EMPLOYMENT AGREEMENT dated May 17, 1995, effective
as of May 17, 1995 (the "Effective Date"), between TIME
WARNER INC., a Delaware corporation (the "Company"), and
Peter R. Haje (the "Executive").
The Executive is currently employed by the Company
pursuant to an Employment Agreement made as of September 19,
1990 (the "Prior Agreement"). The Company wishes to restate
the Prior Agreement and secure the services of the Executive
on a full-time basis for the period to and including December
31, 1999 (the "Term Date") and thereafter for a two-year
advisory period on and subject to the terms and conditions
set forth in this Agreement, and the Executive is willing for
the Prior Agreement to be so restated and to provide such
services on and subject to the terms and conditions set forth
in this Agreement. The parties therefore agree as follows:
1. Term of Employment. The Executive's "term of
employment", as this phrase is used throughout this Agree-
ment, shall be for the period beginning on the Effective Date
and ending on the Term Date, subject, however, to the terms
and conditions set forth in this Agreement. Notwithstanding
the foregoing or anything to the contrary contained in this
Agreement, the "term of employment", as used in Sections 3.6,
3.7, 3.8 and 8 through 12 shall mean the period ending at the
end of the Advisory Period (as defined in Section 13).
2. Employment. The Company shall employ the
Executive, and the Executive shall serve, as Executive Vice
President, Secretary and General Counsel of the Company
during the term of employment, and the Executive shall have
the authority, functions, duties, powers and responsibilities
normally associated with such position and as the Board of
Directors, the Chief Executive Officer or the President of
the Company may from time to time delegate to the Executive
in addition thereto. The Executive shall, subject to his
election as such from time to time and without additional
compensation, serve during the term of employment in such
additional offices of comparable or greater stature and
responsibility in the Company and its subsidiaries and as a
director and as a member of any committee of the Board of
Directors of the Company and its subsidiaries, to which he
may be elected from time to time. During the term of
employment, (i) the Executive's services shall be rendered on
a substantially full-time, exclusive basis and he will apply
on a full-time basis all of his skill and experience to the
performance of his duties in such employment, (ii) the
Executive shall report only to the Company's Board of
Directors, its Chief Executive Officer, its President or its
Chief Operating Officer, (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 New
York City metropolitan area, subject to such reasonable
travel as may be appropriate or required in the performance
of the Executive's duties in the business of the Company.
The foregoing shall be subject to the Company's 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 Company 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 $450,000 per annum during calendar year 1995 and not
less than $550,000 per annum during the remainder of 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
level as the Executive.
3.2 Bonus. In addition to Base Salary, the
Executive may be entitled to receive during the term of
employment an annual cash bonus based on the performance of
the Company and of the Executive. Bonuses for senior
executives may be determined by the Compensation Committee of
the Company's Board of Directors or by the Chief Executive
Officer of the Company. Such 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.
3.3 Deferred Compensation. In addition to
Base Salary and bonus as set forth in Sections 3.1 and 3.2,
the Executive shall be credited with deferred compensation
which shall be determined and paid out as provided in this
Agreement, including Annex A hereto. Subject to the
provisions of Section A.7 of Annex A, during the term of
employment, the Company shall credit to a special account
maintained on the Company's books for the Executive (the
"Account"), monthly, an amount equal to 50% of one-twelfth of
the Executive's then current Base Salary. If a lump sum
payment is made pursuant to Section 4.2.2 or 4.2.3, the
Company shall credit to the Account at the time of such
payment an amount equal to 50% of the Base Salary portion of
such lump sum payment. The Account shall be maintained by
the Company in accordance with the terms of this Agreement,
including Annex A, until the full amount which the Executive
is entitled to receive therefrom has been paid in full.
3.4 Deferred Bonus. In addition to any other
deferred bonus plan in which the Executive may be entitled to
participate, the Executive may elect by written notice
delivered to the Company at least 15 days prior to the
commencement of any calendar year during the term of
employment during which an annual cash bonus would otherwise
accrue or to which it would relate, to defer payment of and
to have the Company credit to the Account all or any portion
of the Executive's bonus for such year. Any such election
shall only apply to the calendar year during the term of
employment with respect to which such election is made and a
new election shall be required with respect to each
successive calendar year during the term of employment.
3.5 Prior Account. The parties confirm that
the Company has maintained a deferred compensation account
(the "Prior Account") for the Executive in accordance with
the Prior Agreement. The Prior Account shall be promptly
transferred to, and shall for all purposes be deemed part of,
the Account and shall continue to be maintained by the
Company in accordance with this Agreement. All prior credits
to the Prior Account shall be deemed to be credits made under
this Agreement, all "Account Retained Income" thereunder
shall be deemed to be Account Retained Income under this
Agreement and all increases or decreases to the Prior Account
as a result of income, gains, losses and other changes shall
be deemed to have been made under this Agreement.
3.6 Reimbursement. The Company shall 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 practices and policies with respect to
senior executives of the Company and upon presentation of
expense statements or vouchers or such other supporting
information as the Company may customarily require of its
senior executives.
3.7 No Anticipatory Assignments. Except as
specifically contemplated in Section 12.8 or under the life
insurance policies and benefit plans referred to in Sections
7 and 8, respectively, neither the Executive, his legal
representative nor any beneficiary designated by him shall
have any right, without the prior written consent of the
Company, to assign, transfer, pledge, hypothecate, anticipate
or commute to any person or Entity any payment due in the
future pursuant to any provision of this Agreement, and any
attempt to do so shall be void and shall not be recognized by
the Company.
3.8 Indemnification. The Executive shall be
entitled throughout the term of employment in his capacity as
an officer or director of the Company or any of its
subsidiaries or a member of the Board of Representatives or
other governing body of any partnership or joint venture in
which the Company has an equity interest (and after the term
of employment, to the extent relating to his service as such
officer, director or member) to the benefit of the
indemnification provisions contained on the date hereof in
the Certificate of Incorporation and By-Laws of the Company
(not including any amendments or additions after the date of
execution hereof that limit or narrow, but including any that
add to or broaden, the protection afforded to the Executive
by those provisions), to the extent not prohibited by
applicable law at the time of the assertion of any liability
against the Executive.
4. Termination.
4.1 Termination for Cause. The Company may
terminate the term of employment, the Advisory Period and all
of the Company's obligations under this Agreement, other than
its obligations set forth below in this Section 4.1, only for
"cause" and only if the term of employment and Advisory
Period have not previously been terminated pursuant to any
other provision of this Agreement. Termination by the
Company for "cause" shall mean termination by action of the
Company's Board of Directors, or a committee thereof, because
of the Executive's conviction (treating a nolo contendere
plea as a conviction) of a felony (whether or not any right
to appeal has been or may be exercised) or willful refusal
without proper cause to perform his obligations under this
Agreement or because of the Executive's breach of any of the
covenants provided for in Section 9. Such termination shall
be effected by written notice thereof delivered by the
Company to the Executive and shall be effective as of the
date of such notice; provided, however, that if (i) such
termination is because of the Executive's willful refusal
without proper cause to perform any one or more of his
obligations under this Agreement, (ii) such notice is the
first such notice of termination for any reason delivered by
the Company to the Executive under this Section 4.1, and
(iii) within 15 days following the date of such notice the
Executive shall cease his refusal and shall use his best
efforts to perform such obligations, the termination shall
not be effective.
In the event of such termination by the Company for
cause, without prejudice to any other rights or remedies that
the Company may have at law or in equity, the Company shall
have no further obligations to the Executive other than
(i) to pay Base Salary and make credits of deferred
compensation to the Account or to pay Advisory Period
compensation, as the case may be, 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 in respect of amounts credited to the Account
or pursuant to any insurance or other benefit plans or
arrangements of the Company maintained for the benefit of its
senior executives. The Executive hereby disclaims any right
to receive a pro rata portion of the Executive's annual bonus
with respect to the year in which such termination occurs.
The last sentence of Section 3.3 and the provisions of
Sections 3.8, 8.2, 8.3 and 9 through 12 and Annex A shall
survive any termination pursuant to this Section 4.1.
4.2 Termination by Executive for Material
Breach by the Company and Wrongful Termination by the
Company. 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 and the Advisory Period effective 15
days after the giving of such notice, if, at the time of the
giving of such notice, the Company shall be in material
breach of its obligations under this Agreement; provided,
however, that, with the exception of clause (i) below, this
Agreement shall not so terminate if such notice is the first
such notice of termination delivered by the Executive
pursuant to this Section 4.2 and within such 15-day period
the Company shall have cured all such material breaches of
its obligations under this Agreement. A material breach by
the Company shall include, but not be limited to, (i) the
Company failing to cause the Executive to retain the title
specified in the first sentence of Section 2 or a more senior
title; (ii) the Executive being required to report to persons
other than those specified in Section 2; (iii) the Company
violating the provisions of Section 2 with respect to the
Executive's authority, functions, duties, powers or
responsibilities (whether or not accompanied by a change in
title); (iv) the Company requiring the Executive's primary
services to be rendered at a place other than at the
Company's principal executive offices in the New York City
metropolitan area; (v) the Company failing to cause the
successor to all or substantially all of the business and
assets of the Company expressly to assume the obligations of
the Company under this Agreement.
In the event of a termination pursuant to the
preceding paragraph of this Section 4.2, or in the event of a
termination of this Agreement or the term of employment or
the Advisory Period by the Company in breach of this
Agreement, the Executive shall be entitled to elect by
delivery of written notice to the Company, within 30 days
after written notice of such termination is given pursuant to
the preceding paragraph of this Section 4.2, either (A) to
cease being an employee of the Company and receive a lump sum
payment as provided in Section 4.2.2 or (B) to remain an
employee of the Company as provided in Section 4.2.3. After
the Executive makes such election, the following provisions
shall apply:
4.2.1 Regardless of the election made by
the Executive, (i) after the effective date of such
termination, the Executive shall have no further obligations
or liabilities to the Company whatsoever, except that
Sections 4.4 and 4.5 and Sections 6 through 12 shall survive
such termination, and (ii) the Executive shall be entitled to
receive any earned and unpaid Base Salary and deferred
compensation or Advisory Period compensation, as the case may
be, accrued through the date of such termination and if such
termination occurs during the term of employment, a pro rata
portion of the Executive's annual bonus for the year in which
such termination occurs through the date of such termination
based on the average of the regular annual bonus amounts
(excluding the amount of any special or spot bonuses) in
respect of the two calendar years for which the regular
annual bonus received by the Executive from the Company was
the greatest, all or a portion of which pro rata bonus will
be credited to the Account if the Executive previously
elected to defer all or any portion of the Executive's bonus
for such year pursuant to Section 3.4.
4.2.2 In the event the Executive shall
make the election provided in clause (A) above, the Company
shall pay to the Executive as damages in a lump sum within 30
days thereafter (provided that if the Executive was named in
the compensation table in the Company's then most recent
proxy statement, such lump sum payment shall be made within
30 days after the end of the calendar year in which such
notice of termination is given) an amount (discounted as
provided in the immediately following sentence) equal to all
amounts otherwise payable pursuant to Sections 3.1, 3.2, 3.3
and 13 for the year in which such termination occurs and for
each subsequent year through the end of the Advisory Period
(assuming that annual bonuses are required to be paid for
each such year during the term of employment, with each such
annual bonus being equal to the average of the regular annual
bonus amounts (excluding the amount of any special or spot
bonuses) in respect of the two calendar years for which the
regular annual bonus received by the Executive from the
Company was the greatest (assuming that no portion of such
bonus is deferred pursuant to Section 3.4). Any payments
required to be made to the Executive pursuant to this Section
4.2.2 upon such termination in respect of Sections 3.1, 3.2
and 13 and the credit to the Account provided for in the
penultimate sentence of Section 3.3 shall be discounted to
present value as of the date of payment from the times at
which such amounts would have become payable absent any such
termination at an annual discount rate for the relevant
periods equal to 120% of the "applicable Federal rate"
(within the meaning of Section 1274(d) of the Internal
Revenue Code of 1986 (the "Code"), in effect on the date of
such termination, compounded semi-annually, the use of which
rate is hereby elected by the parties hereto pursuant to
Treas. Reg. Section 1.280G-1 Q/A 32 (provided that, in the event
such election is not permitted under Section 280G of the Code
and the regulations thereunder, such other rate determined as
of such other date as is applicable for determining present
value under Section 280G of the Code shall be used).
4.2.3 In the event the Executive shall
make the election provided in clause (B) above, the term of
employment and the Advisory Period shall continue and the
Executive shall remain an employee of the Company through the
end of the Advisory Period and during such period the
Executive shall be entitled to receive, whether or not he
becomes disabled during such period but subject to Section 6,
(a) Base Salary at an annual rate equal to the greater of (i)
his Base Salary in effect immediately prior to the notice of
termination and (ii) the Base Salary provided for in Section
3.1, (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 the
term of employment 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 for which the
regular annual bonus received by the Executive from the
Company was the greatest as provided in Section 3.2, (c)
deferred compensation as provided in Section 3.3 and (d)
Advisory Period compensation as provided in Section 13.
Except as provided in the next sentence, if the Executive
accepts full-time employment with any other Entity during
such period or notifies the Company in writing of his
intention to terminate his status as an employee during such
period, then the term of employment and the Advisory Period
shall cease and the Executive shall cease to be an employee
of the Company effective upon the commencement of such
employment or the effective date of such termination as
specified by the Executive in such notice, whichever is
applicable, and the Executive shall be entitled to receive as
damages in a lump sum within 30 days after such commencement
or such effective date (provided that if the Executive was
named in the compensation table in the Company's then most
recent proxy statement, such lump sum payment shall be made
within 30 days after the end of the calendar year in which
such commencement or effective date occurred) an amount
(discounted as provided in the second sentence of Section
4.2.2) for the balance of the Base Salary, deferred
compensation (which shall be credited to the Account as
provided in the penultimate sentence of Section 3.3), regular
annual bonuses (assuming no deferral pursuant to Section 3.4)
and Advisory Period compensation the Executive would have
been entitled to receive pursuant to this Section 4.2.3 had
the Executive remained on the Company's payroll until the end
of the Advisory Period. Notwithstanding the preceding
sentence, if the Executive accepts employment with any
charitable or not-for-profit Entity or any family-owned
corporation, trust or partnership, then the Executive shall
be entitled to remain an employee of the Company and receive
the payments as provided in the first sentence of this
Section 4.2.3; and if the Executive accepts full-time
employment with any affiliate of the Company, then the
payments provided for in this Section 4.2.3 and the term of
employment and the Advisory Period shall cease and the
Executive shall not be entitled to any such lump sum payment.
For purposes of this Agreement, the term "affiliate" shall
mean any Entity which, directly or indirectly, controls, is
controlled by, or is under common control with, the Company.
4.3 Office Facilities. In the event the
Executive shall make the election provided in clause (B) of
Section 4.2, then for the period beginning on the day the
Executive makes such election and ending one year thereafter,
the Company shall, without charge to the Executive, make
available to the Executive office space at the Executive's
principal job location immediately prior to his termination
of employment, or other location reasonably close to such
location, together with secretarial services, office
facilities, services and furnishings, in each case reasonably
appropriate to an employee of the Executive's position and
responsibilities prior to such termination of employment.
4.4 Release. In partial consideration for
the Company's obligation to make the payments described in
Section 4.2, the Executive shall execute and deliver to the
Company a release in substantially the form attached hereto
as Annex B. The Company shall deliver such release to the
Executive within 10 days after the written notice of
termination is delivered pursuant to Section 4.2 and the
Executive shall execute and deliver such release to the
Company within 21 days after receipt thereof. If the
Executive shall fail to execute and deliver such release to
the Company within such 21 day period, or if the Executive
shall revoke his consent to such release as provided therein,
the Executive's term of employment shall terminate as
provided in Section 4.2, but the Executive shall receive, in
lieu of the payments provided for in said Section 4.2, a lump
sum cash payment in an amount determined in accordance with
the personnel policies of the Company relating to notice and
severance then generally applicable to employees with length
of service and compensation level of the Executive.
4.5 Mitigation. In the event of termination
of the term of employment and the Advisory Period by the
Executive pursuant to Section 4.2 as a result of a material
breach by the Company of any of its obligations hereunder, or
in the event of termination of the term of employment and the
Advisory Period by the Company in breach of this Agreement,
the Executive shall not be required to seek other employment
in order to mitigate his damages hereunder; provided,
however, that, notwithstanding the foregoing, if there are
any damages hereunder by reason of the events of termination
described above which are "contingent on a change" (within
the meaning of Section 280G(b)(2)(A)(i) of the Code), the
Executive shall be required to mitigate such damages
hereunder, including any such damages theretofore paid, but
not in excess of the extent, if any, necessary to prevent the
Company from losing any tax deductions to which it otherwise
would be entitled in connection with such damages if they
were not so "contingent on a change". In addition to any
obligation under the preceding sentence, and without dupli-
cation 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, the
total cash salary and bonus received in connection with such
other employment, whether paid to him or deferred for his
benefit, for any services through December 31, 1999 and for
services as a full-time employee from January 1, 2000 through
December 31, 2001, up to an amount equal to (x) the
discounted lump sum payment received by or for the account of
the Executive with respect to Base Salary, annual bonus and
deferred compensation under Section 3 and Advisory Period
compensation under Section 13 for such period, minus (y) the
amount of severance the Executive would have received in
accordance with the personnel policies of the Company if the
Executive had been job eliminated on the date of such
termination, provided that if such termination occurs during
the Advisory Period, the amount determined pursuant to this
clause (y) shall be zero, 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 and the Advisory Period by the Executive
pursuant to Section 4.2 or in the event of the termination of
the term of employment by the Company in breach of this
Agreement shall be considered as damages hereunder. With
respect to the second preceding sentence, the Executive shall
in no event be required to pay the Company with respect to
any calendar year more than the discounted amount received by
him or credited to the Account with respect to Base Salary,
annual bonus and deferred compensation under Section 3 and
Advisory Period compensation under Section 13 for such year.
Any obligation of the Executive to mitigate his damages
pursuant to this Section 4.5 shall not be a defense or offset
to the Company's obligation to pay the Executive in full the
amounts provided in Section 4.2.2 or 4.2.3, as the case may
be, at the time provided therein or the timely and full
performance of any of the Company's other obligations under
this Agreement.
4.6 Payments. So long as the Executive
remains on the payroll of the Company or any subsidiary of
the Company, payments of salary, deferred compensation and
bonus required to be made pursuant to Section 4.2 shall be
made at the same times as such payments are made to senior
executives of the Company or such subsidiary.
5. Disability. If during the term of employment
and prior to any termination of this Agreement under Section
4.2, the Executive shall become physically or mentally
disabled, whether totally or partially, so that he is pre-
vented from performing his usual duties for a period of six
consecutive months, or for shorter periods aggregating six
months in any twelve-month period, the Company shall,
nevertheless, continue to pay the Executive his full
compensation and continue to credit the Account, when
otherwise due, as provided in Section 3 and Annex A, through
the last day of the sixth consecutive month of disability or
the date on which the shorter periods of disability shall
have equalled 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 period ending on the Term Date
(the "Disability Period"), in an amount equal to 75% of
(a) the Executive's Base Salary at the time the Executive
becomes disabled (and this reduced amount shall also be
deemed to be the Base Salary for purposes of determining the
amounts to be credited to his Account pursuant to Section 3.3
and Annex A as further disability benefits) and (b) the
average of the regular annual bonuses (excluding the amount
of any special or spot bonuses) in respect of the two
calendar years for which the annual bonus received by the
Executive from the Company was the greatest (all or a portion
of which may be deferred by the Executive pursuant to Section
3.4). If during the Disability Period 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 compensa-
tion. 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 and
Advisory Period 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
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 Disability Period; and (ii) the provisions of Sec-
tions 9 and 10 shall continue to apply to the Executive
during the Disability Period. The advisory services referred
to in clause (i) of the immediately preceding sentence shall
consist of rendering advice concerning the business, affairs
and management of the Company as requested by the Chief
Executive Officer, the President or the Chief Operating
Officer of the Company but the Executive shall not be
required to devote more than five days (up to eight hours per
day) each month to such services, which shall be performed at
a time and place mutually convenient to both parties. Any
income from such other employment shall not be applied to
reduce the Company's obligations under this Agreement. The
Company shall be entitled to deduct from all payments to be
made to the Executive during the Disability Period pursuant
to this Section 5 an amount equal to all disability payments
received by the Executive during the Disability Period from
Workmen's Compensation, Social Security and disability
insurance policies maintained by the Company; provided,
however, that for so long as, and to the extent that,
proceeds paid to the Executive from such 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. At the end of a Disability Period or if a
Disability Date occurs during the Advisory Period, the
Company shall pay to the Executive the full amount of the
Advisory Period compensation in accordance with Section 13
without regard to the preceding two sentences. Except as
otherwise provided in this Section 5, during the Disability
Period and the Advisory Period, the Executive shall be
entitled to all of the rights and benefits provided for in
this Agreement except that Section 4.2 shall not apply during
the Disability Period or the Advisory Period and the term of
employment and the Advisory Period shall end and the
Executive shall cease to be an employee of the Company at the
end of the Advisory Period and shall not be entitled to
notice and severance or to receive or be paid for any accrued
vacation time or unused sabbatical.
6. Death. Upon the death of the Executive during
the term of employment, 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) shall be entitled to receive, to the
extent being received by the Executive immediately prior to
his death, Base Salary and deferred compensation or, if
applicable, Advisory Period compensation, to the last day of
the month in which his death occurs and bonus compensation
(at the time bonuses are normally paid) based on the average
of the regular annual bonuses (excluding the amount of any
special or spot bonuses) in respect of the two calendar years
for which the annual bonus received by the Executive from the
Company was the greatest, but prorated according to the
number of whole or partial months the Executive was employed
by the Company in such calendar year, and (ii) the Account
shall be liquidated and revalued as provided in Annex A as of
the date of the Executive's death (except that all taxes
shall be computed and charged to the Account as of such date
of death to the extent not theretofore so computed and
charged) and the entire balance thereof (plus any amount due
under the last paragraph of Section A.6 of Annex A) shall be
paid to the Executive's estate (or a designated beneficiary)
in a single payment not later than 75 days following such
date of death.
7. Life Insurance. The Company shall maintain
$4,000,000 face amount of split ownership life insurance on
the life of the Executive, to be owned by the Executive or
the trustees of a trust for the benefit of the Executive's
spouse and/or descendants. Until the death of the Executive,
and irrespective of any termination of this Agreement except
pursuant to Section 4.1, the Company shall pay all premiums
on such policy and shall maintain such policy (without
reduction of the face amount of the coverage). At the death
of the Executive, or on the earlier surrender of such policy
by the owner, the Executive agrees 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 or on behalf of the Executive
with respect to such insurance, (iii) dividends received by
the Company in respect of such premiums, but only to the
extent such dividends are not used to purchase additional
insurance on the life of the Executive, and (iv) any unpaid
borrowings by the Company on the policy), whether before,
during or after the term of this Agreement. The owner of the
policy from time to time shall execute, deliver and maintain
a customary split dollar insurance and collateral assignment
form, assigning to the Company the proceeds of such policy
but only to the extent necessary to secure the reimbursement
obligation contained in the preceding sentence. The life
insurance provided for in this Section 7 shall be in addition
to any other insurance hereafter provided by the Company on
the life of the Executive under any group or individual
policy.
8. Other Benefits.
8.1 General Availability. To the extent that
(a) the Executive is eligible under the general provisions
thereof and (b) the Company maintains such plan or program
for the benefit of its senior executives, during the term of
employment and the Advisory Period and so long as the
Executive is an employee of the Company, the Executive shall
be eligible to participate in any pension, profit-sharing,
stock option or similar plan or program and in any group
insurance, hospitalization, medical, dental, accident,
disability or similar plan or program of the Company now
existing or established hereafter. In addition, so long as
the Executive is an employee of the Company during the term
of employment (but not the Advisory Period) the Executive
shall be entitled to receive other benefits generally
available to all senior executives of the Company to the
extent the Executive is eligible under the general provisions
thereof, including, without limitation, to the extent
maintained in effect by the Company for its senior
executives, an automobile allowance and financial services.
8.2 Benefits After a Termination or
Disability. During the period the Executive remains on the
payroll of the Company after a termination pursuant to
Section 4.2 and during the Disability Period and the Advisory
Period the Executive shall continue to be eligible to receive
the benefits required to be provided to the Executive under
Section 8.1 to the extent such benefits are maintained in
effect by the Company for its senior executives; provided,
however, the Executive shall not be entitled to any
additional awards or grants under any stock option,
restricted stock or other stock based incentive plan. The
Executive shall continue to be an employee of the Company for
purposes of any stock option and restricted shares agreements
and any other incentive plan awards during the term of
employment and the Advisory Period and until such time as the
Executive shall leave the payroll of the Company. At the
time the Executive's term of employment and Advisory Period
terminates and he leaves the payroll of the Company pursuant
to the provisions of Section 4.1, 4.2, 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 (but
without affecting any less restrictive or more favorable to
the Executive provisions of any such plan or agreement), if
the Executive leaves the payroll of the Company as a result
of a termination pursuant to Section 4.2, then all stock
options granted to the Executive by the Company shall (i)
become immediately exercisable at the time the Executive
shall leave the payroll of the Company pursuant to
Section 4.2 and (ii) shall remain exercisable (but not beyond
the term thereof) during the remainder of the term of
employment and the Advisory Period and for a period of three
months thereafter.
8.3 Payments in Lieu of Other Benefits. In
the event the term of employment and the Executive's
employment with the Company is terminated pursuant to
Sections 4.1, 4.2, 5 or 6 (and regardless of whether the
Executive elects clause (A) or (B) as provided in Section
4.2), the Executive shall not be entitled to notice and
severance or to be paid for any accrued vacation time or
unused sabbatical, the payments provided for in such Sections
being in lieu thereof.
9. Protection of Confidential Information; Non-
Compete. The provisions of Section 9.2 shall continue to
apply through the latest of (i) the end of the Advisory
Period (but not later than three years after the effective
date of any termination of this Agreement pursuant to Section
4.2) or (ii) the date the Executive ceases to be an employee
of the Company and leaves the payroll of the Company for any
reason. The provisions of Sections 9.1 and 9.3 shall
continue to apply until three years after the latest of the
events described in the preceding sentence.
9.1 Confidentiality Covenant. The Executive
acknowledges that his employment by the Company (which, for
purposes of this Section 9 shall mean Time Warner Inc. and
its affiliates) will, throughout the term of employment and
the Advisory Period, bring him into close contact with many
confidential affairs of the Company, including information
about costs, profits, markets, sales, products, key person-
nel, pricing policies, operational methods, technical pro-
cesses and other business affairs and methods and other
information not readily available to the public, and plans
for future development. The Executive further acknowledges
that the services to be performed under this Agreement are of
a special, unique, unusual, extraordinary and intellectual
character. The Executive further acknowledges that the
business of the Company is international in scope, that its
products are marketed throughout the world, that the Company
competes in nearly all of its business activities with other
Entities that are or could be located in nearly any part of
the world and that the nature of the Executive's services,
position and expertise are such that he is capable of compet-
ing 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 and
the Advisory Period, except with the Company's written
consent, provided that (i) the Executive shall have no such
obligation to the extent such matters are or become publicly
known other than as a result of the Executive's breach of his
obligations hereunder and (ii) the Executive may, after
giving prior notice to the Company to the extent practicable
under the circumstances, disclose such matters to the extent
required by applicable laws or governmental regulations or
judicial or regulatory process;
9.1.2 The Executive shall deliver
promptly to the Company on termination of his employment by
the Company, or at any other time the Company may so request,
at the Company's expense, all memoranda, notes, records,
reports and other documents (and all copies thereof) relating
to the Company's business, which he obtained while employed
by, or otherwise serving or acting on behalf of, the Company
and which he may then possess or have under his control; and
9.1.3 If the term of employment is
terminated pursuant to Section 4.1 or 4.2 for a period of one
year after such termination, without the prior written
consent of the Company, the Executive shall not employ, and
shall not cause any Entity of which he is an affiliate to
employ, any person who was a full-time executive employee of
the Company at the date of such termination or within six
months prior thereto.
9.2 Non-Compete. The Executive shall not,
directly or indirectly, without the prior written consent of
the Chief Executive Officer, the President or the Chief
Operating Officer of the Company, render any services to any
person or Entity or acquire any interest of any type in any
Entity, that might be deemed in competition with the Company;
provided, however, that the foregoing shall not be deemed to
prohibit the Executive from (a) acquiring, solely as an
investment and through market 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, (c) serving as a director of
any Entity that is not in competition with the Company or (d)
during the Advisory Period, being a partner in or of counsel
to a law firm that represents any person or Entity that is in
competition with the Company so long as the Executive does
not personally provide or assist in the provision of services
to any such person or Entity. For purposes of the foregoing,
a person or Entity shall be deemed to be in competition with
the Company if such person or it engages in any line of
business that is substantially the same as either (i) any
line of operating business which the Company engages in,
conducts or, to the knowledge of the Executive, has
definitive plans to engage in or conduct, or (ii) any
operating business that is engaged in or conducted by the
Company and as to which, to the knowledge of the Executive,
the Company covenants in writing, in connection with the
disposition of such business, not to compete therewith.
9.3 Specific Remedy. In addition to such
other rights and remedies as the Company may have at equity
or in law with respect to any breach of this Agreement, if
the Executive commits a material breach of any of the provi-
sions of Section 9.1, the Company shall have the right and
remedy to have such provisions specifically enforced by any
court having equity jurisdiction, it being acknowledged and
agreed that any such breach or threatened breach will cause
irreparable injury to the Company and that money damages will
not provide an adequate remedy to the Company.
9.4 Liquidated Damages. If the Executive
commits a material breach of the provisions of Section 9.2,
the Executive shall pay to the Company as liquidated damages
an amount equal to two and one-half times the Executive's
then current Base Salary, or if the Executive is not employed
by the Company at the time of such breach or such breach
occurs during the Advisory Period, an amount equal to two and
one-half times the most recent Base Salary paid to the
Executive by the Company. The Company shall be entitled to
offset any amounts owed by the Executive to the Company under
this Section 9.4 against any amounts owed by the Company to
the Executive under any provision of this Agreement or
otherwise, including without limitation, amounts payable to
the Executive under Sections 4.2. The Company and the
Executive agree that it is impossible to determine with any
reasonable accuracy the amount of prospective damages to the
Company upon a breach of Section 9.2 by the Executive and
further agree that the damages set forth in this Section 9.4
are reasonable, and not a penalty, based upon the facts and
circumstances of the parties and with due regard to future
expectations.
10. Ownership of Work Product. The Executive
acknowledges that during the term of employment and the
Advisory Period, he may conceive of, discover, invent or
create inventions, improvements, new contributions, literary
property, material, ideas and discoveries, whether patentable
or copyrightable or not (all of the foregoing being
collectively referred to herein as "Work Product"), and that
various business opportunities shall be presented to him by
reason of his employment by the Company. The Executive
acknowledges that all of the foregoing shall be owned by and
belong exclusively to the Company and that he shall have no
personal interest therein, provided that they are either
related in any manner to the business (commercial or experi-
mental) 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 opportu-
nities; (iii) sign all papers necessary to carry out the
foregoing; and (iv) give testimony in support of his inven-
torship or creation in any appropriate case. The Executive
agrees that he will not assert any rights to any Work Product
or business opportunity as having been made or acquired by
him prior to the date of this Agreement except for Work
Product or business opportunities, if any, disclosed to and
acknowledged by the Company in writing prior to the date
hereof.
11. Notices. All notices, requests, consents and
other communications required or permitted to be given under
this Agreement shall be effective only if given in writing
and shall be deemed to have been duly given if delivered
personally or sent by prepaid telegram, or mailed first-
class, postage prepaid, by registered or certified mail, as
follows (or to such other or additional address as either
party shall designate by notice in writing to the other in
accordance herewith):
11.1 If to the Company:
Time Warner Inc.
75 Rockefeller Plaza
New York, New York 10019
Attention: Chief Executive Officer
(with a copy, similarly addressed
but Attention: Senior Vice President-
Administration)
11.2 If to the Executive, to his residence
address set forth on the records of the
Company.
12. General.
12.1 Governing Law. This Agreement shall be
governed by and construed and enforced in accordance with the
substantive laws of the State of New York applicable to
agreements made and to be performed entirely in New York.
12.2 Captions. The section headings con-
tained herein are for reference purposes only and shall not
in any way affect the meaning or interpretation of this
Agreement.
12.3 Entire Agreement. This Agreement,
including Annexes A, and B, sets forth the entire agreement
and understanding of the parties relating to the subject
matter of this Agreement and supersedes all prior agreements,
arrangements and understandings, written or oral, between the
parties, including without limitation, the Prior Agreement.
12.4 No Other Representations. No represen-
tation, 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 representa-
tion, promise or inducement not so set forth.
12.5 Assignability. This Agreement and the
Executive's rights and obligations hereunder may not be
assigned by the Executive. The Company may assign its rights
together with its obligations hereunder, in connection with
any sale, transfer or other disposition of all or
substantially all of its business and assets; and such rights
and obligations shall inure to, and be binding upon, any
successor to all or substantially all of the business and
assets of the Company, whether by merger, purchase of stock
or assets or otherwise. The Company shall cause such
successor expressly to assume such obligations.
12.6 Amendments; Waivers. This Agreement may
be amended, modified, superseded, cancelled, renewed or
extended and the terms or covenants hereof may be waived only
by written instrument executed by both of the parties hereto,
or in the case of a waiver, by the party waiving compliance.
The failure of either party at any time or times to require
performance of any provision hereof shall in no manner affect
such party's right at a later time to enforce the same. No
waiver by either party of the breach of any term or covenant
contained in this Agreement, in any one or more instances,
shall be deemed to be, or construed as, a further or
continuing waiver of any such breach, or a waiver of the
breach of any other term or covenant contained in this
Agreement.
12.7 Resolution of Disputes. Any dispute or
controversy arising with respect to this Agreement may be
referred by either party to ENDISPUTE for resolution in
arbitration in accordance with the rules and procedures of
ENDISPUTE. Any such proceedings shall take place in New York
City before a single arbitrator (rather than a panel of
arbitrators), pursuant to any streamlined or expedited
(rather than a comprehensive) arbitration process, before a
nonjudicial (rather than a judicial) arbitrator, and in
accordance with an arbitration process which, in the judgment
of such arbitrator, shall have the effect of reasonably
limiting or reducing the cost of such arbitration. The
resolution of any such dispute or controversy by the
arbitrator appointed in accordance with the procedures of
ENDISPUTE shall be final and binding. Judgment upon the
award rendered by such arbitrator may be entered in any court
having jurisdiction thereof, and the parties consent to the
jurisdiction of the New York courts for this purpose. The
prevailing party shall be entitled to recover the costs of
arbitration (including reasonable attorneys fees and the fees
of experts) from the losing party. If at the time any
dispute or controversy arises with respect to this Agreement,
ENDISPUTE is not in business or is no longer providing
arbitration services, then the American Arbitration
Association shall be substituted for ENDISPUTE for the
purposes of the foregoing provisions of this Section 12.7.
If the Executive shall be the prevailing party in such
arbitration, The Company shall promptly pay, upon demand of
the Executive, all legal fees, court costs and other costs
and expenses incurred by the Executive in any legal action
seeking to enforce the award in any court.
12.8 Beneficiaries. Whenever this Agreement
provides for any payment to the Executive's estate, such
payment may be made instead to such beneficiary or
beneficiaries as the Executive may designate by written
notice to the Company. The Executive shall have the right to
revoke any such designation and to redesignate a beneficiary
or beneficiaries by written notice to the Company (and to any
applicable insurance company) to such effect.
12.9 No Conflict. The Executive represents
and warrants to the Company that this Agreement is legal,
valid and binding upon the Executive and the execution of
this Agreement and the performance of the Executive's
obligations hereunder does not and will not constitute a
breach of, or conflict with the terms or provisions of, any
agreement or understanding to which the Executive is a party
(including, without limitation, any other employment
agreement). The Company represents and warrants to the
Executive that this Agreement is legal, valid and binding
upon the Company and the execution of this Agreement and the
performance of the Company's obligations hereunder does not
and will not constitute a breach of, or conflict with the
terms or provisions of, any agreement or understanding to
which the Company is a party.
12.10 Withholding Taxes. Payments made to
the Executive pursuant to this Agreement shall be subject to
withholding and social security taxes and other ordinary and
customary payroll deductions.
12.11 No Offset. Except as provided in
Section 9.4 of this Agreement, Neither the Company nor the
Executive shall have any right to offset any amounts owed by
one party hereunder against amounts owed or claimed to be
owed to such party, whether pursuant to this Agreement or
otherwise, and the Company and the Executive shall make all
the payments provided for in this Agreement in a timely
manner.
12.12 Severability. If any provision of this
Agreement shall be held invalid, the remainder of this
Agreement shall not be affected thereby; provided, however,
that the parties shall negotiate in good faith with respect
to equitable modification of the provision or application
thereof held to be invalid. To the extent that it may
effectively do so under applicable law, each party hereby
waives any provision of law which renders any provision of
this Agreement invalid, illegal or unenforceable in any
respect.
12.13 Definitions. The following terms are
defined in this Agreement in the places indicated:
Account - Section 3.3
Account Retained Income - Section A.6 of Annex A
Advisory Period - Section 13
affiliate - Section 4.2.3
Applicable Tax Law - Section A.5 of Annex A
Base Salary - Section 3.1
cause - Section 4.1
Code - Section 4.2.2
Company - the first paragraph on page 1
and Section 9.1
Disability Date - Section 5
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
Investment Advisor - Section A.1 of Annex A
Other Period Deferred Amount - Section A.6 of
Annex A
Pay-Out Period - Section A.6 of Annex A
Prior Account - Section 3.5
Prior Agreement - the second paragraph on page 1
senior executives - Section 3.1
Term Date - the second paragraph on page 1
term of employment - Section 1
Valuation Date - Section A.6 of Annex A
Work Product - Section 10
13. Advisory Services. The Executive shall render
the advisory services described in this Section for the
period beginning on January 1, 2000 and ending on December
31, 2001 (the "Advisory Period"). During the Advisory
Period, the Executive will provide such advisory services
concerning the business, affairs and management of the
Company as may be requested by the Board of Directors, the
Chief Executive officer or the President of the Company, but
shall not be required to devote more than five days (up to
eight hours per day) each month to such services, which shall
be performed at a time and place mutually convenient to both
parties and consistent with the Executive's other activities.
If at any time during the Advisory Period, the Executive
engages in other full-time employment, the Executive shall
not be deemed to be in breach of this Section 14, but unless
such employment consists of the Executive providing services
to one or more (i) charitable or non-profit organizations or
(ii) family-owned corporations, trusts, or partnerships, the
term of employment and the Advisory Period shall terminate,
the Executive shall leave the payroll of the Company and the
Company shall have no further obligations under this
Agreement other than with respect to earned and unpaid
compensation and benefits. Notwithstanding the foregoing,
but subject to Section 9 of this Agreement, during the
Advisory Period the Executive may provide part-time services
to third parties (including serving as a member of the Board
of Directors of any such party). During the Advisory Period,
the Executive shall be entitled to receive compensation in an
amount equal to $400,000 per annum and shall continue to be
entitled to the benefits described in Section 8 hereof;
provided, however, that the Executive shall not be entitled
or (iii) to a driver or automobile allowance or financial
counseling during the Advisory Period, shall not accrue any
vacation time during the Advisory Period and shall not be
entitled to any severance pay at the end thereof. In
addition, during the first year of the Advisory Period the
Company shall provide the Executive with an office, office
facilities and a secretary at the Company's principal
executive headquarters or other location reasonably close to
such headquarters in mid-town Manhattan.
IN WITNESS WHEREOF, the parties have duly executed
this Agreement as of the date first above written.
TIME WARNER INC.
By ___________________________
Richard D. Parsons
President
______________________________
Peter R. Haje
ANNEX A
Deferred Compensation Account
A.1 Investments. Funds credited to the Account,
at the Company's option, shall either be actually invested
and reinvested, or deemed 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 either
actually purchased and sold, or deemed to have been purchased
or sold, for the Account on the date of reference. Such
purchases may be made or deemed to 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 or deemed purchased on margin to be
sold or deemed 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
monthly 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 or deemed to have been 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 or deemed to have been purchased. In
the case of any sale, the Account shall be charged with the
quantity and kind of securities sold or deemed to have been
sold, and shall be credited with a dollar amount equal to the
quantity and kind of securities sold or deemed to have been
sold multiplied by the fair market value of such securities
on the date of reference. Such charges and credits to the
Account shall take place immediately upon the consummation of
the transactions to which they relate. As used herein "fair
market value" means either (i) if the security is actually
purchased or sold by the Company on the date of reference,
the actual purchase or sale price per security to the Company
or (ii) if the security is not purchased or sold on the date
of reference, in the case of a listed security, the closing
price per security on the date of reference, or if there were
no sales on such date, then the closing price per security on
the nearest preceding day on which there were such sales,
and, in the case of an unlisted security, the mean between
the bid and asked prices per security on the date of
reference, or if no such prices are available for such date,
then the mean between the bid and asked prices per security
on the nearest preceding day for which such prices are
available. If no bid or asked price information is available
with respect to a particular security, the price quoted to
the Company as the value of such security on the date of
reference (or the nearest preceding date for which such
information is available) shall be used for purposes of
administering the Account, including determining the fair
market value of such security. The Account shall be charged
currently with all interest paid or deemed payable by the
Account with respect to any credit extended or deemed
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 and, for margin
purchases deemed to have been made, at the rates and times
then charged by an investment banking firm designated by the
Company with which the Company does significant business.
The Company may, in the Company's sole discretion, from time
to time serve as the lender with respect to any margin
transactions by notice to the then Investment Advisor and in
such case interest shall be charged at the rate and times
then charged by an investment banking firm designated by the
Company with which the Company does significant business.
Brokerage fees shall be charged to the Account, for
transactions actually made, at the rates and times actually
paid and, for transactions deemed to have been made, at the
rates and times then charged for transactions of like size
and kind by an investment banking firm designated by the
Company with which the Company does significant business.
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 or deemed to be
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 or deemed to be
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 or deemed to
be held therein.
A.4 Obligation of the Company. The Company
shall not be required to purchase, hold or dispose of any of
the securities designated by the Investment Advisor; however,
whether or not it elects to purchase or sell any such
securities, such transactions shall be deemed to have been
made and the Account shall be charged with all taxes
(including stock transfer taxes), interest, brokerage fees
and investment advisory fees, if any, deemed payable by the
Company and attributable to such transactions (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 only obligation of the Company is its contractual
obligation to make payments to the Executive measured as set
forth below. To the extent that the Company, in its
discretion, purchases or holds any of the securities
designated by the Investment Advisor, the same 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 him 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 or deemed to have been received by the
Account pursuant to Section A.2 and gains recognized upon
sales of any of the securities which are deemed to have been
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
or deemed to be made pursuant to Section A.1 or A.2 and as a
result of any payment of brokerage fees and investment
advisory fees made or deemed to be made pursuant to Section
A.1. If any of the sales of the securities which are deemed
to have been sold pursuant to Section A.1 or A.6 results in a
loss to the Account, such net loss shall be deemed to offset
the income and gains referred to in the second preceding
sentence (and thus reduce the charge for taxes referred to
therein) to the extent then permitted under the Internal
Revenue Code of 1986, as amended from time to time, and under
applicable state and local income and franchise tax laws
(collectively referred to as "Applicable Tax Law"); provided,
however, that for the purposes of this Section A.5 the
Account shall, except as provided in the third following
sentence, be deemed to be a separate corporate taxpayer and
the losses referred to above shall be deemed to offset only
the income and gains referred to in the second preceding
sentence. Such losses shall be carried back and carried
forward within the Account to the extent permitted by
Applicable Tax Law in order to minimize the taxes deemed
payable on such income and gains within the Account. For the
purposes of this Section A.5, all charges and credits to the
Account for taxes shall be deemed to be made as of the end of
the Company's taxable year during which the transactions,
from which the liabilities for such taxes are deemed to have
arisen, are deemed to have occurred. Notwithstanding the
foregoing, if and to the extent that in any year there is a
net loss in the Account that cannot be offset against income
and gains in any prior year, then an amount equal to the tax
benefit to the Company of such net loss (after such net loss
is reduced by the amount of any net capital loss of the
Account for such year) shall be credited to the Account on
the last day of such year. If and to the extent that any
such net loss of the Account shall be utilized to determine a
credit to the Account pursuant to the preceding sentence, it
shall not thereafter be carried forward under this Section
A.5. For purposes of determining taxes payable by the
Company under any provision of this Annex A it shall be
assumed that the Company is a taxpayer and pays all taxes at
the maximum marginal rate of federal income taxes and state
and local income and franchise taxes (net of assumed federal
income tax benefits) applicable to business corporations and
that all of such dividends, interest, gains and losses are
allocable to its corporate headquarters, which are currently
located in New York City.
A.6 Payments. Subject to the provisions of
Section A.7, payments of deferred compensation shall be made
as provided in this Section A.6. Deferred compensation shall
be paid monthly for a period of 60 months (the "Pay-Out
Period") commencing on the first day of the month after the
end of the Advisory 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 or
deemed to be held in the Account shall be not less than the
payment then due and the Company may select the securities to
be sold or deemed sold to provide such cash if the Investment
Advisor shall fail to do so on a timely basis. The amount of
any taxes payable with respect to any such sales shall be
computed, as provided in Section A.5 above, and deducted from
the Account, as of the end of the taxable year of the Company
during which such sales are deemed to have occurred. Solely
for the purpose of determining the amount of monthly payments
during the Pay-Out Period, the Account shall be valued on the
fifth trading day preceding the first monthly payment of each
year of the Pay-Out Period, or more frequently at the
Company's election (the "Valuation Date"), by adjusting all
of the securities held or deemed to be held in the Account to
their fair market value (net of the tax adjustment that would
be made thereon if sold, as estimated by the Company) and by
deducting from the Account the amount of all outstanding
indebtedness and all amounts with respect to which the
Executive has elected pursuant to clause (ii) of Section A.7
to receive payments at times different from the time provided
in this Section A.6 (the "Other Period Deferred Amount").
The extent, if any, by which the Account, valued as provided
in the immediately preceding sentence (but not reduced by the
Other Period Deferred Amount to the extent not theretofore
distributed), exceeds the aggregate amount of credits to the
Account pursuant to Sections 3.3, 3.4 and 3.5 of the
Agreement as of each Valuation Date and not theretofore
distributed or deemed distributed pursuant to this Section
A.6 is herein called "Account Retained Income". The amount
of each payment for the year, or such shorter period as may
be determined by the Company, of the Pay-Out Period
immediately succeeding such Valuation Date, including the
payment then due, shall be determined by dividing the aggre-
gate 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 or deemed to have been held therein have been
sold or deemed to 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 or deemed to have been 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)
December 31, 2001 or (ii) twelve months after termination of
the Executive's employment with the Company, and the balance
of the Account, after the securities held or deemed to have
been held therein have been sold or deemed to 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 or deemed to have been held in the Account
since the end of the preceding taxable year of the Company,
which taxes shall be computed as of the date of such payment.
Payments made pursuant to this paragraph shall be deemed made
first out of Account Retained Income.
If the Executive becomes disabled within the
meaning of Section 5 of the Agreement and is not thereafter
returned to full-time employment with the Company as provided
in said Section 5, then deferred compensation shall be paid
monthly during the Pay-Out Period commencing on the first day
of the month following the end of the Disability Period in
accordance with the provisions of the first paragraph of this
Section A.6.
If the Executive shall die at any time whether
during or after the term of employment, the Account shall be
valued as of the date of the Executive's death and the
balance of the Account shall be paid to the Executive's
estate or beneficiary within 75 days of such death in
accordance with the provisions of the second preceding
paragraph.
Within 90 days after the end of each taxable year
of the Company in which payments have been made from the
Account and at the time of the final payment made 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 included in any such payment. No additional
credits shall be made to the Account pursuant to the
preceding sentence in respect of the amounts credited to the
Account pursuant to the preceding sentence. Notwithstanding
any provision of this Section A.6, the Executive shall not be
entitled to receive pursuant to this Annex A an aggregate
amount that shall exceed the sum of (i) all credits made to
the Account pursuant to Sections 3.3, 3.4 and 3.5 of the
Agreement to which this Annex is attached, (ii) the net
cumulative amount (positive or negative) of all income,
gains, losses, interest and expenses charged or credited to
the Account pursuant to this Annex A (excluding credits made
pursuant to the second preceding sentence), after all credits
and charges to the Account with respect to the tax benefits
or burdens thereof, and (iii) an amount equal to the tax
benefit to the Company from the payment of the amount (if
positive) determined under clause (ii) above; and the final
payment(s) otherwise due may be adjusted or eliminated
accordingly. In determining the tax benefit to the Company
under clause (iii) above, the Company shall be deemed to have
made the payments under clause (ii) above with respect to the
same taxable years and in the same proportions as payments of
Account Retained Income were actually made from the Account.
Except as otherwise provided in this paragraph, the
computation of all taxes and tax benefits referred to in this
Section A.6 shall be determined in accordance with Section
A.5 above.
A.7 Other Payment Methods. Notwithstanding
the foregoing provisions of this Annex A, the Executive may,
prior to the commencement of any calendar year elect by
written notice to the Company to cause (i) all or any portion
of the amounts otherwise to be credited to the Account in
such year under Section 3.3 of the Agreement not to be so
credited but to be paid to the Executive on the date(s) such
credits otherwise would have been made thereunder and/or (ii)
all or any portion of the amounts to be credited to the
Account under Section 3.3 of the Agreement in such year
(after giving effect to clause (i) above) to be payable from
the Account at times different from those provided in Section
A.6 above but not earlier than the dates on which such
amounts were to be credited to the Account.
ANNEX B
RELEASE
Pursuant to the terms of the Employment Agreement
dated [Date] between TIME WARNER INC., a Delaware corporation
(the "Company"), 75 Rockefeller Plaza, York, New York 10019
and the undersigned (the "Agreement"), and in consideration
of the payments made to me and other benefits to be received
by me pursuant thereto, I, [Name], being of lawful age, do
hereby release and forever discharge the Company and its
officers, shareholders, subsidiaries, agents, and employees,
from any and all actions, causes of action, claims, or
demands for general, special or punitive damages, attorney's
fees, expenses, or other compensation, which in any way
relate to or arise out of my employment with the Company or
any of its subsidiaries or the termination of such
employment, which I may now or hereafter have under any
federal, state or local law, regulation or order, including
without limitation, under the Age Discrimination in
Employment Act, as amended, through and including the date of
this Release; provided, however, that the execution of this
Release shall not prevent the undersigned from bringing a
lawsuit against the Company to enforce its obligations under
the Agreement.
I acknowledge that I have been given at least 21
days from the day I received a copy of this Release to sign
it and that I have been advised to consult an attorney. I
understand that I have the right to revoke my consent to this
Release for seven days following my signing. This Release
shall not become effective or enforceable until the
expiration of the seven-day period following the date it is
signed by me.
I further state that I have read this document and
the Agreement referred to herein, that I know the contents of
both and that I have executed the same as my own free act.
WITNESS my hand this ____ day of ___________ ,
____.
___________________________
[Name]