Exhibit 10.9
EXECUTION COPY
TAX SHARING AGREEMENT
This Tax Sharing Agreement (this
“Agreement”) is entered into as of November 17,
2006 between Verizon Communications Inc., a Delaware corporation
(“Verizon”), and Idearc Inc., a Delaware corporation
and wholly owned subsidiary of Verizon (“Spinco” and
together with Verizon, the “Parties”). Capitalized
terms used in this Agreement and not otherwise defined herein shall
have the meanings ascribed to such terms in the Distribution
Agreement, dated as of November 13, 2006, between Verizon and
Spinco (the “Distribution Agreement”).
RECITALS
Whereas, Verizon is the common
parent corporation of an affiliated group of corporations within
the meaning of Section 1504(a) of the Internal Revenue Code of
1986, as amended (the “Code”), that has filed
consolidated federal income tax returns.
Whereas, Spinco is a newly-formed,
wholly owned subsidiary of Verizon.
Whereas, pursuant to the
Distribution Agreement, among other things, Verizon will transfer
to Spinco all of the Spinco Assets, Spinco will assume all of the
Spinco Liabilities, and Spinco will issue to Verizon shares of
Spinco Common Stock and the Spinco Exchange Debt and will pay to
Verizon the Special Distribution (collectively, the
“Contribution”).
Whereas, on the Distribution Date,
Verizon will distribute all of the issued and outstanding shares of
Spinco Common Stock on a pro rata basis to holders of Verizon
Common Stock (the “Distribution”).
Whereas, the Parties intend that the
Contribution, together with the Distribution and the Debt Exchange,
qualifies as a reorganization under Section 368 of the
Code.
Whereas, the Parties desire to set
forth their rights and obligations with respect to Taxes (as
defined herein) due for periods before and after the Distribution
Date.
NOW, THEREFORE, for good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Parties hereto agree as
follows:
ARTICLE I. DEFINITIONS
1.01 GENERAL. As used in this
Agreement, the following terms shall have the following
meanings:
“Affiliate” shall have
the meaning set forth in the Distribution Agreement.
“Agreement” shall have the meaning
set forth in the preamble to this Agreement.
“Code” shall have the
meaning set forth in the recitals.
“Contribution” shall
have the meaning set forth in the recitals.
“Credit Agreement” shall
mean the Credit Agreement dated as of November 17, 2006, among
Spinco, the Lenders (as defined therein) and JPMorgan Chase Bank,
N.A., as administrative agent and collateral agent for such
lenders.
“Debt Exchange” shall
have the meaning set forth in the Distribution
Agreement.
“Directories” shall have
the meaning set forth in the Ruling Request.
“Dispute” shall have the
meaning set forth in Article VIII.
“Distribution” shall
have the meaning set forth in the recitals.
“Distribution Agreement”
shall have the meaning set forth in the preamble to this
Agreement.
“Distribution Date”
shall mean the date on which the Distribution shall become
effective.
“Final Determination”
shall mean a determination within the meaning of Section 1313
of the Code or any similar provision of state or local Tax
law.
“Governmental Authority”
shall have the meaning set forth in the Distribution
Agreement.
“Indemnifiable Losses”
shall have the meaning set forth in the Distribution
Agreement.
“Indenture” shall mean
the Indenture dated as of November 17, 2006, among Spinco, the
initial Subsidiary Guarantors (as defined therein) and U.S. Bank
National Association, as Trustee.
“Parties” shall have the
meaning set forth in the preamble to this Agreement.
“Person” shall have the
meaning set forth in the Distribution Agreement.
“Post-Distribution
Period” shall mean any taxable year or other taxable period
beginning after the Distribution Date and, in the case of any
taxable year or other taxable period that begins before and ends
after the Distribution Date, that part of the taxable year or other
taxable period that begins at the beginning of the day after the
Distribution Date.
“Pre-Distribution
Period” shall mean any taxable year or other taxable period
that ends on or before the Distribution Date and, in the case of
any taxable year or other taxable period that begins before and
ends after the Distribution Date, that part of the taxable year or
other taxable period through the close of the Distribution
Date.
“Preliminary
Restructuring” shall have the meaning set forth in the
Distribution Agreement.
“Prohibited Acts” shall
have the meaning set forth in Section 3.02.
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“Ruling” shall have the meaning set
forth in Section 2.01(b).
“Ruling Request” shall
mean the request for rulings submitted by Verizon to the Internal
Revenue Service on June 14, 2006, including the exhibits
attached thereto, and all related supplements.
“Sales East” shall have
the meaning set forth in the Ruling Request.
“Senior Notes” shall
mean the Senior Notes issued under the Indenture.
“Special Distribution”
shall have the meaning set forth in the Distribution
Agreement.
“Spinco” shall have the
meaning set forth in the preamble to this Agreement.
“Spinco Assets” shall
have the meaning set forth in the Distribution
Agreement.
“Spinco Business” shall
have the meaning set forth in the Distribution
Agreement.
“Spinco Common Stock”
shall have the meaning set forth in the Distribution
Agreement.
“Spinco Exchange Debt”
shall have the meaning set forth in the Distribution
Agreement.
“Spinco Filed Tax
Return” shall have the meaning set forth in
Section 2.01(b).
“Spinco Group” shall
have the meaning set forth in the Distribution
Agreement.
“Spinco Liabilities”
shall have the meaning set forth in the Distribution
Agreement.
“Spinco Taxes” shall
have the meaning set forth in Section 2.03(a).
“Subsidiary” shall have
the meaning set forth in the Distribution Agreement.
“Taxes” shall mean
(i) all taxes, charges, fees, duties, levies, imposts, rates
or other assessments or governmental charges of any kind imposed by
any federal, state, local or foreign Governmental Authority,
including, without limitation, income, gross receipts, employment,
excise, severance, stamp, occupation, premium, windfall profits,
environmental, custom duties, property, sales, use, license,
capital stock, transfer, franchise, registration, payroll,
withholding, social security, unemployment, disability, value
added, alternative or add-on minimum or other taxes, whether
disputed or not, and including any interest, penalties, charges or
additions attributable thereto, (ii) liability for the payment
of any amount of the type described in clause (i) above
arising as a result of being (or having been) a member of any group
or being (or having been) included or required to be included in
any Tax Return related thereto, and (iii) liability for the
payment of any amount of the type described in clauses (i) or
(ii) above as a result of any express or implied obligation to
indemnify or otherwise assume or succeed to the liability of any
other Person.
“Tax Advisor” shall have
the meaning set forth in Article VIII.
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“Tax Benefit” shall mean the sum of
the amount by which the Tax liability of a corporation or
affiliated group (within the meaning of Section 1504(a) of the
Code) or other relevant group of corporations to the appropriate
Governmental Authority is reduced (including by deduction,
entitlement to refund, credit or otherwise, whether available in
the current taxable year, as an adjustment to taxable income in any
other taxable year or as a carryforward or carryback, as
applicable) plus any interest from such Governmental Authority
relating to such Tax liability.
“Tax Certificates” shall
mean certificates of officers of Verizon and Spinco, dated as of
November 17, 2006, provided to Verizon’s counsel in
connection with the Tax Opinion.
“Tax Contest” shall have
the meaning set forth in Section 5.01.
“Tax Information
Packages” shall mean any information required in order to
prepare and file any Verizon Filed Tax Return.
“Tax Materials” shall
have the meaning set forth in Section 3.01(a).
“Tax Opinion” shall mean
the written opinion of Skadden, Arps, Slate, Meagher &
Flom LLP, dated as of November 17, 2006, regarding certain
United States federal income tax consequences of the Preliminary
Restructuring, the Distribution, the Debt Exchange and other
transactions associated therewith as described in the Ruling or the
Distribution Agreement.
“Tax Return” shall mean
any return, report, certificate, form or similar statement or
document (including any related supporting information or schedule
attached thereto and any information return, amended tax return,
claim for refund or declaration of estimated tax) required to be
supplied to, or filed with, a Governmental Authority or any bill
for or notice related to ad valorem or other similar Taxes received
from a Governmental Authority, in each case, in connection with the
determination, assessment or collection of any Tax or the
administration of any laws, regulations or administrative
requirements relating to any Tax.
“Tranche B Term Loan”
shall have the meaning set forth in the Credit
Agreement.
“Transaction Agreements”
shall have the meaning set forth in the Distribution
Agreement.
“Verizon” shall have the
meaning set forth in the preamble to this Agreement.
“Verizon Filed Tax
Return” shall have the meaning set forth in
Section 2.01(a).
“Verizon Group” shall
have the meaning set forth in the Distribution
Agreement.
“Verizon Taxes” shall
have the meaning set forth in Section 2.03(b).
“VIS” shall have the
meaning set forth in the Credit Agreement.
1.02 INTERPRETATION. For all
purposes of this Agreement: (i) the terms defined in this
Agreement include the plural as well as the singular; (ii) all
references in this Agreement to “Preamble”,
“Recitals”, “Articles”,
“Sections” and other subdivisions are to the designated
Preamble, Recitals, Articles, Sections and other subdivisions of
the body of this Agreement; (iii)
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pronouns of either gender or neuter include, as
appropriate, the other pronoun forms; (iv) the words
“herein,” “hereof” and
“hereunder” and other words of similar import refer to
this Agreement as a whole and not to any particular Article,
Section or other subdivision; (v) “or” is not
exclusive; (vi) “including” shall be deemed to be
followed by “but not limited to”; and (vii) any
definition of or reference to any statute shall be construed as
referring also to any rules and regulations promulgated
thereunder.
ARTICLE II.
TAX RETURNS AND TAX
PAYMENTS
2.01 OBLIGATIONS TO FILE TAX
RETURNS.
(a) Verizon shall have the sole and
exclusive responsibility for the preparation and filing of each Tax
Return that (1) includes any member of the Verizon Group or
the Spinco Group and that is required to be filed before or on the
Distribution Date or (2) includes any member of the Verizon
Group and that is required to be filed after the Distribution Date
(each, a “Verizon Filed Tax Return”); provided,
however, that (x) Spinco shall promptly prepare and deliver to
Verizon in a manner consistent with past practices pro forma Tax
Returns and Tax Information Packages for any taxable period in
which any member of the Spinco Group is included in, or any portion
of the Spinco Business is reflected on, a Verizon Filed Tax Return,
(y) Verizon shall provide to Spinco sufficiently in advance of
the due date for the filing thereof, and Spinco shall have a
reasonable opportunity to review and comment on, any such Verizon
Filed Tax Return (or the relevant portion thereof) to the extent
that Spinco is responsible for any portion of the Taxes reported on
such Verizon Filed Tax Return, and (z) in the case of any
Verizon Filed Tax Return that includes any member of the Spinco
Group or the Spinco Business only for the portion of the relevant
taxable period that ends on the Distribution Date, Taxes shall be
allocated to the portion of such taxable period that ends on the
Distribution Date based on an actual or hypothetical closing of the
books at the close of the Distribution Date. Each member of the
Spinco Group hereby irrevocably authorizes and designates Verizon
as its agent, coordinator and administrator for the purpose of
taking any and all actions necessary or incidental to the filing of
any such Verizon Filed Tax Returns and, except as otherwise
provided herein, for the purpose of making payments to, or
collecting refunds from, any Governmental Authority in respect of a
Verizon Filed Tax Return. Except as otherwise provided herein,
Verizon shall have the exclusive right to file, prosecute,
compromise or settle any claim for, or refund of, Taxes in respect
of a Verizon Filed Tax Return for which Verizon bears
responsibility hereunder and to determine whether any refunds of
Taxes to which the Verizon Group may be entitled shall be received
by way of refund or credit against the Tax liability of the Verizon
Group.
(b) Spinco shall have the sole and
exclusive responsibility for the preparation and filing of each Tax
Return that is required to be filed after the Distribution Date
that includes any member of the Spinco Group or otherwise relates
to the Spinco Business that is not a Verizon Filed Tax Return
(each, a “Spinco Filed Tax Return”); provided, however,
that, except as otherwise required by law, (1) all Spinco
Filed Tax Returns shall be prepared on a basis that is consistent
with the Tax Opinion and the private letter ruling with respect to,
among other things, the Contribution, the Distribution and the Debt
Exchange received by Verizon on September 25, 2006 (the
“Ruling”) and consistent with past practices of
Verizon, (2) Spinco shall provide to
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Verizon sufficiently in advance of
the due date for the filing thereof, and Verizon shall have a
reasonable opportunity to review and comment on, any such Spinco
Filed Tax Return (or the relevant portion thereof) to the extent
that (x) Verizon is responsible for any portion of the Taxes
reported on such Spinco Filed Tax Return or (y) such Spinco
Filed Tax Return is a Tax Return of Sales East and (3) in the
case of any Spinco Filed Tax Return that includes any member of the
Spinco Group or the Spinco Business only for the portion of the
relevant taxable period that begins after the Distribution Date,
Taxes shall be allocated to the portion of such taxable period that
begins after the Distribution Date based on an actual or
hypothetical closing of the books at the close of the Distribution
Date.
2.02 OBLIGATION TO REMIT TAXES.
Subject to Section 2.01 and subject always to the ultimate
division of responsibility for Taxes set out in Section 2.03,
Verizon and Spinco shall each remit or cause to be remitted to the
applicable Governmental Authority in a timely manner any Taxes due
in respect of any Tax Return that such Party is required to file
(or, in the case of a Tax for which no Tax Return is required to be
filed, which is otherwise payable by such Party or a member of such
Party’s group (the Verizon Group or the Spinco Group) to any
Governmental Authority); provided, however, that in the case of any
Tax Return, the Party not required to file such Tax Return shall
remit to the Party required to file such Tax Return in immediately
available funds the amount of any Taxes reflected on such Tax
Return for which the former Party is responsible hereunder at least
two (2) Business Days before payment of the relevant amount is
due to a Governmental Authority.
2.03 TAX SHARING OBLIGATIONS AND
PRIOR AGREEMENTS.
(a) Spinco and the members of the
Spinco Group shall be responsible for the payment of (and shall be
entitled to any refund of or credit for) all Taxes (i) that
are attributable to any member of the Spinco Group or the Spinco
Business for any taxable period, including, for purposes of
clarification, any taxable period that ended prior to the
Distribution Date, as determined in accordance with Schedule A,
(ii) resulting from the Preliminary Restructuring, the
Distribution, the Debt Exchange or any transaction associated
therewith as described in the Ruling or the Distribution Agreement,
to the extent that such Taxes arise as a result of any action taken
by Spinco or any member of the Spinco Group following the
Distribution (other than, in the case of the Tranche B Term Loan,
the repayment thereof prior to the stated maturity in accordance
with Section 2.10(b) of the Credit Agreement), or
(iii) resulting from any breach of or inaccuracy in any
representation, covenant or obligation of any member of the Spinco
Group under this Agreement (collectively, “Spinco
Taxes”).
(b) Verizon and the members of the
Verizon Group shall be responsible for the payment of (and shall be
entitled to any refund of or credit for) all Taxes attributable to
any member of the Verizon Group or any member of the Spinco Group
that are not Spinco Taxes (collectively, “Verizon
Taxes”).
(c) Notwithstanding anything else to
the contrary contained herein or in any other Transaction Agreement
and notwithstanding whether any such Tax Benefits are realized on
Verizon Filed Tax Returns or Spinco Filed Tax Returns, the Parties
agree to allocate the Tax Benefits set forth on Schedule B in
accordance therewith.
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(d) Except as set forth in this
Agreement and in consideration of the mutual indemnities and other
obligations of this Agreement, any and all prior Tax sharing or
allocation agreements or practices between any member of the
Verizon Group and any member of the Spinco Group shall be
terminated with respect to the Spinco Group as of the Distribution
Date, and no member of the Spinco Group shall have any continuing
rights or obligations thereunder.
2.04 AMENDED RETURNS. Spinco shall
not, and shall not permit any member of the Spinco Group to, file
any amended Tax Return that includes any member of the Verizon
Group.
ARTICLE III.
REPRESENTATIONS AND
COVENANTS
3.01 COMPLIANCE WITH THE RULING AND
TAX OPINION.
(a) Verizon (on behalf of itself and
all other members of the Verizon Group) hereby represents and
warrants that (i) it has examined (A) the Ruling,
(B) the Tax Opinion, (C) the Ruling Request, (D) the
Tax Certificates and (E) any other materials delivered or
deliverable in connection with the issuance of the Ruling and the
rendering of the Tax Opinion (collectively, the “Tax
Materials”) and (ii) the facts presented and
representations made therein, to the extent descriptive of or
otherwise relating to Verizon or any member of the Verizon Group,
are or will be from the time presented or made through and
including the Distribution Date true, correct and complete in all
material respects. Verizon (on behalf of itself and all other
members of the Verizon Group) hereby confirms and agrees to comply
with any and all covenants and agreements in the Tax Material
applicable to Verizon or any member of the Verizon
Group.
(b) Spinco (on behalf of itself and
all other members of the Spinco Group) hereby represents and
warrants that (i) it has examined the Tax Materials and
(ii) the facts presented and representations made therein, to
the extent descriptive of or otherwise relating to Spinco or any
member of the Spinco Group, are or will be from the time presented
or made through and including the Distribution Date true, correct
and complete in all material respects. Spinco (on behalf of itself
and all other members of the S
