Verizon Communications (VZ)

Employment Agreements, Severance and Change in Control Benefits

When the Verizon merger was completed in 2000, the Company negotiated and entered into employment agreements with Messrs. Strigl and Barr, who were executive officers of the Company. The Committee believed that it was important to ensure that these individuals would continue to lead the Company and provide the expertise and continuity that were critical to the Company’s success. In 2000, the Company also entered into an employment agreement with Ms. Toben, who was a senior executive, but not an executive officer, at that time. In addition, in 2000, Verizon Wireless entered into an employment agreement with Mr. McAdam, who was a senior executive of Verizon Wireless at that time, but not an executive officer of Verizon. Mr. McAdam’s employment agreement was assumed by Verizon when he became an executive officer of Verizon in 2007. Mr. Seidenberg’s employment agreement expired in 2004 and was not replaced. Accordingly, Mr. Seidenberg is not eligible for a cash separation payment upon his separation from service.

The compensation levels established under each of the employment agreements reflect the Company’s general compensation practices, as applicable to each individual’s position, at the time the agreements were entered into.

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The severance benefits and the circumstances under which they would be payable were based on each executive’s position and tenure with the Company and competitive practices among the Company’s peers at the time of execution of the agreements. Consistent with these competitive practices, the definitions of “cause” and “good reason” incorporated into the agreements were selected to assure that the executives would be fairly compensated in the event that the Company denied them the opportunity to fulfill the terms of their agreements, or materially altered the terms and conditions under which they were to perform their services. These severance benefits are described in more detail in the severance and change in control tables on pages 47-51.

Mr. Barr retired from the Company effective December 31, 2008. The Company has determined that Mr. Barr is eligible to receive separation benefits under the terms of his employment agreement. These benefits are more fully outlined in the termination and change in control table on page 48. The total amount of his cash separation payment is equal to $10,380,000 and will be payable on or about July 1, 2009. In addition, Mr. Barr is eligible to receive certain other benefits that he is entitled to as a retiree of the Company. At the time of his retirement and as required by his employment agreement as a condition to receiving separation benefits, Mr. Barr executed a release and agreed that he will not compete or interfere with any Verizon business for a period of one year after his separation from service.

In 2007, the Committee revised its policy relating to shareholder approval or ratification of any new employment agreement or severance agreement with an executive officer that provides for a total cash value severance payment exceeding 2.99 times the sum of the executive’s base salary plus Short-Term Plan incentive payment. The revised policy more specifically defines the elements of severance pay and specifies that a lump-sum cash severance payment includes payments for any consulting services, payments to secure a non-compete agreement, payments to settle any litigation or claim, payments to offset tax liabilities, payments or benefits that are not generally available to similarly-situated management employees and payments in excess of, or outside, the terms of a Company plan or policy.

Employment Agreements, Severance and Change in Control Benefits

When the Verizon merger was completed in 2000, the Company negotiated and entered into employment agreements with Messrs. Strigl and Barr, who were executive officers of the Company. The Committee believed that it was important to ensure that these individuals would continue to lead the Company and provide the expertise and continuity that were critical to the Company’s success. The Company also entered into an employment agreement with Ms. Toben, who was a senior executive, but not an executive officer, at that time. In addition, Verizon Wireless entered into an employment agreement with Mr. McAdam, who was a senior executive of Verizon Wireless, but not an executive officer of Verizon, at that time.

The compensation levels established under each of the employment agreements reflected the Company’s general compensation practices, as applicable to each individual’s position, at the time the agreements were entered into. The severance benefits established, and the circumstances under which they would be payable, are appropriate based on each executive’s position and tenure with the Company, and competitive practices in effect among the Market Peers at the time of execution of the agreements. Consistent with these competitive practices, the definitions of “cause” and “good reason” incorporated into the agreements were selected to assure that the executives would be fairly compensated in the event that the Company denied them the opportunity to fulfill the terms of their agreements, or materially altered the terms and conditions under which they were to perform their services. The terms and conditions of these severance benefits are described in more detail in the severance and change in control tables on pages 37-41. Since the merger in 2000, the Committee has generally not provided new employment agreements. However, the Committee has retained the ability to offer employment agreements in the future if it deems that it is appropriate and in the best interests of the Company and its shareholders. In addition, the Committee continues to honor employment agreements that have been in effect since the merger or that have been subsequently renewed.

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In 2007, to better define the elements of severance pay, the Committee revised its policy that requires shareholders to approve or ratify any new employment agreement or severance agreement with an executive officer which provides for a total cash value severance payment exceeding 2.99 times the sum of the executive’s base salary plus Short-Term Plan incentive payment. The revised policy specifies that any lump-sum cash severance payment includes payments for any consulting services, payments to secure a non-compete agreement, payments to settle any litigation or claim, payments to offset tax liabilities, payments or benefits that are not generally available to similarly-situated management employees and payments in excess of, or outside, the terms of a Company plan or policy.