IDEARC INC.
RESTRICTED STOCK AWARD AGREEMENT
This Agreement is
made as of the 30th day of May, 2008, by and between IDEARC INC., a
Delaware corporation (the “Company”), and Frank P.
Gatto (the “Executive”).
1.
Award . The Company has made a restricted stock award to the
Executive for 87,065 shares of the Company’s common stock
(the “Shares”). The award and the Shares are subject to
the provisions of the Idearc Inc. Long Term Incentive Plan (the
“Plan”), a copy of which is furnished with this
Agreement, and, to the extent not inconsistent with the Plan, the
terms and conditions of this Agreement.
(a)
General . The Shares will become vested in three equal
annual installments beginning May 30, 2009, subject to the
Executive’s continuous employment with the Company or any of
its subsidiaries (collectively, “Idearc”).
(b)
Forfeiture of Unvested Shares . Except as otherwise
provided, if the Executive’s employment with Idearc
terminates before May 30, 2011, then, upon such termination,
the Executive will forfeit all right, title and interest in the
unvested Shares.
(c)
Special Vesting Rules . The special vesting rules of this
Section 2(c) will apply if (and only if) the Executive is in
compliance with the restrictive covenants set forth in Exhibit A
annexed hereto and the Executive executes and delivers to the
Company a general release of claims against the Company, its
subsidiaries and any of its or their affiliates, in form and
substance satisfactory to the Company.
(i)
Acceleration of Vesting – General . If, before
May 30, 2011, the Executive’s employment with Idearc
terminates by reason of the Executive’s Retirement (as
defined below) after November 30, 2008, or death, or is
terminated by Idearc without Cause (as defined below) or by reason
of the Executive’s Disability (as defined below) then, in the
case of any such event, the Executive will be immediately vested in
all unvested Shares. The Executive may designate a beneficiary who
shall be entitled to receive Shares that become vested by reason of
the Executive’s death. Any such designation must be made in
writing in such manner and in accordance with such other
requirements as may be prescribed by the Company’s Executive
Vice President – Human Resources and Employee Administration.
If the Executive fails to designate a beneficiary, or if no
designated beneficiary survives the Executive, the
Executive’s beneficiary shall be the Executive’s
surviving spouse, if any, or, if none, the Executive’s
estate.
(ii)
Change in Control . In the event of a Change in Control (as
defined below), the Executive will become fully vested in any then
unvested Shares held by the Executive.
(d)
Definitions . For the purpose of this Agreement, the
following terms shall have the following meanings:
(i)
“ Cause ” means the Executive’s
(a) conviction or plea of nolo contendre to a felony;
(b) commission of fraud or a material act or omission
involving dishonesty with respect
to the Company
or its affiliates, as reasonably determined by the
Company; (c) willful failure or refusal to carry out the
material responsibilities of his employment, as reasonably
determined by the Company; (d) gross negligence, willful
misconduct, or engaging in a pattern of behavior which has had or
is reasonably likely to have a significant adverse effect on the
Company, as reasonably determined by the Company; or
(e) willfully engaging in any act or omission that is in
material violation of a material policy of the Company, including,
without limitation, policies on business ethics and conduct, and
policies on the use of inside information and insider trading. The
determination of whether the Executive’s employment is
terminated with or without Cause will be made in the good faith
discretion of the Committee (as defined below) or its designee, and
any such determination shall be final, conclusive and binding on
all persons.
(ii)
“ Change in Control ” shall have the meaning
ascribed to that term by Section 2.5 of the Plan, except that
40% shall be substituted for 20% in subsections (a) and
(c) of said Section 2.5.
(iii)
“ Committee ” means the Human Resources
Committee of the Idearc Inc. Board of Directors.
(iv)
“ Disability ” means the inability of the
Executive to perform the material duties of his employment by
reason of a medically determinable physical or mental impairment
that can be expected to result in death or that has lasted or is
expected to last for a continuous period of at least
12 months, as determined by a duly licensed physician selected
by the Committee.
(v)
“ Retirement ” means voluntary termination of
employment by the Executive after the date on which the sum of the
employee’s age and number of years of service with Idearc or
a predecessor company (including Verizon Communications Inc.) is at
least 75, provided the number of years of service is at least
15.
3.
Transfer Restrictions . Except as otherwise permitted with
respect to Shares that become vested upon the Executive’s
death, the Executive may not sell, assign, transfer, pledge, hedge,
hypothecate, encumber or dispose of in any way (whether by
operation of law or otherwise) any unvested Shares, and unvested
Shares may not be subject to execution, attachment or similar
process. Any sale or transfer, or purported sale or transfer, shall
be null and void. The Company will not be required to recognize on
its books any action taken in contravention of these
restrictions.
4.
Dividend Equivalents and Voting Rights . If the Company
declares and pays dividends on its outstanding shares of common
stock, then, on the dividend payment date, the Executive will be
credited with dividend equivalent restricted stock units with
respect to any unvested Shares (and dividend equivalent restricted
stock units). The number of such dividend equivalent restricted
stock units will be determined by multiplying the number of
unvested Shares (and dividend equivalent restricted stock units)
immediately prior to the dividend payment date by the quotient
(rounded to the nearest whole number) of (a) the amount of the
dividend payable with respect to one outstanding share of Company
common stock on the dividend payment date, divided by (b) the
closing price per share of Company common stock on the New York
Stock Exchange on the dividend payment date (or, if no shares are
traded on such
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date, the
closing price on the immediately preceding date on which shares of
the Company’s common stock are traded). The dividend
equivalent restricted stock units will be subject to substantially
the same vesting, forfeiture and other terms and conditions
applicable to the corresponding unvested Shares and will be settled
in the form of an equivalent number of shares of Company common
stock (or, at the election of the Committee, cash equal to the
value of such shares of Company common stock) if and when the
corresponding unvested Shares become vested. The Executive will be
entitled to exercise voting rights with respect to the unvested
Shares held under this Agreement, and will have no voting rights
with respect to shares of Company common stock covered by dividend
equivalent restricted stock units unless and until vested shares of
Company common stock are issued in settlement of such restricted
stock units.
5.
Issuance of Shares . The Executive is the record owner of
the Shares on the Company’s books, subject to the
restrictions and conditions set forth in this Agreement. By
executing this Agreement, the Executive expressly authorizes the
Company to cancel, reacquire, retire or retain, at its election,
any unvested Shares if and when they are forfeited in accordance
with this Agreement. The Executive will execute and deliver such
other documents and take such other actions, if any, as the Company
may reasonably request in order to evidence such action with
respect to any unvested Shares that are forfeited. If, as and when
Shares become vested, and subject to the satisfaction of applicable
withholding and other legal requirements, the vested Shares will no
longer be subject to the transfer restrictions contained in this
Agreement and the Company’s books will be updated
accordingly.
6.
Withholding . The Company’s obligation to remove
restrictions on Shares under this Agreement shall be subject to and
conditioned upon the satisfaction by the Executive of applicable
tax withholding obligations and compliance with the restrictive
covenants contained in Exhibit A attached to this Agreement.
Idearc may require the Executive to remit an amount sufficient to
satisfy applicable withholding taxes or deduct or withhold such
amount from any payments otherwise owed the Executive (whether or
not under this Agreement or the Plan). The Executive expressly
elects to authorize the Company to deduct from any compensation or
any other payment of any kind due to the Executive, including
withholding the issuance of Shares, the amount of any federal,
state, local or foreign taxes required by law to be withheld as a
result of the grant or vesting of the Shares in whole or in part;
provided, however, that the value of the Shares withheld may not
exceed the statutory minimum withholding amount required by
law.
7. No
Other Rights Conferred . The grant of restricted Shares to the
Executive shall not be deemed to constitute a contract of
employment with the Executive or affect in any way the right of
Idearc to terminate the Executive’s employment at any time
for any or no reason. Compensation attributable to the award of
Shares shall not be taken into account as compensation for purposes
of determining the Executive’s benefits or entitlements under
any employee pension, savings, group insurance, severance or other
benefit plan or arrangement in which the Executive participates,
unless and except to the extent
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