EXHIBIT 10.28
EMPLOYMENT AGREEMENT made April ______, 2002, effective as of
January 1, 2002 (the "Effective Date"), between TIME INC., a Delaware
corporation (the "Company"), and XXX XXXXX.
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You and the Company desire to set forth the terms and
conditions of your employment by the Company and agree as follows:
1. Term of Employment. Your "term of employment" as this
phrase is used throughout this Agreement, shall be for the period beginning on
the Effective Date and ending on December 31, 2004 (the "Term Date"), subject,
however, to earlier termination as set forth in this Agreement.
2. Employment. During the term of employment, you shall
serve as Chairman and Chief Executive Officer of the Company and you shall have
the authority, functions, duties, powers and responsibilities normally
associated with such position and such additional authority, functions, duties,
powers and responsibilities as may be assigned to you from time to time by the
Company consistent with your senior position with the Company. During the term
of employment, (i) your services shall be rendered on a substantially full-time,
exclusive basis and you will apply on a full-time basis all of your skill and
experience to the performance of your duties, (ii) you shall report to the Chief
Operating Officer of AOL Time Warner Inc. ("AOLTW"), (iii) you shall have no
other employment and, without the prior written consent of the Chairman, the
Chief Executive Officer or Chief Operating Officer of AOLTW, no outside business
activities which require the devotion of substantial amounts of your time, and
(iv) the place for the performance of your services shall be the principal
executive offices of the Company in New York City, subject to such reasonable
travel as may be required in the performance of your duties. The foregoing shall
be subject to the Company's written policies, as in effect from time to time,
regarding vacations, holidays, illness and the like.
3. Compensation.
3.1 Base Salary. The Company shall pay you a
0base salary at the rate of not less than $1,000,000 per annum during the term
of employment ("Base Salary"). The Company may not decrease your Base Salary
during the term of employment. Base Salary shall be paid in accordance with the
Company's customary payroll practices.
3.2 Bonus. In addition to Base Salary, the
Company typically pays its executives an annual cash bonus ("Bonus"). Although
your Bonus is fully discretionary, your target annual Bonus is $3,000,000. Each
year, your personal performance will be considered in the context of your
executive duties and any individual goals set for you, and your actual Bonus
will be determined. Although as a general matter the Company expects to pay
bonuses at the target level in cases of satisfactory individual performance, it
does not commit to do so, and your Bonus may be negatively affected by the
exercise of the Company's discretion or by overall Company performance.
3.3 Stock Options. So long as the term of
employment has not terminated, and subject to the approval of the Compensation
Committee of the AOLTW Board of Directors, you will be eligible to receive
annual grants of stock options at a level consistent with grants made to other
AOLTW division chief executive officers, although neither AOLTW nor the Company
commit to do so. Each such stock option grant shall be at an exercise price
equal to the fair market value of the Common Stock of AOLTW on the date of grant
and shall be reflected in a separate AOLTW Stock Option Agreement in accordance
with AOLTW's customary practices.
3.4 Deferred Compensation. Pursuant to the terms
of your previous employment agreements with the Company, you have been paid
deferred compensation which has been deposited in a special account (the "Trust
Account") maintained on the books of a Time Warner Inc. grantor trust (the
"Rabbi Trust") for your benefit. The Trust Account shall be maintained by the
trustee (the "Trustee") thereof in accordance with the terms of Annex A attached
hereto and the trust agreement (the "Trust Agreement") establishing the Rabbi
Trust (which Trust Agreement shall in all respects be consistent with the terms
of Annex A) until the full amount which you are entitled to receive from the
Rabbi Trust has been paid in full. The Company shall pay all fees and expenses
of the Trustee and shall enforce the provisions of the Trust Agreement for your
benefit.
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3.5 Indemnification. You shall be entitled
throughout the term of employment (and after the end of the term of employment,
to the extent relating to service during the term of employment) to the benefit
of the indemnification provisions contained on the date hereof in the
Certificate of Incorporation and By-laws of the Company (not including any
amendments or additions after the date hereof that limit or narrow, but
including any that add to or broaden, the protection afforded to you by those
provisions).
4. Termination.
4.1 Termination for Cause. The Company may
terminate the term of employment and all of the Company's obligations under this
Agreement, other than its obligations set forth below in this Section 4.1, for
"cause". Termination by the Company for "cause" shall mean termination by action
of the Company because of (a) your conviction (treating a nolo contendere plea
as a conviction) of a felony (whether or not any right to appeal has been or may
be exercised), (b) willful refusal without proper cause to perform your
obligations under this Agreement, (c) fraud, embezzlement or misappropriation or
(d) your breach of any of the covenants provided for in Section 9. Such
termination shall be effected by written notice thereof delivered by the Company
to you and shall be effective as of the date of such notice; provided, however,
that if (i) such termination is because of your willful refusal without proper
cause to perform any one or more of your obligations under this Agreement, (ii)
such notice is the first such notice of termination for any reason delivered by
the Company to you under this Section 4.1, and (iii) within 15 days following
the date of such notice you shall cease your refusal and shall use your best
efforts to perform such obligations, the termination shall not be effective.
In the event of termination by the Company for cause,
without prejudice to any other rights or remedies that the Company may
have at law or in equity, the Company shall have no further obligation to you
other than (i) to pay Base Salary through the effective date of termination,
(ii) to pay any Bonus for any year prior to the year in which such termination
occurs that has been determined but not yet paid as of the date of such
termination, and (iii) with respect to any rights you have pursuant to any
insurance or other benefit plans or arrangements of the Company. You hereby
disclaim any right to receive a pro rata portion of any Bonus with respect to
the year in which such termination occurs.
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4.2 Termination by You for Material Breach by
the Company and Termination by the Company Without Cause. Unless previously
terminated pursuant to any other provision of this Agreement and unless a
Disability Period shall be in effect, you shall have the right, exercisable by
written notice to the Company, to terminate the term of employment effective 15
days after the giving of such notice, if, at the time of the giving of such
notice, the Company is in material breach of its obligations under this
Agreement; provided, however, that, with the exception of clause (i) below, this
Agreement shall not so terminate if such notice is the first such notice of
termination delivered by you pursuant to this Section 4.2 and within such 15-day
period the Company shall have cured all such material breaches. A material
breach by the Company shall include, but not be limited to, (i) the Company
violating Section 2 with respect to your title, reporting lines, duties or place
of employment or (ii) the Company failing to cause any successor to all or
substantially all of the business and assets of the Company expressly to assume
the obligations of the Company under this Agreement.
The Company shall have the right, exercisable by
written notice to you, to terminate your employment under this Agreement
without cause, which notice shall specify the effective date of such
termination.
4.2.1 After the effective date of a
termination pursuant to this Section 4.2 (a "termination without cause"), you
shall receive Base Salary and a pro rata portion of your Average Annual Bonus
(as defined below) through the effective date of termination. Your Average
Annual Bonus shall be equal to the average of the regular annual bonus amounts
(excluding the amount of any special or spot bonuses) in respect of the two
calendar years during the most recent five calendar years for which the annual
bonus received by you from the Company was the greatest.
4.2.2 After the effective date of a
termination without cause, you shall be entitled to remain on the payroll of the
Company for a period (the "Severance Period") ending five years following the
effective date of such termination (the "Severance Term Date") and to receive,
as severance, whether or not you become disabled or commence other employment
during such period (but not in violation of Section 9.2 hereof), Base Salary at
an annual rate of $1,250,000 per year, but you shall no longer be eligible to
receive a Bonus. In the event of your death prior to the Severance Term Date or
if you commence employment with a competitive entity, as defined in Section 9.2
hereof, all payments hereunder shall cease. The Company acknowledges that at the
end of the Severance Period,
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you shall be entitled to retire under the terms of the Time Warner Inc. Pension
Plan - AOLTW as then in effect.
4.3 Release. A condition precedent to the
Company's obligation to make the payments associated with a termination without
cause shall be your execution and delivery of a release in the form attached
hereto as Annex B. If you shall fail to execute and deliver such release, or if
you revoke such release as provided therein, then in lieu of the payments
provided for herein, you shall receive a severance payment determined in
accordance with the Company's policies relating to notice and severance.
4.4 Special Early Termination Right. At any time
during the months of September of 2002 and 2003 during the term of employment,
you may elect by notice to the Company to terminate your active employment with
the Company, effective as of January 1st of the next succeeding year, and to
thereafter become an advisor to the Company on the terms and for the period
provided in Section 12 hereof. During the period following an early termination
notice as provided herein, you shall continue to perform your responsibilities
and to assist the Company to effect an orderly transition to your successor, and
the Company shall (i) continue to pay you Base Salary until the effective date
of termination of your active employment, and (ii) pay you any Bonus for the
final year of your employment with the Company at such time that bonuses are
paid to senior executives of the Company.
4.5 Mitigation. In the event of a termination
without cause under this Agreement, you shall not be required to seek other
employment in order to mitigate your damages hereunder unless Section 280G of
the Code would apply to any payments to you by the Company and your failure to
mitigate would result in the Company losing tax deductions to which it would
otherwise have been entitled. In such an event, you will engage in whatsoever
mitigation is necessary to preserve the Company's tax deductions. With respect
to the preceding sentences, any payments or rights to which you are entitled by
reason of the termination of employment without cause shall be considered as
damages hereunder. Any obligation to mitigate your damages pursuant to this
Section 4.6 shall not be a defense or offset to the Company's obligation to pay
you in full the amounts provided in this Agreement upon the occurrence of a
termination without cause, at the time provided herein, or the timely and full
performance of any of the Company's other obligations under this Agreement.
4.7 Payments. So long as you remain on the
payroll of the Company or any subsidiary of the Company, payments of Base Salary
and Bonus required to be made
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after a termination without cause shall be made at the same times as similar
payments are made to other senior executives of the Company.
5. Disability. If during the term of employment and
prior to the delivery of any notice of termination without cause, you become
physically or mentally disabled, whether totally or partially, so that you are
prevented from performing your usual duties for a period of six consecutive
months, or for shorter periods aggregating six months in any twelve-month
period, the Company shall, nevertheless, continue to pay your full compensation
through the last day of the sixth consecutive month of disability or the date on
which the shorter periods of disability shall have equaled a total of six months
in any twelve-month period (such last day or date being referred to herein as
the "Disability Date"). If you have not resumed your usual duties on or prior to
the Disability Date, the term of employment shall end on the Disability Date and
the Company shall pay you a pro rata Bonus (based on your Average Annual Bonus)
for the year in which the Disability Date occurs and you shall thereafter become
an advisor to the Company for a period of five years following the Disability
Date (the "Disability Period") on the terms provided in Section 12 hereof.
However, the Company shall be entitled to deduct from all payments to be made to
you during the Disability Period pursuant to this Section 5 an amount equal to
all disability payments received by you during the Disability Period from
Worker's Compensation, Social Security and disability insurance policies
maintained by the Company; provided, however, that for so long as, and to the
extent that, proceeds paid to you from such disability insurance policies are
not includible in your income for federal income tax purposes, the Company's
deduction with respect to such payments shall be equal to the product of (i)
such payments and (ii) a fraction, the numerator of which is one and the
denominator of which is one less the maximum marginal rate of federal income
taxes applicable to individuals at the time of receipt of such payments. All
payments made under this Section 5 after the Disability Date are intended to be
disability payments, regardless of the manner in which they are computed.
6. Death. If you die during the term of employment, this
Agreement and all obligations of the Company to make any payments hereunder
shall terminate except that your estate (or a designated beneficiary) shall be
entitled to receive Base Salary to the last day of the month in which your death
occurs and Bonus compensation (at the time bonuses are normally paid) based on
the Average Annual Bonus, but prorated according to the number of whole or
partial months you were employed by the Company in such calendar year.
7. Life Insurance.
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7.1 Split-Dollar Life Insurance. Subject your
satisfactory completion of any documentation and physical examination that may
be required from time to time by the insurer, the Company shall continue to
maintain during your lifetime $4,000,000 face amount of split ownership life
insurance on your life, to be owned by you or the trustees of a trust. The
Company shall pay all premiums on such policy and shall maintain such policy
without reduction of the face amount of the coverage, notwithstanding any
termination or expiration of the term of employment, the Advisory Period, or
this Agreement. At the time of your death, you agree that 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 you or on your behalf 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 your
life, and (iv) any unpaid borrowings by the Company on the policy), whether
before, during or after the term of this Agreement. If the policy is owned by a
trust, the owner of the policy shall execute 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.
7.2 Group Life Insurance. During your employment
with the Company, the Company shall (i) provide you with $50,000 of group life
insurance and (ii) pay you annually an amount equal to two times the premium you
would have to pay to obtain life insurance under the Group Universal Life
("GUL") insurance made available by the Company in an amount equal to two times
your Base Salary. You shall be under no obligation to use the payments made by
the Company pursuant to the preceding sentence to purchase GUL insurance or to
purchase any other life insurance. If the Company discontinues its GUL insurance
program, the Company shall nevertheless make the payments required by this
Section 7.2 as if such program were still in effect. The payments made to you
hereunder shall not be considered as "salary" or "compensation" or "bonus" in
determining the amount of any payment under any retirement, profit sharing or
other benefit plan of the Company or any subsidiary of the Company.
8. Other Benefits.
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8.1 General Availability. To the extent that (a)
you are eligible under the general provisions thereof (including without
limitation, any plan provision providing for participation to be limited to
persons who were employees of the company or certain of its subsidiaries prior
to a specific point in time) and (b) the Company maintains such plan or program
for the benefit of its executives, during the term of employment and so long as
you are an employee of the Company, you shall be eligible to participate in any
savings 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.
8.2 Benefits After a Termination Without Cause
and During the Advisory Period. During the period you remain on the payroll of
the Company after a termination without cause pursuant to Section 4.2.2 hereof
and following the commencement and during the continuation of the Advisory
Period as provided in Sections 4.4, 5 and 12 hereof, you shall continue to be
eligible to participate in the benefit plans and to receive the benefits
required to be provided to you under this Agreement to the extent such benefits
are maintained in effect by the Company for its executives; provided, however,
you shall not be entitled to any additional awards or grants under any stock
option, restricted stock or other stock based incentive plan. At the time you
leave the payroll of the Company, your rights to benefits and payments under any
benefit plans or any insurance or other death benefit plans or arrangements of
the Company or under any stock option, restricted stock, stock appreciation
right, bonus unit, management incentive or other plan of the Company shall be
determined in accordance with the terms and provisions of such plans and any
agreements under which such stock options, restricted stock or other awards were
granted. However, notwithstanding the foregoing or any more restrictive
provisions of any such stock option plan or agreement, for so long as you remain
on the payroll of the Company, (i) all stock options granted to you by AOLTW or
Time Warner Inc. on or after January 10, 2000 which would have vested on or
before the later of the Severance Term Date or the date the Advisory Period
terminates as provided in Section 12 hereof, as applicable (or the comparable
dates provided under any employment agreement that amends, replaces or
supersedes this Agreement) shall vest and become immediately exercisable upon
the effective date of termination of your active employment with the Company,
(ii) all your vested options shall continue to be exercisable while you are on
the payroll of the Company (but not beyond the term of such options), and (iii)
the Company shall not be permitted to determine that your employment was
terminated for "unsatisfactory performance" within the meaning of any stock
option agreement between you and AOLTW or Time Warner Inc. At the time you leave
the payroll of the Company on
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the Severance Term Date following a termination without cause or at the
conclusion of the Advisory Period, as applicable, you shall qualify for
retirement under the terms of the applicable stock option agreement. The Company
acknowledges that consistent with the terms of your prior Employment Agreement
with the Company dated August 7, 1997, all stock options granted to between
January 1, 1997 and December 31, 2001 shall continue to be exercisable for their
full ten year terms, regardless of the termination of your employment with the
Company (except in connection with a termination for cause), your retirement,
disability or death.
8.3 Payments in Lieu of Other Benefits. In the
event the term of employment and your employment with the Company is terminated
pursuant to any section of this Agreement, you shall not be entitled to notice
and severance under the Company's general employee policies or to be paid for
any accrued vacation time or unused sabbatical, the payments provided for in
such sections being in lieu thereof.
9. Protection of Confidential Information; Non-Compete.
9.1 Confidentiality Covenant. You acknowledge
that your employment by the Company (which, for purposes of this Section 9.1
shall mean AOL Time Warner Inc. and its affiliates) will, throughout the term of
employment, bring you into close contact with many confidential affairs of the
Company, including information about costs, profits, markets, sales, products,
key personnel, pricing policies, operational methods, technical processes and
other business affairs and methods and other information not readily available
to the public, and plans for future development. You further acknowledge that
the services to be performed under this Agreement are of a special, unique,
unusual, extraordinary and intellectual character. You further acknowledge that
the business of the Company is international in scope, that its products and
services are marketed throughout the world, that the Company competes in nearly
all of its business activities with other entities that are or could be located
in nearly any part of the world and that the nature of your services, position
and expertise are such that you are capable of competing with the Company from
nearly any location in the world. In recognition of the foregoing, you covenant
and agree:
9.1.1 You shall keep secret all
confidential matters of the Company and shall not disclose such matters to
anyone outside of the Company, or to anyone inside the Company who does not have
a need to know or use such information, and shall not use such information for
personal benefit or the benefit of a third party, either during or after
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the term of employment, except with the Company's written consent, provided that
(i) you shall have no such obligation to the extent such matters are or become
publicly known other than as a result of your breach of your obligations
hereunder and (ii) you may, after giving prior notice to the Company to the
extent practicable under the circumstances, disclose such matters to the extent
required by applicable laws or governmental regulations or judicial or
regulatory process;
9.1.2 You shall deliver promptly to the
Company on termination of your employment, or at any other time the Company may
so request, all memoranda, notes, records, reports and other documents (and all
copies thereof) relating to the Company's business, which you obtained while
employed by, or otherwise serving or acting on behalf of, the Company and which
you may then possess or have under your control; and
9.1.3 If the term of employment is
terminated pursuant to Section 4, for a period of one year after such
termination, without the prior written consent of the Company, you shall not
employ, and shall not cause any entity of which you are an affiliate to employ,
any person who was a full-time employee of the Company at the date of such
termination or within six months prior thereto but such prohibition shall not
apply to your secretary or executive assistant or to any other employee eligible
to receive overtime pay.
9.2 Non-Compete. During the term of employment
and through the end of the Advisory Period or the Severance Period, as
applicable, you shall not, directly or indirectly, without the prior written
consent of the Chairman, the Chief Executive Officer or the Chief Operating
Officer of AOLTW, render any services to, or act in any capacity for, any
Competitive Entity, or acquire any interest of any type in any Competitive
Entity; provided, however, that the foregoing shall not be deemed to prohibit
you from acquiring, (a) solely as an investment and through market purchases,
securities of any Competitive Entity which are registered under Section 12(b) or
12(g) of the Securities Exchange Act of 1934 and which are publicly traded, so
long as you are not part of any control group of such Competitive Entity and
such securities, including converted securities, do not constitute more than one
percent (1%) of the outstanding voting power of that entity and (b) securities
of any Competitive Entity that are not publicly traded, so long as you are not
part of any control group of such Competitive Entity and such securities,
including converted securities, do not constitute more than three percent (3%)
of the outstanding voting power of that entity. For purposes of the
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foregoing, the following shall be deemed to be a Competitive Entity: (x) during
the period that you are actively employed with the Company, any person or entity
that engages in any line of business that is substantially the same as either
(i) any line of business which the Company engages in, conducts or, to your
knowledge, has definitive plans to engage in or conduct or (ii) any operating
business that is engaged in or conducted by the Company as to which, to your
knowledge, the Company covenants, in writing, not to compete with in connection
with the disposition of such business, and (y) during the Advisory Period or the
period you are receiving severance from the Company pursuant to Section 4.2.2
hereof, any of the following magazines or businesses: Business Week, Conde Nast,
ESPN, Forbes, Xxxxxx & Xxxx, Xxxxxx, Xxxxxxxx, Newsweek, Primedia, U.S. News &
World Report and Xxxxxx Media, and any successor to a substantial portion of the
publishing business of any of the foregoing.
10. Ownership of Work Product. You acknowledge that
during the term of employment, you may conceive of, discover, invent or create
inventions, improvements, new contributions, literary property, material, ideas
and discoveries, whether patentable or copyrightable or not (all of the
foregoing being collectively referred to herein as "Work Product"), and that
various business opportunities shall be presented to you by reason of your
employment by the Company. You acknowledge that all of the foregoing shall be
owned by and belong exclusively to the Company and that you shall have no
personal interest therein, provided that they are either related in any manner
to the business (commercial or experimental) of the Company, or are, in the case
of Work Product, conceived or made on the Company's time or with the use of the
Company's facilities or materials, or, in the case of business opportunities,
are presented to you for the possible interest or participation of the Company.
You shall (i) promptly disclose any such Work Product and business opportunities
to the Company; (ii) assign to the Company, upon request and without additional
compensation, the entire rights to such Work Product and business opportunities;
(iii) sign all papers necessary to carry out the foregoing; and (iv) give
testimony in support of your inventorship or creation in any appropriate case.
You agree that you will not assert any rights to any Work Product or business
opportunity as having been made or acquired by you prior to the date of this
Agreement except for Work Product or business opportunities, if any, disclosed
to and acknowledged by the Company in writing prior to the date hereof.
11. Notices. All notices, requests, consents and other
communications required or permitted to be given under this Agreement shall be
effective only if given in writing and shall be deemed to have been duly given
if delivered personally or sent by a nationally recognized overnight delivery
service, or mailed first-class, postage prepaid, by
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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 Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: General Counsel
(with a copy, addressed to:
AOL Time Warner Inc.
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attention: Vice President, Global
Compensation and Benefits
11.2 If to you, to your residence address set
forth on the records of the Company.
12. Advisory Services. Following (i) the expiration of
the term of employment on the Term Date, (ii) the early termination of the term
of employment pursuant to section 4.4 hereof, or (iii) the Disability Date as
provided in section 5 hereof, as applicable, you shall become an advisor to the
Company on the terms provided in this Section 12 for a period terminating on the
applicable date set forth below (the "Advisory Period"):
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Commencement of Advisory Period Termination of Advisory Period
------------------------------- ------------------------------
Immediately following Disability Date 5th anniversary of Disability Date
1/01/03 (following notice 9/02) 12/31/04
1/01/04 (following notice 9/03) 6/30/07
1/01/05 (following end of contract term) 12/31/09
During the Advisory Period, you will provide such advisory services concerning
the business, affairs and management of the Company as may be requested by the
Board of Directors or the Chairman, Chief Executive or Chief Operating Officer
of the Company or AOLTW, but you shall not be required to devote more than five
days (up to eight hours per day) each month to such services, which shall be
performed at a time and place mutually convenient to you. You may accept
full-time employment during the Advisory Period with any governmental,
charitable or not-for-profit organization and you may provide part-time services
to third parties (including serving as a member of the Board of Directors of any
such party) that are not in competition with the Company as described in Section
9.2 hereof and any compensation earned by you from such employment shall not
reduce the compensation payable by the Company under this Section 12. During the
Advisory Period, you shall continue to be on the payroll of the Company and you
shall be entitled (x) to receive Base Salary at the rate of $1,250,000 per year
(but you shall no longer be eligible to receive a Bonus), and (y) to participate
in and to receive benefits as provided in Section 8.1 hereof. [During the first
six months of the Advisory Period, the Company shall provide you with office
facilities in accordance with Section 4.5 hereof.] You may terminate the
Advisory Period at any time on 14 days written notice to the Company and in such
event the Company and you shall have no further obligations under this
Agreement, except that Sections 3.4, 3.5, 9.1 and 10 through 13 shall survive
any such termination. At the conclusion of the Advisory Period or at any earlier
date during the Advisory Period that you cease to be on the payroll of the
Company, you shall commence retirement pursuant to the terms and conditions of
the Time Warner Inc. Pension Plan- AOLTW as then in effect, and all unexercised
stock options then held by you shall remain exercisable following your
retirement as provided under the terms of the AOL Time Warner Inc. and Time
Warner Inc. Stock Option Plans under which such options were granted.
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13. General.
13.1 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.
13.2 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.
13.3 Entire Agreement. This Agreement, including
the Annexes hereto, 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 the Employment Agreement between you and the Company dated
August 7, 1997.
13.4 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.
13.5 Assignability. This Agreement and your
rights and obligations hereunder may not be assigned by you and except as
specifically contemplated in this Agreement, neither you, your legal
representative nor any beneficiary designated by you shall have any right,
without the prior written consent of the Company, to assign, transfer, pledge,
hypothecate, anticipate or commute to any person or entity any payment due in
the future pursuant to any provision of this Agreement, and any attempt to do so
shall be void and shall not be recognized by the Company. The Company shall
assign its rights together with its obligations hereunder in connection with any
sale, transfer or other disposition of all or substantially all of the Company's
business and assets, whether by merger, purchase of stock or assets or
otherwise, as the case may be. Upon any such assignment, the Company shall cause
any such successor expressly to assume such obligations, and such rights and
obligations shall inure to and be binding upon any such successor.
13.6 Amendments; Waivers. This Agreement may be
amended, modified, superseded, cancelled, renewed or extended and the terms or
covenants hereof may
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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.
13.7 Specific Remedy. In addition to such other
rights and remedies as the Company may have at equity or in law with respect to
any breach of this Agreement, if you commit a material breach of any of the
provisions of Sections 9.1, 9.2, or 10, 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.
13.8 Resolution of Disputes. Except as provided
in the preceding Section 13.7, any dispute or controversy arising with respect
to this Agreement and your employment hereunder (whether based on contract or
tort or upon any federal, state or local statute, including but not limited to
claims asserted under the Age Discrimination in Employment Act, Title VII of the
Civil Rights Act of 1964, as amended, any state Fair Employment Practices Act
and/or the Americans with Disability Act) shall, at the election of either you
or the Company, be submitted to JAMS/ENDISPUTE for resolution in arbitration in
accordance with the rules and procedures of JAMS/ENDISPUTE. Either party shall
make such election by delivering written notice thereof to the other party at
any time (but not later than 45 days after such party receives notice of the
commencement of any administrative or regulatory proceeding or the filing of any
lawsuit relating to any such dispute or controversy) and thereupon any such
dispute or controversy shall be resolved only in accordance with the provisions
of this Section 13.8. 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 non-judicial (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.
15
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 13.8. If you shall be the prevailing party in such arbitration, the
Company shall promptly pay, upon your demand, all legal fees, court costs and
other costs and expenses incurred by you in any legal action seeking to enforce
the award in any court.
13.9 Beneficiaries. Whenever this Agreement
provides for any payment to your estate, such payment may be made instead to
such beneficiary or beneficiaries as you may designate by written notice to the
Company. You shall have the right to revoke any such designation and to
redesignate a beneficiary or beneficiaries by written notice to the Company (and
to any applicable insurance company) to such effect.
13.10 No Conflict. You represent and warrant to
the Company that this Agreement is legal, valid and binding upon you and the
execution of this Agreement and the performance of your obligations hereunder
does not and will not constitute a breach of, or conflict with the terms or
provisions of, any agreement or understanding to which you are a party
(including, without limitation, any other employment agreement). The Company
represents and warrants to you that this Agreement is legal, valid and binding
upon the Company and the execution of this Agreement and the performance of the
Company's obligations hereunder does not and will not constitute a breach of, or
conflict with the terms or provisions of, any agreement or understanding to
which the Company is a party.
13.11 Withholding Taxes. Payments made to you
pursuant to this Agreement shall be subject to withholding and social security
taxes and other ordinary and customary payroll deductions.
13.12 No Offset. Neither you nor the Company shall
have any right to offset any amounts owed by one party hereunder against amounts
owed or claimed to be owed to such party, whether pursuant to this Agreement or
otherwise, and you and the Company shall make all the payments provided for in
this Agreement in a timely manner.
13.13 Severability. If any provision of this
Agreement shall be held invalid, the remainder of this Agreement shall not be
affected thereby; provided, however,
16
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.
13.14 Survival. Sections 3.5, 8.3 and 9 through 13
shall survive any termination of the term of employment by the Company for cause
pursuant to Section 4.1. Sections 3.4, 3.5, 4.4, 4.5, 4.6 and 8 through 13 shall
survive any termination of the term of employment pursuant to Sections 4.2, 4.5,
5 or 6.
13.15 Definitions. The following terms are defined
in this Agreement in the places indicated:
Advisory Period - Xxxxxxx 00
XXXXX - Xxxxxxx 0
Average Annual Bonus - Section 4.2.1
Base Salary - Section 3.1
Bonus - Section 3.2
cause - Section 4.1
Company - the first paragraph on page 1 and Section 9.1
Competitive Entity - Section 9.2
Disability Date - Section 5
Disability Period - Section 5
Effective Date - the first paragraph on page 1
Severance Period - Section 4.2.2
Severance Term Date - Section 4.2.2
Term Date - Section 1
term of employment - Section 1
termination without cause - Section 4.2.1
Work Product - Section 10
17
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first above written.
TIME INC.
By
------------------------------
---------------------------------
Xxx Xxxxx
18
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 Time Warner or any
corporation or other entity of which the Company or Time Warner 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
A-2
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 or Time Warner 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-3
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.
A-4
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 month in which the Advisory Period is scheduled to terminate under
the Amended and Restated Employment Agreement (the "Agreement") to which this
Annex is attached 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 Time
Warner's or 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
A-5
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 and 3.4
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 date on which the Advisory Period is scheduled to terminate
under the Agreement 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
A-6
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 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 or the Advisory Period, 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 and 3.4 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
A-7
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.
A-8
ANNEX B
RELEASE
Pursuant to the terms of the Employment Agreement made as of
_____________, between TIME INC., a Delaware corporation (the "Company"), 0000
Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, XX 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 any successors, subsidiaries, affiliates,
related entities, predecessors, merged entities and parent entities and their
respective officers, directors, shareholders, employees, benefit plan
administrators and trustees, agents, attorneys, insurers, representatives,
affiliates, successors and assigns from any and all actions, causes of action,
claims, or demands for general, special or punitive damages, attorney's fees,
expenses, or other compensation or damages (collectively, "Claims"), 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 the Agreement, any federal, state or local law, regulation or order,
including without limitation, Claims related to any stock options held by me or
granted to me by the Company that are scheduled to vest subsequent to my
termination of employment and Claims under the Age Discrimination in Employment
Act, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities
Act, the Fair Labor Standards Act, the Family and Medical Leave Act and the
Employee Retirement Income Security Act, each as amended through and including
the date of this Release; provided, however, that the execution of this Release
shall not prevent the undersigned from bringing a lawsuit against the Company to
enforce its obligations under the Agreement.
I acknowledge that I have been given at least 21 days from the
day I received a copy of this Release to sign it and that I have been advised to
consult an attorney. I understand that I have the right to revoke my consent to
this Release for seven days following my signing. This Release shall not become
effective or enforceable until the expiration of the seven-day period following
the date it is signed by me.
I ALSO ACKNOWLEDGE THAT BY SIGNING THIS RELEASE I MAY BE
GIVING UP VALUABLE LEGAL RIGHTS AND THAT I HAVE BEEN ADVISED TO CONSULT A LAWYER
BEFORE SIGNING. I further state that I have read this document and the Agreement
referred to herein, that I know the contents of both and that I have executed
the same as my own free act.
WITNESS my hand this day of , .
---- ----------- ----
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[Name]
