Time Warner Telecom Llc Option Plan

Exhibit 10.4


As amended as of:


December 16, 1998


TIME WARNER TELECOM LLC
1998 OPTION PLAN


ARTICLE I
Purpose of the Plan
The purpose of the Time Warner Telecom LLC (the "Company") 1998 Option Plan (hereinafter the "Plan") is to provide for the granting of options to representatives and employees of the Company and its Subsidiaries in recognition of the valuable services provided, and contemplated to be provided, by such representatives and employees. The general purpose of the Plan is to promote the interests of the Company and its members and to reward dedicated representatives and employees of the Company and its Subsidiaries by providing them additional incentives to continue and increase their efforts with respect to, and to remain in the employ of, the Company or its Subsidiaries.


ARTICLE II
Certain Definitions
The following terms (whether used in the singular or plural) have the meanings indicated when used in the Plan:


(a) "Agreement" means the option agreement specified in Article XI.


(b) "Approved Transaction" means any transaction in which the Board (or, if
approval of the Board is not required as a matter of law, the members of
the Company) shall approve (i) any consolidation or merger of the
Company in which the Company is not the continuing or surviving company
or pursuant to which Interests would be converted into cash, securities
or other property, other than a merger of the Company in which the
equity holders of the Company immediately prior to the merger have the
same proportionate ownership of the equity value of the surviving
company immediately after the merger or (ii) any sale, lease, exchange,
or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the
Company, or (iii) the adoption of any plan or proposal for the
liquidation or dissolution of the Company; provided that the
reconstitution of the Company as a corporation or other entity or a
public offering of the equity of the Company (or its successor) shall
not constitute an Approved Transaction.


(c) "Award" means grants of Options under this Plan.

(d) "Board" means the Management Committee of the Company.


(e) "Board Change" means such time as the Initial Members and their
respective affiliates as a group cease to have the ability to elect a
majority of the members of the Board (other than the chief executive
officer of the Company and independent representatives; provided that
independent representatives shall be included in calculating whether the
foregoing majority requirement is satisfied if the representatives
nominated by the Initial Members and their respective affiliates do not
constitute a majority of the committee that selects the Board's nominees
for independent representatives) and a "person" or "group" (within the
meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) (other than
the Initial Members and their respective affiliates) has become the
ultimate "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act) of more than 35% of the total voting power of the voting interests
of the Company on a fully diluted basis and such ownership represents a
greater percentage of the total voting power of the voting interests of
the Company, on a fully diluted basis, than is held by the Initial
Members and their respective affiliates as a group on such date.


(f) "Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor statute or statutes thereto. Reference to any
specific Code section shall include any successor section.


(g) "Committee" means the Committee comprised of members of the Board
appointed pursuant to Article IV.


(h) "Company" means Time Warner Telecom LLC, a limited liability company,
and any successor thereto.


(i) "Effective Date" means the date the Plan becomes effective pursuant to
Article XV.


(j) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor statute or statutes thereto.
Reference to any specific Exchange Act section shall include any
successor section.


(k) "Fair Market Value" of Units shall mean the fair market value of such
Units as determined in good faith by the Board after consultation with
an independent appraiser or other third party deemed appropriate by the
Board. In the event of an Approved Transaction involving the sale of
Interests of the Company, the Fair Market Value of a Unit shall be based
upon the price per Unit paid by the acquiror in connection with such
Approved Transaction, subject to appropriate adjustment to reflect
relative differences among the Units as determined in good faith by the
Board.


(l) "Holder" means a representative or an employee of the Company or any of
its Subsidiaries who has received an Award under this Plan. An
individual shall continue to be considered a Holder for purposes of this
Plan during the period such individual holds Units acquired pursuant to
an exercise of an Option.


(m) "Initial Members" means Time Warner Inc., MediaOne Group, Inc.,
Advance/Newhouse Partnership and the affiliates of each of the
foregoing.


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(n) "Interest" shall mean a Class A Interest in the Company as defined in
the Operating Agreement.


(o) "Operating Agreement" shall mean the Amended and Restated Limited
Liability Company Agreement of Time Warner Telecom LLC dated July 14,
1998, as in effect from time to time.


(p) "Option" means any option granted pursuant to this Plan.


(q) "Plan" has the meaning ascribed thereto in Article I.


(r) "Subsidiary" of a person means any present or future subsidiary of such
person as such term is defined in Section 425 of the Code and any
present or future trade or business, whether or not incorporated,
controlled by or under common control with such person. An entity shall
be deemed a Subsidiary of a person only for such periods as the
requisite ownership or control relationship is maintained.


(s) "Total Disability" means a permanent and total disability as defined in
Section 22(e)(3) of the Code.


(t) "Unit" shall mean an Interest in the Company expressed as a unit. As of
the date of the initial grant of Options under the Plan, the Board shall
determine the notional amount of Units considered to be outstanding and
the percentage interest of the equity value of the Company represented
by each Unit, which amounts shall be subject to adjustment as provided
in Section 3.02 and Section 6.06. Any references herein to Units include
any securities exchanged in the conversion of Units.


ARTICLE III
Units Subject to the Plan
SECTION 3.01 Number of Units. Subject to the provisions of Section 3.02 and Section 6.06, the maximum number of Units in respect of which Awards may be granted under the Plan shall be determined by the Board as of the date of the initial grant of Awards under the Plan, but shall in no event represent more than 10% of the equity value of the Company as of that date. The maximum number of Units in respect of which Awards may be granted during any calendar year to any one individual under the Plan shall not exceed one-half the number of Units that may be subject to Awards granted under the Plan under the preceding sentence. If and to the extent that an Option shall expire, terminate or be canceled for any reason without having been exercised, the Units subject to such expired, terminated or canceled portion of the Option shall again become available for purposes of the Plan.


SECTION 3.02 Adjustments. In addition to the adjustment in the Interests as described in Section 6.06, in the event that the Board determines that any dividend or other distribution (whether in the form of cash, Interests, securities or other property), recapitalization, reorganization, merger, consolidation, issuance or exchange of Interests, other ownership interests or other securities of the Company, issuance of warrants or other rights to purchase Interests, other ownership


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interests or other securities of the Company or other similar corporate transaction or event affects the Interests such that an adjustment is determined by the Board in its discretion to be appropriate in order to prevent inappropriate dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Board may, in such manner as it may deem equitable, adjust any or all of (a) the number of Units, other ownership interests or other securities of the Company (or number and kind of other securities or property) with respect to which Awards may be granted, (b) the number of Units, other ownership interests or other securities of the Company (or number and kind of other securities or property) subject to outstanding Awards or the percentage of Interests, other ownership interests or other securities of the Company subject to Units and (c) the exercise price with respect to any Option or, if deemed appropriate, make provision for a cash payment to the Holder of an outstanding Option in consideration for the cancellation of such Option. No adjustment shall be made on account of the issuance of Interests with respect to Options.


ARTICLE IV
Administration
SECTION 4.01 Powers. The Plan shall be administered by the Board. Subject to the express provisions of the Plan, the Board shall have plenary authority, in its discretion, to grant Awards under the Plan and to determine the terms and conditions (which need not be identical) of all Awards so granted, including without limitation, (a) the individuals to whom, and the time or times at which, Awards shall be granted or awarded, (b) the number of Units to be subject to each Award, (c) when an Option can be exercised and whether in whole or in installments, and (d) the form, terms and provisions of any Agreement (which terms may be amended, subject to Article XIV).


SECTION 4.02 Factors to Consider. In making determinations hereunder, the Board may take into account the nature of the services rendered by the respective representatives and employees, their dedication and past contributions to the Company and its Subsidiaries, their present and potential contributions to the success of the Company and its Subsidiaries and such other factors as the Board in its discretion shall deem relevant.


SECTION 4.03 Interpretation. Subject to the express provisions of the Plan, the Board shall have plenary authority to interpret the Plan, to prescribe, amend and rescind the rules and regulations relating to it and to make all other determinations deemed necessary or advisable for the administration of the Plan. The determinations of the Board on the matters referred to in this Article IV shall be conclusive.


SECTION 4.04 Delegation to Committee. Notwithstanding anything to the contrary contained herein, the Board may at any time, or from time to time, appoint a Committee and delegate to such Committee the authority of the Board to administer the Plan, including to the extent provided by the Board, the power to further delegate such authority. Upon such appointment and delegation, any such Committee shall have all the powers, privileges and duties


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of the Board in the administration of the Plan to the extent provided in such delegation, except for the power to appoint members of the Committee and to terminate, modify or amend the Plan. The Board may from time to time appoint members of any such Committee in substitution for or in addition to members previously appointed, may fill vacancies in such Committee and may discharge such Committee.


Any such Committee shall hold its meetings at such times and places as it shall deem advisable. A majority of members shall constitute a quorum and all determinations shall be made by a majority of such quorum. Any determination reduced to writing and signed by all of the members shall be fully as effective as if it had been made by a major ...