Document:

EX-10.47 FORM OF RESTRICTED STOCK UNITS AGREEMENT

 

Exhibit 10.47

RSU Agreement

For Use from February 2007

Time Warner Cable Inc.

Restricted 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 restricted stock units (the “RSUs”) 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:

	1.	 	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.

	 	a)	 	“Cause” means, “Cause” as defined in an employment, consulting,
advisory or similar 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) the 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) the 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) the
Participant’s insubordination, willful malfeasance or willful misconduct in connection
with the 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) the 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.
	 
	 	b)	 	“Disability” means, “Disability” as defined in an employment,
consulting, advisory or similar 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.
	 
	 	c)	 	“Good Reason” means “Good Reason” as defined in an employment,
consulting, advisory or similar agreement between the Company or any of its Affiliates and

 

 

	 	 	 	the Participant or, if not defined therein or if there is no such agreement, “Good
Reason” means (i) the failure of the Company or any Affiliate to pay or cause to be
paid the Participant’s base salary or annual bonus when due or (ii) any substantial
and sustained diminution in the Participant’s authority or responsibilities
materially inconsistent with the Participant’s position; provided that
either of the events described in clauses (i) and (ii) will constitute Good Reason
only if the Company fails to cure such event within 30 days after receipt from the
Participant of written notice of the event which constitutes Good Reason;
provided, further, that “Good Reason” will cease to exist for an
event on the sixtieth (60th) 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.
	 
	 	d)	 	“Notice” means the Notice of Grant of Restricted Stock Units, which has
been provided to the Participant separately and which accompanies and forms a part of
this Agreement.
	 
	 	e)	 	“Participant” means an individual to whom RSUs as set forth in the
Notice 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.
	 
	 	f)	 	“Plan” means the equity plan, as such plan may be amended, supplemented
or modified from time to time, maintained by the Company that is specified in the
Notice.
	 
	 	g)	 	“Retirement” means a voluntary 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 Time Warner Affiliate or
(ii) pursuant to a retirement plan or early retirement program of the Company or any
Affiliate.
	 
	 	h)	 	“Shares” means shares of Class A Common Stock, par value $.01 per
share, of the Company.
	 
	 	i)	 	“Time Warner Affiliate” means Time Warner Inc. and any entity that is
consolidated with Time Warner Inc. for financial reporting purposes or any other entity
designated by the Board in which Time Warner Inc. has a direct or indirect equity
interest of at least twenty percent (20%), measured by reference to vote or value.
	 
	 	j)	 	“Vesting Date” means each vesting date set forth in the Notice.

	2.	 	Grant of Restricted Stock Units. The Company hereby grants to the Participant (the
“Award”), on the terms and conditions hereinafter set forth, the number of RSUs set
forth on the Notice. Each RSU represents the unfunded, unsecured right of the Participant to
receive one Share on the date(s) specified herein or in the Notice. RSUs do not constitute
issued and outstanding Shares for any corporate purposes and do not confer

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	 	 	on the Participant any right to vote on matters that are submitted to a vote of holders of
Shares.

	3.	 	Dividend Equivalents and Retained Distributions. If on any date while RSUs are
outstanding hereunder the Company shall pay any regular cash dividend on the Shares, the
Participant shall be paid, for each RSU held by the Participant on the record date, an amount
of cash equal to the dividend paid on a Share (the “Dividend Equivalents”) at the time
that such dividends are paid to holders of Shares. If on any date while RSUs are outstanding
hereunder the Company shall pay any dividend other than a regular cash dividend or make any
other distribution on the Shares, the Participant shall be credited with a bookkeeping entry
equivalent to such dividend or distribution for each RSU 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 unless the Committee has in its sole discretion determined that an
amount equivalent to such dividend or distribution shall be paid currently to the Participant
(the “Retained Distributions”); provided, however, that if the
Retained Distribution relates to a dividend paid in Shares, the Participant shall receive an
additional amount of RSUs equal to the product of (i) the aggregate number of RSUs 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 RSUs to which they relate. Notwithstanding anything else contained in this paragraph 3, no
payment of Dividend Equivalents or 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”).

	4.	 	Vesting and Delivery of Vested Securities.

	 	a)	 	Subject to the terms and provisions of the Plan and this Agreement, after each
Vesting Date with respect to the Award, the Company shall issue or transfer to the
Participant the number of Shares that vested on such Vesting Date as set forth on the
Notice and the Retained Distributions, if any, covered by that portion of the Award.
Except as otherwise provided in paragraphs 6 and 7, the vesting of such RSUs and any
Retained Distributions relating thereto shall occur only if the Participant has
continued in Employment of the Company, any of its Affiliates or any Time Warner
Affiliate on the Vesting Date and has continuously been so employed since the Date of
Grant (as defined in the Notice).
	 
	 	b)	 	RSUs Extinguished. Upon each issuance or transfer of Shares in
accordance with this Agreement, a number of RSUs equal to the number of Shares issued
or transferred to the Participant shall be extinguished and such number of RSUs will
not be considered to be held by the Participant for any purpose.
	 
	 	c)	 	Final Issuance. Upon the final issuance or transfer of Shares and
Retained Distributions, if any, to the Participant pursuant to this Agreement, in lieu
of a

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	 	 	 	fractional Share, the Participant shall receive a cash payment equal to the Fair
Market Value of such fractional Share.
	 
	 	d)	 	Section 409A. Notwithstanding anything else contained in this
Agreement, no Shares shall be issued or transferred to a Participant 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 Code.

	5.	 	Termination of Employment.

	 	(a)	 	If the Participant’s Employment with the Company, its Affiliates and Time
Warner Affiliates is (i) terminated prior to the Vesting Date by the Participant for
any reason other than those described in clauses (b) and (c) below with respect to any
portion of the Award, then the RSUs covered by any such portion of the Award and all
Retained Distributions relating thereto shall be completely forfeited on the date of
any such termination, unless otherwise provided in an employment, consulting, advisory
or similar agreement between the Participant and the Company or an Affiliate.
	 
	 	(b)	 	If the Participant’s Employment with the Company, its Affiliates and Time
Warner Affiliates terminates (i) as a result of his or her death
or Disability or (ii) as a result of his or her Retirement or by the Company, its
Affiliates or any Time Warner Affiliate for any reason other than for Cause on a
date when the Participant satisfies the requirements for Retirement, then the RSUs
for which a Vesting Date has not yet occurred and all Retained Distributions
relating thereto shall, to the extent the RSUs were not extinguished prior to such
termination of Employment, fully vest on the date of any such termination and Shares
subject to the RSUs shall be issued or transferred to the Participant as soon as
practicable following such termination of Employment.
	 
	 	(c)	 	Subject to the terms of any employment, consulting, advisory or similar
agreement entered into by the Participant and the Company, an Affiliate or a Time
Warner Affiliate that provides for treatment of RSUs that is more favorable to the
Participant than the terms of this paragraph 5(c), if the Participant’s Employment with
the Company, its Affiliates and Time Warner Affiliates is terminated by the Company,
its Affiliates or any Time Warner Affiliate for any reason other than for Cause (unless
such termination is due to death or Disability), then a pro rata portion of the RSUs
that would vest on the next Vesting Date, and any Retained Distributions relating
thereto, shall, to the extent the RSUs were not extinguished prior to such termination
of Employment, become vested, and Shares subject to such RSUs shall be issued or
transferred to the Participant as soon as practicable following such termination of
Employment, determined as follows:

	 	(x)	 	the number of RSUs covered by the portion of
the Award that would vest on the next Vesting Date, multiplied by;

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	 	(y)	 	a fraction, the numerator of which shall be the
number of days from the last Vesting Date (or the Date of Grant if
there has not yet occurred a Vesting Date) preceding the date of such
termination of Employment through the date of such termination, and the
denominator of which shall be the number of days from the last Vesting
Date (or the Date of Grant if there has not yet occurred a Vesting
Date) through the next succeeding Vesting Date.

If the product of (x) and (y) results in a fractional share, such fractional
share shall be rounded to the next higher whole share.

The RSUs and any Retained Distributions related thereto that have not vested shall
be completely forfeited on the date of any such termination.

For purposes of this paragraph 5, a temporary leave of absence shall not constitute a
termination of Employment or a failure to be continuously employed by the Company, any
Affiliate or a Time Warner Affiliate regardless of the Participant’s payroll status during
such leave of absence if such leave of absence is approved in writing by the Company, any
Affiliate or any Time Warner Affiliate subject to the other terms and conditions of the
Agreement and the Plan. Notice of any such approved leave of absence should be sent to the
Company, but such notice shall not be required for the leave of absence to be considered
approved.

In the event the Participant’s Employment with the Company, any of its
Affiliates or any Time Warner Affiliate is terminated, the Participant shall have no claim
against the Company with respect to the RSUs and related Retained Distributions, if any,
other than as set forth in this paragraph 5, the provisions of this paragraph 5 being the
sole remedy of the Participant with respect thereto.

	6.	 	Acceleration of Vesting Date. Subject to paragraph 7 and the terms of any
employment, consulting, advisory or similar agreement entered into by the Participant and the
Company, an Affiliate or a Time Warner Affiliate that provides for treatment of RSUs that is
more favorable to the Participant than the terms of this paragraph 6, in the event of a Change
in Control, to the extent the Award has not been previously canceled or forfeited, (a) the
Award will vest in full upon the earlier of (i) the expiration of the one-year period
immediately following the Change in Control, provided the Participant’s Employment with the
Company and its Affiliates has not terminated, (ii) the original Vesting Date with respect to
each portion of the Award, or (iii) the termination of the Participant’s Employment with the
Company or any of its Affiliates (x) by the Company other than for Cause (unless such
termination is due to death or Disability) or (y) by the Participant for Good Reason and (b)
Shares subject to the RSUs shall be issued or transferred to the Participant, as soon as
practicable following such Vesting Date, along with the Retained Distributions related
thereto. In the event of any such vesting as described in clauses (i) and (iii) of the
preceding sentence, the date described in such clauses shall be treated as the Vesting Date.

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	7.	 	Limitation on Acceleration. Notwithstanding any provision to the contrary in the
Plan
or this Agreement, if the Payment (as hereinafter defined) due to the Participant hereunder
as a result of the acceleration of vesting of the RSUs pursuant to paragraph 6 of this
Agreement, either alone or together with all other Payments received or to be received by
the Participant from the Company or any of its Affiliates (collectively, the “Aggregate
Payments”), or any portion thereof, would be subject to the excise tax imposed by
Section 4999 of the Code (or any successor thereto), the following provisions shall apply:

	 	a)	 	If the net amount that would be retained by the Participant after all taxes on
the Aggregate Payments are paid would be greater than the net amount that would be
retained by the Participant after all taxes are paid if the Aggregate Payments were
limited to the largest amount that would result in no portion of the Aggregate Payments
being subject to such excise tax, the Participant shall be entitled to receive the
Aggregate Payments.
	 
	 	b)	 	If, however, the net amount that would be retained by the Participant after all
taxes were paid would be greater if the Aggregate Payments were limited to the largest
amount that would result in no portion of the Aggregate Payments being subject to such
excise tax, the Aggregate Payments to which the Participant is entitled shall be
reduced to such largest amount.
	 
	 	The term “Payment” shall mean any transfer of property within the meaning of Section
280G of the Code.
	 
	 	The determination of whether any reduction of Aggregate Payments is required and the timing
and method of any such required reduction in Payments under this Agreement or in any such
other Payments otherwise payable by the Company or any of its Affiliates consistent with any
such required reduction, shall be made by the Participant, including whether any portion of
such reduction shall be applied against any cash or any shares of stock of the Company or
any other securities or property to which the Participant would otherwise have been entitled
under this Agreement or under any such other Payments, and whether to waive the right to the
acceleration of the Payment due under this Agreement or any portion thereof or under any
such other Payments or portions thereof, and all such determinations shall be conclusive and
binding on the Company and its Affiliates. To the extent that Payments hereunder or any
such other Payments are not paid as a consequence of the limitation contained in this
paragraph 7, then the RSUs and Retained Distributions related thereto (to the extent not so
accelerated) and such other Payments (to the extent not vested) shall be deemed to remain
outstanding and shall be subject to the provisions hereof and of the Plan as if no
acceleration or vesting had occurred. Under such circumstances, if the Participant
terminates Employment for Good Reason or is terminated by the Company or any of its
Affiliates without Cause, the RSUs and Retained Distributions related thereto (to the extent
that they have not already become vested) shall become immediately vested in their entirety
upon such termination and Shares subject to the RSUs shall be issued or transferred to the
Participant, as soon as

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	 	 	 	practicable following such termination of Employment, subject to the provisions relating to
Section 4999 of the Code set forth herein.
	 
	 	 	 	The Company shall promptly pay, upon demand by the Participant, all legal fees, court costs,
fees of experts and other costs and expenses which the Participant incurred in any actual,
threatened or contemplated contest of the Participant’s interpretation of, or determination
under, the provisions of this paragraph 7.

	8.	 	Withholding Taxes. The Participant agrees that,

	 	a)	 	Obligation to Pay Withholding Taxes. Upon the payment of any Dividend
Equivalents and the vesting of any portion of the Award of RSUs and the Retained
Distributions relating thereto, the Participant will be required to pay to the Company
any applicable Federal, state, local or foreign withholding tax due as a result of such
payment or vesting. The Company’s obligation to deliver the Shares subject to the RSUs
or to pay any Dividend Equivalents or Retained Distributions shall be subject to such
payment. The Company and its Affiliates shall, to the extent permitted by law, have
the right to deduct from the Dividend Equivalent, Shares issued in connection with the
vesting or Retained Distribution, as applicable, or any payment of any kind otherwise
due to the Participant any Federal, state, local or foreign withholding taxes due with
respect to such vesting or payment.
	 
	 	b)	 	Payment of Taxes with Stock. Subject to the Committee’s right to
disapprove any such election and require the Participant to pay the required
withholding tax in cash, the Participant shall have the right to elect to pay the
required withholding tax associated with a vesting with Shares to be received upon
vesting. Unless the Company shall permit another valuation method to be elected by the
Participant, Shares used to pay any required withholding taxes shall be valued at the
closing price of a Share on the New York Stock Exchange on the date the withholding tax
becomes due (hereinafter called the “Tax Date”). Notwithstanding anything herein to the
contrary, if a Participant who is required to pay the required withholding tax in cash
fails to do so within the time period established by the Company, then the Participant
shall be deemed to have elected to pay such withholding taxes with Shares to be
received upon vesting. Elections must be made in conformity with conditions
established by the Committee from time to time.
	 
	 	c)	 	Conditions to Payment of Taxes with Stock. Any election to pay withholding
taxes with Shares must be made on or prior to the Tax Date and will be irrevocable
once made.

	9.	 	Changes in Capitalization and Government and Other Regulations. The Award
shall be subject to all of the terms and provisions as provided in this Agreement and in the
Plan, which are incorporated by reference herein and made a part hereof, including, without
limitation, the provisions of Section 10 of the Plan (generally relating to

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	 	 	adjustments to the number of Shares subject to the Award, upon certain changes in
capitalization and certain reorganizations and other transactions).
	 
	10.	 	Forfeiture. A breach of any of the foregoing restrictions or a breach of any of the
other restrictions, terms and conditions of the Plan or this Agreement, with respect to any of
the RSUs or any Dividend Equivalents and Retained Distributions relating thereto, except as
waived by the Board or the Committee, will cause a forfeiture of such RSUs and any Dividend
Equivalents or Retained Distributions relating thereto.
	 
	11.	 	Right of Company to Terminate Employment. Nothing contained in the Plan or this
Agreement shall confer on any Participant any right to continue in the employ of the Company,
any of its Affiliates or any Time Warner Affiliate, and the Company and any such Affiliate
shall have the right to terminate the Employment of the Participant at any such time, with or
without cause, notwithstanding the fact that some or all of the RSUs and related Retained
Distributions covered by this Agreement may be forfeited as a result of such termination. The
granting of the RSUs under this Agreement shall not confer on the Participant any right to any
future Awards under the Plan.
	 
	12.	 	Notices. Any notice which either party hereto may be required or permitted to give
the other shall be in writing and may be delivered personally or by mail, postage prepaid,
addressed to Time Warner Cable Inc., at 7910 Crescent Executive Drive, Charlotte, NC 28217,
attention Manager, Stock Programs, and to the Participant at his or her address, as it is
shown on the records of the Company or its Affiliate, or in either case to such other address
as the Company or the Participant, as the case may be, by notice to the other may designate in
writing from time to time.
	 
	13.	 	Interpretation and Amendments. The Board and the Committee (to the extent delegated
by the Board) have plenary authority to interpret this Agreement and the Plan, to prescribe,
amend and rescind rules relating thereto and to make all other determinations in connection
with the administration of the Plan. The Board or the Committee may from time to time modify
or amend this Agreement in accordance with the provisions of the Plan, provided that no such
amendment shall adversely affect the rights of the Participant under this Agreement without
his or her consent.
	 
	14.	 	Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the Company and its successors and assigns, and shall be binding upon and inure to
the benefit of the Participant and his or her legatees, distributees and personal
representatives.
	 
	15.	 	Copy of the Plan. The Participant agrees and acknowledges that he or she has
received and read a copy of the Plan.
	 
	16.	 	Governing Law. The Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York without regard to any choice of law rules thereof
which might apply the laws of any other jurisdiction.

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	17.	 	Waiver of Jury Trial. To the extent not prohibited by applicable law which cannot
be waived, each party hereto hereby waives, and covenants that it will not assert (whether as
plaintiff, defendant or otherwise), any right to trial by jury in any forum in respect of any
suit, action, or other proceeding arising out of or based upon this Agreement.
	 
	18.	 	Submission to Jurisdiction; Service of Process. Each of the parties hereto hereby
irrevocably submits to the jurisdiction of the state courts of the State of New York and the
jurisdiction of the United States District Court for the Southern District of New York for the
purposes of any suit, action or other proceeding arising out of or based upon this Agreement.
Each of the parties hereto to the extent permitted by applicable law hereby waives, and agrees
not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or
proceeding brought in such courts, any claim that it is not subject personally to the
jurisdiction of the above-named courts, that its property is exempt or immune from attachment
or execution, that such suit, action or proceeding in the above-referenced courts is brought
in an inconvenient forum, that the venue of such suit, action or proceedings, is improper or
that this Agreement may not be enforced in or by such court. Each of the parties hereto
hereby consents to service of process by mail at its address to which notices are to be given
pursuant to paragraph 12 hereof.
	 
	19.	 	Personal Data. The Company, the Participant’s local employer and the local
employer’s parent company or companies may hold, collect, use, process and transfer, in
electronic or other form, certain personal information about the Participant for the exclusive
purpose of implementing, administering and managing the Participant’s participation in the
Plan. Participant understands that the following personal information is required for the
above named purposes: his/her name, home address and telephone number, office address
(including department and employing entity) and telephone number, e-mail address, date of
birth, citizenship, country of residence at the time of grant, work location country, system
employee ID, employee local ID, employment status (including international status code),
supervisor (if applicable), job code, title, salary, bonus target and bonuses paid (if
applicable), termination date and reason, taxpayer’s identification number, tax equalization
code, US Green Card holder status, contract type (single/dual/multi), any shares of stock or
directorships held in the Company, details of all grants of RSUs (including number of grants,
grant dates, vesting type, vesting dates, and any other information regarding RSUs that have
been granted, canceled, vested, or forfeited) with respect to the Participant, estimated tax
withholding rate, brokerage account number (if applicable), and brokerage fees (the
“Data”). Participant understands that Data may be collected from the Participant
directly or, on Company’s request, from Participant’s local employer. Participant understands
that Data may be transferred to third parties assisting the Company in the implementation,
administration and management of the Plan, including the brokers approved by the Company, the
broker selected by the Participant from among such Company-approved brokers (if applicable),
tax consultants and the Company’s software providers (the “Data Recipients”).
Participant understands that some of these Data Recipients may be located outside the
Participant’s country of residence, and that the Data Recipient’s country may have different
data privacy laws and protections than the Participant’s country of residence. Participant
understands that the Data Recipients will receive, possess, use, retain and

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	 	 	transfer the Data, in electronic or other form, for the purposes of implementing,
administering and managing the Participant’s participation in the Plan, including any
requisite transfer of such Data as may be required for the administration of the Plan and/or
the subsequent holding of Shares on the Participant’s behalf by a broker or other third
party with whom the Participant may elect to deposit any Shares acquired pursuant to the
Plan. Participant understands that Data will be held only as long as necessary to implement,
administer and manage the Participant’s participation in the Plan. Participant understands
that Data may also be made available to public authorities as required by law, e.g., to the
U.S. government. Participant understands that the Participant may, at any time, review Data
and may provide updated Data or corrections to the Data by written notice to the Company.
Except to the extent the collection, use, processing or transfer of Data is required by law,
Participant may object to the collection, use, processing or transfer of Data by contacting
the Company in writing. Participant understands that such objection may affect his/her
ability to participate in the Plan. Participant understands that he/she may contact the
Company’s Stock Plan Administration to obtain more information on the consequences of such
objection.

10Exhibit 10.1

 

Exhibit 10.1

Description of Annual Incentive Bonus Award Program, Long-Term Incentive Bonus

Award Program and Amended Change in Control Agreements

Annual Incentive Bonus Program

     For 2007, the annual incentive award will be based on goals established and approved by the
Company’s Compensation Committee. Potential bonuses are specified as a percentage of annual base
salary, ranging from 25% to 150% for the Chief Executive Officer, 20% to 100% for Senior Vice
Presidents and 15% to 70% for all other named executive officers of the Company. For 2007, the
annual incentive award will be based on a combination of financial and operational objectives.
Such objectives and their relative weighting in the overall performance score are as follows:

	 	 	 	 	 
	Objective	 	Weight	 
	 

	Operating revenue
	 	 	30	%
	 
	 	 	 	 
	Operating earnings before interest, taxes,
depreciation and amortization
	 	 	30	%
	 
	 	 	 	 
	Operating free cash flow
	 	 	10	%
	 
	 	 	 	 
	Aggregate net customer growth in the
Company’s ILEC, CLEC, Greenfield,
Wireless and DSL businesses
	 	 	15	%
	 
	 	 	 	 
	Aggregate customer disconnects in the
Company’s ILEC, CLEC, Greenfield,
Wireless and DSL businesses
	 	 	15	%

Any bonuses awarded under the annual incentive plan will be paid out in cash after the end of the
2007 fiscal year.

Long-Term Incentive Bonus Award Program

     On February 22, 2007, the Compensation Committee established a long-term incentive bonus award
program for its named executive officers for the 2007 through 2011 period. In establishing that
program, the Compensation Committee modified its historical long-term incentive structure whereby
award grants were made at the conclusion of a multi-year measurement period based on the Company’s
performance over that period relative to pre-approved performance metrics. Due to the difficulty
of establishing multi-year objectives in the Company’s current industry and business environment,
and to increase the retention incentive associated with the long-term program, the Compensation
Committee modified the award structure to use performance accelerated stock that would vest no
earlier than five years from the date of grant unless the Company achieved certain shareholder
return metrics.

     Specifically, under the 2007-2011 long-term incentive bonus award program, each named
executive officer received an award of performance accelerated restricted stock under the Company’s
shareholder-approved Amended and Restated 2001 Stock Incentive Plan in an

 

 

amount equal to two times the named executive officer’s annual base salary. The restricted
stock awards will vest on February 22, 2012 unless accelerated vesting is earned based on the total
return realized by the Company’s shareholders. Specifically, accelerated vesting would be earned
if the Company’s total shareholder return for the applicable measurement period exceeded the mean
total shareholder return of a peer group of companies by twenty percent. The accelerated vesting
measurement periods and opportunities are as follows:

	 	 	 	 	 
	Measurement	 	 	 
	Period	 	Acceleration	 
	(Fiscal Year)	 	Opportunity	 
	 

	2007-2008
	 	 	50	%
	2007-2010
	 	 	100	%

Any unvested restricted stock would be forfeited upon termination of a named executive officer’s
employment other than due to death or disability.

Amended Change in Control Agreements

     The Company previously entered into Change in Control Agreements with the following named
executive officers: Michael R. Coltrane, Matthew J. Dowd, Michael R. Nash, James E. Hausman and
David H. Armistead. These agreements provide that if there is a “change in control” of the
Company, as defined in the agreements, and the employment of the employee is terminated other than
for cause or the employee resigns for “good reason,” as defined in the agreements, in either case
within two years following the change in control, the executive would be entitled to receive a
severance payment and benefits.

     The amendments to the Change in Control Agreements increase the severance payment that would
be payable to the executives other than Mr. Coltrane, require the executive to provide a general
release of employment-related claims against the Company as a condition to receiving the severance
benefit and adjust the length of the period following termination that the executive would be
restricted from competing with the Company. The following paragraph describes the terms of the
agreements as amended.

     Under the agreements, if a change in control occurs and an executive’s employment is
terminated by the Company other than for cause or the executive resigns for good reason, in either
case within two years following the change in control, the executive would receive, within 30 days
of termination of employment, a lump sum severance payment. The lump sum severance payment to Mr.
Coltrane would be equal to 35 months of compensation. The lump sum severance payment to Messrs.
Dowd, Nash, Hausman and Armistead would be equal to 24 months of compensation. Compensation for
this purpose would be equal to: (1) the executive’s monthly base salary, in effect immediately
preceding the change in control plus (2) the average annual incentive award to the executive for
each one-year performance period for the three most recent fiscal years ending prior to such change
in control divided by 12. The executive also would be entitled to maintain for 35 months (in the
case of Mr. Coltrane) or 24 months (in the case of Messrs. Dowd, Nash, Hausman and Armistead)
following termination medical, life and short and long-term disability insurance and participation
in all qualified retirements plans. Additionally, the executive would be entitled to receive
outplacement assistance for a period of six months at the Company’s expense. The agreements
contain confidentiality provisions and two-year post-employment non-competition and
non-solicitation covenants. The agreements

 

 

prohibit payment of any benefit that would be deemed an excess parachute payment under
Internal Revenue Code Section 280G or any successor provision.

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