Document:

Exhibit
10.1

EXECUTION COPY

TRANSITION SERVICES AGREEMENT

by and among

VERIZON INFORMATION TECHNOLOGIES LLC,

NORTHERN NEW ENGLAND TELEPHONE OPERATIONS INC.,

ENHANCED COMMUNICATIONS OF NORTHERN NEW ENGLAND INC.

and

FAIRPOINT COMMUNICATIONS, INC.

January 15, 2007

	
  Table of Contents

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  I

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  DEFINITIONS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  II

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TRANSITION
  SERVICES

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  2.1

  	
   

  	
  Transition Services and Fees

  	
   

  	
  7

  
	
  2.2

  	
   

  	
  Third-Party Vendor Costs

  	
   

  	
  8

  
	
  2.3

  	
   

  	
  Special Services and Fees

  	
   

  	
  8

  
	
  2.4

  	
   

  	
  Schedule B Fee

  	
   

  	
  9

  
	
  2.5

  	
   

  	
  Service Administration

  	
   

  	
  9

  
	
  2.6

  	
   

  	
  Supplier to Pay Its Affiliates and Vendors

  	
   

  	
  9

  
	
  2.7

  	
   

  	
  Supplier Cutover Planning Services

  	
   

  	
  9

  
	
  2.8

  	
   

  	
  Performance by Buyers and FairPoint

  	
   

  	
  9

  
	
  2.9

  	
   

  	
  Services Not to Be Withheld

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  III

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SCOPE
  OF SERVICES; CHANGES

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  3.1

  	
   

  	
  General Scope

  	
   

  	
  10

  
	
  3.2

  	
   

  	
  Changes in Scope

  	
   

  	
  11

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  IV

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  CUTOVER
  REPORTS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  4.1 

  	
   

  	
  Cutover Plan

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  V

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  THIRD-PARTY
  INTELLECTUAL PROPERTY

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  5.1

  	
   

  	
  Intellectual Property

  	
   

  	
  14

  
	
  5.2

  	
   

  	
  Obtaining Waivers or Licenses

  	
   

  	
  15

  
	
  5.3

  	
   

  	
  Alternatives

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  VI

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PAYMENT
  FOR TRANSITION SERVICES

  	
   

  	
   

  
										

 

 i
 

 

	
  

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  6.1

  	
   

  	
  Payment Upon Termination

  	
   

  	
  17

  
	
  6.2

  	
   

  	
  Closing Date Service Payments

  	
   

  	
  17

  
	
  6.3

  	
   

  	
  Subsequent Service Invoices and Payment.

  	
   

  	
  18

  
	
  6.4

  	
   

  	
  Invoices

  	
   

  	
  18

  
	
  6.5

  	
   

  	
  Late Payment

  	
   

  	
  18

  
	
  6.6

  	
   

  	
  Surviving Obligations

  	
   

  	
  19

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  VII

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SERVICE
  LEVEL COMMITMENTS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  7.1

  	
   

  	
  General

  	
   

  	
  19

  
	
  7.2

  	
   

  	
  Supplier Cooperation

  	
   

  	
  19

  
	
  7.3

  	
   

  	
  Correction

  	
   

  	
  19

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  VIII

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  PERSONNEL
  AND SYSTEMS PROVIDING TRANSITION SERVICES

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  8.1

  	
   

  	
  Personnel

  	
   

  	
  20

  
	
  8.2

  	
   

  	
  Intellectual Property, Equipment and Systems

  	
   

  	
  20

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  IX

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  INTENTIONALLY
  OMITTED

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  X

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EMPLOYMENT
  OF CONTRACTORS OR THIRD PARTIES

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  10.1

  	
   

  	
  Subcontractors

  	
   

  	
  20

  
	
  10.2

  	
   

  	
  Subcontractor Payments

  	
   

  	
  21

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XI

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SINGLE
  POINT OF CONTACT; DISPUTE RESOLUTION

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  11.1

  	
   

  	
  Single Point of Contact

  	
   

  	
  21

  
	
  11.2

  	
   

  	
  Dispute Resolution

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  XII

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  POLICIES,
  PROCEDURES AND TRAINING

  	
   

  	
   

  
									

 

 ii
 

 

	
  

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  12.1

  	
   

  	
  Policies and Procedures

  	
   

  	
  22

  
	
  12.2

  	
   

  	
  Training

  	
   

  	
  22

  
	
  12.3

  	
   

  	
  No Warranty

  	
   

  	
  22

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XIII

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  TERM

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  13.1

  	
   

  	
  Term

  	
   

  	
  22

  
	
  13.2

  	
   

  	
  Full Term Cutover Notice

  	
   

  	
  23

  
	
  13.3

  	
   

  	
  Notice of Readiness for Early Cutover in Respect of
  Schedule A, Schedule C and Schedule D Services.

  	
   

  	
  23

  
	
  13.4

  	
   

  	
  Notice of Readiness for Early Cutover in Respect of
  Schedule A Services and Schedule D Services Only

  	
   

  	
  24

  
	
  13.5

  	
   

  	
  Notice of Readiness for Early Cutover in Respect of
  Schedule C Services Only

  	
   

  	
  24

  
	
  13.6

  	
   

  	
  Cutover Date Notice

  	
   

  	
  24

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XIV

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  TERMINATION

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  14.1

  	
   

  	
  Termination of Agreement.

  	
   

  	
  25

  
	
  14.2

  	
   

  	
  Post Expiration Continuation of Services

  	
   

  	
  26

  
	
  14.3

  	
   

  	
  Survival

  	
   

  	
  26

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XV

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  LIMITATION
  ON LIABILITIES

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  15.1

  	
   

  	
  Limitation on Liabilities

  	
   

  	
  26

  
	
  15.2

  	
   

  	
  No Warranties; No Special Damages

  	
   

  	
  27

  
	
  15.3

  	
   

  	
  Exceptions to Limitations

  	
   

  	
  27

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XVI

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  INDEMNIFICATION

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  16.1

  	
   

  	
  Indemnification by Surviving Corporation

  	
   

  	
  27

  
	
  16.2

  	
   

  	
  Indemnification by Supplier

  	
   

  	
  28

  
	
  16.3

  	
   

  	
  Tax Indemnification

  	
   

  	
  28

  
	
  16.4

  	
   

  	
  Indemnification Procedure- Defense of Claims.

  	
   

  	
  28

  
	
  16.5

  	
   

  	
  Surviving Liability.

  	
   

  	
  30

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  XVII

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TAXES

  	
   

  	
   

  
											

 

 iii
 

 

	
  

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  17.1

  	
   

  	
  Taxes

  	
   

  	
  31

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XVIII

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  RECORDS;
  ACCESS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  18.1

  	
   

  	
  Records

  	
   

  	
  31

  
	
  18.2

  	
   

  	
  Access to Books, Records, Personnel

  	
   

  	
  32

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XIX

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  DISPUTE
  RESOLUTION

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  19.1

  	
   

  	
  General

  	
   

  	
  32

  
	
  19.2

  	
   

  	
  Initiation

  	
   

  	
  32

  
	
  19.3

  	
   

  	
  Arbitration Request

  	
   

  	
  33

  
	
  19.4

  	
   

  	
  Injunctive Relief and Specific Performance.

  	
   

  	
  33

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XX

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  PLANT
  WORK RULES AND RIGHT OF ACCESS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  20.1

  	
   

  	
  Compliance

  	
   

  	
  34

  
	
  20.2

  	
   

  	
  Access to Facilities

  	
   

  	
  34

  
	
  20.3

  	
   

  	
  Computer Matters

  	
   

  	
  34

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XXI

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  INSURANCE

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  21.1

  	
   

  	
  Coverage

  	
   

  	
  35

  
	
  21.2

  	
   

  	
  Self-insurance

  	
   

  	
  35

  
	
  21.3

  	
   

  	
  Rating

  	
   

  	
  35

  
	
  21.4

  	
   

  	
  Subrogation

  	
   

  	
  35

  
	
  21.5

  	
   

  	
  Indemnification

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  XXII

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MISCELLANEOUS

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  22.1

  	
   

  	
  Notices

  	
   

  	
  36

  
	
  22.2

  	
   

  	
  Assignment; Exclusivity

  	
   

  	
  38

  
	
  22.3

  	
   

  	
  Amendments

  	
   

  	
  38

  
	
  22.4

  	
   

  	
  Headings/Captions

  	
   

  	
  38

  
	
  22.5

  	
   

  	
  Entire Agreement

  	
   

  	
  38

  
	
  22.6

  	
   

  	
  Waiver

  	
   

  	
  39

  
											

 

 iv
 

 

	
  

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  22.7

  	
   

  	
  Counterparts

  	
   

  	
  39

  
	
  22.8

  	
   

  	
  Governing Law

  	
   

  	
  39

  
	
  22.9

  	
   

  	
  Further Assurances

  	
   

  	
  40

  
	
  22.10

  	
   

  	
  Severability

  	
   

  	
  40

  
	
  22.11

  	
   

  	
  No Third-Party Beneficiary

  	
   

  	
  40

  
	
  22.12

  	
   

  	
  Independent Contractor

  	
   

  	
  40

  
	
  22.13

  	
   

  	
  Governing Provisions

  	
   

  	
  40

  
	
  22.14

  	
   

  	
  Force Majeure

  	
   

  	
  41

  
	
  22.15

  	
   

  	
  Confidentiality

  	
   

  	
  41

  

 

 v

TRANSITION SERVICES
AGREEMENT

Transition Services Agreement, dated as of January 15,
2007, by and among Verizon Information Technologies LLC (“Supplier”),
Northern New England Telephone Operations Inc. and Enhanced Communications of
Northern New England Inc. (collectively, “Buyers”) and FairPoint
Communications, Inc. FairPoint (“FairPoint” and following the Closing,
the “Surviving Corporation”).

RECITALS

WHEREAS, Verizon
Communications Inc., Northern New England Spinco Inc., and FairPoint have
entered into an Agreement and Plan of Merger, dated as of the date hereof (the “Merger
Agreement”), pursuant to which FairPoint will be the surviving entity in a
merger (“Merger”) with Northern New England Spinco Inc.; and Verizon
Communications Inc. and Northern New England Spinco Inc. have entered into a
Distribution Agreement, dated as of the date hereof (the “Distribution
Agreement”);

WHEREAS, Buyers will be,
after the consummation of the Merger, subsidiaries of the Surviving
Corporation;

WHEREAS, after the
Merger, the Surviving Corporation and Buyers will operate certain businesses
including, but not limited to, businesses which provide local exchange and long
distance telecommunications services in the States of Maine, New Hampshire and
Vermont which businesses were formerly operated by Affiliates of Supplier;

WHEREAS, Supplier and its
Affiliates have employees with expertise and capabilities to provide the
Transition Services described herein and in the attached Schedules; and

WHEREAS, Buyers, FairPoint
and Supplier (each, a “party” and collectively, the “parties”)
desire to enter into an agreement whereby Supplier and its Affiliates, on the
terms and conditions set forth in this Agreement, will provide certain
Transition Services to the Buyers exclusively for the benefit of the Spinco
Business and not for the benefit of FairPoint’s or Surviving Corporation’s
other Affiliates.

AGREEMENT

NOW THEREFORE, in consideration of the mutual promises
and covenants contained herein, the parties agree as follows.

ARTICLE I

DEFINITIONS

Capitalized terms used in this Agreement or its
Schedules but not defined herein or therein shall have the meanings given them
in the Merger Agreement.  Other
capitalized terms, as used herein, have the meanings set forth below or
elsewhere in this Agreement.

“Agreement” means this Transition Services
Agreement, together with the Schedules attached hereto and made a part hereof.

“Applicable Rate” means the three-month LIBOR
rate published on Telerate Page 3750 as of 11:00 a.m. London time, on the date
which is two days prior to the date such rate is determined less 10 basis
points, such rate to be reset every 90 days.

“Approved Third-Party Intellectual Property”
has the meaning set forth in Section 5.1(ii) hereto.

“Buyers” has the meaning set forth in the
preamble hereto.

“Change of Control” means (i) any
transaction or series of transactions in which any person or group (within the
meaning of Rule 13d-5 under the Securities Exchange Act and Sections 13(d) and
14(d) of the Securities Exchange Act) that is a direct or indirect “beneficial
owner” (as defined in Rule 13d-3 under the Securities Exchange Act), acquires
by way of a stock issuance, stock purchase, tender offer, merger, consolidation
or other business combination or otherwise, greater than 50% of the total
voting power entitled to vote in the election of directors of either of the
Buyers, or the Surviving Corporation, (ii) any merger,
consolidation, reorganization or other business combination with a Person in
which either of the Buyers or the Surviving Corporation does not survive, (iii) any
merger, consolidation, reorganization or other business combination in which
either of the Buyers or the Surviving Corporation survives, but the shares of
common stock outstanding of either of the Buyers or Surviving Corporation or
its ultimate controlling Affiliate immediately prior to such merger,
consolidation, reorganization or other business combination represent 50% or
less of the voting power of either of the Buyers or the Surviving Corporation
after such merger, consolidation, reorganization or other business combination
and (iv) any transaction or series of transactions in which assets
comprising more than 50% of the total assets of either of the

 2
 

Buyers or Surviving Corporation and its Subsidiaries (in
value) are sold to another Person.

“Change Request” has the meaning set forth in
Section 3.2(b) hereto.

“Conforming Change” has the meaning set forth
in Section 3.2(a) hereto.

“Contributing Companies” has the meaning set
forth in the Distribution Agreement.

“Cutover” has the meaning set forth in Section
4.1(b) hereto.

“Cutover Plan” has the meaning set forth in
Section 4.1(e) hereto.

“Cutover Planning Committee” has the meaning
set forth in Section 4.1(a) hereto.

“Direct Claim” has the meaning set forth in
Section 16.4(b).

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

“FairPoint” has the meaning set forth in the
preamble hereto.

“FairPoint Cutover Preparation Tasks” has the
meaning set forth in Section 4.1(f).

“Final Cutover Date” has the meaning set forth
in Section 13.6 hereto.

“Fixed Monthly Service Fee” has the meaning set
forth in Section 2.1(a) hereto.

“Force Majeure Event” has the meaning set forth
in Section 22.14 hereto.

“Indemnitee” means a Supplier Indemnitee or a FairPoint
Indemnitee, as the case may be.

 3
 

“Indemnitor” means any person or entity
required to provide indemnification under this Agreement.

“Initial Payment” has the meaning set forth in
Section 6.2 hereto.

“Holdover Period” has the meaning set forth in
Section 14.2.

“Intellectual Property” has the meaning set
forth in the Intellectual Property Agreement which is one of the Transaction
Agreements as defined in the Merger Agreement.

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

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

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

“Notice Effective Date” has the meaning set
forth in Sections 13.3, 13.4 and 13.5 hereto.

“Preliminary Cutover Plan” means the written document prepared
by Supplier which includes, without limitation, a plan which identifies
specific business and systems deliverables to be delivered by Supplier to Buyer
in stages.  The plan includes, without
limitation, the extraction of data contained in certain electronic databases of
the Spinco Business in two test extracts and one final extract and the transfer
of such data to the Surviving Corporation or its designee in an existing format
defined by Supplier.  The plan shall also
include a description of the activities that must be performed by Supplier and
Buyers to transfer customer service responsibility for long distance customers
of the Spinco Business to Buyers. Additionally, the plan shall include a
description of the activities that must be undertaken by Supplier and Buyers to
transfer customer service responsibility for the dial-up, DSL and fiber to the
premises (aka Fios) data and other ISP customers of Spinco Business to
Buyers.  Further, the plan shall also include
a description of the activities that must be undertaken by Supplier and Buyers
should Schedule A Services and Schedule D Services be terminated prior to the
termination of Schedule C Services and a description of the activities that
must be undertaken by Supplier and Buyers if Schedule C Services were to be
terminated prior to the termination of Schedule A Services and Schedule D
Services and a description of the activities that

 4
 

must be
undertaken by Supplier and Buyers if Schedule C Services were to be terminated
prior to the termination of Schedule A Services and Schedule D Services.

“Preliminary FairPoint Cutover Preparation Tasks”
means a written document prepared by FairPoint which identifies those
activities that FairPoint must undertake and complete to be prepared for
cutover.

“Schedule A Fee” has the meaning set forth in
Section 2.1(b) hereto.

“Schedule A Services” has the meaning set forth
in Section 2.1 hereto.

“Schedule B Fee” has the meaning set forth in
Section 2.4 hereto.

“Schedule B Services” has the meaning set forth
in Section 2.4 hereto.

“Schedule C Fees” has the meaning set forth in
Section 2.1(c) hereto.

“Schedule C Services” has the meaning set forth
in Section 2.1 hereto.

“Schedule D Fees” has the meaning set forth in
Section 2.1(d) hereto.

“Schedule D Services” has the meaning set forth
in Section 2.1 hereto.

“Senior Executive Officers” means, in the case
of FairPoint, Peter Nixon, and in the case of Supplier, Stephen E. Smith.

“Service Modification” has the meaning set
forth in Section 3.2(b) hereto.

“Settlement Requirements” has the meaning set
forth in Section 16.4(a).

“Single Point of Contact” has the meaning set
forth in Section 11.1 hereto.

“Special Services” has the meaning set forth in
Section 2.3 hereto.

 5
 

“Special Services Fee” has the meaning set
forth in Section 2.3 hereto.

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

“Supplier” has the meaning set forth in the
preamble hereto.

“Supplier License Fees” has the meaning set
forth in Section 2.2 hereto.

“Supplier Cutover Planning Services” has the
meaning set forth in Section 4.1(b) hereto.

“Supplier Indemnitees” has the meaning set
forth in Section 16.1 hereto.

“Surviving Corporation” has the meaning set
forth in the preamble hereto.

“Team Leader” has the meaning set forth in
Section 4.1(a) hereto.

“Termination Schedule” has the meaning set
forth in Section 4.1(a) hereto.

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

“Third Party Claim” has the meaning set forth
in Section 16.4(a).

“Third-Party Contractors” has the meaning set forth
in Section 10.1 hereto.

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

“Third-Party Vendor Costs” has the meaning set
forth in Section 2.2 hereto.

“Third-Party Vendors” has the meaning set forth
in Section 2.2 hereto.

“Transition Service” has the meaning set forth
in Section 2.1 hereto.

 6
 

“Unit-Based Service Fee” has the meaning set
forth in Section 2.1(d) hereto

ARTICLE
II

TRANSITION
SERVICES

2.1           Transition
Services and Fees.

(a)   Following the Closing, and subject to the
terms and conditions hereof, Supplier shall arrange for, procure, aggregate and
otherwise cause its Affiliates and their employees to provide to the Buyers for
use in the Spinco Business during the term hereof the services listed on
Schedule A (collectively “Schedule A Services” and each service a “Schedule
A Service”), the services listed on Schedule C (collectively, the Schedule
C Services” and each service, a “Schedule C Service”) and the
services listed on Schedule D (collectively the “Schedule D Services”
and each service a “Schedule D Service”) the Schedule A Services,
Schedule C Services and the Schedule D Services 
(collectively, the “Transition Services” and each service, a “Transition
Service”).  Each of Schedule A,
Schedule C  and  Schedule D includes, for each Transition
Service, (i) a description of the service (or group of related
services) to be performed and (ii) significant performance
requirements of Supplier or its Affiliates and Buyers and other special terms
and conditions relating directly to the services to be performed.

(b)   The Schedule A Services shall be provided for
the following monthly fee (each a “Schedule A Fee”):  

	
  For the first eight months
  after the closing Date:

  	
   

  	
  $14,200,000 per
  month

  
	
   

  	
   

  	
   

  
	
  For each month beginning in the ninth month after
  closing

  	
   

  	
  $500,000 less
  than for the prior month

  
	
   

  	
   

  	
   

  
	
  For the thirteenth month

  	
   

  	
  $14,700,000 per
  month

  
	
   

  	
   

  	
   

  
	
  For each month following the thirteenth month until
  termination of the Schedule A Services

  	
   

  	
  $500,000 more
  than the amount paid with respect to the prior month, provided that no
  increase shall occur after 60 calendar days after the Notice Effective Date
  with respect to early termination pursuant to Section 13.3, 13.4 or 13.5
  hereof.

  

 

 7
 

For example, in the tenth month, the Schedule A Fee shall be
$13,200,000 and in the fourteenth month the Schedule A Fee shall be
$15,200,000.  The
Schedule A Fee is exclusive of any Taxes, which shall be allocated as provided
in Article XVII.

(c)           The Schedule
C Services shall be provided for the fees described in Schedule C (the “Schedule
C Fees”), stated as a monthly fixed payment (a “Fixed Monthly Service
Fee”).  The Schedule C Fees are
exclusive of any Taxes, which shall be allocated as provided in Article XVII.

(d)           The Schedule
D Services shall be provided for the fees described in Schedule D (the “Schedule
D Fees”), stated as a monthly fixed payment (a “Fixed Monthly Service Fee”)
or a “Unit Based Service Fee” as applicable. The Schedule D Fees are exclusive
of any Taxes, which shall be allocated as provided in Article XVII.

2.2           Third-Party Vendor Costs.  In order to provide the Transition Services,
the parties acknowledge and agree that it may be necessary for Supplier to pay
third-party suppliers or vendors (“Third-Party Vendors”) incremental or
other costs and expenses or new costs or expenses incidental to Supplier’s
providing transition support for the Buyers, including without limitation,
product and service fees, programming fees, Taxes, maintenance fees, initiation
and set-up costs and license fees and costs (including attorney’s fees)
associated with any obtaining licenses, approvals, waivers or rights relating
to Third-Party Intellectual Property as described in Article V.  Collectively such incremental costs and expenses
payable to third parties described in the preceding sentence are “Third-Party
Vendor Costs”.  Third-Party Vendor
Costs associated with Schedule A Services shall be paid by Supplier.  Third-Party Vendor Costs associated with
Schedule C and Schedule D Services are in addition to the Schedule C  and Schedule D Fees described in Section
2.1(c) and 2.1(d) and are payable by Buyers or FairPoint to Supplier pursuant
to Article VI.

2.3           Special
Services and Fees.  Buyers or FairPoint
may request that Supplier or its Affiliates participate in meetings, telephone
calls, or other consultations for Buyers or FairPoint to perform their
respective requirements as described in Schedule A,

 8
 

Schedule C or Schedule D (“Special Services”).  Supplier shall consider all requests for
Special Services in good faith, and shall provide such Special Services, where
in Supplier’s judgment Supplier or its Affiliates can provide such Special
Services without materially adversely disproportionately or unreasonably
impacting Supplier’s or its Affiliates’ then current operations and planned
future work loads and without violating any applicable law, regulation or
agreement; and further provided that Supplier and its Affiliates shall have no
obligation to share Verizon Proprietary Business Information or provide any
training to FairPoint or its representatives or agents.   After the first 500 hours of Special
Services which shall be provided by Supplier to FairPoint without cost and
related to planning for the receipt of the Transition Services,  FairPoint shall pay Supplier for Special
Services at the rate of $125 per hour (the “Special Service Fee”).  FairPoint shall also reimburse Supplier for
all reasonable pre-approved out-of-pocket travel-related costs and expenses in
connection with providing Special Services hereunder.

2.4           Schedule
B Fee.  Prior to the Closing,
Supplier and its Affiliates shall provide the services listed in Schedule B
(the “Schedule B Services”) for the fee described on Schedule B (the “Schedule
B Fee”), which fee is exclusive of Taxes. 
FairPoint shall pay Supplier the Schedule B Fee in the amount and at the
time specified in Schedule B.

2.5           Service
Administration.  Supplier shall
administer this Agreement with respect to the delivery of Transition
Services.  As more fully described in
Article XI and subject to specific arrangements set forth in Schedule A,
Schedule C and Schedule D, Supplier shall coordinate all communications,
questions and problem resolution with respect to all Transition Services.

2.6           Supplier
to Pay Its Affiliates and Vendors. 
Without limiting the obligation of the Buyers under Article VI, Supplier
shall be responsible to pay its Affiliates for any Transition Services or
Special Services provided and pay Third-Party Vendors for Third-Party Vendor
Costs.

2.7           Supplier
Cutover Planning Services.  Supplier
shall provide the Supplier Cutover Planning Services described in Article IV at
no additional cost.

2.8           Performance
by Buyers and FairPoint.  Subject to
Section 14.2, the Buyers and FairPoint shall perform in a timely fashion those
tasks, and provide the personnel, facilities and accurate information, as are
expressly set forth in the Schedules hereto. 
In addition, the Buyers and FairPoint agree to use
commercially-reasonable efforts to

 9
 

cooperate with Supplier and its Affiliates, and to perform, in a timely
fashion, those additional commercially-reasonable tasks directly related to the
performance of the Transition Services which Supplier may reasonably
request.  FairPoint’s and Buyers’ failure
to cooperate with Supplier in the manner requested shall not relieve Supplier
of its obligations hereunder, except and to the extent that such failure would
preclude or materially interfere with performance by Supplier of a particular
component of the Transition Services.

2.9           Services
Not to Be Withheld.  Subject to
Supplier’s rights under Article XIV and provided none of  Buyers or FairPoint is in default of its
obligation to pay fees or has refused to pay fees hereunder in bad faith, or
has had a Change of Control, Supplier shall not intentionally withhold the
provision of  any or all of the Schedule
A Services, or substantially all of the Schedule C Services or Schedule D
Services for any reason during the term of this Agreement.  If Supplier breaches or threatens to breach
the provisions of this Section, Supplier agrees that FairPoint and Buyers will
be irreparably harmed, and, without any additional findings of irreparable
injury or harm or other considerations of public policy, FairPoint and/or
Buyers shall be entitled to apply to a court of competent jurisdiction for and,
provided FairPoint and/or Buyers follow the appropriate procedural requirements
(including notice and an affidavit that none of Buyers or FairPoint has failed
to make all undisputed payments or is in material breach), Supplier shall not
oppose the granting of an injunction compelling specific performance by the
Supplier of its obligations under this Agreement without the necessity of
posting any bond or other security. 
Supplier further agrees not to oppose any such application for
injunctive relief.

ARTICLE
III

SCOPE OF
SERVICES; CHANGES

3.1           General
Scope.  Each Transition Service
described on Schedule A, Schedule C and Schedule D is limited to such
functionality as was included in the same service which was provided to Verizon
New England Inc. or any of the Contributing Companies, as applicable, on the
date immediately prior to the Closing Date, unless the service descriptions on
the Schedules hereto specifically indicate otherwise.  Unless otherwise specifically stated in the
Schedules hereto, Transition Services are provided only in respect of the
Spinco Business as conducted (or substantially as conducted) on the Closing
Date by Buyers or their Affiliates as successors to one or more of the
Contributing Companies, as defined in the Distribution Agreement, and such
services are not provided in respect of, or in support of, or in combination
with, any other business operation or interests of Buyers, Surviving
Corporation or their Affiliates.  Except
as specifically described in the Schedules hereto or this Agreement, neither
Supplier nor its

 10
 

Affiliates shall have any obligation to provide any additional,
modified, general or customized services.

3.2           Changes
in Scope.

(a)   The parties acknowledge and agree that
Supplier and its Affiliates shall provide the Transition Services utilizing
systems, databases, reports, formats and processes used to support Verizon New
England Inc. (and the Contributing Companies as to the respective service they received)
immediately prior to the Closing Date, and except as otherwise specifically
described herein or in the Schedules hereto, Supplier and its Affiliates are
not obligated to make any modification or customization of any such systems,
databases, reports, formats or processes. 
Supplier and its Affiliates will adhere to the policies, practices and
methodologies used to support Verizon New England Inc. and the Contributing
Companies immediately prior to the Closing Date.  During the term of this Agreement, Supplier
may at any time modify the Transition Services, as necessary or desirable, to
allow for continued or conforming use of the then-existing systems and
databases and to allow for continued or conforming adherence to the
then-existing policies, practices and methodologies, which Supplier or its
Affiliates will use to provide similar services to Verizon New England Inc. or
the Contributing Companies after the Closing (each, a “Conforming Change”).  Provided that the Conforming Change complies
with applicable law, neither Buyers nor Surviving Corporation shall be
responsible for any additional costs in connection with such Conforming Change,
and Supplier shall reimburse Buyers for all of Buyers’ reasonable out-of-pocket
costs in connection with the implementation of such Conforming Change.  Prior to the implementation of a Conforming
Change, Supplier will provide the Buyers with written notice of such change
contemporaneously with the notice provided to Verizon New England Inc. or the
Contributing Companies, as applicable.

(b)   In addition to Conforming Changes, during the
term, the Buyers or FairPoint may request that Supplier agree to modify any of
the Transition Services to comply with then-existing law or requirements of a
Governmental Authority (a “Service Modification”).  Buyers or FairPoint shall deliver to Supplier’s
Single Point of Contact (as defined in Article XI) a written description of the
proposed change (each, a “Change Request”).

(c)   Supplier shall provide all proposed Service
Modifications.  Supplier shall make
commercially reasonable efforts to complete and implement Service Modifications
at the time or on the schedule required by law or requirements of the
Governmental Authority, taking into account Supplier’s pre-existing work load,

 11
 

service
obligations and requirements of law in respect of its Affiliates.  The Supplier’s time expended to implement a
Service Modification (other than a Service Modification required to be
implemented by applicable law or any governmental order generally applicable to
all telecommunications operators as in effect prior to the Closing Date but not
any Service Modification which is part of any order of a Governmental Authority
issued in connection with the Merger) shall be billed to Buyers as Special
Services.  The Buyers shall reimburse
Supplier for its costs and out-of pocket expenses associated with
implementation and delivery of any post-Closing Service Modification (other
than a Service Modification required to be implemented by applicable law or any
governmental order generally applicable to all telecommunications operators as
in effect prior to the Closing Date but not any Service Modification which is
part of any order of a Governmental Authority issued in connection with the
Merger).  FairPoint shall reimburse
Supplier for its cost and out-of-pocket expenses associated with implementation
and delivery of any pre-Closing Service Modification (except as provided
above).

(d)   If a Conforming Change occurs or a Change
Request is approved in accordance with this Article III, the definition of
Transition Services and the Schedules hereto will be deemed amended to reflect
the implementation of the Conforming Change or Service Modification as well as
any other terms and conditions agreed upon by the parties in writing.

ARTICLE
IV

CUTOVER
REPORTS

4.1           Cutover
Plan.

(a)   As of the date hereof, Supplier and FairPoint
shall establish a planning committee (the “Cutover Planning Committee”)
consisting of two representatives of both Supplier and FairPoint (or their
Affiliates), to discuss and plan the delivery by Supplier to Buyer of specific
business and system deliverables, including without limitation the extraction
of data contained in certain electronic databases of the Supplier no later than
15 months after the Closing Date. Each of FairPoint, on the one hand, and the
Supplier, on the other hand, shall designate a member of the Cutover Planning
Committee as team leader (“Team Leader”) who shall have the primary
responsibility and accountability for making team assignments for his/her
party, coordinating communications between party teams, and assessing and
reporting progress planning and implementing the Cutover Plan as described
below.  Each Party will devote adequate
planning resources to their portion of the Cutover Planning

 12
 

Committee to
allow for timely planning consistent with timelines established in the Cutover
Plan, the Deliverable Schedule and FairPoint Cutover Preparation Tasks.  The Parties expect to invite other employees
or contractors to participate in specialized areas related to the Cutover Plan
based on their areas of expertise and responsibility as it relates to the
operation of the Spinco Business.  The
activities of the Cutover Planning Committee shall be conducted consistent with
all applicable requirements of law, regulation and contracts, including
antitrust and telecommunications laws.

(b)   Within 30 calendar days following the date
hereof, the Cutover Planning Committee shall hold its initial meeting to
commence planning and preparation for the Buyers to cease using all Transition
Services and thereafter to operate the Spinco Business using FairPoint’s and/or
Surviving Corporation’s own systems and services or those of other third
parties (the “Cutover”).  The
services provided by the Supplier in connection with planning the Cutover are “Supplier
Cutover Planning Services”.

(c)   Within 90 calendar days following the date
hereof, Supplier shall deliver to FairPoint Supplier’s preliminary draft of a
cutover plan (the “Preliminary Cutover Plan”) The Preliminary Cutover
Plan shall include, among other provisions, a plan for activities and tasks
that will be completed prior to and immediately following the Cutover Date, and
those matters relating to ISP cutover described on Schedule E hereto.

(d)   The Cutover Planning Committee shall review
the Preliminary Cutover Plan.  Within 30
calendar days following receipt, FairPoint may make suggestions for
modification and amendment to the Preliminary Cutover Plan.  Supplier shall review all such suggestions in
good faith and consider, among other factors, their commercial reasonableness,
technical feasibility, the anticipated implementation period, available
Supplier and Affiliate resources, and existing Supplier and Affiliate
obligations and activities.  Within 30
calendar days following receipt of the FairPoint suggestions for modification,
Supplier shall accept or reject any or all such suggestions in its reasonable
discretion and resubmit to FairPoint the Preliminary Cutover Plan.  In addition, Supplier will provide a detailed
deliverable schedule based on a target cutover date. This schedule, which shall
become part of the Cutover Plan, shall include projected time lines for
delivery of Supplier deliverables which are sufficient to allow Buyers’ testing
where applicable, and the final deliverable dates in respect of all portions of
the Spinco Business.  The final documents
delivered to FairPoint by Supplier after good faith consideration of FairPoint
modification suggestions shall constitute the “Cutover Plan” Under no
circumstances may the Cutover Plan contradict the express terms of this
Agreement, unless unanimously agreed to by the Cutover Planning Committee.

 13
 

(e)   Within 90 calendar days following the date
hereof, FairPoint shall deliver to Supplier a preliminary description of its
proposed cutover tasks (the “Preliminary FairPoint Cutover Preparation Tasks”).  The Preliminary FairPoint Cutover Preparation
Tasks shall include, among other provisions, a suggested cutover date using a
target cutover of approximately15 months from the date hereof, a plan for
activities and tasks related to pre-cutover acceptance, testing and processing
of Supplier’s data extracts, and the plan to establish FairPoint systems and
processes in order to allow Buyers to function independent of Supplier and its
Affiliates.[ The Preliminary FairPoint Cutover Preparation Tasks will provide
for post-exit regular data feeds to the Supplier such that the Supplier may
meet its Schedule A Service obligations related to DSL service with the
understanding that such data feeds are provided at no cost to Supplier.]

(f)    The Cutover Planning Committee shall review
the Preliminary FairPoint Cutover Preparation Tasks.  Within 30 days following receipt, Supplier
shall review and may make suggestions in its reasonable discretion for
modification and amendment to the Preliminary FairPoint Cutover Preparation
Tasks.  Within 30 days after receipt of
Supplier’s suggestions for modification and suggested cutover date, FairPoint
shall accept any or all such suggestions and resubmit to Supplier the
Preliminary FairPoint Cutover Preparation Tasks.  The final document delivered to Supplier
after incorporation of Supplier modification suggestions shall constitute the “FairPoint
Cutover Preparation Tasks”.

(g)   In addition to the scheduled reviews and
meetings described in the Section 4.1, after delivery of the Cutover Plan, the
Cutover Planning Committee and/or Team Leaders shall have additional meetings
(telephonically or otherwise) not more frequently than weekly to consider the
status of the various plans and consider any mutually-agreed additional plans
or schedules.

ARTICLE V

THIRD-PARTY
INTELLECTUAL PROPERTY

5.1           Intellectual
Property.  Buyers understand that
certain rights and licenses to use Third-Party Intellectual Property may be
required to provide Transition Services. 
Within 60 days after the date of this Agreement, Supplier will commence
commercially-reasonable efforts to identify licensors of Third-Party
Intellectual Property and determine whether consents or waivers are necessary
to be obtained from such licensors in order to provide Transition Services.

 14
 

5.2           Obtaining
Waivers or Licenses.

(a)    Subject to the last sentence of Section 6.1,
within 90 days after the date of the Agreement, Supplier or its Affiliates
shall commence commercially-reasonable efforts to obtain, at Supplier’s sole
cost and expense, any necessary rights, waivers or licenses to use any and all
Third-Party Intellectual Property necessary to provide Schedule A Services and
Schedule B Services to the Buyers. 
Subject to any contrary provision of Schedule C or Schedule D, Supplier
shall make similar efforts to obtain any necessary rights, waivers or licenses
to use any and all Third-Party Intellectual Property necessary to provide
Schedule C Services and Schedule D Services at Buyers’ sole cost and expense.

(b)   To the extent licensors of Third-Party
Intellectual Property demand payment of license or other fees for the right to
use Third-Party Intellectual Property to deliver Schedule C Services or
Schedule D Services, Supplier shall use commercially-reasonable efforts to
communicate such demands to FairPoint.  FairPoint
may direct Supplier to accept or reject such licensor demands and may authorize
Supplier in making counteroffers and otherwise direct fee negotiations for a
period not to exceed 30 days after receipt of licensor demands.

(c)   If no agreement with licensors of Third-Party
Intellectual Property in connection with Schedule C Services is reached within
30 days after such licensor’s first demand, Supplier will resume its sole and
exclusive efforts to obtain necessary licenses and rights on
commercially-reasonable terms.  Supplier
may enter into agreements to pay fees in its sole discretion.  All negotiated license fees in respect of
Schedule C Services and Schedule D Services shall be paid by Supplier as
Third-Party Vendor Costs.  FairPoint
shall reimburse Supplier for all such fees paid as described in Article VI.

(d)   FairPoint agrees to reimburse Supplier for
all of its costs and expenses incurred in seeking licenses, waivers or rights
from all licensors of Third-Party Intellectual Property in connection with
Schedule C Services and Schedule D Services including, without limitation,
attorneys’ fees which are Third-Party Vendor Costs.

(e)   FairPoint agrees to cooperate as reasonably
necessary to assist Supplier with obtaining such licenses.  From time to time, Supplier may provide FairPoint
with a list of Third Party Intellectual Property for which it is seeking
waivers or licenses as described in subsection (a) above. Within 30 days after
receipt of any such list FairPoint shall advise Supplier in writing of any such
Third Party Intellectual Property,

 15
 

that FairPoint
has a license (or will have immediately following Closing) such that it will not
be necessary for Supplier to obtain licenses or waivers in respect of the same.

(f)    Supplier’s obligation to provide each
Transition Service shall be contingent upon receipt of all necessary
third-party approvals, licenses and rights. 
Failure to receive such approvals, licenses or rights on a timely basis,
after Supplier uses its commercially-reasonable efforts, shall be cause for
termination of this agreement with respect to any and all Transition Services
affected by the failure to receive such approvals, licenses or rights.

5.3           Alternatives.

(a)   If after commercially-reasonable efforts to
obtain a license have been undertaken as described in Section 5.2 above, any
Third-Party Intellectual Property in connection with Schedule C Services or
Schedule D Services is not available to Supplier for any reason, Supplier shall
suggest specific product alternatives or alternative providers, if known, and
if available, provide such information to FairPoint within 120 calendar days of
the date Supplier is finally advised that such Third-Party Intellectual
Property is not available.  Supplier
shall obtain a license for the most commercially-reasonable alternative, at FairPoint’s
sole cost and expense in connection with Schedule C Services or Schedule D
Services.  If Supplier does not suggest
an alternative in respect of Schedule C Services or Schedule D Services as
applicable, then FairPoint may suggest an appropriate commercially-available
alternative for Supplier’s approval, which approval shall not be unreasonably
withheld.  Supplier shall obtain a
license to the alternative suggested by FairPoint, at FairPoint’s sole cost and
expense in connection with Schedule C Services and Schedule D Services as
Third-Party Vendor Costs.   If no
alternatives are available or approved, then the affected Transition Service
shall not be provided.

(b)   If Third-Party Intellectual Property is only
available to be licensed directly by Buyers or FairPoint, Supplier shall so
notify FairPoint and FairPoint shall obtain for its own account or for Buyers’
account and at FairPoint’s cost and expense (not a Third-Party Vendor Cost) in
connection with Schedule C Services and Schedule D Services and at Supplier’s
cost and expense in connection with Schedule A and B Services,  such Third-Party Intellectual Property and
the right for Supplier to use such Third-Party Software in the provision of
Transition Services for a term not to exceed 16 months after the Closing Date.

 16
 

(c)   FairPoint Intellectual Property .  “FairPoint Intellectual Property” is that
Intellectual Property created by FairPoint or developed by a third party on
behalf of or at the direction of FairPoint, in which FairPoint has all right,
title and interest and which is utilized in the performance of the Transition
Services.  FairPoint grants Supplier a
limited, non-exclusive, revocable, worldwide, paid up license to use FairPoint
Intellectual Property solely for the purpose of providing the Transition
Services.

ARTICLE
VI

PAYMENT
FOR TRANSITION SERVICES

6.1           Payment
Upon Termination.  In the event that
the Merger Agreement is terminated prior to the Closing in circumstances
described in Section 9.3(b) of the Merger Agreement, Supplier will invoice FairPoint
for (i) any Special Services Fees, including all pre-approved travel
costs in connection with the performance of such Special Services, which for
greater certainty, does not include any fee for the 500 hours of Special
Services described in Section 2.3 above, or any Special Service Fees which have
been paid  previously (ii) the
number of dollars which is equal to the number of hours Supplier, its
Affiliates or contractors have labored to provide Schedule B Services
multiplied by the Special Service Fee in an amount not to exceed $34 million;
(iii) the amount of Qualified Transition Expenses that exceeds $20 million; and
(iv) (without duplication) any and all Taxes arising from or relating to
such payments.  FairPoint shall pay such
invoice, less any amounts disputed in writing, within 15 calendar days of
receipt.  Notwithstanding anything herein
to the contrary, Supplier shall be under no obligation to incur any fees other
than Special Service Fees prior to the date when FairPoint’s stockholders have
approved the merger contemplated by the Merger Agreement.

6.2           Closing
Date Service Payments.  On the
Closing Date, the Buyers shall pay Supplier in advance the sum of: (i) Fourteen
Million Two Hundred Thousand Dollars ($14,200,000) for Schedule A Services,
(ii) the Schedule C Fees for one month, (iii) the Schedule D Fixed Monthly
Service Fees for one month (iv) Third-Party Vendor Costs, if any covering the
Schedule C Services and Schedule D Services to be provided during the first
month after Closing plus, (v) any Taxes arising from or relating to such
payments.  The payments described in Sections
(i) through (v) collectively the “Initial Payment”.

 17
 

6.3           Subsequent
Service Invoices and Payment.

(a)   Prior to the beginning of the second month
after Closing the Supplier will invoice in advance for each month of the term
thereafter for (i) the Schedule A Fee at the rate specified in Section 2.1(b),
(ii) the Schedule C Fixed Monthly Service Fee, (iii) the Schedule D Fixed
Monthly Service Fee (iv) Third-Party Vendor Costs, if any, (without duplicating
any Third-Party Vendor Fee previously paid in advance pursuant to Section
6.2(iii) above) covering Schedule C 
Services and Schedule D Services to be provided in the
immediately-following month, and (iv) any Taxes arising from or relating to
such payments.  The Buyers shall pay such
invoice, less any amounts disputed in writing, within 15 calendar days of
receipt.

(b)   Within 30 calendar days after the end of the
first month after Closing and each month of the term thereafter and within 30
calendar days after the last day of the term hereof, Supplier shall invoice the
Buyers in arrears for (i) the Schedule D Unit-Based Service Fees
and Special Service Fees covering all Transition Services provided in the
immediately preceding calendar month, or a pro-rata portion of such fees for
any partial month and (ii) any Taxes arising from or relating to
such payments.  The Buyers shall pay each
such invoice, less any amounts disputed in writing, within 15 calendar days of
receipt.

(c)   If the Buyers or FairPoint in good faith
dispute owing any amount stated on an invoice, they shall notify Supplier in
writing stating the amount of the dispute and giving the reasons for the
dispute.  The dispute shall be resolved
pursuant to the provisions of Article XIX below.

(d)   All payments by the Buyers or FairPoint under
this Agreement shall be in U.S. dollars by wire transfer of immediately
available funds to Supplier’s designated account.

6.4           Invoices.  All invoices for amounts due under this
Agreement on which Taxes would be due shall indicate the jurisdiction of
taxation for such Tax.  In addition, with
each invoice, Supplier shall provide Buyers or FairPoint with a reasonably-detailed
breakdown of the Third-Party Vendor Costs and other charges included on such
invoice; provided that Supplier received such a breakdown from such third
parties.

6.5           Late
Payment.  All amounts due Supplier
under this Agreement that are not paid within 30 calendar days of their due
date (other than any amount which is properly disputed) shall bear interest at
the Applicable Rate from the due date until paid.

 18
 

6.6           Surviving
Obligations.  FairPoint upon early
termination of this Agreement pursuant to Section 14.1(a), or Buyers upon early
termination of this Agreement pursuant to Sections 14.1(b), or (c), as
applicable shall be responsible for paying amounts due or owing to Supplier up
to the effective date of such termination. 
To the extent FairPoint or the Buyers have made any advance payments of
Fixed Monthly Service Fees or Third-Party Vendor Costs at the time of early
termination, and Supplier has been credited for or is not obligated to pay such
Third-Party Vendor Costs, Supplier will issue a credit to the Buyers or FairPoint
for the unused portion of any such payments. 
Buyers’ and FairPoint’s obligations to reimburse Supplier for any Third-
Party Vendor Costs paid by Supplier shall survive termination of any or all
Transition Services or this Agreement.

ARTICLE
VII

SERVICE
LEVEL COMMITMENTS

7.1           General.  Supplier and its Affiliates shall devote such
time, effort and resources to the performance of Transition Services specified
in Schedule A, Schedule C and Schedule D in a manner that generally meets any
applicable service levels and other requirements set forth in Schedule A,
Schedule C and Schedule D; provided, however, that the parties agree that the obligations
of Supplier and its affiliates are to tender performance and that its ability
to perform will be, or may be, adversely affected by the Buyers’ or FairPoint’s
failure to perform its obligations described in Section 2.8.  Supplier further agrees that it and its
Affiliates shall perform the
Transition Services (i) in compliance with applicable law and any
governmental or regulatory requirements and (ii) with the same
overall standards of quality, timeliness and efficiency as such services are
then being provided by Supplier’s Affiliates to Verizon New England Inc. taking
into account reasonable fluctuations that occur from month to month.

7.2           Supplier
Cooperation.  Supplier shall, and
shall cause its Affiliates to, use commercially reasonable efforts to cooperate
with FairPoint and its Affiliates, and to perform, in a timely fashion, its
obligations prior to the Closing Date and after the Closing Date; provided,
that such efforts shall not require Supplier and its Affiliates to (x) incur
additional expenses, obligations or liabilities other than as expressly
required herein, (y) disproportionably or unreasonably interfere, either
individually or in the aggregate, with the conduct of the Verizon Business or
(z) be inconsistent with the express terms of this Agreement or any Schedule
hereto.

7.3           Correction.  In the event Supplier fails to deliver the
Transition Services in any material respect in accordance with this Agreement,
Supplier shall, at its expense,

 19
 

resolve any such discrepancies as promptly as reasonably practicable,
given the nature and severity of the matter at issue. Supplier shall keep
FairPoint and Buyers informed regarding the status of its actions to resolve
such discrepancies and the resolution thereof.

ARTICLE
VIII

PERSONNEL
AND SYSTEMS

PROVIDING TRANSITION SERVICES

8.1           Personnel.  Supplier and its Affiliates shall have the
sole and exclusive responsibility for selecting and managing their personnel
who provide Transition Services and shall supervise them in connection with the
performance of Transition Services.  Such
personnel shall be qualified, in the reasonable opinion of Supplier, for the
tasks to which they are assigned. 
Supplier or its Affiliates shall pay and be responsible for all wages,
salary or other compensation, taxes, insurance and, except as expressly
specified herein or in any Schedule or separate agreement, other costs and
expenses with respect to such personnel.

8.2           Intellectual
Property, Equipment and Systems. 
Supplier and its Affiliates shall have the sole and exclusive
responsibility and discretion to select and provide the Intellectual Property,
equipment and systems necessary to deliver the Transition Services, provided,
however, that the foregoing shall not affect the Supplier’s obligation to
comply with any specified service level and the other terms and conditions of
this Agreement.

ARTICLE
IX

INTENTIONALLY
OMITTED

ARTICLE X

EMPLOYMENT
OF CONTRACTORS OR THIRD PARTIES

10.1         Subcontractors.  To the extent that Supplier or any of its
Affiliates determines that it is desirable for any reason in their sole
discretion, Supplier may contract with reasonably-qualified third parties to
provide any or all Transition Services to the Buyers for the remainder of the
term and (ii) further, if in the judgment of counsel for Supplier,
any requirement of law precludes Supplier from performing any Transition
Service or performing any of its obligations of this Agreement, Supplier may
assign the

 20

performance of those
obligations to a reasonably-qualified third party selected by Supplier in its
reasonable discretion.

10.2                           Subcontractor
Payments.  Supplier shall remain
fully responsible for its performance of this Agreement in accordance with its
terms, including any obligations it performs through third parties, and
Supplier shall be solely responsible for all payments due to third
parties.  Notwithstanding anything to the
contrary, amounts due from Supplier and its Affiliates to their subcontractors
shall not be included in the Third-Party Vendor Costs to the extent such
amounts are for services that are duplicative of services for which Supplier is
charging Buyers or FairPoint any fee.

ARTICLE XI

SINGLE POINT OF CONTACT; DISPUTE RESOLUTION

11.1                           Single
Point of Contact.  FairPoint and
Supplier shall each appoint a person who shall be available to receive
communications and coordinate responses to questions and concerns on behalf of
their respective parties and their Affiliates with respect to this Agreement or
the Transition Services, including billing and operational matters (“Single
Point of Contact”).  Except in
respect of the activities of the Cutover Planning Committee or the Team Leaders
described in Section 4.1, or unless otherwise authorized in writing or set
forth in the policies and procedures of Supplier or its Affiliates or as
specified on any Schedule hereto, FairPoint and Supplier agree that their
representatives and employees shall not contact any representatives of the
other party, other than the designated Single Point of Contact.  Notwithstanding the provisions of this
Article XI, in the event of any network or service outage or other similar
emergency relating to any Transition Service, a party shall attempt to contact
the Single Point of Contact of the other party, but may also directly contact
that person most able to resolve the emergency expeditiously.

11.2                           Dispute
Resolution.  The Single Points of
Contact shall meet as often as reasonably necessary in an effort to resolve
disputes without the necessity of any formal proceeding relating thereto.  If the Single Points of Contact do not
resolve a dispute within 30 calendar days, then either party may escalate the
dispute to its Senior Executive Officer. 
If such dispute cannot be resolved by the Senior Executive Officers of
the parties within 10 days after initiation of discussions, either party may
initiate formal proceedings as permitted by this Agreement. The foregoing
requirements and limitations shall not, however, prevent a party from: (i)
seeking injunctive relief in circumstances permitted by this Agreement, or (ii)
terminating this Agreement (in whole or in part) in accordance with Article
XIV.

 21
 

ARTICLE
XII

POLICIES,
PROCEDURES AND TRAINING

12.1                           Policies
and Procedures.  Supplier and its
Affiliates agree to follow and abide by all commercially-reasonable written
policies and procedures provided by FairPoint or Buyers from time to time in
connection with the provision of Transition Services with respect to access to FairPoint’s
or its Affiliates’ systems or premises, to the extent that such policies and
procedures do not conflict with the requirements of this Agreement or any
Schedule hereto.  FairPoint and its
Affiliates agree to follow and abide by all commercially-reasonable written
policies and procedures provided by Supplier from time to time in connection
with the provision of Transition Services with respect to (i) provision
of data by FairPoint, Buyers or their Affiliates to Supplier or its Affiliates,
(ii) Buyers’ access to or use of any Supplier or Affiliate computer
support systems and (iii) plant work and right-of-access rules as
further described in Article XX, all to the extent that such policies and
procedures do not conflict with the requirements of any schedule hereto, it
being understood that the policies applicable to Verizon New England Inc. as of
the Closing Date shall be deemed to be commercially reasonable.

12.2                           Training.  To the extent that a party deems reasonably
necessary, the other party shall make its employees or representatives
reasonably available for training with respect to its policies and procedures,
at times and locations mutually agreed upon by the parties.  The parties may charge a fee for such
training consistent with the provisions of Section 2.3 hereof.

12.3                           No
Warranty.  The parties acknowledge
and agree that Supplier and its Affiliates are not generally in the business of
providing commercial transition services, and accordingly, neither Supplier nor
any of its Affiliates makes any representation or warranty that any policies,
procedures or training materials shall be complete, accurate or suitable for FairPoint’s
or the Buyers’ purposes, nor shall Supplier be required to revise such
policies, procedures or training materials for any reason.

ARTICLE
XIII

TERM

13.1                           Term.  This Agreement shall become effective as of
the date first written above and shall expire without notice upon the earlier
of: (i) the date that a termination pursuant to Section 14.1
becomes effective, or (ii) the date identified in a Cutover Date 

 22
 

Notice delivered by Supplier
pursuant to Section 13.6 hereof, after receipt of a Notice of Readiness for
Cutover described in Section 13.2 hereof, which date shall be in the month of
January, March, May, July, September or November immediately following the
15-month anniversary of the Closing Date, or (iii) in respect of early
termination of the Schedule A Services, Schedule C and Schedule D Services,
(terminating at the same time) the date identified in a Cutover Date Notice
delivered by Supplier pursuant to Section 13.6 hereof after receipt of a Notice
of Readiness for Cutover described in Section 13.3 hereof, which date shall be
in the month of January, March, May, July, September or November, or (iv) in
respect of early termination of the Schedule A Services and Schedule D Services
only (without termination of Schedule C Services), the date identified in a
Cutover Notice delivered by Supplier pursuant to Section 13.6 hereof after
receipt of a Notice of Readiness for Cutover described in Section 13.4, which
date shall be in the month of January, March, May, July, September or November,
or (v) in respect of early termination of the Schedule C services only (without
termination of Schedule A Services or Schedule D Services) the date identified
in a Cutover Notice delivered by Supplier pursuant to Section 13.6 hereof after
receipt of a Notice of Readiness for Cutover described in Section 13.5, which
date shall be in the month of January, March, May, July, September or November.  Supplier and its Affiliates shall commence
providing Transition Services described on Schedules A, C and D on the Closing
Date of the Merger and, upon receipt of the Initial Payment.  Subject to the terms and conditions hereof
and of the Cutover Plan shall provide each Transition Service for the remainder
of the term hereof.

13.2                           Full
Term Cutover Notice.  Unless this
agreement is earlier terminated pursuant to the provisions of Article XIV or
pursuant to the provisions of Sections 13.3, 13.4 or 13.5, at least 60 calendar
days prior to the 15-month anniversary of the Closing Date, Surviving
Corporation shall deliver to Supplier either (i) an irrevocable “Notice
of Readiness for Cutover”, which shall include a representation to the effect
that Surviving Corporation or Buyers have made arrangements to operate the
Spinco Business without any Transition Services from Supplier or have engaged a
third party to provide such services, or (ii) an irrevocable “Notice of
Intention to Holdover” which shall include a representation to the effect that
either the Surviving Corporation and the Buyers have not made arrangements to
operate the Spinco Business without any Transition Services from Supplier and
have not engaged a third party to provide such services.  Surviving Corporation shall also deliver to
Supplier a Notice of Readiness for Cutover, at such time as Surviving
Corporation is prepared to end a Holdover Period as described in Section 14.2.

13.3                           Notice of Readiness for
Early Cutover  in Respect of Schedule A,
Schedule C and Schedule D Services. Surviving Corporation may at any time
after the later of the 13 month anniversary of the date hereof and the 1 month
anniversary of the Closing Date, deliver to Supplier an irrevocable “Notice of
Readiness for Cutover” in 

 23
 

respect of Schedule A, Schedule
C and Schedule D Services (to be terminated on the same date), which notice
shall include a representation to the effect that Surviving Corporation or
Buyers have made arrangements to operate the Spinco Business without any
Schedule A, Schedule C and Schedule D Services from Supplier or have engaged a
third party to provide such services. The effective date for any such Notice of
Readiness for Cutover shall be deemed to be the last calendar day of the month
in which such notice is received by Supplier (the “Notice Effective Date”)

13.4                           Notice
of Readiness for Early Cutover in Respect of Schedule A Services and Schedule D
Services Only.  Surviving Corporation
may at any time after  the later of the
13 month anniversary of the date hereof and the 1 month anniversary of the
Closing Date, deliver to Supplier an irrevocable “Notice of Readiness for
Cutover” in respect of Schedule A Services and Schedule D Services only (it
being understood that in such case, Schedule C Services shall continue after
termination of Schedule A Services and Schedule D Services), which notice shall
include a representation to the effect that Surviving Corporation or Buyers
have made arrangements to operate the Spinco Business without any Schedule A
Services and Schedule D Services from Supplier or have engaged a third party to
provide such services.  The effective
date for any such Notice of Readiness for Cutover shall be deemed to be the
last calendar day of the month in which such notice is received by Supplier (the
“Notice Effective Date”)

13.5                           Notice
of Readiness for Early Cutover in Respect of Schedule C Services Only.  Surviving Corporation may at any time
after  the later of the 13 month
anniversary of the date hereof and the 1 month anniversary of the Closing Date,
deliver to Supplier an irrevocable “Notice of Readiness for Cutover” in respect
of Schedule C Services only (it being understood that in such case, Schedule A
Services and Schedule D Services shall continue after termination of Schedule C
Services), which notice shall include a representation to the effect that
Surviving Corporation or Buyers have made arrangements to operate the Spinco
Business without any Schedule C Services from Supplier or have engaged a third
party to provide such services. . The effective date for any such Notice of
Readiness for Cutover shall be deemed to be the last calendar day of the month
in which such notice is received by Supplier (the “Notice Effective Date”)

13.6                           Cutover Date Notice.  Within 10 calendar days of Supplier’s receipt
of a Notice of Readiness for Cutover described in Section 13.2, Supplier shall
deliver to Surviving Corporation a “Cutover Date Notice” identifying the
specific date for Cutover and termination of all Transition Services.  Supplier shall also deliver a Cutover Date
Notice to Surviving Corporation in connection with any termination pursuant to
the provisions of Section 14.1(b),(c) or 14.2.  In respect of any Cutover Date Notice
delivered after receipt of a Notice of Readiness for Cutover pursuant to
Section 13.3, 13.4 or 13.5 above, the Cutover Date shall be a date which is not
earlier than 50 days nor later 

 24
 

than 90 days after the Notice
Effective Date if such date is in the month or January, March, May, July,
September or November.  If the date required
by the immediately preceding sentence is not in one of the named months, then
Cutover Date shall be within the next calendar month.  In determining in its reasonable discretion
the specific cutover date to include in a Cutover Date Notice, in addition to
other factors, Supplier shall consider Supplier’s Affiliates month-end
financial data processing and the last regular monthly bill cycle.  The date on which the Cutover and termination
of all remaining Transition Services to any part of the Spinco Business occurs
shall be referred to as the “Final Cutover Date.”

ARTICLE
XIV

TERMINATION

14.1                           Termination
of Agreement.

(a)          This Agreement shall automatically terminate
upon the termination of the Merger Agreement.

(b)         Supplier may terminate this Agreement at: (i) for
non-payment of any fee or amount due under this Agreement which is not disputed
or was disputed in bad faith after providing at least 30 days prior written
notice to FairPoint to cure or (ii) after a Change of Control
(other than pursuant to the transactions contemplated by the Distribution
Agreement or the Merger Agreement).  A
termination pursuant to this section shall be effective on the date identified
in a Cutover Date Notice delivered by Supplier, which date shall be in the
month of January, March, May, July, September or November immediately following
the expiration of the 30-day cure period or Change of Control described above.

(c)          FairPoint may terminate this Agreement for a
material breach after providing the Supplier at least 60 days prior written
notice and a reasonable opportunity to cure. 
A termination pursuant to this section shall be effective on the date
identified in a Cutover Date Notice delivered by Supplier, which date shall be
in the month of January, March, May, July, September or November immediately
following the expiration of the 60-day cure period described above.

(d)         This Agreement shall terminate automatically
upon the Final Cutover Date.

 25
 

14.2                           Post
Expiration Continuation of Services. 
Buyers and FairPoint acknowledge and agree that Buyers must be prepared
to perform, or have other third parties perform on their behalf, all of the
remaining Transition Services without interruption upon the Cutover.  Supplier agrees to reasonably cooperate in
such planning and preparation and to reasonably cooperate in the transition of
the remaining Transition Services to the Buyers, Surviving Corporation or their
designee, including by performing the tasks assigned to it in the Cutover
Plan.  If at the time for termination,
the Buyers have not made arrangements to operate the Spinco Business without
any remaining Transition Services from Supplier or have not engaged a third
party to provide such services, and after the time for termination, the Buyers
continue to receive any of the remaining Transition Services for any reason,
then the parties agree that Supplier and its Affiliates shall continue to
provide all such Transition Services, until (i) such time as Buyers can
transition off all of Transition Services and (ii) the effective date of
termination as described hereafter (“Holdover Period”).  The Holdover Period shall end and the
effective date of termination shall be on the date identified in a Cutover Date
Notice delivered by Supplier, which date shall be in  the month of January, March, May, July,
September or November which is at least 30 calendar days following receipt by
Supplier of Buyers’ Notice of Readiness for Cutover.

14.3                           Survival.  The following provisions will survive any
expiration or termination of this Agreement with respect to any or all of the
Transition Services: Article II (“Transition Services”), Article V (“Third-Party
Intellectual Property”), Article VI (“Payment For Transition Services”),
Article IX (“Non-Solicitation of Employees”), Article XV (“Limitation
on Liabilities”), Article XVI (“Indemnification”), Article XVIII (“Records;
Access”), Article XIX (“Dispute Resolution”), Article XXII (“Miscellaneous”)
and this Article XIV (“Termination”).

ARTICLE
XV

LIMITATION
ON LIABILITIES

15.1                           Limitation on Liabilities.  Except as otherwise provided in this Article
XV, the liability of Supplier and its Affiliates on the one hand, and of FairPoint,
Surviving Corporation, the Buyers or their Affiliates on the other hand,
arising out of or relating to this Agreement, including without limitation on
account of performance or nonperformance of obligations hereunder, regardless
of the form of the cause of action, whether in contract, tort (including
without limitation gross negligence), statute or otherwise, shall in no event exceed:  (i) with respect to Supplier’s
liability, the sum of the amounts paid to Supplier during the term contemplated
hereby (excluding Schedule C and Schedule D Third-Party Vendor Costs and Taxes)
under this Agreement during the term at the time the liability arises under
this Agreement and (ii) with respect to Buyers’ 

 26
 

liability, FairPoint’s or
Surviving Corporation’s liability, the sum of the amounts payable to Supplier
were this Agreement to continue in effect for the entire 15-month term
contemplated hereby.

15.2                           No
Warranties; No Special Damages. 
SUPPLIER AND ITS AFFILIATES MAKE NO EXPRESS OR IMPLIED REPRESENTATIONS
OR WARRANTIES WITH RESPECT TO THE TRANSITION SERVICES, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE.  EXCEPT AS OTHERWISE PROVIDED IN
THIS ARTICLE XV, IN NO EVENT SHALL ANY PARTY OR ANY OF THEIR AFFILIATES BE
LIABLE HEREUNDER FOR ANY INDIRECT, SPECIAL, CONSEQUENTIAL, PUNITIVE OR
EXEMPLARY DAMAGES OF ANY KIND ARISING FROM THE BREACH OF THIS AGREEMENT,
INCLUDING WITHOUT LIMITATION, LOSS OF PROFITS OR BUSINESS INTERRUPTION.

15.3                           Exceptions
to Limitations.  Notwithstanding
Sections 15.1 and 15.2 above, the caps on the amount of liability and the
limitations on type of liability described therein shall not apply to: (i) the
willful misconduct of a party, (ii) any violation by Supplier of Section 2.9,
(iii) third party indemnity obligations pursuant to Article XVI below, or (iv)
any violation of Section 22.15.

ARTICLE
XVI

INDEMNIFICATION

16.1                           Indemnification
by Surviving Corporation.  FairPoint
and, after the Closing Date, the Surviving Corporation and Buyers shall,
jointly and severally, indemnify and hold harmless Supplier and its Affiliates
and their respective officers, directors, employees, successors and assigns
(collectively, “Supplier Indemnitees”) from and against any expense,
claim, loss or damage (including court costs and reasonable attorney’s fees) (“Losses”)
suffered or incurred by any of the Supplier Indemnitees in connection with any
third-party claims against any of the Supplier Indemnitees arising from or
relating to:

(a)          all claims for bodily injury to persons or
physical damage to tangible personal or real property for which FairPoint (and
after the Closing Date Surviving Corporation and Buyers) are legally liable to
that third party, except to the extent caused by the negligence or intentional
misconduct of Supplier Indemnitees;

 27
 

(b)         all claims arising from a violation of any
federal, state, local or foreign law, rule, regulation or order applicable to FairPoint
by FairPoint;

(c)          all claims for any Tax owed by Surviving
Corporation and Buyers under Article XVII (including any Tax that is the
subject of an exemption certificate which exemption is determined to have been
inapplicable in whole or in part);

16.2                           Indemnification
by Supplier.  Supplier shall
indemnify and hold harmless FairPoint and after the Closing Date Surviving
Corporation and Buyers and their respective officers, directors, employees,
successors and assigns (collectively, “FairPoint Indemnitees”) from and
against any Losses suffered or incurred by any of the FairPoint Indemnitees in
connection with any third-party claims against any of the FairPoint
Indemnitees, arising from or relating to:

(a)          all claims for bodily injury to persons or
physical damage to tangible personal property or real property for which
Supplier (and prior to the Closing Date Buyers) are legally liable to that
third party, except to the extent caused by the negligence or intentional
misconduct of FairPoint Indemnitees;

(b)         all claims arising from a violation of any
federal, state, local or foreign law, rule, regulation or order applicable to
Supplier by Supplier; and

(c)          all claims for any Tax owed by Supplier under
Article XVII.

16.3                           Tax
Indemnification.  FairPoint and after
the Closing Date Buyers shall also jointly and severally indemnify and hold
harmless Supplier and its Affiliates from and against any Tax owed to any of
them under Article XVII (including any Tax that is the subject of an exemption
certificate which exemption is determined to have been inapplicable in whole or
in part), plus any costs or expenses (including reasonable attorneys’ fees)
suffered or incurred by Supplier or any Affiliate in defending itself against a
claim for such Taxes.

16.4                           Indemnification
Procedure- Defense of Claims.

(a)          (a)  Third Party Claims.  If any Indemnitee
receives notice of the assertion of any claim or of the commencement of any
action or proceeding by any entity that is not either a FairPoint Indemnitee or
a Supplier Indemnitee (each, a “Third
Party 

 28
 

Claim”) against such Indemnitee, with respect
to which an Indemnitor is obligated to provide indemnification under this
Agreement, the Indemnitee will give such Indemnitor prompt written notice thereof,
but in any event not later than ten calendar days after receipt of notice of
such Third Party Claim, provided, however, that the failure of an
Indemnitee to notify the Indemnitor within the time period set forth herein
shall only relieve the Indemnitor from its obligation to indemnify to the
extent that the Indemnitor is materially prejudiced by such failure or delay
(whether as a result of the forfeiture of substantive rights or defenses or
otherwise).  Upon receipt of notification
of a Third Party Claim, the Indemnitor shall be entitled, upon written notice
to the Indemnitee, to assume the investigation and defense thereof at such
Indemnitor’s expense with counsel reasonably satisfactory to the Indemnitee, provided
that the Indemnitor shall not have the right to assume the defense of any Third
Party Claim in the event such Third Party Claim is primarily for injunctive
relief or criminal penalty of the Indemnitee, and in any such case, the
reasonable fees and expenses of counsel to the Indemnitee in connection with
such Third Party Claim shall be considered “Losses” for purposes of this
Agreement.  Whether or not the Indemnitor
elects to assume the investigation and defense of any Third Party Claim, the
Indemnitee shall have the right to employ separate counsel and to participate
in the investigation and defense thereof; provided, however, that
the Indemnitee shall pay the fees and disbursements of such separate counsel
unless (1) the employment of such separate counsel has been
specifically authorized in writing by the Indemnitor; (2) the
Indemnitor has failed to assume the defense of such Third Party Claim within 20
calendar days after receipt of notice thereof with counsel reasonably
satisfactory to such Indemnitee; or (3) the named parties to the
proceeding in which such claim, demand, action or cause of action has been
asserted include both the Indemnitor and such Indemnitee and, in the reasonable
judgment of counsel to such Indemnitee, there exists one or more good faith
defenses that may be available to the Indemnitee that are in conflict with
those available to the Indemnitor or that the Indemnitor and Indemnitee have
actual material conflicting interests with respect to such claim, demand,
action or cause of action. 
Notwithstanding the foregoing, the Indemnitor shall not be liable for
the fees and disbursements of more than one counsel for all Indemnitees in
connection with any one proceeding or any similar or related proceedings
arising from the same general allegations or circumstances.  Without the prior written consent of an
Indemnitee, which shall not be unreasonably withheld or delayed, the Indemnitor
will not enter into any settlement of or consent to the entry of judgment in
connection with any Third Party Claim that (i) would lead to
liability or create any financial or other obligation on the part of the
Indemnitee, (ii) does not contain, as an unconditional term
thereof, the release of the Indemnitee from all liability in respect of such
Third Party Claim or such Third Party Claim is not dismissed against the
Indemnitee with prejudice and without the imposition of any financial or other
obligation on the Indemnitee or (iii) admits the liability or fault
of the Indemnitee (the “Settlement Requirements”).  If a settlement offer solely for money
damages (and otherwise satisfying the Settlement Requirements) is made to
resolve a Third Party Claim and the 

 29
 

Indemnitor notifies the Indemnitee in writing
of the Indemnitor’s willingness to accept the settlement offer and pay the
amount called for by such offer without reservation of any rights or defenses
against the Indemnitee and if the Indemnitee fails to consent to such
settlement offer within ten calendar days after its receipt of such notice,
Indemnitee may continue to contest such claim, free of any participation by the
Indemnitor, and the amount of any ultimate liability with respect to such Third
Party Claim that the Indemnitor has an obligation to pay hereunder shall be
limited to the lesser of (x) the amount of the settlement offer
that the Indemnitee declined to accept plus the Losses of the Indemnitee
relating to such Third Party Claim through the date of its rejection of the
settlement offer or (y) the aggregate Losses of the Indemnitee with
respect to such claim.  The party
controlling any defense shall keep the other party advised of the status of
such action, suit, proceeding or claim and the defense thereof and shall
consider in good faith all reasonable recommendations made by the other party
with respect thereto.

(b)         Direct Claims. Any claim by an Indemnitee for Losses that do not result from
a Third Party Claim (each, a “Direct
Claim”) shall be asserted by giving the Indemnitor prompt written
notice thereof, but in any event not later than 60 calendar days after the
incurrence thereof or such Indemnitee’s actual knowledge of such event
(whichever is later), provided, however, that the failure of an
Indemnitee to notify the Indemnitor within the time period set forth herein
shall only relieve the Indemnitor from its obligation to indemnify to the
extent that the Indemnitor is materially prejudiced by such failure or delay
(whether as a result of the forfeiture of substantive rights or defenses or
otherwise), and the Indemnitor will have a period of 30 calendar days within
which to respond in writing to such Direct Claim.  If the Indemnitor does not so respond within
such 30 calendar day period, the Indemnitor will be deemed to have accepted
such claim.  If the Indemnitor rejects
such claim, the Indemnitee will be free to pursue such remedies as may be
available to the Indemnitee on the terms and subject to the provisions of this
Article XVI.

16.5                           Surviving
Liability.

(a)          As of the date hereof and until the Closing, FairPoint
shall be liable for any amounts owed to Supplier and its Affiliates pursuant to
this Agreement.

(b)         As of the Closing and thereafter, Surviving
Corporation and Buyers shall be jointly and severally liable for any amounts
owed to Supplier and its Affiliates pursuant to this Agreement.

 30
 

ARTICLE
XVII

TAXES

17.1                           Taxes.  The Buyers shall pay Supplier or its
Affiliates for any Tax (except income taxes) levied upon any Transition Service
or Schedule B Service or on Supplier or an Affiliate with respect to any
Transition Service or Schedule B Service; provided, however, to the extent
Tax is not collected and remitted by Supplier or its Affiliates, Buyers may
remit such Tax directly to the appropriate Governmental Authority.  If the Buyers determine that any Transition
Service or Schedule B Service is exempt from a Tax, the Buyers shall provide
Supplier with a properly completed and timely exemption certificate for each
jurisdiction for which the Buyers are claiming an exemption before Supplier may
exclude the respective Tax from the amounts charged the Buyers.  Supplier will invoice the Buyers for
applicable Taxes with respect to the Transition Services in the manner provided
in Article VI.  If the Buyers dispute any
invoice for Taxes owing in good faith, it shall immediately notify Supplier in
writing, giving the reasons for the dispute. 
The Buyers shall be responsible for and will reimburse Supplier for any
costs and expenses incurred by Supplier in contesting those Taxes disputed by
the Buyers before the appropriate Governmental Authority.  Any amount due under this paragraph, which is
not paid within 30 calendar days that is not subject to a good faith dispute,
shall bear interest at the Applicable Rate until paid.  Notwithstanding the foregoing, the Buyers
shall not be obligated for, and Supplier shall pay, all Taxes on the income of
Supplier (and, prior to the Closing, Buyers), 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 Transition 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.

ARTICLE
XVIII

RECORDS;
ACCESS

18.1                           Records.  Supplier and its Affiliates shall maintain
records with respect to the Transition Services that are in a form and contain
a level of detail similar to records, if any, that are maintained in providing
similar services for Verizon New England Inc. and the Contributing Companies (and
in any event consistent with applicable law), for a period of 1 year after the
termination of this Agreement or such longer period as required by applicable
law.  Supplier shall also maintain
records in accordance with applicable law and generally accepted accounting
principles to substantiate charges for Third-Party Intellectual Property and
Taxes for a period of 18 months from the date of termination or expiration of
this Agreement.  During the period in
which Supplier is required to 

 31
 

maintain such records, upon
prior written request to Supplier, Buyers shall have access to such records
during normal business hours of Supplier or its applicable Affiliate at the
place where such records are normally maintained.

18.2                           Access
to Books, Records, Personnel.  During
the term of this Agreement and for a period of 18 months thereafter, Supplier
and its Affiliates shall permit Buyers and their employees, auditors and other
representatives to have reasonable access, during normal business hours and
upon reasonable advance notice, to books and records and appropriate personnel
of Supplier and its Affiliates, to the extent such access is reasonably
requested by Buyers in order to permit the evaluation of, and any required
reporting, certifications and attestations with respect to, internal controls,
processes and systems in connection with the provision of the Transition
Services for purposes of compliance with the Sarbanes-Oxley Act of 2002.

ARTICLE
XIX

DISPUTE
RESOLUTION

19.1                           General.  Except with respect to injunctive relief
described below, any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, which shall not include any challenge or
dispute as to the rate for any Transition Service payable under Article II or
Section 14.2(b), shall attempt to be settled first, by good faith efforts of
the parties to reach mutual agreement, and second, if mutual agreement is not
reached to resolve the dispute, by final, binding arbitration as set out below.

19.2                           Initiation.  A party that wishes to initiate the dispute
resolution process shall send written notice to the other party with a summary
of the controversy and a request to initiate these dispute resolution
procedures.  Each party shall appoint a knowledgeable,
responsible representative who has the authority to settle the dispute, to meet
and to negotiate in good faith to resolve the dispute.  The discussions shall be left to the
discretion of the representatives who may utilize other alternative dispute
resolution procedures such as mediation to assist in the negotiations.  Discussions and correspondence among the
representatives for purposes of these negotiations (i) shall be
treated as confidential information under the Confidentiality Agreement
developed for purposes of settlement, (ii) shall be exempt from
discovery and production and (iii) shall not be admissible in the
arbitration described above or in any lawsuit pursuant to Rule 408 of the
Federal Rules of Evidence.  Documents
identified in or provided with such communications, which are not prepared for
purposes of the negotiations, are not so exempted and may, if otherwise
admissible, be admitted in evidence in the arbitration or 

 32
 

lawsuit.  The parties agree to pursue resolution under
this subsection for a minimum of 30 calendar days before requesting
arbitration.

19.3                           Arbitration
Request.  If the dispute is not
resolved under the preceding subsection within 30 days of the initial written
notice, either party may demand arbitration by sending written notice to the
other party.  The parties shall promptly
submit the dispute to the American Arbitration Association for resolution by a
single neutral arbitrator acceptable to both parties, as selected under the
rules of the American Arbitration Association. 
The dispute shall then be administered according to the American
Arbitration Association’s Commercial Arbitration Rules, with the following
modifications:  (i) the
arbitration shall be held in a location mutually acceptable to the parties,
and, if the parties do not agree, the location shall be New York City, New
York; (ii) the arbitrator shall be licensed to practice law; (iii) the
arbitrator shall conduct the arbitration as if it were a bench trial and shall
use, apply and enforce the Federal Rules of Evidence and Federal Rules of Civil
Procedure; (iv) except for breaches related to Confidential
Information, the arbitrator shall have no power or authority to make any award
that provides for consequential, punitive or exemplary damages or extend the
term hereof; (v) the arbitrator shall control the scheduling so
that the hearing is completed no later than 30 days after the date of the
demand for arbitration; and (vi) the arbitrator’s decision shall be
given within 5 days thereafter in summary form that states the award, without
written decision, which decision shall follow the plain meaning of this
Agreement, and in the event of any ambiguity, the intent of the parties.  Judgment on the award rendered by the
arbitrator may be entered in any court having jurisdiction over the
parties.  Each party to the dispute shall
bear its own expenses arising out of the arbitration, except that the parties
shall share the expenses of the facilities to conduct the arbitration and the
fees of the arbitrator equally.

19.4                           Injunctive
Relief and Specific Performance.

(a)           The foregoing and Section 22.8 below
notwithstanding, each party shall have the right to seek injunctive relief in
any permitted court of law or equity to preserve the status quo pending
resolution of the dispute and enforce any decision relating to the resolution
of the dispute.

(b)         
If Supplier materially breaches its obligations with respect to planning for
Cutover set forth in Article IV, Supplier agrees that FairPoint would be
irreparably harmed, and, without any additional findings of irreparable injury
or harm or other considerations of public policy, FairPoint shall be entitled
to apply to a court of competent jurisdiction for and, provided FairPoint follows
the appropriate procedural requirements (including notice and an affidavit that  FairPoint has not failed to perform 

 33
 

its material obligations set forth in Article
IV).  Supplier shall not oppose the
granting of an injunction compelling specific performance by the Supplier of
its obligations under Article IV of this Agreement without the necessity of
posting any bond or other security.

ARTICLE
XX

PLANT
WORK RULES AND RIGHT OF ACCESS

20.1                           Compliance.  Subject to any policies and procedures
provided as set forth in Article XII above, the employees, subcontractors and
agents of the parties, while on the premises of the other, shall comply with
all reasonable and customary plant rules, regulations and standards for
security which are not in violation of the terms and conditions of this
Agreement.

20.2                           Access
to Facilities.  Each party shall
permit reasonable access commensurate with the requirements of the tasks to be
performed during normal working hours to its facilities that are used in
connection with the performance of Transition Services.  No charge shall be made for such visits.  Reasonable prior notice shall be given when
access is required.

20.3                           Computer Matters.  Subject to any policies and procedures
provided as set forth in Article XII above, to the extent that the Transition
Services include a party’s access to computer support systems or electronic
data storage systems of the other party or its Affiliates, whether on-site or
through remote facilities, the accessing party shall use such computer support
systems solely for the purpose of providing or receiving Transition Services.  An accessing party or its Affiliates shall
not access or attempt to access any computer system, electronic file, software
or other electronic services other than those specifically required to
accomplish or receive the Transition Services required under this
Agreement.  Under no circumstances shall
either party’s personnel access any networks or facilities of the other party
for the purpose of accessing other external networks, nor shall any such
capabilities for such access be published or made known via any medium, as for
example and not by way of limitation, posting on bulletin boards or
E-mail.  Any such use or publication
shall be a material breach of this Agreement. 
Neither party shall use back doors, data capture routines, games,
viruses, worms or Trojan horses, and any intentional introduction of such into
the other party’s data networks shall be deemed a material breach of this
Agreement.  The party receiving access
shall limit such access to those of its employees whom the other party has authorized
in writing to have such access in connection with this Agreement or the
applicable Transition Service, and shall strictly follow all security rules and
procedures 

 34
 

for use of the providing party’s
electronic resources.  All user
identification numbers and passwords and any information obtained as a result
of access to and use of a party’s computer and electronic data storage systems
shall be deemed to be, and shall be treated as, Confidential Information under
applicable provisions of the Confidentiality Agreement.  Each party agrees to cooperate with the other
in the investigation of any apparent unauthorized access to a party’s computer
or electronic data storage systems.

ARTICLE
XXI

INSURANCE

21.1                           Coverage.  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, (e) contractual liability and (f) explosion,
collapse and underground hazards, with combined single limit of not less than
$5,000,000.00 each occurrence or its equivalent; (ii) Worker’s
Compensation in amounts required by applicable law and Employer’s Liability
with a limit of at least $1,000,000.00 each accident; and (iii) Automobile
Liability including coverage for owned/leased, non-owned or hired automobiles
with combined single limit of not less than $1,000,000.00 each accident.

21.2                           Self-insurance.  Without limiting the required coverage
amounts set forth in Section 21.1, all parties expressly acknowledge that a
party shall be deemed to be in compliance with the provisions of this Section
21.2 if it maintains an approved self-insurance program providing for
retention of up to $1,000,000.00.  If
either party provides any of the foregoing coverage on a claims-made basis,
such policy or policies shall be for at least a 3 year extended reporting or
discovery period.

21.3                           Rating.  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 request, provide the other party with
an insurance certificate confirming compliance with the requirements of this
Section 21.3.

21.4                           Subrogation.  The parties shall each obtain from the
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.

 35

21.5                           Indemnification.  In the event any party fails to maintain the
required insurance coverage and a claim is made or suffered, such party shall
indemnify and hold harmless the other parties from any and all claims for which
the required insurance would have provided coverage.

ARTICLE XXII

MISCELLANEOUS

22.1                           Notices.  All
notices and other communications required or permitted hereunder shall be in
writing and, unless otherwise provided in this Agreement, will be deemed to
have been given when delivered in person or dispatched by electronic facsimile
transfer (confirmed in writing by certified mail, concurrently dispatched) or
one business day after having been dispatched for next-day delivery by a
nationally-recognized overnight courier service to the appropriate party at the
address specified below:

(a)          If to the Buyers, to:

Northern New
England Telephone Operations Inc. 

c/o Verizon Communications Inc. 

One Verizon Way, VC22E202

Basking Ridge, NJ 07920

Facsimile: (908) 696-2172

Attn:                  Stephen
E. Smith

                                                Vice
President

With a copy (which
shall not constitute notice) to:

Dale R. Chamberlain

Assistant General Counsel

Verizon Communications Inc.

One Verizon Way, VC 54S403

Basking Ridge, NJ 07920

Facsimile: (908) 696-2068

and

Debevoise
& Plimpton LLP

919 Third Avenue

New York, NY 10022

Facsimile:  (212) 909-6836

Attn:  Kevin M. Schmidt

 36
 

(b)         If to the FairPoint or Surviving Corporation,
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

Facsimilie: 704.344.1594

Attn:                    Shirley J. Linn
                                                Executive Vice President and General Counsel

With
a copy to (which shall not constitute notice):

Paul,
Hastings, Janofsky & Walker LLP

75 East 55th Street

New York, NY  10022

Facsimile No.:  (212) 230-7700

Attn:                    Thomas E. Kruger

(c)          If to Supplier, to:

Verizon
Information Technologies LLC 

c/o Verizon Communications Inc. 

One Verizon Way, VC22E202

Basking Ridge, NJ 07920

Facsimile: (908) 696-2172

Attn:                  Stephen
E. Smith

                                                Vice
President

With a copy (which
shall not constitute notice) to:

Dale R.
Chamberlain

Assistant General Counsel

Verizon Communications Inc.

One Verizon Way, VC 54S403

Basking Ridge, NJ 07920

Facsimile: (908) 696-2068

 37
 

and

Debevoise &
Plimpton LLP

919 Third Avenue

New York, NY 10022

Facsimile:  (212) 909-6836

Attn:  Kevin M. Schmidt

or to such other address
or addresses as such party may, from time to time, designate by like notice.

22.2                           Assignment;
Exclusivity.  The Buyers, FairPoint,
Surviving Corporation and their Affiliates shall not assign any of their rights
or obligations under this Agreement (by assignment, operation of law, merger or
otherwise) without the prior written consent of Supplier, which may be withheld
in its sole discretion, and any such prohibited assignment shall be null and
void; provided, however, that (i) Buyers and FairPoint may, without the
consent of Supplier, (A) assign any of their rights and obligations, in whole
or in part, hereunder to any Affiliate of Buyers controlled, directly or
indirectly, by FairPoint (it being agreed that any such assignment shall not
relieve Buyers or FairPoint from their respective obligations hereunder) and
(B) collaterally assign, in whole or in part, any of their rights hereunder as
security to one or more lenders; provided that such lenders agree to the
terms and conditions of this Agreement. 
The Supplier may assign any of its rights and obligations to an
Affiliate or Affiliates of Supplier without the consent of Buyers, FairPoint or
Surviving Corporation (it being agreed that, any such assignment shall not
relieve Supplier of its obligations hereunder). 
This Agreement shall be binding on, and inure to the benefit of, the parties
hereto and their respective permitted successors and assigns.

22.3                           Amendments.  This Agreement may be amended or modified
only by a subsequent writing signed by authorized representatives of all
parties.

22.4                           Headings/Captions.  The headings and captions set forth in this
Agreement are for convenience only and shall not be considered as part of this
Agreement nor as in any way limiting or amplifying the terms and provisions
hereof.

22.5                           Entire
Agreement.  This Agreement (together
with its Schedules), the Distribution Agreement and the Merger Agreement
supersede and revoke any prior 

 38
 

discussions and
representations, other agreements, term sheets, commitments, arrangements or
understandings of any sort whatsoever, whether written or oral, that may have been
made or entered into by the parties relating to the matters contemplated
hereby; provided, that if there is a conflict between the provisions of
the Distribution Agreement, the Merger Agreement and this Agreement, the
provisions of this Agreement shall govern and control.

22.6                           Waiver.  Except as otherwise expressly provided in
this Agreement, neither the failure nor any delay on the part of any party to
exercise any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise or waiver of any such right,
power or privilege preclude any other or further exercise thereof or the
exercise of any other right, power or privilege available to each party at law
or in equity.

22.7                           Counterparts.  This Agreement may be executed in one or more
counterparts, any or all of which shall constitute one and the same instrument.

22.8                           Governing
Law.  This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
(except that no effect shall be given to any conflicts of law principles of the
State of New York that would require the application of the laws of any other
jurisdiction).  The parties irrevocably
submit to the exclusive jurisdiction of any New York State Court or any Federal
Court located in the borough of Manhattan in the City of New York for purposes
of any suit, action or other proceeding to enforce the provisions of Article
XIX or any arbitration award under Article XIX. 
The parties agree that service of process, summons or notice or document
by U.S. registered mail to such party’s respective address set forth in Section
21.1 shall be effective service of process for any action, suit or proceeding
in New York with respect to any matters to which it has submitted to jurisdiction
as set forth above in the immediately preceding sentence.  THE PARTIES
HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION
OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER AGREEMENT ENTERED INTO IN
CONNECTION THEREWITH AND FOR ANY COUNTERCLAIM WITH RESPECT THERETO.  In the event of any breach of the provisions
of this Agreement, the non-breaching party shall be entitled to seek equitable
relief, including in the form of injunctions and orders for specific
performance, where the applicable legal standards for such relief in such
courts are met, in addition to all other remedies available to the
non-breaching party with respect thereto at law or in equity.

 39
 

22.9                           Further
Assurances.  From time to time after
the Closing Date, as and when requested by one of the parties, the other
parties will use their commercially reasonable efforts to execute and deliver,
or cause to be executed and delivered, all such documents and instruments as
may be reasonably necessary or appropriate, in the reasonable opinion of
counsel for Supplier and the Buyers, to provide or receive the services or
perform the obligations contemplated by this Agreement.

22.10                     Severability.  If any provision of this Agreement is
determined to be invalid, illegal or unenforceable by any Governmental
Authority, the remaining provisions of this Agreement to the extent permitted
by law shall remain in full force and effect provided that the essential terms
and conditions of this Agreement for both parties remain valid, binding and
enforceable and provided that the economic and legal substance of the
transactions contemplated is not affected in any manner materially adverse to
any party.  In the event of any such
determination, the parties agree to negotiate in good faith to modify this
Agreement to fulfill, as closely as possible, the original intents and purposes
hereof.  To the extent permitted by law,
the parties hereby to the same extent waive any provision of law that renders
any provision hereof prohibited or unenforceable in any respect.

22.11                     No
Third-Party Beneficiary.  Nothing
herein expressed or implied is intended to confer upon any Person, other than
the parties and their respective permitted assignees, any right, obligations or
liabilities under or by reason of this Agreement; provided however, that
notwithstanding the foregoing, each subsidiary of the Surviving Corporation
which engages in the Spinco Business as conducted on the Closing Date as a
successor to one or more of the Contributing Companies in whole or in part is
an intended third-party beneficiary.

22.12                     Independent
Contractor.  The parties hereto
understand and agree that this Agreement does not make any of them an agent or
legal representative of any other for any purpose whatever.  No party is granted, by this Agreement or
otherwise, any right or authority to assume or create any obligation or
responsibility, express or implied, on behalf of or in the name of any other
party or to bind any other party in any manner whatsoever.  The parties expressly acknowledge (i) that
Supplier and its Affiliates are independent contractors with respect to the
Buyers and their Affiliates in all respects, including, without limitation, the
provision of Transition Services and (ii) the parties are not
partners, joint venturers, employees or agents of or with each other.

22.13                     Governing
Provisions.  To the extent that any
of the provisions, terms or conditions set forth in this Agreement are
inconsistent or conflict with any specific provisions or descriptions set forth
in any Schedule to this Agreement, the provisions of 

 40
 

the Schedule shall govern and
control, provided, that if the provisions of any Schedule are
inconsistent with the provisions of Section 3.1 or 3.2 of this Agreement, then
Section 3.1 or 3.2 shall control.  If the
provisions of the “General Provisions and Select Definitions” of the Schedule
A, Schedule C and Schedule D, are inconsistent with or conflict with any
specific Transition Service description subsection of Schedule A, Schedule C or
Schedule D, then such “General Provisions and Select Definitions” shall
control.

22.14                     Force
Majeure.  If performance of any
Transition Service or other obligation under this Agreement is prevented,
restricted, interrupted or interfered with by reason of acts of God, wars,
revolution, civil commotion, acts of public enemy, embargo, acts of government
in its sovereign capacity, labor difficulties, including, without limitation,
strikes, slowdowns, picketing or boycotts, communication line failures, power
failures, or any other circumstances beyond the reasonable control and not
involving any willful misconduct or gross negligence of the party seeking
relief under this Section 21.14 or its Affiliates (each, a “Force Majeure
Event”), such party upon giving prompt notice to the other, shall be
excused from such performance on a day-to-day basis during the continuance of
such prevention, restriction or interference, provided, however, that such
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 such causes are removed or cease; provided
further, however, that, except as provided in Article XIV, in no event
shall any of the foregoing result in an extension of the term of this
Agreement.  Without limiting the
generality of the foregoing, Supplier shall make available to FairPoint and
Buyers any business continuity and disaster recovery services that Supplier has
in place for its own operations on an equal basis as Supplier makes such
business continuity and disaster recovery services available to its own
operations similarly affected by such Force Majeure Event.  Notwithstanding the foregoing, if Supplier’s
performance is excused by a Force Majeure Event, and Supplier fails to resume
full performance of all its obligations hereunder within 10 business days of
the onset of the Force Majeure Event, the Buyers or FairPoint may terminate
this Agreement without penalty or other liability whatsoever (other than for
Transition Services previously rendered), in whole or in part, immediately upon
written notice to Supplier.  Furthermore,
if either party does not perform any of its obligations hereunder as a result
of a Force Majeure Event, and the other party’s performance of its obligations
hereunder are conditioned upon the first party’s performance, then
notwithstanding anything in this Agreement to the contrary, the party’s
performance will be excused until such time as the first party has performed
those obligations prevented by the Force Majeure Event.

22.15                     Confidentiality.  For all purposes of this Section 22.15,
Confidential Information of Buyers shall be deemed Confidential Information of FairPoint,
and Confidential Information of FairPoint shall be deemed Confidential
Information of 

 41
 

Buyers. For purposes of this
Agreement, Confidential Information of Buyers/FairPoint shall mean (i) the
Customer Data (as that term is defined in the Intellectual Property Agreement)
and any updates thereto provided by Buyers or FairPoint to Supplier or any of
its Affiliates pursuant to this Agreement, (ii) non-public, non-technical
information based on Customer Data created by Supplier in the performance of
Transition Services pursuant to this Agreement, and (iii) non-public,
non-technical business information related to Cutover as disclosed by Buyer or FairPoint
pursuant to Section 4.1.  For purposes of
this Agreement, Confidential Information of Supplier shall mean (i) Licensed
Intellectual Property, (ii) any technical information provided to Buyer or FairPoint
or any of their Affiliates by Supplier or any of its Affiliates pursuant to
this Agreement, and (iii) any information provided to Buyer, FairPoint or any
of their Affiliates or contractors by Supplier or any of its Affiliates
pursuant to Section 4.1, including, but not limited to, technical information,
data formats, software, documentation, and software scripts.

(a)          Obligations

FairPoint and Supplier
will each refrain from disclosure of Confidential Information of the other
party to any Person not authorized by the other party and will use the
Confidential Information of the other party solely for the performance of or
use of Transition Services; it being understood and agreed that each party will
use the same level of care (including both facility physical security and
electronic security) to prevent unauthorized disclosure and/or use by third
parties of the Confidential Information of the other party as it employs to
avoid unauthorized disclosure or use of its own information of a similar
nature, but in no event less than a reasonable standard of care.  Notwithstanding the foregoing obligations
(but subject to compliance with law) the parties may disclose to and permit use
of the Confidential Information of the other party by their respective legal
counsel, auditors, contractors and subcontractors where: (i) such disclosure
and use is reasonably necessary; and (ii) such auditors, contractors and
subcontractors are bound by obligations of confidentiality, non-disclosure and
other terms as restrictive in scope as those set forth in this Section 22.15.

(b)         Exclusions

Notwithstanding the
foregoing, this Section 22.15 shall not apply to any information which Supplier
or FairPoint can demonstrate was or is: 
(a) at the time of disclosure to it, in the public domain; (b) after
disclosure to it, published or otherwise becomes part of the public domain
through no fault of the receiving party; (c) received after disclosure to it
from a third party, who had a lawful right to and, without a breach of duty
owed to the disclosing party, without any restriction on use or disclosure; or
(d) independently developed by or for the receiving party without reference to
or use of the Confidential 

 42
 

Information of the
disclosing party.  Further, either party
may disclose the other party’s Confidential Information to the extent required
by law or order of a court or governmental agency.  However, in the event of disclosure pursuant
to an order of a court or governmental agency, and subject to compliance with
law or such order of a court or governmental agency, the recipient of such
Confidential Information shall give the disclosing party prompt notice to
permit the disclosing party an opportunity, if available, to obtain a protective
order or otherwise protect the confidentiality of such information, all at the
disclosing party’s cost and expense.

(c)          Ownership

All Confidential
Information of a party or a designated group shall remain the exclusive
property of the disclosing party and the disclosure shall not grant any express
or implied interest in the other party or its subcontractors to such
Confidential Information.  Upon written
request by a party at any time and without regard to the default status of the
parties under this Agreement, the other party shall promptly return to the
disclosing party the Confidential Information in the format as it exists on the
date of the request.

(d)         Loss of or Unauthorized Access to Confidential
Information

Each of Supplier and FairPoint
shall promptly notify the other party in writing if it becomes aware of any
disclosure or use in violation of this Agreement of the other party’s
Confidential Information that is in such party’s or an Affiliate’s or
subcontractor’s possession.

(e)          Data Privacy

FairPoint shall be and
remain the controller of Confidential Information of the Buyer for purposes of
all applicable laws relating to data privacy, personal data, transborder data
flow and data protection (collectively, the “Privacy Laws”), with rights
to determine the purposes for which Confidential Information of Buyer is
processed, and nothing in this Agreement will restrict or limit in any way FairPoint’s
rights or obligations as owner and/or controller of Confidential Information of
Buyer for such purposes.

 43
 

(f)            Limitation

The obligations of this
Section 22.15 (a) will apply after the Effective Date to any Confidential
Information disclosed to the receiving party after the Effective Date and (b)
will continue and must be maintained with respect to Confidential Information
for a period: (i) in the case of Personally Identifiable Information or
software (including software scripts and data formats), in perpetuity, and (ii)
in the case of all other Confidential Information, except as otherwise set
forth in the Merger Agreement, the Distribution Agreement or Intellectual
Property Agreement, for a period of [ten] years from receipt.

Personally Identifiable
Information means personally identifiable information
included in Customer Data.  Personally
Identifiable Information may include social security numbers, personal credit
histories, personal financial information and employment records.

 44
 

IN WITNESS WHEREOF, the parties, acting through their
duly authorized representatives, have caused this Agreement to be duly executed
and delivered as of the date first above written.

	
  

  	
  VERIZON INFORMATION 

  TECHNOLOGIES LLC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jack M. Farris

  
	
   

  	
   

  	
  Name: Jack M. Farris

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  FAIRPOINT COMMUNICATIONS, 

  INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Eugene B. Johnson

  
	
   

  	
   

  	
  Name: Eugene B. Johnson

  
	
   

  	
   

  	
  Title: Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  NORTHERN NEW ENGLAND 

  TELEPHONE OPERATIONS INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stephen E. Smith

  
	
   

  	
   

  	
  Name: Stephen E. Smith

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ENHANCED COMMUNICATIONS OF 

  NORTHERN NEW ENGLAND INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stephen E. Smith

  
	
   

  	
   

  	
  Name: Stephen E. Smith

  
	
   

  	
   

  	
  Title: Vice President

  

 

 45Exhibit
10.2

DISTRIBUTION AGREEMENT

BY AND BETWEEN

VERIZON COMMUNICATIONS INC.

AND

NORTHERN NEW ENGLAND SPINCO INC.

DATED AS OF JANUARY 15, 2007

 

	
  ARTICLE I

  	
   

  	
  Definitions

  	
   

  	
  3

  
	
  Section 1.1

  	
   

  	
  General

  	
   

  	
  3

  
	
  Section 1.2

  	
   

  	
  References to Time

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
   

  	
  The Contribution

  	
   

  	
  20

  
	
  Section 2.1

  	
   

  	
  Transfers of Spinco Assets and Spinco Liabilities

  	
   

  	
  20

  
	
  Section 2.2

  	
   

  	
  Conveyancing and Assumption Agreements

  	
   

  	
  21

  
	
  Section 2.3

  	
   

  	
  Certain Resignations

  	
   

  	
  21

  
	
  Section 2.4

  	
   

  	
  Special Dividend; New Financing; Debt Exchange

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
   

  	
  Conditions

  	
   

  	
  24

  
	
  Section 3.1

  	
   

  	
  Conditions to the Distribution

  	
   

  	
  24

  
	
  Section 3.2

  	
   

  	
  Waiver of Conditions

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
   

  	
  The Distribution

  	
   

  	
  24

  
	
  Section 4.1

  	
   

  	
  Record Date and Distribution Date

  	
   

  	
  24

  
	
  Section 4.2

  	
   

  	
  Spinco Reclassification

  	
   

  	
  24

  
	
  Section 4.3

  	
   

  	
  The Agent

  	
   

  	
  25

  
	
  Section 4.4

  	
   

  	
  Delivery of Shares to the Agent

  	
   

  	
  25

  
	
  Section 4.5

  	
   

  	
  The Distribution

  	
   

  	
  25

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
   

  	
  Post Closing Adjustments

  	
   

  	
  26

  
	
  Section 5.1

  	
   

  	
  Post-Closing Adjustments

  	
   

  	
  26

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
   

  	
  Transaction Agreements

  	
   

  	
  28

  
	
  Section 6.1

  	
   

  	
  Transaction Agreements

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
   

  	
  Additional Covenants

  	
   

  	
  28

  
	
  Section 7.1

  	
   

  	
  Survival; Exclusive Remedy

  	
   

  	
  28

  
	
  Section 7.2

  	
   

  	
  Mutual Release

  	
   

  	
  28

  
	
  Section 7.3

  	
   

  	
  Intercompany Agreements; Intercompany Accounts

  	
   

  	
  29

  
	
  Section 7.4

  	
   

  	
  Guarantee Obligations and Liens

  	
   

  	
  30

  
	
  Section 7.5

  	
   

  	
  Insurance

  	
   

  	
  31

  
	
  Section 7.6

  	
   

  	
  Subsequent Transfers

  	
   

  	
  32

  
	
  Section 7.7

  	
   

  	
  Further Assurances

  	
   

  	
  33

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
   

  	
  Access to Information

  	
   

  	
  33

  
	
  Section 8.1

  	
   

  	
  Provision of Information

  	
   

  	
  33

  
	
  Section 8.2

  	
   

  	
  Privileged Information

  	
   

  	
  34

  
	
  Section 8.3

  	
   

  	
  Production of Witnesses

  	
   

  	
  35

  
	
  Section 8.4

  	
   

  	
  Retention of Information

  	
   

  	
  36

  
	
  Section 8.5

  	
   

  	
  Confidentiality

  	
   

  	
  36

  
	
  Section 8.6

  	
   

  	
  Cooperation with Respect to Government Reports and
  Filings

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
   

  	
  No Representations or Warranties

  	
   

  	
  37

  
	
  Section 9.1

  	
   

  	
  No Representations or Warranties

  	
   

  	
  37

  

 

 

	
  ARTICLE X

  	
   

  	
  Miscellaneous

  	
   

  	
  37

  
	
  Section 10.1

  	
   

  	
  Complete Agreement

  	
   

  	
  37

  
	
  Section 10.2

  	
   

  	
  Expenses

  	
   

  	
  38

  
	
  Section 10.3

  	
   

  	
  Governing Law

  	
   

  	
  38

  
	
  Section 10.4

  	
   

  	
  Notices

  	
   

  	
  38

  
	
  Section 10.5

  	
   

  	
  Amendment and Modification

  	
   

  	
  38

  
	
  Section 10.6

  	
   

  	
  Successors and Assigns; No Third-Party Beneficiaries

  	
   

  	
  38

  
	
  Section 10.7

  	
   

  	
  Counterparts

  	
   

  	
  39

  
	
  Section 10.8

  	
   

  	
  Interpretation

  	
   

  	
  39

  
	
  Section 10.9

  	
   

  	
  Severability

  	
   

  	
  39

  
	
  Section 10.10

  	
   

  	
  References; Construction

  	
   

  	
  39

  
	
  Section 10.11

  	
   

  	
  Termination

  	
   

  	
  39

  
	
  Section 10.12

  	
   

  	
  Consent to Jurisdiction and Service of Process

  	
   

  	
  39

  
	
  Section 10.13

  	
   

  	
  Waivers

  	
   

  	
  40

  
	
  Section 10.14

  	
   

  	
  Waiver of Jury Trial

  	
   

  	
  40

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exhibit A

  	
   

  	
  Form of Idearc
  Agreements

  	
   

  	
   

  
	
  Exhibit B

  	
   

  	
  Form of
  Intellectual Property Agreement

  	
   

  	
   

  
	
  Exhibit C

  	
   

  	
  Terms of Spinco
  Securities

  	
   

  	
   

  

 

DISTRIBUTION AGREEMENT

This DISTRIBUTION AGREEMENT (this “Agreement”),
dated as of January 15, 2007, by and between Verizon Communications Inc., a
Delaware corporation (“Verizon”), and Northern New England Spinco Inc.,
a Delaware corporation (“Spinco”).

RECITALS

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

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

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

WHEREAS, prior to the Distribution (as defined herein)
upon the terms and subject to the conditions set forth in this Agreement,
Verizon will, pursuant to a series of restructuring transactions that will
occur prior to the Distribution, (a)  transfer or cause to be
transferred by one or more of its Subsidiaries to the Non-ILEC Spinco
Subsidiary (as defined herein) all of the ILEC Spinco Assets (as defined
herein), such transfer to be subject to the assumption by such entity of the
Non-ILEC Spinco Liabilities (as defined herein) and (b)  transfer
or cause to be transferred by Verizon New England Inc., a New York corporation
(“Verizon New England”) to the ILEC Spinco Subsidiary (as defined
herein) all of the ILEC Spinco Assets (as defined herein), subject to the
assumption by such entity of the ILEC Spinco Liabilities (as defined herein),
and shall transfer the ILEC Spinco Subsidiary (after receiving its stock from
its Subsidiaries in a series of internal distributions) to Spinco;

WHEREAS, in exchange for the transfers to the Spinco
Subsidiaries contemplated by the immediately preceding recital, Spinco will
upon the terms and subject to the conditions set forth in this Agreement (a)
distribute to Verizon the Spinco

Securities (as defined
herein) and (b) pay to Verizon the Special Dividend (as defined herein),
all upon the terms and subject to the conditions set forth herein (the
transactions described in this recital and in the immediately preceding
recital, collectively, the “Contribution”);

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

WHEREAS, the parties to this Agreement intend that (i)
the First Internal Spinoff (as defined in the Merger Agreement) qualify as a
reorganization under Section 368(a)(1)(D) of the Internal Revenue Code of 1986,
as amended (the “Code”) and a distribution eligible for nonrecognition
under Sections 355(a) and 361(c) of the Code; (ii) the Second
Internal Spinoff (as defined in the Merger Agreement) qualify as a distribution
eligible for nonrecognition under Sections 355(a) and 361(c) of the Code; (iii)
the Contribution, together with the Distribution, qualify as a tax-free
reorganization under Section 368(a)(1)(D) of the Code; (iv) the
Distribution qualify as a distribution of Spinco stock to Verizon stockholders
eligible for nonrecognition under Sections 355(a) and 361(c) of the Code, (v)
no gain or loss be recognized by Verizon for federal income tax purposes in
connection with the receipt of the Spinco Securities (as defined herein) or the
consummation of the Debt Exchange (as defined herein); (vi) the Special
Dividend qualify as money transferred to creditors or distributed to
shareholders in connection with the reorganization within the meaning of
Section 361(b)(1) of the Code, to the extent that Verizon distributes the
Special Dividend to its creditors and/or shareholders in connection with the
Contribution, (vii) the Merger qualify as a tax-free reorganization
pursuant to Section 368 of the Code; and (viii) no gain or loss be
recognized as a result of such transactions for federal income tax purposes by
any of Verizon, Spinco, and their respective stockholders and Subsidiaries
(except to the extent of cash received in lieu of fractional shares); and

WHEREAS, the parties to this Agreement intend that
throughout the internal restructurings taken in contemplation of this
Agreement, including the Internal Spinoffs (as defined in the Merger Agreement),
Internal Restructurings (as defined in the Merger Agreement), the Contribution,
and the Distribution, the Spinco Employees shall maintain uninterrupted
continuity of employment, compensation and benefits, and also for union
represented employees, uninterrupted continuity of representation for purposes
of collective bargaining and uninterrupted continuity of coverage under their
collective bargaining agreements, as described in the Employee Matters
Agreement.

 2
 

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

ARTICLE I

DEFINITIONS

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

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

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

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

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

“Applicable Rate” means the three-month LIBOR
rate published on Telerate Page 3750 as of 11:00 a.m. London time, on the
date which is two days prior to the date such rate is determined, less 10 basis
points, such rate to be reset every 90 days.

 3
 

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

“Backstop Facility Commitment” has the meaning
set forth in the Merger Agreement.

“Blended Customer Contracts” means billing and
collection Contracts, operator service Contracts, directory assistance
Contracts and Contracts with end user customers, in each case to which one of
the Contributing Companies or another Subsidiary of Verizon is a party, and in
each case which provide for such customers to receive one or more products
and/or services that are offered by the Spinco Business as well as one or more
products and/or services that are offered by the Verizon Business, other than
those Contracts listed on Section 1.1(a) of the Disclosure Letter.

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

 4
 

“Business Day” means any day other than a
Saturday, Sunday or a day on which banking institutions in the City of
Charlotte, North Carolina or the City of New York, New York are authorized or
obligated by law or executive order to close.

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

“Claims Made Policies” has the meaning set
forth in Section 7.5(a).

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

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

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

“Commitment Letter” has the meaning set forth
in the Merger Agreement.

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

“Company Consent” means the written consent of
the Company, which consent shall not be unreasonably withheld, conditioned or
delayed.

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

“Contributing Companies” means Verizon New
England, NYNEX Long Distance Company, Bell Atlantic Communications Inc.,
Verizon Select Services Inc., Verizon Internet Services Inc., and, any
Subsidiary of Verizon that employs Continuing Employees (as defined in the
Merger Agreement) as of the Closing Date.

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

 5
 

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

“Current Liabilities” means the total current
liabilities of Spinco and the Spinco Subsidiaries, determined in accordance
with the last sentence of Section 5.1(a), as of the opening of business on the
Distribution Date, but excluding (i) the current portion of any Indebtedness
and excluding all Spinco Debt Expenses and (ii) for the avoidance of doubt, any
amounts that are the responsibility of the Surviving Corporation pursuant to Section
11.1 of the Merger Agreement.

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

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

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

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

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

“Distribution Date Spinco Indebtedness” means
the aggregate amount of Indebtedness of Spinco and its Subsidiaries as of the
opening of business on the Distribution Date, calculated pro forma for the
Contribution.

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

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

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

 6
 

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

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

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

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

“GAAP” means United States generally accepted
accounting principles.

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

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

“Idearc Agreements” means the
Publishing Agreement, the Non-competition Agreement and the Branding Agreement,
each to be entered into between Idearc Media Inc., a Delaware corporation, and
Spinco and such Subsidiaries of Spinco as are designated by Verizon prior to
the Distribution (in consultation with the Company), each in the form attached hereto
as Exhibits A-1, A-2 and A-3.

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

“Identified Persons” has the meaning set forth
in the Merger Agreement.

“ILEC” means an incumbent local exchange
carrier.

 7
 

“ILEC Spinco Assets” means Spinco Assets which
are subject to regulations applicable to ILECs promulgated by one or more of
the State of Vermont Public Service Board, the State of Maine Public Utilities
Commission or the New Hampshire Public Utilities Commission.

“ILEC Spinco Liabilities” means Spinco
Liabilities that arise from or relate to ILEC Spinco Assets.

“ILEC Spinco Subsidiary” means Northern New
England Telephone Operations Inc., a newly formed Delaware corporation.

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

“Intellectual Property Agreement” means the
Intellectual Property Agreement to be entered into among Verizon and its
Affiliates and Spinco and its Affiliates, in the form of Exhibit B hereto.

“Intellectual Property Assets” means all “Statutory
Intellectual Property” and “Non-Statutory Intellectual Property”, as each
such term is defined in the Intellectual Property Agreement.

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

“Liability” or “Liabilities” means all
debts, liabilities and obligations (including those arising under contracts)
whether absolute or contingent, matured or unmatured, liquidated or
unliquidated, accrued or unaccrued, known or unknown, whenever arising, and
whether or not the same would properly be reflected on a balance sheet.  “Liabilities” shall not include (a)
any liabilities in respect of any Intellectual Property, (b) any
liabilities for or in respect of Taxes, which shall be governed solely by the
Tax Sharing Agreement and, to the extent applicable, the Merger Agreement or (c)
any liabilities for or in respect of any benefit plans, programs, agreements,
and arrangements, which shall

 8
 

be governed exclusively
by the Employee Matters Agreement and, to the extent applicable, the Merger
Agreement.

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

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

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

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

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

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

“Non-ILEC Spinco Subsidiary” means Enhanced
Communications of Northern New England Inc., a newly-formed Delaware
corporation.

“Occurrence Basis Policies” has the meaning set
forth in Section 7.5(a).

“Owned Real Property” means all land in the
Territory that is owned by Verizon or one of its Affiliates and used primarily
in the conduct of the Spinco Business, together with all buildings, structures,
improvements and fixtures located thereon, subject to all easements and other
rights and interests appurtenant thereto, including those listed in
Section 1.1(d) of the Disclosure Letter.

“Person” or “person” means a natural
person, corporation, company, partnership, limited partnership, limited
liability company, or any other entity, including a Governmental Authority.

 9
 

“Policies” means all insurance policies,
insurance contracts and claim administration contracts of any kind of Verizon
and its Subsidiaries (including members of the Spinco Group) and their
predecessors which were or are in effect at any time at or prior to the
Distribution Date, including but not limited to commercial general liability,  automobile, workers’ compensation, excess and
umbrella, aircraft, crime, property and business interruption, directors’ and
officers’ liability, fiduciary liability, employment practices liability,
errors and omissions, special accident, environmental, inland and marine, and
captive insurance company arrangements, together with all rights, benefits and
privileges thereunder.

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

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

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

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

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

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

 10
 

“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.

“SEC” means the U.S. Securities and Exchange
Commission.

“Securities Act” means the Securities Act of
1933, as amended, together with the rules and regulations of the SEC
promulgated thereunder.

“Special Dividend” means a dividend in an
amount to be set forth in a certificate delivered by Verizon to Spinco, with a
copy to the Company, no later than 30 days prior to the Distribution Date,
which amount shall not exceed Verizon’s estimate of its tax basis in Spinco.

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

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

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

(A) those set forth on
the Spinco Interim Balance Sheet (after giving effect for this purpose to any
exclusion of Assets resulting from application of the principles, methodologies
and policies set forth in Section 5.1 of the Disclosure Letter) to the extent
held on the Distribution Date;

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

(C) all Real Property
Interests;

(D) Telephone Plant; and

 11
 

(E) Contracts, including
the Contracts listed in Section 1.1(g) of the Disclosure Letter;

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

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

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

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

(vi) any additional Assets set forth on
Section 1.1(e) of the Disclosure Letter;

provided,
that in no event will Spinco Assets include:

(A) any
Intellectual Property Asset (except to the extent specified in a Transaction
Agreement);

(B) any
Verizon Assets;

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

(D) any Assets of
Verizon Network Integration Corp.;

(E) any Assets of Verizon
Federal Inc.;

(F) any Assets of
Federal Network Systems LLC;

(G) any Assets of
Verizon Global Networks Inc.;

 12
 

(H) any Assets of
Verizon Select Services Inc., other than Assets that constitute customer
relationships or Contracts that relate solely to the Spinco Business or are
referred to in clause (v) above, including, for the avoidance of doubt, the
Verizon Select Services Inc. customer relationships managed by Verizon Business
Global LLC or its subsidiaries;

(I) any Assets of Cellco
Partnership (d/b/a Verizon Wireless); or

(J) any Cash or
Cash Equivalents or short term investments except as may be elected by Verizon.

“Spinco Audited Balance Sheet” means the
audited Combined Statements of Selected Assets, Selected Liabilities and Parent
Funding as of December 31, 2005 for the local exchange businesses and related
landline activities of Verizon in the states of Maine, New Hampshire and
Vermont (including Internet access, long distance and customer premises
equipment services provided to customers in those states).

“Spinco Business” means:

(i) all of the incumbent local exchange carrier
business activities and operations of Verizon and its Affiliates in the
Territory (consisting of local exchange service, intraLATA toll service,
network access service, enhanced voice and data services, DSL services and
wholesale services); and

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

(A) consumer and
small business switched and dedicated long distance service to customers located
in the Territory;

(B) large business
switched and dedicated long distance service to customers of Verizon Select
Services Inc. located in the Territory;

(C) the delivery by
Verizon Internet Services Inc. of dial-up, DSL and fiber to the premises (a/k/a
FiOS) data and dedicated internet access services to customers located in the
Territory;

 13
 

(D) customer premise
equipment sales, and installation and maintenance services currently offered by
Verizon Select Services, Inc. to customers located in the Territory; and

(E) private line service
to customers of Verizon Select Services Inc. where the line originates and
terminates in the Territory;

provided
that, for the avoidance of doubt, “Spinco Business” shall not include any other
business activities or operations of Verizon or its Affiliates that may be
conducted in the Territory, including, without limitation,

(A) the offering of
wireless voice, data and other services by Cellco Partnership (d/b/a Verizon
Wireless) and the offering of air-to-ground or rail-to-ground services by
Verizon Airfone;

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

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

(D) multi-dwelling unit
voice, data and video services as provided generally by Verizon Avenue Corp.;

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

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

(G) monitoring,
provision, maintenance and repair of intrastate, interstate and international
telecommunications and information services, managed services, internet
protocol services, data center services, professional services, hosting
services,

 14
 

web infrastructure and
application management and other products, services and software provided to
government and large business customers as provided generally by Verizon
Business Global LLC, f/k/a MCI, LLC, which is the successor to the business of
MCI, Inc., or direct and indirect subsidiaries of Verizon Business Global LLC;

(H) consumer and small
business CPE services (including DSL modem and router fulfillment) as provided
generally by Verizon TeleProducts;

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

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

(K) Verizon Voice Over
Internet Protocol service as provided generally by Verizon d/b/a Verizon Long
Distance and NYNEX Long Distance; or

(L) activities relating
to the foregoing or in substitution for the foregoing by the named entities or
any successor thereto.

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

“Spinco Debt Expenses” means (i) the
aggregate amount of all fees and expenses payable to lenders or lenders’
advisors by Spinco or the Surviving Corporation pursuant to the terms of the
New Financing (or Alternative Financing) in connection with the consummation of
the New Financing (or Alternative Financing) multiplied by (ii) a
fraction, the numerator of which is (A) the amount drawn by Spinco
under the terms of the New Financing (or Alternative Financing) immediately
prior to the Effective Time and the denominator is (B) the sum of the
aggregate amount of indebtedness contemplated by the New Financing (or
Alternative Financing).

“Spinco Group” means Spinco and the Spinco
Subsidiaries.

“Spinco Guarantees” has the meaning set forth
in Section 7.4(b).

 15
 

“Spinco Interim Balance Sheet” means the
balance sheet that is part of the Interim Financial Statements (as defined in
the Merger Agreement).

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

(i) all Liabilities of Verizon or any of
its Subsidiaries (including Spinco and the Spinco Subsidiaries) to the extent
relating to or arising from the Spinco Business, including the Liabilities set
forth on the Spinco Interim Balance Sheet (after giving effect for this purpose
to any exclusion of Liabilities resulting from application of the principles,
methodologies and policies set forth in Section 5.1 of the Disclosure Letter)
or arising after the date thereof and the Liabilities of Spinco under the
Transaction Agreements;

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

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

(iv) those Liabilities in the Blended Customer
Contracts that are assigned to and assumed by the Company pursuant to Section
7.7(e) of the Merger Agreement;

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

(vi) all Liabilities set forth on Section
1.1(f) of the Disclosure Letter. 
Notwithstanding the foregoing, Spinco Liabilities shall not include any
Liabilities specifically agreed not to be assumed by Spinco under any other
Transaction Agreement.  For the avoidance
of doubt, Spinco Liabilities do not include Verizon Liabilities.

“Spinco Securities” means the notes to be
issued by Spinco to Verizon, as contemplated in Section 2.4 hereof and having
the principal terms set forth on Exhibit C hereto and other terms
determined in accordance with Section 7.20 of the Merger Agreement.

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

 16
 

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

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

“Target Working Capital” means $50,500,000,
provided that such amount will be reduced by the amount, if any, equal to (x)
the sum of (i) any amount the Company pays or becomes obligated to pay to a
Commitment Party (as defined in the Commitment Letter) pursuant to the fifth
paragraph of the fee letter that is part of the Commitment Letter, and (ii) any
amount the Company pays or becomes obligated to pay pursuant to the fee letter
that is part of the Backstop Commitment, divided by (y) 0.39579.

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

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

“Telephone Plant” means the plant, systems,
structures, regulated construction work in progress, telephone cable (whether
in service or under construction), microwave facilities (including frequency
spectrum assignment), telephone line facilities, machinery, furniture,
fixtures, tools, implements, conduits, stations, substations, equipment
(including central office equipment, subscriber station equipment and other
equipment in general), instruments and house wiring connections located in the
Territory used in the Spinco Business.

“Territory” means the local franchise area of
Verizon New England in the states of Maine, Vermont and New Hampshire.

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

“Transaction Agreements” means this Agreement,
the Employee Matters Agreement, the Intellectual Property Agreement, the Merger
Agreement, the Tax Sharing Agreement, the Idearc Agreements and the Transition
Services Agreement.

 17
 

“Transferred Affiliate Arrangements” means (i) any
intercompany trade accounts payable or receivable of the Spinco Business as of
the date of the Contribution, including amounts payable by or to Verizon or any
Verizon Subsidiaries under Contracts for the provision of billing and
collection, network access and other services, (ii) any
reimbursements due as of the date of the Contribution in respect of the Spinco
Business for corporate services under the pro-rate agreement or other
arrangements with Verizon or any Verizon Subsidiary consistent with past
practice, (iii) any Transaction Agreement and any arrangement
expressly contemplated by a Transaction Agreement, (iv) any Affiliate
interconnection Contract or (v) any Contract listed on Section 1.1(g) of
the Disclosure Letter.

“Transition Services Agreement” means that
Transition Services Agreement entered into on the date hereof, between Verizon
and Spinco, as such agreement may be amended from time to time.

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

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

(i) all of the right, title and interest
of Verizon and its Subsidiaries in all Assets held by them other than those
identified in clauses (i) through (vi) of the definition of Spinco Assets, it
being acknowledged that Verizon Assets include (a) all Excluded Contracts (it
being agreed that Spinco and the Spinco Subsidiaries shall be permitted to (x) retain
any product or license under an Excluded Contract delivered and paid for prior
to the Closing in the conduct of the Spinco Business and (y) receive
any product or license under an Excluded Contract that was ordered and paid for
prior to the Closing in the conduct of the Spinco Business but which shall be
delivered after the Closing), (b) all Contracts between Verizon and the
Verizon Subsidiaries on one hand and Spinco and the Spinco Subsidiaries on the
other hand (other than to the extent they constitute Transferred Affiliate
Arrangements), (c) any Asset, other than any customer relationships, of
the dial-up and ISP and the consumer or small business long distance portions
of the Spinco Business and (d) tangible Assets used exclusively by personnel
who are retained by Verizon but who work in one of the work centers or other
locations located in the Territory which serve both the Spinco Business and the
Verizon Business, all of which are set forth in Section 1.1(h) of the
Disclosure Letter.

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

 18
 

(iii) the capital stock of each Verizon
Subsidiary,

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

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

(vi) any additional Assets set forth on Section
1.1(i) of the Disclosure Letter.

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

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

“Verizon Group” means Verizon and the Verizon
Subsidiaries.

“Verizon Guarantees” has the meaning set forth
in Section 7.4(a).

“Verizon Liabilities” means, subject to Section
2.1(c), collectively, (i) all Liabilities of Verizon or any of its
Subsidiaries relating to or arising out of the Verizon Business, including the
Liabilities of Verizon under the Transaction Agreements, in each case other
than the Spinco Liabilities, (ii) all Liabilities in respect of the
Transferred Affiliate Arrangements other than the Spinco Liabilities related
thereto, (iii) those Liabilities under the Blended Customer Contracts
except to the extent assumed by the Company pursuant to Section 7.8(e) of the
Merger Agreement, (iv) all Liabilities in respect of Excluded Contracts,
(v) all Liabilities set forth on Section 1.1(j) of the Disclosure
Letter, (vi) all Liabilities relating to or arising from any Spinco
Guarantee, and (vii) all expenses allocated to Verizon pursuant to Section
11.1 of the Merger Agreement, (viii) all obligations in respect of
guarantees issued by any member of the Spinco Group prior to the Closing Date
in respect of the Verizon Business, (ix) Spinco Debt Expenses, (x)
the amount, if any, by which Distribution Date Spinco Indebtedness exceeds $1.7
billion and (xi) Liabilities in respect of claims asserted against any
Identified Person as a result of acts or omissions occurring prior to the
Distribution.  For the avoidance of
doubt, Verizon Liabilities do not include Spinco Liabilities.

 19
 

“Verizon New England” has the meaning set forth
in the Recitals.

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

Section 1.2                                      References to
Time.  All references in this
Agreement to times of the day shall be to New York City time.

ARTICLE II

The Contribution

Section 2.1                                      Transfers of
Spinco Assets and Spinco Liabilities.

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

(b)                                 Nothing
in this Agreement (including, for the avoidance of doubt, Section 7.6) shall be
deemed to require the transfer of any Assets or the assumption of any
Liabilities which by their terms or operation of law cannot be transferred or
assumed until such time as all legal impediments to such transfer or assumption
have been removed.  The rights and
obligations of the parties in respect of removing such impediments, (including
pursuing and obtaining all applicable consents, waivers and approvals in
connection with the Contribution) and in respect of such Assets and Liabilities
to the extent not transferred on the Distribution Date are set forth in the
Merger Agreement and no additional rights or obligations shall be deemed to
arise under this Agreement in connection therewith.

(c)                                  The
rights and obligations of the parties with respect to Taxes shall be governed
exclusively by the Tax Sharing Agreement (and, to the extent applicable, the

 20

Merger Agreement).  Accordingly,
items relating to Taxes shall not be treated as Assets or Liabilities for
purposes of, or otherwise be governed by, this Agreement.  In the event of any inconsistency between
this Agreement and the Tax Sharing Agreement, the terms of the Tax Sharing
Agreement shall control.  In addition,
the rights and obligations of the parties with respect to benefit plans,
programs, agreements and arrangements shall be governed exclusively by the Employee
Matters Agreement.  Accordingly, assets
and liabilities relating to any benefit plans, programs, agreements and
arrangements shall not be treated as Assets or Liabilities for purposes of, or
otherwise be governed by, this Section 2.1. 
The rights and obligations of the parties with respect to collective
bargaining agreements and practices, including Spinco collective bargaining
agreements, memoranda of agreement and memoranda of understanding, and the
rights and obligations arising under those contracts and practices on benefit
plans, programs, agreements and arrangements shall be treated as Assets or
Liabilities for purposes of this Section 2.1, and are described in the Employee
Matters Agreement.  In the event of any
conflict between this Section 2.1, or any other Section of this Agreement, and
the Employee Matters Agreement, the Employment Matters Agreement shall control.

Section 2.2                                      Conveyancing
and Assumption Agreements.  In
connection with the transfer of the Spinco Assets and the assumption of the
Spinco Liabilities contemplated by this Article II, Verizon and Spinco shall
execute, or cause to be executed by the appropriate entities, customary
conveyancing and assumption instruments (provided that such instruments
shall not impose obligations on any party or grant rights, through representations
or otherwise, beyond those set forth in this Agreement).

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

 21
 

Section 2.4                                      Special
Dividend; New Financing; Debt Exchange.

(a)                                  The
Spinco Board will establish a Special Dividend record date and will authorize
Spinco to pay out of funds legally available therefor the Special Dividend on
the Distribution Date to Verizon, as the holder of record of Spinco Common
Stock as of the specified record date. 
The Special Dividend will be paid to Verizon on the Distribution Date
immediately prior to the Distribution.

(b)                                 At
or prior to the Distribution Date, Spinco will (i) enter into the
agreements associated with the New Financing and use a portion of the proceeds
thereof to pay the Special Dividend and (ii) distribute Spinco
Securities to Verizon.  The principal
amount of the Spinco Securities will be an amount equal to (x) $1.7
billion less (y) the amount of the Special Dividend, with the
precise aggregate principal amount of the Spinco Securities to be set forth on
a certificate to be delivered by Verizon to Spinco, with a copy to the Company,
no later than 30 days prior to the Distribution Date.

(c)                                  The
rights and obligations of the parties in respect of pursuing and obtaining the
New Financing are set forth in the Merger Agreement and no additional rights or
obligations shall be deemed to arise under this Agreement in connection
therewith.

(d)                                 The
parties acknowledge that Verizon intends to enter into arrangements prior to or
following the Distribution Date providing for the exchange of outstanding
Spinco Securities for debt obligations of Verizon or its Affiliates or the
transfer of Spinco Securities to other Verizon creditors or stockholders (the “Debt
Exchange”), provided that the parties further acknowledge that (i)
if Verizon desires to consummate the Debt Exchange concurrently with the
Distribution, Verizon shall not be obligated to consummate the Distribution
unless Verizon shall have entered into such arrangements and the Debt Exchange
shall be consummated concurrently with the Distribution and (ii) if Verizon
elects not to pursue the Debt Exchange at the time of the Distribution or
thereafter, Verizon may dispose of the Spinco Securities in another manner, but
will in any event dispose of all of its interest in the Spinco Securities
within 360 days following the Distribution Date.

(e)                                  At
Verizon’s election, to be exercised by Verizon no later than 15 days prior to
the Distribution Date (the “Election”), notwithstanding any other
provision of the Transaction Agreements, the following alternative transaction
structure may be adopted in lieu of the transaction steps currently described
in the Transaction Documents:

 22
 

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

(ii) the Special Dividend shall be a
dividend paid by Spinco to Verizon New England, instead of being paid by Spinco
to Verizon;

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

(iv) the Debt Exchange shall be
undertaken by Verizon New England with its creditors or stockholders, instead
of being undertaken by Verizon with Verizon’s creditors or stockholders,

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

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

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

(f)                                    The
parties recognize that Spinco and the Company desire that as of the time of the
distribution the amount of Current Assets exceeds the amount of Current
Liabilities and therefore Verizon agrees to use commercially reasonable efforts
to conduct the Spinco Business in a manner that would cause Current Assets to
exceed Current Liabilities as of the time of the Distribution.

(g)                                 Verizon
shall pay all Spinco Debt Expenses (i) on the Closing Date or (ii)
on such subsequent date when the fees and expenses payable to lenders or the
lenders’ advisors pursuant to the terms of the New Financing (or Alternative
Financing) in

 23
 

connection with the consummation of the New Financing (or Alternative
Financing), other than the Spinco Debt Expenses, are paid by the Surviving
Corporation.

ARTICLE III

Conditions

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

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

ARTICLE IV

The Distribution

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

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

 24
 

Common Stock to be determined by Verizon and Spinco prior to the
Distribution Date, all of which will be held by Verizon.

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

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

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

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

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

At the Effective Time (as defined in the Merger
Agreement), all such shares of Spinco Common Stock shall be converted into the
right to receive shares of Company

 25
 

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

ARTICLE V

Post Closing Adjustments

Section 5.1                                      Post-Closing
Adjustments.

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

(b)                                 Verizon
shall give the Surviving Corporation and each of its Representatives access at
all reasonable times and on reasonable advance notice to Verizon’s books and
records to the extent reasonably required to permit the Surviving Corporation
to review the Closing Statement.  Within
60 days after receipt of the Closing Statement, Surviving Corporation shall, in
a written notice to Verizon, describe in reasonable detail any proposed
adjustments to the items set forth on the Closing Statement and the reasons
therefor (it being agreed that the only permitted reasons for such adjustments
shall be mathematical error or the failure to compute items set forth therein
in accordance with this Article V). 
Surviving Corporation shall have the right to discuss the Closing
Statement with Verizon’s accountants, it being understood that in connection
with such discussion, Surviving Corporation will not have access to the work
papers of such accountants.  If Verizon
shall not have received a notice of proposed adjustments (provided that
any and all proposed adjustments to the calculation of

 26
 

Distribution Date Working Capital must in the aggregate exceed One
Hundred Thousand Dollars ($100,000) or more) within such 60 day period,
Surviving Corporation will be deemed to have accepted irrevocably such Closing
Statement.

(c)                                  Verizon
and Surviving Corporation shall negotiate in good faith to resolve any disputes
over any proposed adjustments to the Closing Statement, during the 30 days
following Verizon’s receipt of the proposed adjustments.  If the parties are unable to resolve such
dispute within such 30 day period, then, at the written request of either party
(the “Dispute Resolution Request”),
each party shall appoint a knowledgeable, responsible representative to meet in
person and negotiate in good faith to resolve the disputed matters.  The parties intend that these negotiations be
conducted by experienced business representatives empowered to decide the
issues.  Such negotiations shall take
place during the 15 day period following the date of the Dispute Resolution
Request.  If the business representatives
resolve the dispute, such resolution shall be memorialized in a written
agreement (the “Final Closing
Statement”), executed within five days thereafter.  If the business representatives do not
resolve the dispute, within five days Surviving Corporation and Verizon shall
jointly select a nationally recognized independent public accounting firm
(which is not the regular independent public accounting firm of either Verizon
or Surviving Corporation) to arbitrate and resolve such disputes, which
resolution shall be final, binding and enforceable in accordance with Section
10.12.  If Surviving Corporation and
Verizon do not jointly select such firm within five days, a nationally
recognized accounting firm shall be selected by lot from among those nationally
recognized firms which are not the regular firm of either Verizon or Surviving
Corporation.  Such accounting firm shall
arbitrate and resolve such dispute based solely on the written submission
forwarded by Verizon and Surviving Corporation and shall only consider whether
the Closing Statement was prepared in accordance with the standards set forth
herein and (only with respect to disputed matters submitted to the accounting
firm) whether and to what extent the Closing Statement requires
adjustment.  The fees and expenses of
such accounting firm shall be shared by Surviving Corporation and Verizon in
inverse proportion to the relative amounts of the disputed amount determined to
be for the account of Surviving Corporation and Verizon, respectively.

(d)                                 If
the amount of the Distribution Date Working Capital, as set forth in the Final
Closing Statement (the “Final Distribution Date Working Capital”)
exceeds the Target Working Capital, the Surviving Corporation shall pay to
Verizon an amount equal to such excess and if the amount of the Final
Distribution Date Working Capital is less than the Target Working Capital,
Verizon shall pay to the Surviving Corporation an amount equal to such deficit.

(e)                                  Any amounts payable pursuant to Section
5.1(d) above shall be made via wire transfer of immediately available funds
within five Business Days after the date

 27
 

upon which the Closing Statement becomes a
Final Closing Statement.  All such
amounts shall bear interest from the Distribution Date through
but excluding the date of payment, at the Applicable Rate.  Such interest shall accrue daily on the basis
of a 365 day year calculated for the actual number of days for which payment is
due and such payment shall be payable together with the amount payable pursuant
to this Section 5.1.

ARTICLE VI

Transaction Agreements

Section 6.1                                      Transaction
Agreements.  Subject to the terms and
conditions set forth herein no later than the Distribution Date, Verizon and
Spinco (and/or other Subsidiaries of Verizon, as applicable) shall each execute
and deliver each of the Transaction Agreements to which it is a party.

ARTICLE VII

Additional Covenants

Section 7.1                                      Survival;
Exclusive Remedy.  The covenants and
agreements contained herein to be performed following the Closing shall survive
the Effective Time in accordance with their respective terms and all other
terms shall expire as of the Effective Time (other than the obligation to
convey the Spinco Assets and the Spinco Liabilities in accordance with Section
2.1).  The parties hereby agree that the
sole and exclusive remedy for any claim (whether such claim is framed in tort,
contract or otherwise), arising out of a breach of this Agreement shall be
asserted pursuant to Section 10.2 of the Merger Agreement (or if this Agreement
and the Merger Agreement are terminated, Section 9.2 of the Merger Agreement)
and only to the extent expressly contemplated therein.  For the avoidance of doubt, Section 10.2 of
the Merger Agreement is acknowledged to provide for equitable relief to the
extent the requisite showing is made under applicable law of the inadequacy of
the payment of money damages thereunder.

Section 7.2                                      Mutual
Release.  Effective as of the
Distribution Date and except as otherwise specifically set forth in the
Transaction Agreements, each of Verizon, on behalf of itself and each of the
Verizon Subsidiaries, on the one hand, and Spinco, on behalf of itself and each
of the Spinco Subsidiaries, on the other hand, hereby releases and forever
discharges the other party and its Subsidiaries, and its and their respective
officers, directors, managers or other persons acting in a similar capacity,
agents, record

 28
 

and beneficial security holders (including trustees and beneficiaries
of trusts holding such securities), advisors and Representatives (in each case,
in their respective capacities as such) and their respective heirs, executors,
administrators, successors and assigns, of and from all debts, demands,
actions, causes of action, suits, accounts, covenants, contracts, agreements,
damages, claims and other Liabilities whatsoever of every name and nature, both
in law and in equity, which the releasing party has or ever had or ever will
have, which exist or arise out of or relate to events, circumstances or actions
taken by such other party occurring or failing to occur or any conditions
existing at or prior to the Distribution Date whether or not known on the
Distribution Date, including in connection with the transactions and all other
activities to implement the Contribution and the Distribution; provided,
however, that the foregoing general release shall not apply to (i) any
Liabilities or other obligations (including Liabilities with respect to payment,
reimbursement, indemnification or contribution) under the Merger Agreement,
this Agreement or the other Transaction Agreements or any Contracts (as defined
therein) contemplated thereby, or assumed, transferred, assigned, allocated or
arising under any of the Merger Agreement, this Agreement or the other
Transaction Agreements or any Contract contemplated thereby in each case
subject to the terms thereof (including any Liability that the parties may have
with respect to payment, performance, reimbursement, indemnification or
contribution pursuant to the Merger Agreement, this Agreement or any other
Transaction Agreement or any Contract contemplated thereby), and the foregoing
release will not affect any party’s right to enforce the Merger Agreement, this
Agreement or the other Transaction Agreements or the Contracts contemplated
thereby in accordance with their terms or (ii) any Liability the
release of which would result in the release of any Person other than a Person
released pursuant to this Section 7.2 (provided, that the parties agree
not to bring suit or permit any of their Subsidiaries to bring suit against any
such Person with respect to any Liability to the extent such Person would be
released with respect to such Liability by this Section 7.2 but for this clause
(ii)).  Each party to this Agreement
agrees, for itself and each member of its Group, not to make any claim or
demand or commence any action or assert any claim against any member of the
other Party’s Group with respect to the Liabilities released pursuant to this Section
7.2.

Section 7.3                                      Intercompany
Agreements; Intercompany Accounts.

(a)                                  Except
for the Transaction Agreements, any agreements entered into pursuant to the
Merger Agreement including without limitation pursuant to Section 7.8 thereof,
and the Transferred Affiliate Arrangements, all contracts, licenses,
agreements, commitments and other arrangements, formal and informal, between
any member of the Verizon Group, on the one hand, and any member of the Spinco
Group, on the other hand, in existence as of the Distribution Date, shall
terminate as of the close of business on the day prior to the Distribution
Date.  No such terminated agreement
(including any provision thereof that purports to survive termination) shall be
of any further force or effect after the Distribution Date and all parties
shall be released from all obligations

 29
 

thereunder.  From and after the
Distribution Date, no member of either Group shall have any rights under any
such terminated agreement with any member of the other Group, except as
specifically provided herein or in the other Transaction Agreements.

(b)                                 Effective
immediately prior to the Distribution Date, all intercompany cash management
loan balances between Verizon and the Verizon Subsidiaries, on one hand, and
Spinco and the Spinco Subsidiaries, on the other hand, shall be canceled.

Section 7.4                                      Guarantee
Obligations and Liens.

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

(b)                                 Verizon
and Spinco shall, upon Spinco’s request, cooperate, and shall cause their
respective Groups to cooperate and use their respective reasonable best efforts
to:  (x) terminate, or to
cause a member of the Verizon Group to be substituted in all respects for any
member of Spinco Group in respect of, all obligations of any member of the
Spinco Group under any Verizon Liabilities for which such member of the Spinco
Group may be liable, as guarantor, original tenant, primary obligor or
otherwise (including any Verizon financial instrument) (“Spinco Guarantees”),
and (y) terminate, or to cause Verizon Assets to be substituted in
all respects for any Spinco Assets in respect of, any liens or encumbrances on
Spinco Assets which are securing any Verizon Liabilities.  If such a termination or substitution is not
effected by the Distribution Date,

 30
 

without the prior written consent of Spinco, from and after the
Distribution Date, Verizon shall not, and shall not permit any member of the
Verizon Group to, renew or extend the term of, increase its obligations under,
or transfer to a third party, any loan, lease, contract or other obligation for
which a member of the Spinco Group is or may be liable or for which any Spinco
Asset is or may be encumbered unless all obligations of the Spinco Group and
all liens and encumbrances on any Spinco Asset with respect thereto are
thereupon terminated by documentation reasonably satisfactory in form and
substance to Spinco.

Section 7.5                                      Insurance.

(a)                                  Notwithstanding
any other provision of this Agreement, from and after the Distribution Date,
Spinco and the Spinco Subsidiaries will have no rights with respect to any
Policies, except that (i)  Verizon will use its reasonable best
efforts, at Spinco’s request, to assert claims on behalf of Spinco and the
Spinco Subsidiaries for any loss, liability or damage identified by Spinco with
respect to the Spinco Assets or Spinco Liabilities under Policies with
third-party insurers which are “occurrence basis” insurance policies (“Occurrence
Basis Policies”) arising out of insured incidents occurring from the date
coverage thereunder first commenced until the Distribution Date to the extent
that the terms and conditions of any such Occurrence Basis Policies and
agreements relating thereto so allow and (ii)  Verizon will use its
reasonable best efforts to obtain from the relevant third-party insurer an
assignment to Spinco of any rights to prosecute claims identified by Spinco
properly asserted with respect to Spinco Assets or Spinco Liabilities with an
insurer prior to the Distribution Date under Policies with third-party insurers
which are insurance policies written on a “claims made” basis (“Claims Made
Policies”) arising out of insured incidents occurring from the date
coverage thereunder first commenced until the Distribution Date to the extent
that the terms and conditions of any such Claims Made Policies and agreements
relating thereto so allow; provided, that in the case of both clauses
(i) and (ii) above, (A) all of Verizon’s and each Verizon
Subsidiary’s reasonable out-of-pocket costs and expenses incurred in connection
with the foregoing are promptly paid by Spinco (it being agreed that Verizon
will not incur material expenditures above reasonable amounts specified by
Spinco unless authorized by Spinco), (B) Verizon and the Verizon
Subsidiaries may, at any time, without liability or obligation to Spinco or any
Spinco Subsidiary (other than as set forth in Section 7.5(c)), amend, commute,
terminate, buy-out, extinguish liability under or otherwise modify any
Occurrence Basis Policies or Claims Made Policies (and such claims shall be
subject to any such amendments, commutations, terminations, buy-outs,
extinguishments and modifications), and (C) any such claim will be
subject to all of the terms and conditions of the applicable Policy.

 31
 

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

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

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

(e)                                  The
obligations of Verizon and its Subsidiaries under this Section 7.5 shall
terminate on the seventh anniversary of the Effective Time.

Section 7.6                                      Subsequent
Transfers.  In the event that at any
time during the 18-month period following the Distribution Date, a member
of the Verizon Group becomes aware that it possesses any Spinco Assets (except
(i) for assets, rights and properties provided by members of the
Verizon Group pursuant to the Transition Services Agreement or (ii) as
otherwise contemplated by the Transaction Agreements), Verizon shall cause the
prompt transfer of such assets, rights or properties to Spinco.  Prior to any such transfer, Verizon shall
hold such Spinco Asset in trust for Spinco. 
In the event that at any time during the 18-month period following the
Distribution Date, a member of the Spinco Group becomes aware that it possesses
any Verizon Assets (except as otherwise contemplated by the Transaction
Agreements), the Spinco Group shall cause the prompt transfer of such assets,
rights or properties to Verizon or a member of the Verizon Group.  Prior to any such transfer, the Spinco Group
shall hold such Verizon Asset in trust for Verizon.

 32
 

Section 7.7                                      Further
Assurances.  From time to time after
the Distribution Date, and for no further consideration, each of the parties
shall execute, acknowledge and deliver such assignments, transfers, consents,
assumptions and other documents and instruments and take such other actions as
may be necessary to consummate and make effective the transactions contemplated
by this Agreement; provided, that no such documents or instruments shall
impose obligations on any party broader than or additive to those in any
Transaction Agreement.

ARTICLE VIII

Access to Information

Section 8.1                                      Provision
of Information.  Notwithstanding
anything herein to the contrary, the parties agree that the obligation of
Verizon to deliver Information that is part of the Spinco Assets to Spinco from
and after the Distribution will be governed by this Article VIII.  Subject to the terms of this Article VIII,

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

(b)                                 Following
the Closing Date, Verizon shall deliver or make available to Spinco from time
to time upon the request of Spinco following the Distribution Date Information
not provided pursuant to Section 8.1(a) relating directly to the Spinco Assets,
the Spinco Business, or the Spinco Liabilities that consist of: (i) active
Contracts, (ii) active litigation files and (iii) all other Information that
constitutes Spinco Assets or relates directly to any Spinco Liability, in each
case to the extent they are material to the conduct of the Spinco Business
following the Distribution Date.  Verizon
in good faith will also consider providing upon the request of Spinco from time
to time following the Distribution Date other Information relating directly to
the Spinco Assets, the Spinco Business or the Spinco Liabilities, but it shall
be under no obligation to do so.  Subject
to Section 8.5, Verizon may retain complete and accurate copies of such
Information.  The

 33
 

costs and expenses incurred in the identification, isolation and
provision of Information to the Spinco Group shall be paid for by the Spinco
Group, provided that to the extent any Information exists in paper form,
other than pre-Distribution billing Information, Verizon shall provide copies
of same without charge.  Information
shall be provided as promptly as practicable upon request, with due regard for
other commitments of Verizon personnel and the materiality of the information
to Spinco (including the need to comply with any “Order” or any “Law” (each as
defined in the Merger Agreement)).

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

Section 8.2                                      Privileged
Information.

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

(b)                                 Each
of Verizon and Spinco agrees, on behalf of itself and each member of the Group
of which it is a member, not to disclose or otherwise waive any privilege
attaching to any Privileged Information relating to the pre-Distribution Spinco
Business or Verizon Business, as applicable, or, in the case of the Spinco
Group, relating to or arising in connection with the relationship among Verizon
and its Subsidiaries on or prior to the Distribution Date, without providing
prompt written notice to and obtaining the prior written consent of the other,
which consent shall not be unreasonably withheld, conditioned or delayed and
shall not be withheld, conditioned or delayed if the other

 34
 

party certifies that such disclosure is to be made in response to a
likely threat of suspension or debarment or similar action; provided, however,
that Verizon and Spinco shall not be required to give any such notice or obtain
any such consent and may make such disclosure or waiver with respect to
Privileged Information if such Privileged Information relates solely to the
pre-Distribution Spinco Business or Verizon Business, as applicable.  In the event of a disagreement between any
member of the Verizon Group and any member of the Spinco Group concerning the
reasonableness of withholding such consent, no disclosure shall be made prior
to a resolution of such disagreement by a court of competent jurisdiction, provided
that the limitations in this sentence shall not apply in the case of disclosure
required by law and so certified as provided in the first sentence of this
paragraph.

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

Section 8.3                                      Production
of Witnesses.  Subject to Section 8.2,
after the Distribution Date, each of Verizon and Spinco shall, and shall cause
each member of its respective Group to make available to Spinco or Verizon or
any member of the Spinco Group or of the Verizon Group, as the case may be,
upon reasonable prior written request, such Group’s directors, managers or
other persons acting in a similar capacity, officers, employees and agents as
witnesses to the extent that any such Person may reasonably be required in
connection with any Litigation Matters, administrative or other proceedings in
which the requesting party may from time to time be involved and relating to
the pre-Distribution Spinco Business or Verizon Business, as applicable, or, in
the case of the Spinco Group, relating to or in connection with the
relationship among Verizon and its Subsidiaries on or prior to the Distribution
Date.  The costs and expenses incurred in
the provision of such witnesses shall be paid by the party requesting the
availability of such persons.

 35
 

Section 8.4                                      Retention
of Information.  Except as otherwise
agreed in writing, or as otherwise provided in the other Transaction
Agreements, each of Verizon and Spinco shall, and shall cause the members of
the Group of which it is a member to, retain all Information in such party’s
Group’s possession or under its control, relating directly and primarily to the
pre-Distribution business, Assets or Liabilities of the other party’s Group for
so long as such Information is retained pursuant to such party’s general
document retention policies as of such time or such later date as may be
required by law, except that if, prior to the expiration of such period, any
member of either party’s Group wishes to destroy or dispose of any such
Information that is at least three years old, prior to destroying or disposing
of any of such Information, (a) the party whose Group is proposing
to dispose of or destroy any such Information shall provide no less than 30
days’ prior written notice to the other party, specifying the Information
proposed to be destroyed or disposed of, and (b) if, prior to the
scheduled date for such destruction or disposal, the other party requests in writing
that any of the Information proposed to be destroyed or disposed of be
delivered to such other party, the party whose Group is proposing to dispose of
or destroy such Information promptly shall arrange for the delivery of the
requested Information to a location specified by, and at the expense of, the
requesting party.  This Section 8.4 shall
not apply to Information referred to in clauses (x) and (y) of Section 8.1(c).

Section 8.5                                      Confidentiality.  Subject to Section 8.2, which shall govern
Privileged Information, from and after the Distribution Date, each of Verizon
and Spinco shall hold, and shall use commercially reasonable efforts to cause
its Affiliates and Representatives to hold, in strict confidence all
Information concerning the other party’s Group obtained by it or furnished to
it by such other party’s Group pursuant to this Agreement or the other
Transaction Agreements and shall not release or disclose such Information to
any other Person, except its Affiliates and Representatives, who shall be
advised of the provisions of this Section 8.5, and each party shall be
responsible for a breach by any of its Affiliates or Representatives; provided,
however, that any member of the Verizon Group or the Spinco Group may
disclose such Information to the extent that (a) disclosure is
compelled by judicial or administrative process or, based on advice of such
Person’s counsel, by other requirements of law or regulation including without
limitation filing requirements with the U.S. Securities and Exchange
Commission, or (b) such party can show that such Information was (i) in
the public domain through no fault of such Person or (ii) lawfully
acquired by such Person from another source after the time that it was
furnished to such Person by the other party’s Group, and not acquired from such
source subject to any confidentiality obligation on the part of such source
known to the acquiror.  Notwithstanding
the foregoing, each of Verizon and Spinco shall be deemed to have satisfied its
obligations under this Section 8.5 with respect to any Information (other than
Privileged Information) if it exercises the same care with regard to such
Information as it takes to preserve confidentiality for its own similar
Information.

 36
 

Section 8.6                                      Cooperation
with Respect to Government Reports and Filings.  Verizon, on behalf of itself and each member
of the Verizon Group, agrees to provide any member of the Spinco Group, and
Spinco, on behalf of itself and each member of the Spinco Group, agrees to
provide any member of the Verizon Group, with such cooperation and Information
(with regard to Verizon and the Verizon Group, with respect to the Spinco
Business only) as may be reasonably requested by the other in connection with
the preparation or filing of any government report or other government filing
contemplated by this Agreement or in conducting any other government proceeding
relating to the pre-Distribution business of the Verizon Group or the Spinco
Group, Assets or Liabilities of either Group or relating to or in connection
with the relationship between the Groups on or prior to the Distribution
Date.  Such cooperation and Information
shall include promptly forwarding copies of appropriate notices, forms and other
communications received from or sent to any government authority which relate
to the Verizon Group, in the case of the Spinco Group, or the Spinco Group, in
the case of the Verizon Group.  All
cooperation provided under this section shall be provided at the expense of the
party requesting such cooperation.  Each
party shall make its employees and facilities available during normal business
hours and on reasonable prior notice to provide explanation of any documents or
Information provided hereunder.

ARTICLE IX

No Representations or Warranties

Section 9.1                                      No
Representations or Warranties. 
Except as expressly set forth in any Transaction Agreement, Spinco and
Verizon understand and agree that no member of the Verizon Group is
representing or warranting to Spinco or any member of the Spinco Group in any
way as to the Spinco Assets, the Spinco Business or the Spinco
Liabilities.  Except as expressly set
forth in the Merger Agreement, Verizon and Spinco understand and agree that no
member of the Spinco Group is representing or warranting to Verizon or any
member of the Verizon Group in any way as to the Verizon Assets, the Verizon
Business or the Verizon Liabilities.

ARTICLE X

Miscellaneous

Section 10.1                                Complete
Agreement.  This Agreement, the
Exhibits and the Disclosure Letter hereto, the other Transaction Agreements and
other documents referred to herein shall constitute the entire agreement
between the parties hereto with respect to the subject matter hereof and shall
supersede all previous negotiations, commitments and

 37
 

writings with respect to such subject matter.  The Disclosure Letter delivered pursuant
hereto is expressly made a part of, and incorporated by reference into, this
Agreement.  In the case of any conflict
between the terms of this Agreement and the terms of any other Transaction Agreement,
the terms of such other Transaction Agreement shall be applicable.

Section 10.2                                Expenses.  All fees and expenses and any other costs
incurred by the parties in connection with the transactions contemplated hereby
and by the Transaction Agreements shall be paid as set forth in Section 11.1 of
the Merger Agreement.

Section 10.3                                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 conflicts of laws principles.

Section 10.4                                Notices.  Prior to the Closing under the Merger
Agreement, all notices and other communications required or permitted to be
given hereunder shall be in writing and shall be deemed given upon (a) a
transmitter’s confirmation of a receipt of a facsimile transmission (but only
if followed by confirmed delivery of a standard overnight courier the following
Business Day or if delivered by hand the following Business Day), (b) confirmed
delivery of a standard overnight courier or when delivered by hand or (c) the
expiration of five Business Days after the date mailed by certified or
registered mail (return receipt requested), postage prepaid, to the parties at
such addresses as may be specified by the parties from time to time.  Following the Closing notices shall be sent
to Verizon and the Company (as successor by merger to Spinco) in accordance
with Section 11.2 of the Merger Agreement, or to such other address as any
party hereto may have furnished to the other parties by a notice in writing in
accordance with this Section.

Section 10.5                                Amendment
and Modification.  This Agreement may
be amended, modified or supplemented, and any provision hereunder may be
waived, prior to the Effective Time, only by a written agreement signed by the
parties hereto.

Section 10.6                                Successors
and Assigns; No Third-Party Beneficiaries. 
This Agreement and all of the provisions hereof shall be binding upon
and inure to the benefit of the parties hereto and their successors and
permitted assigns, but neither this Agreement nor any of the rights, interests
and obligations hereunder shall be assigned by any party hereto without the
prior written consent of the other parties and a Company Consent.  This Agreement is solely for the benefit of
Verizon, Spinco and the Company

 38
 

and their respective Subsidiaries and Affiliates and is not intended to
confer upon any other Persons any rights or remedies hereunder.

Section 10.7                                Counterparts.  This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

Section 10.8                                Interpretation.  The Article and Section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties hereto and shall not in any way affect the meaning or
interpretation of this Agreement.

Section 10.9                                Severability.  If any provision of this Agreement or the
application thereof to any person or circumstance is determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to persons or
circumstances other than those as to which it has been held invalid or
unenforceable, shall remain in full force and effect and shall in no way be
affected, impaired or invalidated thereby, so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party.

Section 10.10                          References;
Construction.  References to any “Article,”
“Exhibit,” or “Section,” without more, are to Articles, Exhibits and Sections
to or of this Agreement.  Unless
otherwise expressly stated, clauses beginning with the term “including” or
similar words set forth examples only and in no way limit the generality of the
matters thus exemplified.

Section 10.11                          Termination.  Notwithstanding any provision hereof, in the
event of termination of the Merger Agreement, this Agreement may be terminated
and the Distribution abandoned at any time prior to the Distribution by and in
the sole discretion of Verizon.  In the
event of such termination, no party hereto or to any other Transaction
Agreement (other than the Merger Agreement to the extent provided therein)
shall have any Liability to any Person by reason of this Agreement or any other
Transaction Agreement (other than the Merger Agreement to the extent provided
therein).

Section 10.12                          Consent
to Jurisdiction and Service of Process. 
THE PARTIES AGREE THAT IRREPARABLE DAMAGE WOULD OCCUR IN THE EVENT THAT
ANY OF THE PROVISIONS OF THIS AGREEMENT WERE NOT PERFORMED IN ACCORDANCE WITH
THEIR SPECIFIC TERMS OR WERE OTHERWISE BREACHED.  IT IS ACCORDINGLY AGREED THAT THE PARTIES
SHALL BE

 39
 

ENTITLED TO AN INJUNCTION OR INJUNCTIONS TO PREVENT BREACHES OF THIS
AGREEMENT AND TO ENFORCE SPECIFICALLY THE TERMS AND PROVISIONS OF THIS
AGREEMENT IN ANY COURT OF THE UNITED STATES LOCATED IN THE STATE OF NEW YORK,
THIS BEING IN ADDITION TO ANY OTHER REMEDY TO WHICH THEY ARE ENTITLED AT LAW OR
IN EQUITY.  IN ADDITION, EACH OF THE
PARTIES HERETO (A) CONSENTS TO SUBMIT ITSELF TO THE PERSONAL
JURISDICTION OF ANY FEDERAL COURT LOCATED IN THE STATE OF NEW YORK IN THE EVENT
ANY DISPUTE ARISES OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT, (B) AGREES THAT IT WILL NOT ATTEMPT
TO DENY OR DEFEAT SUCH PERSONAL JURISDICTION BY MOTION OR OTHER REQUEST FOR
LEAVE FROM ANY SUCH COURT AND (C) AGREES THAT IT WILL NOT BRING ANY
ACTION RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT IN ANY COURT OTHER THAN A FEDERAL COURT SITTING IN THE STATE OF
NEW YORK.  NOTWITHSTANDING THIS SECTION
10.12, ANY DISPUTE REGARDING THE CLOSING STATEMENT SHALL BE RESOLVED IN
ACCORDANCE WITH ARTICLE V HEREOF; PROVIDED THAT SUCH ARTICLE V MAY BE
ENFORCED BY EITHER PARTY IN ACCORDANCE WITH TERMS OF THIS SECTION 10.12.

Section 10.13                          Waivers.  Except as provided in this Agreement, no
action taken pursuant to this Agreement, including, without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representations,
warranties, covenants or agreements contained in this Agreement.  The waiver by any party hereto of a breach of
any provision hereunder shall not operate or be construed as a waiver of any
prior or subsequent breach of the same or any other provision hereunder.

Section 10.14                          Waiver
of Jury Trial.  Each of the parties
hereto irrevocably and unconditionally waives all right to trial by jury in any
litigation, claim, action, suit, arbitration, inquiry, proceeding,
investigation or counterclaim (whether based in contract, tort or otherwise)
arising out of or relating to this Agreement or the actions of the parties
hereto in the negotiation, administration, performance and enforcement thereof.

[SIGNATURE PAGE FOLLOWS]

 40
 

IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be duly executed as of the date
first above written.

	
  

  	
   

  	
  VERIZON COMMUNICATIONS INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John W. Diercksen

  
	
   

  	
   

  	
   

  	
  Name:

  	
  John W.
  Diercksen

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President—Strategy,

  
	
   

  	
   

  	
   

  	
   

  	
  Development and
  Planning

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  NORTHERN NEW ENGLAND

  
	
   

  	
   

  	
  SPINCO INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Stephen E. Smith

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Stephen E. Smith

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Vice President

  
							

 

 41

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