Exhibit 10.40

 

 

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Short-term Incentive (STI)

 

 

 

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TABLE OF CONTENTS

Introduction and Overview   3    Timing of Payments   3    Short-term Incentive
Targets   3 Eligibility   3 Short-term Incentive Calculation   4 Performance
Criteria   4    Company Performance Measures   4    Individual Performance
Measures   5 Pro-rations   5    New Hires   5    Rehires   6    STI Target
Percentage Changes   6    Change in Employment Status   6    Change in Job
Classification   7    Leaves of Absence and Short-Term Disability   7  
 Transfers to Affiliates   7    Termination   7    Retirement   7    Death   7
Deferrals   8 Taxes   8 Tax Withholding   8 Benefits Treatment   8 Payout
Process   8

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This Guide is intended to provide you with general information regarding the STI
program. In all instances, the terms of the STI plan itself in effect during the
plan year will apply except where a written employment agreement signed by the
VP-Human Resources provides otherwise. Nothing in this Guide guarantees any
specific STI payout or compensation.

Page 2 of 8   Last Updated: 06/22/2004

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Introduction and Overview

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The Short-Term Incentive (STI) plan supports Verizon Wireless’s
pay-for-performance philosophy by aligning a percentage of an employee’s total
compensation with the attainment of annual business goals and individual
performance objectives. The STI plan is also designed to increase awareness,
understanding and commitment to Verizon Wireless’ business goals. It is also a
retention tool to encourage employees to remain working for the Company.

Timing of Payments
Short-term incentives are typically paid annually, during the first quarter for
the preceding year, after authorization by the Verizon Human Resources Committee
of the Board of Representatives for the period between January 1st and December
31st.

Short-term Incentive Targets
Short-term incentive targets are based on band assignment and are expressed as a
percentage of base salary. STI targets assigned to each band are based on
competitive market data. Positions in higher bands have higher target
percentages, indicating that these positions carry more “pay at risk”. The
following chart indicates the STI targets for bands C - F and status as an
exempt or non-exempt employee under federal and/or state wage and hour laws:

Band Exemption Status STI Target %
(as a % of base pay) C Exempt 15% D Exempt 10% D Non-exempt 6% E Exempt 10% E
Non-exempt 6% F Non-exempt 6%

Union-represented employees are not eligible for the STI program except to the
extent that such a program exists in the collective bargaining agreement.

Eligibility

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All regular, full-time and part-time employees who have actively worked for at
least one day during the plan year, are employed on the last day of the plan
year, and are not covered under a sales incentive plan are eligible to
participate in the Short-Term Incentive program. If the last day of the plan
year ends on a Saturday or Sunday, the last weekday of the plan year will be
used to determine eligibility for the plan year.

Active status includes employees who are on vacation, holiday, jury duty, or on
an approved paid emergency military leave.

Union-represented employees are not eligible for the STI program except to the
extent that such a program exists in a collective bargaining agreement.

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This Guide is intended to provide you with general information regarding the STI
program. In all instances, the terms of the STI plan itself in effect during the
plan year will apply except where a written employment agreement signed by the
VP-Human Resources provides otherwise. Nothing in this Guide guarantees any
specific STI payout or compensation.

Page 3 of 8   Last Updated: 06/22/2004

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Short-term Incentive Calculation

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The target STI is calculated by multiplying an employee’s year-end annualized
base salary by the STI target percentage associated with his/her band and
exemption status. The target STI may be modified by performance criteria and/or
pro-rations.

Performance Criteria

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Two components: business results, which include overall Company results, and
individual performance may modify the target STI. Depending on Company and
individual performance, the STI payout may range from 0 – 200% of the target.
Here’s how:

Company Performance Measures
Each year Company objectives are established to measure the extent to which we,
Verizon Wireless employees, have attained our financial, strategic and quality
goals. These measures may change slightly year to year to reflect the business
objectives for that year and may include:

Financial Measures

• EBITDA • Net Income • Net Subscriber Additions • Service Revenue    

Customer Measures:

• First Call Resolution • Ineffective Attempts • Lost Calls     Strategic
Measures • Diversity • Data Products • EV-DO Pops Covered

Each measurable objective is assigned a weighting, with the sum of the
weightings equaling 100%.

Once the company performance measures are established, a target performance
level will be assigned to each. Target performance represents the level of
performance required to meet the budgeted goals. At the end of the plan year,
actual performance is compared to targeted performance and STI funding for the
year is determined. In no event will payouts, in the aggregate, exceed the
amount of funding that has been established.

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This Guide is intended to provide you with general information regarding the STI
program. In all instances, the terms of the STI plan itself in effect during the
plan year will apply except where a written employment agreement signed by the
VP-Human Resources provides otherwise. Nothing in this Guide guarantees any
specific STI payout or compensation.

Page 4 of 8   Last Updated: 06/22/2004

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Individual Performance Measures
The second component that modifies the STI target is individual performance. All
employees at Verizon Wireless receive a performance rating indicating their
level of performance for the previous year. Managers must submit performance
ratings prior to determining STI awards. Managers will have the discretion to
make adjustments to STI targets related to individual performance and/or
business conditions. Since Verizon Wireless has a pay-for-performance
philosophy, it is important that the STI award is aligned with the performance
rating. A recommended range will be provided based on performance rating. The
purpose for the recommended ranges is to provide some guidance to managers while
also providing flexibility.

Example:
Considering company and individual performance, an example of an STI calculation
is provided below:

Assume an employee was in his/her job for the entire year with a final base
salary on 12/31 of $45,000 and a 6% target STI percentage.

> The target STI is calculated by multiplying the final base salary on 12/31 by
> the STI target % and then prorating the calculation by the number of eligible
> days worked in the job.
> 
> > (($45,000)(.06)(365 days))/365 total days = $2,700
> 
> The STI funding for this employee is determined by multiplying the target by
> the Company performance modifier.
> 
> > Assume the company’s performance modifier is 120%.
> > The STI target of $2,700 is then modified by 120%
> > 
> > ($2,700)(1.20) = $3,240

$3,240 becomes the “budget” for this employee. The manager must then apply
discretion within a range above/below the modified target (budget). The
percentage above or below the modified target should be aligned with the
performance rating. Therefore an employee, who is rated “Leading”, typically
should not receive an award below the modified target (budget). Similarly, an
employee who has not met his/her performance objectives typically should not
receive an award above the modified target (budget).

Pro-rations

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New Hires
Target STI for eligible participants who are newly hired to the Company will be
pro-rated based upon the actual number of days worked in the plan year for which
they were eligible.

Example:
If an employee is hired into an eligible position on June 1st, his/her STI will
be pro-rated by 214/365 (214 eligible days of 365 potential days in the plan
year).

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This Guide is intended to provide you with general information regarding the STI
program. In all instances, the terms of the STI plan itself in effect during the
plan year will apply except where a written employment agreement signed by the
VP-Human Resources provides otherwise. Nothing in this Guide guarantees any
specific STI payout or compensation.

Page 5 of 8   Last Updated: 06/22/2004

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Rehires
If an eligible employee terminates from the Company and is subsequently rehired
into an eligible position, his/her STI target will be prorated from the rehire
date through the end of the plan year or until s/he changes to an ineligible
position.

Example:

If an employee terminates on April 2nd, and is rehired into an eligible position
on June 1st, his/her STI will be pro-rated by 214/365 (214 eligible days of 365
potential days in the plan year).

STI Target Percentage Changes
Target STI will be prorated for participants who change jobs resulting in a
change to STI target percentage during the plan year.

Example:
An employee is promoted from a Band D with a 10% STI target percentage to a Band
C with a 15% STI target percentage on June 1st. The employee’s target STI will
be prorated as follows:

Ending salary in Job #1 with 10% target is $60,000
Ending salary in Job #2 with 15% target is $70,000

Job Ending
Salary Begin
Date End
Date Total Days
Worked STI
Target % STI Target  #1 $ 60,000 1/1 5/31 151 10% $ 2,482.19  #2 $ 70,000 6/1
12/31 214 15% $ 6,156.16 Total Target STI *           $ 8,638.35

> > > > > * The target is then adjusted based on Company and individual
> > > > > performance.

Changes in Employment Status
Target STI will be prorated for participants who change their employment status
from full-time to part-time, or vice-versa, during the plan year.

Example:
An employee changes employment status from full-time to part-time, changing
scheduled hours from 40 hours to 25 hours. The employee’s target STI will be
prorated as follows:

Ending salary in job as a full-time employee is $40,000 (scheduled hours = 40).
Ending salary in job as a part-time employee is $25,000 (scheduled hours = 25).

Job Ending
Salary Begin
Date End
Date Total Days
Worked Standard
Hours STI
Target % STI Target  #1 $40,000 1/1 5/31 151 40 10% $1,654.79  #2 $25,000 6/1
12/31 214 25 10% $1,465.75 Total Target STI *             $3,120.54

> > > * The target is then adjusted based on Company and individual performance.

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This Guide is intended to provide you with general information regarding the STI
program. In all instances, the terms of the STI plan itself in effect during the
plan year will apply except where a written employment agreement signed by the
VP-Human Resources provides otherwise. Nothing in this Guide guarantees any
specific STI payout or compensation.

Page 6 of 8   Last Updated: 06/22/2004

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Changes in Job Classification
Participants, who change their job classification during the plan year from
eligible non-sales, non-commissioned positions to commissioned sales positions,
or vice-versa, shall have their STI target prorated for the number of days of
active service in the eligible position.

Leaves of Absence and Short-Term Disability
Participants on approved leaves, lasting in duration beyond 30 calendar days
during a Plan year shall have their STI targets prorated. The first 30 calendar
days of absence or disability are counted as days of active service for purposes
of calculating STI.

Terminations
If a participant voluntarily or involuntarily terminates employment (for reasons
other than retirement, long-term disability, death or transfer to an affiliate)
before the last day of the plan year, s/he is no longer eligible to receive a
STI and all outstanding STI awards shall be cancelled. If the participant
terminates employment after the last day of the plan year and before the payout
date for that plan year, s/he will be eligible for a STI award based on actual
company and individual performance.

Retirement
If a participant retires (55 years of age and has 10 years of active service)
before the last day of the plan year, s/he is eligible to receive a prorated STI
award for the number of days of active service during the plan year. It will be
paid out at 100% of target at the time of retirement. If the participant retires
after the last day of the plan year and before the payout date for that plan
year, s/he will be eligible for a STI award based on actual company and
individual performance.

Long-term Disability
If a participant terminates employment under the long-term disability plan
before the last day of the plan year, s/he is eligible to receive a prorated STI
award for the number of days of active service during the plan year. It will be
paid out at 100% of target at the time of termination. If the participant
terminates employment after the last day of the plan year and before the payout
date for that plan year, s/he will be eligible for a STI award based on actual
company and individual performance.

Deaths
In the event of death, an employee’s designated beneficiary may receive a
prorated STI award based upon the number of days of active service the employee
had in the plan year. The STI payment will be paid at 100% target to the
employee’s designated beneficiary as soon as administratively possible. If the
death occurs after the end of the plan year, yet before the payout, the award
will be paid on actual Company and individual performance to the employee’s
designated beneficiary as soon as administratively possible.

Transfers to Affiliates
Participants who directly transfer to a position with an affiliate of Verizon
Wireless (Verizon Communications or Vodafone Group) will be eligible for a
prorated STI under the Verizon Wireless plan for the number of days of active
service with Verizon Wireless provided they held an eligible position, and
followed the appropriate approval process prior to and during the transfer. Upon
transferring, the participant may be eligible to participate in the affiliate’s
plan provided they move into an eligible position, as defined by the affiliate
company.

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This Guide is intended to provide you with general information regarding the STI
program. In all instances, the terms of the STI plan itself in effect during the
plan year will apply except where a written employment agreement signed by the
VP-Human Resources provides otherwise. Nothing in this Guide guarantees any
specific STI payout or compensation.

Page 7 of 8 Last Updated: 06/22/2004

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Deferrals

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Eligible employees may elect to defer payment of all or a percentage of their
award under the Executive Savings Plan (ESP). Please refer to the Summary Plan
Description for more information.

Taxes

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Short-term incentives are subject to federal, state, and local income tax
withholdings, social security withholding, state disability deductions, Verizon
Wireless Savings and Retirement Plan deductions or other legally required
withholdings.

Tax Withholding

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> Federal Income
> Supplemental Tax Taxed at a fixed statutory rate set by the IRS, which is
> currently set at
> 25% regardless of your W4 elections. FICA Tax 6.2% Social Security portion
> subject to an annual limitation.
> 1.45% Medicare portion NOT subject to an annual limitation. State/Local Taxed
> at state and local supplemental rates, if applicable. S.U.I. Normal taxes up
> to the state limit, if any.

Benefits Treatment

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The treatment of Short-term Incentive awards for the purposes of employee
benefit plans (e.g. Verizon Wireless Savings and Retirement Plan and Life
Insurance) shall be governed by the applicable benefit plan provisions. Please
refer to the Summary Plan Description of these plans for more information.

Payout Process

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Short-term incentives are typically paid annually, during the first quarter of
the following calendar year, after authorization by the Verizon Human Resources
Committee of the Board of Representatives.

The STI payment is distributed via the same payment method as the employee’s
regular paycheck. If the employee has elected direct deposit for his/her regular
paycheck, the STI award will be direct deposited. If the employee receives a
live paycheck, the STI award will be mailed as a live check.

Depending on the timing of the STI valuation cycle, the award may be paid either
with regular pay or as a separate check.

 

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This Guide is intended to provide you with general information regarding the STI
program. In all instances, the terms of the STI plan itself in effect during the
plan year will apply except where a written employment agreement signed by the
VP-Human Resources provides otherwise. Nothing in this Guide guarantees any
specific STI payout or compensation.

Page 8 of 8   Last Updated: 06/22/2004

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