EMPLOYMENT AGREEMENT made as of November 29, 1999, effective as of January
1, 2000 (the "Effective Date"), between TIME WARNER INC., a Delaware corporation
(the "Company"), and Xxxxxxxxxxx X. Xxxxxx.
You are currently employed by the Company pursuant to an Employment
Agreement made as of January 23, 1998 ( the "Prior Agreement"). The Company
wishes to replace the Prior Agreement with this Agreement, effective January 1,
2000, in order to secure your services on a full-time basis for the period of
January 1, 2000 to and including December 31, 2004 (the "Term Date"), on and
subject to the terms and conditions set forth in this Agreement. You are willing
for the Prior Agreement to be so replaced and to provide your services on and
subject to the terms and conditions set forth in this Agreement. The parties
therefore agree as follows:
1. Term of Employment. Your "term of employment", as this phrase is used
throughout this Agreement, shall be for the period beginning on the Effective
Date and ending on the Term Date, subject, however, to earlier termination as
set forth in this Agreement.
2. Employment. You shall serve as Executive Vice President, General Counsel
and Secretary of the Company during the term of employment, and you shall have
the authority, functions, duties, powers and responsibilities normally
associated with such position and as the Board of Directors, the Chief Executive
Officer or the President of the Company may from time to time delegate to you in
addition thereto. During the term of employment, (i) your services shall be
rendered on a substantially full-time, exclusive basis and you will apply on a
full-time basis all of your skill and experience to the performance of your
duties, (ii) you shall report only to the Company's Board of Directors, its
Chief Executive Officer or its President, (iii) you 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 your time and (iv) the place for the
performance of your services shall be the principal executive offices of the
Company which shall be in the New York City metropolitan area, subject to such
reasonable travel as may be required in the performance of your duties. The
foregoing shall be subject to the Company's written policies, as in effect from
time to time, regarding vacations, holidays, illness and the like.
3. Compensation.
3.1 Base Salary. The Company shall pay you a base salary of not less
than $400,000 per annum during the term of employment (the "Base Salary"). The
Company may increase, but not decrease, the Base Salary during the term of
employment. Base Salary shall be paid in accordance with the Company's customary
payroll practices.
3.2 Bonus. In addition to Base Salary, you may be entitled to receive
during the term of employment an annual cash bonus ("Bonus") based on your
performance and the performance of the Company. The determination of any such
Bonus is entirely within the Company's discretion.
3.3 Deferred Compensation. In addition to Base Salary and Bonus as set
forth in Sections 3.1 and 3.2, you will be credited with deferred compensation
which shall be determined and paid out as provided in this Agreement and in
Annex A hereto. Unless you shall make the election described in the last
sentence of this Section 3.3 and subject to the provisions of Section A.8 of
Annex A, during the term of employment, the Company shall pay to the trustee (
the "Trustee") of a Company grantor trust (the "Rabbi Trust") for credit to a
special account maintained on the books of the Rabbi Trust for you (the "Trust
Account"), monthly, an amount equal to one twelfth of 50% of your then current
Base Salary. The Trust Account shall be maintained by the Trustee in accordance
with the terms of this Agreement and Annex A and the trust agreement ( the
"Trust Agreement") establishing the Rabbi Trust (which Trust Agreement shall in
all respects be in furtherance of, and not inconsistent with, the terms of this
Agreement, including Annex A), until the full amount which you are entitled to
receive therefrom has been paid in full. The Company has established and shall
maintain the Rabbi Trust as a grantor trust within the meaning of subpart E,
part 1, subchapter J, chapter 1, subtitle A of the Code and shall pay all fees
and expenses of the Trustee and shall enforce the provisions of the Trust
Agreement for your benefit. You may elect by written notice delivered to the
Company at least 15 days prior to the commencement of any calendar year during
the term of employment (a) to have all of the payments to be made to the Rabbi
Trust pursuant to the second sentence of this Section 3.3 to be credited instead
to the Deferred Compensation Plan established by the Company on November 18,
1998, as the same may be amended from time to time (as so amended, the "Deferred
Plan"), or (b) to have 50% of the payments to be made by the Company pursuant
the second sentence of this Section 3.3 to be credited instead to the Deferred
Plan and the remaining 50% to be paid to the Rabbi Trust.
3.4 Deferred Bonus. In addition to any other deferred bonus plan in
which you may be entitled to participate, you may elect by written notice
delivered to the Company not later than June 30 of the calendar year during the
term of employment during which a Bonus would otherwise accrue or to which it
would relate, to defer payment of and to
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have the Company either pay to the Rabbi Trust for credit to the Trust Account
or credit to the Deferred Plan all or any portion of your Bonus for such year
(or such election may direct that such deferred portion be divided 50% to the
Rabbi Trust and 50% to the Deferred Plan). 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 you in the Rabbi Trust
in accordance with the Prior Agreement. The Prior Account shall for all purposes
be deemed part of the Trust Account and shall be maintained by the Trustee in
accordance with this Agreement and the Trust 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 Indemnification. You shall be entitled throughout the term of
employment 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 after the date hereof that limit or
narrow, but including any that add to or broaden, the protection afforded to you
by those provisions).
4. Termination.
4.1 Termination for Cause. The Company may terminate the term of
employment and all of the Company's obligations under this Agreement, 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 action of the Company's Board of Directors, or a committee
thereof, because of your 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 your obligations
under this Agreement or because of your breach of any of the covenants provided
for in Section 9. Such termination shall be effected by written notice thereof
delivered by the Company to you and shall be effective as of the date of such
notice; provided, however, that if (i) such termination is because of your
willful refusal without proper cause to perform any one or more of your
obligations under this Agreement, (ii) such notice is the first such notice of
termination for any reason delivered by the Company to you under this Section
4.1, and (iii) within 15 days
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following the date of such notice you shall cease
your refusal and shall use your best efforts to perform such obligations, the
termination shall not be effective.
In the event of termination by the Company for cause, without
prejudice to any other rights or remedies that the Company may have at law or in
equity, the Company shall have no further obligations to you other than (i) to
pay Base Salary and make credits of Deferred Compensation through the effective
date of termination, (ii) to pay any Bonus that has been determined but not yet
paid as of the date of such termination and (iii) with respect to any rights you
have pursuant to any insurance or other benefit plans or arrangements of the
Company. You hereby disclaim any right to receive a pro rata portion of any
Bonus with respect to the year in which such termination occurs.
4.2 Termination by You for Material Breach by the Company and
Termination by the Company Without Cause. Unless previously terminated pursuant
to any other provision of this Agreement and unless a Disability Period shall be
in effect, you shall have the right, exercisable by written notice to the
Company, to terminate the term of employment effective 15 days after the giving
of such notice, if, at the time of the giving of such notice, the Company is in
material breach of its obligations under this Agreement; 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
you pursuant to this Section 4.2 and within such 15-day period the Company shall
have cured all such material breaches. A material breach by the Company shall
include, but not be limited to, (i) the Company violating Section 2 with respect
to your title, reporting lines, duties or place of employment or (ii) the
Company failing to cause any 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 Company shall have the right, exercisable by written notice to
you, to terminate your employment under this Agreement without cause, which
notice shall specify the effective date of such termination.
4.2.1 After the effective date of a termination pursuant to this
Section 4.2 (a "termination without cause"), you shall receive Base Salary,
Deferred Compensation and a pro rata portion of your Average Annual Bonus (as
defined below) through the effective date of termination. Your Average Annual
Bonus shall be equal to the average of the regular annual bonus amounts
(excluding the amount of any special or spot bonuses) in respect of the two
calendar years during the most recent five calendar years for which the annual
bonus received by you from the Company was the greatest; provided that if the
date of notice for such termination under this Section 4.2.1 (or for purposes of
Section 5.1, the Disability Date, or for purposes of Section 6, the date of
death) is before the final
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determination of your Bonus for the year 2000, your Average Annual Bonus shall
be twice the amount of your regular annual bonus (excluding any special or spot
bonus) for the year 1999.
4.2.2 After the effective date of a termination without cause, you
shall remain an employee of the Company for the period ending on the later of
(i) the Term Date and (ii) the date which is one year after the effective date
of such termination and during such period you shall be entitled to receive,
whether or not you become disabled during such period but subject to Section 6,
(a) Base Salary at an annual rate equal to your Base Salary in effect
immediately prior to the notice of termination, (b) an annual Bonus in respect
of each calendar year or portion thereof (in which case a pro rata portion of
such Bonus will be payable) during such period equal to the Average Annual Bonus
(which payment shall be subject to any Bonus deferral election made pursuant to
Section 3.4; provided that such election must be made not later than 15 days
after such termination (and not later than June 30) for the calendar year in
which such termination occurs and for any subsequent calendar year must be made
before January 1 of such calendar year) and (c) credits of Deferred
Compensation. Except as provided in the third succeeding sentence, if you accept
other full-time employment during such period or notify the Company in writing
of your intention to terminate your status as an employee during such period,
you shall cease to be an employee of the Company effective upon the commencement
of such other employment or the effective date of such termination as specified
by you in such notice, whichever is applicable, and you shall be entitled to
receive, as severance, a lump sum payment within 30 days after such commencement
or such effective date (provided that if you were named in the compensation
table in the Company's then most recent proxy statement, such lump sum payment
shall be made within 30 days after the end of the calendar year in which such
commencement or effective date occurred), discounted as provided in the
immediately following sentence, equal to the balance of the payments you would
have received pursuant to this Section 4.2.2 (excluding Deferred Compensation,
which is provided for below in this Section 4.2.2) had you remained on the
Company's payroll. That lump sum shall be discounted to present value as of the
date of payment from the times at which such amounts would otherwise have become
payable absent 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, as amended (the "Code"),
in effect on the date of such termination, compounded semi-annually. If a lump
sum payment is made pursuant to this Section 4.2.2, the Company shall pay to the
Trustee for credit to the Trust Account at the time of such payment an amount
equal to 50% of the portion of such lump sum payment (as discounted) which is
attributable to Base Salary; provided, however, that you may elect by written
notice to the Company no later than the effective date of such termination or
the commencement of such other employment to have all or 50% of such amount
credited instead to the Deferred Plan. Notwithstanding the foregoing, if you
accept employment with any not-for-profit entity, then
5
you shall be entitled to remain an employee of the Company and receive the
payments as provided in the first sentence of this Section 4.2.2; and if you
accept full-time employment with any affiliate of the Company, then the payments
provided for in this Section 4.2.2 shall immediately cease and you shall not be
entitled to any lump sum payment. For purposes of this Agreement, the term
"affiliate" shall mean any entity which, directly or indirectly, controls, is
controlled by, or is under common control with, the Company.
4.3 After the Term Date. If at the Term Date, the term of employment
shall not have been previously terminated pursuant to the provisions of this
Agreement, no Disability Period is then in effect and the parties shall not have
agreed to an extension or renewal of this Agreement or on the terms of a new
employment agreement, then the term of employment shall continue and you shall
continue to be employed by the Company pursuant to the terms of this Agreement,
subject to termination by either party hereto on 60 days written notice
delivered to the other party (which notice may be delivered by either party at
any time on or after the date which is 60 days prior to the Term Date). If the
Company shall terminate the term of employment on or after the Term Date for any
reason (other than for cause as defined in Section 4.1, in which case Section
4.1 shall apply), which the Company shall have the right to do so long as no
Disability Date (as defined in Section 5) has occurred prior to the delivery by
the Company of written notice of termination, then such termination shall be
deemed for all purposes of this Agreement to be a "termination without cause"
under Section 4.2 and the provisions of Sections 4.2.1 and 4.2.2 shall apply.
4.4 Office Facilities. In the event of a termination without cause,
then for the period beginning on the effective date of such termination and
ending one year thereafter, the Company shall, without charge to you, make
available to you office space at or near your principal job location immediately
prior to such termination, together with secretarial services, office
facilities, services and furnishings, in each case reasonably appropriate to an
employee of your position and responsibilities prior to such termination but
taking into account your reduced need for such office space, secretarial
services and office facilities, services and furnishings as a result of you no
longer being a full-time employee.
4.5 Release. A condition precedent to the Company's obligation to make
the payments associated with a termination without cause shall be your execution
and delivery of a release in the form attached hereto as Annex A. If you shall
fail to execute and deliver such release, or if you revoke such release as
provided therein, then in lieu of the payments provided for herein, you shall
receive a severance payment determined in accordance with the Company's policies
relating to notice and severance.
4.6 Retirement. Notwithstanding the provisions of this Agreement
relating to a termination without cause and Disability, on the date you first
become eligible for
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normal retirement (which is currently at age 65 under the Time Warner Employees'
Pension Plan) as defined in any applicable retirement plan of the Company or any
subsidiary of the Company (the "Retirement Date"), then this Agreement shall
terminate automatically on such date and your employment with the Company shall
thereafter be governed by the policies generally applicable to employees of the
Company, and you shall not thereafter be entitled to the payments provided in
this Agreement to the extent not received by you on or prior to the Retirement
Date. In addition, no benefits or payments provided in this Agreement relating
to termination without cause and Disability shall include any period after the
Retirement Date and if the provision of benefits or calculation of payments
provided in this Agreement with respect thereto would include any period
subsequent to the Retirement Date, such provision of benefits shall end on the
Retirement Date and the calculation of payments shall cover only the period
ending on the Retirement Date.
4.7 Mitigation. The payments provided for in this Agreement in the
event of a termination without cause are not subject to mitigation unless your
failure to mitigate would result in the Company losing tax deductions to which
it would otherwise have been entitled. In such an event, you will engage in
whatever mitigation is necessary to preserve the Company's tax deductions. In
addition to any obligation under the preceding sentence, and without duplication
of any amounts required to be paid to the Company thereunder, if after a
termination without cause you obtain other employment with any entity other than
a not-for-profit entity, then the total cash salary and bonus received in
connection with such other employment, whether paid to you or deferred for your
benefit, for services through the later of (i) the Term Date or (ii) one year
after the effective date of such termination without cause, up to an amount
equal to (a) the discounted lump sum payment received by you or for your account
with respect to Base Salary, Bonus and Deferred Compensation for such period,
minus (b) the amount of severance you would have received in accordance with the
personnel policies of the Company if you had been job eliminated, shall reduce,
pro tanto, any amount which the Company would otherwise be required to pay to
you as a result of such termination and, to the extent amounts have theretofore
been paid to you 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. The
provisions of the preceding sentence (i) 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 and (ii) shall treat 70% of the compensation payable to you as a
partner or shareholder or counsel to a law firm, regardless of how characterized
by such entity, as "cash salary and bonus" and the other 30% as an equity
interest benefit. With respect to the preceding sentences, any payments or
rights to which you are entitled by reason of the termination of employment
without cause shall be considered as damages hereunder. With respect to the
third preceding sentence, (i) you shall in no event be required to pay the
Company with respect to any calendar year more than the discounted amount
received by you or credited to the Deferred Plan with respect to Base Salary,
Bonus
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and Deferred Compensation for such year and (ii) subject to the provisions
of the second sentence of this Section 4.7, you shall not be required to pay the
Company any amount with respect to services rendered by you during the first
twelve months following the date of termination of your employment hereunder.
Any obligation to mitigate your damages pursuant to this Section 4.7 shall not
be a defense or offset to the Company's obligation to pay you in full the
amounts provided in this Agreement upon the occurrence of a termination without
cause, at the time provided herein, or the timely and full performance of any of
the Company's other obligations under this Agreement.
4.8 Payments. So long as you remain on the payroll of the Company or
any subsidiary of the Company, payments of Base Salary, Deferred Compensation
and Bonus required to be made after a termination without cause shall be made at
the same times as similar payments are made to other senior executives of the
Company.
5. Disability.
5.1 Disability Payments. If during the term of employment and prior to
any termination without cause, you become physically or mentally disabled,
whether totally or partially, so that you are prevented from performing your
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 your full compensation and continue to make the
Deferred Compensation credits when otherwise due, through the last day of the
sixth consecutive month of disability or the date on which the shorter periods
of disability shall have equaled a total of six months in any twelve-month
period (such last day or date being referred to herein as the "Disability
Date"). If you have not resumed your usual duties on or prior to the Disability
Date, the Company shall pay you a pro rata Bonus for the year in which the
Disability Date occurs and shall pay you disability benefits for the longer of
(i) the period ending on the Term Date or (ii) one year (in the case of either
(i) or (ii) (the "Disability Period"), in an annual amount equal to 75% of (a)
your Base Salary at the time you become disabled (and this reduced amount shall
also be deemed to be the Base Salary for purposes of determining the amounts to
be credited by the Company as Deferred Compensation) and (b) the Average Annual
Bonus. Unless timely elected before a Disability Date, you may not elect to
defer any portion of your Bonus for the calendar year in which the Disability
Period commences and for any subsequent calendar years of the Disability Period,
you must make any bonus deferral election before January 1 of such year.
5.2 Recovery from Disability. If during the Disability Period you
shall fully recover from your disability, the Company shall have the right
(exercisable within 60 days after notice from you of such recovery), but not the
obligation, to restore you to full-time service at full compensation. If the
Company elects to restore you to full-time service, then this
8
Agreement shall continue in full force and effect in all respects and the Term
Date shall not be extended by virtue of the occurrence of the Disability Period.
If the Company elects not to restore you to full-time service, you shall be
entitled to obtain other employment, subject, however, to the following: (i) you
shall perform advisory services during any balance of the Disability Period; and
(ii) you shall comply with the provisions of Sections 9 and 10 during the
Disability Period. The advisory services referred to in 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 Chief
Executive Officer or the President of the Company but you 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.
5.3 Other Disability Provisions. The Company shall be entitled to
deduct from all payments to be made to you during the Disability Period pursuant
to this Section 5 an amount equal to all disability payments received by you
during the Disability Period from Worker'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 you from such
disability insurance policies are not includible in your 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 you 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 and unless the
Company has restored you to full-time service at full compensation prior to the
end of the Disability Period, the term of employment shall end and you shall
cease to be an employee of the Company at the end of the Disability Period and
shall not be entitled to notice and severance or to receive or be paid for any
accrued vacation time or unused sabbatical.
6. Death. If you die during the term of employment, this Agreement and all
obligations of the Company to make any payments hereunder shall terminate except
that your estate (or a designated beneficiary) shall be entitled to receive Base
Salary and Deferred Compensation to the last day of the month in which your
death occurs and Bonus compensation (at the time bonuses are normally paid)
based on the Average Annual Bonus, but prorated according to the number of whole
or partial months you were employed by the Company in such calendar year.
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7. Life Insurance. During your employment with the Company, the Company
shall (i) provide you with $50,000 of group life insurance and (ii) pay you
annually an amount equal to two times the premium you would have to pay to
obtain life insurance under the Group Universal Life ("GUL") insurance program
made available by the Company in an amount equal to $4 million. You shall be
under no obligation to use the payments made by the Company pursuant to the
preceding sentence to purchase GUL insurance or to purchase any other life
insurance. If the Company discontinues its GUL insurance program, the Company
shall nevertheless make the payments required by this Section 7 as if such
program were still in effect. The payments made to you hereunder shall not be
considered as "salary" or "compensation" or "bonus" in determining the amount of
any payment under any pension, retirement, profit-sharing or other benefit plan
of the Company or any subsidiary of the Company.
8. Other Benefits.
8.1 General Availability. To the extent that (a) you are eligible
under the general provisions thereof and (b) the Company maintains such plan or
program for the benefit of its senior executives, during the term of employment
and so long as you are an employee of the Company, you shall be eligible to
participate in any pension, profit-sharing, stock option or similar plan or
program and in any group life insurance (to the extent set forth in Section 7),
hospitalization, medical, dental, accident, disability or similar plan or
program of the Company now existing or established hereafter. In addition, you
shall be entitled during the term of employment and so long as you are an
employee of the Company, to receive other benefits generally available to all
senior executives of the Company, including, without limitation, to the extent
maintained in effect by the Company for its senior executives, an automobile
allowance and financial services.
8.2 Benefits After a Termination or Disability. During the period you
remain on the payroll of the Company after a termination without cause or during
the Disability Period, you shall continue to be eligible to participate in the
benefit plans and to receive the benefits required to be provided to you under
this Agreement to the extent such benefits are maintained in effect by the
Company for its senior executives; provided, however, you shall not be entitled
to any additional awards or grants under any stock option, restricted stock or
other stock based incentive plan. You shall continue to be an employee of the
Company for purposes of any stock option and restricted shares agreements and
any other incentive plan awards until such time as you leave the payroll of the
Company. At the time you leave the payroll of the Company, your rights to
benefits and payments under any benefit plans or 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
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shall be determined 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 you leave the
payroll of the Company as a result of a termination pursuant to Section 4.2,
then (i) all stock options granted to you by the Company after the date of this
Agreement shall vest and become immediately exercisable at the time you leave
the payroll of the Company, (ii) all stock options granted to you by the Company
after the date of this Agreement shall remain exercisable (but not beyond the
term thereof) during the remainder of the term of employment and for a period of
three months thereafter or such longer period as may be specified in any stock
option agreement and (iii) the Company shall not be permitted to determine that
your employment was terminated for "unsatisfactory performance" within the
meaning of any stock option agreement between the you and the Company.
8.3 Payments in Lieu of Other Benefits. In the event the term of
employment and your employment with the Company is terminated pursuant to any
section of this Agreement, you shall not be entitled to notice and severance or
to be paid for any accrued vacation time or unused sabbatical, the payments
provided for in such sections being in lieu thereof.
9. Protection of Confidential Information; Non-Compete.
9.1 Confidentiality Covenant. You acknowledge that your employment by
the Company (which, for purposes of this Section 9 shall mean Time Warner Inc.
and its affiliates) will, throughout the term of employment, bring you 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. You further acknowledge that the services to
be performed under this Agreement are of a special, unique, unusual,
extraordinary and intellectual character. You further acknowledge 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 entities that are or could be located in nearly
any part of the world and that the nature of your services, position and
expertise are such that you are capable of competing with the Company from
nearly any location in the world. In recognition of the foregoing, you covenant
and agree:
9.1.1 You shall keep secret all confidential matters of the
Company and shall not 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) you shall have no such obligation to the extent such
matters are or become publicly known
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other than as a result of your breach of your obligations hereunder and (ii) you
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 You shall deliver promptly to the Company on termination
of your employment, or at any other time the Company may so request, all
confidential information and if it shall be so requested by the Company, any
other memoranda, notes, records, reports and other documents (and all copies
thereof) relating to the Company's business, which you obtained while employed
by, or otherwise serving or acting on behalf of, the Company and which you may
then possess or have under your control; and
9.1.3 If the term of employment is terminated pursuant to
Section 4, for a period of one year after such termination, without the prior
written consent of the Company, you shall not employ, and shall not cause any
entity of which you are an affiliate to employ, any person who was a full-time
employee of the Company at the date of such termination or within six months
prior thereto but such prohibition shall not apply to your secretary or
executive assistant or to any other employee eligible to receive overtime pay.
9.2 Non-Compete. During the term of employment and through the later
of (i) the Term Date, (ii) the date you leave the payroll of the Company and
(iii) twelve months after the effective date of any termination of the term of
employment pursuant to Section 4, you 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 Competitive Entity (as defined in the next
sentence) or acquire any interest of any type in any Competitive Entity;
provided, however, that the foregoing shall not be deemed to prohibit you from
(a) acquiring, solely as an investment and through market purchases, securities
of any Competitive Entity 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
you are not part of any control group of such Competitive Entity and such
securities, if converted, do not constitute more than one percent (1%) of the
outstanding voting power of that Competitive Entity; or (b) after the effective
date of a termination pursuant to Section 4.1 or after your resignation in
breach of this Agreement or after a termination pursuant to Section 4.2, being a
partner or shareholder in or of counsel to or in some other like capacity
providing legal services to a law firm that represents any Competitive Entity
and personally providing legal services to such Competitive Entity, except that
if such termination is pursuant to Section 4.1 or after your resignation in the
breach of this Agreement, you shall not personally provide or assist in the
provision of services to any such Competitive Entity with respect to any line of
its business which causes it to be a Competitive Entity. For purposes of the
foregoing, a Competitive Entity shall mean a person or entity that engages in
any line of business that is substantially the same as either (i) any line of
operating
12
business which the Company engages in, conducts or, to your knowledge, has
definitive plans to engage in or conduct or (ii) any operating business that is
engaged in or conducted by the Company and as to which, to your knowledge, the
Company covenants in writing, in connection with the disposition of such
business, not to compete therewith; provided, however, that after you are no
longer on the payroll of the Company, the provisions of this Section 9.2 shall
apply only to a Competitive Entity that had, or the parent entity or predecessor
entity of such Competitive Entity had, consolidated gross revenues from all
sources, including non-competitive businesses, of $2 billion or more for the
fiscal year preceding your commencement of service for such Competitive Entity.
No provision of this Section 9.2 shall be deemed a waiver by the Company of any
rules or standards of professional responsibility or ethical conduct or to
release you from or to modify the confidentiality provisions of Section 9.1.
9.3 Specific Remedy. In addition to such other rights and remedies as
the Company may have at equity or in law with respect to any breach of this
Agreement, if you commit a material breach of 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.
10. Ownership of Work Product. You acknowledge that during the term of
employment, you 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 you by reason of your employment by
the Company. You acknowledge that all of the foregoing shall be owned by and
belong exclusively to the Company and that you shall have no personal interest
therein, provided that they are either related in any manner to the business
(commercial 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 you for the possible interest or participation of the Company.
You shall (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 your inventorship or creation in any appropriate case.
You agree that you will not assert any rights to any Work Product or business
opportunity as having been made or acquired by you 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.
13
11. Notices. All notices, requests, consents and other communications
required or permitted to be given under this Agreement shall be effective only
if given in writing and shall be deemed to have been duly given if delivered
personally or sent by a nationally recognized overnight delivery service, or
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: Chief Executive Officer
(with a copy, similarly addressed
but Attention: President)
11.2 If to you, to your residence 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 substantive 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.
12.3 Entire Agreement. This Agreement, including Annex A, sets forth
the entire agreement and understanding of the parties relating to the subject
matter of this Agreement and supersedes all prior agreements, arrangements and
understandings, written or oral, between the parties.
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.
14
12.5 Assignability. This Agreement and your rights and obligations
hereunder may not be assigned by you and except as specifically contemplated in
this Agreement, neither you, your legal representative nor any beneficiary
designated by you shall have any right, without the prior written consent of the
Company, to assign, transfer, pledge, hypothecate, anticipate or commute to any
person or entity any payment due in the future pursuant to any provision of this
Agreement, and any attempt to do so shall be void and shall not be recognized by
the Company. 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 all or substantially all
of the business and assets of the Company, whether by merger, purchase of stock
or assets or otherwise. The Company shall cause any such successor expressly to
assume such obligations.
12.6 Amendments; Waivers. This Agreement may be amended, modified,
superseded, cancelled, 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, 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 and your employment hereunder (whether based on
contract or tort or upon any federal, state or local statute, including but not
limited to claims asserted under the Age Discrimination in Employment Act, Title
VII of the Civil Rights Act of 1964, as amended, any state Fair Employment
Practices Act and/or the Americans with Disability Act) shall, at the election
of either you or the Company, be submitted to JAMS/ENDISPUTE for resolution in
arbitration in accordance with the rules and procedures of JAMS/ENDISPUTE.
Either party shall make such election by delivering written notice thereof to
the other party at any time (but not later than 45 days after such party
receives notice of the commencement of any administrative or regulatory
proceeding or the filing of any lawsuit relating to any such dispute or
controversy) and thereupon any such dispute or controversy shall be resolved
only in accordance with the provisions of this Section 12.7. 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
15
in accordance with the procedures of JAMS/ENDISPUTE shall be final and binding.
Judgment upon the award rendered by such arbitrator 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 you shall be the prevailing
party in such arbitration, the Company shall promptly pay, upon your demand, all
legal fees, court costs and other costs and expenses incurred by you in any
legal action seeking to enforce the award in any court.
12.8 Beneficiaries. Whenever this Agreement provides for any payment
to your estate, such payment may be made instead to such beneficiary or
beneficiaries as you may designate by written notice to the Company. You 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. You represent and warrant to the Company that this
Agreement is legal, valid and binding upon you and the execution of this
Agreement and the performance of your 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 you are a party (including, without
limitation, any other employment agreement). The Company represents and warrants
to you that this Agreement is legal, valid and binding upon the Company and the
execution of this Agreement and the performance of the Company'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 Company is a
party.
12.10 Withholding Taxes. Payments made to you pursuant to this
Agreement shall be subject to withholding and social security taxes and other
ordinary and customary payroll deductions.
12.11 No Offset. Neither you nor the Company 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
you and the Company shall make all the payments provided for in this Agreement
in a timely manner.
12.12 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
16
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.
12.13 Survival. Sections 3.4, 8.2, 8.3 and 9 through 12 shall survive
any termination of the term of employment by the Company for cause. Sections
3.4, 4.4, 4.5, 4.7 and 6 through 12 shall survive any termination of the term of
employment without cause.
12.14 Definitions. The following terms are defined in this Agreement
in the places indicated:
Account Retained Income - Section 3.5
affiliate - Section 4.2.2
Average Annual Bonus - Section 4.2.1
Annex A - Section 3.3
Base Salary - Section 3.1
Bonus - Section 3.2
cause - Section 4.1
Code - Section 4.2.2
Company - the first paragraph on page 1 and Section 9.1
Competitive Entity -Section 9.2
Deferred Account - Section 3.3
Deferred Compensation - Section 3.3
Deferred Plan - Section 3.3
Disability Date - Section 5
Disability Period - Section 5
Effective Date - the first paragraph on page 1
GUL - Section 7
Prior Account - Section 3.5
Prior Agreement - the second paragraph on page 1
Rabbi Trust - Section 3.3
Retirement Date - Section 4.6
Term Date - Section 1
term of employment - Section 1
termination without cause - Section 4.2.1
Trust Account - Section 3.3
Trustee - Section 3.3
Work Product - Section 10
17
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
TIME WARNER INC.
By /s/ Xxxxxxx X Xxxxxxx
---------------------------------
Xxxxxxx X. Xxxxxxx
President
/s/ Xxxxxxxxxxx X. Xxxxxx
---------------------------------
Xxxxxxxxxxx X. Xxxxxx
18
Deferred Compensation Account
A.1 Investments. Funds credited to the Trust Account shall be actually
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 actually
purchased and sold for the Trust Account on the date of reference. Such
purchases may be made on margin; provided that the Company may, from time to
time, by written notice to the Executive, the Trustee 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, the Trustee and the
Investment Advisor, cause all eligible securities theretofore purchased on
margin to be sold. The Investment Advisor shall send notification to the
Executive and the Trustee in writing of each transaction within five business
days thereafter and shall render to the Executive and the Trustee written
quarterly reports as to the current status of his or her Trust Account. In the
case of any purchase, the Trust Account shall be charged with a dollar amount
equal to the quantity and kind of securities 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. In the case of any sale,
the Trust Account shall be charged with the quantity and kind of securities
sold, and shall be credited with a dollar amount equal to the quantity and kind
of securities sold multiplied by the fair market value of such securities on the
date of reference. Such charges and credits to the Trust 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 purchased or sold by the Rabbi Trust on the date of reference, the
actual purchase or sale price per security to the Rabbi Trust 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
1
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 Trustee
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 Trust Account, including determining the fair market value of
such security. The Trust Account shall be charged currently with all interest
paid by the Trust Account with respect to any credit extended to the Trust
Account. Such interest shall be charged to the Trust Account, for margin
purchases actually made, at the rates and times actually paid by the Trust
Account. 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 the Trustee 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 Trust Account at the rates and times
actually paid.
A.2 Dividends and Interest. The Trust Account shall be credited with
dollar amounts equal to cash dividends paid from time to time upon the stocks
held therein. Dividends shall be credited as of the payment date. The Trust
Account shall similarly be credited with interest payable on interest bearing
securities held therein. Interest shall be credited as of the payment date,
except that in the case of purchases of interest-bearing securities the Trust
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
Trust 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
Trust Account pursuant to this Section A.2 shall be charged with all taxes
thereon deemed payable 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 he has with
respect to the balance of the Trust Account.
A.3 Adjustments. The Trust Account shall be equitably adjusted to
reflect stock dividends, stock splits, recapitalizations, mergers,
consolidations, reorganizations and other changes affecting the securities held
therein.
A.4 Obligation of the Company. Without in any way limiting the
obligations of the Company otherwise set forth in the Agreement or this Annex A,
the Company shall have the obligation to establish, maintain and enforce the
Rabbi Trust and to make payments to the Trustee for credit to the Trust Account
in accordance with the provisions of Section 3.3 of the Agreement, to use due
care in selecting the Trustee or any successor trustee and to in all respects
work cooperatively with the Trustee to fulfill the obligations of the Company
and the Trustee to the Executive. The Trust Account shall be charged with all
taxes
2
(including stock transfer taxes), interest, brokerage fees and investment
advisory fees, if any, payable by the Company and attributable to the purchase
or disposition of securities designated by the Investment Advisor (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) and only in the
event of a default by the Company of its obligation to pay such fees and
expenses, the fees and expenses of the Trustee in accordance with the terms of
the Trust Agreement, but no other costs of the Company. Subject to the terms of
the Trust Agreement, the securities purchased for the Trust Account as
designated by the Investment Advisor shall remain the sole property of the
Company, subject to the claims of its general creditors, as provided in the
Trust Agreement. Neither the Executive nor his legal representative nor any
beneficiary designated by the Executive shall have any right, other than the
right of an unsecured general creditor, against the Company or the Trust in
respect of any portion of the Trust Account.
A.5 Taxes. The Trust 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 by the Trust Account pursuant to
Section A.2 and gains recognized upon sales of any of the securities which are
sold pursuant to Section A.1, A.6 or A.7. The Trust 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 pursuant to Section A.1 or A.2 and as a result
of any payment of brokerage fees and investment advisory fees made pursuant to
Section A.1. If any of the sales of the securities which are sold pursuant to
Section A.1, A.6 or A.7 results in a loss to the Trust Account, such net loss
shall be deemed to offset the income and gains referred to in the second
preceding sentence (and 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 Trust 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 Trust Account to the extent permitted by
Applicable Tax Law in order to minimize the taxes deemed payable on such income
and gains within the Trust Account. For the purposes of this Section A.5, all
charges and credits to the Trust 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 Trust 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 Trust Account for such year) shall be credited to
the Trust Account on the last day of such year. If and to the extent
3
that any such net loss of the Trust Account shall be utilized to determine a
credit to the Trust 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 One-Time Transfer to Deferred Plan. So long as the Executive is an
employee of the Company, the Executive shall have the right to elect at any
time, but only once during the Executive's lifetime, by written notice to the
Company to transfer to the Deferred Plan all or a portion of the Net
Transferable Balance (determined as provided in the next sentence) of the Trust
Account. If the Executive shall make such an election, the Net Transferable
Balance shall be determined as of the end of the calendar quarter following the
date of such election (unless such election is made during the first ten
calendar days following the end of a calendar quarter, in which case such
determination shall be made as of the end of such preceding calendar quarter) by
adjusting all of the securities held in the Trust Account to their fair market
value (net of the tax adjustment that would be made thereon if sold, as
estimated by the Company or the Trustee) and by deducting from such value the
amount of all outstanding indebtedness and any other amounts payable by the
Trust Account. Transfers to the Deferred Plan shall be made in cash as promptly
as reasonably practicable after the end of such calendar quarter and the
Investment Advisor (or the Company or the Trustee if the Investment Advisor
shall fail to act in a timely manner) shall cause securities held in the Trust
Account to be sold to provide cash equal to the portion of the Net Transferable
Balance of the Trust Account selected to be transferred by the Executive. If the
Executive elects to transfer more than 75% of the Net Transferable Balance of
the Trust Account to the Deferred Plan, the Company or the Trustee shall be
permitted to take such action as they may deem reasonably appropriate, including
but not limited to, retaining a portion of such Net Transferable Balance in the
Trust Account, to ensure that the Trust Account will have sufficient assets to
pay the Company the amount of taxes payable on such sales of securities at the
end of the year in which such sales are made.
A.7 Payments. Payments of deferred compensation shall be made as
provided in this Section A.7. Unless the Executive makes the election referred
to in the next succeeding sentence, deferred compensation shall be paid
bi-weekly for a period of ten years (the "Pay-Out Period") commencing on the
first Company payroll date in the month following the later of (i) the Term Date
and (ii) 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
4
statement, such payments shall commence on the first Company payroll date in
January of the year following the year in which the latest of such events
occurs. The Executive may elect a shorter Pay-Out Period by delivering written
notice to the Company or the Trustee at least one-year prior to the commencement
of the Pay-Out Period, which notice shall specify the shorter Pay-Out Period. On
each payment date, the Trust Account shall be charged with the dollar amount of
such payment. On each payment date, the amount of cash held in the Trust Account
shall be not less than the payment then due and the Company or the Trustee may
select the securities to be sold to provide such 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 Trust 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 payments during the Pay-Out Period, the
Trust Account shall be valued on the fifth trading day prior to the end of the
month preceding the first payment of each year of the Pay-Out Period, or more
frequently at the Company's or the Trustee's election (the "Valuation Date"), by
adjusting all of the securities held in the Trust Account to their fair market
value (net of the tax adjustment that would be made thereon if sold, as
estimated by the Company or the Trustee) and by deducting from the Trust Account
the amount of all outstanding indebtedness. The extent, if any, by which the
Trust Account, valued as provided in the immediately preceding sentence, plus
any amounts that have been transferred to the Deferral Plan pursuant to Section
A.6 hereof and not therefore distributed or deemed distributed therefrom,
exceeds the aggregate amount of credits to the Trust 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.7 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 or the Trustee,
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
Trust 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 Trust
Account, after all the securities held therein 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 in the Trust 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
or if the Executive terminates this Agreement or the term of employment in
breach of this Agreement, the Trust Account shall be valued as of the later of
(i) the Term Date or (ii) twelve months after termination of the Executive's
employment with the Company, and the balance of the Trust
5
Account, after the securities held therein 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 in the Trust Account
since 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
bi-weekly during the Pay-Out Period commencing on the first Company payroll date
in the month following the end of the Disability Period in accordance with the
provisions of the first paragraph of this Section A.7.
If the Executive shall die at any time whether during or after the
term of employment, the Trust Account shall be valued as of the date of the
Executive's death and the balance of the Trust 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.
Notwithstanding the foregoing provisions of this Section A.7, if the
Rabbi Trust shall terminate in accordance with the provisions of the Trust
Agreement, the Trust Account shall be valued as of the date of such termination
and the balance of the Trust Account shall be paid to the Executive within 15
days of such termination in accordance with the provisions of the third
preceding paragraph.
If a transfer to the Deferred Plan has been made pursuant to Section
A.6 hereof, payments made to the Executive from the Deferred Plan (a) shall be
deemed made first from the amounts transferred to the Deferred Plan pursuant to
Section A.6 and (b) shall be deemed made first out of Account Retained Income.
Within 90 days after the end of each taxable year of the Company in
which payments are made, directly or indirectly, to the Executive from the Trust
Account or from the Deferred Plan with respect to amounts transferred to the
Deferred Plan from the Trust Account pursuant to Section A.6 and at the time of
the final payment from the Trust Account, the Company or the Trustee shall
compute and the Company shall pay to the Trustee for credit to the Trust
Account, the amount of the tax benefit assumed to be received by the Company
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 Trust Account pursuant to the
preceding sentence in respect of the amounts
6
credited to the Trust Account pursuant to the preceding sentence.
Notwithstanding any provision of this Section A.7, the Executive shall not be
entitled to receive pursuant to this Annex A (including any amounts that have
been transferred to the Deferred Plan pursuant to Section A.6 hereof) an
aggregate amount that shall exceed the sum of (i) all credits made to the Trust
Account pursuant to Sections 3.3, 3.4 and 3.5 of the Agreement, (ii) the net
cumulative amount (positive or negative) of all income, gains, losses, interest
and expenses charged or credited to the Trust Account pursuant to this Annex A
(excluding credits made pursuant to the second preceding sentence), after all
credits and charges to the Trust 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 Trust Account.
Except as otherwise provided in this paragraph, the computation of all taxes and
tax benefits referred to in this Section A.7 shall be determined in accordance
with Section A.5 above.
7
ANNEX B
RELEASE
Pursuant to the terms of the Employment Agreement made as of
_____________, 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 ALSO ACKNOWLEDGE THAT BY SIGNING THIS RELEASE I MAY BE GIVING UP
VALAUBLE LEGAL RIGHTS AND THAT I HAVE BEEN ADVISED TO CONSULT A LAWYER BEFORE
SIGNING. 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 ___________, ____.
___________________________
[Name]
