall assign
such claim against such third party to the Indemnifying Party.  Any tax benefit actually received by an
Indemnified Party shall be paid over to the Indemnifying Party to the extent
such tax benefit relates to an Indemnifiable Loss for which indemnification has
already been received.  Notwithstanding
any other provisions of this Agreement, it is the intention of the Parties
hereto that no insurer or any other third party shall be (i) entitled
to a benefit it would not be entitled to receive in the absence of the
foregoing indemnification provisions or (ii) relieved of the
responsibility to pay any claims for which it is obligated.  If an Indemnitee shall have received the
payment required by this Agreement from an Indemnifying Party in respect of any
Indemnifiable Losses and shall subsequently actually receive insurance
proceeds, tax benefits or other amounts in respect of such Indemnifiable
Losses, then such Indemnitee shall hold such insurance proceeds in trust for
the benefit of such Indemnifying Party and shall promptly pay to such
Indemnifying Party a sum equal to the amount of such insurance proceeds, tax
benefits or other amounts actually received, up to the aggregate amount of any
payments received from such Indemnifying Party pursuant to this Agreement in
respect of such Indemnifiable Losses.

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

 55
 

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

Section 11.6.          Contribution

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

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

 56
 

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

Section 11.7.          Consequential
Damages

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

Section 11.8.          Joint
Defense and Cooperation

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

 57
 

ARTICLE XII.

General
and Administrative

Section 12.1.          Cooperation

(a)           General.  Each of the Parties hereto will use its
commercially reasonable efforts to promptly take, or cause to be taken, any and
all actions and to do, or cause to be done, any and all things necessary proper
and advisable under applicable laws and regulations to consummate the
transactions contemplated by this Agreement, including without limitation,
adopting plans or plan amendments.  Each
of the Parties hereto shall cooperate fully on any issue relating to the
transactions contemplated by this Agreement for which the other Party seeks a
determination letter or any other filing, consent, or approval with respect to
governmental authorities regarding a benefit plan.

(b)           Cooperation in Benefits, Plan, and
Other Employee Transition.  Without
limitation, the Parties’ cooperation under this Agreement shall include Verizon
(and its employees and agents) acting to provide FairPoint (and its employees
and agents) with all information (including, without limitation, plan
documentation, names of employees anticipated to be assigned to Spinco and
their respective work status, demographics and data, and underwriting and
risk-assessment information and periodic updates on the foregoing) that is
reasonably requested by FairPoint in connection with establishing Spinco’s
ongoing benefit plans and assessing appropriate insurances for the period on
and after the Distribution Date and that is reasonably available to Verizon
after taking commercially reasonable efforts to obtain such information. Such
information may be requested by FairPoint at any time following the date which
is six months prior to the anticipated Distribution Date, and shall be provided
by Verizon or a Verizon agent as soon as reasonably practicable without
incurring undue expense and in a de-identified

 58
 

format to the extent
necessary to comply with privacy provisions of federal or applicable state law.

Section 12.2.          Consent
of Third Parties

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

Section 12.3.          Survival

This Agreement shall
survive the Effective Time.

Section 12.4.          Interpretation

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

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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 or arrangement described in or
contemplated by this Agreement and each person (and any beneficiary thereof)
shall be entitled to look only to the express terms of any such plan, program
or arrangement for his, her or its rights thereunder.

(b)           Nothing in this
Agreement shall create any right of a Person to object or to refuse to assent
to the assumption of or succession to, by any member of the Spinco Group or the
FairPoint Group, any benefit plan, collective bargaining agreement or other
agreement relating to conditions of employment, termination of employment,
severance or employee benefits, nor shall this Agreement be construed as
recognizing that any such rights exist.

(c)           Nothing in this
Agreement shall amend or shall be construed to amend any Plan, program or
arrangement described in or contemplated by this Agreement (other than to
change the sponsor of a plan in accordance with the express terms hereof).

Section 12.6.          Notices

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

 60
 

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

(a)           If to Spinco (prior
to the Effective Time) or Verizon, to:

Verizon Communications Inc. 

140 West Street

New York, NY 10007

Facsimile:  (908) 766-3813

Attn:  Marianne Drost, Esq.

Senior Vice President,
Deputy General Counsel and 

Corporate Secretary

and

Verizon Communications Inc. 

One Verizon Way

Basking Ridge, NJ 07920-1097

Facsimile:  (908) 696-2068

Attn: 
Dale Chamberlain, Esq.

With copies to:

Debevoise & Plimpton
LLP

919 Third Avenue

New York, NY 10022

Attn:  Kevin M. Schmidt

(b)           If to FairPoint, to:

FairPoint Communications, Inc.

521 E. Morehead St., Ste. 250

Charlotte, NC 28202

Facsimile:  704.344.1594

Attn:  Peter G. Nixon

Chief Operating Officer

and

FairPoint Communications, Inc.

521 E. Morehead St., Ste. 250

Charlotte, NC 28202

Facsimile: 704.344.1594

Attn:  Shirley J. Linn

Executive Vice President and General Counsel

 61
 

With copies to
(which shall not constitute notice):

Paul, Hastings, Janofsky
& Walker LLP

75 East 55th Street

New York, New York 10022

Facsimile No.: (212)
230-7700

Attn:  Thomas E. Kruger

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

Three Wachovia Center

401 South Tryon Street,
Suite 3000

Charlotte, NC 28202

Facsimile No.:

Attn:  Heloise C. Merrill

Section 12.7.          Governing
Law; Jurisdiction.  This Agreement
and the legal relations between the parties hereto shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to the conflict of laws rules thereof to the extent such rules would require
the application of the law of another jurisdiction.  The state or federal courts located within
the City of New York shall have exclusive jurisdiction over any and all
disputes between the parties hereto, whether in law or equity, arising out of
or relating to this agreement and the agreements, instruments and documents
contemplated hereby and the parties consent to and agree to submit to the
exclusive jurisdiction of such courts. 
Each of the Parties hereby waives and agrees not to assert in any such
dispute, to the fullest extent permitted by applicable law, any claim that (i) such
Party is not personally subject to the jurisdiction of such courts, (ii) such
party and such Party’s property is immune from any legal process issued by such
courts or (iii) any litigation or other proceeding commenced in
such courts is brought in an inconvenient forum.

 62
 

Section 12.8.          Waiver
of Jury Trial.

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

Section 12.9.          Specific
Performance.

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

Section 12.10.        No
Assignment; No Amendment; Counterparts

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

 63
 

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

	
  

  	
   

  	
   

  	
   

  	
  VERIZON COMMUNICATIONS INC.

  
	
   

  	
   

  	
  /s/ John W. Diercksen

  
	
   

  	
   

  	
  By:

  	
  John W. Diercksen

  
	
   

  	
   

  	
  Its:

  	
  Executive Vice President—Strategy,

  
	
   

  	
   

  	
   

  	
  Development and Planning

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  NORTHERN NEW ENGLAND SPINCO,

  	 

	
   

  	
   

  	
  INC. 

  
	
   

  	
   

  	
  /s/ Stephen E. Smith

  
	
   

  	
   

  	
  By:

  	
  Stephen E. Smith

  
	
   

  	
   

  	
  Its:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  FAIRPOINT COMMUNICATIONS, INC.

  
	
   

  	
   

  	
  /s/ Eugene B. Johnson

  
	
   

  	
   

  	
  By:

  	
  Eugene B. Johnson

  
	
   

  	
   

  	
  Its:

  	
  Chief Executive Officer

  
											

 

 64

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