EXHIBIT 10q

EXECUTION VERSION

SECURITIES PURCHASE AGREEMENT

by and between

FRONTIER COMMUNICATIONS CORPORATION

and

VERIZON COMMUNICATIONS INC.

Dated as of February 5, 2015

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TABLE OF CONTENTS

 

         Page     ARTICLE I      DEFINITIONS AND TERMS    1.1  

Definitions

     1    1.2  

Other Terms

     22    1.3  

Other Definitional Provisions

     22      ARTICLE II      THE PRE-CLOSING REORGANIZATION    2.1  

Formation of Newco and Contribution and Distribution of Assets

     23    2.2  

Intercompany Agreements and Accounts

     23    2.3  

Assumed and Excluded Liabilities

     23    2.4  

Nonassignability of Assets

     24    2.5  

Transfer Documentation

     26    2.6  

Shared Locations

     26      ARTICLE III      PURCHASE AND SALE    3.1  

Purchase and Sale

     26    3.2  

Purchase Price

     26    3.3  

Closing

     26    3.4  

Deliveries by Buyer

     27    3.5  

Deliveries by Seller

     27    3.6  

Closing Statement

     28    3.7  

Allocation of Purchase Price

     30    3.8  

Withholding

     31      ARTICLE IV      REPRESENTATIONS AND WARRANTIES OF SELLER    4.1  

Organization and Qualification

     31    4.2  

Capital Structure

     32    4.3  

Corporate Authorization

     32    4.4  

Consents and Approvals

     33    4.5  

Non-Contravention

     33    4.6  

Binding Effect

     34    4.7  

Financial Statements

     34   

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4.8  

Litigation and Claims

     35    4.9  

Taxes

     36    4.10  

Employees and Employee Benefits

     37    4.11  

Labor and Employment Matters

     40    4.12  

Compliance with Laws; Communications Authorizations

     41    4.13  

Environmental Matters

     41    4.14  

Intellectual Property

     42    4.15  

Contracts

     44    4.16  

Absence of Changes

     45    4.17  

Assets

     45    4.18  

Communications Licenses

     46    4.19  

Title to Property

     47    4.20  

Real Property

     47    4.21  

Finders’ Fees

     48    4.22  

Customers

     48    4.23  

Newco

     48      ARTICLE V      REPRESENTATIONS AND WARRANTIES OF BUYER    5.1  

Organization and Qualification

     48    5.2  

Corporate Authorization

     49    5.3  

Consents and Approvals

     49    5.4  

Non-Contravention

     49    5.5  

Binding Effect

     50    5.6  

Litigation and Claims

     50    5.7  

Finders’ Fees

     50    5.8  

Financial Capability

     51    5.9  

Solvency

     51    5.10  

Regulatory Compliance

     52    5.11  

Inspections

     52      ARTICLE VI      COVENANTS    6.1  

Access and Information

     52    6.2  

Conduct of Business

     54    6.3  

Reasonable Best Efforts; Governmental and Other Consents

     57    6.4  

Control of Business Pending the Closing

     59    6.5  

Tax Matters

     59    6.6  

Employee Matters

     66    6.7  

Non-Solicitation of Employees

     66    6.8  

Confidentiality

     67    6.9  

Privileged Matters

     68    6.10  

Production of Witnesses

     69   

 

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6.11

Release by Seller and Its Affiliates

  69    6.12

Release by Buyer and Its Affiliates

  69    6.13

Customer Agreements

  70    6.14

Insurance

  71    6.15

Financing

  72    6.16

Ancillary Documents

  75    6.17

Assistance with Network Element Software; Seller Owned Software

  76    6.18

Financial Information

  78    6.19

Intellectual Property Matters

  79    6.20

Exclusivity

  82    6.21

USF Refunds

  83    6.22

Publishing Agreements

  83    6.23

Guarantee Obligations and Liens

  83    ARTICLE VII CONDITIONS TO CLOSING 7.1

Conditions to the Obligations of Buyer and Seller

  84    7.2

Conditions to the Obligations of Buyer

  85    7.3

Conditions to the Obligations of Seller

  86    ARTICLE VIII SURVIVAL; INDEMNIFICATION; CERTAIN REMEDIES 8.1

Survival

  87    8.2

Indemnification by Buyer

  87    8.3

Indemnification by Seller

  87    8.4

Third-Party Claim Indemnification Procedures

  88    8.5

Consequential Damages

  90    8.6

Limitation on Indemnification by Seller

  90    8.7

Adjustments to Losses

  91    8.8

Payments

  91    8.9

Characterization of Indemnification Payments

  91    8.10

Mitigation

  91    8.11

Remedies

  92    8.12

Specific Performance

  92    ARTICLE IX TERMINATION 9.1

Termination

  92    9.2

Effect of Termination

  93   

 

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  ARTICLE X      MISCELLANEOUS    10.1  

Notices

     93    10.2  

Amendment; Waiver

     94    10.3  

No Assignment or Benefit to Third Parties

     95    10.4  

Entire Agreement

     95    10.5  

Fulfillment of Obligations

     95    10.6  

Public Disclosure

     95    10.7  

Expenses

     96    10.8  

Bulk Sales

     96    10.9  

Further Assurances

     96    10.10  

Disclaimer of Other Representations or Warranties

     97    10.11  

Governing Law; Submission to Jurisdiction; Selection of Forum; Waiver of Jury
Trial

     98    10.12  

Counterparts

     99    10.13  

Headings

     99    10.14  

Severability

     99    10.15  

Construction

     99    10.16  

Payments

     99    10.17  

No Recourse

     99    10.18  

Conflicts; Privilege

     100   

 

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EXHIBITS, ANNEXES AND SCHEDULES

 

EXHIBITS Exhibit A    -    Cutover Plan Support Agreement Exhibit B    -   
Employee Matters Agreement Exhibit C    -    Intellectual Property Agreement
Exhibit D    -    Seller Knowledge Exhibit E    -    Buyer Knowledge Exhibit F
   -    Working Capital Calculation Methodologies Exhibit G    -    Amendment
No. 1 to FS Trademark License Agreement Exhibit H       Software License
Agreement Exhibit I    -    SHE Video Services Agreement Exhibit J    -    Point
Code and IP Address Agreement Exhibit K    -    Amendment No. 1 to FS
Intellectual Property Agreement Exhibit L    -    Amendment No. 2 to FS
Intellectual Property Agreement Exhibit M    -    Amendment No. 1 to FS Software
License Agreement Exhibit N    -    Amendment No. 2 to FS Software License
Agreement ANNEXES    -    Annex 1.1(a)    -    Assigned Contracts Annex 1.1(b)
   -    Master Agreements Annex 1.1(c)    -    Transferred Assets Annex 1.1(d)
and (e)    -    Legal Entities and Their Products and Services Excluded from the
Transferred Business Annex 2.1(b)(i) and (ii)    -    Excluded Assets Annex 2.5
   -    Form of Assignment and Assumption Agreement Annex 6.2(a)(xvii)    -   
Capital Expenditures Annex 6.2(a)(xviii)    -    Marketing Expenditures

 

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SCHEDULES Seller Schedule 1.1(a)    -    Retained Contracts Seller Schedule
1.1(b)    -    Transferred Affiliate Arrangements Seller Schedule 2.6    -   
Shared Locations Seller Schedule 3.6(b)    -    Audit Adjustment Amount Seller
Schedule 4.2    -    Capital Structure Seller Schedule 4.4    -    Consents and
Approvals Seller Schedule 4.5    -    Non-Contravention Seller Schedule 4.7    -
   Financial Statements Seller Schedule 4.8    -    Litigation and Claims Seller
Schedule 4.9    -    Taxes Seller Schedule 4.10    -    Employees and Employee
Benefits Seller Schedule 4.11    -    Labor and Employment Matters Seller
Schedule 4.12    -    Compliance with Laws; Communications Authorizations Seller
Schedule 4.13    -    Environmental Matters Seller Schedule 4.14    -   
Intellectual Property Seller Schedule 4.15    -    Contracts Seller Schedule
4.16    -    Absence of Changes Seller Schedule 4.17(b)(i)    -    Assets Seller
Schedule 4.18    -    Communications Licenses Seller Schedule 4.19(g)    -   
Title to Property Seller Schedule 4.20    -    Real Property Seller Schedule
4.22    -    Customers Seller Schedule 6.2(a)    -    Conduct of the Business
Buyer Schedule 5.3    -    Consents and Approvals Buyer Schedule 5.8    -   
Financial Capability

 

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SECURITIES PURCHASE AGREEMENT, dated as of February 5, 2015, by and between
Verizon Communications Inc., a Delaware corporation (“Seller”), and Frontier
Communications Corporation, a Delaware corporation (“Buyer”). Capitalized terms
used but not defined elsewhere in this Agreement shall have the meanings set
forth in Section 1.1.

RECITALS:

WHEREAS, Verizon Florida LLC, GTE Southwest Incorporated and Verizon California
Inc. (each an “ILEC Subsidiary” and collectively the “ILEC Subsidiaries”)
provide the ILEC Services in the States and Seller and certain of its Affiliates
provide certain other services in the States;

WHEREAS, prior to the closing of the transactions contemplated by this
Agreement, and subject to the terms and conditions contained in this Agreement,
Seller and its Subsidiaries will effect the Pre-Closing Reorganization, pursuant
to which (i) Seller will form a new limited liability company disregarded for
federal income Tax purposes (“Newco”), (ii) Seller will cause GTE Corporation to
contribute the membership interests and capital stock of the ILEC Subsidiaries
to Newco, (iii) Seller and its Subsidiaries will transfer to Newco the
Transferred Assets and the ILEC Subsidiaries will transfer to Seller and its
Subsidiaries certain of the Excluded Assets and (iv) Newco will assume or retain
the Assumed Liabilities and Seller and its Subsidiaries (other than Newco and
the ILEC Subsidiaries (the “Transferred Companies”)) will assume or retain the
Excluded Liabilities; and

WHEREAS, Buyer desires to purchase from Seller and Seller desires to sell to
Buyer all of the limited liability company interests of Newco and thereby Buyer
will acquire the Transferred Business, upon the terms and conditions contained
in this Agreement.

THEREFORE, in consideration of the premises and the mutual representations,
warranties, covenants and undertakings contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:

ARTICLE I

DEFINITIONS AND TERMS

1.1 Definitions. As used in this Agreement, the following terms have the
meanings set forth below:

“Accountant” has the meaning set forth in Section 3.6(d).

“Action” means any demand, action, claim, suit, countersuit, arbitration,
inquiry, discovery, notice, proceeding or investigation by or before any
Governmental Entity, or any arbitration or mediation tribunal.

“Advanced Intelligent Network” means a telecommunications network architecture
that uses databases to facilitate call processing, call routing and network
management, allowing carriers to change the routing of both inbound and outbound
calls from moment to moment, commonly referred to as “AIN.”

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“Affiliate” means, with respect to any Person, any Person directly or indirectly
controlling, controlled by, or under common control with, such other Person as
of the date on which, or at any time during the period for which, the
determination of affiliation is being made. For purposes of this definition, the
term “control” (including the correlative meanings of the terms “controlled by”
and “under common control with”), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of such Person, whether through the
ownership of voting securities or by Contract or otherwise.

“Agreement” means this Securities Purchase Agreement, together with the Annexes,
Exhibits and Schedules hereto, as the same may be amended or supplemented from
time to time in accordance with the terms hereof.

“Allocated Support Employees” has the meaning set forth in Section 4.10(i).

“Allocation Schedule” has the meaning set forth in Section 3.7.

“Alternative Financing” has the meaning set forth in Section 6.15(c).

“Ancillary Documents” means, collectively, the Cutover Plan Support Agreement,
the Employee Matters Agreement, the Intellectual Property Agreement, Amendment
No. 1 to FS Trademark License Agreement, the Software License Agreement,
Amendment No. 1 to FS Intellectual Property Agreement, Amendment No. 2 to FS
Intellectual Property Agreement, Amendment No. 1 to FS Software License
Agreement, Amendment No. 2 to FS Software License Agreement, the SHE Video
Services Agreement and the Point Code and IP Address Agreement in the forms
attached hereto as Exhibits A – N and all other documents and certificates
required to be executed pursuant to this Agreement and/or to effect the
transactions contemplated by this Agreement, including the Assignment and
Assumption Agreements and the Shared Location Leases.

“Assigned Contracts” means (i) all Contracts identified on Annex 1.1(a),
(ii) all Customer Contracts and Service Contracts to which Seller or one or more
of its Subsidiaries (other than the Transferred Companies) is a party, except,
in each case (other than Contracts with any agency of the United States
Government which are assigned even though expired, if there remain continuing
obligations or rights under them or the Government has not closed out the
Contract(s)), to the extent expiring after the date of this Agreement and prior
to the Closing unless otherwise renewed or extended prior to the Closing,
(iii) Transferred IP Licenses, (iv) the Transferred Affiliate Arrangements and
(v) all other Contracts to which Seller or any of its Subsidiaries (other than
the Transferred Companies) is a party which is exclusively related to the
Transferred Business as of the Closing unless included as an Excluded Asset.

“Assignment and Assumption Agreements” means the assignment and assumption
agreements to be entered into among Seller, Newco and the ILEC Subsidiaries, as
applicable, in connection with the Pre-Closing Reorganization, substantially in
the form set forth on Annex 2.5(a), providing for the transfer to and assumption
by Newco of the Transferred Assets and the Assumed Liabilities and the transfer
to and assumption by Seller and its Subsidiaries (other than the Transferred
Companies) of the Excluded Assets and Excluded Liabilities.

 

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“Assumed Liabilities” has the meaning set forth in Section 2.3.

“Audit Adjustment Amount” has the meaning set forth in Section 3.6(b).

“Audited 2014 Financial Statements” has the meaning set forth in
Section 6.18(a).

“Audited 2014 Revenue Amount” has the meaning set forth in Section 3.6(b).

“Books and Records” means all books, ledgers, files, customer and supplier
lists, reports, plans, records, manuals and other similar recordkeeping
materials (in any form or medium).

“Business Conduct Exceptions” has the meaning set forth in Section 6.2(a).

“Business Day” means any day other than a Saturday, a Sunday or a day on which
banks in New York City are authorized or obligated by Law or executive order to
close.

“Business Employees” has the meaning set forth in Section 4.10(a).

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

“Buyer Adverse Condition” has the meaning set forth in Section 6.3(a).

“Buyer Confidential Information” has the meaning set forth in Section 6.8(a).

“Buyer Group” means Buyer and its Subsidiaries from time to time including,
after the Closing, the Transferred Companies.

“Buyer Indemnified Parties” has the meaning set forth in Section 8.3(a).

“Buyer Licenses” has the meaning set forth in Section 5.10.

“Buyer Release Parties” has the meaning set forth in Section 6.11.

“Buyer Schedules” has the meaning set forth in Article V.

“Cash and Cash Equivalents” means, as of any date of determination, all cash and
cash equivalents, including all deposited but uncleared bank deposits,
determined in accordance with GAAP, but excluding any Restricted Cash.

“Chosen Courts” has the meaning set forth in Section 10.11.

“Claim Notice” has the meaning set forth in Section 8.4(a).

“Closing” means the closing of the sale and purchase of all the issued and
outstanding limited liability company interests of Newco.

 

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“Closing Date” has the meaning set forth in Section 3.3.

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

“Collective Bargaining Agreements” has the meaning set forth in Section 4.11(a).

“Commitment Letter” has the meaning set forth in Section 5.8.

“Committed Financing” has the meaning set forth in Section 5.8.

“Committed Financing Sources” has the meaning set forth in Section 6.15(b).

“Communications Act” means the Communications Act of 1934, as amended, and the
rules and regulations of the FCC thereunder.

“Communications Licenses” means all licenses issued or granted by the FCC, the
State Commissions or the Video Franchisors held by Seller or any of its
Subsidiaries in each applicable jurisdiction with respect to the Transferred
Business as presently conducted, as set forth on Seller Schedule 4.18.

“Company Claims” has the meaning set forth in Section 6.14.

“Company Plans” has the meaning set forth in Section 4.10(a).

“Complaint” has the meaning set forth in Section 5.3(b).

“Confidentiality Agreement” means the confidentiality agreement between Seller
and Buyer, dated November 13, 2012, as amended on August 4, 2014.

“Consolidated Tax Return” means any federal, state, local or foreign Tax Returns
that are filed on an affiliated, consolidated, combined, unitary or similar
basis that includes one or more of the Transferred Companies, on the one hand,
and any member of the Seller Group, on the other hand.

“Contract” means any agreement, contract, lease, sublease, note, bond, loan,
mortgage, commitment, license, purchase order or other agreement, whether
written or oral.

“Customer Contracts” means (i) with respect to Contracts entered into by the
ILEC Subsidiaries, all customer Contracts (other than any Master Agreement) with
respect to the Transferred Business as of the Closing (including customer
equipment leases, customer equipment warranties, payphone service agreements and
other Contracts for the provision of goods or services), and (ii) with respect
to Contracts entered into by Seller or any of its Affiliates (other than the
Transferred Companies), (x) all customer Contracts that exclusively provide for
the delivery of goods or services of the Transferred Business as of the Closing
to customers of the Transferred Business as of the Closing in the States
(including customer equipment leases, customer equipment warranties, pay phone
service agreements and Contracts with customers with originating switched long
distance traffic initiating from the local exchanges), and (y) the portion of
any Master Agreement that provides for the delivery of goods or services of the

 

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Transferred Business as of the Closing to customers of the Transferred Business
as of the Closing in the States, it being understood that in no event shall
those portions of any Master Agreement providing for the delivery of goods and
services that do not relate to the Transferred Business as of the Closing be
considered a Customer Contract. For the avoidance of doubt, “Customer Contract”
shall include customer Contracts exclusively providing the FiOS TV video service
in the States.

“Customer Proprietary Network Information” means customer proprietary network
information as defined in the Communications Act, that was generated by the
Transferred Companies, relating to goods or services in the States for any
customers of the Transferred Business.

“Cutover” shall have the meaning assigned to such term in the Cutover Plan
Support Agreement.

“Cutover Plan Support Agreement” means the Cutover Plan Support Agreement
entered into by Seller (or its Subsidiary) and Buyer as of the date hereof and
attached hereto as Exhibit A.

“Debt Obligations” means (i) $200,000,000 6.75% Series F Debentures issued by
Verizon California Inc. due May 15, 2027, (ii) $300,000,000 6.86% Series E
Debentures issued by Verizon Florida LLC due February 1, 2028,
(iii) $100,000,000 8.50% Series E Debentures issued by GTE Southwest
Incorporated (d/b/a Verizon Southwest) due November 15, 2031 and (iv) all
accrued and unpaid interest on the items listed in clauses (i) through
(iii) above.

“Disclosure Schedules” has the meaning set forth in Article V.

“Easements” means any easement, quasi-easement, right-of-way or right of
re-entry to access real property located in the States.

“Effective Time” means 12:01 a.m., Eastern Time, on the Closing Date (if the
penultimate sentence of Section 3.3 does not apply) or the date on which the
Closing is deemed to have occurred (if the penultimate sentence of Section 3.3
does apply).

“Employee Matters Agreement” means the agreement between the parties attached
hereto as Exhibit B.

“Encumbrance” means any lien, pledge, charge, security interest, option,
mortgage or easement, or other similar restriction.

“Entitlement Party” has the meaning set forth in Section 10.9(c).

“Environmental Claim” means any Action by any Person alleging actual or
potential liability (including actual or potential liability for investigatory
costs, cleanup costs, governmental response costs, natural resources damages,
property damages, personal injuries, attorneys’ fees or penalties) arising out
of, based on or resulting from (a) the presence, or release into the
environment, of, or exposure to, any Hazardous Material at any location, whether
or not owned or operated by any of the Transferred Companies, now or in the
past, or (b) circumstances

 

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forming the basis of any violation, or alleged violation, of any Environmental
Law, and including any Action alleging the violation of an Environmental Law or
Environmental Permit brought, issued or asserted by any Person for compliance,
damages, penalties, removal, response, remedial or other action.

“Environmental Law” means any federal, state or local Law or requirements of any
applicable Governmental Entity, and applicable common law, relating to
(i) pollution, the protection of human health or the environment (including air,
water vapor, surface water, groundwater, drinking water supply, surface or
subsurface land or strata, and natural resources), (ii) the manufacture,
generation, transportation, processing, handling, distribution, use, treatment,
storage, containment (whether on or above ground or underground), or disposal of
any Hazardous Material, (iii) emissions, discharges, releases or threatened
releases of, or exposure to, Hazardous Materials, (iv) recordkeeping,
notification, disclosure and reporting requirements regarding Hazardous
Materials, (v) endangered or threatened species of fish, wildlife and plant and
natural resources, or (vi) emissions or control of greenhouse gases.

“Environmental Permits” means all permits, licenses, approvals, authorizations,
consents, orders or binding agreements required by or issued by or entered into
with any Governmental Entity under any applicable Environmental Law.

“ERISA” has the meaning set forth in Section 4.10(a).

“ERISA Affiliate” has the meaning set forth in Section 4.10(c).

“Estimated Buyer Working Capital Payment” has the meaning set forth in
Section 3.6(a).

“Estimated Closing Statement” has the meaning set forth in Section 3.6(a).

“Estimated Net Debt” has the meaning set forth in Section 3.6(a).

“Estimated Net Working Capital” has the meaning set forth in Section 3.6(a).

“Estimated Seller Working Capital Payment” has the meaning set forth in
Section 3.6(a).

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and all
regulations and rules issued thereunder, or any successor Law.

“Excluded Assets” means

(i) the assets, property and rights listed on Annex 2.1(b)(i);

(ii) any Intellectual Property, including Intellectual Property owned by Seller
or any of its Affiliates (including the Transferred Companies), and Intellectual
Property owned by any third party and licensed to Seller or any of its
Affiliates (including the Transferred Companies), other than Intellectual
Property licensed to the Transferred Companies pursuant to the Assigned
Contracts (for the avoidance of doubt, this clause (ii) does not limit any
Intellectual Property licenses granted pursuant to the Ancillary Documents);

 

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(iii) all Retained Contracts;

(iv) all Books and Records (other than Transferred Books and Records);

(v) all assets and operations owned or used by Verizon Long Distance LLC
(excluding, for the avoidance of doubt, accounts receivable, Customer Contracts,
Master Agreements (to the extent transferred pursuant to Section 6.13(a)),
accounts and relationships, in each case, to the extent related to customers in
the States for services delivered in the States and to the extent related to the
Transferred Business as of the Closing);

(vi) all assets and operations owned or used by Verizon Online LLC (excluding,
for the avoidance of doubt, customer premises equipment (such as modems and
set-top boxes), accounts receivable, Customer Contracts, Master Agreements (to
the extent transferred pursuant to Section 6.13(a)), accounts and relationships,
in each case, to the extent related to customers in the States for services
delivered in the States and to the extent related to the Transferred Business as
of the Closing);

(vii) all third party vendor relationships and agreements, excluding, for the
avoidance of doubt, the Network Element Software Licenses assigned to or to be
assigned to Newco pursuant to Section 6.17 and other vendor relationships and
agreements that relate exclusively to the Transferred Business as of the Closing
or that otherwise represent Service Contracts;

(viii) any third party communications facilities that are used to support the
Excluded Assets;

(ix) the Super Head End and all equipment (other than the “patch panel” and all
equipment running from the “patch panel” to the customer) located at 7701
Telecom Parkway, Temple Terrace, Florida 33637;

(x) all assets and operations owned or used by Verizon Network Integration Corp.
and Verizon Select Services Inc. (excluding, for the avoidance of doubt,
accounts receivable, Customer Contracts, Master Agreements (to the extent
transferred pursuant to Section 6.13(a)), accounts and relationships, in each
case, to the extent related to customers in the States for services delivered in
the States and to the extent related to the Transferred Business as of the
Closing);

(xi) all assets existing as of the Closing Date, to the extent relating to,
arising out of or resulting from any intercompany receivables to be settled
pursuant to Section 2.2; and

(xii) any IT Systems whether or not used in the Transferred Business, other than
the Transferred IT Systems.

For the avoidance of doubt, the following shall not be included in the
Transferred Assets or the assets held by the Transferred Companies as of
immediately prior to the Closing and shall be considered to be Excluded Assets:

 

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(x) any right, title, or interest to or in, or any assets used in any business
of Seller or any of its Subsidiaries, whether tangible or intangible (including
Seller Owned Software and, other than the Transferred IP Licenses, any licenses
or other rights held by Seller or any of its Subsidiaries with respect to
computer software and related databases), real, personal or mixed, used to
deliver any of the following excluded functions or services: (i) any centralized
support functions provided by Seller or any of its Subsidiaries, including the
provision of network design, monitoring, surveillance and dispatch services,
call center services and tools (including all interactive voice response
applications and logic for call routing, self service functions and applications
and tools such as call recording, training delivery and work force scheduling
platforms), customer care/technical support, billing, order taking and
processing and collection services, contract management systems, account
management, sales opportunity databases, information technology services and the
platforms and databases utilized in providing Advanced Intelligent Network and
911 services, (ii) any directory publishing services, (iii) mobile and fixed
wireless service or (iv) any function or service listed on Annex 2.1(b)(ii); or

(y) any data network transport facilities, including circuits, routers and
firewall equipment, that connect from the core routers serving the States to
Seller’s and its Subsidiaries’ other routers.

“Excluded Liabilities” has the meaning set forth in Section 2.3.

“FCC” means the Federal Communications Commission.

“Fee Letter” has the meaning set forth in Section 5.8.

“Final Closing Statement” has the meaning set forth in Section 3.6(c).

“Final Determination” has the meaning set forth in Section 6.5(l).

“Final Net Debt” has the meaning set forth in Section 3.6(c).

“Final Net Working Capital” has the meaning set forth in Section 3.6(c).

“Financial Statements” has the meaning set forth in Section 6.18(a).

“Financing” has the meaning set forth in Section 6.15(d).

“Financing Sources” means the entities that have committed to provide, or enter
into definitive agreements to provide, the Financing or Alternative Financing in
connection with the transactions contemplated hereby, including the lead
arranger or arranger or any of the parties to the Commitment Letter and any
joinder agreements or credit agreements relating thereto, and their Affiliates
and the former, current or future partners, shareholders, members, managers,
directors, officers, employees, agents and representatives of the foregoing.

“GAAP” means United States generally accepted accounting principles as in effect
from time to time.

 

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“Governmental Authorizations” means all franchises, grants, licenses,
certificates, permits, variances, exceptions, waivers, consents, orders and
other authorizations and approvals issued by or obtained from a Governmental
Entity, other than Governmental Consents and Easements. For the avoidance of
doubt, “Governmental Authorization” does not include any form of notices to be
made, or authorizations required to be maintained or obtained, pursuant to any
Contract in respect to which a Governmental Entity is a customer of Seller or
any of its Subsidiaries; provided that such Governmental Entity is only acting
in the capacity of a customer pursuant to any such Contract.

“Governmental Consents” means all notices, reports and other filings required to
be made prior to the Closing by Seller or Buyer or any of their respective
Affiliates with, and all consents, registrations, approvals, permits, clearances
and authorizations required to be obtained prior to the Closing by Seller or
Buyer or any of their respective Affiliates from any Governmental Entity
pertaining to the transactions contemplated by this Agreement and the Ancillary
Documents. For the avoidance of doubt, “Governmental Consent” does not include
any form of notices to be made, or consents required to be maintained or
obtained, pursuant to any Contract in respect to which a Governmental Entity is
a customer of Seller or any of its Subsidiaries; provided that such Governmental
Entity is only acting in the capacity of a customer pursuant to any such
Contract.

“Governmental Entity” means any U.S. federal, state or local government or
governmental entity or any foreign government or governmental entity or any
political or other subdivision, department or branch thereof or any regulatory,
administrative or other agency or any court or tribunal of any of the foregoing
or any stock exchange or similar self-regulatory organization.

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

“Hazardous Material” means chemical, pollutant, contaminant, waste, and any
other substance or material that is listed, defined, designated, treated or
classified as hazardous or toxic pursuant to applicable Environmental Laws, and
including any petroleum or petroleum products, wastes or derivatives, asbestos
or asbestos-containing materials, urea formaldehyde or poly chlorinated
biphenyls, greenhouse gases, lead or lead-based paints or materials, radon, and
toxic or hazardous mold.

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.

“ILEC Subsidiaries” has the meaning set forth in the Recitals.

“ILEC Services” means, as the following services are provided as of any of
(x) the date of this Agreement, (y) December 31, 2014 or (z) immediately prior
to the Closing, in each case after giving effect to all changes to such services
as are made from December 31, 2014 until immediately prior to the Closing (a) in
the Ordinary Course and not in violation of Section 6.2(a) (as if such covenant
were in effect as of December 31, 2014) or (b) that are otherwise required or
expressly permitted by this Agreement (including the Seller Schedules), all of
the incumbent local exchange carrier business activities and operations of
Seller and its Affiliates in the States

 

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consisting of (i) local exchange services and exchange access, (ii) “intraLATA”
toll services, (iii) network access services, (iv) enhanced voice and data
services and (v) video services, broadband services, digital subscriber line
services, fiber-to-the-premise high speed Internet in the States, wholesale
services, operator services, payphone services, directory assistance services,
special access services, unbundled network element platform services, customer
service to end users, resale services, colocation services and any other
services provided by Seller and its Subsidiaries (including the Transferred
Companies) exclusively related to the delivery of the foregoing services, and,
in connection with any of the foregoing, repairs, billing and collections.

“Indebtedness” means, without duplication, (i) all liabilities for borrowed
money, whether current or funded, secured or unsecured, all obligations
evidenced by bonds, debentures, notes or similar instruments, and all
liabilities in respect of mandatorily redeemable or purchasable capital stock or
securities convertible into capital stock and, except with respect to the Debt
Obligations, all prepayment premiums, penalties and other fees and expenses paid
or payable to satisfy such liabilities or obligations; (ii) any obligations
under conditional sale or other title retention agreements; (iii) any
obligations issued or assumed as the deferred purchase price of property or
services (excluding trade accounts payable and similar obligations to creditors
for goods and services); (iv) any capitalized lease obligations; (v) all
liabilities for the reimbursement of any obligor on any (x) letter of credit,
(y) banker’s acceptance or (z) similar credit transaction securing obligations
of a type described in clause (i) above to the extent of the obligation secured;
(vi) all accrued and unpaid interest on any of the liabilities or obligations
described in clauses (i) through (v) above; and (vii) all liabilities as
guarantor of obligations of any other Person of a type described in clauses
(i) through (v) above, to the extent of the obligation guaranteed.

“Indemnified Parties” has the meaning set forth in Section 8.3(a).

“Indemnifying Party” has the meaning set forth in Section 8.4(a).

“Indemnity Cap” has the meaning set forth in Section 8.3(b).

“Indemnity Threshold” has the meaning set forth in Section 8.3(b).

“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).

“Insolvent” has the meaning set forth in Section 5.9.

“Intellectual Property” means all intellectual property and industrial property
rights throughout the world, including (i) trademarks, service marks, brand
names, certification marks, collective marks, d/b/a’s, Internet domain name
registrations, logos, slogans, symbols, trade dress, design rights, assumed
names, fictitious names, corporate names, trade names, social media usernames
(e.g., Twitter handles), personalized subdomains or vanity URLs, and other
digital identifiers and other indicia of origin, all registrations, renewals and
applications for registration of the foregoing, and all goodwill associated
therewith and symbolized by any of the

 

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foregoing (collectively, “Trademarks”); (ii) patents, patent applications,
invention disclosures, and all related divisionals, continuations,
continuations-in-part, provisional applications and renewal applications, and
including renewals, extensions, substitutions, reexaminations and reissues;
(iii) rights in confidential information, trade secrets and know-how, including
processes, inventions, schematics, business methods, formulae, drawings,
prototypes, models, methodologies, designs, customer lists and supplier lists,
and other proprietary information (including concepts, ideas, procedures,
techniques, technical information, specifications, operating and maintenance
manuals, tools, algorithms, Software architectures, data and databases, plans,
discoveries, research and development, compositions, modifications, extensions,
improvements and other proprietary content) (collectively, “Trade Secrets”);
(iv) copyrights and rights in copyrightable subject matter in published and
unpublished works of authorship (other than rights in Software), including all
registrations and applications therefor, and all renewals, extensions,
restorations and reversions thereof; and (v) rights in all computer software
programs, including application software, system software, firmware, middleware
and mobile digital applications, and all versions, upgrades, updates,
enhancements and error corrections of the foregoing, and all code,
human-readable code, source code, and documentation related thereto, in any and
all forms and media (collectively, “Software”).

“Intellectual Property Agreement” means the Intellectual Property Agreement
substantially in the form attached hereto as Exhibit C.

“Interim 2015 Financial Statements” has the meaning set forth in
Section 6.18(a).

“IRS” has the meaning set forth in Section 4.10(b).

“IT Systems” means technology, computer systems and infrastructure (including
Software, hardware, middleware, servers, workstations and routers).

“Knowledge” means, for those Persons listed on Exhibit D (in the case of
Knowledge of Seller) or Exhibit E (in the case of Knowledge of Buyer), the
actual knowledge of such Persons, without any inquiry or investigation other
than reasonable inquiry by such Person of such Person’s direct reports.

“Law” means any law, statute, ordinance, rule, regulation, code or Order
enacted, issued, promulgated, enforced or entered by a Governmental Entity.

“Liabilities” means any and all debts, liabilities, commitments and obligations
of any kind, whether fixed, contingent or absolute, matured or unmatured,
liquidated or unliquidated, accrued or not accrued, asserted or not asserted,
known or unknown, determined, determinable or otherwise, whenever or however
arising (including, whether arising out of any Contract or tort based on
negligence or strict liability) and whether or not the same would be required by
GAAP to be reflected in financial statements or disclosed in the notes thereto.

“Listed Employees” has the meaning set forth in Section 4.10(i).

“Litigation Matters” means all pending or threatened litigation, investigations
or claims that have been or may be asserted by a third party against, or
otherwise adversely affect, Seller or its Subsidiaries (other than the
Transferred Companies), on the one hand, and the Transferred Business, on the
other hand.

 

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“Losses” has the meaning set forth in Section 8.2.

“Marketing Period” means any period of twenty (20) consecutive Business Days
throughout which (a) Buyer shall have received the Audited 2014 Financial
Statements and all other applicable Required Information and (b) the applicable
Refresh Date for the most recently delivered Financial Statements shall not have
occurred; provided that (x) no “Marketing Period” shall commence and any prior
Marketing Period shall be deemed not to have commenced if, on or prior to the
completion of such twenty (20) consecutive Business Day period, (i) Ernst &
Young LLP shall have withdrawn or qualified its audit opinion, or asked in
writing that future reliance not be placed on such audit opinion, with respect
to any of the Newco Financial Statements or the Financial Statements (in which
case no Marketing Period may commence unless and until a new audit opinion is
issued with respect to the combined financial statements of the Transferred
Business for the applicable periods by Ernst & Young LLP, another “big-four”
accounting firm or an independent public accounting firm reasonably acceptable
to Buyer) or (ii) Seller or any of its Affiliates shall have publicly announced
any intention to restate any material financial information included in the
Required Information or that any such restatement is under consideration,
unless, if any such announcement has been made, such restatement shall have been
completed and the applicable Required Information shall have been amended or
Seller or any of its Affiliates shall have announced that it has concluded that
no restatement shall be required and (y) for purposes of any Marketing Period,
(i) if such period has not ended prior to August 21, 2015, such period shall be
deemed not to have commenced until September 8, 2015, (ii) November 25, 2015 and
November 27, 2015 shall not be considered Business Days for purposes of any
Marketing Period, and (iii) if such period has not ended prior to December 18,
2015, such period shall be deemed not to have commenced until January 4, 2016.

“Marketing Period Termination Date” means the earliest to occur of (a) the date
of completion of two (2) non-overlapping Marketing Periods; provided that
(x) the first Marketing Period shall commence no earlier than the date of
delivery of the Audited 2014 Financial Statements and the Interim 2015 Financial
Statements for the first and second fiscal quarters of 2015 (it being understood
that such Financial Statements may be delivered on different days) and (y) the
second Marketing Period shall commence no earlier than the date of delivery of
the Interim 2015 Financial Statements for the first, second and third fiscal
quarters of 2015 (it being understood that such Financial Statements may be
delivered on different days), (b) the date on which the entire Committed
Financing (less the amount of any Securities Financing) shall have been obtained
and (c) the date on which Buyer notifies Seller in writing of its decision to
accelerate the Marketing Period Termination Date.

“Master Agreements” means Contracts with customers of Seller or any of its
Subsidiaries, in each case to which Seller or any of its Subsidiaries is a
party, and in each case which provide for such customers to receive one or more
products or services that are provided by the Transferred Business as well as
one or more products or services that are provided by Seller’s and its
Subsidiaries’ other business. For the avoidance of doubt, Master Agreements
shall include the agreements listed on Annex 1.1(b).

 

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“Material Contract” has the meaning set forth in Section 4.15(a).

“Material Transferred Lease” means any Transferred Real Property Lease with
annual rent payments in excess of $100,000.

“Narrative Report” means, with respect to the financial statements for which
such narrative report is required, a narrative report describing the financial
condition and results of operations of the Transferred Business in a form
reasonably acceptable to Buyer; provided that if such narrative report is in the
form of a management’s discussion and analysis of financial condition and
results of operations customarily included in filings made with the SEC, such
report shall be deemed to be acceptable to Buyer.

“NES Consideration” has the meaning set forth in Section 6.17(c).

“Network Element” means any network device, computer, server or other processing
device connected to or used in support of the public switched voice, video hub
office, data, digital subscriber line and other networks of the Transferred
Companies, to the extent such element (i) is located in the States and (ii) is
used primarily in the support of the Transferred Business as of the Closing.

“Network Element Software” means any third-party Software, as and to the extent
installed on Network Elements as of the Closing.

“Network Element Software License” has the meaning set forth in Section 6.17(a).

“Net Debt” means an amount, which may be positive or negative, equal to (i) the
amount of Indebtedness (including, for the avoidance of doubt, the Debt
Obligations) of the Transferred Companies, less (ii) an amount equal to the Cash
and Cash Equivalents of the Transferred Companies, in each case, as of the
Effective Time (taking into account the effect of the transactions contemplated
by the Pre-Closing Reorganization but otherwise without giving effect to the
Closing).

“Net Debt Difference” has the meaning set forth in Section 3.6(e).

“Net Working Capital” means an amount equal to, as of the Effective Time (taking
into account the effect of the transactions contemplated by the Pre-Closing
Reorganization but otherwise without giving effect to the Closing) the “Net
Working Capital” of the Transferred Business as defined and calculated in the
manner set forth on Exhibit F.

“Net Working Capital Threshold” means $68,500,000.

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

“Newco Audited Financial Statements” has the meaning set forth in
Section 4.7(a).

“Newco Balance Sheet” has the meaning set forth in Section 4.7(a).

“Newco Financial Statements” has the meaning set forth in Section 4.7(a).

 

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“Newco Unaudited Financial Statements” has the meaning set forth in
Section 4.7(a).

“Non-Scheduled Contract” means any railroad crossing agreement or Easement, or
any Transferred Real Property Lease with annual rents of less than $100,000.

“Notice Period” has the meaning set forth in Section 8.4(a).

“Order” means any judgment, determination, decree, injunction or order (whether
temporary, preliminary or permanent) enforced or entered by a Governmental
Entity.

“Ordinary Course” means the conduct of the Transferred Business in accordance
with the normal customs, practices and procedures of Seller or its Subsidiaries
applicable to the Transferred Business from time to time through the date
hereof.

“Outside Counsel” has the meaning set forth in Section 10.18.

“Permitted Encumbrances” has the meaning set forth in Section 4.19.

“Person” means an individual, a group, a corporation, a partnership, an
association, a limited liability company, a Governmental Entity, a trust or
other entity or organization.

“Personal Information” has the meaning set forth in Section 4.14(g).

“Phaseout Period” has the meaning set forth in Section 6.19(c).

“Post-Closing Tax Period” means (a) in respect of income Taxes, any taxable
period beginning after the Closing Date and the portion of any Straddle Period
beginning after the Closing Date and (b) in respect of Taxes other than income
Taxes, any taxable period beginning after the Effective Time and the portion of
any Straddle Period beginning after the Effective Time.

“Pre-Closing Reorganization” means the reorganization contemplated by Article
II.

“Pre-Closing Tax Period” means (a) in respect of income Taxes, any taxable
period ending on or before the Closing Date and the portion of any Straddle
Period ending on the Closing Date and (b) in respect of Taxes other than income
Taxes, any taxable period ending before the Effective Time and the portion of
any Straddle Period ending as of the Effective Time.

“Privileged Information” means, with respect to each party, Information
regarding such party or its Subsidiaries, 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 protected from disclosure pursuant to the
attorney-client privilege, the work product doctrine or another applicable legal
privilege, in each case that the other party or its Subsidiaries may come into
possession of or obtain access in connection with this Agreement or the
Ancillary Documents.

“Purchase Price” has the meaning set forth in Section 3.2.

“Receiving Party” has the meaning set forth in Section 10.9(c).

 

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“Refresh Date” shall mean (a) November 7, 2015, with respect to the Interim 2015
Financial Statements for the second fiscal quarter of 2015 and (b) March 1,
2016, with respect to the Interim 2015 Financial Statements for the third fiscal
quarter of 2015.

“Required Information” means the Interim 2015 Financial Statements required to
be delivered by Seller as of the date of determination pursuant to
Section 6.18(a).

“Required Payment Amount” means the aggregate amount, if any, of all amounts
(excluding, for the avoidance of doubt, any state income taxes imposed on Seller
or its Subsidiaries as a result of the transfer of the outstanding membership
interests of Newco as contemplated under this Agreement) required to be paid,
refunded, deferred, escrowed or foregone pursuant to an Order, settlement
agreement or otherwise (including in the form of any contribution or transfer of
assets or assumption or retention of liabilities, measured at fair market value
and assuming the maximum amount of any contingent amount is paid or foregone and
the full amount of any deferred, contingent or escrowed amount is not received)
by Seller or its Subsidiaries, other than post-Closing obligations of Newco or
any Subsidiary of Newco, as a condition to obtaining any consent of any
Governmental Entity in the States required to consummate the transactions
contemplated by this Agreement or to comply with any Order approving the
transactions contemplated by this Agreement, in each case excluding any amounts
reimbursed by Buyer to Seller pursuant to Section 6.3(a); it being understood
that any amount (i) required to be so paid, refunded, deferred, escrowed or
foregone shall not be considered a Required Payment Amount to the extent not
related to the Transferred Business, (ii) that is deferred and therefore
included as a Required Payment Amount that is subsequently paid to any member of
the Seller Group or any of their Affiliates after the Closing shall, to the
extent of such subsequent payment to Seller, be promptly (but in no event later
than five (5) Business Days after receipt of such payment) refunded to Buyer,
(iii) that is contingent and therefore the maximum amount was assumed in the
determination of Required Payment Amount and such amount subsequently is
actually less than such assumed maximum amount, then to the extent such amount
is actually less it shall be promptly (but in no event later than five
(5) Business Days after final determination that such amount is actually less)
refunded to Buyer and (iv) any amount that is part of the Required Payment
Amount shall be supported by reasonable documentation provided by Seller to
Buyer.

“Restricted Cash” means cash in escrow accounts or which is otherwise subject to
any other contractual or legal restriction that impairs the ability of the owner
of such cash to freely transfer or use such cash for any lawful purpose.

“Retained Contract” means (i) any Contract (including Master Agreements) entered
into by Seller or any Subsidiary of Seller (other than any Transferred Company),
on the one hand, with a non-Affiliate of Seller, on the other hand, which is
used or held for use in the conduct of the Transferred Business as well as
Seller’s other business (in each case, other than the portions of any Master
Agreements transferred or to be transferred pursuant to Section 6.13(a) or any
Contract to the extent it represents a Service Contract), (ii) any Contract
entered into solely between or among Seller and/or Affiliates of Seller, other
than Transferred Affiliate Arrangements and Contracts entered into solely
between or among the Transferred Companies, and (iii) those Contracts listed in
Seller Schedule 1.1(a).

 

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“Retained Employee” means a Listed Employee who will not be an employee of a
Transferred Company at Closing.

“SEC” means the United States Securities and Exchange Commission.

“Section 338(h)(10) Allocation Schedule” has the meaning set forth in
Section 6.5(n)(ii).

“Section 338(h)(10) Company” has the meaning set forth in Section 6.5(n)(i).

“Section 338(h)(10) Election” has the meaning set forth in Section 6.5(n)(i).

“Section 338(h)(10) Final Allocation Schedule” has the meaning set forth in
Section 6.5(n)(ii).

“Securities Act” means the Securities Act of 1933, as amended, and all
regulations and rules issued thereunder, or any successor Law.

“Securities Financing” has the meaning set forth in Section 6.15(d).

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

“Seller Adverse Condition” has the meaning set forth in Section 6.3(a).

“Seller Authorizations” has the meaning set forth in Section 4.12.

“Seller Benefit Plans” has the meaning set forth in Section 4.10(a).

“Seller Confidential Information” has the meaning set forth in Section 6.8(b).

“Seller Group” means Seller and its Subsidiaries from time to time, other than
the Transferred Companies.

“Seller Guarantees” has the meaning set forth in Section 6.23(a).

“Seller Indemnified Parties” has the meaning set forth in Section 8.2.

“Seller Insurance Policies” has the meaning set forth in Section 6.14.

“Seller IP” has the meaning set forth in Section 6.19(a).

“Seller Material Adverse Effect” means any event, occurrence, development, state
of facts, effect, condition or change that, individually or in the aggregate,
(a) has a material adverse effect on the business, financial condition, assets,
liabilities or results of operations of the Transferred Business taken as a
whole; provided that none of the following (or the results thereof) shall be, or
shall be deemed to result in or contribute to, a Seller Material Adverse Effect:
(i) any change in Law or accounting standards or interpretations thereof
applicable to the Transferred Business, (ii) any change in the United States
telecommunications industry or financial market conditions generally, (iii) any
change in general economic conditions in the United States generally or in any
of the States generally, (iv) any geopolitical conditions, the

 

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outbreak or escalation of hostilities, any acts of war, sabotage, terrorism or
military actions, or any escalation or worsening of any such hostilities, acts
of war, sabotage, terrorism or military actions threatened or underway as of the
date of this Agreement, (v) hurricanes, tornados, earthquakes or other natural
disasters, (vi) any action(s) taken by Seller or any of its Subsidiaries that
are expressly required to be taken under this Agreement or actions not taken by
Seller or its Subsidiaries that are expressly prohibited by this Agreement or to
which Buyer has specifically consented in writing, (vii) any disruption of
supplier, partner, employee or similar relationships or any loss of employees of
the Transferred Business, in each case solely to the extent resulting from the
execution, performance or public announcement of this Agreement or the Ancillary
Documents or (viii) any condition, restriction, action or other matter that
Buyer agrees to in connection with securing any consent, approval, waiver or
authorization required in connection with the transactions contemplated by this
Agreement; provided, further, that in the case of clauses (i), (ii), (iii) and
(iv) above, only to the extent such event, occurrence, development, state of
facts, effect, condition or change does not disproportionately adversely affect
the Transferred Business compared to other companies operating in the United
States telecommunications industry or (b) prevents or would reasonably be
expected to prevent or materially delay or impede the consummation of the
transactions contemplated by this Agreement.

“Seller Materials” has the meaning set forth in Section 6.19(c).

“Seller Owned Software” means software that has been developed, created or
otherwise acquired by Seller or any Affiliate thereof.

“Seller Release Parties” has the meaning set forth in Section 6.11.

“Seller Schedules” has the meaning set forth in Article IV.

“Seller Trademarks” has the meaning set forth in Section 6.19(a).

“Service Contracts” means (i) all Contracts for the purchase by Seller or any of
its Subsidiaries of services that are exclusively used by the Transferred
Business as of the Closing and (ii) all pending or open purchase orders,
statements of work and other similar Contracts to the extent providing for the
purchase of goods or services by the Transferred Business as of the Closing
(which purchase orders, statements of work and other similar Contracts, for the
avoidance of doubt, shall each constitute its own individual “Service Contract”
even if entered into under the framework of a master services agreement or
similar Contract that is retained by the Seller Group under this Agreement).

“Shared Locations” means real property set forth on Seller Schedule 2.6.

“Shared Location Lease” has the meaning set forth in Section 2.6.

“SLA Licensed Software” means the Seller Owned Software agreed by the parties,
as of the date hereof, to be licensed to Buyer pursuant to the Software License
Agreement.

“Software” has the meaning set forth in the definition of “Intellectual
Property”.

 

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“Software License Agreement” means the Software License Agreement substantially
in the form attached hereto as Exhibit H.

“Specified Representations” has the meaning set forth in Section 7.2(b).

“State Commissions” means the California Public Utility Commission, the Florida
Public Service Commission and the Public Utility Commission of Texas.

“States” means the states of California, Florida and Texas.

“Straddle Period” means (a) in the case of income Taxes, any taxable period that
begins on or before and ends after the Closing Date and (b) in the case of Taxes
other than income Taxes, any taxable period that begins before and ends after
the Effective Time.

“Subsidiary” means with respect to any Person, any other Person of which at
least fifty (50) percent of the securities or ownership interests having by
their terms ordinary voting power to elect a majority of the board of directors
or persons performing similar functions is directly or indirectly owned or
controlled by such Person and/or by one or more of its Subsidiaries.

“Tariffs” shall mean tariffs, price lists, schedules of rates, or other
statements of terms and conditions, including special customer arrangements,
special assemblies, price flex arrangements, and individual customer-based
arrangements of Seller and its Affiliates for telecommunications services, which
are applicable in whole or in part in the States, are effective under applicable
Laws, and are in effect immediately prior to the Closing.

“Tax Proceedings” has the meaning set forth in Section 6.5(f)(ii).

“Tax Returns” means all reports, returns, statements, schedules, notices, forms,
declarations, or claims for refund (including any amendments to the foregoing)
required to be filed with respect to Taxes, including any attachments thereto.

“Taxes” means all federal, state, local and foreign taxes, including income,
alternative minimum, gross receipts, windfall profits, value added, severance,
property, production, sales, use, duty, license, excise, franchise, employment,
telecommunications, video, withholding or similar taxes of any kind, together
with any deficiency, assessments, interest, additions or penalties with respect
thereto and any interest in respect of such additions or penalties, provided
that, for the avoidance of doubt, “Taxes” shall not include any e-911, USF or
other similar federal, state or local regulatory fees or charges.

“Termination Date” has the meaning set forth in Section 9.1(b).

“Third-Party Claim” has the meaning set forth in Section 8.4(a).

“Third Party IP License” has the meaning set forth in Section 6.19(i).

“Trade Secrets” has the meaning set forth in the definition of “Intellectual
Property”.

“Trademarks” has the meaning set forth in the definition of “Intellectual
Property”.

 

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“Transfer Documents” means the Assignment and Assumption Agreements and any
other bills of sale, assignments, assumptions or other instruments of transfer
documenting the Pre-Closing Reorganization.

“Transfer Taxes” means all U.S. federal, state and local and all foreign or
other excise, sales, use, value added, transfer (including real property
transfer or gains), stamp, documentary, filing, recordation and other similar
Taxes and fees that may be imposed or assessed in connection with the
Pre-Closing Reorganization or the transfer of the outstanding membership
interests of Newco as contemplated under this Agreement, together with any
interest, additions or penalties with respect thereto and any interest in
respect of such additions or penalties. For the avoidance of doubt, Transfer
Taxes shall not include any income or similar taxes imposed on Seller or its
Subsidiaries as a result of the transfer of the outstanding membership interests
of Newco as contemplated under this Agreement.

“Transferred Affiliate Arrangements” means (i) this Agreement and all Ancillary
Documents and all arrangements expressly contemplated by this Agreement or an
Ancillary Document, (ii) all Affiliate interconnection Contracts and (iii) all
Contracts listed on Seller Schedule 1.1(b) to the extent applicable to the
Transferred Companies, in the case of clauses (ii) and (iii) true and
substantially complete copies of which have been provided to Buyer prior to the
date hereof.

“Transferred Assets” means (i) the Assigned Contracts, (ii) the Transferred
Books and Records (subject to Section 6.1), (iii) to the extent not held by the
Transferred Companies prior to Closing, the Transferred Real Property and
Transferred Real Property Leases, (iv) set top boxes and other local equipment
that is used to deliver FiOS video to Seller’s customers in the States, (v) all
existing FTTP network elements located in the States, from and including the
video hub office(s) to the end-user customers, including all elements of the
video hub office(s) (including equipment primarily supporting the Video Head
End), trunks and other connecting facilities from the video hub office(s) to the
serving offices and all connections from serving offices to end-user customers
in the States, (vi) the customer premises equipment sales and installation
Contracts and related maintenance Contracts (including 911 customer premises
equipment sales and maintenance Contracts) for customers whose telephone service
is provided by the local exchanges, (vii) the assets, property and rights listed
on Annex 1.1(c), (viii) personal computers, laptops, workstations and tablets
used exclusively by Business Employees in the conduct of the Transferred
Business as of the Closing (and excluding any software thereon other than
Software licensed to the Transferred Companies pursuant to the Assigned
Contracts), the Network Elements and, solely to the extent a Network Element
Software License is assigned pursuant to Section 6.17, the corresponding Network
Element Software and general business equipment, such as cell phones, fax
machines, copiers and related infrastructure owned by or licensed directly to
the Transferred Companies or used exclusively in the Transferred Business as of
the Closing (collectively, the “Transferred IT Systems”), (ix) customer
directories (other than publishing services associated therewith) of customers
of the Transferred Companies, (x) retail stores primarily relating to the
provision of ILEC Services, (xi) the fiber solutions facilities or centers and
maintenance control operations centers located in the States, (xii) other fixed
assets exclusively related to the provision of ILEC Services, (xiii) all assets,
property and rights reflected on the balance sheet included in the Audited 2014
Financial Statements to the extent held by the Transferred Companies at Closing
and (xiv) to the extent not held by the

 

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Transferred Companies prior to the Closing, all other assets, property and
rights (other than Intellectual Property and IT Systems) of Seller and its
Subsidiaries as of immediately prior to the Closing that are exclusively used in
the conduct of the Transferred Business as of the Closing, in each case other
than any Excluded Assets.

“Transferred Books and Records” means the Books and Records (or portions
thereof) in the possession of Seller or its Subsidiaries to the extent related
to the Transferred Business as of the Closing but excluding, in each case, any
such Books and Records (or portions thereof) to the extent that (a) they are
included in or related to any Excluded Assets or Excluded Liabilities or any
portion of Seller’s and its Subsidiaries’ business not being transferred
hereunder, (b) any Law prohibits their transfer, (c) such Books and Records are
not to be transferred as set forth in Section 6.1 or (d) such Books and Records
are Consolidated Tax Returns. For the avoidance of doubt, Transferred Books and
Records shall include all customer records held as of immediately prior to the
Closing that are exclusively related to services provided by the Transferred
Business as of the Closing, records of Business Employees and any Books and
Records of the Transferred Companies to the extent that they relate to the
States.

“Transferred Business” means the business of Seller and its Subsidiaries as
conducted as of any of (x) the date of this Agreement, (y) December 31, 2014 or
(z) immediately prior to the Closing, in each case after giving effect to all
changes to such business as are made from December 31, 2014 until immediately
prior to the Closing (a) in the Ordinary Course and not in violation of
Section 6.2(a) (as if such covenant were in effect as of December 31, 2014) or
(b) that are otherwise required or expressly permitted by this Agreement
(including the Seller Schedules), of:

(i) providing, marketing and selling the ILEC Services in the States;

(ii) providing, marketing and selling video services in the States;

(iii) originating central office voice switched long distance services in the
States switched by wire centers that are otherwise Transferred Assets;

(iv) the provision by Verizon Online LLC of dial-up, digital subscriber line
(“DSL”) and dedicated Internet access services and related value added services
taken by DSL customers located in the States; or

(v) the sale, installation and related maintenance of customer premises
equipment including 911 related premises equipment for customers of the ILEC
Services in the States.

provided that, for the avoidance of doubt, “Transferred Business” shall not
include the following:

(i) tangible long distance assets and related operations;

(ii) the entities listed and the specific services offered by such entities as
described on Annex 1.1(d); and

 

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(iii) the products and services listed on Annex 1.1(e).

“Transferred Business as of the Closing” means the Transferred Business as
conducted as of any of (x) the date of this Agreement, (y) December 31, 2014 or
(z) immediately prior to the Closing, in each case after giving effect to all
changes to such business as are made from December 31, 2014 until immediately
prior to the Closing (a) in the Ordinary Course and not in violation of
Section 6.2(a) (as if such covenant were in effect as of December 31, 2014) or
(b) that are otherwise required or expressly permitted by this Agreement
(including the Seller Schedules).

“Transferred Companies” has the meaning set forth in the Recitals.

“Transferred Company Guarantees” has the meaning set forth in Section 6.23(b).

“Transferred IP Licenses” means any (x) Contract between a Transferred Company
and a third party (other than Seller or any of its Affiliates) pursuant to which
a Transferred Company is licensed directly Intellectual Property, provided,
however, that if (A) such Contract licensing such Intellectual Property is
governed by a master or enterprise license agreement between Seller or any of
its Affiliates (other than the Transferred Companies) and a third party, then
such Contract and such Intellectual Property shall be an Excluded Asset unless
(1) such Contract for such Intellectual Property is assignable without any
payment of any further consideration by Seller or any of its Affiliates (unless
Buyer agrees in writing to pay any consideration required under a given
Contract), and (2) the applicable master or enterprise agreement does not
prevent a transfer or assignment of the underlying Contract licensing such
Intellectual Property, and (B) if such Contract licensing such Intellectual
Property is a Contract to which one or more Affiliates of Seller (other than the
Transferred Companies) is also a party, then such Contract and such Intellectual
Property shall be an Excluded Asset unless such Contract allows for the
assignment of solely the portion of such Contract that is solely applicable to
the Transferred Companies, without any payment of any further consideration by
Seller or any of its Affiliates (unless Buyer agrees in writing to pay any
consideration required under a given Contract), in which case solely such
portion of such Contract shall be a Transferred IP License, and (y) Network
Element Software License assigned to Newco pursuant to Section 6.17(a).

“Transferred IT Systems” has the meaning set forth in clause (viii) of the
definition of “Transferred Assets”.

“Transferred Leased Real Property” means all real property that is the subject
of the Transferred Real Property Leases.

“Transferred Real Property” means all real property that is owned by Seller or
any of its Subsidiaries as of immediately prior to the Closing and is primarily
used in the Transferred Business as of the Closing.

“Transferred Real Property Leases” means (i) all leases and subleases of real
property used primarily by the Transferred Business as of the Closing and
(ii) all leases and subleases where one of the Transferred Companies is the
landlord, sublandlord or licensor in respect of real property as of immediately
prior to the Closing.

 

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“Unassigned Assets” has the meaning set forth in Section 2.4(a).

“U.S. Antitrust Laws” means the Sherman Act, as amended, the Clayton Act, as
amended, the HSR Act, the Federal Trade Commission Act, as amended, and all
other federal and state Laws that are designed or intended to prohibit, restrict
or regulate actions having the purpose or effect of monopolization or restraint
of trade.

“USF” means universal service funding or universal service fund, as set forth in
47 CFR 36.601 et seq., as amended or supplemented.

“Video Franchisors” has the meaning set forth in Section 4.4.

“Volume Commitments” has the meaning set forth in Section 6.13(b).

“Working Capital Difference” has the meaning set forth in Section 3.6(e).

“Working Capital Principles” has the meaning set forth in Section 3.6(a).

1.2 Other Terms. Other terms may be defined elsewhere in the text of this
Agreement and, unless otherwise indicated, shall have such meaning throughout
this Agreement.

1.3 Other Definitional Provisions. Unless the express context otherwise
requires:

(a) the words “hereof”, “herein”, and “hereunder” and words of similar import,
when used in this Agreement, shall refer to this Agreement as a whole and not to
any particular provision of this Agreement;

(b) terms defined in the singular have a comparable meaning when used in the
plural, and vice versa;

(c) the terms “Dollars” and “$” mean United States Dollars;

(d) references herein to a specific Section, Subsection, Annex, Exhibit or
Schedule shall refer, respectively, to Sections, Subsections, Annexes, Exhibits
or Schedules of this Agreement;

(e) wherever the word “include”, “includes”, or “including” is used in this
Agreement, it shall be deemed to be followed by the words “without limitation”;

(f) references herein to any gender include each other gender; and

(g) terms defined herein shall have the meanings set forth herein without
reference to statutory or industry usage unless otherwise specified herein.

 

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ARTICLE II

THE PRE-CLOSING REORGANIZATION

2.1 Formation of Newco and Contribution and Distribution of Assets. Prior to the
Closing, subject to the terms and conditions of this Agreement, Seller shall
cause GTE to form Newco and shall (a) cause GTE to contribute the limited
liability company interests and capital stock of the ILEC Subsidiaries to Newco
and (b) to the extent not transferred pursuant to clause (a) of this
Section 2.1, (i) Seller shall, and shall cause its Subsidiaries to, convey,
transfer, assign and deliver to Newco all right, title and interest of Seller
and its Subsidiaries in and to all of the Transferred Assets, free and clear of
all Encumbrances (other than Permitted Encumbrances) and (ii) Seller shall cause
the Transferred Companies to convey, transfer, assign and deliver to the Seller
Group all right, title and interest of the Transferred Companies in and to all
of the Excluded Assets.

2.2 Intercompany Agreements and Accounts. Immediately prior to the Closing,
Seller shall have caused all intercompany payables and receivables between any
member of Seller Group on the one hand and the Transferred Companies on the
other hand (other than ordinary course trade payables and receivables
outstanding as of the Effective Time, which shall be included in Net Working
Capital and which Buyer and Seller agree not to dispute (or setoff) and agree to
pay according to the terms thereof) to be settled, and all intercompany
agreements between any member of Seller Group on the one hand and the
Transferred Companies on the other hand, other than the Transferred Affiliate
Arrangements, to be terminated, without any further liability, payment or
obligation on the part of the Transferred Companies or the Seller Group
thereunder.

2.3 Assumed and Excluded Liabilities. (a) The applicable Transferred Company
shall assume or retain and be responsible, from and after the Closing, for
(i) all of the Liabilities of Seller and its Subsidiaries to the extent relating
to, arising out of or resulting from the Transferred Business, the Transferred
Companies or the ownership or operation of the Transferred Assets, whether
incurred before, on or after the Closing, including the Liabilities of the
Transferred Companies under this Agreement and the Ancillary Documents (other
than the Excluded Liabilities and except as otherwise expressly provided in this
Agreement) including Liabilities (to the extent relating to, arising out of or
resulting from the Transferred Business, the Transferred Companies or the
ownership or operation of the Transferred Assets) (A) in respect of leased
vehicles, equipment leases, Transferred Real Property Leases, or any of the
Transferred Companies’ use and occupancy of leased premises, (B) arising from
existing orders of or agreements with the State Commissions, Video Franchisors
and other regulatory authorities, (C) arising from new orders of or agreements
with the State Commissions, Video Franchisors and other regulatory authorities
imposed or agreed to during the course of approval for the transactions
contemplated by this Agreement, (D) arising from customer service obligations
and contracts, (E) for customer deposits, prepayments and advance billings and
(F) arising out of or related to any of the Transferred Real Property; and
(ii) all Liabilities in respect of the Assigned Contracts or Unassigned Assets
or yet to be novated Federal Government Contracts as provided in Section 2.4
((i) and (ii) collectively, the “Assumed Liabilities”) and (b) one or more
members of the Seller Group, as applicable, shall assume and be responsible for
(i) all of the Liabilities of the Transferred Companies to the extent relating
to, arising out of or resulting from an Excluded

 

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Asset or any other asset specifically retained by the Seller Group at the
Closing pursuant to this Agreement or an Ancillary Document, whether incurred
before, on or after the Closing, provided, however, that this clause (b)(i)
shall not apply to any Intellectual Property to the extent used or practiced in
the Transferred Business before, on or after the Closing; (ii) any Liability of
Seller or any of its Subsidiaries to their employees in their capacity as
employers under any employee benefits or similar plans, or under any workers
compensation Laws or arrangements, in each case except to the extent expressly
assumed by Buyer under the Employee Matters Agreement; (iii) all Taxes for which
Seller is responsible under Section 6.5(a); (iv) except as otherwise expressly
provided in this Agreement or the Ancillary Documents, any liability for any
fees or expenses incurred by Seller or any of its Subsidiaries (including the
fees and expenses of legal counsel, any accountant, auditor, broker, financial
advisor, investment banker or consultant retained by Seller or its Subsidiaries
or on their behalf) in connection with the preparation, negotiation, execution
and delivery of this Agreement or the Ancillary Documents or the consummation of
the transactions contemplated by this Agreement, including any accountant,
auditor, broker, financial advisor, investment banker or consultant fees in
connection with the implementation of the Pre-Closing Reorganization; (v) any
Liabilities of the Transferred Companies relating to, arising out of or
resulting from any business currently or formerly conducted by Seller or any of
its Subsidiaries (other than to the extent such Liabilities relate to, arise out
of or result from the Transferred Business, the Transferred Companies, the
ownership or operation of the Transferred Assets or the Transferred Companies’
historic wireline business conducted within the States) and (vi) all Liabilities
existing as of the Closing Date, to the extent relating to, arising out of or
resulting from any intercompany payables to be settled pursuant to Section 2.2,
in each case whether incurred before, on or after the Closing, except as
otherwise expressly provided in this Agreement (collectively, the “Excluded
Liabilities”).

2.4 Nonassignability of Assets.

(a) Notwithstanding anything to the contrary contained in this Agreement, to the
extent that the conveyance, transfer, assignment or delivery or attempted
conveyance, transfer, assignment or delivery to or from the Transferred
Companies, as the case may be, of any asset that would be a Transferred Asset
(including an Assigned Contract) or Excluded Asset, as applicable, or any claim
or right or any benefit arising thereunder or resulting therefrom (and the
subsequent acquisition of Newco by Buyer) is prohibited by any applicable Law or
would result in a violation or breach of Contract, or would require any
Governmental Authorizations or third-party authorizations, approvals, consents
or waivers, and such authorizations, approvals, consents or waivers have not
been obtained, or such violation or breach has not been cured, prior to the
Closing (other than for Federal Government Contracts, which will transfer at the
Closing subject to a subsequent Federal Government Contract novation) (the
“Unassigned Assets”), the Closing shall proceed without the conveyance,
transfer, assignment or delivery of such asset and there shall be no adjustment
to the Purchase Price. The parties shall use their commercially reasonable
efforts for six (6) months following the Closing (other than for Federal
Government Contracts, for which there will be no six (6) month limit on the
parties’ obligations to use commercially reasonable efforts to obtain a Federal
Government novation), and cooperate with each other, to obtain promptly such
authorizations, approvals, consents or waivers or cure any such violation or
breach; provided, however, that none of Seller or its Subsidiaries or Buyer or
its Subsidiaries shall be required to pay any consideration therefor, other than
filing, recordation or similar fees and, provided, further, that the parties
shall not be required to seek any

 

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authorizations, approvals, consents or waivers or cure any such violation or
breach under Non-Scheduled Contracts. Seller shall not authorize or enter into
any agreement or commitment with respect to obtaining any such authorizations,
approvals, consents, novations or waivers or curing any such violation or breach
that would impose an additional obligation or burden on the Transferred Business
without Buyer’s prior written consent (which consent shall not be unreasonably
withheld, conditioned or delayed). Pending such authorization, approval,
consent, novation or waiver, or the cure of any such violation or breach, and
subject to Section 6.17, the parties shall cooperate with each other in any
mutually agreeable, reasonable and lawful arrangements designed to assert any
rights under such Unassigned Asset or yet to be novated Federal Government
Contract (and Seller shall keep Buyer reasonably informed with respect to
material changes to any such Unassigned Asset) and provide (a) to the intended
transferee the benefits of use, burdens and obligations of such Unassigned Asset
or yet to be novated Federal Government Contract and (b) to the intended
transferor the benefits that they would have obtained had the Unassigned Asset
been conveyed at the Closing and relief from all Liabilities associated with
such Unassigned Asset or yet to be novated Federal Government Contract. Once
authorization, approval, consent or waiver for the conveyance, transfer,
assignment, or delivery of any such Unassigned Asset not conveyed, transferred,
assigned, or delivered at the Closing is obtained, or such violation or breach
is cured, Seller or Buyer, as applicable, shall, or shall cause the applicable
Subsidiary or Subsidiaries to, convey, transfer and deliver such Unassigned
Asset to the intended transferee for no additional cost (other than any
applicable Transfer Taxes for which Buyer shall be responsible in accordance
with Section 6.5(e) hereof), and such Unassigned Asset shall thereafter be
deemed to be a Transferred Asset or Excluded Asset, as applicable.

(b) To the extent that any such Unassigned Asset or unnovated Federal Government
Contract cannot be transferred or the full benefits of use of any such
Unassigned Asset or unnovated Federal Government Contract cannot be provided to
the intended transferee following the Closing pursuant to this Section 2.4
(including with respect to Non-Scheduled Contracts), then Buyer and Seller or
the applicable Subsidiary shall enter into such arrangements (including
subleasing, sublicensing or subcontracting) to provide to the parties hereto the
operational equivalent, to the extent permitted, of obtaining such
authorization, approval, consent or waiver, and the performance by the intended
transferee of the obligations thereunder. Seller or Buyer, as applicable, shall
hold in trust for and pay to the other party promptly upon receipt thereof, all
income, proceeds and other monies received by such party or any of its
Subsidiaries in connection with its use of any Unassigned Asset or unnovated
Federal Government Contract in connection with the arrangements under this
Section 2.4. Buyer or Seller, as applicable, shall pay to the other party,
promptly upon receipt of any invoice from the other party, all Losses generated
by such party or any of its Subsidiaries in connection with the intended
transferee’s use of any Unassigned Asset or unnovated Federal Government
Contract in connection with the arrangements under this Section 2.4. Obligations
pursuant to this Section 2.4(b) with respect to any such Unassigned Asset or
unnovated Federal Government Contract shall continue for the duration of the
term of such Unassigned Asset or unnovated Federal Government Contract and, for
the avoidance of doubt, neither party nor their Subsidiaries may extend or renew
the term of an Unassigned Asset or unnovated Federal Government Contract or
exercise any option for such extension or renewal. Further, to the extent a
party is required to give notice of intent not to renew or extend any term of an
Unassigned Asset or unnovated Federal Government Contract at the end of a
current term, such party may provide such notice in accordance with the terms
and conditions of such underlying asset. This Section 2.4 shall be subject to
the treatment of Contracts addressed in Section 6.13 and Section 6.17.

 

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2.5 Transfer Documentation. The transfers of Transferred Assets and Excluded
Assets, and the assumption of Assumed Liabilities and Excluded Liabilities,
shall be effected pursuant to the Transfer Documents substantially in the form
attached as Annex 2.5 to this Agreement; provided, however, that the transfer to
Seller and its Affiliates of the Intellectual Property owned by the Transferred
Companies prior to the Closing, and the license to the Transferred Companies
from Seller and its Affiliates of certain Intellectual Property that is an
Excluded Asset, shall be effected pursuant to the Intellectual Property
Agreement substantially in the form attached as Exhibit C to this Agreement. Any
substantive amendments, supplements or deviations from such forms shall require
the prior written consent of Buyer.

2.6 Shared Locations. At or prior to Closing, Seller and Buyer (or their
applicable Subsidiaries) shall enter into a lease, sublease or other occupancy
agreement governing each Shared Location (each, a “Shared Location Lease”) in
accordance with the terms of Seller Schedule 2.6. To the extent that the consent
of a third-party landlord is necessary for a Shared Location Lease and such
consent is not obtained, such Shared Location shall be subject to Section 2.4.
Buyer and Seller shall cooperate to identify any property that is used both in
the Transferred Business and in the Seller Group’s other operations and is not
listed on Seller Schedule 2.6, and to fully negotiate a Shared Location Lease
with respect to any such property, in each case no later than six (6) months
from the date hereof; it being understood that any such Shared Location Lease
shall be deemed an Ancillary Document.

ARTICLE III

PURCHASE AND SALE

3.1 Purchase and Sale. On the terms and subject to the conditions set forth
herein, at the Closing, Seller shall cause GTE to sell, convey, transfer, assign
and deliver to Buyer (or otherwise cause to be sold, conveyed, transferred,
assigned and delivered to Buyer), and Buyer shall purchase and acquire from GTE,
all of the issued and outstanding limited liability company interests of Newco
free and clear of all Encumbrances.

3.2 Purchase Price. On the terms and subject to the conditions set forth herein,
in consideration of the sale of Newco, at the Closing, Buyer shall pay to GTE an
amount in cash equal to (i) $10,540,000,000 (ten billion five hundred forty
million dollars), plus (ii) the Required Payment Amount, plus (iii) the
Estimated Buyer Working Capital Payment, if any, minus (iv) the Estimated Seller
Working Capital Payment, if any, minus (v) the Audit Adjustment Amount, if any,
plus (vi) the absolute value of the amount of Estimated Net Debt, if negative,
minus (vii) the amount of Estimated Net Debt, if positive (the “Purchase
Price”).

3.3 Closing. The Closing shall take place at the offices of Debevoise & Plimpton
LLP, 919 Third Avenue, New York, New York 10022 at 10:00 a.m. New York City time
on (i) the date that is the first Business Day that is in the month after, and
is at least three (3) Business Days after, the later of (a) the date on which
the conditions set forth in Article VII are satisfied (other than those
conditions that by their nature are to be satisfied by actions taken at (or

 

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substantially concurrently with) the Closing, but subject to the satisfaction or
waiver of those conditions) and (b) the Marketing Period Termination Date (but
subject to the satisfaction or waiver of the conditions set forth in Article VII
as of the date described in this clause (i)), provided that if (w) Buyer has
used its reasonable best efforts to prepare for the Cutover at the time the
Closing otherwise would have occurred pursuant to this clause (i), (x) despite
such efforts Buyer reasonably believes that it would not be able to successfully
achieve the Cutover on such date, (y) Buyer provides Seller written notice, at
least sixty one (61) days prior to the date the Closing otherwise would have
occurred pursuant to this clause (i), that it elects to defer the Closing due to
the application of clauses (w) and (x) above, and (z) the date the Closing
otherwise would have occurred pursuant to this clause (i) is on or prior to the
date that is seventeen (17) months after the date hereof, then the Closing will
occur on the first Business Day of the immediately following month (but subject
to the satisfaction or waiver of the conditions set forth in Article VII as of
such date) or (ii) at such other time and place as the parties hereto may
mutually agree. Notwithstanding the foregoing, if such first Business Day of the
month is not the first calendar day of the month, then the Closing will be
deemed (other than with respect to Article VII and Article VIII hereunder) to
occur at 12:01 a.m., Eastern Time, on the first calendar day of the month in
which the Closing occurs and Seller will be deemed to have operated the
Transferred Business for the benefit of Buyer between such first calendar day
and such first Business Day (which shall include the payment by Seller to Buyer
of any cash generated by the Transferred Business during such period and not
held by the Transferred Companies). The date on which the Closing occurs is the
“Closing Date”.

3.4 Deliveries by Buyer. At the Closing, Buyer shall deliver to Seller the
following:

(a) the Purchase Price, in immediately available funds by wire transfer to an
account or accounts which have been designated by Seller in writing at least
three (3) Business Days prior to the Closing Date;

(b) a duly executed counterpart of each of the Ancillary Documents to which
Buyer is a party;

(c) a properly executed IRS Form 8023 with respect to the Section 338(h)(10)
Companies (and any comparable state and local forms) signed by Buyer and
containing information then available; and

(d) the certificate to be delivered pursuant to Section 7.3(d).

3.5 Deliveries by Seller. At the Closing, Seller shall deliver, or cause to be
delivered, to Buyer the following:

(a) a membership interest transfer power transferring ownership of the limited
liability company interests of Newco;

(b) a duly executed counterpart of each of the Ancillary Documents;

(c) a duly executed copy of each of the Transfer Documents;

 

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(d) letters of resignation in form and substance reasonably acceptable to Buyer
from each member of the Board of Directors (or similar governing body) of each
of the Transferred Companies, effective not later than the Closing Date, or
other evidence that each member of the Board of Directors (or similar governing
body) of each of the Transferred Companies immediately prior to the Closing
shall cease to be a member of the Board of Directors (or similar governing body)
of the Transferred Companies at the Closing;

(e) a certificate of non-foreign status reasonably acceptable to Buyer and
otherwise meeting the applicable requirements of Treasury Regulation
Section 1.1445-2(b)(2);

(f) a properly executed IRS Form 8023 with respect to the Section 338(h)(10)
Companies (and any comparable state and local forms) signed by Seller and
containing information then available; and

(g) the certificate to be delivered pursuant to Section 7.2(g).

3.6 Closing Statement.

(a) No later than five (5) Business Days prior to the Closing Date, Seller shall
deliver to Buyer an estimated pro forma (for the Pre-Closing Reorganization)
statement of Net Working Capital (“Estimated Net Working Capital”) and Net Debt
(“Estimated Net Debt”), which statement will be prepared in accordance with
GAAP, applied in a manner consistent with the preparation of the Newco Financial
Statements and in accordance with the principles, policies and methodologies set
forth in Exhibit F attached hereto (collectively, the “Working Capital
Principles”). If there is a conflict between GAAP, applied in a manner
consistent with the Newco Financial Statements, and Exhibit F, then Exhibit F
shall prevail. The process described in this Section 3.6 is not intended to
permit the introduction of different accounting methodologies, classification,
practices, estimation techniques, assumptions and principles to the preparation
of the Estimated Closing Statement or the Final Closing Statement from those
used in the preparation of the balance sheet as of December 31, 2013 included in
the Newco Financial Statements, except as may be expressly provided for in the
definitions set forth herein and in Exhibit F attached hereto. The statement
prepared in accordance with the foregoing is referred to as the “Estimated
Closing Statement”. Seller shall also prepare and deliver to Buyer a worksheet
showing the difference, if any, between the Estimated Net Working Capital and
the Net Working Capital Threshold. The amount, if any, by which the Estimated
Net Working Capital exceeds the Net Working Capital Threshold is referred to
herein as the “Estimated Buyer Working Capital Payment”. The amount, if any, by
which the Net Working Capital Threshold exceeds the Estimated Net Working
Capital is referred to herein as the “Estimated Seller Working Capital Payment”.

(b) Audit Adjustment Amount. If upon delivery to Buyer of the Audited 2014
Financial Statements pursuant to Section 6.18(a)(i), the total revenues of the
Transferred Business reflected in the Audited 2014 Financial Statements for the
fiscal year ending December 31, 2014 (the “Audited 2014 Revenue Amount”) is less
than the amount set forth on Schedule 3.6(b)(1), then the Purchase Price shall
be decreased by the dollar amount equal to the product of (x) 5.9 multiplied by
(y) 0.41 multiplied by (z) the dollar amount by which the Audited 2014 Revenue
Amount is less than the amount set forth on Schedule 3.6(b)(2). The “Audit

 

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Adjustment Amount” shall be either: (i) such product, if the Audited 2014
Revenue Amount is less than the amount set forth on Schedule 3.6(b)(1); or
(ii) zero dollars ($0), if the Audited 2014 Revenue Amount is not less than the
amount set forth on Schedule 3.6(b)(1).

(c) Seller shall prepare, or cause to be prepared, no later than sixty (60) days
after the Closing Date, a statement of Net Working Capital and Net Debt of the
Transferred Business as of the Effective Time, which statement (the “Final
Closing Statement”) will be prepared in accordance with the Working Capital
Principles, together with a worksheet showing the difference, if any, between
(i) the Net Working Capital shown on the Final Closing Statement (the “Final Net
Working Capital”) and the Estimated Net Working Capital and (ii) the Net Debt
shown on the Final Closing Statement (the “Final Net Debt”) and the Estimated
Net Debt. From and after the Closing Date, Buyer shall provide Seller and its
authorized representatives with reasonable access during business hours on
reasonable notice to the Transferred Business, including the Transferred Books
and Records, and other information that may reasonably relate to the Final
Closing Statement as Seller shall from time to time reasonably request in
writing.

(d) For thirty (30) days following its receipt of the Final Closing Statement,
Buyer shall have the right to object thereto or any portion thereof (it being
agreed that the only permitted reasons for objections shall be mathematical
error or the failure to prepare the Final Closing Statement or compute items set
forth therein in accordance with this Section 3.6, including any failure of the
Final Closing Statement or any items set forth therein to adhere to the Working
Capital Principles). Any objection made by Buyer shall be accompanied by
materials showing in reasonable detail Buyer’s support for its position or a
reasonable basis for why it lacks sufficient information on which to make such
an objection. Buyer shall be deemed to have waived any rights to object to the
Final Closing Statement, unless Buyer furnishes its written objections, together
with supporting materials, to Seller within such thirty (30) day period. Within
thirty (30) days after Seller’s receipt of Buyer’s objection to the Final
Closing Statement, Buyer and Seller shall meet to resolve any differences in
their respective positions with respect to the Final Closing Statement. Each
party shall provide the other party supporting documentation and make their
respective representatives reasonably available to answer questions as to their
respective positions with respect to the Final Closing Statement. If Buyer and
Seller are unable to agree on the Final Closing Statement within ninety
(90) days after Seller’s receipt of Buyer’s written objections, then
PricewaterhouseCoopers LLP will be appointed to resolve any remaining
disagreements. If such mutually selected accounting firm is not willing and able
to serve in such capacity, then Seller shall deliver to Buyer a list of three
(3) other accounting firms of recognized national standing in the United States
and Buyer shall select one (1) of such three (3) accounting firms
(PricewaterhouseCoopers LLP or such firm as is ultimately selected pursuant to
the aforementioned procedures being the “Accountant”). Buyer and Seller shall
execute any agreement reasonably required by the Accountant for its engagement
hereunder. The Accountant, acting as an expert and not as an arbitrator, shall
be charged with determining as promptly as practicable, but in any event within
thirty (30) days after the date on which such dispute is referred to the
Accountant, whether Final Net Working Capital, Final Net Debt and the Final
Closing Statement were prepared in accordance with this Agreement, including the
Working Capital Principles, and (only with respect to the disagreements as to
the items set forth in the notice of disagreement and submitted to the
Accountant and any other items affected by the resolution of those disputed
items, and in all instances, the Accountant’s determinations must be within the
range of the amounts asserted by

 

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Buyer and Seller) whether and to what extent, if any, Final Net Working Capital,
Final Net Debt and the Final Closing Statement require adjustment. The
Accountant shall allocate its costs and expenses between Buyer and Seller based
upon the percentage of the contested amount submitted to the Accountant that is
ultimately awarded to Buyer on the one hand or Seller on the other hand, such
that Buyer bears a percentage of such costs and expenses equal to the percentage
of the contested amount awarded to Seller and Seller bears a percentage of such
costs and expenses equal to the percentage of the contested amount awarded to
Buyer. If there is no timely objection as provided above, the Final Closing
Statement as determined by Seller shall be binding and final for purposes of
this Agreement. If there is a timely objection as provided above, the
determination of the Accountant shall be binding and final for purposes of this
Agreement.

(e) The amount equal to the Final Net Working Capital minus the Estimated Net
Working Capital shall be referred to as the “Working Capital Difference” and the
amount equal to the Final Net Debt minus the Estimated Net Debt shall be
referred to as the “Net Debt Difference”. Within two (2) Business Days following
the final determination of the Final Closing Statement, whether by agreement
between Buyer and Seller or as set forth in Section 3.6(b), (x) Buyer shall pay
to GTE an amount equal to the Working Capital Difference, if the Working Capital
Difference is a positive number, and Seller shall pay (or cause GTE to pay) to
Buyer an amount equal to the absolute value of the Working Capital Difference,
if the Working Capital Difference is a negative number, and (y) Seller shall pay
(or cause GTE to pay) to Buyer an amount equal to the Net Debt Difference, if
the Net Debt Difference is a positive number, and Buyer shall pay to GTE an
amount equal to the absolute value of the Net Debt Difference, if the Net Debt
Difference is a negative number. Such amount shall be paid, in immediately
available funds, together with interest thereon calculated pursuant to the
penultimate sentence of this Section 3.6(e), pursuant to the instructions
previously delivered by Buyer or GTE, as applicable. Notwithstanding the
foregoing, the aggregate of the respective amounts to be paid (if any) by Seller
or GTE, on the one hand, and Buyer, on the other hand, under the preceding two
sentences shall, if payable at the same time, be netted against each other and
the party with the positive net payment obligation shall pay such net obligation
amount. Any payment under this Section 3.6(e) shall accrue interest at the rate
of 200 basis points per annum above the “prime rate” as of the Closing Date as
announced by Bank of America, N.A. (or any successor thereto) from the Closing
Date to the date of payment. Any payment made pursuant to this Section 3.6(e)
shall, for tax purposes, be deemed to be an adjustment to the consideration
payable to GTE.

3.7 Allocation of Purchase Price. The parties have agreed that the purchase and
sale of the limited liability company interests of Newco shall be treated for
U.S. federal income tax purposes as an acquisition by Buyer, and a sale by
Seller, of all of the assets of Newco and that the purchase and sale of the
limited liability company interests of Newco will be treated as an “applicable
asset acquisition” within the meaning of Section 1060 of the Code. Within ninety
(90) days following the Closing Date, Buyer shall deliver to Seller a draft
allocation schedule, prepared in accordance with Section 1060 of the Code,
allocating the Purchase Price and the Assumed Liabilities (to the extent treated
as liabilities for federal income tax purposes) among the assets of Newco
(including, for purposes of this Section 3.7, the stock of the
Section 338(h)(10) Companies and the assets of any Subsidiary of Newco that is
treated as a flow-through-entity for U.S. federal income tax purposes) (the
“Allocation Schedule”). If Seller believes that all or a portion of the
Allocation Schedule is incorrect and Seller notifies Buyer in a

 

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writing including a description of the objection and basis supporting Seller’s
objections and any calculations or documentation that support the objection,
within 30 (thirty) days after having received such Allocation Schedule, Buyer
and Seller agree to consult and resolve in good faith any such disputed item. In
the event the parties are unable to resolve any such dispute within 30 (thirty)
days following notice to Buyer of Seller’s objection (in the form and within the
time set forth herein), the Accountant will be retained to resolve solely any
issue in dispute as promptly as possible and the determination of the Accountant
shall be final with respect to such disputed issues. Buyer and Seller shall then
be bound by the Allocation Schedule, as adjusted to reflect the determination,
if any, of the Accountant. The costs of the Accountant shall be borne equally by
Buyer and Seller. In the event that Final Net Working Capital is determined, or
another adjustment to the Purchase Price for tax reporting purposes is made
under this Agreement or the Employee Matters Agreement, after delivery of the
Allocation Schedule, Buyer and Seller shall cooperate to revise such schedule to
take into account the portion of such Final Net Working Capital or such other
adjustment to the Purchase Price allocable to the assets of Newco. The
Allocation Schedule, as finally determined, shall be used in preparing IRS Form
8883 and each of Seller, on the one hand, and Buyer on the other hand, shall
report the transaction contemplated by this Agreement, and file all Tax Returns,
in each case, for federal, state, local and foreign Tax purposes in accordance
with the Allocation Schedule, as finally determined pursuant to this
Section 3.7.

3.8 Withholding. Notwithstanding any other provision of this Agreement, any
party making a payment under this Agreement shall be entitled to deduct and
withhold from any consideration payable hereunder, or other payment otherwise
payable pursuant to this Agreement, the amounts required to be deducted and
withheld under the Code, or any provision of any U.S. federal, state, local or
foreign Tax law, provided, however, that if either party becomes aware that any
amount is required to be so withheld, it shall promptly notify the other party
of any such required withholding and the parties shall cooperate with each other
in good faith (including by taking all reasonable actions requested by the other
party to the extent such actions would not reasonably be expected to have an
adverse impact on the requested party) to minimize or eliminate such withholding
Taxes. Any amounts so withheld shall be paid over to the appropriate
Governmental Entity. To the extent that amounts are so deducted and withheld,
such deducted and withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the Person in respect of which such deduction
and withholding was made.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF SELLER

Except as set forth in the applicable section or subsection of the disclosure
schedules delivered to Buyer by Seller prior to the execution hereof (the
“Seller Schedules”) (it being agreed that disclosure of any item in any section
or subsection of the Seller Schedules shall be deemed disclosure with respect to
any other section or subsection to the extent the relevance of such item is
reasonably apparent on its face), Seller represents and warrants to Buyer that:

4.1 Organization and Qualification. Each of Seller, each Transferred Company and
each Subsidiary of Seller that has title to any asset reasonably expected to be
a Transferred Asset is, and Newco on the date of its formation will be, duly
organized, validly existing and in good

 

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standing under the Laws of its jurisdiction of organization and has, and Newco
on the date of its formation will have, all requisite corporate, limited
liability company or similar power and authority to own, lease and operate its
assets and to carry on its business as currently conducted and is, or in the
case of Newco prior to the Closing will be, duly qualified to do business and is
(or will be) in good standing as a foreign corporation, limited liability
company or other entity in each jurisdiction where the ownership or operation of
its assets or the conduct of its business requires such qualification, except
for failures to be so qualified or in good standing that would not, individually
or in the aggregate, reasonably be expected to have a Seller Material Adverse
Effect.

4.2 Capital Structure.

(a) Prior to the date hereof, Seller has made available to Buyer complete and
correct copies of the certificate of incorporation or certificate of formation
and the by-laws (or similar organizational documents) of each of the Transferred
Companies as presently in effect. Seller directly or indirectly owns all right,
title and interest in and to, all outstanding stock, membership interests and
other equity interests of the Transferred Companies, free and clear of all
Encumbrances, other than Permitted Encumbrances. All of the outstanding stock,
membership interests and other equity interests of the Transferred Companies
have been duly authorized, are validly issued, fully paid and non-assessable.
None of the shares of outstanding stock, membership interests and other equity
interests of the Transferred Companies was issued in violation of any preemptive
rights, rights of first refusal or similar rights.

(b) Seller Schedule 4.2(b) lists the total number of authorized and issued and
outstanding shares of all classes of the capital stock or membership interests,
as applicable, of each of the Transferred Companies as of the date of this
Agreement. Except as contemplated by the Pre-Closing Reorganization, none of the
Transferred Companies has any subsidiaries or owns any shares of capital stock,
partnership interests or other beneficial ownership interests in any other
Person.

(c) There are no preemptive or other outstanding rights, options, warrants,
conversion rights, stock appreciation rights, redemption rights, repurchase
rights, agreements, arrangements, commitments, securities or obligations of any
character under which Seller or its Subsidiaries, including the Transferred
Companies, are or may become obligated to issue or sell, or giving any Person a
right to subscribe for or acquire, or in any way dispose of, any shares of the
capital stock or other equity interests, or any securities or obligations
exercisable or exchangeable for or convertible into any shares of the capital
stock or other equity interests, of the Transferred Companies. The outstanding
stock and other equity interests of the Transferred Companies are not subject to
any voting trust agreement or other Contract, agreement or arrangement
restricting or otherwise relating to the voting, dividend rights or disposition
of such stock or other equity interests. There are no phantom stock or similar
rights providing economic benefits based, directly or indirectly, on the value
or price of the stock, membership interests or other equity interests of the
Transferred Companies.

4.3 Corporate Authorization. Seller and each of its Subsidiaries, as applicable,
has full corporate or limited liability company power and authority to execute
and deliver this Agreement and each of the Ancillary Documents to which it is,
or as of the Closing will be, a

 

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party, to perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereunder and thereunder. The execution, delivery and
performance by Seller and each of its Subsidiaries, as applicable, of this
Agreement and each of the Ancillary Documents to which it is, or as of the
Closing will be, a party, and the consummation by Seller and each of its
Subsidiaries, as applicable, of the transactions contemplated hereunder and
thereunder, has been duly and validly authorized and no additional company or
equityholder authorization or consent is required in connection with the
execution, delivery and performance by Seller and each of its Subsidiaries, as
applicable, of this Agreement or any of the Ancillary Documents to which it is,
or as of the Closing will be, a party, and the consummation by Seller and each
of its Subsidiaries, as applicable, of the transactions contemplated hereunder
and thereunder.

4.4 Consents and Approvals. Other than (a) under the HSR Act, (b) from or to the
FCC, (c) from or to the State Commissions (other than the Florida Public Service
Commission), (d) from or to state and local regulatory bodies or grantors of
multichannel video franchises set forth on Seller Schedule 4.4 (the “Video
Franchisors”) and (e) consents required to be maintained or obtained pursuant to
any Contract in respect to which a Governmental Entity is a customer of Seller
or any of its Subsidiaries, no consent, approval, waiver, authorization, report,
notice or filing is required to be obtained by Seller or any of its Subsidiaries
from, or to be given by Seller or any of its Subsidiaries to, or made by Seller
or any of its Subsidiaries with, any Governmental Entity in connection with the
execution, delivery and performance by Seller or any of its Subsidiaries of this
Agreement and any Ancillary Document to which it is a party, and the
consummation by Seller and each of its Subsidiaries, as applicable, of the
transactions contemplated hereby and thereby, except for those consents,
approvals, waivers, authorizations, reports, notices or filings the failure to
obtain, give or make, as the case may be, would not, individually or in the
aggregate, reasonably be expected to be material to the Transferred Business or
reasonably be expected to prevent or materially impair or delay Seller’s or its
Subsidiaries’ ability to perform their respective obligations under this
Agreement or the Ancillary Documents.

4.5 Non-Contravention. The execution, delivery and performance by Seller and its
Subsidiaries of this Agreement and the Ancillary Documents to which they are, or
as of the Closing will be, a party, and the consummation of the transactions
contemplated hereby and thereby, do not and will not (i) violate any provision
of Seller’s or its Subsidiaries’ respective organizational documents,
(ii) assuming the receipt of all consents, approvals, waivers, novations and
authorizations and the making of the notices and filings listed in Section 4.4
or set forth on Seller Schedule 4.4, conflict with or result in a violation or
breach of, or constitute a default under, or result in the termination,
cancellation, modification or acceleration (whether after the filing of notice
or the lapse of time or both) of any right or obligation of Seller or any of its
Subsidiaries under, or result in any right of buy-out by any third party under,
or result in a loss of any benefit to which Seller or any of its Subsidiaries is
entitled under, any Material Contract or result in the creation of any
Encumbrance upon any of the Transferred Assets (other than Permitted
Encumbrances), or (iii) assuming the receipt of all consents, approvals,
waivers, novations and authorizations and the making of notices and filings
listed in Section 4.4 or set forth on Seller Schedule 4.4 or required to be made
or obtained by Buyer, conflict with or result in a violation or breach of, or
constitute a default under, any Law to which the Transferred Business is
subject, or under any Governmental Authorizations, other than, in the case of
clauses (ii) and (iii), conflicts, violations, breaches, defaults, terminations,
cancellations, modifications,

 

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accelerations, losses or Encumbrances that would not, individually or in the
aggregate, reasonably be expected to have a Seller Material Adverse Effect
(disregarding clauses (vi) and (vii) of the first proviso in the definition of
Seller Material Adverse Effect) or prevent or materially impair or delay
Seller’s or its Subsidiaries’ ability to perform their respective obligations
under this Agreement or the Ancillary Documents.

4.6 Binding Effect. This Agreement and each of the Ancillary Documents, assuming
due execution and delivery by Buyer and the other parties thereto, constitutes,
or in the case of the Ancillary Documents will upon execution thereof
constitute, a valid and legally binding obligation of any of Seller or any of
its Subsidiaries that is a party to such agreements, enforceable against Seller
or such Subsidiary, as applicable, in accordance with their respective terms,
subject, in each case, to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar Laws of general applicability relating to
or affecting creditors’ rights and to general equity principles.

4.7 Financial Statements.

(a) Seller has previously made available to Buyer true, complete and correct
copies of the (i) audited combined statements of assets, liabilities and parent
funding of the Transferred Business for the fiscal years ended December 31, 2013
(the “Newco Balance Sheet”) and December 31, 2012, and the related audited
combined statements of operations, cash flows and parent funding for the fiscal
year ended December 31, 2013 and December 31, 2012, including the notes thereto
and together with an unqualified report of Seller’s independent accountant
thereon (together with any reports related thereto, collectively, the “Newco
Audited Financial Statements”) and (ii) unaudited combined statements of assets,
liabilities and parent funding of the Transferred Business for the nine months
ended September 30, 2014, and the related unaudited combined statements of
operations, cash flows and parent funding for the nine months ended
September 30, 2014 (collectively, the “Newco Unaudited Financial Statements”
and, together with the Newco Audited Financial Statements, the “Newco Financial
Statements”).

(b) The Newco Financial Statements present fairly, in all material respects, the
financial position, cash flow, parent funding and results of operations of the
Transferred Business as of the dates specified therein and for the period then
ended and were prepared in accordance with GAAP applied in a manner consistent
with Seller’s past practices with respect to the Transferred Business and are
compliant with Regulation S-X, in each case, except as otherwise noted therein
and, in the case of the Newco Unaudited Financial Statements, subject to (x) the
absence of notes and (y) normal year-end audit adjustments.

(c) The Financial Statements, when delivered pursuant to this Agreement, shall
present fairly in all material respects, the financial position, cash flow,
changes in parent funding and results of operations of the Transferred Business
as of the dates specified therein and for the periods then ended (on an
historical basis and in compliance with Regulation S-X), except as otherwise
noted therein and, in the case of unaudited interim statements, subject to
normal year-end audit adjustments. The Financial Statements shall be prepared in
accordance with GAAP, applied in a manner consistent with Seller’s past
practices with respect to the Transferred Business and in compliance with
Regulation S-X, in each case, except as otherwise noted therein and, in the case
of unaudited statements, subject to (x) the absence of notes and (y) normal
year-end audit adjustments.

 

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(d) Except as set forth in the Newco Unaudited Financial Statements, since
September 30, 2014, Seller and its Subsidiaries conducting the Transferred
Business have not incurred any Liabilities that are of a nature that would be
required to be disclosed on a combined balance sheet prepared consistently with
the Newco Financial Statements or in the notes thereto prepared in conformity
with GAAP, other than (i) Liabilities incurred in the Ordinary Course;
(ii) other Liabilities under Contracts, Communications Licenses and other
permits and licenses in accordance with the terms thereof (other than as a
result of any breach thereof by Seller or its Subsidiaries); (iii) Liabilities
that individually or in the aggregate would not reasonably be expected to be
material to the Transferred Business; and (iv) Liabilities incurred in
connection with the transactions contemplated by this Agreement prior to the
date of this Agreement or to the extent permitted by this Agreement on or after
the date of this Agreement. Notwithstanding the foregoing, the representations
and warranties in this Section 4.7(d) shall not apply to any subject matters
that are addressed by other representations and warranties in Section 4.8
(Litigation and Claims), Section 4.9 (Taxes), Section 4.12 (Compliance with
Laws; Communications Authorizations) and Section 4.13 (Environmental Matters).

(e) Other than (i) the Debt Obligations and (ii) Indebtedness of less than
$5,000,000 in the aggregate, the Transferred Companies have no Indebtedness.

4.8 Litigation and Claims.

(a) There is no civil, criminal or administrative action, suit, demand, claim,
investigation, review hearing or proceeding pending, or to the Knowledge of
Seller, threatened in writing against Seller or any of its Subsidiaries at law
or in equity relating to the Transferred Business or the transactions
contemplated by this Agreement or the Ancillary Documents, other than those that
would not, individually or in the aggregate with any related claims, (i) have a
reasonable possibility of resulting in (A) monetary liability of the Transferred
Business in excess of $5 million individually or in the aggregate with any
related claims, (B) material non-monetary relief against the Transferred
Business, (C) a criminal violation or criminal liability by the Transferred
Business or (D) a Seller Material Adverse Effect or (ii) reasonably be expected
to prevent or materially impair or delay Seller’s or its Subsidiaries’ ability
to perform their respective obligations under this Agreement or the Ancillary
Documents.

(b) The Transferred Business is not subject to any order, writ, judgment, award,
injunction or decree of any Governmental Entity of competent jurisdiction or any
arbitrator or arbitrators, other than those that would not, individually or in
the aggregate, (i) have a reasonable possibility of resulting in (A) monetary
liability of the Transferred Business in excess of $5 million individually or in
the aggregate with any related claims, (B) material non-monetary relief against
the Transferred Business, (C) a criminal violation or criminal liability by the
Transferred Business or (D) a Seller Material Adverse Effect or (ii) reasonably
be expected to prevent or materially impair or delay Seller’s or its
Subsidiaries’ ability to perform their respective obligations under this
Agreement or the Ancillary Documents.

 

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4.9 Taxes.

(a) (i) Seller has prepared or caused to be prepared in good faith and duly and
timely filed or caused to be duly and timely filed (taking into account any
extension of time within which to file) all material Consolidated Tax Returns to
the extent relating to a Transferred Company or the Transferred Business,
(ii) Seller has prepared or caused to be prepared in good faith and duly and
timely filed (taking into account any extension of time within which to file)
all other material Tax Returns required to be filed by or with respect to each
of the Transferred Companies or the Transferred Business, (iii) all such Tax
Returns described in clauses (i) and (ii) above are complete and accurate in all
material respects to the extent relating to a Transferred Company or the
Transferred Business, and (iv) each of Seller, the Transferred Companies and the
Transferred Business has paid or caused to be paid all material Taxes that are
required to be paid by or with respect to the Transferred Companies and the
Transferred Business (whether or not shown an any Tax Return), or that such
Transferred Company or the Transferred Business is obligated to withhold from
amounts owing to any Person, except with respect to matters contested in good
faith for which appropriate reserves have been maintained in accordance with
GAAP.

(b) None of the Transferred Companies is currently the beneficiary of any
outstanding waivers of any statute of limitations with respect to material Taxes
or extensions of time with respect to a material Tax assessment or deficiency
and no request for any such a waiver or extension is currently outstanding.

(c) There are no audits, examinations, investigations or other proceedings
ongoing or threatened in writing in respect of material Taxes of the Transferred
Companies or the Transferred Business.

(d) There are no material Encumbrances for Taxes on any of the assets of the
Transferred Companies or the Transferred Business, other than Permitted
Encumbrances.

(e) There is no pending claim for a material refund filed by or with respect to
any of the Transferred Companies with respect to Taxes previously paid.

(f) None of the Transferred Companies has engaged in any listed transaction
within the meaning of Treasury Regulation Section 1.6011-4.

(g) None of the Transferred Companies has received written notice from any
jurisdiction in which such company currently does not file Tax Returns claiming
that such company is required to file Tax Returns in such jurisdiction.

(h) None of the Transferred Companies (i) is or has ever been a member of an
affiliated group filing a consolidated U.S. federal income tax return (other
than the consolidated group of which Seller is the common parent), and (ii) has
any liability for the Taxes of another Person under Treasury Regulation
Section 1.1502-6 (or any comparable income tax provision of state or local law),
as a transferee or successor or by Contract (other than the consolidated group
of which Seller is the common parent and other than any Contract entered into in
the ordinary course of business and which does not relate primarily to Taxes).

 

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(i) None of the Transferred Companies will be required to include any item of
income in, or exclude any item of deduction from, taxable income for any taxable
period (or portion thereof) ending after the Closing Date as a result of any
(a) change in method of accounting under Section 481 of the Code (or any
comparable provision of state, local, or foreign law) for a taxable period
ending on or prior to the Closing Date; (b) “closing agreement” as described in
Section 7121 of the Code (or any comparable provision of state, local, or
foreign law) executed on or prior to the Closing Date; (c) installment sale or
open transaction disposition made on or prior to the Closing Date; or
(d) prepaid amount received on or prior to the Closing Date.

(j) None of the Transferred Companies is a party to or bound by any Tax
allocation, indemnity, sharing or similar agreement that will not be terminated
prior to the Closing (excluding, for the avoidance of doubt, any Contract
entered into in the ordinary course of business and which does not relate
primarily to Taxes).

(k) Other than with respect to a Consolidated Tax Return, no power of attorney
which is currently in force has been granted by or with respect to any of the
Transferred Companies with respect to any matter relating to Taxes that will not
be terminated prior to the Closing.

(l) Newco is and has been since its date of formation a single member limited
liability company properly treated as an entity disregarded as separate from GTE
for U.S. federal income tax purposes and no election has been made to treat it
as anything other than a disregarded entity for state income tax purposes.
Verizon Florida LLC is a single member limited liability company properly
treated as an entity disregarded as separate from GTE for U.S. federal income
tax purposes and no election has been made to treat it as anything other than a
disregarded entity for state income tax purposes. Both of GTE Southwest
Incorporated and Verizon California Inc. are properly treated as corporations
for U.S. federal income tax purposes that are members of the affiliated group
filing a consolidated U.S. federal income Tax Return of which Seller is the
common parent. None of the Transferred Companies has any Subsidiaries or owns
any shares of capital stock, partnership interests or other beneficial ownership
interests in any other Person, except for Newco, which as of the Closing will
own the equity of the ILEC Subsidiaries.

4.10 Employees and Employee Benefits.

(a) As used in this Agreement, “Seller Benefit Plans” means all (i) “employee
benefit plans” as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended (“ERISA”) and (ii) all other incentive,
profit-sharing, stock option, stock purchase, other equity-based compensation,
employment, compensation, vacation or other leave, change in control, retention,
supplemental retirement, severance, health, medical, disability, life insurance,
welfare, deferred compensation, fringe benefit and other employee compensation
and benefit plans, programs, practices and agreements, written or oral, in each
case established, maintained or contributed to, by Seller or any of its
Affiliates and (x) that will (or will be required to) be established, maintained
or contributed to, by Buyer on the Closing Date as provided herein, (y) with
respect to which any Business Employee is (or will be) entitled to any benefit,
or (z) with respect to which any Transferred Company has any liability. As used
in this

 

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Agreement, the term “Business Employees” means (i) all active Listed Employees
who are employees of the Transferred Companies immediately prior to the Closing
and (ii) all Listed Employees who immediately prior to the Closing are on
maternity or paternity leave, educational leave, short-term disability, military
leave with veterans’ reemployment rights under federal law, leave under the
Family Medical Leave Act of 1993, or any other approved leave of absence, or are
union represented employees who have been laid off and have a right to recall
that has not expired, but in either case, excluding all Retained Employees. The
Seller Benefit Plans are set forth on Seller Schedule 4.10(a)(i), and those
Seller Benefit Plans that are currently sponsored, maintained or contributed to
solely by a Transferred Company (the “Company Plans”) are set forth on Seller
Schedule 4.10(a)(ii). None of the Seller Benefit Plans other than the Company
Plans will be sponsored or maintained by a Transferred Company as of immediately
prior to the Closing Date. With respect to each Seller Benefit Plan, Seller has
made available to Buyer true and complete copies of all plan documents, summary
plan descriptions, and any other documentation that is material to Buyer’s
obligations under Section 6.6 or the Employee Matters Agreement.

(b) Each Seller Benefit Plan has been operated and administered in compliance
with its terms and with applicable Law, including ERISA and the Code, except for
any non-compliance that, individually and in the aggregate, would not result in
a Seller Material Adverse Effect. None of Seller or any of its Subsidiaries has
engaged in a transaction with respect to any Seller Benefit Plan that, assuming
the taxable period of such transaction expired as of the date of this Agreement
(in the case of a Tax or penalty imposed by Section 4975 of the Code), would
reasonably be expected to subject the Transferred Companies or any Seller
Benefit Plan to a Tax or penalty imposed by Section 502(i) of ERISA or by
Section 4975 of the Code, either individually or in the aggregate, in an amount
which could be material. Each Seller Benefit Plan intended to be qualified under
Section 401(a) of the Code, and the trust (if any) forming a part thereof, has
received a favorable determination letter from the U.S. Internal Revenue Service
(“IRS”), each trust maintained under any Seller Benefit Plan intended to satisfy
the requirements of Section 501(c)(9) of the Code has received recognition of
exemption from the IRS, and, to the Knowledge of Seller, no event has occurred
and no condition exists that would reasonably be expected to adversely affect
such qualified or exempt status.

(c) No liability under Title IV of ERISA has been or is reasonably expected to
be incurred by the Transferred Companies or any ERISA Affiliate. None of the
Transferred Companies or any ERISA Affiliate have failed to make any
contribution when due to any Seller Plan subject to Section 412 of the Code or
Section 302 of ERISA. As used in this Agreement, “ERISA Affiliate” means, with
respect to a Transferred Company, any Person or any trade or business, whether
or not incorporated, that, together with such Transferred Company, would be
deemed a “single employer” within the meaning of Section 4001(b) of ERISA prior
to the consummation of the transactions contemplated by this Agreement.

(d) No Seller Benefit Plan is a “multiemployer plan” as defined in Section 3(37)
of ERISA. None of the Transferred Companies or any ERISA Affiliate has made or
suffered or will as of the Closing Date (including as a result of the
consummation of the transactions contemplated by this Agreement) have made or
suffered a “complete withdrawal” or a “partial withdrawal” as such terms are
respectively defined in Section 4203 and 4205 of ERISA, the liability for which
has not been satisfied in full.

 

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(e) All contributions required to be made under the terms of any material Seller
Benefit Plan have been timely made when due and any other current obligations
with respect thereto are appropriately reflected on the Newco Financial
Statements and, when delivered, the Financial Statements.

(f) None of the Transferred Companies has obligations for retiree welfare
benefits other than (i) coverage mandated by applicable Law or (ii) Transferred
Company contributions toward such mandated coverage that continues during a
severance period that does not exceed 18 months.

(g) There are no pending or, to the Knowledge of Seller, threatened written
claims against Seller or its Affiliates under workers’ compensation law or under
the Seller Benefit Plans that (i) could transfer to Buyer (in whole or in part)
in connection with an assumption of obligations required by Section 6.6 or the
Employee Matters Agreement, (ii) are not accrued under the applicable Seller
Benefit Plan or reflected on the Newco Financial Statements and (iii) if
adversely determined, would, individually or in the aggregate, reasonably be
expected to result in a material Liability to Buyer.

(h) Except as contemplated by this Agreement or the Employee Matters Agreement,
the consummation of the transactions contemplated by this Agreement and the
Ancillary Documents will not (either alone or together with any other event)
(i) entitle any Business Employee to severance, change of control or other
similar pay or benefits under any Seller Benefit Plan, or (ii) accelerate the
time of payment or vesting or trigger any payment of funding (through a grantor
trust or otherwise) of compensation or benefits to any Business Employee or
beneficiary of any Business Employee under any Seller Benefit Plan, or increase
the amount payable or trigger any other material obligation with respect to any
Business Employee or beneficiary of any Business Employee.

(i) Seller Schedule 4.10(i) sets forth a list (as of the date set forth therein)
of the individuals whose primary duties immediately prior to the date hereof
have been (or whose primary duties immediately prior to their last date of
active employment prior to commencing maternity or paternity leave, educational
leave, short-term disability, military leave with veterans’ reemployment rights
under federal law, leave under the Family Medical Leave Act of 1993, or any
other approved leave of absence, or in the case of individuals who were union
represented employees who have been laid off and have a right to recall that has
not expired, were) in respect of the Transferred Business or the Transferred
Assets. Such Seller Schedule 4.10(i) separately identifies each Retained
Employee and identifies as to each employee named on Seller Schedule 4.10(i)
such employee’s identification number and job title. In addition, Seller
Schedule 4.10(i) identifies an estimate of the call center employees and other
classifications of employees who do not individually devote a majority of their
time to, but who currently support the Transferred Business and Transferred
Assets, and who will be allocated to the Transferred Business (the “Allocated
Support Employees”). Seller will provide a list of the names, identification
numbers and job titles of such Allocated Support Employees not later than 90
days prior to the Closing Date, and such list shall be deemed to amend Seller
Schedule 4.10(i). The individuals set forth on Seller Schedule 4.10(i), as the
same may be amended in accordance herewith, shall be referred to as the “Listed
Employees”. Within both twenty-five (25) and ten (10) Business Days before the
date that Seller reasonably anticipates

 

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will be the Closing, Seller shall further revise Seller Schedule 4.10(i) in
accordance with the terms of Section 4.1(a) of the Employee Matters Agreement,
with any final updates to such information to be provided to Buyer no later than
ten (10) Business Days after the Closing in accordance with the terms of
Section 4.1(a) of the Employee Matters Agreement.

(j) The Transferred Companies are not obligated under any service provider
Contract for payroll, human resources, or employee benefits.

4.11 Labor and Employment Matters.

(a) Except for the collective bargaining agreements and other agreements
disclosed in Seller Schedule 4.11(a) (each a “Collective Bargaining Agreement”
and, collectively, the “Collective Bargaining Agreements”), neither Seller nor
any of its Subsidiaries is party to or bound by any collective bargaining
agreement or other agreement with a labor union regarding any of the Business
Employees. Neither Seller nor any of its subsidiaries is currently engaged in
negotiating a new collective bargaining agreement covering any of the Business
Employees or is under an obligation to do so as a result of a unit certification
issued by the National Labor Relations Board.

(b) Seller and its Subsidiaries are in compliance in all material respects with
all Laws and material contractual obligations respecting employment, employment
practices and terms and conditions of employment applicable to the Business
Employees, including those relating to wages, hours, equal opportunity, labor
relations, workplace safety and the payment of social security and unemployment
Taxes.

(c) Neither Seller nor its Subsidiaries have engaged in any reductions in force
or plant closings affecting Business Employees which triggered any notice
obligation under the Worker Adjustment and Retraining Notification Act as of the
one-year period preceding the date hereof that remain unsatisfied and do not
anticipate engaging in any such activity prior to Closing.

(d) Except for such matters which would not, individually or in the aggregate,
reasonably be expected to result in a Liability to Buyer of more than five
million dollars ($5,000,000), there is no pending, or to the Knowledge of
Seller, threatened strike, lockout, walkout, other work stoppage, or any adverse
labor action such as picketing or boycott by any labor organization, or any
union organizing effort by or among any of the Business Employees.

(e) There is no unfair labor practice charge or complaint against any of the
Transferred Companies or related to the Business Employees pending or, to the
Knowledge of Seller, threatened in writing before the National Labor Relations
Board or any other Governmental Entity. There is no unit clarification or
representation petition pending before the National Labor Relations Board.

(f) Except for such matters which would not, individually or in the aggregate
together with any related claims, reasonably be expected to result in a
Liability to Buyer of more than five million dollars ($5,000,000), there is no
grievance or labor arbitration against any of the Transferred Companies pending,
or to the Knowledge of Seller, threatened in writing.

 

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4.12 Compliance with Laws; Communications Authorizations. (a) The Transferred
Business is being, and has been for the three (3) year period prior to the date
of this Agreement, conducted in compliance in all material respects with
applicable Laws, (b) during the three (3) year period prior to the date of this
Agreement, none of Seller or any of its Subsidiaries has received any written
notice alleging (1) that the Transferred Business has been conducted in
violation of applicable Law in any material respect or (2) that the Transferred
Business is under investigation with respect to any such material violation and
(c) the Transferred Companies have all the material Governmental Authorizations
issued by the FCC, the State Commissions or other Governmental Entity under all
Laws currently in effect that are material to the conduct of the Transferred
Business as currently conducted (collectively, the “Seller Authorizations”); it
being understood that nothing in this representation is intended to address the
matters addressed by Section 4.9 (Taxes), Section 4.13 (Environmental Matters)
or Section 4.18 (Communications Licenses). As of the date of this Agreement,
there are no applications by Seller or any of its Subsidiaries pending before
the FCC, the State Commissions or any other Governmental Entity for additional
authorizations that would be Seller Authorizations if they existed as of the
date of this Agreement.

4.13 Environmental Matters.

(a) All material Environmental Permits required for operation of the Transferred
Business (i) have been obtained and are held by the Transferred Companies and
(ii) are currently in full force and effect. The Transferred Companies are in
material compliance with all Environmental Permits required for operation of the
Transferred Business.

(b) The Transferred Companies and the Transferred Business are, and at the
Effective Time each of the foregoing will be, in material compliance with all
Environmental Laws applicable or relating to the Transferred Business, the
Transferred Real Property or the Transferred Leased Real Property, including all
reporting, discharge and emission requirements under or pursuant to any
Environmental Laws, and neither Seller nor any of the Transferred Companies has
received any notice from any Person alleging that any of the foregoing are not
in such compliance with any Environmental Laws. There are no events, conditions,
circumstances, activities, practices or incidents, including the release,
emission, discharge, transportation, handling, storage, presence or disposal of
any Hazardous Materials, related to the Transferred Business, the Transferred
Real Property or the Transferred Leased Real Property which have given, or, to
Seller’s Knowledge, would reasonably be likely to give, rise to any material
Environmental Claim or Liability.

(c) There is no civil, criminal or administrative action, suit, demand,
Environmental Claim, hearing, notice, or demand letter, notice of violation,
investigation or proceeding pending or, to Seller’s Knowledge, threatened
against the Transferred Companies or against any Person for whom the Transferred
Companies are or would reasonably be expected to have Liability for, related to
any Environmental Permit or any Environmental Law, or any plan, order, decree,
judgment, injunction, notice or demand letter issued, entered, promulgated,
pending or approved thereunder, that has constituted or would reasonably be
expected to constitute a material Liability.

 

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(d) (i) The Transferred Companies have not generated, stored, used, emitted,
discharged or disposed of any Hazardous Material in the conduct of the
Transferred Business except in material compliance with applicable Environmental
Law, (ii) all underground storage tanks located at any Transferred Real Property
or Transferred Leased Real Property are listed in Schedule 4.13(d)(ii), and all
such underground storage tanks are in material compliance with all Environmental
Laws and have not been the subject of any release or investigation for any
Hazardous Materials, (iii) there is no asbestos contained in or forming part of
any building, building component, structure or office space owned, leased,
operated or used by the Transferred Business except as is in material compliance
with all Environmental Laws, and (iv) no polychlorinated biphenyls (PCBs) or
PCB-containing items are owned by the Transferred Companies or the Transferred
Business, and, to Seller’s Knowledge, no PCB-containing equipment is located at
any Transferred Real Property or Transferred Leased Real Property except in
material compliance with Environmental Law.

(e) Prior to the date hereof, Seller has made available to Buyer all recent
environmental assessments, reports, Environmental Permits, results of
investigations, or audits, any material correspondence with agencies or third
parties, and any other material documents concerning any of the foregoing
regarding any matters that are outstanding or otherwise prepared in the last
five (5) years that are in the possession of or reasonably available to Seller,
any of its Subsidiaries, or any of the Transferred Companies pertaining to the
Transferred Business, the Transferred Real Property or the Transferred Leased
Real Property, or Liability of any of the foregoing under or pertaining to any
Environmental Law.

(f) None of Seller, the Transferred Companies or the Transferred Business
(i) have received any request for information or Environmental Claim regarding,
or have been notified that they are a potentially responsible party under, or
that any of the Transferred Business, the Transferred Real Property or the
Transferred Leased Real Property are the subject of or responsible for any
investigation, claim, remediation or Action for any on-site or off-site
locations relating to the handling, transportation, storage, disposal, treatment
or recycling of Hazardous Materials, including pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act, or any state or
provincial analog thereto, in connection with the conduct of the Transferred
Business, the Transferred Real Property or the Transferred Leased Real Property,
and (ii) have not been, and, to Seller’s Knowledge, are not reasonably expected
to be, subject to Liability for any Environmental Claim arising under or
pursuant to such Laws in connection with the conduct of the Transferred
Business, the Transferred Real Property or the Transferred Leased Real Property.

(g) Notwithstanding any other provision of this Article IV, the representations
and warranties contained in this Section 4.13 constitute the sole and exclusive
representations and warranties of Seller with respect to any Environmental Law,
Environmental Claim or Hazardous Material.

4.14 Intellectual Property.

(a) To the Knowledge of Seller, the conduct of the Transferred Business
(including the ILEC Services) does not, and as conducted during the two (2) year
period prior to the date of this Agreement did not, infringe, misappropriate or
otherwise violate any Intellectual

 

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Property rights of any Person except for any such infringement, misappropriation
or violations that would not, individually or in the aggregate, reasonably be
expected to be material to the Transferred Business. Notwithstanding any other
provision of this Article IV, the representations and warranties contained in
this Section 4.14(a) constitute the sole and exclusive representations and
warranties of Seller regarding infringement, misappropriation or other violation
of any Intellectual Property of any Person by the conduct of the Transferred
Business.

(b) Other than as would not reasonably be expected to be material to the
Transferred Business, (i) there are no pending or, to the Knowledge of Seller,
threatened, proceedings, administrative claims, litigation or adverse claims
alleging that the operation of the Transferred Business infringes,
misappropriates or otherwise violates the Intellectual Property rights of any
other Person, and (ii) there has been no such claim threatened in writing or, to
the Knowledge of Seller, asserted in the past two (2) years.

(c) To the Knowledge of Seller, no Person is infringing, misappropriating or
otherwise violating any Intellectual Property owned by the Transferred Companies
prior to the Closing, and no such claims have been asserted or threatened
against any Person by Seller or its Subsidiaries in the past two (2) years.

(d) Seller and its Subsidiaries take reasonable measures to protect the
confidentiality of Trade Secrets in respect of the Transferred Business. To the
Knowledge of Seller, there has not been any disclosure of any material Trade
Secret in respect of the Transferred Business to any Person in a manner that has
resulted or is likely to result in the loss of trade secret or other rights in
and to such information.

(e) The Transferred IT Systems have been maintained in accordance with standards
prevalent in the telecommunications industry. To the Knowledge of Seller, the
Transferred IT Systems are in good working condition, normal wear and tear
excepted, and are useable to effectively perform all information technology
operations necessary to conduct the portion of the Transferred Business that
such Transferred IT Systems support. Seller and its Subsidiaries have not
experienced within the past three (3) years any material disruption to, or
material interruption in, their conduct of the Transferred Business attributable
to a defect, bug, breakdown or other failure or deficiency of any Transferred IT
Systems.

(f) Seller and its Subsidiaries have established, and the Transferred Business
is in compliance in all material respects with, a written information security
program or programs covering the Transferred Business that (i) includes
safeguards for the security, confidentiality, and integrity of transactions and
confidential or proprietary data, (ii) is designed to protect against
unauthorized access to the Transferred IT Systems and proprietary data, and
(iii) is adequate in all material respects for the conduct of the Transferred
Business. To the Knowledge of Seller, the Transferred Business has not suffered
a material security breach with respect to any proprietary data or Trade Secrets
in the last three (3) years.

(g) Seller and its Subsidiaries, in respect of the Transferred Business,
(i) have a privacy policy regarding the collection and use of information that
identifies, or could reasonably be used to identify, any natural persons
(including names, addresses, telephone numbers, email addresses, social security
numbers, and/or account information) (“Personal

 

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Information”) and (ii) to the Knowledge of Seller are in compliance, and have
complied, in all material respects with the privacy policies applicable to the
Transferred Business and all applicable Laws regarding information privacy and
security and the collection, use, disposal, disclosure, maintenance and
transmission of Personal Information in connection with the Transferred
Business. Seller has posted its applicable privacy policy(ies), or a link
thereto, in a clear and conspicuous location on Seller’s website located at
www.verizon.com. Neither the execution, delivery or performance of this
Agreement or any Ancillary Document nor the consummation of any of the
transactions contemplated hereby will result in any violation, in any material
respect, of (i) any of Seller’s or its Subsidiaries’ privacy policies applicable
to the Transferred Business or (ii) of any agreement of Seller or its
Subsidiaries with respect to the collection, use, disposal, disclosure,
maintenance, and transmission of Personal Information.

4.15 Contracts.

(a) Seller Schedule 4.15 sets forth each of the Contracts in effect as of the
date of this Agreement that (I) is a Transferred Asset or to which any of the
Transferred Companies is a party (other than Contracts that are Excluded Assets)
and (II): (i) limits in any material respect the freedom of any of the
Transferred Companies or their Affiliates to compete in any line of business or
within any geographic area or with any Person, (ii) involves the sharing of
profits of any of the Transferred Companies with any third party (other than
Seller or its Subsidiaries), (iii) involves future payments, performance or
services or delivery of goods or materials to or by any of the Transferred
Companies of any amount or value reasonably expected to exceed $5 million in any
future twelve (12) month period, other than Contracts that can be terminated on
less than ninety (90) days’ notice without material monetary penalty or other
material impact, (iv) involves any acquisition or disposition of any business or
a majority of the stock or assets of any other Person, in each case having a
purchase price in excess of $5 million, (v) contains a put, call or similar
right (other than as described in clause (iii) above) pursuant to which any of
the Transferred Companies could be required to purchase or sell, as applicable,
any equity interests in or assets of any Person, in the case of this clause (v),
having a purchase price for acquisition of assets in excess of $5 million,
(vi) is a Material Transferred Lease or (vii) is a material partnership or joint
venture agreement or similar Contract (any of the foregoing, together with any
Contract of a type described above that is entered into after the date of this
Agreement and prior to Closing, other than any portion of any Master Agreement
that is not a Transferred Asset, a “Material Contract”).

(b) Seller has made available to Buyer complete and accurate copies of each
Material Contract as in effect as of the date of this Agreement. Each Material
Contract is valid and binding on Seller or its Subsidiaries, as the case may be,
and, to the Knowledge of Seller, each other party thereto, and is in full force
and effect, except for failures to be valid and binding or to be in full force
and effect as would not, individually or in the aggregate, reasonably be
expected to be material to the Transferred Business. There is no default under
any such Material Contract by Seller or any of its Subsidiaries, or, to the
Knowledge of Seller, any other party thereto, and no event has occurred that,
with the lapse of time or the giving of notice or both, would constitute a
default thereunder by Seller or any of its Subsidiaries, or, to the Knowledge of
Seller, any other party thereto, in each case except as would not, individually
or in the aggregate, reasonably be expected to be material to the Transferred
Business.

 

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4.16 Absence of Changes. Since December 31, 2013 and through the date of this
Agreement, (a) Seller and its Subsidiaries have conducted the Transferred
Business only in the Ordinary Course, and have not taken any actions which, if
taken after the date hereof, would require Buyer’s consent pursuant to
Section 6.2(a)(i) (with respect to such actions taken after September 30, 2014
and in all cases disregarding the proviso in Section 6.2(a)(i)),
Section 6.2(a)(v), Section 6.2(a)(vi) and Section 6.2(a)(x) and (b) the
Transferred Business has not experienced any event or condition, and no
condition, change, event, occurrence or development has occurred, that,
individually or in the aggregate, has had, or would reasonably be expected to
have, a Seller Material Adverse Effect.

4.17 Assets.

(a) After giving effect to the Pre-Closing Reorganization, and subject to the
receipt of all applicable approvals and consents, including those contemplated
by Section 4.4, the Transferred Companies will have, in all material respects,
good and valid title to, or in the case of leased property, valid leasehold
interests in, all of the material Transferred Assets.

(b) Subject to the immediately following sentence, the assets of the Transferred
Companies as of the Closing Date (assuming the consummation of the Pre-Closing
Reorganization), together with the assets, licenses and services to be made
available pursuant to the Ancillary Documents, will be sufficient, and
constitute all assets of Seller and its Subsidiaries that are necessary, to
permit Buyer and the Transferred Companies to operate the Transferred Business
substantially in the same manner as the operation of the Transferred Business as
of the Closing. Notwithstanding the foregoing, it is understood and agreed that:

(i) the Transferred Companies will not be assigned those assets and services
listed or described in Seller Schedule 4.17(b)(i), which are necessary for the
conduct of the Transferred Business;

(ii) the Transferred Companies are not being assigned the Retained Contracts and
the services provided under the Retained Contracts (in each case excluding, for
the avoidance of doubt, the portions of any Master Agreement transferred or to
be transferred pursuant to Section 6.13(a)) that are necessary for the conduct
of the Transferred Business;

(iii) certain of the administrative and regional headquarters management
employees currently operating or advising the Transferred Business may not be
transferred to the Transferred Companies and the immediately preceding sentence
assumes that Buyer or the Transferred Companies after Closing will provide such
equivalent personnel as may be appropriate for the benefit of the Transferred
Business;

(iv) certain Intellectual Property that is not owned by or licensed to the
Transferred Companies or included in the Transferred Assets is needed to operate
the Transferred Business. Except as provided in Section 6.17, Seller will not be
obligated to procure or grant rights in or licenses to such Intellectual
Property on behalf of the Transferred Companies or the Transferred Business;

 

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(v) certain Seller Owned Software is needed to operate the Transferred Business.
Except for any such Seller Owned Software to be licensed to Buyer pursuant to an
Ancillary Document or a software license agreement agreed upon pursuant to
Sections 6.17(d) or 6.17(e) hereof, Seller will not be obligated to license any
other Seller Owned Software or to procure rights in or licenses to any similar
third party software after Closing;

(vi) certain IT Systems that are not Transferred IT Systems are needed to
operate the Transferred Business. Except as may be set forth in any Ancillary
Document, Seller will not be obligated to procure, lease or license any such IT
Systems after Closing;

(vii) the only assets that will be held by the Transferred Companies as of the
Closing with respect to (A) the provision by Verizon Online LLC of dial-up, DSL
services and dedicated Internet access services and related value added services
taken by DSL customers located in the States, (B) the resale of satellite to
terrestrial video services, (C) the provision by Verizon Long Distance LLC of
long distance services to customers located in the States, (D) the provision by
Verizon Network Integration Corp. and Verizon Select Services Inc. of CPE sales,
installation and related maintenance services and (E) the provision by Verizon
Services Corp. and Verizon Avenue Inc. of services to multi-dwelling unit owners
in the States, will be (i) customer relationships (including Contracts and terms
and conditions with respect to such relationships) and (ii) those assets
identified as exclusions in clauses (v), (vi) and (x) of the definition of
Excluded Assets, and Buyer or the Transferred Companies will need to procure all
other assets needed to undertake such activities;

(viii) the provisions of this Section 4.17 assume the receipt of all necessary
authorizations, approvals, consents or waivers required by Law, by Governmental
Entities or other third Persons pursuant to their Contract rights in connection
with the transactions contemplated by this Agreement and the Ancillary
Documents; and

(ix) this Section 4.17 does not constitute a representation or warranty
regarding infringement, misappropriation or other violation of any Intellectual
Property of any Person by the conduct of the Transferred Business, which is the
subject of the representation and warranty set forth in Section 4.14(a).

4.18 Communications Licenses. Seller and its Subsidiaries are the authorized
legal holders or otherwise have rights to the Communications Licenses, which
licenses constitute all of the material licenses, from the FCC or the State
Commissions that are required for and/or used in the operation of the
Transferred Business as presently operated. All the Communications Licenses were
duly obtained and are valid and in full force and effect, unimpaired by any
condition, except those conditions that may be contained within the terms of
such Communications Licenses or those conditions applicable to the particular
class of Communications Licenses generally. Seller and its Subsidiaries are in
compliance in all material respects with the Communications Act of 1934, as
amended, and the rules, regulations and policies of the FCC and all applicable
State Commissions in respect of the operation of the

 

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Transferred Business. There is not pending or, to the Knowledge of Seller,
threatened, any action by or before the FCC or any State Commissions in which
the requested remedy is the revocation, suspension, cancellation, rescission or
modification of any of the Communications Licenses. Seller Schedule 4.18
contains a complete and correct list of Seller’s Communications Licenses.

4.19 Title to Property. Seller and its applicable Subsidiaries have transferred,
and at or prior to the Closing will transfer, to the Transferred Companies, as
applicable, good and valid title to, or a valid and binding leasehold interest
in, the real and personal tangible property included in or with the tangible
Transferred Assets that they own or lease having a value in excess of $100,000
(or which are otherwise material to the Transferred Business), free and clear of
all Encumbrances, except (a) Encumbrances specifically reflected or specifically
reserved against in the Newco Financial Statements, (b) mechanics’,
materialmen’s, warehousemen’s, carriers’, workers’, repairmen’s or other similar
common law or statutory Encumbrances arising or incurred in the Ordinary Course
and which would not materially impair the use, operation or value of any
material assets included in the Transferred Business, (c) Encumbrances for
Taxes, assessments and other governmental charges not yet due and payable or due
but not delinquent or being contested in good faith by appropriate proceedings
for which reserves have been maintained in accordance with GAAP, (d) liens
arising under original purchase price conditional sales contracts and equipment
leases with third parties entered into in the Ordinary Course, (e) with respect
to real property, (i) Easements, licenses, covenants or other similar
restrictions, including any other agreements, conditions or restrictions,
(ii) Encumbrances arising pursuant to the terms of any Transferred Real Property
Lease, (iii) zoning, building, subdivision or other similar requirements or
restrictions and (iv) Encumbrances arising pursuant to the terms of any leases,
subleases and licenses, (f) non-exclusive licenses granted in the Ordinary
Course and (g) the Encumbrances set forth on Seller Schedule 4.19 (collectively,
the “Permitted Encumbrances”).

4.20 Real Property.

(a) Prior to the date hereof, Seller has made available to Buyer complete and
accurate copies of each of the Material Transferred Leases, as in effect as of
the date of this Agreement. Neither Seller nor any of its Subsidiaries has
granted any lease, license or sublicense to use the material Transferred Real
Property, other than Permitted Encumbrances.

(b) The use and operation of the material Transferred Real Property and the
Material Transferred Leases in the conduct of the Transferred Business do not
violate in any material respect any instrument of record or agreement affecting
such property.

(c) There are no pending, or to the Knowledge of Seller, threatened in writing,
appropriation, condemnation, eminent domain or similar proceedings brought by a
Governmental Entity relating to the material Transferred Real Property, or to
the Knowledge of Seller, the Material Transferred Leases.

(d) As of the date of this Agreement, the Transferred Real Property and the
Transferred Leased Real Property have not suffered any material damage by fire
or other casualty which has not heretofore been repaired and restored to its
condition prior to such damage in all material respects, except for damage that
would not, individually or in the aggregate, reasonably be expected to be
material to the Transferred Business.

 

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4.21 Finders’ Fees. There is no investment banker, broker, finder or other
intermediary that has been retained by or is authorized to act on behalf of
Seller or any of its Subsidiaries that might be entitled to any fee or
commission from any of the Transferred Companies in connection with the
transactions contemplated by this Agreement and the Ancillary Documents.

4.22 Customers. Set forth on Seller Schedule 4.22 is a complete and accurate
list in respect of the Transferred Business in each of California, Florida and
Texas of (a) the ten (10) largest wholesale customers and (b) the ten
(10) largest commercial customers (in each case based on the amounts paid to
Seller and its Subsidiaries in respect of the Transferred Business and in each
case other than Seller or its Subsidiaries) during the nine (9) months ended
September 30, 2014, with respect to the Transferred Business, showing the
approximate total revenues generated with respect to the Transferred Business
from each such customer during such period. As of the date of this Agreement,
none of the customers set forth on Seller Schedule 4.22 has (i) terminated or
canceled its business relationship with any of the Transferred Companies or
(ii) to the Knowledge of Seller, provided written notice to Seller or any of its
Subsidiaries of an intention or request to so terminate or cancel, except, in
each case, for such termination or cancellation which would not reasonably be
expected to be, individually or in the aggregate, material to the Transferred
Business.

4.23 Newco. After formation until the Closing, Newco shall not conduct any
business, and shall have no assets, liabilities or obligations of any nature, in
each case, other than those incident to its formation and holding of the
interests of the other Transferred Companies, the Transferred Assets and the
Assumed Liabilities or relating to the Pre-Closing Reorganization and other
transactions contemplated by to this Agreement.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF BUYER

Except as set forth in the applicable section or subsection of the disclosure
schedules delivered to Seller by Buyer prior to the execution hereof (the “Buyer
Schedules” and, together with the Seller Schedules, the “Disclosure Schedules”)
(it being agreed that disclosure of any item in any section or subsection of the
Buyer Schedules shall be deemed disclosure with respect to any other section or
subsection to the extent the relevance of such item is reasonably apparent on
its face), Buyer represents and warrants to Seller that:

5.1 Organization and Qualification. Each of Buyer and each of its Subsidiaries
is duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization and has all requisite corporate or similar power
and authority to own, lease and operate its assets and to carry on its business
as currently conducted and is duly qualified to do business and is in good
standing as a foreign corporation or other entity in each jurisdiction where the
ownership or operation of its assets or the conduct of its business requires
such qualification, except for failures to be so qualified or in good standing
that would not, individually or in the aggregate, reasonably be expected to
prevent or materially impair or delay Buyer’s or its Subsidiaries’ ability to
perform their respective obligations under this Agreement or the Ancillary
Documents.

 

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5.2 Corporate Authorization. Buyer has full corporate power and authority to
execute and deliver this Agreement and each of the Ancillary Documents, to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereunder and thereunder. The execution, delivery and
performance by Buyer of this Agreement and each of the Ancillary Documents, and
the consummation by Buyer of the transactions contemplated hereunder and
thereunder, has been duly and validly authorized and no additional corporate or
shareholder authorization or consent is required in connection with the
execution, delivery and performance by Buyer of this Agreement or any of the
Ancillary Documents and the consummation by Buyer of the transactions
contemplated hereunder and thereunder.

5.3 Consents and Approvals.

(a) Other than (i) under the HSR Act, (ii) from or to the FCC, (iii) from or to
the State Commissions (other than the Florida Public Service Commission),
(iv) from or to the Video Franchisors and (v) consents required to be maintained
or obtained pursuant to any Contract in respect to which a Governmental Entity
is a customer of Seller or any of its Subsidiaries, no consent, approval,
waiver, authorization, report, notice or filing is required to be obtained by
Buyer from, or to be given by Buyer to, or made by Buyer with, any Governmental
Entity in connection with the execution, delivery and performance by Buyer of
this Agreement and the Ancillary Documents to which it is a party, and the
consummation by Buyer of the transactions contemplated hereunder and thereunder,
except for those consents, approvals, waivers, authorizations, reports, notices
or filings the failure to obtain, give or make, as the case may be, would not,
individually or in the aggregate, reasonably be expected to prevent or
materially impair or delay Buyer’s or its Subsidiaries’ ability to perform their
respective obligations under this Agreement or the Ancillary Documents.

(b) Assuming the receipt of all consents, approvals, waivers and authorizations
and the making of all notices and filings listed in Section 5.3(a), Buyer will
be, as of the Closing Date, authorized under the Communications Act and pursuant
to such other Governmental Authorizations as are required from all Governmental
Entities to provide the ILEC Services and to own and operate the Transferred
Assets. As of the date of this Agreement, there is no claim, lawsuit, agency
complaint, investigation or proceeding (“Complaint”) pending against Buyer or
any of its Subsidiaries, nor, to the Knowledge of Buyer, any threat to file a
Complaint, in each case that if determined adversely to Buyer would materially
impair or delay Buyer’s qualifications to acquire the Transferred Companies,
operate the Transferred Business or obtain any required Governmental
Authorization, or materially delay the grant of any consent set forth on Buyer
Schedule 5.3. As of the date of this Agreement, no Complaint has been filed with
any Governmental Entity with jurisdiction over Buyer or any of its Subsidiaries
that raises any such question or results in any such delay.

5.4 Non-Contravention. The execution, delivery and performance by Buyer of this
Agreement and each of the Ancillary Documents, and the consummation of the
transactions contemplated hereby and thereby, do not and will not (i) violate
any provision of Buyer’s

 

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organizational documents, (ii) assuming the receipt of all consents, approvals,
waivers and authorizations and the making of the notices and filings listed in
Section 5.3 or set forth on Buyer Schedule 5.3, conflict with or result in a
violation or breach of, or constitute a default under, or result in the
termination, cancellation, modification or acceleration (whether after the
filing of notice or the lapse of time or both) of any right or obligation of
Buyer under, or result in a loss of any benefit to which Buyer is entitled
under, any Contract or result in the creation of any Encumbrance upon any of
Buyer’s or its Subsidiaries’ assets or (iii) assuming the receipt of all
consents, approvals, waivers and authorizations and the making of notices and
filings listed in Section 5.3 or set forth on Buyer Schedule 5.3 or required to
be made or obtained by Seller conflict with or result in a violation or breach
of, or constitute a default under, any Law to which Buyer is subject, or under
any Governmental Authorizations, other than, in the case of clauses (ii) and
(iii), conflicts, violations, breaches, defaults, terminations, cancellations,
modifications, accelerations, losses or Encumbrances that would not,
individually or in the aggregate, reasonably be expected to prevent or
materially impair or delay Buyer’s or its Subsidiaries’ ability to perform their
respective obligations under this Agreement or the Ancillary Documents.

5.5 Binding Effect. This Agreement and each of the Ancillary Documents, assuming
due execution and delivery by Seller and the other parties thereto, constitutes,
or in the case of the Ancillary Documents will upon execution thereof
constitute, a valid and legally binding obligation of Buyer and each of its
Subsidiaries that is a party to such agreements, enforceable against Buyer and
each such Subsidiary in accordance with their respective terms, subject, in each
case, to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
and similar Laws of general applicability relating to or affecting creditors’
rights and to general equity principles.

5.6 Litigation and Claims. As of the date of this Agreement, there is no civil,
criminal or administrative action, suit, demand, claim, investigation, review
hearing or proceeding pending, or to the Knowledge of Buyer, threatened against
Buyer or any of its Subsidiaries at law or in equity relating to the businesses
of Buyer or its Subsidiaries or the transactions contemplated by this Agreement
and the Ancillary Documents, other than those that would not, individually or in
the aggregate, reasonably be expected to prevent or materially impair or delay
Buyer’s or its Subsidiaries’ ability to perform their respective obligations
under this Agreement or the Ancillary Documents. As of the date of this
Agreement, none of Buyer nor any of its Subsidiaries is subject to any order,
writ, judgment, award, injunction or decree of any Governmental Entity of
competent jurisdiction or any arbitrator or arbitrators, other than those that
would not, individually or in the aggregate, reasonably be expected to prevent
or materially impair or delay Buyer’s or its Subsidiaries’ ability to perform
their respective obligations under this Agreement or the Ancillary Documents.

5.7 Finders’ Fees. Except for JPMorgan Chase Bank, N.A., J.P. Morgan Securities
LLC, Bank of America, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Citigroup Global Markets Inc. and Greenhill & Co., LLC, whose fees will be paid
by Buyer, there is no investment banker, broker, finder or other intermediary
that has been retained by or is authorized to act on behalf of Buyer, or any
Subsidiary of Buyer, that might be entitled to any fee or commission from Buyer
or such Subsidiary of Buyer in connection with the transactions contemplated by
this Agreement and the Ancillary Documents.

 

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5.8 Financial Capability. At the Closing, assuming the satisfaction of the
conditions set forth in Section 7.2, Buyer will have sufficient funds to effect
the Closing and all other transactions contemplated by this Agreement and the
Ancillary Documents and to conduct its businesses and operations following the
Closing. Buyer has provided to Seller, on or prior to the date of this
Agreement, a true, complete and correct copy of the executed financing
commitment letter among Buyer, JPMorgan Chase Bank, N.A., J.P. Morgan Securities
LLC, Bank of America, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated
and Citigroup Global Markets Inc., including any exhibits, annexes, schedules or
amendments thereto (collectively, the “Commitment Letter”), pursuant to which
the lender party thereto has committed to provide, subject to the terms and
conditions set forth therein, debt financing in the amounts set forth therein
(the “Committed Financing”). As of the date of this Agreement, (i) the
Commitment Letter is (A) a legal, valid and binding obligation of Buyer and, to
the Knowledge of Buyer, each of the other parties thereto, (B) enforceable in
accordance with its terms against Buyer and, to the Knowledge of Buyer, each of
the other parties thereto, except as such enforceability may be limited by
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar Laws of general applicability relating to or affecting creditors’ rights
and general equity principles (regardless of whether enforcement is sought in a
proceeding at law or in equity) and (C) in full force and effect, (ii) the
Commitment Letter has not been amended or modified except as permitted pursuant
to Section 6.15, (iii) none of the obligations and commitments contained in the
Commitment Letter has been withdrawn, terminated or rescinded in any respect,
(iv) no event has occurred which (with or without notice or lapse of time, or
both) would constitute a default or breach on the part of Buyer or, to the
Knowledge of Buyer, any other parties thereto under the Commitment Letter, and
(v) Buyer does not have any reason to believe that any of the conditions to the
Committed Financing will not be satisfied or that the Committed Financing will
not be available to Buyer at the Closing Date. Buyer has fully paid or caused to
be paid any and all commitment fees or other fees in connection with the
Commitment Letter that are payable on or prior to the date of this Agreement.
The Commitment Letter contains all of the conditions precedent to the
obligations of the lenders thereunder to fund the Committed Financing. Except
for fee letters relating to fees with respect to the Committed Financing (a
complete copy of which has been provided to Seller (the “Fee Letter”), with only
the fee amounts, time periods, covenants that apply on and after the Closing
Date, pricing caps, specific flex terms that do not relate to conditionality and
other economic terms set forth therein (none of which would reasonably be
expected to adversely affect the availability or aggregate principal amount of
the Committed Financing) redacted, provided that Seller may only share such Fee
Letter with those Persons set forth on Buyer Schedule 5.8), as of the date of
this Agreement, there are no side letters or other agreements, arrangements or
contracts (including fee letters) to which Buyer or any of its Subsidiaries is a
party that would affect the availability of the Committed Financing other than
as expressly set forth in the Commitment Letter. Without limiting Section 7.2,
in no event shall the receipt or availability of any funds or financing by or to
Buyer or any of its Subsidiaries or any other financing transaction be a
condition to any of the obligations of Buyer hereunder.

5.9 Solvency. As of the Closing, after giving effect to any indebtedness being
incurred on such date in connection herewith, and assuming satisfaction of the
conditions set forth in Section 7.2(b), Section 7.2(c) and Section 7.2(d), and
assuming that the Transferred Business is not Insolvent (as defined below) as of
the date of this Agreement or as of the Closing, neither Buyer nor the
Transferred Companies will (i) be insolvent (either because its

 

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financial condition is such that the sum of its debts (including a reasonable
estimate of the amount of all contingent liabilities) is greater than the fair
value of its assets, or because the present fair salable value of its assets
will be less than the amount required to pay its probable liability on its debts
as they become absolute and matured), (ii) have unreasonably small capital with
which to engage in its business or (iii) have incurred or plan to incur debts
beyond its ability to pay as they become absolute and matured (clauses
(i)-(iii), “Insolvent”).

5.10 Regulatory Compliance. Buyer and its Subsidiaries are the authorized legal
holders or otherwise have rights to all material permits, licenses, franchises,
waivers, orders, approvals, concessions, registrations and other authorizations
issued or granted by the FCC, the State Commissions and the Video Franchisors
that are required for and/or used in the operation of Buyer’s business in the
States (the “Buyer Licenses”). The Buyer Licenses were duly obtained and are
valid and in full force and effect, unimpaired by any condition, except those
conditions that may be contained within the terms of the Buyer Licenses or those
conditions applicable to the particular class of licenses generally. Buyer and
its Subsidiaries are in compliance in all material respects with the
Communications Act of 1934, as amended, and the rules, regulations and policies
of the FCC, the State Commissions and the Video Franchisors in respect of the
operation of Buyer’s business in the States, except to the extent that such
non-compliance or violation would not reasonably be expected to, individually or
in the aggregate, delay or adversely affect Buyer’s ability to consummate the
transactions contemplated by this Agreement. There is not pending or, to the
Knowledge of Buyer, threatened, any action by or before the FCC, the State
Commissions or Video Franchisors that would reasonably be expected to,
individually or in the aggregate, delay or adversely affect Buyer’s ability to
consummate the transactions contemplated by this Agreement.

5.11 Inspections. Buyer is an informed and sophisticated purchaser that is, and
has engaged expert advisers that are, experienced in the evaluation and purchase
of property and assets such as the Transferred Companies and the Transferred
Assets as contemplated hereunder. Buyer has undertaken an independent
investigation of the business and operations of the Transferred Business and has
been provided with and evaluated such documents and information made available
by Seller as Buyer has determined are sufficient to make an informed decision
with respect to the execution, delivery and performance of this Agreement and
the Ancillary Documents and the consummation of the transactions contemplated
hereby and thereby.

ARTICLE VI

COVENANTS

6.1 Access and Information.

(a) From the date of this Agreement until the Closing, subject to any applicable
Laws, Seller shall afford Buyer and its representatives reasonable access,
during regular business hours and upon reasonable advance written notice, to the
Assigned Contracts, the Transferred Books and Records and the officers of the
Transferred Business, as Buyer shall from time to time reasonably request in
writing and otherwise as mutually agreed (including pursuant to the Cutover Plan
Support Agreement). Seller shall use its reasonable best efforts to afford Buyer
and its representatives reasonable access, during regular business hours and
upon

 

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reasonable advance written notice, to (i) accountants’ work papers relating to
the Transferred Books and Records and access to auditors of Seller or any of its
Affiliates and (ii) properties of the Transferred Business to the extent that
circumstances arise that could reasonably be expected to result in a material
environmental Liability, provided that Buyer or its representatives, during such
access, shall not conduct any invasive procedures, including sampling of soil,
groundwater, surface water or other media; it being understood and agreed that
in no event shall Buyer have access to (i) any information that (x) Seller’s
counsel advises (after consultation in good faith with Buyer’s counsel) that
sharing such information would create any potential Liability under applicable
Laws, including U.S. Antitrust Laws, (y) in the reasonable judgment of Seller
would violate any obligation of Seller or any of its Subsidiaries with respect
to disclosure of information or confidentiality or eliminate or reduce the
benefit of any legal privilege of Seller or any of its Subsidiaries (if, with
respect to confidentiality, Seller has made commercially reasonable efforts to
obtain a waiver regarding the possible disclosure from the third party to whom
it owes an obligation of confidentiality), provided that Seller shall in good
faith use its commercially reasonable efforts to provide such information in a
manner and form that would not reasonably be expected to violate any such
obligation with respect to disclosure of information or confidentiality or
eliminate or reduce the benefit of any such legal privilege, or (z) that
constitutes Customer Proprietary Network Information (other than as permitted by
the rules and regulations of the FCC); provided further that in the case of
competitively sensitive information, Seller and Buyer shall agree upon mutually
acceptable “clean team” procedures with respect to such information and it being
further understood that Buyer shall reimburse Seller promptly for reasonable out
of pocket costs and expenses incurred by Seller or any of its Subsidiaries in
complying with any such request by or on behalf of Buyer. All information
received by Buyer or its representatives pursuant to this Section 6.1 shall be
governed by the terms of the Confidentiality Agreement.

(b) Following the Closing, upon the request of the other party, Buyer and Seller
shall, to the extent permitted by Law, make available to the requesting party
and its representatives copies of all financial, Tax and other information
pertaining to the Transferred Business or the operation or ownership of the
Transferred Business and its assets and liabilities, Transferred Assets, Assumed
Liabilities and the Business Employees reasonably requested in connection with
(i) any audit or other investigation by any Taxing authority or any required
returns, responses to inquiries, reports or submissions to Governmental Entities
(including reports filed with the SEC, any consolidated financial or statutory
reporting obligations and any Tax Returns or replies to the Tax inquiries of
Seller or its Subsidiaries) with respect to the Transferred Business, the
Transferred Companies, the Transferred Assets, the Assumed Liabilities or the
Excluded Liabilities related to periods prior to the Closing; provided, however,
that Seller shall have no obligation to provide copies of any Consolidated Tax
Return, or (ii) any matters relating to insurance coverage, third-party
litigation, claims, proceedings and investigations pertaining to the Transferred
Companies, the Transferred Assets, the Transferred Business, or the Assumed
Liabilities, as applicable, in each case with respect to periods prior to the
Closing. Without limiting the generality of the foregoing, Buyer shall comply
with its obligations under Section 6.5(i).

 

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(c) As promptly as reasonably practicable following the Closing Date, Seller
will transfer, or cause to be transferred, to the Transferred Companies the
organizational documents related to the Transferred Companies and materials in
any data room prepared by Seller or its Subsidiaries in connection with the
transactions contemplated by this Agreement. After the Closing, and until the
expiration of any applicable retention periods described in Seller’s data
retention policy, as amended from time to time, Buyer or its Subsidiaries may
request a copy of any other Transferred Books and Records not previously
provided to Buyer. Upon receipt of such request, Seller or its Subsidiaries
shall provide Buyer with the requested documents as promptly as reasonably
practicable. Buyer shall reimburse Seller or its Subsidiaries for all reasonable
out-of-pocket costs and expenses incurred by Seller in connection with providing
any such requested records.

6.2 Conduct of Business.

(a) During the period from the date of this Agreement until the Closing, except
(v) as otherwise expressly required or permitted by this Agreement, the
Ancillary Documents or the Collective Bargaining Agreements, (w) as required by
any Governmental Entity or Law, (x) for actions solely affecting the Excluded
Assets or Excluded Liabilities, (y) as set forth on Seller Schedule 6.2(a) or
(z) as Buyer otherwise consents in writing, which consent shall not be
unreasonably delayed, conditioned or withheld (collectively, clauses (w) through
(z), the “Business Conduct Exceptions”), Seller shall, and shall cause each of
its Subsidiaries operating the Transferred Business to, operate the Transferred
Business, in all material respects, in the Ordinary Course and use commercially
reasonable efforts to preserve, in all material respects, the Transferred
Companies, the Transferred Assets and relationships with the Listed Employees
and customers of the Transferred Business. During the period from the date of
this Agreement until the Closing, except for the Business Conduct Exceptions,
Seller shall, and shall cause each of its Subsidiaries to, with respect to the
Transferred Business, the Transferred Companies and the Transferred Assets, as
applicable:

(i) not sell, lease, license, transfer, dispose of or create any Encumbrance on
any assets having a replacement cost in excess of $500,000 individually or
$10,000,000 in the aggregate, other than the sale of obsolete equipment
(provided that such obsolete equipment is no longer in use in the support of
customers in any manner, whether in call centers, IT, network, production of
products or services or otherwise), in the Ordinary Course, or upon expiration
of any leases for any such assets, and other than Permitted Encumbrances;

(ii) other than in the Ordinary Course, not enter into, terminate, materially
extend or materially modify any Contract that is or would be if it had been
entered into prior to the date of this Agreement (x) a Material Contract or
(y) a Contract that includes any non-standard service levels to be maintained by
any of the Transferred Companies in relation to customers or the Transferred
Business;

(iii) not institute any proceeding with respect to, or otherwise materially
change, amend or supplement any of its local exchange, intrastate toll or
intrastate and interstate access Tariffs related to the Transferred Business or
make any other filings with the FCC or State Commissions with respect to the
Transferred Business, except in the Ordinary Course and other than Seller-wide
proceedings with the FCC;

 

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(iv) with respect to those Listed Employees other than the Retained Employees,
not (A) increase materially the compensation of such Listed Employees
individually or in the aggregate, except in the Ordinary Course or pursuant to
the terms of the Collective Bargaining Agreements or any agreements or plans
currently in effect and listed on Seller Schedule 4.10(a)(i) (provided, however,
that Seller may increase benefits for Listed Employees as a result of the
amendment of any Seller Benefit Plan to the extent such increase applies
generally to participants under such Seller Benefit Plan, including a
substantial number of employees who are similarly situated to the Listed
Employees but are not Listed Employees), or (B) enter into any new employment or
severance agreements with any such Listed Employee (it being understood and
agreed that Seller shall not be restricted from making changes to severance
programs that affect Seller’s employees generally, unless such changes
disproportionately affect Listed Employees as compared to other of Seller’s
employees);

(v) not amend the certificate of incorporation or certificate of formation,
by-laws or other organizational documents of any of the Transferred Companies;

(vi) not issue, sell, pledge, transfer, dispose of or encumber any shares of the
Transferred Companies’ capital stock or limited liability company interests or
securities convertible into or exchangeable for any such shares or interests, or
any rights, warrants, options, calls or commitments to acquire any such shares
or interests or other securities;

(vii) not alter or amend the list of Listed Employees, except as set forth in
the Employee Matters Agreement;

(viii) not enter into any Contract that obligates any Transferred Company
following the Closing under any service provider Contract for payroll, human
resources or employee benefits;

(ix) other than in respect of matters relating to Taxes, not settle or
compromise, or consent to entry of any judgment, any civil, criminal or
administrative action, suit, demand, claim, hearing or proceeding which imposes
on the Transferred Business or the Transferred Companies (A) material injunctive
or other non-monetary relief, (B) a criminal violation or (C) Liability of more
than $5 million individually or in the aggregate with any related claims;

(x) unless required by GAAP or applicable Law, (A) except for actions affecting
the businesses, generally, of Seller or its Subsidiaries, not adopt any material
accounting method or change any material accounting method that affects the
Transferred Business or the Transferred Companies or (B) make any write downs,
impairments or other accounting adjustments in respect of the Transferred
Assets;

 

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(xi) except to the extent related to a Consolidated Tax Return, not (A) make,
change or revoke any material Tax election of the Transferred Companies, or file
any amended Tax Return of or with respect to the Transferred Companies,
(B) enter into any material closing agreement affecting any Tax Liability or
refund of or with respect to the Transferred Companies, (C) settle or compromise
any material Tax Liability or material refund of or with respect to the
Transferred Companies or (D) extend or waive the application of any statute of
limitations regarding the assessment or collection of any material Tax of or
with respect to the Transferred Companies, in each case to the extent such
action (x) relates to non-income Taxes and (y) would have a legally binding
effect on Seller or the Transferred Business with respect to a Post-Closing Tax
Period;

(xii) not permit any Transferred Company to adopt a plan of complete or partial
liquidation or authorize or undertake a dissolution, consolidation,
restructuring, recapitalization or other reorganization, other than as
contemplated by this Agreement;

(xiii) incur any material Indebtedness that subjects the Transferred Assets to
any Encumbrance, other than Permitted Encumbrances;

(xiv) not amend, modify, terminate, waive any rights under or fail to enforce
any Transferred Affiliate Arrangement, except for Ordinary Course changes to
Contracts providing for the delivery of ILEC Services to a member of the Seller
Group;

(xv) maintain property and casualty insurance covering the Transferred Assets to
an extent substantially consistent with such coverage as is maintained by Seller
as of the date of this Agreement; it being understood that Seller shall, or
shall cause its Affiliates to, promptly apply in full any proceeds (after
deducting any related out-of-pocket costs) received from such insurance for
damages or losses relating to the Transferred Business to the repair of such
damages or losses;

(xvi) not authorize or enter into any agreement or commitment with respect to
any of the foregoing;

(xvii) make capital expenditures in respect of the Transferred Business in
amounts not less than the amounts set forth on Annex 6.2(a)(xvii); and

(xviii) make marketing expenditures in respect of the Transferred Business in
amounts not less than the amounts set forth on Annex 6.2(a)(xviii).

(b) During the period from the date of this Agreement until the Closing, Buyer
and its Subsidiaries shall not make any written or oral communications
(including websites or other passive communications channels) that are directed
to the directors, officers or employees of Seller or any of its Subsidiaries
pertaining to the matters that are affected by the transactions contemplated by
this Agreement, in each case except as permitted in the Employee Matters
Agreement or the Cutover Plan Support Agreement.

(c) Prior to the Closing Date or at such other time as set forth in the Employee
Matters Agreement, Seller and its Subsidiaries shall take all necessary actions
to effect the actions contemplated in the Employee Matters Agreement.

 

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6.3 Reasonable Best Efforts; Governmental and Other Consents.

(a) Each of Seller and Buyer shall cooperate and use their respective reasonable
best efforts to consummate as promptly as practicable the transactions
contemplated by this Agreement, including fulfilling the conditions precedent to
the other party’s obligations hereunder, and securing as promptly as practicable
all Governmental Authorizations required in connection with the transactions
contemplated by this Agreement; it being understood that nothing in this
Agreement shall require, or be construed to require, (i) Seller or any of its
Subsidiaries to (A) subject to Section 6.17(c), make any payment or incur any
cost in connection with fulfilling such conditions precedent, other than
(x) legal and accounting fees and disbursements and regulatory filing fees and
costs and (y) payments or costs related to the Transferred Business that result
in a dollar-for-dollar payment to Seller as a Required Payment Amount, or
(B) take or refrain from taking any action, agree to any restriction or
condition or enter into any agreement with respect to any of their assets or
operations other than the Transferred Business (a “Seller Adverse Condition”) or
(C) request (x) any consent from any third party which is party to a
Non-Scheduled Contract or (y) subject to Section 6.17(a), any consent from any
third party if such consent is not material to the Transferred Business taken as
a whole and Seller reasonably believes that such request would materially
adversely affect Seller’s relationship with such third party with respect to any
of Seller’s businesses other than the Transferred Business or (ii) with respect
to the obligation to use reasonable best efforts to secure Governmental
Consents, Buyer or any of its Subsidiaries to take or refrain from taking any
action that would reasonably be expected to have a Buyer Adverse Condition.
“Buyer Adverse Condition” means any action, restriction, condition or
requirement which would, individually or in the aggregate and when combined with
the Required Payment Amount, reasonably be expected to be materially adverse to
Buyer and its Subsidiaries (including the Transferred Companies) taken as a
whole (with materiality being measured for such purposes in relation to the
financial condition, properties, assets, liabilities, business and results of
operations of the Transferred Business, taken as a whole (i.e., a business the
size of the Transferred Business), rather than that of Buyer and its
Subsidiaries, taken as a whole) disregarding for this purpose any condition or
requirement (i) that is consistent with, or mandates the continuation of, the
manner in which Buyer operates its and its Subsidiaries’ existing business as of
the date of this Agreement and/or the manner in which Seller operates the
Transferred Business as of the date of this Agreement (including with respect to
each of Buyer’s and its Subsidiaries’ existing business and the Transferred
Business, capital expenditure conditions or requirements in an annualized amount
consistent with the capital expenditures spent in such business in the twelve
(12) months prior to the Closing) or (ii) that is offered by Buyer in its
discretion in an application for an order approving the transactions
contemplated by this Agreement or in any related filing or testimony. Without
limiting the generality of the foregoing, Buyer and Seller will make all filings
and submissions required by the U.S. Antitrust Laws, the FCC, any State
Commission and any Video Franchisor within forty-five (45) Business Days after
the date of this Agreement and promptly file any additional information
requested as soon as reasonably practicable after receipt of such request
therefor (provided that any failure to make such filings within forty-five
(45) Business Days after the date of this Agreement shall not constitute a
breach of this Agreement so long as such filings are made as promptly as
reasonably practicable thereafter). To the extent that, as an accommodation to
Buyer and with Buyer’s prior written consent, Seller or any of its Subsidiaries
incurs costs that Buyer otherwise would have to incur in order to secure any
Governmental Authorization, Buyer shall promptly reimburse Seller for any such
costs that are invoiced by Seller to Buyer.

 

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(b) Subject to the terms and conditions set forth in this Agreement (including
Section 6.3(a)), without limiting the generality of the undertakings pursuant to
this Section 6.3, each of Seller and Buyer agree to take or cause to be taken
the following actions: (i) the prompt provision to each and every federal,
state, or local Governmental Entity with jurisdiction over enforcement of any
applicable antitrust or competition Laws or state or federal telecommunication
Laws (including multi-channel video and including any state, local municipal or
county franchise authorities with respect to video franchises) of non-privileged
information and documents requested by any such Governmental Entity or that are
necessary, proper or advisable to permit consummation of the transactions
contemplated by this Agreement and the Ancillary Documents; (ii) the prompt use
of its reasonable best efforts to avoid the entry of any permanent, preliminary
or temporary injunction or other order, decree, decision, determination or
judgment that would reasonably be likely to delay, restrain, prevent, enjoin or
otherwise prohibit consummation of the transactions contemplated by this
Agreement and the Ancillary Documents, including the defense through litigation
on the merits of any claim asserted in any court, agency or other proceeding by
any Person, including any Governmental Entity, seeking to delay, restrain,
prevent, enjoin or otherwise prohibit consummation of such transactions; and
(iii) the prompt use of its reasonable best efforts to take, in the event that
any permanent, preliminary or temporary injunction, decision, order, judgment,
determination or decree is entered or issued, or becomes reasonably foreseeable
to be entered or issued, in any proceeding or inquiry of any kind that would
make consummation of the transactions contemplated by this Agreement in
accordance with the terms of this Agreement and the Ancillary Documents unlawful
or that would delay, restrain, prevent, enjoin or otherwise prohibit
consummation of the transactions contemplated by this Agreement and the
Ancillary Documents by the Termination Date, any and all steps (including the
appeal thereof, the posting of a bond or in the case of Buyer, the taking of the
steps contemplated by clause (ii) of this paragraph) necessary to resist,
vacate, modify, reverse, suspend, prevent, eliminate or remove such actual,
anticipated or threatened injunction, decision, order, judgment, determination
or decree so as to permit such consummation prior to the Termination Date.

(c) Subject to the terms and conditions set forth in this Agreement (including
Section 6.3(a)), Seller and Buyer shall cooperate with each other and shall
furnish to each other all information necessary or desirable in connection with
making any filing under the HSR Act and for any application or other filing to
be made pursuant to any competition or state, local or federal
telecommunications or franchising Law, or in connection with resolving any
investigation or other inquiry by any Governmental Entity or any consumer
advocate which is, or may reasonably be expected to be, a party to a proceeding
before a Governmental Entity (or any third-party consultant or advisor to any of
the foregoing) under any competition or state, local or federal
telecommunications or franchising Laws with respect to the transactions
contemplated by this Agreement and the Ancillary Documents. Each of Buyer and
Seller shall promptly inform the other in writing of any communication with, and
any proposed understanding, undertaking or agreement with, any Governmental
Entity or any consumer advocate or third-party consultant or advisor to any of
the foregoing regarding any such filings or any such transaction. Neither Seller
nor Buyer shall participate in any substantive meeting (in person or by
telephone) with any Governmental Entity or any consumer advocate or third-party
consultant or advisor to any of the foregoing in respect of any such filings,
investigation or other inquiry without giving the other party prior written
notice of, and the opportunity to participate in, the meeting to the extent
reasonably practicable. To the extent not prohibited by Law and reasonably
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parties will consult and cooperate with one another in connection with any
analyses, appearances, presentations, memoranda, briefs, arguments, opinions and
proposals made or submitted by or on behalf of any party in connection with all
meetings, actions and proceedings under or relating to the HSR Act or other
competition or state, local or federal telecommunications or franchising Laws
(including, with respect to making a particular filing, by providing copies of
all such documents to the non-filing party and their advisors prior to making
such filing and, if requested, giving due consideration to all reasonable
additions, deletions or changes suggested in connection therewith).

(d) To the extent necessary to comply with state laws and regulations and the
rules, regulations, written policies, instructions and orders of the FCC,
including those prohibiting “slamming” as set forth in 47 C.F.R.
Section 64.1120, at least 60 days prior to the estimated Closing Date (as
reasonably estimated by the parties) (i) Buyer shall, at its own expense,
prepare and deliver to Seller a draft notice providing the information required
by 47 C.F.R. Section 64.1120(e) addressed to the telecommunications customers of
the Transferred Companies, after giving effect to the Pre-Closing
Reorganization, it being understood that Seller shall have the opportunity to
review and comment on the contents of such notice and Buyer shall give
reasonable consideration to any comment proposed by Seller and (ii) Seller
shall, at Buyer’s cost and expense (which shall be a reimbursement of Seller’s
reasonable and documented out-of-pocket costs and expenses), cause such notice
to be delivered to such customers at least 30 days before the estimated Closing
Date (as reasonably estimated by the parties) by a direct mailing or in
accordance with such method of notice and notification period that the FCC or
State Commissions may order or require. Seller will be responsible for
preparing, distributing, and filing (at Buyer’s expense) any notices relating to
“discontinuance, reduction, or impairment” of service to the customers of the
Transferred Companies after giving effect to the Pre-Closing Reorganization
required by 47 C.F.R. Sections 63.19 and 63.71.

(e) Neither Buyer nor any of its Subsidiaries shall, directly or indirectly,
acquire or agree to acquire (whether by merger, consolidation, stock or asset
purchase, tender or exchange offer, recapitalization, reorganization or any
other form of transaction) any other Person if and to the extent that such
transaction would reasonably be expected to materially impair or delay the
ability of Buyer to consummate the transactions contemplated by this Agreement
(including as a result of the failure of Buyer to obtain the Debt Financing or
have sufficient liquidity to fund its obligations in connection with the
transactions contemplated by this Agreement).

6.4 Control of Business Pending the Closing. Nothing contained in this Agreement
shall give Buyer, directly or indirectly, any right to control or direct the
operations of Seller or any of its Subsidiaries prior to the Closing.

6.5 Tax Matters.

(a) Seller Liability for Taxes. Seller hereby agrees that from and after the
Closing it shall indemnify, defend and hold harmless the Buyer Indemnified
Parties from, against, and in respect of any Losses incurred or sustained by, or
imposed upon, any such Buyer Indemnified Party based upon, arising out of, with
respect to or by reason of: (i) Taxes imposed on any of the Transferred
Companies under Treasury Regulation Section 1.1502-6 (and any

 

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comparable provision of state, local, or foreign Law), as a transferee or
successor or by Contract (other than any Contract entered into in the ordinary
course of business and which does not relate primarily to Taxes), for Taxes of
any Person other than a Transferred Company for any Pre-Closing Tax Period;
(ii) Taxes arising as a result of any deemed sale of assets of any
Section 338(h)(10) Company for which a Section 338(h)(10) Election is made,
(iii) Taxes imposed on any of the Transferred Companies or otherwise arising
with respect to the Transferred Business with respect to a Pre-Closing Tax
Period, (iv) Taxes arising as a result of any breach of or inaccuracy in any
representation or warranty contained in Sections 4.9(d), 4.9(h), 4.9(i), 4.9(j)
and 4.9(l) (determined as if such representations and warranties were made as of
the Effective Time or, solely with respect to Section 4.9(l), as of the
Closing), any indemnity pursuant to this clause (iv) is limited solely to Losses
with respect to a Pre-Closing Tax Period, (v) any withholding Taxes imposed on
the payment of the Purchase Price as a method for collecting a Tax payable by
Seller under applicable Law or this Agreement (excluding, for the avoidance of
doubt, withholding Taxes that represent a mechanism to collect a Transfer Tax
which Buyer and Seller have agreed to share pursuant to Section 6.5(e));
(vi) Transfer Taxes for which Seller is responsible pursuant to Section 6.5(e);
(vii) Taxes (other than Transfer Taxes) directly or indirectly arising from,
related to or attributable to the Pre-Closing Reorganization or the transfer of
Transferred Assets to the Transferred Companies, or any transfer of Excluded
Assets to Seller or its Affiliates, pursuant to Section 10.9 after the Closing,
and (viii) Taxes directly or indirectly arising from, related to or attributable
to the breach of any covenant or agreement of Seller or any of its Affiliates
contained in this Agreement, in each case, with respect to non-income Taxes
only, to the extent such non-income Taxes exceed any accrual in respect thereof
on the Final Closing Statement as finally determined, but only to the extent
applicable.

(b) Buyer Liability for Taxes. Buyer hereby agrees that from and after the
Closing it shall indemnify, defend and hold harmless the Seller Indemnified
Parties from, against, and in respect of any Losses incurred or sustained by, or
imposed upon, any such Seller Indemnified Party based upon, arising out of, with
respect to or by reason of: (i) Taxes imposed on any of the Transferred
Companies or otherwise arising with respect to the Transferred Business with
respect to a Post-Closing Tax Period; (ii) Transfer Taxes for which Buyer is
responsible pursuant to Section 6.5(e); (iii) Taxes arising from, related to or
attributable to the breach of any covenant or agreement of Buyer or any of its
Affiliates contained in this Agreement; and (iv) Taxes arising out of any action
taken outside the ordinary course of business by Buyer or any of its Affiliates
after the Closing but on the Closing Date.

(c) Proration of Taxes.

(i) With respect to a Straddle Period, the Taxes that shall be treated as
attributable to a Pre-Closing Tax Period shall be determined as follows: (a) to
the extent such Tax is calculated on an annual basis, whether or not the lien
date, or valuation date, begins within the taxable year, such as property tax,
such Tax shall be prorated based on the number of days in such taxable period up
to and including the end of the day before the Effective Time, and (b) to the
extent such Tax is measured by income or receipts or other factors not described
in (a), above, such Tax shall be allocated based on a closing of the books on
the Closing Date (or in the case of Taxes other than income Taxes, based on a
closing of the books as of the end of the day before the Effective Time) with
respect to the Transferred Companies.

 

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(ii) In the case of Taxes that are payable with respect to a Straddle Period,
the portion of any such Taxes that shall be treated as attributable to a
Post-Closing Tax Period shall be all such Taxes other than the Taxes
attributable to a Pre-Closing Tax Period pursuant to Section 6.5(c)(i) hereof.

(iii) To the extent permitted under applicable Law, the parties shall use
commercially reasonable efforts to terminate the taxable year of the Transferred
Companies on the Closing Date.

(d) Tax Returns.

(i) Seller shall have the sole and exclusive right to prepare and file all
required Consolidated Tax Returns.

(ii) Seller shall timely prepare, or cause to be prepared, and, to the extent
permitted by Law, timely file or cause to be timely filed all Tax Returns (other
than Consolidated Tax Returns) that are required to be filed in respect of a
taxable period ending on or before the Closing Date (taking into account any
applicable extensions) by or with respect to the Transferred Companies or the
Transferred Business and shall cause any amounts shown to be due on such Tax
Returns to be timely remitted to the applicable Taxing authority. To the extent
any Tax Return described in this Section 6.5(d)(ii) is required to be filed by
Buyer or any of its Affiliates after the Closing, Buyer shall timely file or
cause to be timely filed any such Tax Return upon receipt from Seller.

(iii) Buyer shall prepare, or cause to be prepared, and timely file, or cause to
be timely filed, all Tax Returns in respect of a Straddle Period that are
required to be filed by or with respect to the Transferred Companies; provided
that: (A) before filing any such Tax Return, Buyer shall provide Seller with a
copy of such Tax Return (or a pro forma Tax Return solely related to the
Transferred Companies in the case of any consolidated, combined, affiliated or
unitary Tax Return that includes Buyer or any of its Affiliates) at least thirty
(30) days prior to the last date for timely filing such Tax Return (giving
effect to any valid extensions thereof) accompanied by a statement setting forth
Seller’s indemnification obligation, if any, pursuant to Section 6.5(a);
(B) Buyer shall consider the reasonable comments of Seller to any such Tax
Return and shall not withhold incorporation of such comments to the extent doing
so would not materially increase Buyer’s or any of its Affiliates’ liability for
Taxes, (C) Seller shall pay to Buyer the amount of its indemnification
obligation pursuant to Section 6.5(a) related to such Tax Returns within a
reasonable time for the filing of such Tax Returns, (D) no such Tax Return shall
be filed without the consent of Seller, such consent not to be unreasonably
withheld, conditioned or delayed and (E) Buyer shall cause any amounts shown to
be due on such Tax Returns to be timely remitted to the applicable Taxing
authority.

(iv) Any Tax Returns described in Section 6.5(d)(ii) or Section 6.5(d)(iii)
shall be prepared in a manner consistent with most recent past practice in
respect of the Transferred Companies and the Transferred Business except to the
extent otherwise required by applicable Law.

 

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(v) Without the prior written consent of Seller, such consent not to be
unreasonably withheld, conditioned or delayed, Buyer shall not, and shall not
permit any of its Affiliates to, amend any Tax Returns or make or change any Tax
elections or accounting methods, in each case with respect to any Transferred
Company or otherwise with respect to the Transferred Business for any taxable
period (or portion thereof) ending on or prior to the Closing Date, except to
the extent required by applicable Law.

(e) Transfer Taxes. Seller and Buyer shall each bear one half of any Transfer
Taxes, including, for the avoidance of doubt, any Transfer Taxes resulting from
any transfer of Transferred Assets to the Transferred Companies, or any transfer
of Excluded Assets to Seller or its Affiliates, pursuant to Section 10.9 after
the Closing. Buyer and Seller will cooperate in the preparation and filing of
any Tax Returns with respect to Transfer Taxes, and join in the execution of any
such Tax Returns or other documentation, as applicable. Any Tax Returns that
must be filed in connection with Transfer Taxes shall be prepared and filed by
the party primarily or customarily responsible under applicable Law for filing
such Tax Returns, provided that such party preparing such Tax Returns shall use
its reasonable best efforts to provide such Tax Returns to the other party for
review and comment at least ten (10) Business Days prior to the date such Tax
Returns are due to be filed.

(f) Contest Provisions.

(i) Each of Buyer and Seller shall promptly notify the other in writing upon
receipt of notice of any pending or threatened audits or assessments with
respect to Taxes for which such other party (or such other party’s Affiliates)
may be liable hereunder.

(ii) Seller shall have the right to control all audits, examinations,
assessments or other proceedings in respect of Taxes (“Tax Proceedings”) and may
make any decisions in connection with any Tax Proceeding relating to a Tax
Return described in Section 6.5(d)(i) or Section 6.5(d)(ii) or that otherwise
relates to Taxes for which Seller may be responsible under Section 6.5(a);
provided that (A) to the extent that any Tax Proceeding controlled by Seller
relates to (1) Taxes arising as a result of any breach of or any inaccuracy in
any representation or warranty contained in Section 4.9(l) or the tax treatment
of the purchase and sale of the membership interests in Newco described in
Sections 3.7 and 6.5(a), (2) the Allocation Schedule described in Section 3.7 or
the Section 338(h)(10) Final Allocation Schedule described in Section 6.5(n)(ii)
or (3) a Straddle Period (excluding in the case of this clause (3) any Tax
Proceeding relating to a Consolidated Tax Return): (x) the Buyer Indemnified
Parties may at their own expense participate in the proceedings related to such
Tax Proceeding, but in the case of a Tax Proceeding in respect of a Consolidated
Tax Return only with respect to Tax matters described in clause (1) or (2),
(y) Seller shall keep the Buyer Indemnified Parties reasonably and timely
informed with respect to the commencement, status and nature of such Tax
Proceeding and (z) Seller shall consider any reasonable comments proposed by the
Buyer Indemnified Parties that are related to the defense of such Tax Proceeding
and (B) with respect to any Tax Proceeding controlled by Seller described in
Section 6.5(f)(ii)(A)(3), Seller shall not settle, compromise or dispose of such
Tax Proceeding if such settlement, compromise or disposition would reasonably be
expected to adversely

 

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affect the Tax liability of the Buyer Indemnified Parties in a Post-Closing Tax
Period without the consent of the Buyer Indemnified Parties, such consent not to
be unreasonably withheld, conditioned or delayed; provided, further, however,
that (1) nothing contained in this Section 6.5(f)(ii)(B) shall prohibit Seller
from settling, compromising or disposing of a Tax Proceeding without the consent
of the Buyer Indemnified Parties to the extent Seller agrees in writing to
indemnify the Buyer Indemnified Parties for any Losses arising out of, with
respect to or by reason of such settlement, compromise or disposition and
(2) for the avoidance of doubt, this Section 6.5(f)(ii)(B) shall in no event
apply to a Tax Proceeding relating to a Consolidated Tax Return.

(iii) The Buyer Indemnified Parties shall have the right to control all
proceedings and may make any decisions in connection with all Tax Proceedings
not controlled by Seller pursuant to Section 6.5(f)(ii).

(g) Refunds. If, after the Closing, Buyer or any of its Affiliates (A) receives
any refund, or (B) utilizes the benefit of any overpayment or prepayment of
Taxes (including as a result of any reimbursement or credit in respect of Taxes)
which, in either of cases (A) and (B), (x) relate to a Tax paid by Seller or any
of its Affiliates, or (y) is the subject of indemnification by Seller hereunder,
Buyer shall promptly transfer, or cause to be transferred, to Seller the entire
amount of the refund or overpayment (including interest or other additions
thereto) received or utilized by Buyer or its Affiliates, net of any Taxes or
other reasonable costs incurred by Buyer or its Affiliates attributable to the
receipt of such refund. Buyer agrees to notify Seller promptly of both the
discovery of a right to claim any such refund or overpayment and the receipt of
any such refund or utilization of any such overpayment. Buyer agrees to use
commercially reasonable efforts to claim any such refund or to utilize any such
overpayment as soon as possible and to furnish to Seller all information,
records and assistance necessary to verify the amount of the refund or
overpayment, provided, that Buyer shall be permitted to use its own Tax
attributes prior to utilizing such overpayment described in this Section 6.5(g).

(h) Assistance and Cooperation. From and after the Closing, the parties shall
cooperate fully, as and to the extent reasonably requested by the other party,
in preparing any Tax Returns and for any audits of, or disputes with Taxing
authorities regarding, any Tax Returns involving the Transferred Companies or
Transferred Business and payments in respect thereof. Such cooperation shall
include, upon such other party’s request, the provision of records and
information reasonably relevant to the Transferred Companies or Transferred
Business and any related Tax Returns or Tax Proceedings and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder; provided, however, that Seller
shall have no obligation to provide Buyer copies of any Consolidated Tax
Returns.

(i) Maintenance of Buyer’s Books and Records. Until the later of seven (7) years
following the Closing and expiration of the applicable statute of limitations
(including periods of waiver) for any Tax Returns filed or required to be filed
covering the periods up to and including the Closing Date, Buyer and Seller
shall, and shall cause its respective Affiliates to, retain all Books and
Records related to the Transferred Business and Transferred Companies and after
the Closing Date will provide the other party access to such Books and Records
for

 

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inspection and copying by Buyer or Seller, as applicable, or its respective
agents and representatives upon reasonable request and upon reasonable notice.
After the expiration of such period, no Books and Records referred to in the
previous sentence shall be destroyed without first advising the other party in
writing and giving such party a reasonable opportunity to obtain possession
thereof, with any costs of transferring such Books and Records to be paid by the
party requesting such books and records; provided, however, that Seller shall
have no obligation to provide Buyer access to, or copies of, any Consolidated
Tax Returns.

(j) Tax Sharing Agreements. As of the Closing Date and, after the Closing Date,
none of the Transferred Companies shall be bound by or have any liability under
any Tax sharing agreements with respect to or involving the Transferred
Companies.

(k) Survival. The indemnification obligations pursuant to this Section 6.5, as
well as the representations and warranties contained in Sections 4.9(d), 4.9(h),
4.9(i), 4.9(j) and 4.9(l), shall survive the Closing until ninety (90) days
following the expiration of the applicable statute of limitations (including any
extensions thereof) relevant to each particular item; provided that if a notice
described under Section 6.5(f)(i) is provided to the Indemnifying Party prior to
any such expiration date, any obligation to indemnify for any claim described in
such notice shall continue indefinitely until such claim is finally resolved.

(l) Timing of Payments. The Indemnifying Party shall pay all amounts payable
pursuant to this Section 6.5 promptly following receipt from an Indemnified
Party of a claim for a Loss that is the subject of indemnification hereunder,
unless and for so long as the Indemnifying Party in good faith disputes the Loss
in which event it shall so notify the Indemnified Party. In any event, the
Indemnifying Party shall pay to the Indemnified Party, by wire transfer of
immediately available funds, the amount of any Loss for which it is liable
hereunder no later than ten (10) Business Days following any Final Determination
of such Loss and the Indemnifying Party’s liability therefor. A “Final
Determination” shall exist when (i) the parties to the dispute have reached an
agreement in writing, (ii) a court of competent jurisdiction shall have entered
a final and non-appealable order or judgment, or (iii) an arbitration or like
panel shall have rendered a final non-appealable determination with respect to
disputes the parties have agreed to submit thereto.

(m) Characterization of Indemnification Payments. Except as otherwise required
by Law, all payments made by an Indemnifying Party to an Indemnified Party in
respect of any claim pursuant to this Section 6.5 hereof shall be treated as
adjustments to the Purchase Price for Tax purposes.

(n) Section 338(h)(10) Election.

(i) Buyer and Seller agree to treat the indirect acquisition of each of GTE
Southwest Incorporated and Verizon California Inc. (each, a “Section 338(h)(10)
Company”) as a “qualified stock purchase” within the meaning of
Section 338(d)(3) of the Code and shall make a joint election under
Section 338(h)(10) of the Code, and comparable state and local Tax provisions,
with respect to the acquisition of each of the Section 338(h)(10) Companies and,
to the extent that an applicable State’s treatment of Newco and Verizon Florida
LLC does not conform to their U.S. federal income tax

 

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treatment as entities disregarded as separate from GTE, with respect to each of
Newco and Verizon Florida LLC (the “Section 338(h)(10) Elections”). At the
Closing, Buyer and Seller shall exchange properly completed and executed
originals of IRS Form 8023 and any similar state or local forms, and required
schedules thereto, containing information available at such time. If any changes
are required in the forms as a result of information which is first available
after such forms are prepared, Buyer and Seller will promptly agree on such
changes. After all required schedules to support the forms are completed, Buyer
and Seller shall file the forms, which filing shall be made within the time
period specified under applicable Law. Buyer and Seller and their Affiliates
shall make all required filings relating to the Section 338(h)(10) Elections in
connection with their federal and applicable state and local income Tax Returns,
and shall cooperate fully with each other to take all other actions necessary
and appropriate otherwise to effect, perfect and timely preserve the
Section 338(h)(10) Elections.

(ii) Within ninety (90) days following the Closing Date, Buyer shall (i) draft a
schedule allocating the deemed sales price of the assets of the
Section 338(h)(10) Companies resulting from the Section 338(h)(10) Elections
among such assets (the “Section 338(h)(10) Allocation Schedule”) and
(ii) deliver such Section 338(h)(10) Allocation Schedule to Seller for Seller’s
review. The Section 338(h)(10) Allocation Schedule shall be prepared in
accordance with Section 338(h)(10) of the Code and the Treasury regulations
thereunder. If Seller believes that all or a portion of the Section 338(h)(10)
Allocation Schedule is incorrect and Seller notifies Buyer in a writing
including a description of the objection and basis supporting Seller’s
objections and any calculations or documentation that support the objection,
within 30 (thirty) days after having received the Section 338(h)(10) Allocation
Schedule, Buyer and Seller agree to consult and resolve in good faith any such
disputed item. In the event the parties are unable to resolve any such dispute
within 30 (thirty) days following notice to Buyer of Seller’s objection (in the
form and within the time set forth herein), the Accountant will be retained to
resolve solely any issue in dispute as promptly as possible and the
determination of the Accountant shall be final with respect to such disputed
issues. Buyer and Seller shall then be bound by the Section 338(h)(10)
Allocation Schedule as adjusted to reflect the determination, if any, of the
Accountant (the “Section 338(h)(10) Final Allocation Schedule”). The costs of
the Accountant shall be borne equally by Buyer and Seller. In the event that
Final Net Working Capital is determined, or another adjustment to the Purchase
Price for tax reporting purposes is made under this Agreement or the Employee
Matters Agreement, after delivery of the Section 338(h)(10) Allocation Schedule,
Buyer and Seller shall cooperate to revise such schedule to take into account
the portion of such Final Net Working Capital or such other adjustment to the
Purchase Price allocable to the assets of the Section 338(h)(10) Companies. The
Section 338(h)(10) Final Allocation Schedule shall be used in preparing IRS Form
8883 and each of Seller, on the one hand, and Buyer on the other hand, shall
report the transaction contemplated by this Agreement, and file all Tax Returns,
in each case, for federal, state, local and foreign Tax purposes in accordance
with the Section 338(h)(10) Final Allocation Schedule.

(iii) Neither Buyer nor Seller shall take any action, whether before or after
the Closing, that could reasonably be expected to cause the purchase and sale of
the membership interests of Newco contemplated by this Agreement not to be
treated as described in Sections 3.7 and this Section 6.5(n).

 

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(o) Notwithstanding anything to the contrary in this Agreement, solely for
purposes of this Section 6.5 and Section 4.9(l), and other than for purposes of
any references to “Effective Time”, any references to the Closing and Closing
Date shall refer to the date on which the purchase and sale of all the issued
and outstanding limited liability company interest of Newco actually occurs, and
not the date on which the Closing and Closing Date are deemed to occur under the
penultimate sentence of Section 3.3.

(p) Exclusivity. All issues relating to indemnification for the Tax matters
addressed by Section 6.5(a) and Section 6.5(b) shall be governed exclusively by
the provisions of this Section 6.5 and not by Article VIII, including a breach
of the representations and warranties contained in Section 4.9 (Taxes). For the
avoidance of doubt, the indemnification obligations under Section 6.5(a) and
Section 6.5(b) shall not be subject to the limits on indemnity as described in
Article VIII.

6.6 Employee Matters. Seller and Buyer agree that throughout the Pre-Closing
Reorganization contemplated by this Agreement, the Listed Employees shall
maintain uninterrupted continuity of employment, compensation and benefits, and,
additionally for union-represented employees, uninterrupted continuity of
representation for purposes of collective bargaining and uninterrupted
continuity of coverage under their collective bargaining agreements, in each
case as contemplated by and provided in the Employee Matters Agreement. Buyer’s
obligations and responsibilities in respect of the Business Employees shall be
as set forth in the Employee Matters Agreement.

6.7 Non-Solicitation of Employees.

(a) Except as required by the terms of the Collective Bargaining Agreements or
as otherwise mutually agreed by the parties, Seller agrees that it will not, and
it will cause its Subsidiaries not to, for a period from the Closing Date until
the date that is six (6) months after the Closing Date, (i) solicit or request
any other Person to solicit any Business Employee to leave employment of Buyer
or to accept any other position or employment with Seller Group, except for
general solicitations of employment not targeted toward employees of Buyer or
(ii) employ (directly or indirectly as a contractor) any employee of the Buyer
Group who has voluntarily separated from employment with Buyer or any member of
the Buyer Group within the immediately preceding six (6) months, provided that
after the six (6) month anniversary of the voluntary separation of any such
employee, Seller or any member of the Seller Group may employ or retain as a
contractor such individual in its sole discretion.

(b) Except for those employees who shall be retained and employed by the
Transferred Companies on and following the Closing Date or as otherwise mutually
agreed by the parties, Buyer agrees that for a period from the Closing Date
until the date that is six (6) months after the Closing Date, it will not, and
will cause its Affiliates not to, (i) solicit or request any other Person to
solicit (x) any officer of Seller or any of its Subsidiaries who works in a
business similar to the Transferred Business or who otherwise negotiated or
participated in the transactions contemplated by this Agreement or (y) Seller’s
agents or contractors who are or

 

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have been directly involved in supporting activities relating to the effecting
of the transactions contemplated by this Agreement (such as pre-signing
diligence or pre-closing readiness), provided, that Buyer shall be permitted to
hire the companies that employ such individuals but not the individual agents or
contractors who represented Seller or its Affiliates, to leave such employment
or to accept any other position or employment with Buyer or its Affiliates
except for general solicitations of employment not targeted toward employees of
Seller or any of its Subsidiaries or (ii) employ (directly or indirectly as a
contractor) any employee of the Seller Group who has voluntarily separated from
employment with Seller or any member of the Seller Group within the immediately
preceding six (6) months, provided that after the six (6) month anniversary of
the voluntary separation of any such employee, Buyer or any member of the Buyer
Group may employ or retain as a contractor such individual in its sole
discretion.

6.8 Confidentiality.

(a) Subject to Section 6.9, which shall govern Privileged Information, and the
terms of any Ancillary Document for the period commencing at the Closing and
expiring on the third anniversary of the Closing Date, Seller shall, and shall
cause its Subsidiaries to, treat as confidential and safeguard any and all
information, knowledge and data included as of the Closing in the Transferred
Business to the extent it is related to the Transferred Business (other than
Excluded Assets) other than information, knowledge or data that becomes publicly
available through no breach by Seller of this Agreement (“Buyer Confidential
Information”). Thereafter, Seller shall not intentionally disclose any such
information, knowledge or data without Buyer’s written consent. Nothing herein
shall restrict Seller’s ability to make any disclosures that are required by
applicable Law.

(b) For the period commencing at the Closing and expiring on the third
anniversary of the Closing Date, Buyer shall, and shall cause its Subsidiaries
to, treat as confidential and safeguard any and all information, knowledge and
data relating to the businesses of Seller and its Subsidiaries, other than to
the extent it is related to the Transferred Business (other than Excluded
Assets) as of the Closing, that becomes known to Buyer as a result of the
transactions contemplated by this Agreement or the Ancillary Documents other
than information, knowledge or data that (i) becomes known to Buyer from a
third-party source not known by Buyer to be under an obligation to Seller to
maintain confidentiality; or (ii) becomes publicly available through no breach
by Buyer of this Agreement (“Seller Confidential Information”). Thereafter,
Buyer shall not intentionally disclose any such Seller Confidential Information
without Seller’s written consent. Nothing herein shall restrict Buyer’s ability
to make any disclosures that are required by applicable Law. For the period
commencing at the Closing and expiring on the third anniversary of the Closing
Date, Buyer and its Subsidiaries shall not use any Seller Confidential
Information for any purpose other than in connection with its rights and
obligations under this Agreement or the Ancillary Documents.

(c) Buyer and Seller acknowledge that the confidentiality obligations set forth
herein shall not extend to information, knowledge and data (i) the disclosure of
which is required by applicable Law, (ii) that is publicly available or becomes
publicly available through no act or omission of the party owing a duty of
confidentiality, (iii) that becomes available on a non-confidential basis from a
source other than the party owing a duty of confidentiality so long as such
source is not known by such party to be bound by a confidentiality agreement
with or other obligations of secrecy to the other party or (iv) that can
reasonably be demonstrated to have been independently developed by a party
without reference to or use of the other party’s confidential information.

 

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(d) In the event of a breach of the obligations hereunder by Buyer or Seller,
the other party, in addition to all other available remedies, will be entitled
to seek injunctive relief to enforce the provisions of this Section 6.8 in any
court of competent jurisdiction.

6.9 Privileged Matters.

(a) Each party hereto acknowledges that: (i) each party and its Affiliates has
or may obtain Privileged Information; (ii) there are and/or may be a number of
Litigation Matters affecting both of Buyer and Seller; (iii) both Buyer and
Seller 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 Transferred Business; and (iv) both
Buyer and Seller intend that the transactions contemplated hereby and by the
Agreement and the Ancillary Documents and any transfer of Privileged Information
in connection therewith shall not operate as a waiver of any potentially
applicable privilege.

(b) Following the Closing, each of Buyer and Seller agrees, on behalf of itself
and each of its Subsidiaries, not to disclose or otherwise waive any privilege
attaching to any Privileged Information relating to the Transferred Business
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 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
Buyer 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 Transferred Business (unless
such information relates to matters for which Seller may have indemnification
obligations under this Agreement or the Ancillary Documents). In the event of a
disagreement 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) After the Closing, upon receipt of any subpoena or other compulsory
disclosure notice from a Governmental Entity or otherwise which requests
disclosure of Privileged Information relating to the Transferred Business, to
the extent not prohibited by Law, Seller or Buyer (in the case of information
relating to matters for which Seller may have indemnification obligations under
this Agreement or the Ancillary Documents, or in the case of Privileged
Information not solely related to the Transferred Business and in which Seller
may have an interest), as applicable, shall as promptly as practicable provide
to the other party (following the notice provisions set forth herein) a copy of
such notice, the intended response, and all materials or information 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 disclosing party
shall, at the other party’s expense, cooperate to the extent such other party
seeks to limit such disclosure and take all reasonable steps to resist or avoid
such disclosure, except as otherwise required by a court order requiring such
disclosure.

 

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(d) Nothing in this Section 6.9 shall limit a party’s ability to assert its
rights under this Agreement or the Ancillary Documents in the event of any
dispute between the parties.

6.10 Production of Witnesses. Subject to Section 6.9, after the Closing, each of
Buyer and Seller shall, and shall cause each of its Subsidiaries to, use its
respective reasonable best efforts to make available to Seller or Buyer, as the
case may be, upon reasonable prior written request, such party’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 Transferred Business, as applicable. The reasonable and
documented out-of-pocket costs and expenses incurred in the provision of such
witnesses shall be paid by the party requesting the availability of such
persons.

6.11 Release by Seller and Its Affiliates. Seller, on behalf of itself and its
Affiliates, successors, and assigns (all such Persons, together with Seller, the
“Seller Release Parties”), as of the Closing, hereby releases and forever
discharges Buyer, and its Affiliates, successors and assigns (all such Persons
(including the Transferred Companies), together with Buyer, the “Buyer Release
Parties”), from any and all Liabilities which the Buyer Release Parties may have
or may have had, known or unknown, from the beginning of the world until the
Closing, arising out of or against the Transferred Companies or the Transferred
Assets or the Transferred Business; provided that nothing herein constitutes a
release from, waiver of, or otherwise applies to the terms of this Agreement
(including any matters for which Buyer has indemnification obligations pursuant
to the provisions of this Agreement) or any Ancillary Documents, or any
Liability, Contract or arrangement contemplated by this Agreement or any
Ancillary Document to be in effect after the Closing, or any enforcement
thereof; provided further that, for the avoidance of doubt, with respect to any
Ancillary Document that constitutes an amendment to an existing agreement, the
release herein shall apply to the terms of such existing agreement and any
enforcement thereof for all periods prior to the Closing, unless otherwise
contemplated by such Ancillary Document. Seller, for itself and the Seller
Release Parties, hereby irrevocably covenants to refrain from, directly or
indirectly, asserting any claim or demand, or commencing, instituting or causing
to be commenced or voluntarily aiding, any proceeding of any kind against any
Buyer Release Party, based upon any matter purported to be released hereby.
Seller, for itself and the Seller Release Parties, shall refrain from bringing
any Action for contribution or indemnification from the Buyer Release Parties
(only with respect to the Transferred Companies or as a result of the
transactions contemplated by this Agreement), or otherwise commencing,
instituting or causing to be commenced any Action against any Buyer Release
Party (only as it relates to the Transferred Companies or the transactions
contemplated by this Agreement), for or in respect of any of the Actions set
forth on Buyer Schedule 6.11.

6.12 Release by Buyer and Its Affiliates. Buyer, on behalf of itself and the
Buyer Release Parties, as of the Closing, hereby releases and forever discharges
all Seller Release Parties from any and all Liabilities which the Seller Release
Parties may have or may have had, known or unknown, from the beginning of the
world until the Closing, arising out of or against

 

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the Transferred Companies, the Transferred Assets or the Transferred Business
(other than Excluded Assets or Excluded Liabilities); provided that nothing
herein constitutes a release from, waiver of, or otherwise applies to the terms
of this Agreement (including any matters for which Seller has indemnification
obligations pursuant to the provisions of this Agreement) or any Ancillary
Documents or any Liability, Contract or arrangement contemplated by this
Agreement or any Ancillary Document to be in effect after the Closing, or any
enforcement thereof; provided further that, for the avoidance of doubt, with
respect to any Ancillary Document that constitutes an amendment to an existing
agreement, the release herein shall apply to the terms of such existing
agreement and any enforcement thereof for all periods prior to the Closing,
unless otherwise contemplated by such Ancillary Document. Buyer, for itself and
the Buyer Release Parties, hereby irrevocably covenants to refrain from,
directly or indirectly, asserting any claim or demand, or commencing,
instituting or causing to be commenced or voluntarily aiding, any proceeding of
any kind against any Seller Release Party, based upon any matter purported to be
released hereby.

6.13 Customer Agreements.

(a) With respect to Master Agreements, Seller, Buyer and their respective
Subsidiaries will use commercially reasonable efforts to obtain prior to the
Closing or, if not obtained, will use commercially reasonable efforts to obtain
within six (6) months following the Closing Date (other than for Federal
Government Contracts for which there will be no six (6) month limit on the
parties’ obligations to use commercially reasonable efforts to obtain a Federal
Government novation), from the counterparty to each Master Agreement, any
consent that is required to separate the portion of such Master Agreement that
provides for the delivery of ILEC Services or other goods or services provided
by the Transferred Business, it being understood that neither Seller nor Buyer
or any of their respective Subsidiaries shall be required to grant any
consideration to any counterparty to such Master Agreement. Buyer and Seller
shall cooperate and work in good faith to separate the applicable portion of any
Master Agreement hereunder. The Contract constituting the separated portion of
any Master Agreement that provides for the delivery of ILEC Services or other
goods or services provided by the Transferred Business as described in the
preceding sentence shall constitute a “Customer Contract” and “Assigned
Contract” under this Agreement, it being understood that in no event shall those
portions of any Master Agreement providing for the delivery of goods and
services that do not constitute ILEC Services or other goods or services
provided by the Transferred Business be considered a Customer Contract or any
Assigned Contract.

(b) Buyer agrees that, to the extent Tariffs or agreements implementing Tariffs
contain rates and charges or other terms and conditions based on volume of
service, amount of purchase or spend, or similar volume commitments by the
customers which are party to agreements implementing such Tariffs with customers
served by Seller or its Affiliates under Master Agreements and the agreements of
customers who do not provide consents under this Agreement (the “Volume
Commitments”), Buyer will, for the term of each such Master Agreement, reduce
such Volume Commitments pro-rata, without a change in rates and charges or other
terms and conditions under such Tariffs or agreements, to reflect the fact that
the customers who are party to such an Agreement or such Affiliates may, after
the Closing, take service from both Affiliates of Seller and Buyer and not from
Affiliates of Seller or Buyer alone. The pro-rata reduction shall be equal to or
exceed the amount of the Volume Commitment

 

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provided by Affiliates of Seller after the Closing. By way of example, and not
by limitation, if after the Closing, such customer or Affiliate purchased 75% of
a Volume Commitment from Buyer and 25% of a Volume Commitment from Affiliates of
Seller, then Buyer would reduce the Volume Commitment by 25% in affected Tariffs
and agreements implementing such Tariffs. Buyer and Seller shall work together
to make all filings and take all other actions as may be required by applicable
Laws to make the pro-rata reductions of Volume Commitments adopted or made by
Buyer under this Section 6.13(b) legally effective no later than the Closing
Date and each party shall bear its own costs associated with making its required
filings.

(c) Buyer and Seller agree to use commercially reasonable efforts after Closing
to finalize a United States Federal Government novation (per Federal Acquisition
Regulation, Subpart 42.12) to have the Federal Government recognize the
transfer, as a result of the transactions contemplated by this Agreement, to the
Transferred Companies (and/or Buyer) of any: (i) Contracts between Seller and
its Subsidiaries and U.S. Federal Government agencies which are exclusively for
the provision of ILEC Services or the Transferred Business in the States if
there remain continuing obligations or rights under them or the Federal
Government has not closed out the Contract(s) or (ii) portions of Master
Agreements between Seller and its Subsidiaries and the United States Federal
Government agencies to the extent related to the provision of ILEC Services or
the Transferred Business in the States if there remain continuing obligations or
rights under them or the Federal Government has not closed out the Contract(s).

6.14 Insurance. Following the Closing, to the extent that (i) any insurance
policies owned or controlled by any member of the Seller Group and provided by a
Person who is not an Affiliate of Seller (collectively, “Seller Insurance
Policies”) cover any Assumed Liability or Loss of any of the Transferred
Companies resulting from, arising out of, based on or relating to, occurrences
prior to the Closing and (ii) the Seller Insurance Policies permit claims to be
made thereunder with respect to the Assumed Liabilities or such Losses resulting
from, arising out of, based on or relating to, occurrences prior to the Closing
(the “Company Claims”), at Buyer’s cost and expense (including any increased
retrospective premiums, deductible and other retention amounts and any other
reasonable out-of-pocket costs and expenses related to such Company Claims),
Seller shall, and shall cause the other members of Seller Group to, cooperate
with Buyer or its Subsidiaries in submitting Company Claims (or pursuing claims
previously made) on behalf of Buyer or such Subsidiary, as applicable, under any
Seller Insurance Policy; provided, however, that Buyer acknowledges and agrees
that (A) none of Seller or any member of the Seller Group shall be responsible
for any Assumed Liabilities or Losses that are “self-insured” by Seller or any
member of Seller Group as of immediately prior to the Closing, that are within
any applicable deductible or retention amounts under any Seller Insurance Policy
or that are insured by any captive insurer, (B) none of Seller or any member of
the Seller Group shall be liable to Buyer or any of its Subsidiaries (including,
after the Closing, the Transferred Companies) for any losses or other amounts
hereunder if any insurance company that has issued any Seller Insurance Policy
fails to pay such losses or amounts as a result of, or in connection with, the
filing or declaration of, or institution of proceeding for, any type of
bankruptcy (whether voluntary or involuntary), insolvency or the commencement of
any similar action or proceeding or otherwise, (C) the Seller Group may, at any
time, without liability or obligation to Buyer or its Subsidiaries, including,
after the Closing, the Transferred Companies, amend, commute, terminate,
buy-out, extinguish liability under or otherwise modify any Seller Insurance
Policy and (D) following the Closing, the Transferred Companies shall continue
to be

 

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responsible for payment of any assessments made by any Governmental Entity
associated with any Assumed Liabilities and none of Seller or any member of the
Seller Group shall be responsible for the payment or reimbursement of any such
assessments. Nothing in this Section 6.14 shall relieve Buyer or any of its
Subsidiaries (including, after the Closing, the Transferred Companies) from any
obligations with respect to the Assumed Liabilities or any other Losses. Nothing
in this Section 6.14 affects rights of the Buyer Indemnified Parties to be
indemnified under Section 8.3. This Agreement shall not be construed to waive
any right or remedy of any member of Seller Group in respect of any Seller
Insurance Policy.

6.15 Financing.

(a) Subject to the terms and conditions of this Agreement, Buyer shall use its
reasonable best efforts (unless, with respect to any action, another standard
for performance is expressly provided for herein) to obtain the Committed
Financing (taking into account any reductions thereof pursuant to
Section 6.15(b)(I)(A)) on the terms and conditions set forth in the Commitment
Letter (taking into account the anticipated timing of the Marketing Period
Termination Date), and Buyer shall not permit any amendment or modification to
be made to, or any waiver of any provision under, the Commitment Letter or the
Fee Letter (or following entry into definitive documents relating to the
Committed Financing), such definitive documents) if such amendment, modification
or waiver (A) with respect to the Commitment Letter or the Fee Letter or such
definitive documents, as applicable, reduces (or would reasonably be expected to
have the effect of reducing) the aggregate amount of the Committed Financing
(including by increasing the amount of fees to be paid or original issue
discount unless the Committed Financing is increased by a corresponding amount
or the Committed Financing is otherwise made available to fund such fees or
original issue discount) from that contemplated in the Commitment Letter or such
definitive documents (other than any reductions permitted pursuant to
Section 6.15(b)(I)(A)), or (B) imposes new or additional conditions or otherwise
expands, amends or modifies any of the conditions to the Committed Financing, in
a manner that would, in the case of this subclause (B), reasonably be expected
to (x) prevent or materially delay the Closing or the availability of the
Committed Financing on the Closing Date or (y) adversely impact the ability of
Buyer to enforce its rights against the other parties to the Commitment Letter
in any material respect (provided that, subject to compliance with the other
provisions of this Section 6.15, Buyer may amend the Commitment Letter or such
definitive documents to add additional lenders, arrangers and agents). Buyer
shall promptly deliver to Seller copies of any such amendment, modification or
replacement. For purposes of this Section 6.15 and Section 5.8 and the
definitions of, and references to, the Financing, any Committed Financing
Source, any Financing Source and the Marketing Period Termination Date,
references to “Committed Financing” shall include the financing contemplated by
the Commitment Letter as permitted by this Section 6.15(a) to be amended,
modified or replaced and references to “Commitment Letter” shall include such
document as permitted by this Section 6.15(a) to be amended, modified or
replaced.

(b) Buyer shall (I) use its reasonable best efforts (taking into account the
anticipated timing of the Marketing Period Termination Date) to (A) maintain in
effect the Commitment Letter in accordance with the terms and subject to the
conditions thereof, provided that, subject to clause (IV) of this sentence and
to the penultimate sentence of this Section 6.15(b), Buyer may, without Seller’s
consent, reduce the amount of the Committed Financing

 

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under the Commitment Letter to the extent that the remaining amount of the
Committed Financing under the Commitment Letter after such reduction, taken
together with the net cash proceeds of one or more offerings, placements, sales
and/or other issuances of debt and/or equity securities of or term loans to
Buyer that are placed into escrow for use solely in paying amounts payable by
Buyer at the Closing pursuant to this Agreement, is no less than $10,540,000,000
less the Debt Obligations, (B) negotiate and enter into definitive agreements
with respect to the Committed Financing contemplated by the Commitment Letter on
the terms and conditions contained in the Commitment Letter (or on such other
terms not materially less favorable to Buyer (or its Subsidiaries), as
determined in the reasonable judgment of Buyer after consultation with Seller,
than the terms and conditions set forth in the Commitment Letter and that do not
materially impair the ability of Buyer to fund its obligations at the Closing
Date), (C) satisfy all conditions to funding in the Commitment Letter and such
definitive agreements with respect thereto that are within its control and to
consummate the Committed Financing at or prior to the Closing Date, as
applicable, including using its reasonable best efforts to cause the lenders and
the other persons committing to fund the Committed Financing on the Closing Date
(the “Committed Financing Sources”), (D) enforce its rights under the Commitment
Letter and any definitive agreements with respect thereto and (E) comply with
its obligations under the Commitment Letter, (II) not use any net proceeds
received and placed in escrow as contemplated in this Section 6.15(b) from any
Financing other than to fund amounts required to be paid by Buyer pursuant to
this Agreement at Closing and fees and expenses related to the Financing and the
transactions contemplated hereby, (III) maintain cash on hand or access to other
liquid sources of funding in an amount sufficient to make all payments required
to be made by Buyer related to the transactions contemplated hereby, including
any Required Payment Amount (the amount of which, solely for this purpose, shall
be estimated in the good faith judgment of Buyer from time to time, to the
extent such amount is not finally determined) and (IV) not take any action that
would cause the amount of the Committed Financing to be reduced to the extent
that the remaining amount of the Committed Financing under the Commitment Letter
after such reduction, taken together with the net cash proceeds of one or more
offerings, placements, sales and/or other issuances of debt and/or equity
securities of or term loans to Buyer, as contemplated by the Commitment Letter
and the related fee letter, that are placed into escrow (which escrow complies
with the penultimate sentence of this Section 6.15(b)) for use solely in paying
amounts payable by Buyer at the Closing pursuant to this Agreement, is less than
$10,540,000,000 less the Debt Obligations. The conditions for the release of
funds from any escrow referred to in this Section 6.15(b) shall include no new,
additional or modified conditions beyond those applicable to the Committed
Financing to the extent that such new, additional or modified conditions would
reasonably be expected to prevent or materially delay the Closing or the
availability of the escrowed funds on the Closing Date.

(c) Without limiting the generality of the foregoing, Buyer shall give Seller
prompt notice (x) of any breach or default by any party to the Commitment Letter
or definitive agreements relating to the Committed Financing of which Buyer has
Knowledge, (y) of the receipt of any notice or other communication, in each case
from any Committed Financing Source with respect to any actual or potential
material breach, material default, termination or repudiation by any party to
the Commitment Letter or definitive agreements relating to the Committed
Financing of any provisions of the Commitment Letter or definitive agreements
relating to the Committed Financing and (z) if at any time for any reason Buyer
believes that it will not be able to obtain all or any portion of the Committed
Financing on the terms and

 

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conditions, in the manner or from the Committed Financing Sources contemplated
by the Commitment Letter or definitive agreements relating to the Committed
Financing. As soon as reasonably practicable after the date Seller delivers to
Buyer a written request, Buyer shall provide any information reasonably
requested by Seller relating to any circumstance referred to in clause (x),
(y) or (z) of the immediately preceding sentence. Upon the occurrence of any
circumstance referred to in clause (x), (y) or (z) of the second preceding
sentence resulting in any portion of the Committed Financing becoming
unavailable, or if any portion of the Committed Financing otherwise becomes
unavailable on the terms and conditions (including the flex provisions)
contemplated in the Commitment Letter and Fee Letter, and such portion is
reasonably required to effect the Closing, Buyer shall use its reasonable best
efforts to arrange and obtain in replacement thereof alternative financing
(“Alternative Financing”) from alternative sources in an amount at least equal
to the Committed Financing or such unavailable portion thereof, as the case may
be (taking into account any reductions thereof pursuant to
Section 6.15(b)(I)(A)), with terms and conditions not materially less favorable
to Buyer (or its Subsidiaries), as determined in the reasonable judgment of
Buyer after consultation with Seller, than the terms and conditions set forth in
the Commitment Letter and the Fee Letter (including the flex provisions therein)
and as promptly as reasonably practicable following the occurrence of such
event. For the avoidance of doubt, in no event shall the reasonable best efforts
obligation set forth in this Section 6.15 be construed so as to require Buyer or
any of its Affiliates to (i) agree to, or accept, economic terms that are
materially less favorable to Buyer, as determined in the reasonable judgment of
Buyer after consultation with Seller, than the economic terms contained in the
Commitment Letter and the Fee Letter (assuming the application of the “market
flex” provisions) or (ii) seek any equity investment or any offering, placement,
sale or other issuance of any equity securities (it being understood and agreed
that any Alternative Financing shall be permitted to be in the form of any such
equity financing). Buyer shall deliver to Seller true and complete copies of all
written agreements, arrangements or contracts (including any side letters or
(subject to customary redactions) fee letters) pursuant to which any such
alternative source shall have committed to provide any Alternative Financing.

(d) From and after the date of this Agreement, and through the earliest of the
Closing, the date on which this Agreement is terminated in accordance with
Article IX and the completion of the Committed Financing, Seller shall, and
Seller shall cause each of its Subsidiaries and each of its and their
representatives to, use its respective reasonable best efforts to provide all
cooperation that is necessary, customary or advisable and reasonably requested
by Buyer to assist Buyer in the arrangement of the Committed Financing and any
public or private offering, sale, placement or other issuance of debt and/or
equity securities undertaken in replacement of all or a portion of the Committed
Financing (the “Securities Financing” and, together with the Committed
Financing, the “Financing”) for the purposes of financing the Purchase Price and
any other amounts required to be paid in connection with the consummation of the
transactions contemplated hereby and all related fees and expenses of Buyer (it
being acknowledged and agreed by Buyer that the receipt of such Financing is not
a condition to the Closing), including (A) participating in a reasonable number
of meetings, road shows, rating agency sessions and drafting sessions, and
participating in reasonable and customary due diligence, (B) furnishing Buyer
and the Committed Financing Sources with the Required Information, (C) assisting
Buyer and the Committed Financing Sources in the preparation of (1) offering
documents for the Financing and (2) materials for rating agency presentations,
bank confidential information memoranda, pro forma financial statements and
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connection with the Financing, (D) reasonably cooperating with the marketing
efforts for any portion of the Financing, (E) using its reasonable efforts to
cause its independent accountants to provide assistance and cooperation in the
Financing, including (1) participating in a reasonable number of drafting
sessions and accounting due diligence sessions, (2) providing any necessary
customary consents to use or file with the SEC their audit reports relating to
the Transferred Business and (3) providing any necessary customary “comfort
letters,” (F) causing the Transferred Companies to execute and deliver customary
definitive financing documents to the extent reasonably requested by Buyer and
otherwise facilitating the pledging of collateral reasonably necessary to secure
the Financing; provided that the effectiveness of any definitive documentation
executed by the Transferred Companies or the pledging of collateral by the
Transferred Companies shall be subject to the occurrence of the Closing and
(G) furnishing Buyer and any Committed Financing Sources promptly, and in any
event at least five (5) Business Days prior to the Closing Date, with all
documentation and other information required by any Governmental Entity with
respect to the Financing under applicable “know your customer” and anti-money
laundering rules and regulations, including the USA PATRIOT Act of 2001, as
amended. Nothing herein shall require such cooperation to the extent it would
(A) unreasonably disrupt the conduct of the business or operations of Seller or
its Subsidiaries, (B) require Seller or any of its Subsidiaries to pay any
commitment or other similar fee or incur any other cost or expense that is not
reimbursed by Buyer or otherwise incur any liability or give any indemnities, in
connection with the Financing; provided, however, that Seller shall be
responsible for such fees, costs and expenses incurred by Seller in connection
with preparing and delivering any of the Financial Statements provided for in
Sections 6.18(a) or 6.18(b), or (C) require Seller or any of its Subsidiaries to
take any action that would reasonably be expected to conflict with, or result in
any violation or breach of, or default (with or without notice or lapse of time,
or both) under, the certificate of incorporation or by-laws or other comparable
organizational documents of Seller or any of its Subsidiaries, any applicable
Laws or any material Contract. In addition, nothing herein shall require Seller
or any of its Subsidiaries or any of its representatives to deliver legal
opinions. In furtherance of and without limitation to the second immediately
preceding sentence, nothing herein shall require Seller or any of its
Subsidiaries to, enter into any agreement (or require their respective boards of
directors or equivalent governing bodies to approve any such agreement) in
connection with the Financing. Except for the fees, costs and expenses incurred
by Seller in connection with preparing and delivering any of the Financial
Statements provided for in Sections 6.18(a) or 6.18(b), Buyer shall promptly,
upon request by Seller, reimburse Seller for all reasonable and documented
out-of-pocket third party costs and expenses (including reasonable attorneys’
fees) incurred by Seller or any of its Subsidiaries or their respective
representatives in connection with the Financing and shall indemnify and hold
harmless Seller, its Subsidiaries and their respective representatives from and
against any and all losses, damages, claims, costs or expenses suffered or
incurred by any of them in connection with the arrangement of the Financing and
any information used in connection therewith (other than arising from fraud,
intentional misrepresentation, misstatements or omissions on the part of Seller
or its Affiliates).

6.16 Ancillary Documents.

(a) At the Closing, Buyer shall, and shall cause each of its applicable
Subsidiaries to, execute and deliver each Ancillary Document, and Seller shall,
and shall cause each of its applicable Subsidiaries to, execute and deliver each
Ancillary Document to which it is a party.

 

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(b) Except as expressly provided in this Agreement, in any Ancillary Document or
in connection with providing any service under any Ancillary Document, (i) all
data processing, accounting, insurance, banking, personnel, legal,
communications, sales and marketing and other services provided to any member of
the Seller Group by any of the Transferred Companies, or provided to the
Transferred Companies by any member of the Seller Group and (ii) all
Intellectual Property licenses granted by any member of the Seller Group to any
of the Transferred Companies, including any agreements or understandings
(written or oral) with respect thereto, will terminate as of the Closing.

6.17 Assistance with Network Element Software; Seller Owned Software.

(a) Prior to Closing, except to the extent Buyer instructs Seller otherwise with
respect to any Software license, the parties shall reasonably cooperate to seek
any consents required in connection with the assignment to Newco of the Software
licenses between Seller or any of its Affiliates (other than the Transferred
Companies) and a third party for Network Element Software used in the
Transferred Business, provided that, if any such licenses were obtained pursuant
to a master or enterprise license agreement that benefits both the Transferred
Business and one or more of Seller’s other businesses, the parties shall
reasonably cooperate to seek consent to assign only the portions of such
licenses that are applicable to the Transferred Business (collectively, the
“Network Element Software Licenses”). If consent for assignment of any Network
Element Software License cannot reasonably be obtained, Seller shall not be
responsible for providing an alternative arrangement for the use of the
applicable Network Elements or Network Element Software (other than by bearing
its portion of the NES Consideration as set forth in Section 6.17(c)).

(b) Buyer shall be responsible for negotiating and obtaining its own Contracts
with third parties to replace any Network Element Software Licenses in respect
of which, following the commercially reasonable efforts of the parties, consent
for assignment cannot be obtained. Seller shall use reasonable best efforts to:
(i) identify all Network Element Software and third party licensors of Network
Element Software as soon as reasonably practicable after the date hereof and
(ii) provide (A) a preliminary schedule of such information to Buyer within two
(2) months after the date hereof and (B) a substantially final schedule of such
information to Buyer within six (6) months after the date hereof. Buyer shall
use such schedules to (x) obtain its own Contracts for such Network Element
Software (to the extent necessary in accordance with Section 6.17(a)),
(y) notify Seller of any consents for which it will not require Seller’s
cooperation pursuant to Section 6.17(a) and (z) obtain appropriate maintenance
services with respect to the Network Element Software.

(c) Each of Seller and Buyer shall bear fifty percent (50%) of any consent or
one-time license fees required to be paid to (i) any third party vendor in
connection with the assignment of any Network Element Software Licenses pursuant
to Section 6.17(a) and (ii) any third party vendor in connection with Buyer’s
entry into any Contracts to replace any Network Element Software Licenses
pursuant to Section 6.17(b) (collectively, the “NES Consideration”) until the
aggregate of all such NES Consideration equals $5,000,000 (five million
dollars). Buyer shall bear one hundred percent (100%) of the portion of the NES
Consideration that exceeds $5,000,000 (five million dollars).

 

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(d) From and after the date hereof until such date that is five (5) years after
the Closing Date, to the extent Buyer identifies any Seller Owned Software
installed on a Network Element that is necessary for the operation of the
Network Element, as operated as of the Closing, then Seller and Buyer shall
negotiate in good faith, or amend the Software License Agreement to include, a
perpetual, royalty-free license to such Seller Owned Software, on an “as-is,
where-is” basis, solely for use as necessary for the operation of the Network
Element in the conduct of the Transferred Business and solely on the Network
Elements on which such Seller Owned Software was installed as of the Closing.

(e) From and after the date hereof until such date that is five (5) years after
the Closing Date, to the extent Buyer identifies any Seller Owned Software
(other than Seller Owned Software to which Buyer is entitled to a license
pursuant to Section 6.17(d)) that is unique to Seller and necessary for the
delivery of services to customers of the Transferred Business as conducted as of
the Closing, then Seller and Buyer shall negotiate in good faith, or amend the
Software License Agreement to include, a perpetual, royalty-free license to such
Seller Owned Software, on an “as-is, where-is” basis, solely for use as
necessary for the conduct of the Transferred Business and as such Seller Owned
Software was used in the Transferred Business as of the Closing.

(f) The parties acknowledge and agree that (i) Seller Owned Software shall not
be unique to Seller or deemed to be unique to Seller, for purposes of
Section 6.17(e), if it is reasonably practicable for Buyer to replace such
Seller Owned Software with third party Software that is generally or
commercially available and, if necessary, is customizable for use in the
Transferred Business, (ii) neither Section 6.17(d) nor Section 6.17(e) shall
apply to any modules, scripts, applications, components or sub-categories of the
SLA Licensed Software that are not expressly set forth, as of the date hereof,
in Schedule A to the Software License Agreement and (iii) Seller shall have no
responsibility to provide or license (as applicable) to Buyer or any of its
Affiliates any maintenance, support, training, revisions, updates, upgrades,
modifications, enhancements, new versions, bug fixes, patches or any other
assistance of any kind for any Seller Owned Software licensed pursuant to
Section 6.17(d) or 6.17(e), unless expressly negotiated and agreed pursuant to a
separate Contract between the parties or any of their respective Affiliates.

(g) From the Closing Date until the date that is five (5) years after the
Closing Date, Seller, on behalf of itself and its Affiliates, hereby covenants
not to sue or commence any other legal proceeding against the Buyer or its
Affiliates (including the Transferred Companies) due to the presence, on any
Transferred Assets as of the Closing, of any Seller Owned Software to which
Buyer and its Affiliates have not been granted a license, provided that, upon
learning of any such Seller Owned Software, Buyer promptly either (i) requests
and obtains a license for such Seller Owned Software from Seller pursuant to
Section 6.17(d) or Section 6.17(e) or (ii) deletes such Seller Owned Software
from the applicable Transferred Assets, at Buyer’s expense, and certifies to
Seller in writing that such deletion has been completed.

 

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6.18 Financial Information.

(a) At Seller’s sole cost and expense, Seller shall (i) deliver to Buyer by
March 31, 2015 audited combined statements of assets, liabilities and parent
funding of the Transferred Business, and the related audited combined statements
of operations, cash flows and parent funding on an historical basis taking into
account adjustments required by the Exchange Act or the Securities Act and
prepared on a “predecessor” basis (together with a Narrative Report for such
period and an unqualified report thereon of Seller’s independent accountants
that expressed the opinion on the Newco Audited Financial Statements; provided,
that the inclusion of explanatory language in such accountant’s report
describing the special purpose nature of such financial statements, without
more, will not make such report qualified) as of and for the year ending
December 31, 2014 (such audited combined financial statements together with any
reports related thereto, the “Audited 2014 Financial Statements”), (ii) unless
the Closing has occurred prior to May 12, 2015, deliver to Buyer as soon as
reasonably practicable but in any event no later than May 15, 2015 unaudited
combined statements of assets, liabilities and parent funding of the Transferred
Business, and the related combined statements of operations, cash flows and
parent funding (reviewed in accordance with SAS 100 by Seller’s independent
accountants that expressed the opinion on the Newco Audited Financial
Statements) as of and for the three months ended March 31, 2015 and the three
months ended March 31, 2014 on an historical basis and in compliance with
Regulation S-X and prepared on a “predecessor” basis (together with a Narrative
Report for such period), (iii) unless the Closing has occurred prior to
August 8, 2015, deliver to Buyer as soon as reasonably practicable but in any
event no later than August 14, 2015 the unaudited combined statements of assets,
liabilities and parent funding of the Transferred Business, and the related
combined statements of operations, cash flows and parent funding (reviewed in
accordance with SAS 100 by Seller’s independent accountants that expressed the
opinion on the Newco Audited Financial Statements) as of and for the three and
six months ended June 30, 2015 and the three and six months ended June 30, 2014
on an historical basis and in compliance with Regulation S-X and prepared on a
“predecessor” basis (together with a Narrative Report for such period), and
(iv) unless the Closing has occurred prior to November 7, 2015, deliver to Buyer
as soon as reasonably practicable but in any event no later than November 13,
2015 the unaudited combined statements of assets, liabilities and parent funding
of the Transferred Business, and the related combined statements of operations,
cash flows and parent funding (reviewed in accordance with SAS 100 by Seller’s
independent accountants that expressed the opinion on the Newco Audited
Financial Statements) as of and for the three and nine months ended
September 30, 2015 and the three and nine months ended September 30, 2014 on an
historical basis and in compliance with Regulation S-X and prepared on a
“predecessor” basis (together with a Narrative Report for such period) (together
with such interim consolidated financial statements delivered pursuant to
clauses (ii) and (iii) above, the “Interim 2015 Financial Statements”);
provided, however, that if the Closing has not occurred (A) prior to
February 29, 2016, Seller shall also deliver to Buyer as soon as reasonably
practicable but in any event no later than March 30, 2016 audited combined
statements of assets, liabilities and parent funding of the Transferred
Business, and the related audited combined statements of operations, cash flows
and parent funding (together with an unqualified report of Seller’s independent
accountants thereon; provided, that the inclusion of explanatory language in
such accountant’s report describing the special purpose nature of such financial
statements, without more, will not make such report qualified) of the
Transferred Business for the year ending December 31, 2015 on an historical
basis and in compliance with Regulation S-X and prepared on a “predecessor”
basis (together with a Narrative Report for such period) or (B) with

 

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respect to any fiscal quarter of Seller ending after December 31, 2015, Seller
shall also deliver to Buyer as soon as reasonably practicable but in any event
no later than the date that is 45 days after the end of any such fiscal quarter
(provided that such date is prior to the Closing Date) unaudited combined
statements of assets, liabilities and parent funding of the Transferred
Business, and the related combined statements of operations, cash flows and
parent funding (reviewed in accordance with SAS 100 by Seller’s independent
accountants that expressed the opinion on the Newco Audited Financial
Statements) as of and for the applicable fiscal period of 2015 on an historical
basis taking into account adjustments required by the Exchange Act or the
Securities Act and prepared on a “predecessor” basis (together with a Narrative
Report for such period) (the financial statements referred to in subclauses
(A) and (B) of this sentence, together with the Audited 2014 Financial
Statements and the Interim 2015 Financial Statements, the “Financial
Statements”). If requested by Buyer in writing either prior to the Closing Date
or following the Closing Date for a period of one year, Seller shall, as
promptly as practicable (and in any event within fifteen (15) Business Days) and
at Buyer’s expense, deliver to Buyer any required adjustments and/or supporting
documentation relating to the Newco Financial Statements and/or the Financial
Statements as Buyer may reasonably require in connection with the Financing or
with its reporting obligations under the Securities Act and the Exchange Act.

(b) To the extent the Financial Statements provided above do not include
transaction(s) contemplated by the Pre-Closing Reorganization, Seller will
prepare, at its expense, a schedule that shows the pro forma effects of the
Pre-Closing Reorganization and reconciles any applicable adjustments to the
related Financial Statements as a result of the Pre-Closing Reorganization. To
the extent pro forma Financial Statements are prepared, Ernst & Young LLP will
be engaged, at Buyer’s expense, to perform procedures and deliver a report on
such procedures to Buyer. Seller shall deliver the applicable pro forma schedule
to Buyer no later than seven (7) days following the date that Seller delivers
the corresponding Financial Statements pursuant to Section 6.18(a).

(c) Following the Closing Date for a period of one year, Seller shall, at
Buyer’s expense, provide Buyer with such financial information, on a historical
basis, in compliance with Regulation S-X and prepared on a “predecessor” basis,
from and after January 1, 2014 through the Closing for which quarterly financial
statements were not previously provided to Buyer as Buyer may reasonably request
with respect to the Transferred Business in connection with its reporting
obligations under the Securities Act and the Exchange Act.

6.19 Intellectual Property Matters.

(a) Except as expressly provided in this Agreement or any Ancillary Document, it
is expressly agreed that none of Buyer or any of its Subsidiaries (including,
after the Closing, the Transferred Companies) is purchasing, acquiring,
licensing or otherwise obtaining under this Agreement or any Ancillary Document
any right, title or interest (whether express or implied) in, to or under
(i) the trademarks Verizon, “Verizon” Logo, “V” Logo, VZ, FIOS, GTE, MCI, NYNEX
and BELL ATLANTIC or any other Trademarks that are owned or controlled by Seller
or any of its Subsidiaries, or any derivation, variation, translation or
adaptation thereof, or any Trademarks that are confusingly similar to, including
or embodying any of the foregoing (collectively, the “Seller Trademarks”), or
(ii) any other Intellectual Property owned by or licensed to Seller or any of
its Subsidiaries (including, prior to the Closing, the Transferred Companies)
(the foregoing, together with the Seller Trademarks, the “Seller IP”).

 

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(b) Buyer, for itself and its Subsidiaries (including, after the Closing, the
Transferred Companies), acknowledges and agrees that, (i) as between the parties
hereto, Seller or its Subsidiaries own or have the exclusive right to use and
display any and all of the Seller Trademarks and except as otherwise expressly
provided in this Section 6.19 or in any Ancillary Document, neither Buyer nor
any of its Subsidiaries (including, after the Closing, the Transferred
Companies) shall, as of the Closing, have any rights in or to the Seller
Trademarks and (ii) neither Buyer nor any of its Subsidiaries (including, after
the Closing, the Transferred Companies) shall contest the use, ownership or
validity of any rights of Seller or its Subsidiaries in or to the Seller IP that
exists as of the Closing.

(c) Except as expressly provided in this Agreement or any Ancillary Document,
Buyer shall, and shall cause its Subsidiaries (including, after the Closing, the
Transferred Companies) to, cease and discontinue as of the Closing any and all
uses of any and all Seller IP at the expense of Buyer or its Subsidiaries
(including, after the Closing, the Transferred Companies). Notwithstanding the
foregoing sentence, Buyer and its Subsidiaries (including, after the Closing,
the Transferred Companies) shall have a limited right to utilize existing
stationery, business cards, signage, vehicles, advertising materials, inventory,
packaging, products, equipment, hard hats, tools, tool boxes, kits (safety and
others), displays, manuals, forms, service and training literature, bulletins,
sales literature, websites, email, computer software, Transferred IT Systems,
and other similar materials bearing the Seller Trademarks (but excluding all
credit and collection materials and notices) (“Seller Materials”) following the
Closing in the administration of the Transferred Business as conducted
immediately prior to the Closing Date until the existing supply of such items is
depleted or until the date that is one hundred twenty (120) days following the
Closing Date (such one hundred twenty (120) day period, the “Phaseout Period”),
whichever occurs first; provided, further, that notwithstanding the foregoing,
Buyer and its Subsidiaries (including, after the Closing, the Transferred
Companies) shall (i) have a period of up to one hundred eighty (180) days
following the Closing Date to remove the Seller Trademarks from signs and
vehicles to the extent Buyer and its Subsidiaries (including, after the Closing,
the Transferred Companies) undertake commercially reasonable efforts immediately
to remove such Seller Trademarks from such signs and vehicles, and (ii) use
commercially reasonable efforts to remove the Seller Trademarks from tools,
equipment, manuals and, except as expressly set forth in Section 6.19(d)(ii),
other written materials or other assets that are used solely for internal
purposes and are not visible by the public, on or prior to the date that is two
hundred seventy (270) days following the Closing Date, or otherwise promptly
after becoming aware of any Seller Trademarks on any of the foregoing items.
Subject to the foregoing sentence, on or prior to the expiration of the Phaseout
Period (or the timeframes set forth in Section 6.19(c)(i)-(ii), as applicable),
Buyer shall, and shall cause its Subsidiaries (including, after the Closing, the
Transferred Companies) to, destroy, or to remove, strike over, cover over or
otherwise eliminate all Seller Trademarks from, all Seller Materials in their
possession and to send a written statement to Seller confirming that Buyer has,
and has caused its Subsidiaries to have, exhausted or destroyed all such Seller
Materials or eliminated all Seller Trademarks therefrom. The foregoing permitted
uses in this Section 6.19(c) are subject to (x) compliance by Buyer and its
Subsidiaries with the reasonable quality control requirements and guidelines in
effect for the Seller Trademarks immediately prior to the Closing, and (y) the

 

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conduct of the Transferred Business at a standard and with skill that is at
least commensurate with the standard and skill at and with which the Transferred
Business was conducted immediately prior to the Closing. Buyer and its
Subsidiaries (including, after the Closing, the Transferred Companies) agree
that any use of the Seller Trademarks in the operation of the Transferred
Business after the Closing, as permitted by this Section 6.19, shall be provided
in accordance with all applicable Laws, and Buyer and its Subsidiaries shall not
use the Seller Trademarks in a manner that would reasonably be expected to
reflect adversely upon Seller’s good name. Buyer and its Subsidiaries
(including, after the Closing, the Transferred Companies), shall promptly cease
use of the Seller Trademarks in connection with any goods or services whose
nature or quality is not substantially the same quality of such goods and/or
services prior to the Closing.

(d) Notwithstanding the foregoing Section 6.19(c), nothing therein shall
(i) require Buyer or its Subsidiaries to take any steps with respect to, or to
destroy, any products (including any packaging), or any service, training,
advertising or other related materials that have already been placed on the
market or otherwise distributed in the ordinary course of conducting the
Transferred Business as conducted immediately prior to the Closing,
(ii) preclude Buyer or its Subsidiaries from making any reference to the Seller
Trademarks in internal historical, tax, employment or similar records or for
purposes of prospectus and similar disclosures as are reasonably necessary and
appropriate to describe the historical relationship of the Transferred Business
with Seller and its Affiliates, or (iii) preclude Buyer or its Subsidiaries
(including, after the Closing, the Transferred Companies) from making use of the
Seller Trademarks in a non-trademark manner for purposes of conveying to
customers or the general public of the change in ownership or that the name of
the business has changed, provided that the use described in this
Section 6.19(d)(iii) shall exist for no more than one hundred twenty (120) days
after Closing.

(e) Any and all goodwill arising from or in connection with the use of the
Seller Trademarks by Buyer or its Subsidiaries (including, after the Closing,
the Transferred Companies) shall inure to the benefit of Seller. Buyer, for
itself and its Subsidiaries (including, after the Closing, the Transferred
Companies), shall indemnify and hold harmless Seller and its Affiliates from and
against any and all Losses arising from Buyer’s and its Subsidiaries’
(including, after the Closing, the Transferred Companies’) use of the Seller
Trademarks during the Phaseout Period.

(f) The parties hereto acknowledge that any damage caused to Seller or any of
its Affiliates by reason of the breach by Buyer or any of its Subsidiaries
(including, after the Closing, the Transferred Companies) of this Section 6.19
would cause irreparable harm that could not be adequately compensated for in
money damages alone; therefore, each party agrees that, in addition to any other
remedies, at law or otherwise, Seller and its Affiliates shall be entitled to
seek an injunction from a court of competent jurisdiction restraining and
enjoining any violation by Buyer or any of its Subsidiaries (including, after
the Closing, the Transferred Companies) of this Section 6.19, and Buyer further
agrees, and will cause its Subsidiaries (including, after the Closing, the
Transferred Companies) to further agree, that it and they will stipulate to the
fact that Seller or any of its Affiliates have been irreparably harmed by such
violation and not oppose the granting of such injunctive relief. Buyer hereby
waives, and will cause its Subsidiaries (including, after the Closing, the
Transferred Companies) to waive, any requirement for the securing or posting of
any bond in connection with such remedy.

 

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(g) At the Closing, Buyer shall execute, or shall cause the execution of, such
amended organizational documents with respect to the Transferred Companies such
that each Transferred Company can effect a change in its respective name to a
name not containing any of the Seller Trademarks. Immediately after the Closing,
Buyer shall cause the Transferred Companies to file such amended organizational
documents with the applicable Governmental Entity and take all other necessary
action to fulfill its obligations set forth in this Section 6.19(g) as soon as
reasonably practicable.

(h) Buyer acknowledges and agrees that on or before the Closing, Seller or its
designee may transfer and migrate to any devices or media at a location or
locations designated by Seller or its designee all copies and versions of any
Seller Owned Software that reside on any of the IT Systems owned by the
Transferred Companies or included in the Transferred Assets; provided, however,
Seller or its designee shall leave copies of such Seller Owned Software on such
IT Systems to the extent such Seller Owned Software will be licensed to Newco
and its Affiliates that conduct the Transferred Business post-Closing pursuant
to an Ancillary Document or a software license agreement entered into pursuant
to Section 6.17(d) or Section 6.17(e).

(i) From and after the Closing until such date that is five (5) years after the
Closing Date, in the event that a third Person asserts against Buyer or any of
the Transferred Companies a written claim material to the Transferred Business
that the conduct of the Transferred Business as of the Closing infringes,
misappropriates or otherwise violates such Person’s Intellectual Property
rights, Buyer shall have the right to ask Seller if Seller obtained, prior to
the Closing, a license to use or practice such asserted Intellectual Property in
support of the Transferred Business (a “Third Party IP License”). After
receiving notice from Buyer of such request, Seller shall either (i) notify
Buyer that no Third Party IP License provides that the Transferred Business, as
a divested business, may use or continue to make use of such asserted
Intellectual Property, or (ii)(A) if a Third Party IP License provides that the
Transferred Business, as a divested business, may continue to make use of such
asserted Intellectual Property (without any need to grant a sublicense thereto),
provide a copy of such Third Party IP License to Buyer if Seller is permitted to
do so (or use commercially reasonable efforts to obtain such third Person’s
consent to disclose such Third Party IP License), or (B) if such Third Party IP
License (I) includes a sublicensing right that permits Seller or any of its
Affiliates to grant Buyer or the Transferred Companies rights in such asserted
Intellectual Property in respect of the Transferred Business as of the Closing,
and (II) requires a sublicense to Buyer or the Transferred Companies for such
asserted Intellectual Property rights to apply to the Transferred Business as of
the Closing, then provided that such a sublicense does not require the payment
of any consideration by Seller, Seller shall grant to Buyer a sublicense for
such asserted Intellectual Property no greater in scope than Seller’s license
under such Third Party IP License, solely for use in the conduct of the
Transferred Business as of the Closing.

6.20 Exclusivity. From the date of this Agreement through the earlier of the
Closing Date or the termination of this Agreement, Seller and its Affiliates
shall not (and shall cause their representatives not to) (i) solicit, initiate,
facilitate or encourage the submission of any proposal or offer from any Person
relating to the acquisition of all or a majority of the Transferred Business in
any State; or (ii) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in, or facilitate
in any other manner any effort or attempt by any Person to do or seek any of the
foregoing.

 

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6.21 USF Refunds. To the extent not included in the calculation of Net Working
Capital pursuant to Section 3.6, if, after the Closing, Buyer or its Affiliates
(A) receive any refund, or (B) utilize the benefit of any overpayment or
prepayment of USF contributions which relate to amounts paid by Seller or any of
its Subsidiaries (including the Transferred Companies prior to Closing), Buyer
shall promptly transfer, or cause to be transferred, to Seller the entire amount
of the refund or overpayment (including interest) received or utilized by Buyer
or its Affiliates, net of any Taxes or other costs incurred by Buyer or its
Affiliates attributable to the receipt of such refund. Buyer agrees to notify
Seller promptly of both the discovery of a right to claim any such refund or
overpayment and the receipt of any such refund or utilization of any such
overpayment. Buyer agrees to use commercially reasonable efforts to claim any
such refund or to utilize any such overpayment as soon as possible and to
furnish to Seller all information, records and assistance necessary to verify
the amount of the refund or overpayment.

6.22 Publishing Agreements. At or prior to the Closing, Buyer shall enter into a
publishing agreement, a non-compete agreement and a branding agreement with Dex
Media, each effective as of the Closing, as required by Seller’s agreements with
Dex Media for the States, unless otherwise agreed by Dex Media.

6.23 Guarantee Obligations and Liens.

(a) Seller and Buyer shall reasonably cooperate, and shall cause their
respective Subsidiaries to reasonably cooperate and use their respective
reasonable best efforts to: (x) terminate, or to cause Newco, or the appropriate
member of the Buyer Group, to be substituted in all respects for Seller or the
applicable member of the Seller Group in respect of, all obligations of any
member of the Seller Group under any Assumed Liabilities, performance bonds or
other financial underwriting identified by Seller for which such member of the
Seller Group may be liable, as guarantor, original tenant, primary obligor or
otherwise (“Seller Guarantees”), and (y) terminate, or to cause reasonably
comparable substitute Transferred Assets to be substituted in all respects for
any Excluded Assets in respect of, any liens or Encumbrances identified by
Seller on Excluded Assets which are securing any Assumed Liabilities. If such a
termination or substitution is not effected by the Closing Date, without the
prior written consent of Seller, from and after the Closing Date, Buyer shall
not, and shall not permit any member of the Buyer Group to, renew or extend the
term of, increase its monetary obligations (or any other obligations for which
Seller or any of its Affiliates might be liable) under, or transfer to a third
party, any loan, lease, contract or other obligation for which a member of the
Seller Group is or may be liable or for which any Excluded Asset is or may be
encumbered unless all obligations of the Seller Group and all Encumbrances on
any Excluded Asset with respect thereto are thereupon terminated by
documentation reasonably satisfactory in form and substance to Seller. Buyer
further agrees that to the extent Seller or any of its Affiliates incurs any
Losses in connection with such Seller Guarantees on or after the Closing Date,
Buyer shall indemnify, defend and hold harmless Seller against, and reimburse
Seller for, any and all Losses, including costs or expenses in connection with
such Seller Guarantees, including Seller’s expenses in maintaining such Seller
Guarantees, whether or not any such Seller Guarantee is drawn upon or required
to be

 

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performed, and shall in any event promptly reimburse Seller to the extent any
Seller Guarantee is called upon and Seller or any of its Affiliates incurs any
Losses in connection with the Seller Guarantees; provided that the foregoing
indemnity shall not apply with respect to any out-of-pocket cost or expense to
be borne by Seller, as described in this Section 6.23(a).

(b) Seller and Buyer shall reasonably cooperate, and shall cause their
respective Subsidiaries to reasonably cooperate and use their respective
reasonable best efforts to: (x) terminate, or to cause a member of the Seller
Group to be substituted in all respects for any Transferred Company in respect
of, all obligations of any Transferred Company under any Excluded Liabilities
for which such Transferred Company may be liable, as guarantor, original tenant,
primary obligor or otherwise (“Transferred Company Guarantees”), and
(y) terminate, or cause reasonably comparable substitute Excluded Assets to be
substituted in all respects for any Transferred Assets in respect of, any liens
or Encumbrances on Transferred Assets which are securing any Excluded
Liabilities. If such a termination or substitution is not effected by the
Closing Date, without the prior written consent of Buyer, from and after the
Closing Date, Seller shall not, and shall not permit any member of the Seller
Group to, renew or extend the term of, increase its monetary obligations (or any
other obligations for which Buyer or any of its Affiliates might be liable)
under, or transfer to a third party, any loan, lease, contract or other
obligation for which any of the Transferred Companies is or may be liable or for
which any Transferred Asset is or may be encumbered unless all obligations of
the Transferred Companies and all Encumbrances on any Transferred Asset with
respect thereto are thereupon terminated by documentation reasonably
satisfactory in form and substance to Buyer. Seller further agrees that to the
extent any of the Transferred Companies incurs any Losses in connection with
such Transferred Company Guarantees on or after the Closing Date, Seller shall
indemnify, defend and hold harmless the Transferred Companies against, and
reimburse the Transferred Companies for, any and all Losses, and shall in any
event promptly reimburse the Transferred Companies to the extent any Transferred
Company Guarantee is called upon and any Transferred Company incurs any Losses
in connection with such Transferred Company Guarantees.

ARTICLE VII

CONDITIONS TO CLOSING

7.1 Conditions to the Obligations of Buyer and Seller. The obligations of the
parties hereto to effect the Closing are subject to the satisfaction (or written
waiver) prior to the Closing of the following conditions:

(a) HSR Act. The waiting period applicable to the consummation of the
transactions contemplated by this Agreement under the HSR Act shall have expired
or been earlier terminated.

(b) FCC and Other Approvals. All approvals, waivers and authorizations required
to be obtained from the FCC, the California Public Utility Commission and the
Public Utility Commission of Texas pertaining to the transactions contemplated
by this Agreement and the Ancillary Documents shall have been obtained.

 

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(c) Litigation. No court or other Governmental Entity of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any Order or Law on
or after the date of this Agreement that restrains, enjoins or otherwise
prohibits consummation of the transactions contemplated by this Agreement.

7.2 Conditions to the Obligations of Buyer. The obligation of Buyer to effect
the Closing is also subject to the satisfaction (or written waiver by Buyer)
prior to the Closing of the following conditions:

(a) Consents and Approvals. All Video Franchisor approvals shall have been
obtained, except for such Video Franchisor approvals the failure of which to be
obtained would not reasonably be expected, individually or in the aggregate, to
have a Buyer Adverse Condition.

(b) Representations and Warranties. (i) The representations and warranties of
Seller set forth in Section 4.1 (Organization and Qualification), Section 4.2
(Capital Structure), Section 4.3 (Corporate Authorization), Section 4.6 (Binding
Effect) and Section 4.21 (Finders’ Fees) (collectively, the “Specified
Representations”) of Seller shall be true and correct in all material respects,
in each case as of the date of this Agreement and as of the Closing as though
made on and as of such date and time (except to the extent that any such
representation and warranty expressly speaks as of an earlier date, in which
case such representation and warranty shall be so true and correct as of such
earlier date) and (ii) the representations and warranties of Seller set forth in
Article IV of this Agreement (other than the Specified Representations) shall be
true and correct as of the date of this Agreement and as of the Closing as
though made on and as of such date and time (except to the extent that such
representation and warranty expressly speaks as of an earlier date, in which
case such representation and warranty shall be so true and correct as of such
earlier date), and in each case disregarding any materiality and Seller Material
Adverse Effect qualifications contained therein (provided that the “Seller
Material Adverse Effect” qualifier in Section 4.16(b) and any reference to
materiality in the definition of “Material Contract” shall not be disregarded),
except, in the case of this clause (ii) for such failures to be so true and
correct that have not had, and would not reasonably be expected to have,
individually or in the aggregate, a Seller Material Adverse Effect.

(c) No Seller Material Adverse Effect. Since the date of this Agreement, there
shall not have occurred any event, occurrence, development, state of facts,
effect, condition or change that, individually or in the aggregate, has had, or
is reasonably likely to have, a Seller Material Adverse Effect.

(d) Covenants. The covenants and agreements of Seller to be performed on or
prior to the Closing shall have been duly performed in all material respects.

(e) Cutover Milestone. The conditions to Closing set forth under Section 2.4
“Condition to Closing” of the Cutover Plan Support Agreement shall have been
satisfied or waived.

(f) Financial Statements. (x) Seller shall have complied in all material
respects with its obligation to deliver the Financial Statements required to be
delivered pursuant to Section 6.18 prior to the time that the Closing would have
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(disregarding this clause (x) of Section 7.2(f)) and (y) any unqualified report
relating to the Financial Statements and the Newco Financial Statements, as
applicable, of Seller’s independent accountants shall not have been withdrawn or
qualified (unless another such unqualified report is subsequently delivered and
not withdrawn or qualified); provided, that the inclusion of explanatory
language in such accountant’s report describing the special purpose nature of
such financial statements, without more, will not make such report qualified.

(g) Certificate. Buyer shall have received a certificate, signed by a duly
authorized officer of Seller and dated the Closing Date, to the effect that the
conditions set forth in Sections 7.2(b) and 7.2(d) have been satisfied.

7.3 Conditions to the Obligations of Seller. The obligation of Seller to effect
the Closing is also subject to the satisfaction (or written waiver by Seller)
prior to the Closing of the following conditions:

(a) Consents and Approvals. All Video Franchisor approvals shall have been
obtained, except for such Video Franchisor approvals the failure of which to be
obtained would not reasonably be expected, individually or in the aggregate, to
have a Seller Adverse Condition.

(b) Representations and Warranties. The representations and warranties of Buyer
set forth in Section 5.1 (Organization and Qualification), Section 5.2
(Corporate Authorization), Section 5.5 (Binding Effect) and Section 5.7
(Finders’ Fees) shall be true and correct in all material respects as of the
date of this Agreement and as of the Closing as if made on and as of the Closing
(except for such representations and warranties that are made as of a specific
date which shall speak only as of such date, in which case such representation
and warranty shall be so true and correct as of such earlier date). The
representations and warranties of Buyer set forth in Article V (other than
Section 5.1 (Organization and Qualification), Section 5.2 (Corporate
Authorization), Section 5.5 (Binding Effect) and Section 5.7 (Finders’ Fees))
shall be true and correct as of the date of this Agreement and as of the Closing
as though made as of such date and time (except to the extent that any such
representation expressly speaks as of an earlier date, and in each case
disregarding any materiality qualifications contained therein) except in the
case of this sentence where such failure would not reasonably be expected to
prevent or materially impair or delay Buyer’s or its Subsidiaries ability to
perform their respective obligations under this Agreement or the Ancillary
Documents.

(c) Covenants. The covenants and agreements of Buyer to be performed on or prior
to the Closing shall have been duly performed in all material respects.

(d) Certificate. Seller shall have received a certificate, signed by a duly
authorized officer of Buyer and dated the Closing Date, to the effect that the
conditions set forth in Section 7.3(b) and Section 7.3(c) have been satisfied.

 

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ARTICLE VIII

SURVIVAL; INDEMNIFICATION; CERTAIN REMEDIES

8.1 Survival. The representations and warranties of Seller and Buyer contained
in this Agreement and all claims with respect thereto shall survive the Closing
for the periods set forth in this Section 8.1. All representations and
warranties contained in this Agreement and all claims with respect thereto shall
terminate upon the expiration of eighteen (18) months after the Closing Date,
except that the representations and warranties contained in Section 4.1
(Organization and Qualification), Section 4.2 (Capital Structure), Section 4.3
(Corporate Authorization), Section 4.6 (Binding Effect) and Section 4.21
(Finders’ Fees) shall terminate sixty (60) days after the expiration of the
applicable statutes of limitations, the representations and warranties contained
in Section 4.10 (Employees and Employee Benefits) and Section 4.13
(Environmental Matters) shall terminate upon the expiration of three (3) years
after the Closing Date, and the representations and warranties contained in
Section 4.9 (Taxes) shall terminate as of the Closing, except for the
representations and warranties contained in Sections 4.9(d), 4.9(h), 4.9(i),
4.9(j) and 4.9(l) and the related indemnification obligations contained in
Section 6.5 (Tax Matters) which shall survive as provided for in Section 6.5.
Any claim for breach of representation or warranty must be delivered prior to
the expiration of the applicable survival term set forth in this Section 8.1. It
is the intention of the parties that the survival periods and termination dates
set forth in this Section 8.1 supersede any statute of limitation applicable to
such representations and warranties or claims with respect thereto. Any
covenants contained in this Agreement shall survive in accordance with their
terms and any claim for Losses in respect of a breach of a covenant for which
this Agreement contemplated performance prior to Closing must be delivered
within eighteen (18) months after the Closing.

8.2 Indemnification by Buyer. Buyer agrees that from and after the Closing Date
it shall indemnify, defend and hold harmless Seller, each of Seller’s
Subsidiaries, and their respective directors, officers, shareholders, partners,
members, attorneys, accountants, agents, representatives and employees and their
heirs, successors and permitted assigns, each in their capacity as such (the
“Seller Indemnified Parties”) from, against and in respect of any claims,
damages, losses, charges, Liabilities, actions, suits, proceedings, judgments,
settlements, assessments, interest, penalties, and reasonable costs and expenses
(including reasonable attorneys’ fees and expenses) (collectively, “Losses”)
actually incurred or suffered by any of the Seller Indemnified Parties arising
out of or resulting from, (i) any breach of any representation or warranty made
by Buyer in Article V of this Agreement (including as if such representations
and warranties were made as of the Effective Time (except for such
representations and warranties that are made as of a specific date)) for the
period such representation or warranty survives, (ii) except to the extent that
the Buyer Indemnified Parties are entitled to be indemnified in respect thereof
(without giving effect to the limitations contained in Section 8.1 or 8.3(b)),
any of the Assumed Liabilities, (iii) any breach of a covenant or agreement of
Buyer or any of its Affiliates contained in this Agreement and (iv) except to
the extent that the Buyer Indemnified Parties are entitled to be indemnified in
respect thereof (without giving effect to the limitations contained in
Section 8.1 or 8.3(b)), any Liabilities that Buyer has expressly agreed to
assume pursuant to this Agreement.

8.3 Indemnification by Seller.

(a) Seller hereby agrees that from and after the Closing it shall indemnify,
defend and hold harmless Buyer, its Affiliates, and their respective directors,
officers, shareholders, partners, members, attorneys, accountants, agents,
representatives and employees (other than the Business Employees) and their
heirs, successors and permitted assigns, each in their capacity as such (the
“Buyer Indemnified Parties” and, collectively with the Seller

 

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Indemnified Parties, the “Indemnified Parties”) from, against and in respect of
any Losses actually incurred or suffered by any of the Buyer Indemnified Parties
arising out of or resulting from (i) subject to Section 8.3(b), any breach of
any representation or warranty made by Seller in Article IV of this Agreement
(including as if such representations and warranties were made as of the
Effective Time (except for such representations and warranties that are made as
of a specific date)) for the period such representation or warranty survives,
(ii) any breach of any covenant or agreement of Seller contained in this
Agreement, (iii) any of the Excluded Liabilities, (iv) all USF contributions
that relate to the Transferred Business prior to the Closing, and (v) any
Indebtedness of the Transferred Companies existing as of immediately prior to
the Closing (after taking into account the Pre-Closing Reorganization) and not
reflected on the Final Closing Statement.

(b) Seller shall not be liable to the Buyer Indemnified Parties for any Losses
with respect to the matters contained in Section 8.3(a)(i) unless the Losses
therefrom exceed an aggregate amount equal to $131,750,000 (the “Indemnity
Threshold”) and then only for Losses in excess of that amount and up to an
aggregate amount equal to $1,054,000,000 (the “Indemnity Cap”). Seller shall not
be liable to the Buyer Indemnified Parties in respect of any individual claim or
series of claims arising out of a similar occurrence or set of facts for
indemnification under Section 8.3(a)(i) involving Losses of less than $300,000
and no such amounts shall be taken into account for purposes of satisfying the
Indemnity Threshold. Notwithstanding the foregoing, the limitations set forth in
this Section 8.3(b) shall not apply to any claims for Losses resulting from or
arising out of breaches of the Specified Representations or Section 4.9(l) or
due to fraud by or on behalf of Seller.

(c) For purposes of this Article VIII, any inaccuracy in or breach of any
representation or warranty shall be determined without regard to any “material”,
“materially”, “in all material respects”, “in any material respect”, “material
to the Transferred Business” and “Seller Material Adverse Effect” qualification
contained in or otherwise applicable to such representation or warranty,
provided that (A) such qualifiers shall not be disregarded in Section 4.7(d)
(Financial Statements), Section 4.8 (Litigation and Claims), Section 4.10(i)
(Employees and Employee Benefits), Section 4.15(a) (Contracts), Section 4.16
(Absence of Changes), the first sentence of Section 4.18 (Communications
Licenses) or Section 4.19 (Title to Property), and (B) the word “material” shall
not be disregarded where it immediately precedes (1) the term “Seller Benefit
Plan” in Section 4.10 (Employees and Employee Benefits) and (2) the term
“Governmental Authorizations” in Section 4.12 (Compliance with Laws;
Communications Authorizations). The rights of an Indemnified Party to
indemnification under this Agreement or any Ancillary Documents shall not be
affected by any investigation conducted or actual or constructive knowledge
acquired at any time by such Indemnified Party, whether before or after the date
of this Agreement or any Closing Date.

8.4 Third-Party Claim Indemnification Procedures.

(a) In the event that any claim or demand for which an indemnifying party (an
“Indemnifying Party”) may have liability to any Indemnified Party hereunder is
asserted against or sought to be collected from any Indemnified Party by a third
party (other than a claim by a Taxing authority for Taxes) (a “Third-Party
Claim”), such Indemnified Party shall promptly, but in no event more than thirty
(30) days following such Indemnified Party’s receipt of a Third-

 

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Party Claim, notify the Indemnifying Party in writing of such Third-Party Claim,
the amount or the estimated amount of damages sought thereunder (which estimate
shall not be conclusive of the final amount of such Third-Party Claim), any
other remedy sought thereunder, any relevant time constraints relating thereto
and, to the extent practicable, any other material details pertaining thereto (a
“Claim Notice”); provided, however, that the failure timely to give a Claim
Notice shall affect the rights of an Indemnified Party hereunder only to the
extent that such failure has an adverse effect on the resolution of the
Third-Party Claim or on the defenses or other rights available to the
Indemnifying Party with respect to such Third-Party Claim. The Indemnifying
Party shall have thirty (30) days after receipt of the Claim Notice (the “Notice
Period”) to notify the Indemnified Party that it desires to defend the
Indemnified Party against such Third-Party Claim. Notwithstanding anything to
the contrary contained herein, to the extent that Buyer reasonably expects that
the Losses resulting from a Third-Party Claim would not, when aggregated with
all other Losses for which Seller has previously indemnified Buyer Indemnified
Parties pursuant to this Agreement or would reasonably be expected to indemnify
Buyer Indemnified Parties in the future (based on information available at such
time), exceed the Indemnity Threshold, Buyer shall have the right to defend such
Third-Party Claim and shall have the sole power to direct and control such
defense.

(b) In the event that the Indemnifying Party notifies the Indemnified Party
within the Notice Period that it desires to defend the Indemnified Party against
a Third-Party Claim, the Indemnifying Party shall have the right to defend the
Indemnified Party by appropriate proceedings and shall have the sole power to
direct and control such defense. Once the Indemnifying Party has duly assumed
the defense of a Third-Party Claim, the Indemnified Party shall have the right,
but not the obligation, to participate in any such defense. If the Indemnified
Party shall participate in any such defense, it shall participate at its sole
cost and expense unless (i) the Indemnifying Party and the Indemnified Party are
both named parties to the proceedings and the Indemnified Party shall have
reasonably concluded that representation of both parties by the same counsel
would be inappropriate, due to a non-waivable conflict, or (ii) the Indemnified
Party assumes the defense of a Third-Party Claim after the Indemnifying Party
has failed to diligently pursue a Third-Party Claim it has assumed, in which
case the Indemnifying Party shall be liable for the reasonable and documented
fees and expenses of one separate counsel (in addition to any necessary local
counsel) to the extent such Third-Party Claim is subject to indemnification or
reimbursement under Section 8.2 or Section 8.3. The Indemnifying Party shall
not, without the prior written consent of the Indemnified Party, settle,
compromise or offer to settle or compromise any Third-Party Claim on a basis
that would result in (i) the imposition of a consent order, injunction or decree
that would restrict the future activity or conduct of the Indemnified Party,
(ii) a finding or admission of a violation of Law or violation of the rights of
any Person by the Indemnified Party, (iii) a finding or admission that would
have an adverse effect on other claims made or threatened against the
Indemnified Party, or (iv) except to the extent within the amounts set forth in
Section 8.3(b) if applicable, any monetary liability of the Indemnified Party
that will not be paid or reimbursed by the Indemnifying Party.

(c) If the Indemnifying Party (i) elects not to defend the Indemnified Party
against a Third-Party Claim, whether by not giving the Indemnified Party timely
notice of its desire to so defend or otherwise, (ii) is not entitled to defend
the Third-Party Claim as a result of the Indemnified Party’s election to defend
the Third-Party Claim as provided in Section 8.4(b)

 

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hereof, or (iii) after assuming the defense of a Third-Party Claim, fails to
take reasonable steps necessary to defend diligently such Third-Party Claim, the
Indemnified Party shall have the right but not the obligation to provide its own
defense and shall consult with the Indemnifying Party regarding the strategy for
defense of such claim, including with respect to the Indemnified Party’s choice
of legal counsel; it being understood that the Indemnified Party’s right to
indemnification for a Third-Party Claim shall not be adversely affected by
whether it assumes the defense of such Third-Party Claim. The Indemnified Party
shall have no liability with respect to a Third-Party Claim settled in violation
of the last sentence of Section 8.4(b).

(d) The Indemnified Party and the Indemnifying Party shall cooperate in order to
ensure the proper and adequate defense of a Third-Party Claim, including by
providing access to each other’s relevant business records and other documents,
and employees (including, if necessary, availability for depositions and
testifying); it being understood that the reasonable and documented costs and
expenses of the Indemnified Party relating thereto shall be considered Losses.
The Indemnified Party and the Indemnifying Party shall keep each other fully
informed with respect to the status of such Third-Party Claim.

(e) The Indemnified Party and the Indemnifying Party shall use commercially
reasonable efforts to avoid production of confidential information (consistent
with applicable Law), and to cause all communications among employees, counsel
and others representing any party to a Third-Party Claim to be made so as to
preserve any applicable attorney-client or work-product privileges (if
applicable).

(f) Each of Buyer and Seller hereby consents to the non-exclusive jurisdiction
of any court in which a Third-Party Claim is brought for purposes of any claim
for indemnification or reimbursement with respect to such Third-Party Claim or
the matters alleged therein.

8.5 Consequential Damages. Notwithstanding anything to the contrary contained in
this Agreement, no Person shall be liable under this Article VIII for any
consequential, punitive, special or exemplary damages, regardless of the form of
action, whether in contract, tort, strict liability or otherwise, and whether or
not such damages were foreseen or unforeseen, except to the extent awarded by a
court of competent jurisdiction in connection with a Third-Party Claim;
provided, however, that nothing herein shall limit an Indemnified Party’s
ability to recover lost profits or diminution in value to the extent they are
reasonably foreseeable damages from the applicable matter that is the subject of
an indemnity claim.

8.6 Limitation on Indemnification by Seller. Seller shall not be required to
indemnify, defend or hold harmless the Buyer Indemnified Parties from, against
or in respect of any Losses incurred or suffered by any of the Buyer Indemnified
Parties arising out of or resulting from any Liability to the extent the amount
of such Liability is included in the calculation of Final Net Working Capital.

 

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8.7 Adjustments to Losses.

(a) Insurance. In calculating the amount of any Loss, the proceeds actually
received by the Indemnified Party or any of its Affiliates under any insurance
policy or pursuant to any claim, recovery, settlement or payment by or against
any other Person, net of any actual costs, expenses or premiums incurred in
connection with securing or obtaining such proceeds, shall be deducted, except
to the extent that the adjustment itself would excuse, exclude or limit the
coverage of all or part of such Loss. In the event that an Indemnified Party has
any rights against a third party with respect to any occurrence, claim or loss
that results in a payment by an Indemnifying Party under this Article VIII, such
Indemnifying Party shall be subrogated to such rights to the extent of such
payment; provided that until the Indemnified Party recovers full payment of the
Loss, any and all claims of the Indemnifying Party against any such third party
on account of said indemnity payment is hereby expressly made subordinate and
subject in right of payment to the Indemnified Party’s rights against such third
party. Without limiting the generality or effect of any other provision hereof,
each Indemnified Party and Indemnifying Party shall duly execute upon request
all instruments reasonably necessary to evidence and perfect the subrogation and
subordination rights detailed herein, and otherwise cooperate in the prosecution
of such claims.

(b) Reimbursements and Adjustments. In calculating the amount of any Loss for
which either party is entitled to indemnification hereunder, to the extent such
Loss is otherwise recovered by a party pursuant to other terms of this Agreement
or any Ancillary Document, such amount actually recovered shall be deducted from
the amount owed for such Loss, so that the same amount shall not be paid more
than once.

(c) Reimbursement. If an Indemnified Party recovers an amount from a third party
in respect of a Loss that is the subject of indemnification hereunder after all
or a portion of such Loss has been paid by an Indemnifying Party pursuant to
this Article VIII, the Indemnified Party shall promptly remit to the
Indemnifying Party the excess (if any) of (A) the amount paid by the
Indemnifying Party in respect of such Loss, plus the amount received from the
third party in respect thereof (net of any actual costs or expenses incurred in
connection with obtaining such amount), less (B) the full amount of the Loss.

8.8 Payments. The Indemnifying Party shall pay all amounts payable pursuant to
this Article VIII promptly following receipt from an Indemnified Party of a
claim for a Loss that is the subject of indemnification hereunder, unless and
for so long as the Indemnifying Party in good faith disputes such claim in which
event it shall so notify the Indemnified Party. The Indemnifying Party agrees to
provide reasonable supplementary documentation for all claims they make under
this Article VIII. In any event, the Indemnifying Party shall pay to the
Indemnified Party, by wire transfer of immediately available funds, the amount
of any Loss for which it is liable hereunder no later than three (3) Business
Days following any Final Determination of such Loss and the Indemnifying Party’s
liability therefor.

8.9 Characterization of Indemnification Payments. Except as otherwise required
by Law, all payments made by an Indemnifying Party to an Indemnified Party in
respect of any claim pursuant to Section 6.23, Section 8.2 or Section 8.3 hereof
shall be treated as adjustments to the Purchase Price for Tax purposes.

8.10 Mitigation. Nothing herein shall prevent an Indemnifying Party from
asserting that the amount of such Loss incurred by an Indemnified Party for
which indemnification is sought hereunder may take into account the Indemnified
Party’s failure to use commercially reasonable efforts to mitigate such Loss; it
being understood that any such assertion shall not be dispositive in determining
the amount of such Loss.

 

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8.11 Remedies. Except as otherwise expressly specified in this Agreement, the
rights and remedies of Seller and Buyer under this Article VIII are exclusive
following the Closing and in lieu of any and all other rights and remedies which
Seller and Buyer may have under this Agreement or otherwise for monetary relief
with respect to the subject matter hereof. The parties covenant not to sue,
assert any arbitration claim or otherwise threaten any claim other than those
described in this Article VIII as being available under the particular
circumstances described in this Article VIII.

8.12 Specific Performance. The parties acknowledge and agree that any breach of
this Agreement would give rise to irreparable harm for which monetary damages
would not be an adequate remedy. The parties accordingly agree that, in addition
to any other rights or remedies it may have at law or in equity, the other party
shall be entitled to (x) enforce the terms of this Agreement by decree of
specific performance without the necessity of proving the inadequacy of monetary
damages as a remedy and (y) seek injunctive relief against any breach or
threatened breach of this Agreement. Neither party will contest an action by the
other party for injunctive relief or an order of specific performance on the
basis that there is an adequate remedy at law, or that an award of specific
performance is not an appropriate remedy for any reason, at law or in equity.
The parties agree to not seek and agree to waive any requirement for the
securing or posting of a bond in connection with a party seeking or obtaining
any relief pursuant to this Section 8.12.

ARTICLE IX

TERMINATION

9.1 Termination. This Agreement may be terminated at any time prior to the
Closing:

(a) by mutual agreement of Buyer and Seller;

(b) by either Buyer or Seller, by giving written notice of such termination to
the other party, if the Closing shall not have occurred by the date that is
fourteen months after the date hereof (as extended pursuant to this Section 9.1,
the “Termination Date”); provided, however, that in the event that, as of such
date, all Closing conditions other than the conditions set forth in
Section 7.1(a), Section 7.1(b), Section 7.2(a), Section 7.2(e), Section 7.2(f)
or Section 7.3(a) are satisfied, waived or capable of being satisfied as of such
date (assuming for such purpose that such date were the Closing Date), then the
Termination Date may be extended by either Buyer or Seller on one or more
occasions upon written notice to the other party and the period of each such
extension shall be for a one month period, not to exceed four (4) calendar
months in the aggregate, to satisfy the conditions set forth in Section 7.1(a),
Section 7.1(b), Section 7.2(a), Section 7.2(e), Section 7.2(f) and
Section 7.3(a); provided, further, that if Buyer shall have delivered the notice
contemplated by the proviso of clause (i) of Section 3.3, neither Buyer nor
Seller may terminate this Agreement until the second Business Day of the
immediately following month;

 

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(c) by either Buyer or Seller, by giving written notice of such termination to
the other party, if any Order prohibiting the Closing shall become final and
non-appealable;

(d) by Buyer if there has been a breach of any representation, warranty,
covenant or agreement made by Seller in this Agreement, or any such
representation and warranty shall have become untrue after the date of this
Agreement, such that Section 7.2(b) or 7.2(d) would not be satisfied and such
breach or condition is not curable or, if curable, is not cured within the
earlier of (i) sixty (60) days after written notice thereof is given by Buyer to
Seller and (ii) the Termination Date; or

(e) by Seller if there has been a breach of any representation, warranty,
covenant or agreement made by Buyer in this Agreement, or any such
representation and warranty shall have become untrue after the date of this
Agreement, such that Section 7.3(b) or 7.3(c) would not be satisfied and such
breach or condition is not curable or, if curable, is not cured within the
earlier of (i) sixty (60) days after written notice thereof is given by Seller
to Buyer and (ii) the Termination Date.

9.2 Effect of Termination. In the event of the termination of this Agreement in
accordance with Section 9.1, this Agreement shall thereafter become void and
have no further effect, and no party hereto shall have any liability to the
other party hereto or their respective Affiliates, directors, officers or
employees, except for the obligations of the parties hereto contained in this
Section 9.2 and in the last sentence of Section 6.1 (Access and Information),
and in Section 10.1 (Notices), Section 10.2 (Amendment; Waiver), Section 10.3
(No Assignment or Benefit to Third Parties), Section 10.4 (Entire Agreement),
Section 10.6 (Public Disclosure), Section 10.7 (Expenses), Section 10.11
(Governing Law; Submission to Jurisdiction; Selection of Forum; Waiver of Jury
Trial), Section 10.14 (Severability), Section 10.15 (Construction) and
Section 10.17 (No Recourse) hereof (and any related definitional provisions set
forth in Article I), and except that nothing in this Section 9.2 shall relieve
any party from liability for any fraud or willful or material breach of this
Agreement that arose prior to such termination.

ARTICLE X

MISCELLANEOUS

10.1 Notices. All notices and communications hereunder shall be deemed to have
been duly given and made if in writing and if served by personal delivery upon
the party for whom it is intended or delivered by registered or certified mail,
return receipt requested, or if sent by facsimile, provided that the facsimile
is promptly confirmed by telephone confirmation thereof, to the Person at the
address set forth below, or such other address as may be designated in writing
hereafter, in the same manner, by such Person:

 

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To Buyer:

Frontier Communications Corporation

3 High Ridge Park

Stamford, CT 06905

Telephone:      (203) 614-5600 Facsimile:      (203) 614-4651 Attn:      General
Counsel

With a copy to:

Skadden, Arps, Slate, Meagher & Flom LLP

Four Times Square

New York, New York 10036

Telephone:      (212) 735-3000 Facsimile:      (212) 735-2000 Attn:     

Martha E. McGarry

Thomas W. Greenberg

To Seller:

Verizon Communications Inc.

One Verizon Way

Basking Ridge, New Jersey 07920

Telephone:      (908) 559-2001 Facsimile:      (908) 766-3818 Attn:      William
L. Horton, Jr., Senior Vice President, Deputy General Counsel and Corporate
Secretary Michael Rosenblat, Vice President, Associate General Counsel

With a copy to:

Debevoise & Plimpton LLP

919 Third Avenue

New York, New York 10022

Telephone:      (212) 909-6000 Facsimile:      (212) 909-6836 Attn:     

Jeffrey J. Rosen

Michael A. Diz

10.2 Amendment; Waiver. Any provision of this Agreement may be amended or waived
if such amendment or waiver is in writing and signed, in the case of an
amendment, by the parties hereto, or in the case of a waiver, by the party
against whom the waiver is to be effective. No failure or delay by any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
Notwithstanding the foregoing, the provisions of this Section 10.2,
Section 10.3, Section 9.2,

 

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Section 10.11 and Section 10.17, to the extent affecting any of the Financing
Sources, may not be amended, modified, waived or supplemented (including any
defined term used therein) in a manner adverse to any of the Financing Sources
without the prior written consent of each such affected Financing Source.

10.3 No Assignment or Benefit to Third Parties.

(a) This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors, legal representatives and permitted
assigns. No party to this Agreement may assign any of its rights or delegate any
of its duties or obligations under this Agreement, by operation of Law or
otherwise, without the prior written consent of the other party hereto, provided
that Buyer may, by written notice, assign any and all of its rights under this
Agreement (A) to one or more of its wholly owned Subsidiaries or (B) to the
Committed Financing Sources for collateral security purposes (but no such
assignment referred to in the foregoing clause (A) or (B) shall relieve Buyer of
any of its duties or obligations hereunder). Nothing in this Agreement, express
or implied, is intended to confer upon any Person other than Buyer, Seller, the
Indemnified Parties and their respective successors, legal representatives and
permitted assigns, any rights or remedies under or by reason of this Agreement,
except for the rights of the Financing Sources pursuant to this Section 10.3,
Section 10.2, Section 9.2, Section 10.11 and Section 10.17 and Outside Counsel
pursuant to Section 10.18.

(b) Prior to the Closing, Buyer shall not convey, transfer or lease its
properties and assets substantially as an entirety to any Person, unless the
Person which acquires by conveyance or transfer, or which leases, the properties
and assets of Buyer substantially as an entirety shall expressly assume, by an
instrument in writing, executed and delivered to Seller, in form reasonably
satisfactory to Seller, the due and punctual payment of any amounts due from
Buyer at or prior to the Closing hereunder and the performance or observance of
every covenant of this Agreement on the part of Buyer to be performed or
observed at or prior to the Closing.

10.4 Entire Agreement. This Agreement (including the Confidentiality Agreement,
and all Disclosure Schedules, Annexes and Exhibits hereto) and the Ancillary
Documents contain the entire agreement between the parties hereto with respect
to the subject matter hereof and supersedes all prior agreements and
understandings, oral or written, with respect to such matters, except for the
Confidentiality Agreement, which shall remain in full force and effect until the
Closing.

10.5 Fulfillment of Obligations. Any obligation of any party to any other party
under this Agreement, which obligation is performed, satisfied or fulfilled
completely by an Affiliate of such party, shall be deemed to have been
performed, satisfied or fulfilled by such party.

10.6 Public Disclosure. Each party hereto shall obtain consent of the other
party (such consent to be not unreasonably delayed, conditioned or withheld),
prior to issuing any press releases regarding this Agreement or the transactions
contemplated hereby, except as required by Law or by any Governmental Entity and
except to the extent that the text of such release is substantially similar to
text that has previously been publicly disclosed by Seller or Buyer in
accordance with the terms of this Agreement or is substantially similar to any
mutually agreed

 

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upon communication plan. In the case of any such press release to be made as
required by Law or by any such Governmental Entity, the party proposing to make
such disclosure shall provide the other party a reasonable opportunity to review
and comment on any reference to this Agreement or the transactions contemplated
hereby, prior to issuing or making any such press release (and such disclosing
party shall review and consider any such comments in good faith). To the extent
practicable, each party shall use reasonable best efforts to cause any other
public announcements or public disclosures (other than press releases) with
respect to the transactions contemplated by this Agreement and any Ancillary
Documents to be consistent with the parties’ prior disclosures and any mutually
agreed upon communication plan. Notwithstanding the foregoing, Buyer may, in
connection with the Financing, disclose information concerning the transactions
contemplated by this Agreement or the Ancillary Documents of the type typically
included in a public debt offering on Form S-3 where the proceeds are to be used
by an operating company in the telecommunications industry to finance an
acquisition, including pro forma financial information and a summary of the
transaction, this Agreement and the Ancillary Documents, after providing Seller
a reasonable opportunity to review such disclosure and acting in good faith to
take into account the reasonable comments of Seller; provided, however, that
Buyer will not disclose any information that is competitively sensitive to
Seller, without obtaining Seller’s prior written consent. To the extent a party
is obligated to file this Agreement or any Ancillary Document publicly with any
Governmental Entity, such party shall give the non-disclosing party a reasonable
opportunity to review and comment (and shall in good faith take into account the
comments of such party) on the scope of any redactions and requests for
confidential treatment of the terms hereof.

10.7 Expenses. Except as otherwise expressly provided in this Agreement or the
Ancillary Documents, whether or not the transactions contemplated by this
Agreement and the Ancillary Documents are consummated, all costs and expenses
incurred in connection with this Agreement and the Ancillary Documents and the
transactions contemplated hereby and thereby shall be borne by the party
incurring such expenses. For the avoidance of doubt, except as otherwise
expressly provided in this Agreement or the Ancillary Documents, whether or not
the transactions contemplated by this Agreement and the Ancillary Documents are
consummated, any fees or expenses incurred by any of Seller, its Subsidiaries of
the Transferred Companies or any of their respective Affiliates (including the
fees and expenses of legal counsel, any accountant, auditor, broker, financial
advisor or consultant retained by them or on their behalf) in connection with
the preparation, negotiation, execution and delivery of this Agreement or the
Ancillary Documents or the consummation of the transactions contemplated by this
Agreement shall be the responsibility of, and paid by, Seller.

10.8 Bulk Sales. Seller and Buyer (on behalf of themselves and their
Subsidiaries) agree to waive compliance with Article 6 of the Uniform Commercial
Code and other bulk sales Laws as adopted in each of the jurisdictions in which
any of the Transferred Assets are located to the extent that such Article is
applicable to the transactions contemplated by this Agreement and the Ancillary
Documents.

10.9 Further Assurances.

(a) From time to time after the Closing Date, Seller shall, and shall cause its
applicable Subsidiaries to, promptly execute, acknowledge and deliver any other
documents and take such further actions as may be reasonably requested by Buyer
and necessary for Buyer to satisfy its obligations hereunder or under the
Ancillary Documents.

 

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(b) From time to time after the Closing Date, Buyer shall, and shall cause its
Subsidiaries to, promptly execute, acknowledge and deliver any other documents
and take such further actions as may be reasonably requested by Seller and
necessary for Seller or any of its Subsidiaries to satisfy its obligations
hereunder or under the Ancillary Documents.

(c) If after the Closing Date, Seller or its Affiliate (other than a Transferred
Company), on the one hand, or Buyer, on the other hand (the “Receiving Party”),
receives any funds which belong to the other party (the “Entitlement Party”)
under this Agreement or the Ancillary Documents, the Receiving Party shall hold
such funds in trust for, and immediately pay over such funds to, the Entitlement
Party.

(d) In the event it is determined following the Closing that (i) any asset that
constitutes a Transferred Asset should have been transferred to the Transferred
Companies pursuant to Section 2.1 but was not so transferred, such asset shall
be promptly transferred, without the payment of additional consideration by
Buyer or the Transferred Companies, to the applicable Transferred Company, and
shall upon such transfer constitute a Transferred Asset and (ii) any Liability
that constitutes an Assumed Liability that should have been assumed by the
Transferred Companies pursuant to Section 2.3 but was not assumed pursuant to an
instrument of assumption, such Liability shall be promptly assumed by the
applicable Transferred Company (and Buyer shall cause the applicable Transferred
Company to assume such Liability), without the payment of additional
consideration by Seller, pursuant to an instrument of assumption.

(e) In the event it is determined following the Closing that (i) any asset that
is not a Transferred Asset and should not have been transferred to, or held by,
the Transferred Companies pursuant to Section 2.1 but was transferred to, or
held by, the Transferred Companies, such asset shall be promptly transferred
(and Buyer shall cause the applicable Transferred Company to transfer such
asset), without the payment of consideration by Seller, to Seller, and shall
upon such transfer not constitute a Transferred Asset or (ii) any Liability that
is an Excluded Liability that should not have been assumed or retained by the
Transferred Companies pursuant to Section 2.3 but was assumed pursuant to an
instrument of assumption or retained by the Transferred Companies, such
Liability shall be promptly assumed by Seller, without the payment of additional
consideration by Buyer, pursuant to an instrument of assumption.

(f) The obligations of Buyer and Seller under subsections (a), (b), (d), (e) and
(f) of this Section 10.9 shall terminate on the date that is one year following
the Closing Date.

10.10 Disclaimer of Other Representations or Warranties. EACH PARTY AGREES THAT,
EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS AGREEMENT OR THE
ANCILLARY DOCUMENTS, NEITHER BUYER NOR SELLER MAKES OR RELIES ON ANY OTHER
REPRESENTATIONS, WARRANTIES OR INDUCEMENTS, AND EACH HEREBY DISCLAIMS ANY OTHER
REPRESENTATIONS, WARRANTIES OR INDUCEMENTS, EXPRESS OR IMPLIED, AS TO THE
ACCURACY OR COMPLETENESS OF ANY OTHER INFORMATION (INCLUDING IN ANY

 

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DATAROOM OR MANAGEMENT PRESENTATION OR INFORMATION MEMORANDUM OR IN RESPONSE TO
QUESTIONS SUBMITTED BY A PARTY OR ANY OF ITS REPRESENTATIVES AND INCLUDING ANY
PROJECTIONS OR SIMILAR INFORMATION), MADE BY, OR MADE AVAILABLE BY, ITSELF OR
ANY OF ITS REPRESENTATIVES, WHETHER WRITTEN OR ORAL, WITH RESPECT TO, OR IN
CONNECTION WITH, THE NEGOTIATION, EXECUTION OR DELIVERY OF THIS AGREEMENT OR THE
ANCILLARY DOCUMENTS OR THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT AND THE ANCILLARY DOCUMENTS, NOTWITHSTANDING THE DELIVERY OR
DISCLOSURE TO THE OTHER PARTY OR THE OTHER PARTY’S REPRESENTATIVES OF ANY
DOCUMENTATION OR OTHER INFORMATION WITH RESPECT TO ANY ONE OR MORE OF THE
FOREGOING. FOR THE AVOIDANCE OF DOUBT, EXCEPT FOR THE REPRESENTATIONS AND
WARRANTIES CONTAINED IN Article IV OR THE ANCILLARY DOCUMENTS, (I) NEITHER
SELLER NOR ANY OTHER PERSON MAKES ANY EXPRESS OR IMPLIED REPRESENTATION OR
WARRANTY ON BEHALF OF SELLER, AND, NOTWITHSTANDING ANYTHING TO THE CONTRARY
CONTAINED HEREIN, SELLER MAKES NO EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY
WITH RESPECT TO ANY EXCLUDED ASSETS AND (II) THE TRANSFERRED ASSETS AND
TRANSFERRED COMPANIES ARE ASSIGNED “AS IS” WITHOUT ANY WARRANTY OF ANY KIND,
WHETHER EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, INCLUDING ANY WARRANTIES OF OR
RELATED TO TITLE, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

10.11 Governing Law; Submission to Jurisdiction; Selection of Forum; Waiver of
Jury Trial. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ITS PRINCIPLES OR
RULES OF CONFLICT OF LAWS, TO THE EXTENT SUCH PRINCIPLES OR RULES ARE NOT
MANDITORILY APPLICABLE BY STATUTE AND WOULD PERMIT OR REQUIRE THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION. Each party hereto agrees that it shall bring
any action or proceeding in respect of any claim arising out of or related to
this Agreement or the transactions contained in or contemplated by this
Agreement and the Ancillary Documents (including any action or proceeding
involving any Financing Sources), exclusively in courts of the State of New York
located in the Borough of Manhattan or Federal courts of the United States of
America located in the Southern District of New York (the “Chosen Courts”), and
solely in connection with claims arising under this Agreement or the
transactions contained in or contemplated by this Agreement and the Ancillary
Documents (a) irrevocably submits to the exclusive jurisdiction of the Chosen
Courts, (b) waives any objection to laying venue in any such action or
proceeding in the Chosen Courts, (c) waives any objection that the Chosen Courts
are an inconvenient forum or do not have jurisdiction over any party hereto,
(d) agrees that service of process upon such party in any such action or
proceeding shall be effective if notice is given in accordance with Section 10.1
of this Agreement and (e) agrees not to bring or permit any of their controlled
Affiliates to bring any such action or proceeding in any court other than the
Chosen Courts. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (INCLUDING ANY LEGAL
PROCEEDING INVOLVING ANY FINANCING SOURCES).

 

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The provisions of this Section 10.11 shall inure to the benefit of, and be
enforceable by, each Financing Source, each of which is hereby intended to be an
express third-party beneficiary of this Section 10.11.

10.12 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, and all of which shall constitute one and the
same Agreement.

10.13 Headings. The heading references herein and the table of contents hereof
are for convenience purposes only, and shall not be deemed to limit or affect
any of the provisions hereof.

10.14 Severability. The provisions of this Agreement shall be deemed severable
and the invalidity or unenforceability of any provision shall not affect the
validity or enforceability of the other provisions hereof. If any provision of
this Agreement, or the application thereof to any Person or any circumstance, is
invalid or unenforceable, (a) a suitable and equitable provision shall be
substituted therefor in order to carry out, so far as may be valid and
enforceable, the intent and purpose of such invalid or unenforceable provision
and (b) the remainder of this Agreement and the application of such provision to
other Persons or circumstances shall not be affected by such invalidity or
unenforceability, nor shall such invalidity or unenforceability affect the
validity or enforceability of such provision, or the application thereof, in any
other jurisdiction.

10.15 Construction. The parties have participated jointly in negotiating and
drafting this Agreement. In the event that an ambiguity or a question of intent
or interpretation arises, this Agreement shall be construed as if jointly
drafted by the parties, and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any provision
of this Agreement.

10.16 Payments. No party hereto shall be entitled to payment under any provision
of this Agreement for any amount to the extent payment with respect to the same
matter is recovered by such Person or its Affiliates or such amount is otherwise
included or taken into consideration under any other provision of this Agreement
or any Ancillary Document such that such party would be unfairly enriched.

10.17 No Recourse. No Financing Source shall have any liability for any
obligations or liabilities hereunder of the parties to this Agreement or in
respect of any oral representations made or alleged to be made in connection
herewith. Without limiting the rights of Seller against Buyer (including in
connection with causing Buyer to enforce its rights against the Financing
Sources), Seller (on behalf of itself and its stockholders, partners, members,
Affiliates, directors, officers and employees, representatives and agents)
hereby waives to the fullest extent permitted by law any rights or claims
against any Financing Source in connection with this Agreement or the Commitment
Letter or any other commitment or engagement with respect to any Financing or
Alternative Financing, whether in law or equity, in contract, in tort or
otherwise.

 

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10.18 Conflicts; Privilege. Recognizing that Debevoise & Plimpton LLP and
certain other law firms or outside counsel (each an “Outside Counsel”) have
acted as legal counsel to Seller, the Transferred Companies and certain of their
respective Affiliates prior to date hereof, and that Debevoise & Plimpton LLP
intends to act as legal counsel to Seller and its Affiliates after the Closing
(which will no longer include the Transferred Companies), Buyer hereby waives,
on its own behalf and agrees to cause its Affiliates, the Transferred Companies
and its Subsidiaries to waive, any conflicts that may arise in connection with
Debevoise & Plimpton LLP representing Seller or its Affiliates after the Closing
as such representation may relate to Buyer, the Transferred Companies or the
transactions contemplated hereby. In addition, all communications involving
attorney-client confidences between Seller, its Subsidiaries, the Transferred
Companies and their respective Affiliates, on the one hand, and such Outside
Counsel or internal counsel of Seller or any of its Affiliates, on the other
hand, in the course of the negotiation, documentation, preparation, execution,
delivery and consummation of the transactions contemplated hereby, or any
dispute or proceeding arising under or in connection with this Agreement
(including in any claim for indemnification brought by Buyer), shall be deemed
to be attorney-client confidences that belong solely to Seller and its
Affiliates (and not the Transferred Companies). Accordingly, the Transferred
Companies shall not have access to any such communications or to the files of
such Outside Counsel or such internal counsel relating to such engagement from
and after the Closing and none of Buyer, the Transferred Companies or any Person
acting or purporting to act on behalf of or through Buyer or the Transferred
Companies shall seek to obtain the same by any process on the grounds that the
privilege attaching to such communications belongs to Buyer or the Transferred
Companies. Without limiting the generality of the foregoing, from and after the
Closing, (a) Seller and its Affiliates (and not the Transferred Companies) shall
be the sole holders of the attorney-client privilege with respect to such
engagement, and none of the Transferred Companies shall be a holder thereof,
(b) to the extent that files of such Outside Counsel or such internal counsel in
respect of such engagement constitute property of the client, only Seller and
its Affiliates (and not the Transferred Companies) shall hold such property
rights and (c) such Outside Counsel or such internal counsel shall have no duty
whatsoever to reveal or disclose any such attorney-client communications or
files to the Transferred Companies by reason of any attorney-client relationship
between such Outside Counsel or such internal counsel and the Transferred
Companies or otherwise. For the avoidance of doubt, nothing in this
Section 10.18 shall apply to any communication between the Transferred Companies
and their Affiliates (including Buyer), on the one hand, and internal counsel of
the Transferred Companies, on the other hand, from and after the Closing. This
Section 10.18 will be irrevocable, and no term of this Section 10.18 may be
amended, waived or modified, without the prior written consent of such Outside
Counsel.

[Signature page follows.]

 

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

 

FRONTIER COMMUNICATIONS CORPORATION By:   /s/ Mary Agnes Wilderotter   Name:
Mary Agnes Wilderotter   Title:   Chairman and Chief Executive Officer VERIZON
COMMUNICATIONS INC. By:   /s/ John N. Doherty   Name: John N. Doherty   Title:
  Senior Vice President,               Corporate Development and Ventures