TABLE OF CONTENTS

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ARTICLE I.	Definitions				2
Section 1.1.			Definitions		2
Section 1.2.			Capitalized Terms		13
ARTICLE II.	Collective Bargaining Agreements and Obligations				14
Section 2.1.			Assumption and Continuation of Agreements		14
ARTICLE III.	Spinco Plans Generally				21
Section 3.1.			Establishment of Spinco Plans		21
Section 3.2.			Terms of Participation by Spinco Employees		21
ARTICLE IV.	Employees				22
Section 4.1.			Employees		22
Section 4.2.			No Solicitation of Employees		26
Section 4.3.			Unavailable Employees		28
ARTICLE V.	Pension Plans				29
Section 5.1.			Establishment of Pension Plans and Trusts		29
Section 5.2.			Assumption of Pension Plan Liabilities and Allocation of Interests in the Verizon Pension Trusts		30
Section 5.3.			Continuation of Elections and Application to Spinco Dependents		35
ARTICLE VI.	Health and Welfare				36
Section 6.1.			Assumption of Health and Welfare		36
Section 6.2.			Adoption of Health and Welfare Plans		38
Section 6.3.			COBRA and HIPAA		40
Section 6.4.			Workers’ Compensation Claims		40
Section 6.5.			Leave of Absence Programs		41
Section 6.6.			Time-Off Benefits		41
ARTICLE VII.	Savings Plans				42
Section 7.1.			Establishment of the Spinco Savings Plan		42
Section 7.2.			Assumption of Liabilities and Transfer of Assets		42
ARTICLE VIII.	Equity Based Incentive Awards				44
Section 8.1.			General Treatment of Outstanding Awards		44
Section 8.2.			Outstanding Options		44

 

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Section 8.3.			Treatment of Outstanding Verizon RSU and PSU Awards		45
Section 8.4			Treatment of Verizon Options outstanding as of the Record Date but Exercised Prior to the Distribution Date47		47
Section 8.5			Treatment of Outstanding FairPoint Equity Awards47		47
ARTICLE IX.	Short Term Incentives and Sales Commission Programs				48
Section 9.1.			Incentive and Commission Plans		48
ARTICLE X.	Deferred Compensation Plans				49
Section 10.1.			Generally		49
Section 10.2.			Vesting and Payout of Balances		49
ARTICLE XI.	ASSUMPTION OF LIABILITIES				49
Section 11.1.			Assumption of Liabilities		49
Section 11.2.			Reimbursement		52
Section 11.3.			Indemnification		53
Section 11.4.			Procedures for Indemnification for Third-Party Claims		54
Section 11.5.			Reductions for Insurance Proceeds and Other Amounts		54
Section 11.6.			Contribution.		56
Section 11.7.			Consequential Damages		57
Section 11.8.			Joint Defense and Cooperation		57
ARTICLE XII.	General and Administrative				58
Section 12.1.			Cooperation		58
Section 12.2.			Consent of Third Parties		59
Section 12.3.			Survival		59
Section 12.4.			Interpretation		59
Section 12.5.			No Third Party Beneficiary		60
Section 12.6.			Notices		60
Section 12.7.			Governing Law; Jurisdiction		62
Section 12.8.			Waiver of Jury Trial		63
Section 12.9.			Specific Performance		63
Section 12.10.			No Assignment; No Amendment; Counterparts		63

 

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EXHIBITS
Exhibit A.	Actuarial Assumptions and Methods for Pension Asset Transfer
Exhibit B. Sales Commissions Programs
Exhibit C. Short Term Incentive Programs
Exhibit 2.1. Collective Bargaining Agreements
SCHEDULES
Schedule 4.1(d). Minimum Severance Benefits for Non-Union Employees
Schedule 4.1(e). Performance and Bonus Opportunities

 

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Employee Matters Agreement

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

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

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

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

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

 

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

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

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

ARTICLE I.

DEFINITIONS

Section 1.1.            Definitions

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

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

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

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

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

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

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

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

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

“ EDP ” means the Verizon Executive Deferral Plan.

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

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

“ FairPoint ” means FairPoint Communications, Inc.

“ FairPoint Group ” means FairPoint and the FairPoint Subsidiaries.

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

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

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

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

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

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

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

“ FRP ” means the Verizon Flexible Reimbursement Plan.

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

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

“ IDP ” means the Verizon Income Deferral Plan.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

“ Verizon ” means Verizon Communications Inc.

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

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

“ Verizon Group ” means Verizon and the Verizon Subsidiaries.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

“ VNE ” means Verizon New England Inc.

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

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ARTICLE II.

COLLECTIVE BARGAINING AGREEMENTS AND OBLIGATIONS

Section 2.1.            Assumption and Continuation of Agreements

(a)           Distribution

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(b)           Merger

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

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

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

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

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

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

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

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

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

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ARTICLE III.

SPINCO PLANS GENERALLY

Section 3.1.            Establishment of Spinco Plans

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

Section 3.2.            Terms of Participation by Spinco Employees

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

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

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

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

ARTICLE IV.

EMPLOYEES

Section 4.1.            Employees

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

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

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

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

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

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

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

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

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

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

Section 4.2.            No Solicitation of Employees

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

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

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

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