EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of May 15, 1996, between TIME
WARNER INC., a Delaware corporation (the "Company"), and Xxxxxxx X. Xxxxx (the
"Executive").
The Company currently employs the Executive on a full-time basis
pursuant to an Employment Agreement dated as of February 1, 1992 (the "Prior
Agreement") which expired on December 31, 1995. The Company has continued to
employ the Executive pursuant to the terms of the Prior Agreement and desires to
continue to secure the services of the Executive on a full-time basis subject to
the terms and conditions set forth in this Agreement, and the Executive is
willing to provide such services on and subject to the terms and conditions set
forth in this Agreement. The parties therefore agree as follows:
1. Term of Services. The Executive's "term of employment", as
this phrase is used throughout this Agreement, shall be for the period beginning
May 15, 1996 (the "Effective Date") and ending on December 31, 2000 (the "Term
Date") subject, however, to earlier termination as expressly provided herein.
2. Employment. The Company shall employ the Executive, and the
Executive shall serve, as Senior Vice President, Government and Public Affairs
of the Company during the term of employment, and the Executive shall have the
authority, functions, duties, powers and responsibilities normally associated
with such position and as the Board of Directors, the Chief Executive Officer,
the President or the Senior Vice President-Communications of the Company may
from time to time delegate to the Executive in addition thereto. The Executive
agrees, subject to his election as such and without additional compensation, to
serve during the term of employment in such particular additional offices of
comparable stature and responsibility to which he may be elected from time to
time in the Company and its subsidiaries and to serve as a director and as a
member of any committee of the Board of Directors of the Company and its
subsidiaries. During the term of employment, (i) the Executive's services shall
be rendered on a substantially full-time, exclusive basis, (ii) he will apply on
a full-time basis all of his skill and experience to the performance of his
duties in such employment, and shall report only to the Senior Vice President -
Communications of the Company, the Company's Board of Directors, if so
requested, and to such other corporate officer(s) of the Company more senior
than the Executive as the Board of Directors shall determine, (iii) he shall
have no other employment and, without the prior written consent of the Chief
Executive Officer or
the President of the Company, no outside business activities which require the
devotion of substantial amounts of the Executive's time and (iv) unless the
Executive otherwise consents, the headquarters for the performance of his
services shall be the principal executive offices of the Company in the greater
Washington, D.C. area, subject to such reasonable travel as the performance of
his duties in the business of the Company may require. The foregoing shall be
subject to the policies of the Company, as in effect from time to time,
regarding vacations, holidays, illness and the like and shall not prevent the
Executive from devoting such time to his personal affairs as shall not interfere
with the performance of his duties hereunder.
During the term of employment and so long as the Executive
remains on the payroll of the Company, the Executive shall not, directly or
indirectly, without the prior written consent of the Chief Executive Officer or
the President of the Company, render any services to any other person, or
acquire any interest of any type in any other person, that might be deemed in
competition with the Company or any of its subsidiaries or affili- ates or in
conflict with his full-time, exclusive position as a senior executive officer of
the Company; provided, however, that the foregoing shall not be deemed to
prohibit the Executive from (a) acquiring, solely as an investment and through
market pur- chases, securities of any corporation which are registered under
Section 12(b) or 12(g) of the Securities Exchange Act of 1934 and which are
publicly traded, so long as he is not part of any control group of such
corporation and such securities, if converted, do not constitute more than one
percent (1%) of the outstanding voting power of that public company, (b)
acquiring, solely as an investment, any securities of a partnership, trust,
corporation (other than a corporation that has outstanding securities covered by
the preceding clause (a)) or other entity so long as he remains a passive
investor in such entity and does not become part of any control group thereof
and so long as such entity is not, directly or indirectly, in competition with
the Company or any of its subsidiaries or affiliates, or (c) serving as a
director of any other public company that is not in competition with the Company
or any of its subsidiaries or affiliates. For purposes of the foregoing, a
person or entity shall be deemed to be in competition with the Company or any of
its subsidiaries or affiliates if he or it engages in any line of business that
is substantially the same as either (i) any line of operating business which the
Company or any of its subsidiaries or affiliates engages in, conducts or, to the
knowledge of the Executive, has definitive plans to engage in or conduct during
the term of employment, or (ii) any operating business that is engaged in or
conducted by the Company or any of its subsidiaries or affiliates during the
term of employment and as to which, to the knowledge of the Executive, the
Company or any of its subsidiaries or affiliates covenants in writing, in
connection with the disposition of such business, not to compete therewith (in
each case, a "Competitive Entity").
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3. Compensation.
3.1 Base Salary. The Company shall pay or cause to be paid to
the Executive a base salary of not less than $300,000 per annum during the term
of employment (the "Base Salary"). The Company may increase, but not decrease,
the Base Salary at any time and from time to time during the term of employment
and upon each such increase the term "Base Salary" shall mean such increased
amount. Base Salary shall be payable in monthly or more frequent installments in
accordance with the Company's regular payroll practices for senior executives of
the Company.
3.2 Bonus. In addition to Base Salary, the Executive shall be
eligible to receive an annual cash bonus based on the performance of the Company
and of the Executive as determined by the Compensation Committee of the
Company's Board of Directors or the Company's Chief Executive Officer, President
or Senior Vice President-Communications, as the case may be. The Executive's
target bonus shall be 100% of the Executive's Base Salary but the Executive
acknowledges that the Executive's actual bonus will vary depending upon the
performance of the Company and the Executive. The Company may increase, but not
decrease, the target bonus from time to time. The Company's determination of the
amount, if any, of annual bonuses to be paid to the Executive under this
Agreement shall be final and conclusive except as otherwise provided herein.
Payments of any bonus compensation under this Section 3.2 shall be made in
accordance with the Company's then current practices and policies with respect
to other senior executives of the Company.
3.3 Deferred Compensation. In addition to Base Salary and
bonus as set forth in Sections 3.1 and 3.2, the Executive will be credited with
deferred compensation which shall be determined and paid out as provided in this
Agreement and in Annex A hereto. During the term of employment, the Company
shall credit to a special account maintained on the Company's books for the
Executive (the "Account"), monthly, an amount equal to 25% of one-twelfth of
Executive's then annual Base Salary. If a lump sum payment is made pursuant to
Section 4.2.2, 4.2.3 or 4.3 hereof, the Company shall credit to the Account at
the time of such payment an amount equal to 25% of any portion of such lump sum
payment attributable to Base Salary. The Account will be maintained by the
Company in accordance with the terms of this Agreement and Annex A until the
full amount which the Executive is entitled to receive therefrom has been paid
in full.
3.4 Deferred Bonus. In addition to any other deferred bonus
plan in which the Executive may be entitled to participate, the Executive may
elect by written notice delivered to the Company as of the Effective Date or at
least 15 days prior to the commencement of any subsequent calendar year during
the term of employment during which an annual cash bonus would otherwise accrue
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or to which it would relate, to defer payment of and to
have the Company credit to the Account all or any portion of the Executive's
bonus for such year. Any such election shall only apply to the calendar year
during the term of employment with respect to which such election is made and a
new election shall be required with respect to each successive calendar year
during the term of employment.
3.5 Prior Account. The parties confirm that the Company has
maintained a deferred compensation account (the "Prior Account") for the
Executive in accordance with the Prior Agreement through the Effective Date. The
Prior Account shall be promptly transferred to, and shall for all purposes be
deemed part of, the Account and shall continue to be maintained by the Company
in accordance with this Agreement. All prior credits to the Prior Account shall
be deemed to be credits made under this Agreement, all "Account Retained Income"
thereunder shall be deemed to be Account Retained Income under this Agreement
and all increases or decreases to the Prior Account as a result of income,
gains, losses and other changes shall be deemed to have been made under this
Agreement.
3.6 Reimbursement. The Company shall pay or xxxx- xxxxx the
Executive for all reasonable expenses actually incurred or paid by the Executive
during the term of employment in the performance of his services hereunder upon
presentation of expense statements or vouchers or such other supporting
information as the Company may customarily require of its senior executives.
3.7 No Anticipatory Assignments. Except as specifically
contemplated hereunder (including Section 12.8 and the life insurance policies
and benefit plans referred to herein), neither the Executive, his legal
representative nor any beneficiary designated by him shall have any right,
without the prior written consent of the Company, to assign, transfer, pledge,
hypothecate, anticipate or commute any payment due in the future to such person
pursuant to any provision of this Agreement, and any attempt to do so shall be
void and will not be recognized by the Company.
3.8 Indemnification. The Executive shall be entitled
throughout the term of employment in his capacity as an officer or director of
the Company or any of its subsidiaries or a member of the board of
representatives or other governing body of any partnership or joint venture in
which the Company has an equity interest (and after the term of employment to
the extent relating to his service as such officer, director or member) to the
benefit of the indemnification provisions contained on the date hereof in the
Certificate of Incorporation and By-Laws of the Company (not including any
amendments or additions that limit or narrow, but including any that add to or
broaden, the protection afforded to the Executive by those provisions), to the
extent not prohibited by applicable law at the time of the assertion of any
liability against the Executive.
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4. Termination.
4.1 Termination for Cause. The Company may termi- nate the
term of employment and all of the Company's obligations hereunder, other than
its obligations set forth below in this Section 4.1, for "cause" but only if the
term of employment has not previously been terminated pursuant to any other
provision of this Agreement. Termination by the Company for "cause" shall mean
termination by the Company's Board of Directors (or a Committee thereof), Chief
Executive Officer or President (as the case may be) because of the Executive's
conviction (treating a nolo contendere plea as a conviction) of a felony
(whether or not any right to appeal has been or may be exercised) or willful
refusal without proper cause to perform his obligations under this Agreement or
because of the Executive's material breach of any of the covenants provided for
in Section 9. Such termination shall be effected by notice thereof delivered by
the Company to the Executive and shall be effective as of the date of such
notice; provided, however, that if (i) such termination is because of the
Executive's willful refusal without proper cause to perform any one or more of
his obligations under this Agreement, (ii) such notice is the first such notice
of termination for any reason delivered by the Company to the Executive under
this Section 4.1, and (iii) within 15 days following the date of such notice the
Executive shall cease his refusal and shall use his best efforts to perform such
obligations, the termination shall not be effective.
In the event of termination by the Company for cause in
accordance with the foregoing procedures, without prejudice to any other rights
or remedies that the Company may have at law or equity, the Company shall have
no further obligations to the Executive other than (i) to pay Base Salary and
make credits of deferred compensation to the Account accrued through the
effective date of termination, (ii) to pay any annual bonus pursuant to Sec-
tion 3.2 to the Executive in respect of the year prior to the year in which such
termination is effective, in the event such annual bonus has been determined but
not yet paid as of the date of such termination and (iii) with respect to any
rights the Executive has under Section 8 through the effective date of
termination (except as may be otherwise specifically provided in any such plan
or program) or any rights which the Executive has in respect of amounts credited
to the Account through the effective date of termination or pursuant to any
insurance or other benefit plans or arrangements of the Company maintained for
the benefit of its senior executives. The Executive hereby disclaims any right
to receive a pro rata portion of the Executive's annual bonus with respect to
the year in which such termination occurs. The last paragraph of Section 2, the
last sentence of Section 3.3 and Sections 3.6, 3.8 and 9 through 12 and Annex A
shall survive any termination pursuant to this Section 4.1.
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4.2 Termination by Executive for Material Breach by the
Company and Wrongful Termination by the Company. The Executive shall have the
right, exercisable by notice to the Company, to terminate the term of employment
effective 15 days after the giving of such notice, if, at the time of such
notice, the Company shall be in material breach of its obligations hereunder;
provided, however, that, with the exception of clause (i) below, this Agreement
shall not so terminate if such notice is the first such notice of termination
delivered by the Executive pursuant to this Section 4.2 and within such 15-day
period the Company shall have cured all such material breaches of its
obligations hereunder. The parties acknowledge and agree that a material breach
by the Company shall include, but not be limited to, (i) the Company failing to
cause the Executive to remain as Senior Vice President Government and Public
Affairs of the Company; (ii) the Executive being required to report to persons
other than those specified in Section 2; (iii) the Company violating the
provisions of Section 2 with respect to the Executive's authority, functions,
duties, powers or responsibilities (whether or not accompanied by a change in
title); and (iv) unless the Executive otherwise consents, the Company requiring
the Executive's primary services to be rendered in an area other than at the
Company's principal offices in the greater Washington, D.C. area and (v) the
Company failing to cause the successor to all or substantially all of the
business and assets of the Company expressly to assume the obligations of the
Company under this Agreement.
The parties agree that in the event of a termination pursuant to
this Section 4.2, or in the event of a termination of this Agreement or the term
of employment by the Company in breach of this Agreement, the Executive shall be
entitled to elect, within 30 days after notice of termination is given by either
party, either (A) to cease being an employee of the Company and receive the lump
sum payment (and credits) described in Section 4.2.2 or (B) to remain an
employee of the Company as provided in Section 4.2.3. After the Executive makes
such election, the following provisions shall apply:
4.2.1 Regardless of the election made by the Executive, (i)
the Executive shall have no further obligations or liabilities to the Company
whatsoever, except that the last paragraph of Section 2, Sections 3.8, 4.4 and
4.5, and Sections 6 through 12 and Annex A shall survive such termination and
(ii) the Executive shall be entitled to receive any earned and unpaid Base
Salary and deferred compensation accrued through the effective date of such
termination and a pro rata portion of the Executive's annual bonus for the year
in which such termination occurs through the date of such termination, based on
the average of the regular annual bonus amounts (excluding the amount of any
special or spot bonuses) received by the Executive from the Company for the two
calendar years immediately preceding the year of termination, provided that all
or a portion of such pro rata bonus shall be
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credited to the Account in accordance with any timely deferral election the
Executive may previously have made pursuant to Section 3.4 hereof.
4.2.2 In the event the Executive shall make the election
provided in clause (A) above, the Company shall pay to the Executive as damages
(or credit to the Account with respect to Section 3.3) within 30 days thereafter
in a lump sum (discounted as provided in the immediately following sentence) all
amounts otherwise payable (whether or not deferred) pursuant to Section 3 for
the year in which such termination occurs and for each subsequent year of the
term of employment (assuming that annual bonuses are required to be paid for
each such year), with the annual bonuses due the Executive in respect of the
balance of the term of employment being equal to the average of the regular
annual bonus amounts (excluding the amount of any special or spot bonuses)
received by the Executive from the Company (whether or not deferred) for the two
calendar years immediately preceding the year of termination; provided, however,
that for purposes of this Section 4.2.2, the term of employment shall be deemed
to end on the later of (a) the date set forth in Section 1 or (b) the date which
is one year from the date of such termination. Any payments required to be made
to the Executive upon such termination in respect of Sections 3.1 and 3.2 and
the credit to the Account provided for in the penultimate sentence of Section
3.3 shall be discounted to present value as of the date of payment from the
times at which such amounts would have been paid absent any such termination at
an annual discount rate for the relevant periods equal to 120% of the
"applicable Federal rate" (within the meaning of Section 1274(d) of the Internal
Revenue Code of 1986 (the "Code")), in effect on the date of such termination,
compounded semi-annually, the use of which rate is hereby elected by the parties
hereto pursuant to Treas. Reg. ss.1.280G-1 Q/A 32 (provided that, in the event
such election is not permitted under Section 280G of the Code and the
regulations thereunder, such other rate determined as of such other date as is
applicable for determining present value under Section 280G of the Code shall be
used).
4.2.3 In the event the Executive shall make the election
provided in clause (B) above, the Executive shall remain an employee of the
Company until the later of (a) the Term Date and (b) the date that is one year
after the date of termination of the Executive's employment under this Section
4.2 and during such period the Executive shall be entitled to receive, whether
or not he becomes disabled during such period, but subject to Section 5 hereof,
(i) Base Salary at an annual rate equal to his Base Salary in effect immediately
prior to the notice of termination, (ii) an annual bonus (subject to deferral
hereunder) in respect of each calendar year during such period equal to the
average of the regular annual bonus amounts (excluding the amount of any special
or spot bonuses) received by the Executive from the
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Company (whether or not deferred) for the two calendar years immediately
preceding the year of termination and (iii) deferred compensation as provided in
Section 3.3; provided, however, that if the Executive accepts full-time
employment with any other corporation, partnership, trust, government agency or
body or other entity during such period or notifies the Company in writing of
his intention to terminate his employment during such period, the Executive
shall cease to be an employee of the Company effective upon the commencement of
such employment, or the effective date of such termination as specified by the
Executive in such notice, and shall be entitled to receive as damages within 30
days after such commencement or effective date, a lump sum cash payment
(discounted as provided in Section 4.2.2) for the balance of the Base Salary,
deferred compensation (which shall be credited to the Account as provided in the
penultimate sentence of Section 3.3) and annual bonuses (assuming no deferral)
that the Executive would have been entitled to receive pursuant to this Section
4.2.3 had the Executive remained on the Company's payroll until the end of the
period described in the first sentence of this Section 4.2.3. Notwithstanding
the preceding sentence, if the Executive accepts employment with any
not-for-profit entity, then the Executive shall be entitled to remain an
employee of the Company and receive the payments as provided in the first
sentence of this Section 4.2.3; and the Executive shall not be entitled to
receive such lump sum cash payment if he accepts full-time employment with any
subsidiary or affiliate of the Company. For purposes of this Agreement, the term
"affiliates" shall mean any entity which, directly or indirectly, controls, is
controlled by, or is under common control with, the Company.
4.2.4 In the event the Executive shall make the election
provided in clause (B) above, then during the period the Executive remains on
the payroll of the Company, the Executive will continue to be eligible to
receive the benefits required to be provided to the Executive under this
Agreement to the extent such benefits are maintained in effect by the Company
for its senior executives; provided, however, the Executive shall not be
entitled to any additional awards or grants under any stock option, restricted
stock or other stock based incentive plan. In the event of a termination of this
Agreement pursuant to the terms hereof, the Executive shall continue to be an
employee of the Company for purposes of any stock option and restricted share
agreements and any other incentive plan awards until such time as the Executive
shall leave the payroll of the Company.
4.2.5 At the time the Executive shall terminate his employment
and leave the payroll of the Company pursuant to the provisions of this Section
4.2, the Executive's rights to benefits and payments under any insurance or
other death benefit plans or arrangements of the Company or under any stock
option, restricted stock, stock appreciation right, bonus unit, management
incentive or other plan of the Company shall be
8
determined, subject to the other terms and conditions of this Agreement, in
accordance with the terms and provisions of such Plans and any agreements under
which such stock options, restricted stock or other awards were granted;
provided, however, that notwithstanding the foregoing or any more restrictive
provisions of any such plan or agreement, if the Executive leaves the payroll of
the Company as a result of a termination pursuant to Section 4.2, then all stock
options granted to the Executive by the Company (i) shall become immediately
exercisable at the time the Executive shall leave the payroll of the Company
pursuant to Section 4.2 and (ii) shall remain exercisable (but not beyond the
expiration of the option term) until three months after the Term Date.
4.2.6 The Executive's rights to receive deferred compensation,
and the Company's obligations with respect to the maintenance of the Account and
the payment of such deferred compensation, shall be governed by the provisions
of Section 3.3 and Annex A.
4.2.7 Any obligation of the Executive to mitigate his damages
pursuant to Section 4.5 shall not be a defense or offset to the Company's
obligation to pay the Executive in full the damages provided in Section 4
hereof, as the case may be, at the time provided therein or the timely and full
performance of any of the Company's other obligations under this Agreement.
4.3 End of Term of Employment. At least 120 days prior to the
Term Date, the Company and the Executive shall commence discussions regarding a
renewal or extension of this Agreement on terms and conditions mutually
agreeable to the parties. If at the Term Date, the parties have not agreed to an
extension or renewal of this Agreement or on the terms of a new employment
agreement and no Disability Period is in effect, then either party may terminate
the Executive's employment on 60 days written notice to the other party, which
notice may be delivered at any time on or after the November 1st immediately
preceding the Term Date. If the Executive shall cause his employment with the
Company to terminate on or after the Term Date, then the Executive shall receive
Base Salary and deferred compensation through the effective date of termination
and a pro rata bonus for the year in which such termination occurs calculated as
provided in Section 4.2.1; provided, however, that if the Company has changed
the terms or conditions of the Executive's employment from those provided for in
this Agreement such that the Executive would have been able to terminate the
term of employment pursuant to Section 4.2 if such Section 4.2 had been
applicable at the time (without giving effect to any cure right of the Company),
then the Executive shall be entitled to the additional benefits described in the
next sentence. If the Company shall cause the Executive's employment to
terminate on or after the Term Date for any reason (other than cause as defined
in Section 4.1, in which case Section 4.1 shall apply, and other than for death
or disability, in which case Section 5 or 6
9
shall apply), then in lieu of the provisions of Section 4.2, the Executive shall
be entitled to receive Base Salary and deferred compensation through the
effective date of such termination and a pro rata bonus for the year in which
such termination occurs calculated as provided in Section 4.2.1 and shall be
entitled to elect by delivery of written notice to the Company, within 30 days
after such notice of termination is given, either (A) to cease being an employee
of the Company and receive a lump sum payment (and credits) as provided in
Section 4.3.2 or (B) remain an employee of the Company for a period of twelve
months pursuant to Section 4.3.3 and receive the payments (and credits) provided
in Section 4.3.3. The payments described in this Section 4.3 are in addition to
any annual bonus otherwise payable pursuant to Section 3.2 hereof with respect
to the last calendar year of the term of employment, which bonus shall be paid
in accordance with the Company's then current practices and policies with
respect to other senior executives. After the Executive makes such election, the
following provisions shall apply:
4.3.1 Regardless of the election made by the Executive, at the
end of the 60-day notice period provided for in the first sentence of Section
4.3 the Executive shall have no further obligations or liabilities to the
Company whatsoever, except that Sections 3.8, 4.4 and 4.5 and Sections 6 through
12 and Annex A shall survive such termination.
4.3.2 In the event the Executive shall make the election
provided in clause (A) above, the Company shall pay the Executive (or credit to
the Account with respect to Section 3.3) in a lump sum at the end of the 60-day
notice period provided for in the first sentence of Section 4.3 an amount
(discounted as provided in Section 4.2.2) equal to the sum of (i) one year's
Base Salary, (ii) the annual amount of deferred compensation to be credited to
the Account pursuant to Section 3.3, and (iii) an amount equal to the average of
the regular annual bonus amounts (excluding the amount of any special or spot
bonuses) received by the Executive from the Company (or credited to the Account)
for the two calendar years immediately preceding the year of termination.
4.3.3 In the event the Executive shall make the election
provided in clause (B) above, the Executive shall remain an employee of the
Company until the date which is twelve months after the end of the 60-day period
referred to in the first sentence of Section 4.3 and during such period the
Executive shall be entitled to receive, whether or not he thereafter becomes
disabled during such period but subject to Section 5, (i) salary at an annual
rate equal to the Base Salary, (ii) credits to the Account of deferred
compensation as provided in Section 3.3, and (iii) an annual bonus (all or any
portion of which may be deferred by the Executive pursuant to Section 3.4) equal
to the average of the regular annual bonus amounts (excluding the amount of any
special or spot bonuses) received by the Executive from the Company
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(or credited to the Account) for the two calendar years immediately preceding
the year of termination. Except as provided in the next sentence, if the
Executive accepts full-time employment with any other entity during such
twelve-month period or notifies the Company in writing of his intention to leave
the payroll of the Company during such period, the Executive shall cease to be
an employee of the Company effective upon the commencement of such employment or
the effective date of such termination as specified by the Executive in such
notice, whichever is applicable, and shall be entitled to receive a lump sum
payment within 30 days after such commencement or such effective date in an
amount (discounted as provided in the second sentence of Section 4.2.2) equal to
the balance of the Base Salary, deferred compensation (which shall be credited
to the Account as provided in the penultimate sentence of Section 3.3.1) and
regular annual bonuses the Executive would have been entitled to receive
pursuant to this Section 4.3.3 had the Executive remained on the Company's
payroll until the end of such twelve-month period. Notwithstanding the preceding
sentence, if the Executive accepts employment with any not-for-profit entity,
then the Executive shall be entitled to remain an employee of the Company and
receive the payments as provided in the first sentence of this Section 4.3.3;
and if the Executive accepts full-time employment with any affiliate of the
Company, then the payments provided for in this Section 4.3.3 shall cease and
the Executive shall not be entitled to any such lump sum payment.
4.4 Release. In partial consideration for and as an express
condition of, the Company's obligation to make the payments described in
Sections 4.2.2, 4.2.3 and 4.3, the Company shall be entitled to require the
Executive to execute and deliver to the Company a release in substantially the
form attached hereto as Annex B. If the Company so elects, it shall deliver such
release to the Executive within 10 days after written notice of termination is
delivered pursuant to Section 4.2 or 4.3, and the Executive shall execute and
deliver such release to the Company within 21 days after receipt thereof. If the
Executive elects not to execute and deliver such release to the Company within
such 21 day period, or if the Executive shall revoke the Executive's consent to
such release as provided therein, the Executive's employment with the Company
shall terminate as provided in Section 4.2 or 4.3, but the Executive shall
receive, in lieu of the payments provided for in said Section 4.2 or 4.3, a lump
sum cash payment in an amount determined in accordance with the personnel
policies of the Company relating to notice and severance applicable to employees
with the length of service and compensation level of the Executive.
4.5 Mitigation. In the event of the termination of this
Agreement pursuant to Section 4.2 or 4.3, or in the event of the termination of
this Agreement or the term of employment by the Company in breach of this
Agreement, the Executive shall not be required to seek other employment in order
to mitigate his damages
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hereunder; provided, however, that, notwithstanding the
foregoing, if there are any damages hereunder by reason of the events of
termination described above which are "contingent on a change" (within the
meaning of Section 280G(b)(2)(A)(i) of the Code), the Executive shall be
required to mitigate such damages hereunder, including any such damages
theretofore paid, but not in excess of the extent, if any, necessary to prevent
the Company from losing any tax deductions to which it otherwise would be
entitled in connection with such damages if they were not so "contingent on a
change". In addition to any obligation under the preceding sentence, and without
duplication of any amounts required to be paid to the Company thereunder, if any
such termination occurs and the Executive, whether or not required to mitigate
his damages under the preceding sentence, thereafter obtains other employment
with any entity other than a not-for-profit organization or a governmental body
or agency, the total cash salary and bonus received in connection with such
other employment, whether paid to him or deferred for his benefit, for services
through the Term Date or during the one-year period referred to in Section 4.2
or 4.3, whichever is later, in each case up to an amount equal to (x) the
payment actually received by or for the account of the Executive with respect to
Base Salary, annual bonus under Section 3.2 and deferred compensation under
Section 3.3 for such period, minus (y) the amount of severance the Executive
would have received in accordance with the personnel policies of the Company if
the Executive had been job eliminated, shall reduce, pro tanto, any amount which
the Company would otherwise be required to pay to him as a result of such
termination and, to the extent amounts have theretofore been paid to him by the
Company as a result of such termination, such cash salary and bonus shall be
paid over to the Company as received with respect to such period, but the
provisions of this sentence shall not apply to any type of equity interest,
bonus unit, phantom or restricted stock, stock option, stock appreciation right
or similar benefit received as a result of such other employment. With respect
to the preceding sentences, any payments or rights to which the Executive is
entitled by reason of the termination of the Executive's employment pursuant to
Section 4.2 or 4.3 or in the event of the termination of this Agreement or the
term of employment by the Company in breach of this Agreement shall be
considered as damages hereunder. With respect to the second preceding sentence,
the Executive shall in no event be required to pay the Company with respect to
any calendar year more than the amount actually received by the Executive or
credited to the Account with respect to Base Salary or annual bonus under
Section 3.2 and deferred compensation under Section 3.3 for such year.
4.6 Office Facilities. In the event the Executive shall make
the election provided in clause (B) of Section 4.2 or 4.3, then for the period
beginning on the day the Executive makes such election and ending one year
thereafter, the Company shall, without charge to the Executive, make available
to the Executive
12
office space at the Executive's principal job location immediately prior to his
termination of employment, or other location reasonably close to such location,
together with secretarial services, office facilities, services and furnishings,
in each case reasonably appropriate to an employee of the Executive's position
and responsibilities prior to such termination of employment.
5. Disability. If during the term of employment the Executive
shall become physically or mentally disabled, whether totally or partially, so
that he is prevented from performing his usual duties for a period of six
consecutive months, or for shorter periods aggregating six months in any
twelve-month period, the Company shall, nevertheless, continue to pay the
Executive his full compensation and continue to credit the Account, when
otherwise due, as provided in Section 3 and Annex A, through the last day of the
sixth consecutive month of disability or the date on which the shorter periods
of disability shall have equalled a total of six months in any twelve-month
period (such last day or date being referred to herein as the "Disability
Date"). If the Executive has not resumed his usual duties on or prior to the
Disability Date, the Company shall pay the Executive a pro rata bonus for that
portion of the calendar year preceding the Disability Date and shall pay the
Executive disability benefits for the longer of (i) the balance of the term of
employment or (ii) one year following the Disability Date (in the case of either
(i) or (ii), the "Disability Period") in an amount equal to 75% of (a) what the
Base Salary otherwise would have been pursuant to this Agreement had the
disability not occurred, and this reduced amount shall also be deemed to be the
Base Salary for purposes of determining the amounts to be credited to his
Account pursuant to Section 3.3 and Annex A as further disability benefits and
(b) the average of the regular annual bonuses (excluding the amount of any
special or spot bonuses) in respect of the two calendar years for which the
annual bonus received by the Executive from the Company was the greatest (which
may be deferred by the Executive pursuant to Section 3.4). If during the term of
employment and subsequent to the Disability Date the Executive shall fully
recover from a disability, the Company shall have the right (exercisable within
sixty (60) days after notice from the Executive of such recovery), but not the
obligation, to restore the Executive to full-time service at full compensation.
If the Company elects to restore the Executive to full-time service, then this
Agreement shall continue in full force and effect in all respects. If the
Company elects not to restore the Executive to full-time service, the Company
shall continue to pay the Executive the disability benefits provided for in this
Section 5 (notwithstanding any such recovery by the Executive) and the Executive
shall be entitled to obtain other employment, subject, however, to the
following: (i) the Executive shall be obligated to perform advisory services
during any balance of the term of employment; and (ii) the provisions of Section
9 and the last sentence of Section 2 shall continue to apply to the Executive
during the Disability Period. The advisory services referred to in
13
clause (i) of the immediately preceding sentence shall consist of rendering
advice concerning the business, affairs and management of the Company as
requested by the Company but the Executive shall not be required to devote more
than five days (up to eight hours per day) each month to such services, which
shall be performed at a time and place mutually convenient to both parties. Any
income from such other employment shall not be applied to reduce the Company's
obligations under this Agreement. The term of employment shall not be extended
or be deemed suspended by reason of any period of disability. The Company shall
be entitled to deduct from all payments to be made to the Executive during any
Disability Period (whether or not there has been a reduction in amounts paid
pursuant to this Section 5 and whether or not such payments are made in lieu of
Base Salary, bonus or deferred compensation) an amount equal to all disability
payments received by the Executive (but only with respect to that portion of the
Disability Period occurring during the term of employment) from Workmen's
Compensation, Social Security and disability insurance policies maintained by
the Company; provided, however, that for so long as, and to the extent that,
proceeds paid to the Executive from such disability insurance policies are not
includible in his income for federal income tax purposes, the Company's
deduction with respect to such payments shall be equal to the product of (i)
such payments and (ii) a fraction, the numerator of which is one and the
denominator of which is one less the maximum marginal rate of federal income
taxes applicable to individuals at the time of receipt of such payments. All
payments made under this Section 5 after the Disability Date are intended to be
disability payments, regardless of the manner in which they are computed. Except
as otherwise provided in this Section 5, the term of employment shall continue
during the Disability Period and the Executive shall be entitled to all of the
rights and benefits provided for in this Agreement except that, Sections 4.2 and
4.3 shall not apply during the Disability Period (unless the Company terminates
this Agreement in breach hereof in which case Section 4.2 shall apply) and
unless the Company has restored the Executive to full-time service at full
compensation prior to the end of the Disability Period, the term of employment
shall end and the Executive shall cease to be an employee of the Company at the
end of the Disability Period.
6. Death. Upon the death of the Executive, this Agreement and
all benefits hereunder shall terminate except that (i) the Executive's estate
(or a designated beneficiary thereof) shall be entitled to receive the Base
Salary and deferred compensation to the last day of the month in which his death
occurs and shall be entitled to receive bonus compensation based on the average
of the regular annual bonuses (excluding the amount of any special or spot
bonuses) in respect of the two years for which the annual bonus received by the
Executive from the Company was the greatest, but prorated according to the
number of whole or partial months the Executive was employed by the Company in
such year, (ii) such termination shall not affect any vested rights which the
14
Executive may have at the time of his death pursuant to any insurance or other
death benefit plans or arrangements of the Company or any subsidiary or the
benefit plans described in Section 8, which vested rights shall continue to be
governed by the provisions of such plans, and (iii) the Account shall be
liquidated and revalued as provided in Annex A as of the date of the Executive's
death (except that all taxes shall be computed and charged to the Account as of
such date of death to the extent not theretofore so computed and charged) and
the entire balance thereof (plus any amount due under the last paragraph of
Section A.6 of Annex A) shall be paid to the Executive's estate in a single
payment not later than 75 days following such date of death.
7. Life Insurance. Subject to the Executive's satisfactory
completion of any applications and other documentation and any physical
examination that may be required by the insurer for any additional insurance on
the Executive, the Company shall obtain $1,000,000 face amount of split
ownership life insurance on the life of the Executive. The Company shall pay all
premiums on such policy and shall maintain such policy (without reduction of the
face amount of the coverage) during the term of employment, including during the
period the Executive remains on the payroll of the Company following a
termination pursuant to Section 4.2 or 4.3. The Executive shall be entitled to
designate the beneficiary or beneficiaries of such policy which may include a
trust. The Executive agrees that at the time of his death, his estate (or the
owner of the policy if such owner is a trust as contemplated below) shall
promptly pay to the Company an amount equal to the premiums on such policy paid
by the Company (net of (i) tax benefits, if any, to the Company in respect of
the payment of such premiums, (ii) any amounts payable by the Company which had
been paid by or on behalf of the Executive with respect to such insurance, (iii)
dividends received by the Company in respect of such premiums, but only to the
extent such dividends are not used to purchase additional insurance for the
benefit of the Executive, and (iv) any unpaid borrowings by the Company) but in
no event shall such payment to the Company exceed the death benefit paid under
the policy. Except as hereinafter provided, the Company shall own the policy and
shall provide by endorsement or collateral assignment as it may deem appropriate
for the payment of benefits on the death of the Executive. In the event that the
Executive advises the Company in writing within 60 days of the date of this
Agreement that the Executive desires to have such policy owned by the trustees
of a trust for the benefit of the Executive's designees, the Company shall
permit such ownership provided the trustees of the trust enter into a split
dollar insurance agreement and collateral assignment in favor of the Company
which in the Company's judgment satisfactorily protects the Company's investment
in such policy. The provisions of this Section 7 shall be in addition to any
other insurance hereafter provided by the Company on the life of the Executive
under any group policy.
15
8. Other Benefits. To the extent that (a) he is eligible under
the general provisions thereof and (b) the Company maintains such plan or
program for the benefit of its senior executive officers, during the term of
employment and so long as the Executive is an employee of the Company, the
Executive shall be eligible to participate in any pension, profit-sharing, stock
option or similar plan or program of the Company now existing or established
hereafter.
To the extent maintained in effect by the Company for its senior
executives, the Executive shall also be entitled to participate in any group
insurance, hospitalization, medical, dental, accident, disability or similar
plan or program of the Company now existing or established hereafter to the
extent that he is eligible under the general provisions thereof. In addition,
during the term of employment and for so long as the Executive is an employee of
the Company, the Executive shall be entitled to receive other benefits generally
available to all senior executive officers of the Company to the extent that he
is eligible under the general provisions thereof, including, without limitation,
to the extent maintained in effect by the Company for its senior executives, an
automobile allowance and financial services.
9. Protection of Confidential Information.
9.1 Covenant. The Executive acknowledges that his employment
by the Company (which, for purposes of this Section 9 shall mean Time Warner
Inc., its subsidiaries and affiliates) will, throughout the term of employment,
bring him into close contact with many confidential affairs of the Company,
including information about costs, profits, markets, sales, products, key
personnel, pricing policies, operational methods, technical processes and other
business affairs and methods and other information not readily available to the
public, and plans for future development. The Executive further acknowledges
that the services to be performed under this Agreement are of a special, unique,
unusual, extraordinary and intellectual character. The Executive further
acknowledges that the business of the Company is international in scope, that
its products are marketed throughout the world, that the Company competes in
nearly all of its business activities with other organizations that are or could
be located in nearly any part of the world and that the nature of the
Executive's services, position and expertise are such that he is capable of
competing with the Company from nearly any location in the world. In recognition
of the foregoing, the Executive covenants and agrees:
9.1.1 The Executive will keep secret all confidential matters
of the Company and will not intentionally disclose such matters to anyone
outside of the Company, either during or after the term of employment, except
with the Company's written consent, provided that (i) the Executive shall have
no such obligation to the extent such matters are or become publicly known
16
other than as a result of the Executive's breach of his obligations hereunder
and (ii) the Executive may, after giving prior notice to the Company to the
extent practicable under the circumstances, disclose such matters to the extent
required by applicable laws or governmental regulations or judicial or
regulatory process;
9.1.2 The Executive will deliver promptly to the Company on
termination of his employment by the Company, or at any other time the Company
may so request, at the Company's expense, all memoranda, notes, records, reports
and other documents (and all copies thereof) relating to the Company's business,
which he obtained while employed by, or otherwise serving or acting on behalf
of, the Company and which he may then possess or have under his control (other
than the Executive's personal tax and accounting records and publicly available
documents); and
9.1.3 If the term of employment is terminated pursuant to
Section 4.1, or if the term of employment terminates as scheduled, for a period
of one year after such termination, without the consent of the Company, the
Executive shall not employ, and shall not cause any entity of which he is an
affiliate to employ, any person who was a full-time executive employee of the
Company or any of its affiliates at the date of such termination or within six
months prior thereto.
9.2 Non-Compete. If this Agreement is terminated pursuant to
Section 4.1, 4.2 or 4.3 or by the Company in breach of this Agreement or if the
Executive quits in breach of this Agreement, then for the time period specified
in the second sentence of this Section 9.2, the Executive shall not (a) become
an officer, director, partner or employee of or consultant to or act in any
managerial capacity or own an equity interest in excess of one percent in The
Xxxx Disney Company, The News Corporation, The Seagram Company, Ltd.,
Tele-Communications, Inc. or Viacom Inc. or any of their respective subsidiaries
or affiliates (each of the foregoing companies is herein referred to as a
"Prohibited Entity" but only if at the time such company is a Competitive
Entity) or (b) provide consulting, lobbying or public relations services or
activities (collectively "Lobbying Services") to or for any Prohibited Entity
whether directly or indirectly through a separate firm or entity, provided that
this clause (b) shall not prevent the Executive from becoming an officer,
employee or partner of a firm or entity (or providing Lobbying Services to a
firm or entity) that in turn provides Lobbying Services to a Prohibited Entity
so long as the Executive is not directly or indirectly involved in providing
such Lobbying Services to such Prohibited Entity. If the Executive's employment
is terminated pursuant to Section 4.1, 4.2 or 4.3 of this Agreement or by the
Company in breach of this Agreement or if the Executive quits in breach of this
Agreement, then (i) so long as the Executive remains on the payroll of the
Company, the last paragraph of Section 2 shall apply and (ii) if the Executive
leaves the payroll of the Company within 12 months
17
after the effective date of any notice of termination delivered hereunder, then
the provisions of this Section 9.2 shall apply for the remainder of such
12-month period.
9.3 Specific Remedy. In addition to the provisions of Section
9.4 and such other rights and remedies as the Company may have at equity or in
law with respect to any breach of this Agreement, if the Executive commits a
material breach of the last paragraph of Section 2 or any of the provisions of
Sections 9.1 or 9.2, the Company shall have the right and remedy to have such
provisions specifically enforced by any court having equity jurisdiction, it
being acknowledged and agreed that any such breach or threatened breach will
cause irreparable injury to the Company and that money damages will not provide
an adequate remedy to the Company.
9.4 Liquidated Damages. If the Executive breaches the
provisions of Section 9.2, the Executive shall pay to the Company as liquidated
damages an amount equal to the product of (i) the sum of (x) the monthly Base
Salary and deferred compensation payable to the Executive immediately prior to
his termination of employment with the Company, plus (y) one-twelfth of the
average of the regular annual bonuses (excluding the amount of any special or
spot bonuses) received by the Executive from the Company for the two calendar
years immediately preceding the year of such termination, multiplied by (ii) the
number of months remaining in the non-compete period applicable to the Executive
under Section 9.2 at the time of such breach. The Company shall be entitled to
offset any amounts owed by the Executive to the Company under this Section 9.4
against any amounts owed by the Company to the Executive under any provision of
this Agreement or otherwise, including without limitation, amounts payable to
the Executive under Sections 4.2 or 4.3. The Company and the Executive agree
that it is impossible to determine with any reasonable accuracy the amount of
prospective damages to the Company upon a breach of Section 9.2 by the Executive
and further agree that the damages set forth in this Section 9.4 are reasonable,
and not a penalty, based upon the facts and circumstances of the parties and
with due regard to future expectations.
10. Ownership of Work Product. The Executive acknowledges that
during the term of employment, he may conceive of, discover, invent or create
inventions, improvements, new contributions, literary property, material, ideas
and discoveries, whether patentable or copyrightable or not (all of the
foregoing being collectively referred to herein as "Work Product"), and that
various business opportunities shall be presented to him by reason of his
employment by the Company. The Executive acknowledges that, unless the Company
otherwise agrees in writing, all of the foregoing shall be owned by and belong
exclusively to the Company and that he shall have no personal interest therein,
provided that they are either related in any manner to the business (commercial
18
or experimental) of the Company, or are, in the case of Work Product, conceived
or made on the Company's time or with the use of the Company's facilities or
materials, or, in the case of business opportunities, are presented to him for
the possible interest or participation of the Company. The Executive shall
further, unless the Company otherwise agrees in writing, (i) promptly disclose
any such Work Product and business opportunities to the Company; (ii) assign to
the Company, upon request and without additional compensation, the entire rights
to such Work Product and business opportunities; (iii) sign all papers necessary
to carry out the foregoing; and (iv) give testimony in support of his
inventorship or creation in any appropriate case. The Executive agrees that he
will not assert any rights to any Work Product or business opportunity as having
been made or acquired by him prior to the date of this Agreement except for Work
Product or business opportunities, if any, disclosed to and acknowledged by the
Company in writing prior to the date hereof.
11. Notices. All notices, requests, consents and other
communications required or permitted to be given hereunder shall be in writing
and shall be deemed to have been duly given at the time personally delivered,
the day after being sent by overnight courier, or three days after being mailed
first-class, postage prepaid, by registered or certified mail, as follows (or to
such other or additional address as either party shall designate by notice in
writing to the other in accordance herewith):
11.1 If to the Company:
Time Warner Inc.
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: General Counsel
(with a copy, similarly addressed
but Attention: Vice President - Executive
Compensation and Organization Development
11.2 If to the Executive, to the address set forth on the records
of the Company.
12. General.
12.1 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York
applicable to agreements made and to be performed entirely in New York.
12.2 Captions. The section headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
19
12.3 Entire Agreement. This Agreement, including Annexes A and
B, sets forth the entire agreement and understanding of the parties relating to
the subject matter hereof and supersedes all prior agreements, arrangements and
understandings, written or oral, between the parties, including without
limitation, the Prior Agreement.
12.4 No Other Representations. No representation, promise or
inducement has been made by either party that is not embodied in this Agreement,
and neither party shall be bound by or be liable for any alleged representation,
promise or inducement not so set forth.
12.5 Assignability. This Agreement and the Executive's rights
and obligations hereunder may not be assigned by the Executive. The Company may
assign its rights together with its obligations hereunder, in connection with
any sale, transfer or other disposition of all or substantially all of its
business and assets; and such rights and obligations shall inure to, and be
binding upon, any successor to the business or substantially all of the assets
of the Company, whether by merger, purchase of stock or assets or otherwise, and
the Company shall cause such successor expressly to assume such obligations.
12.6 Amendments; Waivers. This Agreement may be amended,
modified, superseded, canceled, renewed or extended and the terms or covenants
hereof may be waived only by written instrument executed by both of the parties
hereto, or in the case of a waiver, by the party waiving compliance. The failure
of either party at any time or times to require performance of any provision
hereof shall in no manner affect such party's right at a later time to enforce
the same. No waiver by either party of the breach of any term or covenant
contained in this Agreement, whether by conduct or otherwise, in any one or more
instances, shall be deemed to be, or construed as, a further or continuing
waiver of any such breach, or a waiver of the breach of any other term or
covenant contained in this Agreement.
12.7 Resolution of Disputes. Any dispute or controversy
arising with respect to this Agreement may be referred by either party to
JAMS/ENDISPUTE for resolution in arbitration in accordance with the rules and
procedures of JAMS/ENDISPUTE. Any such proceedings shall take place in New York
City before a single arbitrator (rather than a panel of arbitrators), pursuant
to any streamlined or expedited (rather than a comprehensive) arbitration
process, before a nonjudicial (rather than a judicial) arbitrator, and in
accordance with an arbitration process which, in the judgment of such
arbitrator, shall have the effect of reasonably limiting or reducing the cost of
such arbitration. The resolution of any such dispute or controversy by the
arbitrator appointed in accordance with the procedures of JAMS/ENDISPUTE shall
be final and binding. Judgment upon the award rendered by such arbitrator
20
may be entered in any court having jurisdiction thereof, and the parties consent
to the jurisdiction of the New York courts for this purpose. The prevailing
party shall be entitled to recover the costs of arbitration (including
reasonable attorneys fees and the fees of experts) from the losing party. If at
the time any dispute or controversy arises with respect to this Agreement,
JAMS/ENDISPUTE is not in business or is no longer providing arbitration
services, then the American Arbitration Association shall be substituted for
JAMS/ENDISPUTE for the purposes of the foregoing provisions of this Section
12.7. If the Executive shall be the prevailing party in such arbitration, the
Company shall promptly pay, upon demand of the Executive, all legal fees, court
costs and other costs and expenses incurred by the Executive in any legal action
seeking to enforce the award in any court.
12.8 Beneficiaries. Whenever this Agreement provides for any
payment to the Executive's estate, such payment may be made instead to such
beneficiary or beneficiaries as the Executive may designate in writing filed
with the Company. The Executive shall have the right to revoke any such
designation and to redesignate a beneficiary or beneficiaries by written notice
to the Company (and to any applicable insurance company) to such effect.
12.9 No Conflict. The Executive represents and warrants to the
Company that this Agreement is legal, valid and binding upon the Executive and
the execution of this Agreement and the performance of the Executive's
obligations hereunder does not and will not constitute a breach of, or conflict
with the terms or provisions of, any agreement or understanding to which the
Executive is a party (including, without limitation, any other employment
agreement). The Company represents and warrants to the Executive that this
Agreement is legal, valid and binding upon the Company and the Company is not a
party to any agreement or understanding which would prevent the fulfillment by
the Company of the terms of this Agreement or pursuant to which performance by
the Company of its obligations hereunder would constitute a breach or conflict.
12.10 Withholding Taxes. Payments made to the Executive
pursuant to this Agreement shall be subject to withholding and social security
taxes and other ordinary and customary payroll deductions.
12.11 Severability. If any provision of this Agreement shall
be held invalid, the remainder of this Agreement shall not be affected thereby;
provided, however, that the parties shall negotiate in good faith with respect
to equitable modification of the provision or application thereof held to be
invalid. To the extent that it may effectively do so under applicable law, each
party hereby waives any provision of law which renders any provision of this
Agreement invalid, illegal or unenforceable in any respect.
21
12.12 No Offset. Except as set forth in Section 9.4, neither
the Company nor the Executive shall have any right to offset any amounts owed by
one party hereunder against amounts owed or claimed to be owed to such party,
whether pursuant to this Agreement or otherwise, and the Company and the
Executive shall make all the payments provided for in this Agreement in a timely
manner.
IN WITNESS WHEREOF, the parties have duly executed this Agreement
as of the date first above written.
TIME WARNER INC.
/s/ Xxx X. Xxxxxx
By:_________________________________
/s/ Xxxxxxx X. Xxxxx
_________________________________
Xxxxxxx X. Xxxxx
22
ANNEX A
DEFERRED COMPENSATION ACCOUNT
A.1 Investments. Funds credited to the Account, at the Company's
option, shall either be actually invested and reinvested, or deemed invested and
reinvested, in an account in securities selected from time to time by an
investment advisor designated from time to time by the Company (the "Investment
Advisor"), substantially all of which securities shall be "eligible securities".
The designation from time to time by the Company of an Investment Advisor shall
be subject to the approval of the Executive, which approval shall not be
withheld unreasonably. "Eligible securities" are common and preferred stocks,
warrants to purchase common or preferred stocks, put and call options, and
corporate or governmental bonds, notes and debentures, either listed on a
national securities exchange or for which price quotations are published in
newspapers of general circulation, including The Wall Street Journal, and
certificates of deposit. Eligible securities shall not include the common or
preferred stock, any warrants, options or rights to purchase common or preferred
stock or the notes or debentures of the Company or any corporation or other
entity of which the Company owns directly or indirectly 5% or more of any class
of outstanding equity securities. The Investment Advisor shall have the right,
from time to time, to designate eligible securities which shall be either
actually purchased and sold, or deemed to have been purchased or sold, for the
Account on the date of reference. Such purchases may be made or deemed to be
made on margin; provided that the Company may, from time to time, by written
notice to the Executive and the Investment Advisor, limit or prohibit margin
purchases in any manner it deems prudent and, upon three business days written
notice to the Executive and the Investment Advisor, cause all eligible
securities theretofore purchased or deemed purchased on margin to be sold or
deemed sold. The Investment Advisor shall notify the Executive in writing of
each transaction within five business days thereafter and shall render to the
Executive written monthly reports as to the current status of the Executive's
Account. In the case of any purchase, the Account shall be charged with a dollar
amount equal to the quantity and kind of securities purchased or deemed to have
been purchased multiplied by the fair market value of such securities on the
date of reference and shall be credited with the quantity and kind of securities
so purchased or deemed to have been purchased. In the case of any sale, the
Account shall be charged with the quantity and kind of securities sold or deemed
to have been sold, and shall be credited with a dollar amount equal to the
quantity and kind of securities sold or deemed to have been sold multiplied by
the fair market value of such securities on the date of reference. Such charges
and credits to the Account shall take place immediately upon the consummation of
the transactions to which they relate. As used herein "fair market value" means
either (i) if the security is actually
A-2
purchased or sold by the Company on the date of reference, the actual purchase
or sale price per security to the Company or (ii) if the security is not
purchased or sold on the date of reference, in the case of a listed security,
the closing price per security on the date of reference, or if there were no
sales on such date, then the closing price per security on the nearest preceding
day on which there were such sales, and, in the case of an unlisted security,
the mean between the bid and asked prices per security on the date of reference,
or if no such prices are available for such date, then the mean between the bid
and asked prices per security on the nearest preceding day for which such prices
are available. If no bid or asked price information is available with respect to
a particular security, the price quoted to the Company as the value of such
security on the date of reference (or the nearest preceding date for which such
information is available) shall be used for purposes of administering the
Account, including determining the fair market value of such security. The
Account shall be charged currently with all interest paid or deemed payable by
the Account with respect to any credit extended or deemed extended to the
Account. Such interest shall be charged to the Account, for margin purchases
actually made, at the rates and times actually paid by the Account and, for
margin purchases deemed to have been made, at the rates and times then charged
by an investment banking firm designated by the Company with which the Company
does significant business. The Company may, in the Company's sole discretion,
from time to time serve as the lender with respect to any margin transactions by
notice to the then Investment Advisor and in such case interest shall be charged
at the rate and times then charged by an investment banking firm designated by
the Company with which the Company does significant business. Brokerage fees
shall be charged to the Account, for transactions actually made, at the rates
and times actually paid and, for transactions deemed to have been made, at the
rates and times then charged for transactions of like size and kind by an
investment banking firm designated by the Company with which the Company does
significant business.
A.2 Dividends and Interest. The Account shall be credited with
dollar amounts equal to cash dividends paid from time to time upon the stocks
held or deemed to be held therein. Dividends shall be credited as of the payment
date. The Account shall similarly be credited with interest payable on interest
bearing securities held or deemed to be held therein. Interest shall be credited
as of the payment date, except that in the case of purchases of interest-bearing
securities the Account shall be charged with the dollar amount of interest
accrued to the date of purchase, and in the case of sales of such
interest-bearing securities the Account shall be credited with the dollar amount
of interest accrued to the date of sale. All dollar amounts of dividends or
interest credited to the Account pursuant to this Section A.2 shall be charged
with all taxes thereon deemed payable
A-3
by the Company (as and when determined pursuant to Section A.5). The Investment
Advisor shall have the same right with respect to the investment and
reinvestment of net dividends and net interest as the Investment Advisor has
with respect to the balance of the Account.
A.3 Adjustments. The Account shall be equitably adjusted to
reflect stock dividends, stock splits, recapitalizations, mergers,
consolidations, reorganizations and other changes affecting the securities held
or deemed to be held therein.
A.4 Obligation of the Company. The Company shall not be required
to purchase, hold or dispose of any of the securities designated by the
Investment Advisor; however, whether or not it elects to purchase or sell any
such securities, such transactions shall be deemed to have been made and the
Account shall be charged with all taxes (including stock transfer taxes),
interest, brokerage fees and investment advisory fees, if any, deemed payable by
the Company and attributable to such transactions (in all cases net after any
tax benefits that the Company would be deemed to derive from the payment
thereof, as and when determined pursuant to Section A.5), but no other costs of
the Company. The only obligation of the Company is its contractual obligation to
make payments to the Executive measured as set forth below. To the extent that
the Company, in its discretion, purchases or holds any of the securities
designated by the Investment Advisor, the same shall remain the sole property of
the Company, subject to the claims of its general creditors, and shall not be
deemed to form part of the Account. Neither the Executive nor his legal
representative or any beneficiary designated by the Executive shall have any
right, other than the right of an unsecured general creditor, against the
Company in respect of any portion of the Account.
A.5 Taxes. The Account shall be charged with all federal, state
and local taxes deemed payable by the Company with respect to income recognized
upon the dividends and interest received or deemed to have been received by the
Account pursuant to Section A.2 and gains recognized upon sales of any of the
securities which are deemed to have been sold pursuant to Section A.1 or A.6.
The Account shall be credited with the amount of the tax benefit received by the
Company as a result of any payment of interest actually made or deemed to be
made pursuant to Section A.1 or A.2 and as a result of any payment of brokerage
fees and investment advisory fees made or deemed to be made pursuant to Section
A.1. If any of the sales of the securities which are deemed to have been sold
pursuant to Section A.1 or A.6 results in a loss to the Account, such net loss
shall be deemed to offset the income and gains referred to in the second
preceding sentence (and
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thus reduce the charge for taxes referred to therein) to the extent then
permitted under the Internal Revenue Code of 1986, as amended from time to time,
and under applicable state and local income and franchise tax laws (collectively
referred to as "Applicable Tax Law"); provided, however, that for the purposes
of this Section A.5 the Account shall, except as provided in the third following
sentence, be deemed to be a separate corporate taxpayer and the losses referred
to above shall be deemed to offset only the income and gains referred to in the
second preceding sentence. Such losses shall be carried back and carried forward
within the Account to the extent permitted by Applicable Tax Law in order to
minimize the taxes deemed payable on such income and gains within the Account.
For the purposes of this Section A.5, all charges and credits to the Account for
taxes shall be deemed to be made as of the end of the Company's taxable year
during which the transactions, from which the liabilities for such taxes are
deemed to have arisen, are deemed to have occurred. Notwithstanding the
foregoing, if and to the extent that in any year there is a net loss in the
Account that cannot be offset against income and gains in any prior year, then
an amount equal to the tax benefit to the Company of such net loss (after such
net loss is reduced by the amount of any net capital loss of the Account for
such year) shall be credited to the Account on the last day of such year. If and
to the extent that any such net loss of the Account shall be utilized to
determine a credit to the Account pursuant to the preceding sentence, it shall
not thereafter be carried forward under this Section A.5. For purposes of
determining taxes payable by the Company under any provision of this Annex A it
shall be assumed that the Company is a taxpayer and pays all taxes at the
maximum marginal rate of federal income taxes and state and local income and
franchise taxes (net of assumed federal income tax benefits) applicable to
business corporations and that all of such dividends, interest, gains and losses
are allocable to its corporate headquarters, which are currently located in New
York City.
A.6 Payments. Payments of deferred compensation shall be made as
provided in this Section A.6. Except as otherwise specifically provided in this
Section A.6, deferred compensation shall be paid monthly for a period of 60
months (the "Pay-Out Period") commencing on the first day of the month after the
date the Executive ceases to be an employee of the Company and leaves the
payroll of the Company for any reason; provided, however, that if the Executive
was named in the compensation table in the Company's then most recent proxy
statement, such payments shall commence on January 1st of the year following the
year in which such event occurs. On each payment date, the Account shall be
charged with the dollar amount of such payment. On each payment date, the amount
of cash held or deemed to be held in the Account shall be not less than the
payment then due and the Company may select the securities to be sold or deemed
sold to provide such
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cash if the Investment Advisor shall fail to do so on a timely basis. The amount
of any taxes payable with respect to any such sales shall be computed, as
provided in Section A.5 above, and deducted from the Account, as of the end of
the taxable year of the Company during which such sales are deemed to have
occurred. Solely for the purpose of determining the amount of monthly payments
during the Pay-Out Period, the Account shall be valued on the fifth trading day
preceding the first monthly payment of each year of the Pay-Out Period, or more
frequently at the Company's election (the "Valuation Date"), by adjusting all of
the securities held or deemed to be held in the Account to their fair market
value (net of the tax adjustment that would be made thereon if sold, as
estimated by the Company) and by deducting from the Account the amount of all
outstanding indebtedness. The extent, if any, by which the Account, valued as
provided in the immediately preceding sentence exceeds the aggregate amount of
credits to the Account pursuant to Sections 3.3, 3.4 and 3.5 of the Agreement as
of each Valuation Date and not theretofore distributed or deemed distributed
pursuant to this Section A.6 is herein called "Account Retained Income". The
amount of each payment for the year, or such shorter period as may be determined
by the Company, of the Pay-Out Period immediately succeeding such Valuation
Date, including the payment then due, shall be determined by dividing the
aggregate value of the Account, as valued and adjusted pursuant to the second
preceding sentence, by the number of payments remaining to be paid in the
Pay-Out Period, including the payment then due; provided that each payment made
shall be deemed made first out of Account Retained Income (to the extent
remaining after all prior distributions thereof since the last Valuation Date).
The balance of the Account, after all the securities held or deemed to have been
held therein have been sold or deemed to have been sold and all indebtedness
liquidated, shall be paid to the Executive in the final payment, which shall be
decreased by deducting therefrom the amount of all taxes attributable to the
sale of any securities held or deemed to have been held in the Account since the
end of the preceding taxable year of the Company, which taxes shall be computed
as of the date of such payment.
If this Agreement is terminated by the Company pursuant to
Section 4.1, the Account shall be valued as of the later of (i) the date the
Executive ceases to be an employee of the Company and leaves the Company's
payroll or (ii) twelve months after the date the Agreement is terminated
pursuant to Section 4.1 and, after the securities held or deemed to have been
held therein have been sold or deemed to have been sold and all related
indebtedness liquidated, shall be paid to the Executive as soon as practicable
and in any event within 75 days following the later of such dates in a final
lump sum payment, which shall be decreased by deducting therefrom the amount of
all taxes attributable to the sale of any securities held or deemed to have been
held in the Account since
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the end of the preceding taxable year of the Company, which taxes shall be
computed as of the date of such payment. Payments made pursuant to this
paragraph shall be deemed made first out of Account Retained Income.
If the Executive becomes disabled within the meaning of Section 5
of the Agreement and is not thereafter returned to full-time employment with the
Company as provided in said Section 5, then deferred compensation shall be paid
monthly during the Pay-Out Period commencing on the first day of the month
following the termination of the Executive's employment with the Company in
accordance with the provisions of the first paragraph of this Section A.6.
If the Executive shall die at any time whether during or after
the termination of the Agreement, the Account shall be valued as of the date of
the Executive's death and the balance of the Account shall be paid to the
Executive's estate or beneficiary within 75 days of such death in accordance
with the provisions of the second preceding paragraph.
Within 90 days after the end of each taxable year of the Company
in which payments have been made from the Account and at the time of the final
payment from the Account, the Company shall compute and shall credit to the
Account, the amount of the tax benefit assumed to be received by it from the
payment to the Executive of amounts of Account Retained Income during such
taxable year or since the end of the last taxable year, as the case may be. No
additional credits shall be made to the Account pursuant to the preceding
sentence in respect of the amounts credited to the Account pursuant to the
preceding sentence. Notwithstanding any provision of this Section A.6, the
Executive shall not be entitled to receive pursuant to this Annex A an aggregate
amount that shall exceed the sum of (i) all credits made to the Account pursuant
to Sections 3.3, 3.4 and 3.5 of the Agreement to which this Annex is attached,
(ii) the net cumulative amount (positive or negative) of all income, gains,
losses, interest and expenses charged or credited to the Account pursuant to
this Annex A (excluding credits made pursuant to the second preceding sentence),
after all credits and charges to the Account with respect to the tax benefits or
burdens thereof, and (iii) an amount equal to the tax benefit to the Company
from the payment of the amount (if positive) determined under clause (ii) above;
and the final payment(s) otherwise due may be adjusted or eliminated
accordingly. In determining the tax benefit to the Company under clause (iii)
above, the Company shall be deemed to have made the payments under clause (ii)
above with respect to the same taxable years and in the same proportions as
payments of Account Retained Income were actually made from the Account. Except
as otherwise provided in this paragraph, the computation of all taxes and tax
benefits referred to in this
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Section A.6 shall be determined in accordance with Section A.5 above.
A.7. Other Payment Methods. Notwithstanding the foregoing
provisions of this Annex A, the Executive may, prior to the commencement of any
calendar year elect by written notice to the Company to cause (i) all or any
portion of the amounts otherwise to be credited to the Account in such year
under Section 3.3 of the Agreement not to be so credited but to be paid to the
Executive on the date(s) such credits otherwise would have been made thereunder
and/or (ii) all or any portion of the amounts to be credited to the Account
under Section 3.3 of the Agreement in such year (after giving effect to clause
(i) above) to be payable from the Account at times earlier than those provided
in Section A.6 above but not earlier than the dates on which such amounts were
to be credited to the Account.
ANNEX B
RELEASE
Pursuant to the terms of the Employment Agreement made as of
November , 1995, between TIME WARNER INC., a Delaware corporation (the
"Company"), 00 Xxxxxxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 and the undersigned
(the "Agreement"), and in consideration of the payments made to me and other
benefits to be received by me pursuant thereto, I, [NAME], being of lawful age,
do hereby release and forever discharge the Company and its officers,
shareholders, subsidiaries, agents, and employees, from any and all actions,
causes of action, claims, or demands for general, special or punitive damages,
attorney's fees, expenses, or other compensation, which in any way relate to or
arise out of my employment with the Company or any of its subsidiaries or the
termination of such employment, which I may now or hereafter have under any
federal, state or local law, regulation or order, including without limitation,
under the Age Discrimination in Employment Act, as amended, through and
including the date of this Release; provided, however, that the execution of
this Release shall not prevent the undersigned from bringing a lawsuit against
the Company to enforce its obligations under the Agreement.
I acknowledge that I have been given at least 21 days from the
day I received a copy of this Release to sign it and that I have been advised to
consult an attorney. I understand that I have the right to revoke my consent to
this Release for seven days following my signing. This Release shall not become
effective or enforceable until the expiration of the seven-day period following
the date it is signed by me.
I further state that I have read this document and the Agreement
referred to herein, that I know the contents of both and that I have executed
the same as my own free act.
WITNESS my hand this ____ day of ___________ , ____.
