Time Warner Cable 2008 Annual Report Download - page 131

December 31, 2009; however, various events could cause the Company’s current expectations to change in the
future. These uncertain tax positions, if ever recognized in the financial statements, would be recorded in the
statement of operations as part of the income tax provision.
With few exceptions, periods ending after March 31, 2003 are subject to U.S., state and local income tax
examinations by tax authorities.
12. EQUITY-BASED COMPENSATION
Time Warner Equity Plans
Prior to 2007, Time Warner granted options to purchase Time Warner common stock and shares of Time
Warner common stock (“restricted stock”) or restricted stock units (“RSUs”) under its equity plans (collectively, the
“Time Warner Equity Awards”) to employees of TWC. TWC recognizes compensation expense for the fair value of
such awards according to the provisions of FASB Statement No. 123 (revised 2004), Share-Based Payment. Time
Warner has not granted Time Warner Equity Awards to employees of TWC since TWC Class A common stock
began to trade publicly in March 2007. In addition, employees of Time Warner who become employed by TWC
retain their Time Warner Equity Awards pursuant to their terms and TWC records equity-based compensation
expense from the date of transfer through the end of the applicable vesting period. The stock options granted by
Time Warner to employees of TWC were granted with exercise prices equal to, or in excess of, the fair market value
of a share of Time Warner common stock at the date of grant. Generally, the stock options vest ratably over a four-
year vesting period and expire ten years from the date of grant. The awards of restricted stock or RSUs generally
vest between three to five years from the date of grant. Holders of Time Warner restricted stock and RSU awards are
generally entitled to receive cash dividends or dividend equivalents, respectively, paid by Time Warner during the
period of time that the restricted stock or RSU awards are unvested. Certain Time Warner stock options and RSU
awards provide for accelerated vesting upon an election to retire pursuant to TWC’s defined benefit pension plans or
a voluntary termination of employment after reaching a specified age and years of service.
Upon the exercise of a stock option, the vesting of a RSU award or the grant of restricted stock, shares of Time
Warner common stock are issued from authorized but unissued shares or from treasury stock.
In connection with the Separation Transactions, and as provided for in Time Warner’s equity plans, the number
of Time Warner stock options and RSUs outstanding at the Separation and the exercise prices of such stock options
will be adjusted to maintain the fair value of those awards. The changes in the number of equity awards and the
exercise prices will be determined by comparing the fair value of such awards immediately prior to the Separation
Transactions to the fair value of such awards immediately after the Separation Transactions. In performing this
analysis, the only assumptions that would change relate to the Time Warner stock price and the employee’s exercise
price. The modifications to the outstanding equity awards will be made pursuant to existing antidilution provisions
in Time Warner’s equity plans.
Under the terms of Time Warner’s equity plans and related award agreements, as a result of the Separation,
TWC employees who hold Time Warner equity awards will be treated as if their employment with Time Warner had
been terminated without cause at the time of the Separation. This treatment will result in the forfeiture of unvested
stock options and shortened exercise periods for vested stock options and pro rata vesting of the next installment of
(and forfeiture of the remainder of) the RSU awards for those TWC employees who do not satisfy retirement-
treatment eligibility provisions in the Time Warner equity plans and related award agreements. TWC plans to grant
“make-up” TWC equity awards or make cash payments to TWC employees that are generally intended to offset any
loss of economic value in Time Warner equity awards as a result of the Separation.
Other information pertaining to each category of Time Warner equity-based compensation appears below.
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TIME WARNER CABLE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)