Exhibit 10.1
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made as of July 14, 1997,
effective as of May 1, 1997 (the "Effective Date"), between
TIME WARNER INC., a Delaware corporation (the "Company"), and
Xxxx X. XxXxxxx (the "Executive").
The Executive is currently employed by the Company
pursuant to an Employment Agreement dated as of January 1, 1995
(the "Prior Agreement"). The Company wishes to restate the
Prior Agreement and secure the services of the Executive on a
full-time basis for the period to and including April 30, 2002
and thereafter for a one-year advisory period on and subject to
the terms and conditions set forth in this Agreement, and the
Executive is willing for the Prior Agreement to be so restated
and 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 Employment. The Executive's "term of
employment", as this phrase is used throughout this Agreement,
shall be for the period beginning on the Effective Date and
ending on April 30, 2002, subject, however, to the terms and
conditions set forth in this Agreement. Notwithstanding the
foregoing or anything to the contrary contained in this
Agreement, the "term of employment" as used in Section 3.6,
3.7, 3.8 and 8 through 12 shall mean the period ending at the
end of the Advisory Period (as defined in Section 13).
2. Employment. The Company shall employ the
Executive, and the Executive shall serve, as Senior Vice
President, Financial Operations and Controller 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
Chief Financial Officer of the Company may from time to time
delegate to the Executive in addition thereto. The Executive
shall, subject to his election as such from time to time and
without additional compensation, serve during the term of
employment in such additional offices of comparable or greater
stature and responsibility in the Company and its subsidiaries
and as a director and as a member of any committee of the Board
of Directors of the Company and its subsidiaries, to which he
may be elected from time to time. During the term of
employment, (i) the Executive's services shall be rendered on a
substantially full-time, exclusive basis and he will apply on a
full-time basis all of his skill and experience to the
performance of his duties in such employment, (ii) the
Executive shall report only to the Chief Financial Officer of
the Company, (iii) the Executive shall have no other employment
and, without the prior written consent of the Chief Executive
Officer, the President or the Chief Financial Officer of the
Company, no outside business activities which require the devo-
tion of substantial amounts of the Executive's time and (iv)
the place for the performance of the Executive's 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 appropriate or required in the
performance of the Executive's duties in the business of the
Company. 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 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, provided that the Executive complies with the
provisions of Sections 9 and 10 and any of the Company's
written policies on conflicts of interest and service as a
director of another corporation, partnership, trust or other
entity ("Entity").
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 $325,000 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 then current practices and policies with
respect to senior executives. For the purposes of this
Agreement "senior executives" shall mean executives of the
Company at the same executive level as the Executive.
3.2. Bonus. In addition to Base Salary, the
Executive may be entitled to receive during the term of
employment an annual cash bonus based on the performance of the
Company and of the Executive. Bonuses for senior executives
may be determined by the Compensation Committee of the
Company's Board of Directors or by the Chief Executive Officer
or the Chief Financial Officer of the Company. Such determi-
nation with respect to the amount, if any, of annual bonuses to
be paid to the Executive under this Agreement shall be final
and conclusive except as specifically provided otherwise in
this Agreement. 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 senior
executives, but in no event later than 90 days after the end of
the period for which the bonus is payable.
3.3. Deferred Compensation. In addition to
Base Salary and bonus as set forth in Sections 3.1 and 3.2, the
Executive shall be credited with deferred compensation which
shall be determined and paid out as provided in this Agreement,
including Annex A hereto. Subject to the provisions of Sec-
tion A.7 of Annex A, 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 50% of one-twelfth of the Executive's then current
Base Salary. If a lump sum payment is made pursuant to Section
4.2.2 or 4.2.3, the Company shall credit to the Account at the
time of such payment an amount equal to 50% of the Base Salary
portion of such lump sum payment. The Account shall be
maintained by the Company in accordance with the terms of this
Agreement, including 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 at least 15 days prior to the
commencement of any calendar year during the term of employment
during which an annual cash bonus would otherwise accrue 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. 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
reasonably promptly pay or reimburse the Executive for all
reasonable travel, entertainment and other business expenses
actually incurred or paid by the Executive during the term of
employment in the performance of his services under this
Agreement provided such expenses are incurred or paid in
accordance with the Company's then current written practices
and policies with respect to senior executives of the Company
and 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 in Section 12.8 or under the life
insurance policies and benefit plans referred to in Sections 7
and 8, respectively, 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 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.
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 after the date of
execution hereof 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.
4. Termination.
4.1. Termination for Cause. The Company may
terminate 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 action of the Company's
Board of Directors, or a committee thereof, 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 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 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 such 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 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 calendar year prior
to the calendar 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 in respect of amounts credited
to the Account 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 sentence of Section 3.3 and the provisions of
Sections 3.8, 8.2, 8.3 and 9 through 12 and Annex A shall
survive any termination pursuant to this Section 4.1.
4.2. Termination by Executive 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 Date has
occurred and the disability period remains in effect, the
Executive 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 shall be 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 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 under
this Agreement. A material breach by the Company shall
include, but not be limited to, (i) the Company failing to
cause the Executive to retain the title specified in the first
sentence of Section 2 or a more senior title; (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); (iv) the
Company requiring the Executive's primary services to be
rendered at a place other than at the Company's principal
executive offices in the New York City metropolitan 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 Company shall have the right, exercisable by
written notice to the Executive, to terminate the Executive's
employment under this Agreement without cause, effective at
least 30 days after the giving of such notice, which notice
shall specify the effective date of such termination.
In the event of a termination pursuant to this
Section 4.2, the Executive shall be entitled to elect by
delivery of written notice to the Company, within 30 days after
written notice of such termination is given pursuant to this
Section 4.2, either (A) to cease being an employee of the
Company and receive a lump sum payment as provided 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 pursuant to the preceding paragraph, (i) after the
effective date of such termination, the Executive shall have no
further obligations or liabilities to the Company whatsoever,
except that Sections 4.4 and 4.5 and Sections 6 through 12
shall survive such termination, and (ii) the Executive shall be
entitled to receive any earned and unpaid Base Salary and
deferred compensation accrued through 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) in respect of the two calendar years during the
most recent five calendar years for which the regular annual
bonus received by the Executive from the Company was the
greatest, all or a portion of which pro rata bonus will be
credited to the Account if the Executive previously elected to
defer all or any portion of the Executive's bonus for such year
pursuant to Section 3.4.
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 in a lump sum within 30 days
thereafter (provided that if the Executive was 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 notice of
termination is given) an amount (discounted as provided in the
immediately following sentence) equal to all amounts otherwise
payable pursuant to Sections 3.1, 3.2, 3.3 and 13 for the year
in which such termination occurs and for each subsequent year
of the term of employment and the Advisory Period (assuming
that annual bonuses are required to be paid for each such year
of the term of employment, with each such annual bonus being
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 regular annual bonus received by
the Executive from the Company was the greatest (assuming that
no portion of such bonus is deferred pursuant to Section 3.4),
with the bonus for any partial calendar year appropriately
annualized). Any payments required to be made to the Executive
pursuant to this Section 4.2.2 upon such termination in respect
of Sections 3.1, 3.2 and 13 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 become payable
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.
Section 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 term of
employment shall continue and the Executive shall remain an
employee of the Company until the end of the term of employment
and the Advisory Period and during such period the Executive
shall be entitled to receive, whether or not he becomes
disabled during such period but subject to Section 6, (a) Base
Salary at an annual rate equal to his Base Salary in effect
immediately prior to the notice of termination for each year
through the term of employment, (b) an annual bonus (all or a
portion of which may be deferred by the Executive pursuant to
Section 3.4) in respect of each calendar year or portion
thereof during the term of employment (in which case a pro rata
portion of such annual bonus will be payable) during such
period 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 regular annual bonus received by
the Executive from the Company was the greatest (with any
partial calendar year bonus appropriately annualized) as
provided in Section 3.2, (c) deferred compensation as provided
in Section 3.3 and (d) Advisory Period compensation as provided
in Section 13. Except as provided in the next sentence, if the
Executive accepts full-time employment with any other Entity
during such period or notifies the Company in writing of his
intention to terminate his status as an employee during such
period, then the term of employment and the Advisory Period
shall cease and 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 the
Executive shall be entitled to receive as damages in a lump sum
within 30 days after such commencement or such effective date
(provided that if the Executive was 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) an amount (discounted as provided in the second
sentence of Section 4.2.2 except that the "applicable Federal
rate" shall be determined as of the date the Executive shall
cease to be an employee of the Company) 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), regular annual bonuses (assuming no deferral pursuant to
Section 3.4) and Advisory Period compensation 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 Advisory 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 4.2.3; and if
the Executive accepts full-time employment with any affiliate
of the Company, then the payments provided for in this Section
4.2.3 and the term of employment and the Advisory Period shall
cease and the Executive shall not be entitled to any such 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. Office Facilities. In the event the
Executive shall make the election provided in clause (B) of
Section 4.2, 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 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 but
taking in account the Executive's reduced need for such office
space, secretarial services and office facilities, services and
furnishings as a result of the Executive no longer being a
full-time employee.
4.4. Release. In partial consideration for the
Company's obligation to make the payments described in Section
4.2, the Executive shall execute and deliver to the Company a
release in substantially the form attached hereto as Annex B.
The Company shall deliver such release to the Executive within
10 days after the written notice of termination is delivered
pursuant to Section 4.2 and the Executive shall execute and
deliver such release to the Company within 21 days after
receipt thereof. If the Executive shall fail to execute and
deliver such release to the Company within such 21 day period,
or if the Executive shall revoke his consent to such release as
provided therein, the Executive's term of employment shall
terminate as provided in Section 4.2, but the Executive shall
receive, in lieu of the payments provided for in said Section
4.2, a lump sum cash payment in an amount determined in
accordance with the written personnel policies of the Company
relating to notice and severance then generally applicable to
employees with length of service and compensation level of the
Executive.
4.5. Mitigation. In the event of termination
of the term of employment pursuant to Section 4.2, the
Executive shall not be required to seek other employment in
order to mitigate his damages 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 Entity,
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 April 30, 2003 up to an amount
equal to (x) the discounted lump sum payment received by or for
the account of the Executive with respect to Base Salary,
annual bonus and deferred compensation under Section 3 and
Advisory Period compensation under Section 13 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 the Executive as a result of such
termination and, to the extent amounts have theretofore been
paid to him 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 a termination pursuant to Section 4.2 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
discounted amount received by him or credited to the Account
with respect to Base Salary, annual bonus, deferred
compensation under Section 3 and Advisory Period compensation
under Section 13 for such year. Any obligation of the
Executive to mitigate his damages pursuant to this Section 4.5
shall not be a defense or offset to the Company's obligation to
pay the Executive in full the amounts provided in Section 4.2.2
or 4.2.3, 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.
4.6. Payments. So long as the Executive
remains on the payroll of the Company or any subsidiary of the
Company, payments of salary, deferred compensation and bonus
required to be made pursuant to Section 4.2 shall be made at
the same times as such payments are made to senior executives
of the Company or such subsidiary.
5. Disability. If during the term of employment or the
Advisory Period and prior to any termination of this Agreement
under Section 4.2, 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 13 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
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 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 the year in which the Disability
Date occurs and shall pay the Executive annual disability
benefits (a) for the balance of the term of employment in an
amount equal to 75% of (i) the Executive's Base Salary at the
time the Executive becomes disabled (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
(ii) the average of the regular annual bonuses (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 the Executive from the
Company was the greatest (all or a portion of which may be
deferred by the Executive pursuant to Section 3.4 and (b) for
the balance of the Advisory Period in an amount equal to
$350,000 per annum). If during the term of employment and
subsequent to the Disability Date the Executive shall fully
recover from his disability, the Company shall have the right
(exercisable within 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 and the term of employment shall not be extended
by virtue of the occurrence of the disability. If the Company
elects not to restore the Executive to full-time service, 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 Advisory Period; and (ii) the
provisions of Sections 9 and 10 shall continue to apply to the
Executive during such 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, the President or the Chief Financial Officer
of 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 Company shall
be entitled to deduct from all payments to be made to the
Executive during any disability period pursuant to this Section
5 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 and
the Advisory Period) 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 dis-
ability 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 and the Advisory Period 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, Section 4.2 shall not apply during the
disability period and unless the Company has restored the
Executive to fill-time service at full compensation prior to
April 30, 2002, the term of employment and the Advisory Period
shall end as provided in this Agreement and the Executive shall
cease to be an employee of the Company at the end of the
Advisory 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. Upon the death of the Executive during
the term of employment or the Advisory Period, this Agreement
and all obligations of the Company to make any payments under
Sections 3, 4, 5 and 13 shall terminate except that (i) the
Executive's estate (or a designated beneficiary) shall be
entitled to receive, to the extent being received by the
Executive immediately prior to his death, Base Salary and
deferred compensation or Advisory Period compensation, as
applicable, to the last day of the month in which his death
occurs and if the Executive dies during the term of employment,
shall be entitled to receive bonus compensation (at the time
bonuses are normally paid) based on the average of the regular
annual bonuses (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 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 calendar year,
and (ii) the Account shall be liquidated and revalued as pro-
vided 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 (or a designated
beneficiary) in a single payment not later than 75 days follow-
ing such date of death.
7. Life Insurance. The Company shall continue to
maintain $1,500,000 face amount of split ownership life
insurance on the life of the Executive, to be owned by the
Company or the trustees of a trust for the benefit of the
Executive's spouse and/or descendants. The Company shall pay
all premiums on such policy and shall maintain such policy
(without reduction of the face amount of the coverage) until
the Executive reaches age 65, whether or not the Executive is
an employee of the Company or any of its affiliates; provided,
however, that the Company's obligation to pay such premiums
shall terminate on the date the Executive's employment with the
Company is terminated for cause pursuant to Section 4.1 or the
Executive terminates his employment in breach of this
Agreement. The Company shall not borrow from the cash value of
such policy. The Executive shall be entitled from time to time
to designate the beneficiary or beneficiaries of such policy
which may include a trust. At the death of the Executive, or
on the earlier surrender of such policy by the owner, the
Executive agrees that the Executive's estate or the owner of
the policy 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 payments 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 on the life of the
Executive, and (iv) any unpaid borrowings by the Company on the
policy), whether before, during or after the term of this
Agreement. Unless the policy is owned by a trust, 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. If the
owner of the policy is a trust, such owner shall execute,
deliver and maintain a customary split dollar insurance and
collateral assignment form, assigning to the Company the
proceeds of such policy but only to the extent necessary to
secure the reimbursement obligation contained in the preceding
sentence. At the time the Executive reaches age 65, the
Company shall offer the Executive the opportunity to purchase
such policy for the lesser of the net premiums paid by the
Company or the cash surrender value of such policy. The
provisions of this Section 7 shall be in addition to any other
insurance normally provided by the Company under any group policy.
8. Other Benefits.
8.1. General Availability. To the extent that
(a) the Executive is 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 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 and in any group insurance, hospitalization, medical,
dental, accident, disability or similar plan or program of the
Company now existing or established hereafter. In addition,
the Executive shall be entitled during the term of employment
and so long as the Executive is an employee of the Company, to
receive other benefits generally available to all senior
executives of the Company to the extent the Executive is eligi-
ble 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.
8.2. Benefits After a Termination or
Disability. During the period the Executive remains on the
payroll of the Company after a termination pursuant to Section
4.2 and during the Disability Period the Executive shall
continue to be eligible to participate in the benefit plans and
to receive the benefits required to be provided to the
Executive under Section 8.1 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. The Executive 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 during the term of employment and until
such time as the Executive shall leave the payroll of the
Company. At the time the Executive's term of employment with
the Company terminates and he leaves the payroll of the Company
pursuant to the provisions of Section 4.1, 4.2, 5, 6 or 13, the
Executive's 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 shall be
determined, subject to the other terms and provisions 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 shall (i) 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 term thereof)
during the remainder of the term of employment and the Advisory
Period and for a period of three months thereafter.
8.3. Payments in Lieu of Other Benefits. In
the event the term of employment and the Executive's employment
with the Company is terminated pursuant to Sections 4.1, 4.2,
5, 6 or 13 (and regardless of whether the Executive elects
clause (A) or (B) as provided in Section 4.2), the Executive
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.
8.4. Retirement Benefits. Upon the Executive's
termination of employment for any reason, except by the Company
for cause pursuant to Section 4.1 and except for a termination
by the Executive in breach of this Agreement, the Company will
calculate the retirement benefits to which the Executive is
entitled under the Time Warner Employees' Pension Plan, any
supplemental retirement or excess benefit plan maintained by
the Company or any of its affiliates or any successor plans
thereto (hereinafter collectively referred to as the "Pension
Plan"), by crediting the Executive with an extra .9
(nine-tenths) of a year of service for each year the Executive
is employed by the Company up to a maximum of nine additional
years of service. Such additional pension benefits shall be
paid at the same times and in the same manner as shall be
elected by the Executive or his beneficiary for payment of
amounts under the Pension Plan.
9. Protection of Confidential Information; Non-Compete.
The provisions of Section 9.2 shall continue to apply
through the latest of (i) the end of the Advisory Period, (ii)
the date the Executive ceases to be an employee of the Company
and leaves the payroll of the Company for any reason and (iii)
twelve months after the termination of the Executive's
employment with the Company pursuant to Section 4.1 or 4.2.
The provisions of Sections 9.1 and 9.3 shall continue to apply
until three years after the latest of the events described in
the preceding sentence.
9.1. Confidentiality Covenant. The Executive
acknowledges that his 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 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 Entities 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 shall keep secret all
confidential matters of the Company and shall 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 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 shall 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; and
9.1.3. If the term of employment is
terminated pursuant to Section 4.1 or 4.2, for a period of one
year after such termination, without the prior written 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 exempt employee of the Company at
the date of such termination or within six months prior thereto.
9.2. Non-Compete. 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 person or Entity or acquire any
interest of any type in any Entity, that might be deemed in
competition with 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 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 he is not part of any
control group of such Entity and such securities, if converted,
do not constitute more than one percent (1%) of the outstanding
voting power of that Entity, (b) acquiring, solely as an
investment, any securities of an Entity (other than an Entity
that has outstanding securities covered by the preceding
clause (a)) 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 (c) serving as a director of
any Entity that is not in competition with the Company. For
purposes of the foregoing, a person or Entity shall be deemed
to be in competition with the Company if such person or it
engages in any line of business that is substantially the same
as either (i) any line of operating business which the Company
engages in, conducts or, to the knowledge of the Executive, 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 the knowledge of the Executive, the Company
covenants in writing, in connection with the disposition of
such business, not to compete therewith.
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 the
Executive commits a material breach of any of the provisions of
Section 9.1, 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
commits a material breach of the provisions of Section 9.2, the
Executive shall pay to the Company as liquidated damages an
amount equal to two and one-half times the Executive's then
current Base Salary, or if the Executive is not employed by the
Company at the time of such breach, an amount equal to two and
one-half times the most recent Base Salary paid to the
Executive by the Company. 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. 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 and the
Advisory Period, 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
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 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 (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 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 prepaid telegram, 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: General Counsel)
11.2. If to the Executive, to his 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 Annexes A and B, 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, including without limitation, the Prior Agreement.
12.4. No Other Representations. No representa-
tion, 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 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 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 may be
referred by either party to ENDISPUTE for resolution in
arbitration in accordance with the rules and procedures of
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 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, ENDISPUTE is not in business or is no longer
providing arbitration services, then the American Arbitration
Association shall be substituted for 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 by written notice
to 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
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 the
Executive pursuant to this Agreement shall be subject to
withholding and social security taxes and other ordinary and
customary payroll deductions.
12.11. No Offset. Except as provided in
Section 9.4 of this Agreement, 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.
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 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. Definitions. The following terms are
defined in this Agreement in the places indicated:
Account - Section 3.3
Account Retained Income - Section A.6 of Annex A
Advisory Period - Section 13
affiliate - Section 4.2.3
Applicable Tax Law - Section A.5 of Annex A
Base Salary - Section 3.1
cause - Section 4.1
Code - Section 4.2.2
Company - the first paragraph on page 1
and Section 9.1
Disability Date - Section 5
Effective Date - the first paragraph on page 1
eligible securities - Section A.1 of Annex A
Entity - Section 2
Executive - the first paragraph in page 1
fair market value - Section A.1 of Annex A
Investment Advisor - Section A.1 of Annex A
Other Period Deferred Amount - Section A.6 of Annex A
Pay-Out Period - Section A.6 of Annex A
Pension Plan - Section 8.4
Prior Account - Section 3.5
Prior Agreement - the second paragraph on page 1
senior executives - Section 3.1
term of employment - Section 1
Valuation Date - Section A.6 of Annex A
Work Product - Section 10
13. Advisory Services. The Executive shall render
the advisory services described in this Section for the period
beginning on May 1, 2002 and ending on April 30, 2003 (the
"Advisory Period"). During the Advisory Period, the Executive
will provide such advisory services concerning the business,
affairs and management of the Company as may be requested by
the Board of Directors, the Chief Financial Officer or the
President of the Company, but 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 and consistent with the
Executive's other activities. If at any time during the
Advisory Period, the Executive engages in other full-time
employment, the Executive shall not be deemed to be in breach
of this Section 13, but unless such employment consists of the
Executive providing services to one or more (i) charitable or
non-profit organizations or (ii) family-owned corporations,
trusts, or partnerships, the term of employment and the
Advisory Period shall terminate, the Executive shall leave the
payroll of the Company and the Company shall have no further
obligations under this Agreement other than with respect to
earned and unpaid compensation and benefits. Notwithstanding
the foregoing, but subject to Section 9.2 of this Agreement,
during the Advisory Period the Executive may provide part-time
services to third parties (including serving as a member of the
Board of Directors of any such party). During the Advisory
Period, the Executive shall be entitled to receive compensation
in an amount equal to $350,000 per annum and shall continue to
be entitled to the benefits described in Section 8 hereof;
provided, however, that the Executive shall not be entitled to
a driver or automobile allowance or financial counseling during
the Advisory Period, shall not accrue any vacation time during
the Advisory Period and shall not be entitled to any severance
pay at the end thereof. In addition, during the Advisory
Period the Company shall provide the Executive with an office,
office facilities and a secretary as described in Section 4.3 hereof.
IN WITNESS WHEREOF, the parties have duly executed
this Agreement as of the date first above written.
TIME WARNER INC.
By /s/ Xxxxxxx X. Xxxxxxxx
Senior Vice President
and Chief Financial Officer
/s/ Xxxx X. XxXxxxx
Xxxx X. XxXxxxx
ANNEX A
Deferred Compensation Account
A.1 Investments. Funds credited to the 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
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 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 on margin to be 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 quarterly reports as to the
current status of his 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 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 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 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 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
by the Account with respect to any credit 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. 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 at
the rates and times actually paid.
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 therein. Dividends shall be
credited as of the payment date. The 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 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 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 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 therein.
A.4 Obligation of the Company. The Account shall be
charged with all taxes (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), but no other costs of the
Company. The securities purchased for the Account as
designated by the Investment Advisor 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 nor 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 by the Account pursuant to Section A.2 and
gains recognized upon sales of any of the securities which are
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
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 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 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. Subject to the provisions of Section
A.7, payments of deferred compensation shall be made as
provided in this Section A.6. Unless the Executive makes the
election referred to in the next succeeding sentence, deferred
compensation shall be paid monthly for a period of 120 months
(the "Pay-Out Period") commencing on the first day of the month
after the later of (i) the date the Advisory Period is
scheduled to terminate 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 statement, such payments shall commence
on January 1st 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 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 Account shall be charged
with the dollar amount of such payment. On each payment date,
the amount of cash held in the Account shall be not less than
the payment then due and the Company 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 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 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 and all amounts with
respect to which the Executive has elected pursuant to clause
(ii) of Section A.7 to receive payments at times different from
the time provided in this Section A.6 (the "Other Period
Deferred Amount"). The extent, if any, by which the Account,
valued as provided in the immediately preceding sentence (but
not reduced by the Other Period Deferred Amount to the extent
not theretofore distributed), 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 (excluding the Other Period Deferred
Amount), 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 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 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
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 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 monthly
during the Pay-Out Period commencing on the first day of the
month following the end of the Disability Period 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 term of employment, 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 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 different
from 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 _____________, 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 ___________ , ____.
___________________________
[Name]
