o Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
þ Definitive
Proxy Statement
o Definitive
Additional Materials
o Soliciting
Material Pursuant to § 240.14a-12
TIME WARNER CABLE
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):
þ
No fee required.
o
Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1)
Title of each class of securities to which transaction applies:
(2)
Aggregate number of securities to which transaction applies:
(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):
(4)
Proposed maximum aggregate value of
transaction:
(5)
Total fee
paid:
o
Fee paid previously with preliminary materials.
o
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.
We cordially invite you to attend Time Warner Cable Inc.’s
annual meeting of stockholders. The meeting will be held on
Thursday, May 19, 2011, at 9:30 a.m. in the Ballantyne
Ballroom A at The Ballantyne Hotel, 10000 Ballantyne Commons
Parkway, Charlotte, North Carolina28277. A map with directions
to the meeting is provided on the back cover of the Proxy
Statement.
As a stockholder, you will be asked to vote on a number of
important matters, which are listed in the Notice of Annual
Meeting of Stockholders:
•
to re-elect twelve members of the Company’s Board of
Directors for another annual term;
•
to ratify the Board’s selection of independent auditors;
•
to approve a new stock incentive plan; and
•
to consider two non-binding advisory votes on the compensation
of our named executive officers as described in the proxy
statement and on how frequently the stockholder vote on
executive compensation should be held.
The Board of Directors recommends a vote FOR the
proposals listed as items 1, 2, 3 and 4 and for an
annual non-binding vote on executive compensation in
proposal 5.
We are again this year taking advantage of Securities and
Exchange Commission rules that allow companies to furnish proxy
materials to their stockholders on the Internet. We believe that
these rules allow us to provide our stockholders with the
information they need, while lowering the costs of delivery and
reducing the environmental impact of producing and distributing
materials for our annual meeting. Under these rules, you can
vote in one of several ways. Instructions are provided in our
communications to you. If you received a Notice of Internet
Availability of Proxy Materials in the mail, you can vote over
the Internet, or, if you request printed copies of the proxy
materials by mail, you also can vote by mail or by telephone.
If you are planning to attend the annual meeting in person,
because of security procedures, you will need to register in
advance to gain admission to the meeting. You can register
by calling
1-866-892-8925
by May 17, 2011. In addition to registering in advance, you
will be required to present government-issued identification
(e.g., driver’s license or passport) to enter the
meeting. The meeting also will be audiocast live on the Internet
at www.timewarnercable.com/investors.
I look forward to greeting those of you who are able to attend
the annual meeting.
Sincerely,
Glenn A. Britt Chairman and
Chief Executive Officer
The Annual Meeting (the “Annual Meeting”) of
Stockholders of Time Warner Cable Inc. (the “Company”)
will be held on Thursday, May 19, 2011, at 9:30 a.m.
(local time). The meeting will take place at:
To elect twelve directors for a term of one year, and until
their successors are duly elected and qualified;
2.
To ratify the appointment of the firm of Ernst & Young
LLP as the Company’s independent registered public
accounting firm for 2011;
3.
To approve the Time Warner Cable Inc. 2011 Stock Incentive Plan;
4.
To adopt, on an advisory basis, a resolution approving the
compensation of the Company’s named executive officers, as
described in the proxy statement under “Executive
Compensation;”
5.
To select, on an advisory basis, the frequency of the advisory
stockholder vote on the compensation of the Company’s named
executive officers; and
6.
To transact such other business as may properly come before the
Annual Meeting.
The close of business on March 24, 2011 is the record date
for determining stockholders entitled to vote at the Annual
Meeting. Only holders of the Company’s common stock, par
value $0.01 per share (the “Common Stock”), as of the
record date are entitled to vote on the matters listed in this
Notice of Annual Meeting.
Your vote is important. Whether or not you plan to attend the
Annual Meeting in person, it is important that your shares be
represented. Please follow the instructions in the Notice you
received by mail or
e-mail and
vote as soon as possible. Any stockholder of record who is
present at the meeting may vote in person instead of by proxy,
thereby canceling any previous proxy. You may not appoint more
than three persons to act as your proxy at the meeting.
Please note that, if you plan to attend the Annual Meeting in
person, you will need to register in advance to be admitted.
You may register in advance by telephone at 1-866-892-8925. The
Annual Meeting will start promptly at 9:30 a.m. To
avoid disruption, admission may be limited once the meeting
begins.
Time Warner Cable Inc.
Marc
Lawrence-Apfelbaum Executive Vice President, General
Counsel and Secretary
This Proxy Statement is being furnished in connection with the
solicitation of proxies by the Board of Directors (the
“Board”) of Time Warner Cable Inc., a Delaware
corporation (“TWC” or the “Company”), for
use at the Annual Meeting of the Company’s stockholders
(the “Annual Meeting”) to be held on Thursday,
May 19, 2011, at the Ballantyne Ballroom A at The
Ballantyne Hotel, 10000 Ballantyne Commons Parkway, Charlotte,
North Carolina28277 commencing at 9:30 a.m., local time,
and at any adjournment or postponement, for the purpose of
considering and acting upon the matters set forth in the
accompanying Notice of Annual Meeting of Stockholders.
Stockholders attending the Annual Meeting in person should refer
to the driving directions provided on the back cover of the
Proxy Statement.
The Company is again taking advantage of Securities and Exchange
Commission (“SEC”) rules that allow companies to
furnish proxy materials to stockholders via the Internet.
Accordingly, the Company is sending a Notice of Internet
Availability of Proxy Materials (the “Notice”) to its
stockholders of record and beneficial owners, unless they have
directed the Company to provide the materials in a different
manner. The Notice provides instructions on how to access and
review all of the important information contained in the
Company’s Proxy Statement and Annual Report to
Stockholders, as well as how to submit a proxy over the
Internet. If a stockholder receives the Notice and would still
like to receive a printed copy of the Company’s proxy
materials, instructions for requesting these materials are
included in the Notice. The Company plans to mail the Notice to
stockholders by April 7, 2011. The Company will continue to
mail a printed copy of this Proxy Statement and form of proxy to
certain stockholders, and it expects that mailing to begin on or
about April 7, 2011.
At the close of business on March 24, 2011, the record date
for determining the stockholders entitled to notice of, and to
vote at, the Annual Meeting, there were outstanding and entitled
to vote 340,240,533 shares of the Company’s common
stock, par value $0.01 per share (“Common Stock”). For
information about stockholders’ eligibility to vote at the
Annual Meeting, shares outstanding on the record date and the
ways to submit and revoke a proxy, please see “Voting at
the Annual Meeting” below. Each issued and outstanding
share of Common Stock has one vote on any matter submitted to a
vote of stockholders.
Voting
Shares in Your Brokerage Account
If you hold your TWC shares through a broker, bank or other
financial institution, your broker is not permitted to vote on
your behalf on most of the matters presented at the Annual
Meeting, including the election of directors, unless you provide
specific instructions by completing and returning the Voting
Form or following the instructions provided to you to vote your
shares via telephone or the Internet. For your vote to be
counted, you will need to communicate your voting decisions to
your broker, bank or other financial institution before the date
of the Annual Meeting.
If you have any questions about this rule or the proxy voting
process in general, please contact the broker, bank or other
financial institution where you hold your shares. The SEC also
has a website(www.sec.gov/spotlight/proxymatters.shtml)
with more information about your rights as a shareowner.
The Company is committed to maintaining strong corporate
governance practices that allocate rights and responsibilities
among stockholders, the Board of Directors and management in a
manner that benefits the long-term interests of the
Company’s stockholders. Accordingly, the Company’s
corporate governance practices are designed not merely to
satisfy regulatory requirements, but to provide for effective
oversight and management of the Company.
The Board has devoted substantial attention to the subject of
corporate governance. Among other things, the Board has
established a Nominating and Governance Committee and has
developed a Corporate Governance Policy. The Board refines this
Policy from time to time as it deems necessary. The Corporate
Governance Policy sets forth the basic “rules of the
road” to guide how the Board and its committees operate.
The Board of Directors also regularly holds executive sessions
without management present, conducts examinations of
management’s and the Board’s performance, has adopted
a code of conduct for employees and has enacted a set of ethics
guidelines specifically for outside directors. The Board of
Directors engages in a regular process of reviewing its
corporate governance practices, including comparing its
practices with those recommended by various corporate governance
groups, the expectations of the Company’s stockholders, and
the practices of other leading public companies. The Company
also regularly reviews its practices in light of proposed and
adopted laws and regulations, including the Sarbanes-Oxley Act
of 2002, the Dodd-Frank Wall Street Reform and Consumer
Protection Act, the rules of the SEC, and the rules and listing
standards of the New York Stock Exchange (“NYSE”) on
which the Common Stock is listed for trading.
Information on the Company’s corporate governance is
available to the public under “Corporate Governance”
at www.timewarnercable.com/investorson the
Company’s website. The information on the website includes:
the Company’s by-laws, its Corporate Governance Policy
(which includes the Board’s categorical standards for
determining director independence), the charters of the
Board’s five standing committees, the Company’s codes
of conduct, and information regarding the process by which
shareholders may communicate with members of the Board of
Directors. These documents are also available in print by
writing to the Company’s Corporate Secretary at the
following address: Time Warner Cable Inc., 60 Columbus Circle,
New York, New York10023, Attn: General Counsel.
The number of directors constituting the full Board is currently
set at twelve. The Board of Directors has adopted a policy,
consistent with the Company’s Certificate of Incorporation
and by-laws, that it may determine the size of the Board from
time to time. In establishing its size, the Board considers a
number of factors, including (i) resignations and
retirements from the current Board, (ii) the availability
of appropriate and qualified candidates and (iii) balancing
the desire of having a small enough Board to facilitate
deliberations with, at the same time, having a large enough
Board to have the diversity of backgrounds, professional
experience and skills so that the Board and its committees can
effectively perform their responsibilities in overseeing the
Company’s businesses.
While a significant amount of public attention has been focused
on the need for directors to be “independent,”
independence is just one of the important factors that the Board
and its Nominating and Governance Committee take into
consideration in selecting nominees for director. The Nominating
and Governance Committee and the Board of Directors apply the
same criteria to all candidates, regardless of whether the
candidate is proposed by a stockholder or is identified through
some other source.
Overall Composition. As a threshold
matter, the Board of Directors believes it is important for the
Board as a whole to reflect an appropriate combination of
skills, professional experience, and diversity of backgrounds in
light of the Company’s current and future business needs.
Personal Qualities. Each director must
possess certain personal qualities, including financial literacy
and a demonstrated reputation for integrity, judgment, business
acumen, and high personal and professional ethics. In addition,
each director must be at least 21 years of age at the
commencement of service as a director.
Commitment to the Company and its
Stockholders. Each director must have the
time and ability to make a constructive contribution to the
Board, as well as a clear commitment to fulfilling the
director’s fiduciary duties and serving the interests of
all the Company’s stockholders.
Other Commitments. Each director must
satisfy the requirements of antitrust laws that limit service as
an officer or director of a significant competitor of the
Company. In addition, in order to ensure that directors have
sufficient time to devote to their responsibilities, the Board
has determined that directors should generally serve on no more
than four other public company boards.
Additional Criteria for Incumbent
Directors. During their terms, all incumbent
directors on the Company’s Board are expected to attend the
meetings of the Board and committees on which they serve and the
annual meetings of stockholders; to stay informed about the
Company and its business; to participate in discussions; to
comply with applicable Company policies; and to provide advice
and counsel to the Company’s management.
Additional Criteria for New
Directors. As part of its annual assessment
of the Board’s composition in light of the Company’s
current and expected business needs, the Nominating and
Governance Committee has identified additional criteria for new
members of the Board. The following attributes may evolve over
time depending on changes in the Board and the Company’s
business needs and environment, and may be changed before the
proxy statement for the 2012 annual meeting of stockholders is
furnished to stockholders.
•
Professional Experience. New candidates
for the Board should have significant experience in areas such
as the following: (i) senior officer (e.g.,
president, chief executive officer or chief financial officer)
of a major corporation (or a comparable position in the
government, academia or non-profit sector); or (ii) a
high-level position and expertise in one of the following
areas—cable, telecommunications, media and entertainment,
marketing or consumer technology.
Diversity. The Nominating and
Governance Committee also believes it would be desirable for new
candidates for the Board to enhance the gender, ethnic,
and/or
geographic diversity of the Board.
•
Committee Eligibility. In addition to
satisfying the independence requirements that apply to directors
generally (see below), the Nominating and Governance Committee
believes that it would be desirable for new candidates for the
Board to satisfy the requirements for serving on the
Board’s committees, as set forth in the charters for those
committees and applicable regulations.
•
Director Experience. The Nominating and
Governance Committee believes it would also be desirable for
candidates for the Board to have experience as a director of a
public corporation.
Independence. Under NYSE rules, a
majority of the directors on the Board must be independent. The
Board has determined that nine of the twelve current directors,
each of whom is also a nominee for director (or 75% of the
Board), are independent in accordance with the Company’s
criteria. The Board applies the following NYSE criteria in
making its independence determinations.
•
No Material Relationship. The director
must not have any material relationship with the Company. In
making this determination, the Board considers all relevant
facts and circumstances, including commercial, charitable, and
familial relationships that exist, either directly or
indirectly, between the director and the Company.
•
Employment. The director must not have
been an employee of the Company at any time during the past
three years. In addition, a member of the director’s
immediate family (including the director’s spouse; parents;
children; siblings; mothers-, fathers-, brothers-, sisters-,
sons- and
daughters-in-law;
and anyone who shares the director’s home, other than
household employees) must not have been an executive officer of
the Company in the prior three years.
•
Other Compensation. The director or
immediate family member (as an executive officer) must not have
received more than $100,000 per year in direct compensation from
the Company, other than in the form of director fees, pension,
or other forms of deferred compensation, during the past three
years.
•
Auditor Affiliation. The director must
not be a current partner or employee of the Company’s
internal or external auditor and the director’s immediate
family member must not be a current employee of such auditor who
participates in the firm’s audit, assurance or tax
compliance (but not tax planning) practice or a current partner
of such auditor. In addition, the director or an immediate
family member must not have been within the last three years a
partner or employee of such firm who personally worked on the
Company’s audit.
•
Interlocking Directorships. During the
past three years, the director or immediate family member cannot
have been employed as a non-employee director or an executive
officer by another entity where one of the Company’s or its
former parent company’s, Time Warner Inc. (“Time
Warner”), current executive officers served at the same
time on the compensation committee.
•
Business Transactions. The director
must not be an employee of another entity that, during any one
of the past three years, received payments from the Company, or
made payments to the Company, for property or services that
exceed the greater of $1 million or 2% of the other
entity’s annual consolidated gross revenues. In addition, a
member of the director’s immediate family cannot have been
an executive officer of another entity that, during any one of
the past three years, received payments from the Company, or
made payments to the Company, for property or services that
exceed the greater of $1 million or 2% of the other
entity’s annual consolidated gross revenues.
•
Additional Categorical Criteria. In
addition to applying the NYSE requirements summarized above, the
Board has also developed categorical standards, which it uses to
guide it in determining whether a “material
relationship” exists with the Company that would affect a
director’s independence:
Ø
Charitable Contributions. Discretionary
charitable contributions by the Company to established
non-profit entities with which a director or a member of the
director’s family is affiliated will
generally be deemed not to create a material relationship,
unless they occurred within the last three years and
(i) were inconsistent with the Company’s philanthropic
practices; or (ii) were provided to an organization where
the director or spouse is an executive officer or director and
the Company’s contributions for the most recently completed
fiscal year represent more than (a) the greater of $100,000
or 10% of that organization’s annual gross revenues for
organizations with gross revenues up to $10 million per
year or (b) the greater of $1 million or 2% of that
organization’s annual gross revenues for organizations with
gross revenues of more than $10 million per year; or
(iii) the aggregate amount of the Company’s
contributions to the organizations where a director or spouse is
an executive officer or director is more than the greater of
$1 million or 2% of all such organizations’ annual
gross revenues.
Ø
Employment and Benefits. The employment
by the Company of a member of a director’s family will
generally be deemed not to create a material relationship,
unless such employment involves employment at a salary of more
than $60,000 per year of a director’s current spouse,
domestic partner, or child. Further, vested and non-forfeitable
equity-based benefits and retirement benefits provided to
directors or their family members under qualified plans as a
result of prior employment will generally be deemed not to
create a material relationship.
Ø
Other Transactions. Transactions
between the Company and another entity with which a director or
a member of a director’s family is affiliated will
generally be deemed not to create a material relationship unless
(i) they are the type set forth above under “Business
Transactions;” (ii) they occurred within the last
three years and were inconsistent with other transactions in
which the Company has engaged with third parties;
(iii) they occurred within the last three years and the
director is an executive officer, employee, or substantial
owner, or an immediate family member is an executive officer, of
the other entity and such transactions represent more than 2% of
the other entity’s gross revenues for the prior fiscal year
or more than 5% of the Company’s consolidated gross
revenues for its prior fiscal year.
Ø
Interlocking Directorships. Service by
an employee of the Company as a director of an entity where one
of the Company’s directors or director’s family
members serves as an executive officer will generally be deemed
not to create a material relationship, unless the employee
(i) is an executive officer of the Company;
(ii) reports directly to the Board or a committee of the
Board; or (iii) has annual compensation approved by the
Board’s Compensation Committee. In addition, service by an
employee of the Company as a director of an entity where one of
the Company’s directors or a member of the director’s
family serves as a non-employee director will generally be
deemed not to create a material relationship.
Ø
Educational and Other
Affiliations. Attendance by an employee of
the Company at an educational institution affiliated with one of
the Company’s directors or a member of the director’s
family, or membership by an employee of the Company in a
professional association, social, fraternal or religious
organization, club or institution affiliated with a Company
director or member of the director’s family, will generally
be deemed not to create a material relationship.
Ø
Security Ownership. Ownership by an
employee of the Company of the securities of an entity where one
of the Company’s directors or a member of the
director’s family serves as a director or an employee will
generally be deemed not to create a material relationship,
unless (i) the Company employee (a) is an executive
officer of the Company or reports directly to the Board or a
committee of the Board or has annual compensation approved by
the Board’s Compensation Committee and
(b) beneficially owns more than 5% of any class of the
other entity’s voting securities; and (ii) the Company
director or a member of a director’s family is a director
or executive officer of the other entity.
Independent Judgment. Finally, in
addition to the foregoing independence criteria, which relate to
a director’s relationship with the Company, the Board also
requires that independent directors be free of any other
affiliation—whether with the Company or another
entity—that would interfere with the exercise of
independent judgment.
There are a number of different ways in which an individual may
be nominated for election to the Board of Directors.
Nominations Developed by the Nominating and Governance
Committee. The Nominating and Governance
Committee may identify and propose an individual for election to
the Board. This involves the following steps:
•
Assessment of Needs. As described
above, the Nominating and Governance Committee conducts periodic
assessments of the overall composition of the Board in light of
the Company’s current and expected business needs and, as a
result of such assessments, the Committee may establish specific
qualifications that it will seek in Board candidates. The
Committee reports on the results of these assessments to the
full Board of Directors.
•
Identifying New Candidates. In light of
such assessments, the Committee may seek to identify new
candidates for the Board who possess the specific qualifications
established by the Committee and satisfy the other requirements
for Board service. In identifying new director candidates, the
Committee seeks advice and names of candidates from Committee
members, other members of the Board, members of management, and
other public and private sources. The Committee may also, but
need not, retain a search firm in order to assist it in these
efforts.
•
Reviewing New Candidates. The Committee
reviews the potential new director candidates identified through
this process. This involves reviewing the candidates’
qualifications as compared to the specific criteria established
by the Committee and the more general criteria established by
the by-laws and Corporate Governance Policy. The Committee may
also select certain candidates to be interviewed by one or more
Committee members.
•
Reviewing Incumbent Candidates. On an
annual basis, the Committee also reviews incumbent candidates
for renomination to the Board. This review involves an analysis
of the criteria set forth above that apply to incumbent
directors.
•
Recommending Candidates. The Committee
recommends a slate of candidates for the Board of Directors to
submit for approval to the stockholders at the annual
stockholders meeting. This slate of candidates may include both
incumbent and new nominees. In addition, apart from this annual
process, the Committee may, in accordance with the by-laws,
recommend that the Board elect new members of the Board who will
serve until the next annual stockholders meeting.
Stockholder Nominations Submitted to the
Committee. Stockholders may also submit names
of director candidates, including their own, to the Nominating
and Governance Committee for its consideration. The process for
stockholders to use in submitting suggestions to the Nominating
and Governance Committee is set forth below at “Other
Procedural Matters—Procedures for Submitting Director
Recommendations and Nominations.”
Stockholder Nominations Submitted to
Stockholders. Stockholders may choose to
submit nominations directly to the Company’s stockholders.
The Company’s by-laws set forth the process that
stockholders may use if they choose this approach, which is
described below at “Other Procedural
Matters—Procedures for Submitting Director Recommendations
and Nominations.”
Director Elections—Majority
Vote.The Company’s by-laws provide,
among other things, that in any uncontested election of
directors, each person receiving a majority of the votes cast
will be deemed elected. Any abstentions or broker non-votes will
not be counted as a vote cast. Accordingly, any new director
nominee in an uncontested election who receives more
“against” votes than “for” votes will not be
elected to the Board. If any incumbent director receives more
“against” votes than “for” votes, he or she
must submit an offer to resign from the Board no later than two
weeks after the certification by the Company of the voting
results. The Board will then consider the resignation offer and
may either (i) accept the resignation offer or
(ii) reject the resignation offer and seek to address the
underlying cause(s) of the “against” votes. The Board
is required to make its determination within 90 days
following the certification of the stockholder vote and make
a public announcement of its decision, including a statement
regarding the reasons for its decision if the Board rejects the
resignation offer. This procedure also provides that the
Chairman of the Nominating and Governance Committee has the
authority to manage the Board’s review of the resignation
offer, unless it is the Chairman of the Nominating and
Governance Committee who has received the majority-withheld
vote, in which case, the remaining independent directors who
received a majority of the votes cast will select a director,
which director will have the authority otherwise delegated to
the Chairman of the Nominating and Governance Committee, to
manage the process. In any contested election of directors, the
election will be subject to a plurality vote standard, where the
persons receiving the highest numbers of the votes cast, up to
the number of directors to be elected in such election, will be
deemed elected. A contested election is generally one in which
the number of persons nominated exceeds the number of directors
to be elected.
The Board’s primary responsibility is to seek to maximize
long-term stockholder value. The Board selects senior management
of the Company, monitors management’s and the
Company’s performance, and provides advice and counsel to
management. Among other things, the Board at least annually
reviews the Company’s long-term strategy and longer-term
business plan and also approves an annual budget for the
Company. The Board also reviews and approves transactions in
accordance with guidelines that the Board may adopt from time to
time. In fulfilling the Board’s responsibilities, directors
have full access to the Company’s management, internal and
external auditors, and outside advisors.
The Board of Directors holds at least five meetings each year,
including at least four quarterly meetings and generally one
meeting devoted to addressing the Company’s strategy. In
2010, the Board of Directors met ten times. The meeting schedule
is normally established in the summer of the previous year. The
Board of Directors also communicates informally with management
on a regular basis.
Non-employee directors meet by themselves, without management or
employee directors present, at every regularly scheduled Board
meeting. Additionally, the independent directors meet together
without any other directors or management present at least once
a year. Any director may request additional executive sessions.
The lead director generally presides at these executive sessions
with the Chair of the committee that is responsible for the
subject matter at issue (e.g., the Audit Committee Chair
would lead a discussion of audit-related matters) leading the
discussion, if appropriate.
The Company’s Corporate Governance Policy provides that the
Nominating and Governance Committee may from time to time make
recommendations to the Board regarding the leadership structure
of the Board, including whether to combine or separate the
positions of Chairman and Chief Executive Officer
(“CEO”), or to establish the position of
“lead” or “presiding” director. In making
the leadership structure determination, the Board considers many
factors, including the specific needs of the business and what
is in the best interests of the Company’s stockholders. In
connection with the Company’s separation from Time Warner
in March 2009 (the “Separation”), the Board named
Glenn A. Britt, the Company’s Chief Executive Officer, to
the additional position of Chairman and named Peter R. Haje to
serve as the independent lead director. Each of them has served
in those roles since the Separation.
As lead director, Mr. Haje chairs the Board’s
executive sessions, serves as a liaison between the Chairman of
the Board and the independent directors, approves Board meeting
schedules and agenda items, has the authority to call meetings
of the independent directors and organizes the Board evaluation
of the CEO. The Board believes that it is in the best interest
of the Company and its stockholders to have Mr. Britt, who
is responsible for the Company’s operations and strategy,
chair the Board’s discussions. The combined position
enhances Mr. Britt’s ability to provide insight and
direction on important strategic initiatives to both management
and the Board, and to ensure that they act with a common
purpose. The Company believes that its overall corporate
governance policies and practices combined with the presence of
a lead director, whose
role closely parallels that of an independent Chairman,
adequately addresses any governance concerns raised by the dual
CEO and Chairman role. The lead director, along with the other
non-employee directors, provides independent oversight of
management and the Company’s strategy. The Company believes
that separating the roles would potentially result in less
effective management and governance processes through
undesirable duplication of work and, in worst case, lead to a
blurring of the current clear lines of accountability and
responsibility.
While risk management is primarily the responsibility of the
Company’s management, the Board provides overall risk
oversight with a focus on the most significant risks facing the
Company. Throughout the year, in conjunction with its regular
business presentations to the Board and its committees,
management highlights any significant related risks. In
addition, annually a meeting of the Board is dedicated to
reviewing the Company’s short- and long-term strategies,
including consideration of significant risks facing the Company.
The Board has delegated responsibility for the oversight of
specific risks to the Board committees as follows:
•
Audit Committee. The Audit Committee oversees
the Company’s risk policies and processes relating to the
financial statements and financial reporting process as well as
overseeing the Company’s enterprise risk management
processes. In that role, the Company’s management discusses
with the Committee the Company’s major risk exposures and
how these risks are managed and monitored. At least annually,
the Audit Committee receives a report from management regarding
the manner in which the Company is assessing and managing the
Company’s exposure to financial and other risks.
•
Compensation Committee. The Compensation
Committee monitors the risks associated with the Company’s
compensation philosophy and programs.
•
Nominating and Governance Committee. The
Nominating and Governance Committee oversees risks related to
the Company’s governance structure and processes and risks
from related person transactions.
•
Finance Committee. The Finance Committee
monitors the risks associated with the Company’s financing
activities, capital structure, pension obligations and hedging
programs.
•
Marketing and Customer Care Committee. The
Marketing and Customer Care Committee oversees the
Company’s marketing and customer care activities, including
risks related to its strategies and programs.
The Board’s risk oversight process builds upon the
Company’s enterprise risk management processes. The
description, assessment, mitigation plan and status for each
enterprise risk are developed and monitored by management,
including management “risk owners” and an oversight
enterprise risk management committee. Management identifies and
monitors the Company’s risks. In addition to the
Company’s enterprise risk management processes, it has
regular management disclosure committee meetings, a strong
compliance office, Codes of Business Conduct and a comprehensive
internal and external audit process.
The Board has five standing committees: the Audit Committee, the
Compensation Committee, the Nominating and Governance Committee,
the Finance Committee and the Marketing and Customer Care
Committee. The Board may eliminate or create additional
committees as it deems appropriate.
Each of the Audit Committee, the Nominating and Governance
Committee and the Compensation Committee is composed entirely of
Independent Directors. The Chair of each committee is elected by
the Board, generally upon the recommendation of the Nominating
and Governance Committee, and is expected to be rotated
periodically. Each committee also holds regular executive
sessions at which only committee members are present. Each
committee is also authorized to retain its own outside counsel
and other advisors as it desires.
As noted above, charters for each standing committee are
available on the Company’s website, but a brief summary of
the committees’ responsibilities follows:
Audit Committee. The Audit Committee
assists the Board of Directors in fulfilling its
responsibilities in connection with the Company’s
(i) independent auditors, (ii) internal auditors,
(iii) financial statements, (iv) earnings releases and
guidance, as well as (v) the Company’s compliance
program, internal controls, and risk management. The Board has
determined that each member of the Audit Committee qualifies as
an audit committee financial expert under the rules of the SEC
implementing section 407 of the Sarbanes-Oxley Act and
meets the independence and experience requirements of the NYSE
and the federal securities laws.
Compensation Committee. The
Compensation Committee is responsible for (i) approving
compensation and employment agreements for, and reviewing
benefits provided to, certain of the Company’s senior
executives, (ii) overseeing the Company’s disclosure
regarding executive compensation, (iii) administering the
Company’s equity-based compensation plans, and
(iv) reviewing the Company’s overall compensation
structure, practices, risks and benefit plans. A
sub-committee
of the Compensation Committee is responsible for certain
executive compensation matters, including (i) reviewing and
approving corporate goals and objectives relevant to the
compensation of the CEO, each of the other executive officers
and each of the other employees whose annual total compensation
has a target value of $2 million or more (the “Senior
Executives”), (ii) evaluating the performance of the
CEO and the Senior Executives, and (iii) setting the
compensation level of the CEO and the Senior Executives.
Nominating and Governance
Committee. The Nominating and Governance
Committee is responsible for assisting the Board in relation to
(i) corporate governance, (ii) director nominations,
(iii) committee structure and appointments, (iv) CEO
performance evaluations and succession planning, (v) Board
performance evaluations, (vi) director compensation,
(vii) regulatory matters relating to corporate governance,
(viii) stockholder proposals and communications, and
(ix) related person transactions.
Finance Committee. The Finance
Committee is responsible for (i) reviewing and approving
the Company’s financing activities and (ii) assisting
the Board in overseeing the Company’s (a) capital
structure and financing strategies, including the related risks,
(b) insurance program, and (c) management of its
retirement plans, including the defined benefit pension plan
trust.
Marketing and Customer Care
Committee. The Marketing and Customer Care
Committee is responsible for (i) assisting the Board in
overseeing the Company’s marketing and customer care
activities, including strategies, programs, spending, execution
and related technical operation matters, and (ii) providing
feedback to the Company’s management regarding such matters.
The Board of Directors conducts a self-evaluation of its
performance annually, which includes a review of the
Board’s composition, responsibilities, structure, processes
and effectiveness. Each standing committee of the Board also
conducts a similar self-evaluation with respect to such
committee.
Each individual, upon joining the Board of Directors, is
provided with an orientation regarding the role and
responsibilities of the Board and the Company’s operations.
As part of this orientation, new directors have opportunities to
meet with members of the Company’s senior management. The
Company is also committed to the ongoing education of its
directors. From time to time, the Company’s executives make
presentations to the Board regarding their respective areas. In
addition, the Company reimburses directors for reasonable
expenses relating to ongoing director education.
The Board of Directors is responsible for establishing
compensation for the Company’s non-employee directors who
are not active employees of the Company. At least every two
years, the Nominating and Governance Committee reviews the
compensation for non-employee directors, including compensation
provided to non-employee directors at other companies, and makes
a recommendation to the Board for its approval. (For details on
the compensation currently provided to non-employee directors,
please see “Director Compensation.”)
All directors who are not actively employed by the Company are
required, within five years of joining the Board, to own stock
or stock-based equivalents (whether as a result of receipt of
shares from the Company or the purchase of shares) with a value
of at least five times the annual cash retainer paid for Board
service.
The Company also expects all directors to comply with all
federal, state and local laws regarding trading in securities of
the Company and disclosing material, non-public information
regarding the Company, and the Company has procedures in place
to assist directors in complying with these laws.
Standards of Business Conduct. The
Company’s Standards of Business Conduct apply to the
Company’s employees, including any employee directors. The
Standards of Business Conduct establish policies pertaining to
employee conduct in the workplace, electronic communications and
information security, accuracy of books, records and financial
statements, securities trading, confidentiality, conflicts of
interest, fairness in business practices, the Foreign Corrupt
Practices Act, antitrust laws and political activities and
solicitations.
Code of Ethics for Principal Executive and Senior
Financial Officers.The Company’s Code
of Ethics for Principal Executive and Senior Financial Officers
applies to certain officers of the Company, including the
Company’s Chief Executive Officer, Chief Financial Officer,
Controller, and other senior executives performing senior
financial officer functions. The code serves as a supplement to
the Standards of Business Conduct. Among other things, the code
mandates that the designated officers engage in honest and
ethical conduct, avoid conflicts of interest and disclose any
material transaction or relationship that could give rise to a
conflict, protect the confidentiality of non-public information
about the Company, work to achieve responsible use of the
Company’s assets and resources, comply with all applicable
governmental rules and regulations and promptly report any
possible violation of the code. Additionally, the code requires
that these individuals promote full, fair, understandable and
accurate disclosure in the Company’s publicly filed reports
and other public communications and sets forth standards for
accounting practices and records. Individuals to whom the code
applies are held accountable for their adherence to it. Failure
to observe the terms of this code or the Standards of Business
Conduct can result in disciplinary action (including termination
of employment).
Guidelines for Non-Employee
Directors. The Guidelines for Non-Employee
Directors assist the Company’s non-employee directors in
fulfilling their fiduciary and other duties to the Company. In
addition to affirming the directors’ duties of care and
loyalty, the guidelines set forth specific policies addressing,
among other things, securities trading and reporting
obligations, gifts, the Foreign Corrupt Practices Act, political
contributions and antitrust laws.
The Company’s Independent Directors have approved a process
for stockholders to communicate with directors. This process is
described below at “Other Procedural
Matters—Communicating with the Board of Directors.”
The Company’s directors are elected annually by the holders
of Common Stock. The nominees for director at the Annual Meeting
will be elected to serve for a one-year term until the next
annual meeting of stockholders and until their successors have
been duly elected and qualified or until their earlier death,
resignation or retirement.
As set forth in the Company’s Corporate Governance Policy,
in selecting its slate of nominees for election to the Board,
the Nominating and Governance Committee and the Board have
evaluated, among other things, each nominee’s independence,
satisfaction of regulatory requirements, financial literacy,
personal and professional accomplishments and experience in
light of the needs of the Company and, with respect to incumbent
directors, past performance on the Board. See “Corporate
Governance—Criteria for Membership on the Board.” Each
of the nominees is currently a director of the Company. The
Board has determined that nine of the twelve current and
incumbent directors (or 75% of the Board) have no material
relationship with the Company either directly or indirectly and
are “independent” within the meaning of the listing
requirements of the NYSE and the Company’s more rigorous
independence standards (such directors, the “Independent
Directors”). Specifically, the Board has identified Mses.
Black and James and Messrs. Castro, Chang, Copeland, Haje,
Nicholas, Shirley and Sununu as Independent Directors as
independence is defined in the NYSE Listed Company Manual and as
defined by
Rule 10A-3
of the Securities Exchange Act of 1934 (the “Exchange
Act”). Additionally, each of these directors meets the
categorical standards for independence established by the Board,
as set forth in the Company’s Corporate Governance Policy
and discussed elsewhere in this Proxy Statement. As former
executive officers of Time Warner, which was the Company’s
parent company prior to the Separation, Messrs. Logan and
Pace do not yet satisfy the three-year “cooling off”
post-employment period required under the NYSE independence
rules described above. This period will expire in March 2012.
The Company believes that if it were not for this past
employment, the Board could determine that each of
Messrs. Logan and Pace is independent under these criteria.
In addition, the Board has determined that each director nominee
is financially literate and possesses the high level of skill,
experience, reputation and commitment that is mandated by the
Board.
In selecting its slate of nominees for election to the Board,
the Nominating and Governance Committee and the Board of
Directors consider the appropriate combination of skills,
professional experience, and diversity of backgrounds for the
Board as a whole. The Board of Directors believes that each of
the nominees possesses integrity, good judgment, business acumen
and high personal and professional ethics. More detailed
information about their experience is provided below with their
biographical information.
Several of the directors have substantial experience in the
cable, media and entertainment industries, including
Messrs. Britt, Castro, Chang, Haje, Logan, Nicholas and
Pace and Ms. Black. Messrs. Britt, Haje, Logan,
Nicholas and Pace all share a deep understanding of the
Company’s business developed through their long service at
Time Warner. Ms. Black served as the President and Chief
Executive Officer of Lifetime Entertainment Services, a
multi-media brand for women, for six years, where she oversaw
all aspects of programming and marketing. Mr. Castro
co-founded a radio broadcasting company that primarily targets
the Hispanic community, an increasingly important focus for
distributing the Company’s services. In addition to
Dr. Chang’s technological and management experience,
he has a long history serving as a director of the Company and
its predecessors.
Each of the directors has significant experience as a senior
officer of a major corporation or a comparable position in
government or academia. Mr. Shirley, with his long service
history with The Procter & Gamble Company and The
Gillette Company, brings his marketing and managerial experience
to the Board. Several of the directors also have extensive
finance and accounting experience, including Messrs. Britt,
Copeland, Nicholas and Pace, Senator Sununu, and Ms. James.
Messrs. Britt, Copeland and Pace and Ms. James also
have valuable experience serving on the audit committees of
other public companies. Several of the directors
have extensive legislative or regulatory experience, including
Senator Sununu and Messrs. Britt, Castro and Copeland and
Ms. James, through their experience in highly-regulated
industries.
While backgrounds of all of the directors contribute a diversity
of experience and opinion to the Board, Messrs. Castro and
Chang and Mses. Black and James also bring ethnic and gender
diversity.
The Board has set the number of directors at twelve. Each of the
current directors has been nominated for election at the Annual
Meeting and was elected by the Company’s stockholders at
the annual meeting in 2010. Set forth below are the principal
occupation and certain other information, as of
February 28, 2011, for the twelve nominees, each of whom
currently serves as a director.
Name
Age
Principal Occupation During the Past Five Years
Carole Black
67
Former President and Chief Executive Officer, Lifetime Entertainment Services. Carole Black served as the President and Chief Executive Officer of Lifetime Entertainment Services, a multi-media brand for women, including Lifetime Network, Lifetime Movie Network, Lifetime Real Women Network, Lifetime Online and Lifetime Home Entertainment, from March 1999 to March 2005. Prior to that, Ms. Black served as the President and General Manager of NBC4, Los Angeles, a commercial television station, from 1994 to 1999, and in various marketing-related positions at The Walt Disney Company, a media and entertainment company, from 1986 to 1993. Ms. Black has served as a director since July 2006.
Ms. Black has broad experience as the former president and chief executive officer of a large media and entertainment company, and her extensive experience in television programming and the cable, media and entertainment business provides her with a strong understanding of
the Company’s business and its competitive environment.
Glenn A. Britt
61
Chairman and Chief Executive Officer of the Company. Glenn A. Britt has served as the Company’s Chief Executive Officer since August 2001. He also has served as the Company’s Chairman since March 2009 and previously from August 2001 to March 2006. Prior to assuming the Chief Executive Officer position, he held various senior positions with Time Warner Cable Ventures, a unit of Time Warner Entertainment Company, L.P., now a Company subsidiary (“TWE”), certain of the Company’s predecessor entities, and Time Warner and its predecessor Time Inc. Mr. Britt has served as a director since March 2003 and is also a director
of Xerox Corporation and Cardinal Health Inc. He previously served as a trustee of Teachers’ Insurance and Annuity Association from 2007 until November 2009.
Mr. Britt has substantial business, finance and accounting experience developed through his nearly 40 years at the Company and Time Warner. He is a recognized leader in the cable industry, and serves on the boards of the National Cable & Telecommunications Association and the Paley Center for Media. As a result of his extensive experience, Mr. Britt possesses a deep understanding of the Company’s business and the cable industry.
President and Chief Executive Officer, El Dorado Capital, LLC. Thomas H. Castro, the founder of El Dorado Capital, LLC, a private equity investment firm, has served as its President and Chief Executive Officer since December 2008. Prior to that, he was the co-founder, Chief Executive Officer and Vice Chairman of Border Media Partners, LLC, a radio broadcasting company that primarily targeted Hispanic listeners, from July 2007, having served as its President and Chief Executive Officer from 2002. Prior to that, Mr. Castro, an entrepreneur, owned and operated other radio stations and founded a company that exported oil field equipment to Mexico. Mr. Castro has served as a director since July 2006.
Mr. Castro has significant operating and financial experience as well as an in-depth understanding of the Company’s business and industry. In addition, through his entrepreneurial
experience and community work, Mr. Castro brings an appreciation and awareness of issues important to the Hispanic community, an increasingly important customer base for the Company.
David C. Chang
69
Chancellor, Polytechnic Institute of New York University. David C. Chang has served as Chancellor and Professor of Electrical and Computer Engineering of Polytechnic Institute of New York University (formerly known as Polytechnic University) since July 2005, having served as its President from 1994. Prior to assuming that position, he was Dean of the College of Engineering and Applied Sciences at Arizona State University. Dr. Chang has served as a director since March 2003 and served as an independent director of American Television and Communications Corporation (a predecessor of the Company) from 1986 to 1992. He is also a director of AXT, Inc. and previously served as a director of Fedders Corporation from 1998 until August 2007.
Dr. Chang has significant technology and managerial experience as well as historical perspective and understanding of the
Company through his long-standing board service, first as a director of American Television and Communications Corporation and then as a director of the Company.
Former Chief Executive Officer of Deloitte & Touche USA LLP and Deloitte Touche Tohmatsu and Former Global Scholar, Robinson School of Business, Georgia State University. James E. Copeland, Jr. served as a Global Scholar at the Robinson School of Business at Georgia State University from 2003 to 2007. Prior to that, Mr. Copeland served as the Chief Executive Officer of Deloitte & Touche USA LLP, a public accounting firm, and Deloitte Touche Tohmatsu, its global parent, from 1999 to May 2003. Prior to that, Mr. Copeland served in various positions at Deloitte & Touche and its predecessors from 1967. Mr. Copeland has served as a director since July 2006 and is also a director of ConocoPhillips and Equifax, Inc. Previously, Mr. Copeland served as a director of Coca-Cola Enterprises Inc. from July 2003 until April 2008.
Mr. Copeland has substantial accounting, regulatory and business experience from his distinguished career in the accounting
industry. He has extensive technical accounting expertise as well as experience managing a leading accounting firm and working with regulators to develop and apply accounting policy. In addition, Mr. Copeland has experience serving on audit committees of other public companies.
Peter R. Haje
76
Legal and Business Consultant and Private Investor. Peter R. Haje has served as a legal and business consultant and private investor since he retired from service as an executive officer of Time Warner on January 1, 2000. Prior to that, he served as the Executive Vice President and General Counsel of Time Warner from October 1990, adding the title of Secretary in May 1993. He also served as the Executive Vice President and General Counsel of TWE from June 1992 until 1999. Prior to his service to Time Warner, Mr. Haje was a partner of the law firm of Paul, Weiss, Rifkind, Wharton & Garrison LLP for more than 20 years. Mr. Haje has served as a director since July 2006 and as the independent lead director since March 2009. Previously, Mr. Haje served as a director of American Community Newspapers Inc. from 2005 until May 2009.
Mr. Haje has substantial experience guiding various aspects of corporate
legal and executive compensation matters as well as in the cable, media and entertainment industry from his service as the chief legal officer at Time Warner and as a member of a premier law firm. Mr. Haje also has significant historical perspective and knowledge of the Company through his long service at Time Warner.
Consultant, Business Advisor and Managing Director, Lardon & Associates LLC. Donna James has served as a consultant, business advisor and managing director of Lardon & Associates LLC, a business and executive advisory services firm, since April 2006. Prior to that, Ms. James served as President of Nationwide Strategic Investments, a division of Nationwide Mutual Insurance Company (“Nationwide Mutual”), a financial services and insurance company, from 2003, and as Executive Vice President and Chief Administrative Officer of Nationwide Mutual from 2000. Ms. James also has served as Chair of the National Women’s Business Council since her appointment by President Obama in October 2010. Ms. James has served as a director since March 2009 and is also a director of CNO Financial Group, Inc. (through May 12, 2011), Limited Brands, Inc. and Coca-Cola Enterprises Inc.
Ms. James has significant finance,
accounting and human resources experience. In addition, Ms. James’s service on other public company boards contributes to her knowledge of public company matters, including corporate governance and public affairs.
Don Logan
66
Former Chairman of the Board of the Company and Former Chairman, Time Warner’s Media & Communications Group. Don Logan served as the Chairman of the Company’s Board of Directors from February 2006 until March 2009. He served as Chairman of Time Warner’s Media & Communications Group from July 2002 until December 31, 2005. Prior to assuming that position, he was Chairman and Chief Executive Officer of Time Inc., Time Warner’s publishing subsidiary, from 1994 to July 2002 and was its President and Chief Operating Officer from 1992 to 1994. Prior to that, Mr. Logan held various executive positions with Southern Progress Corporation, which was acquired by Time Inc. in 1985. Mr. Logan has served as a director since March 2003.
Mr.
Logan has substantial business, finance and accounting experience as well as extensive knowledge of the media and entertainment industry. In addition, Mr. Logan oversaw Time Warner’s investment in the Company as Chairman of Time Warner’s Media and Communications Group, and he has a deep understanding of the Company’s business.
Investor. N.J. Nicholas, Jr. is an investor. From 1964 until 1992, Mr. Nicholas held various positions at Time Inc. and Time Warner. He was named President of Time Inc. in 1986 and served as Co-Chief Executive Officer of Time Warner from 1990 to 1992. Mr. Nicholas has served as a director since March 2003 and is also a director of Boston Scientific Corporation and Xerox Corporation.
Mr. Nicholas has substantial executive experience as well as extensive experience in the media and entertainment field developed through his nearly 30 years at Time Warner and Time Inc. Mr. Nicholas also possesses valuable corporate governance experience from his long-standing service on other public company boards.
Wayne H. Pace
64
Former Executive Vice President and Chief Financial Officer, Time Warner. Wayne H. Pace served as Executive Vice President and Chief Financial Officer of Time Warner from November 2001 through December 2007, and served as Executive Vice President and Chief Financial Officer of TWE from November 2001 until October 2004. Prior to that, he was Vice Chairman and Chief Financial and Administrative Officer of Turner Broadcasting System, Inc., a cable programming subsidiary of Time Warner (“TBS”), from March 2001 to November 2001 and held various other executive positions at TBS, including Chief Financial Officer, from 1993 to 2001. Prior to that, Mr. Pace was an audit partner with Price Waterhouse, now PricewaterhouseCoopers LLP, an international accounting firm. Mr. Pace has served as a director since March 2003.
Mr. Pace has substantial business, finance and accounting experience developed during his nearly fifteen years with Time Warner and TBS and,
prior to that, Price Waterhouse. Mr. Pace also brings an extensive knowledge of the Company’s business and financial condition.
Edward D. Shirley
54
Vice-Chairman, Global Beauty and Grooming, The Procter & Gamble Company. Edward Shirley has served as Vice-Chairman of Global Beauty and Grooming, a business unit of The Procter & Gamble Company, a consumer goods company, since July 2008, and as Group President, North America from April 2006. Prior to that, Mr. Shirley held several senior executive positions with The Gillette Company, a consumer goods company, which was acquired by The Procter & Gamble Company in 2005. Mr. Shirley has served as a director since March 2009.
Mr. Shirley has substantial executive and marketing experience developed as a senior executive at The Procter & Gamble Company and The Gillette Company. The Company operates in an extremely competitive industry, and Mr. Shirley brings valuable marketing experience and perspective to the Board.
Former U.S. Senator, New Hampshire. Senator Sununu served as a U.S. Senator from New Hampshire from January 2002 to 2008. He was a member of the Committees on Banking, Commerce, Finance and Foreign Relations, and he was appointed the Congressional Representative to the United Nations General Assembly. Prior to his election to the Senate, he represented New Hampshire’s First District in the U.S. House of Representatives from 1996 to 2002. Prior to serving in Congress, he served as the Chief Financial Officer of Teletrol Systems, Inc., a manufacturer of building control systems, from 1993 to 1996. Senator Sununu has served as a director since March 2009 and is also a director of Boston Scientific Corporation.
Senator Sununu has significant legislative, regulatory and financial experience. The Company’s business is subject to extensive regulation, and Senator Sununu
provides legislative and regulatory insight. He also possesses corporate governance experience from his service on another public company board.
During 2010, the Board of Directors met ten times. Each
incumbent director attended over 85% of the total number of
meetings of the Board of Directors and the committees of which
he or she was a member. In addition, the directors are
encouraged to attend the Company’s annual meetings of
stockholders. All of the Company’s twelve directors
attended the 2010 annual meeting of the Company’s
stockholders.
The Current members of the Board’s standing committees are
as follows:
Audit Committee. The members of the
Audit Committee are James Copeland, Jr., who serves as the
Chair, David Chang, Donna James and Edward Shirley. Among other
things, the Audit Committee complies with all NYSE and legal
requirements and consists entirely of Independent Directors. The
authority and responsibility of the Audit Committee, which met
seven times during 2010, are described above (see
“Corporate Governance—Committees of the Board”)
and set forth in detail in its Charter, which is posted on the
Company’s website at
www.timewarnercable.com/investors.
Compensation Committee. The members of
the Compensation Committee are Peter Haje, who serves as the
Chair, Carole Black, Thomas Castro and N.J. Nicholas, Jr.
All of the members of the Compensation Committee are Independent
Directors. The Compensation Committee has a
sub-committee
consisting of three Independent Directors who are also
considered “outside directors” under
Section 162(m) of the Internal Revenue Code of 1986, as
amended (the “Internal Revenue Code”), Ms. Black
and Messrs. Castro and Nicholas, to which it may delegate
executive compensation matters. The authority and responsibility
of the Compensation Committee, which met six times during 2010,
are described above (see “Corporate
Governance—Committees of the Board”) and set forth in
detail in its Charter, which is posted on the Company’s
website at www.timewarnercable.com/investors.
Nominating and Governance
Committee. The members of the Nominating and
Governance Committee are N.J. Nicholas, Jr., who serves as
the Chair, Carole Black, David Chang, Edward Shirley and John
Sununu. All of the members of the Nominating and Governance
Committee are Independent Directors. The authority and
responsibility of the Nominating and Governance Committee, which
met four times during 2010, are described above (see
“Corporate Governance—Committees of the Board”)
and set forth in detail in its Charter, which is posted on the
Company’s website at
www.timewarnercable.com/investors.
Finance Committee. The members of the
Finance Committee are Wayne Pace, who serves as the Chair,
Thomas Castro, Donna James, Don Logan and John Sununu. The
members of the Finance Committee who are Independent Directors
are Ms. James and Messrs. Castro and Sununu. The
authority and responsibility of the Finance Committee, which met
four times during 2010, are described above (see “Corporate
Governance—Committees of the Board”) and set forth in
detail in its Charter, which is posted on the Company’s
website at www.timewarnercable.com/investors.
Marketing and Customer Care
Committee. The members of the Marketing and
Customer Care Committee are Carole Black, who serves as the
Chair, Don Logan, Edward Shirley and John Sununu. The members of
the Marketing and Customer Care Committee who are Independent
Directors are Ms. Black and Messrs. Shirley and
Sununu. The authority and responsibility of the Marketing and
Customer Care Committee, which met three times during 2010, are
described above (see “Corporate Governance—Committees
of the Board”) and set forth in detail in its Charter,
which is posted on the Company’s website at
www.timewarnercable.com/investors.
In connection with the Separation, on March 12, 2009, TWC
paid a special cash dividend of $10.27 per share ($30.81 per
share after giving effect to the
1-for-3
reverse stock split discussed below, aggregating
$10.856 billion) to holders of record on March 11,2009 of its outstanding Class A common stock and
Class B common stock (the “Special Dividend”).
Following the payment of the Special Dividend, each outstanding
share of Class A common stock and Class B common stock
was automatically converted (the “Recapitalization”)
into one share of Common Stock. Effective immediately after the
Recapitalization, the Company implemented a reverse stock split
of the Common Stock at a
1-for-3
ratio (the “Reverse Stock Split”). TWC’s
separation from Time Warner was effected as a pro rata dividend
of all shares of TWC Common Stock held by Time Warner to holders
of record of Time Warner’s common stock (“Time Warner
Common Stock”) (the “Spin-Off Dividend”). The
shares of Common Stock distributed in the Spin-off Dividend
reflected both the Recapitalization and the Reverse Stock Split.
Unless otherwise indicated in this Proxy Statement,
information about TWC’s equity securities prior to
March 12, 2009 has been adjusted to reflect the Separation,
the Spin-Off Dividend and the Reverse Stock Split. As a
result of the Separation, the Company is no longer considered a
“controlled company” under NYSE governance
requirements.
The following table sets forth information as of the close of
business on February 1, 2011 as to the number of shares of
the Company’s Common Stock beneficially owned by:
•
each executive officer named in the Summary Compensation Table
included elsewhere in this Proxy Statement (a “named
executive officer”);
•
each current director and director nominee; and
•
all current executive officers and directors, as a group.
All current directors and executive officers as a group
(21 persons)(3)-(5)
107,840
1,149,812
*
*
Represents beneficial ownership of
less than one percent of the issued and outstanding Common Stock
on February 1, 2011.
(1)
Beneficial ownership as reported in
the above table has been determined in accordance with
Rule 13d-3
of the Exchange Act. Unless otherwise indicated, beneficial
ownership represents both sole voting and sole investment power.
This table does not include any shares of Common Stock or other
TWC equity securities that may be held by pension and
profit-sharing plans of other corporations or endowment funds of
educational and charitable institutions for which various
directors and officers serve as directors or trustees. As of
February 1, 2011, the only equity securities of TWC
beneficially owned by the named persons or group were
(a) shares of Common Stock, (b) options to purchase
shares of Common Stock and (c) restricted stock units
(“RSUs”) and deferred stock units reflecting the
contingent right to receive shares of Common Stock. The
beneficial ownership of Common Stock for each of the
non-employee directors does not include their interests in
(a) RSUs issued to them as compensation prior to 2011,
which represent the right to receive shares of Common Stock six
months after termination of service as a member of the Board (as
set forth in the table below), and 1,838 RSUs issued to each of
them in February 2011, which represent the right to receive
shares of Common Stock after termination of service as a member
of the Board and (b) deferred stock units issued under the
Directors’ Deferred Compensation Program, which represent
the right to receive shares of Common Stock on the distribution
date selected by the director. Each non-employee director’s
RSUs and deferred stock units as of February 1, 2011 are
set forth below. The directors do not have voting rights with
respect to these RSUs and deferred stock units, but they
represent an economic interest in the shares of Common Stock.
See “Director Compensation.” For information about
RSUs held by the named executive officers, see “Executive
Compensation—Outstanding Equity Awards.”
Reflects shares of Common Stock
subject to (a) options to purchase Common Stock that, on
February 1, 2011, were unexercised, but were exercisable on
or within 60 days after that date and (b) RSUs that,
on February 1, 2011, were unvested, but were expected to
vest on or within 60 days after that date. These shares are
excluded from the column headed “Number of Shares.”
(3)
Includes 29 shares of Common
Stock owned by Mr. Britt’s spouse, as to which
Mr. Britt disclaims beneficial ownership.
(4)
Includes 666 shares of Common
Stock owned by the Peter and Helen Haje Foundation, as to which
Mr. Haje and his spouse share voting power but have no
investment power.
(5)
Includes an aggregate of
approximately 909 shares of Common Stock held by a trust
under the TWC Savings Plan for the benefit of the Company’s
current executive officers, including 845 shares for
Mr. Lawrence-Apfelbaum.
Based on a review of filings with the SEC, the Company has
determined that each of the persons listed below is a beneficial
holder of more than 5% of the outstanding shares of Common Stock
as of December 31, 2010.
Based solely on a Schedule 13G
filed by Capital Research Global Investors with the SEC on
February 10, 2011, which reported that it had sole voting
and dispositive power over all the indicated shares.
(2)
Based solely on a Schedule 13G
filed by Dodge & Cox with the SEC on February 10,2011, which reported that it had sole dispositive power over all
the indicated shares and sole voting power over 18,364,322 of
such shares.
(3)
Based solely on a Schedule 13G
filed with the SEC on February 9, 2011 by AllianceBernstein
L.P. (“AllianceBernstein”), which reported that it had
sole dispositive power over 17,946,714 of the indicated shares
and sole voting power over of 14,459,185 shares. The
Schedule 13G states that AllianceBernstein is a majority
owned subsidiary of AXA Financial, Inc. and an indirect majority
owned subsidiary of AXA SA. AllianceBernstein operates under
independent management and makes independent decisions.
AllianceBernstein may be deemed to share beneficial ownership
with such entities with respect to 14,561 of the indicated
shares as to which it serves as a subadvisor.
In accordance with its charter, the Audit Committee of the
Company’s Board of Directors assists the Board of Directors
in fulfilling responsibilities in a number of areas. These
responsibilities include, among others: (i) the appointment
and oversight of the Company’s independent registered
public accounting firm (“independent auditor”), as
well as the evaluation of the independent auditor’s
qualifications, performance and independence;
(ii) oversight of the Company’s internal audit
function; (iii) the review of the Company’s financial
statements and the results of each external audit; (iv) the
review of other matters with respect to the Company’s
accounting, auditing and financial reporting practices and
procedures as the Audit Committee may find appropriate or may be
brought to its attention; and (v) the oversight of the
Company’s compliance program. To assist it in fulfilling
its oversight and other duties, the Audit Committee regularly
meets separately with the internal auditor, the independent
auditor and management.
Independent Auditor and Internal Audit
Matters. The Audit Committee discusses with
the Company’s independent auditor its plan for the audit of
the Company’s annual consolidated financial statements and
the independent auditor’s evaluation of the effectiveness
of the Company’s internal control over financial
reporting, as well as reviews of the Company’s quarterly
financial statements. During 2010, the Audit Committee met
regularly with the independent auditor, with and without
management present, to discuss the results of its audits and
quarterly reviews of the Company’s financial statements, as
well as its evaluations of the Company’s internal controls
and the overall quality of the Company’s accounting
principles. The Audit Committee has also appointed, subject to
stockholder ratification, Ernst & Young LLP
(“E&Y”) as the Company’s independent auditor
for 2011, and the Board concurred in its appointment.
The Audit Committee reviews and approves the annual internal
audit plan and meets regularly with the representatives of the
Company’s internal audit group, with and without management
present, to review and discuss the internal audit reports,
including reports relating to operational, financial and
compliance matters.
Financial Statements as of December 31,2010. Management has the primary
responsibility for the financial statements and the reporting
process, including its systems of internal and disclosure
controls (including internal control over financial reporting).
The independent auditor is responsible for performing an
independent audit of the Company’s consolidated financial
statements and expressing opinions on the conformity of the
consolidated financial statements with U.S. generally
accepted accounting principles and on the Company’s
internal control over financial reporting.
In this context, the Audit Committee has met and held
discussions with management and the independent auditor with
respect to the Company’s audited financial statements for
the fiscal year ended December 31, 2010. Management
represented to the Audit Committee that the Company’s
consolidated financial statements were prepared in accordance
with U.S. generally accepted accounting principles.
In connection with its review of the Company’s year-end
financial statements, the Audit Committee has reviewed and
discussed with management and the independent auditor the
consolidated financial statements and the independent
auditor’s evaluation of the Company’s internal control
over financial reporting. The Audit Committee also discussed
with the independent auditor the matters required to be
discussed by the Statement on Auditing Standards No. 61,
Communications with Audit Committees, as amended, as
adopted by the Public Company Accounting Oversight Board (PCAOB)
in Rule 3200T, including the quality and acceptability of
the Company’s accounting policies, financial reporting
processes and controls. The Audit Committee also received from
the independent auditor the written disclosures regarding the
auditor’s independence required by PCAOB Ethics and
Independence Rule 3526, Communication with Audit
Committees Concerning Independence, and the Audit Committee
discussed with E&Y its independence. The Audit Committee
further considered whether the provision by the independent
auditor of any non-audit services described elsewhere in this
Proxy Statement is compatible with maintaining auditor
independence and determined that the provision of those services
does not impair the independent auditor’s independence.
In performing its functions, the Audit Committee acts only in an
oversight capacity and necessarily relies on the work and
assurances of the Company’s management, internal audit and
independent auditor, which, in their reports, express opinions
on the conformity of the Company’s annual financial
statements with U.S. generally accepted accounting
principles and the Company’s internal control over
financial reporting. In reliance on the reviews and discussions
referred to in this Report and in light of its role and
responsibilities, the Audit Committee recommended to the Board
of Directors, and the Board approved, that the audited financial
statements of the Company be included in the Company’s
Annual Report on
Form 10-K
for the fiscal year ended December 31, 2010 (the “2010
Form 10-K”)
for filing with the SEC.
Members of the Audit Committee. The
members of the Audit Committee are as follows:
The Audit Committee has established a policy (the
“Policy”) requiring its pre-approval of all audit
services and permissible non-audit services provided by the
independent auditor, along with the associated fees
for those services. The Policy provides for the annual
pre-approval of specific types of services pursuant to policies
and procedures adopted by the Audit Committee, and gives
detailed guidance to management as to the specific services that
are eligible for such annual pre-approval. The Policy requires
the specific pre-approval of all other permitted services. For
both types of pre-approval, the Audit Committee considers
whether the provision of a non-audit service is consistent with
the SEC’s rules on auditor independence, including whether
provision of the service (i) would create a mutual or
conflicting interest between the independent auditor and the
Company; (ii) would place the independent auditor in the
position of auditing its own work; (iii) would result in
the independent auditor acting in the role of management or as
an employee of the Company; or (iv) would place the
independent auditor in a position of acting as an advocate for
the Company. Additionally, the Audit Committee considers whether
the independent auditor is best positioned and qualified to
provide the most effective and efficient service, based on
factors such as the independent auditor’s familiarity with
the Company’s business, personnel, systems or risk profile
and whether provision of the service by the independent auditor
would enhance the Company’s ability to manage or control
risk or improve audit quality or would otherwise be beneficial
to the Company.
The Audit Committee has delegated to its Chair the authority to
address certain requests for pre-approval of services between
meetings of the Audit Committee, and the Chair must report his
pre-approval decisions to the Audit Committee at its next
regular meeting. The Policy is designed to ensure that there is
no delegation by the Audit Committee of authority or
responsibility for pre-approval decisions to management of the
Company. The Audit Committee monitors compliance by management
with the Policy by requiring management, pursuant to the Policy,
to report to the Audit Committee on a regular basis regarding
the pre-approved services rendered by the independent auditor.
Management has also implemented internal procedures to ensure
compliance with the Policy.
As described above, the Audit Committee is responsible for the
appointment, compensation, retention and oversight of the work
of the independent auditor. Accordingly, the Audit Committee has
appointed E&Y to perform audit and other permissible
non-audit services for the Company and its subsidiaries. The
aggregate fees billed by E&Y to the Company for the years
ended December 31, 2010 and 2009 are as follows:
Fees of
the Independent Auditor
2010
2009
Audit Fees(1)
$
4,410,560
$
4,491,057
Audit-Related Fees(2)
808,838
427,010
Tax Fees(3)
136,304
31,280
All Other Fees
—
—
Total Fees for Services Provided
$
5,355,702
$
4,949,347
(1)
Audit Fees
were for audit services,
including (a) the annual audit (including required
quarterly reviews) and other procedures required to be performed
by the independent auditors to be able to form an opinion on the
Company’s consolidated financial statements; (b) the
audit of the effectiveness of internal control over financial
reporting; (c) consultation with management as to the
accounting or disclosure treatment of transactions or events
and/or the actual or potential impact of final or proposed
rules, standards or interpretations by the SEC, the Financial
Accounting Standards Board (“FASB”) or other
regulatory or standard-setting bodies; and (d) services
that only the independent auditors reasonably can provide, such
as services associated with SEC registration statements,
periodic reports and other documents filed with the SEC or other
documents issued in connection with securities offerings and
assistance in responding to SEC comment letters.
(2)
Audit-Related
Fees were principally
for services related, in 2010 and 2009, to
(a) agreed-upon
procedures or expanded audit procedures to comply with
contractual arrangements or regulatory/franchise reporting
requirements and (b) audits of employee benefit plans and,
in 2010, to (a) due diligence services pertaining to an
acquisition, and (b) advice related to internal controls.
(3)
Tax
Fees were for services
related to tax planning and tax advice.
None of the services related to Audit-Related Fees or Tax Fees
presented above was approved by the Audit Committee pursuant to
a waiver of the pre-approval provisions as set forth in the
applicable rules of the SEC.
Summary:
Key Compensation Principles, Design and Determination
The Company’s executive compensation program is designed to
attract, retain, motivate and reward leaders who create value
for the Company and its stockholders. The Company seeks to:
Pay-for-
Performance
Orientation
•
pay for performance by rewarding executives for leadership
excellence and sustained financial and operating performance in
line with the Company’s strategic goals; and
•
align executives’ interests and risk orientation with the
Company’s business goals and the interests of the
Company’s stockholders.
The Company believes that its compensation programs have played
a key role in the Company’s operating and financial
success, which in turn have helped drive strong stock price
performance since the Company’s Separation from Time Warner
in March 2009.
This section of the Proxy Statement describes the Company’s
compensation philosophy, principles and practices for those of
its executive officers named in the Summary Compensation Table
in this Proxy Statement (the “named executive
officers”), and explains how they were applied to determine
these executives’ 2010 compensation.
The
Company’s Performance
The Company’s strong operating and financial results
continued in 2010 despite challenging economic conditions, a
robust competitive environment, rapid technological change and
regulatory uncertainty. The Company believes that its executive
officers have created significant shareholder value over the
past several years.
Strong Performance
Return of Capital
Total Shareholder Return
• Increased revenues 5.6% compared to
2009 and 18.3% compared to 2007
• Increased operating income 11.2%
compared to 2009 and 33.4% compared to 2007
• Developed and rolled out innovative
products and services that make customers’ lives simpler
and easier, such as Start
Over®
and Look
Back®
capabilities
• Paid a significant special cash
dividend to shareholders in connection with its March 2009
Separation from Time Warner
• Attained its target leverage ratio on
the one-year schedule announced at the time of the Separation
• Initiated a regular quarterly dividend,
with a yield at announcement of over 3.5% and first payment in
March 2010
• Announced a $4 billion share repurchase
program in November 2010
• Delivered significant total return to
stockholders: 106% cumulative return in the three years from
January 1, 2008; and 172% cumulative return from the
Separation on March 12, 2009 through December 31,2010
• Outperformed peers and S&P 500 in
total shareholder return for 2010
This chart compares the performance
of the Company’s Common Stock with the performance of the
S&P 500 Index and an index comprised of the companies
included in the Primary Peer Group (as defined and listed below)
over the last three fiscal years. The chart reflects the Special
Dividend, the Reverse Stock Split and the Recapitalization. The
chart assumes $100 was invested on December 31, 2007 and
reflects reinvestment of regular dividends and distributions on
a monthly basis and quarterly market capitalization weighting.
Source: Capital IQ, a Standard & Poor’s business.
The
Company’s Compensation Structure Reflects its Key
Compensation Principles
The core elements of the Company’s compensation program are
intended to focus the Company’s named executive officers on
different but complementary aspects of the Company’s
economic and strategic goals:
Consistency
between
Philosophy
and Design
•
Annual Base Salary: The base salary paid to the
Company’s named executive officers and other employees is
intended to focus the recipient on his or her
day-to-day
duties.
•
Short-Term Performance-Based Incentive: The
Company’s annual cash bonus program is designed to motivate
the executive officers to meet and exceed Company operating and
financial goals and, in the case of other employees, to make
individual contributions to the Company’s strategic and
operational objectives. For additional information, see
“—2010 Short-Term Incentive Program—Annual Cash
Awards.”
•
Long-Term Performance-Based Incentive:The Company’s
long-term incentive (“LTI”) program is designed to
retain participants and motivate them to meet and exceed those
of the Company’s goals that are likely to result in
long-term value creation for shareholders. For additional
information, see “—2010 Long-Term Incentive
Program—Equity-Based Awards.”
In establishing its executive compensation programs, the Company
is guided by the following key principles:
Principle
Compensation Goal
Compensation Practice
Pay for performance
Provide an appropriate level of performance-based compensation
tied to the achievement of Company financial performance goals.
The compensation structure has a mix of base salary and variable or performance-based awards.
For 2010, 92% of the CEO’s compensation and at least 73% of each of the other named executive officers’ target direct compensation was variable and performance-based.
Align executives’ interests with stockholders’
Deliver equity compensation to align executives’ interests
with those of stockholders.
The 2010 LTI program consisted of Company stock options and RSUs
that vest over a period of time. The Company recently adopted
stock ownership requirements for its senior officers.
Balance incentives
Focus executives on both short-term and long-term objectives.
The Company believes its compensation mix of short-term and
long-term incentives, with a larger proportion focused on the
long-term, encourages focus on both long-term strategic
objectives and shorter-term business objectives without
introducing excessive risk.
Encourage appropriate risk-taking
Encourage neither excessive risk-taking nor inappropriate
conservatism in decision-making.
Compensate competitively
Consider the competitive marketplace for talent inside and
outside the Company’s industry in light of the risk of
losing (and the difficulty of replacing) the relevant executive.
Total target and actual compensation, as well as each
compensation element, are established to be competitive and
consistent internally and externally.
Consider internal equity
Seek to ensure comparable compensation for executives with
comparable roles and organizational value.
2010
Changes in Compensation Practices
The Company and the Compensation Committee regularly monitor
best practices and emerging trends in executive compensation and
the Company, from time to time, communicates with significant
institutional stockholders to discuss the design and operation
of its executive compensation and governance programs. During
2010, the Company made numerous enhancements to its compensation
practices that it believes will further strengthen the
relationship between its compensation practices and its
philosophy. The Company:
•
Introduced performance-based vesting conditions for 60% of the
2011 LTI grant value awarded to the Company’s most senior
executives.
•
Implemented an executive stock ownership requirement starting in
2011.
Began using a new form of employment agreement that is the basis
for the current employment agreement of each of the
Company’s Chairman and Chief Executive Officer and its
President and Chief Operating Officer, incorporating:
Ø
“double-trigger”
change-in-control
provisions (i.e., no
change-in-control
severance benefits unless the Company undergoes a change in
control and the executive’s employment terminates
involuntarily);
Ø
no “gross up” payments in respect of executives’
tax liability for severance benefits;
Ø
“clawback” provisions, which allow the Company to
recover certain compensation from an executive following a
financial restatement, a determination that incentive
compensation was paid based on incorrect financial performance
results or if the executive is terminated for
“cause;” and
Ø
fixed terms that do not renew automatically.
•
Increased the number of performance measures used to determine
bonuses under the annual bonus plan (from one measure to three)
to better reflect the Company’s current strategic
objectives and focus executives on both “top line” and
“bottom line” results.
Compensation
Practices Checklist
The listing below identifies compensation practices that are
(and, where noteworthy, are not) incorporated into the
Company’s compensation programs as of the date of this
Proxy Statement and identifies, to the extent relevant, the
discussion of the practice in this Proxy Statement.
TWC’s Compensation
Discussion in Proxy
Type of Benefit or
Obligation
Practices
Statement
Stock ownership requirements with a retention component
YES
Compensation Discussion &Analysis
(“CD&A”)—“Ownership and Retention
Requirements”
Above market or guaranteed earnings in non-qualified deferred
compensation program
NO
n.a.
Supplemental executive health benefits
NO
n.a.
Repricing of stock options without express shareholder approval
NO
Approval of the Time Warner Cable Inc. 2011 Stock Incentive Plan
2010
Compensation Levels
The Compensation Committee generally reviews each named
executive officer’s target compensation annually or at the
time an executive’s role or responsibilities change. In
each case, Management (as defined below under “Role of
Management and Compensation Consultants”) conducts an
initial review and makes a recommendation to the Compensation
Committee. Management considers the following factors, among
others, in making these recommendations, and the Compensation
Committee considers these factors in determining whether to
accept such recommendations:
executive-specific items, such as the terms of any negotiated
employment agreement, the compensation previously provided to
the executive, the executive’s performance and the
importance of retaining the executive and the executive’s
role and tenure in the role;
•
the value and structure of compensation provided to individuals
in similar positions at peer companies to ensure competitiveness
and within the Company to ensure internal equity; and
•
whether the proposed compensation is consistent with the
Company’s compensation philosophy and key compensation
principles, each as described above.
2010
Base Salary and Target Incentive Compensation
Determinations
Each named executive officer’s 2010 base salary and target
short-term cash and long-term equity incentive compensation
(along with comparative 2009 data) is set out below. As
discussed below, each of the named executive officers received
an increase in target compensation for 2010. Executive
officers’ base salaries and short-term and long-term
incentive target levels had been frozen for 2009 and, prior to
the changes identified below, the Compensation Committee had not
changed these levels since 2008.
As noted below, the Compensation Committee, working with its
independent consultant, reviewed a wide range of information
regarding compensation structures, and pay and governance
practices in deciding on these compensation packages.
Mr. Britt. Mr. Britt’s
2010 annual base salary and incentive compensation targets were
established in August 2009 in connection with his entry into a
new fixed-term agreement that extended his employment term
through December 31, 2012. See “—Employment
Agreements—Glenn A. Britt.” The new arrangement-which
provided Mr. Britt with a 25% increase in total target
direct compensation (i.e., base salary, target annual
bonus and target LTI award value) (“TDC”) during
2010-was intended to reflect Mr. Britt’s increased
responsibilities as a result of the Company’s Separation
from Time Warner, his and the Company’s performance during
the period leading up to his employment agreement renewal, the
importance of his position within the Company and of retaining
him in that position during a period of significant change in
the
Company’s industry (occasioned by the downturn in the
U.S. economy, increased competition and new technological
and consumer trends), and to ensure the integrity of the Board
of Directors’ long-term succession planning strategy. The
Compensation Committee also noted that Mr. Britt’s
salary had not changed since 2002 and that—even after this
increase—his TDC was below the 2009 median of chief
executive officers in the Primary Peer Group (as defined below).
2010
2009
Glenn A. Britt
Glenn A. Britt
Target Direct Compensation
Target Direct Compensation
$15,000
$12,000
The Compensation Committee also determined that it was
appropriate to continue to weight Mr. Britt’s
compensation most heavily toward performance-based compensation
in the belief that this compensation structure would best focus
Mr. Britt on achieving the Company’s strategic and
business objectives. During 2010, as in 2009,
Mr. Britt’s TDC was approximately 92%
performance-based.
Mr. Marcus. The Compensation
Committee reviewed Mr. Marcus’s 2010 compensation in
December 2009 in connection with his entry into a new fixed-term
agreement that extended his employment term through
December 31, 2012. See “—Employment
Agreements—Robert D. Marcus.” The new
arrangement—which provided Mr. Marcus with a 37.5%
increase in TDC—was intended to reflect the increase in
Mr. Marcus’s responsibilities following the
Separation, his performance, the importance of his position as
Chief Financial Officer and of retaining him in that role while
the Company developed and executed on its long-term financial
plan, and the importance of retaining Mr. Marcus in light
of the Board of Directors’ long-term succession planning
strategy. In setting Mr. Marcus’s compensation, the
Compensation Committee noted that Mr. Marcus’s new TDC
was at the 2009 median for TDC for chief financial officers in
the Primary Peer Group.
2010
2009
Robert D. Marcus
Robert D. Marcus
Target Direct Compensation
Target Direct Compensation
$5,500
$4,000
The Compensation Committee also determined that it was
appropriate to weight Mr. Marcus’s compensation most
heavily (84% for 2010 as compared with 80% for 2009) toward
performance-based compensation in the belief that this
compensation structure would best focus Mr. Marcus on
achieving the Company’s strategic and business objectives.
To achieve this result, and to ensure that Mr. Marcus would
actively focus on the Company’s long term strategic and
business objectives, his 2010 TDC increase was principally
driven by a higher LTI target ($1.3 million of the
$1.5 million TDC increase).
The charts and discussion above reflect Mr. Marcus’s
compensation prior to December 14, 2010, when he was
appointed President and Chief Operating Officer. As of the date
of his appointment, Mr. Marcus’s base salary was
increased to $1 million and his annual bonus target was
increased to $2.5 million.
Other Named Executive Officers. The
following table sets out the 2010 base salary and target
short-term cash and long-term equity incentive compensation,
effective in February 2010 (along with the same information for
2009), for each of the other named executive officers.
TDC
Changes
2009 to 2010
Base Salary
Target Annual Bonus
Target LTI
TDC
TDC
Executive Officer
2010
2009
2010
2009
2010
2009
2010
2009
Change
(in thousands)
Michael LaJoie
$
600
$
525
$
600
$
525
$
1,050
$
919
$
2,250
$
1,969
14%
Marc Lawrence-Apfelbaum
600
550
600
550
1,050
880
2,250
1,980
14%
Carl U.J. Rossetti
515
500
515
500
824
800
1,854
1,800
3%
Landel C. Hobbs
1,000
900
2,100
2,100
3,650
3,000
6,750
6,000
12.5%
Messrs. LaJoie, Lawrence-Apfelbaum and
Rossetti. In February 2010, the Compensation
Committee reviewed 2010 compensation for Messrs. LaJoie,
Lawrence-Apfelbaum and Rossetti and increased their TDC to
reflect:
•
In the case of Mr. LaJoie, the rapidly changing technology
environment in which the Company operates and the importance of
retaining him in his current role as the Company pursues its
long-term technology strategy.
•
In the case of Mr. Lawrence-Apfelbaum, his additional
responsibilities following the Company’s Separation from
Time Warner, his performance and the importance of his position
as the Company’s General Counsel.
•
In the case of Mr. Rossetti, the importance of his position
as the Company’s Executive Vice President overseeing new
ventures and opportunities and of retaining him in that role as
the Company explores growth prospects.
In setting compensation for these executives, the Compensation
Committee noted that each of their 2010 TDC was below the 2009
median of the most comparable positions within the Primary Peer
Group. The Compensation Committee also determined that it was
appropriate to continue to weight their compensation most
heavily toward performance-based compensation since the Company
believes that such compensation focuses the executive on
achieving the Company’s strategic and business objectives.
During 2010, as in 2009, each of them had TDC that was 72% or
73% performance-based.
Mr. Hobbs. Mr. Hobbs served as the
Company’s Chief Operating Officer until December 14,2010. Following the Board of Directors’ determination on
that date, as part of its long-term succession planning
strategy, that Mr. Marcus should assume responsibility for
the Company’s operations, Mr. Hobbs’s employment
was terminated without cause.
The Compensation Committee had reviewed Mr. Hobbs’s
2010 compensation in December 2009 in connection with his entry
into a new fixed-term agreement which extended his employment
through January 31, 2011. See “—Employment
Agreements—Landel C. Hobbs.” The new
arrangement—which provided Mr. Hobbs with a 12.5%
increase in TDC—was intended to reflect the scope of his
responsibilities, his performance, the importance of his
position within the organization, the importance of retaining
him in light of the competitive environment in which the Company
operates and the Company’s executive succession
considerations and organizational restructuring efforts. For
2010, as in 2009, Mr. Hobbs’s TDC was approximately
85% performance-based.
The Company believes that its compensation philosophy and key
principles, and the other factors noted above, were properly
reflected in the 2010 target and actual compensation for each
named executive officer,
including base salary, short-term and long-term incentives, and
the mix of compensation elements. As noted above, the TDC for
each of the named executive officers is generally below or
consistent with 2009 compensation for the most comparable
executive positions within the Primary Peer Group.
The
Role of Competitive Comparisons
The Compensation Committee reviewed information about
compensation practices and values from two groups of companies
to assist it in establishing 2010 compensation for the named
executive officers. These groups include other cable and media
companies as well as other comparable public companies. The
Compensation Committee used this data to assist it in evaluating
general competitiveness and comparability of compensation
design, mix and levels but does not target any particular pay
range within the data sets in setting compensation. Information
on the Primary and Secondary Peer Groups are presented in the
table below.
Primary Peer
Group(1)
Secondary Peer
Group(2)
Role in
Compensation
Analysis
• Data from the Primary Peer Group are the
Compensation Committee’s main reference point in
determining the value of compensation provided to comparably
situated individuals at peer companies.
• The Secondary Peer Group provides
an additional reference point in the Compensation
Committee’s compensation deliberations.
Characteristics
• 15 public companies
• Media and communications industries
• Median annual revenues of $21 billion
• Principal competitors for available
executive
talent(3)
• 17 public companies (originally 20)
• Broader industry environment
• Annual revenues of $7.5 billion to
$32.5 billion ($17.7 billion
median)
• Objective, mechanical selection
methodology based on size
Composition
• AT&T Inc.
• Cablevision Systems Corporation
• CBS Corporation
• Charter Communications Inc.
• Comcast Corporation
• DIRECTV
• DISH Network Corporation
• Liberty Media Corporation
• News Corporation
• QWEST Communications
International, Inc.
• Sprint Nextel Corporation
• The Walt Disney Company
• Time Warner Inc.
• Verizon Communications, Inc.
• Viacom Inc.
• Amgen Inc.
• Dominion Resources, Inc.
• Eli Lilly & Company
• EMC Corporation
• Exelon Corporation
• Freeport-McMoRan Copper &
Gold
Inc.
• General Mills, Inc.
• Google Inc.
• Kimberly-Clark Corporation
• Medtronic, Inc.
• Occidental Petroleum Corporation
• Raytheon Company
• Textron Inc.
• The Southern Company
• Union Pacific Corporation
• Waste Management, Inc.
• Xerox Corporation
(1)
This is the same group as 2009,
with the addition of Time Warner Inc. following the Separation
in March 2009. The group’s 2009 median annual revenues of
$21 billion were approximately equal to the Company’s
2009 annual revenues ($17.9 billion). However, the Primary
Peer Group was selected primarily based on the Company’s
beliefs regarding its competitors for executive talent, not
based on the companies’ size relative to the Company.
(2)
As required under the criteria
established in 2009, the group represents a broad range of
industries (effectively all industries except financial
services, healthcare and those covered by the Primary Peer
Group) with annual revenues of not less than $7.5 billion
and not more than $32.5 billion (approximately 50% to 200%
of the Company’s 2009 annual revenues) and median annual
revenues of $17.7 billion (approximately equal to the
Company’s 2009 annual revenues).
(3)
To assist the Committee in
selecting and validating the Primary Peer Group members, two
analyses were undertaken: (i) a “peer of peers”
analysis to review which companies and industry groups include
the Company as a peer in their respective peer group and (ii) an
internal review of the companies and industry groups to which
the Company lost executive talent or from which the Company
sourced executive talent in recent years.
Market Surveys. In addition to the Peer
Groups, Management and the Compensation Committee considered, as
a general reference, market compensation survey data available
through a number of nationally-recognized compensation
consulting firms. This data covers companies roughly comparable
in size (median annual revenues of approximately
$16 billion) to the Company from a broad range of
industries, including the cable/satellite, telecommunications
and media industries.
The Company’s short-term cash incentive payments to the
named executive officers for 2010 were made under the 2007
Annual Bonus Plan (the “162(m) Bonus Plan”), which is
intended to comply with Section 162(m) of the Internal
Revenue Code (“Section 162(m)”). The awards were
made by a subcommittee of the Compensation Committee, whose
members are “outside directors” as defined in
Section 162(m) (the “Subcommittee”). However, in
determining the awards, the Subcommittee was guided by the
Company’s financial performance results under the 2010 Time
Warner Cable Incentive Plan (the “2010 TWCIP”), which
served as the annual cash bonus plan for all other
bonus-eligible Company employees.
2010 TWCIP Financial Goals and
Results. Management proposed the use of three
metrics to determine 2010 Company financial performance for the
named executive officers. The most heavily weighted metric was
the same as the sole metric used for 2009—Operating Income
(Loss) before depreciation of tangible assets and amortization
of intangible assets (“OIBDA” and, after certain
mandatory adjustments, “OIBDA (as adjusted)”) less
capital expenditures. The two new performance metrics were:
(i) commercial revenues (i.e., revenues from sales
of the Company’s products and services to businesses) and
(ii) Company-wide revenues.
In adopting Management’s proposal for the 2010 TWCIP, the
Compensation Committee believed that OIBDA (as adjusted) minus
capital expenditures would be an important indicator of the
operational strength and performance of the Company’s
business in 2010, including the ability to provide cash flows to
service debt. This metric also captures the Company’s
ability to adjust expenses and capital spending as necessary to
ensure its financial health in challenging economic
environments. At the same time, the Compensation Committee
believed that it was appropriate to establish a total revenue
target to encourage
across-the-board
growth in the face of strong competition and a commercial
revenue target in light of the importance of building the
Company’s commercial operations as its residential product
lines continue to mature.
The following financial threshold and maximum goals were
established based upon a review of the prior year’s results
in these areas, the Company’s 2010 budget and other
factors. The Compensation Committee chose not to use individual
performance under the 2010 TWCIP as a factor in establishing
bonuses for the named executive officers and, therefore, the
Company’s performance against financial goals accounted for
100% of the 2010 TWCIP calculation for these executives.
2010
TWCIP Performance Criteria
for Executive Officers
2010 Performance Criteria
Threshold
Maximum
Percentage
(50% of
(175% of
2010 Company Performance Financial Metrics
Allocation
target)
target)
(in millions)
OIBDA (as adjusted) less capital expenditures
75%
$
3,500
$
4,100
Total revenues
12.5%
18,300
19,200
Commercial revenues
12.5%
1,000
1,200
Total
100%
The Compensation Committee determined that each threshold set an
appropriate level of performance to earn an annual bonus award.
If the Company failed to meet a threshold level of financial
performance for a given metric, no bonus payment would be made
with respect to that financial performance component. Similarly,
the maximum goals were considered to present very significant
challenges and were not likely to be
attained. As a result, if a 2010 financial metric exceeded its
maximum goal, the Company financial performance
“score” with respect to that metric would be 175%.
If the Company’s result for a 2010 financial metric was
above the threshold but below the maximum goal, the Compensation
Committee would determine the financial performance score for
that metric in its discretion, but using as its starting point
the “straight line interpolation” of the
Company’s performance against the threshold and maximum
goals. For example, if the Company’s results were exactly
at the midpoint between the threshold and maximum goals for that
metric, the straight line interpolation would be 112.5%, the
midpoint between 50% and 175%. In no event would the
Compensation Committee be able to assign a score outside of the
50% and 175% parameters established by the 2010 TWCIP. The
payouts under the 2010 TWCIP were also capped so that no
participant could receive a payout of more than 150% of his
target annual bonus.
2010 TWCIP Determination. In early
2011, the Compensation Committee reviewed the Company’s
2010 OIBDA (as adjusted) less capital expenditures for 2010
TWCIP purposes as well as the Company’s revenues and
commercial revenues. As mandated by the terms of the 2010 TWCIP,
reported OIBDA less capital expenditures was adjusted to reflect
identified items, such as accounting changes, and other items
that affect reported OIBDA and capital expenditures but that are
beyond the control of management or otherwise not indicative of
management’s performance. For 2010, these mandatory
adjustments had the net impact of increasing OIBDA less capital
expenditures for compensation purposes by $24 million in
aggregate.
The Company’s 2010 total revenues, commercial revenues and
OIBDA (as adjusted) less capital expenditures for 2010 TWCIP
purposes of $18.868 billion, $1.108 billion and
$3.912 billion, respectively, each exceeded the threshold
goal but was below the maximum goal. The Compensation Committee
noted the straight-line interpolation between each set of
threshold and maximum target levels and used these
interpolations as the starting point for its final determination
of performance for 2010 TWCIP purposes.
Pursuant to the 2010 TWCIP, in evaluating performance, the
Compensation Committee was able to consider, among other factors:
•
the Company’s 2010 financial performance, which was
significantly above the threshold goals, as shown in the table
above;
the Company’s performance relative to that of other cable
operators;
•
Management’s recommendation for the Company financial
performance score; and
•
the external business environment and market conditions.
After deliberation, the Compensation Committee determined that
the interpolated scores appropriately reflected the
Company’s performance under the 2010 TWCIP. This
determination, which resulted in a weighted average Company
performance score of approximately 133%, reflected the
Compensation Committee’s very positive view of the
Company’s accomplishments during the year (as outlined
above under “The Company’s Performance”) in a
difficult economic and competitive environment.
Threshold/
Final
2010 Company Performance
2010
Maximum
TWCIP
Financial Metrics
Results
Interpolation
Score
(in millions)
OIBDA (as adjusted) less capital expenditures
$
3,912
136%
136%
Total revenues
18,868
129%
129%
Commercial revenues
1,108
118%
118%
In recent years, the Compensation Committee has similarly
considered the straight-line interpolation of the results as
compared with the relevant TWCIP’s threshold and maximum
results as a starting point in assessing Company performance
under the TWCIP. In prior years, however, in light of various
considerations, the Committee has reduced the Company
performance score below the interpolated level in making its
final determination.
162(m) Bonus Plan. In order to ensure
that the short-term incentive awards are deductible under
Section 162(m), additional conditions and limitations on
awards are imposed under the 162(m) Bonus Plan. The
Company’s stockholders approved the 162(m) Bonus Plan for
the named executive officers in May 2007. Pursuant to the 162(m)
Bonus Plan, the Subcommittee annually establishes objective
performance criteria that determine the maximum bonus pool from
which the named executive officers’ bonuses can be paid and
a maximum allocation for each named executive officer.
Under the objective criteria established by the Subcommittee, an
aggregate 2010 maximum bonus pool was established equal to 7.5%
of the amount by which the Company’s 2010 OIBDA (as
adjusted) of $6.842 billion exceeded $6.0 billion. The
table below sets out how this maximum pool was allocated among
the named executive officers. Each annual bonus was subject in
all cases to a 162(m) Bonus Plan cap equal to the lesser of 200%
of the officer’s target short-term incentive compensation
and $10 million, in addition to the TWCIP maximum bonus of
150% of the individual’s target annual bonus.
In awarding 2010 bonuses to each named executive officer, the
Subcommittee exercised its discretion to reduce the maximum
amount available for each executive officer under the 162(m)
Bonus Plan’s pool. The basis for this exercise of negative
discretion was the Company’s performance score under the
2010 TWCIP (which, for executive officers, averaged to
approximately 133%), subject, in the case of Mr. LaJoie, to
a further negative adjustment related to compliance with
workplace policies. Mr. Hobbs’s annual bonus was
determined in accordance with the severance terms of his
employment agreement based on the Company score and his target
annual bonus. The table below indicates the final 2010 annual
bonus paid to each named executive officer.
162(m) Bonus Plan
2010
Maximum
Target
Award
2010
Short-Term
(200% of
Short-Term
Incentive
Percent
Target
Incentive
Executive Officer
Award
of Pool
Award)
Award
Glenn A. Britt
$
6,250,000
40
%
$
10,000,000
(1)
$
8,306,250
Robert D.
Marcus(2)
1,549,315
10
%
3,098,630
2,059,040
Michael LaJoie
587,500
4
%
1,175,000
585,591
Marc Lawrence-Apfelbaum
591,667
4
%
1,183,334
786,325
Carl U.J. Rossetti
512,500
4
%
1,025,000
681,113
Landel Hobbs
2,100,000
12
%
4,200,000
2,790,375
Other executive officers and unallocated amounts
26
%
(1)
Bonuses under the 162(m) Bonus Plan
are subject to a cap equal to the lesser of 200% of target
annual bonus and $10 million.
(2)
Prorated to reflect
Mr. Marcus’s target annual bonus change effective as
of December 14, 2010.
The Company’s 2010 LTI program consisted of a combination
of RSUs and stock options awarded under the Time Warner Cable
Inc. 2006 Stock Incentive Plan, as amended (the “2006 Stock
Plan”).
2010 Target Long-Term Incentive
Mix. Executives with a high level of
strategic impact on the Company’s success receive a greater
relative proportion of their LTI compensation in the form of
stock options (as compared with RSUs) than other employees. The
Company and the Compensation Committee believe this is
appropriate because the ultimate value of stock options is more
performance-dependent than RSUs. Under the 2010 LTI program
(like the 2008 and 2009 programs), the Company’s executive
officers, including the
named executive officers, received their LTI compensation 60% in
the form of stock options and 40% in the form of RSUs.
2010 Equity
Awards—Determinations. The number of
stock options awarded to each named executive officer was
determined by reference to the target stock option value for
such executive and the Black-Scholes valuation for the
Company’s stock options over a
ten-day
period selected in advance by the Compensation Committee. The
number of RSUs awarded to each named executive officer was
determined by reference to the target RSU value for such
executive and the average closing price of the Company’s
Common Stock over the same
ten-day
period.
2010 Equity Awards—Terms. The 2010
annual LTI awards were made on February 12, 2010. The stock
options were granted with an exercise price equal to the closing
price of the Company’s Common Stock on the grant date. The
stock options vest in four equal installments on each of the
first four anniversaries of the date of grant and have a
ten-year term from the date of grant. The RSUs vest in two equal
installments on the third and fourth anniversaries of the date
of grant. The Company and the Compensation Committee believe
that the multi-year vesting schedules for stock options and RSUs
encourage executive retention and emphasize a longer-term
perspective. The stock options and RSUs provide for accelerated
vesting upon a termination of employment after reaching a
specified age and years of service and upon certain involuntary
terminations of employment.
Performance-Based LTI Awards. In
developing the 2010 LTI program, the Compensation Committee
carefully considered the inclusion of equity awards that would
vest upon the satisfaction of specified performance goals but
determined that the available vehicles were not appropriate in
light of the Company’s goals at that time. However, in
2011, the Company included such “performance-based”
vesting conditions in a portion (60%) of its grants (including
all RSU grants) to the Company’s executive officers, and
currently expects to continue this practice.
Ownership and Retention
Requirements. Beginning in 2011, the Company
adopted stock ownership requirements that, following a five-year
phase-in period, require that covered officers hold stock
(including in the form of unvested RSUs (other than those then
subject to satisfaction of performance criteria)) in an amount
equal to or exceeding a multiple of their annual base salary:
Stock Ownership Requirement
Title
Multiple of Annual Base Salary
Chief Executive Officer
6X
Chief Operating Officer
3.5X
Chief Financial Officer
3.5X
Other Executive Officers (and Executive Vice Presidents)
2X
Although not yet applicable because of the phase-in period, as
of January 31, 2011, each of the currently serving named
executive officers would have met his ownership requirement.
Under the ownership requirements, the Company will review
covered officers’ compliance on January 31 of each calendar
year. If an officer is not in compliance with the requirement by
January 31, 2016, he or she will be required to retain at
least 50% of any stock received upon exercise of stock options
or vesting of RSUs (after shares used to cover exercise costs,
taxes, etc.). Prior to the full implementation of the
requirements, the executive officers must obtain consent from
the Chief Executive Officer if a sale of Common Stock would
cause the executive to no longer satisfy the ownership
requirement. The Compensation Committee will also consider the
executive officers’ compliance with the ownership and
retention requirements in determining compensation.
Prior to adopting the new ownership requirements, the
Compensation Committee felt that, in light of the Company’s
relatively short history with a publicly traded security, the
named executive officers’ holdings of Company stock options
and unvested RSUs provided a sufficient level of personal
exposure to the value of the Company’s stock to support
alignment with the interests of the Company’s stockholders.
The Compensation
Committee did, however, monitor executive officers’
transactions and holdings in the Company’s Common Stock
throughout 2010.
Oversight
and Authority for Executive Compensation
Under its charter, the Compensation Committee has authority and
oversight over all elements of the Company’s executive
compensation program, including:
•
salaries;
•
short-term incentives;
•
long-term incentives, including equity-based awards;
•
employment agreements for the named executive officers,
including any change of control or severance provisions or
personal benefits set forth in those agreements;
•
severance and change of control arrangements, if any, for the
named executive officers that are not part of their employment
agreements; and
•
employee benefits and perquisites.
The Compensation Committee’s charter states that in
determining compensation levels for each named executive
officer, the Compensation Committee should consider, among other
factors, the Company’s overall performance, stockholder
return, the achievement of specific performance objectives
established by the Compensation Committee on an annual basis,
compensation previously provided to the executive, the value of
compensation provided to individuals in similar positions at
peer companies and the Company’s general compensation
policy.
Role
of Management and Compensation Consultants
Although the Compensation Committee has authority and oversight
over compensation for the named executive officers, members of
management, including Glenn A. Britt, Chairman and Chief
Executive Officer (and President through December 14, 2010),
Paul Gilles, Senior Vice President, Compensation, Benefits and
Human Capital, Robert D. Marcus, Senior Executive Vice President
and Chief Financial Officer (and President and Chief Operating
Officer as of December 14, 2010), and Tomas Mathews,
Executive Vice President, Human Resources (collectively,
“Management”), provide recommendations for the
Compensation Committee’s consideration (other than with
respect to the Company’s Chairman and CEO), and provide
ongoing assistance to the Compensation Committee with respect to
its review of the effectiveness of the Company’s executive
compensation programs. The Company also, from time to time,
engages consulting firms (independent of those engaged by the
Compensation Committee) to assist Management in evaluating the
Company’s executive compensation policies and practices.
During 2010, the Compensation Committee retained ClearBridge
Compensation Group (“ClearBridge”) as its sole
compensation advisor. The Company paid ClearBridge an annual
retainer, plus additional amounts for special projects that the
Compensation Committee requested. In connection with the
retention, the Compensation Committee determined that
ClearBridge had the necessary experience, skill and independence
to advise the Committee. The Compensation Committee plans to
review its determination annually.
During 2010, ClearBridge reported directly to the Compensation
Committee, providing assistance and advice to it in carrying out
its principal responsibilities. The Compensation Committee
consulted with ClearBridge with respect to all significant 2010
compensation decisions and determinations. In this advisory
role, ClearBridge attended and participated in all Compensation
Committee meetings, including executive sessions when
appropriate. In connection with ClearBridge’s role as
advisor to the Compensation Committee, Management from time to
time seeks input from ClearBridge about compensation proposals
it is considering for presentation to the Compensation
Committee. ClearBridge does not provide services to the Company
other than under its engagement by the Compensation Committee
related to executive compensation.
The Compensation Committee periodically reviews “pay
tallies” for the named executive officers (i.e.,
analyses of the executives’ annual pay and long-term
compensation with potential severance payments under various
termination scenarios, including involuntary termination
scenarios, pursuant to the negotiated employment agreements) to
help ensure that the design of the compensation program is
consistent with the Company’s compensation philosophy and
key principles, and that the amount of compensation is within
appropriate competitive parameters.
Based on the Compensation Committee’s review of 2010 pay
tallies, the Compensation Committee has concluded that the total
compensation of the named executive officers (and, in the case
of involuntary termination or
change-in-control
scenarios, potential payouts) continues to be appropriate in
light of the Company’s compensation philosophy and guiding
principles, and is consistent with relevant competitive
marketplace data.
Risk
Assessment
During 2010, the Compensation Committee conducted a risk
assessment of the named executive officers’ compensation.
As part of the risk assessment, the Compensation Committee
reviewed the key design features of the Company’s 2010
incentive programs, the nature of the risks that these features
might give rise to and certain mitigating factors.
The Compensation Committee concluded that the Company’s
executive incentive programs do not incentivize excessive
risk-taking or inappropriate conservatism in behavior and
decision-making. Among the factors giving rise to the
Compensation Committee’s determination were the following:
•
The Company’s compensation programs for the named executive
officers provide a balanced mix of cash and equity, stock
options and RSUs, and annual and longer-term incentives.
•
Short-term incentives are designed to require the Company to
reach “stretch” (but not unrealistic) targets and
provide for a range of potential payout levels depending on
performance above a threshold level.
•
Maximum annual bonus payout levels are limited to 150% of target
annual bonus.
•
The Compensation Committee has discretion in determining payouts
under the Company’s annual cash bonus plans and can use its
discretion to ensure that neither excessive risk-taking nor
inappropriate conservatism in decisionmaking is rewarded.
Perquisites
The Company provides a limited number of perquisites to the
named executive officers. Where provided, the Company believes
these perquisites facilitate the operation of its business,
allow named executive officers to better focus their time,
attention and capabilities on their Company activities, address
safety and security concerns, and assist the Company in
recruiting and retaining key executives.
The Company’s perquisites for its named executive officers
in 2010 included, in the case of Mr. Britt, a
Company-provided car and specially-trained driver in light of
security concerns. All the named executive officers were also
eligible for reimbursement for certain financial services
(e.g., tax and estate planning). At the request of the
Company’s Board, Mr. Britt uses Company-owned or
leased aircraft for business and personal travel under most
circumstances. With CEO approval, the Company’s other
executive officers (including their family members) are
permitted to join an otherwise scheduled business-purpose
Company flight for personal purposes. The Company imputes income
to executive officers who make personal use of Company aircraft
as and when required under applicable tax rules. The perquisites
provided to the named executive officers are noted in the
Summary Compensation Table, below.
The Company maintains defined benefit and defined contribution
retirement programs for its employees in which the
Company’s named executive officers participate. The
objective of these programs is to help provide financial
security into retirement, reward and motivate tenure and recruit
and retain talent in a competitive market. In addition to the
Company’s tax-qualified defined benefit plan, the Company
maintains a nonqualified defined benefit plan in which the named
executive officers participate. The tax-qualified defined
benefit plan has a maximum compensation limit and a maximum
annual benefit imposed by the tax laws, which limit the benefit
under the plan for certain participants. In order to provide
retirement benefits commensurate with salary levels, the
nonqualified defined benefit plan provides benefits to key
salaried employees, including the named executive officers,
using the same formula for calculating benefits as is used under
the tax-qualified defined benefit plan but taking into account
compensation in excess of the compensation limitations for the
tax-qualified defined benefit plan up to a cap of $350,000 per
year and determined without regard to the maximum annual benefit
under the tax-qualified plan. See “—Pension
Plans.”
The Company sponsors other nonqualified deferred compensation
plans to which contributions by the Company or employees are no
longer permitted. See “—Nonqualified Deferred
Compensation.”
The
Role of Employment Agreements
Each of the named executive officers is employed pursuant to a
multi-year employment agreement that reflects the individual
negotiations with the relevant named executive officer. The
Company has long used such agreements to foster retention, to be
competitive and to protect the business with restrictive
covenants, such as non-competition, non-solicitation and
confidentiality provisions, and, in some cases,
“clawback” rights (i.e., rights to recover
compensation paid to an executive if the Company subsequently
determines that the compensation was not properly earned). The
employment agreements provide for severance pay in the event of
the involuntary termination of the executive’s employment
without cause, which serves as consideration for the restrictive
covenants, provides financial security to the executive, and
allows the executive to remain focused on the Company’s
interests at all times.
The employment agreement for each named executive officer is
described in detail in this Proxy Statement under
“—Employment Agreements” and
“—Potential Payments Upon Termination or Change in
Control.”
Tax
Deductibility of Compensation
Section 162(m) generally disallows a tax deduction to
public corporations for compensation in excess of $1,000,000 in
any one year with respect to each of its Chief Executive Officer
and three most highly paid executive officers (other than the
Chief Financial Officer) with the exception of compensation that
qualifies as performance-based compensation. The Compensation
Committee considers Section 162(m) implications in making
compensation recommendations and in designing compensation
programs for the executives. In this regard, the 162(m) Bonus
Plan and the 2006 Stock Plan were submitted and approved by
stockholders in May 2007 so that compensation paid under those
plans may qualify as performance-based compensation under
Section 162(m). However, the Compensation Committee retains
the discretion to pay compensation that is not deductible when
it determines that to be in the best interests of the Company
and its stockholders. For 2010, the Company believes that the
salary and cash bonuses paid to the named executive officers
subject to Section 162(m) will be deductible, except for
Mr. Britt’s annual salary to the extent it exceeded
$1 million. RSUs that vested in 2010 are not considered
performance-based for tax purposes and will be subject to the
deduction limitations of Section 162(m). However, in 2011,
the Company granted RSUs with performance-based vesting criteria
to the named executive officers. When these RSUs vest (scheduled
to occur in 2014 and 2015), the Company believes they will be
exempt from the deduction limitations of Section 162(m).
The Compensation Committee has reviewed and discussed the
Compensation Discussion and Analysis with Management and, based
on such review and discussions, the Compensation Committee
recommended to the Board of Directors that the Compensation
Discussion and Analysis be included in this Proxy Statement and
the Company’s Annual Report on
Form 10-K
(by reference).
The following table presents information concerning total
compensation paid to the Company’s Chief Executive Officer,
Chief Financial Officer and each of its three other most highly
compensated executive officers who served in such capacities on
December 31, 2010 and Landel C. Hobbs, who served as the
Company’s Chief Operating Officer until December 14,2010 (collectively, the “named executive officers”).
Additional information regarding salary, incentive compensation
and other components of the named executive officers’ total
compensation is provided under “—Compensation
Discussion and Analysis.”
SUMMARY
COMPENSATION TABLE
Change in
Pension
Value and
Non-Equity
Nonqualified
Incentive
Deferred
Stock
Option
Plan
Compensation
All Other
Name and Principal Position
Year
Salary
Bonus
Awards(1)
Awards(2)
Compensation(3)
Earnings(4)
Compensation(5)
Total
Glenn A.
Britt(6)
2010
$
1,250,000
—
$
3,053,449
$
4,395,270
$
8,306,250
$
120,480
$
296,880
$
17,422,329
Chairman and Chief
2009
1,000,000
—
2,324,387
5,923,289
6,250,000
177,092
264,621
15,939,389
Executive Officer
2008
1,000,000
—
2,860,050
4,042,042
6,434,270
120,950
82,534
14,539,846
Robert D.
Marcus(7)
2010
$
904,932
—
$
1,262,123
$
1,742,950
$
2,059,040
$
43,130
$
31,239
$
6,043,414
President and Chief Operating
2009
800,000
—
697,338
1,126,614
1,750,000
34,790
24,447
4,433,189
Officer and Acting Chief Financial Officer
2008
800,000
—
858,037
1,131,697
1,970,711
22,160
30,352
4,812,957
Michael LaJoie
2010
$
589,725
—
$
427,480
$
590,361
$
585,591
$
94,790
$
17,045
$
2,304,992
Executive Vice President and
2009
525,000
—
399,712
639,941
660,188
66,530
16,635
2,308,006
Chief Technology Officer
2008
525,000
—
437,959
577,645
858,807
44,150
14,911
2,458,472
Marc Lawrence-Apfelbaum
2010
$
593,150
—
$
427,480
$
590,361
$
786,325
$
103,780
$
18,485
$
2,519,581
Executive Vice President, General Counsel and Secretary
2009
550,000
—
382,495
659,134
687,500
66,690
16,490
2,362,309
Carl U.J. Rossetti
2010
$
512,945
—
$
335,510
$
482,896
$
681,113
$
153,460
$
24,119
$
2,190,043
Executive Vice President and
2009
500,000
—
309,922
481,375
625,000
110,540
23,517
2,050,354
President, Time Warner Cable Ventures
2008
500,000
—
381,289
538,939
796,550
79,890
24,819
2,321,487
Landel C. Hobbs
2010
$
1,000,000
—
$
1,486,022
$
2,052,191
$
2,790,375
$
45,070
$
36,731
$
7,410,389
Former Chief Operating
2009
900,000
—
1,346,336
1,886,773
2,625,000
30,920
32,337
6,821,366
Officer
2008
895,192
—
1,430,025
1,886,161
3,024,849
8,160
48,546
7,292,933
(1)
Amounts set forth in the Stock
Awards column represent the aggregate grant date fair value of
TWC RSU awards granted by the Company in each year included in
the table, as computed in accordance with SEC rules. These
amounts were calculated based on the closing sale price of the
Common Stock on the NYSE on the date of grant. See
“—Outstanding Equity Awards.” For information
about the assumptions used in these calculations, see
Note 14 to the Company’s audited consolidated
financial statements included in the 2010
Form 10-K.
The amounts set forth in the Stock Awards column do not
represent the actual value that may be realized by the named
executive officers. See “—Grants of Plan-Based
Awards.”
(2)
Amounts set forth in the Option
Awards column represent the aggregate grant date fair value of
stock option awards with respect to Common Stock granted by the
Company in each year included in the table, as computed in
accordance with SEC rules. For information about the assumptions
used in these calculations, see Notes 3 and 14 to the 2010
Form 10-K
and footnote (3) to the table below entitled “Grants
of Plan-Based Awards During 2010.” The actual value, if
any, that may be realized by an executive officer from any stock
option will depend on the extent to which the market value of
the Common Stock exceeds the exercise price of the option on the
date the option is exercised. Consequently, there is no
assurance that the value realized by an executive officer will
be at
or near the value estimated above.
These amounts should not be used to predict stock performance.
None of the stock options reflected in the table was awarded
with tandem stock appreciation rights.
(3)
Amounts set forth in the Non-Equity
Incentive Plan Compensation column for 2010 and earlier years
represent amounts paid pursuant to the Company’s 162(m)
Bonus Plan and TWCIP and, for 2008, also includes payments under
the 2006 Cash Long-Term Incentive Plan, which was a three-year,
performance-based cash award plan. For additional information
regarding the Compensation Committee’s determinations with
respect to annual bonus payments under the 162(m) Bonus Plan and
2010 TWCIP, see “—Compensation Discussion and
Analysis—2010 Short-Term Incentive Program—Annual Cash
Awards.”
(4)
These amounts represent the
aggregate change in the actuarial present value of each named
executive officer’s accumulated pension benefits under the
Time Warner Cable Pension Plan, the Time Warner Cable Excess
Benefit Pension Plan, the Time Warner Pension Plan and the Time
Warner Excess Benefit Pension Plan, to the extent the named
executive officer participates in these plans. See the Pension
Benefits Table and “—Pension Plans” for
additional information regarding these benefits. The named
executive officers did not receive any above-market or
preferential earnings on compensation deferred on a basis that
is not tax qualified.
(5)
Amounts shown in the All Other
Compensation column for 2010 include the following:
(a) Pursuant to the TWC Savings Plan, a tax-qualified
defined contribution plan available generally to TWC employees,
for the 2010 plan year, each of the named executive officers
deferred a portion of his annual compensation and TWC
contributed $11,000 as a matching contribution on the amount
deferred by each named executive officer.
(b) The Company maintains a program of life and disability
insurance generally available to all salaried employees on the
same basis. This group term life insurance coverage was reduced
to $50,000 for each of Messrs. Britt, Marcus,
Lawrence-Apfelbaum and Hobbs who were each given a cash payment
to cover the cost of specified coverage under a voluntary group
program available to employees generally (“GUL
insurance”). For 2010, this cash payment was $52,896 for
Mr. Britt, $3,504 for Mr. Marcus, $7,485 for
Mr. Lawrence-Apfelbaum and $2,826 for Mr. Hobbs.
Messrs. LaJoie and Rossetti elected to receive group term
life insurance available generally to employees as well as
supplemental group term life insurance coverage provided by the
Company and were taxed on the imputed income. For 2010, the
Company paid $6,045 and $13,119 for Mr. LaJoie’s and
Mr. Rossetti’s respective supplemental life insurance
coverage. For a description of life insurance coverage for
certain executive officers provided pursuant to the terms of
their employment agreements, see “—Employment
Agreements.”
(c) The amounts of personal benefits shown in this column
for 2010 consist of the aggregate incremental cost to the
Company: for Mr. Britt, reimbursement of fees for financial
services of $40,250 and transportation-related benefits of
$192,734 related to personal use of corporate-owned aircraft
($186,224) (based on fuel, landing, repositioning and catering
costs and crew travel expenses related to the personal use), and
personal use of a Company-provided car and specially trained
driver provided for security reasons (based on the cost of the
car, the driver’s compensation, fuel and parking and the
portion of usage that was personal); for Mr. Marcus,
reimbursement of fees for financial services of $16,468 and the
incremental cost of his spouse accompanying him on a business
trip; and for Mr. Hobbs, reimbursement of fees for
financial services of $22,905. The Board has encouraged
Mr. Britt to use corporate-owned or leased aircraft for
security reasons. Mr. Britt’s transportation-related
benefits also include the incremental cost of his spouse
accompanying him on certain business and personal trips on
corporate aircraft. Each of Messrs. LaJoie and Rossetti and
his respective spouse accompanied Mr. Britt on the
corporate aircraft on one combined business and personal trip.
The incremental cost to TWC for the use of the aircraft under
these circumstances is limited to catering, crew expenses and
TWC’s portion of employment taxes attributable to the
income imputed to Mr. Britt and the others for tax purposes.
(6)
Mr. Britt became Chairman of
the Board effective March 12, 2009 and continues to serve
as Chief Executive Officer.
(7)
Mr. Marcus became President
and Chief Operating Officer on December 14, 2010 having
served as Senior Executive Vice President and Chief Financial
Officer since January 1, 2008. He continues to serve as
acting Chief Financial Officer.
The following table presents information with respect to each
award of plan-based compensation to each named executive officer
in 2010, including (a) annual cash awards under the 162(m)
Bonus Plan and 2010
TWCIP and (b) awards of stock options to purchase Common
Stock and RSUs granted under the 2006 Stock Plan.
GRANTS OF
PLAN-BASED AWARDS DURING 2010
Stock
Option
Awards:
Awards:
Grant Date
Number of
Number of
Exercise or
Fair Value
Estimated Possible Payouts Under
Shares of
Securities
Base Price
of Stock
Grant
Non-Equity Incentive Plan Awards(1)
Stock or
Underlying
of Option
and Option
Name
Date
Threshold
Target
Maximum
Units(2)
Options(3)
Awards(4)
Awards(2)(3)
Glenn A. Britt
$
3,125,000
$
6,250,000
$
9,375,000
2/12/2010
387,932
$
45.15
$
4,395,270
2/12/2010
67,629
$
3,053,449
Robert D. Marcus
$
774,658
$
1,549,315
$
2,323,973
2/12/2010
160,345
$
45.15
$
1,742,950
2/12/2010
27,954
$
1,262,123
Michael LaJoie
$
293,750
$
587,500
$
881,250
2/12/2010
54,311
$
45.15
$
590,361
2/12/2010
9,468
$
427,480
Marc Lawrence-Apfelbaum
$
295,834
$
591,667
$
887,501
2/12/2010
54,311
$
45.15
$
590,361
2/12/2010
9,468
$
427,480
Carl U.J. Rossetti
$
256,250
$
512,500
$
768,750
2/12/2010
42,621
$
45.15
$
482,896
2/12/2010
7,431
$
335,510
Landel C. Hobbs
$
1,050,000
$
2,100,000
$
3,150,000
2/12/2010
188,794
$
45.15
$
2,052,191
2/12/2010
32,913
$
1,486,022
(1)
Reflects the threshold, target and
maximum payout amounts under the 2010 TWCIP of non-equity
incentive plan awards that were awarded in 2010 and were paid
out in 2011 under the 162(m) Bonus Plan and 2010 TWCIP. The
target payout amount for each named executive officer was
established in accordance with the terms of the named executive
officer’s employment agreement. Under the TWCIP, each
maximum payout amount reflects 150% of the applicable target
payout amount. For a discussion of 2010 TWCIP performance goals,
see “—Compensation Discussion and Analysis.”
(2)
Reflects awards of RSUs under the
2006 Stock Plan and the full grant date fair value of each
award. See footnote (1) to the Summary Compensation Table
for the assumptions used to determine the grant-date fair value
of the stock awards.
(3)
Reflects awards of stock options to
purchase Common Stock under the 2006 Stock Plan and the full
grant date fair value of each award. For information about the
assumptions used in these calculations, see Notes 3 and 14
to the 2010
Form 10-K,
which, among other things, presents weighted-average assumptions
on a combined basis for retirement-eligible employees and
non-retirement-eligible employees. The amounts provided in this
table reflect specific assumptions for
(a) Messrs. Britt and Rossetti who were retirement
eligible at the time of the 2010 awards, and (b) the other
named executive officers, who were not retirement eligible under
the terms of the awards. Specifically, the amounts with respect
to 2010 awards of stock options for the named executive officers
other than Messrs. Britt and Rossetti were calculated using
the Black-Scholes option pricing model, based on the following
assumptions used in developing the grant valuations for awards:
an expected volatility of 31.37%, calculated using a 75%-25%
weighted average of implied volatilities of TWC traded options
and the historical stock price volatility of a comparable peer
group of publicly-traded companies; an expected term to exercise
of 6.63 years from the date of grant; a risk-free interest
rate of 3.03%; and a dividend yield of 3.54%. Because
Messrs. Britt and Rossetti were retirement eligible,
different assumptions were used in developing grant valuations
for their 2010 awards: an expected volatility of 31.50%; an
expected term to exercise of 7.31 years from the date of
grant; a risk-free interest rate of 3.23%; and a dividend yield
of 3.54%. See “—Outstanding Equity Awards” below.
(4)
The exercise price for the awards
of stock options under the 2006 Stock Plan was determined based
on the closing sale price of Common Stock on the date of grant.
The stock options granted in 2010 shown in the table become
exercisable, or vest, in installments of 25% on the anniversary
of each grant date over a four-year period, assuming continued
employment, and expire ten years from the grant date. In
addition, holders of the stock options do not receive dividends
or dividend equivalents or have any voting rights with respect
to the shares of Common Stock underlying the stock options.
The awards of TWC RSUs granted in 2010 vest in equal
installments on each of the third and fourth anniversaries of
the date of grant. Holders of these RSUs are entitled to receive
dividend equivalents on unvested RSUs if and when regular cash
dividends are paid on outstanding shares of Common Stock and at
the same rate. The awards of RSUs confer no voting rights on
holders and are subject to restrictions on transfer and
forfeiture prior to vesting. See “—Compensation
Discussion and Analysis—2010 Long-Term Incentive
Program—Equity-Based Awards.”
The following table provides information about the outstanding
awards of options to purchase the Company’s Common Stock
and Time Warner Common Stock and the aggregate TWC RSUs held by
each named executive officer on December 31, 2010.
The information in this table reflects (1) antidilution
adjustments to the stock option exercise prices of and number
and kind of shares underlying (a) TWC stock options and
RSUs, as applicable, as a result of the payment of the Special
Dividend, the Reverse Stock Split and the Recapitalization and
(b) Time Warner stock options as a result of Time
Warner’s Spin-Off Dividend,
one-for-three
reverse stock split and spin-off distribution of its interest in
AOL Inc. and (2) the forfeiture and vesting of Time Warner
stock options and RSUs and the shortened exercise periods of
certain Time Warner stock options as a result of the Separation.
General information about the impact of the Separation on the
awards is provided in certain footnotes.
The dates of grant of each named
executive officer’s TWC and Time Warner stock options
outstanding as of December 31, 2010 are set forth in the
table, and the vesting dates for each TWC award can be
determined based on the vesting schedules described in this
footnote. Except as noted below, the awards of TWC and Time
Warner stock options become exercisable in installments of 25%
on the first four anniversaries of the date of grant, assuming
continued employment and subject to accelerated vesting upon the
occurrence of certain events, including retirement, death or
disability, as defined in the applicable award agreement. As a
result of the Separation and pursuant to the terms of the award
agreements and, in the case of each of Mr. Britt and
Mr. Marcus, the terms of his respective employment
agreement, (a) the unvested portion of the 2006 award of
Time Warner stock options held by Messrs. Britt, Marcus and
Rossetti vested and (b) the option expiration dates for
vested Time Warner stock options were shortened such that those
held by (i) Mr. Marcus expire on the earlier of the
original expiration date and March 12, 2012 (the third
anniversary of the Separation) and (ii) Messrs. Britt
and Rossetti expire on the earlier of the original expiration
date and March 12, 2014 (the fifth anniversary of the
Separation). The Separation-related
make-up
stock options awarded on May 11, 2009, which were designed
to
offset the loss of economic value
in Time Warner equity awards as a result of the Separation, to
(a) Mr. Marcus become exercisable three years after
the Separation (March 12, 2012);
(b) Messrs. Britt and Rossetti, who are retirement
eligible under the terms of the award agreement, become
exercisable five years after the grant date of the related Time
Warner stock option; (c) others whose Time Warner stock
options were forfeited become exercisable on the schedule of the
related forfeited Time Warner stock options; and (d) others
whose Time Warner stock options experienced a shortened term
became exercisable one year after the Separation (March 12,2010). As a result of the Company’s termination of
Mr. Hobbs’s employment without cause, his equity
awards granted before 2010 will continue to vest during his
two-year severance period (unless earlier terminated due to his
acceptance of other employment) (the “severance
period”) and those that remain unvested at that time will
vest pro rata and the remainder will be forfeited. These vested
stock options will remain exercisable for three years from the
end of his severance period. His awards granted during 2010
vested in full on January 28, 2011 and his stock options
remain exercisable for a year after that date.
(2)
This column presents the number of
shares of Common Stock represented by unvested RSU awards at
December 31, 2010, excluding fractional RSUs resulting from
the antidilution adjustment for the Reverse Stock Split and the
Special Dividend RSUs (as defined below), the value of which
will be paid in cash on the final vesting date of the related
RSUs. The TWC RSU awards vest equally on each of the third and
fourth anniversaries of the date of grant. The vesting schedules
for the awards of RSUs assume continued employment and are
subject to accelerated vesting upon the occurrence of certain
events, including retirement, as defined in the award agreement.
Messrs. Britt, LaJoie, Lawrence-Apfelbaum and Rossetti are
eligible for retirement and accelerated vesting except for
Mr. LaJoie with respect to his 2010 award. The vesting
dates for the unvested TWC RSU awards are as follows as of
December 31, 2010:
Number of
TWC RSUs
That Have
Date of
Not Vested
Grant
Vesting Dates
Glenn A. Britt
44,643
4/2/2007
4/2/2011
77,380
3/3/2008
3/3/2011 and 3/3/2012
95,372
2/13/2009
2/13/2012 and 2/13/2013
67,629
2/12/2010
2/12/2013 and 2/12/2014
Robert D. Marcus
10,045
4/2/2007
4/2/2011
23,214
3/3/2008
3/3/2011 and 3/3/2012
28,612
2/13/2009
2/13/2012 and 2/13/2013
27,954
2/12/2010
2/12/2013 and 2/12/2014
Michael LaJoie
6,251
4/2/2007
4/2/2011
11,849
3/3/2008
3/3/2011 and 3/3/2012
14,603
2/13/2009
2/13/2012 and 2/13/2013
9,468
2/12/2010
2/12/2013 and 2/12/2014
Marc Lawrence-Apfelbaum
2,799
4/2/2007
4/2/2011
5,082
3/3/2008
3/3/2011 and 3/3/2012
6,264
2/13/2009
2/13/2012 and 2/13/2013
9,468
2/12/2010
2/12/2013 and 2/12/2014
Carl U.J. Rossetti
2,499
4/2/2007
4/2/2011
10,317
3/3/2008
3/3/2011 and 3/3/2012
12,716
2/13/2009
2/13/2012 and 2/13/2013
7,431
2/12/2010
2/12/2013 and 2/12/2014
Landel C. Hobbs
18,229
4/2/2007
4/2/2011
38,690
3/3/2008
3/3/2011 and 3/3/2012
47,686
2/13/2009
2/13/2012 and 2/13/2013
32,913
2/12/2010
2/12/2013 and 2/12/2014
As described and defined in
connection with the description of the Time Warner Cable Inc.
2011 Stock Incentive Plan below, Special Dividend RSUs and
Special Dividend retained cash distribution, as applicable, were
credited on each TWC RSU on March 12, 2009. They will be
paid in shares of Common Stock or cash, respectively, pursuant
to the holder’s election, when the shares of Common Stock
underlying the RSUs are distributed to the holder, subject to
the terms of the underlying award. For Messrs. Britt,
Marcus, LaJoie, Rossetti and Hobbs each of whom elected to
receive Special Dividend RSUs, the Special Dividend RSUs are
included in the market value and the number of units in the
table.
(3)
Calculated using the NYSE closing
price on December 31, 2010, of $66.03 per share of Common
Stock. Excludes the value (based on the Common Stock closing
price on December 31, 2010) of the fractional RSUs
resulting from the antidilution adjustment for the Reverse Stock
Split and the Special Dividend RSUs, which will be paid in cash,
as follows: $30 for Mr. Britt; $84 for Mr. Marcus;
$104 for Mr. LaJoie; $110 for Mr. Lawrence-Apfelbaum;
$74 for Mr. Rossetti; and $95 for Mr. Hobbs. Each of
Messrs. Lawrence-Apfelbaum and Mr. Rossetti elected to
receive the Special Dividend retained cash distribution related
to some or all of his outstanding
RSUs. The market value of
Mr. Lawrence-Apfelbaum’s and Rossetti’s RSUs do
not include the Special Dividend retained cash distribution
aggregating $522,096 and $153,998, respectively, of which
$86,237 was paid to Mr. Lawrence-Apfelbaum and $76,994 was
paid to Mr. Rossetti in 2010 with the remainder to be paid
in cash on the respective vesting dates of the underlying RSUs.
The following table sets forth as to each of the named executive
officers information on exercises of TWC stock options and the
vesting of TWC RSU awards during 2010, including: (i) the
number of shares of Common Stock underlying options exercised
during 2010; (ii) the aggregate dollar value realized upon
exercise of such options; (iii) the number of shares of
Common Stock received from the vesting of awards of TWC RSUs
during 2010; and (iv) the aggregate dollar value realized
upon such vesting (based on the stock price of Common Stock on
the vesting dates). None of the named executive officers
exercised Time Warner stock options during 2010.
OPTION
EXERCISES AND STOCK VESTED DURING 2010
Option
Awards(1)
Stock Awards
Number of
Number of
Shares
Value
Shares
Value
Acquired on
Realized on
Acquired on
Realized on
Exercise
Exercise
Vesting
Vesting(2)
Glenn A. Britt
192,252
$
4,313,167
44,642
$
2,387,454
Robert D. Marcus
28,504
$
875,968
10,044
$
537,153
Michael LaJoie
45,807
$
883,931
7,545
$
395,562
Marc Lawrence-Apfelbaum
25,111
$
624,568
4,030
$
207,978
Carl U.J. Rossetti
44,152
$
592,888
2,499
$
133,647
Landel C. Hobbs
57,000
$
1,394,435
21,921
$
1,149,697
(1)
The value realized on exercise is
calculated based on the difference between the sale price per
share of Common Stock and the option exercise price.
(2)
Calculated using the closing sale
price of Common Stock on the NYSE on the vesting date.
Eligible employees of the Company, including the named executive
officers, currently participate in the Time Warner Cable Pension
Plan, a tax qualified defined benefit pension plan, and the Time
Warner Cable Excess Benefit Pension Plan (the “Excess
Benefit Plan”), a nonqualified defined benefit pension plan
(collectively, the “TWC Pension Plans”), which are
sponsored by the Company. Each of Messrs. Britt, Marcus and
LaJoie was an active participant in pension plans sponsored by
Time Warner until March 31, 2003, August 14, 2005 and
July 31, 1995, respectively, when their respective
participation in the TWC Pension Plans commenced.
Federal tax law limits both the amount of compensation that is
eligible for the calculation of benefits and the amount of
benefits that may be paid to participants under a tax-qualified
plan, such as the Time Warner Cable Pension Plan. However, as
permitted under Federal tax law, TWC has adopted the Excess
Benefit Plan that is designed to provide for supplemental
payments by TWC of an amount that eligible employees would have
received under the Time Warner Cable Pension Plan if eligible
compensation were subject to a higher limit and there were no
payment restrictions. The amount of the payment under the Excess
Benefit Plan is calculated based on the differences between
(a) the annual benefit that would have been payable under
the Time Warner Cable Pension Plan if the annual eligible
compensation limit imposed by the tax laws was $350,000 (the
maximum compensation limit imposed under the Excess Benefit
Plan) and (b) the actual benefit payable under the Time
Warner Cable Pension Plan. The pension benefit under the Excess
Benefit Plan is payable, at the participant’s election, in
either a lump sum or 120 monthly installments starting six
months following termination of employment.
Benefit payments under the TWC Pension Plans are calculated
using the highest consecutive five-year average annual
compensation (subject to federal law limits and the $350,000
limit referred to above), which is referred to as “average
compensation.” Compensation covered by the TWC Pension
Plans takes into account salary, bonus, some elective deferrals
and other compensation paid, but excludes the payment of
deferred or long-term incentive compensation and severance
payments. The annual pension payment under the terms of the TWC
Pension Plans, if the employee is vested, and if paid as a
single life annuity, commencing at age 65, is an amount
equal to the sum of:
•
1.25% of the portion of average compensation that does not
exceed the average of the Social Security taxable wage base
ending in the year the employee reaches the Social Security
retirement age, referred to as “covered compensation,”
multiplied by the number of years of benefit service up to
35 years, plus
•
1.67% of the portion of average compensation that exceeds
covered compensation, multiplied by the number of years of
benefit service up to 35 years, plus
•
0.5% of average compensation multiplied by the employee’s
number of years of benefit service in excess of 35 years,
plus
•
a supplemental benefit in the amount of $60 multiplied by the
employee’s number of years of benefit service up to
30 years, with a maximum supplemental benefit of $1,800 per
year.
Special rules apply to various participants who were previously
participants in plans that have been merged into the TWC Pension
Plans and to various participants in the TWC Pension Plans prior
to January 1, 1994. Reduced benefits are available in the
case of retirement before age 65 and in other optional
forms of benefits payouts, as described below. Eligible
employees become vested in benefits under the TWC Pension Plans
after completion of five years of service, including service
with Time Warner and its affiliates prior to the Separation.
Time
Warner Pension Plans
In addition to the benefits to which they are entitled under the
TWC Pension Plans, as a result of prior service at Time Warner
or one of its affiliates, each of Messrs. Britt, Marcus and
LaJoie is entitled to vested benefits under the Time Warner
Employees’ Pension Plan, as amended (the “Old TW
Pension Plan”), as further amended effective as of
January 1, 2000, as described below, and renamed (the
“Amended TW Pension Plan” and, together with the Old
TW Pension Plan, the “TW Pension Plans”), which
provides benefits to eligible employees of Time Warner and
certain of its subsidiaries. Messrs. Britt, Marcus and
LaJoie have ceased to be active participants in the TW Pension
Plans described below and commenced participation in the TWC
Pension Plans described above.
Under the terms of the Amended TW Pension Plan, applicable to
Messrs. Marcus and LaJoie, a participant accrues benefits
(calculated based on a lifetime monthly annuity formula) equal
to the sum of:
•
1.25% of a participant’s average annual compensation
(defined as the highest average annual compensation for any five
consecutive full calendar years of employment, which includes
regular salary, overtime and shift differential payments, and
non-deferred bonuses paid according to a regular program) not in
excess of his covered compensation up to the applicable average
Social Security wage base, multiplied by his years of benefit
service (not in excess of 30) plus
•
1.67% of his average annual compensation in excess of such
covered compensation multiplied by his years of benefit service
(not in excess of 30).
Under the Old TW Pension Plan, applicable to Mr. Britt, a
participant accrues benefits on the basis of:
•
1.67% of the participant’s average annual compensation
(defined as the highest average annual compensation for any five
consecutive full and partial calendar years of employment, which
includes regular salary, overtime and shift differential
payments, and non-deferred bonuses paid according to a regular
program) for each year of service up to 30 years plus
0.50% of average annual compensation for each year of service
over 30.
Annual pension benefits under the Old TW Pension Plan are
reduced by a Social Security offset determined by a formula that
takes into account benefit service of up to 35 years,
covered compensation up to the average Social Security wage base
and a disparity factor based on the age at which Social Security
benefits are payable (the “Social Security Offset”).
Under the Old TW Pension Plan and the Amended TW Pension Plan,
the pension benefit of participants on December 31, 1977 in
the former Time Employees’ Profit-Sharing Savings Plan (the
“Profit Sharing Plan”) is further reduced by a fixed
amount attributable to a portion of the employer contributions
and investment earnings credited to such employees’ account
balances in the Profit Sharing Plan as of such date (the
“Profit Sharing Offset”).
Under the Amended TW Pension Plan, employees who are at least
62 years old and have completed at least ten years of
service may elect early retirement and receive the full amount
of their annual pension (calculated as described above). This
provision could apply to Messrs. Marcus and LaJoie with
respect to their benefits under the TW Plans. Under the Old TW
Pension Plan, employees who are at least 60 years old and
have completed at least ten years of service may elect early
retirement and receive the full amount of their annual pension
(calculated as described above). Under this provision,
Mr. Britt received a lump-sum pension payout in February
2010 of $1,255,120 (including interest), based on a
December 1, 2009 requested commencement date.
Time Warner has adopted the Time Warner Excess Benefit Pension
Plan (the “TW Excess Plan”), which, like the TWC
Excess Benefit Plan, provides for payments by Time Warner of
certain amounts that eligible employees would have received
under the TW Pension Plans if eligible compensation (including
deferred bonuses) were limited to $250,000 in 1994 (increased 5%
per year thereafter, to a maximum of $350,000) and there were no
payment restrictions.
Forms
of Benefit Payments
The benefits under the Time Warner Cable Pension Plan and the TW
Pension Plans are payable as (i) a single life annuity,
(ii) a 50%, 75% or 100% joint and survivor annuity,
(iii) a life annuity that is guaranteed for 10 years
(with certain participants in the Time Warner Cable Pension Plan
eligible for 5- and
15-year
guaranteed periods), or (iv) in certain cases, a lump sum.
Spousal consent is required in certain cases. The participant
may elect the form of benefit payment at the time of retirement.
Mr. Britt may elect a lump-sum distribution under the Time
Warner Cable Pension Plan and in 2010, Mr. Britt received a
lump-sum distribution under the TW Pension Plans.
Messrs. Lawrence-Apfelbaum and Rossetti would be eligible
to elect a partial lump-sum distribution from the Time Warner
Cable Pension Plan. In the case of a single life annuity, the
amount of the annuity is based on the applicable formulas
described above. In the case of a joint and survivor annuity,
the amount of the annuity is based on the single life annuity
amount but is reduced to take into account the ages of the
participant and beneficiary at the time the annuity payments
begin and the percentage elected by the participant. In the case
of a life annuity that is guaranteed for a period of time, the
amount of the annuity is based on the single life annuity amount
but is reduced to take into account the guaranteed period.
Benefits under the Time Warner Cable Excess Benefit Plan and the
TW Excess Plan are payable only as a lump sum, unless the
participant elected to receive monthly installments over
10 years by the applicable deadline.
Pension
Benefits Table
Set forth in the table below is each named executive
officer’s years of credited service and the present value
of his accumulated benefit under each of the pension plans
pursuant to which he would be entitled to a retirement benefit
computed as of December 31, 2010, the pension plan
measurement date used for financial statement reporting purposes
in the Company’s audited consolidated financial statements
for the year ended December 31, 2010. The estimated amounts
are based on the assumption that payments under the TWC Pension
Plans and the TW Pension Plans will commence upon normal
retirement (generally age 65) or, under the TW Pension
Plans, early retirement (for those who have at least ten years
of service), that the TWC Pension Plans and the TW Pension Plans
will continue in force in their forms as of December 31,2010, that
the maximum annual covered compensation is $350,000 and that no
joint and survivor annuity will be payable (which would on an
actuarial basis reduce benefits to the employee but provide
benefits to a surviving beneficiary). Amounts calculated under
the pension formula that exceed Internal Revenue Code limits
will be paid under the Excess Benefit Plan or the TW Excess
Plan, as the case may be, from TWC’s or Time Warner’s
assets, respectively, and are included in the present values
shown in the table.
PENSION
BENEFITS FOR 2010
Number
Present
of Years
Value of
Payments
Credited
Accumulated
During
Plan Name
Services(1)
Benefit(2)
2010
Glenn A. Britt
Time Warner Cable Pension Plan
7.8
$
257,910
$
—
Time Warner Cable Excess Benefit Plan
7.8
138,070
—
Old TW Pension
Plan(3)
30.7
—
1,255,120
Total
38.5
$
395,980
$
1,255,120
Robert D. Marcus
Time Warner Cable Pension Plan
5.4
$
69,370
$
—
Time Warner Cable Excess Benefit Plan
5.4
38,390
—
Amended TW Pension Plan
7.7
122,530
—
Total
13.1
$
230,290
$
—
Michael LaJoie
Time Warner Cable Pension Plan
15.4
$
368,210
$
—
Time Warner Cable Excess Benefit Plan
15.4
199,470
—
Amended TW Pension Plan
1.6
45,700
—
TW Excess Plan
1.6
32,880
—
Total
17.0
$
646,260
$
—
Marc Lawrence-Apfelbaum
Time Warner Cable Pension Plan
20.5
$
473,760
$
—
Time Warner Cable Excess Benefit Plan
20.5
257,740
—
Total
20.5
$
731,500
$
—
Carl U.J. Rossetti
Time Warner Cable Pension Plan
24.0
$
824,110
$
—
Time Warner Cable Excess Benefit Plan
24.0
440,010
—
Total
24.0
$
1,264,120
$
—
Landel C. Hobbs
Time Warner Cable Pension Plan
9.3
$
138,580
$
—
Time Warner Cable Excess Benefit Plan
9.3
76,350
—
Total
9.3
$
214,930
$
—
(1)
Consists of the number of years of
service credited to the executive officers as of
December 31, 2010 for the purpose of determining benefit
service under the applicable pension plan.
(2)
The present values of accumulated
benefits for the TWC Pension Plans as of December 31, 2010
were calculated using a 5.90% discount rate and the RP-2000
Mortality Table projected to 2020, with no collar adjustment,
consistent with the assumptions used in the calculation of the
Company’s benefit obligations as disclosed in Note 14
to the audited consolidated financial statements of the Company
included in the 2010
Form 10-K.
The present value of the accumulated benefits for the TW Pension
Plans and the TW Excess Plan were calculated using a 5.57%
discount and lump sum rate and the RP-2000 Mortality Table
projected to 2020 with white collar adjustment. The present
values also assume all benefits are payable at the earliest
retirement age at which unreduced benefits are assumed to be
payable (which is age 65 under the TWC Pension Plans, and
age 62 under the TW Pension Plans in the case of
Messrs. Marcus and LaJoie) valued as if paid as a life
annuity. Mr. Britt’s benefits under the TW Pension
Plans were paid as a lump sum determined using assumptions in
effect at the time of the distribution. No preretirement
turnover is reflected in the calculations.
(3)
Because of certain grandfathering
provisions under the TW Pension Plans, the benefit of
participants with a minimum of ten years of benefit service
whose age and years of benefit service equal or exceed
65 years as of January 1, 2000, including
Mr. Britt, will be determined under either the provisions
of the Old TW Pension Plan or the Amended TW Pension Plan,
whichever produces the greater benefit. Mr. Britt’s
payment amount shown in the table was determined under the Old
TW Pension Plan, which produced the greater annual benefit.
Certain of the named executive officers participate, or have
participated, in nonqualified deferred compensation plans
maintained by the Company or Time Warner or their respective
affiliates. None of these plans provides, or has provided, a
guaranteed rate of return on deferred amounts. Prior to 2003,
the Time Warner Entertainment Deferred Compensation Plan, an
unfunded deferred compensation plan (the “TWE Deferral
Plan”), permitted certain employees (including certain
named executive officers) to defer receipt of all or a portion
of their annual bonus until a specified future date at which a
lump-sum or installment distribution would be made based on the
participant’s election. During the deferral period, the
participant selects a crediting rate or rates to be applied to
the deferred amount from certain of the third party investment
vehicles then offered under the TWC Savings Plan and may change
that selection quarterly. Mr. Lawrence-Apfelbaum has an
account in the TWE Deferral Plan and Mr. Britt has an
account balance as a result of the transfer of his account
balance from a Time Warner nonqualified deferred compensation
plan. Since March 2003, deferrals may no longer be made under
the TWE Deferral Plan but amounts previously credited under the
Plan continue to track the available crediting rate elections.
In addition, prior to 2001, pursuant to his employment agreement
then in place, TWE made contributions for Mr. Britt to a
separate deferred compensation account maintained in a grantor
trust. This individual account was invested in certain eligible
securities by a third-party investment advisor designated by the
Company (subject to Mr. Britt’s approval). In
accordance with the terms of the deferred compensation
arrangement, the accrued amount payable to Mr. Britt, as
valued on December 31, 2009 pursuant to its terms, was paid
to Mr. Britt in a lump sum in cash in early 2010.
Set forth in the table below is information about the earnings,
if any, credited to the accounts maintained by the named
executive officers under these arrangements and any withdrawal
or distributions therefrom during 2010 and the balance in the
account on December 31, 2010.
NONQUALIFIED
DEFERRED COMPENSATION FOR 2010
Aggregate
Executive
Registrant
Aggregate
Aggregate
Balance at
Contributions
Contributions
Earnings
Withdrawals/
December 31,
in 2010
in 2010
in
2010(1)
Distributions
2010
Glenn A.
Britt(2)
—
—
$
1,549
$
3,062,185
$
90,208
Robert D. Marcus
—
—
—
—
—
Michael LaJoie
—
—
—
—
—
Marc
Lawrence-Apfelbaum(3)
—
—
4,565
—
35,145
Carl U.J. Rossetti
—
—
—
—
—
Landel C. Hobbs
—
—
—
—
—
(1)
None of the amounts reported in
this column are required to be reported as compensation for
fiscal year 2010 in the Summary Compensation Table.
(2)
The amounts reported for
Mr. Britt consist of the aggregate earnings and year-end
balance credited to his account under the TWE Deferral Plan and
the amount of his distribution in early 2010 discussed above.
(3)
The amounts reported for
Mr. Lawrence-Apfelbaum reflect the aggregate earnings and
the year-end balance credited to his account under the TWE
Deferral Plan.
The following is a description of the material terms of the
compensation provided to the Company’s named executive
officers during the term of their employment pursuant to
employment agreements between the Company or TWE, and each
executive. See “—Potential Payments Upon Termination
or Change in Control” for a description of the payments and
benefits that would be provided to the Company’s named
executive officers in connection with a termination of their
employment or a change in control of the Company.
Glenn A. Britt. During 2010,
Mr. Britt served as the Company’s Chairman and Chief
Executive Officer pursuant to an employment agreement with a
term through December 31, 2012. Mr. Britt’s
agreement and employment terminates automatically on
December 31, 2012, unless earlier terminated, or extended,
pursuant to its terms. The agreement provides Mr. Britt
with (a) a minimum annual base salary of $1,250,000 as of
January 1, 2010; (b) an annual discretionary cash
bonus with a target amount of 500% of his base salary, no
minimum bonus entitlement and a maximum bonus opportunity of
150% of the target bonus; and (c) annual long-term
incentive compensation beginning in 2010, for each year of the
agreement, with a target value of approximately $7,500,000
(based on a valuation method established by the Company), which
may be in the form of stock options, RSUs, other equity-based
awards, any of which may include performance-based vesting
conditions, cash or other components, or any combination of such
forms, as may be determined by the Company’s Board of
Directors or, if delegated by the Board, the Compensation
Committee, in its sole discretion. Mr. Britt participates
in the benefit plans and programs available to the
Company’s other senior executive officers, including
$50,000 of group life insurance and reimbursement of financial
services. Mr. Britt also receives an annual payment equal
to two times the premium cost for $4 million of life
insurance as determined by the Company based on its GUL
insurance program. Mr. Britt’s agreement includes
compensation forfeiture and “clawback” provisions and
confidentiality terms, as well as non-solicitation, non-compete
and non-disparagement covenants that apply during and after his
employment.
Robert D. Marcus. During 2010,
Mr. Marcus served as the Company’s Senior Executive
Vice President and Chief Financial Officer through
December 14, 2010 and as President and Chief Operating
Officer thereafter pursuant to a fixed-term employment agreement
effective January 1, 2010, which provides that
Mr. Marcus will continue to serve the Company until the
employment agreement terminates automatically on
December 31, 2012, unless earlier terminated or extended
pursuant to its terms. If the employment agreement is not
extended or renewed at or before its expiration date,
Mr. Marcus’s employment continues thereafter on an
at-will basis. The agreement further provides Mr. Marcus
with (a) a minimum annual base salary of $900,000
(increased to $1,000,000 effective as of December 14,2010); (b) an annual discretionary cash bonus with a target
amount of $1,500,000 (increased to $2,500,000 effective as of
December 14, 2010); and (c) annual long-term incentive
compensation with a target value of approximately $3,100,000
(increased to $4,500,000, effective as of January 1, 2011)
(based on a valuation method established by the Company), which
may be in the form of stock options, RSUs, other equity-based
awards, any of which may include performance-based vesting
conditions, cash or other components, or any combination of such
forms, as may be determined by the Compensation Committee, in
its sole discretion. The employment agreement provides for
participation in the Company’s benefit plans and programs,
including $50,000 of group life insurance and reimbursement of
financial services. Mr. Marcus also receives an annual
payment equal to two times the premium cost for $2 million
of life insurance as determined by the Company based on its GUL
insurance program. Mr. Marcus’s employment agreement
includes compensation forfeiture and clawback provisions and
confidentiality terms, as well as non-solicitation, non-compete
and non-disparagement covenants that apply during and after the
term of his employment.
Michael LaJoie. During 2010,
Mr. LaJoie served as the Company’s Executive Vice
President and Chief Technology Officer pursuant to an employment
agreement, effective as of June 1, 2000, which was
previously renewed through December 31, 2011, and amended
on December 16, 2009, effective as of January 1, 2010,
subject to earlier termination as provided in the agreement. The
agreement provides for a minimum annual base salary (which was
increased from $600,000 to $625,000 by the Compensation
Committee effective February 18, 2011) and an annual
discretionary target bonus of 100% of his base salary, subject
to Mr. LaJoie’s and the Company’s performance,
and participation in the Company’s benefit plans and
programs, including life insurance. The Compensation Committee
established a 2011 long-term incentive compensation target value
of $1,093,750 for Mr. LaJoie. Mr. LaJoie also receives
group term life insurance coverage and supplemental group term
life insurance coverage with an aggregate death benefit
equivalent to two and a half times his annual base salary and
bonus pursuant to the agreement. The agreement also includes
confidentiality terms as well as non-solicitation, non-compete
and non-disparagement covenants that apply during and after his
employment. The Company’s failure, prior to the expiration
of the agreement, to offer Mr. LaJoie a renewal agreement
with terms substantially similar to those of his current
agreement is considered a termination without cause.
Marc Lawrence-Apfelbaum. During 2010,
Mr. Lawrence-Apfelbaum served as the Company’s
Executive Vice President, General Counsel and Secretary pursuant
to an employment agreement with a term of three years, subject
to earlier termination as provided in the agreement. Prior to
the end of each year, the Company may renew the term of
Mr. Lawrence-Apfelbaum’s employment agreement for a
term of three years from that date.
Mr. Lawrence-Apfelbaum’s employment agreement had been
extended in successive three-year terms through December 2012.
On December 2, 2010, Mr. Lawrence-Apfelbaum’s
employment agreement was amended effective January 1, 2011
and the term extended through December 31, 2013. The
amended agreement provides for a minimum annual base salary of
$600,000 and an annual discretionary target bonus (which is
currently $600,000), with no minimum bonus entitlement, subject
to Mr. Lawrence-Apfelbaum’s and the Company’s
performance, and participation in the Company’s benefit
plans and programs, including life insurance. The Compensation
Committee increased Mr. Lawrence-Apfelbaum’s base
annual salary above the minimum to $620,000, effective
February 18, 2011 and established his 2011 long-term
incentive compensation target value of $1,280,000. In addition,
the amended agreement provides that all equity awards granted by
the Company to Mr. Lawrence-Apfelbaum after the effective
date of the amendment will be eligible for
“retirement” treatment if at the time of his
termination of employment, Mr. Lawrence-Apfelbaum is at
least 55 years old and has ten years of service with the
Company or its affiliates regardless of any other definition of
retirement in the related equity award agreements.
Mr. Lawrence-Apfelbaum also receives an annual payment
equal to the premium cost for life insurance with a death
benefit equivalent to three times his annual base salary and
bonus pursuant to the agreement, as determined by the Company
based on its GUL insurance program. The agreement also includes
confidentiality terms as well as non-solicitation, non-compete
and non-disparagement covenants that apply during and after his
employment. The Company’s failure, prior to the expiration
of the agreement. to offer Mr. Lawrence-Apfelbaum a renewal
agreement with terms substantially similar to those of his
current agreement is considered a termination without cause.
Carl U.J. Rossetti. During 2010,
Mr. Rossetti served as the Company’s Executive Vice
President and President, Time Warner Cable Ventures pursuant to
an employment agreement with a term of three years, subject to
earlier termination as provided in the agreement. Prior to the
end of each year, the Company may renew the term of
Mr. Rossetti’s employment agreement for a term of
three years from that date. Mr. Rossetti’s employment
agreement had been extended in successive three-year terms
through December 2010. On December 14, 2010,
Mr. Rossetti’s employment agreement was amended
effective January 1, 2011 and the term extended through
December 31, 2013. The amended agreement provides for a
minimum annual base salary of $515,000, and an annual
discretionary target bonus of $515,000, with no minimum bonus
entitlement, subject to Mr. Rossetti’s and the
Company’s performance, and participation in the
Company’s benefit plans and programs, including life
insurance. The Compensation Committee increased
Mr. Rossetti’s base annual salary above the minimum to
$535,000 and increased his discretionary annual target bonus to
$535,000, effective February 18, 2011, and established
his 2011 long-term incentive compensation target value of
$856,000. Mr. Rossetti also receives group term life
insurance coverage and supplemental group term life insurance
coverage with an aggregate death benefit equivalent to three
times his annual base salary and bonus pursuant to the
agreement. The agreement also includes confidentiality terms as
well as non-solicitation, non-compete and non-disparagement
covenants that apply during and after his employment. The
Company’s failure, prior to the expiration of the
agreement, to offer Mr. Rossetti a renewal agreement with
terms substantially similar to those of his current agreement is
considered a termination without cause.
Landel C. Hobbs. During 2010,
Mr. Hobbs served as the Company’s Chief Operating
Officer through December 14, 2010 pursuant to a fixed-term
employment agreement effective January 1, 2010, which
provides that Mr. Hobbs would continue to serve the Company
until the employment agreement terminated automatically on
January 31, 2011, unless earlier terminated pursuant to its
terms. The agreement provided Mr. Hobbs with, beginning
January 1, 2010, (a) a minimum annual base salary of
$1,000,000; (b) an annual discretionary cash bonus with a
target amount of $2,100,000; and (c) annual long-term
incentive compensation with a target value of approximately
$3,650,000 (based on a valuation method established by the
Company), which may be in the form of stock options, RSUs, other
equity-based awards, cash or other components, or any
combination of such forms, as may be determined by the
Compensation Committee, in its sole discretion.
Mr. Hobbs’s employment agreement includes the same
compensation clawback provisions as Mr. Marcus’s
agreement. The employment agreement also provided Mr. Hobbs
with participation in the Company’s benefit
plans and programs, including $50,000 of group life insurance
and reimbursement of financial services. Mr. Hobbs’s
agreement also provided for an annual payment equal to two times
the premium cost for $2 million of life insurance as
determined by the Company based on its GUL insurance program, as
well as post-employment non-compete, non-solicitation,
non-disparagement and confidentiality provisions.
Right to Recover Compensation. The
named executive officers are subject to compensation
“clawback” provisions under the terms of their
employment agreements
and/or
equity award agreements. These provisions allow the Company to
require repayment of certain compensation in the event of a
termination for “cause.” In the case of
Messrs. Britt, Marcus and Hobbs, the clawback provisions
are also applicable following a financial restatement or a
determination that incentive compensation was paid based on
incorrect financial performance results.
The following summaries and tables describe and quantify the
potential additional payments and benefits that would be
provided to each of the Company’s named executive officers
in connection with a termination of employment or a change in
control of the Company on December 31, 2010 under the
executive’s employment agreement, in each case as in effect
on such date, and the Company’s other compensation plans
and programs. In determining the benefits payable upon certain
terminations of employment, the Company has assumed in all cases
that (i) the executive’s employment terminates on
December 31, 2010, (ii) he does not become employed by
a new employer or return to work for the Company and
(iii) after the termination of his employment, he does not
breach any of the restrictive covenants (including
non-competition, non-solicitation and confidentiality) contained
in his employment agreement.
Glenn
A. Britt
Under his employment agreement, Mr. Britt is entitled to
certain payments and benefits upon the Company’s
termination of his employment “without cause,” upon
Mr. Britt’s resignation due to the Company’s
“material breach” of the agreement (collectively
referred to as a termination “without cause”) and in
connection with his termination of employment for other reasons.
For this purpose, “cause” includes certain felony
convictions and certain willful and intentional actions by
Mr. Britt including failure to perform material duties;
misappropriation, embezzlement or destruction of the
Company’s property; material breach of duty of loyalty to
the Company having a significant adverse financial impact on the
Company or the Company’s reputation; improper conduct
materially prejudicial to the Company’s business; and
material breach of certain restrictive covenants regarding
non-competition, non-solicitation of employees, customers and
suppliers, and nondisclosure of confidential information. A
“material breach” of the agreement for purposes of a
termination without cause includes (a) the Company’s
failure to cause a successor to assume the Company’s
obligations under the employment agreement;
(b) Mr. Britt’s not being employed as the
Company’s Chairman and CEO with authority, functions,
duties and powers consistent with that position or not reporting
solely to the Board; (c) Mr. Britt’s not being
reelected or otherwise ceasing to be a member of the Board,
other than in connection with Mr. Britt’s removal as a
director for cause or no longer serving as Chairman of the Board
as a result of any change in applicable law or stock exchange
listing requirements; and (d) Mr. Britt’s
principal place of employment being anywhere other than the
Company’s principal corporate offices in the New York City
metropolitan area.
For Cause; Voluntary Resignation or Retirement Absent
Material Breach by Company. If the Company
terminates Mr. Britt’s employment for cause (as
defined above), or Mr. Britt voluntarily resigns or retires
prior to the expiration of the term, the Company will have no
further obligations to Mr. Britt other than (a) to pay
his base salary through the effective date of termination;
(b) to pay any bonus for any year prior to the year in
which such termination occurs that has been determined but not
yet paid as of the date of such termination; and (c) to
satisfy any rights Mr. Britt has pursuant to any insurance
or other benefit plans or arrangements of the Company. In
addition, as noted above, the Company has a compensation
“clawback” right in the event of certain for
“cause” terminations.
Expiration of Term. If Mr. Britt’s
employment terminates at the expiration of the agreement’s
term (December 31, 2012), the Company will have no further
obligation to Mr. Britt other than (a) to pay Base
Salary through the termination date; (b) to pay any bonus
for the last calendar year of the term of the Agreement
(i.e., 2012) and any other bonus that has been
determined but not yet paid as of such termination date; and
(c) with respect to any rights Mr. Britt may have
pursuant to any insurance or other benefit plans or arrangements
of the Company. The Company also will make available to
Mr. Britt office space and secretarial services at a level
commensurate with his reduced needs as a result of ceasing
full-time status until the earlier of (i) one year
following the expiration of the term and (ii) such time as
Mr. Britt commences other full time employment.
Termination without Cause. In the event that
the Company terminates Mr. Britt’s employment without
cause, Mr. Britt will be entitled to the following payments
and benefits:
•
any earned but unpaid base salary through the termination date;
•
a pro-rata portion of any bonus through the termination date for
the year of termination, subject to the actual achievement of
the performance criteria established for the year of termination
under the Company’s bonus plans, which will be paid at the
same time the full annual bonus would have been paid under the
employment agreement had such termination not occurred;
•
any accrued, but unpaid bonus for the year prior to the year in
which his termination of employment occurs, based on the
Company’s performance;
•
annual base salary and annual cash target bonus for twenty-four
(24) months after the termination date, paid on the
Company’s normal payroll payment dates in effect
immediately prior to Mr. Britt’s termination;
•
continued participation during the
24-month
severance period in the Company’s life insurance, medical,
dental and hospitalization programs, as well as Company courtesy
services and financial planning services (subject to certain
limitations if Mr. Britt subsequently secures employment
following his termination date); and
•
office space and secretarial services at a level commensurate
with Mr. Britt’s reduced needs as a result of ceasing
full-time status until the earlier of (i) one year
following the termination date, and (ii) such time as
Mr. Britt commences other full time employment.
Change in Control. If Mr. Britt’s
employment is terminated without cause within two years after a
change in control event (as defined in his employment
agreement), all of the cash severance payments due
Mr. Britt will be paid in a single lump sum within
30 days of the termination date; provided that, $200,000 of
such severance payments will be paid in equal payroll
installments through September 30, 2012.
Disability. In the event Mr. Britt
becomes disabled, the Company will continue to pay
Mr. Britt’s full compensation through the last day of
the sixth consecutive month of disability or the date on which
any shorter periods of disability will have equaled a total of
six months in any twelve-month period (such last day, the
“Disability Date”). If Mr. Britt has not resumed
his usual duties on or prior to the Disability Date, the Company
will pay a pro-rata bonus based on actual performance results
for the year in which the Disability Date occurs and thereafter
will pay Mr. Britt disability benefits for the period
ending on the later of (a) December 31, 2012 or
(b) the date which is twelve months after the Disability
Date (the “Disability Period”), in an annual amount
equal to 75% of (i) base salary at the time Mr. Britt
becomes disabled and (ii) target bonus, as well as
continued participation in the Company’s benefit plans and
programs during the Disability Period. The Company may generally
deduct from these payments amounts equal to disability payments
received by Mr. Britt during this payment period from
Workers’ Compensation, Social Security and the
Company’s disability insurance policies.
Death. If Mr. Britt dies during the term
of the employment agreement, Mr. Britt’s estate (or a
designated beneficiary) will be entitled to receive:
(a) Mr. Britt’s base salary to the last day of
the month in which his death occurs, (b) any bonus award
for any year prior to the year in which his death occurs that
has not yet been paid based on the actual performance results
for such year, and (c) bonus compensation (at the
time bonuses are normally paid) for the year in which his death
occurs based on the actual performance results for the relevant
year, but prorated according to the number of whole or partial
months Mr. Britt was employed by the Company in such
calendar year.
Equity Awards. Unless a more favorable outcome
is specified in Mr. Britt’s employment agreement, the
terms of Mr. Britt’s equity award agreements govern
his entitlements under those awards in the event of a
termination of his employment with or without cause, retirement,
disability, death or a change in control. Unless otherwise
noted, the provisions below are contained in the applicable
award agreements:
•
Termination for Cause. In the event of
a termination for cause, Mr. Britt would forfeit his
unvested stock options and RSUs upon his termination of
employment. He would have one month to exercise any vested stock
options, unless his termination of employment is as a result of
fraud, embezzlement or misappropriation or certain other
specified reasons in the case of awards in and after 2010, in
which case, the exercise period would be eliminated.
•
Termination without Cause. Because
Mr. Britt satisfies the retirement eligibility provisions
of his equity award agreements (he was over 60 years old
and had more than 10 years of service with the Company or
its affiliates, on December 31, 2010), in the event of his
termination without cause, his equity awards would generally be
governed by the “retirement” provisions of his equity
award agreements. As a result, upon such a termination of
employment, all of Mr. Britt’s unvested RSUs would
vest and be distributed upon his termination date in accordance
with their terms (other than those awards that are subject to
performance-based vesting conditions, which would not be
distributed until the satisfaction of the condition was
certified by the Compensation Committee). Pursuant to his
employment agreement, Mr. Britt’s unvested stock
options would continue to vest during his severance period.
Pursuant to the “retirement” provisions of his award
agreements, any remaining unvested stock options would vest at
the end of his severance period and would remain exercisable for
five years thereafter, but not beyond the original expiration
date (other than those awards that are subject to
performance-based vesting conditions, which would not be
exercisable until the condition was satisfied).
•
Retirement. Under the agreements
governing Mr. Britt’s stock options and RSUs, because
Mr. Britt satisfied the retirement eligibility provisions
on December 31, 2010, all of his unvested RSUs and all of
his stock options would vest upon his retirement except one
Separation-related
make-up
stock option award that would vest pro rata based on his service
after the Separation.
•
Death/Disability. Pursuant to the terms
of the award agreements, his stock options and RSUs would vest
following his death or disability.
•
Change in Control. The agreements
governing Mr. Britt’s equity awards granted prior to
2010 generally provide for vesting following a change in control
upon the earlier of (i) the first anniversary of the change
in control and (ii) the termination of his employment other
than for cause unless due to death or disability or by
Mr. Britt for good reason. The agreements governing
Mr. Britt’s equity awards granted in 2010 generally
provide for vesting following a change in control in the event
of the termination of his employment other than for cause within
12 months of the change in control.
Conditions and Obligations Applicable to Receipt of Payments
and Benefits. Mr. Britt’s right to
receive severance payments and benefits upon a termination
without cause is conditioned on his execution of a release of
claims against the Company after his separation of service from
the Company. If Mr. Britt does not execute a release of
claims, he would not be entitled to any other severance benefits
pursuant to the Company’s general policies or other
programs relating to notice and severance. To the extent that
any of the severance payments and benefits described above
constitute a “parachute payment” within the meaning of
Section 280G of the Internal Revenue Code and therefore
would be subject to an excise tax, such payments will be reduced
to the greatest amount that would not trigger an excise tax
obligation if such reduction would result in
Mr. Britt’s receipt of a greater after-tax amount.
Also, if Mr. Britt obtains other full-time employment
during the
24-month
severance period or the Disability Period, he will no longer be
eligible to participate in the
Company’s benefit plans and programs effective upon the
commencement of such employment or such time as he becomes
eligible for comparable coverage by the new employer. The
severance payments may be delayed to the extent the Company
deems it necessary for compliance with Section 409A of the
Internal Revenue Code governing nonqualified deferred
compensation. Severance benefits also may be reduced or
terminated if it is determined that Mr. Britt breached the
confidentiality and non-compete restrictive covenant terms set
forth in the employment agreement.
Assuming the trigger event causing any of the payments and other
benefits described above occurred on December 31, 2010 and
that Mr. Britt signed the mandated release, based on the
NYSE closing price per share on December 31, 2010 of the
Company’s Common Stock ($66.03), the dollar value of
payments and other benefits provided to Mr. Britt under his
employment agreement are estimated to be as follows:
Annual
Group Benefit
Base Salary
Bonus
Pro Rata
Plans
Stock-Based
Continuation
Continuation
Bonus(1)
Continuation(2)
Awards(3)
Other(4)
Termination without Cause
$
2,500,000
$
12,500,000
$
6,250,000
$
31,628
$
47,930,811
$
446,752
Change in Control(5)
—
—
—
—
35,365,248
—
Retirement
—
—
—
—
47,922,206
—
Disability
1,875,000
9,375,000
6,250,000
31,628
47,930,811
305,792
Death
—
—
6,250,000
—
47,930,811
—
Termination for Cause
—
—
—
—
—
—
(1)
Pro rata bonus is presented as
Mr. Britt’s target bonus on December 31, 2010. In
the event of a termination, the pro rata bonus would be
determined based on the Company’s performance.
(2)
Covers the estimated cost of
continued health, life and disability insurance through
December 31, 2012. The value of a health insurance subsidy
under the Time Warner Inc. Retiree Medical Plan to which
Mr. Britt is entitled upon retirement pursuant to an
arrangement with Time Warner is not reflected.
(3)
Based on the excess of the closing
sale price of Common Stock on December 31, 2010 over the
exercise price for each option that vests as a result of the
termination or change in control and based on the closing sale
price of Common Stock on December 31, 2010 in the case of
accelerated vesting of TWC RSUs. See “—Outstanding
Equity Awards” for additional information as of
December 31, 2010.
(4)
Includes financial services
reimbursement of up to $100,000 annually for two years, annual
payments of $52,896 for the
24-month
severance period corresponding to two times the premium cost of
$4,000,000 of life insurance coverage under the Company’s
GUL insurance program, and, other than in the case of disability
or death, office space and secretarial support each for one year
after termination without cause at an estimated cost of $80,960
and $60,000, respectively.
(5)
The Change in Control values
reflect the occurrence of a change in control without a
termination of employment. The stock-based awards value in the
event of a change in control is based on the terms of the equity
award agreements. The severance benefits payable in the event of
a termination without cause in connection with a change in
control would be based on the Termination without Cause
provisions shown above.
Robert
D. Marcus
Under his employment agreement in effect as of December 31,2010, Mr. Marcus is entitled to certain payments and
benefits upon the Company’s termination of his employment
without cause and in connection with his termination of
employment for other reasons. For this purpose,
“cause” has the same meaning as in
Mr. Britt’s employment agreement, which is described
above. A “material breach” of the agreement for
purposes of a termination without cause, includes (a) the
Company’s failure to cause a successor to assume the
Company’s obligations under the agreement;
(b) Mr. Marcus’s not being employed as the
Company’s Senior Executive Vice President and Chief
Financial Officer with authority, functions, duties and powers
consistent with that position; (c) Mr. Marcus’s
not reporting to the CEO; and (d) Mr. Marcus’s
principal place of employment being anywhere other than the
Company’s principal corporate offices within the New York
metropolitan area.
For Cause. If the Company terminates
Mr. Marcus’s employment for cause (as defined above),
the Company would have no further obligations to Mr. Marcus
other than (a) to pay base salary through the effective
date of termination, (b) to pay any bonus for any year
prior to the year in which such termination occurs that has been
determined but not yet paid as of the date of such termination
in certain situations, and (c) to satisfy any rights
Mr. Marcus has pursuant to any insurance or other benefit
plans or arrangements.
Termination without Cause. If the Company
terminates Mr. Marcus’s employment without cause,
pursuant to his employment agreement, Mr. Marcus will be
entitled to the following payments and benefits:
•
any earned but unpaid base salary through the termination date;
•
a pro-rata portion of any bonus through the termination date,
subject to the actual achievement of the performance criteria
for the year of termination;
•
annual base salary and annual cash target bonus for
24 months following the termination date; provided
generally that if his employment is terminated within two years
after a change in control (as defined in the 2006 Stock Plan or
a successor plan), the salary and bonus payments will continue
for 36 months following the termination date;
•
continued participation in the Company’s health and welfare
benefits during the
24-month
severance period unless earlier terminated due to his acceptance
of other employment (the “severance period”);
•
full acceleration and vesting of all equity awards granted
during the term of the employment agreement (other than those
awards that are subject to performance-based vesting conditions,
which would not be distributed until the condition was
satisfied) and any stock option will remain exercisable
thereafter pursuant to the terms of the award agreement; and
•
unless Mr. Marcus otherwise qualifies for retirement as
determined under the applicable stock option or RSU agreement,
all his stock options and RSUs awarded before 2010 will
continue to vest for 24 months during the severance period. In
the event Mr. Marcus accepts other employment during the
severance period, all of his stock options and RSUs that would
have vested during the
24-month
period, including any pro rata portion thereof, will vest and
such stock options will become immediately exercisable. All
vested stock options, including stock options that become vested
as a result of his acceptance of other employment during the
severance period will remain exercisable for three years after
the end of the severance period (but not beyond the original
term of the options).
If Mr. Marcus’s employment is terminated without cause
while he is serving as an at-will employee after the term of his
employment agreement, subject to the execution and delivery of a
release of claims, (a) his outstanding equity awards will
be treated as if he had been terminated without cause and
(b) he will be entitled to benefits under an executive
level severance program that will provide a minimum severance
benefit equal to his base salary and target bonus in effect at
the time of the termination for twelve months from the
termination date.
Disability. In the event Mr. Marcus
becomes disabled and has not resumed his duties after six
consecutive months or an aggregate of six months in any
12-month
period, the Company will pay him a pro-rata bonus for the year
in which the disability occurs (which will be calculated based
on actual performance). In addition, for 24 months
following the date the disability occurs, the Company will pay
Mr. Marcus disability benefits equal to 75% of his annual
base salary and target bonus, and he will continue to be
eligible for vesting in any equity awards granted before 2010,
to participate in the Company’s benefit plans (other than
equity-based plans, additional pension plan accrual and
contributions to the TWC Savings Plan) and to receive his other
benefits (including financial services). The Company may
generally deduct from these payments amounts equal to disability
payments received by Mr. Marcus during this payment period
from Workers’ Compensation, Social Security and the
Company’s disability insurance policies.
Death. If Mr. Marcus dies, the employment
agreement and all of the Company’s obligations to make any
payments under the agreement will terminate, except that
Mr. Marcus’s estate or designated beneficiary will be
entitled to receive: (a) his salary to the last day of the
month in which his death occurred and (b) a bonus for the
year in which he dies paid at the time bonuses are normally
paid, based on achievement of established performance criteria
but pro-rated according to the number of whole or partial months
he was employed by the Company in the calendar year.
Equity Awards. Unless a more favorable outcome
is specified in Mr. Marcus’s employment agreement, the
terms of his equity award agreements govern his entitlements
under those awards in the event of a termination of employment
with or without cause, retirement, disability, death or a change
in control. In the
event of a change in control, his termination for cause or
death, Mr. Marcus’s unvested stock options and RSUs,
would be treated in the same fashion as Mr. Britt’s,
described under “—Glenn A. Britt—Equity
Awards.” In the event of a termination without cause,
Mr. Marcus’s unvested stock options and RSUs will be
treated pursuant to the provisions outlined in his employment
agreement described above under “—Termination without
Cause.” Mr. Marcus was not retirement eligible on
December 31, 2010 for the purposes of any equity awards.
Conditions and Obligations Applicable to Receipt of Payments
and Benefits. Mr. Marcus is subject to the
same “Conditions and Obligations Applicable to Receipt of
Payments and Benefits” as described for Mr. Britt
above, including post-employment restrictive covenant and
clawback provisions.
Assuming the trigger event causing any of the payments and other
benefits described above occurred on December 31, 2010, the
effectiveness of his increased compensation levels and based on
the NYSE closing price per share on December 31, 2010 of
the Company’s Common Stock ($66.03), the dollar value of
payments and other benefits provided to Mr. Marcus under
his contract are estimated to be as follows:
Annual
Group Benefit
Base Salary
Bonus
Pro Rata
Plans
Stock-Based
Continuation
Continuation
Bonus(1)
Continuation(2)
Awards(3)
Other(4)
Termination without Cause
$
2,000,000
$
5,000,000
$
2,500,000
$
39,421
$
14,522,080
$
58,064
Change in Control(5)
—
—
—
—
9,421,664
—
Disability
1,500,000
3,750,000
2,500,000
39,421
14,615,470
58,064
Death
—
—
2,500,000
—
14,615,470
—
Termination for Cause
—
—
—
—
—
—
(1)
Pro rata bonus is presented as
Mr. Marcus’s target bonus on December 31, 2010.
In the event of a termination, the pro rata bonus would be
determined based on the Company’s performance.
(2)
Includes the estimated cost of
continued health, life and disability insurance.
(3)
Based on the excess of the closing
sale price of Common Stock on December 31, 2010 over the
exercise price for each option that vests as a result of the
termination or change in control and based on the closing sale
price of Common Stock on December 31, 2010 in the case of
accelerated vesting of RSUs. See “—Outstanding Equity
Awards” for additional information as of December 31,2010.
(4)
Includes financial services
reimbursement of up to $25,000 annually and annual payments of
$4,032 corresponding to two times the premium cost of $2,000,000
of life insurance coverage under the Company’s GUL
insurance program for the severance period.
(5)
The Change in Control values
reflect the occurrence of a change in control without a
termination of employment. The stock-based awards value in the
event of a change in control is based on the terms of the equity
award agreements. The severance benefits payable in the event of
a termination without cause in connection with a change in
control would be based on the Termination without Cause
provisions shown above for a
36-month
period, instead of 24 months.
Michael
LaJoie
Under his employment agreement, Mr. LaJoie is entitled to
certain payments and benefits upon the Company’s
termination of his employment without cause and in connection
with his termination of employment for other reasons. For this
purpose, “cause” means a felony conviction; willful
refusal to perform his obligations; material breach of specified
covenants, including restrictive covenants relating to
confidentiality, non-competition and non-solicitation; or
willful misconduct that has a substantial adverse effect on the
Company. A “material breach” for purposes of a
termination without cause includes Mr. LaJoie’s not
being employed as the Company’s Executive Vice President
and Chief Technology Officer, with authority, functions, duties
and powers consistent with that position, or certain changes in
Mr. LaJoie’s reporting line. If Mr. LaJoie
attains age 65 by the end of the term of his employment
agreement, the Company will not be obligated to renew the
agreement, and Mr. LaJoie will not be entitled to severance
as a result of the Company’s non-renewal in such event.
For Cause. Under Mr. LaJoie’s
employment agreement, if the Company terminates
Mr. LaJoie’s employment for cause (as defined above),
the Company would have no further obligation to Mr. LaJoie
other than (a) to pay him base salary through the effective
date of his termination, (b) to pay any bonus for any year
prior to the year in which such termination occurs that has not
yet been paid as of the date of such termination and (c) to
satisfy any rights Mr. LaJoie has pursuant to any insurance
or other benefit plans or arrangements.
Retirement Option; Voluntary
Resignation. Under Mr. LaJoie’s
employment agreement, because Mr. LaJoie has worked for the
Company at the senior executive level for more than five years
and he is over 55 years of age, he may elect a retirement
option. The retirement option would require Mr. LaJoie to
remain actively employed by the Company for a transition period
of six months to one year following this election (as negotiated
by the parties). During this transition period, Mr. LaJoie
will remain actively employed and will continue to receive his
current annual salary and bonus (based upon actual performance
results for the relevant year). Following the transition period,
Mr. LaJoie would become an advisor to the Company for three
years during which he will be paid his annual base salary and he
will also receive his full bonus for the first year, a 50% bonus
for the second year and no bonus for the third year. Such
bonuses are determined based on the greater of the average of
(a) his two most recent annual bonuses and (b) his
then applicable annual target bonus. As an advisor, he will not
be required to devote more than 5 days per month to such
services. If Mr. LaJoie elects the retirement option, his
stock options and RSUs would be treated in the same fashion as
Mr. Britt’s in the event of a termination without
cause, as described under “—Glenn A. Britt—Equity
Awards,” except that awards made to Mr. LaJoie in 2010
continue to vest until the end of the advisory period, at which
time any unvested RSUs would vest on a prorated basis and any
unvested stock options would be forfeited. Mr. LaJoie would
continue participation in benefit plans (except for additional
pension plan accrual and contributions to the TWC Savings Plan)
and group insurance plans, and receive reimbursement for
financial and estate planning expenses and $10,000 for office
space expenses. If Mr. LaJoie obtains other full-time
employment during the period, he will continue to receive the
payments described above but will cease to be eligible for
continuation of benefits or vesting in any outstanding stock
options, RSUs or long-term cash incentives (or similar
arrangements). As of the date of this Proxy Statement,
Mr. LaJoie has not exercised the retirement option under
his employment agreement.
Termination without Cause. If the Company
terminates Mr. LaJoie’s employment without cause, if
the Company fails to renew his agreement or if Mr. LaJoie
terminates his employment due to the Company’s material
breach of his agreement, he will receive the benefits due under
any of the Company’s benefit plans, and he will be continue
to be treated as an active employee for up to 30 months
during which he will continue to receive his annual base salary
and annual bonuses equal to the greater of the average of
(a) his two most recent annual bonuses and (b) his
then applicable annual target bonus; and during such period, he
will continue to receive employee benefits (other than
stock-based awards, additional pension plan accrual and
contributions to the TWC Savings Plan). Mr. LaJoie will
also receive a pro rata portion of his bonus for the year of his
termination based on actual Company performance results for such
year. Mr. LaJoie will also be entitled to executive level
outplacement services and office space for up to one year
following his termination of employment. If Mr. LaJoie
obtains other full-time employment during the period, he will
continue to receive the payments described above but will cease
to be eligible for continuation of benefits or vesting in any
outstanding stock options, RSUs or long-term cash incentives (or
similar arrangements).
Disability. Under his employment agreement, if
Mr. LaJoie becomes disabled and cannot perform his duties
for 26 consecutive weeks, his employment may be terminated, and
he will receive, in addition to earned and unpaid base salary
through termination, an amount equal to 2.5 times his annual
base salary and the greater of the average of (a) his two most
recent annual bonuses and (b) his then applicable annual target
bonus amount.
Death. If Mr. LaJoie dies prior to the
termination of his employment agreement, his estate or
beneficiaries will receive a group term life insurance benefit
with an aggregate death benefit equivalent to two and a half
times his annual base salary and the greater of the average of
(a) his two most recent annual bonuses and (b) his
then applicable annual target bonus.
Equity Awards. Unless a more favorable outcome
is specified in Mr. LaJoie’s employment agreement, the
terms of his equity award agreements govern his entitlements
under those awards in the event of a termination of employment
with or without cause, retirement, disability, death or a change
in control. In the event of a termination with or without cause,
retirement (other than pursuant to the retirement option
discussed above), disability, death or a change in control,
under the award agreements, Mr. LaJoie’s TWC unvested
stock options and RSUs would be treated in the same fashion as
Mr. Britt’s, described under “—Glenn A.
Britt—Equity Awards,” except that awards made in and
after 2010 are not eligible for retirement treatment until
Mr. LaJoie is 60 years old and, as a result, in the
event of a termination without cause, his unvested RSUs will
vest on a prorated basis, subject to the satisfaction of any
performance condition, and he will forfeit any unvested stock
options.
Conditions and Obligations Applicable to Receipt of Payments
and Benefits. Mr. LaJoie’s right to
receive these payments and benefits upon a termination without
cause, or under the retirement option, is conditioned on his
execution of a release of claims against the Company. If
Mr. LaJoie does not execute a release of claims, he will
receive a severance payment determined in accordance with the
Company’s policies relating to notice and severance.
Mr. LaJoie is required to engage in any mitigation
necessary to avoid applicability of the “golden
parachute” excise taxes and related lost corporate tax
deduction.
Assuming the trigger event causing any of the payments and other
benefits described above occurred on December 31, 2010, and
based on the NYSE closing price per share on December 31,2010 of the Company’s Common Stock ($66.03), the dollar
value of payments and other benefits provided Mr. LaJoie
under his contract are estimated to be as follows:
Annual
Group Benefit
Base Salary
Bonus
Pro Rata
Plans
Stock-Based
Continuation
Continuation
Bonus(1)
Continuation(2)
Awards(3)
Other(4)
Termination without Cause
$
1,500,000
$
1,500,000
$
600,000
$
46,625
$
6,050,886
$
24,852
Change in Control(5)
—
—
—
—
4,770,129
—
Retirement(6)
2,100,000
1,200,000
600,000
68,782
6,529,315
27,393
Disability
1,500,000
1,500,000
600,000
—
6,529,315
—
Death(7)
—
—
600,000
—
6,529,315
2,950,000
Termination for Cause
—
—
—
—
—
—
(1)
Pro rata bonus is presented as
Mr. LaJoie’s target bonus on December 31, 2010.
In the event of a termination, the pro rata bonus would be
determined based on the Company’s performance. In certain
instances, the terms of the Company’s annual cash bonus
plan may determine the bonus entitlement.
(2)
Includes the estimated cost of
continued health, life and disability insurance.
(3)
Based on the excess of the closing
sale price of Common Stock on December 31, 2010 over the
exercise price for each option that vests as a result of the
termination or change in control and based on the closing sale
price of Common Stock on December 31, 2010 in the case of
accelerated vesting of RSUs. See “—Outstanding Equity
Awards” for additional information as of December 31,2010.
(4)
Includes financial planning
reimbursement of up to $3,000 annually, life insurance coverage
at an annual cost of $1,541, and $12,000 in the aggregate for
outplacement services (including office space) in the event of a
termination without cause. In the event of retirement,
Mr. LaJoie would receive the financial planning and life
insurance benefits, as described above, in addition to $10,000
for office space.
(5)
The Change in Control values
reflect the occurrence of a change in control without a
termination of employment. The stock-based awards value in the
event of a change in control is based on the terms of the equity
award agreements. The severance benefits payable in the event of
a termination without cause in connection with a change in
control would be based on the Termination without Cause
provisions shown above.
(6)
Assumes that Mr. LaJoie elects
the retirement option on December 31, 2010 and has a
six-month transition period followed by a three-year advisory
period, resulting in a total of 42 months of payments. The
bonus payment for the transition period is based on the same
calculation applicable to the advisory period.
(7)
Reflects the death benefit payable
under a Company-paid life insurance policy provided pursuant to
the terms of Mr. LaJoie’s employment agreement.
Marc
Lawrence-Apfelbaum
Under his employment agreement, Mr. Lawrence-Apfelbaum is
entitled to certain payments and benefits upon the termination
of employment under his employment agreement without cause and
in connection with his termination of employment for other
reasons. For this purpose, “cause” generally means the
commission of acts resulting in material financial loss or
substantial embarrassment to the Company, or the conviction of a
felony.
For Cause. Under
Mr. Lawrence-Apfelbaum’s employment agreement, if the
Company terminates his employment with cause, it will have no
further obligations to Mr. Lawrence-Apfelbaum other than
(a) to pay
his base salary through the effective date of termination and
(b) to satisfy any rights Mr. Lawrence-Apfelbaum has
pursuant to any insurance or other benefit plans or arrangements.
Retirement Option; Voluntary
Resignation. Under
Mr. Lawrence-Apfelbaum’s employment agreement, because
Mr. Lawrence-Apfelbaum is at least 55 years of age, he
may elect a retirement option, which has the same terms as that
for Mr. LaJoie described above. As of the date of this
Proxy Statement, Mr. Lawrence-Apfelbaum has not exercised
the retirement option under his employment agreement.
Termination without Cause. Upon a termination
without cause, Mr. Lawrence-Apfelbaum would be treated as
an active employee for three years during which he will continue
to receive his annual base salary and annual bonuses equal to
the greater of the average of (a) his two most recent
annual bonuses and (b) his then applicable annual target
bonus. During this period, he will continue to receive employee
benefits (other than stock-based awards, additional pension plan
accrual and contributions to the TWC Savings Plan).
Mr. Lawrence-Apfelbaum will also be entitled to use office
space, secretarial services and other office facilities for up
to one year following his termination of employment and
reimbursement for financial services. If
Mr. Lawrence-Apfelbaum obtains other full-time employment
during the period, he will continue to receive the payments
described above but will cease to be eligible for continuation
of benefits.
Disability. Under his employment agreement, if
Mr. Lawrence-Apfelbaum becomes disabled and cannot perform
his duties for 26 consecutive weeks, his employment may be
terminated, and he will receive, in addition to earned and
unpaid base salary through termination, an amount equal to three
times his annual base salary and then applicable annual target
bonus amount.
Death. If Mr. Lawrence-Apfelbaum dies
prior to the termination of his employment agreement, his estate
or beneficiaries will receive the same benefits as those
described for Mr. Britt.
Equity Awards. Unless a more favorable outcome
is specified in Mr. Lawrence-Apfelbaum’s employment
agreement, the terms of his equity award agreements govern his
entitlements under those awards in the event of a termination of
employment with or without cause, retirement (other than
pursuant to the retirement option) or a change in control. In
the event of a termination with or without cause, disability,
death, retirement, or a change in control, under the award
agreements, Mr. Lawrence-Apfelbaum’s unvested stock
options and RSUs would be treated in the same fashion as
Mr. Britt’s, described under “—Glenn A.
Britt—Equity Awards,” and Mr. Lawrence-Apfelbaum
is eligible for retirement treatment. If
Mr. Lawrence-Apfelbaum elects the retirement option, his
stock options and RSUs would be treated in the same fashion as
Mr. Britt’s in the event of a termination without
cause, as described under “—Glenn A. Britt—Equity
Awards.”
Conditions and Obligations Applicable to Receipt of Payments
and Benefits. Mr. Lawrence-Apfelbaum’s
right to receive these payments and benefits upon a termination
without cause, a termination due to a material breach or under
the retirement option, is conditioned on his execution of a
release of claims against the Company after his separation of
service from the Company.
Assuming the trigger event causing any of the payments and other
benefits described above occurred on December 31, 2010, and
based on the NYSE closing price per share on December 31,2010 of Common Stock ($66.03), the dollar value of payments and
other benefits provided to Mr. Lawrence-Apfelbaum under his
contract are estimated to be as follows:
Annual
Group Benefit
Base Salary
Bonus
Pro Rata
Plans
Stock-Based
Continuation
Continuation
Bonus(1)
Continuation(2)
Awards(3)
Other(4)
Termination without Cause
$
1,800,000
$
1,852,125
$
600,000
$
62,850
$
5,633,052
$
176,503
Change in Control(5)
—
—
—
—
3,873,866
—
Retirement(6)
2,100,000
1,234,750
600,000
76,022
5,633,052
76,300
Disability
1,800,000
1,800,000
600,000
—
5,633,052
—
Death
—
—
600,000
—
5,633,052
—
Termination for Cause
—
—
—
—
—
—
(1)
Pro rata bonus is presented as
Mr. Lawrence-Apfelbaum’s target bonus on
December 31, 2010. In the event of a termination, the pro
rata bonus would be determined based on the Company’s
performance.
Includes the estimated cost of
continued health, life and disability insurance.
(3)
Based on the excess of the closing
sale price of Common Stock on December 31, 2010 over the
exercise price for each option that vests as a result of the
termination or change in control and based on the closing sale
price of Common Stock on December 31, 2010 in the case of
accelerated vesting of RSUs and the Special Dividend retained
cash distribution related thereto. See “—Outstanding
Equity Awards” for additional information as of
December 31, 2010.
(4)
The amount reflects financial
planning reimbursement of up to $3,000 annually and supplemental
life insurance coverage at an annual cost of $15,514 and, in the
event of termination without cause, office space and secretarial
support each for one year at an estimated cost of $80,960 and
$40,000, respectively. In the event of retirement,
Mr. Lawrence-Apfelbaum would receive the financial planning
and life insurance benefits, as described above, in addition to
$10,000 for office space.
(5)
The Change in Control values
reflect the occurrence of a change in control without a
termination of employment. The stock-based awards value in the
event of a change in control is based on the terms of the equity
award agreements. The severance benefits payable in the event of
a termination without cause in connection with a change in
control would be based on the Termination without Cause
provisions shown above.
(6)
Assumes that
Mr. Lawrence-Apfelbaum elects the retirement option on
December 31, 2010 and has a six-month transition period
followed by a three-year advisory period, resulting in a total
of 42 months of payments. The bonus payment for the
transition period is based on the same calculation applicable to
the advisory period.
Carl
U.J. Rossetti
Under his employment agreement, Mr. Rossetti is entitled to
certain payments and benefits upon the termination of employment
under his employment agreement without cause and in connection
with his termination of employment for other reasons. For this
purpose, “cause” generally means the commission of
acts resulting in material financial loss or substantial
embarrassment to the Company, or the conviction of a felony.
For Cause. Under Mr. Rossetti’s
employment agreement, if the Company terminates his employment
with cause, it will have no further obligations to
Mr. Rossetti other than (a) to pay his base salary
through the effective date of termination and (b) to
satisfy any rights Mr. Rossetti has pursuant to any
insurance or other benefit plans or arrangements.
Retirement Option; Voluntary
Resignation. Under Mr. Rossetti’s
employment agreement, because Mr. Rossetti is over
55 years of age, he may elect a retirement option, which
has the same terms as that for Mr. LaJoie described above.
As of the date of this Proxy Statement, Mr. Rossetti has
not exercised the retirement option under his employment
agreement.
Termination without Cause. Upon such a
termination, Mr. Rossetti would be treated as an active
employee for three years during which he will continue to
receive his annual base salary and annual bonuses equal to the
greater of the average of (a) his two most recent annual
bonuses and (b) his then applicable annual target bonus.
During this period, he will continue to receive employee
benefits (other than stock-based awards, additional pension plan
accrual and contributions to the TWC Savings Plan).
Mr. Rossetti will also be entitled to use office space,
secretarial services and other office facilities for up to one
year following his termination of employment and reimbursement
for financial services. If Mr. Rossetti obtains other
full-time employment during the period, he will continue to
receive the payments described above but will cease to be
eligible for continuation of benefits.
Disability. Under his employment agreement, if
Mr. Rossetti becomes disabled and cannot perform his duties
for 26 consecutive weeks, his employment may be terminated, and
he will receive, in addition to earned and unpaid base salary
through termination, an amount equal to three times his annual
base salary and then applicable annual target bonus amount.
Death. If Mr. Rossetti dies prior to the
termination of his employment agreement, his estate or
beneficiaries will receive a group term life insurance benefit
with an aggregate death benefit equivalent to three times his
annual base salary and the greater of (a) his two most
recent annual bonuses and (b) his then applicable annual
target bonus.
Equity Awards. Unless a more favorable outcome
is specified in Mr. Rossetti’s employment agreement,
the terms of his equity award agreements govern his entitlements
under those awards in the event of a termination of employment
with or without cause, retirement (other than pursuant to the
retirement option) or
a change in control. In the event of a termination with or
without cause, disability, death, retirement, or a change in
control, under the award agreements, Mr. Rossetti’s
unvested stock options and RSUs would be treated in the same
fashion as Mr. Britt’s, described under
“—Glenn A. Britt—Equity Awards,” and
Mr. Rossetti is eligible for retirement treatment. If
Mr. Rossetti elects the retirement option, his stock
options and RSUs would be treated in the same fashion as
Mr. Britt’s in the event of a termination without
cause, as described under “—Glenn A. Britt—Equity
Awards.”
Conditions and Obligations Applicable to Receipt of Payments
and Benefits. Mr. Rossetti’s right to
receive these payments and benefits upon a termination without
cause, a termination due to a material breach or under the
retirement option is conditioned on his execution of a release
of claims against the Company after his separation of service
from the Company.
Assuming the trigger event causing any of the payments and other
benefits described above occurred on December 31, 2010, and
based on the NYSE closing price per share on December 31,2010 of Common Stock ($66.03), the dollar value of payments and
other benefits provided to Mr. Rossetti under his contract
are estimated to be as follows:
Annual
Group Benefit
Base Salary
Bonus
Pro Rata
Plans
Stock-Based
Continuation
Continuation
Bonus(1)
Continuation(2)
Awards(3)
Other(4)
Termination without Cause
$
1,545,000
$
1,683,750
$
515,000
$
68,609
$
5,439,806
$
136,446
Change in Control(5)
—
—
—
—
4,059,211
—
Retirement(6)
1,802,500
1,122,500
515,000
82,740
5,439,806
29,567
Disability
1,545,000
1,545,000
515,000
—
5,439,806
—
Death(7)
—
—
515,000
—
5,439,806
3,178,750
Termination for Cause
—
—
—
—
—
—
(1)
Pro rata bonus is presented as
Mr. Rossetti’s target bonus on December 31, 2010.
In the event of a termination, the pro rata bonus would be
determined based on the Company’s performance.
(2)
Includes the estimated cost of
continued health, life and disability insurance.
(3)
Based on the excess of the closing
sale price of Common Stock on December 31, 2010 over the
exercise price for each option that vests as a result of the
termination or change in control and based on the closing sale
price of Common Stock on December 31, 2010 in the case of
accelerated vesting of RSUs and the Special Dividend retained
cash distribution related thereto. See “—Outstanding
Equity Awards” for additional information as of
December 31, 2010.
(4)
Includes financial planning
reimbursement of up to $3,000 annually, life insurance coverage
at an annual cost of $2,162 and office space and secretarial
support each for one year at an estimated cost of $80,960 and
$40,000, respectively, in the event of a termination without
cause. In the event of retirement, Mr. Rossetti would
receive the financial planning and life insurance benefit
described above in addition to $10,000 for the cost of office
space.
(5)
The Change in Control values
reflect the occurrence of a change in control without a
termination of employment. The stock-based awards value in the
event of a change in control is based on the terms of the equity
award agreements. The severance benefits payable in the event of
a termination without cause in connection with a change in
control would be based on the Termination without Cause
provisions shown above.
(6)
Assumes that Mr. Rossetti
elects the retirement option on December 31, 2010 and has a
six-month transition period followed by a three-year advisory
period, resulting in a total of 42 months of payments. The
bonus payment for the transition period is based on the same
calculation applicable to the advisory period.
(7)
Reflects the death benefit payable
under a Company-paid life insurance policy provided pursuant to
the terms of Mr. Rossetti’s employment agreement.
Landel
C. Hobbs
As discussed above, Mr. Hobbs’s employment was
terminated without cause effective January 28, 2011 and his
service as the Company’s Chief Operating Officer was
terminated effective December 14, 2010. As a result of his
termination, Mr. Hobbs is entitled to (a) any earned
but unpaid base salary through the termination date; (b) a
pro-rata portion of any bonus through the termination date for
the year in which the termination occurs, subject to the actual
achievement of the performance criteria for the year of
termination; (c) payment of base salary and target bonus
for 24 months following the termination date;
(d) continuation of health and welfare benefits for the
period Mr. Hobbs receives such severance benefits, unless
earlier terminated due to his acceptance of other employment;
and (e) full acceleration and vesting of all equity
awards granted during the term of his current employment
agreement with any vested stock options remaining exercisable
pursuant to the terms of the award agreement.
Mr. Hobbs’s unvested stock options and RSUs awarded
prior to 2010 will continue to vest during his two-year
severance period and those that remain unvested at that time
will vest pro rata and the remainder will be forfeited. These
vested stock options will remain exercisable for three years
from the end of his severance period. His awards granted during
2010 vested in full on January 28, 2011 and the stock
options remain exercisable for a year after that date.
Conditions and Obligations Applicable to Receipt of Payments
and Benefits. Mr. Hobbs is subject to the
same “Conditions and Obligations Applicable to Receipt of
Payments and Benefits” as described for Mr. Britt
above, including post-employment restrictive covenant and
clawback provisions.
Assuming the trigger event causing any of the payments and other
benefits described above occurred on December 31, 2010, and
based on the NYSE closing price per share on December 31,2010 of the Company’s Common Stock ($66.03), the dollar
value of payments and other benefits provided to Mr. Hobbs
under his contract are estimated to be as follows:
Annual
Group Benefit
Base Salary
Bonus
Pro Rata
Plans
Stock-Based
Continuation
Continuation
Bonus(1)
Continuation(2)
Awards(3)
Other(4)
Termination without Cause
$
2,000,000
$
4,200,000
$
2,100,000
$
39,421
$
21,413,676
$
89,792
(1)
Pro rata bonus is presented as
Mr. Hobbs’s target bonus on December 31, 2010.
The bonus actually paid to Mr. Hobbs equal to $2,790,375,
as reported in the Summary Compensation Table above, was
determined, pursuant to the terms of Mr. Hobbs’s employment
agreement, based on the Company’s performance.
(2)
Includes the estimated cost of
continued health, life and disability insurance.
(3)
Based on the excess of the closing
sale price of Common Stock on December 31, 2010 over the
exercise price for each option that vests as a result of the
termination and based on the closing sale price of Common Stock
on December 31, 2010 in the case of accelerated vesting of
RSUs. See “—Outstanding Equity Awards” for
additional information as of December 31, 2010.
(4)
Includes financial services
reimbursement of up to $40,000 annually and annual payments of
$3,024 for 2011, $6,767 for 2012 and 2013 corresponding to two
times the premium cost of $2,000,000 of life insurance coverage
under the Company’s GUL insurance program.
The table below sets out the compensation for 2010 that was paid
to or earned by the Company’s directors who were not active
employees of the Company or its affiliates (“non-employee
directors”). Directors who are active employees of the
Company are not separately compensated for their Board
activities.
The Company compensates non-employee directors with a
combination of equity and cash that it believes is comparable to
and consistent with approximately the median compensation
provided to independent directors of similarly sized public
entities. During 2010, each non-employee director received a
total annual director compensation package consisting of:
•
a cash retainer of $85,000;
•
an annual equity award of vested, full value stock units, in the
form of RSUs, valued at $115,000 representing the Company’s
unsecured obligation to deliver the designated number of shares
of Common Stock, generally after the Director ceases his or her
service as a director for any reason other than cause; and
•
an additional annual cash retainer for service on the
Board’s committees or as lead director, in each case
prorated for service for any partial year.
The directors are entitled to receive dividend equivalents on
the RSUs, if any dividends are paid on the Common Stock. In
2010, each non-employee director received 2,593 RSUs under the
2006 Stock Plan. Directors who have served on the Board for at
least three years are eligible to elect to receive the
distribution of Common Stock underlying 50% of any future RSU
award on the earlier of (a) the third anniversary of the
award date or (b) after the director ceases to serve as a
director for any reason other than cause.
The following additional annual cash retainers were paid in 2010
for service on the Board’s committees: (i) $30,000 to
the chair of the Audit Committee and $10,000 to each other
member of the Audit Committee and (ii) $5,000 to each
member of the Compensation, Nominating and Governance, Finance
and Marketing and Customer Care Committees, with $20,000 to the
chair of the Compensation Committee and $10,000 for the chairs
of each of the Nominating and Governance, Finance and Marketing
and Customer Care Committees. The independent lead director
received an additional annual cash retainer of $20,000. No
additional compensation is paid for attendance at meetings of
the Board of Directors or a Board committee.
For 2011, the annual cash retainer was increased to $90,000 and
the value of the annual equity award was increased to $125,000.
The additional retainers for service on the Board’s
committees were established as follows for 2011:
(i) $15,000 per year for each member of the Audit Committee
and Compensation Committee, with $30,000 for each chair and
(ii) $7,500 per year for each member of the other
Committees, with $15,000 for each chair. In addition, the
independent lead director will receive an additional annual cash
retainer of $30,000.
In general, for non-employee directors who join the Board after
the date on which the annual equity award to directors has been
made, the Company’s policy is to make the stock unit grant
on a pro-rated basis shortly after election and to provide a
pro-rated cash retainer consistent with the compensation package
described above, subject to limitations that may exist under the
applicable equity plan.
Non-employee directors are reimbursed for
out-of-pocket
expenses (including the costs of travel, food and lodging)
incurred in connection with attending Board, committee and
stockholder meetings. Travel to such meetings may include the
use of aircraft owned or leased by the Company if available and
appropriate under the circumstances. Directors are also
reimbursed for reasonable expenses associated with other
Company-related business activities, including participation in
director education programs.
As it does for its employees, the Company may provide its cable,
high-speed data
and/or voice
service to directors who live in its service area generally at
no cost to the director. The Company believes that providing
this service serves a business purpose by expanding the
directors’ knowledge of the Company’s business,
products and services. The Company may also invite directors and
their spouses to attend Company-related events. The Company
generally provides for, or reimburses expenses of, the
spouses’ travel, food and lodging for attendance at these
events to which directors’ spouses and guests have been
invited, which may result in a non-employee director recognizing
income for tax purposes under applicable regulations. The
Company reimburses the non-employee director for the estimated
taxes incurred in connection with any income recognized by the
director as a result of the spouse’s attendance at such
events. In the year ended December 31, 2010, the aggregate
incremental cost to the Company of these items was less than
$10,000 per director. In addition, in 2010, the Company offered
to make a $500 contribution in the name of each director to a
charity selected by the director.
Non-employee directors are given the opportunity to defer for
future distribution payment of their cash retainer. Deferred
payments of director fees are recorded as deferred units of the
Company’s Common Stock under the 2006 Stock Plan (the
“Directors’ Deferred Compensation Program”).
Distributions of the account upon the selected deferral date
will be made in shares of the Company’s Common Stock. The
directors are
entitled to receive dividend equivalents in cash on their
deferred stock units if regular cash dividends are paid on the
Common Stock.
DIRECTOR
COMPENSATION FOR 2010
Change in
Pension
Value and
Fees
Non-Equity
Nonqualified
Earned
Incentive
Deferred
All
or Paid
Stock
Option
Plan
Compensation
Other
in Cash(1)
Awards(2)
Awards
Compensation
Earnings
Compensation(3)
Total
Carole Black
$
100,000
$
117,074
$
—
$
—
$
—
$
500
$
217,574
Thomas H. Castro
95,000
117,074
—
—
—
500
212,574
David C. Chang
100,000
117,074
—
—
—
500
217,574
James E. Copeland, Jr.
115,000
117,074
—
—
—
1,527
233,601
Peter R. Haje
125,000
117,074
—
—
—
500
242,574
Donna A. James
100,000
117,074
—
—
—
500
217,574
Don Logan
92,500
117,074
—
—
—
1,593
211,167
N.J. Nicholas, Jr.
100,000
117,074
—
—
—
500
217,574
Wayne H. Pace
95,000
117,074
—
—
—
997
213,071
Edward D. Shirley
102,500
117,074
—
—
—
500
220,074
John E. Sununu
97,500
117,074
—
—
—
500
215,074
(1)
Amounts earned by each non-employee director in 2010 represent
(a) an annual cash retainer of $85,000; (b) an annual
additional payment of $10,000 for each member of the Audit
Committee (Messrs. Chang and Shirley and Ms. James),
with $30,000 to its chair (Mr. Copeland) and $5,000 for
each member of the Compensation Committee (Ms. Black and
Messrs. Castro, and Nicholas), Nominating and Governance
Committee (Messrs. Chang, Shirley and Sununu and
Ms. Black), Finance Committee (Messrs. Castro, Logan
and Sununu and Ms. James) and Marketing and Customer Care
Committee (Messrs. Logan, Shirley and Sununu), with $20,000
to the Compensation Committee Chair (Mr. Haje) and $10,000
to each of the Nominating and Governance, Finance and Marketing
and Customer Care Committee’s chair (Mr. Nicholas,
Mr. Pace, and Ms. Black, respectively); and (c) a
cash payment of $20,000 for the lead director (Mr. Haje).
Messrs. Chang, Haje and Pace elected to defer all or a
portion of their cash retainer under the Directors’
Deferred Compensation Program for 2010 and received awards of
deferred stock units (in July 2010 and January
2011) covering, in the aggregate, 1,325, 1,035 and
1,573 shares of Common Stock, respectively. The value of
these deferred stock units is included in this column. These
deferrals and the related deferred stock units are not reflected
in a separate column in the table. The number of deferred stock
units credited to the non-employee directors on
December 31, 2010 was: Dr. Chang—4,587;
Mr. Copeland—6,126; Mr. Haje—5,235;
Mr. Nicholas—5,424; and Mr. Pace—7,149.
(2)
The amounts set forth in the Stock Awards column represent the
value of the award to each non-employee director of RSUs with
respect to 2,593 shares of Common Stock, as computed in
accordance with FASB ASC Topic 718. The amounts were calculated
based on the grant date fair value per share of $45.15, which
was the closing sale price of Common Stock on the date of grant
(February 12, 2010). On December 31, 2010, each
non-employee director held the following number of RSUs: 12,409
RSUs for each of Ms. Black and Messrs. Castro, Chang,
Copeland, Haje, Logan and Nicholas, 10,500 RSUs for
Mr. Pace, and 5,912 RSUs for Ms. James,
Mr. Shirley and Senator Sununu.
(3)
Reflects (a) the Company’s commitment to make a
charitable contribution of $500 to an organization selected by
each director and (b) reimbursement for estimated taxes
incurred by Mr. Copeland ($1,027), Mr. Logan ($1,093)
and Mr. Pace ($497) as a result of a spouse accompanying
the director to a Company-sponsored event.
In connection with an administrative order dated March 21,2005, Mr. Pace reached a settlement with the SEC pursuant
to which he agreed, without admitting or denying the SEC’s
allegations, to the entry of an administrative order that he
cease and desist from causing violations or future violations of
certain reporting provisions of the securities laws; however,
the order does not subject him to any suspension, bar or penalty.
Mr. Logan was a member of the Compensation Committee
through March 2009. He served as Chairman of Time Warner’s
Media and Communications Group from July 31, 2002 until
December 31, 2005 and was, until December 31, 2009, a
non-active employee of Time Warner. Mr. Haje, a member of
the Compensation Committee, served as Executive Vice President
and General Counsel of TWE from June 1992 until 1999.
The Board has adopted the Time Warner Cable Inc. Policy and
Procedures Governing Related Person Transactions. This is a
written policy and set of procedures for the review and approval
or ratification of transactions involving related persons, which
consist of directors, director nominees, executive officers,
persons or entities known to the Company to be the beneficial
owner of more than five percent (5%) of any outstanding class of
the voting securities of the Company, or immediate family
members or certain affiliated entities of any of the foregoing
persons. Under authority delegated by the Board, the Nominating
and Governance Committee (or its Chair, under certain
circumstances) is responsible for applying the policy with the
assistance of the General Counsel or his designee (if any).
Transactions covered by the policy consist of any financial
transaction, arrangement or relationship or series of similar
transactions, arrangements or relationships, in which
(i) the aggregate amount involved will or may be expected
to exceed $100,000 in any calendar year; (ii) the Company
is, will or may be expected to be a participant; and
(iii) any related person has or will have a direct material
interest or an indirect material interest. Prior to the
Separation, the policy also included previously-disclosed
procedures for the approval of certain transactions between Time
Warner and its affiliates, on the one hand, and the Company and
its subsidiaries, on the other hand. These procedures were also
a part of the Company’s pre-Separation organizational
documents. In connection with the Separation, the Company’s
organizational documents were amended to remove these procedures
and the Board similarly revised the policy.
In addition, the Company’s Standards of Business Conduct
and Guidelines for Non-Employee Directors contain general
procedures for the approval of transactions between the Company
and its directors and executive officers and certain other
transactions involving the Company’s directors and
executive officers. The Company’s Standards of Business
Conduct and Guidelines for Non-Employee Directors are available
on its website.
Excluded
Transactions
In addition to the requirements described above for transactions
covered by the policy, the policy includes a list of categories
of transactions identified by the Board as having no significant
potential for an actual or the appearance of a conflict of
interest or improper benefit to a related person, and thus are
not subject to review by the Nominating and Governance
Committee. These excluded transactions consist of the following
types of transactions between the Company and a related person
or another entity with which the related person is affiliated:
•
Ordinary Course Transactions with Other
Entities. Transactions in the ordinary course of
business between the Company and another entity with which a
related person is affiliated unless (a) the related person
serves as an executive officer, employee, or beneficial owner of
an equity interest of 10% or more in the other entity and
(b) the transactions, in the aggregate, represent more than
5% of
the Company’s consolidated gross revenues for the prior
fiscal year or 2% of the other entity’s gross revenue for
the prior fiscal year;
•
Charitable Contributions. Discretionary
charitable contributions by the Company to a non-profit entity
with which a related person is affiliated that would satisfy the
Company’s categorical standards for determining that a
material relationship does not exist with an entity that would
impact a director’s independence. See “Corporate
Governance—Criteria for Membership on the
Board—Independence” above;
•
Transactions with Significant
Stockholders. Transactions between the Company
and a corporation, firm or other entity known to the Company to
be the beneficial owner of more than 5% of any outstanding class
of the Company’s voting securities (a “Significant
Stockholder”), if the transactions occur in the ordinary
course of business and are consistent with other transactions in
which the Company has engaged with third parties, unless the
transactions, in the aggregate, represent more than 5% of the
Company’s consolidated gross revenues for the prior fiscal
year or 2% of the Significant Stockholder’s gross revenues
for the prior fiscal year;
•
Non-employee Position with Other Affiliated
Entities. Transactions where the related
person’s interest in the transaction is based solely on his
or her position as (a) a non-employee director of the other
entity or (b) subject to the requirements relating to the
Company’s charitable contributions as described above, a
non-employee director or trustee, or unpaid volunteer at a
non-profit organization;
•
Executive Compensation. Any compensation paid
to an executive officer of the Company if (a) the
compensation is required to be reported in the Company’s
annual report on
Form 10-K
or proxy statement under the compensation disclosure
requirements of the SEC or (b)(i) the executive officer is not
an “immediate family member” otherwise covered by the
policy and the compensation would be reported in the
Company’s annual report on
Form 10-K
or proxy statement if the executive officer was a “named
executive officer” (as defined under SEC rules) and
(ii) the Compensation Committee approved (or recommended
that the Board approve) such compensation;
•
Director Compensation. Any compensation paid
to a director of the Company if the compensation is required to
be reported in the Company’s annual report on
Form 10-K
or proxy statement under the SEC’s compensation disclosure
requirements;
•
Transactions Where All Stockholders Receive Proportional
Benefits. Transactions in which all stockholders
receive the same benefits on a pro rata basis
(e.g., dividends);
•
Transactions Involving Competitive Bids, Regulated
Transactions and Certain Banking-Related
Services. Transactions involving a related person
where the rates or charges involved are determined by
competitive bids; transactions with a related person involving
the rendering of services as a common carrier, or public
utility, at rates or charges fixed in conformity with law or
governmental authority; or transactions with a related person
involving services as a bank depositary of funds, transfer
agent, registrar, trustee under a trust indenture, or similar
services; and
•
Other. Other categories of transactions that
may be identified by the Nominating and Governance Committee
from time to time as having no significant potential for an
actual, or the appearance of a, conflict of interest or improper
benefit to a related person.
Approval
Procedure
The General Counsel or his designee will assess whether any
proposed transaction involving a related person is a related
person transaction covered by the policy, and if so, the
transaction will be presented to the Nominating and Governance
Committee for review and consideration at its next meeting or,
in those instances in which the General Counsel or his designee
determines that it is not practicable or desirable for the
Company to wait until the next Committee meeting, to the Chair
of the Nominating and Governance Committee. If the General
Counsel or his designee potentially may be involved in a related
person transaction, the applicable person is required to inform
the Chief Executive Officer and the Chair of the Nominating and
Governance Committee. Related person transactions (other than
the excluded transactions) will be reviewed and be subject to
approval by the Nominating and Governance Committee. If
possible, the approval will be obtained before the Company
commences the transaction or enters into or amends any contract
relating to the transaction. If advance Committee approval of a
related person transaction is not feasible or not identified
prior to commencement of a transaction, then the transaction
will be considered and, if the Nominating and Governance
Committee determines it to be appropriate, ratified at the
Committee’s next regularly scheduled meeting.
In determining whether to approve or ratify a related person
transaction covered by the policy, the Nominating and Governance
Committee may take into account such factors it deems
appropriate, which may include:
•
the extent of the related person’s interest in the
transaction;
•
whether the transaction would interfere with the objectivity and
independence of any related person’s judgment or conduct in
fulfilling his or her duties and responsibilities to the Company;
•
whether the transaction is fair to the Company and on terms no
less favorable than terms generally available to an unaffiliated
third party under the same or similar circumstances;
•
whether the transaction is in the interest of the Company and
its stockholders; and
•
whether the transaction is consistent with any conflicts of
interest policies set forth in the Company’s Standards of
Business Conduct and other policies.
A member of the Nominating and Governance Committee who
potentially is a related person in connection with a particular
proposed related person transaction will not participate in any
discussion or approval of the transaction, other than
discussions for the purpose of providing material information
concerning the transaction to the Committee.
Upon the recommendation of the Nominating and Governance
Committee, the Board has nominated for election at the Annual
Meeting the following slate of twelve nominees for directors.
Each of the nominees is currently serving as a director of the
Company having been elected by the Company’s stockholders
at the Company’s 2010 annual meeting of stockholders. The
Company expects each nominee for election as a director at the
Annual Meeting to be able to accept such nomination. Information
about these nominees is provided above under the heading
“Directors.”
The persons named in the proxy intend to vote such proxy for the
election of each of the twelve nominees for director named
below, unless the holder indicates on the proxy that the vote
should be “against” any or all of the nominees. If any
nominee is unable to accept the nomination, proxies will be
voted in favor of the remainder of those nominated for director
and may be voted for substitute nominees. Proxies cannot be
voted for a greater number of persons than the number of
nominees.
The Board of Directors recommends a vote FOR the
election
of the twelve director nominees listed below.
Carole Black
Glenn A. Britt
Thomas H. Castro
David C. Chang
James E. Copeland, Jr.
Peter R. Haje
Donna A. James
Don Logan
N.J. Nicholas, Jr.
Wayne H. Pace
Edward D. Shirley
John E. Sununu
Vote
Required for Approval
A majority of the votes duly cast by the holders of Common Stock
with respect to each director is required for the election of
each director.
The Audit Committee of the Board of Directors has appointed
Ernst & Young LLP as independent auditor of the
Company to audit its consolidated financial statements for 2011
and the Board of Directors has determined that it would be
desirable to request that the stockholders ratify such
appointment.
Ernst & Young LLP, a registered public accounting
firm, has served the Company as independent auditor since the
Company’s incorporation in 2003. Representatives of
Ernst & Young LLP will be present at the Annual
Meeting with the opportunity to make a statement if they desire
to do so and to respond to appropriate questions from
stockholders.
Vote
Required for Approval
Stockholder approval is not required for the appointment of
Ernst & Young LLP, since the Audit Committee of the
Board of Directors has the responsibility for selecting
auditors. However, the appointment is being submitted for
ratification at the Annual Meeting. No determination has been
made as to what action the Board of Directors would take if
stockholders do not ratify the appointment by a majority of the
votes duly cast by the holders of Common Stock.
The Board of Directors recommends a vote FOR approval of
the appointment
of Ernst & Young LLP as independent auditor.
The Company is asking stockholders to approve the Time Warner
Cable Inc. 2011 Stock Incentive Plan (the “2011
Plan”). The Company will use the 2011 Plan to grant various
types of stock-based incentives to selected participants,
including employees, prospective employees, officers, directors
and advisors of the Company and its affiliates. The Board of
Directors approved adoption of the 2011 Plan in March 2011. It
will become effective on May 19, 2011, if approved by
stockholders at the Annual Meeting.
The Board is recommending that the Company’s stockholders
approve the 2011 Plan because it believes that employee and
non-employee director stock ownership serves the best interests
of all stockholders by promoting a focus on long-term Company
performance and aligning compensation directly with the
stockholders’ interests. In addition to stockholder
alignment, the Company believes that equity-based incentive
awards are crucial to recruit and retain employees and directors
and to incentivize them appropriately. In making awards from the
2011 Plan, the Company will balance the goals of retaining and
motivating employees with the interests of stockholders in
limiting dilution from equity plans.
The 2011 Plan, if approved, would replace the Time Warner Cable
Inc. 2006 Stock Incentive Plan (the “2006 Plan”),
which is the Company’s only active equity plan. Pursuant to
the terms of the 2011 Plan, if the 2011 Plan is approved by
stockholders at the Annual Meeting, the Company will no longer
be permitted to grant awards under the 2006 Plan after such
approval. As of March 24, 2011, there were approximately
10.6 million shares available for awards under the 2006
Plan.
Stockholder approval of the 2011 Plan at the Annual Meeting will
also constitute approval of (i) the performance criteria
for performance-based awards that are intended to be deductible
by the Company under Section 162(m) of the Internal Revenue
Code; (ii) the annual per-participant limits for awards
under the 2011 Plan; and (iii) the classes of employees
eligible to receive awards under the 2011 Plan.
Plan
Highlights
The 2011 Plan has an initial share authorization of
20 million shares (subject to adjustment, as described
below). The 2011 Plan will terminate on the fifth anniversary of
stockholder approval (which would be May 19, 2016 if the
2011 Plan is approved at the Annual Meeting), but awards granted
prior to such date may extend beyond that date. The 2011 Plan
also includes the following features that are intended to
protect the interests of the Company’s stockholders:
•
No Evergreen Provision. The number of
authorized shares under the 2011 Plan is fixed at
20 million with no “evergreen” feature that would
cause the number of authorized shares to automatically increase.
•
Fungible Share Design. Shares of Common
Stock subject to Full-Value Awards (as defined below) are
counted against the share authorization as one share for every
one share up to a limit of 9 million shares, above which
such shares are deducted from the share authorization at a rate
of 3.05 shares for each share subject to a Full-Value Award.
•
Annual Per-Person Limits. An annual
per-participant grant limit of 1,500,000 shares of Common
Stock underlying awards, whether the award is ultimately to be
settled in shares of Common Stock or cash with each share of
Common Stock underlying a Full-Value Award counted against the
limit as 3.05 shares.
•
No Discounted Options and Stock Appreciation
Rights. Exercise prices must be at least 100%
of fair market value on the date of the award with certain
limited exceptions.
No Repricing without Stockholder
Approval. Repricing is prohibited without
prior stockholder approval, with customary exceptions for stock
dividends or splits, reorganization, recapitalization or similar
events at the Company or a “change in control” of the
Company (as defined in the 2011 Plan).
•
Minimum Vesting Requirements. Awards
under the 2011 Plan must meet minimum vesting requirements, with
certain limited exceptions. Awards that are not
performance-based must vest over a period of at least three
years, with certain limited exceptions. If awards are considered
“performance-based,” performance must be measured over
a period of at least one year.
•
Limitations on Share Recycling. Shares
of Common Stock withheld from an award to pay taxes or used for
the exercise of stock options will not be eligible for reissue.
•
Conservative Change in Control
Provisions. A “change in control”
would not be triggered by acquisitions of the Company’s
securities representing less than 30% of the voting power of the
Company’s outstanding voting securities. The Company
currently intends that the award agreements used under the 2011
Plan will only provide for a so-called
“double-trigger” acceleration, which affords special
treatment in the event of a change in control only if and when
the holder’s employment is terminated after the change in
control.
•
Changes Require Stockholder
Approval. Without stockholder approval, the
Company cannot make material amendments to the 2011 Plan. For
example, without stockholder approval, the Company could not
increase the total number of shares authorized under the 2011
Plan, increase the maximum number of Full-Value Awards that may
be awarded or increase the annual per-participant limit.
•
Independent Oversight. The 2011 Plan
will be administered by the Compensation Committee, which is
composed entirely of independent directors.
Description
of 2011 Plan
The description of the 2011 Plan set forth below is a summary,
does not purport to be complete and is qualified in its entirety
by the provisions of the 2011 Plan itself. The complete text of
the 2011 Plan is attached as Annex A to this Proxy
Statement.
Purpose
The purpose of the 2011 Plan is to aid the Company in
attracting, retaining and motivating employees, directors and
advisors and to provide a stock plan providing incentives
directly related to the Company’s success.
Eligibility
Awards may be made to employees, prospective employees,
directors, officers and advisors of the Company and any of its
subsidiaries in the discretion of the Compensation Committee or
a subcommittee of the Compensation Committee (the “Plan
Committee”).
Shares Subject
to the Plan
The total number of shares of Common Stock that may be issued
under the 2011 Plan is 20,000,000. Any shares of Common Stock
issued in connection with awards of stock options or similar
awards based on stock appreciation will be counted against this
authorization as one share for every one share subject to such
award. Any shares of Common Stock subject to an award of
restricted stock units (“RSU”), restricted stock, or
similar full-value awards (a “Full-Value Award”) will
be counted against this limit as one share for every one share
subject to such award, up to the first 9,000,000 shares
subject to such Full-Value Awards, above which
such shares will be deducted from the authorization at a rate of
3.05 shares for each share subject to a Full-Value Award.
If any award is forfeited, canceled, expired or otherwise
terminates or lapses without payment of consideration, the
shares subject to that award will again be available for future
grant, on the same basis that such shares were counted against
the share authorization at the time of grant. Awards that are
payable solely in cash will not reduce the share authorization
under the 2011 Plan. Shares retained by or delivered to the
Company to pay the exercise price or tax withholding obligation
in connection with the exercise, net settlement or vesting of
awards do not become available for future awards under the 2011
Plan.
The number of shares of Common Stock with respect to which
awards may be granted during each calendar year to any given
participant may not exceed 1,500,000 shares (whether
ultimately to be settled in shares of Common Stock or cash),
with each share of Common Stock covered by a Full-Value Award
counted against this limit as 3.05 shares.
Types
of Awards
Under the 2011 Plan, the Plan Committee may grant option-type
awards, including stock options and stock appreciation rights,
and Full-Value Awards, including restricted stock and RSUs, as
described below.
Stock Options and Stock Appreciation
Rights. Stock options awarded under the 2011
Plan may be nonqualified or incentive stock options. Stock
appreciation rights may be granted independent of or in
conjunction with stock options. With certain exceptions, the
exercise price per share of Common Stock for any nonqualified or
incentive stock options or stock appreciation rights cannot be
less than the fair market value of a share of Common Stock on
the date the award is granted; except that, in the case of a
stock appreciation right granted in conjunction with a stock
option, the exercise price cannot be less than the exercise
price of the related stock option. The Plan Committee will be
responsible for administering the 2011 Plan and may impose the
terms and conditions of stock options and stock appreciation
rights as it deems fit, but the awards generally may not be
exercisable for a period of more than ten years after they are
granted. Participants in the 2011 Plan will not receive
dividends or have any voting rights with respect to shares
underlying stock options or stock appreciation rights prior to
exercise.
No Repricing. Without prior stockholder
approval, stock options and stock appreciation rights cannot be
repriced (as defined under then applicable rules and regulations
and New York Stock Exchange listing requirements), except as
permitted in connection with a stock dividend or split,
reorganization, recapitalization or a similar event at the
Company or a “change in control” of the Company (as
defined in the 2011 Plan).
Restricted Stock and RSUs. The Plan
Committee will determine the terms and conditions of Full-Value
Awards, such as restricted stock and RSU awards, including the
vesting period and the conditions, if any, under which such
awards may be forfeited. Dividends or dividend equivalents with
respect to Full-Value Awards may be paid directly to the
participant, withheld by the Company to be distributed at a
later date, or reinvested in additional shares of restricted
stock, RSUs or other Full-Value Awards, as determined by the
Plan Committee. Certain Full-Value Awards may be granted in a
manner designed to allow the Company to deduct their value under
Section 162(m); these awards will be based on one or more
of the performance criteria set forth below under
“Performance-Based Awards.”
Other Stock-Based Awards. The Plan
Committee may grant stock awards, unrestricted stock and other
awards that are valued in whole or in part by reference to, or
are otherwise based on, the fair market value of, Common Stock.
The Plan Committee will establish the form, terms and conditions
of any such awards, which might include the right to receive, or
vest with respect to, one or more shares of Common Stock (or the
equivalent cash value of such shares) upon the completion of a
specified period of service, the occurrence of an event
and/or the
attainment of performance objectives.
Performance-Based Awards. Certain
awards may be granted in a manner designed to allow the Company
to deduct their value under Section 162(m). The Plan
Committee will establish the performance goals for these
performance-based awards having a performance period of not less
than one year and certify
that the goals have been met, in each case, in the manner
required by Section 162(m). These performance-based awards
will be based on one or more of the following performance
criteria:
•
operating income;
•
operating income before or after taxes, interest, depreciation
and/or
amortization, or any combination thereof (and including or
excluding capital expenditures);
•
earnings before or after taxes, interest, depreciation
and/or
amortization;
•
net earnings;
•
net income;
•
operating profit;
•
earnings per share;
•
book value;
•
market share;
•
shareholders’ equity;
•
return measures (including, but not limited to, return on
capital, invested capital, assets and equity);
•
revenues, sales or product volume growth;
•
cash flow measures (including, but not limited to, cash flow,
free cash flow, cash provided by operating activities, operating
cash flow and cash flow return on capital);
•
margins;
•
working capital and targets related thereto;
•
costs or expenses, any component thereof and targets related
thereto;
•
stock price (including, but not limited to, growth measures and
total stockholder return);
•
measures of economic value added;
•
inventory control;
•
enterprise value;
•
subscriber and unit-based metrics;
•
objective measures of customer satisfaction; and
•
productivity improvement or operating efficiency-based metrics.
The foregoing performance criteria may relate to the Company,
one or more of its affiliates or one or more of its or their
divisions or units, departments or functions, or any combination
of the foregoing, and may be applied on a per share or absolute
basis and/or
relative to one or more peer group companies or indices, or any
combination thereof, all as the Plan Committee may determine. In
addition, to the extent consistent with Section 162(m), the
Plan Committee, at the time the relevant performance goals are
established, may provide for various adjustments that could be
made to accommodate unanticipated events or events over which
the participant might have limited control that might impact
performance against the established goals, including capital
costs, interest, taxes, depreciation and amortization,
restructurings, discontinued operations, impairments, changes in
foreign currency exchange rates, extraordinary items, other
unusual non-recurring items, industry margins, general economic
conditions, interest rate movements
and/or the
cumulative effects of tax or accounting changes in accordance
with U.S. generally accepted accounting principles.
Vesting
At least 95% of the shares of Common Stock authorized for awards
under the 2011 Plan must be subject to awards that vest over a
period of at least three years from the date of grant, subject
to earlier vesting, in whole or in part, in the event of a
change in control of the Company or the death, disability or
other termination of the award holder’s employment. Awards
to members of the Company’s Board of Directors, awards
subject to performance-based conditions and certain substitute
awards (discussed below) are not subject to this limitation.
Method
of Payment for Awards
The Plan Committee will determine the form of payment, if any,
for any shares of Common Stock issued in exercise or settlement
of an award under the 2011 Plan, including payment in cash,
shares
and/or
netting against already-owned shares of Common Stock or shares
that could be received upon exercise or vesting (valued at fair
market value).
In the event of a change in the outstanding shares of Common
Stock due to a stock dividend or split, reorganization,
recapitalization, merger, consolidation, spin-off, combination,
share exchange or any distribution to stockholders (other than
regular cash dividends) or any other similar transaction, the
Plan Committee will adjust (i) the number or kind of shares
of Common Stock or other securities issued or reserved for
issuance pursuant to the 2011 Plan or pursuant to outstanding
awards and related terms, (ii) the maximum number of shares
for which awards may be granted during a calendar year to any
participant, (iii) the option price or exercise price of
any stock option, stock appreciation right or similar award
and/or
(iv) any other affected terms of such awards. The Plan
Committee also has the right to substitute or assume awards in
such circumstances, which will not under such circumstance be
counted against the share authorization under the 2011 Plan.
Upon the occurrence of a change in control of the Company (as
defined in the 2011 Plan), the Plan Committee may
(a) accelerate, vest or cause the restrictions to lapse
with respect to all or any portion of an award, (b) cancel
awards for fair value, (c) provide for the issuance of
substitute awards that will substantially preserve the otherwise
applicable terms of any affected awards previously granted under
the 2011 Plan, as determined by the Plan Committee in its sole
discretion, or (d) provide that, for a period of at least
30 days prior to the change in control, stock options will
be exercisable as to all shares subject to the 2011 Plan and
that upon the occurrence of the change in control, such stock
options will terminate.
Administration
The 2011 Plan will be administered by the Plan Committee, which
has appointed a subcommittee that consists of at least two
directors who are intended to qualify as “non-employee
directors” within the meaning of
Rule 16b-3
under the Exchange Act and “outside directors” within
the meaning of Section 162(m). The Plan Committee is
authorized to interpret the 2011 Plan, to establish, amend and
rescind any rules and regulations relating to the 2011 Plan, and
to make any other determinations that it deems necessary or
desirable for the administration of the 2011 Plan.
Amendment
and Termination
The Board of Directors or the Plan Committee may amend, alter or
discontinue the 2011 Plan, but no amendment, alteration or
discontinuation will be made (i) without stockholder
approval, if it would increase the total number of shares of
Common Stock authorized under the Plan or the maximum number of
Full-Value Awards that may be awarded thereunder, or if it would
increase the maximum number of shares for which awards may be
granted to any participant in a calendar year, (ii) without
the consent of a participant, if it would diminish any of the
rights of the participant under any award previously granted to
the participant or (iii) without stockholder approval, to
permit repricing of options or stock appreciation rights. No new
awards may be made under the 2011 Plan after the fifth
anniversary of the effective date.
Transferability
Awards under the 2011 Plan are not transferable or assignable by
participants other than by will or the laws of descent and
distribution, unless determined otherwise by the Plan Committee
(but subject to the limitation that no Award may be transferred
for consideration or value).
Awards
Under the 2011 Plan
As stated above, any awards under the 2011 Plan will be
determined by the Plan Committee in its discretion. It is,
therefore, not possible to predict the awards that will be made
to particular individuals in the future under the 2011 Plan. The
awards made in 2010 to each of the named executive officers and
non-employee directors are listed above under “Executive
Compensation—Grants of Plan-Based Awards” and
“Director Compensation,” respectively. During 2010,
nonqualified stock options and RSUs covering in the aggregate
(i) 886,020 and 160,482 shares of Common Stock,
respectively, were awarded to the Company’s current
executive officers (10 people as a group) and
(ii) 2,917,103 and 1,780,885 shares of Common Stock,
The following table summarizes information as of
December 31, 2010 about the Company’s outstanding
equity compensation awards and shares of Common Stock reserved
for future issuance under the 2006 Plan.
Number of
Securities
Remaining
Number of
Available for
Securities to be
Future Issuance
Issued Upon
Weighted-average
Under Equity
Exercise of
Exercise Price of
Compensation
Outstanding
Outstanding
Plans (excluding
Options, Warrants
Options, Warrants
securities reflected
and
Rights(1)
and
Rights(1)
in column
(a))(2)
(a)
(b)
(c)
Equity compensation plans approved by security
holders(3)
16,798,014
$
36.03
17,691,764
Equity compensation plans not approved by security holders
—
—
—
Total
16,798,014
$
36.03
17,691,764
(1)
Column (a) is comprised of
11,484,839 stock options and 5,313,175 shares of Common
Stock underlying outstanding restricted stock units. Because
there is no exercise price associated with RSUs, such equity
awards are not included in the weighted-average exercise price
calculation in column (b).
(2)
A total of 51,299,660 shares
of Common Stock have been authorized for issuance pursuant to
the terms of the 2006 Plan. Any shares of Common Stock issued in
connection with stock options or stock appreciation rights are
counted against the 2006 Plan available share reserve as one
share for every share issued. Any shares of Common Stock issued
in connection with Full-Value Awards (restricted stock or RSUs)
are counted against the available share reserve under the 2006
Plan as (a) one share for every share issued multiplied by
(b) a ratio. The ratio (the “Ratio”) is the
quotient resulting from dividing (a) the grant date fair
value of such Full-Value Award, as determined for financial
reporting purposes, by (b) the grant date fair value of a
stock option granted under the 2006 Plan. As a result, based on
the Ratio determined on December 31, 2010, of the shares of
Common Stock available for future issuance under the 2006 Plan
listed in column (c), as of December 31, 2010, a maximum of
4,820,958.80 shares could have been issued in connection
with Full-Value Awards.
(3)
Equity compensation plans approved
by security holders covers the 2006 Plan, which was originally
approved by the Company’s stockholders in May 2007 and is
currently the Company’s only compensation plan pursuant to
which the Company’s equity is awarded.
Historical
Share Usage Practices—“Run Rate”
The Company expects that its stockholders will evaluate the
potential impact of the 2011 Plan from two perspectives—the
annual “run rate,” a measure of the awards that are
made annually as a percentage of the Company’s outstanding
shares of Common Stock, as well as the potential dilutive impact
of the outstanding and future awards. Often stockholders will
look to historical grant practices to determine the potential
share usage patterns of a company. For this purpose, it is
important to understand the impact of and rationale for certain
adjustments and awards that were made in connection with the
Company’s Separation from Time Warner in 2009 as well as
the impact of the Company’s return of capital activities,
which set it apart from some other companies to which the
Company might otherwise be compared.
The Impact of the Separation. In
connection with the Separation, the Company paid a Special
Dividend on its Common Stock of $10.27 per share ($30.81 per
share after adjustment for a contemporaneous
1-for-3
Reverse Stock Split), representing, at the time, approximately
57% of the Company’s equity market value. As a result of
the Special Dividend and the Reverse Stock Split, the Company
(a) made certain antidilution adjustments (as defined
below) to outstanding equity awards and (b) granted Special
Dividend RSUs in lieu of a retained cash distribution that would
have been paid on outstanding RSUs. In addition, the
Company granted
“make-up”
stock options and RSUs to employees to offset the loss of
economic value in Time Warner equity awards that resulted from
the Separation. Each of these actions is discussed in more
detail below.
Ø
Antidilution Adjustment to Company Stock
Options—Value Preservation. As mandated by the 2006
Plan and related equity award agreements, the Compensation
Committee authorized equitable adjustments (the
“antidilution adjustments”) to the number of shares
covered by, and the exercise prices of, outstanding Company
stock options, to maintain the fair value of those awards
following the Special Dividend and the Reverse Stock Split. As a
result of these adjustments the number of shares covered by
stock options awarded in 2009 increased by approximately
2.76 million shares.
Ø
Special Dividend RSUs—Shareholder Alignment.
In connection with the payment of the Special Dividend, RSU
holders were to be credited with a deferred cash payment of
$10.27 ($30.81 after adjustment) for each share of Common Stock
underlying their RSUs (without interest). Based on
management’s recommendation, the award agreements were
amended to give holders the opportunity to elect to receive
additional RSUs (the “Special Dividend RSUs”) in lieu
of this retained cash distribution (the “Special Dividend
retained cash distribution”). The vesting dates of the
Special Dividend RSUs and the Special Dividend retained cash
distribution are the same as the vesting dates of the related
RSUs.
As a result of the Special Dividend RSU election right,
employees were able to maintain their equity interest in the
Company, reinforcing the alignment of their interests with those
of stockholders. A total of 1.3 million Special Dividend
RSUs were awarded on the Special Dividend payment date in March
2009 to electing RSU holders.
Ø
“Make-up”
Awards—Lost Value Offset. As a result of the
Separation, Company employees with outstanding Time Warner
equity awards were treated as if their employment with Time
Warner was terminated without cause as of March 12, 2009.
This resulted in the forfeiture of most of those employees’
unvested Time Warner stock options and the truncation of the
exercise periods for their vested Time Warner stock options (to
one year after the Separation in most cases). These employees
also vested in a portion of their Time Warner RSUs and forfeited
the remainder.
To offset this loss in economic value, the Compensation
Committee approved
“make-up”
grants of Company stock options and RSUs (the
“Separation-related
make-up
awards”) to affected employees. As a result,
1.2 million stock options and 55,237 RSUs were awarded as
Separation-related
make-up
awards on May 11, 2009.
The table below provides more detail about the Company’s
annual grant practices and the impact on the run-rate
calculation of the Separation-related awards.
Assumes each share of Common Stock
covered by an RSU granted during the year is counted as one
share.
(2)
Assumes each share of Common Stock
covered by an RSU granted during the year is counted as
2.5 shares, a typical weighting used by various
stockholders in analyzing run rates. The 2011 Plan will apply a
weighting of 3.05 shares in the event the number of Full-Value
Awards exceeds 9 million. Under the 2006 Plan, a variable
Ratio (discussed above) was applied to these Awards.
(3)
Run rate is calculated for purposes
of this table by dividing the number of shares of Common Stock
subject to awards granted during the year by the Average Common
Shares Outstanding for that year.
(4)
Refer to the discussion below under
“Impact of Return of Capital to Stockholders” for a
discussion of the impact of the Special Dividend and the regular
cash dividend on the 2010 run rate.
(5)
The 2009 antidilution adjustments
reflect the antidilution adjustment related to stock options
awarded in 2009 only. The Special Dividend RSUs in 2009 reflect
the Special Dividend RSUs awarded with respect to all
outstanding RSUs for which the holder elected to receive Special
Dividend RSUs.
(6)
Identifies the impact on the run
rate of the Special Dividend RSUs, Separation-related
make-up
awards, and awards reflected in the 2009 antidilution
adjustments.
(7)
The awards and Average Common
Shares Outstanding reported for 2007 and 2008 do not
reflect the antidilution adjustments for the Separation or the
Reverse Stock Split.
Impact of Return of Capital to
Stockholders. In connection with the
Separation and continuing thereafter, the Company has returned
significant amounts of capital to its stockholders. The
Company’s
return-of-capital
activities have included (1) the 2009 Special Dividend,
(2) a regular quarterly cash dividend of $0.40 per share of
Common Stock, which was commenced in 2010 (and increased in
2011) and (3) a share repurchase program commenced at
the end of 2010. Each component of these
return-of-capital
activities has caused—and in some cases will continue to
cause—the potential dilutive impact of the Company’s
equity grants and the Company’s run rate to be higher than
for companies with less leveraged capital structures and lesser
or no regular dividends.
Ø
2009 Special Dividend. The 2009 Special Dividend and the
related debt financing significantly changed the leverage
characteristics of the Company. In short, following the Special
Dividend, the Company’s equity represented a far smaller
proportion of the Company’s overall enterprise value (and
debt a greater proportion) than previously was the case. This
relative decrease in equity value, accentuated by a sharp
downturn in equity prices generally around the time of the
Separation, naturally resulted in the Company needing to grant
more awards to deliver the target LTI value intended for each
employee.
Ø
Regular Cash Dividend. When the Company announced its
first regular cash dividend, its yield was over 3.5%, placing it
in the top quartile of S&P 500 dividend-paying companies.
Including this dividend yield assumption in its 2010 stock
option award valuation calculation reduced, by approximately
47%, the value of each option as used for determining the number
of 2010 stock option awards granted to each employee (assuming
no change to the other variables). Again, as a result, the
Company needed to issue more of these awards to deliver the
target LTI value intended for each employee.
Ø
Share Repurchase Program. The Company announced a
$4 billion share repurchase program in November 2010.
Since repurchases of stock under the program reduce the number
of shares outstanding, the program tends to inflate the run rate
and dilutive impact of the Company’s equity programs as
calculated by many shareholders (since the denominator used in
these calculations is decreased by the repurchasing activity).
Any future repurchases under this program will have a similar
impact.
The Company intends to continue to manage the shares of Common
Stock used under the 2011 Plan at levels it believes are
reasonable in light of its outstanding shares and the business
needs of its equity compensation program. The Company expects
the 2011 run rate (net of forfeitures) to be less than 2%,
counting each Full-Value Award at a rate of 2.5 shares.
Award Activity after December 31, 2010 and Potential
Dilution. The table below sets out
information about changes to the number of shares of Common
Stock subject to outstanding equity awards under the 2006 Plan
after December 31, 2010. These changes result from Common
Stock (1) subject to awards that were granted from
January 1, 2011 through March 24, 2011,
(2) issued during the period from January 1, 2011
through March 24, 2011 pursuant to exercises of outstanding
stock options and vesting of outstanding RSUs and
(3) expected to be issued during April 2011 pursuant to the
vesting of RSUs outstanding as of March 24,
2011. In addition, the table identifies the Special Dividend
RSUs, Separation-related
make-up
awards and the additional shares of Common Stock subject to
stock options as a result of the antidilution adjustments, in
each case outstanding as of March 24, 2011.
Weighted-
Weighted-
Total
Total
Average
Average
Number of
Number of
Exercise
Remaining
Shares
Shares
Number of
Price of
Term of
Issuable
Available
Outstanding
Outstanding
Outstanding
Number of
Under
for Award
Stock
Stock
Stock
Outstanding
Outstanding
Under 2006
Options
Options
Options
RSUs
Awards
Plan(3)
(in thousands)
(in years)
(in thousands)
(in thousands)
(in thousands)
Outstanding as of 12/31/2010
11,485
$
36.03
7.92
5,313
16,798
17,692
Add: Activity 1/1/2011 — 3/24/2011:
Granted(1)
2,194
72.05
1,353
Exercised/Vested
(1,915
)
34.02
(669
)
Forfeited/Expired
(93
)
38.12
(59
)
Outstanding as of 3/24/2011
11,671
43.11
8.09
5,938
17,609
10,623
Less: Anticipated April 2011 RSU vesting:
RSUs scheduled to vest and be distributed in April 2011
—
(358
)
Outstanding as of 3/24/2011, as adjusted for anticipated
April 2011 RSU vesting
11,671
43.11
8.09
5,580
17,251
10,623
Less: Separation-Related
Awards(2)
Outstanding as of 3/24/2011:
Special Dividend RSUs
—
(900
)
(900
)
Separation-related
make-up
awards
(3,220
)
—
(3,220
)
Antidilution adjustments
(278
)
(7
)
(285
)
Outstanding as of 3/24/2011, as adjusted for anticipated
April 2011 RSU vesting and Separation-Related Awards Outstanding
as of 3/24/2011
8,173
4,673
12,846
10,623
(1)
Includes 261,606 stock options and
158,280 RSUs that are subject to performance-based vesting
conditions.
(2)
Refer to the discussion above under
“The Impact of the Separation” for a discussion of
these Separation-related items.
(3)
If and when the stockholders
approve the 2011 Plan, the remaining share authorization under
the 2006 Plan will no longer be available for awards.
The Company anticipates that as of April 2, 2011, the
Company’s outstanding equity awards will cover
17,251,400 shares of Common Stock, representing
approximately 5.1% of the shares outstanding on the record date
for the Annual Meeting. If the stockholders approve the 2011
Plan, the Company will be authorized to issue equity awards
covering an additional 20 million shares of Common Stock,
representing an incremental 5.9% of the outstanding shares of
Common Stock on March 24, 2011.
Award
Practices—Key Terms of Outstanding Awards
The Company anticipates that it will continue the grant
structure used historically, including the following key terms:
•
Awards Subject to a “Clawback.”The
clawback feature will permit the Company to seek repayment of
the benefit of vested
and/or
exercised equity awards under certain circumstances, including
for cause termination of employment and breach of restrictive
covenants.
Double-Trigger Change in Control
Provisions.The Company currently intends
that the award agreements used under the 2011 Plan will only
provide for a so-called “double-trigger” acceleration,
which affords special treatment in the event of a change in
control only if and when the holder’s employment is
involuntarily terminated after the change in control.
•
Performance-Based Awards. RSUs and
stock options with performance-based vesting conditions continue
to be permitted under the 2011 Plan as under the 2006 Plan. The
Plan Committee may issue awards the vesting of which are
conditioned on the accomplishment of performance goals over a
one year or multiple years, as determined by the Plan Committee.
Performance-based awards represented up to 60% of the value of
the 2011 LTI awards for the Company’s most senior
executives.
•
Multi-Year Vesting Over a Period of Four Years in Most
Cases.
•
Retirement Eligibility Provisions that Encourage
Retention. Retirement eligibility provisions that
require the employee to be at least age 60 with ten years
of service.
•
Net Issuance Exercise Provisions that Reduce Potential
Dilution. The Company has implemented a “net
exercise” process which results in fewer shares being
issued into the market to minimize shareholder dilution but
reduces fully the number of authorized shares under the
applicable stock incentive plan.
Tax
Status of 2011 Plan Awards
The following discussion of the U.S. federal income tax
status of awards under the 2011 Plan is based on current
U.S. federal tax laws and regulations and does not purport
to be a complete description of the U.S. federal income tax
laws. Participants may also be subject to certain state and
local taxes or may be subject to taxes imposed by countries
other than the U.S., none of which are described below.
Nonqualified Stock Options. If the
stock option is a nonqualified stock option, no income is
realized by the participant at the time of grant of the stock
option, and no deduction is available to the Company at such
time. At the time of exercise, ordinary income is realized by
the participant in an amount equal to the excess, if any, of the
fair market value of the shares of Common Stock on the date of
exercise over the exercise price, and the Company receives a tax
deduction for the same amount.
Incentive Stock Options. If the stock
option is an incentive stock option, the participant is
generally not subject to income tax upon grant or exercise,
although the participant may be subject to the alternative
minimum income tax upon exercise. The Company generally does not
receive a tax deduction in connection with incentive stock
options, except as noted below. Upon disposition of the Common
Stock after exercise, any resulting gain is taxed at long-term
capital gains rates if the Common Stock is held by a participant
for at least two years from the date of the grant of such option
and for at least one year after exercise. If the Common Stock
purchased pursuant to the option is disposed of before the
expiration of that period, any gain on the disposition, up to
the difference between the fair market value of the Common Stock
at the time of exercise and the exercise price, is taxed at
ordinary rates as compensation paid to the participant, and the
Company is entitled to a deduction for an equivalent amount. Any
amount realized by the participant in excess of the fair market
value of the stock at the time of exercise is taxed at capital
gains rates.
Stock Appreciation Rights. No income is
realized by the participant at the time a stock appreciation
right is granted, and no deduction is available to the Company
at such time. When the right is exercised, ordinary income is
realized by the participant in the amount of the cash
and/or the
fair market value of the Common Stock received by the
participant, and the Company will be entitled to a deduction of
equivalent value.
Restricted Stock; Stock Awards. Subject
to Section 162(m), discussed below, the Company receives a
deduction and the participant recognizes taxable income equal to
the fair market value of the restricted stock at the time the
restrictions on the shares awarded lapse, unless the participant
elects to recognize such income immediately by so electing not
later than 30 days after the date of grant as permitted
under Section 83(b) of
the Internal Revenue Code, in which case both the Company’s
deduction and the participant’s inclusion in income occur
on the grant date.
Restricted Stock Units; Deferred Stock
Units. Subject to Section 162(m),
discussed below, the Company receives a deduction and the
participant recognizes taxable income at the time restricted or
deferred stock units are settled equal to the fair market value
of the shares of Common Stock issued or other cash or property
paid in settlement of the award. Section 83(b) of the
Internal Revenue Code is not applicable to RSUs or deferred
stock units.
Section 162(m). Section 162(m)
generally disallows a tax deduction to public companies for
compensation over $1 million paid to each of the Chief
Executive Officer and the three other most highly compensated
executive officers in any taxable year of the Company (other
than the Chief Financial Officer). Performance-based
compensation is not subject to the deduction limit if certain
requirements are met. One requirement is shareholder approval of
(i) the performance criteria upon which performance-based
awards may be based, (ii) the annual per-participant limits
on grants and (iii) the class of employees eligible to
receive awards. In the case of RSUs and similar awards, other
requirements generally are that objective performance goals and
the amounts payable upon achievement of the goals be established
by a committee comprised solely of at least two outside
directors, as defined under Section 162(m), and that no
discretion be retained to increase the amount payable under the
awards. In the case of stock options and stock appreciation
rights, other requirements are that the option or stock
appreciation right be granted by a committee of at least two
outside directors and that the exercise price of the stock
option or stock appreciation right be not less than the fair
market value of the Common Stock on the date of grant. Certain
RSUs and other awards under the 2011 Plan may not be
performance-based and may not be deductible as a result of
Section 162(m).
Other
Information and Conclusion
On April 1, 2011, the closing sale price of the Common
Stock, as reported on the New York Stock Exchange, was $72.13
per share.
The Company believes that its best interests will be served by
the approval of the 2011 Plan. The 2011 Plan will enable the
Company to be in a position to continue to grant long-term
incentive awards to employees and directors, including those who
through promotions and development of the Company’s
business will be entrusted with new and more important
responsibilities, while preserving, where appropriate, the tax
deductibility of these awards.
Vote
Required for Approval
The affirmative vote of a majority of the votes duly cast by the
holders of Common Stock is required to approve the 2011 Plan.
The Board of Directors recommends a vote FOR the approval
of the
Time Warner Cable Inc. 2011 Stock Incentive Plan.
The Company is asking stockholders to approve an advisory
resolution on the Company’s executive compensation as
reported in this Proxy Statement. As described above in the
“Compensation Discussion and Analysis” section of this
Proxy Statement, the Compensation Committee has structured the
Company’s executive compensation program to achieve the
following key objectives:
•
pay for performance by rewarding executives for leadership
excellence and sustained financial and operating performance in
line with the Company’s strategic goals; and
•
align executives’ interests and risk orientation with the
Company’s business goals and the interests of the
Company’s stockholders.
The Company believes that its compensation programs have played
a key role in the Company’s operating and financial
success, which in turn have helped drive strong stock price
performance since the Company’s Separation from Time Warner
Inc. in March 2009. The Company encourages stockholders to read
the “Compensation Discussion and Analysis” beginning
on page 23 of this Proxy Statement, which provides an
overview of the Company’s executive compensation policies
and procedures, how they operate and are designed to achieve the
Company’s
pay-for-performance
objectives, how they were applied for 2010, as well as certain
enhancements that were made during 2010. It also highlights
certain key compensation practices. The Summary Compensation
Table and other related compensation tables and narrative
provide detailed information on the compensation of the
Company’s named executive officers. The Compensation
Committee and the Board of Directors believe that the policies
and procedures articulated in the “Compensation Discussion
and Analysis” are effective in achieving the Company’s
goals and that the compensation of the named executive officers
reported in this Proxy Statement has contributed to the
Company’s recent and long-term success.
In accordance with recently adopted Section 14A of the
Exchange Act and as a matter of good corporate governance, the
Company is asking stockholders to approve the following advisory
resolution at the 2011 Annual Meeting of Stockholders:
RESOLVED, that the stockholders of Time Warner Cable Inc. (the
“Company”) approve, on an advisory basis, the
compensation of the Company’s named executive officers as
disclosed in the Compensation Discussion and Analysis, the
Summary Compensation Table and the related compensation tables,
notes and narrative in the Proxy Statement for the
Company’s 2011 Annual Meeting of Stockholders.
Vote
Required for Approval
This advisory resolution, commonly referred to as a
“say-on-pay”
resolution, will be considered approved if it receives the
affirmative vote of a majority of the votes duly cast by holders
of the Common Stock. However, the vote is non-binding on the
Board of Directors. Although non-binding, the Board and the
Compensation Committee will review and consider the voting
results when making future decisions regarding the
Company’s executive compensation program.
The Board of Directors recommends a vote FOR the approval
of the
advisory resolution on executive compensation.
Pursuant to recently adopted Section 14A of the Exchange
Act, the Company is asking stockholders to vote on whether
future advisory votes on executive compensation of the nature
reflected in Proposal Four above should occur every year,
every two years or every three years.
After careful consideration and dialogue with our stockholders,
the Board of Directors has determined that holding an advisory
vote on executive compensation every year is the most
appropriate policy for the Company at this time, and recommends
that stockholders vote for future advisory votes on executive
compensation to occur every year. While the Company’s
executive compensation programs are designed to promote a
long-term connection between pay and performance, the Board of
Directors recognizes that executive compensation disclosures are
made annually. Given that the
“say-on-pay”
advisory vote provisions are new, holding an annual advisory
vote on executive compensation provides the Company with more
direct and immediate feedback on its compensation disclosures.
However, stockholders should note that because the advisory vote
on executive compensation occurs well after the beginning of the
compensation year, and because the different elements of the
Company’s executive compensation programs are designed to
operate in an integrated manner and to complement one another,
in many cases it may not be appropriate or feasible to change
executive compensation programs in consideration of any one
year’s advisory vote on executive
compensation by the time of the following year’s annual
meeting of stockholders. The Company believes that an annual
advisory vote on executive compensation is consistent with its
practice of seeking input and engaging in dialogue with its
stockholders on corporate governance matters (including the
Company’s practice of having all directors elected annually
and annually providing stockholders the opportunity to ratify
the Audit Committee’s selection of independent auditors)
and the Company’s executive compensation philosophy,
policies and practices.
Vote
Required for Approval
Pursuant to this advisory vote on the frequency of future
advisory votes on executive compensation, stockholders will be
able to specify one of four choices for this proposal on the
proxy card or voting instruction: one year, two years, three
years or abstain. Stockholders are not voting to approve or
disapprove the Board’s recommendation. To the extent one
frequency receives the affirmative vote of a majority of the
votes duly cast by the holders of Common Stock, such frequency
will be deemed approved by the stockholders. However, the vote
is non-binding on the Board of Directors. Although non-binding,
the Board and the Compensation Committee will carefully review
the voting results. Notwithstanding the Board’s
recommendation and the outcome of the stockholder vote, the
Board may in the future decide to conduct advisory votes on a
more or less frequent basis and may vary its practice based on
factors such as discussions with stockholders and the adoption
of material changes to compensation programs.
The Board of Directors recommends stockholders vote
to conduct future advisory votes on executive compensation
ANNUALLY.
Only holders of record of the Company’s Common Stock at the
close of business on March 24, 2011, the record date, are
entitled to notice of and to vote at the Annual Meeting. At that
time, 340,240,533 shares of Common Stock, par value $0.01
per share, were entitled to vote. Each issued and outstanding
share of Common Stock has one vote on any matter submitted to a
vote of stockholders.
The presence, in person or by proxy, of the holders of a
majority of the votes entitled to be cast at the Annual Meeting
is necessary to constitute a quorum.
A majority of the votes duly cast by the holders of Common Stock
with respect to each nominee is required for the election of
that nominee as a director.
The affirmative vote of a majority of the votes duly cast by the
holders of Common Stock is required to approve each of the other
matters to be acted upon at the Annual Meeting.
An abstention is deemed “present,” but is not deemed a
“vote cast.” As a result, abstentions and broker
“non-votes” are not included in the tabulation of the
voting results on the election of directors or issues requiring
approval of a majority of the votes cast and, therefore, do not
have the effect of votes in opposition. A broker
“non-vote” occurs when a nominee holding shares for a
beneficial owner does not vote on a particular proposal because
the nominee does not have discretionary voting power on that
item (as the item is considered a “non-routine”
matter) and has not received instructions from the beneficial
owner. Each of the proposals other than proposal two
(ratification of the independent registered public accounting
firm) is a non-routine matter and could result in broker
“non-votes.” Broker “non-votes” and the
shares with respect to which a stockholder abstains are included
in determining whether a quorum is present.
Proxies. All shares entitled to vote
and represented by properly executed proxies received prior to
the Annual Meeting, and not revoked, will be voted as instructed
on those proxies. If no instructions are indicated, the
shares will be voted as recommended by the Board of
Directors. No stockholder of record may appoint more than
three persons to act as his or her proxy at the Annual Meeting.
Voting on Other Matters. If any other
matters are properly presented at the Annual Meeting for
consideration, the persons named in the enclosed form of proxy
will have discretion to vote on those matters in accordance with
their own judgment to the same extent as the person signing the
proxy would be entitled to vote. In accordance with the
Company’s by-laws, the Annual Meeting may be adjourned,
including by the Chairman, in order to permit the solicitation
of additional proxies. The Company does not currently anticipate
that any other matters will be raised at the Annual Meeting.
Voting Methods—Internet, Telephone or
Mail. Many stockholders will have the option
to submit their proxies or voting instructions electronically
through the Internet or by telephone. Stockholders should check
their Notice of Internet Availability of Proxy Material, proxy
card or voting instructions forwarded by their broker, bank or
other holder of record to see which options are available.
Stockholders submitting proxies or voting instructions via the
Internet should understand that there may be costs associated
with electronic access, such as usage charges from Internet
access providers and telephone companies, that would be borne by
the stockholder.
Revoking a Proxy. Any stockholder of
record may revoke a proxy at any time before it is voted by:
•
filing with the Secretary of the Company, at or before the
taking of the vote at the Annual Meeting, a written notice of
revocation or a duly executed proxy, in either case dated later
than the prior proxy relating to the same shares; or
•
attending the Annual Meeting and voting in person (although
attendance at the Annual Meeting will not by itself revoke a
proxy).
Any written notice of revocation or subsequent proxy should be
delivered to Time Warner Cable Inc., 60 Columbus Circle, NewYork, New York10023, Attention: General Counsel, or hand
delivered to the Secretary, before the taking of the vote at the
Annual Meeting. To revoke a proxy previously submitted by
telephone or Internet, a stockholder may simply submit a new
proxy at a later date before the taking of the vote at the
Annual Meeting, in which case, the later submitted proxy will be
recorded and the earlier proxy will be revoked.
In accordance with notices to many stockholders who hold their
shares through a bank, broker or other holder of record (a
“street-name stockholder”) and share a single address,
only one annual report and proxy statement or Notice of Internet
Availability of Proxy Material, as applicable, is being
delivered to that address unless contrary instructions from any
stockholder at that address were received. This practice, known
as “householding,” is intended to reduce the
Company’s printing and postage costs. However, any such
street-name stockholder residing at the same address who wishes
to receive a separate copy of a Notice of Internet Availability
of Proxy Material or this Proxy Statement or accompanying Time
Warner Cable Inc. 2010 Annual Report to Stockholders may request
a copy by contacting the bank, broker or other holder of record,
or the Company by telephone at: 1-877-4-INFO-TWC, by
e-mail to:
ir@twcable.com or by mail to: Time Warner Cable Inc., 60
Columbus Circle, New York, New York10023, Attention: Investor
Relations. The voting instruction or Notice of Internet
Availability of Proxy Material, as applicable, sent to a
street-name stockholder should provide information on how to
request (1) householding of future Company materials or
(2) separate materials if only one set of documents is
being sent to a household. If it does not, a stockholder who
would like to make one of these requests should contact the
Company as indicated above.
Section 16(a) of the Exchange Act requires the
Company’s officers and directors, and persons who own more
than ten percent of a registered class of the Company’s
equity securities, to file reports of ownership and changes in
ownership with the SEC and the NYSE. Officers, directors and
greater than ten-percent stockholders are required by SEC
regulations to furnish the Company with copies of all
Section 16(a) forms they file. Based solely on a review of
the copies of such forms furnished to the Company, or written
representations that no Forms 5 were required, the Company
believes that during 2010, its officers, directors and greater
than ten-percent beneficial owners complied with all applicable
Section 16(a) filing requirements.
All expenses of this solicitation, including the cost of
preparing and mailing this Proxy Statement, will be borne by the
Company. In addition to solicitation by use of the mail, proxies
and voting instructions may be solicited by directors, officers
and employees of the Company in person, by telephone or other
means of communication. Such directors, officers and employees
will not be additionally compensated but may be reimbursed for
reasonable
out-of-pocket
expenses in connection with such solicitation. The Company has
retained D.F. King & Co., Inc. at an estimated cost of
$8,000, plus reimbursement of expenses, to assist in its
solicitation of proxies from brokers, nominees, institutions and
individuals. Arrangements will also be made with custodians,
nominees and fiduciaries for forwarding proxy solicitation
materials to beneficial owners of shares held of record by such
custodians, nominees and fiduciaries, and the Company will
reimburse such custodians, nominees and fiduciaries for
reasonable expenses incurred in connection therewith.
Proposals for Inclusion in the Proxy
Statement. Pursuant to
Rule 14a-8
under the Exchange Act, stockholders may present proper
proposals for inclusion in the Company’s proxy statement
and for consideration at the next annual meeting of its
stockholders by submitting their proposals to the Company in a
timely manner. In order to be included for the 2012 Annual
Meeting, stockholder proposals must be received by the Company
no later than December 9, 2011, and must otherwise comply
with the requirements of
Rule 14a-8.
Proposals not Included in the Proxy
Statement. In addition, the Company’s
by-laws establish an advance notice procedure with regard to
certain matters, including stockholder proposals not included in
the Company’s proxy statement, to be brought before an
annual meeting of stockholders. In general, notice must be
received by the Corporate Secretary of the Company not less than
90 days nor more than 120 days prior to the
anniversary date of the immediately preceding annual meeting and
must contain specified information concerning the matters to be
brought before such meeting and concerning the stockholder
proposing such matters. Therefore, to be presented at the
Company’s 2012 Annual Meeting, such a proposal must be
received by the Company on or after January 20, 2012 but no
later than February 19, 2012. If the date of the annual
meeting is more than 30 days earlier or more than
60 days later than such anniversary date, notice must be
received not earlier than the 120th day prior to such
annual meeting and not later than the close of business on the
later of the 90th day prior to such annual meeting or the
10th day following the day on which public announcement of
the date of such meeting is first made.
If a stockholder who has notified the Company of his intention
to present a proposal at an annual meeting does not appear or
send a qualified representative to present his proposal at such
meeting, the Company need not present the proposal for a vote at
such meeting.
Submitting Director Recommendations to the Nominating and
Governance Committee. If a stockholder would
like the Nominating and Governance Committee to consider an
individual as a candidate for election to the Board of
Directors, the stockholder must submit a proper and timely
request as follows:
Timing. The stockholder should
notify the Nominating and Governance Committee by no later than
September 1 of the year prior to the annual stockholders meeting
at which the candidate would seek to be elected.
Information. In notifying the
Committee, the stockholder should provide the following
information to the Committee:
•
The name and the address of the stockholder making the
submission and the name, address, telephone number and social
security number of the candidate to be considered.
•
The class or series and number of shares of the Company’s
stock that are beneficially owned by the stockholder making the
submission, including a reasonably detailed description of
derivative contracts, derivative securities or derivative
transactions to which such stockholder is a party and impact
such stockholder’s economic interest in the Company’s
securities or any other proxy, contract, arrangement or
understanding to which such stockholder has or may have a right
or has or may have granted a right to vote any shares of the
Company’s securities, a description of all arrangements or
understandings between the stockholder and the candidate, and an
executed written consent of the candidate to serve as a director
of the Company if so elected.
•
A copy of the candidate’s resume and references.
•
An analysis of the candidate’s qualifications to serve on
the Board of Directors and on each of the Board’s
committees in light of the criteria set forth in the by-laws,
Corporate Governance Policy, and the Policy Statement Regarding
Director Nominations (including all regulatory requirements
incorporated by references therein).
Address. The foregoing
information should be submitted to the Nominating and Governance
Committee through the Corporate Secretary, Time Warner Cable
Inc., 60 Columbus Circle, New York, New York10023.
The Committee has a policy of applying the same criteria in
reviewing candidates proposed by stockholders as it employs in
reviewing candidates proposed by any other source.
Stockholder Nominations Submitted to
Stockholders.The Company’s by-laws
provide that stockholders may nominate persons for election as
directors at the Company’s stockholders meeting by giving
timely written notice to the Company containing required
information. The Company’s by-laws require that, to be
timely and proper, notice of a nomination by a stockholder must
be delivered to or mailed to and received at the Company’s
principal executive offices as follows:
Annual Stockholders Meetings. For elections to be
held at an annual meeting of the stockholders, at least
90 days and no more than 120 days before the first
anniversary of the date of the annual meeting of stockholders
for the prior year. If the date of the annual meeting is more
than 30 days earlier or more than 60 days later than
such anniversary date, notice by the stockholder must be
delivered or received no earlier than the 120th day before
the annual meeting and no later than the close of business on
the later of the 90th day prior to the annual meeting or
the 10th day after the day on which the date of such
meeting is first publicly announced.
Special Stockholders Meetings. For elections that
are going to take place at a special meeting of the
stockholders, no earlier than the 90th day before the
special meeting and no later than the close of business on the
later of the 60th day before the special meeting or the
10th day after the day on which the date of the special
meeting and the names of the nominees to be elected at the
meeting are first publicly announced.
Other Circumstances. Additionally, if the number
of directors to be elected to the Board at an annual meeting of
the stockholders is increased and there is no public
announcement naming all of the nominees for directors or
specifying the size of the increased Board at least 90 days
before the first anniversary of the date of the prior
year’s annual meeting, a stockholder’s notice will
also be timely with respect to nominees for any new positions if
it is delivered to or mailed to and received by the Company not
later than the 10th day after the public announcement is
made.
Information. The notice must contain prescribed
information about the proponent and each nominee, including the
information about the nominee that would have been required to
be included in a proxy statement filed under SEC rules had such
nominee been nominated by the Board of Directors.
Address. All notices of proposals by
stockholders, whether or not to be included in the
Company’s proxy materials, should be sent to the attention
of the Corporate Secretary of the Company at 60 Columbus Circle,
New York, New York10023.
The Company’s Independent Directors have approved a process
for stockholders to communicate with directors. Pursuant to that
process, stockholders, employees and others interested in
communicating with the CEO, the Board’s only employee
director, should write to the address below:
Glenn A. Britt
Chairman and Chief Executive Officer
Time Warner Cable Inc.
60 Columbus Circle New York, New York10023
Those interested in communicating directly with the Board, any
of the Board’s committees, the non-employee directors as a
group or any individual non-employee director should write to
the address below:
[Name of Addressee]
c/o Corporate
Secretary
Time Warner Cable Inc.
60 Columbus Circle New York, New York10023
The Board of Directors does not currently know of any other
matters to be presented at the Annual Meeting. If any additional
matters are properly presented, the persons named in the proxy
will have discretion to vote in accordance with their own
judgment on such matters.
The purpose of the Plan is to aid the Company and its Affiliates
in recruiting and retaining employees, directors and advisors
and to motivate such employees, directors and advisors to exert
their best efforts on behalf of the Company and its Affiliates
by providing incentives through the granting of Awards. The
Company expects that it will benefit from the added interest
which such employees, directors and advisors will have in the
welfare of the Company as a result of their proprietary interest
in the Company’s success.
2.
Definitions
The following capitalized terms used in the Plan have the
respective meanings set forth in this Section:
(a) “Act” means The Securities
Exchange Act of 1934, as amended, or any successor thereto.
(b)
“Affiliate” means any entity that is
consolidated with the Company for financial reporting purposes
or any other entity designated by the Board in which the Company
or an Affiliate has a direct or indirect equity interest of at
least twenty percent (20%), measured by reference to vote or
value.
(c)
“Award” means an Option, Stock
Appreciation Right, RSU, Restricted Stock or Other Stock-Based
Award, including any Full-Value Award and Option-Type Award,
granted pursuant to the Plan.
(d) “Board” means the Board of
Directors of the Company.
(e) “Change in Control” means the
occurrence of any of the following events:
(i) any “Person” within the meaning of
Section 13(d)(3) or 14(d)(2) of the Act (other than the
Company or any company owned, directly or indirectly, by the
stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company) becomes
the “Beneficial Owner” within the meaning of
Rule 13d-3
promulgated under the Act of 30% or more of the combined voting
power of the then outstanding securities of the Company entitled
to vote generally in the election of directors,
excluding, however, any circumstance in which such
beneficial ownership resulted from any acquisition by an
employee benefit plan (or related trust) sponsored or maintained
by the Company or by any entity controlling, controlled by, or
under common control with, the Company;
(ii) a change in the composition of the Board since the
Effective Date, such that the individuals who, as of such date,
constituted the Board (the “Incumbent
Board”) cease for any reason to constitute at least
a majority of such Board; provided that any individual
who becomes a director of the Company subsequent to the
Effective Date whose election, or nomination for election by the
Company’s stockholders, was approved by the vote of at
least a majority of the directors then comprising the Incumbent
Board shall be deemed a member of the Incumbent Board; and
provided further, that any individual who was initially
elected as a director of the Company as a result of an actual or
threatened election contest, as such terms are used in
Rule 14a-12
of Regulation 14A promulgated under the Act, or any other
actual or threatened solicitation of proxies or consents by or
on behalf of any person or Entity other than the Board shall not
be deemed a member of the Incumbent Board;
(iii) a reorganization, recapitalization, merger or
consolidation (a “Corporate
Transaction”) involving the Company, unless
securities representing more than 50% of the combined voting
power of the then outstanding voting securities entitled to vote
generally in the election of directors of the Company or the
corporation resulting from such Corporate Transaction (or the
parent of such corporation) are held subsequent to such
transaction by the person or persons who were the
beneficial holders of the outstanding voting securities entitled
to vote generally in the election of directors of the Company
immediately prior to such Corporate Transaction, in
substantially the same proportions as their ownership
immediately prior to such Corporate Transaction; or
(iv) the sale, transfer or other disposition of all or
substantially all of the assets of the Company.
(f)
“Code” means the Internal Revenue Code
of 1986, as amended, or any successor thereto.
(g)
“Committee” means the Compensation
Committee of the Board or its successor, or such other committee
of the Board to which the Board has delegated power to act under
or pursuant to the provisions of the Plan or a subcommittee of
the Compensation Committee (or such other committee) established
by the Compensation Committee or such other committee.
(h) “Company” means Time Warner
Cable Inc., a Delaware corporation.
(i) “Effective Date” means the date
the Company’s stockholders approve the Plan.
(j)
“Fair Market Value” means, on a given
date, (i) if there should be a public market for the Shares
on such date, the closing price of the Shares on the New York
Stock Exchange, or, if the Shares are not listed or admitted on
any national securities exchange, the average of the per Share
closing bid price and per Share closing asked price on such date
as quoted on the National Association of Securities Dealers
Automated Quotation System (or such market in which such prices
are regularly quoted) (the “NASDAQ”), or, if no sale
of Shares shall have been reported on the New York Stock
Exchange or quoted on the NASDAQ on such date, then the
immediately preceding date on which sales of the Shares have
been so reported or quoted shall be used, and (ii) if there
should not be a public market for the Shares on such date, the
Fair Market Value shall be the value established by the
Committee in good faith.
(k)
“Full-Value Award” means a Restricted
Stock, RSU or Other Stock-Based Award the value of which is
equal to the Fair Market Value of a Share rather than related to
the appreciation in the Fair Market Value of a Share.
(l)
“Full-Value Limit” has the meaning set
forth in Section 3(a).
(m)
“ISO” means an Option that is also an
incentive stock option granted pursuant to Section 6(e).
(n)
“Option” means a stock option granted
pursuant to Section 6.
(o)
“Option Price” means the price for which
a Share can be purchased upon exercise of an Option, as
determined pursuant to Section 6(b).
(p)
“Option-Type Award” means an Option,
Stock Appreciation Right or Other Stock Based Award the value of
which is related to the appreciation in the Fair Market Value of
a Share.
(q)
“Other Stock-Based Awards” means Awards
granted pursuant to Section 10.
(r)
“Participant” means an employee,
prospective employee, director or advisor of the Company or an
Affiliate who is selected by the Committee to participate in the
Plan.
(s)
“Performance-Based Awards” means certain
Awards granted pursuant to Section 11.
(t)
“Plan” means the Time Warner Cable Inc.
2011 Stock Incentive Plan, as amended from time to time.
(u)
“Restricted Stock” means any Share
granted under Section 9.
(v)
“RSU” means a restricted stock unit
award granted pursuant to Section 8.
(w)
“Section 162(m)” means
Section 162(m) of the Code and the Department of Treasury
regulations and other interpretive guidance issued thereunder,
or any successor thereto.
“Share Authorization” means the number
of Shares available under the Plan as set forth in
Section 3, as such authorization may be increased,
decreased or otherwise adjusted pursuant to the terms of the
Plan.
(y)
“Shares” means shares of Common Stock of
the Company, $.01 par value per share.
(z)
“Stock Appreciation Right” means a stock
appreciation right granted pursuant to Section 7.
(aa)
“Subsidiary” means a subsidiary
corporation, as defined in Section 424(f) of the Code (or
any successor section thereto), of the Company.
(bb) “Substitute Award” has the
meaning set forth in Section 4(c).
3.
Shares Subject
to the Plan
(a)
Authorized Shares. The total number of Shares
issued under the Plan shall not exceed 20,000,000 Shares,
as such authorization may be increased, decreased or otherwise
adjusted pursuant to the terms of the Plan (the “Share
Authorization”).
Option-Type Awards: Any Shares subject to an
Option-Type Awards granted under the Plan shall be counted
against the Share Authorization as one Share for every one Share
subject to such Option-Type Award. Any Option-Type Award payable
solely in cash shall not be counted against the Share
Authorization. If an Option-Type Award that could be settled in
either cash or Shares is ultimately settled in cash, then the
unissued Shares subject to such Option-Type Award shall again be
available under the Plan. If an Option-Type Award granted under
the Plan expires, terminates or is canceled, the unissued Shares
subject to such Option-Type Award shall again be available under
the Plan.
Full-Value Awards: Any Shares subject to a
Full-Value Award granted under the Plan shall be counted against
the Share Authorization as one Share for every one Share so
subject. However, if the aggregate number of Shares subject to
Full-Value Awards granted under the Plan exceeds the Full-Value
Limit (as defined below), any Shares subject to those Awards in
excess of the Full-Value Limit shall be deducted against the
Share Authorization as 3.05 Shares for every one Share so
subject. Any Full-Value Award payable solely in cash shall not
be counted against the Share Authorization. If (i) a
Full-Value Award that could be settled in either cash or Shares
is ultimately settled in cash or (ii) a Full-Value Award is
forfeited to the Company, the Shares subject to such Full-Value
Award shall again be available under the Plan, with the
corresponding increase in the Share Authorization determined in
the same manner as the original deduction from the Share
Authorization (i.e., either
one-for-one
or 3.05 for one).
Full-Value Limit: The “Full-Value
Limit” shall equal 9,000,000 Shares.
Share Withholding: Shares subject to Awards
that are used by a Participant as full or partial payment of
withholding or other taxes or as payment for the exercise or
conversion price of an Award under the Plan shall not again
become available for Awards pursuant to the Share Authorization
under the Plan.
(b)
Annual Per Person Limit. The maximum number of
Shares with respect to which Awards may be granted during a
calendar year to any Participant under this Plan (together with
awards during such year under any other stock incentive plan of
the Company) shall be 1,500,000; provided, however, that each
Share covered by a Full-Value Award shall be counted against
this annual per person limit as 3.05 Shares. The foregoing
maximum shall apply regardless of whether an Award is ultimately
to be settled in Shares or in cash or in another form of
consideration. Shares subject to Substitute Awards shall not be
applied against this limit except to the extent required under
Section 162(m) for such Awards to be
“performance-based” compensation.
(c)
Vesting Period Requirements. Ninety-five
percent or more of the aggregate number of Shares available
under the Share Authorization shall be subject to Awards that
vest over a period of at least three years from the date of
grant, subject to accelerated vesting in whole or in part in the
event of a
Change in Control or death, disability or other termination of
the Participant’s employment. Accordingly, up to five
percent of the aggregate number of Shares available under the
Share Authorization may be subject to Awards that have a vesting
period of less than three years from the date of grant.
Furthermore, the following Awards shall be deemed to satisfy the
three-year vesting requirement: (i) Awards made to
non-employee members of the Company’s Board,
(ii) Performance-Based Awards and other Awards with
performance-based vesting conditions, and (iii) Substitute
Awards, provided that in the case of Substitute Awards
that are made in substitution for outstanding Awards previously
granted by the Company or its Affiliates, the aggregate vesting
period for the Substitute Awards and the Awards previously
granted must satisfy the three-year vesting period requirement
of this paragraph. Performance-Based Awards and any other Awards
with performance-based vesting conditions must have a
performance period of at least one year.
4.
Administration
(a)
The Plan shall be administered by the Committee, which may
delegate its duties and powers in whole or in part to any
subcommittee thereof consisting solely of at least two
individuals who are intended to qualify as “independent
directors” within the meaning of the New York Stock
Exchange listed company rules (to the extent required),
“Non-Employee Directors” within the meaning of
Rule 16b-3
under the Act (or any successor rule thereto) and, to the extent
required by Section 162(m), “outside directors”
within the meaning thereof. In addition, the Committee may
delegate the authority to grant Awards under the Plan to any
employee or group of employees of the Company or an Affiliate;
provided that such grants are consistent with guidelines
established by the Committee from time to time.
(b)
The Committee shall have the full power and authority to make,
and establish the terms and conditions of, any Award to any
person eligible to be a Participant, consistent with the
provisions of the Plan and to waive any such terms and
conditions at any time (including, without limitation,
accelerating or waiving any vesting conditions).
(c)
Subject to the restrictions on “repricing” set forth
in Section 5, Awards may, in the discretion of the
Committee, be made under the Plan in assumption of, or in
substitution for, outstanding Awards previously granted by the
Company or its Affiliates or awards previously granted by a
company acquired by the Company or any of its Affiliates or with
which the Company or any of its Affiliates combines (whether in
connection with a corporate transaction, such as a merger,
combination, consolidation or acquisition of property or stock
or otherwise) (“Substitute Awards”). The number of
Shares subject to Substitute Awards granted in substitution of
the awards of an acquired company or a company with which the
Company or any of its Affiliates combines shall not be counted
against the Share Authorization under the Plan.
(d)
The Committee is authorized to interpret the Plan, to establish,
amend and rescind any rules and regulations relating to the
Plan, and to make any other determinations that it deems
necessary or desirable for the administration of the Plan, and
may delegate such authority, as it deems appropriate. The
Committee may correct any defect or supply any omission or
reconcile any inconsistency in the Plan in the manner and to the
extent the Committee deems necessary or desirable. Any decision
of the Committee in the interpretation and administration of the
Plan, as described herein, shall lie within its sole and
absolute discretion and shall be final, conclusive and binding
on all parties concerned (including, but not limited to,
Participants and their beneficiaries or successors).
(e)
The Committee shall require payment of any amount it may
determine to be necessary to withhold for federal, state, local
or other taxes as a result of the exercise, grant, vesting or
payout of an Award and may, in its discretion, establish payment
methods therefor, including, without limitation, delivery or
withholding of Shares.
(f)
The Committee may, in its discretion, provide in the applicable
Award agreement for the payment of dividends or dividend
equivalents with respect to the Award, which may be paid
directly to the Participant, withheld by the Company subject to
vesting of the underlying Award or treated as
reinvested in additional Full-Value Awards or Option-Type
Awards, as determined by the Committee in its sole discretion in
addition to any other terms and conditions thereof as set forth
in the applicable Award agreement.
(g)
The Committee may determine in its discretion the manner of
delivery of Shares to be issued under the Plan, which may be by
delivery of stock certificates, electronic account entry into
new or existing accounts or any other means as the Committee, in
its discretion, deems appropriate. The Committee may take such
steps as it deems necessary or advisable to restrict transfer of
the Shares issuable in connection with Awards under the Plan
whether issued in certificated or electronic format.
5.
Repricing
Prohibited
Other than with the approval of the Company’s stockholders,
no Option, Stock Appreciation Right or other Option-Type Award,
once granted hereunder, may be repriced, including through
amendment, cancellation in exchange for the grant of a
Substitute Award or repurchase for cash or other consideration
(in each case that has the effect of reducing the exercise price
thereof) or that would otherwise cause a modification of such
Award in a manner that would be treated as a
“repricing” under the then applicable rules,
regulations or listing requirements adopted by the New York
Stock Exchange. Notwithstanding the foregoing, adjustments and
Substitute Awards that preserve the existing intrinsic value of
similar types of awards pursuant to the provisions of
Section 4(c) and Section 12 shall not be treated as
prohibited repricings.
6.
Options
(a)
Grants. Options granted under the Plan shall
be, as determined by the Committee, nonqualified or ISOs for
federal income tax purposes, as evidenced by the related Award
agreements, and shall be subject to the foregoing and the terms
and conditions specified in this Section 6 and to such
other terms and conditions, not inconsistent therewith, as the
Committee shall determine, and as evidenced by the related Award
agreement.
(b)
Option Price. The Option Price per Share shall
be determined by the Committee, but shall not be less than 100%
of the Fair Market Value of a Share on the date an Option is
granted, except as may be provided pursuant to Section 12
or with respect to a Substitute Award in order to preserve the
existing intrinsic value of similar types of awards.
(c)
Exercisability. Options granted under the Plan
shall be exercisable at such time and upon such terms and
conditions as may be determined by the Committee, but in no
event shall an Option be exercisable more than ten years after
the date it is granted, except as may be provided pursuant to
Section 17.
(d)
Exercise of Options. Except as otherwise
provided in the Plan or in an Award agreement, an Option may be
exercised for all, or from time to time any part, of the Shares
for which it is then exercisable. For purposes of this
Section 6, the exercise date of an Option shall be the date
a notice of exercise is received by the Company, together with
provision for payment of the full purchase price in accordance
with this Section 6(d). The purchase price for the Shares
as to which an Option is exercised shall be paid to the Company
in cash or its equivalent (e.g., by check) or, in the
Committee’s discretion, pursuant to one or more of the
following methods: (i) in Shares having a Fair Market Value
equal to the aggregate Option Price for the Shares being
purchased and satisfying such other requirements as may be
imposed by the Committee; provided that such Shares have
been held by the Participant for such period as may be
established from time to time by the Committee, if necessary, to
comply with applicable law and avoid adverse accounting
treatment under generally accepted accounting principles);
(ii) if there is a public market for the Shares at such
time, (x) through the delivery of irrevocable instructions
to a broker to sell Shares obtained upon the exercise of the
Option and to deliver promptly to the Company an amount out of
the proceeds of such Sale or (y) using a net share
settlement procedure or through the withholding of Shares
subject to the Option, in each case, with a value equal to the
aggregate Option Price for the Shares
purchased; (iii) any other form of consideration approved
by the Committee and permitted by applicable law; and
(iv) any combination of the foregoing. No Participant shall
have any rights to dividends or other rights of a stockholder
with respect to Shares subject to an Option until the Shares are
issued to the Participant.
(e)
ISOs. The Committee may grant Options under
the Plan that are intended to be ISOs. Such ISOs shall comply
with the requirements of Section 422 of the Code. No ISO
may be granted to any Participant who at the time of such grant,
owns more than ten percent of the total combined voting power of
all classes of stock of the Company or of any Subsidiary, unless
(i) the Option Price for such ISO is at least 110% of the
Fair Market Value of a Share on the date the ISO is granted and
(ii) the date on which such ISO terminates is a date not
later than the day preceding the fifth anniversary of the date
on which the ISO is granted. Any Participant who disposes of
Shares acquired upon the exercise of an ISO either
(i) within two years after the date of grant of such ISO or
(ii) within one year after the transfer of such Shares to
the Participant, shall notify the Company of such disposition
and of the amount realized upon such disposition. All Options
granted under the Plan are intended to be nonqualified stock
options, unless the applicable Award agreement expressly states
that the Option is intended to be an ISO. If an Option is
intended to be an ISO, and if for any reason such Option (or
portion thereof) shall not qualify as an ISO, then, to the
extent of such non-qualification, such Option (or portion
thereof) shall be regarded as a nonqualified stock option
granted under the Plan; provided that such Option (or
portion thereof) otherwise complies with the Plan’s
requirements relating to nonqualified stock options. In no event
shall any member of the Committee, the Company or any of its
Affiliates (or their respective employees, officers or
directors) have any liability to any Participant (or any other
person) due to the failure of an Option to qualify for any
reason as an ISO.
(f)
Attestation. Wherever in this Plan or any
agreement evidencing an Award a Participant is permitted to pay
the exercise price of an Option or taxes relating to the
exercise of an Option by delivering Shares, the Participant may,
subject to procedures satisfactory to the Committee, satisfy
such delivery requirement by presenting proof of beneficial
ownership of such Shares, in which case the Company shall treat
the Option as exercised without further payment
and/or shall
withhold such number of Shares from the Shares acquired by the
exercise of the Option, as appropriate.
7.
Stock
Appreciation Rights
(a)
Grants. The Committee may grant (i) a
Stock Appreciation Right independent of an Option or (ii) a
Stock Appreciation Right in connection with an Option, or a
portion thereof. A Stock Appreciation Right granted pursuant to
clause (ii) of the preceding sentence (A) may be
granted at the time the related Option is granted or at any time
prior to the exercise or cancellation of the related Option,
(B) shall cover the same number of Shares covered by an
Option (or such lesser number of Shares as the Committee may
determine) and (C) shall be subject to the same terms and
conditions as such Option except for such additional limitations
as are contemplated by this Section 7 (or such additional
limitations as may be included in an Award agreement).
(b)
Terms. The exercise price per Share of a Stock
Appreciation Right shall be determined by the Committee, but
shall not be less than 100% of the Fair Market Value of a Share
on the date a Stock Appreciation Right is granted, except as may
be provided pursuant to Section 12 or with respect to a
Substitute Award in order to preserve the existing intrinsic
value of similar types of awards; provided,
however, that notwithstanding the foregoing, in the case
of a Stock Appreciation Right granted in conjunction with an
Option, or a portion thereof, the exercise price may not be less
than the Option Price of the related Option. Each Stock
Appreciation Right granted independent of an Option shall
entitle a Participant upon exercise to an amount equal to
(i) the excess of (A) the Fair Market Value on the
exercise date of one Share over (B) the exercise price per
Share, times (ii) the number of Shares covered by the Stock
Appreciation Right. Each Stock Appreciation Right granted in
conjunction with an Option, or a portion thereof, shall entitle
a Participant to surrender to the Company the unexercised
Option, or any portion thereof, and to receive from the Company
in
exchange therefor an amount equal to (i) the excess of
(A) the Fair Market Value on the exercise date of one Share
over (B) the Option Price per Share, times (ii) the
number of Shares covered by the Option, or portion thereof,
which is surrendered. Payment shall be made in Shares or in
cash, or partly in Shares and partly in cash (any such Shares
valued at such Fair Market Value), all as shall be determined by
the Committee. Stock Appreciation Rights may be exercised from
time to time upon actual receipt by the Company of written
notice of exercise stating the number of Shares with respect to
which the Stock Appreciation Right is being exercised. The date
a notice of exercise is received by the Company shall be the
exercise date. No fractional Shares will be issued in payment
for Stock Appreciation Rights, but instead cash will be paid for
a fraction or, if the Committee should so determine, the number
of Shares will be rounded downward to the next whole Share. No
Participant shall have any rights to dividends or other rights
of a stockholder with respect to Shares covered by Stock
Appreciation Rights until the Shares are issued to the
Participant.
(c)
Limitations. The Committee may impose, in its
discretion, such conditions upon the exercisability of Stock
Appreciation Rights as it may deem fit, but in no event shall a
Stock Appreciation Right be exercisable more than ten years
after the date it is granted, except as may be provided pursuant
to Section 17.
8.
Restricted
Stock Units
(a)
Grants. RSUs granted under the Plan shall
create a contractual right granted to a Participant pursuant to
this Section 8 to receive, in the discretion of the
Committee, Shares, a cash payment equal to the Fair Market Value
of a Share, such other amount or securities designated by the
Committee, or a combination thereof, subject to the terms and
conditions set forth in the Plan and in the applicable Award
agreement.
(b)
Terms. Subject to the provisions of the Plan,
the Committee shall determine the number of RSUs to be awarded
to a Participant and the number of Shares covered by (or
otherwise related to) such RSUs, the duration of the period
during which, and the conditions, if any, under which, the right
to distribution of the RSUs may be forfeited to the Company, and
the other terms and conditions of such Awards (including without
limitation, provisions ensuring that all Shares issued in
connection with the RSUs shall be fully paid and non-assessable).
(c)
No Rights as a Stockholder. Subject to the
provisions of the applicable Award agreement, the Participant
shall not have any rights as a stockholder with respect to the
Shares subject to the RSU Award until such time as Shares are
delivered to the Participant pursuant to the terms of the Award
agreement.
(d)
Dividend Equivalents. The Committee may, in
its discretion, provide for the payment of dividend equivalents
with respect to the RSUs, which may be paid directly to the
Participant, accrued and paid by the Company at such time or
times specified in the applicable Award agreement, or treated as
reinvested in additional RSUs, or a combination thereof, as
determined by the Committee in its sole discretion.
9.
Restricted
Stock
(a)
Grants. Subject to the provisions of the Plan,
the Committee shall determine the number of Shares of Restricted
Stock to be granted to each Participant, the duration of the
period during which, and the conditions, if any, under which,
the Restricted Stock may be forfeited to the Company, and the
other terms and conditions of such Awards (including, without
limitation, provisions ensuring that all Shares so awarded and
issued shall be fully paid and non-assessable).
(b)
Transfer Restrictions. Shares of Restricted
Stock may not be sold, assigned, transferred, pledged or
otherwise encumbered, except as provided in the Plan or the
applicable Award agreement. Certificates, or other evidence of
ownership, issued in respect of Shares of Restricted Stock shall
be registered in the name of the Participant and deposited by
such Participant, together with a stock
power endorsed in blank, with the Company. After the lapse of
the restrictions applicable to such Shares of Restricted Stock,
the Company shall deliver such certificates, or other evidence
of ownership, to the Participant or the Participant’s legal
representative.
(c)
Dividends. Dividends paid on any Shares of
Restricted Stock may be paid directly to the Participant,
withheld and paid by the Company at such time or times specified
in the applicable Award agreement, or reinvested in additional
Shares of Restricted Stock, or a combination thereof, as
determined by the Committee in its sole discretion.
10.
Other
Stock-Based Awards
The Committee, in its sole discretion, may grant or sell Awards
of Shares and Awards that are valued in whole or in part by
reference to, or are otherwise based on the Fair Market Value
of, Shares that are not Options, Stock Appreciation Rights, RSUs
or Restricted Stock (“Other Stock-Based Awards”),
including, without limitation, Shares awarded as a bonus and not
subject to any restrictions or conditions, Shares in payment of
the amount due under an incentive or performance plan sponsored
or maintained by the Company or an Affiliate, performance stock
units, dividend equivalent units, stock equivalent units and
deferred stock units. Such Other Stock-Based Awards shall be in
such form, and dependent on such conditions, as the Committee
shall determine, including, without limitation, the right to
receive, or vest with respect to, one or more Shares (or the
equivalent cash value of such Shares) upon the completion of a
specified period of service, the occurrence of an event
and/or the
attainment of performance objectives. Other Stock-Based Awards
may be granted alone or in addition to any other Awards granted
under the Plan. Subject to the provisions of the Plan, the
Committee shall determine the number of Shares to be awarded to
a Participant under (or otherwise related to) such Other
Stock-Based Awards; whether such Other Stock-Based Awards shall
be settled in cash, Shares or a combination of cash and Shares;
and all other terms and conditions of such Awards (including,
without limitation, the vesting provisions thereof, whether and
how dividend equivalents are paid, and provisions ensuring that
all Shares so awarded and issued shall be fully paid and
non-assessable).
11.
Performance-Based
Awards
(a)
Notwithstanding anything to the contrary herein, the Committee
may from time to time, in its sole discretion, determine that an
Award that would not otherwise qualify as
“performance-based compensation” under
Section 162(m) shall be made to so qualify by the
implementation of additional conditions to the grant, vesting,
exercisability
and/or other
right to receive the benefits of such Award. These conditions
shall be based, in whole or in part, on the attainment of
written performance goals, over a specified period and on such
other terms and conditions as the Committee, in its discretion,
may from time to time determine (such an Award, a
“Performance-Based Award”). The grant, vesting,
exercisability
and/or other
right to receive the benefits of such a Performance-Based Award
shall be determined based on the attainment of written
performance goals approved by the Committee for a performance
period of not less than one year established by the Committee
(i) while the outcome for that performance period is
substantially uncertain and (ii) no more than 90 days
after the commencement of the performance period to which the
performance goal relates or as otherwise required or permitted
by Section 162(m).
(b)
The performance goals, which must be objective, shall be based
upon one or more of the following criteria:
(i)
operating income;
(ii)
operating income before or after taxes, interest, depreciation
and/or
amortization, or any combination thereof (and including or
excluding capital expenditures);
(iii)
earnings before or after taxes, interest, depreciation
and/or
amortization;
return measures (including, but not limited to, return on
capital, invested capital, assets and equity);
(xii)
revenues, sales or product volume growth;
(xiii)
cash flow measures (including, but not limited to, cash flow,
free cash flow, cash provided by operating activities, operating
cash flow and cash flow return on capital);
(xiv)
margins;
(xv)
working capital and targets related thereto;
(xvi)
costs or expenses, any component thereof and targets related
thereto;
(xvii)
stock price (including, but not limited to, growth measures and
total stockholder return);
(xviii)
measures of economic value added;
(xix)
inventory control;
(xx)
enterprise value;
(xxi)
subscriber and unit-based metrics;
(xxii)
objective measures of customer satisfaction; and
(xxiii)
productivity improvement or operating efficiency-based metrics.
(c)
The foregoing criteria may relate to the Company, one or more of
its Affiliates or one or more of its or their divisions or
units, departments or functions, or any combination of the
foregoing, and may be applied on a per share or absolute basis
and/or
relative to one or more peer group companies or indices, or any
combination thereof, all as the Committee shall determine. In
addition, to the extent consistent with Section 162(m), the
Committee may provide at the time the performance goals are
established for such Performance-Based Awards that the manner in
which such performance criteria are to be calculated or measured
may take into account, or ignore, capital costs, interest,
taxes, depreciation and amortization and other factors over
which the Participant has no control or limited control
including restructurings, discontinued operations, impairments,
changes in foreign currency exchange rates, extraordinary items,
other unusual non-recurring items, industry margins, general
economic conditions, interest rate movements
and/or the
cumulative effects of tax or accounting changes in accordance
with U.S. generally accepted accounting principles.
(d)
If the Committee determines that a change in the business,
operations, corporate structure or capital structure of the
Company, or the manner in which it conducts its business, or
other events or circumstances render the foregoing performance
criteria to be unsuitable, the Committee may modify such
performance criteria or the related minimum acceptable level of
achievement, in whole or in part, as the Committee deems
appropriate and equitable; provided, however, that no such
modification shall be made if the effect would be to cause a
Performance-Based Award to fail to qualify for the
performance-based compensation exception to Section 162(m).
(e)
The Committee shall determine whether, with respect to a
performance period, the applicable performance goals have been
met with respect to a given Participant and, if they have, shall
so certify and ascertain the amount of the applicable
Performance-Based Award. No Performance-Based Awards will be
paid or granted for such performance period until such
certification is made by the
Committee. The amount of the Performance-Based Award actually
paid or granted to a given Participant may be less than the
amount determined by the applicable performance goal formula, at
the discretion of the Committee. A Participant may, if and to
the extent permitted by the Committee and consistent with the
provisions of Section 162(m) and Section 21 below,
elect to defer payment of a Performance-Based Award.
12.
Adjustments
Upon Certain Events
(a)
Generally. Notwithstanding any other
provisions in the Plan to the contrary, in the event of any
change in the outstanding Shares (including, without limitation,
the value thereof) after the Effective Date by reason of any
Share dividend or split, reorganization, recapitalization,
merger, consolidation, spin-off, combination, transaction or
exchange of Shares or other corporate exchange, or any
distribution to holders of Shares other than regular cash
dividends or any transaction similar to the foregoing, the
Committee in its sole discretion and without liability to any
person shall make such substitution or adjustment, if any, as it
deems to be equitable (subject to Section 21), as to
(i) the number or kind of Shares or other securities
authorized, issued or reserved for issuance pursuant to the Plan
or pursuant to outstanding Awards, (ii) the maximum number
of Shares for which Awards (including limits established for
Restricted Stock, RSUs, Other Stock-Based Awards or other
Full-Value Awards) may be granted during a calendar year to any
Participant, (iii) the Option Price or exercise price of
any outstanding Stock Appreciation Right, other Stock-Based
Award or other Option-Type Award, (iv) the Share
Authorization, the Full-Value Limit and other terms and
provisions set forth in Section 3
and/or
(v) any other affected terms of such Awards. The Committee
may grant Substitute Awards (including Stock Options, Stock
Appreciation Rights, Other Stock-Based Awards or other
Option-Type Awards) with a grant price that is less than the
Fair Market Value of a Share on the date of grant in order to
preserve existing intrinsic value under any similar type of
award previously granted by the Company or another entity to the
extent that the existing intrinsic value would otherwise be
diminished without payment of adequate compensation to the
holder thereof.
(b)
Change in Control. In the event of a Change in
Control after the Effective Date, the Committee may (subject to
Section 21), but shall not be obligated to,
(A) accelerate, vest or cause the restrictions to lapse
with respect to, all or any portion of an Award, (B) cancel
Awards for fair value (as determined in the sole discretion of
the Committee) which, in the case of Options, Stock Appreciation
Rights and other Option-Type Awards, may equal the excess, if
any, of the value of the consideration to be paid in the Change
in Control transaction to holders of the same number of Shares
subject to such Awards (or, if no consideration is paid in any
such transaction, the Fair Market Value of the Shares subject to
such Awards) over the aggregate exercise price of such Awards,
(C) provide for the issuance of Substitute Awards that will
substantially preserve the otherwise applicable terms of any
affected Awards previously granted hereunder as determined by
the Committee in its sole discretion or (D) provide that
for a period of at least 30 days prior to the Change in
Control, such Awards shall be exercisable as to all shares
subject thereto and that upon the occurrence of the Change in
Control, such Awards shall terminate and be of no further force
and effect.
13.
No Right
to Employment or Awards
The granting of an Award under the Plan shall impose no
obligation on the Company or any Affiliate to continue the
employment of a Participant and shall not lessen or affect the
Company’s or Affiliate’s right to terminate the
employment of such Participant. No Participant or other person
shall have any claim to be granted any Award, and there is no
obligation for uniformity of treatment of Participants, or
holders of Awards. The terms and conditions of Awards and the
Committee’s determinations and interpretations with respect
thereto need not be the same with respect to each Participant
(whether or not such Participants are similarly situated).
The Plan shall be binding on all successors and assigns of the
Company and a Participant, including without limitation, the
estate of such Participant and the executor, administrator or
trustee of such estate, or any receiver or trustee in bankruptcy
or representative of the Participant’s creditors.
15.
Non-transferability
of Awards
Unless otherwise determined by the Committee (and subject to the
limitation that in no circumstances may an Award be transferred
by the Participant for consideration or value), an Award shall
not be transferable or assignable by the Participant otherwise
than by will or by the laws of descent and distribution. An
Award exercisable after the death of a Participant may be
exercised by the legatees, personal representatives or
distributees of the Participant.
16.
Amendments
or Termination
The Board or the Committee may amend, alter or discontinue the
Plan, but no amendment, alteration or discontinuation shall be
made (a) without the approval of the stockholders of the
Company, (i) if such action would (except as is provided in
Section 12 of the Plan) increase the Share Authorization,
the Full-Value Limit, or the maximum number of Shares for which
Awards may be granted to any Participant pursuant to
Section 3(b), or shorten the vesting period requirements
for Awards or (ii) if such approval is required under
applicable law, rule, regulation or stock exchange listing
requirement, (b) without the consent of a Participant, if
such action would diminish any of the rights of the Participant
under any Award theretofore granted to such Participant under
the Plan or (c) to Section 5, relating to repricing of
Option-Type Awards, to permit such repricing without the prior
approval of the Company’s stockholders; provided,
however, that the Committee may amend the Plan in such
manner as it deems necessary to permit the granting of Awards
meeting the requirements of the Code or other applicable laws.
17.
International
Participants
With respect to Participants who reside or work outside the
United States of America and who are not (and who are not
expected to be) “covered employees” within the meaning
of Section 162(m), the Committee may, in its sole
discretion, amend the terms of the Plan or Awards with respect
to such Participants in order to conform such terms with the
requirements of local law or to obtain more favorable tax or
other treatment for a Participant, the Company or an Affiliate.
18.
Other
Benefit Plans
All Awards shall constitute a special incentive payment to the
Participant and shall not be taken into account in computing the
amount of salary or compensation of the Participant for the
purpose of determining any benefits under any pension,
retirement, profit-sharing, bonus, life insurance or other
benefit plan of the Company or under any agreement between the
Company and the Participant, unless such plan or agreement
specifically provides otherwise.
19.
Choice of
Law
The Plan shall be governed by and construed in accordance with
the laws of the State of New York without regard to conflicts of
laws, and except as otherwise provided in the pertinent Award
agreement, any and all disputes between a Participant and the
Company or any Affiliate relating to an Award shall be brought
only in a state or federal court of competent jurisdiction
sitting in Manhattan, New York.
20.
Effectiveness
and Duration of the Plan
The Plan shall be effective as of the Effective Date. No Award
may be granted under the Plan after the fifth anniversary of the
Effective Date, but Awards granted prior to such fifth
anniversary may extend beyond
that date. As of the Effective Date, no new Awards shall be
permitted to be granted under the Time Warner Cable Inc. 2006
Stock Incentive Plan, as amended.
21.
Section 409A
Awards issued under the Plan that are subject to
Section 409A of the Code are intended to comply with and
shall be interpreted in accordance with Section 409A and
Department of Treasury regulations and other interpretative
guidance issued thereunder, including without limitation any
such regulations or other guidance that may be issued after the
Effective Date. Notwithstanding any provision of the Plan to the
contrary, in the event that the Committee determines that any
amounts payable hereunder will be taxable to a Participant under
Section 409A of the Code and related Department of Treasury
guidance, prior to payment to such Participant of such amount,
the Company may (a) adopt such amendments to the Plan and
Awards and appropriate policies and procedures, including
amendments and policies with retroactive effect, that the
Committee determines necessary or appropriate to preserve the
intended tax treatment of the benefits provided by the Plan and
Awards hereunder
and/or
(b) take such other actions as the Committee determines
necessary or appropriate to avoid or limit the imposition of an
additional tax under Section 409A of the Code.
Proceed on I-77 South. Take Exit 1B off I-77 and merge onto
I-485 South toward Pineville. Proceed approximately 6 miles and
take Exit 61, the Johnston Road exit, and merge right onto
Johnston Road. At the first stoplight, turn left onto John J.
Delaney Drive and the Hotel will be on your left.
From the
South on Interstate 77:
Proceed on I-77 North. Take Exit 1 off I-77 and merge onto I-485
South toward Pineville. Proceed approximately 6 miles and take
Exit 61, the Johnston Road exit, and merge right onto Johnston
Road. At the first stoplight, turn left onto John J. Delaney
Drive and the Hotel will be on your left.
VOTE
BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting
instructions and for electronic delivery of
information up until 11:59 p.m. Eastern Time on
May 18, 2011. Have your proxy card in hand when
you access the web site and follow the
instructions to obtain your records and to create
an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by
our company in mailing proxy materials, you can
consent to receiving all future proxy statements,
proxy cards and annual reports electronically via
e-mail or the Internet. To sign up for electronic
delivery, please follow the instructions above to
vote using the Internet and, when prompted,
indicate that you agree to receive or access proxy
materials electronically in future years.
VOTE
BY PHONE - 1-800-690-6903
Use any touch-tone telephone to vote up until
11:59 p.m. Eastern Time on May 18, 2011. Have your
proxy card in hand when you call and then follow
the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it
in the postage-paid envelope we have provided or
return it to Vote Processing, c/o Broadridge, 51
Mercedes Way, Edgewood, NY11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
M33361-P05550
KEEP THIS PORTION FOR YOUR RECORDS
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
TIME WARNER CABLE INC.
The Board of Directors recommends a vote “FOR” the
following proposals:
1.
Election of Directors
For
Against
Abstain
Nominees:
1a
Carole Black
o
o
o
1b
Glenn A. Britt
o
o
o
1c
Thomas H. Castro
o
o
o
1d
David C. Chang
o
o
o
1e
James E. Copeland, Jr.
o
o
o
1f
Peter R. Haje
o
o
o
1g
Donna A. James
o
o
o
1h
Don Logan
o
o
o
1i
N.J. Nicholas, Jr.
o
o
o
For address change/comments, mark here.
(see reverse for instructions)
o
Please indicate if you plan to attend this meeting.
o
o
Yes
No
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator,
or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must
sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer.
For
Against
Abstain
1j Wayne H. Pace
o
o
o
1k Edward D. Shirley
o
o
o
1l John E. Sununu
o
o
o
For
Against
Abstain
2
Ratification of Independent Registered Public Accounting Firm
o
o
o
3
Approval of the Time Warner Cable Inc. 2011 Stock
Incentive Plan
o
o
o
4
Approval of the advisory resolution on executive compensation
o
o
o
The Board of Directors recommends you vote
for 1 YEAR on the following proposal:
1 Year
2 Years
3 Years
Abstain
5
Advisory vote on frequency of future advisory
votes on executive compensation
o
o
o
o
6
In their discretion, on such other matters as may properly
come before the meeting or any adjournment or
adjournments thereof.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.
M33362-P05550
PROXY
TIME WARNER CABLE INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
TIME WARNER CABLE INC. FOR THE ANNUAL MEETING OF STOCKHOLDERS MAY 19, 2011
The undersigned hereby acknowledges receipt of the Time Warner Cable Inc. Notice of Annual Meeting
and Proxy Statement and hereby constitutes and appoints Marc Lawrence-Apfelbaum, Ellen East and
Robert D. Marcus, and each of them, its true and lawful agents and proxies, with full power of
substitution in each, to attend the Annual Meeting of Stockholders of TIME WARNER CABLE INC. on
Thursday, May 19, 2011, and any adjournment thereof, and to vote on the matters indicated all the
shares of common stock that the undersigned would be entitled to vote if personally present.
PLEASE MARK, SIGN AND DATE THIS PROXY CARD ON THE REVERSE SIDE AND RETURN IT PROMPTLY USING THE
ENCLOSED REPLY ENVELOPE.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE BOARD OF DIRECTORS’ RECOMMENDATIONS.
Address Change/Comments:
(If you noted any Address Changes and/or Comments above, please mark corresponding box on the
reverse side.)
TIME WARNER CABLE INC. C/O TIME WARNER CABLE INC.
PO BOX 145430 CINCINNATI, OH45250-5430
You must provide instructions to the Trustee by
May 16, 2011 for your instructions to be
tabulated. You may issue instructions by telephone
or the Internet until 11:59 p.m. (Eastern Time) on
that day. If you are sending instructions by mail,
the Trustee must receive your executed instruction
card by 5:00 p.m. (Eastern Time) on May 16, 2011.
If you submit your instructions by telephone or
the Internet, there is no need to mail back your
instruction card.
If you do not provide
instructions to the Trustee, the Trustee will vote
your interests as required by the terms of the
Plan and described on the reverse side of the
card.
You may send your voting instructions to the
Trustee on the Internet, over the telephone or by
mail, as follows:
PROVIDE
VOTING INSTRUCTIONS BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting
instructions and for electronic delivery of
information up until 11:59 p.m. Eastern Time on
May 16, 2011. Have your voting instruction card in
hand when you access the web site and follow the
instructions to obtain your records and to create
an electronic voting instruction form.
PROVIDE
VOTING INSTRUCTIONS BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your
voting instructions up until 11:59 p.m. Eastern
Time on May 16, 2011. Have your voting instruction
card in hand when you call and then follow the
instructions.
PROVIDE VOTING INSTRUCTIONS BY MAIL
Mark, sign and date your voting instruction card
and return it in the postage-paid envelope we have
provided or return it to Vote Processing, c/o
Broadridge, 51 Mercedes Way, Edgewood, NY11717.
TO VOTE, MARK BLOCKS BELOW
IN BLUE OR BLACK INK AS FOLLOWS:
M33363-Z54668
KEEP THIS PORTION FOR YOUR RECORDS
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN
SIGNED AND DATED.
TIME WARNER CABLE INC.
The Board of Directors recommends a
vote “FOR” the following proposals:
1.
Election of Directors
Nominees:
For
Against
Abstain
1a
Carole Black
o
o
o
1b
Glenn A. Britt
o
o
o
For
Against
Abstain
1c
Thomas H. Castro
o
o
o
1j Wayne H. Pace
o
o
o
1d
David C. Chang
o
o
o
1k Edward D. Shirley
o
o
o
1e
James E. Copeland, Jr.
o
o
o
1l John E. Sununu
o
o
o
1f
Peter R. Haje
o
o
o
For
Against
Abstain
1g
Donna A. James
o
o
o
2
Ratification of Independent Registered Public Accounting Firm
o
o
o
1h
Don Logan
o
o
o
3
Approval of the Time Warner Cable Inc. 2011 Stock
Incentive Plan
o
o
o
1i
N.J. Nicholas, Jr.
o
o
o
4
Approval of the advisory resolution on executive compensation
o
o
o
For address change/comments, mark here.
(see reverse for instructions)
o
The Board of Directors recommends
you vote for 1 YEAR on the
following proposal:
1 Year
2 Years
3 Years
4 Years
Please indicate if you plan to attend this
meeting.
o
o
5
Advisory vote on frequency
of future advisory votes on
executive compensation
o
o
o
o
Yes
No
Please sign exactly as your name(s) appear(s) hereon.
When signing as attorney, executor, administrator, or
other fiduciary, please give full title as such. Joint
owners should each sign personally. All holders must
sign. If a corporation or partnership, please sign in
full corporate or partnership name, by authorized
officer.
6
To grant discretionary voting
authority to management persons
regarding such other matters as
may properly come before the
meeting or any adjournment or
adjournments thereof.
SUBMIT YOUR CONFIDENTIAL VOTING INSTRUCTIONS
BY TELEPHONE, INTERNET OR MAIL
TWC SAVINGS PLAN
M33364-Z54668
TIME WARNER CABLE INC.
CONFIDENTIAL VOTING INSTRUCTIONS
Instructions solicited by Fidelity Management Trust Company on behalf of the Board of
Directors for the Time Warner Cable Inc. Annual Meeting of Stockholders on May 19, 2011.
The undersigned hereby instructs Fidelity Management Trust Company (“Fidelity”), as Trustee, to
vote as follows by proxy at the Annual Meeting of Stockholders of Time Warner Cable Inc. to be held
on May 19, 2011, and at any adjournment thereof, the undersigned’s proportionate interest in the
shares of Time Warner Cable Inc. Common Stock held in the Time Warner Cable Inc. Stock Fund under
the TWC Savings Plan (the “Plan”).
Under the provisions of the Trust relating to the Plan, Fidelity, as Trustee, is required to
request your confidential instructions as to how your proportionate interests in the shares of Time
Warner Cable Inc. Common Stock held in the Time Warner Cable Inc. Stock Fund under the Plan (an
“interest”) is to be voted at the Annual Meeting of Stockholders scheduled to be held on May 19,2011. Your instructions to Fidelity will not be divulged or revealed to anyone at Time Warner Cable
Inc. If Fidelity does not receive your instructions on or prior to 5:00 p.m. (Eastern Time) via a
voting instruction card or 11:59 p.m. (Eastern Time) via telephone or the Internet on May 16, 2011,
your interest, if any, attributable to (a) accounts transferred from the Time Incorporated
Payroll-Based Employee Stock Ownership Plan (“PAYSOP”) will not be voted and (b) the remainder of
the Plan accounts, if any, will be voted at the Annual Meeting in the same proportion as other
participants’ interests in the Plan for which Fidelity has received voting instructions (excluding
any PAYSOP account).
Address Change/Comments
(If you noted any Address Changes and/or Comments above, please mark corresponding box on the
reverse side.)
Continued and to be signed on reverse side
Dates Referenced Herein and Documents Incorporated by Reference
![[MAP]](/DB/SEC/2011-000/0950/123-0334/04-021.gif "Graphic -- [MAP] -- g26709g2670919.gif")
