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EXHIBIT 10.20
EMPLOYMENT AGREEMENT made as of February 4, 1999, effective as of
January 11, 1999 (the "Effective Date"), between TIME WARNER INC., a Delaware
corporation (the "Company"), and Xxxxxx X. Xxxxxx (the "Executive").
The Company wishes to secure the services of the Executive on a
full-time basis for the period to and including December 31, 2002 (the "Term
Date") on and subject to the terms and conditions set forth in this Agreement,
and the Executive is willing to provide such services on and subject to the
terms and conditions set forth in this Agreement. The parties therefore agree as
follows:
1. Term of 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, 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 , Human Resources 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 such additional authority, functions, duties, powers and
responsibilities consistent with such position as the Board of Directors, the
Chief Executive Officer or the President of the Company may from time to time
delegate to the Executive. 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 subsidiaries of the
Company, 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 substantially full-time basis
all of his skill and experience to the performance of his duties in such
employment, (ii) the Executive shall report only to the Chief Executive Officer,
Vice Chairman or President of the Company, (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 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 New York City area, subject to
such reasonable travel as may be
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appropriate or required in the performance of the Executive's duties in the
business of the Company. The foregoing shall be subject to the Company's written
policies, as in effect from time to time, regarding vacations, holidays, illness
and the like and shall not prevent the Executive from devoting such time to his
personal affairs as shall not interfere with the performance of his duties
hereunder, provided that the Executive complies with the provisions of Sections
9 and 10 and any of the Company's written policies on conflicts of interest and
service as a director of another corporation, partnership, trust or other entity
("Entity").
3. Compensation.
3.1 Base Salary. The Company shall pay or cause to be paid to
the Executive a base salary of not less than $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
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provided in this Agreement and in Annex A hereto. Unless the Executive shall
make the election described in the last sentence of this Section 3.3, 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: (i) during 1999, 25% of one-twelfth of
the Executive's then current Base Salary, (ii) during 2000, 35% of one-twelfth
of the Executive's then current Base Salary and (iii) during 2001 and 2002, 50%
of one-twelfth of the Executive's then current Base Salary. If a lump sum
payment is made pursuant to Section 4.2.2 or 4.3.2, the Company shall pay to the
Trustee for credit to the Trust Account at the time of such payment the portion
of such payment attributable to deferred compensation provided for in this
Section 3.3; provided, however, that the Executive may elect by written notice
to the Company no later than the date the Executive makes the election provided
for in the third paragraph of Section 4.2 or the first paragraph of Section 4.3,
as the case may be, to have such amount credited instead to the Deferred
Compensation Plan established by the Company on November 18, 1998, as the same
may be amended from time to time (as so amended, the "Deferred Plan"). 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 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. 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 (except that for calendar year
1999, such election shall be made no later than January 31, 1999) to have (a)
all of the payments to be made to the Rabbi Trust pursuant to the second
sentence of this Section 3.3 to be credited instead to the Deferred Plan or (b)
to have 50% of the payments to be made by the Company pursuant to the second
sentence of this Section 3.3 to be credited instead to the Deferred Plan and the
remaining 50% to be paid to the Rabbi Trust.
3.4 Deferred Bonus. In addition to any other deferred bonus
plan in which 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 (except
that for calendar year 1999, such election shall be made no later than January
31, 1999), to defer payment of and to have the Company credit all or any
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portion of the Executive's bonus for such year to either the Trust Account or
the Deferred Plan, or a combination of both, subject in the case of a deferral
to the Deferred Plan to the terms and conditions of the Deferred Plan. Any such
election shall only apply to the calendar year during the term of employment
with respect to which such election is made and a new election shall be required
with respect to each successive calendar year during the term of employment.
3.5 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.
3.6 No Anticipatory Assignments. Except as specifically
contemplated in Section 12.8 or under the life insurance policies and benefit
plans referred to in Sections 7 and 8, respectively, neither the Executive, his
legal representative nor any beneficiary designated by him shall have any right,
without the prior written consent of the Company, to assign, transfer, pledge,
hypothecate, anticipate or commute to any person or Entity any payment due in
the future pursuant to any provision of this Agreement, and any attempt to do so
shall be void and shall not be recognized by the Company.
3.7 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. As of the
date of this Agreement, the Company maintains a Directors' and Officers'
Liability and Reimbursement Insurance Policy with coverage of $50 million
relating to directors and officers of the Company and its subsidiaries.
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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 reasonable
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 as provided in Sections 3.1 and 3.3
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 3.5, 3.7, 8.2, 8.3 and 9 through 12 and Annex A shall survive any
termination pursuant to this Section 4.1.
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4.2 Termination by Executive for Material Breach by the
Company and 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 New York City 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 in writing the obligations of the Company under this Agreement.
The Company shall have the right, exercisable by written
notice to the Executive, to terminate the Executive's employment under this
Agreement without cause, effective at least 30 days after the giving of such
notice, which notice shall specify the effective date of such termination.
In the event of a termination pursuant to this Section 4.2,
the Executive shall remain an employee of the Company as provided in Section
4.2.2. In such case, the following provisions shall apply:
4.2.1 After the effective date of such termination, the
Executive shall have no further obligations or liabilities to the Company
whatsoever, except that Sections 3.7, 4.5 and 4.6 and Sections 6 through 12 and
Annex A shall survive such termination, and 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 Annual Bonus (as defined
below), all or a portion of which pro rata bonus will be credited to the Trust
Account or the Deferred
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Plan in accordance with any previous election made by the Executive to defer all
or any portion of the Executive's bonus for such year pursuant to Section 3.4.
The Executive's Average Annual Bonus shall mean 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 if such calculation occurs prior to the
determination of the Executive's annual bonus for 1999, then the Average Annual
Bonus shall be the Executive's target bonus and if such calculation occurs after
the determination of the Executive's annual bonus for 1999 but prior to the
determination of the Executive's annual bonus for 2000, then the Average Annual
Bonus shall be equal to the average of the Executive's target bonus and such
1999 annual bonus.
4.2.2 After the effective date of termination pursuant
to this Section 4.2, 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
eighteen months 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 Annual Bonus 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 immediately following
sentence, equal the balance of the Base Salary, deferred compensation (which
shall be credited as provided in the third sentence of Section 3.3) and annual
bonuses (assuming no deferral pursuant to Section 3.4) the Executive would have
been entitled to receive pursuant to this Section 4.2.2 had the Executive
remained on the Company's payroll until the end of the period described in the
first sentence of this Section 4.2.2. The lump sum payment required to be made
to the Executive
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pursuant to this Section 4.2.2 shall be discounted to present value as of the
date of payment from the times at which such amounts would have become payable
absent any such termination at an annual discount rate for the relevant periods
equal to 120% of the "applicable Federal rate" (within the meaning of Section
1274(d) of the Internal Revenue Code of 1986 (the "Code")), in effect on the
date the Executive shall cease to be an employee of the Company, 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).
Notwithstanding the foregoing, 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 4.2.2; and if the Executive accepts full-time
employment with any affiliate of the Company, then the payments provided for in
this Section 4.2.2 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
renewal 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 then applicable terms of
this Agreement, subject to termination by either party hereto on 60 days written
notice delivered to the other party (which notice may be delivered by either
party at any time on or after the date which is 60 days prior to the Term Date).
If the Company shall terminate the term of employment on or after the Term Date
for any reason (other than cause as defined in Section 4.1, in which case
Section 4.1 shall apply) which the Company shall have the right to do so long as
no Disability Date (as defined in Section 5) has occurred prior to the delivery
by the Company of written notice of termination, then 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 remain an employee of the Company
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for a period of twelve months pursuant to Section 4.3.2 and receive the payments
provided in Section 4.3.2. In such case, the following provisions shall apply:
4.3.1 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 3.7,
4.5 and 4.6 and Sections 6 through 12 and Annex A shall survive such
termination.
4.3.2 After the effective date of termination pursuant
to this Section 4.3, 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 Annual Bonus and (iii) credits of deferred
compensation as provided in Section 3.3 of this Agreement. At the end of such
twelve month period the term of employment shall cease, the Executive shall
cease to be an employee of the Company and the Company shall pay to the
Executive in a lump sum (discounted as provided in the third sentence of Section
4.2.2, except that "applicable Federal rate" shall be determined as of the end
of such twelve-month period) an amount equal to one-half of the sum of the
amounts described in clauses (i), (ii) and (iii) of this Section 4.3.2. 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 third 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
or the Deferred Plan as provided in the third sentence of Section 3.3) and
annual bonuses the Executive would have been entitled to receive pursuant to
this Section 4.3.2 had the Executive remained on the Company's payroll until the
end of such twelve-month period.
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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 4.3.2; 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 4.3.2 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,
voice mail, 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.
In the event the Executive's employment is terminated by the Company pursuant to
Section 4.2 or 4.3, the Company shall, in its sole discretion, consider whether
to provide the Executive with outplacement services.
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 Company shall be entitled to require the Executive to execute
and deliver to the Company a release in substantially the form attached hereto
as Annex B. If the Company so elects, it shall deliver such release to the
Executive within 10 days after 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.
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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 and, except
as otherwise provided in this Section 4.6, any compensation earned from such
other employment may be retained by the Executive; provided, however, that,
notwithstanding the foregoing, if there are any damages hereunder by reason of
the events of termination described above which are "contingent on a change"
(within the meaning of Section 280G(b)(2)(A)(i) of the Code), the Executive
shall be required to mitigate such damages hereunder, including any such damages
theretofore paid, but not in excess of the extent, if any, necessary to prevent
the Company from losing any tax deductions to which it otherwise would be
entitled in connection with such damages if they were not so "contingent on a
change". In addition to any obligation under the preceding sentence, and without
duplication of any amounts required to be paid to the Company thereunder, if any
such termination occurs and the Executive, whether or not required to mitigate
his damages under the preceding sentence, thereafter obtains other employment
with any Entity other than a not-for-profit Entity, the total cash salary and
bonus received in connection with such other employment, whether paid to him or
deferred for his benefit, for services through the Term Date or during the
eighteen month 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 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 or the Deferred Plan 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 or 4.3.2, 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.
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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 make the deferred compensation credits, when
otherwise due, as provided in Section 3, 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) eighteen months
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 by the
Company pursuant to Section 3.3 as further disability benefits) and (b) the
Average Annual Bonus (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 (exercisable within 60 days after notice from the
Executive of such recovery), but not the obligation, to restore the Executive to
full-time service at full compensation. If the Company elects to restore the
Executive to full-time service, then this Agreement shall continue in full force
and effect in all respects and the Term 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 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
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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 payments 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 from Workmen's Compensation, Social Security and
disability insurance policies maintained by the Company; provided, however, that
for so long as, and to the extent that, proceeds paid to the Executive from such
disability insurance policies are not includible in his income for federal
income tax purposes, the Company's deduction with respect to such payments shall
be equal to the product of (i) such payments and (ii) a fraction, the numerator
of which is one and the denominator of which is one less the maximum marginal
rate of federal income taxes applicable to individuals at the time of receipt of
such payments. All payments made under this Section 5 after the Disability Date
are intended to be disability payments, regardless of the manner in which they
are computed. Except as otherwise provided in this Section 5, the term of
employment shall continue during the Disability Period and the Executive shall
be entitled to all of the rights and benefits provided for in this Agreement,
except that Sections 4.2 and 4.3 shall not apply during the Disability Period
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 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 Annual Bonus, 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.7 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.
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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 $2,000,000. 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. The GUL insurance program made
available by the Company provides that the Executive may assume any insurance in
effect at the time the Executive ceases to be an employee of the Company so long
as the Executive continues to pay the premiums therefor.
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 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 Stock Options. The Company shall recommend that the
Compensation Committee of the Company's Board of Directors grant the Executive
options (the "Contract Options") to purchase shares of the Company's Common
Stock as follows: (a) not less than 50,000 options to be granted prior to March
31, 1999; and (b) not less than an additional 50,000 options to be granted prior
to March 31, 2000. All Contract Options granted to the Executive shall be
granted pursuant to the Company's 1997 Stock Option Plan
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or another option plan substantially similar thereto and shall be subject to the
terms and conditions of the option plan or plans under which the options are
granted. After calendar year 2000, the Executive shall be considered annually in
light of stock option grants made to other senior executives of the Company for
eligibility to receive grants of stock options in addition to the Contract
Options in the discretion of the Company.
8.3 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) through the Term Date 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.
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8.4 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 processes and other
business affairs and methods and other information not readily available to the
public, and plans for future development. The Executive further acknowledges
that the services to be performed under this Agreement are of a special, unique,
unusual, extraordinary and intellectual character. The Executive further
acknowledges that the business of the Company is international in scope, that
its products are marketed throughout the world, that the Company competes in
nearly all of its business activities with other Entities that are or could be
located in nearly any part of the world and that the nature of the Executive's
services, position and expertise are such that he is capable of competing with
the Company from nearly any location in the world. In recognition of the
foregoing, the Executive covenants and agrees:
9.1.1 The Executive shall keep secret all confidential
matters of the Company and shall not intentionally disclose such matters to
anyone outside of the Company, either during or after the term of employment,
except with the Company's written consent, provided that (i) the Executive shall
have no such obligation to the extent such matters are or become publicly known
other than as a result of the Executive's breach of his obligations hereunder
and (ii) the Executive may, after giving prior notice to the Company to the
extent practicable under the circumstances, disclose such matters to the extent
required by applicable laws or governmental regulations or judicial or
regulatory process;
9.1.2 The Executive shall deliver promptly to the
Company on termination of his employment by the Company, or at any other time
the Company may so request, at the Company's expense, all memoranda, notes,
records, reports and other documents (and all copies thereof) relating to the
Company's business, which he obtained
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while employed by, or otherwise serving or acting on behalf of, the Company and
which he may then possess or have under his control; and
9.1.3 If the term of employment is terminated pursuant
to Section 4.1, 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. So long as the Executive remains on the
payroll of the Company or any Subsidiary, 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").
If (x) the Executive's employment with the Company is
terminated pursuant to Section 4.1, 4.2 or 4.3 of this Agreement or the
Executive quits in breach of this Agreement and (y) if the Executive leaves the
payroll of the Company within 12 months after
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the effective date of any notice of termination delivered under any such
Section, then for the remainder of such 12-month period the Executive shall not
(a) become an officer, director, partner or employee of or consultant to or act
in any managerial capacity or own an equity interest in excess of one percent in
The Xxxx Disney Company, The News Corporation, The Seagram Company, Ltd.,
Tele-Communications Inc. or Viacom Inc. or any of their respective subsidiaries
or affiliates (each of the foregoing companies is herein referred to as a
"Prohibited Entity" but only if at the time such company is a Competitive
Entity) or (b) provide consulting, lobbying or public relations services or
activities (collectively "Lobbying Services") to or for any Prohibited Entity
whether directly or indirectly through a separate firm or entity, provided that
this clause (b) shall not prevent the Executive from becoming an officer,
employee or partner of a firm or entity (or providing Lobbying Services to a
firm or entity) that in turn provides Lobbying Services to a Prohibited Entity
so long as the Executive is not directly or indirectly involved in providing
such Lobbying Services to such Prohibited Entity.
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 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 1.6 times the average of the annual Base Salaries
paid to the Executive by the Company; provided, however, that if the Executive
shall commit a material breach of Section 9.2 in connection with or following a
termination pursuant to Section 4.1, then the Executive shall pay to the
Company, as liquidated damages, an amount equal to 35% of the average of the
annual Base Salaries paid to the Executive by the Company multiplied by the
number of whole and partial years the Executive shall have been employed by the
Company. The Company shall be entitled to offset any amounts owed by the
Executive to the Company under this Section 9.4 against any amounts owed by the
Company to the Executive under any provision of this Agreement or otherwise,
including without limitation, amounts payable to the Executive under Sections
4.2 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
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damages set forth in this Section 9.4 are reasonable, and not a penalty, based
upon the facts and circumstances of the parties and with due regard to future
expectations.
10. Ownership of Work Product. The Executive acknowledges that
during the term of employment, he may conceive of, discover, invent or create
inventions, improvements, new contributions, literary property, material, ideas
and discoveries, whether patentable or copyrightable or not (all of the
foregoing being collectively referred to herein as "Work Product"), and that
various business opportunities shall be presented to him by reason of his
employment by the Company. The Executive acknowledges that all of the foregoing
shall be owned by and belong exclusively to the Company and that he shall have
no personal interest therein, provided that they are either related in any
manner to the business (commercial or experimental) of the Company, or are, in
the case of Work Product, conceived or made on the Company's time or with the
use of the Company's facilities or materials, or, in the case of business
opportunities, are presented to him for the possible interest or participation
of the Company. The Executive shall (i) promptly disclose any such Work Product
and business opportunities to the Company; (ii) assign to the Company, upon
request and without additional compensation, the entire rights to such Work
Product and business opportunities; (iii) sign all papers necessary to carry out
the foregoing; and (iv) give testimony in support of his inventorship or
creation in any appropriate case. The Executive agrees that he will not assert
any rights to any Work Product or business opportunity as having been made or
acquired by him prior to the date of this Agreement except for Work Product or
business opportunities, if any, disclosed to and acknowledged by the Company in
writing prior to the date hereof.
11. Notices. All notices, requests, consents and other
communications required or permitted to be given under this Agreement shall be
effective only if given in writing and shall be deemed to have been duly given
if delivered personally or sent by prepaid telegram, or mailed first-class,
postage prepaid, by registered or certified mail, as follows (or to such other
or additional address as either party shall designate by notice in writing to
the other in accordance herewith):
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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.
With a copy to:
Xxxxxx Xxxxx Xxxxxxx & Menin LLP
0000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxxx X. Xxxxx
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.
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.
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12.5 Assignability. This Agreement and the Executive's rights
and obligations hereunder may not be assigned by the Executive. The Company may
assign its rights together with its obligations hereunder, in connection with
any sale, transfer or other disposition of all or substantially all of its
business and assets; and such rights and obligations shall inure to, and be
binding upon, any successor to all or substantially all of the business and
assets of the Company, whether by merger, purchase of stock or assets or
otherwise. The Company shall cause such successor expressly to assume such
obligations.
12.6 Amendments; Waivers. This Agreement may be amended,
modified, superseded, cancelled, renewed or extended and the terms or covenants
hereof may be waived only by written instrument executed by both of the parties
hereto, or in the case of a waiver, by the party waiving compliance. The failure
of either party at any time or times to require performance of any provision
hereof shall in no manner affect such party's right at a later time to enforce
the same. No waiver by either party of the breach of any term or covenant
contained in this Agreement, in any one or more instances, shall be deemed to
be, or construed as, a further or continuing waiver of any such breach, or a
waiver of the breach of any other term or covenant contained in this Agreement.
12.7 Resolution of Disputes. Any dispute or controversy
arising with respect to this Agreement 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
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services, then the American Arbitration Association shall be substituted for
JAMS/ENDISPUTE for the purposes of the foregoing provisions of this Section
12.7. If the Executive shall be the prevailing party in such arbitration, the
Company shall promptly pay, upon demand of the Executive, all legal fees, court
costs and other costs and expenses incurred by the Executive in any legal action
seeking to enforce the award in any court.
12.8 Beneficiaries. Whenever this Agreement provides for any
payment to the Executive's estate, such payment may be made instead to such
beneficiary or beneficiaries as the Executive may designate 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
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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 4.2.2
Applicable Tax Law - Section A.5 of Annex A
Average Annual Bonus - Section 4.2.1
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
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first above written.
TIME WARNER INC.
By /s/ Xxxxxxx X. Xxxxxxx
--------------------------------
Xxxxxxx X. Xxxxxxx
President
/s/ Xxxxxx X. Xxxxxx
--------------------------------
Xxxxxx X. Xxxxxx
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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 such security on the date of reference (or the
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A-2
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 other costs of the Company. Subject to the terms of
the Trust Agreement, the securities
27
A-3
purchased for the Trust Account as designated by the Investment Advisor shall
remain the sole property of the Company, subject to the claims of its general
creditors, as provided in the Trust Agreement. Neither the Executive nor his
legal representative nor any beneficiary designated by the Executive shall have
any right, other than the right of an unsecured general creditor, against the
Company or the Trust in respect of any portion of the Trust Account.
A.5 Taxes. The Trust Account shall be charged with all federal,
state and local taxes deemed payable by the Company with respect to income
recognized upon the dividends and interest received by the Trust Account
pursuant to Section A.2 and gains recognized upon sales of any of the securities
which are sold pursuant to Section A.1, A.6. or A.7. The Trust Account shall be
credited with the amount of the tax benefit received by the Company as a result
of any payment of interest actually made pursuant to Section A.1 or A.2 and as a
result of any payment of brokerage fees and investment advisory fees made
pursuant to Section A.1. If any of the sales of the securities which are sold
pursuant to Section A.1, A.6 or A.7results 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 One-Time Transfer to Deferred Plan. So long as the Executive is
an employee of the Company, the Executive shall have the right to elect at any
time, but only
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A-4
once during the Executive's lifetime, by written notice to the Company to
transfer to the Deferred Plan all or a portion of the Net Transferable Balance
(determined as provided in the next sentence) of the Trust Account. If the
Executive shall make such an election, the Net Transferable Balance shall be
determined as of the end of the calendar quarter following the date of such
election (unless such election is made during the ten calendar days following
the end of a calendar quarter, in which case such determination shall be made as
of the end of such preceding calendar quarter) by adjusting all of the
securities held in the Trust Account to their fair market value (net of the tax
adjustment that would be made thereon if sold, as estimated by the Company or
the Trustee) and by deducting from such value the amount of all outstanding
indebtedness and any other amounts payable by the Trust Account. Transfers to
the Deferred Plan shall be made in cash as promptly as reasonably practicable
after the end of such calendar quarter and the Investment Advisor (or the
Company or the Trustee if the Investment Advisor shall fail to act in a timely
manner) shall cause securities held in the Trust Account to be sold to provide
cash equal to the portion of the Net Transferable Balance of the Trust Account
selected to be transferred by the Executive. If the Executive elects to transfer
more than 75% of the Net Transferable Balance of the Trust Account to the
Deferred Plan, the Company or the Trustee shall be permitted to take such action
as they may deem reasonably appropriate, including but not limited to, retaining
a portion of such Net Transferable Balance in the Trust Account, to ensure that
the Trust Account will have sufficient assets to pay the Company the amount of
taxes payable on such sales of securities at the end of the year in which such
sales are made.
A.7 Payments. Payments of deferred compensation shall be made as
provided in this Section A.7. Unless the Executive makes the election referred
to in the next succeeding sentence, deferred compensation shall be paid
bi-weekly for a period of ten years (the "Pay-Out Period") commencing on the
first Company payroll date in the month following the later of (i) the Term Date
and (ii) the date the Executive ceases to be an employee of the Company and
leaves the payroll of the Company for any reason, provided, however, that if the
Executive was named in the compensation table in the Company's then most recent
proxy 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
29
A-5
Trust Account to their fair market value (net of the tax adjustment that would
be made thereon if sold, as estimated by the Company or the Trustee) and by
deducting from the Trust Account the amount of all outstanding indebtedness. The
extent, if any, by which the Trust Account, valued as provided in the
immediately preceding sentence plus any amounts that have been transferred to
the Deferred Plan pursuant to Section A.6 hereof and not theretofore distributed
or deemed distributed therefrom exceeds the aggregate amount of credits to the
Trust Account pursuant to Section 3 of the Agreement as of each Valuation Date
and not theretofore distributed or deemed distributed pursuant to this Section
A.7 is herein called "Account Retained Income". The amount of each payment for
the year, or such shorter period as may be determined by the Company or the
Trustee, of the Pay-Out Period immediately succeeding such Valuation Date,
including the payment then due, shall be determined by dividing the aggregate
value of the Trust Account, as valued and adjusted pursuant to the second
preceding sentence, by the number of payments remaining to be paid in the
Pay-Out Period, including the payment then due; provided that each payment made
shall be deemed made first out of Account Retained Income (to the extent
remaining after all prior distributions thereof since the last Valuation Date).
The balance of the Trust Account, after all the securities held therein have
been sold and all indebtedness liquidated, shall be paid to the Executive in the
final payment, which shall be decreased by deducting therefrom the amount of all
taxes attributable to the sale of any securities held in the Trust Account since
the end of the preceding taxable year of the Company, which taxes shall be
computed as of the date of such payment.
If this Agreement is terminated by the Company pursuant to Section
4.1 or if the Executive terminates this Agreement or the term of employment in
breach of this Agreement, the Trust Account shall be valued as of the later of
(i) the Term Date or (ii) twelve months after termination of the Executive's
employment with the Company, and the balance of the Trust Account, after the
securities held therein have been sold and all related indebtedness liquidated,
shall be paid to the Executive as soon as practicable and in any event within 75
days following the later of such dates in a final lump sum payment, which shall
be decreased by deducting therefrom the amount of all taxes attributable to the
sale of any securities held in the Trust Account since the end of the preceding
taxable year of the Company, which taxes shall be computed as of the date of
such payment. Payments made pursuant to this paragraph shall be deemed made
first out of Account Retained Income.
If the Executive becomes disabled within the meaning of Section 5 of
the Agreement and is not thereafter returned to full-time employment with the
Company as provided in said Section 5, then deferred compensation shall be paid
bi-weekly during the Pay-Out Period commencing on the first Company payroll date
in the month following the end of the Disability Period in accordance with the
provisions of the first paragraph of this Section A.7.
If the Executive shall die at any time whether during or after the
term of employment, the Trust Account shall be valued as of the date of the
Executive's death and the balance of the Trust Account shall be paid to the
Executive's estate or beneficiary within 75 days of such death in accordance
with the provisions of the second preceding paragraph.
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A-6
Notwithstanding the foregoing provisions of this Section A.7, if the
Rabbi Trust shall terminate in accordance with the provisions of the Trust
Agreement, the Trust Account shall be valued as of the date of such termination
and the balance of the Trust Account shall be paid to the Executive within 15
days of such termination in accordance with the provisions of the third
preceding paragraph.
If a transfer to the Deferred Plan has been made pursuant to Section
A.6 hereof, payments made to the Executive from the Deferred Plan (a) shall be
deemed made first from the amounts transferred to the Deferred Plan pursuant to
Section A.6 and (b) shall be deemed made first out of Account Retained Income.
Within 90 days after the end of each taxable year of the Company in
which payments are made, directly or indirectly, to the Executive from the Trust
Account or from the Deferred Plan with respect to amounts transferred to the
Deferred Plan from the Trust Account pursuant to Section A.6 and at the time of
the final payment from the Trust Account, the Company or the Trustee shall
compute and the Company shall pay to the Trustee for credit to the Trust
Account, the amount of the tax benefit assumed to be received by the Company
from the payment to the Executive of amounts of Account Retained Income during
such taxable year or since the end of the last taxable year, as the case may be.
No additional credits shall be made to the Trust Account pursuant to the
preceding sentence in respect of the amounts 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 (including any amounts that have been transferred to the Deferred Plan
pursuant to Section A.6 hereof) an aggregate amount that shall exceed the sum of
(i) all credits made to the Trust Account pursuant to Sections 3.3, 3.4 and 3.5
of the Agreement 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 pursuant to this Annex A (excluding
credits made pursuant to the second preceding sentence), after all credits and
charges to the Trust Account with respect to the tax benefits or burdens
thereof, and (iii) an amount equal to the tax benefit to the Company from the
payment of the amount (if positive) determined under clause (ii) above; and the
final payment(s) otherwise due may be adjusted or eliminated accordingly. In
determining the tax benefit to the Company under clause (iii) above, the Company
shall be deemed to have made the payments under clause (ii) above with respect
to the same taxable years and in the same proportions as payments of Account
Retained Income were actually made from the Trust Account. Except as otherwise
provided in this paragraph, the computation of all taxes and tax benefits
referred to in this Section A.6 shall be determined in accordance with Section
A.5 above.
