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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
VERIZON COMMUNICATIONS INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(4) Date filed:
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[VERIZON LOGO]
VERIZON COMMUNICATIONS INC.
1095 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
March 12, 2001
To Our Shareholders:
On behalf of the Board of Directors, we cordially invite you to attend the 2001
Annual Meeting of Shareholders of Verizon Communications Inc. The Annual Meeting
will be held on Wednesday, April 25, 2001, in the Thousand Oaks Business Center
at the Memphis Marriott East, 2625 Thousand Oaks Blvd., Memphis, Tennessee. The
Annual Meeting will begin at 2:00 p.m. and end no later than 4:00 p.m. Central
Time. The formal Notice of Annual Meeting appears on the next page.
The attached Proxy Statement describes the matters that we expect to act upon at
the Annual Meeting. Those of you who attend the Annual Meeting in person will
also have the opportunity to ask questions of broad interest to Verizon's
shareholders. You will need an admission ticket if you plan to attend the Annual
Meeting. More specific information about obtaining your admission ticket can be
found in the Notice of Annual Meeting. Directions to the Annual Meeting are
printed on the admission ticket.
It is important that your views be represented whether or not you are able to be
present at the Annual Meeting. The Board of Directors recommends that
shareholders vote FOR Items 1 through 4 and AGAINST Items 5 through 8.
We are gratified by your interest in Verizon and urge you to vote your shares
either in person or by proxy as soon as possible.
Sincerely,
/s/ CHUCK LEE /s/ IVAN SEIDENBERG
Chairman and Co-Chief President and Co-Chief
Executive Officer Executive Officer
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[VERIZON LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OF VERIZON COMMUNICATIONS INC.
DATE: April 25, 2001
TIME: 2:00 p.m., Central Time
PLACE: Memphis Marriott East
Thousand Oaks Business Center
2625 Thousand Oaks Blvd.
Memphis, Tennessee 38118
The purposes of the Annual Meeting are:
1. To elect Directors;
2. To ratify the appointment of the independent auditor;
3. To approve the Verizon Communications Inc. Long-Term Incentive Plan;
4. To approve the Verizon Communications Inc. Short-Term Incentive Plan;
and
5. To act upon such other matters, including the four shareholder proposals
described on pages 14-19 of this Proxy Statement, as may properly come
before the meeting.
Only shareholders of record at the close of business on February 26, 2001 will
be entitled to vote at the Annual Meeting. To grant a proxy to vote your shares,
you may complete and return the enclosed proxy card or grant your proxy by
telephone or Internet. You may also cast your vote in person at the Annual
Meeting. Please vote promptly whether or not you expect to attend the Annual
Meeting.
Shareholders will need an admission ticket to attend the meeting. An admission
ticket is attached to the proxy card for this purpose. If your shares are not
registered in your own name, you need to bring proof of your ownership of those
shares to the meeting. You should ask the broker, bank or other institution that
holds your shares to provide you with either a copy of an account statement or a
letter from the firm that shows that you owned shares of Verizon common stock on
February 26, 2001. Please bring that documentation to the meeting in order to
receive an admission ticket.
By Order of the Board of Directors
Marianne Drost March 12, 2001
Senior Vice President,
Deputy General Counsel and
Corporate Secretary
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The Memphis Marriott East is accessible to all shareholders. We will provide a
sign language interpreter if requested by a shareholder. Please direct your
request to the Corporate Secretary, Verizon Communications Inc., 1095 Avenue of
the Americas, 38th Floor, New York, NY 10036, so that we receive it no later
than April 4, 2001.
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PROXY STATEMENT
We are mailing this Proxy Statement and the accompanying proxy card, beginning
March 12, 2001, to holders of shares of Verizon Communications Inc. common stock
in connection with the solicitation of proxies by the Board of Directors for the
Annual Meeting of Shareholders and at any adjournment or postponement of that
Meeting. The proxy procedure permits all Verizon shareholders the opportunity to
vote at the Annual Meeting. The Board of Directors encourages you to read these
documents and to vote on the matters to be considered at the Annual Meeting.
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TABLE OF CONTENTS
PAGE
Voting Procedures........................................... 1
Corporate Governance........................................ 2
Report of the Audit and Finance Committee................... 4
Election of Directors (Item 1 on Proxy Card)................ 5
Ratification of Appointment of Independent Auditor (Item 2
on Proxy Card)........................................... 8
Approval of Verizon Communications Inc. Long-Term Incentive
Plan (Item 3 on Proxy Card).............................. 10
Approval of Verizon Communications Inc. Short-Term Incentive
Plan (Item 4 on Proxy Card).............................. 13
Shareholder Proposals regarding:
Nomination of two candidates for each Board position
(Item 5 on Proxy Card)................................. 14
Executive severance agreements (Item 6 on Proxy Card).... 15
Composition of Board of Directors (Item 7 on Proxy
Card).................................................. 16
Calculation of performance-based executive compensation
(Item 8 on Proxy Card)................................. 18
Executive Compensation:
Report of the Human Resources Committee on Executive
Compensation........................................... 20
Compensation Tables...................................... 24
Retirement Plans......................................... 27
Employment Agreements.................................... 29
Security Ownership of Directors and Officers............. 34
Stock Performance Graphs................................. 36
Other Business.............................................. 37
Audit Committee Charter..................................... Appendix A
Verizon Communications Inc. Long-Term Incentive Plan........ Appendix B
Verizon Communications Inc. Short-Term Incentive Plan....... Appendix C
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VOTING PROCEDURES
YOUR VOTE IS VERY IMPORTANT. Your shares can only be voted at the Annual Meeting
if you are present or represented by proxy. Whether or not you plan to attend
the Annual Meeting, we encourage you to vote by proxy to assure that your shares
will be represented. You may revoke your proxy at any time before it is voted,
by delivering written notice to the Corporate Secretary, by submitting a proxy
bearing a later date, or by appearing in person and casting a ballot at the
Annual Meeting. Properly executed proxies that are received by the Proxy
Committee before the Annual Meeting's adjournment will be voted in accordance
with the directions provided. If you do not indicate how your shares are to be
voted, the Proxy Committee will vote your shares as recommended by the Board of
Directors. If you wish to give a proxy to someone other than the Proxy Committee
named on the proxy card, you should cross out those names and insert the name(s)
of the person(s) to whom you wish to give your proxy.
WHO CAN VOTE? Shareholders as of the close of business on February 26, 2001 are
entitled to vote. On that day, approximately 2.7 billion shares of common stock
were outstanding and eligible to vote. Each share is entitled to one vote on
each matter presented at the Annual Meeting. A list of share-holders eligible to
vote will be available at the Company's Corporate Headquarters, 1095 Avenue of
the Americas, New York, New York 10036, beginning on April 13, 2001.
Shareholders may examine this list during normal business hours for any purpose
relating to the Annual Meeting.
HOW DO I VOTE? You may attend the Annual Meeting and vote in person. Or, as a
registered shareholder, you may vote your shares by proxy:
- - - By mail
- - - By telephone
- - - By Internet
To vote by mail, simply mark, sign and date your proxy card and return it in the
postage-paid envelope provided. You may vote by telephone or Internet 24 hours a
day, 7 days a week. The enclosed proxy card contains instructions for telephone
and Internet voting. IF YOU HOLD YOUR SHARES THROUGH A BROKER, BANK OR OTHER
NOMINEE, THAT INSTITUTION WILL SEND YOU SEPARATE INSTRUCTIONS DESCRIBING THE
PROCEDURE FOR VOTING YOUR SHARES.
WHAT SHARES ARE REPRESENTED BY THE PROXY CARD? The proxy card represents all the
shares registered in your name. If you participate in the Verizon Communications
Direct Invest Plan, it also represents any full shares held in your account. If
you are an employee participating in any of the Verizon employee savings plans
and also hold shares in your own name, you will receive one proxy card for the
plan shares and the shares registered in your name.
HOW ARE VOTES COUNTED? If you return a signed and dated proxy card but do not
indicate how the shares are to be voted, those shares represented by your proxy
card will be voted as recommended by the Board of Directors. A valid proxy also
gives the individuals named as proxies authority to vote in their discretion
when voting the shares on any other matters that are properly presented for
action at the Annual Meeting. A properly executed proxy card marked "abstain"
will not be voted. However, it may be counted to determine whether there is a
quorum present. Abstentions are not counted in determining the number of shares
voted for or against any nominee for Director, the ratification of the
appointment of independent auditor or any other management or shareholder
proposal.
Shares represented by "broker non-votes" will be counted for purposes of
determining whether a quorum has been reached. Broker non-votes occur when
nominees, such as brokers who hold shares on behalf of beneficial owners, do not
receive voting instructions from the beneficial owners by ten days before the
Annual Meeting. The nominees may then vote those shares only on matters deemed
routine by the New York Stock Exchange, such as the election of Directors and
ratification of the appointment of the independent auditor. If the nominees do
not receive instructions on how to vote on non-routine matters, such as the
management proposals for approval of the Long-Term Incentive Plan and the
Short-Term Incentive Plan and the Shareholder Proposals, the nominees cannot
vote and there is a broker non-vote on those matters.
If you are an employee participating in any of the Verizon employee savings
plans and do not return a proxy card representing those shares, those shares
will be voted in the same proportion as the shares for which signed proxy cards
are returned by other participants in the respective plans.
WHAT VOTE IS REQUIRED? In order to have a quorum, a majority of the shares of
Verizon common stock that are outstanding and entitled to vote at the Annual
Meeting must be represented in person or by proxy. If a quorum is not present, a
majority of shares that are represented may adjourn or postpone the Annual
Meeting.
Generally, proposals must be approved by a majority of the votes cast.
Accordingly, broker non-votes and abstentions will have no effect on the outcome
of those proposals. However, since Directors are elected by a plurality of the
votes cast, votes withheld from nominees for Director could have an effect on
the outcome of the election.
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WHO WILL COUNT THE VOTE? The Company's transfer agent, Fleet National Bank c/o
EquiServe, will tally the vote, which will be certified by independent
inspectors of election.
IS MY VOTE CONFIDENTIAL? It is the Company's policy to maintain the
confidentiality of proxy cards, ballots and voting tabulations that identify
individual shareholders, except where disclosure is mandated by law and in other
limited circumstances.
WHO IS THE PROXY SOLICITOR? Georgeson Shareholder Communications, Inc. has been
retained by the Company to assist in the distribution of proxy materials and
solicitation of votes for a fee of $20,000, plus reimbursement of out-of-pocket
expenses.
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CORPORATE GOVERNANCE
On June 30, 2000, Bell Atlantic Corporation and GTE Corporation completed a
"merger-of-equals" which resulted in the creation of the combined
company -- Verizon Communications Inc. In accordance with the Delaware General
Corporation Law and the Company's Certificate of Incorporation and Bylaws, the
Company's business, property and affairs are managed under the direction of the
Board of Directors. Although Directors are not involved in the Company's
day-to-day operations, they are regularly kept informed of the Company's
business through written reports and documents, as well as operating, financial
and other reports presented by the Co-Chief Executive Officers and other
officers of the Company at meetings of the Board of Directors and committees of
the Board.
MEETINGS OF THE BOARD. The Verizon Board of Directors, and its predecessor, the
Bell Atlantic Board of Directors, met a combined total of 14 times in 2000. Each
of the incumbent Directors attended at least 75% of the meetings of the Board
and the committees to which the Director was assigned. The incumbent Directors
in the aggregate attended over 95% of the Board and their committee meetings.
COMMITTEES OF THE BOARD. The following is a description of the four standing
committees of the Board. The Directors' committee memberships are included in
their biographical information beginning on page 5.
Audit and Finance Committee -- acts on behalf of the Board of Directors in
fulfilling its oversight responsibilities related to the Company's controls,
reporting and audit functions. The committee relies upon reports from management
and the independent auditor in reviewing the Company's business risk management
process and the adequacy of the overall control environment, financial
reporting, internal audit responsibilities, independent audit relationships and
the Company's compliance on ethical, legal and regulatory matters. (See Appendix
A, Audit Committee Charter, for a more detailed description of the committee's
functions). The committee and its predecessor, the Bell Atlantic Audit
Committee, met a combined total of seven times during 2000. The Board of
Directors, in its business judgment, has determined that the members of the
committee are "independent", as required by the listing standards of the New
York Stock Exchange.
Human Resources Committee -- is responsible for overseeing management in the
development and implementation of human resources practices and policies,
including succession planning, to support the Company's strategic objectives,
and of competitive management compensation and benefit plans, including senior
management plans. The committee and its predecessor, the Bell Atlantic Human
Resources Committee, met a combined total of eight times in 2000.
Corporate Governance Committee -- provides oversight and guidance to the Board
of Directors to ensure that the membership, structure, policies and processes of
the Board and its committees facilitate the effective exercise of the Board's
role in the governance of the Company. The committee reviews and evaluates the
policies and practices with respect to the size, composition and functioning of
the Board, evaluates the qualifications of and recommends to the full Board
candidates for election as Directors, and reviews and recommends to the full
Board the compensation and benefits for non-employee Directors. The committee
met twice in 2000. In addition, the Bell Atlantic Policy and Organization
Committee, the committee's predecessor for certain functions, met once in 2000.
Public Policy Committee -- reviews and provides guidance to the Board of
Directors on selected issues of significance to the Company and oversees
management in the development and implementation of the Company's charitable
contribution policies, pension fund management and policies related to the
administration of pension benefits, selected social,
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environmental, regulatory and political matters, equal opportunity and diversity
compliance and initiatives, and safety issues. The committee met once in 2000.
In addition, the Bell Atlantic Policy and Organization Committee, the
committee's predecessor for certain functions, met once in 2000.
DIRECTOR COMPENSATION. Compensation for non-employee Directors is divided into
cash and stock components. Non-employee Directors who were on the Board of Bell
Atlantic Corporation prior to the merger received an annual retainer of $30,000
and a fee of $1,500 for each Board or committee meeting attended. Committee
chairpersons each received an additional annual retainer of $5,000. Directors
were able to defer the receipt of all or part of these retainers and fees into
cash or share equivalents. Directors also received an annual option to purchase
2,000 shares of Company stock and the choice to receive an additional option to
purchase 3,000 shares or a grant of shares equivalent in value to the 3,000
options.
Effective with the merger, Verizon's non-employee Directors receive an annual
retainer of $60,000. Directors also receive a meeting fee of $1,000 for each
Board or committee meeting which occurs on a day other than the regularly
scheduled Board meeting day or the day before such day. In addition, the
Directors have the choice of receiving an annual stock option grant valued at
$130,000 or a grant of options and share equivalents each valued at half of that
amount.
Directors may defer the receipt of all or part of their cash retainers and fees
in cash or share equivalents. Deferred accounts are credited quarterly with
interest at a long-term corporate bond rate in the case of cash accounts and
with dividend equivalents in the case of share equivalent accounts.
In connection with the merger, each of the Verizon non-employee Directors
received a one-time Founder's Grant of options to purchase 10,000 shares of
Verizon common stock. Each new non-employee Director who joins the Board will
receive a similar grant at the market price upon his or her initial election to
the Board.
Non-employee Directors are provided business-related travel accident insurance
coverage and could elect life insurance coverage through December 31, 2000. The
total amount of premiums paid by the Company for this insurance coverage for all
participating non-employee Directors in 2000 was $13,936.
Directors who were elected to the Bell Atlantic Board before 1992 participate in
a charitable giving program. Upon the Director's death, the Company will
contribute an aggregate of $500,000 to one or more qualifying charitable or
educational organizations designated by the Director. Directors who formerly
served as Directors of NYNEX Corporation participate in a similar program for
which the aggregate contribution is $1,000,000, payable in ten annual
installments commencing when a Director retires or attains age 65 (whichever
occurs later) or dies. Directors who formerly served as Directors of GTE
Corporation also participate in a similar program for which the aggregate
contribution is $1,000,000, to be paid in five annual installments commencing
upon the Director's death, either while a Director or following retirement after
five or more years of service as a Director. The GTE and NYNEX programs are
financed through the purchase of insurance on the life of each participant. Each
of these charitable programs is closed to future participants.
Each of the nine former non-employee Directors of Bell Atlantic Corporation who
did not continue on the Verizon Board received a $150,000 special cash award in
May, 2000 in recognition and appreciation of their service and contributions.
Directors who are employees of Verizon are not compensated for their Board
service.
OTHER MATTERS. Under the Company's Bylaws, a Director who reaches age 70 must
retire at or prior to the next Annual Meeting.
RELATED TRANSACTIONS. The Boston Consulting Group, Inc. received fees from
Verizon and its subsidiaries of approximately $3,500,000 for consulting services
during 2000. Dr. Sandra O. Moose, a Director of the Company, is Senior Vice
President and Director of that firm.
During 2000, Verizon and its subsidiaries paid approximately $654,000 in various
fees to CSX Corporation. Dr. John W. Snow, a Director of the Company, is
Chairman, President and Chief Executive Officer of CSX Corporation.
The law firm of Skadden, Arps, Slate, Meagher & Flom LLP provides ongoing legal
services to the Company and certain subsidiaries in connection with various
matters. Helene L. Kaplan, a Director of the Company, is Of Counsel to that
firm. In addition, certain subsidiaries of the Company utilized the legal
services of Thompson, Hine & Flory, LLP. Robert D. Storey, a Director of the
Company, is a partner in that law firm.
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REPORT OF THE AUDIT AND FINANCE COMMITTEE
In the performance of our oversight responsibilities, the committee has reviewed
and discussed with management the Company's audited financial statements for the
year ended December 31, 2000.
The committee has discussed with the independent auditors the matters required
to be discussed by Statement on Auditing Standards No. 61, Communication with
Audit Committees.
The committee has received the written disclosures and the letter from the
independent auditors required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees) and has discussed with the
independent auditors the independent auditors' independence.
Based on the reviews and discussions referred to above, in reliance on
management and the independent auditors, and subject to the limitations of our
role, the committee recommended to the Board of Directors that the financial
statements referred to above be included in the Company's Annual Report on Form
10-K.
Respectfully submitted,
Audit and Finance Committee
Thomas H. O'Brien, Chairperson
James R. Barker
Edward H. Budd
Helene L. Kaplan
Sandra O. Moose
Hugh B. Price
John R. Stafford
Robert D. Storey
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ELECTION OF DIRECTORS
ITEM 1 ON PROXY CARD
In accordance with the Company's Bylaws adopted upon the merger of Bell Atlantic
and GTE, the Verizon Board currently consists of 16 members. The Board has
nominated each of the incumbents to serve as Directors for an additional
one-year term. Each nominee has consented to stand for election and the Board
does not anticipate that any nominee will be unavailable to serve. In the event
that one or more of the nominees should become unavailable to serve at the time
of the Annual Meeting, the shares represented by proxy will be voted for the
remaining nominees and substitute nominee(s), if any, designated by the Board.
The Board's ability to designate substitute nominees is subject to restrictions
contained in the Company's Bylaws.
The Proxy Committee intends to vote, unless otherwise instructed, for these
nominees and/or substitute nominees. Shareholders who do not wish their shares
to be voted for a particular nominee may so indicate in the space provided on
the proxy card.
Director elections are determined by a plurality of the votes cast.
The following biographies provide a brief description of each nominee's
principal occupation and business experience, age and directorships held in
other public corporations, as well as Verizon Board committee memberships as of
February 28, 2001.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE LISTED NOMINEES.
DIRECTOR NOMINEES
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[BARKER PHOTO] JAMES R. BARKER, Chairman of Interlake Steamship Co. and
Vice Chairman of Mormac Marine Group, Inc. and Moran Towing
Corporation. Director of The Pittston Company. Director
since June 2000 (Director of GTE Corporation 1976 - 2000);
Chairperson of Public Policy Committee and member of Audit
and Finance Committee. Age 65.
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[BUDD PHOTO] EDWARD H. BUDD, Retired Chairman, Travelers Corporation.
Director of Delta Airlines, Inc. Director since June 2000
(Director of GTE Corporation 1985 - 2000); member of Audit
and Finance Committee and Corporate Governance Committee.
Age 67.
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[CARRION PHOTO] RICHARD L. CARRION, Chairman, President and Chief Executive
Officer, Popular, Inc. (bank holding company) and Chairman,
President and Chief Executive Officer, Banco Popular de
Puerto Rico. Director of American Home Products Corporation;
Telecomunicaciones de Puerto Rico, Inc. Director since 1997
(Director of NYNEX Corporation 1995 - 1997); member of Human
Resources Committee and Public Policy Committee. Age 48.
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[DANIELL PHOTO] ROBERT F. DANIELL, Retired Chairman, United Technologies Corporation; Chairman (1987-1997).
Director of Shell Oil Company. Director since June 2000 (Director of GTE Corporation 1996-2000);
member of Human Resources Committee and Public Policy Committee. Age 67.
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[KAPLAN PHOTO] HELENE L. KAPLAN, Of Counsel, law firm of Skadden, Arps, Slate, Meagher & Flom LLP. Director of
Exxon Mobil Corporation; J.P. Morgan Chase & Co.; The May Department Stores Company;
Metropolitan Life Insurance Company. Director since 1997 (Director of NYNEX Corporation
1990-1997); Chairperson of Corporate Governance Committee and member of Audit and Finance
Committee. Age 67.
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[LEE PHOTO] CHARLES R. LEE, Chairman and Co-Chief Executive Officer since June 2000; Chairman of the Board
and Chief Executive Officer, GTE Corporation (1992-2000). Director of United Technologies
Corporation; USX Corporation; The Procter & Gamble Company. Director since June 2000 (Director
of GTE Corporation 1989-2000). Age 60.
- - --------------------------------------------------------------------------------------------------------------------
[MOOSE PHOTO] SANDRA O. MOOSE, Senior Vice President and Director of The Boston Consulting Group, Inc.
Director of Rohm and Haas Company and Nvest Funds. Director since June 2000 (Director of GTE
Corporation 1978-2000); member of Audit and Finance Committee and Corporate Governance
Committee. Age 59.
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[NEUBAUER PHOTO] JOSEPH NEUBAUER, Chairman and Chief Executive Officer, ARAMARK Corporation (managed services),
since 1984; President (1983-1997). Director of CIGNA Corporation; Federated Department Stores;
First Union Corporation. Director since 1995; member of Human Resources Committee and Public
Policy Committee. Age 59.
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[O'BRIEN PHOTO] THOMAS H. O'BRIEN, Chairman, The PNC Financial Services
Group, Inc. Director of Blackrock, Inc.; Hilb, Rogal and
Hamilton Company; USAirways; Viasystems Group, Inc. Director
since 1987; Chairperson of Audit and Finance Committee and
member of Public Policy Committee. Age 64.
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[PALMER PHOTO] RUSSELL E. PALMER, Chairman and Chief Executive Officer, The
Palmer Group (corporate investment firm). Director of
Honeywell International Inc.; The May Department Stores
Company; Safeguard Scientifics, Inc.; Federal Home Loan
Mortgage Corporation. Director since June 2000 (Director of
GTE Corporation 1984-2000); Chairperson of Human Resources
Committee and member of Corporate Governance Committee. Age
66.
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[PRICE PHOTO] HUGH B. PRICE, President and Chief Executive Officer,
National Urban League. Director of Metropolitan Life
Insurance Company; Sears, Roebuck and Co. Director since
1997 (Director of NYNEX Corporation 1995-1997); member of
Audit and Finance Committee and Corporate Governance
Committee. Age 59.
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[SEIDENBERG PHOTO] IVAN G. SEIDENBERG, President and Co-Chief Executive Officer
since June 2000; Chairman of the Board (December 1998 - June
2000) and Chief Executive Officer (June 1998-June 2000);
Vice Chairman, President and Chief Operating Officer (1997-
1998); Chairman and Chief Executive Officer, NYNEX
Corporation (1995-1997). Director of American Home Products
Corporation; Boston Properties, Inc.; CVS Corporation;
Honeywell International Inc.; Viacom, Inc. Director since
1997 (Director of NYNEX Corporation 1991-1997). Age 54.
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[SHIPLEY PHOTO] WALTER V. SHIPLEY, Retired Chairman and Chief Executive
Officer, The Chase Manhattan Corporation; Chairman and Chief
Executive Officer (1983-1992; 1994-1999). Director of
American Home Products Corporation; Exxon Mobil Corporation.
Director since 1997 (Director of NYNEX Corporation
1983-1997); member of Corporate Governance Committee and
Human Resources Committee. Age 65.
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[SNOW PHOTO] JOHN W. SNOW, Chairman, President and Chief Executive
Officer, CSX Corporation (rail freight). Director of Circuit
City Stores, Inc.; Johnson & Johnson; USX Corp. Director
since June 2000 (Director of GTE Corporation 1998 - 2000);
member of Human Resources Committee and Public Policy
Committee. Age 61.
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[STAFFORD PHOTO] JOHN R. STAFFORD, Chairman and Chief Executive Officer,
American Home Products Corporation (pharmaceutical and
healthcare products). Director of Deere & Company; Honeywell
International Inc.; J.P. Morgan Chase & Co. Director since
1997 (Director of NYNEX Corporation 1989 - 1997); member of
Audit and Finance Committee and Public Policy Committee. Age
63.
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[STOREY PHOTO] ROBERT D. STOREY, Partner, law firm of Thompson, Hine &
Flory LLP. Director of The Procter & Gamble Company.
Director since June 2000 (Director of GTE Corporation
1985 - 2000); member of Audit and Finance Committee and
Public Policy Committee. Age 64.
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RATIFICATION OF APPOINTMENT OF
INDEPENDENT AUDITOR
ITEM 2 ON PROXY CARD
Subject to shareholder ratification, the Board of Directors, acting upon the
recommendation of the Audit and Finance Committee, has appointed the firm of
Ernst & Young LLP, certified public accountants, as independent auditor to
examine the financial statements of Verizon for the fiscal year 2001.
Fees billed to the Company by Ernst & Young for services rendered during fiscal
year 2000 were as follows:
Audit Fees: $4.3 million
Financial Information Systems Design and Implementation Fees:* $0
All Other Fees:* $9.2 million
* The Audit and Finance Committee of the Board considered, in reliance on
management and the independent auditors, whether the provision of these services
is compatible with maintaining the independence of Ernst & Young. All Other Fees
includes fees of $4.2 million for audit related services, including audits
mandated by regulatory requirements, assistance with SEC registration
statements, consultation on accounting standards and proposed transactions, and
the audits of subsidiaries or joint ventures.
After the merger of Bell Atlantic and GTE, Verizon undertook a review of its
existing independent auditor relationships and also considered a variety of
other firms. On September 7, 2000, the Audit and Finance Committee of the Board
recommended, and the Board approved, engaging Ernst & Young LLP as the Company's
independent auditor, replacing PricewaterhouseCoopers LLP, the Company's
previous independent auditor.
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PricewaterhouseCoopers and Arthur Andersen LLP, GTE's previous independent
auditor, continue to maintain independent auditor relationships with various
subsidiaries or companies in which Verizon has investments and to provide audit
and non-audit services to the Company. PricewaterhouseCoopers, expressing
reliance on the report of Arthur Andersen, will continue to report on the
consolidated financial statements of the Company for the fiscal years 1999 and
1998. The independent auditors' reports for the Company and GTE for the fiscal
years 1999 and 1998 did not contain any adverse opinion or disclaimer of
opinion, nor were they qualified or modified as to uncertainty, audit scope or
accounting principles.
During the fiscal years 1999 and 1998 and through September 6, 2000, there were
no disagreements between the Company and PricewaterhouseCoopers or between GTE
and Arthur Andersen, which, if not resolved to the satisfaction of
PricewaterhouseCoopers or Arthur Andersen, as the case may be, would have caused
that auditor to make reference to such disagreement in its reports on the
financial statements for such periods, nor were any required to be reported by
SEC rules.
During the fiscal years 1999 and 1998 and through September 6, 2000, neither the
Company nor GTE consulted with Ernst & Young regarding either: (i) the
application of accounting principles to a specified transaction, either
completed or proposed; or the type of audit opinion that might be rendered on
the Company's financial statements; or (ii) any matter that was either the
subject of a disagreement or a reportable event.
PricewaterhouseCoopers and Arthur Andersen provided letters, which the Company
has filed with the SEC, agreeing with these statements.
Ratification of the appointment of Ernst & Young requires the affirmative vote
of a majority of eligible shares present at the Annual Meeting, in person or by
proxy, and voting on the matter. If this appointment is not ratified by the
shareholders, the Audit and Finance Committee will reconsider its
recommendation.
One or more representatives of Ernst & Young will be at the Annual Meeting. They
will have an opportunity to make a statement and will be available to respond to
appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION.
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APPROVAL OF
VERIZON COMMUNICATIONS INC.
LONG-TERM INCENTIVE PLAN
ITEM 3 ON PROXY CARD
The Board of Directors recommends that shareholders approve the Verizon
Communications Inc. Long-Term Incentive Plan, which was adopted by the Human
Resources Committee subject to shareholder approval. This plan, which is
referred to as the LTIP, is an amendment and restatement of the Bell Atlantic
1985 Incentive Stock Option Plan. The Bell Atlantic shareholders approved this
plan in 1985 and approved amendments in 1994 and 1999. The LTIP will replace all
prior long-term incentive plans of predecessor companies with respect to awards
granted in the future.
The primary purposes for seeking shareholder approval of the LTIP are to comply
with the performance-based compensation exemption from the tax deduction limit
imposed by Section 162(m) of the Internal Revenue Code, also referred to as the
Code, and to obtain approval for the issuance of 200,000,000 shares of Verizon
Common Stock in connection with grants of awards under the LTIP. The HRC will
not make any awards under the LTIP unless shareholder approval is obtained.
The main features of the LTIP are outlined below, but the summary is qualified
by reference to the complete text of the plan, which is in Appendix B to this
Proxy Statement.
PURPOSE
The LTIP is intended to (1) optimize the profitability and growth of the Company
through long-term incentives that are consistent with the Company's goals and
that link the interests of participants to those of the Company's shareholders,
(2) provide participants with an incentive for excellence in individual
performance, (3) provide flexibility to the Company in its ability to motivate,
attract, and retain the services of participants who make significant
contributions to the Company's success, and (4) allow participants to share in
the success of the Company.
ADMINISTRATION AND PARTICIPATION
All of the approximately 260,000 employees of Verizon and certain related
companies, and the non-employee Directors of Verizon, will be eligible to
participate in the LTIP. The LTIP will be administered by the HRC. The HRC may
delegate its authority to persons other than its members, subject to such
limitations as may be imposed by law or any applicable stock exchange rules.
TYPES OF AWARDS
The HRC has the authority to grant various types of awards to employees under
the LTIP. These types of awards include:
STOCK OPTIONS. Each stock option represents the right to purchase a specified
number of shares of Verizon common stock, also referred to as Common Stock, at a
fixed grant price that cannot be less than the fair market value of the shares
on the grant date. The LTIP does not permit the HRC to re-price any previously
granted stock options. The maximum term of a stock option is 10 years from the
date of grant. Any option will be exercisable in accordance with terms
established by the HRC. The purchase price of an option may be payable in cash,
Common Stock (valued at fair market on the day of exercise), or a combination of
both. In addition, the HRC may grant an option to purchase the same number of
shares as were surrendered by a participant to pay the option price.
The LTIP authorizes the HRC to grant non-qualified stock options or incentive
stock options that comply with the requirements of Section 422(b) of the Code.
The HRC is only authorized to grant incentive stock options on up to 60,000,000
shares.
PERFORMANCE SHARES AND PERFORMANCE UNITS. Performance shares and performance
units are linked to the performance of the Company over a performance cycle
designated by the HRC. The initial value of a performance share will be the fair
market value of a share of Common Stock on the date of grant. The initial value
of a performance unit
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will be established by the HRC at the time of grant. These awards will be paid
only to the extent that the Company attains the corresponding performance goals.
These awards are payable in cash, Common Stock, or a combination of both, as
determined by the HRC.
RESTRICTED STOCK AND RESTRICTED STOCK UNITS. Restricted stock and restricted
stock units represent grants of Common Stock or stock units that are subject to
a risk of forfeiture or other restrictions that lapse when one or more
performance or other objectives, as determined by the HRC, are achieved. The
value of a restricted stock unit must equal the fair market value of one share
of Common Stock on the date of the grant. Any awards will be subject to such
conditions, restrictions, and contingencies as the HRC determines. Restricted
stock units are payable in cash, Common Stock, or a combination of both, as
determined by the HRC.
OTHER AWARDS. The HRC has authority to grant other awards. These awards include
stock appreciation rights, or SARs, or other share equivalents that are
denominated, payable in, valued in whole or in part by reference to, or
otherwise related to shares of Common Stock. The HRC has the discretion to
determine the terms and conditions of any such awards.
The Corporate Governance Committee of the Board has the authority to grant
awards and to make other determinations under the LTIP with respect to the
non-employee Directors.
PAYMENT OF AWARDS
The HRC will determine the date on which awards are payable and may permit or
require a participant to defer payment of all or a portion of an award subject
to conditions established by the HRC. If awards are paid in shares of Common
Stock, the HRC shall determine whether the shares will be subject to
restrictions on transfer or provisions regarding forfeiture of the shares.
No awards have been granted under the LTIP. The exact number of future stock
options that may be allocated to any one individual or group of individuals
under the LTIP is not presently determinable. In addition, the exact number of
stock options that would have been allocated to any one individual or group of
individuals had the LTIP been in effect in 2000 is also not determinable.
LIMITATION ON SHARES AND AWARDS
If the shareholders approve the LTIP, Verizon will be authorized to issue up to
200,000,000 shares of Common Stock (adjusted for corporate transactions
described below). Not more than 30,000,000 of these shares may be granted with
respect to awards other than stock options.
Shares will be considered to be issued under the LTIP when awards denominated in
shares are made to a participant. However, certain transactions will restore the
number of shares available under the LTIP. These transactions are (1) the payout
in cash of an award originally awarded in shares, (2) a cancellation,
termination, expiration, or forfeiture of shares subject to an award, and (3)
payment of an option price or tax withholding obligation with previously
acquired shares or by withholding shares that otherwise would have been acquired
on exercise.
During the term of the LTIP, in any calendar year, there may not be awarded to
any one participant more than (i) one-half of one percent of the total number of
shares of Common Stock that are issued and outstanding on the effective date of
the LTIP, or (ii) 13,500,000 shares, whichever is less.
AMENDMENT AND TERMINATION OF THE LTIP
Unless it is terminated earlier, the LTIP will remain in effect until all shares
subject to the LTIP have been purchased, acquired, or forfeited, and all cash
awards have been paid or forfeited, pursuant to the LTIP's provisions. However,
in no event may an award be granted after 10 years from the effective date of
the LTIP. During the term of the LTIP, the HRC may alter, amend, suspend, or
terminate the LTIP, in whole or in part, subject to the terms of the LTIP,
including the Change in Control provisions discussed below. Any amendment that
would cause the LTIP to fail to comply with any requirement of applicable law,
regulation, or rule if it were not approved by shareholders will not be
effective unless the shareholders of Verizon approve the amendment.
If certain events occur, the HRC may adjust the number, type and price of shares
subject to outstanding awards, and the award limits, to prevent dilution or
enlargement of the benefits available under the LTIP and of the rights of
participants. These events include a stock split or a corporate transaction,
including a merger, consolidation, separation, spin-off, or other distribution
of stock or property of the Company, any reorganization, any partial or complete
liquidation of the Company, or other similar events.
CHANGE IN CONTROL
In order to protect the rights of the participants, the LTIP provides that, in
the event of a Change in
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Control, as defined in the LTIP, all stock options and SARs awarded under the
LTIP since its effective date will become immediately exercisable, and any
restriction periods and restrictions imposed on awards granted under the LTIP
since its effective date will lapse.
FEDERAL INCOME TAX CONSIDERATIONS
The federal income tax consequences of the various types of awards available
under the LTIP can be summarized as follows:
STOCK OPTIONS AND SARS. A participant will not recognize any income, and the
Company will not be entitled to a corresponding deduction, upon the grant of a
non-qualified stock option, incentive stock option, or SAR under the LTIP.
Under current tax law, a participant who exercises a non-qualified stock option
or SAR will recognize income on the difference between the fair market value of
the Common Stock on the date of exercise and the grant price. The Company will
be entitled to a tax deduction equal in amount to the income recognized by the
participant. Income taxes and other payroll taxes will be withheld from income
recognized to the extent required by law.
No income is recognized by a participant upon the exercise of an incentive stock
option. However, the difference between the fair market value of the Common
Stock on the date of exercise and the grant price is a tax preference item that
must be considered in determining whether the participant is subject to
alternative minimum tax. If the participant does not dispose of the share
acquired through the exercise of an incentive stock option within two years
after the date of grant or one year after the exercise date, any income
recognized on the date of sale will be subject to tax as a capital gain. If the
above holding period requirements are not met, part or all of any income
recognized on the date of sale will be subject to tax as ordinary income, and
the Company will be entitled to a tax deduction in an equal amount.
An incentive stock option becomes a non-qualified stock option if it is
exercised more than three months after the participant has terminated his or her
employment with the Company (twelve months if termination is due to death or
disability).
RESTRICTED STOCK UNITS, PERFORMANCE UNITS, AND PERFORMANCE SHARES. A participant
who has been granted a restricted stock unit, performance unit, or performance
share will not realize taxable income at the time of grant, and the Company will
not be entitled to a corresponding deduction. Generally, the participant will
have compensation income at the time of distribution equal to the amount of cash
received and the then-fair market value of the distributed shares, and the
Company will be entitled to a corresponding deduction.
RESTRICTED STOCK. A participant who has been granted shares of restricted stock
will not realize taxable income at the time of grant, and the Company will not
be entitled to a corresponding deduction, assuming that the shares are
nontransferable and that the restrictions create a "substantial risk of
forfeiture" for federal income tax purposes. Upon the vesting of stock subject
to an award, the holder will realize ordinary income in an amount equal to the
then-fair market value of those shares, and the Company will be entitled to a
corresponding deduction. Gains or losses realized by the participant upon
disposition of such shares will be treated as capital gains and losses. A
participant may elect to have income recognized at the date of grant of
restricted stock and to have the applicable capital gain holding period commence
as of that date. If this election is made, the Company will be entitled to a
corresponding deduction as of the date of grant.
DEDUCTION LIMITS AND PERFORMANCE MEASURES. A federal income tax deduction
generally is unavailable for annual compensation in excess of $1,000,000 paid to
the chief executive officer or any of the four other most highly compensated
officers. However, "performance-based" compensation is not counted against this
limit. The HRC may designate certain awards under the LTIP as intended to be
"performance-based" compensation and must condition such awards on the
achievement of performance goals. To satisfy the requirements that apply to
"performance-based" compensation, the performance measures must be approved by
the Company's shareholders. The performance measures that may be used by the HRC
will be based on one or more of the following Company performance measures, as
selected by the HRC: income measures (including, but not limited to, gross
profit, operating income, earnings before or after taxes, or earnings per
share); return measures (including, but not limited to, return on assets,
investment, equity, or sales); cash flow return on investments (which equals net
cash flows divided by owners equity); gross revenues; market value added;
economic value added; and share price (including, but not limited to, growth
measures and total shareholder return). Approval of the LTIP will also
constitute approval of the foregoing performance measures.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE VERIZON
COMMUNICATIONS INC. LONG-TERM INCENTIVE PLAN.
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APPROVAL OF
VERIZON COMMUNICATIONS INC.
SHORT-TERM INCENTIVE PLAN
ITEM 4 ON PROXY CARD
The Board recommends that shareholders approve the Verizon Communications Inc.
Short-Term Incentive Plan, which was adopted by the HRC subject to shareholder
approval. The HRC will not make any awards under the Short-Term Incentive Plan,
which is referred to as the STIP, unless shareholder approval is obtained. One
of the primary purposes for seeking shareholder approval of the STIP is to
comply with the performance-based compensation exemption from the tax deduction
limit imposed by Section 162(m) of the Code.
The main features of the STIP are outlined below, but the summary is qualified
by reference to the complete text of the plan, which is in Appendix C to this
Proxy Statement.
PURPOSE
The primary purpose of the STIP is to facilitate the Company's ability to
achieve its short-term financial and operating goals by offering key employees
performance-based annual incentive opportunities. Under the STIP, awards will be
made based on achievement of key goals at the corporate, business unit, and/or
individual levels. By enabling the Company to retain and attract the highest
level of qualified employees, the STIP will be a factor in the Company's
continued success.
ADMINISTRATION AND PARTICIPATION
The HRC is responsible for administering the STIP and for selecting key
employees of Verizon and certain related companies as participants. The HRC may
delegate its authority to persons other than its members, subject to such
limitations as may be imposed by law.
LIMITATION ON AWARDS
Under the STIP, no awards may be made for any plan year in which Verizon's
return on equity, or ROE, is 8% or less. If ROE exceeds 8%, the HRC may
establish an award pool equal to up to 5% of Verizon's consolidated net income.
The HRC may reduce consolidated net income for the purpose of calculating the
award pool and will not consider consolidated net income in excess of $5
billion. The HRC may authorize awards that total less than the award pool and
cannot authorize awards for any plan year that exceed 100% of the award pool for
that plan year. Return on equity and consolidated net income will be determined
after adjusting for certain extraordinary, non-recurring or other events. Such
adjustments will be determined in accordance with generally accepted accounting
principles and disclosed in the Company's annual consolidated financial
statements.
The STIP also restricts the maximum award a participant may receive. The maximum
award is determined by the participant's annual base salary on the last day of
the plan year in accordance with the following table:
- - ----------------------------------------------------
MAXIMUM PERCENTAGE
SALARY POSITION OF AWARD POOL
- - ----------------------------------------------------
Highest and 2nd Highest Paid 3.5%
3rd and 4th Highest Paid 2.5%
5th and 6th Highest Paid 1.25%
7th through 25th Highest Paid 0.85%
Each Other Participant less than 0.50%
- - ----------------------------------------------------
The HRC may reduce but not increase the maximum award for any participant.
PAYMENT OF AWARDS
In determining the awards to be paid to participants, the HRC will consider
factors such as the Company's financial and operating performance for the plan
year, the performance of the participant's business unit, and the participant's
achievement in relation to established goals.
All awards will be paid in cash. Participants are permitted to defer payment of
all or a portion of their awards, subject to any conditions imposed by the HRC.
No awards have been granted under the STIP. The awards that may be granted to
any one individual or group of individuals under the STIP are not presently
determinable. In addition, the awards that would have been granted to any one
individual or group of individuals had the STIP been in effect in 2000 are also
not determinable.
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AMENDMENT OR TERMINATION OF THE STIP
Unless it is terminated earlier, the STIP will remain in effect until the close
of business on the date of Verizon's Annual Meeting of Shareholders in the year
2011, at which time the right to grant awards under the STIP will terminate.
Before that date, the HRC may alter, amend, suspend, or terminate the STIP, in
whole or in part, subject to the terms of the STIP, including the Change in
Control provisions discussed below. Any amendment or revision that would cause
the STIP to fail to comply with any requirement of applicable law, regulation,
or rule if it were not approved by shareholders will not be effective unless the
shareholders of Verizon approve the amendment or revision.
If certain unusual or nonrecurring events affect the Company, or if there is a
change in applicable laws, regulations, or accounting principles, the HRC may
adjust previously granted awards to prevent enlargement of the benefits or
potential benefits intended to be available under the STIP.
CHANGE IN CONTROL
In order to protect the rights of the participants, the STIP provides that, in
the event of a Change in Control, as defined in the STIP, all awards granted
under the STIP will become immediately nonforfeitable and payable at the normal
payment date, unless the participant elects to defer receipt of the award under
the deferral regulations applicable to the STIP. If a participant's award is
based on a performance percentage, the awards for the year in which the Change
in Control occurs and for any earlier year for which STIP awards have not been
granted at the time the Change in Control occurs will be determined using a
performance percentage that is no less than the individual's target percentage
for the year immediately preceding the year in which the Change in Control
occurs.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE VERIZON
COMMUNICATIONS INC. SHORT-TERM INCENTIVE PLAN.
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SHAREHOLDER PROPOSALS
ITEMS 5 -- 8 ON PROXY CARD
The shareholders named below have told us that they intend to have the following
proposals presented at the Annual Meeting. Approval of a shareholder proposal
requires the affirmative vote of a majority of eligible shares present at the
Annual Meeting, in person or by proxy, and voting on the matter. The Board of
Directors has concluded that it cannot support these proposals for the reasons
given.
ITEM 5 ON PROXY CARD:
Mr. Bartlett Naylor, 1255 N. Buchanan, Arlington, VA 22205, owner of 140 shares
of the Company's common stock, proposes the following:
"RESOLVED: The shareholders urge our board of directors to take the necessary
steps to nominate at least two candidates for each open board position, and that
the names, biographical sketches, SEC-required declarations and photographs of
such candidates shall appear in the company's proxy materials (or other required
disclosures) to the same extent that such information is required by law and is
our company's current practice with the single candidates it now proposes for
each position.
SUPPORTING STATEMENT: Although our company's board appreciates the importance
of qualified people overseeing management, we believe that the process for
electing directors can be improved.
Our company currently nominates for election only one candidate for each board
seat, thus leaving shareholders no practical choice in most director elections.
Shareholders who oppose a candidate have no easy way to do so unless they are
willing to undertake the considerable expense of running an independent
candidate for the board. The only other way to register dissent about a given
candidate is to withhold support for that nominee, but that process rarely
affects the outcome of director elections. The current system thus provides no
readily effective way for shareholders to oppose a candidate that has failed to
attend board meetings; or serves on so many boards as to be unable to supervise
our company management diligently; or who serves as a consultant to the company
that could compromise independence; or poses other problems. As a result, while
directors legally serve as the shareholder agent in overseeing management, the
election of directors at the annual meeting is largely perfunctory. Even
directors of near bankrupt companies enjoy re-election with 90% pluralities. The
"real" selection comes through the nominating committee, a process too often
influenced, if not controlled, by the very management the board is expected to
scrutinize critically.
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Our company should offer a rational choice when shareholders elect directors.
Such a process could abate the problem of a chair "choosing" his own board, that
is, selecting those directors he expects will reflexively support his
initiatives, and shedding those who may sometimes dissent. Such a process could
create healthy and more rigorous shareholder evaluation about which specific
nominees are best qualified.
Would such a process lead to board discontinuity? Perhaps, but only with
shareholder approval. Presumably an incumbent would be defeated only because
shareholders considered the alternative a superior choice. Would such a
procedure discourage some candidates? Surely our board should not be made of
those intolerant of competition. Would such a procedure be "awkward" for
management when it recruits candidates? Hopefully so. (Management could print a
nominee's name advanced by an independent shareholder to limit such
embarrassment). The point is to remove the "final" decision on who serves as a
board director from the hands of management, and place it firmly in those of
shareholders.
We urge you to vote FOR this proposal."
BOARD OF DIRECTORS' POSITION:
The Board of Directors believes that its role is to provide the shareholders
with a slate of Director candidates whom the Board believes, in its best
judgment, are the most qualified and who are ready, willing and able to oversee
the management of the affairs of the Company. It is not the Board's role to
create a political environment in which nominees compete with each other for the
available directorships. The Board believes that this proposal would foster this
type of environment.
The Board views the present nominating process as the most effective means of
ensuring that appropriately qualified individuals continue to serve as
Directors. The Corporate Governance Committee of the Board recommends only those
nominees possessing the experience and skills that best serve the Company and
its shareholders. By recommending two "rival" candidates for each position, it
would be difficult to predict which individuals would be elected and which
skills would be represented on the Board. Accordingly, the Board would be less
able to ensure that the proper skills, experience and diversity were represented
on the Board. Moreover, there are appropriate procedures in place for
shareholders who wish to suggest qualified candidates, as set forth on page 19
of this Proxy Statement.
The Board of Directors believes that the present nominating process should be
preserved.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
ITEM 6 ON PROXY CARD:
The Association of BellTel Retirees, 157 Main Street, P.O. Box 33, Cold Spring
Harbor, New York 11724, owners of 214 shares of the Company's common stock, and
Robert A. Rehm, 5 Erie Court, Jericho, New York 11753, owner of 4,125 shares of
the Company's common stock, propose the following:
"RESOLVED: That the shareholders of Verizon urge our Board of Directors to seek
shareholder approval in advance for all future or renewed severance agreements
with the Company's executive officers, including so-called "golden parachute"
and "golden good-bye" severance agreements, that provide more generous pay-outs
than the severance and retirement benefits available to other senior managers.
For the purposes of this resolution, "golden parachutes" are defined as
severance agreements triggered when executives are terminated, or resign, after
a change in corporate control; and "golden good-byes" are defined as severance
payments made to executives who terminate voluntarily, including early
retirement, or who are terminated without good cause.
SUPPORTING STATEMENT: "Golden parachutes" and "golden good-bye" agreements are
among the most costly, wasteful and anti-shareholder forms of executive
compensation. Our Company's executive officers are covered by multi-million
dollar parachute provisions that are triggered not just by a hostile change in
control, but even by voluntary departures under a range of circumstances that we
believe are contrary to stockholder interests.
Without shareholder consent, such severance agreements create potential
conflicts of interest and undermine shareholder confidence that executive pay is
properly aligned with the long-term interests of shareholders.
The Company itself disclosed, in its proxy preceding the GTE merger vote, that
because of these agreements "the interests of these people [the executive
officers] in the merger may be different from, or greater than, your interests."
The merger proxy, for example, revealed that several senior executives had
agreements promising multi-million-dollar payments if current co-CEO Ivan
Seidenberg "is not elected Chairman of the Board" or if "there has been a
"change in control" of Bell
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Atlantic" (with "change of control" defined very broadly). The agreements gave
executive officers Babbio, Cullen, Salerno and Young the option "to terminate
his employment on grounds of constructive discharge following Charles R. Lee's
election" as Chairman and thereby walk away with millions of dollars in
severance payments on top of their other generous retirement benefits, according
to the 2000 proxy.
Last year's proxy statement disclosed an additional $40 million in "retention
incentives" and "implementation incentives". In combination with the parachute
agreements, top executives got a windfall whether they stayed or whether they
decided to leave.
If these agreements required shareholder approval, the Board might at least have
decided which of these two options -- the executive staying or quitting -was
actually worth the expenditure of tens of millions of dollars in shareholder
wealth.
New post-merger agreements disclosed during 2000 are likewise, in our opinion,
contrary to shareholder interests. Executive officers can resign and receive the
liquidated value of their multi-year employment agreements -- as much as tens of
millions of dollars in the case of co-CEO Seidenberg -- if there is a "change of
control" that is defined to include situations where another person acquires as
little as 20% of the Company's stock.
Compare this to the treatment of Company retirees, many with 30 or more years of
loyal service. Most retirees have not received a pension cost-of-living
adjustment (COLA) in over nine years, allowing inflation to steadily erode the
purchasing power of pensions earned over 20-, 30- and even 40-year careers. This
breaks with the Company's long tradition of granting increases every two or
three years at one half the rate of inflation. Although the Company's recent
lump sum payment to certain retirees is a step in the right direction, the
Company's retirement benefits policy as a whole is patently inadequate and
unfair to most retirees.
At last year's Annual Meeting, more than 320 million shares (30.6 percent of the
votes cast) were voted in favor of this proposal. Resolutions requesting advance
shareholder approval of golden parachute agreements also have received majority
support from stockholders of at least six public companies since 1990.
We urge all shareholders to VOTE FOR this proposal."
BOARD OF DIRECTORS' POSITION:
The Board of Directors continues to believe that a blanket prohibition on the
use of employment and severance agreements with executive officers without prior
shareholder approval would unduly restrict the key Board function of hiring,
retaining and, when necessary, separating executive officers from service with
the Company. In the past, the Company has determined that it was advisable to
and has entered into these agreements under the appropriate circumstances. The
agreements were evaluated by the Board's Human Resources Committee and measured
against competitive practices, current business circumstances and other
strategic considerations.
Subsequent to the merger with GTE Corporation, the Company entered into new
agreements with individuals whose skill and experience are critical to the
success of Verizon. Those agreements are described beginning on page 29 of this
Proxy Statement. The Board believes that these agreements are reasonable and
appropriate to ensure the effective integration of the companies and the
realization of the merger's benefits.
The Board firmly believes that agreements of this type, when used judiciously
and under appropriate circumstances, promote shareholders' interests by enabling
the Company to recruit and retain the most qualified executive officers to lead
our business. In many cases (e.g., mergers, unexpected executive departures,
etc.), it would simply not be feasible for the Company to wait the several
months necessary to seek shareholder approval before acting. Accordingly, the
Board has concluded it should retain the flexibility to use such agreements,
where they are appropriate, without the requirement of shareholder approval.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
ITEM 7 ON PROXY CARD:
John A. Parente, 2805 Granville Avenue, Schenectady, New York 12306, owner of
7,514 shares of the Company's common stock, and John Sellen, 285 Boulevard/Box
457, New Milford, New Jersey 07646, owner of 1,350 shares of the Company's
common stock, propose the following:
"RESOLVED: The shareholders of Verizon urge the Company's Board of Directors to
take the steps necessary to amend the Company's By-Laws to provide that the
Board shall consist of a majority of independent directors and that no more than
two directors shall be current or former executive officers
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("insiders"). For these purposes, the definition of independent director shall
mean a director who, within the previous five years:
has not been employed by the Company or an affiliate;
is not a relative of any member of the Company's management;
provides no other personal or professional services for pay to the Company or
its subsidiaries;
is not employed by a significant supplier or provider of professional services
to the Company;
is not employed by a foundation, university or other nonprofit institution that
has received a grant or endowment from the Company;
is not an officer of a company on which any of the Company's top five executive
officers also serves as a board member.
SUPPORTING STATEMENT: Our Company has one of the least independent boards among
large U.S. companies. No more than half of the 16 members of the Board -- and
arguably less than half -- are outside directors truly independent of
management, as defined here. We believe an amendment to the By-Laws is the only
way to ensure that a majority of the Board will at all times be more accountable
to stockholders than it is beholden to management.
Our Board's lack of independence from management influence is unusual among
leading public companies. The boards of 88% of S&P 500 companies have a majority
of independent directors, according to a study by the impartial Investor
Responsibility Research Center (IRRC). While IRRC reported that more than
two-thirds of the S&P 500 directors are independent, during 2000 our Company's
Board included two insiders and at least seven outside directors with financial
ties to the Company or to one of the executive officers.
For years Bell Atlantic's Board was infested with conflicts of interest, a
situation that has improved only marginally since the merger with GTE. In
addition to the two co-CEOs, six outside directors are considered
non-independent due to board interlocks or because their own employer receives
substantial grants, fees, or business from the Company, or did in the recent
past. A ninth director, while technically independent, has an interlock with a
company officer.
With respect to interlocks, co-CEO Seidenberg sits on the board that employs and
sets the salary of Board member Stafford. This interlock is no rare
happenstance: Seidenberg sat on the board employing former Bell Atlantic board
member Goldstein, who was CEO of CVS. In addition, former Bell Atlantic board
member Lawrence Babbio, Vice Chairman and President, helps set the compensation
of Verizon board member Neubauer, CEO of ARAMARK, as a member of that company's
board compensation committee.
With respect to business ties, director Kaplan is Of Counsel to a Company law
firm. Three other outside directors (Moose, Snow, and Storey) work for firms
receiving fees from GTE, as disclosed in the 1999 Joint Statement of Proxy
(April 13, 1999, page III-14). And director Price heads a nonprofit receiving
substantial grants from the Bell Atlantic Foundation.
There is a widespread consensus that a majority of independent directors is
critical to ensure management accountability to shareholders. Among the groups
endorsing this basic principle are the National Association of Corporate
Directors (NACD), the Council of Institutional Investors (CII), the Business
Roundtable, the California Public Employees Retirement System (CalPERS), the
Investor Rights Association of America (IRAA), and the Association of BellTel
Retirees.
Financial studies have also shown that an independent board tends to enhance
shareholder wealth, particularly with respect to tender offer premiums.
The Company is to be commended for reducing the number of inside directors from
five to two -- a reform we urged at the last three annual meetings (supported by
28% of the vote last year). Nevertheless, we believe that a By-Law amendment is
the only way to ensure that the Board will exercise independent oversight.
We urge your VOTE FOR this resolution."
BOARD OF DIRECTORS' POSITION:
The Board of Directors agrees with the main premise of this proposal -- that the
Board of Directors should consist of a majority of independent Directors. In
fact, the Board has consisted of a majority of such independent directors at all
times since the Company was founded in 1983. The Board is confident that the
types of relationships referred to by the proponents do not impair in any way
the independence of the individual Directors, and believes that there is no
basis for the proponents' statement regarding the Board's "lack of independence
from management influence". Because the Company has always operated with an
independent Board, it is not
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necessary to include the Board's established commitment to independence in the
Bylaws.
Furthermore, the Board does not believe that a commitment to an independent
Board leads to the conclusion that the number of employee Directors must be
limited to an arbitrary number. In connection with the merger with GTE
Corporation, it was determined to be appropriate for the combined Company Board
initially to consist of 16 Directors, one-half of whom had been designated by
each pre-merger company and two of whom are executive officers. Following the
merger, the Board continues to believe that this composition structure is
appropriate in order to facilitate the integration process.
Given the Board's history of independence, the Board continues to be concerned
that any Bylaw arbitrarily limiting the number of employee Directors would
unnecessarily restrict its flexibility to tailor the number of employee
Directors to changing business circumstances. The Board has concluded that it
cannot support this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
ITEM 8 ON PROXY CARD:
Mr. C. William Jones, 8411 Aveley Farm Road, Easton, Maryland 21601, owner of
115 shares of the Company's common stock, and Joseph A. Ristuccia and Ann
Ristuccia, 3905 Bayview Road / Box 611, Southold, New York 11971, owners of 663
shares of the Company's common stock, propose the following:
"RESOLUTION: The stockholders of Verizon request the Board to adopt and
announce a policy that determines future awards of performance-based
compensation for executive officers using a measure of earnings per share that
does not include non-recurring accounting rule income, particularly "pension
credits" resulting from increases in the employee pension fund surplus.
SUPPORTING STATEMENT: Last August, Bloomberg News published an expose,
featuring Verizon, with the headline: "U.S. Companies Pad Profits with Market
Gains from Pension Funds." The article stated: "Verizon is now the biggest U.S.
local phone company. It has another distinction: It inflates its earnings more
than any other U.S. company by using gains from its employee pension fund."
Bloomberg revealed that a significant portion of net operating income reported
by both Bell Atlantic and GTE (which merged to form Verizon) for 1999 was not
cash flow from operations, but rather "pension credits" from paper gains on
assets held in the Company pension plan. "In March [2000], Bell Atlantic showed
that its pension fund accounted for $846 million, or about 13%, of its 1999
pretax income. At GTE, the gains were even bigger: $1.08 billion, almost 17% of
its pretax income for the year," the article reported.
"It's magic money," Robert Monks, a corporate governance expert and former top
federal pension regulator under President Ronald Reagan, told Bloomberg. "This
fiction of earnings is being built into the expectations of a number of
companies."
There are several reasons we believe accounting rule income should not be used
to inflate executive pay awards. One is that phantom income from the employee
pension fund does nothing to increase cash flow. In practice, the 50% tax on the
reversion of surplus pension assets means these paper profits cannot be used to
buy back stock, fund capital investments, or for other operating purposes. We
believe only stockholders lose when real operating revenue is paid out to reward
executives for pumping up pension assets held in a separate legal trust.
Another reason is that it creates short-term incentives contrary to the
long-term interest of Verizon stockholders. If incentive pay formulas encourage
top executives to renege on early retirement benefits, or to continue skipping
the cost-of-living adjustments expected by Verizon retirees, the ability of the
Company to recruit and retain experienced employees could be undermined.
In our view, performance-based pay formulas should not encourage top executives
to inflate their own compensation at the expense of retirees for whom the
pension funds are held in trust. We believe the Board should use our Company's
record-high pension surplus for the sole benefit of retirees and workers, as
originally intended. Inflation has cut the purchasing power of most retirees'
pensions by 25% or more over the last 10 years, while the cost of executive
compensation has skyrocketed. Executive officers should not have a personal
disincentive to use the pension surplus for much needed and long overdue
cost-of-living adjustments.
In summary, we recommend that the Board adopt an explicit policy that excludes
accounting rule profit from the calculations of performance-based pay.
We urge you to VOTE FOR this resolution."
BOARD OF DIRECTORS' POSITION:
The Board of Directors has delegated responsibility to its Human Resources
Committee to establish the compensation philosophy for Verizon, establish
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appropriate policies and procedures and oversee the administration of the
related plans. All of the members of the HRC are independent directors.
Verizon's compensation philosophy is described in the Report of the HRC on
Executive Compensation, which appears starting on page 20. Two of the three
principal components of compensation are performance-based and are therefore "at
risk." The Board believes that goals established for performance-based
compensation should provide incentives for executives to deliver superior
performance consistent with the measures recognized by the investment community
and in the best interests of the Company and its shareholders.
The HRC establishes the targets that will determine the awards for
performance-based compensation. These targets include a range of financial and
non-financial performance factors, and each year the HRC assigns relative
weighting to those factors. In 2000, the performance factors included revenue
growth, net income, customer satisfaction, earnings per share and an
individual's personal contribution to the success of Verizon. In order to
determine the appropriate awards under the incentive plans, the HRC compares the
actual performance, including financial results, to the corresponding targets.
The Company's financial results are reported in financial statements prepared in
accordance with generally accepted accounting principles. In evaluating those
results, the HRC has, and exercises, the discretion to determine whether certain
components of the results should be adjusted for compensation purposes.
The Board believes that, in order to continue to determine the appropriate
performance-based compensation and, given the continuously changing business and
market conditions, the HRC must retain the discretion to make appropriate
adjustments. This proposal would arbitrarily limit that discretion and we
believe that it is contrary to generally established compensation practices.
Accordingly, the Board does not agree with the supporting statement and has
concluded that it cannot support the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
- - --------------------------------------------------------------------------------
SUBMISSION OF SHAREHOLDER PROPOSALS AND
DIRECTOR NOMINATIONS
Shareholders wishing to have a proposal included in the Company's 2002 Proxy
Statement must submit the proposal so that the Corporate Secretary receives it
no later than November 12, 2001. SEC rules set forth standards as to which
shareholder proposals are required to be included in a proxy statement. Also, in
the case of shareholder proposals which are not included in the proxy statement,
SEC rules specify that certain requirements contained in the Company's Bylaws
need to be followed. The Bylaws require any shareholder wishing to make a
nomination for Director or to introduce a proposal or other business at the
Company's 2002 Annual Meeting of Shareholders to give the Company advance
written notice thereof no later than 90 days prior to the anniversary date of
the 2001 Annual Meeting, or January 25, 2002. Shareholders may request a copy of
the Bylaws from the Corporate Secretary, Verizon Communications Inc., 1095
Avenue of the Americas, 38th Floor, New York, New York 10036.
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EXECUTIVE COMPENSATION
REPORT OF THE HUMAN RESOURCES COMMITTEE
ON EXECUTIVE COMPENSATION
The Human Resources Committee of the Board, referred to as the HRC, is charged
with establishing and administering the policies and plans related to
compensation for senior managers, including the executives listed in the Summary
Compensation Table beginning on page 24 of this Proxy Statement. The individuals
listed in that table are referred to as the named executive officers.
In connection with the Bell Atlantic and GTE merger completed on June 30, 2000,
the HRC conducted a comprehensive review of the Company's executive compensation
programs. The HRC, with the assistance of an outside compensation consultant,
surveyed executive compensation levels, plans and policies at 32 companies.
These 32 companies will be referred to as the compensation peer companies. The
compensation peer companies were selected based on their relative revenue size,
number of employees, and industry of operation. Based upon an assessment of the
scope of responsibilities of senior management and the levels of compensation at
those peer companies, the HRC established post-merger compensation levels,
including base salary, annual incentives, and long-term incentives for the
Senior Management Group, including the named executive officers.
This report summarizes the philosophy, structure, and compensation levels of the
Company's post-merger executive compensation programs for 2000. It also
discusses the pre-merger compensation programs maintained separately by Bell
Atlantic and by GTE to the extent that they affected compensation that the
Senior Manager Group earned prior to the merger.
PHILOSOPHY
The HRC has established the following objectives for the Company's executive
compensation program:
- To attract and retain high-performing executive talent;
- To achieve key operational and financial goals;
- To competitively reward key performers for achieving superior returns for
shareholders; and
- To align the financial interests of the Senior Management Group with those
of shareholders.
Accordingly, the total compensation of the Senior Management Group has been set
at levels which are intended to be competitive with companies of similar size
and complexity. The HRC evaluates and approves each component of remuneration
(base salary, annual incentives, and long-term incentives) and also approves the
total compensation levels. Given Verizon's long-term strategies and the long-
term nature of the synergies to be achieved in the merger, the HRC has
emphasized long-term pay and performance.
The HRC periodically reviews total compensation and component pay levels at
comparable companies. The post-merger program is designed to deliver
compensation that is consistent with the 50th percentile of the compensation
peer companies for salary and short-term incentives and the 75th percentile for
long-term incentive levels.
The compensation paid to the Senior Management Group in 2000 was designed to
reflect both individual and Company performance. The programs emphasize a
pay-for-performance philosophy. The compensation plans provide incentives for
the Senior Management Group to achieve performance that results in continuing
improvements in the Company's operational results, financial results, and
customer satisfaction levels over both the short term and the long term. The
plans have also been designed to reward the creation of shareholder value. The
long-term incentive plans provide that a significant portion of incentive
compensation is paid in the form of stock options. As a result, the interests of
the Company's Senior Management Group are closely aligned with the interests of
its shareholders. Therefore, if the shareholders benefit through increased
economic value and stock price appreciation, the executives will also benefit.
COMPONENTS OF COMPENSATION
The post-merger compensation structure for the Senior Management Group has three
principal components:
- Salary;
- A short-term bonus paid in cash which is performance-based and, therefore,
at-risk; and
- A long-term award in the form of stock options and other equity vehicles
which is also performance-based and at-risk.
Because two of the three principal components of compensation are
performance-based and at risk, the value of the total compensation depends on
factors such as the Company's operational and financial
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performance, customer satisfaction, attaining diversity objectives, individual
performance, and stock price. Once the HRC has established a senior manager's
salary, that component of compensation is not subject to contingency and is paid
in cash. The HRC regularly reviews each of these components of executive
compensation and the appropriate proportion of the mix.
SALARY. The salaries of the named executives for 2000 are shown in column (c)
of the Summary Compensation Table. Changes in salary depend upon such factors as
individual performance, the period of time the senior manager has been in his
current position, market changes in the value of that position, and the economic
and business conditions affecting Verizon at the time. No increase in base
salary for the Senior Management Group is scheduled for 2001. In addition, the
HRC recognizes that, from time to time, it is appropriate to enter into
agreements with key members of management in order to ensure that Verizon
continues to retain the services of these individuals. The agreements for the
named executive officers are described beginning on page 29 of this Proxy
Statement.
SHORT-TERM INCENTIVE. The amounts shown under "Bonus" in column (d) of the
Summary Compensation Table represent the amount of the short-term incentive
payments awarded to each of the named executive officers for 2000. The 2000
performance period and measures were divided into two periods: pre-merger and
post-merger. Under both the pre-merger and post-merger plans, a performance
range was established to determine the level of awards based upon actual
performance as measured against objectives. The potential awards can range from
zero to a pre-established maximum value. The actual payments are adjusted based
upon corporate and individual performance.
PRE-MERGER PERIOD
The amount of the short-term incentive awarded to each named executive officer
for the pre-merger period was determined based on the plans in place at each of
the respective pre-merger companies.
Former Bell Atlantic Executives
For the first half of 2000, the amount of the short-term incentive awards to the
Senior Manager Group, including each named executive officer who was an employee
of Bell Atlantic prior to the merger, was determined in part by growth in
earnings per share, or EPS, and in part by customer satisfaction levels and
diversity indicators. Furthermore, under the Bell Atlantic Short-Term Incentive
Plan, the award for a named executive officer who has management
responsibilities for a particular line of business or business sector also
depends on certain additional financial results and strategic accomplishments of
that line of business or business sector.
For the Chief Executive Officer and other senior managers, Bell Atlantic's
achievement of financial and other strategic objectives generally had a 75%
weighting when determining an individual's short-term incentive award for 2000.
Bell Atlantic's success in achieving customer satisfaction had a 25% weighting.
The award is also subject to adjustment based on the achievement of customer
service thresholds and diversity objectives. Primarily due to the fact that
financial performance (in particular EPS after adjustment for non-recurring
items) exceeded established objectives, annual bonuses for the first six months
of 2000 slightly exceeded target.
Former GTE Executives
Under the GTE Executive Incentive Plan, awards were based on GTE's performance
during the first half of 2000 and the performance of the individual's business
unit. In general, 70% of the award was determined by achieving financial goals
and 30% by achieving strategic/nonfinancial goals The HRC then assigned an
overall rating to GTE and each business unit based on performance. These ratings
were then used to determine the percentage payout awards for each unit and the
individual awards for certain senior executives. For the first half of 2000, the
financial measures were generally based on: EPS; revenue growth; net income;
earnings before interest, taxes and depreciation (EBITDA); and capital
expenditures. In general, the financial results for GTE and most of its business
units exceeded established objectives. Accordingly, annual bonuses for the first
six months of 2000 exceeded target.
POST-MERGER PERIOD -- VERIZON EXECUTIVES
The amount of the short-term incentive award to each named executive officer for
the six months following the merger was determined based on the objectives
established for the combined organization. This portion of the short-term
incentive program was designed to bring all executives of the merged entity
together under one annual incentive program and provide a unified set of
objectives. These objectives focused upon financial measures, particularly EPS
after adjustment for non-recurring items, and in part on non-financial measures.
Verizon exceeded established objectives primarily as a result of financial
performance. As a result, annual bonuses for the second six months of 2000
slightly exceeded target.
LONG-TERM INCENTIVE. Prior to the effective date of the merger, certain Bell
Atlantic and GTE
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employees received annual long-term equity grants for 2000 consistent with past
practice.
Former Bell Atlantic Executives
For Bell Atlantic executives, the long-term incentive component of compensation
consisted solely of stock options granted under the Bell Atlantic 1985 Incentive
Stock Option Plan. For 2000, the number of stock options granted was generally
based on the recipient's actual base salary multiplied by a long-term incentive
percentage applicable to the recipient's compensation band. In certain cases,
the HRC then increased or decreased the size of the grant as it deemed
appropriate.
Former GTE Executives
Selected GTE employees received grants under the GTE Corporation 1997 Long-Term
Incentive Plan, or GTE LTIP. Under the provisions of the GTE LTIP, two types of
grants were made in 2000: performance bonuses and stock options.
Senior executives were eligible to receive annual performance bonuses, which are
earned during a performance cycle that is typically three years in duration. In
February of 2000, GTE senior executives received grants for the three-year
performance cycle ending in 2002. In determining awards, actual financial
performance over that period is compared to pre-established target levels for
the following measures: revenue growth; EPS growth; EBITDA growth; relative
total shareholder return; and return on investment.
In addition, senior executives and a substantially larger group of executives
received stock options. The stock options represented a majority of the total
long-term incentive value.
Verizon Executives
Shortly following the close of the merger, the HRC approved a Founders' Grant of
stock options to the Senior Manager Group and other employees of Verizon. The
design and structure of the Founders' Grant was based on market data which
indicated that many companies make special, broad-based equity grants and
significant special management equity grants at the time of mergers. The options
granted under the Founders' Grant have an exercise price equal to the fair
market value of Verizon's common stock on the date of grant ($43.34), and they
will become exercisable three years from the date the merger closed. In
conjunction with the Founders' Grant, all senior managers also received a grant
of performance share retention units (PSRUs). These grants of options and PSRUs
were made to recognize the creation of a new company -- Verizon -- and to
retain, energize and motivate employees. One-half of the PSRUs will become
payable in increments of 50%, 25%, and 25% on the third year, fourth year, and
fifth anniversaries of the closing of the merger. The remaining balance of the
PSRUs will become payable on the same time schedule, but only if the Company
achieves certain goals for revenue and EPS growth.
SHARE OWNERSHIP
The Company has adopted stock ownership guidelines to encourage each executive
to achieve and maintain an appropriate ownership stake in the Company. The
ownership levels are based on a multiple of base salary. The guidelines suggest
a multiple of 5 times base salary for the CEO (or Co-CEOs) and a multiple of 1
to 4 times base salary for other executives. These guidelines apply to all
senior management employees. All named executive officers currently exceed these
ownership guidelines.
2000 COMPENSATION FOR THE CO-CHIEF EXECUTIVE OFFICERS
The 2000 compensation of Charles R. Lee, Chairman and Co-Chief Executive
Officer, and Ivan G. Seidenberg, President and Co-Chief Executive Officer, was
determined in accordance with the plans and policies discussed in this report.
Their annual salaries are shown in column (c) of the Summary Compensation Table,
and their respective short-term incentive awards are shown under "Bonus" in
column (d) of this table. In 2000, Mr. Lee and Mr. Seidenberg received
short-term incentive awards of $2,620,800 and $2,577,000, respectively. Since
pre- and post-merger performance exceeded the financial objectives, the awards
for Messrs. Lee and Seidenberg were paid accordingly. For Mr. Lee, the possible
range of a short-term incentive award was $0 to $3,261,500. For Mr. Seidenberg,
the possible range of a short-term incentive award was $0 to $3,225,000. For the
2000 short-term incentive award, the HRC determined to apply the corporate
rating to Messrs. Lee and Seidenberg as described on page 21 of this Proxy
Statement. In February of 2000, Mr. Lee received a grant under the GTE LTIP of
338,672 stock options and 51,606 performance bonus units (both as converted upon
merger). The performance bonus units were for the three-year performance bonus
cycle ending in 2002. In January of 2000, Mr. Seidenberg received a grant of
529,420 stock options under the Bell Atlantic 1985 Incentive Stock Option Plan.
In addition, on September 7, 2000, Mr. Lee and Mr. Seidenberg each received a
Founders' Grant of 650,000 stock options and 150,000 PSRUs. The option grants
are reported in column (g) of the Summary Compensation Table. The PSRU grants
are reported in column (f) of the Summary Compensation Table.
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APPLICABLE TAX CODE PROVISION
The HRC has reviewed the potential consequences for Verizon of Section 162(m) of
the Internal Revenue Code. Section 162(m) provides that a public company may not
deduct compensation in excess of $1 million that is paid to a named executive
unless the compensation is "performance based."
The Bell Atlantic 1985 Incentive Stock Option Plan has historically met the
Section 162(m) criteria, but the short-term incentive plan has not met these
criteria. To minimize the Section 162(m) limitation on Verizon going forward,
the HRC has decided to structure the Verizon long-term and short-term incentive
plans so as to qualify compensation paid under those plans as "performance
based."
Respectfully submitted,
Human Resources Committee
Russell E. Palmer -- Chairperson
Richard L. Carrion
Robert F. Daniell
Joseph Neubauer
Walter V. Shipley
John W. Snow
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Babbio, Vice Chairman and President of the Company, is a Director of ARAMARK
Corporation and serves as a member of the compensation committee of the Board of
Directors of ARAMARK Corporation. Mr. Neubauer, Chairman and Chief Executive
Officer of the Board of Directors of ARAMARK Corporation, serves on the
Company's Board of Directors and its Human Resources Committee.
---------------------------------------------------------
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COMPENSATION TABLES
SUMMARY COMPENSATION TABLE
- - ---------------------------------------------------------------------------------------------------------------------------------
Long Term Compensation
-----------------------------------
Annual Compensation Awards
-------------------------------- ------------------------- Payouts
(a) (b) (c) (d) (f) (g) -------
(e) Restricted Securities (h) (i)
Other Annual Stock Underlying LTIP All Other
Name and Salary Bonus Compensation Award(s) Options/SARs Payouts Compensation
Principal Position Year ($000) ($000) ($000) ($000) Granted(#) ($000) ($000)
- - ---------------------------------------------------------------------------------------------------------------------------------
Charles R. Lee(1) 2000 1,490.4 2,620.8(3) 87.9(4) 6,614.2(5,6) 988,672(8) 4,304.9(9)
Chairman & Co-CEO 1999 1,247.7 1,711.5(3) 9.8 547.3(6) 240,000(8) 7,045.3 56.2
1998 1,098.8 1,424.3(3) 2.2 169.8(6) 221,100(8) 1,292.7 49.5
Ivan G. Seidenberg 2000 1,350.0 2,577.0 148.7(4) 6,562.5(5) 1,179,420 5,096.3(9)
President & Co-CEO 1999 1,200.0 2,106.0 228.3 588,240 9,620.2
1998 850.0 1,210.4 101.7 333,340(7) 965.5
Lawrence T. Babbio, Jr. 2000 912.5 1,297.0 115.7(4) 4,375.0(5) 1,016,806 2,966.4(9)
Vice Chairman & 1999 750.0 866.3 104.2 382,022 2,483.2
President 1998 718.8 962.4 133.6 305,304(7) 4,811.5
Michael T. Masin(1) 2000 928.9(2) 1,343.0(3) 130.2(4) 4,411.5(5,6) 612,016(8) 2,920.2(9)
Vice Chairman & 1999 838.2(2) 974.8(3) 34.8 304.9(6) 118,600(8) 3,904.8 33.8
President 1998 779.9(2) 918.9(3) 3.4 107.9(6) 109,300(8) 807.4 33.9
Frederic V. Salerno 2000 780.0 1,097.0 205.4(4) 4,375.0(5) 711,960 2,581.1(9)
Vice Chairman & CFO 1999 750.0 877.5 183.3 291,060 626.4
1998 718.8 962.4 108.3 300,129(7) 5,473.7
Dennis F. Strigl 2000 712.5 1,212.0 124.4(4) 3,500.0(5) 527,060 3,490.8(9)
Executive Vice 1999 550.0 574.0 54.3 166,834 1,480.8 364.5
President & President -- 1998 500.0 575.0 38.8 162,316(7) 833.3
Domestic Wireless
- - ---------------------------------------------------------------------------------------------------------------------------------
(1) These individuals became executive officers of Verizon upon the merger of
GTE Corporation and Bell Atlantic Corporation on June 30, 2000. The table
reflects salary paid by GTE during the first 6 months of 2000. For prior
years, all salary was paid by GTE, except as noted in footnote 2 below.
(2) The data includes fees received by Mr. Masin for serving as a director of BC
TELECOM Inc., a Canadian company in which GTE owned a 50.8% interest during
1998 and January of 1999, and BCT.TELUS Communications Inc., a successor
company to BC TELCOM, in which Verizon owns a 26.7% interest. Mr. Masin's
salary for 1999 and 1998 includes fees of $16,829 and $18,215, respectively.
In 2000, 1999 and 1998, Mr. Masin received deferred stock units of this
company valued at: $35,651; $32,725; and $6,505, respectively, which are
also included in this column.
(3) The data reflects the amounts the executive officer received under GTE's
Executive Incentive Plan. As described in footnote 6, under GTE's Equity
Participation Program (EPP), a portion of this amount has been deferred into
restricted stock units payable at maturity (generally, a minimum of three
years).
(4) These amounts include incremental costs for personal use of Company aircraft
by Messrs. Lee, Seidenberg, Babbio, Masin, Salerno, and Strigl in the
amounts of: $32,860; $107,708; $80,821; $51,770; $153,275; and $98,640,
respectively.
(5) The data reflects the dollar value of the one-time grant of restricted stock
units based on the closing price of Verizon common stock on September 7,
2000. These units vest over the next five years subject in part to meeting
certain performance measures. Additional restricted units are received on
each dividend payment date in the same manner as described in footnote 6.
Messrs. Lee, Seidenberg, Babbio, Masin, Salerno, and Strigl hold a total of:
151,033; 151,033; 100,689; 100,689; 100,689; and 80,55l restricted stock
units, respectively, which had a dollar value of: $7,570,528; $7,570,528;
$5,047,019; $5,047,019; $5,047,019; and $4,037,615, respectively, based upon
the closing price of Verizon common stock on December 29, 2000.
(6) The data reflects the dollar value of the matching restricted stock units
under the EPP for amounts held in each executive's bonus deferral account.
The number of restricted stock units was calculated by dividing the deferred
amount by the average closing price of the company's common stock on the New
York Stock Exchange Composite Transactions Tape for the 20 consecutive
trading days following the release to the public of the company's financial
results for the fiscal year in which the bonus was earned. On each dividend
payment date, additional restricted stock units are credited to a
participant's account. The number of restricted stock units is determined by
dividing the dividend that would have been paid on the shares represented by
the restricted stock units in the participant's account by the closing price
of the company's common stock on the New York Stock Exchange Composite
Transactions Tape on the dividend declaration date. Executives received one
additional restricted stock unit for every four restricted stock units
deferred into the EPP. Messrs. Lee, and Masin each hold a total of: 15,088;
and 81,484 restricted stock units, respectively, which had a dollar value
of: $756,275; and $4,084,386, respectively, based solely upon the closing
price of Verizon common stock on December 29, 2000.
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(7) Numbers of options have been adjusted to reflect the two-for-one stock split
on June 1, 1998.
(8) For 2000, numbers reflect the conversion of all GTE stock options into
Verizon stock options at the ratio of 1.22 Verizon options for each GTE
option. The figures for 1999 and 1998 have not been converted; however, had
the figures been converted, the number of options for Messrs. Lee and Masin
for 1999 and 1998, respectively, would be as follows: 292,800 and 269,742;
and 144,692 and 133,346; respectively.
(9) For 2000, the column "All Other Compensation" includes payment of merger
retention bonuses for Messrs. Lee, Seidenberg, Babbio, Masin, Salerno, and
Strigl in the amounts of: $4,237,800; $3,825,000; $2,165,700; $2,912,500;
$1,968,800; and $1,627,500, respectively. These bonuses were disclosed in
prior proxy statements. Messrs. Seidenberg and Salerno, who previously
elected to defer receipt of the bonuses into the Company's Income Deferral
Plan, waived their rights to receive their deferred amounts in exchange for
the Company's entering into split-dollar insurance arrangements for their
benefit. Under these arrangements, the insurance premiums paid by the
Company will be ultimately returned to the Company. The present value
after-tax costs of these arrangements to the Company are designed to be
equivalent to the after-tax costs to the Company of these waived deferred
compensation obligations. In addition, the column includes: Company
contributions to qualified plans for Messrs. Lee, Seidenberg, Babbio, Masin,
Salerno, and Strigl in the amounts of: $7,650; $19,069; $20,400; $7,650;
$19,400; and $14,700, respectively; contributions by the Company and its
related companies to the GTE Executive Salary Deferral Plan of $59,417 for
Mr. Lee; Company contributions to the non-qualified Income Deferral Plan
accounts of Messrs. Seidenberg, Babbio, Salerno and Strigl in the amounts
of: $1,208,320; $780,317; $548,875; and $398,647, respectively; the value of
premiums paid by the Company for executive life insurance coverage for
Messrs. Seidenberg and Salerno in the amounts of $43,911 and $44,097,
respectively; and a contract expiration bonus of $1,450,000 for Mr. Strigl.
- - --------------------------------------------------------------------------------
The following table provides information as to options and stock appreciation
rights (referred to as SARs) exercised by each of the named executive officers
during 2000. The table sets forth the value of options and stock appreciation
rights held by such officers at year-end measured in terms of the closing price
of Verizon common stock on December 29, 2000.
AGGREGATED OPTION/SAR EXERCISES IN LAST
FISCAL YEAR AND FY-END OPTION/SAR VALUES
- - --------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
Number of Securities Value of Unexercised
Underlying Options/SARs In-the-Money Options/SARs
Shares Value at FY-End(#) at FY-End ($000)
Acquired on Realized ----------------------------- -----------------------------
Name Exercise(#) ($000) Exercisable Unexercisable Exercisable Unexercisable
- - -----------------------------------------------------------------------------------------------------------------------------
Charles R. Lee 56,120(1) 1,624.4 1,916,986 1,183,872 29,670.6 4,146.4
Ivan G. Seidenberg 0 0 929,236 1,682,714 9,763.1 4,559.4
Lawrence T. Babbio, Jr. 421,511 7,421.7 727,694 1,193,486 4,532.6 4,029.4
13,500(2) 40.1(2)
Michael T. Masin 0 0 781,450 708,478 9,604.3 2,870.6
Frederic V. Salerno 0 0 482,610 1,003,030 3,920.1 3,231.3
Dennis F. Strigl 899 7.5 165,384 652,564 330.3 2,697.4
15,000(3) 90.0(3)
- - -----------------------------------------------------------------------------------------------------------------------------
(1) SARs were exercised prior to expiration and the gain received upon exercise
was deferred into a Stock Option Gain Deferral account.
(2) Options to purchase Class V Common Stock of Grupo Iusacell, S.A. de C.V.
(3) Exercise of options to purchase Class V Common Stock of Grupo Iusacell, S.A.
de C.V. in March 2000.
- - --------------------------------------------------------------------------------
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The following table shows all grants of options to the named executive officers
during 2000. All share amounts and options shown in the table have been adjusted
to reflect the conversion of awards denominated in GTE common stock, options or
other stock equivalents into Verizon common stock or common stock equivalents.
Verizon common stock, options or stock equivalents have been adjusted to reflect
the June 1, 1998 stock split. Pursuant to SEC rules, the table also shows the
value of the options granted at the end of the option terms (ten years) if the
stock price were to appreciate annually by 5% and 10%, respectively. There is no
assurance that the stock price will appreciate at the rates shown in the table.
The table also indicates that, if the stock price does not appreciate, the
potential realized value of the options granted will be zero.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
- - --------------------------------------------------------------------------------
Potential Realizable Value at
Assumed Annual Rates of Stock
Price Appreciation for Option Term
Individual Grants ($000)
--------------------------------------------------------- ----------------------------------
(a) (b) (c) (d) (e) (f) (g) (h)
# of % of Total
Securities Options/ SARs
Underlying Granted to Exercise or
Options/ SARs Employees in Base Price Expiration
Name Granted Fiscal Year(5) ($/ Sh) Date 0% 5% 10%
- - -------------------------------------------------------------------------------------------------------------------------
---------
Charles R. Lee 338,672(1) 0.8% 55.8500 2/09/2010 0 11,895.4 30,145.4
650,000(4) 1.5% 43.3400 6/30/2010 0 17,716.7 44,897.5
Ivan G. Seidenberg 529,420(2) 1.2% 59.2188 1/25/2010 0 19,716.8 49,966.4
650,000(4) 1.5% 43.3400 6/30/2010 0 17,716.7 44,897.5
Lawrence T. Babbio, Jr. 285,490(2) 0.7% 59.2188 1/25/2010 0 10,632.3 26,944.4
4,670(3) 0.0% 58.5625 1/27/2002 0 28.0 57.4
109,720(3) 0.3% 58.5625 1/22/2006 0 2,185.3 4,957.7
70,314(3) 0.2% 44.9375 1/22/2006 0 1,074.6 2,437.9
96,612(3) 0.2% 44.9375 1/27/2007 0 1,767.4 4,118.9
450,000(4) 1.0% 43.3400 6/30/2010 0 12,265.4 31,082.9
Michael T. Masin 162,016(1) 0.4% 55.8500 2/09/2010 0 5,690.6 14,421.1
450,000(4) 1.0% 43.3400 6/30/2010 0 12,265.4 31,082.9
Frederic V. Salerno 261,960(2) 0.6% 59.2188 1/25/2010 0 9,756.0 24,723.7
450,000(4) 1.0% 43.3400 6/30/2010 0 12,265.4 31,082.9
Dennis F. Strigl 127,060(2) 0.3% 59.2188 1/25/2010 0 4,732.0 11,991.9
400,000(4) 0.9% 43.3400 6/30/2010 0 10,902.6 27,629.2
- - -------------------------------------------------------------------------------------------------------------------------
(1) One-third of the options are exercisable on February 9, 2001; two-thirds are
exercisable on February 9, 2002; and the balance are exercisable on February
9, 2003.
(2) One-third of the options are exercisable on January 25, 2001; two-thirds are
exercisable on January 25, 2002; and the balance are exercisable on January
25, 2003.
(3) These options are reload grants that were issued as a result of a
stock-for-stock exercise, become exercisable six months following the date
of grant, and expire at the end of the term of the original option.
(4) These options become exercisable on June 30, 2003.
(5) In addition to the option grants shown in the table, in 2000, Messrs. Lee
and Masin received grants of 51,606 and 26,840 performance share units,
respectively, under the GTE LTIP, which is described in the Report of the
HRC on Executive Compensation.
- - --------------------------------------------------------------------------------
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RETIREMENT PLANS
FOR EXECUTIVE OFFICERS WHO WERE BELL ATLANTIC EXECUTIVES PRIOR TO THE MERGER
WITH GTE
Messrs. Seidenberg, Babbio, and Salerno, and other Verizon executive officers
who were employed by Bell Atlantic prior to the merger, participated in the Bell
Atlantic Cash Balance Pension Plan. This plan is a noncontributory,
tax-qualified pension plan for salaried employees. Pension benefits under this
plan are generally stated as a lump-sum amount. However, participants may elect
to have the benefits distributed either as a lump sum or as an annuity. Benefits
are computed using a cash balance methodology that provides for salary credits
equal to 4 to 7 percent (depending on age and service) on the first $170,000 of
annual salary. In addition, monthly interest credits are made to the
participant's account balance based on prevailing market yields on certain U.S.
Treasury obligations. In order to record these salary and interest credits, the
plan administrator maintains a hypothetical account balance for each
participant. The following table shows the account balance for each
participating named executive officer, as of December 31, 2000. The actual
annual Company contribution has been reflected in column (i) of the Summary
Compensation Table.
- - -----------------------------------------------------------------
EXECUTIVE ACCOUNT BALANCE
- - -----------------------------------------------------------------
Mr. Seidenberg $1,114,403
Mr. Babbio $1,068,450
Mr. Salerno $1,133,113
- - -----------------------------------------------------------------
Mr. Strigl does not participate in the Cash Balance Pension Plan.
Pension benefits under the Cash Balance Pension Plan are not subject to
reduction for Social Security benefits or other offset amounts. Section 415 of
the Internal Revenue Code places certain limitations on pension benefits which
may be paid from the trusts of tax-qualified plans, such as the Cash Balance
Pension Plan. Pension amounts for certain executive officers that exceed such
Section 415 limitations will be paid from the Company's assets under the Bell
Atlantic Senior Management Income Deferral Plan discussed below.
Messrs. Seidenberg, Babbio, Salerno and Strigl, and other Verizon executive
officers who were employed by Bell Atlantic prior to the merger, participate in
the Bell Atlantic Senior Management Income Deferral Plan. This plan is a
nonqualified, unfunded, supplemental retirement and deferred compensation plan
under which an individual account is maintained for each participant. The plan
allows the participants to defer voluntarily the receipt of up to 100% of their
eligible compensation, and also provides retirement and other benefits through
Company credits to the participant's account under the plan. Eligible
compensation consists of:
(i) a participant's base salary in excess of the Internal Revenue Code limit on
compensation for qualified retirement plans (currently $170,000); and
(ii) all of the participant's annual incentive award under the pre-merger Bell
Atlantic short-term incentive plan; and
(iii) retention awards or other bonuses which the plan administrator determines
are eligible for deferral.
If a participant elects to defer income, the Company provides a matching
contribution equal to the rate of match under the qualified savings plan for
management employees. In most cases, that rate is 83 1/3% of the first 6% of
eligible compensation that is deferred. In addition, for the first 20 years of
participation in the plan, the Company automatically makes retirement
contributions to a participant's account equal to 32% of the base salary and
annual incentive award components of the participant's eligible compensation.
Thereafter, the Company makes retirement contributions equal to 7% of such
eligible compensation.
The Company maintains an individual account for each participant in the Senior
Management Income Deferral Plan. The following table shows the portion of each
participating named executive officer's account attributable
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to the Company's contributions as of December 31, 2000. The actual annual
Company contribution has been reflected in column (i) of the Summary
Compensation Table.
- - ---------------------------------------------
EXECUTIVE COMPANY CONTRIBUTIONS
- - ---------------------------------------------
Mr. Seidenberg $9,854,500
Mr. Babbio $8,609,305
Mr. Salerno $8,411,946
Mr. Strigl $1,711,990
- - ---------------------------------------------
FOR EXECUTIVE OFFICERS WHO WERE GTE EXECUTIVES PRIOR TO THE MERGER WITH BELL
ATLANTIC
Messrs. Lee and Masin, and other Verizon executive officers, who were employed
by GTE prior to the merger, participate in the GTE defined benefit pension
plans. The following table illustrates the estimated annual benefits payable
under these plans. The table assumes normal retirement at age 65 and is
calculated on a single life annuity basis, based upon final average earnings
(integrated with social security as described below) and years of service:
PENSION PLAN TABLE
- - --------------------------------------------------------------------------------
Years of Service
Final Average ----------------------------------------------------------------
Earnings 15 20 25 30 35
- - --------------------------------------------------------------------------------
$ 300,000 $ 63,671 $ 84,894 $ 106,118 $ 127,341 $ 148,565
400,000 85,421 113,894 142,368 170,841 199,315
500,000 107,171 142,894 178,618 214,341 250,065
600,000 128,921 171,894 214,868 257,841 300,815
700,000 150,671 200,894 251,118 301,341 351,565
800,000 172,421 229,894 287,368 344,841 402,315
900,000 194,171 258,894 323,618 388,341 453,065
1,000,000 215,921 287,894 359,868 431,841 503,815
1,200,000 259,421 345,894 432,368 518,841 605,315
1,500,000 324,671 432,894 541,118 649,341 757,565
2,000,000 433,421 577,894 722,368 866,841 1,011,315
2,500,000 542,171 722,894 903,618 1,084,341 1,265,065
2,750,000 596,546 795,394 994,243 1,193,091 1,391,940
3,000,000 650,921 867,894 1,084,868 1,301,841 1,518,815
3,500,000 759,671 1,012,894 1,266,118 1,519,341 1,772,565
4,000,000 868,421 1,157,894 1,447,368 1,736,841 2,026,315
4,500,000 977,171 1,302,894 1,628,618 1,954,341 2,280,065
- - --------------------------------------------------------------------------------
All executive officers who were employed by GTE prior to the merger participate
in the GTE Service Corporation Plan for Employees' Pensions. The GTE Service
Corporation plan is a noncontributory pension plan for the benefit of all
employees of GTE Service Corporation and participating affiliates who are not
covered by collective bargaining agreements. It provides a benefit based on a
participant's years of service and earnings. Pension benefits provided by the
plan are related to basic salary and incentive payments, exclusive of overtime,
differentials, certain incentive compensation and other similar types of
payments. Pensions are computed on a two-rate formula basis of 1.15% and 1.45%
for each year of service, with the 1.15% service credit being applied to that
portion of the average annual salary for the five highest consecutive years that
does not exceed $33,000, which is the portion of salary subject to the Federal
Social Security Act, and the 1.45% service credit being applied to that portion
of the average annual salary for the five highest consecutive years that exceeds
this level up to the statutory limit on compensation. As of December 31, 2000,
the actual years of service credited under the GTE Service Corporation plan for
Messrs. Lee and Masin are 17 and 7, respectively.
Section 415 of the Code places certain limitations on pension benefits which may
be paid from the trusts of tax-qualified plans, such as the GTE Service
Corporation plan. The Company maintains the GTE Excess Pension Plan, which
supplements the benefits of any participant in the GTE Service Corporation plan
in an amount by which the participant's benefits under the GTE Service
Corporation plan are limited by law. In addition, the
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Supplemental Executive Retirement Plan provides additional retirement benefits
determined in a similar manner as under the GTE Service Corporation plan on
compensation accrued under certain management incentive plans as determined by
the Human Resources Committee of the Board of Directors.
Benefits under the Supplemental Executive Retirement Plan and the GTE Excess
Pension Plan are payable in a lump sum or an annuity.
- - --------------------------------------------------------------------------------
EMPLOYMENT AGREEMENTS
In recognition of the highly competitive environment in the communications
industry, the Human Resources Committee recognizes that, from time to time, it
is appropriate to enter into agreements with key members of management in order
to ensure that Verizon continues to retain the services of these individuals.
The Company has entered into agreements with Messrs. Lee, Seidenberg, Babbio,
Masin, Salerno, and Strigl. These executives have agreed not to engage in
competitive activities or to interfere with Verizon's business relations for a
specified period of time following their termination of employment. The
agreements provide that each of these executives will also participate in the
Company's perquisites program, which includes a flexible spending account,
financial planning services, use of Company aircraft and automobile, and certain
housing arrangements.
If an executive resigns prior to June 30, 2003, the Founders' Grant of stock
options and the restricted stock units awarded in 2000 will be forfeited. If
there is a change in control, the Founders' Grant will be immediately
exercisable and the unvested restricted stock units that could vest after the
change in control will vest and be payable immediately. In addition, if the
executive terminates employment following a change in control, he will receive
the same benefits as provided in the event of a termination for good reason or a
constructive discharge.
The individual agreements are summarized below.
CHARLES R. LEE. Mr. Lee's agreement is effective July 1, 2000 and replaces all
prior agreements. It provides that he will continue to be employed as Co-CEO and
Chairman of the Board through June 30, 2002. From June 30, 2002 until June 30,
2004, he will serve as the non-employee Chairman of the Board. Mr. Lee's
agreement provides for:
- - - an annual base salary of at least $1,750,000;
- - - annual short-term bonus between 0 and 2.5 times base salary;
- - - annual long-term bonus opportunities of at least 8 times base salary beginning
in 2001;
- - - a special long-term performance incentive in a target amount of approximately
$10 million (subject to a vesting schedule over the term of employment); and
- - - purchase of a split-dollar life insurance policy for approximately $6 million.
When Mr. Lee retires on June 30, 2002, his unvested stock options immediately
vest and can be exercised until the tenth anniversary of the date they were
granted. He will receive financial planning services for two years and will be
provided with office space and administrative support for five years after the
end of the term of his agreement.
If Mr. Lee's employment is involuntarily terminated without cause:
- - - he will immediately become vested in any unvested stock options and they will
be exercisable for up to 10 years from the date they were granted;
- - - the portion of the one-time grant of restricted stock units that was due to
vest on June 30, 2002, without regard to performance goals, will become
payable on the scheduled date. The remaining portions of that grant will
become payable if Verizon attains the applicable revenue growth and earnings
per share growth goals;
- - - he will become vested in his long-term performance incentive award;
- - - he will receive a lump sum cash payment equal to the excess of (A) the sum of
(1) his unpaid base salary through June 30, 2002, (2) 57.5% of his maximum
short-term bonus opportunity from the date of his termination through June 30,
2002, and (3) 100% of his long-term bonus opportunity from the date of his
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34
termination through June 30, 2002, over (B) any amounts payable to him under a
Company-sponsored severance plan;
- - - he will receive a lump sum cash payment equal to any unpaid consulting fees;
and
- - - he will receive the value of his then-outstanding performance-bonus awards
under the long-term incentive plan.
If Mr. Lee terminates employment for good reason or if his employment terminates
as a result of his death or disability, he will generally receive the same
benefits that he would have received if he were involuntarily terminated without
cause. However, in the case of disability, his lump sum payment will be offset
by any amounts payable to him under Company-sponsored disability plans.
If Mr. Lee is terminated for cause, he will forfeit the unvested amount of his
Founders' Grant and the unvested amount of his one-time grant of 150,000
restricted stock units. He will be eligible to receive any and all compensation
and benefits that a similarly situated senior executive would receive upon
termination.
Mr. Lee's agreement also provides that he will serve as a consultant to Verizon
from June 30, 2002 through June 30, 2004. During this period, Mr. Lee will be an
independent contractor and will not be entitled to the benefits generally
provided to Verizon employees. He will receive a consulting fee of $250,000 per
month and will be provided office space and support as well as use of Company
aircraft and financial planning services.
IVAN G. SEIDENBERG. Mr. Seidenberg's agreement was effective January 1, 1999
and was amended and restated as of June 30, 2000. The agreement provides that
Mr. Seidenberg will continue to be employed through June 30, 2004 (he will be
co-CEO until June 30, 2002 and thereafter he will be CEO). His agreement
provides for:
- - - an annual base salary of at least $1,200,000;
- - - annual short-term bonus between 0 and 2.25 times base salary;
- - - annual long-term bonus opportunities of at least 2.5 times base salary; and
- - - a special long-term performance incentive in a target amount of approximately
$10 million (subject to a vesting schedule over the term of employment).
In November 2000, the HRC reviewed Mr. Seidenberg's salary, and short- and
long-term bonus opportunities. At that time the HRC decided to increase (i) his
base pay to $1,500,000, (ii) his short-term bonus to between 0 and 2.5 times
base salary, and (iii) his long-term bonus opportunity to at least 8 times base
salary.
If Mr. Seidenberg retires, resigns, or is discharged for cause, he forfeits his
right to all compensation and benefits other than the credits to the Income
Deferral Plan and he will remain eligible for any and all compensation and
benefits for which a similarly situated senior executive would receive upon
termination.
If Mr. Seidenberg's employment is involuntarily terminated without cause or is
constructively discharged, he will receive for the longer of the remaining term
of the agreement or for the period ending three years after his termination:
- - - monthly payments equal to the monthly salary he would have received increased
by at least 5% annually;
- - - annual payments equal to the short-term bonus he would have been entitled to
receive;
- - - vested rights in the special long-term incentive payment;
- - - an annual grant of stock options equal to 2.5 times his annual base salary
increased by at least 5% annually; and
- - - the excess, if any, of the remuneration earned by the Company's Chairman and
Chief Executive Officer during this period over the amounts paid to Mr.
Seidenberg pursuant to his agreement.
If Mr. Seidenberg's employment is terminated as a result of his death or
disability, he will generally receive the same benefits that he would receive if
he were involuntarily terminated without cause. However, no payments will be
made after June 30, 2004. In the case of disability, the monthly payments in
lieu of salary and annual payments in lieu of short-term bonuses will be offset
by any amounts payable under Company-sponsored disability plans.
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35
LAWRENCE T. BABBIO, JR. Mr. Babbio's agreement is effective July 1, 2000,
through June 30, 2003 and replaces all prior agreements. The terms of the
agreement renew automatically so that the agreement always has a term of at
least two years. His agreement provides for:
- - - an annual base salary of at least $1,000,000;
- - - annual short-term bonus between 0 and 2 times base salary;
- - - annual long-term bonus opportunities of at least 5 times base salary beginning
in 2001; and
- - - a one-time retention bonus equal to (i) 100% of his annual base salary, (ii)
50% of his maximum short-term bonus opportunity, and (iii) 100% of his
long-term bonus opportunity, if continuously employed by Verizon through June
30, 2001.
If Mr. Babbio resigns or retires, his salary, benefits, and perquisites cease to
accrue. He will be entitled to any benefits that would be provided to a
similarly situated senior executive upon termination. In addition, any unvested
stock options, other than the Founders' Grant, immediately vest and can be
exercised for five years (subject to the maximum term of the option).
If Mr. Babbio's employment is involuntarily terminated without cause, he will
receive a lump sum payment equal to (i) his base salary, (ii) the greater of 50%
or the percentage awarded in the immediately preceding year of his maximum
short-term bonus opportunity, and (iii) 100% of his long-term bonus opportunity
for the remaining term of employment. This amount will be in lieu of any
payments made under a Company-sponsored severance plan. In addition:
- - - all of his outstanding stock options will vest immediately and will be
exercisable for five years or, if later, until June 30, 2008 (subject to the
maximum term of the option); and
- - - the portion of the one-time grant of restricted stock units that was due to
vest on June 30, 2003, without regard to performance goals, will become
payable on the scheduled date. The remaining portions of that grant will
become payable if Verizon attains the applicable revenue growth and earnings
per share growth goals.
If Mr. Babbio terminates employment for good reason or if his employment
terminates as a result of his death or disability, he will generally receive the
same benefits he would have received if he were involuntarily terminated without
cause. However, his lump sum payment will be offset by amounts payable to him
under any Company-sponsored disability plans.
If Mr. Babbio is terminated for cause, all salary and benefits will cease, and
he will be eligible for any benefits otherwise provided to a similarly situated
senior executive upon termination.
MICHAEL T. MASIN. Mr. Masin's agreement is effective July 1, 2000, through June
30, 2003 and replaces all prior agreements. The terms of the agreement renew
automatically so that the agreement always has a term of at least two years. His
agreement provides for:
- - - an annual base salary of not less than $925,000;
- - - annual short-term bonus between 0 and 2 times base salary;
- - - annual long-term bonus opportunities of at least 5 times base salary beginning
in 2001; and
- - - a one-time retention bonus equal to (i) 100% of his annual base salary, (ii)
50% of his maximum short-term bonus opportunity, and (iii) 100% of his
long-term bonus opportunity, if continuously employed by Verizon through June
30, 2001.
If Mr. Masin resigns or retires his salary, benefits, and perquisites will cease
to accrue. He will be entitled to any benefits that would be provided to a
similarly situated senior executive upon termination. His unvested stock
options, other than the Founders' Grant, immediately vest and can be exercised
for five years (subject to the maximum term of the option).
If Mr. Masin's employment is involuntarily terminated without cause, he will
receive a lump sum payment equal to (i) his base salary, (ii) the greater of 50%
or the percentage awarded in the immediately preceding year of his maximum
short-term bonus opportunity, and (iii) 100% of his long-term bonus opportunity
for the
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36
remaining term of employment. This amount will be in lieu of any payments made
under a Company-sponsored severance plan. In addition:
- - - all of his outstanding stock options will vest immediately and will be
exercisable for five years (subject to the maximum term of the option); and
- - - the portion of the one-time grant of restricted stock units that was due to
vest on June 30, 2003, without regard to performance goals, will become
payable on the scheduled date. The remaining portions of that grant will
become payable if Verizon attains the applicable revenue growth and earnings
per share growth goals.
If Mr. Masin terminates employment for good reason or if his employment
terminates as a result of his death or disability, he will generally receive the
same benefits he would have received if he was involuntarily terminated without
cause. However, his lump sum payment will be offset by amounts payable to him
under any Company-sponsored disability plans.
If Mr. Masin is terminated for cause, all salary and benefits will cease, and he
will be eligible for any benefits otherwise provided to a similarly situated
senior executive upon termination.
FREDERIC V. SALERNO. Mr. Salerno's agreement is effective July 1, 2000, through
June 30, 2003 and replaces all prior agreements. His agreement provides for:
- - - an annual base salary of not less than $810,000;
- - - annual short-term bonus between 0 and 2 times base salary; and
- - - annual long-term bonus opportunities of at least 5 times base salary beginning
in 2001.
If Mr. Salerno resigns or retires, his salary, benefits, and perquisites cease
to accrue. He will be entitled to any benefits that would be provided to a
similarly situated senior executive upon termination. All unvested stock
options, other than the Founders' Grant, immediately vest and can be exercised
for five years (subject to the maximum term of the option).
If Mr. Salerno's employment is involuntary terminated without cause, he will
receive a lump sum payment equal to (i) his base salary, (ii) the greater of 50%
or the percentage awarded in the immediately preceding year of his maximum
short-term bonus opportunity, and (iii) 100% of his long-term bonus opportunity
for the greater of two years or the remaining term of employment. This amount
will be in lieu of any payments made under a Company-sponsored severance plan.
In addition:
- - - all outstanding stock options will vest immediately and can be exercised for
five years or, if later, until June 30, 2006 (subject to the maximum term of
the option); and
- - - the portion of the one-time grant of restricted stock units that was due to
vest on June 30, 2003, without regard to performance goals, will become
payable on the scheduled date. The remaining portions of that grant will
become payable if Verizon attains the applicable revenue growth and earnings
per share growth goals.
If Mr. Salerno terminates employment for good reason or if his employment
terminates as a result of his death or disability, he will generally receive the
same benefits he would have received if he were involuntarily terminated without
cause. However, his lump sum payment will be offset by amounts payable to him
under any Company-sponsored disability plans.
If Mr. Salerno is terminated for cause, all salary and benefits will cease, and
he will be eligible for any benefits otherwise provided to a similarly situated
senior executive upon termination.
DENNIS F. STRIGL. Mr. Strigl's agreement is effective July 1, 2000, through
June 30, 2003 and replaces all prior agreements. The terms of the agreement
renew automatically so that the agreement always has a term of at least two
years. His agreement provides for:
- - - an annual base salary of not less than $750,000, and, effective January 1,
2002, not less than $800,000;
- - - annual short-term bonus between 0 and 2 times base salary;
- - - annual long-term bonus opportunities of at least 5 times base salary beginning
in 2001; and
32
37
- - - a one-time retention bonus equal to (i) 100% of his annual base salary, (ii)
50% of his maximum short-term bonus opportunity, and (iii) 100% of his
long-term bonus opportunity, if continuously employed by Verizon Wireless
through June 30, 2001.
If Mr. Strigl voluntarily terminates employment, all salary, benefits, and
perquisites will cease, and he will be entitled to any benefits otherwise
provided to a similarly situated senior executive upon termination. In addition,
he will forfeit all unvested stock options and unvested restricted stock units.
If Mr. Strigl retires, his salary, benefits, and perquisites will cease. He will
be entitled to any benefits that would be provided to a similarly situated
senior executive upon retirement. His unvested stock options, other than the
Founders' Grant, immediately vest and can be exercised for five years (subject
to the maximum term of the option).
If Mr. Strigl's employment is involuntarily terminated without cause, he will
receive a lump sum payment equal to (i) his base salary, (ii) 50% of his maximum
short-term bonus opportunity, and (iii) 100% of his long-term bonus opportunity
for the remaining term of employment. This amount will be in lieu of any
payments made under a Company-sponsored severance plan. In addition:
- - - all outstanding stock options will vest immediately and can be exercised for
five years (subject to the maximum term of the option); and
- - - the portion of the one-time grant of restricted stock units that was due to
vest on June 30, 2003, without regard to performance goals, will become
payable on the scheduled date. The remaining portions of that grant will
become payable if Verizon attains the applicable revenue growth and earnings
per share growth goals.
If Mr. Strigl terminates employment for good reason or if his employment
terminates as a result of his death or disability, he will generally receive the
same benefits he would have received if he was involuntarily terminated without
cause. However, his lump sum payment will be offset by amounts payable to him
under any Company-sponsored disability plans.
If Mr. Strigl is terminated for cause, all salary and benefits will cease, and
he will be eligible for any benefits otherwise provided to a similarly situated
senior executive upon termination.
33
38
SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS
The Human Resources Committee of the Board has instituted stock ownership
guidelines for all executive officers. Under these guidelines, by the end of a
five-year period each of the Co-Chief Executive Officers is encouraged to
acquire and hold Company shares with a value of five times each individual's
base salary then in effect; other executive officers, depending upon their
position, are encouraged to acquire and hold shares having a value of one to
four times salary. The HRC reviews stock ownership on an annual basis. Board
guidelines encourage Directors of the Company to hold a minimum of 5,000 shares,
to be acquired over a period of up to five years.
On January 31, 2001, there were approximately 2.7 billion shares of Verizon
Communications Inc. common stock outstanding. The table below sets forth
information as of January 31, 2001 regarding: (a) the shares of Verizon common
stock beneficially owned (including shares held in the Company's employee
savings plans) by the named executive officers, each Director and all executive
officers and Directors as a group; (b) the total Verizon stock-based holdings of
the named individuals and the group; and (c) the shares which may be acquired
within 60 days pursuant to the exercise of stock options by the named
individuals and the group. The shares shown in this table, in the aggregate,
represent less than one percent of the total outstanding shares of Verizon.
Except as otherwise noted, each individual and/or his or her family member(s)
have sole or shared voting and/or investment power with respect to the
securities.
The middle column of the table combines beneficial ownership of shares of
Verizon common stock through holdings of (i) deferred stock units by
non-employee Directors (which are payable in cash or shares of Verizon common
stock at the election of the Director and are accrued under deferred
compensation plans) and by executive officers (which are payable in cash
pursuant to deferrals under the Bell Atlantic Income Deferral Plan, the GTE
Executive Salary Deferral Plan, the GTE Executive Incentive Plan and the GTE
Long-Term Incentive Plan); and (ii) restricted stock units by executive officers
(which are payable in shares of Verizon common stock under the GTE Equity
Participation Program).
- - -----------------------------------------------------------------------------------------------------
SHARES BENEFIT PLAN OPTIONS
BENEFICIALLY STOCK-BASED EXERCISABLE
NAME OWNED HOLDINGS(3) WITHIN 60 DAYS
- - -----------------------------------------------------------------------------------------------------
NAMED EXECUTIVE OFFICERS:
Charles R. Lee* 246,492(1) 290,343 2,127,476
Ivan G. Seidenberg* 88,868 475,002 1,410,487
Lawrence T. Babbio, Jr. 275,246 165,692 1,182,058
Michael T. Masin 6,010 178,907 883,686
Frederic V. Salerno 35,319 198,824 762,137
Dennis F. Strigl 57,413 106,462 285,717
OTHER DIRECTORS:
James R. Barker 5,124 120,454 --
Edward H. Budd 5,985 35,695 --
Richard L. Carrion 2,522 4,167 16,250
Robert F. Daniell 3,815 13,995 --
Helene L. Kaplan 11,440 808 16,250
Sandra O. Moose 696(2) 12,216 --
Joseph Neubauer 525 20,210 57,000
Thomas H. O'Brien 3,163 29,958 45,000
Russell E. Palmer 2,684 11,554 --
Hugh B. Price 1,290 1,999 16,250
Walter V. Shipley 12,798 -- 16,250
John W. Snow 2,962 5,140 --
John R. Stafford 13,126 4,168 16,250
Robert D. Storey 854 15,587 --
All of the above and other Executive Officers as a
group 816,580 1,940,895 7,558,128
- - -----------------------------------------------------------------------------------------------------
(*) Also serves as a Director.
(1) Excludes 31,427 shares held in a family trust as to which Mr. Lee disclaims
beneficial ownership.
(2) Excludes 1,500 shares held in a family trust as to which Ms. Moose disclaims
beneficial ownership.
(3) Shares held under deferred compensation plans may not be voted or
transferred.
- - --------------------------------------------------------------------------------
34
39
GRUPO IUSACELL STOCK
The following table indicates the number of Class V Common Shares of Grupo
Iusacell, S.A. de C.V. beneficially owned as of January 31, 2001, by the named
executive officers, each Director and all executive officers and Directors as a
group. Two indirect subsidiaries of the Company own an aggregate of 3.94% of the
outstanding Class V Common Shares of Grupo Iusacell and the remaining Class V
Common Shares of Grupo Iusacell are owned by a private investment group, a Grupo
Iusacell employee benefit plan and the public. Three indirect subsidiaries of
the Company own an aggregate of 68.45% of the outstanding Class A Common Shares
of Grupo Iusacell and the remaining Class A Common Shares of Grupo Iusacell are
owned by a private investment group. The amounts shown in the following table
represent less than 1% of the outstanding Class V Common Shares of Grupo
Iusacell as of January 31, 2001.
- - ------------------------------------------------------------------------------------
GRUPO IUSACELL CLASS V
COMMON SHARES
NAME BENEFICIALLY OWNED(1)
- - ------------------------------------------------------------------------------------
Lawrence T. Babbio, Jr. 13,500(2)
Dennis F. Strigl 15,000
All Directors and Executive Officers as a group 28,500
- - ------------------------------------------------------------------------------------
(1) All of the following Class V Common Shares of Grupo Iusacell are owned in
the form of American Depositary Shares, each representing 10 Class V Common
Shares of Grupo Iusacell.
(2) Options to purchase Class V Common Shares exercisable within 60 days.
- - --------------------------------------------------------------------------------
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
SEC rules require the Company to disclose late filings of stock transaction
reports by its executive officers and Directors. Based solely on a review of
reports filed by the Company on these individuals' behalf and written
representations from them that no other reports were required, all Section 16(a)
filing requirements have been met during calendar year 2000.
35
40
STOCK PERFORMANCE GRAPHS
COMPARISON OF FIVE-YEAR TOTAL RETURN AMONG VERIZON, OTHER RHCS, S&P TELEPHONE
INDEX AND S&P 500 STOCK INDEX
[STOCK PERFORMANCE LINE GRAPH]
DATA POINTS IN DOLLARS*
AT DECEMBER 31, VERIZON OTHER RHCS S&P TELEPHONE S&P 500
- - ----------------------- ------- ---------- ------------- -------
1995 100.00 100.00 100.00 100.00
1996 101.30 98.40 101.00 122.90
1997 148.30 140.50 141.50 163.90
1998 181.80 226.60 207.80 210.80
1999 212.50 234.30 219.10 255.20
2000 177.80 245.60 193.30 231.90
- - ---------------
* Assumes $100 invested on December 31, 1995.
The Company's previous peer group was comprised of the other regional holding
companies, BellSouth Corporation, SBC Communications Inc., and U S WEST Inc.,
which, like the Company, commenced operations on January 1, 1984, following a
court-approved divestiture of certain assets of the Bell System. For purposes of
the total return calculation, data for U S WEST, Inc. common stock includes the
performance of its predecessor tracking stocks (U S WEST Communications Group
common stock and U S WEST Media Group common stock), as well as the common stock
of MediaOne Group, Inc. which resulted from a June 12, 1998 spin off. Due to the
acquisition of both U S WEST, Inc. and MediaOne Group, Inc. in 2000 by companies
not in the peer group, results for both companies are included only through the
full month prior to their acquisitions. As a result of these acquisitions, only
two companies remain in the original peer group. Accordingly, a new peer group,
the Standard & Poor's Telephone Index, has been selected and added to the
comparison above. The S&P Telephone Index, which was the peer group previously
utilized by GTE Corporation, is a capitalization-weighted index of stocks
designed to measure the performance of the telephone sector of the Standard &
Poor's 500 Stock Index. The S&P Telephone Index currently includes the stocks of
Alltel Corp., BellSouth Corporation, CenturyTel Inc., Qwest Communications
International Inc., SBC Communications Inc., and Verizon Communications Inc.
36
41
The following supplemental table presents a comparison of the Company's stock
performance with that of the S&P 500 Stock Index since the Company commenced
operations. None of the elements of executive compensation reported above were
determined on the basis of this comparison.
COMPARISON OF CUMULATIVE TOTAL RETURN
OF VERIZON AND S&P 500 STOCK INDEX
FROM DIVESTITURE THROUGH DECEMBER 31, 2000
[COMPARISON OF CUMULATIVE TOTAL RETURN/VERIZON AND S&P 500 BAR GRAPH]
- - -------------
Verizon 1313%
S&P 500 1197%
- - --------------------------------------------------------------------------------
OTHER BUSINESS
The Company is not aware of any other matters that will be presented at the
Annual Meeting. If other matters are properly introduced, the Proxy Committee
will vote the shares it represents in accordance with its judgment.
By Order of the Board of Directors
Marianne Drost
Senior Vice President,
Deputy General Counsel and
Corporate Secretary
March 12, 2001
37
42
APPENDIX A
- - --------------------------------------------------------------------------------
AUDIT COMMITTEE CHARTER
OF THE AUDIT AND FINANCE COMMITTEE OF THE BOARD OF DIRECTORS
ROLE. The primary function of the Audit Committee is to act on behalf of the
Board of Directors in fulfilling its oversight responsibilities related to the
Corporation's controls, reporting, and audit functions. Consistent with this
oversight function, the Audit Committee shall authorize investigations into any
matters within the Committee's responsibilities and, in doing so, have full
access to the Corporation's records, employees, and independent auditor (with or
without the presence of management).
STRUCTURE. The Audit Committee shall have at least three members and shall
consist solely of independent Directors, consistent with the listing standards
of the New York Stock Exchange. All members of the Committee shall be
financially literate, or shall become financially literate within a reasonable
period of time after appointment to the Committee. One or more of the members
shall be a current or former leader of a business enterprise or shall otherwise
have experience in overseeing financial matters. The Audit Committee shall meet
at least four times annually, or more frequently as circumstances dictate.
RELATIONSHIP WITH INDEPENDENT AND INTERNAL AUDITORS. The Committee and Board of
Directors have the ultimate responsibility to select, evaluate and, where
appropriate, replace the independent auditor (subject to shareholder approval).
The independent auditor in its capacity as an independent public accountant,
shall be responsible to the Board of Directors and the Audit Committee.
Internal Audit shall be responsible to the Board of Directors through the Audit
Committee.
Periodically, the Committee will meet with the independent auditor and with
internal auditors out of the presence of management.
RESPONSIBILITIES AND DUTIES. The Committee's responsibility is oversight and it
recognizes that management of the Corporation is responsible for preparing the
Corporation's financial statements and maintaining effective internal controls
and that the independent auditor is responsible for auditing the Corporation's
financial statements.
Management and the independent auditor have more knowledge and more detailed
information about the Corporation than do Committee members. Accordingly, in
carrying out its oversight responsibilities, the Committee will be relying on
expertise of Management and the independent auditor.
To fulfill this oversight responsibility, the Audit Committee should receive
reports from management and the independent auditor to assess:
Risk Management and Controls.
- - - The Corporation's business risk management process and the adequacy of the
overall control environment, including controls in selected areas representing
financial reporting and significant financial or business risk.
- - - The Annual Scope and Plans of the independent and internal auditors.
- - - Report on the activities of the Verizon Management Audit Committee.
Financial Reporting.
- - - Receive reports of management and the independent auditor on the annual
financial statements and related footnotes and the opinion of the independent
auditor with respect to the financial statements.
- - - Receive reports of management and the independent auditor on any significant
events, transactions, changes in accounting estimates, and changes in
important accounting principles and their application, affecting the quality
of the Corporation's quarterly financial reporting. The Chair of the Committee
may represent the entire Committee for this purpose.
Internal Audit Responsibilities.
- - - Receive reports on the Audit Plan and the process to develop the Plan.
- - - Receive reports on the status of significant findings, recommendations, and
management's responses.
- - - Review the charter, activities, organizational structure, and credentials of
the Internal Audit department.
43
Independent Audit Responsibilities.
- - - Ensure that the independent auditor submits, on a periodic basis, a formal
written statement delineating all relationships between the independent
auditor and the Corporation, as required by the Independence Standards Board,
Standard Number One. The Audit Committee is then responsible for actively
engaging in a dialogue with the independent auditor with respect to any
disclosed relationships or services that may impact the objectivity and
independence of the independent auditor and for recommending that the Board of
Directors take appropriate action, in response to the independent auditor's
report, to satisfy itself of the independent auditor's independence.
- - - Review matters related to the conduct of the annual audit, which are required
to be communicated by SAS 61 and other Generally Accepted Auditing Standards.
- - - Conduct the annual discussion with the independent auditor on the quality and
acceptability of the Corporation's accounting principles.
- - - Review the independent auditor's management letter.
Ethical, Legal and Regulatory Compliance Matters.
- - - The Corporation's processes regarding compliance with applicable laws,
regulations, and its Code of Business Conduct, including those matters that
could have a significant impact on the financial statements, compliance with
policies, and reports from regulators.
- - - Policies and procedures with respect to Executive Officers' expense accounts
and perquisites, including their use of corporate assets (consider the results
of any review of these areas by the internal auditors).
- - - Significant conflicts of interest and related-party transactions.
The adequacy of this Charter annually.
REPORTS. The Committee will report to the Board, at least annually, with
respect to its activities, including the recommendation of the independent
auditor. The Committee shall report to shareholders in the Corporation's proxy
statement for its annual meeting, whether the Committee has satisfied its
responsibilities under this charter.
A-2
44
APPENDIX B
- - --------------------------------------------------------------------------------
VERIZON COMMUNICATIONS INC.
LONG-TERM INCENTIVE PLAN
CONTENTS
Article 1. Restatement, Objectives, and Duration............ B-2
Article 2. Definitions...................................... B-2
Article 3. Administration................................... B-4
Article 4. Shares Subject to the Plan and Maximum Awards.... B-5
Article 5. Eligibility and Participation.................... B-6
Article 6. Stock Options.................................... B-6
Article 7. Restricted Stock and Restricted Stock Units...... B-7
Article 8. Performance Units and Performance Shares......... B-8
Article 9. Other Awards..................................... B-9
Article 10. Award Agreements................................ B-9
Article 11. Performance Measures............................ B-10
Article 12. Beneficiary Designation......................... B-10
Article 13. Deferrals....................................... B-11
Article 14. No Right to Employment or Participation......... B-11
Article 15. Change in Control............................... B-11
Article 16. Amendment, Modification, and Termination........ B-11
Article 17. Withholding..................................... B-11
Article 18. Successors...................................... B-12
Article 19. Legal Construction.............................. B-12
45
ARTICLE 1. RESTATEMENT, OBJECTIVES, AND DURATION
1.1 RESTATEMENT OF THE PLAN. Verizon Communications Inc., a Delaware
corporation (hereinafter referred to as the "Company"), hereby amends and
restates the Bell Atlantic 1985 Incentive Stock Option Plan, as in effect on
January 1, 2001. This amended and restated plan shall be known as the "Verizon
Communications Inc. Long-Term Incentive Plan" (hereinafter referred to as the
"Plan"), as set forth in this document as amended from time to time. The Plan
permits the grant of Nonqualified Stock Options, Incentive Stock Options,
Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units,
and Other Awards, including Stock Appreciation Rights.
The amended and restated Plan shall be effective on the date the Company's
shareholders first approve the Plan (the "Effective Date"), and shall remain in
effect as provided in Section 1.3 hereof.
1.2 OBJECTIVES OF THE PLAN. The objectives of the Plan are to optimize the
profitability and growth of the Company through long-term incentives that are
consistent with the Company's goals and that link the interests of Participants
to those of the Company's shareholders; to provide Participants with incentives
for excellence in individual performance; to provide flexibility to the Company
in its ability to motivate, attract, and retain the services of Participants who
make significant contributions to the Company's success; and to allow
Participants to share in the success of the Company.
1.3 DURATION OF THE PLAN. The Plan shall commence on the Effective Date and
shall remain in effect, subject to the right of the Committee to amend or
terminate the Plan at any time pursuant to Article 16 hereof, until all Shares
subject to the Plan shall have been purchased, acquired, or forfeited, and all
cash Awards shall have been paid or forfeited, pursuant to the Plan's
provisions. In no event, however, may an Award be granted more than ten (10)
years after the Effective Date.
ARTICLE 2. DEFINITIONS
Whenever the following terms are used in the Plan, with their initial letter(s)
capitalized, they shall have the meanings set forth below:
2.1 "AWARD" means, individually or collectively, a grant under the Plan
of Nonqualified Stock Options, Incentive Stock Options, Restricted
Stock, Restricted Stock Units, Performance Shares, Performance Units,
or Other Awards.
2.2 "AWARD AGREEMENT" means an agreement entered into by the Company and
a Participant, or another instrument prepared by the Company in lieu
of such an agreement, setting forth the terms and conditions
applicable to an Award pursuant to Article 10 hereof.
2.3 "BENEFICIAL OWNER" or "BENEFICIAL OWNERSHIP" shall have the meaning
ascribed to such term in Rule 13d-3 of the General Rules and
Regulations under the Exchange Act, as amended from time to time, or
any successor rule.
2.4 "BOARD" or "BOARD OF DIRECTORS" means the Board of Directors of the
Company.
2.5 "CHANGE IN CONTROL" means a change in control of the Company of a
nature that would be required to be reported in response to Item 6(e)
of Schedule 14A of Regulation 14A promulgated under the Exchange Act,
whether or not the Company is then subject to such reporting
requirement; provided that, without limitation, such a Change in
Control shall be deemed to have occurred if:
(a) Any Person becomes a Beneficial Owner of shares of one or more
classes of stock of the Company representing twenty percent (20%)
or more of the total voting power of the Company's then outstanding
voting stock; or
(b) The Company and any Person consummate a merger, consolidation,
reorganization, or other business combination; or
(c) The Board adopts resolutions authorizing the liquidation or
dissolution, or sale to any Person of all or substantially all of
the assets, of the Company.
B-2
46
Notwithstanding the provisions of Section 2.5 (a), (b), and (c) hereof, a
Change in Control shall not occur if:
(i) The Company's voting stock outstanding immediately before the
consummation of the transaction will represent no less than
forty-five percent (45%) of the combined voting power entitled to
vote for the election of directors of the surviving parent
corporation immediately following the consummation of the
transaction; and
(ii) Members of the Incumbent Board will constitute at least one-half
of the board of directors of the surviving parent corporation;
and
(iii) The Chief Executive Officer or co-Chief Executive Officer of the
Company will be the chief executive officer or co-chief executive
officer of the surviving parent corporation; and
(iv) The headquarters of the surviving parent corporation will be
located in New York, New York.
For the purposes of this Section 2.5, "Person" means any corporation,
partnership, firm, joint venture, association, individual, trust, or
other entity, but does not include the Company or any of its wholly-owned
or majority-owned subsidiaries, employee benefit plans, or related
trusts; and "Incumbent Board" means those persons who either (A) have
been members of the Board of Directors of the Company since June 30,
2000, or (B) are new Directors whose election by the Board of Directors
or nomination for election by the shareholders of the Company was
approved by a vote of at least three-fourths of the members of the
Incumbent Board then in office who either were Directors described in
clause (A) hereof or whose election or nomination for election was
previously so approved, but shall not include any Director elected as a
result of an actual or threatened solicitation of proxies by any Person.
2.6 "CODE" means the Internal Revenue Code of 1986, as amended from time
to time.
2.7 "COMMITTEE" means the Human Resources Committee of the Board or any
other committee appointed by the Board to administer the Plan and
Awards to Participants who are Employees, as specified in Article 3
hereof.
2.8 "COMPANY" means Verizon Communications Inc., a Delaware corporation,
and any successor thereto as provided in Article 18 hereof.
2.9 "DIRECTOR" means any individual who is a member of the Board.
2.10 "EFFECTIVE DATE" shall have the meaning ascribed to such term in
Section 1.1 hereof.
2.11 "EMPLOYEE" means any employee of the Company or of a Subsidiary.
Directors who are employed by the Company or by a Subsidiary shall be
considered Employees under the Plan.
2.12 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor statute.
2.13 "FAIR MARKET VALUE" means the average of the high and low sales
prices of Shares on the principal securities exchange on which the
Shares are traded or, if there are no such sales on the relevant
date, then the average of the high and low sales prices of Shares on
the date or dates that the Committee determines, in its sole
discretion, to be appropriate for purposes of valuation.
2.14 "FREESTANDING SAR" means an SAR that is granted independently of any
Option, as described in Sections 9.2 through 9.6 hereof.
2.15 "INCENTIVE STOCK OPTION" or "ISO" means an Option that is designated
by the Committee as an Incentive Stock Option.
2.16 "INSIDER" means an individual who is, on the relevant date, subject
to the reporting requirements of Section 16(a) of the Exchange Act.
2.17 "1985 PLAN" means the Bell Atlantic 1985 Incentive Stock Option Plan,
as in effect on January 1, 2001.
2.18 "NON-EMPLOYEE DIRECTOR" means (a) a Director who is not an Employee
or (b) a member of the board of directors (or comparable governing
body) of a Subsidiary who is not an Employee.
B-3
47
2.19 "NONQUALIFIED STOCK OPTION" or "NQSO" means an Option that is not
designated by the Committee as an Incentive Stock Option.
2.20 "OPTION" means an Incentive Stock Option or a Nonqualified Stock
Option granted pursuant to Article 6 hereof.
2.21 "OPTION PRICE" means the price at which a Share may be purchased by a
Participant pursuant to an Option, as provided in Section 6.2 hereof.
2.22 "OTHER AWARD" means an Award granted to a Participant pursuant to
Article 9 hereof.
2.23 "PARTICIPANT" means an Employee or Non-Employee Director who has been
selected to receive an Award or who holds an outstanding Award.
2.24 "PERFORMANCE-BASED EXCEPTION" means the performance-based exception
from the tax deductibility limitation imposed by Code Section 162(m),
as set forth in Code Section 162(m)(4)(C).
2.25 "PERFORMANCE PERIOD" means the period during which performance goals
must be met for purposes of Article 8 hereof.
2.26 "PERFORMANCE SHARE" means an Award granted pursuant to Article 8
hereof, which, on the date of grant, shall have a value equal to the
Fair Market Value of a Share on that date.
2.27 "PERFORMANCE UNIT" means an Award granted pursuant to Article 8
hereof, which shall have an initial value established by the
Committee on the date of grant.
2.28 "PLAN" means the Verizon Communication Inc. Long-Term Incentive Plan
as set forth herein and as it may be amended from time to time.
2.29 "RELOAD OPTION" means an Option granted pursuant to Section 6.5
hereof.
2.30 "RESTRICTED STOCK" means an Award granted pursuant to Section 7.1
hereof.
2.31 "RESTRICTED STOCK UNIT" means an Award granted pursuant to Section
7.5 hereof.
2.32 "RESTRICTION PERIOD" means the period during which the transfer of
Shares of Restricted Stock is limited in some way (based on the
passage of time, the achievement of performance goals, or the
occurrence of other events determined by the Committee in its
discretion), and the Shares are subject to a substantial risk of
forfeiture, as provided in Article 7 hereof.
2.33 "SHARE" means a share of common stock of the Company.
2.34 "SHARE POOL" means the number of Shares available under Section 4.1
hereof, as adjusted pursuant to Sections 4.2 and 4.3 hereof.
2.35 "STOCK APPRECIATION RIGHT" or "SAR" means an Award, granted either
alone or in connection with a related Option, pursuant to the terms
of Sections 9.2 through 9.6 hereof.
2.36 "SUBSIDIARY" means (a) a corporation, partnership, joint venture, or
other entity in which the Company has an ownership interest of at
least fifty percent (50%), and (b) any corporation, partnership,
joint venture, or other entity in which the Company holds an
ownership interest of less than fifty percent (50%) but which, in the
discretion of the Committee, is treated as a Subsidiary for purposes
of the Plan.
2.37 "TANDEM SAR" means an SAR granted with respect to a Share pursuant to
Sections 9.2 through 9.6 hereof in connection with a related Option,
under which (a) the exercise of the SAR with respect to the Share
shall cancel the right to purchase such Share under the related
Option and (b) the purchase of the Share under the related Option
shall cancel the right to exercise the SAR with respect to such
Share.
ARTICLE 3. ADMINISTRATION
3.1 GENERAL. Except as otherwise determined by the Board in its discretion,
the Plan shall be administered by the Committee, which shall consist exclusively
of two (2) or more nonemployee directors within the meaning of the rules
promulgated by the Securities and Exchange Commission under Section 16 of the
Exchange Act who
B-4
48
also qualify as outside directors within the meaning of Code Section 162(m) and
the related regulations under the Code. The members of the Committee shall be
appointed from time to time by, and shall serve at the discretion of, the Board.
The Committee shall have the authority to delegate administrative duties,
including the authority to respond to and decide claims or appeals under the
Plan and to interpret the Plan terms, to the Executive Vice President-Human
Resources of the Company. The Committee may not delegate its authority with
respect to (a) non-ministerial actions with respect to Insiders; (b)
non-ministerial actions with respect to Awards that are intended to qualify for
the Performance-Based Exception; and (c) certifying that any performance goals
and other material terms attributable to Awards intended to qualify for the
Performance-Based Exception have been satisfied.
3.2 AUTHORITY OF THE COMMITTEE. Except as limited by law or by the Certificate
of Incorporation or Bylaws of the Company, and subject to the provisions hereof,
the Committee shall have full power in its discretion to select Employees who
shall participate in the Plan; determine the sizes and types of Awards;
determine the terms and conditions of Awards in a manner consistent with the
Plan; construe and interpret the Plan and any Award Agreement or other agreement
or instrument entered into or issued under the Plan; establish, amend, or waive
rules and regulations for the Plan's administration; and (subject to the
provisions of Article 16 hereof) amend the terms and conditions of any
outstanding Award as provided in the Plan. Further, the Committee shall make all
other determinations that may be necessary or advisable for the administration
of the Plan. With respect to the Non-Employee Directors, the authority conferred
by this Section 3.2 shall rest with the Corporate Governance Committee of the
Board.
3.3 DECISIONS BINDING. All determinations and decisions made by the Committee
or the Corporate Governance Committee of the Board pursuant to the provisions of
the Plan and all related orders and resolutions of such committee shall be
final, conclusive, and binding on all persons, including the Company, its
shareholders, Directors, Non-Employee Directors, Employees, Participants, and
their estates and beneficiaries.
3.4 PERFORMANCE-BASED AWARDS. For purposes of the Plan, it shall be presumed,
unless the Committee indicates to the contrary, that all Awards to Employees are
intended to qualify for the Performance-Based Exception. If the Committee does
not intend an Award to an Employee to qualify for the Performance-Based
Exception, the Committee shall reflect its intent in its records in such manner
as the Committee determines to be appropriate.
ARTICLE 4. SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS
4.1 NUMBER OF SHARES AVAILABLE FOR GRANTS. Shares that may be issued pursuant
to Awards may be either authorized and unissued Shares, or authorized and issued
Shares held in the Company's treasury, or any combination of the foregoing.
Subject to adjustment as provided in Section 4.3 hereof, (a) there shall be
reserved for issuance under Awards 200,000,000 Shares, (b) not more than
30,000,000 of such Shares may be used for Awards other than Options, and (c) not
more than 60,000,000 of such Shares shall be available for issuance pursuant to
the exercise of Incentive Stock Options. Shares covered by Awards that are
canceled or forfeited may be reused to make Awards. The maximum aggregate number
of Shares with respect to which Awards may be granted in a single calendar year
to an individual Participant may not exceed the lesser of (i) one-half of one
percent of the total number of Shares that are issued and outstanding on the
Effective Date or (ii) 13,500,000 Shares.
4.2 SHARE POOL ADJUSTMENTS. (a) The following Awards and Payouts shall reduce,
on a Share-for Share basis, the number of Shares available for issuance under
the Share Pool:
(1) An Award of an Option (including a Reload Option);
(2) An Award of an SAR (except a Tandem SAR);
(3) An Award of Restricted Stock;
(4) An Award of a Restricted Stock Unit payable in Shares;
(5) An Award of a Performance Share;
(6) An Award of a Performance Unit payable in Shares; and
(7) Other Awards payable in Shares.
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(b) The following transactions shall restore, on a one-for-one basis, the number
of Shares available for issuance under the Share Pool:
(1) A payout of an SAR, Tandem SAR, Restricted Stock Award, or Restricted
Stock Unit in the form of cash, or a payout of Performance Units,
Performance Shares, or Other Award in the form of cash (if originally
awarded in Shares);
(2) A cancellation, termination, expiration, or forfeiture for any reason
(with the exception of the termination of a Tandem SAR upon exercise
of the related Option, or the termination of a related Option upon
exercise of the corresponding Tandem SAR) of any Award payable in
Shares or Shares subject to an Award; and
(3) Payment of an Option Price or tax withholding obligation with
previously acquired Shares or by withholding Shares that otherwise
would be acquired on exercise (i.e., the Share Pool shall be increased
by the number of Shares turned in or withheld as payment of the Option
Price or tax withholding obligation).
4.3 ADJUSTMENTS IN AUTHORIZED SHARES. In the event of any change in corporate
capitalization, such as a stock split, or a corporate transaction, such as any
merger, consolidation, separation, including a spin-off, or other distribution
of stock or property of the Company, any reorganization (whether or not such
reorganization comes within the definition of such term in Code Section 368) or
any partial or complete liquidation of the Company, such adjustment shall be
made in the number and class of Shares available for grants under Section 4.1
hereof, in the number and class of and/or price of Shares subject to outstanding
Awards, and in the per-Participant Award limit set forth in Section 4.1 hereof,
as may be determined to be appropriate and equitable by the Committee, in its
discretion, to prevent dilution or enlargement of the benefits available under
the Plan and of the rights of Participants; provided that the number of Shares
subject to any Award shall always be a whole number. In a stock-for-stock
acquisition of the Company, the Committee may, in its discretion, substitute
securities of another issuer for any Shares subject to outstanding Awards.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1 ELIGIBILITY. All Employees and Non-Employee Directors are eligible to
participate in the Plan.
5.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the Committee
may, from time to time, select from all Employees those to whom Awards shall be
granted and shall determine the nature and size of each Award. The Corporate
Governance Committee of the Board shall determine the Awards to be granted to
the Non-Employee Directors in accordance with the Company's compensation program
for Non-Employee Directors.
ARTICLE 6. STOCK OPTIONS
6.1 GRANT OF OPTIONS. Subject to the terms of the Plan, Options may be granted
to Participants in such number, and upon such terms, and at any time and from
time to time as shall be determined by the Committee.
6.2 OPTION PRICE. The Option Price under each Option shall be not less than
one hundred percent (100%) of the Fair Market Value of a Share on the date the
Option is granted. The Committee may not re-price a previously granted Option.
6.3 TERM OF OPTIONS. Each Option granted to a Participant shall expire at such
time as the Committee shall determine at the time of grant; provided that no
Option shall be exercisable after the tenth (10th) anniversary of its date of
grant.
6.4 EXERCISE OF OPTIONS. Options granted under this Article 6 shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall in each instance approve, which need not be the same for
each grant or for each Participant. Options shall be exercised by the delivery
of a written notice of exercise to the Company, setting forth the number of
Shares with respect to which the Option is to be exercised, accompanied by full
payment for the Shares.
6.5 RELOAD OPTIONS. Notwithstanding any other provision of the Plan to the
contrary, the Committee may at the time an Option is granted provide for the
automatic granting of Options ("Reload Options") to a Participant upon the
exercise by such Participant of Options ("Predecessor Options") in transactions
in which
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previously owned Shares are tendered by such Participant to pay the Option
Price. In such cases, the number of Reload Options that shall automatically be
granted by the Company to the Participant shall be equal to the number of Shares
tendered by the Participant to pay such Option Price.
The Option Price under each Reload Option shall be equal to the Fair Market
Value of a Share on the date on which the Reload Option is automatically
granted, and such Reload Option shall expire on the same date as the Predecessor
Option would have expired in the absence of being exercised. Reload Options
shall be exercisable by the Participant after the date on which they are
granted, subsequent to any waiting period that the Committee with the advice of
counsel determines is necessary or appropriate to conform with legal or
accounting requirements.
Except as otherwise provided in this Section 6.5, the terms and conditions
applicable to the Reload Options shall be the same as those that apply to other
Options described in this Article 6.
6.6 PAYMENT. When an Option is exercised, the Option Price shall be payable to
the Company in full either:
(a) In cash or its equivalent; or
(b) By tendering previously acquired Shares having an aggregate Fair
Market Value at the time of exercise equal to the total Option Price
(provided that the Shares that are tendered must have been held by the
Participant for at least six (6) months prior to their tender to
satisfy the Option Price); or
(c) By a combination of (a) and (b).
The Committee also may allow broker-assisted exercise as permitted under Federal
Reserve Board's Regulation T, subject to applicable securities law restrictions,
or by any other means that the Committee determines to be consistent with the
Plan's purpose and applicable law.
Subject to any governing rules or regulations, as soon as practicable after
receipt of a written notification of exercise and full payment of the Option
Price, the Company shall deliver to the Participant, in the Participant's name
(or, at the direction of the Participant, jointly in the names of the
Participant and the Participant's spouse), one or more Share certificates for
the Shares purchased under the Option(s).
6.7 LIMITATIONS ON ISOS. Notwithstanding anything in the Plan to the contrary,
to the extent required from time to time by the Code and/or applicable
regulations, the following additional provisions shall apply to the grant of
Options that are intended to qualify as ISOs:
(a) FAIR MARKET VALUE LIMITATION. The aggregate Fair Market Value
(determined as of the date the ISO is granted) of the Shares with
respect to which ISOs are exercisable for the first time by any
Participant during any calendar year (under all plans of the Company
(or any parent or subsidiary corporation within the meaning of Code
Section 424) shall not exceed one hundred thousand dollars ($100,000)
or such other amount as may subsequently be specified by the Code
and/or applicable regulations; provided that, to the extent that such
limitation is exceeded, any Options on Shares with a Fair Market Value
in excess of such amount shall be deemed to be NQSOs.
(b) CODE SECTION 422. ISOs shall contain such other provisions as the
Committee shall deem advisable, but shall in all events be consistent
with and contain or be deemed to contain all provisions required in
order to qualify as ISOs. Moreover, all ISOs must be granted within
ten (10) years from the earlier of the date on which the Plan was
adopted by the Board or the date the Plan was approved by
shareholders.
ARTICLE 7. RESTRICTED STOCK AND RESTRICTED STOCK UNITS
7.1 GRANT OF RESTRICTED STOCK. Subject to the terms and provisions of the
Plan, the Committee, at any time and from time to time, may grant Shares of
Restricted Stock to Participants in such amounts as the Committee shall
determine.
7.2 RESTRICTIONS. (a) Subject to Article 11 hereof, the Committee shall
impose such conditions and/or restrictions on any Shares of Restricted Stock as
the Committee may determine including, without limitation, a requirement that
Participants pay a stipulated purchase price for each Share of Restricted Stock,
transfer restrictions, restrictions based upon the achievement of specific
performance goals (Company-wide, divisional,
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and/or individual), time-based restrictions on vesting following the attainment
of the performance goals, and/or restrictions under applicable federal or state
securities laws.
(b) The Company may retain the certificates representing Shares of Restricted
Stock in the Company's possession until such time as all conditions and/or
restrictions applicable to such Shares have been satisfied.
(c) Except as otherwise provided in this Article 7, Shares of Restricted Stock
that have not yet been forfeited or canceled shall become freely transferable
(subject to any restrictions under applicable securities laws) by the
Participant after the last day of the applicable Restriction Period.
7.3 VOTING RIGHTS. Participants holding Shares of Restricted Stock may be
granted full voting rights with respect to those Shares during the Restriction
Period.
7.4 DIVIDENDS AND OTHER DISTRIBUTIONS. During the Restriction Period,
Participants holding Shares of Restricted Stock may be credited with regular
cash dividends paid with respect to such Shares while they are so held. The
Committee may apply any restrictions to the dividends that the Committee deems
appropriate. Without limiting the generality of the preceding sentence, if the
grant or vesting of Restricted Stock is designed to comply with the requirements
of the Performance-Based Exception, the Committee may apply any restrictions it
deems appropriate to the payment of dividends declared with respect to such
Restricted Stock, so that the dividends and/or the Restricted Stock shall be
eligible for the Performance-Based Exception.
7.5 RESTRICTED STOCK UNITS. In lieu of or in addition to any Awards of
Restricted Stock, the Committee may grant Restricted Stock Units to any
Participant, subject to the terms and conditions of this Article 7 being applied
to such Awards as if those Awards were for Restricted Stock and subject to such
other terms and conditions as the Committee may determine (including, but not
limited to, requiring or permitting deferral of the payment of such Awards after
the time that Participants become vested in them, notwithstanding any provision
to the contrary in Section 7.2 hereof). Each Restricted Stock Unit shall have
the value of one Share. Restricted Stock Units may be paid at such time as the
Committee may determine in its discretion, and payments may be made in a lump
sum or in installments, in cash, Shares, or a combination thereof, as determined
by the Committee in its discretion.
ARTICLE 8. PERFORMANCE UNITS AND PERFORMANCE SHARES
8.1 GRANT OF PERFORMANCE UNITS/SHARES. Subject to the terms of the Plan,
Performance Units, and/or Performance Shares may be granted to Participants in
such amounts and upon such terms, and at any time and from time to time, as
shall be determined by the Committee.
8.2 VALUE OF PERFORMANCE UNITS/SHARES. Each Performance Unit shall have an
initial value that is established by the Committee at the time of grant. Each
Performance Share shall have an initial value equal to the Fair Market Value of
a Share on the date of grant. The Committee shall set performance goals in its
discretion that, depending on the extent to which they are met, shall determine
the number and/or value of Performance Units/Shares that shall be paid out to
the Participant.
8.3 EARNING OF PERFORMANCE UNITS/SHARES. Subject to the terms of the Plan,
after the applicable Performance Period has ended, the holder of Performance
Units/Shares shall be entitled to receive payout with respect to the number and
value of Performance Units/Shares earned by the Participant over the Performance
Period, to be determined as a function of the extent to which the corresponding
performance goals have been achieved.
8.4 FORM AND TIMING OF PAYMENT OF PERFORMANCE UNITS/SHARES. (a) Unless the
Committee determines otherwise in its discretion, payment of earned Performance
Units/Shares shall be made in a single lump sum following the close of the
applicable Performance Period. Subject to the terms of the Plan, the Committee,
in its discretion, may direct that earned Performance Units/Shares be paid in
the form of cash or Shares (or in a combination thereof) that have an aggregate
Fair Market Value equal to the value of the earned Performance Units/Shares on
the last trading day immediately before the close of the applicable Performance
Period. Such Shares may be granted subject to any restrictions deemed
appropriate by the Committee.
(b) At the discretion of the Committee, Participants may be entitled to receive
any dividends declared with respect to Shares that have been earned in
connection with grants of Performance Units and/or Performance Shares that have
been earned, but not yet distributed to Participants; such dividends shall be
subject to the same accrual, forfeiture, and payout restrictions as apply to
dividends earned with respect to Shares of
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Restricted Stock set forth in Section 7.4 hereof. In addition, Participants may,
at the discretion of the Committee, be entitled to exercise voting rights with
respect to such Shares.
ARTICLE 9. OTHER AWARDS
9.1 IN GENERAL. Subject to the terms of the Plan, the Committee may grant any
types of Awards other than those that are specifically set forth in Articles 6
through 8 hereof, including, but not limited to, SARs and the payment of Shares
in lieu of cash under any Company incentive bonus plan or program. Subject to
the terms of the Plan, including the remaining provisions of this Article 9, the
Committee, in its sole discretion, shall determine the terms and conditions of
such Other Awards.
9.2 GRANT OF SARS. Subject to the terms and conditions of the Plan, SARs may
be granted to Participants at any time and from time to time as shall be
determined by the Committee. The Committee may grant Freestanding SARs, Tandem
SARs, or any combination of these forms of SAR.
The Committee shall have complete discretion in determining the number of SARs
granted to each Participant (subject to Article 4 hereof) and, consistent with
the provisions of the Plan, in determining the terms and conditions pertaining
to such SARs.
The grant price of a Freestanding SAR shall equal the Fair Market Value of a
Share on the date of grant of the SAR. The grant price of Tandem SARs shall
equal the Option Price of the related Option.
9.3 EXERCISE OF TANDEM SARS. Tandem SARs may be exercised for all or part of
the Shares subject to the related Option upon the surrender of the right to
exercise the equivalent portion of the related Option. A Tandem SAR may be
exercised only with respect to the Shares for which its related Option is then
exercisable.
Notwithstanding any other provision of the Plan to the contrary, with respect to
a Tandem SAR granted in connection with an ISO: (a) the Tandem SAR shall expire
no later than the expiration of the ISO; (b) the value of the payout with
respect to the Tandem SAR shall not exceed the excess of the Fair Market Value
of the Shares subject to the ISO at the time the Tandem SAR is exercised over
the Option Price under the ISO; and (c) the Tandem SAR may be exercised only
when the Fair Market Value of the Shares subject to the ISO exceeds the Option
Price of the ISO.
9.4 EXERCISE OF FREESTANDING SARS. Freestanding SARs may be exercised upon
whatever terms and conditions the Committee, in its discretion, imposes upon
them, subject, however, to the terms of the Plan.
9.5 TERM OF SARS. The term of an SAR shall be determined by the Committee, in
its discretion; provided that such term shall not exceed ten (10) years.
9.6 PAYMENT OF SAR AMOUNT. Upon exercise of an SAR, a Participant shall be
entitled to receive payment from the Company in an amount determined by
multiplying:
(a) The excess of the Fair Market Value of a Share on the date of exercise
over the grant price, by
(b) The number of Shares with respect to which the SAR is exercised.
At the discretion of the Committee, the payment upon SAR exercise may be in
cash, in Shares of equivalent Fair Market Value, or in some combination thereof.
ARTICLE 10. AWARD AGREEMENTS
10.1 IN GENERAL. Each Award shall be evidenced by an Award Agreement that
shall include such provisions as the Committee shall determine and that shall
specify
(a) In the case of an Option, the number of the Shares to which the Option
pertains, the Option Price, the term of the Option, the schedule on
which the Option becomes exercisable, and whether the Option is
intended to be an ISO or an NQSO;
(b) In the case of Restricted Stock or Restricted Stock Units, the number
of Shares of Restricted Stock or Restricted Stock Units granted, the
applicable restrictions, and the Restriction Period(s);
(c) In the case of Performance Units or Performance Shares, the number of
Performance Units or Performance Shares granted, the initial value of
a Performance Unit (if applicable), and the performance goals; and
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(d) In the case of an SAR, the number of Shares to which the SAR pertains,
the grant price, the term of the SAR, the schedule on which the SAR
becomes exercisable, and whether the SAR is a Freestanding SAR or a
Tandem SAR.
10.2 SEVERANCE FROM SERVICE. Each Award Agreement shall set forth the extent
to which the Participant shall have rights under the Award following the
Participant's severance from service with the Company and its Subsidiaries. The
Award Agreement may make distinctions based on the reason for the Participant's
severance from service.
10.3 RESTRICTIONS ON TRANSFERABILITY. Subject to the provisions of the Plan,
each Award Agreement shall set forth such restrictions on the transferability of
the Award and on the transferability of Shares acquired pursuant to the Award as
the Committee may deem advisable, including, without limitation, restrictions
under applicable securities laws, under the requirements of any stock exchange
or market upon which such Shares are then listed and/or then traded, and under
any blue sky or state securities laws applicable to such Shares. In the case of
an ISO (and in the case of any other Award, except as otherwise provided in the
Award Agreement), a Participant's Award may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than by will or by the
laws of descent and distribution, and shall be exercisable during the
Participant's lifetime only by the Participant.
10.4 UNIFORMITY NOT REQUIRED. The provisions of the Award Agreements need not
be uniform among all Awards, among all Awards of the same type, among all Awards
granted to the same Participant, or among all Awards granted at the same time.
ARTICLE 11. PERFORMANCE MEASURES
Unless and until the Company's shareholders approve a change in the general
performance measures set forth in this Article 11, the attainment of which may
determine the degree of payout and/or vesting with respect to Awards that are
designed to qualify for the Performance-Based Exception, the performance
measure(s) to be used for purposes of such grants may be measured at the Company
level, at a subsidiary level, or at an operating unit level, and shall be chosen
from among:
(a) Income measures (including, but not limited to, gross profit,
operating income, earnings before or after taxes, or earnings per
share);
(b) Return measures (including, but not limited to, return on assets,
investment, equity, or sales);
(c) Cash flow return on investments, which equals net cash flows divided
by owners equity;
(d) Gross revenues;
(e) Marked value added;
(f) Economic value added; and
(g) Share price (including, but not limited to, growth measures and total
shareholder return).
The Committee shall have the discretion to adjust the determinations of the
degree of attainment of the preestablished performance goals; provided that
Awards that are designed to qualify for the Performance-Based Exception may not
be adjusted upward (although the Committee shall retain the discretion to adjust
such Awards downward).
In the case of any Award that is granted subject to the condition that a
specified performance measure be achieved, no payment under such Award shall be
made prior to the time that the Committee certifies in writing that the
performance measure has been achieved. For this purpose, approved minutes of the
Committee meeting at which the certification is made shall be treated as a
written certification. No such certification is required, however, in the case
of an Award that is based solely on an increase in the value of a Share from the
date such Award was made.
ARTICLE 12. BENEFICIARY DESIGNATION
Each Participant may, from time to time, name any beneficiary or beneficiaries
(who may be named contingently or successively) to whom any benefit under the
Plan is to be paid in case of the Participant's death before the Participant
receives any or all of such benefit. Each such designation shall revoke all
prior
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designations by the same Participant with respect to such benefit, shall be in a
form prescribed by the Company, and shall be effective only when filed by the
Participant in writing with the Company during the Participant's lifetime. In
the absence of any such designation, any benefits remaining unpaid under the
Plan at the Participant's death shall be paid to the Participant's estate unless
otherwise provided in the Award Agreement.
ARTICLE 13. DEFERRALS
The Committee may permit or require a Participant to defer receipt of the
payment of cash or the delivery of Shares that would otherwise be due pursuant
to the exercise of an Option or SAR, the lapse or waiver of restrictions with
respect to Restricted Stock or Restricted Stock Units, the satisfaction of any
requirements or goals with respect to Performance Units/Shares, or in connection
with any Other Awards. If any such deferral is required or permitted, the
Committee shall, in its discretion, establish rules and procedures for such
deferrals. All amounts previously deferred under the 1985 Plan shall remain
deferred pursuant to the rules and procedures applicable to such deferrals as
amended from time to time.
ARTICLE 14. NO RIGHT TO EMPLOYMENT OR PARTICIPATION
14.1 EMPLOYMENT. The Plan shall not interfere with or limit in any way the
right of the Company or of any Subsidiary to terminate any Employee's employment
at any time, and the Plan shall not confer upon any Employee the right to
continue in the employ of the Company or of any Subsidiary.
14.2 PARTICIPATION. No Employee or Non-Employee Director shall have the right
to be selected to receive an Award or, having been so selected, to be selected
to receive a future Award.
ARTICLE 15. CHANGE IN CONTROL
15.1 OUTSTANDING AWARDS. Upon the occurrence of a Change in Control, any and
all then-outstanding Options and SARs shall become immediately exercisable, and
any restriction periods and restrictions imposed on then-outstanding Awards
shall lapse.
15.2 POOLING OF INTERESTS ACCOUNTING. Notwithstanding any other provision of
the Plan to the contrary, if the consummation of a Change in Control or other
transaction is contingent on using pooling of interests accounting methodology,
the Committee may take any action necessary to preserve the use of pooling of
interests accounting (including, but not limited to, rescinding any Award).
ARTICLE 16. AMENDMENT, MODIFICATION, AND TERMINATION
16.1 AMENDMENT, MODIFICATION, AND TERMINATION. Subject to the terms of the
Plan, the Committee may at any time and from time to time, alter, amend,
suspend, or terminate the Plan in whole or in part; provided that unless the
Committee specifically provides otherwise, any revision or amendment that would
cause the Plan to fail to comply with any requirement of applicable law,
regulation, or rule if such amendment were not approved by the shareholders of
the Company shall not be effective unless and until shareholder approval is
obtained.
16.2 AWARDS PREVIOUSLY GRANTED. Notwithstanding any other provision of the
Plan to the contrary (but subject to Sections 1.1 and 15.2 hereof), no
termination, amendment, or modification of the Plan shall cause, without the
consent of the Participant, any previously granted Awards to be forfeited or
altered in a way that adversely affects the Participant. After the termination
of the Plan, any previously granted Award shall remain in effect and shall
continue to be governed by the terms of the Plan, the Award, and any applicable
Award Agreement. All Awards previously granted under the 1985 Plan shall be
governed by the terms and conditions of the 1985 Plan.
ARTICLE 17. WITHHOLDING
17.1 TAX WITHHOLDING. The Company and its Subsidiaries shall have the power
and the right to deduct or withhold, or to require a Participant to remit to the
Company or to a Subsidiary, an amount that the Company or a Subsidiary
reasonably determines to be required to comply with federal, state, local, or
foreign tax withholding requirements.
17.2 SHARE WITHHOLDING. With respect to withholding required upon the exercise
of Options or SARs, upon the lapse of restrictions on Restricted Stock, or upon
any other taxable event arising as a result of Awards
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granted hereunder, Participants may elect, subject to the approval of the
Committee, to satisfy the withholding requirement, in whole or in part, by
having the Company withhold Shares having a Fair Market Value on the date the
tax is to be determined equal to the minimum statutory withholding tax that
could be imposed on the transaction. All such elections shall be irrevocable,
made in writing, signed by the Participant, and shall be subject to any
restrictions or limitations that the Committee, in its discretion, deems
appropriate.
ARTICLE 18. SUCCESSORS
All obligations of the Company under the Plan with respect to Awards granted
hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.
ARTICLE 19. LEGAL CONSTRUCTION
19.1 GENDER AND NUMBER. Except where otherwise indicated by the context, any
masculine term used herein also shall include the feminine; any feminine term
used herein also shall include the masculine; and the plural shall include the
singular and the singular shall include the plural.
19.2 SEVERABILITY. If any provision of the Plan shall be held illegal or
invalid for any reason, such illegality or invalidity shall not affect the
remaining parts of the Plan, and the Plan shall be construed and enforced as if
the illegal or invalid provision had not been included.
19.3 REQUIREMENTS OF LAW. The granting of Awards and the issuance of Shares
under the Plan shall be subject to all applicable laws, rules, and regulations,
and to such approvals by any governmental agencies or national securities
exchanges as may be required.
19.4 GOVERNING LAW. The Plan and all Award Agreements shall be construed in
accordance with and governed by the laws of the State of Delaware (without
regard to the legislative or judicial conflict of laws rules of any state),
except to the extent superseded by federal law.
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APPENDIX C
- - --------------------------------------------------------------------------------
VERIZON COMMUNICATIONS INC.
SHORT-TERM INCENTIVE PLAN
CONTENTS
Article 1. Establishment, Objectives, and Duration.......... C-2
Article 2. Definitions...................................... C-2
Article 3. Administration................................... C-4
Article 4. Eligibility and Participation.................... C-4
Article 5. Awards........................................... C-4
Article 6. Beneficiary Designation.......................... C-5
Article 7. Deferrals........................................ C-5
Article 8. No Right to Employment or Participation.......... C-6
Article 9. Change in Control................................ C-6
Article 10. Amendment, Modification, and Termination........ C-6
Article 11. Withholding..................................... C-7
Article 12. Successors...................................... C-7
Article 13. Legal Construction.............................. C-7
57
ARTICLE 1. ESTABLISHMENT, OBJECTIVES, AND DURATION
1.1 ESTABLISHMENT OF THE PLAN. Verizon Communications Inc., a Delaware
corporation (the "Company"), hereby establishes an incentive compensation plan
to be known as the "Verizon Communications Inc. Short-Term Incentive Plan" (the
"Plan"), as set forth herein and as it may be amended from time to time.
The Plan shall become effective as of the date the Company's shareholders first
approve the Plan (the "Effective Date"), and shall remain in effect as provided
in Section 1.3 hereof.
1.2 OBJECTIVES OF THE PLAN. The primary objective of the Plan is to
facilitate the Company's ability to achieve its short-term financial and
operating goals by offering key Employees annual incentives. Under the Plan,
Awards are made based on Participants' achievement of key goals at the
corporate, business unit, and/or individual level.
1.3 DURATION OF THE PLAN. The Plan shall commence on the Effective Date and
shall remain in effect, subject to the right of the Committee to amend or
terminate the Plan at any time pursuant to Article 10 hereof, until the close of
business on the date of the Company's annual meeting of shareholders in the year
2011, at which time the right to grant Awards under the Plan shall terminate.
ARTICLE 2. DEFINITIONS
Whenever the following terms are used in the Plan, with their initial letter(s)
capitalized, they shall have the meanings set forth below:
2.1 "AVERAGE COMMON SHAREHOLDERS' EQUITY" means the sum of month-end common
shareholders' equity determined in accordance with generally accepted
accounting principles for the period from December 31 of the preceding
Plan Year to December 31 of the current Plan Year, divided by thirteen
(13). Common shareholders' equity shall be adjusted to exclude the
after-tax effect of (a) losses from business combinations, (b) losses from
discontinued operations (including loss on disposal of a line of business
or class of customer), (c) losses from changes in accounting principles,
(d) extraordinary losses, (e) restructuring charges, and (f) losses from
changes in tax law. Items (a) through (f) shall be determined in
accordance with generally accepted accounting principles and as disclosed
in the Company's annual consolidated financial statements.
2.2 "AWARD" means an award described in Article 5 hereof.
2.3 "AWARD POOL" means, with respect to a Plan Year, five percent (5%) of CNI
for the Plan Year, disregarding any CNI in excess of $5 billion.
2.4 "BENEFICIAL OWNER" or "BENEFICIAL OWNERSHIP" shall have the meaning
ascribed to such term in Rule 13d-3 of the General Rules and Regulations
under the Exchange Act, as amended from time to time, or any successor
rule.
2.5 "BOARD" or "BOARD OF DIRECTORS" means the Board of Directors of the
Company.
2.6 "CHANGE IN CONTROL" means a change in control of the Company of a nature
that would be required to be reported in response to Item 6(e) of Schedule
14A of Regulation 14A promulgated under the Exchange Act, whether or not
the Company is then subject to such reporting requirement; provided that,
without limitation, such a Change in Control shall be deemed to have
occurred if:
(a) Any Person becomes a Beneficial Owner of shares of one or more classes
of stock of the Company representing twenty percent (20%) or more of
the total voting power of the Company's then outstanding voting stock;
or
(b) The Company and any Person consummate a merger, consolidation,
reorganization, or other business combination; or
(c) The Board adopts resolutions authorizing the liquidation or
dissolution, or sale to any Person of all or substantially all of the
assets, of the Company.
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Notwithstanding the provisions of Section 2.6(a), (b), and (c) hereof, a
Change in Control shall not occur if:
(i) The Company's voting stock outstanding immediately before the
consummation of the transaction will represent no less than
forty-five percent (45%) of the combined voting power entitled to
vote for the election of directors of the surviving parent
corporation immediately following the consummation of the
transaction; and
(ii) Members of the Incumbent Board will constitute at least one-half of
the board of directors of the surviving parent corporation; and
(iii) The Chief Executive Officer or co-Chief Executive Officer of the
Company will be the chief executive officer or co-chief executive
officer of the surviving parent corporation; and
(iv) The headquarters of the surviving parent corporation will be located
in New York, New York.
For the purposes of this Section 2.6, "Person" means any corporation,
partnership, firm, joint venture, association, individual, trust, or other
entity, but does not include the Company or any of its wholly-owned or
majority-owned subsidiaries, employee benefit plans, or related trusts;
and "Incumbent Board" means those persons who either (A) have been members
of the Board of Directors of the Company since June 30, 2000, or (B) are
new Directors whose election by the Board of Directors or nomination for
election by the shareholders of the Company was approved by a vote of at
least three-fourths of the members of the Incumbent Board then in office
who either were Directors described in clause (A) hereof or whose election
or nomination for election was previously so approved, but shall not
include any Director elected as a result of an actual or threatened
solicitation of proxies by any Person.
2.7 "CODE" means the Internal Revenue Code of 1986, as amended from time to
time.
2.8 "COMMITTEE" means the Human Resources Committee of the Board or any other
committee appointed by the Board to administer the Plan and Awards to
Participants hereunder, as specified in Article 3 hereof.
2.9 "COMPANY" means Verizon Communications Inc., a Delaware corporation, and
any successor thereto as provided in Article 12 hereof.
2.10 "CONSOLIDATED NET INCOME" or "CNI" means the Company's net income reported
in the Company's annual consolidated financial statements for the Plan
Year, adjusted to exclude the after-tax effect of (a) losses from business
combinations, (b) losses from discontinued operations (including loss on
disposal of a line of business or class of customer), (c) losses from
changes in accounting principles, (d) extraordinary losses, (e)
restructuring charges, and (f) losses from changes in tax law. Items (a)
through (f) shall be determined in accordance with generally accepted
accounting principles and as disclosed in the Company's annual
consolidated financial statements.
2.11 "DIRECTOR" means any individual who is a member of the Board.
2.12 "EFFECTIVE DATE" shall have the meaning ascribed to such term in Section
1.1 hereof.
2.13 "EMPLOYEE" means any employee of the Company or of a Subsidiary. Directors
who are employed by the Company or by a Subsidiary shall be considered
Employees under the Plan.
2.14 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from
time to time, or any successor statute.
2.15 "INSIDER" means an individual who is, on the relevant date, subject to the
reporting requirements of Section 16(a) of the Exchange Act.
2.16 "PARTICIPANT" means a key Employee who has been selected to receive an
Award or who holds an outstanding Award.
2.17 "PERFORMANCE-BASED EXCEPTION" means the performance-based exception from
the tax deductibility limitation imposed by Code Section 162(m), as set
forth in Code Section 162(m)(4)(C).
2.18 "PLAN" means the Verizon Communications Inc. Short-Term Incentive Plan, as
set forth herein and as it may be amended from time to time.
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2.19 "PLAN YEAR" means the calendar year.
2.20 "RETURN ON EQUITY" or "ROE" means CNI divided by Average Common
Shareholders' Equity for the Company.
2.21 "SUBSIDIARY" means (a) a corporation, partnership, joint venture, or other
entity in which the Company has an ownership interest of at least fifty
percent (50%), and (b) a corporation, partnership, joint venture, or other
entity in which the Company holds an ownership interest of less than fifty
percent (50%) but which, in the discretion of the Committee, is treated as
a Subsidiary for purposes of the Plan.
ARTICLE 3. ADMINISTRATION
3.1 GENERAL. Except as otherwise determined by the Board in its discretion,
the Plan shall be administered by the Committee, which shall consist exclusively
of two (2) or more nonemployee directors within the meaning of the rules
promulgated by the Securities and Exchange Commission under Section 16 of the
Exchange Act who also qualify as outside directors within the meaning of Code
Section 162(m) and the related regulations under the Code. The members of the
Committee shall be appointed from time to time by, and shall serve at the
discretion of, the Board. The Committee shall have the authority to delegate
administrative duties to officers or Directors of the Company; provided that the
Committee may not delegate its authority with respect to (a) non-ministerial
actions with respect to Insiders; (b) non-ministerial actions with respect to
Awards that are intended to qualify for the Performance-Based Exception; and (c)
certifying that any performance goals and other material terms attributable to
Awards intended to qualify for the Performance-Based Exception have been
satisfied.
3.2 AUTHORITY OF THE COMMITTEE. Except as limited by law or by the Certificate
of Incorporation or Bylaws of the Company, and subject to the provisions hereof,
the Committee in its discretion shall select the key Employees who participate
in the Plan; determine the sizes and types of Awards; determine the terms and
conditions of Awards in a manner consistent with the Plan; construe and
interpret the Plan and any Award, document, or instrument issued under the Plan;
establish, amend, or waive rules and regulations for the Plan's administration;
and (subject to the provisions of Article 10 hereof) amend the terms and
conditions of any outstanding Award as provided in the Plan. Further, the
Committee shall make all other determinations that may be necessary or advisable
for the administration of the Plan.
3.3 DECISIONS BINDING. All determinations and decisions made by the Committee
pursuant to the provisions of the Plan and all related orders and resolutions of
the Committee shall be final, conclusive and binding on all persons, including
the Company, its shareholders, Directors, Employees, Participants, and their
estates and beneficiaries.
3.4 PERFORMANCE-BASED AWARDS. For purposes of the Plan, it shall be presumed,
unless the Committee indicates to the contrary, that all Awards are intended to
qualify for the Performance-Based Exception. If the Committee does not intend an
Award to qualify for the Performance-Based Exception, the Committee shall
reflect its intent in its records in such manner as the Committee determines to
be appropriate.
ARTICLE 4. ELIGIBILITY AND PARTICIPATION
4.1 ELIGIBILITY. All key Employees are eligible to participate in the Plan.
4.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the Committee
may, from time to time, select from all eligible Employees those to whom Awards
shall be granted and shall determine the nature and amount of each Award.
ARTICLE 5. AWARDS
5.1 GRANT OF AWARDS. All Awards under the Plan shall be granted upon terms
approved by the Committee. However, no Award shall be inconsistent with the
terms of the Plan or fail to satisfy the requirements of applicable law. Each
Award shall relate to a designated Plan Year.
5.2 CONTINGENT ON ROE. A payment shall be made with respect to an Award for a
Plan Year only if the ROE for the Plan Year exceeds eight percent (8%).
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5.3 AWARD POOL LIMITATION. The sum of the Awards for a single Plan Year shall
not exceed the amount in the Award Pool for that Plan Year.
5.4 MAXIMUM AWARDS. A Participant's maximum Award for a Plan Year shall depend
on the Participant's annual base salary on the last day of the Plan Year in
relation to the annual base salary of the other employees of the Company and the
Subsidiaries, as determined in accordance with the following table (so that in
the case of a Participant described in the left-hand column of the table, the
maximum Award for a Plan Year shall be equal to the percentage of the Award Pool
prescribed by the right-hand column of the table for that Plan Year):
PERCENTAGE OF
SALARY POSITION AWARD POOL
- - ----------------------------------------
Highest & 2nd paid 3.50%
3rd & 4th highest paid 2.50%
5th & 6th highest paid 1.25%
7th through 25th paid .85%
For purposes of this Section 5.4, if two Participants have the same annual base
salary, the Participant with the greater seniority shall be deemed to have the
higher annual base salary. If a Participant's base salary does not fall within
one of the categories described in the foregoing table, the Participant's
maximum Award for the Plan Year shall be less than one-half of one percent
(.50%) of the Award Pool for that Plan Year, as determined by the Committee. The
total amount of the maximum Awards for any Plan Year shall not exceed one
hundred percent (100%) of the Award Pool for that Plan Year.
5.5 LIMITATIONS ON COMMITTEE DISCRETION. The Committee may reduce, but may not
increase, any of the following:
(i) the maximum Award for any Participant,
(ii) the size of the Award Pool, and
(iii) the CNI for a Plan Year.
5.6 PAYMENT. (a) Unless otherwise determined by the Committee, in its
discretion, a Participant shall have no right to receive a payment under an
Award for a Plan Year unless the Participant is employed by the Company or a
Subsidiary at all times during the Plan Year.
(b) The Committee may, in its discretion, authorize payment to a Participant of
less than the Participant's maximum Award and may provide that a Participant
shall not receive any payment with respect to an Award. In exercising its
discretion, the Committee shall take into account such factors as it considers
appropriate. The Committee's decision shall be final and binding upon any person
claiming a right to a payment under the Plan.
(c) Payments of Awards shall be in cash and shall be made on a date prescribed
by the Committee, unless the Participant has elected to defer payment in
accordance with the rules and regulations of the deferral plan in which the
Participant is eligible for.
ARTICLE 6. BENEFICIARY DESIGNATION
Each Participant may, from time to time, name any beneficiary or beneficiaries
(who may be named contingently or successively) to whom any benefit under the
Plan is to be paid in case of the Participant's death before the Participant
receives any or all of such benefit. Each such designation shall revoke all
prior designations by the same Participant with respect to such benefit, shall
be in a form prescribed by the Company, and shall be effective only when filed
by the Participant in writing with the Company during the Participant's
lifetime. In the absence of any such designation, any benefits remaining unpaid
under the Plan at the Participant's death shall be paid to the Participant's
estate.
ARTICLE 7. DEFERRALS
The Committee may permit or require a Participant to defer such Participant's
receipt of the payment of cash that would otherwise be due to such Participant
in connection with any Awards. If any such deferral is required or permitted, it
shall be in accordance with the rules and regulations of the deferral plan for
which the Participant is eligible or, if no such plan exists, in accordance with
the rules and regulations established by the Committee.
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ARTICLE 8. NO RIGHT TO EMPLOYMENT OR PARTICIPATION
8.1 EMPLOYMENT. The Plan shall not interfere with or limit in any way the right
of the Company or of any Subsidiary to terminate any Participant's employment at
any time, and the Plan shall not confer upon any Participant the right to
continue in the employ of the Company or of any Subsidiary.
8.2 PARTICIPATION. No Employee shall have the right to be selected to receive
an Award or, having been so selected, to be selected to receive a future Award.
ARTICLE 9. CHANGE IN CONTROL
9.1 OUTSTANDING AWARDS. (a) Notwithstanding any contrary terms, conditions, or
provisions of the Plan or any Award, upon a Change in Control, all
then-outstanding Awards (determined on the basis of the assumption that the
relevant performance targets have been achieved) under the Plan shall become
immediately nonforfeitable and payable at the normal payment date established by
the Committee before the Change in Control unless the Participant elects to
defer receipt of the Award in accordance with the deferral regulations under the
Plan, and any provision requiring a Participant to be employed on the last day
of the Plan Year in order to receive an Award shall be waived. If the
Participant's Award is based on a performance percentage, his Award for the Plan
Year in which a Change in Control occurs and for any earlier Plan Year for which
the Participant's Award has not been determined at the time the Change in
Control occurs shall be determined by using a performance percentage that is not
less than the Participant's target percentage under the Plan for the Plan Year
immediately preceding the year in which the Change in Control occurs. If the
Participant is involuntarily terminated without cause following a Change of
Control, he shall be entitled to receive a pro-rated Award based on the number
of full months of service he worked in the year that the Change in Control
occurred.
(b) Upon or after a Change in Control, the Committee may not under any
circumstances change any determination of the basis on which any previously
granted Awards shall be measured or paid or change any other terms, conditions
or provisions affecting any previously granted Awards, if the change would
reduce or adversely affect the Award or the Participant's rights thereto.
(c) Without limiting the provisions of Section 9.1(a) and (b) hereof, the
Committee may, in its discretion, include in an Award provisions that the
Committee considers to be appropriate to assure fair and equitable treatment of
the Participant or a beneficiary in the event of a Change in Control, including,
but not limited to, provisions that:
(i) accelerate the time period for purposes of vesting in, or realizing
gain from, any Award; and
(ii) make adjustments or modifications to an Award that the Committee
deems appropriate to maintain and protect the rights and interests of
the Participant or a beneficiary following a Change in Control.
Any such action by the Committee shall be conclusive and binding on the Company,
Participants, beneficiaries, and all other parties.
9.2 POOLING OF INTERESTS ACCOUNTING. Notwithstanding any other provision of
the Plan to the contrary, if the consummation of a Change in Control or other
transaction is contingent on using pooling of interests accounting methodology,
the Committee may take any action necessary to preserve the use of pooling of
interests accounting (including, but not limited to, rescinding any Award).
ARTICLE 10. AMENDMENT, MODIFICATION, AND TERMINATION
10.1 AMENDMENT, MODIFICATION, AND TERMINATION. Subject to the terms of the
Plan, the Committee may at any time and from time to time, alter, amend,
suspend, or terminate the Plan in whole or in part; provided that unless the
Committee specifically provides otherwise, any revision or amendment that would
cause the Plan to fail to comply with any requirement of applicable law,
regulation, or rule if such amendment were not approved by the shareholders of
the Company shall not be effective unless and until shareholder approval is
obtained.
10.2 CERTAIN UNUSUAL OR NONRECURRING EVENTS. The Committee may make
adjustments in the terms and conditions of, and the criteria included in, Awards
in recognition of unusual or nonrecurring events affecting the Company or the
financial statements of the Company, or of changes in applicable laws,
regulations, or accounting principles, whenever the Committee determines that
such adjustments are appropriate in order to
C-6
62
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan; provided that the Committee shall not be
authorized to adjust an Award that the Committee intends to qualify for the
Performance-Based Exception if such adjustment (or the authority to make such
adjustment) would prevent the Award from qualifying for the Performance-Based
Exception.
10.3 AWARDS PREVIOUSLY GRANTED. Notwithstanding any other provision of the
Plan to the contrary (but subject to Sections 1.1 and 9.2 hereof), no
termination, amendment, or modification of the Plan shall cause any previously
granted Awards to be forfeited. After the termination of the Plan, any
previously granted Award shall remain in effect and shall continue to be
governed by the terms of the Plan and the Award.
ARTICLE 11. WITHHOLDING
The Company and its Subsidiaries shall have the power and the right to deduct or
withhold, or to require a Participant to remit to the Company or to a
Subsidiary, an amount that the Company or a Subsidiary reasonably determines to
be required to comply with federal, state, local, or foreign tax withholding
requirements.
ARTICLE 12. SUCCESSORS
All obligations of the Company under the Plan with respect to Awards granted
hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.
ARTICLE 13. LEGAL CONSTRUCTION
13.1 GENDER AND NUMBER. Except where otherwise indicated by the context, any
masculine term used herein also shall include the feminine; any feminine term
used herein also shall include the masculine; and the plural shall include the
singular and the singular shall include the plural.
13.2 SEVERABILITY. If any provision of the Plan shall be held illegal or
invalid for any reason, such illegality or invalidity shall not affect the
remaining parts of the Plan, and the Plan shall be construed and enforced as if
the illegal or invalid provision had not been included.
13.3 REQUIREMENTS OF LAW. The granting of Awards under the Plan shall be
subject to all applicable laws, rules, and regulations, and to such approvals by
any governmental agencies as may be required.
13.4 GOVERNING LAW. The Plan and all Awards shall be construed in accordance
with and governed by the laws of the State of Delaware (without regard to the
legislative or judicial conflict of laws rules of any state), except to the
extent superseded by federal law.
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[VERIZON LOGO]
[RECYCLED PAPER LOGO]
PRINTED ON RECYCLED PAPER.
This document is printed on recycled paper which contains at least 10%
post-consumer waste. SKU 4800-PS-01
64
2001 ANNUAL MEETING
ADMISSION TICKET
[VERIZON LOGO]
c/o EquiServe
P.O. Box 9398
Boston, MA 02205-9398
PLEASE RETAIN AND PRESENT THIS TICKET FOR ADMISSION TO THE MEETING.
- - --------------------------------------------------------------------------------
VOTE BY TELEPHONE OR INTERNET
QUICK-EASY-SAFE
Please take advantage of two cost-effective and convenient ways to vote your
shares. You may vote your proxy at any time using touch-tone telephone service
or through the Internet. Under Delaware law, your telephone or Internet vote
authorizes the named proxies to vote your shares in the same manner as if you
marked, signed and returned your proxy card.
VOTE BY TELEPHONE:
1) Call toll-free using touch-tone telephone service 1-877-PRX-VOTE
(1-877-779-8683).
2) Enter the 14-digit VOTER CONTROL NUMBER located above your name and
address in the lower left of this form.
3) Follow the recorded instructions.
VOTE BY INTERNET:
1) Point your browser to the Web Address: http://www.eproxyvote.com/vz
2) Enter the 14-digit VOTER CONTROL NUMBER located above your name and
address in the lower left of this form.
3) Follow the simple instructions.
4) You may also elect to receive future annual reports and proxy
statements on the Internet instead of receiving paper copies in the
mail. To elect this service go to www.econsent.com/vz
VOTE BY MAIL: Simply mark, sign and date your proxy card and return it in the
enclosed postage-paid envelope.
IF YOU ARE VOTING BY TELEPHONE OR THE INTERNET, PLEASE DO NOT
MAIL YOUR PROXY CARD.
THE VERIZON ANNUAL REPORT AND PROXY STATEMENT ARE AVAILABLE AT:
www.verizon.com/investor
YOUR VOTE IS IMPORTANT DETACH PROXY CARD HERE THANK YOU FOR VOTING
- - --------------------------------------------------------------------------------
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE.
DIRECTORS RECOMMEND A VOTE "FOR":
- - --------------------------------------------------------------------------------
1. Election of All Directors [ ] FOR [ ] WITHHOLD
EXCEPTION(S): For all nominees except as noted below
[ ]_________________________________________________
(01) J.R. Barker, (02) E.H. Budd, (03) R.L. Carrion, (04) R.F. Daniell,
(05) H.L. Kaplan, (06) C.R. Lee, (07) S.O. Moose, (08) J. Neubauer,
(09) T.H. O'Brien, (10) R.E. Palmer, (11) H.B. Price, (12) I.G.
Seidenberg, (13) W.V. Shipley, (14) J.W. Snow, (15) J.R. Stafford, (16)
R.D. Storey
FOR AGAINST ABSTAIN
2. Ratification of Independent Auditor [ ] [ ] [ ]
3. Long-Term Incentive Plan [ ] [ ] [ ]
4. Short-Term Incentive Plan [ ] [ ] [ ]
- - --------------------------------------------------------------------------------
DIRECTORS RECOMMEND A VOTE "AGAINST" THE SHAREHOLDER PROPOSALS REGARDING:
- - --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
5. Additional Director Nominees [ ] [ ] [ ]
6. Executive Severance Agreements [ ] [ ] [ ]
7. Board Composition [ ] [ ] [ ]
8. Calculation of Incentive Compensation [ ] [ ] [ ]
- - --------------------------------------------------------------------------------
9. Eliminate duplicate 10. Indicate notations
Annual Reports [ ] on reverse side [ ]
- - --------------------------------------------------------------------------------
Please sign exactly as name(s) appear on this proxy. If stock is held jointly,
each holder should sign. If signing as attorney, trustee, executor,
administrator, custodian, guardian or corporate officer, please give full title.
Signature(s)___________________________________________________ Date____________
Signature(s)___________________________________________________ Date____________
65
2001 ANNUAL MEETING
ADMISSION TICKET
WEDNESDAY, APRIL 25, 2001, AT 2:00 P.M. CENTRAL TIME
MEMPHIS MARRIOTT
THOUSAND OAKS BUSINESS CENTER
2625 THOUSAND OAKS BLVD.
MEMPHIS, TN 38118
(Directions below)
PLEASE RETAIN AND PRESENT THIS TICKET FOR ADMISSION TO THE MEETING.
- - --------------------------------------------------------------------------------
[GRAPHIC MAP]
FROM MEMPHIS INTERNATIONAL AIRPORT: Take I-240 East to Nashville at
Exit 18, Perkins Rd., proceed South, turn left on American Way and turn
left onto Thousand Oaks Blvd. to hotel.
Detach Proxy Card Here
- - --------------------------------------------------------------------------------
[VERIZON LOGO]
PROXY/VOTING INSTRUCTION CARD PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF VERIZON COMMUNICATIONS INC.
FOR THE ANNUAL MEETING OF SHAREHOLDERS, WEDNESDAY, APRIL 25, 2001, 2:00 P.M.,
CENTRAL TIME, AT THE MEMPHIS MARRIOTT EAST, THOUSAND OAKS BUSINESS CENTER, 2625
THOUSAND OAKS BLVD.,MEMPHIS, TENNESSEE.
The undersigned hereby appoints C.R. Lee and I.G. Seidenberg, and each of them,
proxies, with the powers the undersigned would possess if personally present,
and with full power of substitution, to vote all common shares held of record by
the undersigned in Verizon Communications Inc., upon all subjects that may
properly come before the meeting, including the matters described in the proxy
statement furnished herewith, subject to any directions indicated on the reverse
side of this card. IF NO DIRECTIONS ARE GIVEN, THE PROXIES WILL VOTE FOR THE
ELECTION OF THE NOMINEES FOR DIRECTOR: J.R. BARKER, E.H. BUDD, R.L. CARRION,
R.F. DANIELL, H.L. KAPLAN, C.R. LEE, S.O. MOOSE, J. NEUBAUER, T.H. O'BRIEN, R.E.
PALMER, H.B. PRICE, I.G. SEIDENBERG, W.V. SHIPLEY, J.W. SNOW, J.R. STAFFORD AND
R.D. STOREY, AND IN ACCORD WITH THE DIRECTORS' RECOMMENDATIONS ON THE OTHER
SUBJECTS LISTED ON THE REVERSE SIDE OF THIS CARD AND AT THEIR DISCRETION ON ANY
OTHER MATTER THAT MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT
THEREOF.
This card also constitutes your voting instructions for shares held of record
for your account in the Verizon Communications Direct Invest Plan and, if shares
are held in the same name, shares held in any of the Verizon employee savings
plans.
IF YOU DO NOT PROPERLY SIGN AND RETURN A PROXY, VOTE BY TELEPHONE OR THROUGH THE
INTERNET, OR ATTEND THE MEETING AND VOTE BY BALLOT, YOUR SHARES CANNOT BE VOTED,
NOR YOUR INSTRUCTIONS FOLLOWED, EXCEPT THAT SHARES IN ANY OF THE VERIZON
EMPLOYEE SAVINGS PLANS WILL BE VOTED AS DESCRIBED ON PAGE 1 OF THE PROXY
STATEMENT.
PLEASE SIGN ON THE REVERSE SIDE AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE.
NOTATIONS:
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
66
VERIZON COMMUNICATIONS INC.
2001 TELEPHONE VOTING SCRIPT
TOLL FREE: 1-877-PRX-VOTE OR 1-877-779-8683
1. Welcome to the electronic voting system. Please have your proxy card or
voting instruction sheet or ballot available before voting.
2. Enter the Voter Control Number as it appears on the card followed by
the pound sign.
3. One moment please while we verify your information.
4. Enter the last four digits of the U.S. Social Security number or the
U.S. taxpayer identification number for this account followed by the
pound sign.
5. The company that you are voting for is Verizon Communications Inc.
6. Your vote is subject to the same terms and authorizations as indicated
on the proxy card. Your vote will also authorize the named proxies to
vote according to the instructions at the Annual Meeting of
Shareholders.
7. To vote all proposals in accordance with the recommendations of the
Board of Directors, press 1. If you wish to vote on one proposal at a
time, press 2.
If 1, go to PLAYBACK.
If 2, go to 8.
8. Item # 1. The Board of Directors recommends a vote for the Election of
All Directors. To vote for all nominees press 1. To withhold from all
nominees press 2. To withhold from individual nominees press 3.
If 1, go to 9.
If 2, go to 9.
If 3, go to DIRECTOR EXCEPTION.
Page 1 of 1
67
DIRECTOR EXCEPTION
Enter the 2-digit number next to the nominee from whom you
would like to withhold your vote followed by the pound key. Or
if you have completed voting on directors, press the pound key
again.
If pound key entered twice, go to the next item.
If valid nominee number, go to Next Nominee.
NEXT NOMINEE
To withhold your vote from another nominee, enter the 2-digit
number next to the nominee followed by the pound key, or if
you have completed voting on directors press the pound key
again.
If pound key entered twice, go to the next item.
If valid nominee number, go to Next Nominee.
INVALID NOMINEE NUMBER
You have entered an invalid nominee number.
{Go to Next Nominee.}
9. Item # 2. The Board of Directors recommends a vote for the Ratification
of Independent Auditor. To vote for, press 1; against, press 2;
abstain, press 3.
If 1, go to 10.
If 2, go to 10.
If 3, go to 10.
10. Item # 3. The Board of Directors recommends a vote for the Long-Term
Incentive Plan. To vote for, press 1; against, press 2; abstain, press
3.
If 1, go to 11.
If 2, go to 11.
If 3, go to 11.
11. Item # 4. The Board of Directors recommends a vote for the Short-Term
Incentive Plan. To vote for, press 1; against, press 2; abstain, press
3.
If 1, go to 12.
If 2, go to 12.
If 3, go to 12.
12. Item # 5. The Board of Directors recommends a vote against the
shareholder proposal regarding Additional Director Nominees. To vote
for, press 1; against, press 2; abstain, press 3.
If 1, go to 13.
If 2, go to 13.
If 3, go to 13.
Page 2 of 2
68
13. Item # 6. The Board of Directors recommends a vote against the
shareholder proposal regarding Executive Severance Agreements. To vote
for, press 1; against, press 2; abstain, press 3.
If 1, go to 14.
If 2, go to 14.
If 3, go to 14.
14. Item # 7. The Board of Directors recommends a vote against the
shareholder proposal regarding Board Composition. To vote for, press 1;
against, press 2; abstain, press 3.
If 1, go to 15.
If 2, go to 15.
If 3, go to 15.
15. Item # 8. The Board of Directors recommends a vote against the
shareholder proposal regarding Calculation of Incentive Compensation.
To vote for, press 1; against, press 2; abstain, press 3.
If 1, go to 16.
If 2, go to 16.
If 3, go to 16.
16. If you receive duplicate annual reports and would like to discontinue
receiving an annual report for this account, press 1. If not, press 2.
If 1, go to 17.
If 2, go to 17.
17. You have cast your vote as follows:
PLAYBACK {Playback the appropriate vote for this proxy card.}
-------------------------------------------------------------
DEFAULT PLAYBACK
You have voted in the manner recommended by the Board of
Directors.
DIRECTOR PROPOSAL PLAYBACK
VOTED FOR ALL NOMINEES: Item #. You have voted for all
nominees.
WITHHOLD FROM ALL NOMINEES: Item #. You have voted to withhold
your vote from all nominees.
WITHHOLD FROM INDIVIDUAL NOMINEES: Item #. You have voted for
all nominees except for the following nominee numbers
FOR/AGAINST/ABSTAIN PROPOSAL PLAYBACK
Item # {For | Against | Abstain}
18. To confirm your vote, press 1. To cancel your vote, press 2.
Page 3 of 3
69
If 1, go to 20.
If 2, go to 19.
19. Your vote has been cancelled. If you wish to vote another card, press
1. Otherwise, please hang up and mark, sign, and return your card in
the envelope provided. Thank you for calling.
20. Your vote has been successfully recorded. It is not necessary for you
to mail your card. If you wish to vote another card or change your
vote, press 1. Otherwise, please hang up. Thank you for voting.
INVALID CONTROL NUMBERS
We are unable to authenticate the information that you
entered.
NO KEY PRESSED
Go to the same item (repeat three times); otherwise, go to
Error.
INVALID NUMBER
Go to the same item (repeat three times); otherwise, go to
Error.
ERROR
We are unable to process your request at this time. Thank you
for calling.
{Call ends.}
Page 4 of 4
70
INTERNET VOTING
[VERIZON LOGO]
Welcome!
[VOTE BY NET LOGO]
Name Line
Address Line
City, State, Zip Line
[Proceed Graphic]
Copyright(c) 2000 EquiServe. All rights reserved.
71
[VERIZON LOGO]
PROXY/VOTING INSTRUCTION CARD
This Proxy is solicited by the Board of Directors of Verizon Communications Inc.
for the Annual Meeting of Shareholders,
Wednesday, April 25, 2001, 2:00 p.m., Central Time,
at the Memphis Marriott East,
Thousand Oaks Business Center,
2625 Thousand Oaks Blvd., Memphis, Tennessee.
The undersigned hereby appoints C.R. Lee and I.G. Seidenberg, and each of them,
proxies, with the powers the undersigned would possess if personally present,
and with full power of substitution, to vote all common shares held of record
by the undersigned in Verizon Communications Inc., upon all subjects that may
properly come before the meeting, including the matters described in the proxy
statement furnished herewith, subject to any directions indicated on the
reverse side of this card. IF NO DIRECTIONS ARE GIVEN, THE PROXIES WILL VOTE
FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR: J.R. BARKER, E.H. BUDD, R.L.
CARRION, R.F. DANIELL, H.L. KAPLAN, C.R. LEE, S.O. MOOSE, J. NEUBAUER, T.H.
O'BRIEN, R.E. PALMER, H.B. PRICE, I.G. SEIDENBERG, W.V. SHIPLEY, J.W. SNOW,
J.R. STAFFORD AND R.D. STOREY, AND IN ACCORD WITH THE DIRECTORS'
RECOMMENDATIONS ON THE OTHER SUBJECTS LISTED ON THE REVERSE SIDE OF THIS CARD
AND AT THEIR DISCRETION ON ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENT THEREOF.
This card also constitutes your voting instructions for shares held of record
for your account in the Verizon Communications Direct Invest Plan and, if
shares are held in the same name, shares held in any of the Verizon employee
savings plans.
IF YOU DO NOT PROPERLY SIGN AND RETURN A PROXY, VOTE BY TELEPHONE OR THROUGH
THE INTERNET, OR ATTEND THE MEETING AND VOTE BY BALLOT, YOUR SHARES CANNOT BE
VOTED, NOR YOUR INSTRUCTIONS FOLLOWED, EXCEPT THAT SHARES IN ANY OF THE VERIZON
EMPLOYEE SAVINGS PLANS WILL BE VOTED AS DESCRIBED ON PAGE 1 OF THE PROXY
STATEMENT.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" ALL NOMINEES FOR DIRECTOR.
"FOR" PROPOSALS 2,3 AND 4.
"AGAINST" PROPOSALS 5,6,7 AND 8.
- - --------------------------------------------------------------------------------
Check this box to cast your vote in accordance with the recommendations of the
Board of Directors [ ]
72
THE BOARD RECOMMENDS A VOTE "FOR" ALL NOMINEES FOR DIRECTOR.
For All Nominees Withhold
Except As Noted As To All
Below Nominees
1. Election of Directors [ ] [ ]
Or, check the box for the Director(s) from whom you wish to withhold your vote:
[ ] J.R. Barker [ ] E.H. Budd [ ] R.L. Carrion [ ] R.F. Daniell
[ ] H.L. Kaplan [ ] C.R. Lee [ ] S.O. Moose [ ] J. Neubauer
[ ] T.H. O'Brien [ ] R.E. Palmer [ ] H.B. Price [ ] I.G. Seidenberg
[ ] W.V. Shipley [ ] J.W. Snow [ ] J.R. Stafford [ ] R.D. Storey
THE BOARD RECOMMENDS A VOTE "FOR" PROPOSALS 2, 3 AND 4.
For Against Abstain
2. Ratification of Independent Auditor [ ] [ ] [ ]
For Against Abstain
3. Long-Term Incentive Plan [ ] [ ] [ ]
For Against Abstain
4. Short-Term Incentive Plan [ ] [ ] [ ]
THE BOARD RECOMMENDS A VOTE "AGAINST" PROPOSALS 5, 6, 7 AND 8.
For Against Abstain
5. Additional Director Nominees [ ] [ ] [ ]
For Against Abstain
6. Executive Severance Agreements [ ] [ ] [ ]
For Against Abstain
7. Board Composition [ ] [ ] [ ]
For Against Abstain
8. Calculation of Incentive Compensation [ ] [ ] [ ]
- - --------------------------------------------------------------------------------
Check the box below, if the option applies to you.
[ ] Eliminate duplicate Annual Reports
To submit your vote please click the button below.
(Your vote will not be counted until the Submit Your Vote button is clicked.)
[Submit Your Vote Graphic]
Copyright (C) 2000 EquiServe. All rights reserved.
73
[VERIZON LOGO]
Your proxy vote has been recorded as follows:
[Vote By Net ---------------------------------------------
LOGO]
1. Election of Directors
---------------------------------------------
2. Ratification of Independent Auditor
---------------------------------------------
3. Long-Term Incentive Plan
---------------------------------------------
4. Short-Term Incentive Plan
---------------------------------------------
5. Additional Director Nominees
---------------------------------------------
6. Executive Severance Agreements
---------------------------------------------
7. Board Composition
---------------------------------------------
8. Calculation of Incentive Compensation
---------------------------------------------
Please review your vote. If this is incorrect, please use the
Back button on your browser, change your vote and resubmit. If
this is correct, please click the button below.
[Proceed Graphic]
Copyright (C) 2000 EquiServe. All rights reserved.
74
[VERIZON LOGO]
[VOTE BY NET LOGO]
SUCCESS! YOUR VOTE HAS BEEN CAST AND WILL BE TABULATED BY EQUISERVE WITHIN 24
HOURS. Please take a moment to review the options below.
- - -------------------------------------------------------------------------------
If you wish to receive all future Verizon Communications Inc. Annual Meeting
materials, such as, annual report, proxy statement and your voter control
number, online, click the button below.
[PROCEED GRAPHIC]
If you wish to submit comments to Verizon Communications Inc., click the button
below.
[SUBMIT COMMENTS GRAPHIC]
You can now vote another proxy card or exit to the Verizon Communications Inc.
homepage or EquiServe's homepage.
[VOTE ANOTHER PROXY GRAPHIC]
Copyright (C) 2000 EquiServe. All rights reserved.