PSU
Agreement
Version 3 (PSU3)
For Use from February 2009
Performance
Stock Units Agreement
General
Terms and Conditions
WHEREAS,
the Company has adopted the Plan (as defined below), the terms of
which are hereby incorporated by reference and made a part of this
Agreement; and
WHEREAS,
the Committee has determined that it would be in the best interests
of the Company and its stockholders to grant the performance stock
units (the “ PSUs ”) provided for herein
to the Participant pursuant to the Plan and the terms set forth
herein.
NOW,
THEREFORE, in consideration of the mutual covenants hereinafter set
forth, the parties agree as follows:
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1.
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Definitions
. Whenever the following terms are used in this Agreement, they
shall have the meanings set forth below. Capitalized terms not
otherwise defined herein shall have the same meanings as in the
Plan.
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a)
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“ Adjusted EPS
” means the Adjusted Earnings Per Share of a company for a
designated period, generally a twelve-month period ending on a
specified date, as reported by Bloomberg. As described on Bloomberg
at February 6, 2009, this measure excludes the effects of
one-time and extraordinary gains/losses, including: realized
investment gains/losses, restructuring charges, non-recurring
charges/gains, unusual charges/gains, reserve charges, large
writedowns, spin-off/sell-off expenses, merger expenses,
acquisition charges, sale of subsidiary expenses, forgiveness of
debt, writedown of goodwill, ESOP charges, and acquired research
and development costs.
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b)
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“ Adjusted EPS Percentile ” means the
percentile rank of the Company’s growth in Adjusted EPS from
the beginning through the end of a specified measurement period
(generally the Performance Period) relative to the growth in
Adjusted EPS for the same period for each of the companies in the
S&P 500 Index (the “ Index ”) at the
beginning and throughout such measurement period; provided,
however , that for purposes of measuring the Adjusted EPS
Percentile, (i) the Index shall be deemed to include companies
that were removed from the S&P 500 Index during the measurement
period but that continued during the entire measurement period to
have their shares listed on at least one of the NYSE, NASDAQ,
American Stock Exchange, Boston Stock Exchange, Chicago Stock
Exchange, National Stock Exchange (formerly Cincinnati Stock
Exchange), NYSE Arca (formerly known as the Pacific Stock Exchange)
or Philadelphia Stock Exchange; and (ii) Time Warner Cable
Inc. shall not be considered to be part of the Index for
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measurement
purposes even if it is included in the S&P 500 Index during
some or all of the measurement period.
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c)
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“ Cause ”
means, “Cause” as defined in an employment agreement
between the Company or any of its Affiliates and the Participant
or, if not defined therein or if there is no such agreement,
“Cause” means (i) Participant’s continued
failure substantially to perform such Participant’s duties
(other than as a result of total or partial incapacity due to
physical or mental illness) for a period of ten (10) days
following written notice by the Company or any of its Affiliates to
the Participant of such failure, (ii) dishonesty in the
performance of the Participant’s duties,
(iii) Participant’s conviction of, or plea of nolo
contendere to, a crime constituting (A) a felony under the
laws of the United States or any state thereof or (B) a
misdemeanor involving moral turpitude,
(iv) Participant’s insubordination, willful malfeasance
or willful misconduct in connection with Participant’s duties
or any act or omission which is injurious to the financial
condition or business reputation of the Company or any of its
Affiliates, or (v) Participant’s breach of any
non-competition, non-solicitation or confidentiality provisions to
which the Participant is subject. The determination of the
Committee as to the existence of “Cause” will be
conclusive on the Participant and the Company.
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d)
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“ Disability ”
means, “Disability” as defined in an employment
agreement between the Company or any of its Affiliates and the
Participant or, if not defined therein or if there shall be no such
agreement, “disability” of the Participant shall have
the meaning ascribed to such term in the Company’s long-term
disability plan or policy, as in effect from time to
time.
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e)
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“ Division Change in Control ” means
(i) a transfer by the Company or any Affiliate of the
Participant’s Employment to a corporation, company or other
entity whose financial results are not consolidated with those of
the Company or (ii) a change in the ownership structure of the
Affiliate with which the Participant has Employment such that the
Affiliate’s financial results are no longer consolidated with
those of the Company.
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f)
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“ Good Reason ” means “Good
Reason” as defined in an employment agreement between the
Company or any of its Affiliates and the Participant or, if not
defined therein, “Good Reason” means the termination of
the Participant’s Employment by the Participant because of a
breach by the Company or any Affiliate of any employment agreement
to which the Participant is a party; provided , that
“Good Reason” will cease to exist for an event on the
sixtieth (60
th
) day following the later of its occurrence or the
Participant’s knowledge thereof, unless the Participant has
given the Company written notice of his or her termination of
employment for Good Reason prior to such date.
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g)
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“ Notice of Grant of Performance Stock Units
” means (i) the Notice of Grant of Performance Stock
Units that accompanies this Agreement, if this Agreement is
delivered to the Participant in “hard copy,” and
(ii) the screen of the website for the stock plan
administration with the heading “Vesting Schedule and
Details,”
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which contains the details of the grant governed by this Agreement,
if this Agreement is delivered electronically to the
Participant.
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h)
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“ Participant ” means an individual to
whom PSUs have been awarded pursuant to the Plan and shall have the
same meaning as may be assigned to the terms “Holder”
or “Participant” in the Plan.
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i)
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“ Performance Level ” means the level of
performance achieved by the Company during a measurement period
(generally, the Performance Period) based on the TSR Percentile and
the Adjusted EPS Percentile for such period, which shall determine
the percentage of Target PSUs that will vest, as set forth in
paragraph 4.
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j)
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“ Performance Period ” means the period
commencing and ending on the dates set forth in the Notice of Grant
of Performance Stock Units.
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k)
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“ Plan ”
means the equity plan maintained by the Company that is specified
in the Notice of Grant of Performance Stock Units, which has been
provided to the Participant separately and which accompanies and
forms a part of this Agreement, as such plan may be amended,
supplemented or modified from time to time.
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l)
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“ Retirement ” means a termination of
employment by the Participant (i) following the attainment of
age 55 with ten (10) or more years of service as an
employee or a director with the Company or any Affiliate or
(ii) pursuant to a retirement plan or early retirement program
of the Company or any Affiliate.
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m)
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“ Shares ” means shares of Common Stock
of the Company.
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n)
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“ Total Shareholder Return ” or “
TSR ” means a company’s total shareholder
return, calculated based on stock price appreciation during a
specified measurement period plus the value of dividends paid on
such stock during the measurement period (which shall be deemed to
have been reinvested in the underlying company’s stock
effective the “ex-dividend” date based on the closing
price for such company for purposes of measuring TSR).
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o)
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“ TSR Percentile ” means the percentile
rank of the TSR for the Shares during a specified measurement
period (generally the Performance Period) relative to the TSR for
each of the companies in the Index at the beginning and throughout
such measurement period; provided, however , that for
purposes of measuring the TSR Percentile, (i) the Index shall
be deemed to include companies that were removed from the S&P
500 Index during the measurement period but that continued during
the entire measurement period to have their shares listed on at
least one of the NYSE, NASDAQ, American Stock Exchange, Boston
Stock Exchange, Chicago Stock Exchange, National Stock Exchange
(formerly Cincinnati Stock Exchange), NYSE Arca (formerly known as
the Pacific Stock Exchange) or Philadelphia Stock Exchange;
(ii) Time Warner Cable Inc. shall not be considered to be part
of the Index for measurement purposes even if it is included in the
S&P 500 Index
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during some or all of the measurement period; and (iii) the
beginning and ending TSR values shall be calculated based on the
average of the closing prices of the applicable company’s
stock on the composite tape for the 30 trading days prior to and
including the beginning or ending date, as applicable, of the
measurement period.
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p)
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“ Vesting Date ” means the vesting date
set forth in the Notice of Grant of Performance Stock
Units.
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2.
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Grant of Performance Stock Units
. The Company hereby grants to the Participant (the “
Award ”), on the terms and conditions
hereinafter set forth, the target number of PSUs (the “
Target PSUs ”) set forth in the Notice. Each
PSU represents the unfunded, unsecured right of the Participant to
receive a Share on the date(s) specified herein, subject to
achievement of the relevant performance criteria. The Target PSUs
represent the number of PSUs that will vest on the Vesting Date if
the Company achieves the “Target” Performance Level for
the Performance Period, and the Participant remains in Employment
through the Vesting Date. PSUs do not constitute issued and
outstanding shares of Common Stock for any corporate purposes and
do not confer on the Participant any right to vote on matters that
are submitted to a vote of holders of Shares.
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3.
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Dividend Equivalents and Retained Distributions
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The Participant shall not be entitled to receive any dividend
equivalent payments and the PSUs shall not otherwise be credited or
adjusted to reflect any regular cash dividend on the Shares that is
paid while the PSUs are outstanding hereunder. If on any date while
PSUs are outstanding hereunder the Company shall pay any dividend
other than a regular cash dividend or make any other distribution
on the Shares, then, the Participant shall be credited with a
bookkeeping entry equivalent to such dividend or distribution for
each Target PSU held by the Participant on the record date for such
dividend or distribution, but the Company shall retain custody of
all such dividends and distributions (the “ Retained
Distributions ”) unless the Board has in its sole
discretion (and in a manner consistent with Section 19 of the
Plan) determined that an amount equivalent to such dividend or
distribution shall be paid currently to the Participant;
provided , however , that if the Retained
Distribution relates to a dividend paid in Shares, the Participant
shall receive an additional amount of PSUs (i.e., by increasing the
number of Target PSUs) equal to the product of (I) the
aggregate number of Target PSUs held by the Participant pursuant to
this Agreement through the related dividend record date, multiplied
by (II) the number of Shares (including any fraction thereof)
payable as a dividend on a Share. Retained Distributions will not
bear interest and will be subject to the same restrictions as the
PSUs to which they relate. Notwithstanding anything else contained
in this paragraph 3, no payment of Retained Distributions shall
occur before the first date on which a payment could be made
without subjecting the Participant to tax under the provisions of
Section 409A of the Internal Revenue Code of 1986, as amended
(the “ Code ”).
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4.
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Vesting and Delivery of Vested Securities
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a)
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Subject to the terms and provisions of the Plan and this Agreement,
on the Vesting Date, the Company shall issue or transfer to the
Participant the number of
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Shares
corresponding to the Performance Level achieved during the
Performance Period and the Retained Distributions, if any, covered
by the Award. Except as otherwise provided in paragraphs 5, 6 and
7, the vesting of such PSUs and any Retained Distributions relating
thereto shall occur only if the Participant has continued in
Employment of the Company or any of its Affiliates on the Vesting
Date and has continuously been so employed since the Date of Grant
(as defined in the Notice of Grant of Performance Stock Units). As
of the Vesting Date, a percentage (between 0% and 200%) of the
target number of PSUs shall vest as follows:
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(i)
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If the Company’s TSR Percentile for the Performance Period is
ranked at or above the 50
th
percentile, then the percentage of the target number of PSUs that
shall vest is based on the Company’s TSR Percentile during
the Performance Period, as indicated in the table below;
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(ii)
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If the Company’s TSR Percentile for the Performance Period is
ranked below the 50
th
percentile and the Adjusted EPS Percentile for the Performance
Period is ranked at or above the 50
th
percentile, then the percentage of the target number of PSUs that
shall vest is the average of (x) the percentage of the target
number of PSUs that would vest based on the Company’s TSR
Percentile during the Performance Period, as indicated in the table
below, and (y) 100%; and
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(iii)
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If the Company’s TSR Percentile for the Performance Period is
ranked below the 50
th
percentile and the Adjusted EPS Percentile for the
Performance
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