DISTRIBUTION AGREEMENT

Exhibit 10a

EXECUTION VERSION

DISTRIBUTION AGREEMENT

BY AND BETWEEN

VERIZON COMMUNICATIONS INC.

AND

NEW COMMUNICATIONS HOLDINGS INC.

DATED AS OF May 13, 2009

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DISTRIBUTION AGREEMENT

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

RECITALS

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

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

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

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

distributions) to Spinco and ( c ) to the extent any Assets that are not Spinco Assets and any Liabilities that are not Spinco Liabilities are currently located within an ILEC Spinco Subsidiary, transfer or cause to be transferred by any such ILEC Spinco Subsidiary such Assets or Liabilities to Verizon or an Affiliate of Verizon;

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

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

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

WHEREAS, the Parties to this Agreement intend that, except as set forth in Section 2.3 hereof, throughout the internal restructurings taken in contemplation of this Agreement, including the Internal Spinoffs, the Internal Restructurings, the Contribution,

 

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and the Distribution, the Spinco Employees shall maintain uninterrupted continuity of employment, compensation and benefits, and also for union-represented employees, uninterrupted continuity of representation for purposes of collective bargaining and uninterrupted continuity of coverage under their collective bargaining agreements, as contemplated by and provided in the Employee Matters Agreement.

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

ARTICLE I

Definitions

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

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

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

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

 

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

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

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

 

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

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

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

“ GAAP ” means United States generally accepted accounting principles.

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

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

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

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

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

 

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

 

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

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

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

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

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

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

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

“ Retained Contract ” means (i) any Contract entered into by Verizon or any Subsidiary of Verizon (other than Spinco or a Spinco Subsidiary), on the one hand, with a non-Affiliate of Verizon, on the other hand, which is used or held for use in the conduct of the Spinco Business as well as the Verizon Business, other than any Blended Customer Contract; and (ii) any Contract entered into solely

 

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between or among Verizon and/or Affiliates of Verizon, other than (a) Transferred Affiliate Arrangements, including, in each case, those Contracts listed in Section 1.1(c) of the Disclosure Letter and (b) Contracts governing Retained Customer Accounts.

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

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

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

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

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

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

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

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

(B) the Current Assets;

 

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

(D) all Real Property Interests;

(E) all Telephone Plant;

(F) all Contracts;

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

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

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

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

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

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

 

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

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

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

II. any Verizon Assets;

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

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

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

VI. any Assets of Verizon Network Integration Corp.;

VII. any Assets of Verizon Federal Inc.;

VIII. any Assets of Federal Network Systems LLC;

IX. any Assets of Verizon Global Networks Inc.;

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

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

 

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

“ Spinco Business ” means:

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

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

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

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

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

 

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

“ Spinco Group ” means Spinco and the Spinco Subsidiaries.

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

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

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

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

 

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

(iv) all Current Liabilities;

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

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

(vii) all Distribution Date Spinco Indebtedness; and

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

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

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

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

“ Statutory Intellectual Property ” means all (i) United States patents and patent applications of any kind, (ii) United States