AMENDED AND RESTATED EMPLOYMENT AGREEMENT made as of March 18,
1998, effective as of January 1, 1998 (the "Effective Date"), between TIME
WARNER INC., a Delaware corporation (the "Company"), and Xxxxxxx X. Xxxxx (the
"Executive").
The Executive is currently employed by the Company pursuant to an
Employment Agreement dated as of May 15, 1996 (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 December 31, 2000
(the "Term Date") 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 the Term Date, subject, however, to the
terms and conditions set forth in this Agreement.
2. Employment. The Company shall employ the Executive, and the
Executive shall serve, as Senior Vice President and Government and Public
Affairs of the Company during the term of employment, and the Executive shall
have the authority, functions, duties, powers and responsibilities normally
associated with such position and as the Board of Directors, the Chief Executive
Officer or the President 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 President of the Company, the Company's
Board of Directors, and if so requested, to such other corporate officer(s) of
the Company more senior than the Executive as the Board of Directors shall
determine, (iii) the Executive shall have no other employment and, without the
prior written consent of the Chief Executive Officer or the President of the
Company, no
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outside business activities which require the devotion 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 in the greater
Washington D.C. 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").
During the term of employment and so long as the Executive
remains on the payroll of the Company, the Executive shall not, directly or
indirectly, without the prior written consent of the Chief Executive Officer or
the President of the Company, render any services to any person or Entity or
acquire any interest of any type in any Entity, that might be deemed in
competition with the Company or any of its subsidiaries or in conflict with his
full-time, exclusive position as a senior executive officer of the Company;
provided, however, that the foregoing shall not be deemed to prohibit the
Executive from (a) acquiring, solely as an investment and through market
purchases, 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
any of its subsidiaries or (c) serving as a director of any other public company
that is not in competition with the Company or any of its subsidiaries. For
purposes of the foregoing, a person or Entity shall be deemed to be in
competition with the Company or any of its subsidiaries 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 or any of its subsidiaries engages
in, conducts or, to the knowledge of the Executive, has definitive plans to
engage in or conduct during the term of employment or (ii) any operating
business that is engaged in or conducted by the Company or any of its
subsidiaries and as to which, to the knowledge of the Executive, the Company or
any of its subsidiaries covenants in writing, in connection with the disposition
of such business, not to compete therewith (in each case, a "Competitive
Entity").
3. Compensation.
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3.1 Base Salary. The Company shall pay or cause to be paid
to the Executive a base salary of not less than $300,000 per annum during the
term of employment (the "Base Salary"). The Company may increase, but not
decrease, the Base Salary at any time and from time to time during the term of
employment and upon each such increase the term "Base Salary" shall mean such
increased amount. Base Salary shall be payable in monthly or more frequent
installments in accordance with the Company's 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 shall
be eligible to receive during the term of employment an annual cash bonus based
on the performance of the Company and of the Executive as determined by the
Compensation Committee of the Company's Board of Directors or by the Chief
Executive Officer or the President of the Company, as the case may be. The
Executive's target bonus shall be 100% of the Executive's Base Salary but the
Executive acknowledges that the Executive's actual bonus will vary depending
upon the performance of the Company and the Executive. The Company may increase,
but not decrease, the target bonus from time to time. The Company's
determination 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
a defined contribution which shall be determined and paid out on a deferred
basis ("deferred compensation") as provided in this Agreement and in Annex A
hereto. 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 the Executive
(the "Trust Account"), monthly, an amount equal to 25% of one-twelfth of the
Executive's then current Base Salary. If a lump sum payment is made pursuant to
Section 4.2.2, 4.2.3, 4.3.2 or 4.3.3, the Company shall pay to the Trustee for
credit to the Trust Account at the time of such payment an amount equal to 25%
of any portion of such lump sum payment attributable to Base Salary. The 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 the Executive is entitled to
receive therefrom has been
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paid in full. The Company shall establish and maintain the Rabbi Trust as a
grantor trust within the meaning of subpart E, part I, 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 the benefit of the
Executive. Prior to April 1, 1998, the Company shall credit the Executive with
deferred compensation in accordance with the provisions of Section 3.3 of the
Prior Agreement.
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 Trust 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 (or any preceding agreement).
The Prior Account shall be promptly transferred to, and 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 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
5
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 an officer or 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 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), Chief Executive Officer or President (as the case may be)
because of the Executive's conviction (treating a nolo contendere plea as a
conviction) of a felony (whether or not any right to appeal has been or may be
exercised) or willful refusal without proper cause to perform his obligations
under this Agreement or because of the Executive's material breach of any of the
covenants provided for in Section 9. Such termination shall be effected by
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 in
accordance with the foregoing procedures, 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
6
to the Trust Account accrued through the effective date of termination, (ii) to
pay any annual bonus pursuant to Section 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
under Section 8 through the effective date of termination (except as may be
otherwise specifically provided in any such plan or program) or any rights which
the Executive has in respect of amounts credited to the Trust Account through
the effective date of termination or pursuant to any insurance or other benefit
plans or arrangements of the Company maintained for the benefit of its senior
executives. The Executive hereby disclaims any right to receive a pro rata
portion of the Executive's annual bonus with respect to the year in which such
termination occurs. The fourth sentence of Section 3.3 and the provisions of
Sections 3.6, 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 Period shall be 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 Washington, D.C. area; and (v) the Company failing to cause the successor to
all or substantially all of the business and assets of the Company expressly to
assume the obligations of the Company under this Agreement.
The 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.
7
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 (and credits) described in Section 4.2.2
or (B) to remain an employee of the Company as provided in Section 4.2.3. After
the Executive makes such election, the following provisions shall apply:
4.2.1 Regardless of the election made by the Executive
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 the last paragraph of Section 2, Sections
3.8, 4.5 and 4.6 and Sections 6 through 12 and Annex A shall survive such
termination, and (ii) the Executive shall be entitled to receive any earned and
unpaid Base Salary and deferred compensation accrued through the effective date
of such termination and a pro rata portion of the Executive's annual bonus for
the year in which such termination occurs through the date of such termination
based on the average of the regular annual bonus amounts (excluding the amount
of any special or spot bonuses) 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, provided that such annual bonus
shall not be less than $437,500, all or a portion of which pro rata bonus will
be credited to the Trust 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
(or pay to the Trustee for credit to the Trust Account with respect to Section
3.3) 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 the
greater of (i) all amounts otherwise payable (whether or not deferred) pursuant
to Section 3 for the year in which such termination occurs and for each
subsequent year through and including the Term Date and (ii) all amounts that
would be payable (whether or not deferred) pursuant to Section 3 if the Term
Date had been a date one year after the date of such notice of termination
(assuming, in the case of either (i) or (ii) above, that annual bonuses are
required to be paid for each such year, 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), provided that such annual
bonus shall not be less than $437,500. Any payments required to be made to the
Executive pursuant to this
8
Section 4.2.2 upon such termination in respect of Sections 3.1 and 3.2 and the
credit to the Trust Account provided for in the third 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 Sec tion 1274(d) of the Internal Revenue
Code of 1986 (the "Code")), in effect on the date of such termination,
compounded semi-annually, the use of which rate is hereby elected by the parties
hereto pursuant to Treas. Reg. 'SS'.1.280G-1 Q/A 32 (provided that, in the event
such election is not permitted under Section 280G of the Code and the
regulations thereunder, such other rate determined as of such other date as is
applicable for determining present value under Section 280G of the Code shall be
used).
4.2.3 In the event the Executive shall make the election
provided in clause (B) above, the term of employment shall continue and the
Executive 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 termination under this Section 4.2, and during such period the
Executive shall be entitled to receive, whether or not he becomes disabled
during such period but subject to Section 6, (a) Base Salary at an annual rate
equal to his Base Salary in effect immediately prior to the notice of
termination, (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 (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, provided that such annual bonus shall not be less than $437,500 and
(c) deferred compensation as provided in Section 3.3. 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 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 severance 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 Trust Account as provided in the third sentence of Section 3.3) and
regular annual bonuses
9
(assuming no deferral pursuant to Section 3.4) the Executive would have been
entitled to receive pursuant to this Section 4.2.3 had the Executive remained on
the Company's payroll until the end of the period described in the first
sentence of this Section 4.2.3. Notwithstanding the preceding sentence, if the
Executive accepts employment with any not-for-profit Entity, then the Executive
shall be entitled to remain an employee of the Company and receive the payments
as provided in the first sentence of this Section 4.2.3; and 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 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 After the Term Date. At least 120 days prior to the
Term Date, the Company and the Executive shall commence discussions regarding a
renewed or extension of this Agreement on terms and conditions mutually
agreeable to the parties. 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 the Executive 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
Executive shall cause his employment with the Company to terminate on or after
the Term Date, then the Executive shall receive Base Salary and deferred
compensation through the effective date of termination and a pro rata bonus for
the year in which such termination occurs calculated as provided in Section
4.2.1; provided, however, that if the Company has changed the terms or
conditions of the Executive's employment from those provided for in this
Agreement such that the Executive would have been able to terminate the term of
employment pursuant to Section 4.2 if such Section 4.2 had been applicable at
the time (without giving effect to any cure right of the Company), then the
Executive shall be entitled to the additional benefits described in the next
sentence. If the Company shall terminate the term of employment on or after the
Term Date for any reason (other than cause as defined in Section 4.1, in which
case Section 4.1 shall apply, and other than for death or disability, in which
case Section 5 or 6 shall apply), then in lieu of the provisions of Section 4.2,
the Executive shall be entitled to receive Base Salary and deferred compensation
through the effective date of such termination and a pro rata bonus for the year
in which such termination occurs calculated as provided in Section 4.2.1 and
shall be entitled to elect by delivery of written notice to the Company, within
30 days after such notice of termination is given, either (A) to cease being an
employee of the Company and receive a lump sum payment (and credits) as provided
in Section 4.3.2 or (B) remain an employee of the Company for a period of twelve
10
months pursuant to Section 4.3.3 and receive the payments (and credits) provided
in Section 4.3.3. The payments described in this Section 4.3 are in addition to
any annual bonus otherwise payable pursuant to Section 3.2 hereof with respect
to the last calendar year of the term of employment, which bonus shall be paid
in accordance with the Company's then current practices and policies with
respect to other senior executives. After the Executive makes such election, the
following provisions shall apply:
4.3.1 Regardless of the election made by the Executive
pursuant to the preceding paragraph, at the end of the 60-day notice period
provided for in the first sentence of Section 4.3 the Executive shall have no
further obligations or liabilities to the Company whatsoever, except that
Sections 3.8, 4.5 and 4.6 and Sections 6 through 12 and Annex A shall survive
such termination.
4.3.2 In the event the Executive shall make the election
provided in clause (A) above, the Company shall pay to the Executive (or pay to
the Trustee for credit to the Trust Account with respect to Section 3.3) in a
lump sum at the end of the 60- day notice period provided for in the first
sentence of Section 4.3 (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 year in which such
notice of termination is given) an amount (discounted as provided in the second
sentence of Section 4.2.2) equal to the sum of (i) one year's Base Salary as in
effect immediately prior to such notice of termination, (ii) an amount equal to
the average of the regular annual bonus amounts (excluding the amount of any
special or spot bonuses) received by the Executive from the Company for the two
calendar years during the most recent five calendar years for which the regular
annual bonus received by the Executive was the greatest (assuming that no
portion of such bonus is deferred pursuant to Section 3.4), provided that such
annual bonus shall not be less than $437,500 and (iii) the annual amount of
deferred compensation payable by the Company to the Trust Account pursuant to
Section 3.3 as in effect immediately prior to such notice of termination (which
shall be credited to the Trust Account as provided in the third sentence of
Section 3.3).
4.3.3 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 date which is twelve
months after the end of the 60-day period referred to in the first sentence of
Section 4.3 and during such period the Executive shall be entitled to receive,
whether or not he thereafter becomes disabled during such period but subject to
Section 6, (i) the Executive's Base Salary as in effect immediately prior to
such notice of termination, (ii) an annual bonus (all or any portion of which
may be deferred by the Executive pursuant to Section 3.4) equal to the average
of the regular annual bonus amounts (excluding the amount of any special or spot
bonuses) received by the
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Executive from the Company (or credited to the Trust Account) for the two
calendar years during the most recent five calendar years for which the regular
annual bonus received by the Executive was the greatest, provided that such
annual bonus shall not be less than $437,500 and (iii) credits to the Trust
Account of deferred compensation as provided in Section 3.3 of this Agreement.
Except as provided in the next sentence, if the Executive accepts full-time
employment with any other Entity during such twelve-month period or notifies the
Company in writing of his intention to leave the payroll of the Company during
such period, the Executive shall cease to be an employee of the Company and the
term of employment shall cease effective upon the commencement of such
employment or the effective date of such termination as specified by the
Executive in such notice, whichever is applicable, and shall be entitled to
receive a lump sum payment within 30 days after such commencement or such
effective date (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 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 "applicable Federal rate"
shall be determined as of the date of such commencement or such effective date,
as the case may be) for the balance of the Base Salary, deferred compensation
(which shall be credited to the Trust Account as provided in the third sentence
of Section 3.3) and regular annual bonuses the Executive would have been
entitled to receive pursuant to this Section 4.3.3 had the Executive remained on
the Company's payroll until the end of such twelve-month period. Notwithstanding
the preceding sentence, if the Executive accepts employment with any
not-for-profit Entity, then the Executive shall be entitled to remain an
employee of the Company and receive the payments as provided in the first
sentence of this Section 4.3.3; and if the Executive accepts full-time
employment with any affiliate of the Company, then the term of employment and
the payments provided for in this Section 4.3.3 shall cease and the Executive
shall not be entitled to any such lump sum payment.
4.4 Office Facilities. In the event the Executive shall
make the election provided in clause (B) of Section 4.2 or 4.3, then for the
period beginning on the day the Executive makes such election and ending one
year thereafter, the Company shall, without charge to the Executive, make
available to the Executive 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 into 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.
4.5 Release. In partial consideration for and as an
express condition of the Company's obligation to make the payments described in
Sections 4.2 and 4.3, the
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Executive shall be entitled to require the Executive to execute and deliver to
the Company a release in substantially the form attached hereto as Annex B. If
the Company so elects, it shall deliver such release to the Executive within 10
days after the written notice of termination is delivered pursuant to Section
4.2 or 4.3 and the Executive shall execute and deliver such release to the
Company within 21 days after receipt thereof. If the Executive elects not to
execute and deliver such release to the Company within such 21 day period, or if
the Executive shall revoke his consent to such release as provided therein, the
Executive's term of employment shall terminate as provided in Section 4.2 or
4.3, as applicable, but the Executive shall receive, in lieu of the payments
provided for in said Section 4.2 or 4.3, a lump sum cash payment in an amount
determined in accordance with the 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.
4.6 Mitigation. In the event of termination of the term of
employment pursuant to Section 4.2 or 4.3, 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
or a governmental body or agency, the total cash salary and bonus
received in connection with such other employment, whether paid to him or
deferred for his benefit, for services through the Term Date or during the one
year period referred to in Section 4.2 or 4.3, whichever is later, in each case
up to an amount equal to (x) the discounted lump sum payment actually received
by or for the account of the Executive with respect to Base Salary, annual bonus
and deferred compensation under Section 3 for such period, minus (y) the amount
of severance the Executive would have received in accordance with the personnel
policies of the Company if the Executive had been job eliminated, shall reduce,
pro tanto, any amount which the Company would otherwise be required to pay to
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
13
Executive is entitled by reason of the termination of the term of employment
pursuant to Section 4.2 or 4.3 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 Trust Account with respect
to Base Salary, annual bonus and deferred compensation under Section 3 for such
year. Any obligation of the Executive to mitigate his damages pursuant to this
Section 4.6 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, 4.2.3, 4.3.2 or
4.3.3, 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.
4.7 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 or
4.3 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 and prior to any
termination of this Agreement under Section 4.2 or 4.3, 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 Trust Account, when otherwise due, as
provided in Section 3 and Annex A, through the last day of the sixth consecutive
month of disability or the date on which the shorter periods of disability shall
have 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 disability benefits for the
longer of (i) the period ending on the Term Date or (ii) one year following the
Disability Date (in the case of either (i) or (ii), the "Disability Period"),
in an annual amount equal to 75% of (a) what the Executive's Base Salary
otherwise would have been pursuant to this Agreement had the disability not
occurred (and this reduced amount shall also be deemed to be the Base Salary
for purposes of determining the amounts to be credited to his Trust Account
pursuant to Section 3.3 and Annex A as further disability benefits) and (b)
the average of the regular annual bonuses (excluding the amount of any special
or spot bonuses) in respect of the two calendar years during the most recent
five calendar years for which the annual bonus received by the Executive from
the Company was the greatest, provided that such annual bonus shall not be
less than $437,500 (all or a portion of which may be deferred by the Executive
pursuant to Section 3.4). If during the term of employment and subsequent to
the Disability Date the Executive shall fully recover from his disability, the
Company shall have the right (exercis able within 60 days after notice
14
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 Date shall not be extended
by virtue of the occurrence of the Disability Period. If the Company elects not
to restore the Executive to full-time service, the Company shall continue to pay
the Executive the disability benefits provided for in this Section 5
(notwithstanding any such recovery by the Executive) and the Executive shall be
entitled to obtain other employment, subject, however, to the following: (i) the
Executive shall be obligated to perform advisory services during any balance of
the term of employment; and (ii) the provisions of Section 9 and the last
paragraph of Section 2 shall continue to apply to the Executive 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 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 pay ments to be made
to the Executive during the 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) from Work men's Compensation, Social Security and disability
insurance policies maintained by the Company; provided, however, that for so
long as, and to the extent that, proceeds paid to the Executive from such
disability insurance policies are not includible in his income for federal
income tax purposes, the Company's deduction with respect to such payments shall
be equal to the product of (i) such payments and (ii) a fraction, the numerator
of which is one and the denominator of which is one less the maximum marginal
rate of federal income taxes applicable to individuals at the time of receipt of
such payments. All payments made under this Section 5 after the Disability Date
are intended to be disability payments, regardless of the manner in which they
are computed. Except as otherwise provided in this Section 5, the term of
employment shall continue during the Disability Period and the Executive shall
be entitled to all of the rights and benefits provided for in this Agreement,
except that Sections 4.2 and 4.3 shall not apply during the Disability Period
and unless the Company has restored the Executive to fill-time service at full
compensation prior to the end of the Disability Period, the term of employment
shall end and the Executive shall cease to be an employee of the Company at the
end of the Disability Period 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, this Agreement and all
obligations of the Company to make any payments under Sections 3, 4 and 5 shall
terminate except that (i) the Executive's estate (or a designated beneficiary
thereof) shall be entitled to receive, to the
15
extent being received by the Executive immediately prior to his death, Base
Salary and deferred compensation to the last day of the month in which his death
occurs and 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, provided that such annual bonus shall not be less
than $437,500, 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
Trust Account shall be liquidated and revalued as provided in Annex A as of the
date of the Executive's death (except that all taxes shall be computed and
charged to the Trust 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 following such date of death.
7. Life Insurance. During the Executive's employment with
the Company, the Company shall provide the Executive with $50,000 group life
insurance. In addition, during each year of the Executive's employment, the
Company shall pay to the Executive annually an amount equal to two times the
premium that the Executive 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 (i) $1.5 million plus (ii) twice the Executive's Base Salary
less $50,000. The Executive 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 the
Executive pursuant to this Section 7 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) 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 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, the Executive shall be entitled
during the term of employment and so long as the Executive is an
16
employee of the Company, to receive other benefits generally available to all
senior executives of the Company to the extent the Executive is eligible under
the general provisions thereof, including, without limitation, to the extent
maintained in effect by the Company for its senior executives, an automobile
allowance and financial services.
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 or 4.3 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 Sections 7 and 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, 4.3, 5 or
6, 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 (i) all stock options
granted to the Executive by the Company shall vest and become immediately
exercisable at the time the Executive shall leave the payroll of the Company
pursuant to Section 4.2, (ii) all stock options granted to the Executive by the
Company shall remain exercisable (but not beyond the expiration of the option
term) for the later of the remainder of the term of employment or through the
Term Date, 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 the Executive's employment was terminated for
"unsatisfactory performance" within the meaning of any stock option agreement
between the Company and the Executive. The Executive's rights to receive payment
of deferred compensation from the Trust Account, and the Company's and the
Trustee's obligations with respect to the maintenance of the Trust Account and
the payment of such deferred compensation, shall be governed by the provisions
of Section 3.3, Annex A and the Trust Agreement.
17
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, 4.3, 5 or 6 (and regardless of whether the
Executive elects clause (A) or (B) as provided in Section 4.2 and 4.3), 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.
9. Protection of Confidential Information; Non-Compete.
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 pro cesses 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
18
9.1.3 If the term of employment is terminated pursuant to
Section 4.1, 4.2 or 4.3, 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. If this Agreement is terminated pursuant
to Section 4.1, 4.2 or 4.3 or if the Executive quits in breach of this
Agreement, then for the time period specified in the second sentence of this
Section 9.2, the Executive shall not (a) become an officer, director, partner or
employee of or consultant to or act in any managerial capacity or own an equity
interest in excess of one percent in The Xxxx Disney Company, The News
Corporation, The Seagram Company, Ltd., Tele-Communications Inc. or Viacom Inc.
or any of their respective subsidiaries or affiliates (each of the foregoing
companies is herein referred to as a "Prohibited Entity" but only if at the time
such company is a Competitive Entity) or (b) provide consulting, lobbying or
public relations services or activities (collectively "Lobbying Services") to or
for any Prohibited Entity whether directly or indirectly through a separate firm
or entity, provided that this clause (b) shall not prevent the Executive from
becoming an officer, employee or partner of a firm or entity (or providing
Lobbying Services to a firm or entity) that in turn provides Lobbying Services
to a Prohibited Entity so long as the Executiveis not directly or indirectly
involved in providing such Lobbying Services to such Prohibited Entity. If the
Executive's employment is terminated pursuant to Section 4.1, 4.2 or 4.3 of this
Agreement or by the Company in breach of this Agreement or if the Executive
quits in breach of this Agreement, then (i) so long as the Executive remains on
the payroll of the Company, the last paragraph of Section 2 shall apply and (ii)
if the Executive leaves the payroll of the Company within 12 months after the
effective date of any notice of termination delivered hereunder, then the
provisions of this Section 9.2 shall apply for the remainder of such 12-month
period.
9.3 Specific Remedy. In addition to the provisions of
Section 9.4 and such other rights and remedies as the Company may have at equity
or in law with respect to any breach of this Agreement, if the Executive commits
a material breach of the last paragraph of Section 2 or any of the provisions of
Section 9.1 or 9.2, the Company shall have the right and remedy to have such
provisions specifically enforced by any court having equity jurisdiction, it
being acknowledged and agreed that any such breach or threatened breach will
cause irreparable injury to the Company and that money damages will not provide
an adequate remedy to the Company.
9.4 Liquidated Damages. If the Executive breaches the
provisions of Section 9.2, the Executive shall pay to the Company as liquidated
damages an amount equal to the product of (i) the sum of (x) the monthly Base
Salary and deferred compensation payable
19
to the Executive immediately prior to his termination of employment with the
Company, plus (y) one-twelfth of the average of the regular annual bonuses
(excluding the amount of any special or spot bonuses) received by the Executive
from the Company for the two calendar years immediately preceding the year of
such termination, multiplied by (ii) the number of months remaining in the
non-compete period applicable to the Executive under Section 9.2 at the time of
such breach. The Company shall be entitled to offset any amounts owed by the
Executive to the Company under this Section 9.4 against any amounts owed by the
Company to the Executive under any provision of this Agreement or otherwise,
including without limitation, amounts payable to the Executive under Sections
4.2 or 4.3. The Company and the Executive agree that it is impossible to
determine with any reasonable accuracy the amount of prospective damages to the
Company upon a breach of Section 9.2 by the Executive and further agree that the
damages set forth in this Section 9.4 are reasonable, and not a penalty, based
upon the facts and circumstances of the parties and with due regard to future
expectations.
10. Ownership of Work Product. The Executive acknowledges
that during the term of employment, he may conceive of, discover, invent or
create inventions, improve ments, 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 participa tion
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
20
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 representation, promise
or inducement has been made by either party that is not embodied in this
Agreement, and neither party shall be bound by or be liable for any alleged
representation, promise or inducement not so set forth.
12.5 Assignability. This Agreement and the Executive's
rights and obligations hereunder may not be assigned by the Executive. The
Company may assign its rights together with its obligations hereunder, in
connection with any sale, transfer or other disposition of all or substantially
all of its business and assets; and such rights and obligations
21
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 shall, at the election of either the
Company or the Executive, 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 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 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.
22
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 Retained Income - Section A.6 of Annex A
affiliate - Section 4.2.3
23
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
Competitive Entity - Section 2
deferred compensation - Section 3.3
Disability Date - Section 5
Disability Period - 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
GUL - Section 7
Investment Advisor - Section A.1 of Annex A
Lobbying Services - Section 9.2
Pay-Out Period - Section A.6 of Annex A
Prior Account - Section 3.5
Prior Agreement - the second paragraph on page 1
Prohibited Entity - Section 9.2
Rabbi Trust - Section 3.3
Retirement Date - Section 4.6
senior executives - Section 3.1
Term Date - the second paragraph on page 1
term of employment - Section 1
Trust Account - Section 3.3
Trust Agreement - Section 3.3
Trustee - Section 3.3
Valuation Date - Section A.6 of Annex A
Work Product - Section 10
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
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Xxxxxxx X. Xxxxxxx
President
/s/ Xxxxxxx X. Xxxxx
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Xxxxxxx X. Xxxxx
ANNEX A
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 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
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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 (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
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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 or A.6. 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 or A.6 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 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 Payments. 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
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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 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, 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.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 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
A-5
the Trust 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.6.
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.6, 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.
Within 90 days after the end of each taxable year of the Company
in which payments have been made from the Trust Account 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 credited to the Trust 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 Trust 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 Trust Account pursuantto 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
A-6
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.6 shall be
determined in accordance with Section A.5 above.
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 ___________ , ____.
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[Name]
