10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2008

Commission file number: 1-32939

IDEARC INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware (State of Incorporation)	20-5095175 (I.R.S. Employer Identification No.)
2200 West Airfield Drive, P.O Box 619810 D/FW Airport, TX (Address of Principal Executive Offices)	75261 (Zip Code)

Registrant’s telephone number, including area code: (972) 453-7000

     Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ Accelerated filer o Non-accelerated filer o Smaller Reporting Company o

     Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

     As of August 7, 2008, there were 147,718,157 shares of the Registrant’s common stock outstanding.

TABLE OF CONTENTS

	Page
	No.
Forward-Looking Statements		1
PART I — FINANCIAL INFORMATION
Item 1 Financial Statements		2
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations		16
Item 3 Quantitative and Qualitative Disclosures About Market Risk		21
Item 4 Controls and Procedures		22
PART II — OTHER INFORMATION
Item 1 Legal Proceedings		23
Item 1A Risk Factors		23
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds		23
Item 3 Defaults Upon Senior Securities		23
Item 4 Submission of Matters to a Vote of Security Holders		23
Item 5 Other Information		24
Item 6 Exhibits		24
Stock Option Agreement
2008 Long-Term Incentive Award Agreement
Form of Restricted Stock Award Agreement
Restricted Stock Award Agreement
Form of Stock Option Award Agreement
Form of Stock Option Award Agreement
Certification of Scott W. Klein Filed Pursuant to Section 302
Certification of Samuel D. Jones Filed Pursuant to Section 302
Certification Filed Pursuant to Section 906

FORWARD-LOOKING STATEMENTS

     This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You should not place undue reliance on these statements. These forward-looking statements include statements that reflect the current views of our senior management with respect to our financial performance and future events with respect to our business and industry in general. Statements that include the words “may,” “could,” “should,” “would,” “believe,” “anticipate,” “forecast,” “estimate,” “expect,” “preliminary,” “intend,” “plan,” “project,” “outlook” and similar statements of a future or forward-looking nature identify forward-looking statements. Forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause our actual results to differ materially from those indicated in these statements. We believe that these factors include, but are not limited to, the following:

• risks related to our substantial indebtedness;

• risks related to our declining revenue, including a reduction in customer advertising spend resulting from the current economic downturn;

• limitations on our operating and strategic flexibility under the terms of our debt agreements;

• changes in our competitive position due to competition from other yellow pages directories publishers and other traditional and new media and our ability to anticipate or respond to changes in technology and user preferences;

• declining use of print yellow pages directories;

• our ability to successfully identify and implement cost initiatives;

• our ability to access capital markets should we choose to do so and changes in our credit ratings;

• changes in the availability and cost of paper and other raw materials used to print our directories and our reliance on third-party providers for printing and distribution services;

• increased credit risk associated with our reliance on small- and medium-sized businesses;

• changes in our operating performance;

• our ability to attract and retain qualified executives;

• our ability to maintain good relations with our unionized employees;

• changes in U.S. labor, business, political and/or economic conditions;

• changes in governmental regulations and policies and actions of regulatory bodies; and

• risks associated with our obligations under agreements entered into with Verizon in connection with our spin-off.

     The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this and other reports we file with the Securities and Exchange Commission, including the information in “Item 1A. Risk Factors” in Part I of our Annual Report on Form 10-K for the year ended December 31, 2007. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate.

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

Idearc Inc. and Subsidiaries

Consolidated Statements of Income
(Unaudited)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2008		2007		2008		2007
	(in millions, except per share amounts)
Operating Revenue
Print products	$	683	$	731	$	1,379	$	1,468
Internet		75		73		148		141
Other		1		1		2		2
Total Operating Revenue		759		805		1,529		1,611
Operating Expense
Selling		185		188		370		376
Cost of sales (exclusive of depreciation and amortization)		157		156		304		314
General and administrative		118		97		197		203
Depreciation and amortization		20		22		40		44
Total Operating Expense		480		463		911		937
Operating Income		279		342		618		674
Interest expense, net		163		167		329		337
Income Before Provision for Income Taxes		116		175		289		337
Provision for income taxes		40		66		102		125
Net Income	$	76	$	109	$	187	$	212
Basic and diluted earnings per common share	$	.52	$	.75	$	1.28	$	1.45
Basic and diluted weighted-average common shares outstanding		146		146		146		146
Dividends declared per common share	$	—	$	.3425	$	.3425	$	.6850

See Notes to Consolidated Financial Statements.

2

Idearc Inc. and Subsidiaries

Consolidated Balance Sheets
(Unaudited)

	At June 30,			At December 31,
	2008			2007
	(in millions)
Assets
Current assets:
Cash and cash equivalents	$	127		$	48
Accounts receivable, net of allowances of $83 and $77		408			423
Deferred directory costs		312			312
Prepaid expenses and other		5			10
Total current assets		852			793
Property, plant and equipment		476			471
Less: accumulated depreciation		368			356
		108			115
Goodwill		73			73
Intangible assets, net		295			303
Pension assets		182			171
Non-current deferred tax assets		84			124
Debt issuance costs		81			86
Other non-current assets		3			2
Total assets	$	1,678		$	1,667
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable and accrued liabilities	$	233		$	272
Deferred revenue		197			209
Current maturities of long-term debt		85			48
Current deferred taxes		23			28
Other		25			31
Total current liabilities		563			588
Long-term debt		8,959			9,020
Employee benefit obligations		316			327
Unrecognized tax benefits		87			109
Other liabilities		185			223
Stockholders’ equity (deficit):
Common stock ($.01 par value; 225 million shares authorized, 147,776,287 and 146,795,971 shares issued and outstanding in 2008 and 2007, respectively)		1			1
Additional paid-in capital (deficit)		(8,769	)		(8,776	)
Retained earnings		498			361
Accumulated other comprehensive loss		(162	)		(186	)
Total stockholders’ equity (deficit)		(8,432	)		(8,600	)
Total liabilities and stockholders’ equity (deficit)	$	1,678		$	1,667

See Notes to Consolidated Financial Statements.

3

Idearc Inc. and Subsidiaries

Consolidated Statements of Cash Flows
(Unaudited)

	Six Months Ended June 30,
	2008			2007
	(in millions)
Cash Flows from Operating Activities
Net income	$	187		$	212
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		40			44
Employee retirement benefits		(1	)		10
Deferred income taxes		7			1
Provision for uncollectible accounts		87			64
Stock-based compensation		1			28
Changes in current assets and liabilities
Accounts receivable		(72	)		(152	)
Deferred directory costs		—			(31	)
Other current assets		5			1
Accounts payable and accrued liabilities.		(66	)		(25	)
Other, net		(12	)		(14	)
Net cash provided by operating activities		176			138
Cash Flows from Investing Activities
Capital expenditures (including capitalized software)		(25	)		(22	)
Proceeds from sale of assets		2			1
Other, net		—			4
Net cash used in investing activities		(23	)		(17	)
Cash Flows from Financing Activities
Repayment of long-term debt		(24	)		(24	)
Dividends paid to stockholders		(50	)		(100	)
Net cash used in financing activities		(74	)		(124	)
Increase (decrease) in cash and cash equivalents		79			(3	)
Cash and cash equivalents, beginning of year		48			172
Cash and cash equivalents, end of period	$	127		$	169

See Notes to Consolidated Financial Statements.

4

Idearc Inc. and Subsidiaries

Notes to Consolidated Financial Statements
(Unaudited)

Note 1
Basis of Presentation

     Pursuant to the rules and regulations of the U. S. Securities and Exchange Commission (the “SEC”), the accompanying unaudited consolidated financial statements contain all adjustments, consisting of normal recurring items and accruals, necessary to fairly present the financial position, results of operations and cash flows of Idearc Inc. and its subsidiaries (collectively, “Idearc” or the “Company”). These interim financial statements do not contain all information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States, and should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2007. The results for the interim periods are not necessarily indicative of results for the full year. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amount of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of the financial statements. Certain prior period amounts have been reclassified to conform to current year presentation.

Recent Accounting Pronouncements

Fair Value Measurements

     In February 2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position No. 157-2, “Partial Deferral of the Effective Date of Statement 157” (“FSP 157-2”), for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008. We are currently evaluating the potential impact of the adoption of the deferred portion of the Statement of Financial Accounting Standards No. 157, “Fair Value Measurements,” with regards to nonfinancial assets and liabilities, on our consolidated financial statements.

Business Combinations

     In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (revised 2007), “Business Combinations” (“SFAS 141R”), which replaces SFAS 141. SFAS 141R establishes principles and requirements for how an acquirer in a business combination recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any controlling interest; recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141R is to be applied prospectively to business combinations for which the acquisition date is on or after an entity’s fiscal year that begins after December 15, 2008. We are currently evaluating the potential impact of the adoption of SFAS 141R on our consolidated financial statements.

Derivative Instruments and Hedging Disclosures

     In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133” (“SFAS 161”). SFAS 161 requires enhanced disclosures about an entity’s derivative and hedging activities. These enhanced disclosures will discuss (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. We are currently evaluating the potential impact of the adoption of SFAS 161 on our disclosures related to our consolidated financial statements.

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Determination of the Useful Life of Intangible Assets

     In April 2008, the FASB issued FASB Staff Position FAS 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP FAS 142-3”). FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible Assets.” FSP FAS 142-3 is effective for fiscal years beginning after December 15, 2008 and early adoption is prohibited. We are currently evaluating the potential impact of the adoption of FSP FAS 142-3 on our consolidated financial statements.

Note 2
Restructuring

     In the second quarter of 2008, the Company began implementing strategic organizational and market exit initiatives to improve ongoing operational efficiencies and reduce total operating costs. As a result, the Company recorded a restructuring charge of $7 million associated with one-time termination benefits impacting approximately 350 employees. This charge was recorded to general and administrative expense in the statements of income.

Note 3
Fair Value Measurements

     On January 1, 2008, the Company adopted the provisions of Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines how fair value should be determined for financial reporting purposes by establishing a fair value framework applicable to all fair value measurements.

     As required by SFAS 157, each financial asset and liability must be identified as having been valued according to a specified level of input as follows:

• Level 1 Inputs - Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that are accessible at the measurement date;

• Level 2 Inputs - Level 2 inputs utilize inputs other than quoted prices included in Level 1 that are observable for an asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, and inputs other than quoted prices that are observable for an asset or liability; and

• Level 3 Inputs - Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.

     In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In these cases, the level in the fair value hierarchy, within which the fair value measurement in its entirety falls, has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. Assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

     The measurement of fair value should be consistent with one of the following valuation techniques: market approach, income approach or cost approach. The Company uses the income approach to measure fair value of its financial instruments. The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. Our only assets or liabilities measured at fair value on a recurring basis are our interest rate swap agreements, which, at June 30, 2008, are valued at $183 million ($119 million net of tax, recorded to accumulated other comprehensive loss) using Level 2 inputs, and are classified as other liabilities on the balance sheet.

Note 4
Earnings Per Share

     Basic earnings per share are computed by dividing net income by the number of weighted-average common shares outstanding during the reporting period. Diluted earnings per share are calculated to give effect to all

6

potentially dilutive common shares outstanding during the reporting period. The effect of potentially dilutive common shares for the three and six months ended June 30, 2008 and 2007 was not material.

     The following table illustrates the calculation of basic and diluted earnings per share for the three and six months ended June 30, 2008 and 2007:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2008		2007		2008		2007
	(in millions, except per share amounts)
Income available to common stockholders	$	76	$	109	$	187	$	212
Weighted-average common shares outstanding		146		146		146		146
Basic and diluted earnings per share	$	.52	$	.75	$	1.28	$	1.45

Note 5
Additional Financial Information

     The tables that follow provide additional financial information related to our consolidated financial statements.

Balance Sheets

     The following table displays the components of accounts payable and accrued liabilities.

	At June 30,		At December 31,
	2008		2007
	(in millions)
Accounts payable and accrued liabilities
Accounts payable	$	27	$	38
Accrued expenses		64		73
Accrued vacation pay		22		24
Accrued salaries and wages		73		80
Accrued taxes		17		26
Accrued interest		30		31
	$	233	$	272

7

Comprehensive Income

     The following table displays the computation of total comprehensive income.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2008		2007		2008		2007
	(in millions)
Net income	$	76	$	109	$	187	$	212
Other comprehensive income, net of taxes
Unrealized gain on cash flow hedges		114		25		24		24
Adjustments for pension and post-employment benefits		—		2		—		3
Other comprehensive income		114		27		24		27
Total comprehensive income	$	190	$	136	$	211	$	239

     The following table displays the components of accumulated other comprehensive loss.

	At June 30,			At December 31,
	2008			2007
	(in millions)
Unrealized losses on cash flow hedges, net of tax	$	(119	)	$	(143	)
Pension and post-employment benefits, net of tax		(43	)		(43	)
Accumulated other comprehensive loss	$	(162	)	$	(186	)

Note 6
Debt

Long-Term Debt

     Outstanding long-term debt obligations are as follows:

						At			At
						June 30,			December 31,
	Interest Rates			Maturities		2008			2007
						(in millions)
Senior secured credit facilities:
Revolving credit facility	LIBOR + 1.50%				2011	$	—		$	—
Tranche A facility	LIBOR + 1.50%				2009-2013		1,515			1,515
Tranche B facility	LIBOR + 2.00%				2006-2014		4,679			4,703
Total senior secured credit facilities							6,194			6,218
Senior unsecured notes		8.0	%		2016		2,850			2,850
Total long-term debt, including current maturities							9,044			9,068
Less: current maturities of long-term debt							(85	)		(48	)
Long-term debt						$	8,959		$	9,020

Senior Secured Credit Facilities

     As of June 30, 2008, Idearc had interest rate swap agreements with major financial institutions with notional amounts totaling $5,510 million. These swap agreements consist of three separate swap transactions with notional

8

amounts of $1,710 million maturing on March 31, 2009, $2,700 million maturing on June 29, 2012 and $1,100 million maturing on September 30, 2010. In addition to these swap agreements, Idearc entered into two forward swap transactions effective March 31, 2009 with notional amounts of $800 million maturing on March 31, 2012 and $900 million with annual notional reductions of $200 million maturing on March 31, 2012. Under the swap agreements, we pay fixed rate interest at rates ranging from 4.86% to 5.15% and receive floating rate interest based on the three month LIBOR to hedge the variability in cash flows attributable to changes in the benchmark interest rate. These swap agreements comply with our debt covenants under our senior secured credit facilities that require that at least 50% of our total outstanding debt be subject to fixed interest rates until March 2009. We do not enter into financial instruments for trading or speculative purposes.

     All derivative financial instruments are recognized as either assets or liabilities on the consolidated balance sheets with measurement at fair value. We determine the fair value of the derivative financial instruments in accordance with SFAS 157. On a quarterly basis, the fair value of our interest rate swap agreements is determined based on observable market prices of similar instruments. For those interest rate swap agreements in a liability position, we factor nonperformance risk into the measurement of fair value. See Note 3 for a further explanation of fair value measurements.

     The Company assesses, at both the hedge’s inception and on an ongoing basis, whether the derivatives used in hedged transactions have been highly effective in offsetting the variability in interest cash flows of the hedged items and are expected to remain highly effective in future periods. Changes in the fair value of outstanding cash flow hedge derivative instruments that are highly effective are recorded in accumulated other comprehensive loss, a component of stockholders’ equity (deficit), until net income is affected by the variability of cash flows of the hedged transaction. Any hedge ineffectiveness would be recorded in current period net income.

     The interest rate swap agreements described above, designated as cash flow hedges, were assessed to be highly effective on a retrospective and prospective basis. Accordingly, the changes in fair value of the derivative instruments were recorded in accumulated other comprehensive loss. The derivative financial instruments are currently classified as other liabilities in the amount of $183 million ($119 million net of tax recorded to accumulated other comprehensive loss).

     In addition to these interest rate swap agreements, Idearc entered into a basis swap transaction effective March 31, 2008 with a notional amount of $600 million ($400 million on Tranche A and $200 million on Tranche B) maturing December 31, 2008. Under this basis swap transaction, Idearc will receive one month LIBOR from the counter party, pay one month LIBOR plus the appropriate spread on the secured debt and pay three month LIBOR less 6.375 basis points to the swap counter party.

     The senior secured credit facilities are guaranteed by substantially all subsidiaries of Idearc Inc. and are secured by substantially all present and future assets of Idearc Inc. and its subsidiaries.

Senior Unsecured Notes

     The senior unsecured notes are guaranteed by substantially all subsidiaries of Idearc Inc. The senior unsecured notes are general unsecured obligations of Idearc Inc. and are effectively subordinated to all secured indebtedness of Idearc Inc. to the extent of the value of the assets securing this secured indebtedness. Idearc Inc. has no independent assets or operations. The guarantees by its subsidiaries are full and unconditional and joint and several, and any subsidiaries of Idearc Inc., other than the subsidiary guarantors, are minor. Our financing arrangements contain restrictions on our ability to pay dividends on shares of our common stock based on our satisfying certain performance measures and complying with other conditions.

Debt Covenants and Maturities

     As of June 30, 2008, we were in compliance with the covenants in our debt agreements.

     We made scheduled principal payments of $24 million in the first six months of 2008. Scheduled principal payments of long-term debt outstanding at June 30, 2008, are $24 million for the remainder of 2008, $123 million in 2009, $199 million in 2010, $275 million in 2011, $351 million in 2012 and $8,072 million thereafter.

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Note 7
Pension and Other Post-Employment Benefit Costs

     We maintain non-contributory defined benefit pension plans for the majority of our employees. In addition, we maintain post-employment health care and life insurance plans for our retirees and their dependents, which are both contributory and non-contributory and include a limit on the Company’s share of cost for certain recent and future retirees.

Net Periodic Cost (Income)

     The following tables summarize the benefit costs (income) related to the Company’s pension and post-employment health care and life insurance plans for the three and six months ended June 30, 2008 and 2007.

	Pension
	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2008			2007			2008			2007
Service cost	$	2		$	2		$	4		$	4
Interest cost		8			9			16			18
Expected return on plan assets		(15	)		(15	)		(28	)		(30	)
Amortization of prior service costs		—			—			—			—
Amortization of unrecognized net loss (gain)		—			—			—			—
Settlement (gain)		(3	)		—			(3	)		—
Net periodic benefit (income) cost	$	(8	)	$	(4	)	$	(11	)	$	(8	)

     During the six months ended June 30, 2008, our lump sum pension distributions to separated and retired employees exceeded the expected annual sum of pension service and interest costs. Accordingly, under the provisions of Statement of Financial Standards No. 88, “Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits,” we recorded a $3 million settlement gain in the second quarter of 2008, which represents a pro-rata recognition of the unrecognized gains associated with the separated and retired employees.

	Health Care and Life
	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2008			2007		2008			2007
Service cost	$	—		$	1	$	1		$	3
Interest cost		5			6		9			12
Amortization of prior service costs		(2	)		1		(3	)		1
Amortization of unrecognized net loss (gain)		2			1		3			2
Net periodic benefit (income) cost	$	5		$	9	$	10		$	18

Note 8
Employee Benefits

Savings Plans

     We sponsor defined contribution savings plans to provide opportunities for eligible employees to save for retirement on a tax-deferred basis. Substantially all of our employees are eligible to participate in these plans. Idearc

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offers three defined contribution plans for the benefit of current and former Idearc employees. Under these plans, a certain percentage of eligible employee contributions are matched with Company cash allocated to the participants’ current investment elections. We recognize savings plan expenses based on our matching obligation attributable to our participating employees. For the three and six months ended June 30, 2008, we recorded savings plan expenses of $9 million and $16 million, respectively. For the three and six months ended June 30, 2007, we recorded savings plan expenses of $8 million and $15 million, respectively.

Severance Benefits

     During the three and six months ended June 30, 2008, we paid severance benefits of $6 million and $10 million, respectively.

     In the second quarter of 2008, we recorded additional severance expense of $7 million associated with a restructuring charge. See Note 2 for additional information.

Note 9
Stock-Based Compensation

     Effective March 4, 2008, the Company adopted the Idearc Inc. 2008 Incentive Compensation Plan (the “2008 Plan”), subject to the approval of the Company’s stockholders. The 2008 Plan was approved by the Company’s stockholders on May 1, 2008. The 2008 Plan permits the granting of cash and equity-based incentive compensation awards, including restricted stock and restricted stock units, performance shares and performance share units, stock options, stock appreciation rights, deferred stock units and other stock-based awards and performance-based cash incentive awards. The maximum number of shares of Idearc common stock authorized for issuance under the 2008 Plan is 12 million. During 2008, the Company granted awards under the 2008 Plan to employees and non-management directors.

     Effective November 16, 2006, the Company adopted the Idearc Inc. Long Term Incentive Plan (the “2006 Plan”). The 2006 Plan permits the granting of cash and equity-based incentive compensation awards, including restricted stock, restricted stock units, performance shares, performance units, stock options, and other awards, such as stock appreciation rights and cash incentive awards. The maximum number of shares of Idearc common stock authorized for issuance under the 2006 Plan is 2.5 million. Pursuant to the terms of the 2008 Plan, the Company will not issue more than 350,000 shares under the 2006 Plan after December 31, 2007. During 2007 and 2008, the Company granted awards under the 2006 Plan to employees and non-management directors.

Restricted Stock Units

     The 2006 and 2008 Plans provide for grants of restricted stock units (“RSUs”) that can be settled in cash, shares of Idearc common stock or a combination thereof. These awards are classified as either liability or equity awards based on the criteria established by SFAS No. 123(R) “Share-Based Payment.”

     On January 9, 2007, certain employees were granted awards of RSUs, which were classified as liability awards, that vested on January 9, 2008, and were settled in accordance with the 2006 Plan and related award agreements.

     Changes in the Company’s outstanding RSU liability awards for the six months ended June 30, 2008, were as follows:

				Weighted-
	Restricted			Average
	Stock Units			Fair
	(in thousands)			Value
Nonvested RSUs at beginning of period		525		$	17.56
Granted		—			—
Dividend equivalents		—			—
Payments		(523	)		14.99
Forfeitures		(2	)		n/a
Nonvested RSUs at end of period		—		$	—

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Restricted Stock

     The 2006 and 2008 Plans provide for grants of restricted stock. These awards are classified as equity awards based on the criteria established by SFAS No. 123(R) “Share-Based Payment.”

     During the first quarter of 2008, certain employees were granted restricted stock awards as part of the Company’s 2008 long-term incentive compensation program. These restricted stock awards vest in two equal installments on December 31, 2009, and December 31, 2010. Additionally, our non-management directors were granted restricted stock awards that vest on May 1, 2009, or the date of the Company’s 2009 annual meeting of stockholders, whichever is earlier.

     During the first quarter of 2007, certain employees and our non-management directors were granted restricted stock awards. The employee awards vest in three equal annual installments beginning on the first anniversary of the grant date. The non-management director awards vest on the third anniversary of the grant date.

     Dividends are not payable on unvested restricted stock awards. However, if the Company declares and pays a dividend on Idearc common stock, dividend equivalents are granted in an amount equal to the dividend that would have been paid on the unvested restricted stock awards as if they were vested. Dividend equivalents on employee restricted stock awards are granted in the form of restricted stock units. Each restricted stock unit will be settled for one share of Idearc common stock on the applicable vesting date. Dividend equivalents on non-management director restricted stock awards are paid in cash on the applicable vesting date. Dividend equivalents are subject to the same vesting, forfeiture and other terms applicable to the corresponding restricted stock awards.

     A portion of the cost related to these restricted stock awards is included in the Company’s compensation expense for the three and six months ended June 30, 2008 and 2007.

     Changes in the Company’s outstanding restricted stock awards for the six months ended June 30, 2008, were as follows:

	Number of
	Restricted			Weighted-Average
	Stock Awards			Grant-Date Fair
	(in thousands)			Value
Nonvested restricted stock at beginning of period		976		$	29.60
Granted		1,272			3.51
Dividend equivalent units		33			n/a
Vested		(360	)		29.16
Forfeitures		(234	)		25.02
Nonvested restricted stock at end of period		1,687		$	10.65

Performance Units and Performance Share Units

     The 2006 and 2008 Plans provide for grants of performance units and performance share units that can be settled in cash, shares of Idearc common stock, or a combination thereof. These awards are classified as either liability or equity awards based on the criteria established by SFAS No. 123(R) “Share-Based Payment.”

     During the first quarter of 2008, certain employees were granted a target number of performance share units as part of the Company’s 2008 long-term incentive compensation program. The target number of performance share units may be increased (to a maximum of 200% of the target) or decreased (to zero) based on the Company’s total stockholder return (“TSR”) relative to the TSR of the individual stocks comprising a market benchmark (weighted 80%) and a competitor (weighted 20%) over a three-year measurement period. The measurement period began on March 8, 2008, and will end in 2011 on the 20^th trading day following the date the Company releases to the public its annual earnings for the year ending December 31, 2010. Each performance share unit will be settled for one share of Idearc common stock.

     Dividends are not payable on performance share units. However, if the Company declares and pays a dividend on Idearc common stock, dividend equivalents are granted in an amount equal to the dividend that would have been paid on an equivalent number of shares of Idearc common stock. Dividend equivalents are granted in the

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form of additional performance share units and are subject to the same vesting, forfeiture and other terms applicable to the performance share unit award.

     This award is classified as an equity award because it will be settled in shares of Idearc common stock upon vesting. All payments are subject to approval by the Human Resources Committee of the Company’s Board of Directors. The performance share unit award liability is measured at its fair value at the time of grant, which, for this purpose, was the date on which the Company’s stockholders approved the 2008 Plan. A portion of the cost related to this performance share unit liability is included in the Company’s stock-based compensation expense for the three and six months ended June 30, 2008.

     During the first quarter of 2007, certain employees were granted a target number of performance units as part of the Company’s 2007 long-term incentive compensation program. The target number of performance units may be increased (to a maximum of 150% of the target) or decreased (to zero) based on the Company’s TSR relative to the TSR of a market benchmark over a measurement period beginning on January 1, 2007, and ending on December 31, 2009. Each performance unit will be settled in cash upon vesting in an amount equal to the closing price of Idearc common stock on the last trading day in the measurement period.

     Dividends are not payable on performance units. However, if the Company declares and pays a dividend on Idearc common stock, dividend equivalents are granted in an amount equal to the dividend that would have been paid on an equivalent number of shares of Idearc common stock. Dividend equivalents are granted in the form of additional performance units and are subject to the same vesting, forfeiture and other terms applicable to the performance unit award.

     This award is classified as a liability award because it will be settled in cash upon vesting. All payments are subject to approval by the Human Resources Committee of the Company’s Board of Directors. The performance unit award liability is measured at its fair value at the end of each reporting period and will fluctuate based on the performance of Idearc common stock and Idearc’s TSR relative to the TSR of the market benchmark. A portion of the cost related to this performance unit liability is included in the Company’s stock-based compensation expense for the three and six months ended June 30, 2008 and 2007.

     Changes in the Company’s outstanding performance units and performance share units for the six months ended June 30, 2008, were as follows:

	Performance
	Units /			Weighted-
	Performance			Average
	Share Units			Fair
	(in thousands)			Value
Outstanding performance units at beginning of period		577		$	17.56
Granted		1,769			4.44
Dividend equivalents		39			0.48
Forfeitures		(82	)		3.93
Outstanding performance units/performance share units at end of period		2,303		$	3.40

Stock Options

     The 2006 and 2008 Plans provide for grants of stock options. These awards are classified as equity awards based on the criteria established by SFAS No. 123(R) “Share-Based Payment.”

     During the second quarter of 2008, certain employees were granted stock option awards under the 2006 and 2008 Plans. The stock option awards vest on the third anniversary of the grant date and have a ten year term.

     A stock option holder may pay the option exercise price in cash by delivering unrestricted shares to the Company having a value at the time of exercise equal to the exercise price, by a cashless broker-assisted exercise, by a combination of these methods or by any other method approved by the Human Resources Committee of the Company’s Board of Directors. Options may not be re-priced without the approval of the Company’s stockholders.

     The fair value of each option award is estimated on the grant date using the Black Scholes option pricing model. The model incorporates the ranges of assumptions for inputs as shown in the following table and as follows:

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• Expected volatility is a blend of implied volatility based on market-traded options on Idearc common stock and the historical volatility of Idearc stock over its history;

• Expected life represents the period of time the options are expected to be outstanding and is based on the SEC shortcut method as described in Staff Accounting Bulletin No. 110; and

• The risk-free interest rate is determined using the U.S. Treasury zero-coupon issue with a remaining term equal to the expected life of the options.

	Six Months
	Ended
	June 30, 2008
Expected volatility		75.0	%
Risk-free interest rate.		3.6	%
Expected term (in years)		6.50

     The weighted-average grant-date fair value of stock options granted during the six months ended June 30, 2008, was $2.62.

     A portion of the cost related to these stock option awards is included in the Company’s compensation expense for the three and six months ended June 30, 2008.

     Changes in the Company’s outstanding stock option awards for the six months ended June 30, 2008 were as follows:

					Weighted-
	Number of				Average
	Stock Option		Weighted-		Remaining		Aggregate
	Awards		Average		Contractual		Intrinsic Value
	(in thousands)		Exercise price		Term (years)		(per share)
Outstanding stock option awards at beginning of period		—	$	—		—	$	—
Granted		550		3.96		9.86		0.69
Exercises		—		—		—		—
Forfeitures/expirations		—		—		—		—
Outstanding stock option awards at end of period		550	$	3.96		9.86	$	0.69

     The pre-tax compensation expense recognized for the three and six months ended June 30, 2008, related to stock-based compensation was $6 million and $1 million, respectively. For the three and six months ended June 30, 2007, pre-tax compensation expense related to stock-based compensation awards was $16 million and $28 million, respectively.

     As of June 30, 2008, unrecognized compensation expense related to the unvested portion of the Company’s restricted stock, performance units, performance share units and stock options was approximately $15 million and is expected to be recognized over a weighted-average period of approximately 1.7 years.

Note 10
Income Taxes

     Income taxes for the six months ended June 30, 2008 and 2007 have been included in the accompanying financial statements on the basis of an estimated annual effective tax rate. In determining the estimated annual effective tax rate, the Company includes interest expense on unrecognized tax benefits. The Company anticipates the effective tax rate, including interest expense and other one-time discrete items, to approximate 36.5% for 2008. The full year effective tax rate for 2007 was 35.7%.

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Note 11
Litigation

     The Company is subject to various lawsuits and other claims in the normal course of business. In addition, from time to time, the Company receives communications from government or regulatory agencies concerning investigations or allegations of noncompliance with laws or regulations in jurisdictions in which the Company operates.

     The Company establishes reserves for specific liabilities in connection with regulatory and legal actions that the Company deems to be probable and estimable. No material amounts have been accrued in the financial statements with respect to any matters. In other instances, including the matter described below, the Company is not able to make a reasonable estimate of any liability because of the uncertainties related to the outcome and/or the amount or range of loss. The Company does not expect that the ultimate resolution of pending regulatory and legal matters in future periods, including the matter described below, will have a material effect on the financial condition or results of operations.

     In October 2007, the Company received a proposed assessment from the State of New York related to sales and use tax on printing and mailing charges. The proposed assessment of approximately $28 million relates to the audit period March 1998 through May 2005. The Company has filed an amicus curiae brief in a related matter affecting a third party. On May 5, 2008, the State of New York issued a Notice of Determination to the Company for approximately $28 million. The Company filed its response on August 3, 2008. The ultimate outcome of this matter is not determinable.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview

     We are one of the largest yellow pages directories publishers in the United States as measured by revenues, and we believe that we are one of the nation’s leading online local search providers. Our products include print yellow pages, print white pages, Superpages.com, Switchboard.com and LocalSearch.com, our online local search resources, and Superpages Mobile, our information directory for wireless subscribers. We are the exclusive official publisher of Verizon print directories in the markets in which Verizon is the incumbent local exchange carrier.

Basis of Presentation

     Our financial statements are prepared using accounting principles generally accepted in the United States. These principles require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. Actual results could differ from those estimates and assumptions. Examples of significant estimates include the allowance for doubtful accounts, the recoverability of property, plant and equipment, goodwill and other intangible assets, valuation allowances on tax assets and liabilities, and pension and post-employment benefit assumptions. See “Critical Accounting Policies” below for a summary of the critical accounting policies used in preparing our financial statements.

Results of Operations

Three Months Ended June 30, 2008 Compared to Three Months Ended June 30, 2007

     The following table sets forth our operating results for the three months ended June 30, 2008 and 2007:

Three months ended June 30,	2008		2007		Change			% Change
	(in millions, except %)
Operating Revenue
Print products	$	683	$	731	$	(48	)		(6.6	)%
Internet		75		73		2			2.7
Other		1		1		—			—
Total operating revenue		759		805		(46	)		(5.7	)
Operating Expense
Selling		185		188		(3	)		(1.6	)
Cost of sales (exclusive of depreciation and amortization)		157		156		1			0.6
General and administrative		118		97		21			21.6
Depreciation and amortization		20		22		(2	)		(9.1	)
Total operating expense		480		463		17			3.7
Operating income		279		342		(63	)		(18.4	)
Interest expense, net		163		167		(4	)		(2.4	)
Income before provision for income taxes		116		175		(59	)		(33.7	)
Provision for income taxes		40		66		(26	)		(39.4	)
Net income	$	76	$	109	$	(33	)		(30.3	)%

Operating Revenue

     Operating revenue of $759 million for the three months ended June 30, 2008 decreased $46 million, or 5.7%, compared to $805 million for the three months ended June 30, 2007 for the reasons described below.

     Print Products. Revenue from print products of $683 million for the three months ended June 30, 2008 decreased $48 million, or 6.6%, compared to $731 million for the three months ended June 30, 2007. This decline resulted from reduced advertiser renewals reflecting weaker economic conditions, partially offset by the addition of

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new advertisers and revenue from new product offerings. We continued to face competition in the print directory market and from other advertising media, including cable television, radio and the Internet.

     Internet. Internet revenue of $75 million for the three months ended June 30, 2008 increased $2 million, or 2.7%, compared to $73 million for the three months ended June 30, 2007, as we continued to expand our product offerings, market reach and advertiser base.

Operating Expense

     Operating expense of $480 million for the three months ended June 30, 2008 increased $17 million, or 3.7%, compared to $463 million for the three months ended June 30, 2007 for the reasons described below.

     Selling. Selling expense of $185 million for the three months ended June 30, 2008 decreased $3 million, or 1.6%, compared to $188 million for the three months ended June 30, 2007. This decrease resulted primarily from lower advertising costs and lower employee benefit costs, partially offset by higher employee related costs.

     Cost of Sales. Cost of sales of $157 million for the three months ended June 30, 2008 increased $1 million, or 0.6%, compared to $156 million for the three months ended June 30, 2007. This increase was primarily due to increased Internet traffic and printing costs, offset by lower employee related costs.

     General and Administrative. General and administrative expense of $118 million for the three months ended June 30, 2008 increased $21 million, or 21.6%, compared to $97 million for the three months ended June 30, 2007. The increase was largely the result of higher bad debt, employee severance and contract services costs. Employee severance costs include one-time termination benefits of $7 million associated with a restructuring charge taken in the second quarter of 2008 as part of strategic organizational and market exit initiatives to improve ongoing operational efficiencies and reduce operating costs. These increases were partially offset by lower transition costs associated with our spin off from Verizon and lower stock-based compensation expense. Bad debt expense of $48 million for the three months ended June 30, 2008, increased by $16 million, or 50.0%, compared to $32 million for the three months ended June 30, 2007. The increased bad debt expense was influenced by the current weak economic environment, as well as a temporary relaxation of certain aspects of the Company’s credit policy in mid-2007 associated with the transition of billing activities from Verizon. Bad debt expense as a percent of total operating revenue was 6.3% for the three months ended June 30, 2008 compared to 4.0% for the three months ended June 30, 2007.

Interest Expense, Net

     Interest expense, net of interest income, of $163 million for the three months ended June 30, 2008 decreased $4 million, or 2.4%, compared to $167 million for the three months ended June 30, 2007, as a result of reduced principal balances and lower interest rates associated with our outstanding debt.

Provision for Income Taxes

     Provision for income taxes of $40 million for the three months ended June 30, 2008 decreased $26 million, or 39.4%, compared to $66 million for the three months ended June 30, 2007, primarily due to lower pre-tax income as discussed above. Also, the provision for income taxes reflects a decline in the effective tax rate from 37.7% for the three months ended June 30, 2007 to 34.5% for the three months ended June 30, 2008. The results for the three months ended June 30, 2008 and 2007 include the effects of one-time discrete items. The Company anticipates the effective tax rate, including interest expense and other one-time discrete items, to approximate 36.5% for 2008. The full year effective tax rate for 2007 was 35.7%.

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Six Months Ended June 30, 2008 Compared to Six Months Ended June 30, 2007

     The following table sets forth our operating results for the six months ended June 30, 2008 and 2007:

Six months ended June 30,	2008		2007		Change			% Change
	(in millions, except %)
Operating Revenue
Print products	$	1,379	$	1,468	$	(89	)		(6.1	)%
Internet		148		141		7			5.0
Other		2		2		—			—
Total operating revenue		1,529		1,611		(82	)		(5.1	)
Operating Expense
Selling		370		376		(6	)		(1.6	)
Cost of sales (exclusive of depreciation and amortization)		304		314		(10	)		(3.2	)
General and administrative		197		203		(6	)		(3.0	)
Depreciation and amortization		40		44		(4	)		(9.1	)
Total operating expense		911		937		(26	)		(2.8	)
Operating income		618		674		(56	)		(8.3	)
Interest expense, net		329		337		(8	)		(2.4	)
Income before provision for income taxes		289		337		(48	)		(14.2	)
Provision for income taxes		102		125		(23	)		(18.4	)
Net income	$	187	$	212	$	(25	)		(11.8	)%

Operating Revenue

     Operating revenue of $1,529 million for the six months ended June 30, 2008 decreased $82 million, or 5.1%, compared to $1,611 million for the six months ended June 30, 2007 for the reasons described below.

     Print Products. Revenue from print products of $1,379 million for the six months ended June 30, 2008 decreased $89 million, or 6.1%, compared to $1,468 million for the six months ended June 30, 2007. This decline resulted from reduced advertiser renewals reflecting weaker economic conditions, partially offset by the addition of new advertisers and revenue from new product offerings. We continued to face competition in the print directory market and from other advertising media, including cable television, radio and the Internet.

     Internet. Internet revenue of $148 million for the six months ended June 30, 2008 increased $7 million, or 5.0%, compared to $141 million for the six months ended June 30, 2007, as we continued to expand our product offerings, market reach and advertiser base.

Operating Expense

     Operating expense of $911 million for the six months ended June 30, 2008 decreased $26 million, or 2.8%, compared to $937 million for the six months ended June 30, 2007 for the reasons described below.

     Selling. Selling expense of $370 million for the six months ended June 30, 2008 decreased $6 million, or 1.6%, compared to $376 million for the six months ended June 30, 2007. This decrease resulted primarily from lower advertising costs and lower employee benefit costs, partially offset by higher employee related costs.

     Cost of Sales. Cost of sales of $304 million for the six months ended June 30, 2008 decreased $10 million, or 3.2%, compared to $314 million for the six months ended June 30, 2007. This decrease was primarily due to lower employee related costs, reduced contract services costs and lower Internet traffic costs, partially offset by increased printing costs.

     General and Administrative. General and administrative expense of $197 million for the six months ended June 30, 2008 decreased $6 million, or 3.0%, compared to $203 million for the six months ended June 30, 2007. The decrease was the result of lower transition costs associated with our spin off from Verizon and lower stock-based

18

compensation expense. These decreases were partially offset by higher bad debt, employee severance and contract services costs. Employee severance costs include one-time termination benefits of $7 million associated with the Company’s restructuring charge in the second quarter of 2008 as part of strategic organizational and market exit initiatives to improve ongoing operational efficiencies and reduce operating costs. Bad debt expense of $87 million for the six months ended June 30, 2008, increased by $23 million, or 35.9%, compared to $64 million for the six months ended June 30, 2007. The increased bad debt expense was influenced by the current weak economic environment, as well as a temporary relaxation of certain aspects of the Company’s credit policy in mid-2007 associated with the transition of billing activities from Verizon. Bad debt expense as a percent of total operating revenue was 5.7% for the six months ended June 30, 2008 compared to 4.0% for the six months ended June 30, 2007.

Interest Expense, Net

     Interest expense, net of interest income, of $329 million for the six months ended June 30, 2008 decreased $8 million, or 2.4%, compared to $337 million for the six months ended June 30, 2007, as a result of reduced principal balances and lower interest rates associated with our outstanding debt.

Provision for Income Taxes

     Provision for income taxes of $102 million for the six months ended June 30, 2008 decreased $23 million, or 18.4%, compared to $125 million for the six months ended June 30, 2007, primarily due to lower pre-tax income as discussed above. Also, the provision for income taxes reflects a decline in the effective tax rate from 37.1% for the six months ended June 30, 2007 to 35.3% for the six months ended June 30, 2008. The results for the six months ended June 30, 2008 and 2007 include the effects of one-time discrete items. The Company anticipates the effective tax rate, including interest expense and other one-time discrete items, to approximate 36.5% for 2008. The full year effective tax rate for 2007 was 35.7%.

Liquidity and Capital Resources

     The following table sets forth a summary of cash flows for the six months ended June 30, 2008 and 2007:

Six Months Ended June 30,	2008			2007			Change
	(in millions)
Cash Flows Provided By (Used In):
Operating activities	$	176		$	138		$	38
Investing activities		(23	)		(17	)		(6	)
Financing activities		(74	)		(124	)		50
Increase (Decrease) In Cash and Cash Equivalents	$	79		$	(3	)	$	82

     Our primary source of funds continues to be cash generated from operations. Net cash from operations of $176 million for the six months ended June 30, 2008, increased $38 million compared to the six months ended June 30, 2007. This increase was the result of reduced interest payments on debt, lower transition costs and income tax payments, partially offset by lower collections associated with declines in revenue.

     Net cash used in investing activities of $23 million for the six months ended June 30, 2008 increased $6 million compared to $17 million for the six months ended June 30, 2007, primarily due to increased capital expenditures.

     Net cash used in financing activities of $74 million for the six months ended June 30, 2008 decreased $50 million compared to $124 million for the six months ended June 30, 2007, due to a reduction in dividends paid. On March 27, 2008, we announced the decision by our Board of Directors to eliminate the payment of dividends as part of our current capital allocation program.

     We believe the net cash provided by our operating activities, supplemented if necessary with borrowings under our revolving credit facility, and existing cash and cash equivalents will provide sufficient resources to meet our working capital requirements, estimated principal and interest debt service requirements and other cash needs for at least the next 12 months.

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Restructuring

     In the second quarter of 2008, we began implementing strategic organizational and market exit initiatives to improve operational efficiencies and reduce total operating costs. It is our intention to reduce total annual operating expense by approximately 10% over the next 12 to 18 months. We are continuing to develop our plans to achieve the targeted expense reduction, and anticipate that some measure of expense reduction may be reflected in our 2008 financial results. As part of the proposed restructuring, we anticipate reducing headcount by about 20% over the next 12 months through reductions in force and attrition. As part of the restructuring, we expect to incur restructuring charges, including one-time termination benefits and lease termination costs. During the second quarter of 2008, we reported a $7 million restructuring charge associated with one-time termination benefits. We anticipate that there may be additional restructuring charges in subsequent periods.

Critical Accounting Policies

     See the Company’s critical accounting policies discussed in “Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2007. There were no material changes to these policies during the six months ended June 30, 2008.

Off-Balance Sheet Arrangements

     We do not have any off-balance sheet arrangements that are material to our results of operations, financial condition or liquidity.

Recent Accounting Pronouncements

Fair Value Measurements

     In February 2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position No. 157-2, “Partial Deferral of the Effective Date of Statement 157” (“FSP 157-2”), for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008. We are currently evaluating the potential impact of the adoption of the deferred portion of the Statement of Financial Accounting Standards No. 157, “Fair Value Measurements,” with regards to nonfinancial assets and liabilities, on our consolidated financial statements.

Business Combinations

     In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (revised 2007), “Business Combinations” (“SFAS 141R”), which replaces SFAS 141. SFAS 141R establishes principles and requirements for how an acquirer in a business combination recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any controlling interest; recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141R is to be applied prospectively to business combinations for which the acquisition date is on or after an entity’s fiscal year that begins after December 15, 2008. We are currently evaluating the potential impact of the adoption of SFAS 141R on our consolidated financial statements.

Derivative Instruments and Hedging Disclosures

     In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133” (“SFAS 161”). SFAS 161 requires enhanced disclosures about an entity’s derivative and hedging activities. These enhanced disclosures will discuss (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. We

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are currently evaluating the potential impact of the adoption of SFAS 161 on our disclosures related to our consolidated financial statements.

Determination of the Useful Life of Intangible Assets

     In April 2008, the FASB issued FASB Staff Position FAS 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP FAS 142-3”). FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible Assets.” FSP FAS 142-3 is effective for fiscal years beginning after December 15, 2008 and early adoption is prohibited. We are currently evaluating the potential impact of the adoption of FSP FAS 142-3 on our consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

     We are exposed to various types of market risk in the normal course of business. In particular, we are subject to interest rate variability primarily associated with borrowings under our credit facilities. The debt covenants under our credit agreements require us to employ risk management strategies to minimize our exposure to market risk.

     As of June 30, 2008, we had interest rate swap agreements with major financial institutions with notional amounts totaling $5,510 million, which represents approximately 89% of our floating rate debt. Under the swap agreements, we pay fixed rate interest and receive floating rate interest based on the three month LIBOR to hedge the variability in cash flows attributable to changes in the benchmark interest rate. The impact of our implemented interest rate strategy has effectively increased our fixed rate debt to 92% of our total outstanding debt. These swap agreements comply with our debt covenants under our senior secured credit facilities that require that at least 50% of our total outstanding debt be subject to fixed interest rates until March 2009.

     All derivative financial instruments are recognized as either assets or liabilities on the consolidated balance sheets with measurement at fair value. We determine the fair value of the derivative financial instruments in accordance with SFAS 157. On a quarterly basis, the fair value of our interest rate swap agreements is determined based on observable market prices of similar instruments. For those interest rate swap agreements in a liability position, we factor in nonperformance risk into the measurement of fair value. See Note 3 to our consolidated financial statements included in this report for a further explanation of fair value measurements.

     We assess, at both the hedge’s inception and on an ongoing basis, whether the derivatives used in hedged transactions have been highly effective in offsetting the variability in interest cash flows of the hedged items and are expected to remain highly effective in future periods. Changes in the fair value of outstanding cash flow hedge derivative instruments that are highly effective are recorded in accumulated other comprehensive loss, a component of stockholders’ equity (deficit), until net income is affected by the variability of cash flows of the hedged transaction. Any hedge ineffectiveness would be recorded in current period net income.

     The interest rate swap agreements described above, designated as cash flow hedges, were assessed to be highly effective on a retrospective and prospective basis. Accordingly, the changes in fair value of the derivative instruments were recorded in accumulated other comprehensive loss. The derivative financial instruments are currently classified as other liabilities in the amount of $183 million ($119 million net of tax recorded to accumulated other comprehensive loss).

     In addition to the interest rate swap agreements, we entered into a basis swap transaction effective March 31, 2008 with a notional amount of $600 million ($400 million on Tranche A and $200 million on Tranche B) maturing December 31, 2008. Under this basis swap transaction, Idearc will receive one month LIBOR from the counter party, pay one month LIBOR plus the appropriate spread on the secured debt and pay three month LIBOR less 6.375 basis points to the swap counter party. Changes in the fair value of the basis swap will be recorded directly to the statements of income.

     We performed an interest rate sensitivity analysis on our variable rate debt. The analysis indicated that a 0.5% increase in interest rate associated with floating rate debt would reduce our 2008 pre-tax earnings by $3.5 million, taking into account the impact of our implemented interest rate strategy.

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Item 4. Controls and Procedures.

Disclosure Controls

     Under the supervision and with the participation of our management, including our chief executive officer and acting chief financial officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on that evaluation, our chief executive officer and acting chief financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report to provide reasonable assurance that information we are required to disclose in reports that are filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms specified by the SEC. We note that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving the stated goals under all potential future conditions.

Changes in Internal Control over Financial Reporting

     There were no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

     None.

Item 1A. Risk Factors.

     There have been no material changes in our risk factors from those disclosed in Item 1A to Part I of our Annual Report on Form 10-K for the year ended December 31, 2007.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

     The following table provides information about shares acquired from employees during the second quarter of 2008 as payment of withholding taxes in connection with the vesting of restricted stock awarded to employees pursuant to the Idearc Inc. 2008 Incentive Compensation Plan and the Idearc Inc. Long Term Incentive Plan.

					Total Number
					of Shares		Maximum Number of
					Purchased as Part of		Shares That May Yet Be
	Total Number of		Average Price Paid		Publicly Announced Plans		Purchased Under the
Period	Shares Purchased		Per Share		or Programs		Plans or Programs
April 1 — April 30		1,672	$	3.89		—		—
May 1 — May 31		—		—		—		—
June 1 — June 30		2,294	$	3.67		—		—
Total		3,966	$	3.76		—		—

Item 3. Defaults Upon Senior Securities.

     None.

Item 4. Submission of Matters to a Vote of Security Holders.

     The Company held its 2008 annual meeting of stockholders on May 1, 2008. Stockholders were asked to vote on the election of six directors to serve until the 2009 annual meeting of stockholders, to approve the 2008 Incentive Compensation Plan and to ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2008. The results with respect to the election of directors were as follows:

	Total Vote for Each		Total Vote Withheld for
Director Nominee	Director		Each Director
Jerry V. Elliott.		108,735,936		15,617,890
Jonathan F. Miller		109,321,111		15,032,715
Donald B. Reed		108,763,548		15,590,278
Stephen L. Robertson		108,738,716		15,615,109
Thomas S. Rogers		109,290,160		15,063,666
Paul E. Weaver		109,352,211		15,001,614

     The results with respect to the approval of the 2008 Incentive Compensation Plan were as follows:

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For	84,551,785
Against	15,735,166
Abstain	622,802
Broker non-votes	23,444,072

     The results with respect to the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2008 were as follows:

For	123,467,596
Against	604,415
Abstain	281,812

Item 5. Other Information.

     None.

Item 6. Exhibits.

Exhibit No.		Description
	10.1	Employment Agreement, dated as of May 30, 2008, between Idearc Inc. and Scott W. Klein (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed June 2, 2008)
	10.2	Stock Option Agreement for Scott W. Klein under the Idearc Inc. 2008 Incentive Compensation Plan
	10.3	2008 Long-Term Incentive Award Agreement for Scott W. Klein under the Idearc Inc. 2008 Incentive Compensation Plan
	10.4	Form of Restricted Stock Award Agreement for the 2008 Equity Award to Non-Management Directors under the Idearc Inc. 2008 Incentive Compensation Plan
	10.5	Restricted Stock Award Agreement for Frank P. Gatto under the Idearc Inc. Long Term Incentive Plan
	10.6	Form of Stock Option Award Agreement under the Idearc Inc. 2008 Incentive Compensation Plan
	10.7	Form of Stock Option Award Agreement under the Idearc Inc. Long Term Incentive Plan
	31.1	Certification of Scott W. Klein filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	31.2	Certification of Samuel D. Jones filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	32.1	Certification of Scott W. Klein and Samuel D. Jones filed pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	IDEARC INC.
August 11, 2008	/s/ Scott W. Klein
	Scott W. Klein
	Chief Executive Officer (Principal Executive Officer)

August 11, 2008	/s/ Samuel D. Jones
	Samuel D. Jones
	Acting Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)

EXHIBIT INDEX

Exhibit No.		Description
	10.1	Employment Agreement, dated as of May 30, 2008, between Idearc Inc. and Scott W. Klein (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed June 2, 2008)
	10.2	Stock Option Agreement for Scott W. Klein under the Idearc Inc. 2008 Incentive Compensation Plan
	10.3	2008 Long-Term Incentive Award Agreement for Scott W. Klein under the Idearc Inc. 2008 Incentive Compensation Plan
	10.4	Form of Restricted Stock Award Agreement for the 2008 Equity Award to Non-Management Directors under the Idearc Inc. 2008 Incentive Compensation Plan
	10.5	Restricted Stock Award Agreement for Frank P. Gatto under the Idearc Inc. Long Term Incentive Plan
	10.6	Form of Stock Option Award Agreement under the Idearc Inc. 2008 Incentive Compensation Plan
	10.7	Form of Stock Option Award Agreement under the Idearc Inc. Long Term Incentive Plan
	31.1	Certification of Scott W. Klein filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	31.2	Certification of Samuel D. Jones filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	32.1	Certification of Scott W. Klein and Samuel D. Jones filed pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

EX-10.2

Exhibit 10.2

STOCK OPTION AWARD AGREEMENT UNDER THE
IDEARC INC. 2008 INCENTIVE COMPENSATION PLAN

     AGREEMENT made as of the 2^nd day of June, 2008, by and between IDEARC INC. (the “Company”) and Scott W. Klein (the “Optionee”).

     1. Award. Pursuant to the Idearc Inc. 2008 Incentive Compensation Plan (the “Plan”), the Company hereby grants to the Optionee an option (the “Option”) to purchase up to 250,000 shares of the Company’s common stock (the “Common Stock”) at an exercise price per share of $3.93 upon the terms and conditions set forth in this Agreement and the Plan. A copy of the Plan is attached to this Agreement. The Optionee is a party to that certain Employment Agreement between the Optionee and the Company, dated May 30, 2008 (the “Employment Agreement”). The provisions of the Employment Agreement will govern in the event of any inconsistency with the terms of this Agreement. Capitalized terms used but not defined in this Agreement will have the meanings ascribed to them by the Plan. This award is made in accordance with and in satisfaction of the Company’s obligation under Section 2.4 of the Employment Agreement (relating to the initial award of a Company stock option covering 250,000 shares of Common Stock).

     2. Option Term. Unless terminated sooner, the Option shall expire if and to the extent it is not exercised within ten years from the date hereof.

     3. Vesting Conditions.

     (a) General. Except as otherwise provided, the Option will become vested on May 31, 2011, subject to the Optionee’s continuous employment with the Company or any of its subsidiaries (“Idearc”) through such vesting date.

     (b) Special Vesting Rules. If, before the Option becomes vested, the Optionee’s employment with Idearc terminates by reason of the Optionee’s death, or is terminated by Idearc without Cause or by reason of the Optionee’s Disability (as defined in the Employment Agreement), or is terminated by the Optionee for Good Reason pursuant to the Employment Agreement, then the Option will thereupon become fully vested; provided, however, that no such acceleration of vesting will apply unless, as of the time such acceleration would otherwise occur, the Optionee has maintained continuous compliance with the restrictive covenants set forth in Section 8 of the Employment Agreement (the “Restrictive Covenants”) and the Optionee has executed and delivered to the Company a general release of claims against the Company, its subsidiaries and any of its or their affiliates in the form attached to the Employment Agreement as Exhibit C.

     4. Termination of Employment. If the Optionee ceases to be employed by Idearc for any reason other than death or Disability, then, unless sooner terminated under the terms hereof, the vested portion of the Option (determined with regard to any acceleration of vesting that occurs under Section 3(b) above) will terminate if and to the extent it is not exercised within three months after the date of the Optionee’s termination of employment, provided, however, that, if the Optionee’s employment is terminated by the Company for “Cause” (as defined in the Plan), then the Option (whether or not vested) will terminate upon the date of such termination of employment. If the Optionee’s employment is terminated by reason of the Optionee’s death or

Disability (or if the Optionee’s employment is terminated by reason of Disability and the Optionee dies within one year after such termination of employment), then, unless sooner terminated under the terms hereof, the vested portion of the Option will terminate if and to the extent it is not exercised within one year after the date of such termination of employment (or within one year after the date of the Optionee’s death if the Optionee’s employment is terminated by reason of Disability and the Optionee dies within one year after such termination). The Option will be forfeited by the Optionee and will terminate at the time of the termination of the Optionee’s employment with Idearc if and to the extent the Option is not or does not become vested at such time.

     5. Exercise of Option. If the Option becomes vested, it may be exercised in whole or in part by delivering to the Executive Vice President — Human Resources and Employee Administration of the Company (a) a written notice specifying the number of whole shares of Common Stock with respect to which the Option is being exercised, and (b) payment in full of the exercise price, together with the amount, if any, deemed necessary by the Company to enable it to satisfy any income tax withholding obligations attributable to the exercise. The exercise price and withholding amount shall be payable by bank or certified check or pursuant to such other methods as may be permitted by the Company in accordance with the Plan.

     6. Rights as a Stockholder. No shares of Common Stock shall be sold or delivered hereunder until full payment for such shares has been made (including, for this purpose, satisfaction of the applicable withholding tax). The Optionee shall have no rights as a stockholder with respect to any shares covered by this Option unless and until the Option is exercised and the shares covered by the exercise of the Option are issued in the name of the Optionee. Except as otherwise specified, no adjustment shall be made for dividends or distributions of other rights for which the record date is prior to the date such shares are issued.

     7. Assignment; Beneficiary. The Option and the Optionee’s rights with respect thereto may not be assigned, pledged or transferred except to the Optionee’s beneficiary following the Optionee’s death (subject to the terms of this Agreement and the Plan), and any attempted assignment, pledge or transfer in violation of this Agreement or the Plan will be void ab initio and of no force or effect. The Optionee may designate a beneficiary by filing a written (or electronic) beneficiary designation form with the Company in a manner prescribed or deemed acceptable for this purpose by the Company’s Executive Vice President — Human Resources and Employee Administration. Each such beneficiary designation will automatically revoke all prior designations by the Optionee. If the Optionee does not make a valid beneficiary designation during the Optionee’s lifetime or if no designated beneficiary survives the Optionee, the Optionee’s beneficiary will be deemed to be the Optionee’s surviving spouse or, if none, the Optionee’s estate.

     8. No Other Rights Conferred. The grant of the Option under this Agreement shall not be deemed to constitute a contract of employment with the Optionee or affect in any way the right of the Company or a subsidiary to terminate the Optionee’s employment at any time for any or no reason. Compensation attributable to the Option shall not be taken into account as compensation for purposes of determining the Optionee’s benefits or entitlements under any employee pension, savings, group insurance, severance or other benefit plan or arrangement, unless and except to the extent otherwise specifically provided by such plan or arrangement.

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     9. Withholding. The Company’s obligation to issue shares of Common Stock pursuant to the exercise of the Option shall be subject to and conditioned upon the satisfaction by the Optionee of applicable tax withholding obligations. The Company and its subsidiaries may require the Optionee to remit an amount sufficient to satisfy applicable withholding taxes or deduct or withhold such amount from any payments otherwise owed the Optionee (whether or not under this Agreement or the Plan). The Optionee expressly elects to authorize the Company to deduct from any compensation or any other payment of any kind due to the Optionee, including withholding the issuance of shares of Common Stock, the amount of any federal, state, local or foreign taxes required by law to be withheld as a result of the exercise of the Option; provided, however, that the value of the shares withheld may not exceed the statutory minimum withholding amount required by law.

     10. Committee Authority. The Human Resources Committee of the Company’s Board of Directors (the “Committee”) shall have complete discretion in the exercise of its rights, powers, and duties under this Agreement. Any interpretation or construction of any provision of, and the determination of any question arising under, this Agreement shall be made by the Committee in its discretion and such exercise shall be final, conclusive, and binding. The Committee may designate any individual or individuals to perform any of its functions hereunder.

     11. Successors. This Agreement shall be binding upon, and inure to the benefit of, any successor or successors of the Company and any beneficiary of the Optionee.

     12. Construction. This Agreement is intended to reflect the grant of the Option upon the terms and conditions authorized by the Plan. Any provisions of this Agreement that cannot be so administered, interpreted, or construed shall be disregarded. In the event that any provision of this Agreement is held invalid or unenforceable, such provision shall be considered separate and apart from the remainder of this Agreement, which shall remain in full force and effect. In the event that any provision, including any restrictive covenant made as a part of this Agreement, is held to be unenforceable for being unduly broad as written, such provision shall be deemed amended to narrow its application to the extent necessary to make the provision enforceable according to applicable law and shall be enforced as amended.

     13. Applicable Law. The validity, construction, interpretation and effect of this Agreement shall be governed by and construed in accordance with the laws of the State of Texas, without giving effect to the conflicts of laws provisions thereof.

     14. Notice. Any notice to the Company provided for in this Agreement shall be addressed to the Company in care of the Executive Vice President — Human Resources and Employee Administration of Idearc Inc. at P. O. Box 619810, 2200 West Airfield Dr., D/FW Airport, TX, 75261 and any notice to the Optionee shall be addressed to the Optionee at the current address shown on the payroll records of the Company, or to such other address as the Optionee may designate to the Company in writing. Any notice shall be delivered by hand, sent by telecopy or enclosed in a properly sealed envelope as stated above, registered and deposited, postage prepaid, in a post office regularly maintained by the United States Postal Service.

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     15. Dispute Resolution. Except as otherwise specified herein, all disputes arising under the Plan or this Agreement and all claims in which the Optionee seeks damages that relate in any way to the Option or other benefits of the Plan are subject to the dispute resolution procedures described in the Employment Agreement.

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

IDEARC INC.
By:	/s/ Cody Wilbanks
	Cody Wilbanks
	Acting Executive Vice President – General Counsel
	/s/ Scott W. Klein
Optionee

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EX-10.3

Exhibit 10.3

IDEARC INC. 2008 INCENTIVE COMPENSATION PLAN
2008 LONG-TERM INCENTIVE AWARD AGREEMENT

     AGREEMENT made as of the 30^th day of May, 2008, by and between IDEARC INC. (the “Company”) and SCOTT W. KLEIN (the “Participant”).

     1. Award. In accordance with the Idearc Inc. 2008 Incentive Compensation Plan (the “Plan”), the Company has granted a 2008 long-term incentive award (the “Award”) to the Participant consisting of 311,705 performance share units (“PSUs”) with respect to shares of Idearc Inc. common stock (“Shares”), and (b) 133,588 restricted shares of Idearc Inc. common stock (“Restricted Shares”). This Award and the PSUs and Restricted Shares covered by this Award are subject to the terms and conditions of this Agreement and the Plan, a copy of which is has been furnished to the Participant. The Participant is a party to that certain Employment Agreement between the Participant and the Company, dated May 30, 2008 (the “Employment Agreement”). The provisions of the Employment Agreement will govern in the event of any inconsistency with the terms of this Agreement. Capitalized terms used but not defined in this Agreement will have the meanings ascribed to them by the Plan. This award is made in accordance with and in satisfaction of the Company’s obligation under Section 2.4(b) of the Employment Agreement (relating to the 2008 long term incentive award to Mr. Klein).

     2. Performance Share Unit Account. The Company will maintain a bookkeeping account (the “PSU Account”) in the name of the Participant to reflect the PSUs covered by this Agreement. The Participant’s PSU Account will be credited with the number of PSUs initially covered by the Award and will be credited with additional PSUs to reflect dividends, if any, declared and paid on the Company’s Shares, as described in Section 5 below. At the end of the “Performance Period” (described below), the number of PSUs then credited to the Participant’s PSU Account will be adjusted (up or down) to reflect the extent to which the performance objectives described in Exhibit A attached hereto have been achieved. The Participant’s PSU Account will be subject to the vesting and forfeiture conditions set forth in Section 3 below. If and when the Participant’s PSU Account becomes vested, the Participant will receive a distribution of the PSU Account in accordance with Section 5 below, which distribution will consist of a number of Shares equal to the number of the PSUs, if any, then credited to the Participant’s PSU Account (or, at the election of the Committee, cash equal to the value of such number of Shares) in full and final settlement of the PSUs covered by this Award. For the purposes hereof, the term “Performance Period” means the period beginning on March 8, 2008 and ending in 2011 on the 20^th New York Stock Exchange trading day following the date the Company releases to the public its annual earnings for the year ending December 31, 2010 or, if earlier, immediately preceding a “Change in Control” (as defined in the Plan).

     3. Vesting Conditions.

     (a) General. The Award will become vested as follows, in each case subject to the Participant’s continuous employment with the Company or any of its subsidiaries (“Idearc”) through the applicable vesting date: (1) the Participant’s PSU Account will vest in full on December 31, 2010, and (2) the Restricted Shares will vest in 50% increments on each of December 31, 2009 and December 31, 2010.

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     (b) Forfeiture of Unvested Award. Except as otherwise provided, if the Participant’s employment with Idearc does not continue through December 31, 2010, then, upon the termination of such employment, the Participant will forfeit all right, title and interest in the Participant’s PSU Account and in any then outstanding Restricted Shares. The Participant is the record owner of the Restricted Shares on the Company’s books, subject to the restrictions and conditions set forth in this Agreement. By executing this Agreement, the Participant expressly authorizes the Company to cancel, reacquire, retire or retain, at its election, any Restricted Shares if and when they are forfeited in accordance with this Agreement. The Participant 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 Restricted Shares that are forfeited.

          (i) Special Vesting Rules. If, before the Award becomes vested, the Optionee’s employment with Idearc terminates by reason of the Participant’s death, or is terminated by Idearc without Cause or by reason of the Participant’s Disability (as defined in the Employment Agreement), or is terminated by the Participant for Good Reason pursuant to the Employment Agreement, then the Award will thereupon become fully vested; provided, however, that the value of the Participant’s PSU Account will not be determined and the amount thereof (if any) will not be payable until the completion of the Performance Period, and provided further that no such acceleration of vesting will apply unless, as of the time such acceleration would otherwise occur, the Participant has maintained continuous compliance with the restrictive covenants set forth in Section 8 of the Employment Agreement (the “Restrictive Covenants”) and the Participant has executed and delivered to the Company a general release of claims against the Company, its subsidiaries and any of its or their affiliates in the form attached to the Employment Agreement as Exhibit C.

     4. Dividend Equivalents; Voting Rights.

          (a) General. If the Company declares and pays dividends on outstanding Shares, then, on the dividend payment date, the Participant will be credited with dividend equivalent PSUs with respect to the PSUs then credited to the Participant’s PSU Account and dividend equivalent restricted stock units with respect to the Participant’s outstanding Restricted Shares (and dividend equivalent restricted stock units). The number of such dividend equivalent PSUs and restricted stock units will be determined by multiplying the number of PSUs in the Participant’s PSU Account or the number of the Participant’s outstanding Restricted Shares (and dividend equivalent restricted stock units), as the case may be, 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 on the dividend payment date, divided by (b) the closing price per Share on the New York Stock Exchange on the dividend payment date (or, if no shares are traded on such date, the closing price per Share on the immediately preceding date on which the Shares 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 Restricted Shares and will be settled in the form of an equivalent number of Shares (or, at the election of the Committee, cash equal to the value of such Shares) if and when the corresponding Restricted Shares become vested. The Participant will be entitled to exercise voting rights with respect to outstanding Restricted Shares held under this Agreement, and will have no voting rights with respect to Shares covered by PSUs and dividend equivalent

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restricted stock units unless and until vested Shares are issued in settlement of such PSUs and/or stock units.

          (b) Dividend Equivalents Following Termination of Employment. Notwithstanding the foregoing, if the Participant’s employment with Idearc terminates before the Participant is fully vested in the Award and if, as a result of such termination of employment, the Participant’s vested interest in the Award accelerates pursuant to Section 3 above, then the Committee, acting in its discretion, will determine whether and the extent to which the Participant will be credited with dividend equivalent PSUs and/or dividend equivalent restricted stock units pursuant to the preceding subsection, and the Committee’s exercise of this discretion shall be final, conclusive and binding. The Committee may condition continuing dividend equivalent credits following termination of the Participant’s employment upon the Participant’s compliance with the Restrictive Covenants and the Participant’s execution and delivery of the above-referenced general release.

     5. Settlement of Award.

          (a) Settlement of PSU Account. Unless otherwise specified in this Agreement, the Participant’s PSU Account will be settled as soon as practicable (but in no event more than 90 days) after the end of the Performance Period, provided, however, that, if the Performance Period ends by reason of a Change in Control, the Participant’s PSU Account will be settled as soon as practicable (but in no event more than 30 days) after the date the Participant’s PSU Account becomes vested. The Participant’s PSU Account will be settled by the issuance to the Participant of a number of whole Shares equal to the whole number of PSUs credited to the Participant’s PSU Account at the end of the Performance Period, taking into account the adjustments described in Exhibit A. Notwithstanding the foregoing, the Company may settle the Participant’s PSU Account in the form of a cash payment equal to the value of the Shares that would have been issued to the Participant if the Award had been settled in Shares, which payment will be made as soon as practicable after the applicable valuation date designated for this purpose by the Committee. Settlement of the Participant’s PSU Account will be conditioned upon and subject to the satisfaction of applicable withholding taxes and compliance with the Restrictive Covenants.

          (b) Settlement of Restricted Share Award. If, as and when Restricted Shares become vested, and subject to the satisfaction of applicable withholding and other legal requirements, (1) the Restricted Shares will become vested Shares and will no longer be subject to the transfer restrictions and forfeiture conditions contained in this Agreement, and the Company’s books will be updated accordingly, and (2) any dividend equivalent restricted stock units credited to the Participant with respect to such vested Shares will be settled in the form of Shares and/or cash in accordance with Section 4 above.

          (c) Form of Settlement Following a Change in Control. Notwithstanding the foregoing, if a Change in Control (within the meaning of the Plan) occurs, then, immediately prior to the Change in Control, the Shares covered by this Agreement (including Restricted Shares, as well as Shares represented by PSUs and dividend equivalent restricted stock units) will be converted into (1) publicly traded and registered shares of common stock (“exchange stock”) of the acquiring or successor company (or a parent company) having a value equal to the

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Change in Control transaction value of the Shares or (2) the right to receive the payment of a like amount in cash, as determined by the Committee prior to the Change in Control. For the purposes of applying the provisions of this Agreement, if, in connection with a Change in Control, the Award is converted into an Award covering shares of exchange stock, the definition of the term “Shares” will be deemed to include such shares of exchange stock.

     6. Assignment; Beneficiary. The Award and the Participant’s rights with respect thereto may not be assigned, pledged or transferred except to the Participant’s beneficiary following the Participant’s death (subject to the terms of this Agreement and the Plan), and any attempted assignment, pledge or transfer in violation of this Agreement or the Plan will be void ab initio and of no force or effect. The Participant may designate a beneficiary by filing a written (or electronic) beneficiary designation form with the Company in a manner prescribed or deemed acceptable for this purpose by the Company’s Executive Vice President — Human Resources and Employee Administration. Each such beneficiary designation will automatically revoke all prior designations by the Participant. If the Participant does not make a valid beneficiary designation under the Plan during the Participant’s lifetime or if no designated beneficiary survives the Participant, the Participant’s beneficiary will be deemed to be the Participant’s surviving spouse or, if none, the Participant’s estate.

     7. No Other Rights Conferred. The grant of the Award under this Agreement shall not be deemed to constitute a contract of employment with the Participant or affect in any way the right of the Company or a subsidiary to terminate the Participant’s employment at any time for any or no reason. Compensation attributable to the Award made under this Agreement shall not be taken into account as compensation for purposes of determining the Participant’s benefits or entitlements under any employee pension, savings, group insurance, severance or other benefit plan or arrangement, unless and except to the extent otherwise specifically provided by such plan or arrangement.

     8. Withholding. The Company’s obligation to make payments or issue or remove restrictions on Shares under this Agreement shall be subject to and conditioned upon the satisfaction by the Participant of applicable tax withholding obligations. The Company and its subsidiaries may require the Participant to remit an amount sufficient to satisfy applicable withholding taxes or deduct or withhold such amount from any payments otherwise owed the Participant (whether or not under this Agreement or the Plan). The Participant expressly elects to authorize the Company to deduct from any compensation or any other payment of any kind due to the Participant, 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.

     9. Committee Authority. The Committee shall have complete discretion in the exercise of its rights, powers, and duties under this Agreement. Any interpretation or construction of any provision of, and the determination of any question arising under, this Agreement shall be made by the Committee in its discretion and such exercise shall be final, conclusive, and binding. The Committee may designate any individual or individuals to perform any of its functions hereunder.

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     10. Successors. This Agreement shall be binding upon, and inure to the benefit of, any successor or successors of the Company and any beneficiary of the Participant.

     11. Construction. This Agreement is intended to grant the Award, including PSUs, Restricted Shares and, as applicable, dividend equivalent restricted stock units upon the terms and conditions authorized by the Plan. Any provisions of this Agreement that cannot be so administered, interpreted, or construed shall be disregarded. In the event that any provision of this Agreement is held invalid or unenforceable, such provision shall be considered separate and apart from the remainder of this Agreement, which shall remain in full force and effect. In the event that any provision, including any restrictive covenant made as a part of this Agreement, is held to be unenforceable for being unduly broad as written, such provision shall be deemed amended to narrow its application to the extent necessary to make the provision enforceable according to applicable law and shall be enforced as amended.

     12. Applicable Law. The validity, construction, interpretation and effect of this Agreement shall be governed by and construed in accordance with the laws of the State of Texas, without giving effect to the conflicts of laws provisions thereof.

     13. Notice. Any notice to the Company provided for in this Agreement shall be addressed to the Company in care of the Executive Vice President — Human Resources and Employee Administration of Idearc Inc. at P. O. Box 619810, 2200 West Airfield Dr., D/FW Airport, TX, 75261 and any notice to the Participant shall be addressed to the Participant at the current address shown on the payroll records of the Company, or to such other address as the Participant may designate to the Company in writing. Any notice shall be delivered by hand, sent by telecopy or enclosed in a properly sealed envelope as stated above, registered and deposited, postage prepaid, in a post office regularly maintained by the United States Postal Service.

     14. Dispute Resolution. Except as otherwise specified herein, all disputes arising under the Plan or this Agreement and all claims in which the Participant seeks damages that relate in any way to the Award or other benefits of the Plan are subject to the dispute resolution procedures described in the Employment Agreement.

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

IDEARC INC.
By:	/s/ Cody Wilbanks
	Cody Wilbanks
	Acting Executive Vice President – General Counsel
	/s/ Scott W. Klein
Participant

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EXHIBIT A
ADJUSTMENT OF PSU ACCOUNT

     This Exhibit A is part of and incorporated by reference in the Long-Term Incentive Award Agreement to which this Exhibit A is attached between Idearc Inc. (the “Company”) and the Participant. Except where clearly provided to the contrary, all capitalized terms used in this Exhibit A shall have the definitions given to those terms in the Award Agreement to which this Exhibit A is attached. This Exhibit sets forth the manner in which the number of PSUs credited to the Participant’s PSU Account will be adjusted at the end of the Performance Period.

     1. General. At the end of the Performance Period, the Participant’s PSU Account will be divided into two subaccounts, with 80% of the PSUs then credited to the PSU Account being allocated to subaccount A and the remaining 20% of the PSUs then credited to the PSU Account being allocated to subaccount B. The number of PSUs credited to each subaccount will then be adjusted (up or down) in accordance with the formulae described in subsections (a) and (b) below and the Participant’s PSU Account, as adjusted, will consist of a number of PSUs (not less than zero) equal to the aggregate number of PSUs credited to the two subaccounts (as adjusted). Any fractional PSU in either subaccount will be rounded to the nearest whole number.

          (a) S&P 400 TSR Performance Adjustment. The number of PSUs allocated to subaccount A (the 80% subaccount) will be adjusted by multiplying such number by the S&P adjustment percentage determined under the following table, based upon the “Company TSR” (as defined below) relative to the “S&P 400 TSR” (as defined below) during the Performance Period (with the adjustment percentage being interpolated between points of relative TSR values):

Company TSR Performance Ranking vs. S&P 400	S&P Adjustment Percentage
Below 30th Percentile	0	%
30th Percentile	50	%
50th Percentile	100	%
At or above 80th Percentile	200	%

          (b) R.H. Donnelley TSR Performance Adjustment. The number of PSUs allocated to subaccount B (the 20% subaccount) will be adjusted by multiplying such number by the RHD adjustment percentage determined under the following table, based upon the “Company TSR” (as defined below) relative to the “RHD TSR” (as defined below) during the Performance Period (with the adjustment percentage being interpolated between points of relative TSR values):

Company TSR Performance Ranking vs. RHD	RHD Adjustment Percentage
Below 75% of RHD TSR	0	%
75% of RHD TSR	50	%
100% of RHD TSR	100	%
At or above 125% of RHD TSR	200	%

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If the Company TSR is negative, then (1) if the RHD TSR is positive, the RHD adjustment percentage will be 0%, and (2) if the RHD TSR is negative, the Company performance threshold and RHD adjustment percentages in the above table will be reversed such that, for example, (a) if the Company’s TSR is at or above 125% of the RHD TSR, the RHD adjustment percentage will be zero, and (b) if the Company’s TSR is below 75% of the RHD TSR, the RHD adjustment percentage will be 200%.

     2. Defined Terms. For the purpose of applying the adjustment provisions of this Section 1 above:

          (a) “Company TSR” means the cumulative change (positive or negative) in the value per Share during the Performance Period, with the beginning value being equal to the average closing price per Share on the New York Stock Exchange for the 20 trading days ending March 7, 2008 and the ending value being equal to the average closing price per Share on the New York Stock Exchange for the last 20 trading days of the Performance Period, provided, however, that, if the Performance Period ends by reason of a Change in Control, the ending value for the purpose of determining the Company TSR will be equal to the Change in Control transaction value per Share;

          (b) “RHD TSR” means the cumulative change (positive or negative) in the value per share of common stock of R.H. Donnelley Corp. (“RHD”) during the Performance Period, with the beginning value being equal to the average closing price per share on the New York Stock Exchange for the 20 trading days ending March 7, 2008 and the ending value being equal to the average closing price per share on the New York Stock Exchange for the last 20 trading days of the Performance Period; and

          (c) “S&P 400 TSR” means the cumulative change (positive or negative) in the average per share value of the companies in the Standard & Poor’s Midcap 400 Index (“S&P Midcap 400”) during the Performance Period, as reported by Standard & Poors, with the beginning value being equal to the average closing per share value for the 20 trading days ending March 7, 2008 and the ending value being equal to the average closing per share value for the last 20 trading days of the Performance Period.

     3. Special Rules.

          (a) Dividends. For the purposes of calculating the Company TSR, RHD TSR and S&P 400 TSR, dividends declared and paid during the applicable measurement period shall be deemed to have been reinvested in shares.

          (b) Companies in S&P 400 Index. For the purposes of determining the S&P 400 TSR, the index will include the companies comprising the index at the beginning of the

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Performance Period (i.e., additions and removals during the Performance Period will be disregarded), provided, however, that (A) a company will cease to be included in the index if, during the Performance Period, it is acquired by another company that is not within the index or its shares otherwise cease to be traded on an established securities market; (B) if a company in the index at the beginning of the Performance Period is acquired by another company that is also in the index at the beginning of the Performance Period, the TSR of the surviving company will be tracked and measured; and (C) if, during the Performance Period, a company’s equity is eliminated as a result of bankruptcy, the company will be deemed to be the lowest ranking company in the index; and (D) if, during the Performance Period, a company becomes insolvent or commences bankruptcy proceedings and if the company’s equity continues to be traded, it will be included in the index for the entire period.

          (c) Changes at R.H. Donnelley Corp. The RHD TSR adjustment percentage will be 100% if, before the end of the Performance Period, R.H. Donnelley Corp. is acquired by another company, the shares of R.H. Donnelley Corp. cease to be publicly traded on an established securities market, or R.H. Donnelly Corp. becomes insolvent or commences bankruptcy proceedings (or has bankruptcy proceedings commenced against it).

          (d) Adjustment Percentage of Zero. For the avoidance of doubt, the number of PSUs credited to the Participant’s PSU Account as of the end of the Performance Period will be reduced to zero if the S&P 400 TSR adjustment percentage and the RHD TSR adjustment percentage is each zero percent.

          (e) Decisions of Committee. All determinations made by the Committee in connection with the calculation and application of the adjustments prescribed by this Section 3 will be binding and conclusive on all persons.

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EX-10.4

Exhibit 10.4

FORM OF
IDEARC INC. 2008 DIRECTOR
RESTRICTED STOCK AGREEMENT

     This Agreement is made as of the 1^st day of May, 2008, by and between IDEARC INC., a Delaware corporation (the “Company”), and ___(the “Director”).

     1. Award. The Company has made a restricted stock award to the Director for 26,471 shares of the Company’s common stock (the “Shares”). The award and the Shares are subject to the provisions of the Idearc Inc. 2008 Incentive Compensation 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.

     2. Vesting and Forfeiture. Except as otherwise specified, the Shares will become vested on the earlier of (a) May 1, 2009, and (b) the date of the Company’s 2009 annual meeting of stockholders (the “2009 Annual Meeting”), subject to the Director’s continuous service as a member of the Company’s Board of Directors (“Service”). If the Director’s Service terminates before the Shares become vested by reason of the Director’s death, then the Director will then become fully vested in the Shares. The Director will forfeit all rights, title and interest in and to the Shares if and to the extent they have not become vested on or before the termination of the Director’s Service.

     3. Change in Control. If a “change in control” (within the meaning of the Plan) occurs and if the Director’s Service continues until the date immediately preceding the date of the change in control, then, immediately prior to the change in control, the Director will become fully vested in all of the Shares covered by this Agreement.

     4. Beneficiary Designation. The Director may designate a beneficiary who shall be entitled to receive Shares that become vested by reason of the Director’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 Director fails to designate a beneficiary, or if no designated beneficiary survives the Director, the Director’s beneficiary shall be the Director’s surviving spouse, if any, or, if none, the Director’s estate.

     5. Transfer Restrictions. Except as otherwise permitted with respect to Shares that become vested upon the Director’s death, the Director 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.

     6. Dividends and Voting Rights. No dividends will be payable on unvested Shares; however, if the Company declares and pays dividends on its outstanding shares of common stock, then the Director will be credited with cash dividend equivalents equal to the amount or value of the dividends that would have been paid on the unvested Shares if they were vested. The dividend equivalents, if any, will be credited to a bookkeeping account in the name of the Director and will be payable in cash to the Director if and when the forfeiture conditions applicable to the corresponding unvested Shares shall have lapsed. The Director will be entitled to exercise voting rights with respect to the unvested Shares.

     7. Issuance of Shares. The Director 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 Director 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 Director 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 and when the Shares become vested, 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.

     8. Dispute Resolution. The Human Resources Committee of the Board, acting in its discretion in accordance with the Plan, has sole authority for all matters relating to the administration, interpretation and settlement of the award covered by this Agreement, and its determinations are binding and conclusive. Any subsequent claim or controversy that arises with respect to the Director’s award and/or the Shares covered by the award that cannot be settled after good faith discussions between the Company and the Director shall be resolved exclusively by arbitration. The arbitration will be administered in accordance with the employment dispute resolution rules of the American Arbitration Association and will be conducted in the Dallas metropolitan area before an experienced employment law arbitrator selected in accordance with such rules. Attorneys’ fees and costs may be awarded to a prevailing party in the discretion of the arbitrator. The arbitrator’s award will be enforceable, and a judgment may be entered thereon, in a federal or state court of competent jurisdiction in the state where the arbitration was held. The decision of the arbitrator will be final and binding.

     9. Applicable Law. The validity, construction, interpretation and effect of this Agreement shall be governed by and construed in accordance with the laws of the State of Texas, without giving effect to the conflicts of laws provisions thereof. The dispute resolution provisions shall be governed by the laws of the State of Texas to the extent they are not governed by the Federal Arbitration Act.

     10. Entire Agreement. This Agreement contains the entire agreement between the Director and the Company with respect to the award and the Shares. Any and all prior written and prior or contemporaneous oral agreements, representations, warranties, written inducements, or other communications by any person with respect to the award and/or the Shares are superseded by this Agreement and are void and ineffective for all purposes.

IDEARC INC.

By:

Director

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EX-10.5

Exhibit 10.5

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.

     2. Vesting.

     (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 otherwise specifically provided by such plan or arrangement.

     8. Dispute Resolution. The Committee, acting in its discretion in accordance with the Plan, has sole authority for all matters relating to the administration, interpretation and settlement of the award and the unvested Shares issued pursuant to the award, and its determinations are binding and conclusive. Any subsequent claim or controversy that arises with

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respect to the Executive’s award and/or the Shares covered by the award that cannot be settled after good faith discussions between the Company and the Executive shall be resolved exclusively by arbitration. The arbitration will be administered in accordance with the employment dispute resolution rules of the American Arbitration Association in the metropolitan area in which the Executive is then or was last an Idearc employee, before an experienced employment law arbitrator selected in accordance with such rules. Attorneys’ fees and costs may be awarded to a prevailing party in the discretion of the arbitrator. The arbitrator’s award will be enforceable, and a judgment may be entered thereon, in a federal or state court of competent jurisdiction in the state where the arbitration was held. The decision of the arbitrator will be final and binding.

     9. Additional Remedies. Notwithstanding the dispute resolution procedures, including arbitration of this Agreement, and in addition to any other rights or remedies, whether legal, equitable, or otherwise, that each of the parties to this Agreement may have (including the right of the Company to terminate the Executive for Cause), the Executive acknowledges that:

     (a) The restrictive covenants contained in Exhibit A to this Agreement are essential to the continued goodwill and profitability of the Company;

     (b) The Executive has broad-based skills that will serve as the basis for employment opportunities that are not prohibited by the restrictive covenants contained in Exhibit A;

     (c) When the Executive’s employment with the Company terminates, the Executive shall be able to earn a livelihood without violating any of the restrictive covenants contained in Exhibit A;

     (d) Irreparable damage to the Company shall result in the event that the restrictive covenants contained in Exhibit A are not specifically enforced and that monetary damages will not adequately protect the Company from a breach of said restrictive covenants;

     (e) If any dispute arises concerning the violation or anticipated or threatened violation by the Executive of any of the restrictive covenants contained in Exhibit A, an injunction may be issued restraining such violation pending the determination of such controversy, and no bond or other security shall be required in connection therewith;

     (f) The restrictive covenants contained in Exhibit A shall continue to apply after any expiration, termination, or cancellation of this Agreement;

     (g) The Executive’s breach of any of the restrictive covenants contained in Exhibit A shall result in the Executive’s immediate forfeiture of all rights and benefits of the award under this Agreement; and

     (h) All disputes relating to the restrictive covenants contained in Exhibit A, including their interpretation and enforceability and any damages (including but not limited to damages resulting in the forfeiture of the award under this Agreement) that may result from the breach of such restrictive covenants, shall not be subject to the dispute resolution procedures, including arbitration, of Section 8 above, but shall instead be determined in a court of competent jurisdiction located in the Dallas County, Texas.

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     10. Applicable Law. The validity, construction, interpretation and effect of this Agreement shall be governed by and construed in accordance with the laws of the State of Texas, without giving effect to the conflicts of laws provisions thereof. The dispute resolution provisions shall be governed by the laws of the State of Texas to the extent they are not governed by the Federal Arbitration Act.

     11. Entire Agreement. This Agreement (including the restrictive covenants contained in Exhibit A attached to this Agreement) contains the entire agreement between the Executive and the Company with respect to the award and the Shares. Any and all prior written and prior or contemporaneous oral agreements, representations, warranties, written inducements, or other communications by any person with respect to the award and/or the Shares are superseded by this Agreement and are void and ineffective for all purposes.

     12. Execution of Agreement. By his execution of this Agreement, the Executive expressly consents to and agrees to be bound by the terms of this Agreement, including the restrictive covenants set forth in Exhibit A, and the Plan.

IDEARC INC.
By:	/s/ Cody Wilbanks
	Cody Wilbanks
	Acting Executive Vice President – General Counsel
/s/ Frank P. Gatto
Frank P. Gatto

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EXHIBIT A
RESTRICTIVE COVENANTS

     This Exhibit A is part of and incorporated by reference in the Restricted Stock Award Agreement to which this Exhibit A is attached between Idearc Inc. (the “Company”) and the Executive. Except where clearly provided to the contrary, all capitalized terms used in this Exhibit A shall have the definitions given to those terms in the Restricted Stock Award Agreement to which this Exhibit A is attached.

     1. Noncompetition. In consideration for the benefits described in the Agreement to which this Exhibit A is attached, the consideration set forth in paragraph 4 of this Exhibit A, and other good and valuable consideration, you, the Executive, agree that:

          (a) Prohibited Conduct. During the period of your employment with the Company or any Related Company (as defined below), and for the period ending twelve (12) months following a termination of your employment for any reason with the Company or any Related Company, you shall not, without the prior written consent of the Executive Vice President — Human Resources and Employee Administration of the Company:

     (i) personally engage in Competitive Activities (as defined below); or

     (ii) work for, own, manage, operate, control, or participate in the ownership, management, operation, or control of, or provide consulting or advisory services to, any person, partnership, firm, corporation, institution or other entity engaged in Competitive Activities, or any company or person affiliated with such person or entity engaged in Competitive Activities; provided that your purchase or holding, for investment purposes, of securities of a publicly traded company shall not constitute “ownership” or “participation in the ownership” for purposes of this paragraph so long as your equity interest in any such company is less than a controlling interest; provided that this paragraph (a) shall not prohibit you from (i) being employed by, or providing services to, a consulting firm, provided that you do not personally engage in Competitive Activities or provide consulting or advisory services to any individual, partnership, firm, corporation, institution or other entity engaged in Competitive Activities, or any person or entity affiliated with such individual, partnership, firm, corporation, institution or other entity engaged in Competitive Activities, or (ii) engaging in the private practice of law as a sole practitioner or as a partner in (or as an employee of or counsel to) a law firm in accordance with applicable legal and professional standards.

          (b) Related Company. For purposes of the Agreement, to which this Exhibit A is attached, “Related Company” means (A) any corporation, partnership, joint venture, or other entity in which the Company holds a direct or indirect ownership or proprietary interest of 50 percent or more, or (B) any corporation, partnership, joint venture, or other entity in which the Company holds an ownership or other proprietary interest of less than 50 percent but which, in the discretion of the Committee, is treated as a Related Company for purposes of this Agreement.

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          (c) Competitive Activities. For purposes of the Agreement, to which this Exhibit A is attached, “Competitive Activities” means activities relating to products or services of the same or similar type as the products or services (1) which are sold (or, pursuant to an existing business plan, will be sold) to paying customers of the Company or any Related Company, and (2) for which you have responsibility to plan, develop, manage, market, oversee or perform, or had any such responsibility within your most recent 24 months of employment with the Company or any Related Company.

     2. Interference With Business Relations. During the period of your employment with the Company or any Related Company, and for a period ending with the expiration of twelve (12) months following a termination of your employment for any reason with the Company or any Related Company, you shall not, without the written consent of the Executive Vice President — Human Resources and Employee Administration of the Company:

          (a) recruit, induce or solicit any employee, directly or indirectly, of the Company or Related Company for employment or for retention as a consultant or service provider;

          (b) hire or participate (with another person or entity) in the process of hiring (other than for the Company or any Related Company) any person who is then an employee of the Company or any Related Company, or provide names or other information about any employees of the Company or Related Company to any person or entity (other than the Company or any Related Company), directly or indirectly, under circumstances that could lead to the use of any such information for purposes of recruiting, soliciting or hiring;

          (c) interfere, directly or indirectly, with the relationship of the Company or any Related Company with any of its employees, agents, or representatives;

          (d) solicit or induce, or in any manner attempt to solicit or induce, directly or indirectly, any client, customer, or prospect of the Company or any Related Company (1) to cease being, or not to become, a customer of the Company or any Related Company or (2) to divert any business of such customer or prospect from the Company or any Related Company; or

          (e) otherwise interfere with, disrupt, or attempt to interfere with or disrupt, the relationship, contractual or otherwise, between the Company or any Related Company and any of its customers, clients, prospects, suppliers, consultants, employees, agents, or representatives.

     3. Return Of Property; Intellectual Property Rights. You agree that on or before termination of your employment for any reason with the Company or any Related Company, you shall return to the Company all property owned by the Company or any Related Company or in which the Company or any Related Company has an interest, including files, documents, data and records (whether on paper or in tapes, disks, or other machine-readable form), office equipment, credit cards, and employee identification cards. You acknowledge that the Company (or, as applicable, a Related Company) is the rightful owner of, and you hereby do assign, all right, title and interest in and to any programs, ideas, inventions, discoveries, patentable or copyrighted material, or trademarks that you may have originated or developed, or assisted in originating or developing, during your period of employment with the Company or a Related

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Company, where any such origination or development involved the use of Company or Related Company time, information or resources, was made in the exercise of your responsibilities for or on behalf of the Company or a Related Company or was related to the Company’s or a Related Company’s business or to the Company’s or a Related Company’s actual or demonstrably anticipated research or development. You shall at all times, both before and after termination of your employment, cooperate with the Company (or, as applicable, any Related Company) in executing and delivering documents requested by the Company or a Related Company, and taking any other actions, that are necessary or requested by the Company or a Related Company to assist the Company or any Related Company in patenting, copyrighting, protecting, enforcing or registering any programs, ideas, inventions, discoveries, works of authorship, data, information, patentable or copyrighted material, or trademarks, and to vest title thereto solely in the Company (or, as applicable, a Related Company). If at any time after your termination of employment, you determine that you have any Secret and Confidential Information in your possession or control, you shall immediately return to the Company all such Secret and Confidential Information in your possession or control, including all copies and portions thereof.

     4. Proprietary And Confidential Information. The Company agrees that it shall provide you with Proprietary Information (defined below) and trade secrets of the Company or a Related Company. You shall at all times, including after any termination of your employment with the Company or any Related Company, preserve the confidentiality of all Proprietary Information and trade secrets of the Company or any Related Company, and you shall not use for the benefit of any person, other than the Company or a Related Company, or disclose to any person, except and to the extent that disclosure of such information is legally required, any Proprietary Information or trade secrets of the Company or any Related Company. “Proprietary Information” means any information or data related to the Company or any Related Company, including information entrusted to the Company or a Related Company by others, which has not been fully disclosed to the public by the Company or a Related Company and which is treated as confidential or protected within the Company or any Related Company or is of value to competitors, such as strategic or tactical business plans; undisclosed business, operational or financial data; ideas, processes, methods, techniques, systems, models, devices, programs, computer software, or related information; documents relating to regulatory matters or correspondence with governmental entities; undisclosed information concerning any past, pending, or threatened legal dispute; pricing or cost data; the identity, reports or analyses of business prospects; business transactions that are contemplated or planned; research data; personnel information or data; identities of users or purchasers of the Company’s or Related Company’s products or services; the Agreement to which this Exhibit A is attached; and other non-public information pertaining to or known by the Company or a Related Company, including confidential or non- public information of a third party that you know or should know the Company or a Related Company is obligated to protect.

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EX-10.6

Exhibit 10.6

FORM OF
STOCK OPTION AWARD AGREEMENT UNDER THE
IDEARC INC. 2008 INCENTIVE COMPENSATION PLAN

     AGREEMENT made as of the                      day of                                          , 20___, by and between IDEARC INC. (the “Company”) and                                                              (the “Optionee”).

     1. Award. Pursuant to the Idearc Inc. 2008 Incentive Compensation Plan (the “Plan”), the Company hereby grants to the Optionee an option (the “Option”) to purchase up to                      shares of the Company’s common stock (the “Common Stock”) at an exercise price per share of $                     upon the terms and conditions set forth in this Agreement and the Plan. A copy of the Plan is attached to this Agreement. The provisions of this Agreement will govern in the event of any inconsistency with the terms of the Plan. Capitalized terms used but not defined in this Agreement will have the meanings ascribed to them by the Plan.

     2. Option Term. Unless terminated sooner, the Option shall expire if and to the extent it is not exercised within ten years from the date hereof.

     3. Vesting Conditions.

     (a) General. Except as otherwise provided, the Option will become vested on the                      anniversary of the date hereof, subject to the Optionee’s continuous employment with the Company or any of its subsidiaries (“Idearc”) through such vesting date.

     (b) Special Vesting Rules. The special vesting rules of this Section 3(b) will apply if (and only if) the Optionee is in compliance with the restrictive covenants set forth in Exhibit A annexed hereto and the Optionee 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. Except as otherwise specified in subpart (ii) below, if, before the Option becomes vested, the Optionee’s employment with Idearc terminates by reason of the Optionee’s death or Retirement (as defined below) or is terminated by Idearc by reason of the Optionee’s Disability (as defined in the Plan), then the Option will thereupon become fully vested. For the purpose of this Agreement, the term “Retirement” means the voluntary termination of employment by the Optionee occurring at least ___ months after the date of this Agreement if (and only if) on the date of such termination, (A) the sum of the Optionee’s age and number of years of service with Idearc or a predecessor company (including Verizon Communications Inc.) is at least 75, and (B) the number of the Optionee’s years of service is at least 15.

          (ii) Effect of a Change in Control. If, in connection with a Change in Control (within the meaning of the Plan), the Option is converted into an economically equivalent option to purchase shares of stock of a successor or acquiring company, and if, before the Option becomes vested and within two years after the Change in Control, the Optionee’s employment with Idearc is terminated by the Optionee for “Good Reason” (as defined below) or by Idearc (or the successor or acquiring company) without Cause (as defined in the Plan), then, at the time of such termination of employment, the Option will become fully vested. If the Option is not converted into an option to purchase shares of stock of the successor or acquiring company, then

the Option will become vested immediately prior to the Change in Control and, to the extent not exercised or cashed out, will be terminated at the time of the Change in Control. For the purposes hereof, the term “Good Reason” means (A) a material adverse change in the Optionee’s status or position, including, without limitation, any material adverse change resulting from a diminution in the Optionee’s position, duties, responsibilities or authority or the assignment to the Optionee of duties or responsibilities that are materially inconsistent with the Optionee’s status or position; (B) a reduction in the Optionee’s annual base salary or a failure to pay same; (C) a reduction in the Optionee’s target incentive award opportunities, expressed as a percentage of the Optionee’s base salary; (D) the relocation of the Optionee’s principal place of employment by more than 50 miles from the then current location; or (E) at the time of a Change in Control, the successor or acquiring company fails or refuses to assume the obligations of the Company under this Agreement. In order to terminate employment for Good Reason, the Optionee must provide written notice to the Company (or the successor or acquiring company) of the nature of the act or omission that the Optionee deems to constitute good reason and provide the Company 30 days after receipt of such notice to review and, if required, correct the situation (and thus prevent the participant’s termination for good reason). The written notice of termination for good reason must be provided, if at all, within 90 days after the occurrence of the act or omission giving rise to such termination.

     4. Termination of Employment. If the Optionee ceases to be employed by Idearc for any reason other than death, Disability or Retirement, then, unless sooner terminated under the terms hereof, the vested portion of the Option (determined with regard to any acceleration of vesting that occurs under Section 3(b) above) will terminate if and to the extent it is not exercised within three months after the date of the Optionee’s termination of employment, provided, however, that, if the Optionee’s employment is terminated by the Company for Cause, then the Option (whether or not vested) will terminate upon the date of such termination of employment. If the Optionee’s employment is terminated by reason of the Optionee’s death, Disability or Retirement (or if the Optionee’s employment is terminated by reason of Disability or Retirement and the Optionee dies within one year after such termination of employment), then, unless sooner terminated under the terms hereof, the vested portion of the Option will terminate if and to the extent it is not exercised within one year after the date of such termination of employment (or within one year after the date of the Optionee’s death if the Optionee’s employment is terminated by reason of Disability or Retirement and the Optionee dies within one year after such termination). The Option will be forfeited by the Optionee and will terminate at the time of the termination of the Optionee’s employment with Idearc if and to the extent the Option is not or does not become vested at such time.

     5. Exercise of Option. If the Option becomes vested, it may be exercised in whole or in part by delivering to the Executive Vice President — Human Resources and Employee Administration of the Company (a) a written notice specifying the number of whole shares of Common Stock with respect to which the Option is being exercised, and (b) payment in full of the exercise price, together with the amount, if any, deemed necessary by the Company to enable it to satisfy any income tax withholding obligations attributable to the exercise. The exercise price and withholding amount shall be payable by bank or certified check or pursuant to such other methods as may be permitted by the Company in accordance with the Plan.

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     6. Rights as a Stockholder. No shares of Common Stock shall be sold or delivered hereunder until full payment for such shares has been made (including, for this purpose, satisfaction of the applicable withholding tax). The Optionee shall have no rights as a stockholder with respect to any shares covered by this Option unless and until the Option is exercised and the shares covered by the exercise of the Option are issued in the name of the Optionee. Except as otherwise specified, no adjustment shall be made for dividends or distributions of other rights for which the record date is prior to the date such shares are issued.

     7. Assignment; Beneficiary. The Option and the Optionee’s rights with respect thereto may not be assigned, pledged or transferred except to the Optionee’s beneficiary following the Optionee’s death (subject to the terms of this Agreement and the Plan), and any attempted assignment, pledge or transfer in violation of this Agreement or the Plan will be void ab initio and of no force or effect. The Optionee may designate a beneficiary by filing a written (or electronic) beneficiary designation form with the Company in a manner prescribed or deemed acceptable for this purpose by the Company’s Executive Vice President — Human Resources and Employee Administration. Each such beneficiary designation will automatically revoke all prior designations by the Optionee. If the Optionee does not make a valid beneficiary designation during the Optionee’s lifetime or if no designated beneficiary survives the Optionee, the Optionee’s beneficiary will be deemed to be the Optionee’s surviving spouse or, if none, the Optionee’s estate.

     8. No Other Rights Conferred. The grant of the Option under this Agreement shall not be deemed to constitute a contract of employment with the Optionee or affect in any way the right of the Company or a subsidiary to terminate the Optionee’s employment at any time for any or no reason. Compensation attributable to the Option shall not be taken into account as compensation for purposes of determining the Optionee’s benefits or entitlements under any employee pension, savings, group insurance, severance or other benefit plan or arrangement, unless and except to the extent otherwise specifically provided by such plan or arrangement.

     9. Withholding. The Company’s obligation to issue shares of Common Stock pursuant to the exercise of the Option shall be subject to and conditioned upon the satisfaction by the Optionee of applicable tax withholding obligations. The Company and its subsidiaries may require the Optionee to remit an amount sufficient to satisfy applicable withholding taxes or deduct or withhold such amount from any payments otherwise owed the Optionee (whether or not under this Agreement or the Plan). The Optionee expressly elects to authorize the Company to deduct from any compensation or any other payment of any kind due to the Optionee, including withholding the issuance of shares of Common Stock, the amount of any federal, state, local or foreign taxes required by law to be withheld as a result of the exercise of the Option; provided, however, that the value of the shares withheld may not exceed the statutory minimum withholding amount required by law.

     10. Committee Authority. The Human Resources Committee of the Company’s Board of Directors (the “Committee”) shall have complete discretion in the exercise of its rights, powers, and duties under this Agreement. Any interpretation or construction of any provision of, and the determination of any question arising under, this Agreement shall be made by the Committee in its discretion and such exercise shall be final, conclusive, and binding. The

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Committee may designate any individual or individuals to perform any of its functions hereunder.

     11. Successors. This Agreement shall be binding upon, and inure to the benefit of, any successor or successors of the Company and any beneficiary of the Optionee.

     12. Construction. This Agreement is intended to reflect the grant of the Option upon the terms and conditions authorized by the Plan. Any provisions of this Agreement that cannot be so administered, interpreted, or construed shall be disregarded. In the event that any provision of this Agreement is held invalid or unenforceable, such provision shall be considered separate and apart from the remainder of this Agreement, which shall remain in full force and effect. In the event that any provision, including any restrictive covenant made as a part of this Agreement, is held to be unenforceable for being unduly broad as written, such provision shall be deemed amended to narrow its application to the extent necessary to make the provision enforceable according to applicable law and shall be enforced as amended.

     13. Applicable Law. The validity, construction, interpretation and effect of this Agreement shall be governed by and construed in accordance with the laws of the State of Texas, without giving effect to the conflicts of laws provisions thereof.

     14. Notice. Any notice to the Company provided for in this Agreement shall be addressed to the Company in care of the Executive Vice President — Human Resources and Employee Administration of Idearc Inc. at P. O. Box 619810, 2200 West Airfield Dr., D/FW Airport, TX, 75261 and any notice to the Optionee shall be addressed to the Optionee at the current address shown on the payroll records of the Company, or to such other address as the Optionee may designate to the Company in writing. Any notice shall be delivered by hand, sent by telecopy or enclosed in a properly sealed envelope as stated above, registered and deposited, postage prepaid, in a post office regularly maintained by the United States Postal Service.

     15. Dispute Resolution.

          (a) General. Except as otherwise specified herein, all disputes arising under the Plan or this Agreement and all claims in which the Optionee seeks damages that relate in any way to the Option or other benefits of the Plan are subject to the dispute resolution procedure described below in this Section. The parties to this Agreement are not required to arbitrate Employment Claims, as defined in subsection (b)(ii) below, in which the Optionee does not seek damages that relate in any way to the Option or other benefits of the Plan or this Agreement.

          (b) Definitions.

     (i) The term “Award Dispute” means any claim regarding (A) the interpretation of the Plan or this Agreement, (B) any of the terms or conditions of the Option, or (C) allegations of entitlement to or with respect to the Option or the shares of Common Stock covered by the Option or any other benefits under this Agreement or the Plan, other than Employment Claims described in subsection (b)(ii) below; provided, however, that any dispute relating to the forfeiture of the Option as a result of a breach of any of the restrictive covenants contained in

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Exhibit A shall not be subject to the dispute resolution procedures provided for in this Section.

     (ii) The term “Award Damages Dispute” means any employment related claims between the Optionee and the Company or a subsidiary or against the directors, officers, employees, representatives, or agents of the Company or a subsidiary, including claims of alleged employment discrimination, wrongful termination, or violations of Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Age Discrimination in Employment Act, 42 U.S.C. § 1981, the Fair Labor Standards Act, the Family Medical Leave Act, the Sarbanes-Oxley Act, or any other federal, state or local law, statute, regulation, or ordinance relating to employment or any common law theories of recovery relating to employment, such as breach of contract, tort, or public policy claims (“Employment Claims”), in which the damages sought relate in any way to the Option or other benefits of this Agreement or the Plan.

     (iii) The term “Related Company” means (A) any corporation, partnership, joint venture, or other entity in which the Company holds a direct or indirect ownership or proprietary interest of 50 percent or more, or (B) any corporation, partnership, joint venture, or other entity in which the Company holds an ownership or other proprietary interest of less than 50 percent but which, in the discretion of the Committee, is treated as a Related Company for purposes of this Agreement.

          (c) Internal Dispute Resolution Procedure. All Award Disputes shall be referred in the first instance to the Idearc Employee Benefits Committee (“EB Committee”) for resolution internally within the Company. Except where otherwise prohibited by law, all Award Disputes must be filed in writing with the EB Committee no later than one year from the date that the dispute accrues. Consistent with subsection (d)(i) below, decisions about the enforceability of the limitations period contained herein are for the arbitrator to decide. To the fullest extent permitted by law, the EB Committee shall have full power, discretion, and authority to interpret the Plan and this Agreement and to decide all Award Disputes brought under this Plan and Agreement before them. Determinations made by the EB Committee shall be final, conclusive and binding, subject only to review by arbitration pursuant to subsection (d) below under the arbitrary and capricious standard of review.

          (d) Arbitration. All appeals from determinations of Award Disputes by the EB Committee as described in subsection (c) above, as well as all Award Damages Disputes, shall be submitted to the American Arbitration Association (“AAA”) for final and binding arbitration on an individual basis (and not on a collective or class action basis) before a single arbitrator pursuant to its Commercial Arbitration Rules in effect at the time this grant is accepted. Except where otherwise prohibited by law, all appeals of Award Disputes and all Award Damages Disputes must be filed in writing with the AAA no later than one year from the date that the appeal or dispute accrues. Consistent with subsection (d)(i) below, decisions about the enforceability of the limitations period contained herein are for the arbitrator to decide. If the Optionee and either the Company or a Related Company are party to any prior agreement to arbitrate claims before the AAA under rules other than its Commercial Arbitration Rules, claims

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that are arbitrable under any such agreements shall be submitted to the AAA for disposition under its Commercial Arbitration Rules together with disputes that are arbitrable under this Agreement in order to promote expeditious and efficient dispute resolution. The arbitration shall be held in Dallas County, Texas. All claims by the Company or a Related Company against the Optionee, except for breaches of any of the restrictive covenants contained in Exhibit A, shall also be raised in such arbitration proceedings.

     (i) The arbitrator shall have the authority to determine whether this arbitration agreement is enforceable and whether any dispute submitted for arbitration hereunder is arbitrable. The arbitrator shall decide all issues submitted for arbitration according to the terms of the Plan, this Agreement, existing Company policy, and applicable substantive state and federal law and shall have the authority to award any remedy or relief which could be awarded by a court. The decision of the arbitrator shall be final and binding and enforceable in any applicable court.

     (ii) The Optionee understands and agrees that when Award Disputes or Award Damages Disputes are submitted for arbitration pursuant to this Agreement, both the Optionee and the Company or a Related Company waive any right to sue each other in a court of law or equity, to have a trial by jury, or to resolve disputes on a collective, or class, basis, and that the sole forum available for the resolution of such issues is arbitration as provided herein. This dispute resolution procedure shall not prevent either the Optionee or the Company or a Related Company from commencing an action in any court of competent jurisdiction for the purpose of obtaining injunctive relief to prevent irreparable harm pending arbitration hereunder; in such event, both the Optionee and the Company or a Related Company agree that the party who commences the action may proceed without necessity of posting a bond.

     (iii) In consideration of the Optionee’s agreement in subsection (ii) above, the Company or a Related Company will pay all filing, administrative and arbitrator’s fees incurred in connection with the arbitration proceedings. If the AAA requires the Optionee to pay the initial filing fee, the Company or a Related Company will reimburse the Optionee for that fee.

     (iv) The parties intend that the arbitration procedure to which they hereby agree shall be the exclusive means for resolving all Award Disputes and Award Damages Disputes. Their agreement in this regard shall be interpreted as broadly and inclusively as reason permits to realize that intent.

     (v) Notwithstanding any other provision of this Agreement, this dispute resolution provision shall be governed by laws of the State of Texas to the extent that it is not governed by the Federal Arbitration Act.

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     16. Additional Remedies. Notwithstanding the dispute resolution procedures, including arbitration of this Agreement, and in addition to any other rights or remedies, whether legal, equitable, or otherwise, that each of the parties to this Agreement may have (including the right of the Company to terminate the Optionee for Cause), the Optionee acknowledges that —

          (a) The restrictive covenants contained in Exhibit A to this Agreement are essential to the continued goodwill and profitability of the Company;

          (b) The Optionee has broad-based skills that will serve as the basis for employment opportunities that are not prohibited by the restrictive covenants contained in Exhibit A;

          (c) When the Optionee’s employment with the Company terminates, the Optionee shall be able to earn a livelihood without violating any of the restrictive covenants contained in Exhibit A;

          (d) Irreparable damage to the Company shall result in the event that the restrictive covenants contained in Exhibit A are not specifically enforced and that monetary damages will not adequately protect the Company from a breach of said restrictive covenants;

          (e) If any dispute arises concerning the violation or anticipated or threatened violation by the Optionee of any of the restrictive covenants contained in Exhibit A, an injunction may be issued restraining such violation pending the determination of such controversy, and no bond or other security shall be required in connection therewith;

          (f) The restrictive covenants contained in Exhibit A shall continue to apply after any expiration, termination, or cancellation of this Agreement;

          (g) The Optionee’s breach of any of the restrictive covenants contained in Exhibit A shall result in the Optionee’s immediate forfeiture of the Option and all rights and benefits with respect thereto under this Agreement; and

          (h) All disputes relating to the restrictive covenants contained in Exhibit A, including their interpretation and enforceability and any damages (including but not limited to damages resulting in the forfeiture of the Option) that may result from the breach of such restrictive covenants, shall not be subject to the dispute resolution procedures, including arbitration, of Section 15 above, but shall instead be determined in a court of competent jurisdiction located in the Dallas County, Texas.

     17. Execution of Agreement. By his execution of this Agreement, the Optionee expressly consents to and agrees to be bound by the terms of this Agreement, including the restrictive covenants set forth in Exhibit A, and the Plan.

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

IDEARC INC.

By:

Optionee

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EXHIBIT A
RESTRICTIVE COVENANTS

     This Exhibit A is part of and incorporated by reference in the Stock Option Award Agreement to which this Exhibit A is attached between Idearc Inc. (the “Company”) and the Optionee. Except where clearly provided to the contrary, all capitalized terms used in this Exhibit A shall have the definitions given to those terms in the Stock Option Award Agreement to which this Exhibit A is attached.

     1. Noncompetition. In consideration for the benefits described in the Agreement to which this Exhibit A is attached, the consideration set forth in paragraph 4 of this Exhibit A, and other good and valuable consideration, you, the Optionee, agree that:

          (a) Prohibited Conduct. During the period of your employment with the Company or any Related Company, and for the period ending twelve (12) months following a termination of your employment for any reason with the Company or any Related Company, you shall not, without the prior written consent of the Executive Vice President — Human Resources and Employee Administration of the Company:

     (i) personally engage in Competitive Activities (as defined below); or

     (ii) work for, own, manage, operate, control, or participate in the ownership, management, operation, or control of, or provide consulting or advisory services to, any person, partnership, firm, corporation, institution or other entity engaged in Competitive Activities, or any company or person affiliated with such person or entity engaged in Competitive Activities; provided that your purchase or holding, for investment purposes, of securities of a publicly traded company shall not constitute “ownership” or “participation in the ownership” for purposes of this paragraph so long as your equity interest in any such company is less than a controlling interest; provided that this paragraph (a) shall not prohibit you from (i) being employed by, or providing services to, a consulting firm, provided that you do not personally engage in Competitive Activities or provide consulting or advisory services to any individual, partnership, firm, corporation, institution or other entity engaged in Competitive Activities, or any person or entity affiliated with such individual, partnership, firm, corporation, institution or other entity engaged in Competitive Activities, or (ii) engaging in the private practice of law as a sole practitioner or as a partner in (or as an employee of or counsel to) a law firm in accordance with applicable legal and professional standards.

          (b) Competitive Activities. For purposes of the Agreement, to which this Exhibit A is attached, “Competitive Activities” means activities relating to products or services of the same or similar type as the products or services (1) which are sold (or, pursuant to an existing business plan, will be sold) to paying customers of the Company or any Related Company, and (2) for which you have responsibility to plan, develop, manage, market, oversee or perform, or had any such responsibility within your most recent 24 months of employment with the Company or any Related Company.

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     2. Interference With Business Relations. During the period of your employment with the Company or any Related Company, and for a period ending with the expiration of twelve (12) months following a termination of your employment for any reason with the Company or any Related Company, you shall not, without the written consent of the Executive Vice President — Human Resources and Employee Administration of the Company:

          (a) recruit, induce or solicit any employee, directly or indirectly, of the Company or Related Company for employment or for retention as a consultant or service provider;

          (b) hire or participate (with another person or entity) in the process of hiring (other than for the Company or any Related Company) any person who is then an employee of the Company or any Related Company, or provide names or other information about any employees of the Company or Related Company to any person or entity (other than the Company or any Related Company), directly or indirectly, under circumstances that could lead to the use of any such information for purposes of recruiting, soliciting or hiring;

          (c) interfere, directly or indirectly, with the relationship of the Company or any Related Company with any of its employees, agents, or representatives;

          (d) solicit or induce, or in any manner attempt to solicit or induce, directly or indirectly, any client, customer, or prospect of the Company or any Related Company (1) to cease being, or not to become, a customer of the Company or any Related Company or (2) to divert any business of such customer or prospect from the Company or any Related Company; or

          (e) otherwise interfere with, disrupt, or attempt to interfere with or disrupt, the relationship, contractual or otherwise, between the Company or any Related Company and any of its customers, clients, prospects, suppliers, consultants, employees, agents, or representatives.

     3. Return Of Property; Intellectual Property Rights. You agree that on or before termination of your employment for any reason with the Company or any Related Company, you shall return to the Company all property owned by the Company or any Related Company or in which the Company or any Related Company has an interest, including files, documents, data and records (whether on paper or in tapes, disks, or other machine-readable form), office equipment, credit cards, and employee identification cards. You acknowledge that the Company (or, as applicable, a Related Company) is the rightful owner of, and you hereby do assign, all right, title and interest in and to any programs, ideas, inventions, discoveries, patentable or copyrighted material, or trademarks that you may have originated or developed, or assisted in originating or developing, during your period of employment with the Company or a Related Company, where any such origination or development involved the use of Company or Related Company time, information or resources, was made in the exercise of your responsibilities for or on behalf of the Company or a Related Company or was related to the Company’s or a Related Company’s business or to the Company’s or a Related Company’s actual or demonstrably anticipated research or development. You shall at all times, both before and after termination of your employment, cooperate with the Company (or, as applicable, any Related Company) in executing and delivering documents requested by the Company or a Related Company, and taking any other actions, that are necessary or requested by the Company or a Related Company

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to assist the Company or any Related Company in patenting, copyrighting, protecting, enforcing or registering any programs, ideas, inventions, discoveries, works of authorship, data, information, patentable or copyrighted material, or trademarks, and to vest title thereto solely in the Company (or, as applicable, a Related Company). If at any time after your termination of employment, you determine that you have any Secret and Confidential Information in your possession or control, you shall immediately return to the Company all such Secret and Confidential Information in your possession or control, including all copies and portions thereof.

     4. Proprietary And Confidential Information. The Company agrees that it shall provide you with Proprietary Information (defined below) and trade secrets of the Company or a Related Company. You shall at all times, including after any termination of your employment with the Company or any Related Company, preserve the confidentiality of all Proprietary Information and trade secrets of the Company or any Related Company, and you shall not use for the benefit of any person, other than the Company or a Related Company, or disclose to any person, except and to the extent that disclosure of such information is legally required, any Proprietary Information or trade secrets of the Company or any Related Company. “Proprietary Information” means any information or data related to the Company or any Related Company, including information entrusted to the Company or a Related Company by others, which has not been fully disclosed to the public by the Company or a Related Company and which is treated as confidential or protected within the Company or any Related Company or is of value to competitors, such as strategic or tactical business plans; undisclosed business, operational or financial data; ideas, processes, methods, techniques, systems, models, devices, programs, computer software, or related information; documents relating to regulatory matters or correspondence with governmental entities; undisclosed information concerning any past, pending, or threatened legal dispute; pricing or cost data; the identity, reports or analyses of business prospects; business transactions that are contemplated or planned; research data; personnel information or data; identities of users or purchasers of the Company’s or Related Company’s products or services; the Agreement to which this Exhibit A is attached; and other non-public information pertaining to or known by the Company or a Related Company, including confidential or non- public information of a third party that you know or should know the Company or a Related Company is obligated to protect.

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EX-10.7

Exhibit 10.7

FORM OF
STOCK OPTION AWARD AGREEMENT UNDER THE
IDEARC INC. LONG TERM INCENTIVE PLAN

     AGREEMENT made as of the                      day of                                          , 20___, by and between IDEARC INC. (the “Company”) and                                                              (the “Optionee”).

     1. Award. Pursuant to the Idearc Inc. Long Term Incentive Plan (the “Plan”), the Company hereby grants to the Optionee an option (the “Option”) to purchase up to                      shares of the Company’s common stock (the “Common Stock”) at an exercise price per share of $                     upon the terms and conditions set forth in this Agreement and the Plan. A copy of the Plan is attached to this Agreement. The provisions of this Agreement will govern in the event of any inconsistency with the terms of the Plan. Capitalized terms used but not defined in this Agreement will have the meanings ascribed to them by the Plan.

     2. Option Term. Unless terminated sooner, the Option shall expire if and to the extent it is not exercised within ten years from the date hereof.

     3. Vesting Conditions.

     (a) General. Except as otherwise provided, the Option will become vested on the                      anniversary of the date hereof, subject to the Optionee’s continuous employment with the Company or any of its subsidiaries (“Idearc”) through such vesting date.

     (b) Special Vesting Rules. The special vesting rules of this Section 3(b) will apply if (and only if) the Optionee is in compliance with the restrictive covenants set forth in Exhibit A annexed hereto and the Optionee 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. Except as otherwise specified in subpart (ii) below, if, before the Option becomes vested, the Optionee’s employment with Idearc terminates by reason of the Optionee’s death or Retirement (as defined below) or is terminated by Idearc by reason of the Optionee’s Disability (as defined in the Plan), then the Option will thereupon become fully vested.

          (ii) Effect of a Change in Control. If, in connection with a “Change in Control” (as defined below), the Option is converted into an economically equivalent option to purchase shares of stock of a successor or acquiring company, and if, before the Option becomes vested and within two years after the Change in Control, the Optionee’s employment with Idearc is terminated by the Optionee for Good Reason (as defined below) or by Idearc (or the successor or acquiring company) without Cause (as defined below), then, at the time of such termination of employment, the Option will become fully vested. If the Option is not converted into an option to purchase shares of stock of the successor or acquiring company, then the Option will become vested immediately prior to the Change in Control and, to the extent not exercised or cashed out, will be terminated at the time of the Change in Control.

          (iii) Definitions.

               (1) Disability. For the purposes hereof, the term “Disability” means the inability of the Optionee 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 Human Resources Committee of the Company’s Board of Directors (the “Committee”).

               (2) Cause. For the purposes hereof, the term “Cause” means the Optionee’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 Idearc, 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.

               (3) Change in Control. For the purposes hereof, the term “ 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.

               (4) Good Reason. For the purposes hereof, the term “Good Reason” means (A) a material adverse change in the Optionee’s status or position, including, without limitation, any material adverse change resulting from a diminution in the Optionee’s position, duties, responsibilities or authority or the assignment to the Optionee of duties or responsibilities that are materially inconsistent with the Optionee’s status or position; (B) a reduction in the Optionee’s annual base salary or a failure to pay same; (C) a reduction in the Optionee’s target incentive award opportunities, expressed as a percentage of the Optionee’s base salary; (D) the relocation of the Optionee’s principal place of employment by more than 50 miles from the then current location; or (E) at the time of a Change in Control, the successor or acquiring company fails or refuses to assume the obligations of the Company under this Agreement. In order to terminate employment for Good Reason, the Optionee must provide written notice to the Company (or the successor or acquiring company) of the nature of the act or omission that the Optionee deems to constitute good reason and provide the Company 30 days after receipt of such notice to review and, if required, correct the situation (and thus prevent the participant’s termination for good reason). The written notice of termination for good reason must be provided, if at all, within 90 days after the occurrence of the act or omission giving rise to such termination.

               (5) Retirement. For the purposes hereof, the term “Retirement” means the voluntary termination of employment by the Optionee occurring at least ___ months after the date of this Agreement if (and only if) on the date of such termination, (A) the sum of the Optionee’s age and number of years of service with Idearc or a predecessor company (including

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Verizon Communications Inc.) is at least 75, and (B) the number of the Optionee’s years of service is at least 15.

     4. Termination of Employment. If the Optionee ceases to be employed by Idearc for any reason other than death, Disability or Retirement, then, unless sooner terminated under the terms hereof, the vested portion of the Option (determined with regard to any acceleration of vesting that occurs under Section 3(b) above) will terminate if and to the extent it is not exercised within three months after the date of the Optionee’s termination of employment, provided, however, that, if the Optionee’s employment is terminated by the Company for Cause, then the Option (whether or not vested) will terminate upon the date of such termination of employment. If the Optionee’s employment is terminated by reason of the Optionee’s death, Disability or Retirement (or if the Optionee’s employment is terminated by reason of Disability or Retirement and the Optionee dies within one year after such termination of employment), then, unless sooner terminated under the terms hereof, the vested portion of the Option will terminate if and to the extent it is not exercised within one year after the date of such termination of employment (or within one year after the date of the Optionee’s death if the Optionee’s employment is terminated by reason of Disability or Retirement and the Optionee dies within one year after such termination). The Option will be forfeited by the Optionee and will terminate at the time of the termination of the Optionee’s employment with Idearc if and to the extent the Option is not or does not become vested at such time.

     5. Exercise of Option. If the Option becomes vested, it may be exercised in whole or in part by delivering to the Executive Vice President — Human Resources and Employee Administration of the Company (a) a written notice specifying the number of whole shares of Common Stock with respect to which the Option is being exercised, and (b) payment in full of the exercise price, together with the amount, if any, deemed necessary by the Company to enable it to satisfy any income tax withholding obligations attributable to the exercise. The exercise price and withholding amount shall be payable by bank or certified check or pursuant to such other methods as may be permitted by the Company in accordance with the Plan.

     6. Rights as a Stockholder. No shares of Common Stock shall be sold or delivered hereunder until full payment for such shares has been made (including, for this purpose, satisfaction of the applicable withholding tax). The Optionee shall have no rights as a stockholder with respect to any shares covered by this Option unless and until the Option is exercised and the shares covered by the exercise of the Option are issued in the name of the Optionee. Except as otherwise specified, no adjustment shall be made for dividends or distributions of other rights for which the record date is prior to the date such shares are issued.

     7. Assignment; Beneficiary. The Option and the Optionee’s rights with respect thereto may not be assigned, pledged or transferred except to the Optionee’s beneficiary following the Optionee’s death (subject to the terms of this Agreement and the Plan), and any attempted assignment, pledge or transfer in violation of this Agreement or the Plan will be void ab initio and of no force or effect. The Optionee may designate a beneficiary by filing a written (or electronic) beneficiary designation form with the Company in a manner prescribed or deemed acceptable for this purpose by the Company’s Executive Vice President — Human Resources and Employee Administration. Each such beneficiary designation will automatically revoke all prior designations by the Optionee. If the Optionee does not make a valid beneficiary designation

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during the Optionee’s lifetime or if no designated beneficiary survives the Optionee, the Optionee’s beneficiary will be deemed to be the Optionee’s surviving spouse or, if none, the Optionee’s estate.

     8. No Other Rights Conferred. The grant of the Option under this Agreement shall not be deemed to constitute a contract of employment with the Optionee or affect in any way the right of the Company or a subsidiary to terminate the Optionee’s employment at any time for any or no reason. Compensation attributable to the Option shall not be taken into account as compensation for purposes of determining the Optionee’s benefits or entitlements under any employee pension, savings, group insurance, severance or other benefit plan or arrangement, unless and except to the extent otherwise specifically provided by such plan or arrangement.

     9. Withholding. The Company’s obligation to issue shares of Common Stock pursuant to the exercise of the Option shall be subject to and conditioned upon the satisfaction by the Optionee of applicable tax withholding obligations. The Company and its subsidiaries may require the Optionee to remit an amount sufficient to satisfy applicable withholding taxes or deduct or withhold such amount from any payments otherwise owed the Optionee (whether or not under this Agreement or the Plan). The Optionee expressly elects to authorize the Company to deduct from any compensation or any other payment of any kind due to the Optionee, including withholding the issuance of shares of Common Stock, the amount of any federal, state, local or foreign taxes required by law to be withheld as a result of the exercise of the Option; provided, however, that the value of the shares withheld may not exceed the statutory minimum withholding amount required by law.

     10. Committee Authority. The Committee shall have complete discretion in the exercise of its rights, powers, and duties under this Agreement. Any interpretation or construction of any provision of, and the determination of any question arising under, this Agreement shall be made by the Committee in its discretion and such exercise shall be final, conclusive, and binding. The Committee may designate any individual or individuals to perform any of its functions hereunder.

     11. Successors. This Agreement shall be binding upon, and inure to the benefit of, any successor or successors of the Company and any beneficiary of the Optionee.

     12. Construction. This Agreement is intended to reflect the grant of the Option upon the terms and conditions authorized by the Plan. Any provisions of this Agreement that cannot be so administered, interpreted, or construed shall be disregarded. In the event that any provision of this Agreement is held invalid or unenforceable, such provision shall be considered separate and apart from the remainder of this Agreement, which shall remain in full force and effect. In the event that any provision, including any restrictive covenant made as a part of this Agreement, is held to be unenforceable for being unduly broad as written, such provision shall be deemed amended to narrow its application to the extent necessary to make the provision enforceable according to applicable law and shall be enforced as amended.

     13. Applicable Law. The validity, construction, interpretation and effect of this Agreement shall be governed by and construed in accordance with the laws of the State of Texas, without giving effect to the conflicts of laws provisions thereof.

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     14. Notice. Any notice to the Company provided for in this Agreement shall be addressed to the Company in care of the Executive Vice President — Human Resources and Employee Administration of Idearc Inc. at P. O. Box 619810, 2200 West Airfield Dr., D/FW Airport, TX, 75261 and any notice to the Optionee shall be addressed to the Optionee at the current address shown on the payroll records of the Company, or to such other address as the Optionee may designate to the Company in writing. Any notice shall be delivered by hand, sent by telecopy or enclosed in a properly sealed envelope as stated above, registered and deposited, postage prepaid, in a post office regularly maintained by the United States Postal Service.

     15. Dispute Resolution.

          (a) General. Except as otherwise specified herein, all disputes arising under the Plan or this Agreement and all claims in which the Optionee seeks damages that relate in any way to the Option or other benefits of the Plan are subject to the dispute resolution procedure described below in this Section. The parties to this Agreement are not required to arbitrate Employment Claims, as defined in subsection (b)(ii) below, in which the Optionee does not seek damages that relate in any way to the Option or other benefits of the Plan or this Agreement.

          (b) Definitions.

     (i) The term “Award Dispute” means any claim regarding (A) the interpretation of the Plan or this Agreement, (B) any of the terms or conditions of the Option, or (C) allegations of entitlement to or with respect to the Option or the shares of Common Stock covered by the Option or any other benefits under this Agreement or the Plan, other than Employment Claims described in subsection (b)(ii) below; provided, however, that any dispute relating to the forfeiture of the Option as a result of a breach of any of the restrictive covenants contained in Exhibit A shall not be subject to the dispute resolution procedures provided for in this Section.

     (ii) The term “Award Damages Dispute” means any employment related claims between the Optionee and the Company or a subsidiary or against the directors, officers, employees, representatives, or agents of the Company or a subsidiary, including claims of alleged employment discrimination, wrongful termination, or violations of Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Age Discrimination in Employment Act, 42 U.S.C. § 1981, the Fair Labor Standards Act, the Family Medical Leave Act, the Sarbanes-Oxley Act, or any other federal, state or local law, statute, regulation, or ordinance relating to employment or any common law theories of recovery relating to employment, such as breach of contract, tort, or public policy claims (“Employment Claims”), in which the damages sought relate in any way to the Option or other benefits of this Agreement or the Plan.

     (iii) The term “Related Company” means (A) any corporation, partnership, joint venture, or other entity in which the Company holds a direct or indirect ownership or proprietary interest of 50 percent or more, or (B) any corporation, partnership, joint venture, or other entity in which the Company

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holds an ownership or other proprietary interest of less than 50 percent but which, in the discretion of the Committee, is treated as a Related Company for purposes of this Agreement.

          (c) Internal Dispute Resolution Procedure. All Award Disputes shall be referred in the first instance to the Idearc Employee Benefits Committee (“EB Committee”) for resolution internally within the Company. Except where otherwise prohibited by law, all Award Disputes must be filed in writing with the EB Committee no later than one year from the date that the dispute accrues. Consistent with subsection (d)(i) below, decisions about the enforceability of the limitations period contained herein are for the arbitrator to decide. To the fullest extent permitted by law, the EB Committee shall have full power, discretion, and authority to interpret the Plan and this Agreement and to decide all Award Disputes brought under this Plan and Agreement before them. Determinations made by the EB Committee shall be final, conclusive and binding, subject only to review by arbitration pursuant to subsection (d) below under the arbitrary and capricious standard of review.

          (d) Arbitration. All appeals from determinations of Award Disputes by the EB Committee as described in subsection (c) above, as well as all Award Damages Disputes, shall be submitted to the American Arbitration Association (“AAA”) for final and binding arbitration on an individual basis (and not on a collective or class action basis) before a single arbitrator pursuant to its Commercial Arbitration Rules in effect at the time this grant is accepted. Except where otherwise prohibited by law, all appeals of Award Disputes and all Award Damages Disputes must be filed in writing with the AAA no later than one year from the date that the appeal or dispute accrues. Consistent with subsection (d)(i) below, decisions about the enforceability of the limitations period contained herein are for the arbitrator to decide. If the Optionee and either the Company or a Related Company are party to any prior agreement to arbitrate claims before the AAA under rules other than its Commercial Arbitration Rules, claims that are arbitrable under any such agreements shall be submitted to the AAA for disposition under its Commercial Arbitration Rules together with disputes that are arbitrable under this Agreement in order to promote expeditious and efficient dispute resolution. The arbitration shall be held in Dallas County, Texas. All claims by the Company or a Related Company against the Optionee, except for breaches of any of the restrictive covenants contained in Exhibit A, shall also be raised in such arbitration proceedings.

     (i) The arbitrator shall have the authority to determine whether this arbitration agreement is enforceable and whether any dispute submitted for arbitration hereunder is arbitrable. The arbitrator shall decide all issues submitted for arbitration according to the terms of the Plan, this Agreement, existing Company policy, and applicable substantive state and federal law and shall have the authority to award any remedy or relief which could be awarded by a court. The decision of the arbitrator shall be final and binding and enforceable in any applicable court.

     (ii) The Optionee understands and agrees that when Award Disputes or Award Damages Disputes are submitted for arbitration pursuant to this Agreement, both the Optionee and the Company or a Related Company waive any right to sue each other in a court of law or equity, to have a trial by jury, or to

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resolve disputes on a collective, or class, basis, and that the sole forum available for the resolution of such issues is arbitration as provided herein. This dispute resolution procedure shall not prevent either the Optionee or the Company or a Related Company from commencing an action in any court of competent jurisdiction for the purpose of obtaining injunctive relief to prevent irreparable harm pending arbitration hereunder; in such event, both the Optionee and the Company or a Related Company agree that the party who commences the action may proceed without necessity of posting a bond.

     (iii) In consideration of the Optionee’s agreement in subsection (ii) above, the Company or a Related Company will pay all filing, administrative and arbitrator’s fees incurred in connection with the arbitration proceedings. If the AAA requires the Optionee to pay the initial filing fee, the Company or a Related Company will reimburse the Optionee for that fee.

     (iv) The parties intend that the arbitration procedure to which they hereby agree shall be the exclusive means for resolving all Award Disputes and Award Damages Disputes. Their agreement in this regard shall be interpreted as broadly and inclusively as reason permits to realize that intent.

     (v) Notwithstanding any other provision of this Agreement, this dispute resolution provision shall be governed by laws of the State of Texas to the extent that it is not governed by the Federal Arbitration Act.

     16. Additional Remedies. Notwithstanding the dispute resolution procedures, including arbitration of this Agreement, and in addition to any other rights or remedies, whether legal, equitable, or otherwise, that each of the parties to this Agreement may have (including the right of the Company to terminate the Optionee for Cause), the Optionee acknowledges that —

          (a) The restrictive covenants contained in Exhibit A to this Agreement are essential to the continued goodwill and profitability of the Company;

          (b) The Optionee has broad-based skills that will serve as the basis for employment opportunities that are not prohibited by the restrictive covenants contained in Exhibit A;

          (c) When the Optionee’s employment with the Company terminates, the Optionee shall be able to earn a livelihood without violating any of the restrictive covenants contained in Exhibit A;

          (d) Irreparable damage to the Company shall result in the event that the restrictive covenants contained in Exhibit A are not specifically enforced and that monetary damages will not adequately protect the Company from a breach of said restrictive covenants;

          (e) If any dispute arises concerning the violation or anticipated or threatened violation by the Optionee of any of the restrictive covenants contained in Exhibit A, an injunction may be issued restraining such violation pending the determination of such controversy, and no bond or other security shall be required in connection therewith;

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          (f) The restrictive covenants contained in Exhibit A shall continue to apply after any expiration, termination, or cancellation of this Agreement;

          (g) The Optionee’s breach of any of the restrictive covenants contained in Exhibit A shall result in the Optionee’s immediate forfeiture of the Option and all rights and benefits with respect thereto under this Agreement; and

          (h) All disputes relating to the restrictive covenants contained in Exhibit A, including their interpretation and enforceability and any damages (including but not limited to damages resulting in the forfeiture of the Option) that may result from the breach of such restrictive covenants, shall not be subject to the dispute resolution procedures, including arbitration, of Section 15 above, but shall instead be determined in a court of competent jurisdiction located in the Dallas County, Texas.

     17. Execution of Agreement. By his execution of this Agreement, the Optionee expressly consents to and agrees to be bound by the terms of this Agreement, including the restrictive covenants set forth in Exhibit A, and the Plan.

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

IDEARC INC.

By:

Optionee

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EXHIBIT A
RESTRICTIVE COVENANTS

     This Exhibit A is part of and incorporated by reference in the Stock Option Award Agreement to which this Exhibit A is attached between Idearc Inc. (the “Company”) and the Optionee. Except where clearly provided to the contrary, all capitalized terms used in this Exhibit A shall have the definitions given to those terms in the Stock Option Award Agreement to which this Exhibit A is attached.

     1. Noncompetition. In consideration for the benefits described in the Agreement to which this Exhibit A is attached, the consideration set forth in paragraph 4 of this Exhibit A, and other good and valuable consideration, you, the Optionee, agree that:

          (a) Prohibited Conduct. During the period of your employment with the Company or any Related Company, and for the period ending twelve (12) months following a termination of your employment for any reason with the Company or any Related Company, you shall not, without the prior written consent of the Executive Vice President — Human Resources and Employee Administration of the Company:

     (i) personally engage in Competitive Activities (as defined below); or

     (ii) work for, own, manage, operate, control, or participate in the ownership, management, operation, or control of, or provide consulting or advisory services to, any person, partnership, firm, corporation, institution or other entity engaged in Competitive Activities, or any company or person affiliated with such person or entity engaged in Competitive Activities; provided that your purchase or holding, for investment purposes, of securities of a publicly traded company shall not constitute “ownership” or “participation in the ownership” for purposes of this paragraph so long as your equity interest in any such company is less than a controlling interest; provided that this paragraph (a) shall not prohibit you from (i) being employed by, or providing services to, a consulting firm, provided that you do not personally engage in Competitive Activities or provide consulting or advisory services to any individual, partnership, firm, corporation, institution or other entity engaged in Competitive Activities, or any person or entity affiliated with such individual, partnership, firm, corporation, institution or other entity engaged in Competitive Activities, or (ii) engaging in the private practice of law as a sole practitioner or as a partner in (or as an employee of or counsel to) a law firm in accordance with applicable legal and professional standards.

          (b) Competitive Activities. For purposes of the Agreement, to which this Exhibit A is attached, “Competitive Activities” means activities relating to products or services of the same or similar type as the products or services (1) which are sold (or, pursuant to an existing business plan, will be sold) to paying customers of the Company or any Related Company, and (2) for which you have responsibility to plan, develop, manage, market, oversee or perform, or had any such responsibility within your most recent 24 months of employment with the Company or any Related Company.

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     2. Interference With Business Relations. During the period of your employment with the Company or any Related Company, and for a period ending with the expiration of twelve (12) months following a termination of your employment for any reason with the Company or any Related Company, you shall not, without the written consent of the Executive Vice President — Human Resources and Employee Administration of the Company:

          (a) recruit, induce or solicit any employee, directly or indirectly, of the Company or Related Company for employment or for retention as a consultant or service provider;

          (b) hire or participate (with another person or entity) in the process of hiring (other than for the Company or any Related Company) any person who is then an employee of the Company or any Related Company, or provide names or other information about any employees of the Company or Related Company to any person or entity (other than the Company or any Related Company), directly or indirectly, under circumstances that could lead to the use of any such information for purposes of recruiting, soliciting or hiring;

          (c) interfere, directly or indirectly, with the relationship of the Company or any Related Company with any of its employees, agents, or representatives;

          (d) solicit or induce, or in any manner attempt to solicit or induce, directly or indirectly, any client, customer, or prospect of the Company or any Related Company (1) to cease being, or not to become, a customer of the Company or any Related Company or (2) to divert any business of such customer or prospect from the Company or any Related Company; or

          (e) otherwise interfere with, disrupt, or attempt to interfere with or disrupt, the relationship, contractual or otherwise, between the Company or any Related Company and any of its customers, clients, prospects, suppliers, consultants, employees, agents, or representatives.

     3. Return Of Property; Intellectual Property Rights. You agree that on or before termination of your employment for any reason with the Company or any Related Company, you shall return to the Company all property owned by the Company or any Related Company or in which the Company or any Related Company has an interest, including files, documents, data and records (whether on paper or in tapes, disks, or other machine-readable form), office equipment, credit cards, and employee identification cards. You acknowledge that the Company (or, as applicable, a Related Company) is the rightful owner of, and you hereby do assign, all right, title and interest in and to any programs, ideas, inventions, discoveries, patentable or copyrighted material, or trademarks that you may have originated or developed, or assisted in originating or developing, during your period of employment with the Company or a Related Company, where any such origination or development involved the use of Company or Related Company time, information or resources, was made in the exercise of your responsibilities for or on behalf of the Company or a Related Company or was related to the Company’s or a Related Company’s business or to the Company’s or a Related Company’s actual or demonstrably anticipated research or development. You shall at all times, both before and after termination of your employment, cooperate with the Company (or, as applicable, any Related Company) in executing and delivering documents requested by the Company or a Related Company, and taking any other actions, that are necessary or requested by the Company or a Related Company

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to assist the Company or any Related Company in patenting, copyrighting, protecting, enforcing or registering any programs, ideas, inventions, discoveries, works of authorship, data, information, patentable or copyrighted material, or trademarks, and to vest title thereto solely in the Company (or, as applicable, a Related Company). If at any time after your termination of employment, you determine that you have any Secret and Confidential Information in your possession or control, you shall immediately return to the Company all such Secret and Confidential Information in your possession or control, including all copies and portions thereof.

     4. Proprietary And Confidential Information. The Company agrees that it shall provide you with Proprietary Information (defined below) and trade secrets of the Company or a Related Company. You shall at all times, including after any termination of your employment with the Company or any Related Company, preserve the confidentiality of all Proprietary Information and trade secrets of the Company or any Related Company, and you shall not use for the benefit of any person, other than the Company or a Related Company, or disclose to any person, except and to the extent that disclosure of such information is legally required, any Proprietary Information or trade secrets of the Company or any Related Company. “Proprietary Information” means any information or data related to the Company or any Related Company, including information entrusted to the Company or a Related Company by others, which has not been fully disclosed to the public by the Company or a Related Company and which is treated as confidential or protected within the Company or any Related Company or is of value to competitors, such as strategic or tactical business plans; undisclosed business, operational or financial data; ideas, processes, methods, techniques, systems, models, devices, programs, computer software, or related information; documents relating to regulatory matters or correspondence with governmental entities; undisclosed information concerning any past, pending, or threatened legal dispute; pricing or cost data; the identity, reports or analyses of business prospects; business transactions that are contemplated or planned; research data; personnel information or data; identities of users or purchasers of the Company’s or Related Company’s products or services; the Agreement to which this Exhibit A is attached; and other non-public information pertaining to or known by the Company or a Related Company, including confidential or non- public information of a third party that you know or should know the Company or a Related Company is obligated to protect.

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EX-31.1

Exhibit 31.1

CERTIFICATIONS

     I, Scott W. Klein, certify that:

     1. I have reviewed this quarterly report on Form 10-Q of Idearc Inc.;

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

     4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

     (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

     (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 11, 2008	/s/ Scott W. Klein
	Scott W. Klein
	Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATIONS

     I, Samuel D. Jones, certify that:

     1. I have reviewed this quarterly report on Form 10-Q of Idearc Inc.;

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

     4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

     (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

     (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 11, 2008	/s/ Samuel D. Jones
	Samuel D. Jones
	Acting Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. § 1350,
AS ADOPTED PURSUANT TO § 906
OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the filing of the Quarterly Report on Form 10-Q of Idearc Inc., a Delaware corporation (the “Company”), for the quarter ended June 30, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to such officer’s knowledge:

     1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.

August 11, 2008	/s/ Scott W. Klein
	Scott W. Klein
	Chief Executive Officer (Principal Executive Officer)

/s/ Samuel D. Jones  

Samuel D. Jones 

Acting Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer) 

     The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Report or as a separate disclosure document.