UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A
(Rule 14a-101)

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Time Warner Cable Inc.

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April 20, 2009

 

Dear Stockholder:

 

We cordially invite you to attend Time Warner Cable Inc.’s annual meeting of stockholders. We also welcome our new stockholders who received Time Warner Cable shares as a result of the recent spin-off of our company from Time Warner Inc. The meeting will be held on Wednesday, June 3, 2009, at 11:00 a.m. at the Company’s Mid-Ohio Technical Operations Center at 3760 Interchange Road, Columbus, Ohio 43204. 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. The Board of Directors recommends a vote FOR the proposals listed as items 1 and 2 in the Notice.

 

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 new rules, you can vote in 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 June 2, 2009. 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, President and
Chief Executive Officer

 

PLEASE PROMPTLY SUBMIT YOUR PROXY

 

Time Warner Cable Inc.

60 Columbus Circle

New York, NY 10023

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

The Annual Meeting (the “Annual Meeting”) of Stockholders of Time Warner Cable Inc. (the “Company”) will be held on Wednesday, June 3, 2009 at 11:00 a.m. (local time). The meeting will take place at:

 

Time Warner Cable Inc.

Mid-Ohio Technical Operations Center

3760 Interchange Road

Columbus, Ohio 43204

 

The purposes of the meeting are:

 

 

The close of business on April 8, 2009 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 11:00 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

 

April 20, 2009

 

TABLE OF CONTENTS

 

TIME WARNER CABLE INC.

 

60 Columbus Circle

New York, NY 10023

 

 

This Proxy Statement is being furnished in connection with the solicitation of proxies by the Board of Directors 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 Wednesday, June 3, 2009, at the Company’s Mid-Ohio Technical Operations Center at 3760 Interchange Road, Columbus, Ohio 43204 commencing at 11:00 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.

 

This year 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 24, 2009. 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 23, 2009.

 

At the close of business on April 8, 2009, 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 352,335,722 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.

 

A copy of the Company’s Annual Report to Stockholders for the year 2008 is available on the Company’s website at www.timewarnercable.com/annualmeetingmaterials.

 

The Board of Directors recommends a vote FOR the election of each of the twelve nominees for election as directors and FOR ratification of the appointment of Ernst & Young LLP as the Company’s independent auditor for 2009.

 

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on Wednesday, June 3, 2009:

 

This Proxy Statement and the Company’s 2008 Annual Report to Stockholders are available at www.timewarnercable.com/annualmeetingmaterials.

 

On March 12, 2009, the separation of TWC from Time Warner Inc. (“Time Warner”) was completed pursuant to a Separation Agreement dated as of May 20, 2008 (the “Separation Agreement”) between TWC and certain of its subsidiaries and Time Warner and certain of its subsidiaries. The separation took the form of Time Warner’s 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” or the “Distribution”) as of 8:00 p.m. on March 12, 2009, the record date for the Spin-Off Dividend. Accordingly, on March 12, 2009, pursuant to the Separation Agreement, Time Warner transferred its beneficial ownership of Common Stock to a distribution agent for the benefit of Time Warner’s stockholders, and, as a result, Time Warner no longer has any ownership interest in TWC (the “Separation”). These shares of Common Stock were distributed on March 27, 2009 to Time Warner’s stockholders of record on March 12, 2009 with each such Time Warner stockholder receiving .083670 of a share of Common Stock for each share of Time Warner Common Stock held on the record date. After this distribution, Time Warner effected a one-for-three reverse stock split. In connection with, and before, the Separation, on March 12, 2009, the Company:

 

 

Unless otherwise indicated in this Proxy Statement, information about TWC’s or Time Warner’s equity securities prior to March 12, 2009 has not been adjusted to reflect the Separation, the Distribution or the TWC and Time Warner reverse stock splits. The Company’s Common Stock is listed for trading on the New York Stock Exchange (the “NYSE”). As a result of the Separation, the Company is no longer considered a “controlled company” under NYSE governance requirements.

 

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 rules of the SEC, and the rules and listing standards of the NYSE.

Information on the Company’s corporate governance is available to the public under “Corporate Governance” at www.timewarnercable.com/investors on 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 four 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 York 10023, Attn: General Counsel.

 

The remainder of this section of the Proxy Statement summarizes the key features of the Company’s corporate governance practices:

 

The number of directors constituting the full Board is currently set at twelve. The Board of Directors has adopted a policy, consistent with the Amended Charter and the Company’s 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, (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 and (iv) the goal of having an appropriate mix of inside and independent directors.

 

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 determined that directors should generally serve on no more than five 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 2010 annual meeting of stockholders is furnished to stockholders.

 

 

Independence.  Under the Company’s Amended Charter, at least 50% 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:

 

 

 

 

 

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:

 

 

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.  In connection with the Separation, the Company’s by-laws were amended to 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 2008, 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 (as defined below) meet together without any other directors or management present at least twice a year. Any director may request additional executive sessions.

 

These executive sessions are led by 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). When it is not clear which committee has specific responsibility for the subject matter, the Lead Director presides.

 

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, or to establish the position of “lead” or “presiding” director. In connection with the Separation, the Board has named Glenn A. Britt to the combined positions of Chairman and Chief Executive Officer and has named Peter R. Haje to serve as the Lead Director.

 

The Board has four standing committees: the Audit Committee, the Compensation Committee, the Nominating and Governance Committee, and the Finance Committee, which was constituted in December 2008. The Board may eliminate or create additional committees as it deems appropriate.

 

Despite the availability of a one-year phase-in period following the Separation for full independence of membership under NYSE rules, 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.

 

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) Chief Executive Officer (“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.

 

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 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 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.

 

Finance Committee.  The Finance Committee is responsible for reviewing and approving the Company’s financing activity and assisting the Board in overseeing the Company’s (i) capital structure and financing strategies, (ii) insurance program, and (iii) defined benefit pension plan.

 

 

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 “Compensation—Director Compensation.”)

 

It is also the Board’s policy that all directors who are not actively employed by the Company are required to own the Company’s stock (whether as a result of exercising stock options, receipt of shares from the Company or the purchase of shares). It is expected that, within three years of joining the Board, each director will own at least the number of shares of the Company’s stock, or stock-based equivalents, that have been awarded to him or her pursuant to the Company’s compensation plans for Independent Directors, less any shares sold by the director for the purpose of paying taxes related to such awards.

 

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.

 

In order to help assure the highest levels of business ethics at the Company, the Board of Directors has adopted the following three codes of conduct, which are posted on the Company’s website at www.timewarnercable.com/investors.

 

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 Amended Charter requires that at least 50% of the Board be independent. 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. Messrs. Logan and Pace are former executive officers of Time Warner, which was the Company’s parent company prior to the Separation. 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. The Board has determined that the employment during part of 2008 of Mr. Nicholas’ stepson by Time Inc., a subsidiary of Time Warner, does not affect Mr. Nicholas’ independence. 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.

 

The Board has set the number of directors at twelve. Each of the current directors has been nominated for election at the Annual Meeting. In connection with the Separation, Jeffrey L. Bewkes resigned from the Board, and Donna A. James, Edward D. Shirley and John E. Sununu were appointed by the Board to the Board of Directors effective, in each case, on March 12, 2009.

Set forth below are the principal occupation and certain other information, as of February 28, 2009, for the twelve nominees, each of whom currently serves as a director.

 

 

During 2008, the Board of Directors met ten times. No incumbent director attended fewer than 75% 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. Eight of the Company’s ten directors nominated for election at the 2008 annual meeting of the Company’s stockholders attended the meeting.

 

Pursuant to the Company’s by-laws, the Board has established four principal standing committees of the Board. The Board may eliminate or create additional committees as it deems appropriate. The Board of Directors and the members of each of the committees meet regularly in executive session without management. The current members of the Board’s principal 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 ten times during 2008, 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, 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 eight times during 2008, 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 2008, 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 Finance Committee was constituted in December 2008. The authority and responsibility of the Finance Committee, which did not meet during 2008, 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.

 

Special Committee.  During 2008, a Special Committee of the independent members of the Board of Directors (the “Special Committee”) consisting of Ms. Black and Messrs. Castro, Chang, Copeland (who served as the Chair), Haje and Nicholas was formed to consider the Company’s Separation from Time Warner and the related transactions. The Special Committee met twelve times during 2008.

 

The following table sets forth information as of the close of business on March 31, 2009 as to the number of shares of the Company’s Common Stock beneficially owned by:

 

 

The following table reflects: (i) the shares of Common Stock that were distributed to the listed individuals or their associates in connection with the Spin-off Dividend and their respective ownership of Time Warner Common Stock, (ii) the Recapitalization, pursuant to which each outstanding share of Class A common stock and Class B common stock was converted into one share of Common Stock, (iii) the Reverse Stock Split pursuant to which every three shares of Common Stock was combined into one share of Common Stock and (iv) related adjustments to the Company’s outstanding stock options, restricted stock units and deferred stock units.

 

 

 

 

 

In a Schedule 13D filed with the SEC on March 13, 2009, Time Warner reported that as a result of the Separation, as of 8:00 p.m., eastern time, on March 12, 2009, Time Warner no longer beneficially owned any shares of Common Stock. As a result, based on a review of filings with the SEC, as of March 31, 2009, there were no persons or groups of persons known by the Company to own beneficially more than 5% of the outstanding shares of Common Stock. It is possible, however, that a holder of both Common Stock and Time Warner Common Stock received sufficient additional shares of Common Stock in the Spin-Off Dividend to beneficially own more than 5% of the outstanding shares of Common Stock as a result.

 

In accordance with its charter, the Audit Committee of the Company’s Board of Directors (the “Audit Committee”) 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 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 has discussed 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 2008, 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 2009, and the Board concurred in its appointment.

 

The Audit Committee has reviewed and approved the annual internal audit plan and has met regularly with the representatives of the 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, 2008.  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, 2008. 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, 2008 for filing with the SEC.

 

Members of the Audit Committee

 

James E. Copeland, Jr. (Chair)
David C. Chang
Donna A. James
Edward D. Shirley

 

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.

 

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 Company has formal procedures in place for the pre-approval by the Audit Committee (or its Chair) of all services provided by E&Y. These pre-approval procedures are described above under “Policy Regarding Pre-Approval of Services Provided by the Independent Auditor.”

 

The aggregate fees billed by E&Y to the Company for the years ended December 31, 2008 and 2007 are as follows:

 

Fees of the Independent Auditor

 

 

 

 

None of the services related to Audit-Related Fees presented above was approved by the Audit Committee pursuant to the waiver of pre-approval provisions set forth in the applicable rules of the SEC.

 

Introduction

 

The Company’s executive compensation program is designed to attract, retain, motivate and reward leaders who create long-term value for the Company’s stockholders. Generally, the Company’s compensation program is intended to reward sustained financial and operating performance and leadership excellence, align executives’ long-term interests with those of the Company’s stockholders and motivate executive retention. This Compensation Discussion and Analysis describes the Company’s compensation philosophy, strategy, policies, components and practices for the named executive officers and how they were applied to determine 2008 compensation for the named executive officers, including the following:

 

 

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:

 

 

The Compensation Committee’s charter states that in determining compensation 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, and the competitiveness of the named executive officer’s compensation as compared with the compensation of executives in similar positions at peer companies.

 

Role of Compensation Consultants and Management

 

Since early 2007, the Compensation Committee has retained Executive Compensation Advisors, a Korn/Ferry company (“ECA”), as its independent compensation consultant. The Company pays ECA an annual retainer, plus additional amounts for special projects, and the firm reports directly to the Compensation Committee. ECA provides assistance and advice to the Compensation Committee in carrying out its responsibilities with respect to executive compensation policies and programs. The Compensation Committee consults with ECA with respect to all significant compensation decisions and determinations. In this advisory

role, ECA attends and participates in all Compensation Committee meetings, including executive sessions when appropriate. In connection with ECA’s role as advisor to the Compensation Committee, Management (as defined below) may from time to time seek input from ECA about compensation proposals it is considering for presentation to the Compensation Committee. Annually, the Compensation Committee reviews the performance and independence of ECA.

 

Members of management, including Glenn Britt, President and Chief Executive Officer (and Chairman, as of March 12, 2009), Robert Marcus, Senior Executive Vice President and Chief Financial Officer, and Tomas Mathews, Executive Vice President, Human Resources (collectively, “Management”), provide recommendations for the Compensation Committee’s consideration, and provide ongoing assistance to the Compensation Committee with respect to its review of the effectiveness of the Company’s executive compensation programs, including competitiveness and alignment with the Company’s objectives. 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.

 

Compensation Philosophy and Key Principles

 

The Compensation Committee evaluates all elements of the Company’s executive compensation program in light of its compensation philosophy. This philosophy is to provide a competitive mix of base salary and short-term and long-term incentive compensation to attract, retain, motivate and reward the Company’s executives for achievement of Company and individual performance goals. The Company’s compensation philosophy is guided by the following key principles:

 

 

Compensation Program Design

 

The Company’s compensation program utilizes three principal elements—base salary, short-term incentives and long-term incentives. As discussed below, each is intended to focus the Company’s executives on a different corporate priority.

 

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. The level of base salary paid to a named executive officer generally reflects the executive’s qualifications, level of experience and tenure with the Company, as well as the importance of attracting and retaining the executive.

 

Short-Term Incentive:  The Company’s short-term cash incentive program is designed to motivate the Company’s named executive officers and other participants to help meet and exceed annual financial and non-financial goals established annually by the Compensation Committee by giving them an opportunity to share in the Company’s success. The program also rewards participants for achieving specified individual short-term goals. Short term incentives for the named executive officers are determined using the same general criteria as are used for about 4,400 other bonus-eligible employees. Each participant is eligible to receive a target annual bonus calculated as a percentage of base salary and, for the named executive officers, within the limits of the Bonus Plan (as defined and discussed in more detail below). The percentage is generally determined based on

the participant’s level of responsibility within the Company. With increasing levels of responsibility, a higher percentage of the participant’s total cash compensation comes from the performance-based annual cash bonus. In establishing each year’s short-term incentive program, the Compensation Committee balances the benefits of the program against the risk that it will cause participants to take actions that, while consistent with the achievement of specified short-term goals, might involve unnecessary or excessive risk to the Company. For additional information regarding the structure of the 2008 short-term incentive program, see “2008 Short-Term Incentive Program and Awards.”

 

Long-Term Incentive:  The Company’s long-term incentive (“LTI”) program is designed to retain key employees, including the named executive officers, motivate them to meet and exceed the Company’s long-term goals and align their interests with those of stockholders through stock ownership. The LTI program acts as a balance to the short-term incentive program. Prior to 2007, the Company’s senior executives received equity grants from Time Warner based on Time Warner Common Stock as part of their long-term incentives together with a long-term 2006 Cash LTIP discussed below. Since 2007, the LTI program has consisted of restricted stock units (“RSUs”) and stock options based upon on the Company’s stock. In establishing each year’s LTI program, the Compensation Committee considers whether the program promotes appropriate executive conduct in light of the related risk of encouraging participants to take actions that might involve unnecessary or excessive risk to the Company. For additional information regarding the structure of the 2008 LTI program, see “2008 Long-Term Incentive Program and Awards.”

 

The Company’s short-term and long-term incentives support its “pay for performance” compensation philosophy (as discussed above). Generally, those executives with a high level of strategic impact on the Company’s success receive a greater proportion of their compensation in the form of “variable” (i.e., performance-based and/or equity-based) short-term and long-term incentives. For example, approximately 92% of Mr. Britt’s 2008 target compensation was variable with approximately 8% targeted as base salary. The other named executive officers’ target compensation was approximately 70-80% variable. The Company believes that placing greater emphasis on appropriate levels of variable compensation focuses the named executive officers on achieving the Company’s strategic and performance objectives.

 

For 2008, the Company targeted slightly more compensation to the named executive officers through long-term (as compared with short-term) incentives. The Company believes that this mix of compensation supports its compensation philosophy (as discussed above) that total compensation should be delivered in a form that focuses the executive on both the short-term and long-term strategic objectives of the Company by encouraging the named executive officers to focus at least as much on achieving long-term strategic objectives as on achieving shorter-term business objectives, as well as assisting in the retention of such executives.

 

The Company’s 2008 Compensation Determinations

 

The Compensation Committee reviews each named executive officer’s target compensation annually, as well as when the executive’s employment agreement nears the end of its term and when the executive is promoted or his responsibilities change. Management conducts an initial review and makes recommendations to the Compensation Committee. A starting point for the review is the compensation provided to the executive during the prior year. Generally, this is embodied in an employment agreement between the Company and the named executive officer that provides for a minimum annual salary, a target annual bonus stated as a percentage of annual salary and, in some cases, a target value for long-term incentive awards to be granted each year. See “—Employment Agreements.” In connection with the review, each named executive officer’s performance, the importance of the executive officer’s position within the Company, the risk of losing (and the difficulty of replacing) the executive officer, the importance of retaining the executive officer in his role and his tenure in the role is considered.

 

Competitive Comparisons

 

In addition, the 2008 compensation recommendations for the named executive officers were compared with the compensation for executive officers with similar roles and responsibilities at other companies based upon data published by 16 cable, communications and media companies (identified below) in proxy statements

or other public filings (the “2008 Peer Group”) to validate Management’s recommendations. As a general reference only, the Compensation Committee also considered the named executive officers’ 2008 compensation levels in light of market survey data available through a number of nationally recognized compensation consulting firms based on information relating to companies roughly comparable in size to the Company (median annual revenues of $15 billion) in cable, telecommunications, media and other industries. Where available, the Company further supplemented its compensation review with compensation data for comparable positions within Time Warner, its parent company at that time.

 

The Compensation Committee believes that the companies in the 2008 Peer Group reflect the Company’s competitors for talent. The companies in this group were: Alltel Corporation, AT&T Inc., Cablevision Systems Corporation, CBS Corporation, Charter Communications Inc., Clear Channel Communications, Inc., Comcast Corporation, DirecTV Group, Inc., DISH Network Corporation, Liberty Media Corporation., News Corporation, QWEST Communications International, Inc., Sprint Nextel Corporation, The Walt Disney Company, Verizon Communications, Inc. and Viacom Inc.

 

Management’s recommended target compensation for each named executive officer during 2008 consisted of base salary and short-term and long-term incentives, which, consistent with the compensation philosophy, generally were intended to deliver total target compensation between the median and the 75th percentile of the 2008 Peer Group for such executive that were also consistent with those levels in the market survey data. The Company believes that targeting executive compensation at or above the median helps attract and retain highly qualified senior leaders, which the Company believes is necessary to its success in a competitive environment. The 2008 target compensation approved by the Compensation Committee for each named executive officer was generally consistent with this target range. Actual total cash compensation paid was dependent on the achievement of certain financial performance goals and an evaluation of the executive’s individual performance, as discussed in detail below, while the ultimate value of long-term equity awards will depend on future stock performance.

 

The Company believes that the total target and actual compensation for 2008, including base salary, short-term and long-term incentives, and the mix of compensation elements, appropriately reflects individual and Company performance, stockholder alignment, the importance of each individual’s position within the Company, the importance of retaining the executive in his role, his tenure in the role and competitive market levels. The Company believes that the 2008 compensation program, each named executive officer’s target and actual compensation and the mix of compensation elements was also broadly consistent with the compensation practices and pay levels of companies within the 2008 Peer Group.

 

2008 Base Salary and Target Incentives

 

The basis for the determination of each named executive officer’s 2008 base salary and target short-term cash and long-term incentive compensation is described below.

 

Mr. Britt.  The Compensation Committee reviewed Mr. Britt’s 2008 compensation in December 2007. Under Mr. Britt’s employment agreement, he is entitled to a minimum annual salary of $1 million, which has been his base salary since 2001. As noted above, the Company believes that compensation for its more senior executives should be weighted more heavily toward variable, performance-based and/or equity-based compensation that focuses the executive on achieving the Company’s strategic and business objectives. As a result, Management did not recommend any increase in Mr. Britt’s base salary for 2008, and the Compensation Committee agreed with this recommendation. Mr. Britt’s target annual bonus and long-term incentive had been adjusted in August 2006 in connection with the renewal of his employment agreement to 500% of his base salary ($5 million) and 600% of his base salary ($6 million), respectively, to reflect his increased responsibilities in light of the cable systems acquired in the July 2006 transactions with Adelphia Communications Corporation and Comcast Corporation, the Company’s emergence as a public company, as well as his performance, the importance of his position as President and Chief Executive Officer within the Company, and the importance of retaining him in that role during what could be expected to be a challenging period for the Company. Management recommended that no adjustment be made to Mr. Britt’s target annual bonus or long-

term incentive for 2008 and the Compensation Committee, after deliberation and discussion with Management (excluding Mr. Britt), agreed with this recommendation.

 

Mr. Marcus.  The Compensation Committee reviewed Mr. Marcus’s 2008 compensation in December 2007 in anticipation of his taking on the added role of Chief Financial Officer (in addition to his position as the Company’s Senior Executive Vice President) effective January 1, 2008. Based upon the increase in the scope of each of his responsibilities, his performance, the importance of his position as Chief Financial Officer and Senior Executive Vice President, a review of the 2008 Peer Group for comparable positions and survey market data and the importance of retaining him in these roles in light of the highly competitive environment in which the Company operates, Management (excluding Mr. Marcus) recommended that his base salary and target annual bonus and long-term incentives be adjusted, effective January 1, 2008, to provide for a minimum base salary of $800,000 per year (from $700,000), a target annual bonus of 175% of base salary (from 150% of base salary), and a long-term incentive target of 225% of base salary (from 193% of base salary). The Compensation Committee, after deliberation and discussion with Management (excluding Mr. Marcus), agreed with these recommendations.

 

Mr. Hobbs.  The Compensation Committee approved a new employment agreement with Mr. Hobbs effective February 1, 2008 that extended the term of Mr. Hobbs’s employment as the Company’s Chief Operating Officer through January 31, 2011. Based upon his performance, the importance of his position as Chief Operating Officer within the Company, a review of the 2008 Peer Group for comparable positions and survey market data and the importance of retaining Mr. Hobbs in that role in light of the highly competitive environment in which the Company operates, Management recommended that his base salary and target annual bonus and long-term incentive be adjusted, effective February 1, 2008, to provide for a minimum base salary of $900,000 per year (from $850,000), a target annual bonus of 233% of his base salary (from 200%) and a long-term incentive target of 333% of his base salary (from 288%). The Compensation Committee, after deliberation and discussion with Management, agreed with these recommendations.

 

Mr. LaJoie.  The Compensation Committee reviewed Mr. LaJoie’s 2008 compensation in December 2007. Based upon his performance, the importance of his position as Chief Technology Officer, and the importance of retaining him in that role in light of the Company’s dependence on technology, Management recommended that, effective January 1, 2008, his base salary be increased to $525,000 per year (from $480,000), and that his target annual bonus be maintained at 100% of his base salary and his target long-term incentive be maintained at 175% of his base salary. The Compensation Committee, after deliberation and discussion with Management, agreed with these recommendations.

 

Mr. Rossetti.  The Compensation Committee reviewed Mr. Rossetti’s 2008 compensation in December 2007. Based upon a continued focus on new business opportunities (such as wireless and commercial services), for which Mr. Rossetti is responsible, his performance and the importance of retaining him in his role while the Company explored new business opportunities, Management recommended that his base salary and long-term incentive target be adjusted, effective January 1, 2008, to provide for a base salary of $500,000 per year (from $480,000) and a long-term incentive target of 160% of base salary (from 156% of base salary). Management further recommended that Mr. Rossetti’s target annual bonus be maintained at 100% of his base salary. The Compensation Committee, after deliberation and discussion with Management, agreed with these recommendations.

 

In connection with the 2008 compensation review, Management determined that each of the named executive officers’ base salary, target annual bonus and long-term incentives were generally consistent with those of similarly situated executives within the 2008 Peer Group.

 

2008 Short-Term Incentive Program and Awards

 

The determinations of the Company’s annual cash bonus payments to its executive officers are made under two plans—the Time Warner Cable Inc. 2007 Annual Bonus Plan (the “Bonus Plan”), which is intended to comply with Section 162(m) of the Internal Revenue Code of 1986, as amended (“Section 162(m)”), and the 2008 Time Warner Cable Incentive Plan (the “TWCIP”), which is used to guide the Compensation

Committee in its exercise of negative discretion in making awards under the Bonus Plan, as discussed in more detail below.

 

Annual Bonus Plan

 

The Bonus Plan for the named executive officers was approved by the Company’s stockholders in May 2007. Pursuant to the Bonus Plan, a subcommittee of the Compensation Committee, whose members were “outside directors” as defined in Section 162(m) (the “Subcommittee”), established objective performance criteria that determined the maximum bonus pool from which the named executive officers’ bonuses could be paid and a maximum allocation for each named executive officer. For 2008, the pool was approximately $48 million, equal to 7.5% of the amount by which the Company’s Operating Income (Loss) before depreciation of tangible assets and amortization of intangible assets for the year ended December 31, 2008 (excluding the impact of noncash impairments of goodwill, franchise rights and other intangible and fixed assets) (“2008 OIBDA”) exceeded $5.6 billion. Under the performance criteria established for 2008, this pool was allocated to allow maximum awards of $21,600,000 (45%) for Mr. Britt, $7,200,000 (15%) for Mr. Hobbs, $4,800,000 (10%) for Mr. Marcus, and $2,400,000 (5%) for each of the other named executive officers. The remaining portion of the pool was allocated among the remaining executive officers.

 

As discussed below, in awarding 2008 bonuses to each named executive officer, the Subcommittee exercised its discretion to reduce the maximum amount available for each executive officer under the Bonus Plan’s pool. The basis for this exercise of discretion was the criteria established under the 2008 TWCIP.

 

2008 TWCIP

 

In early 2008, Management recommended that the Compensation Committee establish Company-wide financial and individual goals that would be used to determine payments under the 2008 TWCIP and to guide its determinations with respect to bonuses for executive officers under the Bonus Plan. Management proposed that the TWCIP performance goals for the named executive officers be weighted 70% on Company-wide financial goals and 30% on individual goals. These weightings are the same as those used in the Company’s short-term annual cash incentive plans over the past several years. In light of discussions with Management and ECA, the Compensation Committee approved the TWCIP structure recommended by Management. In connection with its review, Management determined that the 2008 TWCIP structure was broadly consistent with the annual bonus programs of the 2008 Peer Group. A discussion and analysis of the 2008 TWCIP (i) financial criteria, (ii) individual goals and (iii) structure follows:

 

2008 TWCIP Financial Criteria.  As adopted by the Compensation Committee, the 2008 TWCIP financial performance goals were further weighted 60% based on 2008 OIBDA and 40% based on 2008 Cable Operations Cash Flow (defined as 2008 OIBDA less capital expenditures plus or minus changes in working capital) (“COCF”). Management and the Compensation Committee believed that for 2008, OIBDA and COCF would be important indicators of the operational strength and performance of the business, including the ability to provide cash flows to service debt and fund capital expenditures.

 

2008 TWCIP Individual Goals.  Individual goals were established by the Compensation Committee for Mr. Britt and for each of the other named executive officers. Mr. Britt’s 2008 individual goals reflected the Company’s strategic objectives and included optimization of the Company’s strategic positioning in relation to its competitors, identification and implementation of organizational changes to drive efficiencies, furtherance of the Company’s investor relations efforts, achievement of certain operational goals and support of the Company’s diversity efforts.

 

The individual goals for each of the named executive officers were intended to support the Company’s strategic objectives and Mr. Britt’s individual goals, but were tailored to the executive’s particular role and areas of responsibility. Mr. Hobbs’s 2008 individual goals included driving organizational changes within the Company, refining the Company’s marketing, operations and customer care efforts, the furtherance of certain new business efforts, and development and implementation of diversity and succession planning initiatives; Mr. Marcus’s goals included a successful transition to his new role as the Company’s Chief Financial Officer (e.g., effective oversight and management of the Company’s finance, accounting, treasury and investor

relations functions), effective management of the other departments reporting to him (mergers and acquisitions, human resources and programming), and continued support of the Company’s diversity and leadership programs; Mr. Rossetti’s goals included continued development of the Company’s commercial services efforts, including the Company’s Business Class Phone service, continued exploration and development of wireless offering opportunities and investigation and pursuit of other potential business opportunities; and Mr. LaJoie’s goals included ensuring the Company’s technical readiness for the 2009 digital television transition, successful technical deployment of new products and services, effective management of the Company’s advanced engineering and IT functions, and furtherance of the Company’s diversity and succession planning programs.

 

As was the case with Mr. Britt’s individual non-financial goals, the individual non-financial goals established for the other named executive officers were qualitative in nature and did not contain any specific quantitative targets or thresholds. No specific weighting was assigned to any individual non-financial goal.

 

2008 TWCIP Structure.  Based on Management’s recommendation, the Compensation Committee established a performance funding range of between 50% and 150% of each named executive officer’s target annual bonus, based upon the performance of the Company and each executive officer. Set out below are the 2008 TWCIP structure and the weightings assigned to the individual and financial performance criteria:

 

 

Under this structure, each of the performance criteria was separately assessed. If, for either of the two financial performance components (OIBDA and COCF), the threshold level of performance was not attained, no payout would be made with respect to that component. Alternatively, if the maximum level of performance was exceeded for either component, no payout in excess of 150% of target would result with respect of that component. If, for either of the two financial components, actual performance was above the threshold but below the maximum, the payout with respect to that component would be determined based solely upon the Compensation Committee’s discretion, provided the payout with respect to that component would not be less than 50% or more than 150% of the respective weighting of the target bonus, and within the limits established by the Bonus Plan.

 

In light of its subjective nature, the individual goals component of the 2008 TWCIP was not assigned a threshold level of performance. However, under the 2008 TWCIP, a participant’s individual performance assessment could not exceed 150%.

 

2008 Short-Term Incentive Program Award Determination.  In early 2009, the Compensation Committee reviewed the Company’s 2008 OIBDA and COCF performance against the threshold and maximum levels of performance under the TWCIP. Consistent with the terms of the 2008 TWCIP, the Compensation Committee made certain discretionary adjustments to both OIBDA and COCF. In addition to excluding from OIBDA certain noncash impairment charges of approximately $14.859 billion (including an approximately $14.8 billion impairment of the Company’s franchise rights required by its annual FAS 142 review), these adjustments to 2008 OIBDA reflected changes in the accounting classification of converter box retrieval costs and approximately $304 million to COCF for unanticipated, voluntary pension plan contributions, as well as adjustments to both 2008 OIBDA (approximately $30 million) and COCF (approximately $40 million) for the impact of hurricanes and unbudgeted restructuring activity. In making adjustments to each of the performance measures for 2008, the Compensation Committee was guided by the principle that the 2008 TWCIP was intended to measure and reward participants for the performance of the Company’s ongoing operations. The Compensation Committee determined that the Company’s OIBDA (adjusted as described above) of $6.240 billion exceeded the threshold OIBDA performance level but not the maximum OIBDA performance level and

that the Company’s COCF (adjusted as described above) of $2.864 billion exceeded both the threshold and the maximum COCF performance level.

 

Based on the Compensation Committee’s determination that the Company’s 2008 OIBDA and COCF performance (as adjusted by the Committee) each exceeded the corresponding threshold performance target under the 2008 TWCIP, the Compensation Committee exercised its discretion in establishing the Company’s overall financial performance “score” under the 2008 TWCIP. In exercising its discretion, the Compensation Committee considered the following factors: (1) how the Company’s actual adjusted OIBDA and COCF compared to the threshold (50%) and maximum (150%) levels for each metric, (2) Management’s recommendation for the Compensation Committee’s determination, (3) the external business environment, market conditions and budgetary considerations, (4) the Company’s performance relative to the 2008 results of some other cable operators and (5) the Company’s performance relative to its 2007 results. After deliberation, the Compensation Committee established a 2008 Company performance score of 95%.

 

In connection with the Compensation Committee’s assessment of Mr. Britt’s and the other named executive officers’ individual performances, Mr. Britt completed a self-assessment of his performance and asked certain of the Company’s other executive officers to assess his performance. Based in part on these assessments, the Compensation Committee reached the following favorable assessment of Mr. Britt’s performance against his 2008 individual goals:

 

 

In addition, Mr. Britt reviewed with the Compensation Committee each named executive officer’s performance with respect to their individual non-financial goals and recommended a performance assessment score for each of the other named executive officers based on his views of how well or poorly each had performed against each of those goals.

 

Based on the Compensation Committee’s determinations with respect to the Company performance and its assessment of the named executive officers’ performance against their respective individual goals, the Subcommittee exercised its discretion under the Bonus Plan and TWCIP to award each named executive officer a 2008 bonus payout equal to 99.5% of his target bonus. These bonus payments were less than the permitted maximums under the Bonus Plan.

 

2008 Long-Term Incentive Program and Awards

 

The Company’s 2008 LTI program was designed to retain and motivate employees to meet and exceed the Company’s long-term growth goals and acts as a balance to the shorter-term incentives.

 

2008 Target Long-Term Incentive Mix.  Late in 2006, the Company adopted the Time Warner Cable Inc. 2006 Stock Incentive Plan (the “TWC Stock Incentive Plan”), which was approved by the Company’s stockholders. For 2007, an LTI program was established under the TWC Stock Incentive Plan, which consisted of RSUs and stock options. At the time of the 2007 grants, the Company’s common stock had been trading on

the NYSE for only about a month. In light of anticipated volatility of the market price of the Class A common stock (which was exacerbated by relatively light trading volumes), Management and the Compensation Committee determined that providing a significant percentage of LTI through RSUs that vest based on continued service over time was important to executive retention, and the pay for performance and stockholder alignment components of its compensation philosophy. The 2007 mix of target LTI value for all TWC Stock Incentive Plan participants was allocated one-third as stock options and two-thirds as RSUs.

 

For the 2008 LTI program, the Compensation Committee desired to add a stronger performance orientation to the LTI mix while still balancing the need for incentives that would drive retention and stock ownership among the named executive officers. Therefore, for 2008, the executive officers’ mix of target LTI value was changed to 60% as stock options and 40% as RSUs. In contrast, for a group of the Company’s senior, non-executive officers, the 2008 LTI target mix was 50% as stock options and 50% as RSUs, and for the balance of the roughly 1,200 employees who received 2008 LTI grants under the TWC Stock Incentive Plan, the target mix was one-third as stock options and two-thirds as RSUs (the same as the 2007 grants).

 

2008 Equity Awards.  As discussed above, the Company believes that awarding stock options and RSUs helps retain executives and aligns the interests of executives with the interests of stockholders.

 

In February 2008, the Compensation Committee authorized the 2008 equity awards, which were made on March 3, 2008. Mr. Britt and the other named executive officers, along with all other eligible employees, were awarded both stock options and RSUs. The stock options were granted with an exercise price equal to the closing price of Class A common stock on the grant date. Generally, the stock options vest in four equal installments on each of the first four anniversaries of the date of grant, and the RSUs awarded at the same time vest in two equal installments on the third and fourth anniversaries of the date of grant. The Company generally believes that the multi-year vesting schedule encourages executive retention and emphasizes a longer-term perspective.

 

2006-2008 Cash Long-Term Incentive Plan.  In 2006, the Company granted performance-based long-term cash awards under the 2006-2008 Long-Term Incentive Plan (“2006 Cash LTIP”). The Company established the 2006 Cash LTIP to complement awards of Time Warner stock options and RSUs at a time when the Company was not granting awards based on its own equity. The cash component was intended to increase the tie between long-term compensation and the Company’s (as opposed to Time Warner’s) performance.

 

The 2006 Cash LTIP provided a target cash award based on a three-year performance cycle. The payout range was 50% to 200% of target based on the Company’s cumulative OIBDA over the 2006-2008 performance period (“three-year OIBDA”). The 2006 Cash LTIP target awards were established for each eligible executive based on a competitive award level as compared against executives in comparable positions at that time, the importance of the executive’s position within the organization, the importance of retaining the executive in his role and the executive’s tenure in the role.

 

In February 2006, the TWC Board of Directors established and approved the performance targets for the 2006 Cash LTIP. In December 2006, pursuant to the terms of the 2006 Cash LTIP, the Compensation Committee approved certain adjustments to the performance targets to account for the Company’s transactions with Adelphia Communications Corporation and Comcast Corporation, which closed on July 31, 2006, and the distribution of assets by Texas and Kansas City Cable Partners, L.P., which occurred at the end of 2006. The resulting payout range of 50% to 200% of target was based on the Company’s three-year OIBDA, as follows:

 

 

In early 2009, the Compensation Committee reviewed the Company’s performance against the three-year OIBDA target to determine awards under the 2006 Cash LTIP. Consistent with the terms of the 2006 Cash LTIP, certain adjustments that were made in analyzing the Company’s performance under the 2006, 2007 and 2008 annual cash incentive plans were also made in analyzing the Company’s performance under the 2006 Cash LTIP.

 

The Company’s actual cumulative 2006-2008 OIBDA performance (as adjusted by the Compensation Committee) yielded a performance level of 99.95% of target payout. As a result, each of the named executive officers was awarded 99.95% of his target award. Because the 2006 Cash LTIP was delivered as target compensation in 2006 and provided a long-term incentive, the payout under the plan was not taken into account in determining other aspects of 2008 compensation for the named executive officers. Payments under the 2006 Cash LTIP were made in early 2009 and are reported in note 6 to the Summary Compensation Table elsewhere in this Proxy Statement.

 

The Use of Pay Tallies

 

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 involuntary termination scenarios) to help ensure that the design of the compensation program is consistent with the Company’s compensation philosophy and that the amount of compensation is within appropriate competitive parameters. The Compensation Committee finds tools like pay tallies helpful in its analysis of the compensation program, but focuses more on the benchmarking results of the 2008 Peer Group (see “The Company’s 2008 Compensation Program” above) in determining specific compensation levels for the named executive officers.

 

Based on the Compensation Committee’s review of 2008 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) is appropriate and reasonable and, therefore, did not make any adjustments based on this review.

 

Perquisites

 

The Company provides some limited perquisites to the named executive officers. 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, alleviate safety and security concerns, and assist the Company in recruiting and retaining key executives. The Company believes these perquisites are more limited than those provided to executives at many other large companies.

 

The Company’s perquisites for its named executive officers in 2008 include reimbursement for financial services and, in the case of Mr. Britt, a car allowance as well as a company-provided car and specially-trained driver in light of security concerns. Additionally, during 2008, the Company owned aircraft jointly with Time Warner and other Time Warner companies, which was used by the Company primarily for business purposes. Under Company policy, personal use of the aircraft was permitted by the Company’s executive officers when space was available on otherwise-scheduled business flights, with income attributed to the relevant executive officer.

 

Benefits

 

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 plans, the Company maintains non-qualified defined benefit plans in which the named executive officers participate. All tax-qualified defined benefit plans have a maximum compensation limit and a maximum annual benefit, which limit the benefit to participants whose compensation exceeds these limits. In order to provide retirement benefits commensurate with salary levels, the non-qualified plans provide benefits to key salaried employees, including the named

executive officers, using the same formula for calculating benefits as is used under the tax-qualified plans but taking into account compensation in excess of the compensation limitations and maximum benefit accruals for tax-qualified plans. See “—Pension Plans.”

 

The Company also provides other benefits for its employees in which the Company’s named executive officers participate including health care coverage, life and disability insurance protection, reimbursement of educational expenses and access to favorably priced group insurance coverage. The Company provides these benefits to help alleviate the financial costs and loss of income arising from illness, disability or death, to encourage ongoing education in job related areas and to allow employees to take advantage of reduced insurance rates available for group policies.

 

Deferred Compensation

 

Before 2003, the Company maintained a nonqualified deferred compensation plan that generally permitted employees whose annual cash compensation exceeded a designated threshold to defer receipt of all or a portion of their annual bonus until a specified future date. Since March 2003, additional deferrals are no longer permitted, but amounts previously credited under the deferred compensation plan continue to track crediting rate elections made by the employee from an array of third-party investment vehicles offered under the TWC Savings Plan. See “—Nonqualified Deferred Compensation.”

 

Employment Agreements

 

Each of Mr. Britt and the other named executive officers is employed pursuant to a multi-year employment agreement that reflect 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 through the use of restrictive covenants, such as non-competition, non-solicitation and confidentiality provisions. The Company enters into employment agreements when it determines that an employment agreement is desirable for the Company to obtain a measure of assurance as to the executive’s continued employment in light of prevailing market competition for the particular position held by the executive officer, or where the Compensation Committee determines that an employment agreement is necessary and appropriate to attract an executive in light of market conditions, the prior experience of the executive or practices at the Company with respect to other similarly situated employees.

 

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.” The Company believes that the features of the employment agreements appropriately reflect the importance of each individual’s position within the Company and the importance of retaining the executive in his role.

 

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 Bonus Plan and the 2006 Stock Incentive Plan were submitted and approved by stockholders in May 2007 so that compensation paid under these 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 Company’s best interest and the best interests of the stockholders. For 2008, 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 an aggregate of approximately $3.5 million paid under the 2006 Cash LTIP and related to the vesting of RSUs.

Looking Forward

 

The Company’s Management and the Compensation Committee have evaluated the structure of the short-term and long-term incentive programs. The Company believes that the philosophy and compensation elements in place for 2008 are still generally appropriate for 2009.

 

Separation of Time Warner and the Company

 

In connection with the payment of the Special Dividend, the Recapitalization and the Reverse Stock Split, the Company equity awards held by the named executive officers were adjusted to retain their value pursuant to the terms of the TWC Stock Incentive Plan and related award agreements. With respect to the Special Dividend, RSU holders were permitted to elect to receive additional RSUs in place of their entitlement to a cash retained distribution equal to the amount of the Special Dividend.

 

Under the terms of Time Warner’s equity plans and related award agreements, as a result of the Separation, Company employees who held Time Warner equity awards on March 12, 2009, were treated as if their employment with Time Warner was terminated without cause on that date. This treatment resulted in the forfeiture of unvested stock options, shortened exercise periods for vested stock options and pro rata vesting of the next installment (and forfeiture of the remainder of) the RSU awards for Company employees (other than those who satisfied “retirement eligibility” provisions of the Time Warner equity plans and related award agreements). The effect of this treatment on the awards held by each of the named executive officers is discussed in more detail under “— Potential Payments upon Termination or Change in Control.” The Compensation Committee has approved “make-up” awards, or in certain instances, cash payments, to Company employees that are generally intended to offset any loss of economic value in Time Warner equity awards as a result of the Separation. These “make-up” awards have not yet been made. Because the adjustments and make-up awards are intended to offset possible losses as a result of the Separation, the Compensation Committee did not consider the value of these awards in determining 2008 or 2009 compensation for the named executive officers.

 

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).

 

Members of the Compensation Committee

 

 

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, 2008 (collectively, the “named executive officers”).

 

SUMMARY COMPENSATION TABLE

 

 

 

 

 

 

(a) Pursuant to the TWC Savings Plan (the “Savings Plan”), a defined contribution plan available generally to TWC employees, for the 2008 plan year, each of the named executive officers deferred a portion of his annual compensation and TWC contributed $10,334 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 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 2008, this cash payment was $25,152 for Mr. Britt, $2,592 for Mr. Marcus and $1,944 for Mr. Hobbs. Messrs. LaJoie and Rossetti elected not to receive a cash payment for life insurance over $50,000 and instead receive group term life insurance available generally as well as supplemental group term life insurance coverage provided by the Company and are taxed on the imputed income. For 2008, the Company paid $12,485 for Mr. Rossetti’s 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 that aggregate $10,000 or more for 2008 consist of the aggregate incremental cost to the Company of: for Mr. Britt, financial services and transportation-related benefits covering an automobile allowance of $24,000 and $7,868 related to the incremental cost to the Company of a Company-provided car and specially trained driver provided for security reasons, based on the portion of usage that was personal; for Mr. Hobbs, financial services of $36,268; and for Messrs. Marcus, LaJoie and Rossetti, financial services. Mr. Britt’s transportation-related benefits also include the incremental cost of his spouse accompanying him on two business trips on corporate aircraft. There is no incremental cost to TWC for the use by Mr. Britt’s spouse of the aircraft under these circumstances, except for catering and TWC’s portion of employment taxes attributable to the income imputed to Mr. Britt for tax purposes.

 

The following table presents information with respect to each award of plan-based compensation to each named executive officer in 2008, including (a) annual cash awards under the Bonus Plan and TWCIP and (b) awards of stock options to purchase Class A common stock and TWC RSUs granted under the Time Warner Cable Inc. 2006 Stock Incentive Plan (the “TWC Stock Incentive Plan”).

 

The following table does not reflect certain adjustments (“antidilution adjustments”) to the TWC stock option exercise prices and number and kind of shares underlying the TWC stock options and RSUs. These adjustments were made in March 2009 in connection with the Separation and were intended to maintain the awards’ values following the payment of the Special Dividend, the Reverse Stock Split and the Recapitalization. See “—Compensation Discussion and Analysis-Separation of Time Warner and the Company.”

 

GRANTS OF PLAN-BASED AWARDS
DURING 2008

 

 

 

 

The TWC stock options granted in 2008 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. The stock options are subject to accelerated vesting upon the occurrence of certain events such as retirement, death or disability. The exercise price of the stock options cannot be less than the fair market value of the Class A common stock on the date of grant. 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 Class A common stock underlying the stock options.

 

The awards of TWC RSUs granted in 2008 vest in equal installments on each of the third and fourth anniversaries of the date of grant, assuming continued employment and subject to accelerated vesting upon the occurrence of certain events such as retirement, death or disability. Holders of the RSUs are entitled to receive dividend equivalents on unvested RSUs, if and when regular cash dividends are paid on outstanding shares of Class A 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—2008 Long-Term Incentive Program and Awards.”

 

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.  The Company entered into an employment agreement with Mr. Britt, effective as of August 1, 2006, which provides that Mr. Britt will serve as the Company’s Chief Executive Officer through December 31, 2009, subject to earlier termination as provided in the agreement. Mr. Britt’s agreement is automatically extended for consecutive one-month periods, unless terminated by either party upon 60 days’ notice, and terminates automatically on the date Mr. Britt becomes eligible for normal retirement at age 65. The agreement provides Mr. Britt with a minimum annual base salary of $1,000,000 and an annual discretionary target bonus of $5,000,000, which will vary subject to Mr. Britt’s and the Company’s performance from a minimum of $0 up to a maximum of $6,675,000. In addition, the agreement provides that, beginning in 2007, for each year of the agreement, the Company will provide Mr. Britt with long-term incentive compensation with a target value of approximately $6,000,000 (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 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. Mr. Britt also receives an annual payment equal to two times the premium cost of $4 million of life insurance as determined under the Company’s GUL insurance program.

 

Robert D. Marcus.  The Company entered into an employment agreement with Mr. Marcus, effective as of August 15, 2005, which provides that Mr. Marcus will serve as the Company’s Senior Executive Vice President through August 15, 2008, subject to earlier termination as provided in the agreement. Mr. Marcus was appointed Senior Executive Vice President and Chief Financial Officer effective January 1, 2008. Mr. Marcus’ agreement is automatically extended for consecutive one-month periods, unless terminated by Mr. Marcus upon 60 days’ written notice or by the Company upon written notice specifying the effective date of such termination. The agreement provides Mr. Marcus with a minimum annual base salary of $650,000

(which was increased to $800,000 by the Compensation Committee as of January 1, 2008), an annual discretionary target bonus of 125% of his base salary (which was increased by the Compensation Committee to 175% as of January 1, 2008), subject to Mr. Marcus’ and the Company’s performance, a one-time grant of options to purchase 25,000 shares of Time Warner Common Stock (which was issued to Mr. Marcus in connection with the execution of the agreement), a discretionary annual equity and other long-term incentive compensation award with a minimum target value of $1,300,000 (which was increased to 225% of base salary by the Compensation Committee as of January 1, 2008), subject to Mr. Marcus’ and the Company’s performance, and participation in the Company’s benefit plans and programs, including $50,000 of group life insurance. Mr. Marcus also receives an annual payment equal to two times the premium cost of $2 million of life insurance as determined under the Company’s GUL insurance program.

 

Landel C. Hobbs.  The Company entered into an employment agreement with Mr. Hobbs, effective as of February 1, 2008, which provides that Mr. Hobbs will serve as the Company’s Chief Operating Officer through January 31, 2011, subject to earlier termination as provided in the agreement. Mr. Hobbs’ agreement is automatically extended for consecutive one month periods, unless terminated by Mr. Hobbs upon 60 days’ written notice or by the Company upon written notice specifying the effective date of such termination. The agreement provides Mr. Hobbs with a minimum annual base salary of $900,000 (which was increased from $850,000 by the Compensation Committee as of February 1, 2008), an annual discretionary target bonus of 233% of his base salary (which was increased from 200% as of February 1, 2008), subject to Mr. Hobbs’ and the Company’s performance, a discretionary annual equity and other long-term incentive compensation award for 2008 with a minimum target value of $3,000,000, subject to Mr. Hobbs’ and the Company’s performance, and participation in the Company’s benefit plans and programs, including life insurance. Mr. Hobbs also receives an annual payment equal to two times the premium cost of $1.5 million of life insurance as determined under the Company’s GUL insurance program.

 

Michael LaJoie.  The Company entered into an employment agreement with Mr. LaJoie, effective as of June 1, 2000, which was renewed and amended, effective as of January 1, 2009, and provides that Mr. LaJoie will serve as the Company’s Executive Vice President and Chief Technology Officer through December 31, 2011, subject to earlier termination as provided in the agreement. The Company’s failure upon 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. The agreement provides for a minimum annual base salary of $525,000 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.

 

Carl U.J. Rossetti.  The Company entered into an employment agreement with Mr. Rossetti, effective as of June 1, 2000, which provides that Mr. Rossetti will serve as an Executive Vice President of the Company for a term of three years from that date, subject to earlier termination as provided in the agreement. As of January 1 of each year, the Company may renew the term of Mr. Rossetti’s employment agreement for a term of three years from that date. Currently, Mr. Rossetti’s employment agreement has been extended through December 31, 2011. The agreement provides for a minimum annual base salary (which was increased to $500,000 by the Compensation Committee as of January 1, 2008), and an annual discretionary target bonus of 100% of his base salary, subject to Mr. Rossetti’s and the Company’s performance, and participation in the Company’s benefit plans and programs, including life insurance.

 

The following table provides information about each of the outstanding awards of options to purchase the Company’s Class A common stock and Time Warner Common Stock and the aggregate TWC and Time Warner RSUs held by each named executive officer on December 31, 2008. On December 31, 2008, none of the named executive officers held performance-based equity awards.

 

The information in this table does not reflect (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 and RSUs as a result of Time Warner’s Spin-Off Dividend and one-for-three reverse stock split 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. See “—Compensation Discussion and Analysis—Separation of Time Warner and the Company.”

 

OUTSTANDING EQUITY AWARDS AT
DECEMBER 31, 2008