Form of 2006 Annual Award Agreement

Exhibit 10.1

EMBARQ CORPORATION 2006 EQUITY INCENTIVE PLAN

AWARD AGREEMENT

 

To:                                     (“You”  or the “Participant”) From:   
Embarq Corporation (the “Company”) Date:                            , 2006

Notice of Grant

Subject to the Embarq Corporation 2006 Equity Incentive Plan (the “Plan”) and
this Award Agreement, including Attachment A (the “Award Agreement”), the
Company is granting to you an award of Restricted Stock Units (“RSUs”) and Stock
Options (“Options”) under the Plan (this “Award”). The number of RSUs, the
number of Shares subject to Options, the Grant Date, the Regular Annual Grant
Date, and the settlement/vesting dates for such RSUs and Options, respectively,
are as follows:

GRANT OF RSUS

 

Grant Date:   

 

   Regular Annual Grant Date:    February 7, 2006    Total Number of RSUs:   

 1

   Settlement Dates:   

Date:

February 7, 2008

February 7, 2009

 

% of RSUs Settled:

50%

50%

  

GRANT OF STOCK OPTIONS

 

Grant Date:   

 

   Regular Annual Grant Date:    February 7, 2006    Strike Price:   

 

   Total Number of Shares Subject to Options:   

 

   Vesting Dates:   

Date:

February 7, 2007

February 7, 2008

February 7, 2009

 

Vested %:

34%

33%

33%

  

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1 Subject to adjustment as provided in Section 1 to Attachment A.

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Because this Award is subject to the Plan and this Award Agreement, you should
carefully read the Plan and this Award Agreement, including Attachment A, to
fully understand the terms of this Award. You may view a copy of the Plan on the
Company’s intranet at                      or you may obtain a copy of the Plan
by requesting it from the Company. Capitalized terms used in this Award
Agreement without definition have the meanings that they have in the Plan. You
acknowledge that the Plan’s Plan Information Statement dated May 2006 has been
made available to you on-line at                     . The terms of the Plan are
incorporated by reference. In the event of any inconsistency between this Award
Agreement and the Plan, the Plan governs.

General Terms

This Award Agreement is governed by the laws of the State of Delaware without
giving effect to the principles of the conflict of laws to the contrary. This
Award Agreement may be modified only by written instrument signed by you and the
Company; provided that this Award Agreement is subject to the power of the Board
to amend the Plan as provided in the Plan. Neither this Award Agreement, nor the
Award, may be transferred, sold, assigned, pledged or otherwise alienated or
hypothecated by you in any way other than by will, or by the laws of descent and
distribution. Except as specifically provided in this Award Agreement, this
Award Agreement binds and will inure to the benefit of the heirs, legal
representatives, successors and assigns of the Company and you. To properly
accept this Award Agreement, you must enter your Smith Barney trading PIN and
click the “Accept” button on the previous screen. Acceptances shall be made
electronically within 90 days of your receipt of this Award Agreement.

 

EMBARQ CORPORATION By:  

 

Name:   Claudia S. Toussaint Title:   Corporate Secretary

 

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(Attachment A)

SPECIFIC TERMS OF RSU AWARD

Section 1. Performance Adjustment and Dividend Equivalents.

Subject to the discretion of the Committee, the number of RSUs granted under
this Award may be adjusted by multiplying that number of RSUs set forth opposite
the heading “Total Number of RSUs” on page 1 of this Award Agreement by a payout
percentage (from 0% to 200%) based on achievement of financial objectives during
the 2006 calendar year relating to revenues and operating income before
depreciation and amortization (“OIBDA”) (the “Performance Adjustment”). The
Performance Adjustment will be made as soon as practicable after the end of the
2006 calendar year.

If the Company pays cash dividends on shares of its common stock while you hold
the RSUs, you will be entitled to a dividend equivalent payment equal to the per
share cash dividend paid on shares of the Company’s common stock multiplied by
the number of Shares underlying your RSUs. This dividend equivalent will be paid
to you as soon as practicable after the Performance Adjustment. This dividend
equivalent will be calculated by first adjusting your RSUs to reflect the
Performance Adjustment and then applying the per share cash dividend rate for
each dividend paid on shares of the Company’s common stock while you held the
RSUs (assuming you had been granted the RSUs by the applicable record date for a
particular dividend), as adjusted by the Performance Adjustment. After the
Performance Adjustment is made, if cash dividends are paid on the underlying
Shares, you will receive dividend equivalents for your RSUs held on the dividend
record date as soon as practicable after the cash dividends are paid. If
non-cash dividends are paid on the underlying Shares and you hold RSUs on the
dividend record date, the vesting and delivery date of the non-cash dividend
will be the same as the Settlement Date of the RSUs to which the underlying
Shares are attributable.

Section 2. Settlement of RSU Award.

Except as provided below, the Settlement Date for all or a portion of your RSU
Award will be the date on which that portion of your Award is settled as
indicated in the Settlement Dates section on page 1 of this Agreement. This RSU
Award may be settled by delivering to you or your Beneficiary, as applicable and
in the sole discretion of the Company, either (i) an amount of cash equal to the
Fair Market Value of a Share as of the Settlement Date, multiplied by the number
of Shares underlying the RSUs held by you (or a specified portion of your RSUs
in the event of any partial settlement), or (ii) a number of Shares equal to the
whole number of Shares underlying the RSUs then held by you (or a specified
portion of your RSUs in the event of any partial settlement). Before your
Termination Date, the Settlement Date of any unsettled RSUs will be (x) the date
you attain age 65, if your RSUs have been outstanding for at least one year from
the Regular Annual Grant Date; or (y) the first anniversary of the Regular
Annual Grant Date, if you are age 65 or older on that anniversary date. Any
remaining fractional Shares underlying your RSUs remaining on the Settlement
Date will be distributed to you in cash in an amount equal to the Fair Market
Value of a Share as of the Settlement Date, multiplied by the remaining
underlying fractional shares.

Section 3. Effect of Termination of Employment.

If you cease to be an employee of the Company for any reason, the effect of you
ceasing to be an employee on all or any RSUs which have not otherwise been
settled is as provided below.

 

  (a) Death or Disability. If you cease to be an employee on account of your
death or Disability, all RSUs shall be settled as of the date of your death or
Disability.

 

  (b) Resignation or Involuntary Termination. Except as provided below in
Section 3(c), if you cease to be an employee on account of your voluntary
resignation or your employment being involuntarily terminated by the Company,
whether or not constituting a Termination for Cause, all RSUs shall be cancelled
as of your Termination Date and you shall no longer have any rights or be
eligible to receive any benefits with respect to such cancelled RSUs.

 

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  (c) Change in Control. If (1) a Change in Control occurs before the Settlement
Date for all of your RSUs, (2) except as may otherwise be provided in your
employment agreement (if any), your employment is terminated by the Company in a
Termination without Cause within one year after the Change in Control, (3) you
have held the RSUs for more than one year from the Regular Annual Grant Date,
and (4) you have been actively and continuously employed (i.e., not on serial
severance) from the Grant Date to the date of the Change in Control, then all of
your RSUs which have not otherwise been settled will be settled as of your
Termination Date.

Nothing in this Section 3 restricts or otherwise interferes with the Company’s
discretion with respect to the termination of your employment with the Company.

SPECIFIC TERMS OF OPTIONS AWARD

Section 4. Nonqualified Stock Options.

The Options are not intended to qualify as “incentive stock options” within the
meaning of Section 422 of the Code, and shall not be so construed.

Section 5. Exercise of Options.

Your Options shall vest on the Vesting Dates shown opposite the heading “Vesting
Dates” on page 1 of this Award Agreement provided you have been actively and
continuously employed (i.e., not on serial severance)from the Grant Date to the
Vesting Date. To the extent vested, you may exercise your Options under this
Award in whole or in part at such time or times as permitted by the Plan and
this Award Agreement if the Options have not otherwise expired, been forfeited
or terminated. At the time of exercise, you may pay the exercise price in such
form or forms, including payment by delivery of cash, Shares or other
consideration (including, where permitted by law and the Committee, Awards)
having a Fair Market Value on the Exercise Date equal to the total exercise
price, or by any combination of cash, Shares and other consideration as the
Committee may permit.

Section 6. Expiration of Options.

Unless terminated earlier in accordance with the terms of this Award Agreement
or the Plan, the Options granted herein shall expire at          P.M., U.S.
Central Time, on the tenth (10th) Anniversary of the Regular Annual Grant Date
(the “Expiration Date”). In the event the Expiration Date is a Saturday, Sunday
or any other day which is a holiday of the United States Federal Government (a
“Non-Business Day”), then the Options granted herein shall expire, unless
earlier terminated in accordance with the terms of this Award Agreement or the
Plan, at 5:00 P.M., U.S. Central Time, on the first day that is not a
Non-Business Day (a “Business Day”) before such Expiration Date.

Section 7. Effect of Termination of Employment.

If you cease to be an employee of the Company for any reason, the effect of you
ceasing to be an employee on all or any Option portion of this Award is as
provided below. Notwithstanding anything below to the contrary, in no event may
the Options be exercised after the Expiration Date.

 

  (a) For Cause. If your employment is terminated by the Company in a
Termination for Cause, all Options granted pursuant to this Award Agreement will
immediately be forfeited as of such termination.

 

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  (b) Death.

 

  (i) Acceleration of Vesting. If you cease to be an employee on account of your
death, all of the Options, to the extent they have not otherwise expired, been
forfeited or terminated, will become fully exercisable upon your death.

 

  (ii) Period of Time to Exercise. If you cease to be an employee on account of
your death, all of your Options may be exercised by your designated beneficiary
at any time before          P.M., U.S. Central Time, on the 365th calendar day
following the date of your death. If such 365th day is not a Business Day, then
the Options shall remain exercisable until the first Business Day immediately
following such 365th day.

 

  (c) Disability.

 

  (i) Acceleration of Vesting. If you cease to be an employee on account of your
Disability, all of the Options, to the extent they have not otherwise expired,
been forfeited or terminated, will become fully exercisable upon your
Disability.

 

  (ii) Period of Time to Exercise. If you cease to be an employee on account of
your Disability, all of your Options may be exercised by you at any time before
         P.M., U.S. Central Time on the fifth anniversary of the date of your
Separation from Service on account of Disability. If the date of such fifth
anniversary is not a Business Day, then the Options shall remain exercisable
until the first Business Day immediately following such fifth anniversary.

 

  (d) Retirement Other Than Normal Retirement.

 

  (i) No Acceleration of Vesting. If you cease to be an employee by reason of
your Retirement (as defined below in paragraph (iii)), only those Options which
were exercisable on your Termination Date may be exercised.

 

  (ii) Period of Time to Exercise. If you cease to be an employee by reason of
your Retirement, all of your vested Options may be exercised by you at any time
before          P.M., U.S. Central Time on the fifth anniversary of your
Termination Date. If the date of such fifth anniversary is not a Business Day,
then the Options shall remain exercisable until the first Business Day
immediately following such fifth anniversary.

 

  (iii) Definition of Retirement. Your Retirement shall mean your termination of
employment if you are entitled to receive payment of pension benefits in
accordance with the Company’s defined benefit pension plan immediately after
your Termination Date.

 

  (e) Normal Retirement.

 

  (i) Acceleration of Vesting. If you cease to be an employee by reason of your
Normal Retirement (as defined below in paragraph (iii)), all of your Options, to
the extent your Termination Date is at least one year after the Regular Annual
Grant Date, and to the extent they have not otherwise expired, been forfeited or
terminated, will become fully exercisable upon your Termination Date.

 

  (ii) Period of Time to Exercise. If you cease to be an employee by reason of
your Normal Retirement, all of your Options may be exercised by you at any time
before          P.M., U.S. Central Time on the fifth anniversary of your
Termination Date. If the date of such fifth anniversary is not a Business Day,
then the Options shall remain exercisable until the first Business Day
immediately following such fifth anniversary.

 

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  (iii) Definition of Normal Retirement. Your Normal Retirement shall mean your
“Retirement” (as defined above in Section (d)(iii)) at or later than an age
qualifying as “normal retirement” under the Company’s defined benefit pension
plan, whether or not you are a participant in such plan.

 

  (f) Resignation or Involuntary Termination.

 

  (i) No Acceleration of Vesting. If you cease to be an employee on account of
your voluntary resignation or your employment being involuntarily terminated by
the Company other than for a reason constituting Termination for Cause, only
those Options which were vested and exercisable as of your Termination Date may
be exercised.

 

  (ii) Period of Time to Exercise. If you cease to be an employee on account of
your voluntary resignation or your employment being involuntarily terminated by
the Company other than for a reason constituting Termination for Cause, those
Options which were vested and exercisable as of your Termination Date may be
exercised at any time before          P.M., U.S. Central Time, on the 90th
calendar day following your Termination Date. If such 90th day is not a Business
Day, then the Options shall remain exercisable until the first Business Day
immediately following such 90th day. All Options which were not otherwise vested
and exercisable as of your Termination Date will be forfeited.

 

  (g) Change in Control.

 

  (i) Acceleration of Vesting. If (1) a Change in Control occurs before the
Vesting Date for all of your Options, (2) except as may otherwise be provided in
your employment agreement (if any), your employment is terminated by the Company
other than in a Termination for Cause within one year after the Change in
Control, (3) you have held the Options for more than one year from the Regular
Annual Grant Date, and (4) you have been actively and continuously employed
(i.e., not on serial severance) from the Grant Date to the date of the Change in
Control, then all of the Options, to the extent they have not otherwise expired,
been forfeited or terminated, will become fully exercisable upon the date of
your Separation from Service.

 

  (ii) Period of Time to Exercise. The period of time to exercise your Options
following your Termination Date subsequent to a Change in Control shall be
determined based on the reason for your Separation from Service and governed by
Sections 7(a)-(f) above.

Nothing in this Section 7 restricts or otherwise interferes with the Company’s
discretion with respect to the termination of your employment with the Company.

 

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