EXHIBIT 10.18
EMPLOYMENT AGREEMENT made as of December 1, 1994, effective as of January
1, 1995 (the "Effective Date"), between TIME WARNER INC., a Delaware corporation
(the "Company"), and Richard J. Bressler (the "Executive").
The Executive is currently employed by the Company pursuant to an
Employment Agreement dated as of January 1, 1992 (the "Prior Agreement").
Effective on the Effective Date, 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") 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
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phrase is used throughout this Agreement, shall be for the period beginning on
the Effective Date and ending on the Term Date, subject, however, to the terms
and conditions set forth in this Agreement.
2. Employment. The Company shall employ the Executive, and the Executive
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shall serve, as Senior Vice President, Finance of the Company during the term of
employment, and the Executive shall have the authority, functions, duties,
powers and responsibilities normally associated with such position and as the
Board of Directors, the Chief Executive Officer, the Chief Operating 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
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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 Chief Operating Officer or its
President, (iii) the Executive shall have no other employment and, without the
prior written consent of the Chief Executive Officer, the Chief Operating
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.
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3.1 Base Salary. The Company shall pay or cause to be paid to the
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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 level as the Executive.
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3.2 Bonus. In addition to Base Salary, the Executive may be entitled to
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receive during the term of employment an annual cash bonus based on the
performance of the Company and of the Executive. The Executive's target bonus
shall be 100% of the Executive's Base Salary but the Executive acknowledges that
his actual bonus will vary depending upon the performance of the Company and 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,
the Chief Operating Officer or the President 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
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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, 4.2.3,
4.3.2 or 4.3.3, 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
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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
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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
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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
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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
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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
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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
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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.
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4.1 Termination for Cause. The Company may terminate the term of
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employment and all of the Company's obligations hereunder, other than its
obligations set forth below in this Section 4.1, only for "cause" and only if
the term of employment has not previously been terminated pursuant to any other
provision of this Agreement. Termination by the Company for "cause" shall mean
termination by action of the Company's Board of Directors, or a committee
thereof, because of the Executive's conviction (treating a nolo contendere plea
as a conviction) of a felony (whether or not any right to appeal has been or may
be exercised) or willful refusal without proper cause to perform his obligations
under this Agreement or because of the Executive's breach of any of the
covenants provided for in Section 9. Such termination shall be effected by
written notice thereof delivered by the Company to the Executive and shall be
effective as of the date of such notice; provided, however, that if (i) such
termination is because of the Executive's willful refusal without proper cause
to perform
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any one or more of his obligations under this Agreement, (ii) such notice is the
first such notice of termination for any reason delivered by the Company to the
Executive under this Section 4.1, and (iii) within 15 days following the date of
such notice the Executive shall cease his refusal and shall use his best efforts
to perform such obligations, the termination shall not be effective.
In the event of such termination by the Company for cause, without
prejudice to any other rights or remedies that the Company may have at law or in
equity, the Company shall have no further obligations to the Executive other
than (i) to pay Base Salary and make credits of deferred compensation to the
Account accrued through the effective date of termination, (ii) to pay any
annual bonus pursuant to 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
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Wrongful Termination by the Company. Unless previously terminated pursuant to
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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
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pursuant to this Section 4.2 and within such 15-day period the Company shall
have cured all such material breaches of its obligations under this Agreement.
A material breach by the Company shall include, but not be limited to, (i) the
Company failing to cause the Executive to retain the title specified in the
first sentence of Section 2 or a more senior title; (ii) the Executive being
required to report to persons other than those specified in Section 2; (iii) the
Company violating the provisions of Section 2 with respect to the Executive's
authority, functions, duties, powers or responsibilities (whether or not
accompanied by a change in title); (iv) the Company requiring the Executive's
primary services to be rendered at a place other than at the Company's principal
executive offices in the New York City metropolitan area; and (v) the Company
failing to cause the successor to all or substantially all of the business and
assets of the Company expressly to assume the obligations of the Company under
this Agreement.
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 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 4.5
and 4.7 and Sections 6 through 12 and Annex A shall survive such termination,
and (ii) the Executive shall be entitled to receive any earned and unpaid Base
Salary and deferred compensation accrued through the Termination Date and a pro
rata portion of the Executive's annual bonus for the year in
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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,
provided that if such termination occurs prior to the determination of the
Executive's annual bonus for 1995, the annual bonus used for such calculation
shall not be less than the target annual bonus provided for in Section 3.2 and
if such termination occurs after the determination of the Executive's annual
bonus for 1995 but prior to the determination of the Executive's annual bonus
for 1996, the annual bonus used for such calculation shall not be less than the
average of the target annual bonus provided for in Section 3.2 and such 1995
annual bonus, 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 the greater of (i) all amounts
otherwise payable pursuant to Sections 3.1, 3.2 and 3.3 for the year in which
such termination occurs and for each subsequent year through and including the
Term Date and (ii) all amounts that would be payable pursuant to Sections 3.1,
3.2 and 3.3 if the Term Date had been a date three years after the date of such
notice of termination (assuming, in the case of either (i) or (ii) above, that
annual bonuses are required to be paid for each such year, with each such annual
bonus being equal to the average of the regular annual bonus amounts (excluding
the amount of any special or spot bonuses) in respect of the two calendar years
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
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pursuant to Section 3.4), with the bonus for any partial calendar year
appropriately pro rated; provided, however, that if such termination occurs
prior to the determination of the Executive's annual bonus for 1995, then each
such annual bonus shall not be less than the target annual bonus provided for in
Section 3.2 and if such termination occurs after the determination of the
Executive's annual bonus for 1995 but prior to the determination of the
Executive's annual bonus for 1996, the annual bonus used for such calculation
shall not be less than the average of the target annual bonus provided for in
Section 3.2 and such 1995 annual bonus. 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 and 3.2 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. (S)1.280G-1 Q/A 32
(provided that, in the event such election is not permitted under Section 280G
of the Code and the regulations thereunder, such other rate determined as of
such other date as is applicable for determining present value under Section
280G of the Code shall be used).
4.2.3 In the event the Executive shall make the election provided in
clause (B) above, the term of employment shall continue and the Executive shall
remain an employee of the Company for the period ending on the later of (i) the
Term Date and (ii) the date which is three years after the date notice of
termination is given 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 as provided in Section 3.1, (b) deferred compensation as provided in
Section 3.3 and (c) an annual bonus
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(all or a portion of which may be deferred by the Executive pursuant to Section
3.4) in respect of each calendar year or portion thereof (in which case a pro
rata portion of such annual bonus will be payable) during such period equal to
the average of the regular annual bonus amounts (excluding the amount of any
special or spot bonuses) in respect of the two calendar years for which the
regular annual bonus received by the Executive from the Company was the
greatest; provided, however, that if such termination occurs prior to the
determination of the Executive's annual bonus for 1995, then each such annual
bonus shall not be less than the target annual bonus provided for in Section 3.2
and if such termination occurs after the determination of the Executive's annual
bonus for 1995 but prior to the determination of the Executive's annual bonus
for 1996, the annual bonus used for such calculation shall not be less than the
average of the target annual bonus provided for in Section 3.2 and such 1995
annual bonus. 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 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) and annual bonuses
(assuming no deferral pursuant to Section 3.4) the Executive would have been
entitled to receive pursuant to this Section 4.2.3 had the Executive remained on
the Company's payroll until the end of the period described in the first
sentence of this Section 4.2.3. Notwithstanding the preceding
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sentence, if the Executive accepts employment with any not-for-profit Entity,
then the Executive shall be entitled to remain an employee of the Company and
receive the payments as provided in the first sentence of this Section 4.2.3;
and if the Executive accepts full-time employment with any affiliate of the
Company, then the payments provided for in this Section 4.2.3 and the term of
employment shall cease and the Executive shall not be entitled to any such lump
sum payment. For purposes of this Agreement, the term "affiliate" shall mean
any Entity which, directly or indirectly, controls, is controlled by, or is
under common control with, the Company.
4.3 After the Term Date. If at the Term Date, the term of employment
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shall not have been previously terminated pursuant to the provisions of this
Agreement, no Disability Period is then in effect and the parties shall not have
agreed to an extension or renewal of this Agreement or on the terms of a new
employment agreement, then the term of employment shall continue and the
Executive shall continue to be employed by the Company pursuant to the terms of
this Agreement, subject to termination by either party hereto on 60 days written
notice delivered to the other party. 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 elect by delivery of written notice to the Company, within 30 days after such
notice of termination is given, either (A) to cease being an employee of the
Company and receive a lump sum payment as provided in Section 4.3.2 or (B)
remain an employee of the Company for a period of twelve months pursuant to
Section 4.3.3 and receive the payments provided in Section 4.3.3. After the
Executive makes such election, the following provisions shall apply:
4.3.1 Regardless of the election made by the Executive, at the end of the
60-day notice period provided for in the first sentence of Section 4.3 the
Executive shall
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have no further obligations or liabilities to the Company whatsoever, except
that Sections 4.5 and 4.7 and Sections 6 through 12 shall survive such
termination.
4.3.2 In the event the Executive shall make the election provided in
clause (A) above, the Company shall pay to the Executive in a lump sum at the
end of the 60-day notice period provided for in the first sentence of Section
4.3 (provided that if the Executive was named in the compensation table in the
Company's then most recent proxy statement, such lump sum payment shall be made
within 30 days after the end of the year in which such notice of termination is
given) an amount (discounted as provided in the second sentence of Section
4.2.2) equal to three times the sum of (i) the Executive's Base Salary as in
effect immediately prior to such notice of termination, (ii) an amount equal to
the average of the regular annual bonus amounts (excluding the amount of any
special or spot bonuses) received by the Executive from the Company for the two
calendar years immediately preceding the calendar year in which such notice of
termination is given (assuming that no portion of such bonus is deferred
pursuant to Section 3.4), and (iii) the annual amount of deferred compensation
payable by the Company to the Account pursuant to Section 3.3 as in effect
immediately prior to such notice of termination (which shall be credited to the
Account as provided in the penultimate sentence of Section 3.3).
4.3.3 In the event the Executive shall make the election provided in
clause (B) above, the term of employment shall continue and the Executive shall
remain an employee of the Company until the date which is twelve months after
the end of the 60-day period referred to in the first sentence of Section 4.3
and during such period the Executive shall be entitled to receive, whether or
not he becomes disabled during such period but subject to Section 6, (i) the
Executive's Base Salary as in effect immediately prior to such notice of
termination, (ii) an annual bonus (all or any portion of which may be deferred
by the Executive pursuant to Section 3.4) equal to the average of the regular
annual bonus amounts (excluding the amount of any special or spot bonuses)
received by the Executive from the Company for the two calendar years
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immediately preceding the calendar year in which such notice of termination is
given, and (iii) 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
second sentence of Section 4.2.2) an amount equal to two times the sum of the
amounts described in clauses (i), (ii) and (iii) of 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 terminate his employment during such period, the
Executive shall cease to be an employee of the Company and the term of
employment shall cease effective upon the commencement of such employment or the
effective date of such termination as specified by the Executive in such notice,
whichever is applicable, and shall be entitled to receive a lump sum payment
within 30 days after such commencement or such effective date (provided that if
the Executive was named in the compensation table in the Company's then most
recent proxy statement, such lump sum payment shall be made within 30 days after
the end of the year in which such commencement or effective date occurred) an
amount (discounted as provided in the second sentence of Section 4.2.2) 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) and regular
annual bonuses the Executive would have been entitled to receive pursuant to
this Section 4.3.3 (including the lump sum) had the Executive remained on the
Company's payroll until the end of such twelve-month period. Notwithstanding
the preceding sentence, if the Executive accepts employment with any not-for-
profit Entity, then the Executive shall be entitled to remain an employee of the
Company and receive the payments as provided in the first sentence of this
Section 4.3.3; and if the Executive accepts full-time employment with any
affiliate of the Company, then the term of employment and the payments provided
for in this Section 4.3.3 shall cease and the Executive shall not be entitled to
any such lump sum payment.
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4.4 Office Facilities. In the event the Executive shall make the election
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provided in clause (B) of Section 4.2 or 4.3, then for the period beginning on
the day the Executive makes such election and ending one year thereafter, the
Company shall, without charge to the Executive, make available to the Executive
office space at the Executive's principal job location immediately prior to his
termination of employment, or other location reasonably close to such location,
together with secretarial services, office facilities, services and furnishings,
in each case reasonably appropriate to an employee of the Executive's position
and responsibilities prior to such termination of employment.
4.5 Release. In partial consideration for the Company's obligation to
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make the payments described in Sections 4.2 and 4.3, 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 or 4.3 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 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 personnel policies of the Company relating to
notice and severance then generally applicable to employees with length of
service and compensation level of the Executive.
4.6 Retirement. Notwithstanding the provisions of Sections 4.2, 4.3 or 5,
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if the term of employment is in effect and the Executive is still employed by
the Company pursuant to this Agreement on the date the Executive first becomes
eligible for normal retirement under any retirement plan of the Company or any
subsidiary of the Company (the "Retirement Date"), then this Agreement shall
terminate automatically on such date and the Executive's employment with
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the Company shall thereafter be governed by the policies generally applicable to
employees of the Company, and the Executive shall not thereafter be entitled to
the payments provided in such Sections to the extent not received by the
Executive on or prior to the Retirement Date. In addition, no benefits or
payments provided in Sections 4.2, 4.3 or 5 shall include any period after the
Retirement Date and if the provision of benefits or calculation of payments
provided in any such Section would include any period subsequent to the
Retirement Date, such provision of benefits shall end on the Retirement Date and
the calculation of payments shall cover only the period ending on the Retirement
Date. Notwithstanding the foregoing, the Company's obligations under Section 7
of this Agreement shall continue after any such termination and the provisions
of Sections 12.1 and 12.7 shall apply to any dispute with respect to this
Agreement that arises after any such termination.
4.7 Mitigation. In the event of termination of the term of employment by
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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 by the Company pursuant to Section 4.3 or 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 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, the total cash salary and bonus received in connection
with such
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other employment, whether paid to him or deferred for his benefit, for services
through (i) in the case of a termination pursuant to Section 4.2, the later of
(x) the Term Date or (y) three years after the date notice of termination is
delivered pursuant to Section 4.2, and (ii) in the case of a termination
pursuant to Section 4.3, the date which is three years after the end of the 60-
day notice period referred to in the first sentence of Section 4.3, in either
case 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 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 by the Executive pursuant to Section 4.2 or in the event of the
termination of the term of employment by the Company pursuant to Section 4.3 or
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 for such
year. Any obligation of the Executive to mitigate his damages pursuant to this
Section 4.7 shall not be a defense or offset to the Company's obligation to pay
the Executive in full the amounts provided in Section 4.2.2, 4.2.3, 4.3.2 or
4.3.3, as the case may be, at the time provided therein or the timely and full
performance of any of the Company's other obligations under this Agreement.
17
4.8 Payments. So long as the Executive remains on the payroll of the
--------
Company or any subsidiary of the Company, payments of salary, deferred
compensation and bonus required to be made pursuant to Section 4.2 or 4.3 shall
be made at the same times as such payments are made to senior executives of the
Company or such subsidiary.
5. Disability. If during the term of employment and prior to any
----------
termination of this Agreement under Section 4.2 or 4.3, the Executive shall
become physically or mentally disabled, whether totally or partially, so that he
is prevented from performing his usual duties for a period of six consecutive
months, or for shorter periods aggregating six months in any twelve-month
period, the Company shall, nevertheless, continue to pay the Executive his full
compensation and continue to credit the 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 longer of (i) the
period ending on the Term Date or (ii) three years (in the case of either (i) or
(ii), 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); provided, however, that if such disability
occurs prior to the determination of the Executive's annual bonus for 1995, then
each such annual bonus shall not be less than the target annual bonus provided
for in Section 3.2 and if such disability
18
occurs after the determination of the Executive's annual bonus for 1995 but
prior to the determination of the Executive's annual bonus for 1996, then each
such annual bonus shall not be less than the average of the target annual bonus
provided for in Section 3.2 and such 1995 annual bonus. 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 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 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 Sections 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 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
19
(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 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 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, provided that if
such death occurs prior to the determination of the Executive's annual bonus for
1995, the annual bonus used for such calculation shall not be less than the
target annual bonus provided for in Section 3.2 and if such death occurs after
the determination of the Executive's annual bonus for 1995 but prior to the
determination of the Executive's annual bonus for 1996, the annual bonus used
for such calculation shall not be less than the average of the target annual
bonus provided for in Section 3.2 and such 1995 annual bonus, but in any event,
prorated according to the
20
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. Subject to the Executive's satisfactory completion of
--------------
any applications and other documentation and any physical examination that may
be required by the insurer and to the availability of insurance, the Company
shall obtain $2,000,000 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
21
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 so long as the Executive is an employee of the Company, the
Executive shall be eligible to participate in any pension, profit-sharing, stock
option or similar plan or program and in any group insurance, hospitalization,
medical, dental, accident, disability or similar plan or program of the Company
now existing or established hereafter. In addition, the Executive shall be
entitled during the term of employment and so long as the Executive is an
employee of the Company, to receive other benefits generally available to all
senior executives of the Company to the extent the Executive is eligible under
the general provisions thereof, including, without limitation, to the extent
maintained in effect by the Company for its senior executives, an automobile
allowance and financial services.
8.2 Benefits After a Termination or Disability. During the period the
------------------------------------------
Executive remains on the payroll of the Company after a termination pursuant to
Section 4.2 or 4.3 and during the Disability Period the Executive shall continue
to be eligible to receive the benefits required to be provided to the Executive
under Section 8.1 to the extent such benefits are maintained in effect by the
Company for its senior executives; provided, however, the Executive shall not be
entitled to any additional awards or grants under any stock option, restricted
stock or other stock based incentive plan. The Executive shall continue to be
an employee of the Company for purposes of any stock option and restricted
shares agreements and any other incentive plan awards during the term of
employment and until such time as the Executive shall leave the payroll of the
Company. At the time the Executive's term of employment with the Company
terminates and he leaves the payroll of the Company
22
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 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 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, 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. The provisions of
---------------------------------------------------
Section 9.2 shall continue to apply through the latest of (i) the Term Date,
(ii) the date the Executive ceases to be an employee of the Company and leaves
the payroll of the Company for any reason and (iii) twelve months after the
termination of the Executive's employment with the Company pursuant to Section
4.1, 4.2 or 4.3. 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.
23
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
24
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, 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 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 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, or (c) serving as a director of any Entity that is not in
competition with the Company. For purposes of the foregoing, a person or Entity
shall be deemed to be in competition with the Company if such person or it
engages in any line of business that is substantially the same as either (i) any
line of operating business which the Company engages in, conducts or, to the
knowledge of the Executive, has definitive plans to engage in or conduct, or
(ii) any operating business that is engaged in or conducted by the Company and
as
25
to which, to the knowledge of the Executive, the Company covenants in writing,
in connection with the disposition of such business, not to compete therewith.
9.3 Specific Remedy. In addition to such other rights and remedies as the
---------------
Company may have at equity or in law with respect to any breach of this
Agreement, if the Executive commits a material breach of any of the provisions
of Section 9.1, the Company shall have the right and remedy to have such
provisions specifically enforced by any court having equity jurisdiction, it
being acknowledged and agreed that any such breach or threatened breach will
cause irreparable injury to the Company and that money damages will not provide
an adequate remedy to the Company.
9.4 Liquidated Damages. If the Executive commits a material breach of the
------------------
provisions of Section 9.2, the Executive shall pay to the Company as liquidated
damages an amount equal to two and one-half times the Executive's then current
Base Salary, or if the Executive is not employed by the Company at the time of
such breach, an amount equal to two and one-half times the most recent Base
Salary paid to the Executive by the Company. The Company shall be entitled to
offset any amounts owed by the Executive to the Company under this Section 9.4
against any amounts owed by the Company to the Executive under any provision of
this Agreement or otherwise, including without limitation, amounts payable to
the Executive under Sections 4.2 or 4.3. The Company and the Executive agree
that it is impossible to determine with any reasonable accuracy the amount of
prospective damages to the Company upon a breach of Section 9.2 by the Executive
and further agree that the damages set forth in this Section 9.4 are reasonable,
and not a penalty, based upon the facts and circumstances of the parties and
with due regard to future expectations.
10. Ownership of Work Product. The Executive acknowledges that during the
-------------------------
term of employment, he may conceive of, discover, invent or create inventions,
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
26
"Work Product"), and that various business opportunities shall be presented to
him by reason of his employment by the Company. The Executive acknowledges that
all of the foregoing shall be owned by and belong exclusively to the Company and
that he shall have no personal interest therein, provided that they are either
related in any manner to the business (commercial or experimental) of the
Company, or are, in the case of Work Product, conceived or made on the Company's
time or with the use of the Company's facilities or materials, or, in the case
of business opportunities, are presented to him for the possible interest or
participation of the Company. The Executive shall (i) promptly disclose any
such Work Product and business opportunities to the Company; (ii) assign to the
Company, upon request and without additional compensation, the entire rights to
such Work Product and business opportunities; (iii) sign all papers necessary to
carry out the foregoing; and (iv) give testimony in support of his inventorship
or creation in any appropriate case. The Executive agrees that he will not
assert any rights to any Work Product or business opportunity as having been
made or acquired by him prior to the date of this Agreement except for Work
Product or business opportunities, if any, disclosed to and acknowledged by the
Company in writing prior to the date hereof.
11. Notices. All notices, requests, consents and other communications
-------
required or permitted to be given under this Agreement shall be effective only
if given in writing and shall be deemed to have been duly given if delivered
personally or sent by prepaid telegram, or mailed first-class, postage prepaid,
by registered or certified mail, as follows (or to such other or additional
address as either party shall designate by notice in writing to the other in
accordance herewith):
11.1 If to the Company:
Time Warner Inc.
75 Rockefeller Plaza
New York, New York 10019
Attention: Chief Executive Officer
(with a copy, similarly addressed
27
but Attention: General Counsel)
11.2 If to the Executive, to his residence
address set forth on the records of the Company.
12. General.
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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 at the Effective Date, supersedes all prior
agreements, arrangements and understandings, written or oral, between the
parties, including without limitation, the Prior Agreement. The Prior Agreement
shall remain in full force and effect until the Effective Date.
12.4 No Other Representations. No representation, promise or
------------------------
inducement has been made by either party that is not embodied in this Agreement,
and neither party shall be bound by or be liable for any alleged representation,
promise or inducement not so set forth.
12.5 Assignability. This Agreement and the Executive's rights and
-------------
obligations hereunder may not be assigned by the Executive. The Company may
assign its rights together with its obligations hereunder, in connection with
any sale, transfer or other disposition of all or substantially all of its
business and assets; and such rights and obligations 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.
28
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 JAMS/ENDISPUTE for
resolution in arbitration in accordance with the rules and procedures of
JAMS/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 JAMS/ENDISPUTE shall be final and binding.
Judgment upon the award rendered by such arbitrator may be entered in any court
having jurisdiction thereof, and the parties consent to the jurisdiction of the
New York courts for this purpose. The prevailing party shall be entitled to
recover the costs of arbitration (including reasonable attorneys fees and the
fees of experts) from the losing party. If at the time any dispute or
controversy arises with respect to this Agreement, JAMS/ENDISPUTE is not in
business or is no longer providing arbitration services, then the American
Arbitration Association shall be substituted for JAMS/ENDISPUTE
29
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
30
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
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
Retirement Date - Section 4.6
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
31
IN WITNESS WHEREOF, the parties have duly executed
this Agreement as of the date first above written.
TIME WARNER INC.
By /s/ Gerald M. Levin
--------------------------
Gerald M. Levin
Chairman and Chief Executive Officer
/s/ Richard J. Bressler
---------------------------
Richard J. Bressler
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
A-2
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
A-3
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
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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
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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
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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
A-4
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
A-5
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
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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 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 January 1st of the
year following the year in which the
A-6
latest of such events occurs. 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 aggregate value of the Account, as valued and
adjusted pursuant to the second preceding sentence, by the number of payments
remaining to be paid in the Pay-Out Period, including the payment then due;
provided that each payment made shall be deemed made first out of Account
Retained Income (to the extent remaining after all prior distributions thereof
since the last Valuation Date).
A-7
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) the
Term Date or (ii) twelve months after termination of the Executive's employment
with the Company, and the balance of the Account, after the securities held 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
A-8
within 75 days of such death in accordance with the provisions of the second
preceding paragraph.
Within 90 days after the end of each taxable year of the Company in
which payments have been made from the Account and at the time of the final
payment from the Account, the Company shall compute and shall credit to the
Account, the amount of the tax benefit assumed to be received by it from the
payment to the Executive of amounts of Account Retained Income 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
A-9
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
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Pursuant to the terms of the Employment Agreement made as of
_____________, 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
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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]