Exhibit 10.1

 

VERIZON COMMUNICATIONS INC. LONG-TERM INCENTIVE PLAN

YEAR 2004 STOCK OPTION AGREEMENT

 

AGREEMENT between Verizon Communications Inc. (“Verizon”) and you (the
“Participant”).

 

1. Purpose of Stock Option Agreement. The purpose of this Stock Option Agreement
(the “Agreement”) is to provide a grant of stock options to the Participant.
This grant shall be known as the “Year 2004 Stock Option” or the “Option.”

 

2. Stock Option Agreement. This Agreement is entered into pursuant to the terms
of the Verizon Communications Inc. 2001 Long-Term Incentive Plan (the “Plan”)
and evidences the grant of a nonqualified stock option (the “Option”) to the
Participant to purchase shares of Verizon’s Common Stock (“Common Stock”)
pursuant to the Plan. This Option is not an incentive stock option. The Option
and this Agreement (including the covenants set forth in Exhibit A (the
“Covenants”), which are incorporated into and shall be a part of the Agreement)
are subject to the terms and provisions of the Plan. (The Participant may
request a copy of the Plan from the Verizon Compensation and Executive Benefits
Department.) By executing this Agreement, the Participant agrees to be bound by
the terms and provisions of the Plan, and by the actions of the Plan
Administrator, the Human Resources Committee of Verizon’s Board of Directors or
any successor thereto (the “Committee”) or any designee of the Committee, and
Verizon’s Board of Directors pursuant to the Plan.

 

3. Contingency. The grant of stock options is contingent on the Participant’s
timely acceptance of this Agreement and satisfaction of certain other conditions
contained herein. If the Participant does not properly accept (or revokes
acceptance of) this Agreement the Participant shall not be entitled to the Year
2004 Stock Option.

 

4. Date. The date of the grant of the Year 2004 Stock Option is February 4, 2004
(the “Grant Date”).

 

5. Number of Shares. The number of shares of Common Stock as to which the Option
is granted is specified on the cover letter provided in conjunction with this
Agreement.

 

6. Option Price. The option price per share is $36.75.

 

7. (a) Option Period and Vesting Schedule. The period for which the Option is
granted is from the Grant Date until February 3, 2014 (the “Option Period”). In
no event shall the Option be exercisable after the expiration of the Option
Period, and the Option shall expire and be terminated earlier as set forth in
section 7(b) (“Separation from Employment”). Except as set forth in section
7(b), the Option shall become exercisable over a three-year period as follows:
on February 4, 2005, the Option shall become exercisable with respect to
one-third of the Option shares; on February 4, 2006, the Option shall become
exercisable with respect to an additional one-third of the Option shares; and on
February 4, 2007, the Option shall become exercisable with respect to the
remaining Option shares. Notwithstanding the foregoing, upon the occurrence of a
Change in Control (as defined in the Plan), the Option shall immediately become
exercisable in full.

 

(b) Separation from Employment. The Option may be terminated prior to the
expiration of the Option Period, and the date when the Option may first be
exercised may be modified, in accordance with the following terms and
conditions:

 

(i) Voluntary Separation or Discharge for Cause. If the Participant quits or
otherwise separates from the Company under circumstances not described in
section 7(b)(ii) or (b)(iii) below, or if the Participant is discharged from
employment with the Company for Cause (as defined below) and

 

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the Participant does not Retire (as defined below), the Option shall be
forfeited and canceled immediately, even if otherwise exercisable, except to the
extent the Committee decides otherwise.

 

(ii) Retirement, Involuntary Discharge Without Cause, or Disability. If (A) the
Participant Retires (as defined below), (B) the Company discharges the
Participant without Cause (as defined below), such as by reason of a
Company-initiated, voluntary or involuntary, force management or force reduction
program or initiative, or (C) the Participant’s separation from employment with
the Company occurs as a result of total and permanent Disability (as defined
below), the Option shall immediately become exercisable in full and shall remain
exercisable until the earlier of (I) February 3, 2014, or (II) the fifth
anniversary of the date the Participant separates from employment with the
Company, provided that the Participant does not commit a material breach of any
of the Covenants and provided that the Participant executes a release
satisfactory to the Company waiving any claims he may have against the Company.
If at any time the Participant commits a breach of any of the Covenants, the
Option and the right to exercise the Option are immediately forfeited. In the
case of an involuntary discharge without Cause, a Participant’s separation from
employment with the Company occurs on the last day the Participant is on the
payroll of the Company. In the case of Disability, a Participant’s separation
from employment with the Company occurs on the later of the last day the
Participant is on the payroll of the Company or on short-term disability.

 

(iii) Death. If the Participant’s separation from employment with the Company
occurs as a result of death, the Option shall be immediately exercisable in full
by the Participant’s beneficiary and shall remain exercisable until the earlier
of (A) February 3, 2014, or (B) the fifth anniversary of the date of death. If
the Participant dies after separation from employment with the Company, but
while the Option is still exercisable in accordance with subsection (b)(ii)
above, the Participant’s beneficiary may exercise the Option in accordance with
such subsection.

 

(iv) Termination of Option. Upon the expiration of any period during which the
Option is exercisable in accordance with the preceding provisions of this
section 7, the Option and the right to exercise the Option shall terminate and
the Option shall not thereafter be exercisable.

 

(v) Transfer. Transfer of employment from Verizon to a Related Company (as
defined in section 15 of this Agreement), from a Related Company to Verizon, or
from one Related Company to another Related Company shall not constitute a
separation from employment with the Company hereunder.

 

(vi) Retirement. For purposes of this section 7(b), “Retire” means (A) to retire
after having attained at least 15 years of Net Credited Service (as defined
under the Verizon Management Pension Plan) and a combination of age and years of
Net Credited Service that equals or exceeds 75 points, or (B) retirement under
any other circumstances determined in writing by the Plan Administrator.

 

(vii) Cause. For purposes of this section 7(b), “Cause” is defined as (A)
grossly incompetent performance or substantial or continuing inattention to or
neglect of the duties and responsibilities assigned to the Participant; fraud,
misappropriation or embezzlement involving the Company or a material breach of
the Code of Business Conduct or any of the Covenants set forth in Exhibit A,
which is incorporated herein by reference, as determined by the Plan
Administrator in his discretion, or (B) commission of any felony of which the
Participant is finally adjudged guilty by a court of competent jurisdiction.

 

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(viii) Disability. For purposes of this section 7(b), “Disability” is defined
under the Company-sponsored long-term disability plan that applies to the
Participant or, if the Participant is not covered by a long-term disability
plan, as defined in such manner as the Plan Administrator determines.

 

8. (a) Exercise. The Option may be exercised, in whole or in part, as permitted
under this Agreement, by making payment in accordance with subsection (b),
below, or in any other manner approved by the Plan Administrator.

 

(b) Payment of Option Price and Withholding Taxes. In order to exercise the
Option, the Participant must pay the Option Price and any required withholding
taxes (including FICA) by one of the following methods:

 

(i) (A) check, wire transfer or through the cashless exercise procedure
established by the Plan Administrator, (B) tender of Common Stock that has been
held by the Participant (either directly or through a brokerage account) for at
least six months, or (C) a combination of both (A) and (B); or

 

(ii) subject to the prior written approval of the Plan Administrator, payment of
the Option Price and withholding taxes by the administrator of the stock option
program on behalf of the Participant subject to such terms and conditions as the
administrator may impose.

 

For purposes of an exchange of Common Stock in subsection (b)(i), above, the
value of a share of Common Stock used to pay the Option Price or the withholding
taxes shall be equal to the current market price of Verizon’s Common Stock on
the New York Stock Exchange at the time that the exercise is initiated by the
administrator of the stock option program. The Participant may be charged an
administrative fee or fees in connection with the exercise of the Option.

 

(c) Deferral Feature. The Participant may elect, pursuant to procedures adopted
by the Plan Administrator, to defer the delivery of the additional shares of
Common Stock that otherwise would be issued to the Participant upon a stock for
stock exercise of the Option.

 

(d) Reload Feature. If the Participant, while employed by the Company, exercises
all or part of the Year 2004 Option and pays all of the Option Price and the
withholding taxes associated with the option exercise by tendering shares of
Verizon Common Stock in accordance with this section 8, the Company shall
immediately grant the Participant an option (a “Replacement Option”) to purchase
the number of shares of Verizon Common Stock that the Participant used to pay
the Option Price and any withholding taxes. The option price per share under
such Replacement Option shall be equal to the market value of a share of Common
Stock at the time that such exercise occurred, and such Replacement Option shall
expire on the same date as the Year 2004 Option then being exercised. This
Replacement Option fully vests 6 months following the date it is granted. Except
as provided in this section 8(d), the Replacement Option shall have the same
terms and conditions as the Year 2004 Option. A Participant will be limited to a
maximum of three exercises that will be eligible for the granting of Replacement
Options under the terms of this section 8(d).

 

9. Notice and Date of Exercise. The exercise request shall indicate the number
of shares with respect to which the Option is being exercised. The Option may
not be exercised with respect to fractional shares. In addition, the Option may
not be exercised if the administrator of the stock option program determines
that, at the time of an attempted exercise, the market value of the shares with
respect to which the Option is being exercised is either below the Option Price
with respect to such shares or not sufficiently above such Option Price to cover
any applicable taxes and administrative fees. Subject to the conditions and

 

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restrictions set forth in this Agreement, the date of exercise of the Option
shall be the date on which either (a) full payment of the Option Price and the
withholding taxes is received by the administrator of the stock option program
or (b) the administrator of the stock option program is irrevocably committed to
make such payment. Notwithstanding the preceding sentence, no shares shall be
issued until full payment is received by the administrator of the stock option
program. Upon the exercise of the Option and receipt of full payment, Verizon
shall, as soon as practicable, issue or deliver certificates for the number of
shares acquired thereby, subject to the conditions and restrictions set forth in
this Agreement. If the Participant dies following the exercise of all or part of
the Option, but before issuance or delivery of the shares, such shares shall be
issued or delivered to the Participant’s beneficiary.

 

10. Shareholder Rights. The Participant shall have no rights as a shareholder
with respect to shares of Common Stock to which the Option relates until the
date on which the Participant becomes the holder of record of such shares.
Except as provided by the Plan, no adjustment shall be made for dividends or
other rights for which the record date is prior to such date.

 

11. Revocation or Amendment of Agreement. Except to the extent required by law
or specifically contemplated under this Agreement (including, but not limited
to, the determination of whether the Participant has been terminated for Cause,
has a disability, is eligible to Retire, or has separated from employment), the
Committee may not, without the written consent of the Participant, (a) revoke
this Agreement insofar as it relates to the Option granted hereunder, or (b)
make or change any determination or change any term, condition or provision
affecting the Option if the determination or change would materially and
adversely affect the Option or the Participant’s rights thereto. Nothing in the
preceding sentence shall preclude the Committee from exercising reasonable
administrative discretion with respect to the Plan or this Agreement.

 

12. Assignment. The Option shall not be assignable or transferable except by
will or by the laws of descent and distribution. During the Participant’s
lifetime, the Option may be exercised only by the Participant or by the
Participant’s guardian or legal representative.

 

13. Beneficiary. The Participant shall designate a beneficiary in writing and in
such manner as is acceptable to the Plan Administrator. If the Participant fails
to so designate a beneficiary, or if no such designated beneficiary survives the
Participant, the Participant’s beneficiary shall be the Participant’s estate.

 

14. Other Plans and Agreements. Any gain realized by the Participant pursuant to
this Agreement shall not be taken into account as compensation in the
determination of the Participant’s benefits under any pension, savings, group
insurance, or other benefit plan maintained by the Company, except as determined
by the board of directors of Verizon or, in the case of a plan not maintained by
Verizon, the Related Company that maintains the plan. The Participant
acknowledges that receipt of this Agreement or any prior stock option agreement
shall not entitle the Participant to any other benefits under the Plan or any
other plans maintained by the Company.

 

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

 

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16. Employment Status. The grant of the Option shall not be deemed to constitute
a contract of employment between the Company and the Participant, nor shall it
constitute a right to remain in the employ of the Company.

 

17. Withholding. It shall be a condition to the issuance or delivery of shares
of Common Stock as to which the Option shall have been exercised that provisions
satisfactory to the Company shall have been made for payment of any taxes
reasonably determined by the Company to be required to be paid or withheld
pursuant to any applicable law or regulation. The Participant may irrevocably
elect to have the minimum required amount of any withholding tax obligation
satisfied by (a) having shares withheld that are otherwise to be issued or
delivered to the Participant with respect to the exercise of the Option, (b)
delivering to the administrator of the stock option program a check or wire
transfer in full satisfaction of the withholding obligation, or (c) any other
method approved by the Plan Administrator of which the Participant may be
informed in writing.

 

18. Securities Laws. If at the time of any exercise of the Option in whole or in
part, the Company deems it to be a violation of any federal or state securities
law or regulation to issue or deliver its shares pursuant to such exercise, the
Company, at its sole option, may reject such exercise and return the tender or
make application for such qualification or registration as the Company deems
advisable. The Company shall not be required to issue or deliver any shares of
Common Stock prior to the admission of such shares to listing on any stock
exchange on which the stock may then be listed and the completion of any
registration or qualification of such shares under any federal or state law or
rulings or regulations of any government body that the Company, in its sole
discretion, determines to be necessary or advisable.

 

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

 

20. Successors. This Agreement shall be binding upon, and inure to the benefit
of, any successor or successors of Verizon and the person or entity to whom the
Option may have been transferred by will, the laws of descent and distribution,
or beneficiary designation. All terms and conditions of this Agreement imposed
upon the Participant shall, unless the context clearly indicates otherwise, be
deemed, in the event of the Participant’s death, to refer to and be binding upon
such last-mentioned person or entity.

 

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

 

22. Defined Terms. Except where the context clearly indicates otherwise, all
capitalized terms used herein shall have the definitions ascribed to them by the
Plan, and the terms of the Plan shall apply where appropriate.

 

23. Execution of Agreement. The Participant shall indicate consent to the terms
of this Agreement (including its Exhibit) and the Plan by executing this
Agreement pursuant to the instructions provided and otherwise complying with the
requirements of section 3. The Participant and Verizon hereby expressly

 

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agree that the use of electronic media to indicate confirmation, consent,
signature, acceptance, agreement and delivery shall be legally valid and have
the same legal force and effect as if the Participant and Verizon executed this
Agreement (including its Exhibit) in paper form.

 

24. Confidentiality. The Participant shall not disclose, in whole or in part,
any of the terms of this Agreement, except to the extent (a) otherwise required
by law or (b) the Company has publicly disclosed the terms of this Agreement.
This section 24 does not prevent the Participant from disclosing the terms of
this Agreement to the Participant’s spouse or to the Participant’s legal, tax,
or financial adviser, provided that the Participant take all reasonable measures
to assure that such spouse and advisers do not disclose the terms of this
Agreement to a third party except as otherwise required by law.

 

25. Additional Remedies. In addition to any other rights or remedies, whether
legal, equitable, or otherwise, that each of the parties to this Agreement may
have (including the right of the Company to terminate the Participant for
Cause), the Participant acknowledges that—

 

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

 

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

 

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

 

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

 

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

 

  (f) Such Covenants shall continue to apply after any expiration, termination,
or cancellation of this Agreement; and

 

  (g) The Participant’s breach of any of such Covenants shall result in the
Participant’s immediate termination of all rights and benefits, including the
right to exercise an Option, under this Agreement.

 

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Exhibit A - Covenants

 

1. Noncompetition — In consideration for the benefits described in the Agreement
to which this Exhibit A is attached, you, the Participant, agree that:

 

(a) Prohibited Conduct — During the period of your employment with the Company,
and for the period ending six months after your termination of employment for
any reason from the Company, you shall not, without the prior written consent of
the Plan Administrator:

 

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

 

  (2) work for, own, manage, operate, control, or participate in the ownership,
management, operation, or control of, or provide consulting or advisory services
to, any individual, partnership, firm, corporation, or institution engaged in
Competitive Activities, or any company or person affiliated with such person or
entity engaged in Competitive Activities; provided that your purchase or
holding, for investment purposes, of securities of a publicly traded company
shall not constitute “ownership” or “participation in ownership” for purposes of
this paragraph so long as your equity interest in any such company is less than
a controlling interest;

 

provided that this paragraph (a) shall not prohibit you from (i) being employed
by, or providing services to, a consulting firm, provided that you do not
personally engage in Competitive Activities or provide consulting or advisory
services to any individual, partnership, firm, corporation, or institution
engaged in Competitive Activities, or any company or person affiliated with such
person or entity engaged in Competitive Activities, or (ii) engaging in the
private practice of law as a sole practitioner or as a partner in (or as an
employee of or counsel to) a law firm in accordance with applicable legal and
professional standards.

 

(b) Competitive Activities — For purposes of the Agreement to which this Exhibit
A is attached, “Competitive Activities” means business activities relating to
products or services of the same or similar type as the products or services (1)
which are sold (or, pursuant to an existing business plan, will be sold) to
paying customers of the Company, and (2) for which you then have responsibility
to plan, develop, manage, market, oversee or perform, or had any such
responsibility within your most recent 24 months of employment with the Company.
Notwithstanding the previous sentence, a business activity shall not be treated
as a Competitive Activity if the geographic marketing area of the relevant
products or services sold by you or a third party does not overlap with the
geographic marketing area for the applicable products and services of the
Company.

 

2. Interference With Business Relations — During the period of your employment
with the Company, and for a period ending with the expiration of twelve (12)
months following your termination of employment for any reason from the Company,
you shall not, without the written consent of the Plan Administrator:

 

  (a) recruit or solicit any employee of the Company for employment or for
retention as a consultant or service provider;

 

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

 

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

 

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

 

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

 

3. Return Of Property; Intellectual Property Rights — You agree that on or
before your termination of employment for any reason with the Company, you shall
return to the Company all property owned by the Company or in which the Company
has an interest, including files, documents, data and records (whether on paper
or in tapes, disks, or other machine-readable form), office equipment, credit
cards, and employee identification cards. You acknowledge that the Company is
the rightful owner of any programs, ideas, inventions, discoveries, patented or
copyrighted material, or trademarks that you may have originated or developed,
or assisted in originating or developing, during your period of employment with
the Company, where any such origination or development involved the use of
Company time, information or resources, or the exercise of your responsibilities
for or on behalf of the Company. You shall at all times, both before and after
termination of employment, cooperate with the Company in executing and
delivering documents requested by the Company, and taking any other actions,
that are necessary or requested by the Company to assist the Company in
patenting, copyrighting, protecting, enforcing or registering any programs,
ideas, inventions, discoveries, works of authorship, data, information, patented
or copyrighted material, or trademarks, and to vest title thereto solely in the
Company.

 

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

 

5. Definitions — Except where clearly provided to the contrary, all capitalized
terms used in this Exhibit A shall have the definitions given to those terms in
the Agreement to which this Exhibit A is attached.

 

6. Agreement to Covenants. You shall indicate your agreement to these Covenants
in accordance with the instructions provided. You and Verizon hereby expressly
agree that the use of electronic media to indicate confirmation, consent,
signature, acceptance, agreement and delivery shall be legally valid and have
the same legal force and effect as if you and Verizon executed these Covenants
in paper form.