________________________________________________________________________________
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
CHECK THE APPROPRIATE BOX:
[x] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
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TIME WARNER INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT IF OTHER THAN THE REGISTRANT)
------------------------
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1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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5) Total Fee Paid:
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[ ] Fee paid previously with preliminary materials.
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0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: ............
2) Form, Schedule or Registration Statement No.: ............
3) Filing Party: ............
4) Date Filed: ............
________________________________________________________________________________
Preliminary Copy -- As filed with the Securities and Exchange Commission
[Logo]
March 28, 1997
Dear Stockholder:
You are cordially invited to attend the 1997 Annual Meeting of Stockholders
of Time Warner Inc. on Thursday, May 15, 1997, beginning at 10:00 A.M., local
time, at the Apollo Theatre, 253 West 125th Street, New York, NY 10027. I look
forward to greeting as many of you who attend the Meeting as I can.
Please vote on all the matters listed in the enclosed Notice of Annual
Meeting of Stockholders. Your Board of Directors recommends a vote 'FOR' the
proposals listed as items 1, 2, 3 and 4 in the Notice, and 'AGAINST' the
stockholder proposal described in the enclosed Proxy Statement.
At the Annual Meeting, among other things, stockholders will consider a
proposed amendment to Time Warner's restated certificate of incorporation to
change the way we elect directors. If this proposal is approved, in the future,
all of our directors will be elected annually instead of our current system
under which three classes of directors have staggered three-year terms.
Whether or not you plan to attend in person, it is important that your
shares be represented and voted at the Meeting. After reading the enclosed
Notice and Proxy Statement, please sign, date and mail the enclosed proxy card
or voting instructions in the envelope provided.
Because of security procedures required for access to the Apollo Theatre,
if you plan to attend the Meeting in person, you must bring the Admission Ticket
included with the enclosed Notice and Proxy Statement or a Time Warner employee
identification card. YOU WILL NOT BE PERMITTED INTO THE MEETING WITHOUT IT. If
you have not received an Admission Ticket, please contact the Shareholder
Relations Department at (212) 484-6971.
Sincerely,
/s/ GERALD M. LEVIN
GERALD M. LEVIN
Chairman of the Board
and Chief Executive Officer
TIME WARNER INC.
75 Rockefeller Plaza
New York, NY 10019
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 15, 1997
The Annual Meeting (the 'Annual Meeting') of Stockholders of Time Warner
Inc., a Delaware corporation (the 'Company'), will be held on Thursday, May 15,
1997 at the Apollo Theatre, 253 West 125th Street, New York, NY 10027,
commencing at 10:00 A.M., local time, for the following purposes:
1. To elect five directors for a term of three years and until their
successors are duly elected and qualified. If proposal 2 (providing for the
annual election of directors) is approved, the terms of all directors will
expire at the 1998 annual meeting of stockholders. If proposal 2 is not
approved, the terms of these five directors will expire at the 2000 annual
meeting of stockholders or at such time as their successors have been duly
elected and qualified;
2. To consider and approve a proposed amendment to the Company's
Restated Certificate of Incorporation to provide for the annual election of
all directors;
3. To consider and take action upon a proposed Time Warner 1997 Stock
Option Plan;
4. To approve the appointment by the Board of Directors of the firm of
Ernst & Young LLP as independent auditors of the Company for 1997;
5. To consider and vote upon a stockholder proposal described in the
attached Proxy Statement; and
6. To transact such other business as may properly come before the
Annual Meeting.
Only holders of the Company's common stock and certain series of preferred
stock at the close of business on March 27, 1997, the record date, are entitled
to vote on some or all of the matters listed in this Notice of Annual Meeting.
TIME WARNER INC.
PETER R. HAJE
Secretary
March 28, 1997
THE ANNUAL MEETING WILL START PROMPTLY AT 10:00 A.M. TO AVOID DISRUPTION,
ADMISSION MAY BE LIMITED ONCE THE MEETING STARTS. PLEASE SIGN AND DATE THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED PRE-ADDRESSED REPLY
ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING. ANY RECORD
HOLDER WHO IS PRESENT AT THE MEETING MAY VOTE IN PERSON INSTEAD OF BY PROXY,
THEREBY CANCELLING ANY PREVIOUS PROXY. YOU MAY NOT APPOINT MORE THAN THREE
PERSONS TO ACT AS YOUR PROXY AT THE MEETING.
YOU WILL BE REQUIRED TO SHOW THE ENCLOSED ADMISSION TICKET OR A COMPANY ID CARD
TO ATTEND THE ANNUAL MEETING.
TIME WARNER INC.
75 Rockefeller Plaza
New York, NY 10019
PROXY STATEMENT
This Proxy Statement is being furnished in connection with the solicitation
of proxies by the Board of Directors of Time Warner Inc., a Delaware corporation
(the 'Company'), for use at the Annual Meeting of the Company's stockholders
(the 'Annual Meeting') to be held on Thursday, May 15, 1997 at the Apollo
Theatre, 253 West 125th Street, New York, NY 10027, commencing at 10:00 A.M.,
local time, and at any adjournment or postponement thereof, for the purpose of
considering and acting upon the matters set forth in the accompanying Notice of
Annual Meeting of Stockholders. References to the Company prior to the merger
(the 'TBS Merger') with Turner Broadcasting System, Inc. ('TBS') are to its
predecessor.
This Proxy Statement and accompanying forms of proxy and voting
instructions are first being mailed on or about March 31, 1997 to stockholders
entitled to vote at the Annual Meeting.
VOTING AT THE ANNUAL MEETING; RECORD DATE; CONFIDENTIAL VOTING
Only holders of record of the Company's voting stock at the close of
business on March 27, 1997, the record date, are entitled to notice of and to
vote at the Annual Meeting. At that time, the number of shares entitled to vote
and their voting rights were:
xxx,xxx,xxx shares of Common Stock, par value $.01 per share ('Common
Stock'), each of which is entitled to one vote on all matters properly
submitted at the Annual Meeting;
50,642,172 shares of Series LMCN-V Common Stock, par value $.01 per share
('Series LMCN-V Stock'), each of which is entitled to 1/100 of a vote on
the election of directors and on the proposal to amend the Company's
Restated Certificate of Incorporation to provide for the annual election
of directors (the 'Charter Amendment Proposal'); and
33,794,710 shares of six series of Convertible Preferred Stock, par value
$.10 per share, consisting of 11,000,000 shares of Series D Preferred,
3,250,000 shares of Series E Preferred, 3,080,202 shares of Series F
Preferred, 6,200,000 shares of Series G Preferred, 7,000,000 shares of
Series I Preferred and 3,264,508 shares of Series J Preferred
(collectively, the 'Voting Preferred Stock'), each of which is entitled to
two votes on all matters properly submitted at the Annual Meeting.
The presence, in person or by proxy, of the holders of a majority of the
votes entitled to be cast at the Annual Meeting is necessary to constitute a
quorum.
In accordance with the Company's confidential voting policy, all
stockholder proxies, ballots and voting materials will be confidentially
inspected and tabulated by independent inspectors of election and will not be
disclosed to the Company except under certain limited circumstances.
REQUIRED VOTE
A plurality of the votes duly cast is required for the election of
directors. The affirmative vote of 80% in voting power of all outstanding shares
of Common Stock, Series LMCN-V Stock and Voting Preferred Stock, voting together
as a single class, is required to approve the Charter Amendment Proposal. The
affirmative vote of a majority of the votes duly cast by the holders of Common
Stock and Voting Preferred Stock, voting together as a single class, is required
to approve each of the other matters to be acted upon at the Annual Meeting.
An abstention is deemed 'present' but is not deemed a 'vote cast.' As a
result, abstentions and broker 'non-votes' are not included in the tabulation of
the voting results on the election of directors or issues requiring approval of
a majority of the votes cast and, therefore, do not have the effect of votes in
opposition, but do have that effect in tabulating votes on the Charter Amendment
Proposal. A broker 'non-vote' occurs when a nominee holding shares for a
beneficial owner does not vote on a particular proposal because the nominee does
not have discretionary voting power on that item and has not received
instructions from the beneficial owner. Broker 'non-votes' and the shares as to
which a stockholder abstains are included in determining whether a quorum is
present.
PROXIES
All shares entitled to vote and represented by properly executed proxies
received prior to the Annual Meeting, and not revoked, will be voted as
instructed on those proxies. If no instructions are indicated, the shares will
be voted as recommended by the Board of Directors. No stockholder of record may
appoint more than three persons to act as his or her proxy at the Annual
Meeting.
If any other matters are properly presented at the Annual Meeting for
consideration, the persons named in the enclosed form of proxy and acting
thereunder will have discretion to vote on those matters in accordance with
their own judgment to the same extent as the person signing the proxy would be
entitled to vote. In accordance with the Company's By-laws, the Annual Meeting
may be adjourned, including by the Chairman, in order to permit the solicitation
of additional proxies. The Company does not anticipate that any other matters
will be raised at the Annual Meeting.
Any proxy may be revoked at any time before it is voted by (i) filing with
the Secretary of the Company, at or before the taking of the vote at the Annual
Meeting, a written notice of revocation or a duly executed proxy, in either case
later dated than the prior proxy relating to the same shares or (ii) attending
the Annual Meeting and voting in person (although attendance at the Annual
Meeting will not of itself revoke a proxy). Any written notice of revocation or
subsequent proxy should be sent so as to be delivered to Time Warner Inc., 75
Rockefeller Plaza, New York, NY 10019, Attention: Secretary, or hand delivered
to the Secretary, before the taking of the vote at the Annual Meeting.
A copy of the Company's Annual Report to Stockholders for the year 1996,
including financial statements, has been sent simultaneously with this Proxy
Statement or has been previously provided to all stockholders entitled to vote
at the Annual Meeting.
RECOMMENDATIONS OF THE BOARD OF DIRECTORS
The Board of Directors recommends a vote FOR the election of the nominees
for election as directors; FOR approval of the Charter Amendment Proposal; FOR
approval of the Time Warner
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1997 Stock Option Plan; FOR approval of the appointment of Ernst & Young LLP as
independent auditors of the Company for 1997; and AGAINST the stockholder
proposal described in this Proxy Statement.
CORPORATE GOVERNANCE
ELECTION OF DIRECTORS
The Company believes that, in the best interest of its stockholders, a
majority of the members of its Board of Directors should, in the Board's
judgment, have no direct or indirect material economic relationship with the
Company other than as a result of customary directors' compensation or stock
ownership ('Unaffiliated Directors'). Under the Company's By-laws, when the
Board sets the slate of director nominees for election at an annual meeting of
stockholders, it must determine that a majority of its members will be
independent directors within the meaning of the By-laws, assuming the election
of such slate. The Company also has a policy limiting the eligibility for
nomination by the Board of Directors as a non-employee director to persons who
would be less than 70 years old at the time of election.
The Board of Directors is currently divided into three classes. In
connection with the TBS Merger, R.E. Turner and his designee, J. Carter Bacot,
became members of the Board of Directors on October 10, 1996 and November 21,
1996, respectively. Lawrence Buttenwieser, David Kearns and J. Richard Munro,
whose terms expire at the Annual Meeting, are retiring from the Board of
Directors at that time.
The Board of Directors has nominated Stephen F. Bollenbach and Gerald
Greenwald as new directors and has also renominated J. Carter Bacot, Gerald M.
Levin and Richard D. Parsons. Messrs. Bacot, Levin and Parsons are currently
directors and, except for Mr. Bacot, were elected by the stockholders. Assuming
the election of these nominees, there will be 14 directors, of whom eleven will
be Unaffiliated Directors and three will be Affiliated Directors.
The persons named in the enclosed proxy intend to vote such proxy for the
election of each of the five nominees named above, unless the stockholder
indicates on the proxy that the vote should be withheld from any or all of the
nominees. Each nominee elected will continue in office until his successor has
been duly elected and qualified, or until his earlier death, resignation or
retirement. If the Charter Amendment Proposal is approved by the stockholders,
the terms of all the directors will expire at the Company's annual meeting of
stockholders in 1998. If the Charter Amendment Proposal is not approved by
stockholders, the terms of the directors elected at the Annual Meeting will
expire at the Company's annual meeting of stockholders in 2000 and the terms of
the other directors will expire at the Company's annual meetings of stockholders
in 1998 and 1999, as indicated below.
The Company expects each nominee for election as a director at the Annual
Meeting to be able to accept such nomination. If any nominee is unable to accept
such nomination, proxies will be voted in favor of the remainder of those
nominated and may be voted for substitute nominees.
Set forth below is the principal occupation of, and certain other
information regarding, the five nominees and the other directors whose terms of
office will continue after the Annual Meeting.
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NAME AND YEAR FIRST
BECAME A DIRECTOR OF PRINCIPAL OCCUPATION
THE COMPANY AGE DURING THE PAST FIVE YEARS
- ------------------------------------ --- ---------------------------------------------------------------------
NOMINEES FOR ELECTION AT THE ANNUAL MEETING*
J. Carter Bacot .................... 64 CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF THE BANK OF NEW YORK COMPANY,
1996 INC. AND CHAIRMAN OF THE BANK OF NEW YORK. Mr. Bacot has served as
Chairman and Chief Executive Officer of The Bank of New York
Company, Inc. and Chairman of The Bank of New York since 1982. He
is also a director of Associates First Capital Corporation,
Atlantic Reinsurance Company, Centennial Insurance Company, the
Federal Reserve Bank of New York, Phoenix Home Life Mutual
Insurance Company and Woolworth Corporation. Mr. Bacot is an
Unaffiliated Director.
Stephen F. Bollenbach............... 54 PRESIDENT AND CHIEF EXECUTIVE OFFICER OF HILTON HOTELS CORPORATION.
Mr. Bollenbach has served as President and Chief Executive Officer
of Hilton Hotels Corporation (hotels and gaming) since February
1996. Prior to that, Mr. Bollenbach was Senior Executive Vice
President and Chief Financial Officer of The Walt Disney Company
(entertainment) from April 1995 until February 1996; President and
Chief Executive Officer of Host Marriott Corporation (lodging) from
October 1993 to April 1995; and Chief Financial Officer of Marriott
Corporation (lodging) from March 1992 until October 1993. He is
also a director of America West Airlines, Inc., Hilton Hotels
Corporation, Kmart Corporation and Ladbroke Group PLC. Mr.
Bollenbach will be an Unaffiliated Director.
Gerald Greenwald.................... 61 CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF UAL CORPORATION AND UNITED
AIRLINES, INC. Mr. Greenwald has served as Chairman and Chief
Executive Officer of UAL Corporation (airline holding company) and
United Airlines, Inc. since July 1994. Prior to that, he served as
Chairman of Tatra, a Czech republic truck manufacturer, from March
1993 to July 1994 and as President of Olympia & York Developments,
Ltd. (real estate development) from 1992 to March 1993. He is also
a director of Aetna Inc. Mr. Greenwald will be an Unaffiliated
Director.
- ------------
* Terms expire in 1998 if the Charter Amendment Proposal is approved or in 2000
if it is not approved.
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NAME AND YEAR FIRST
BECAME A DIRECTOR OF PRINCIPAL OCCUPATION
THE COMPANY AGE DURING THE PAST FIVE YEARS
- ------------------------------------ --- ---------------------------------------------------------------------
Gerald M. Levin .................... 57 CHAIRMAN OF THE BOARD OF DIRECTORS AND CHIEF EXECUTIVE OFFICER OF THE
1988 COMPANY. Mr. Levin became Chairman of the Board of Directors and
Chief Executive Officer of the Company on January 21, 1993, having
served as President and Co-Chief Executive Officer from February
20, 1992. He previously served as a director of the Company from
1983 until January 1987. He is also a member of the Board of
Representatives of Time Warner Entertainment Company, L.P. Mr.
Levin is an Affiliated Director.
Richard D. Parsons ................. 48 PRESIDENT OF THE COMPANY. Mr. Parsons became President of the Company
1991 on February 1, 1995. Prior to that, Mr. Parsons served as the
Chairman and Chief Executive Officer of The Dime Savings Bank of
New York, FSB from January 1991. He served as a director of
American Television and Communications Corporation, then an
82%-owned subsidiary of the Company, from 1989 until 1991 and is
currently also a director of Citicorp, the Federal National
Mortgage Association and Philip Morris Companies Inc. and a member
of the Board of Representatives of Time Warner Entertainment
Company, L.P. Mr. Parsons is an Affiliated Director.
DIRECTORS WHOSE TERMS EXPIRE IN 1998
Merv Adelson ....................... 67 CHAIRMAN OF EAST-WEST CAPITAL ASSOCIATES AND FORMER CHAIRMAN AND
1989 CHIEF EXECUTIVE OFFICER OF LORIMAR TELEPICTURES. Mr. Adelson has
served as Chairman of East-West Capital Associates (private
investment company) since April 1989. Mr. Adelson served as Vice
Chairman and a director of Warner Communications Inc. ('WCI') from
January 1989 through August 1991. Prior to that, Mr. Adelson served
as Chairman and Chief Executive Officer of Lorimar Telepictures
Corporation from February 1986 until its acquisition by WCI in
January 1989. He is also a director of 7th Level, Inc. Mr. Adelson
is an Unaffiliated Director.
Michael A. Miles ................... 57 FORMER CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER OF PHILIP
1995 MORRIS COMPANIES INC. Mr. Miles served as Chairman of the Board and
Chief Executive Officer of Philip Morris Companies Inc. (consumer
products) from September 1991 until July 1994. He is also a
director of Allstate Corp., Dean Witter, Discover & Co., Dell
Computer Corporation and Sears, Roebuck and Co. and is a Special
Limited Partner in Forstmann Little & Co. Mr. Miles is an
Unaffiliated Director.
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NAME AND YEAR FIRST
BECAME A DIRECTOR OF PRINCIPAL OCCUPATION
THE COMPANY AGE DURING THE PAST FIVE YEARS
- ------------------------------------ --- ---------------------------------------------------------------------
Donald S. Perkins .................. 70 FORMER CHAIRMAN OF JEWEL COMPANIES, INC. Mr. Perkins became President
1979 of Jewel Companies, Inc. (retailing) in 1965, Chairman of its Board
in 1970, and served as Chairman of its Executive Committee from
1980 to June 1983. He is also a director of AON Corporation,
Cummins Engine Company, Inc., Current Assets, Illinova and Illinois
Power Company, Inland Steel Industries, Inc., LaSalle Street Fund,
Inc., LaSalle U.S. Realty Income and Growth Fund Inc., Lucent
Technologies Inc., The Putnam Funds (including all 102 of its
funds), Ryerson Tull, Inc. and Springs Industries, Inc. Mr. Perkins
is an Unaffiliated Director.
Raymond S. Troubh .................. 70 FINANCIAL CONSULTANT AND DIRECTOR OF VARIOUS COMPANIES. Mr. Troubh
1989 served as a director of WCI from 1979 to 1990. Mr. Troubh has been
a financial consultant and a corporate director for more than the
past five years. He is also a director of ADT Limited, America West
Airlines, Inc., ARIAD Pharmaceuticals, Inc., Becton, Dickinson and
Company, Diamond Offshore Drilling, Inc., Foundation Health
Corporation, General American Investors Company, Inc., The MicroCap
Fund, Inc., Olsten Corporation, Petrie Stores Corporation, Triarc
Companies, Inc. and WHX Corporation. Mr. Troubh is an Unaffiliated
Director.
DIRECTORS WHOSE TERMS EXPIRE IN 1999*
Beverly Sills Greenough ............ 67 CHAIRMAN OF LINCOLN CENTER FOR THE PERFORMING ARTS. Mrs. Greenough
1989 served as a director of WCI from 1982 to 1990. Mrs. Greenough has
served as the Chairman of Lincoln Center for the Performing Arts
since June 1994, having served as a Managing Director of The
Metropolitan Opera from 1991. She has also served as National
Chairman of the March of Dimes Birth Defects Foundation. She is
also a director of American Express Company and Human Genome
Sciences Inc. Mrs. Greenough is an Unaffiliated Director.
- ------------
* Terms expire in 1998 if the Charter Amendment Proposal is approved.
6
NAME AND YEAR FIRST
BECAME A DIRECTOR OF PRINCIPAL OCCUPATION
THE COMPANY AGE DURING THE PAST FIVE YEARS
- ------------------------------------ --- ---------------------------------------------------------------------
Carla A. Hills ..................... 63 CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF HILLS & COMPANY AND FORMER
1993 UNITED STATES TRADE REPRESENTATIVE. Ambassador Hills became
Chairman and Chief Executive Officer of Hills & Company
(international trade and investment consultants) in March 1993,
having served in President Bush's Cabinet as the United States
Trade Representative from February 1989 to January 20, 1993.
Ambassador Hills is also a director of American International
Group, Inc., Chevron Corporation and Lucent Technologies Inc.
Ambassador Hills is an Unaffiliated Director.
Reuben Mark ........................ 58 CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF COLGATE- PALMOLIVE COMPANY.
1993 Mr. Mark has served as the Chief Executive Officer of
Colgate-Palmolive Company (consumer products) since May 1984. In
May 1986, he was elected Chairman. Mr. Mark is also a director of
Citicorp, Pearson plc and The New York Stock Exchange, Inc. Mr.
Mark is an Unaffiliated Director.
R.E. Turner ........................ 58 VICE CHAIRMAN OF THE COMPANY. Mr. Turner became Vice Chairman of the
1996 Company upon consummation of the TBS Merger on October 10, 1996.
Prior to that, Mr. Turner served as Chairman of the Board and
President of TBS from 1970. Mr. Turner is an Affiliated Director.
Francis T. Vincent, Jr. ............ 58 CHAIRMAN OF VINCENT ENTERPRISES. Mr. Vincent has been a private
1993 investor at Vincent Enterprises since January 1, 1995. Prior to
that, Mr. Vincent served as the Commissioner of Major League
Baseball from September 1989 until September 1992. He is also a
director of Culbro Corporation, Horizon Group and Oakwood Homes
Corporation. Mr. Vincent is an Unaffiliated Director.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has designated four principal standing committees.
The Company believes that it is in the best interest of the Company's
stockholders that each of the Audit, Compensation and Nominating and Governance
Committees be composed of at least a majority of Unaffiliated Directors. As
noted below, each of such committees is composed entirely of Unaffiliated
Directors. The current members and functions of all the Board's committees are
as follows:
Audit Committee. The Audit Committee is composed entirely of Unaffiliated
Directors. Its members are Messrs. Buttenwieser, Kearns, and Miles (Chair). The
functions of the Audit Committee, which met three times during 1996, include (i)
the review of the professional services and independence of the Company's
independent auditors and the scope of the annual external audit as recommended
by the independent auditors; (ii) the review, in consultation with the
independent auditors and the Company's chief internal auditor, of the plan and
results of the
7
annual audit and the adequacy of the Company's internal accounting controls;
(iii) the review, in consultation with management and the independent auditors,
of the Company's annual financial statements and the results of each external
audit; and (iv) the review, in consultation with the Company's independent
auditors and the Company's principal financial officer and principal accounting
officer, of the auditing and accounting principles and practices to be used in
the preparation of the Company's financial statements.
The Audit Committee has authority to consider the qualification of the
Company's independent auditors and make recommendations to the Board of
Directors as to their selection, and review and resolve any differences of
opinion between such independent auditors and management relating to the
preparation of the annual financial statements.
Compensation Committee. The Compensation Committee is composed entirely of
Unaffiliated Directors. Its members are Ambassador Hills and Messrs. Mark
(Chair), Troubh and Vincent. The Compensation Committee, which met ten times
during 1996, has authority to engage independent compensation consultants to
assist the Committee in its review of the Company's executive compensation. The
Compensation Committee also has authority, as delegated by the Board of
Directors, to administer the Company's executive compensation plans. The
Compensation Committee, after receiving and considering the recommendations of
the Company's Chief Executive Officer, determines the salaries and incentive
compensation (including the grant of stock options) and employment agreements of
the executive officers of the Company. See 'Compensation Committee Report on
Compensation of Executive Officers of the Company.'
Nominating and Governance Committee. The Nominating and Governance
Committee is composed entirely of Unaffiliated Directors. Its members are Mr.
Adelson, Mrs. Greenough and Messrs. Perkins and Vincent (Chair). The Nominating
and Governance Committee, which met four times during 1996, has authority to
review the size and composition of the Board of Directors and recommends
nominees to serve on the Board of Directors and considers the qualifications of
candidates for election as directors. Nominees to the Board of Directors are
selected on the basis of recognized achievements and their ability to bring
various skills and experience to the deliberations of the Board of Directors. In
carrying out its responsibilities, the Nominating and Governance Committee will
consider candidates recommended by other directors, employees and stockholders.
Written suggestions for nominees should be sent to the Secretary of the Company.
The Company's By-laws provide that any stockholder of record who is
entitled to vote for the election of directors may nominate persons for election
as directors only if timely written notice in proper form of the intent to make
a nomination at a meeting of stockholders is received by the Secretary of Time
Warner at 75 Rockefeller Plaza, New York, NY 10019. To be timely and in proper
form under the By-laws, the notice generally must be delivered not less than 70
nor more than 120 days prior to the date of the meeting at which directors are
to be elected and must contain prescribed information about the proponent and
each nominee, including such information about each nominee as would have been
required to be included in a proxy statement filed pursuant to the rules of the
Securities and Exchange Commission had such nominee been nominated by the Board
of Directors.
Finance Committee. The members of the Finance Committee are Mr. Adelson
(Chair), Mrs. Greenough, Ambassador Hills and Messrs. Munro, Perkins and Troubh.
The Finance Committee met three times during 1996. The Finance Committee has
authority to review and make recommendations to the Board of Directors
concerning the financial structure and financial condition of the Company and
its subsidiaries, including annual budgets, long-term financial plans, corporate
borrowings, investments, capital expenditures, long-term commitments and the
issuance of stock.
8
During 1996, the Board of Directors met nine times and no incumbent
director attended fewer than 75% of the total number of meetings of the Board of
Directors and the committees of which he or she was a member.
DIRECTOR COMPENSATION
Directors who are not officers or employees of the Company or any of its
subsidiaries ('Eligible Directors') currently receive $60,000 as an annual
retainer, half of which is paid in cash and the remaining half in shares of
Common Stock under the 1988 Restricted Stock Plan for Non-Employee Directors
(the 'Directors' Restricted Stock Plan'), and an award of stock options under
the Time Warner 1996 Stock Option Plan for Non-Employee Directors (the
'Directors' Option Plan'). No additional compensation is paid for service as a
committee chair or, since May 1996, for attendance at special meetings of the
Board or a committee thereof. Eligible Directors are also reimbursed for
expenses incurred in attending Board and committee meetings, including those for
travel, food and lodging.
Directors who are officers of or employed by the Company or any of its
subsidiaries are not additionally compensated for their Board and committee
activities.
Under the Directors' Restricted Stock Plan, which was approved by
stockholders of the Company, each Eligible Director is generally issued an
annual grant of shares of Common Stock ('Restricted Shares') having a market
value of $30,000. During the restriction period provided under the Directors'
Restricted Stock Plan, the Eligible Director votes the Restricted Shares,
receives and retains all regular cash dividends and exercises all other rights
as a holder of Common Stock, but may not dispose of the Restricted Shares, and
the Company retains custody of the stock certificates and all distributions
other than regular cash dividends.
The restriction period ends, and all Restricted Shares (including any
distributions retained by the Company) vest, upon the termination of the
Eligible Director's service on the Board of Directors on account of (i)
mandatory retirement; (ii) failure to be reelected by stockholders; (iii) death
or disability; and (iv) the occurrence of certain transactions involving a
change in control of the Company; and, with the approval of the Board on a case
by case basis, under certain other designated circumstances. If an Eligible
Director leaves the Board of Directors for any other reason, then all his or her
Restricted Shares are forfeited to the Company. In 1996, each Eligible Director
received 748 Restricted Shares under the Directors' Restricted Stock Plan.
The Company also has a deferred compensation plan for Eligible Directors.
Under this plan, Eligible Directors may elect each year to defer payment of 25%,
50%, 75% or 100% of their cash compensation payable during the next calendar
year. Amounts deferred under the plan are increased based on an interest factor
or the hypothetical investment in shares of Common Stock and dividends thereon,
with the higher valuation used to determine the amount paid upon distribution.
Amounts deferred are payable in a lump-sum or in installments, generally upon
attainment of age 70 or cessation of service as a director of the Company for
certain enumerated reasons.
Each Eligible Director currently receives an annual award of nonqualified
stock options ('Options') to purchase 1,500 shares of Common Stock (and related
limited stock appreciation rights ('Limited SARs') that may be exercised only
during a prescribed period following the occurrence of certain transactions
involving a change in control of the Company) pursuant to the Directors' Option
Plan. Under the Directors' Option Plan, which was approved by the Company's
stockholders in 1996, the Options and related Limited SARs are automatically
awarded on the tenth New York Stock Exchange trading day after each annual
meeting of the Company's
9
stockholders. The purchase price of the shares of Common Stock covered by each
Option is equal to the fair market value of the Common Stock on the date of
grant. Each Option (and the related Limited SAR) becomes exercisable
(cumulatively to the extent not previously exercised) at the rate of one-third
of the aggregate number of shares covered thereby at the end of each successive
one-year period following the date of grant and expires ten years after the date
of grant.
The Directors' Option Plan also provides that Awards become immediately
exercisable in full (1) when the director leaves the Board of Directors for any
reason, except removal for cause, in which case all unexercised Options
immediately terminate, or (2) if certain 'change-in-control' transactions occur.
Options remain exercisable for one year after the director dies and for five
years after the director leaves the Board of Directors for any reason other than
death or removal for cause (but not beyond the ten-year term of the Option).
The Directors' Option Plan replaced the Company's retirement plan (the
'Directors Retirement Plan') for its Eligible Directors and no benefits will
accrue under this Plan after May 1996. Under the Directors Retirement Plan, each
Eligible Director who serves as such for at least three years will receive an
annual retirement benefit commencing after the later of stepping down from the
Board of Directors or attaining age 60 (or earlier in the event such Eligible
Director becomes disabled), equal to $30,000, which benefit will be paid for the
number of years of service as an Eligible Director through May 16, 1996. Service
as an outside director of WCI prior to July 24, 1989 is considered credited
service under the Directors Retirement Plan. In the event an Eligible Director
dies prior to the commencement or completion of payment of benefits under the
Directors Retirement Plan, a lump-sum cash payment will be made in an amount
equal to the total benefits or remaining benefits the Eligible Director would
have been entitled to receive had he or she not died. The Chief Executive
Officer of the Company may accelerate payment of the annual retirement benefit
accrued to an Eligible Director under the Plan.
SECURITY OWNERSHIP
SECURITY OWNERSHIP OF THE BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth as of January 31, 1997 for each current
director, each nominee for election as a director, each of the executive
officers named in the Summary Compensation Table below and for all current
directors and executive officers as a group, information concerning the
beneficial ownership of Common Stock.
As of January 31, 1997, the approximate aggregate market value of the
Common Stock held by certain persons as set forth in the table below (exclusive
of shares subject to stock options) was as follows: 11 current Unaffiliated
Directors -- $34 million; and all current directors -- $2.4 billion. In
addition, as of December 31, 1996, the trusts maintained pursuant to the
Company's qualified employee benefit plans, other than pension plans, held
Common Stock valued at approximately $719 million in accounts for the benefit of
employees of the Company and its subsidiaries.
10
COMMON STOCK BENEFICIALLY OWNED(1)
-------------------------------------
NUMBER OF OPTION PERCENT OF
NAME SHARES SHARES(2) CLASS
- ----------------------------------------------------------------------- ---------- --------- ----------
Merv Adelson........................................................... 700,143 *
J. Carter Bacot (3).................................................... 1,000 *
Stephen F. Bollenbach.................................................. - -
Richard J. Bressler (10)............................................... 5,560 204,137 *
Lawrence B. Buttenwieser (4)........................................... 88,269 *
Beverly Sills Greenough (5)............................................ 22,087 *
Gerald Greenwald....................................................... - -
Peter R. Haje (10)..................................................... 9,931 720,287 *
Carla A. Hills......................................................... 3,787 *
David T. Kearns........................................................ 3,487 *
Gerald M. Levin (6)(10)................................................ 400,905 2,602,268 *
Reuben Mark............................................................ 11,187 *
Michael A. Miles....................................................... 10,034 *
J. Richard Munro (7)................................................... 311,411 316,832 *
Richard D. Parsons (10)................................................ 11,262 300,000 *
Donald S. Perkins...................................................... 14,870 *
Raymond S. Troubh (8).................................................. 10,247 *
R.E. Turner (9)(10).................................................... 61,672,233 12.1%
Francis T. Vincent, Jr................................................. 18,187 *
All current directors and executive officers (20 persons) as a group
(3)-(10)............................................................. 63,364,878 4,948,243 13.4%
- ------------
* Represents beneficial ownership of less than one percent of issued and
outstanding stock on January 31, 1997.
(1) Beneficial ownership as reported in the above table has been determined in
accordance with Rule 13d-3 of the Securities and Exchange Commission
('SEC'). Unless otherwise indicated, beneficial ownership includes both
sole voting and sole investment power. This table does not include, unless
otherwise indicated, any shares of Common Stock or other equity securities
of the Company which may be held by pension and profit-sharing plans of
other corporations or endowment funds of educational and charitable
institutions for which various directors and officers serve as directors or
trustees. As of January 31, 1997, the only equity securities of the Company
beneficially owned by the named persons or group were shares of Common
Stock and options to purchase Common Stock.
(2) Reflects shares of Common Stock subject to options to purchase Common Stock
issued by the Company which, on January 31, 1997, were unexercised but were
exercisable within 60 days from that date. These shares are excluded from
the column headed 'Number of Shares.'
(3) Mr. Bacot purchased these shares on February 12, 1997.
(4) Includes 1,280 shares of Common Stock owned of record and beneficially by
Mr. Buttenwieser's wife and 22,656 shares of Common Stock held of record by
a trust of which Mr. Buttenwieser and others are trustees in which Mr.
Buttenwieser has no beneficial interest and as to all of which Mr.
Buttenwieser disclaims any beneficial ownership.
(5) Includes 10,240 shares of Common Stock held by a trust of which Mrs.
Greenough is the beneficiary but as to which she has no voting or
investment power.
(6) Includes 15,000 shares of Common Stock held by Mr. Levin's wife, as to
which Mr. Levin disclaims any beneficial ownership.
(7) Includes 14,610 shares of Common Stock held by Mr. Munro's wife, as to
which Mr. Munro disclaims any beneficial ownership.
(8) Includes 3,200 shares of Common Stock held beneficially by Mr. Troubh's
wife, as to which Mr. Troubh disclaims any beneficial ownership.
(9) Includes (a) 839,942 shares of Common Stock owned by a corporation wholly
owned by Mr. Turner, (b) 1,488,690 shares of Common Stock held by a trust
over which Mr. Turner has sole voting and dispositive control, (c)
4,500,000 shares of Common Stock held by a limited partnership of which Mr.
Turner is the sole general partner, (d) 386,000 shares of Common Stock
owned by Mr. Turner's wife and (e) 3,450,000 shares of Common Stock held by
the Turner Foundation, Inc., of which Mr. Turner is one of six trustees.
Mr. Turner disclaims beneficial ownership of shares held by his spouse and
the Turner Foundation, Inc.
(10) Includes (a) an aggregate of approximately 36,874 shares of Common Stock
held by a trust under the Time Warner Savings Plan for the benefit of
current directors and executive officers of the Company (including 4,425
shares for Mr. Bressler, 3,443 shares for Mr. Haje, 10,900 shares for Mr.
Levin, 99 shares for Mr. Parsons and 52 shares for Mr. Turner) and (b) an
aggregate of 420,490 shares of Common Stock beneficially owned by certain
relatives of such persons.
11
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Set forth below is the name, address, stock ownership and voting power of
each person or group of persons known by the Company to own beneficially more
than 5% of the outstanding shares of Common Stock, Series LMCN-V Stock or of any
series of Voting Preferred Stock, and, unless otherwise indicated, is based on
information provided to the Company as of January 31, 1997 by the beneficial
owner.
SHARES OF
STOCK PERCENT OF
NAME AND ADDRESS BENEFICIALLY PERCENT OF VOTING
OF BENEFICIAL OWNER OWNED CLASS(1) POWER(2)
- ----------------------------------------------------------------------- ---------- ---------- ----------
COMMON STOCK
The Capital Group Companies, Inc. (3) ................................. 46,828,480 9.2% 7.9%
333 South Hope Street
Los Angeles, CA 90071
The Seagram Company Ltd. (4) .......................................... 56,763,349 11.2 9.9
1430 Peel Street
Montreal, Quebec
Canada H3A 1S9
R.E. Turner (5) ....................................................... 61,672,233 12.1 10.7
c/o Turner Broadcasting
System, Inc.
One CNN Center
Atlanta, GA 30303
SERIES LMCN-V STOCK
Tele-Communications, Inc. (6) ......................................... 50,642,172 100.0 *
5619 DTC Parkway
Englewood, CO 80111
SERIES D PREFERRED STOCK
Houston Industries Incorporated (7) ................................... 11,000,000 100.0 4.0
5 Post Oak Park
4400 Post Oak Parkway
Houston, TX 77027
SERIES E AND F PREFERRED STOCK
Alan Gerry (8) ........................................................ SERIES E
Loomis Road 3,107,956 95.6
Liberty, NY 12754 2.5
SERIES F
2,503,580 81.3
FW Strategic Partners, L.P. ........................................... SERIES F
201 Main Street 442,000 14.3 *
Fort Worth, TX 76102
SERIES G PREFERRED STOCK
ITOCHU Corporation (9) ................................................ 6,200,000 100.0 2.2
5-1, Kita-Aoyama 2-chome
Minato-Ku, Tokyo 107-77
Japan
SERIES I PREFERRED STOCK
Toshiba Corporation (10) .............................................. 7,000,000 100.0 2.4
1-1, Shibaura 1-chome
Minato-Ku, Tokyo 105
Japan
(table continued on next page)
12
SHARES OF
STOCK PERCENT OF
NAME AND ADDRESS BENEFICIALLY PERCENT OF VOTING
OF BENEFICIAL OWNER OWNED CLASS(1) POWER(2)
- ----------------------------------------------------------------------- ---------- ---------- ----------
SERIES J PREFERRED STOCK (11)
Trust for the benefit of Gordon Gray, Jr............................... 769,043 23.6 *
Trust for the benefit of C. Boyden Gray................................ 664,583 20.4 *
Trust for the benefit of Burton C. Gray................................ 769,043 23.6 *
Trust for the benefit of Bernard Gray ................................. 745,035 22.8 *
c/o Wachovia Bank, N.A.
P.O. Box 3099
Winston-Salem, NC 27150
Nancy Maguire Gray, Trustee of the
Nancy Maguire Gray Trust u/a dated 12/16/94 ......................... 188,336 5.8 *
P.O. Box 3199
Church Street Station
New York, NY 10008
- ------------
* Less than 1%.
(1) Each share of Voting Preferred Stock and the Company's Series H Convertible
Preferred Stock, par value $.10 per share ('Series H Preferred'), is
currently convertible into 2.08264 shares of Common Stock. Of the holders
of Voting Preferred Stock identified in this table, none could be deemed
beneficially to own more than 5% of the Common Stock pursuant to Rule
13d-3. Under certain circumstances, each share of Series LMCN-V Stock is
convertible into one share of Common Stock; such circumstances are not
currently present.
(2) Each share of Voting Preferred Stock has two votes. Each share of Series
LMCN-V Stock currently has 1/100 of a vote on certain limited matters.
(3) Beneficial ownership is as of December 31, 1996. The Capital Group
Companies, Inc., a holding company, has filed with the SEC Amendment No. 9,
dated February 14, 1997, to its statement on Schedule 13G to the effect
that (a) it (directly or indirectly) has sole dispositive power over all
these shares, (b) it has sole voting power over 8,983,360 of these shares,
(c) these shares are held principally by Capital Research and Management
Company, an investment adviser, (d) the shares of Common Stock reported as
beneficially owned include 1,349,290 shares of Common Stock issuable upon
conversion of $173,900,000 principal amount of the Company's Liquid Yield
OptionTM Notes due 2013 and 719,020 shares of Common Stock issuable upon
conversion of $75,000,000 principal amount of TBS's Liquid Yield OptionTM
Notes due 2007 (which were redeemed for cash on February 13, 1997) (these
shares have been excluded from the calculation of voting power), (e) all of
the reported shares are held for the benefit of its clients and (f) it and
each of its subsidiary investment management companies acts separately in
exercising investment discretion over its managed accounts.
(4) The Seagram Company Ltd. has filed with the SEC Amendment No. 7, dated
April 13, 1994, to its statement on Schedule 13D and a statement of Changes
in Beneficial Ownership on Form 4 dated May 9, 1994 to the effect that
through its indirect wholly owned subsidiary, Seagram Inc., it has sole
voting and sole dispositive power over all these shares.
(5) Includes (a) 839,942 shares of Common Stock owned by a corporation wholly
owned by Mr. Turner, (b) 1,488,690 shares of Common Stock held by a trust
over which Mr. Turner has sole voting and dispositive control, (c)
4,500,000 shares of Common Stock held by a limited partnership of which Mr.
Turner is the sole general partner, (d) 386,000 shares of Common Stock
owned by Mr. Turner's wife and (e) 3,450,000 shares of Common Stock held by
the Turner Foundation, Inc., of which Mr. Turner is one of six trustees.
Mr. Turner disclaims beneficial ownership of shares held by his spouse and
the Turner Foundation, Inc.
(6) Consists of shares controlled by Tele-Communications, Inc. through its
direct and indirect subsidiaries; excludes 279,533 shares of Common Stock
held by TCI TKR of Southern Kentucky, Inc. as to which Tele-Communications,
Inc. disclaims beneficial ownership.
(7) Voting power includes 1,000,000 shares of Common Stock beneficially owned
by Houston Industries Incorporated.
(8) Voting power includes 2,941,392 shares of Common Stock beneficially owned
by Mr. Gerry.
(9) Includes 1,200,000 shares of Series G Preferred held by a wholly owned
subsidiary of ITOCHU Corporation. ITOCHU Corporation and such subsidiary
also hold an aggregate of 1,800,000 shares of Series H Preferred; each
share of Series H Preferred is convertible into 2.08264 shares of Common
Stock but has no voting rights.
(10) Includes 177,500 shares of Series I Preferred held by a wholly owned
subsidiary of Toshiba Corporation.
(11) The trusts for the benefit of each of Gordon Gray, Jr. and C. Boyden Gray
each also holds 365,365 shares of Common Stock and the trusts for the
benefit of each of Burton C. Gray and Bernard Gray each also holds 275,365
and 265,365 shares of Common Stock, respectively (of which 146,870 shares
are, in each case, held in an escrow account subject to restrictions on
disposition). The Nancy Maguire Gray Trust also holds 89,476 shares of
Common Stock. These shares of Common Stock are included in the voting power
of the beneficial owners.
13
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON COMPENSATION OF EXECUTIVE OFFICERS OF THE
COMPANY
The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation:
COMPENSATION PHILOSOPHY
The Company's executive compensation programs are principally designed to
motivate executives to achieve the Company's business objectives and to increase
stockholder value over the long term. The Company's principal incentive
compensation programs are an annual performance-based incentive bonus, which
permits individual performance to be appropriately recognized each year, and
stock options, which ensure that substantial long-term financial rewards will
accrue to an executive only if long-term stock price appreciation is realized by
the stockholders.
In 1996, as well as currently, each of the Company's executive officers was
employed pursuant to an employment agreement, by which the Company retains his
services for an extended period. The terms of the employment agreements of the
principal executive officers are outlined under 'Employment Arrangements.' Each
executive officer's minimum salary is specified in his employment agreement.
However, the largest elements of executive compensation, the annual bonus and
awards of stock options, are generally subject to the discretion of the
Compensation Committee, which is comprised entirely of Unaffiliated Directors.
In making its compensation decisions, the Compensation Committee takes into
account all Company-provided compensation for the executive, including salary,
bonus, stock options, deferred compensation and benefits. The Compensation
Committee, with the assistance of Towers Perrin, a leading compensation
consultant, reviewed total compensation for the executive officers in the
context of total compensation packages awarded to executives with similar
responsibilities at selected public companies in the consumer product,
entertainment and media businesses. The Compensation Committee believes that the
Company's most direct competitors for executive talent are composed of a broader
range of companies than those with which the Company would ordinarily be
compared for stock performance purposes. Thus, the compensation comparison group
included companies that are not included in the peer group index in the graph
that appears below.
1996 ANNUAL BONUS DETERMINATIONS
Annual Bonus Plan. The starting point of the Compensation Committee's
determination of the annual incentive bonus for Mr. Levin and each other
executive officer of the Company named in the Summary Compensation Table
appearing below, except for Mr. Turner (collectively, 'participating executive
officers'), was the calculation of his 1996 maximum individual bonus payable
under the stockholder-approved Annual Bonus Plan. These calculations were based
on a percentage of the amount by which the Company's earnings before interest,
taxes, depreciation and amortization ('EBITDA'), as adjusted pursuant to the
terms of the Annual Bonus Plan, for 1996 exceeded the Company's average EBITDA
for the preceding three years. This calculation resulted in a maximum individual
deductible annual bonus for Mr. Levin and each other participating executive
officer substantially in excess of the actual bonuses paid, as shown in the
Summary Compensation Table below.
1996 Accomplishments. In 1996, the Company had major strategic and
financial accomplishments both on a Company-wide basis and at its operating
levels. These accomplishments had a significant impact on the assessment of the
annual incentive bonus compensation for all of the Company's executive officers.
The Compensation Committee considered a variety of factors, including these
accomplishments, in making its compensation decisions and no specific weighting
was assigned to any one of those factors or these accomplishments over any
others in determining
14
the bonuses paid to Mr. Levin or the other executive officers for 1996. These
accomplishments included:
Completion of the $6.2 billion TBS Merger, including
Successfully overcoming regulatory and litigation hurdles to the
Merger
Creating the Cable Networks Group
Successfully integrating TBS businesses into the Company
Achievement of 1996 budgeted EBITDA and cash flow on a Company-wide
basis
Continuation of progress on debt management, including
Improving leverage ratio (total net debt to adjusted EBITDA) and
coverage ratio (adjusted EBITDA to total interest and preferred
dividend expense) and meeting or exceeding targets
Reducing interest expense through refinancings of existing debt
Initiation of a Company-wide cost management program aimed at
increasing cash flow and earnings while maintaining long-term growth
prospects for the Company's businesses
Mr. Levin's Annual Bonus. Mr. Levin's 1996 annual incentive bonus as
Chairman of the Board and Chief Executive Officer was determined by the
Compensation Committee. In determining his bonus, the Committee reviewed the
calculation of his maximum bonus payable under the Annual Bonus Plan, the level
of achievement of his 1996 financial performance goals (based on operational
targets for divisional and Company-wide EBITDA and cash-flow), the Company's
other accomplishments during 1996, as described above, and the performance of
the Company's Common Stock. Mr. Levin's bonus, which was unchanged from that
awarded for 1995, reflects the Compensation Committee's belief that Mr. Levin's
performance warranted placing his total cash compensation for 1996 in the upper
quartile of compensation paid to the executives in the comparison group
discussed above. This determination was based on the Committee's overall
evaluation of Mr. Levin's stewardship of the Company's significant
accomplishments during 1996 and his positioning of the Company, its management,
product lines and services for the future.
Annual Bonuses for Executive Officers Other than the Chief Executive
Officer. The Chief Executive Officer reviewed with the Compensation Committee
the 1996 performance of each other executive officer, and recommended an annual
bonus for each such executive (within the limits imposed by the Annual Bonus
Plan for the participating executive officers). These recommendations primarily
reflected individual qualitative executive contributions based upon the level of
the executive's responsibilities, the efficiency and effectiveness with which he
oversaw the matters under his supervision, and the degree to which he
contributed to the accomplishment of the Company's goals. Since these officers
have overall corporate policy-making and administrative responsibilities, and,
except for Mr. Turner, do not directly oversee principal operating units of the
Company, the Compensation Committee's assessment of these executives relates
generally to the accomplishment of their personal goals and the Company's
achievements as a whole. However, the Company's financial performance was a key
factor that affected the overall bonus level for all executive officers.
STOCK OPTION AWARDS
During 1996, each of the Company's executive officers was awarded stock
options. These awards were made after a review of the exercise prices, numbers
and dates of their previous option awards and the option awards made to other
executive officers. Although there are no precise targets with respect to the
number of stock options for executive officers, the Compensation Committee
believes that the higher the level of an executive's responsibilities, the
15
larger the stock-based component of his compensation should be, and that
compensation based on stock price performance should be paid via stock-based
compensation. Each of Messrs. Levin, Parsons and Turner was awarded stock
options, one quarter of which have exercise prices 25% above the fair market
value of the Common Stock on the date of grant and one quarter of which have
exercise prices 50% above such fair market value. Mr. Turner's and Mr. Parson's
awards of stock options were made pursuant to the terms of their employment
agreements with the Company and approved by the Compensation Committee.
SECTION 162(m) CONSIDERATIONS
The Company expects that the compensation paid to executive officers under
the Annual Bonus Plan will qualify for income tax deductibility under Section
162(m) of the Internal Revenue Code. In addition, the Company has adopted a
general policy of awarding stock options to its executive officers only pursuant
to plans that the Company believes will satisfy the requirements of Section
162(m). In 1996, the Company did not pay its executive officers compensation
that would not be deductible as a result of the Section 162(m) deductibility
limit.
Members of the Compensation Committee
Reuben Mark (Chair)
Carla A. Hills
Raymond S. Troubh
Francis T. Vincent, Jr.
EXECUTIVE COMPENSATION SUMMARY TABLE
The following table sets forth information concerning total compensation
paid to the Chief Executive Officer and each of the four most highly compensated
executive officers of the Company who served in such capacities on December 31,
1996 (the 'named executive officers') for services rendered to the Company
during each of the last three fiscal years in their capacities as executive
officers.
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION(6)
--------------------------------------- ---------------
OTHER SECURITIES
NAME AND PRINCIPAL ANNUAL UNDERLYING ALL OTHER
POSITION IN 1996 YEAR SALARY(4) BONUS COMPENSATION(5) OPTIONS AWARDED COMPENSATION(7)
- ------------------------------ ---- ---------- ---------- --------------- --------------- ---------------
Gerald M. Levin............... 1996 $1,050,000 $4,000,000 $ 209,624 350,000 $ 109,773
Chairman of the Board and 1995 1,050,000 4,000,000 153,930 -- 107,039
Chief Executive Officer 1994 1,050,000 4,000,000 130,390 -- 150,667
R.E. Turner................... 1996 $ 235,246 $1,000,000 -- 1,300,000 $ 18,219
Vice Chairman (1)
Richard D. Parsons............ 1996 $ 900,000 $2,000,000 $ 98,627 300,000 $ 104,019
President (2) 1995 825,000 2,000,000 92,000 300,000 77,628
Peter R. Haje................. 1996 $ 825,000 $1,000,000 $ 56,500 45,000 $ 119,105
Executive Vice President 1995 675,000 1,000,000 56,500 40,000 114,102
and General Counsel 1994 675,000 975,000 51,500 -- 129,377
Richard J. Bressler........... 1996 $ 525,000 $ 900,000 $ 50,500 100,000 $ 44,421
Senior Vice President and 1995 450,000 750,000 50,500 100,000 42,755
Chief Financial Officer (3)
- ------------
(1) Mr. Turner became Vice Chairman of the Company on October 10, 1996, upon
consummation of the TBS Merger. Compensation paid by TBS to Mr. Turner for
services rendered to TBS prior to such date is not included in the table.
(2) Mr. Parsons became President on February 1, 1995. Prior to that, he served
as an Unaffiliated Director of the Company and was not an employee of the
Company. Mr. Parsons's 1995 stock options were awarded at the end of 1994 in
connection with his anticipated employment by the Company.
(3) Mr. Bressler became Senior Vice President and Chief Financial Officer on
March 16, 1995, having served as Senior Vice President, Finance from January
2, 1995, and as a Vice President (not an executive officer) prior to that.
(footnotes continued on next page)
16
(4) Amounts shown in the table include credits to each named executive officer's
deferred compensation account equal to one third of the total shown under
the 'salary' column for each of 1996, 1995 and 1994.
(5) In accordance with SEC rules, amounts totalling less than $50,000 have been
omitted. The amounts of personal benefits shown in this column for 1996 that
represent more than 25% of the applicable executive's total Other Annual
Compensation include financial services of $80,000 to Mr. Levin, $70,000 to
Mr. Parsons and $32,500 to each of Messrs. Haje and Bressler,
transportation-related benefits (including an automobile allowance) of
$129,624 to Mr. Levin and $28,627 to Mr. Parsons and automobile allowances
of $24,000 to Mr. Haje and $18,000 to Mr. Bressler.
(6) None of the options indicated was awarded with tandem stock appreciation
rights. Of such executive officers, only Mr. Parsons was awarded restricted
stock during the relevant period and, as of December 31, 1996, held any such
shares. These shares were awarded in or prior to 1994 under the Directors'
Restricted Stock Plan in his capacity then as an Unaffiliated Director. The
value of Mr. Parsons's 4,213 restricted shares based on the closing price of
the Common Stock on the New York Stock Exchange Composite Listing on
December 31, 1996 was $157,988. Mr. Parsons receives the dividends paid in
cash on such shares. See 'Corporate Governance -- Director Compensation.'
(7) The amounts shown in this column for 1996 include the following:
(a) Pursuant to the Time Warner Savings Plan (the 'Savings Plan'), a
defined contribution plan available generally to employees of the Company,
for the 1996 plan year, each executive named above, except Mr. Turner (who
was not eligible to contribute), deferred a portion of his annual
compensation and the Company contributed $2,000 for the first $3,000 so
deferred by the executive ('Matching Contribution'). These Matching
Contributions were invested under the Savings Plan in a Common Stock fund.
In addition, pursuant to a profit-sharing component of the Savings Plan, the
Company may make annual contributions for the benefit of eligible employees
of up to 12% of total eligible compensation; for 1996, the Company
contributed 8%, including $12,000 for the account of each executive named
above, except for Mr. Turner for whom the contribution was $10,769. Because
the Internal Revenue Code of 1986, as amended (the 'Code'), limits the
amount of eligible compensation under the Savings Plan to $150,000 for 1996
for any employee, the Company has adopted an unfunded, non-qualified
supplemental deferred compensation plan covering otherwise eligible
compensation between $150,000 and $275,625 for 1996 (increased 5% per year
thereafter, to a maximum of $350,000). The Company's accrual for this
supplemental plan, $10,050 in 1996 for each named executive officer, except
for Mr. Turner, is deemed to earn interest at a long-term applicable federal
rate announced by the Internal Revenue Service.
(b) The Company maintains a program of life and disability insurance
generally available to all salaried employees on the same basis. In
addition, during 1996, the Company maintained for certain members of senior
management, including the named executive officers, certain supplemental
life insurance benefits and paid premiums for this supplemental coverage of
approximately $250 each. The Company also maintained split-dollar life
insurance policies on the lives of the named executive officers other than
Mr. Turner and paid the following amounts allocated to the term portion of
the split-dollar coverage for 1996: Mr. Levin, $13,467; Mr. Parsons, $3,840;
Mr. Haje, $8,264; and Mr. Bressler, $941. The actuarial equivalent of the
value of the premiums paid by the Company for 1996 based on certain
assumptions regarding interest rates and periods of coverage are: Mr. Levin,
$85,473; Mr. Parsons, $79,719; Mr. Haje, $94,805; and Mr. Bressler, $20,121.
It is anticipated that the Company will recover the net after-tax cost of
the premiums on these policies or the cash surrender value thereof. During
1996, the Company paid a premium of $7,200 to provide Mr. Turner with term
life insurance under its group policy. For a description of life insurance
coverage for certain executive officers provided pursuant to the terms of
their employment agreements, see 'Employment Arrangements.'
STOCK OPTION GRANTS DURING 1996
The following table sets forth certain information with respect to employee
options to purchase shares of Common Stock ('options') awarded during 1996 to
the named executive officers. All such options were nonqualified options. No
stock appreciation rights ('SARs'), alone or in tandem with stock options, were
awarded in 1996.
17
STOCK OPTION GRANTS IN 1996
INDIVIDUAL GRANTS(1)
---------------------------------------------------------
PERCENT
NUMBER OF OF TOTAL
SECURITIES OPTIONS EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS EMPLOYEES PRICE EXPIRATION GRANT DATE
NAME GRANTED IN 1996 ($/SH) DATE PRESENT VALUE(2)
- ------------------------------------- ---------- ---------- --------- ---------- -----------------
Gerald M. Levin...................... 175,000 1.8% $ 42.63 3/19/06 $ 2,831,500
87,500 .9 53.29 3/19/06 1,091,125
87,500 .9 63.95 3/19/06 840,000
R. E. Turner......................... 650,000 6.9% $ 41.25 10/10/06 $10,361,000
325,000 3.4 51.56 10/10/06 4,010,500
325,000 3.4 61.88 10/10/06 3,100,500
Richard D. Parsons................... 150,000 1.6% $ 42.63 3/19/06 $ 2,427,000
75,000 .8 53.29 3/19/06 935,250
75,000 .8 63.95 3/19/06 720,000
Peter R. Haje........................ 45,000 .5% $ 42.63 3/19/06 $ 728,100
Richard J. Bressler.................. 100,000 1.1% $ 42.63 3/19/06 $ 1,618,000
- ------------
(1) Options for executive officers are generally awarded pursuant to plans
approved by the Company's stockholders and the terms are governed by the
plans and the recipient's option agreement. The option exercise price is the
fair market value of the Common Stock on the date of grant except for the
awards to Messrs. Levin, Turner and Parsons of which one quarter of the
total award has an exercise price 25% above the fair market value of the
Common Stock on the date of grant and one quarter of which has an exercise
price 50% above such fair market value. The options shown in the table
become exercisable in installments of one-third on the first three
anniversaries of the date of grant, subject to acceleration upon the
occurrence of certain events. Payment of the exercise price of an option may
be made in cash or, in whole or in part, in full shares of Common Stock
already owned by the holder of the option. The payment of withholding taxes
due upon exercise of an option may generally be made with shares of Common
Stock.
(2) These amounts represent the estimated present value of stock options at the
date of grant calculated using the Black-Scholes option pricing model, based
upon the following assumptions used in developing the grant valuations: an
expected volatility of 21.7% based on a three-year period ending October 31,
1996; an expected term to exercise of eight years; a risk-free rate of
return based on the interest rate of a U.S. Government zero-coupon bond in
effect on the date of the award with an eight-year maturity (March 20,
1996 -- 6.37%; October 11, 1996 -- 6.60%); and a dividend yield of 1%. The
actual value of the options, if any, realized by an officer will depend on
the extent to which the market value of the Common Stock exceeds the
exercise price of the option on the date the option is exercised.
Consequently, there is no assurance that the value realized by an officer
will be at or near the value estimated above. These amounts should not be
used to predict stock performance.
OPTION EXERCISES AND VALUES IN 1996
The following table sets forth as to each of the named executive officers
information on option exercises during 1996 and the status of his options on
December 31, 1996: (i) the number of shares of Common Stock underlying options
exercised during 1996; (ii) the aggregate dollar value realized upon exercise of
such options; (iii) the total number of shares of Common Stock underlying
exercisable and nonexercisable stock options held on December 31, 1996; and (iv)
the aggregate dollar value of in-the-money exercisable and nonexercisable stock
options on December 31, 1996.
AGGREGATE OPTION EXERCISES DURING 1996
AND
OPTION VALUES ON DECEMBER 31, 1996
NUMBER OF NUMBER OF SHARES DOLLAR VALUE OF
SHARES DOLLAR UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY
UNDERLYING VALUE OPTIONS ON 12/31/96 OPTIONS ON 12/31/96*
OPTIONS REALIZED ----------------------------- -----------------------------
NAME EXERCISED ON EXERCISE EXERCISABLE NONEXERCISABLE EXERCISABLE NONEXERCISABLE
- -------------------------- ---------- ----------- ----------- -------------- ----------- --------------
Gerald M. Levin (1)....... 48,000 $1,003,680 2,485,600 350,000 $23,664,040 --
R.E. Turner............... -- -- -- 1,300,000 -- --
Richard D. Parsons........ -- -- 200,000 400,000 $ 374,000 $187,000
Peter R. Haje............. -- -- 691,954 71,666 $12,012,131 --
Richard J. Bressler (1)... -- -- 132,804 181,332 $ 977,588 $ 18,700
(footnotes on next page)
18
* Calculated using the closing price of $37.50 per share on December 31, 1996
minus the option exercise price.
(1) Messrs. Levin and Bressler are the only executive officers listed above who
have been awarded SARs in tandem with any of their stock options. 265,600 of
Mr. Levin's options and 9,644 of Mr. Bressler's options held on December 31,
1996 were awarded with tandem SARs; they all were awarded on or prior to
September 22, 1989 and are currently exercisable; and at December 31, 1996,
they had a value of $2,074,640 and $68,102, respectively, but no separate
value has been attributed to these SARs. These SARs are exercisable for
Common Stock or cash, subject to a $250,000 limit on the amount of cash that
may be received upon their exercise.
The option exercise price of all the options held by the named executive
officers is the fair market value of the Common Stock on the date of grant
except for options awarded to Messrs. Levin, Turner and Parsons in 1996 (see
'Stock Option Grants in 1996') and 500,000 of Mr. Levin's options awarded in
1993, half of which have an exercise price 25% above the fair market value of
the Common Stock on the date of grant and the other half of which have an
exercise price 50% above such fair market value. All options held by the named
executive officers become immediately exercisable in full upon the occurrence of
certain events, including the death or total disability of the option holder,
certain change-of-control transactions and, in most cases, the Company's breach
of the holder's employment agreement and all such nonqualified options permit a
portion of each award to be transferred by gift directly or indirectly to
members of the holder's immediate family.
The options held by executive officers remain exercisable for the full term
of their employment agreements in the event their employment terminates as a
result of the Company's breach. For some executive officers, some or all of
their options remain exercisable for the full term of the options if their
employment is terminated for any reason other than for cause, including death.
Otherwise, options may generally be exercised for one year after death or total
disability. All options terminate immediately if the holder's employment is
terminated for cause. The terms of the options shown in the chart are generally
ten years, although 320,000 options held by Mr. Levin have a term of 15 years
from the date of their award in 1989.
EMPLOYMENT ARRANGEMENTS
The Company is, and during 1996 was, a party to employment agreements with
the executive officers of the Company. These agreements have been filed with the
SEC as exhibits to the Company's periodic filings.
Among other things, the agreements with the Company's executive officers
typically provide for: a fixed term of employment in a specified executive post;
annual salary; deferred compensation, generally equal to 50% of annual salary,
which is invested and paid out as described below under 'Deferred Compensation';
an annual bonus in the discretion of the Compensation Committee, all or a
portion of which may be deferred at the election of the executive officer; and
life insurance benefits to be provided by split dollar policies, generally for
the life of the executive and pursuant to which the Company recovers an amount
equal to the net after-tax cost to the Company of the premiums on such policy or
the cash surrender value thereof, as well as any group life insurance generally
provided by the Company to its employees.
Generally, such agreements include a narrow definition of the 'cause' for
which an executive's employment may be terminated and in that event, the
executive will only receive earned and unpaid base salary and deferred
compensation accrued through such date of termination.
These agreements typically provide that in the event of the Company's
material breach or wrongful termination of an executive's employment, the
executive will be entitled to elect either (a) to receive a lump-sum payment
equal to the present value of the base salary, projected bonuses and deferred
compensation otherwise payable during the remaining portion of the executive's
term of employment or (b) to remain an employee of the Company through the end
of the term of employment and, without performing any services, receive the base
salary, bonuses and deferred compensation payable as if there had been no breach
or wrongful termination. Executives are not generally required to mitigate
damages after such a termination, other than as necessary to
19
prevent the Company from losing any tax deductions to which it otherwise would
have been entitled for any payments deemed to be 'contingent on a change' under
the Code. In addition, except for Mr. Turner's agreement, these agreements
typically provide that if an executive thereafter obtains other employment, the
total cash salary and bonus received therefrom for services prior to the
expiration of the executive's employment term (up to the amount of compensation
paid to the executive by the Company for such period) must be paid over to the
Company as received. Except for Mr. Levin's agreement, the provisions of the
employment agreements relating to payments described in the preceding sentence
provide that the executive officer may retain and not pay over to the Company an
amount equal to the severance he would have received in accordance with the
Company's personnel policies if he had been job eliminated.
In addition, if his employment terminates as a result of the Company's
material breach or wrongful termination, or the Company terminates his
employment after the term of his employment agreement, Mr. Bressler is entitled
to a severance payment equal to the greater of the amount described in the
preceding paragraph or the present value of three times the sum of his annual
base salary, average bonus and deferred compensation. If his employment
terminates under these circumstances, Mr. Parsons is entitled to a severance
payment equal to the greater of the amount described in the preceding paragraph
or the present value of the sum of one year's annual salary and deferred
compensation and an average bonus.
If an executive becomes disabled during the term of his employment
agreement the executive typically will receive full salary, bonus and deferred
compensation for six months and 75% thereof through the end of the employment
term or, in some cases, for three years, if longer. Deferred compensation will
be maintained and paid after giving effect to the executive's base salary after
disability. Any such payments will be reduced by amounts received from Worker's
Compensation, Social Security and disability insurance policies maintained by
the Company.
If an executive dies during the term of an employment agreement, generally
the executive's beneficiaries will receive the executive's earned and unpaid
salary and deferred compensation to the last day of the month in which the death
occurs and a pro rata portion of the executive's bonus for the year of his
death.
The minimum annual salaries and deferred compensation under these
agreements for the named executive officers are as shown for 1996 in the Summary
Compensation Table, except that the current annual salary and deferred
compensation for Mr. Turner is $1,050,000. The expiration dates of these
agreements and the amounts of the individual life insurance coverage for the
lifetime of such persons are: Mr. Levin -- January 10, 2000 and $6 million; Mr.
Turner -- December 31, 2001 and $6 million; Mr. Parsons -- December 31, 1999 and
$4 million; Mr. Haje -- December 31, 1999 (not including a two-year advisory
period) and $4 million; and Mr. Bressler -- December 31, 1999 and $2 million.
In addition, under his employment agreement, Mr. Turner was awarded stock
options to purchase 1.3 million shares of Common Stock half of which have
exercise prices above the fair market value on the date of grant. See 'Stock
Option Grants in 1996.' Mr. Turner is also entitled to further awards of stock
options on the first four anniversaries of the TBS Merger, each covering an
additional 300,000 shares of Common Stock. Pursuant to his employment agreement
with TBS, Mr. Turner also received $844,000 as salary and $200,000 as annual
bonus from TBS for services rendered to TBS in 1996 prior to the TBS Merger, as
well as a $640,000 payment upon termination of the TBS Long-Term Incentive Plan
and required distributions from certain TBS supplemental benefit plans totalling
$1,262,447. So long as Mr. Turner is employed by the Company, the Company has
agreed to include him in management's slate for election as a director and to
use its best efforts to cause his election.
20
DEFERRED COMPENSATION
Deferred compensation for executive officers is deposited into separate
accounts maintained by the Company for each of such officers. The Company
appoints an investment advisor for each such account subject to approval by the
relevant executive. Funds are invested in securities as directed by the
investment advisor, with the assumed after-tax effect upon the Company of gains,
losses and income, and distributions thereof, and of interest expenses and
brokerage commissions and other direct expenses attributed thereto, being
credited or charged to the account. Payments are generally made to the officer
from the account in installments to liquidate the account over a period of three
to five years commencing on the date employment was to terminate under the
employment agreement, or at such other times as the officer might have elected.
Such payments include an amount equal to the assumed tax benefit to the Company
of the compensation deduction available for tax purposes for the portion of the
account represented by the net appreciation in such account, even though the
Company might not actually receive such tax benefit.
Amounts paid by the Company to the deferred compensation accounts of the
named executive officers for 1996 and the portion, if any, of the 1996 annual
bonus elected to be deferred by any such officer are included in the amounts
shown in the Summary Compensation Table above.
TIME WARNER EMPLOYEES' PENSION PLAN
The Time Warner Employees' Pension Plan, as amended (the 'Pension Plan'),
provides benefits to eligible employees, including officers, of the Company and
certain of its subsidiaries. Directors who are not also employees of the Company
are not eligible to participate in the Pension Plan.
A participant accrues benefits under the Pension Plan on the basis of 1
2/3% of the average annual compensation (defined as the average of the highest
five consecutive full or partial years of compensation, which includes regular
salary, overtime and shift differential payments, and non-deferred bonuses paid
according to a regular program) for each year of service up to 30 years and 1/2%
for each year of service over 30. Compensation for purposes of calculating
average annual compensation under the Pension Plan is limited to $200,000 per
year for 1988 through 1993 and $150,000 per year for 1994 and thereafter (each
subject to adjustments provided in the Code). Eligible employees become vested
in all benefits under the Pension Plan on the earlier of five years of service
or certain other events.
Annual pension benefits are reduced by a Social Security offset determined
by a formula that takes into account credited service up to 35 years, covered
compensation up to the average Social Security wage base and a disparity factor
based on the age at which Social Security benefits are payable (the 'Social
Security Offset'). The pension benefit of participants on December 31, 1977 in
the former Time Employees' Profit-Sharing Savings Plan (the 'Profit Sharing
Plan') is further reduced by a fixed amount attributable to a portion of the
employer contributions and investment earnings credited to such employees'
account balances in the Profit Sharing Plan as of such date (the 'Profit Sharing
Plan Offset').
Under the Pension Plan, employees who are at least 60 years old and have
completed at least ten years of service may elect early retirement and receive
the full amount of their annual pension ('early retirement'). An early
retirement supplement is payable to an employee terminating employment at age 55
and before age 60, after 20 years of service, equal to the actuarial equivalent
of such person's accrued benefit, or, if greater, an annual amount equal to 35%
of such person's average compensation determined under the Pension Plan. The
supplement ceases when the regular pension commences at age 60 or upon the death
of the retiree.
Federal law limits both the amount of compensation that is eligible for the
calculation of benefits and the amount of benefits derived from employer
contributions that may be paid to
21
participants under the Pension Plan. However, as permitted by the Employee
Retirement Income Security Act of 1974, as amended ('ERISA'), the Company has
adopted the Time Warner Excess Benefit Pension Plan (the 'Excess Plan'), which
provides for payments by the Company of certain amounts which employees of the
Company would have received under the Pension Plan if eligible compensation were
limited to $250,000 in 1994 (increased 5% per year thereafter, to a maximum of
$350,000) and there were no payment restrictions. For purposes of the Excess
Plan, the $200,000 limit (as indexed for years after 1989) on eligible
compensation will only apply to compensation received in 1988 through 1993; the
$250,000 limit (as adjusted) will apply to compensation received in 1994 and
thereafter.
The following table shows the estimated annual pension payable upon
retirement to employees in specified remuneration and years-of-service
classifications. The amounts shown in the table do not reflect the effect of the
previously-described (i) Social Security Offset, (ii) Profit Sharing Plan Offset
or (iii) early retirement supplements. The amount of the estimated annual
pension is based upon a pension formula which applies to all participants in
both the Pension Plan and the Excess Plan. The estimated amounts are based on
the assumption that payments under the Pension Plan will commence upon normal
retirement (generally age 65) or early retirement, that the Pension Plan will
continue in force in its present form and that no joint and survivor annuity
will be payable (which would on an actuarial basis reduce benefits to the
employee but provide benefits to a surviving beneficiary). Amounts calculated
under the pension formula which exceed ERISA limits will be paid under the
Excess Plan from the Company's assets and are included in the amounts shown in
the following table.
ESTIMATED ANNUAL PENSION FOR
HIGHEST CONSECUTIVE YEARS OF CREDITED SERVICE
FIVE YEAR AVERAGE --------------------------------------------------------------------
COMPENSATION 10 15 20 25 30 35
- ---------------------------------- -------- -------- -------- -------- -------- --------
$100,000.......................... $ 16,667 $ 25,000 $ 33,334 $ 41,668 $ 50,001 $ 52,501
200,000.......................... 33,334 50,001 66,668 83,335 100,002 105,002
400,000.......................... 66,668 100,002 133,336 166,670 200,004 210,004
600,000.......................... 100,002 150,003 200,004 250,005 300,006 315,006
800,000.......................... 133,336 200,004 266,672 333,340 400,008 420,008
The amount of covered compensation that would be considered in the
determination of the highest five consecutive full or partial years of
compensation under the Pension Plan and the Excess Plan for each of Messrs.
Levin, Turner, Parsons, Haje, and Bressler is limited as a result of the
imposition of the limitations on eligible compensation. However, because
combined payments under the Pension Plan and the Excess Plan are based on the
average of the highest five consecutive full or partial years of compensation
(taking into account the compensation limits only for 1988 and thereafter), the
compensation used for determining benefits under such Plans for Mr. Levin (and
employees who participated in the Pension Plan prior to 1988) will include
eligible compensation in years prior to 1988 which exceeded these limits. The
estimated annual benefits payable under the Pension Plan and the Excess Plan, as
of February 1, 1997, would be based on average compensation of $729,248 for Mr.
Levin; $250,565 for Mr. Turner; $269,000 for Mr. Parsons; $250,565 for Mr. Haje;
and $250,565 for Mr. Bressler; with 24.8, .4, 2.0, 6.4, and 8.2 years of
credited service, respectively. In addition, pursuant to his employment
agreement, Mr. Parsons will be entitled to receive supplemental payments from
the Company that will achieve a total retirement benefit equal to what he would
have received if he had five additional years of credited service under the
Pension Plan.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
The chart below compares the Company's Common Stock performance with the
performance of the Standard & Poor's 500 Composite Stock Price Index ('S&P 500
Index') and a Peer Group Index by measuring the changes in common stock prices
from December 31, 1991 plus reinvested
22
dividends and distributions. Pursuant to the SEC's rules, the Company has
created a peer group index with which to compare its own stock performance since
a published industry or line-of-business index does not exist. The Company has
attempted to select a grouping of companies that includes companies in lines of
business similar to its own. Because of the Company's involvement in a broad mix
of several major media and entertainment businesses and the fact that no other
public companies are engaged in all of these businesses, no grouping could
closely mirror the Company's businesses or weight those businesses to match the
relative contributions of each of the Company's business units to the Company's
performance. All of the companies included in the Company's Peer Group Index are
engaged in only some of the businesses in which the Company is engaged and some
are also engaged in businesses in which the Company does not participate. The
common stocks of the following companies have been included in the Peer Group
Index: Cablevision Systems Corporation, Comcast Corporation, McGraw-Hill Inc.,
Meredith Corporation, The News Corporation Limited, Tele-Communications, Inc.,
Viacom Inc. and The Walt Disney Company. Capital Cities/ABC, Inc. and CBS Inc.,
which were previously included in the Peer Group, have been removed from the
Peer Group Index because of their acquisitions in early 1996 and late 1995 by
The Walt Disney Company and Westinghouse Electric Corporation, respectively. The
chart assumes $100 was invested on December 31, 1991 in each of the Company's
Common Stock, the S&P 500 Index and the Peer Group Index and reflects
reinvestment of dividends and distributions on a monthly basis and annual market
capitalization weighting.
[PERFORMANCE GRAPH]
VALUE AT TIME WARNER PEER GROUP S&P 500
DECEMBER 31 COMMON STOCK INDEX INDEX
- ------------ ------------ ---------- ---------
1991.... $100 $100 $100
1992.... 135 138 108
1993.... 206 165 118
1994.... 165 150 120
1995.... 180 188 165
1996.... 179 182 203
ADDITIONAL INFORMATION
During 1996, the Company and its subsidiaries engaged in transactions in
the ordinary course of business, on normal commercial terms, with The Seagram
Company Ltd., the beneficial owner of more than five percent of the voting power
of the Company's outstanding common stock,
23
and ITOCHU Corporation and Toshiba Corporation, the beneficial owners of more
than five percent of the voting power of separate series of the Voting Preferred
Stock. The amounts involved in such transactions were not material to the
Company or any of such companies. Mr. Haje, an executive officer of the Company,
agreed to an order entered on September 27, 1993 by the U.S. Office of Thrift
Supervision that, for a period of five years, suspends him from practicing
before the OTS and requires him not to engage in the legal representation of a
federally insured depository institution. Mr. Haje also agreed, for such period,
not to participate in any unsafe or unsound banking practices or the submission
of any materially misleading statements to any federal banking authority. Such
order relates to events that occurred while Mr. Haje was a partner in a law firm
that represented a federally insured depository institution, prior to his
employment by the Company, and places no limits on his services for the Company.
During 1996, the Company provided approximately $80,000 of personal benefits to
Mr. Munro, a director of the Company.
CERTAIN LITIGATION
TIME WARNER STOCKHOLDER LITIGATION
On October 30, 1995, two complaints were filed in the Court of Chancery of
the State of Delaware in and for New Castle County ('Delaware Chancery Court')
against the Company, certain officers and directors of the Company, and other
defendants, by stockholders of the Company, purportedly derivatively on behalf
of the Company. The two complaints allege, among other things, that in
connection with the then proposed TBS Merger, some or all of the defendants have
violated fiduciary duties owed to the Company and its stockholders by, among
other things, (i) seeking to entrench themselves in board and management
positions and to eliminate the threat of a hostile takeover, (ii) securing
economic benefits for themselves or conferring special benefits on
Tele-Communications, Inc. ('TCI') and others at the expense of the Company's
public stockholders, and (iii) structuring the TBS Merger so as to place the
Company's chief executive officer in a position which allegedly will involve a
conflict between the interests of TCI and the Company. Among other relief
demanded, both complaints seek an injunction against consummation of the TBS
Merger and an order directing the individual defendants to account to the
Company for their alleged profits and plaintiffs' alleged damages. On November
22, 1995, the Company and the other defendants moved to dismiss the complaint in
one of these actions on the ground that the plaintiff had failed to comply with
Delaware Chancery Court Rule 23.1. There has been no further activity in these
actions.
On March 12, 1996, a complaint was filed in the Delaware Chancery Court
against the directors and certain officers of the Company by a stockholder of
the Company, purportedly derivatively on behalf of the Company. The complaint
alleges, among other things, that some or all of the defendants have breached
fiduciary duties owed to the Company and its stockholders in furtherance of an
entrenchment scheme by, among other things, (i) forcing the resignations of or
firing certain directors and officers of the Company, (ii) conferring special
benefits upon TCI, R.E. Turner and Michael Milken in connection with the TBS
Merger, and (iii) certain matters relating to a dispute with U S WEST, Inc. that
has since been successfully litigated by the Company. The complaint seeks, among
other things, (i) an injunction against consummation of the TBS Merger and
certain related arrangements, (ii) an injunction against any settlement of a
litigation between the Company and U S WEST, Inc. (in which U S WEST, Inc.
sought to enjoin the transaction with TBS and other relief), (iii) a declaratory
judgment that defendants breached their fiduciary duties to the Company and its
stockholders, and (iv) unspecified damages. On April 8, 1996, the defendants
moved to dismiss the complaint in this action. There has been no further
activity in this action.
24
TBS SHAREHOLDER LITIGATION
Fifteen actions against TBS, the Company, certain officers and directors of
TBS or Time Warner Entertainment Company, L.P., and other defendants,
purportedly on behalf of a class of TBS shareholders, filed in Superior Court,
Fulton County, Georgia in connection with the TBS Merger have been consolidated.
On February 29, 1996, plaintiffs filed their third amended consolidated
supplemental and derivative class action complaint (the 'Third Amended
Complaint'). The Third Amended Complaint, which included a derivative claim,
alleged, among other things, that the terms of the TBS Merger were unfair to TBS
shareholders and that the defendants had breached or aided and abetted the
breach of fiduciary common law and statutory duties owned to TBS shareholders by
(a) conferring benefits on controlling shareholders at the expense of other
shareholders, (b) committing corporate waste and (c) taking actions to entrench
TBS board members. The Third Amended Complaint further alleged that the
defendants acted fraudulently in negotiating and approving the TBS Merger, that
the approval of the TBS Merger by the TBS Board of Directors had been
fraudulently obtained, and that the vote of the TBS Board approving the TBS
Merger did not comply with the TBS Articles of Incorporation and By-laws or with
Georgia law. Among other relief demanded, the Third Amended Complaint sought
damages, an injunction against the consummation of the TBS Merger and related
transactions, and an auction of TBS. On April 1, 1996, defendants filed motions
for judgment on the pleadings on all claims asserted in the Third Amended
Complaint. On June 17, 1996, the court transformed the defendants' motion for
judgment on the pleadings into a motion for summary judgment with respect to two
of the plaintiffs' claims and denied the plaintiffs' request for discovery on
those claims. On September 13, 1996, plaintiffs filed a motion for a preliminary
injunction (and related relief) seeking, among other things, an order enjoining
consummation of the TBS Merger. Their motion was denied on October 3, 1996. On
September 19, 1996, plaintiffs sought leave to file a fourth amended complaint.
On December 20, 1996, the Court granted defendants' motion for judgment on the
pleadings with respect to certain of the claims in the Third Amended Complaint
and also granted plaintiffs' motion for leave to file a fourth amended
complaint. On January 16, 1997, plaintiffs filed a fourth amended class action
complaint containing allegations and requesting relief substantially similar in
substance to the Third Amended Complaint.
The Company intends to continue to defend vigorously these actions.
PROPOSAL TO AMEND THE RESTATED CERTIFICATE OF INCORPORATION TO
PROVIDE FOR ELECTION OF ALL DIRECTORS ANNUALLY
The Board of Directors has unanimously approved and recommends to
stockholders that they consider and approve a proposal to amend the Company's
Restated Certificate of Incorporation to eliminate the current division of the
Board of Directors into three classes, with one class elected each year for a
three-year term, and to provide instead for the annual election of the entire
Board of Directors commencing in 1998. If the proposed amendment is approved,
Section 4 of Article VI of the Company's Restated Certificate of Incorporation
would be deleted and Sections 1 and 3 thereof would be amended to read as
follows:
'SECTION 1. Except as otherwise fixed by or pursuant to the provisions
of Article IV of this Certificate of Incorporation relating to the rights
of the holders of any series of Preferred Stock or Series Common Stock or
any class or series of stock having a preference over the Common Stock as
to dividends or upon liquidation, the number of the directors of the
Corporation shall be fixed from time to time by or pursuant to the By-laws
of the Corporation. The directors, other than those who may be elected by
the holders of any series of Preferred Stock or Series Common Stock or any
class or series of stock having a preference over the Common Stock as to
dividends or upon liquidation pursuant to the terms of this Certificate of
Incorporation or any resolution or resolutions providing for the issue of
such class or series of stock adopted by the Board of Directors, shall
be elected by the stockholders entitled to vote
25
thereon at each annual meeting of stockholders and shall hold office
until the next annual meeting of stockholders and until each of their
successors shall have been elected and qualified. The term of office of
each director in office at the time this Section 1 of Article VI becomes
effective shall expire at the next annual meeting of stockholders held
after the time this Section 1 of Article VI becomes effective. The
election of directors need not be by written ballot. No decrease in the
number of directors constituting the Board of Directors shall shorten the
term of any incumbent director.
***
'SECTION 3. Except as otherwise provided for or fixed by or pursuant
to the provisions of Article IV of this Certificate of Incorporation
relating to the rights of the holders of any series of Preferred Stock or
Series Common Stock or any class or series of stock having a preference
over the Common Stock as to dividends or upon liquidation, newly created
directorships resulting from any increase in the number of directors may be
filled by the Board of Directors, or as otherwise provided in the By-laws,
and any vacancies on the Board of Directors resulting from death,
resignation, removal or other cause shall only be filled by the affirmative
vote of a majority of the remaining directors then in office, even though
less than a quorum of the Board of Directors, or by a sole remaining
director, or as otherwise provided in the By-laws. Any director elected in
accordance with the preceding sentence of this Section 3 shall hold office
until the next annual meeting of stockholders and until such director's
successor shall have been elected and qualified.'
Since the Company's original incorporation in the State of Delaware in
1983, its Certificate of Incorporation has provided, as specifically permitted
by Delaware law and the rules of the New York Stock Exchange, that the Board of
Directors would be divided into three classes, with one class elected each year
for a three-year term. The Company, like many companies, believed that a
'classified' Board of Directors provided continuity and stability in the
membership of the Board of Directors and in the policies established by the
Board and ensured that new Directors would have an opportunity to become
familiar with the Company's business and benefit from the experience of the
continuing Directors. The provision was designed to help assure continuity of
Company policies and make management changes more gradual. It was also designed
to ensure that any person seeking to acquire control of the Company would seek
approval of the Board of Directors rather than proceeding unilaterally. The
Company also recognized that a classified Board of Directors could strengthen
its position in negotiating with, or otherwise responding to, any person
attempting a proxy fight or other change-of-control transaction and thereby
might enable the Company to improve the terms of any proposal made by such a
person.
In recent years, the Board of Directors has initiated a number of reforms
in its governance procedures. The Board has reduced its size while bringing on
strong new members and reducing the number of Affiliated Directors. A
requirement that a majority of the Board be independent directors and a policy
of appointing only Unaffiliated Directors to the Audit, Compensation and
Nominating and Governance Committees were adopted. A retirement age for
directors has been implemented. The Company adopted a confidential voting policy
and replaced its directors' retirement plan with a stock option plan. In line
with these changes, the Board of Directors determined that the classified Board
has served the Company well but is no longer desirable and that the benefits of
continuity, stability and experience, while to some degree protected by the
staggered election of directors, do not depend on it alone. Accordingly, the
Board has come to believe that stockholders should have the opportunity to vote
on the entire Board of Directors each year to be able to register their views on
the performance of the Board collectively and each director individually. The
Board of Directors has, therefore, unanimously approved the advisability of the
proposed amendment to the Restated Certificate of Incorporation to provide for
the annual election of all directors and is submitting it to the stockholders
for approval at the Annual Meeting.
26
VOTE REQUIRED FOR APPROVAL
The affirmative vote, in person or by proxy, of the holders of 80% in
voting power of all outstanding shares of Common Stock, Series LMCN-V Stock and
Voting Preferred Stock, voting together as a single class, is required to
approve the Charter Amendment Proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE CHARTER
AMENDMENT PROPOSAL TO PROVIDE FOR THE ANNUAL ELECTION OF DIRECTORS.
APPROVAL OF THE TIME WARNER 1997 STOCK OPTION PLAN
GENERAL
The Time Warner 1997 Stock Option Plan (the '1997 Option Plan') providing
for the granting of stock options to purchase shares of Common Stock and the
granting of related stock appreciation rights to employees of the Company and
its subsidiaries is proposed to be approved by stockholders. The 1997 Option
Plan is intended to be used primarily to grant stock options to the executive
officers of the Company. Approval of the 1997 Option Plan by stockholders is
needed to preserve the Company's tax deduction for the ordinary income
recognized by executive officers upon exercise of nonqualified stock options
granted under the 1997 Option Plan in light of the Omnibus Budget Reconciliation
Act of 1993 (the 'Act').
In general, the Act denies a publicly held corporation a deduction for
Federal income tax purposes for compensation in excess of $1 million per year
paid to its Chief Executive Officer and the four other officers whose
compensation is disclosed in its annual proxy statement, subject to certain
exceptions. The 1997 Option Plan is intended to qualify under one of these
exceptions under the Act which, in substance, require that the plan be approved
by the corporation's stockholders, that it contain a limit on the number of
options that may be granted to any one person and that the exercise price of
options granted under the plan be not less than the fair market value of the
underlying stock on the date of grant.
The Company believes that the stock options to be granted under the 1997
Option Plan are an important part of the compensation of the Company's executive
officers and provide long-term rewards that coincide with long-term stock price
appreciation recognizable by the Company's stockholders. If the 1997 Option Plan
is not approved by the stockholders, the Board of Directors may consider
replacing stock options with other forms of compensation. The Board of Directors
approved the 1997 Option Plan on March 20, 1997. The following summary of the
1997 Option Plan does not purport to be complete and is subject to, and
qualified in its entirety by reference to, the text of the 1997 Option Plan set
forth as Annex A to this Proxy Statement.
STOCK SUBJECT TO THE PLAN
The 1997 Option Plan provides for the granting of options ('Options') to
purchase a maximum of 6,250,000 shares (approximately 1% of the Common Stock
outstanding) of the Company's Common Stock and stock appreciation
rights ('SARs') in connection therewith (collectively, 'Awards'). The Company
believes that this number will be adequate for its needs for a five-year period
for Option awards to its executive officers and it does not expect, under
current conditions, to request approval of any other stock option plan for such
officers prior to 2001. The shares of Common Stock issued under the 1997 Option
Plan may be either authorized and unissued shares or issued shares held in
treasury, or both. During 1996, the Company repurchased in the open market,
approximately 11.4 million shares of Common Stock. The Company will reserve the
number of shares necessary to satisfy the maximum number of shares
that may be issued under the 1997 Option Plan. The Common Stock underlying any
Option that expires, terminates or is canceled for any reason without being
exercised (or without being deemed exercised upon exercise of a related SAR)
will again become available for Awards under the 1997 Option Plan. Cash
27
payments received by the Company upon the exercise of Options will be used
for general corporate purposes.
ADMINISTRATION AND ELIGIBILITY
The Board of Directors has initially delegated authority to administer the
1997 Option Plan to its Compensation Committee (the 'Committee'). Members of the
Committee will be 'non-employee directors' within the meaning of SEC Rule 16b-3
and 'outside directors' within the meaning of Section 162(m) of the Code.
The Company intends to make Awards under the 1997 Option Plan only to
officers subject to the restrictions of Section 16(b) of the Securities Exchange
Act of 1934, as amended (the 'Exchange Act'), although the 1997 Option Plan will
permit Awards to other employees of the Company and its subsidiaries. Awards may
be made to officers whether or not they participate or are entitled to
participate in any other option, restricted stock or other compensation plan of
the Company. The maximum number of shares that may be awarded to any one person,
whether in the form of Options or SARs, is 2,500,000. The exercise of Options
and SARs granted to a prospective employee will be conditioned upon such person
becoming an employee of the Company or one of its subsidiaries.
Except as expressly provided by the 1997 Option Plan, the Committee will
have the plenary authority, in its discretion, to grant Awards under the Plan
and to determine the terms and conditions (which need not be identical) of such
Awards, including without limitation, (a) the officers to whom, and the time or
times at which, Awards will be granted, (b) the number of Awards to be granted,
(c) whether an Option will be an incentive stock option, within the meaning of
Section 422A of the Code ('ISO') or a nonqualified stock option ('NSO'), (d) the
exercise price of any such Award, (e) when an Option or SAR can be exercised and
whether in whole or in installments, and (f) the form, terms and provisions of
any agreement in which Awards of Options or SARs is made (an 'Award Agreement').
No 'reload' or repricing feature is available under the 1997 Option Plan.
OPTIONS AND SARS
Purchase Price. Subject to the limitations set forth below, the purchase
price of the shares of Common Stock covered by each Option and the appreciation
bases of any related SARs will be determined by the Committee on the date of
grant. The purchase price of the shares of Common Stock covered by each Option
will not be less than the fair market value of the Common Stock on the date of
grant of such Option. In addition, an ISO may not be granted to any person who
owns stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company unless the purchase price is at least 110% of
the fair market value of the Common Stock at the time the ISO is granted and the
ISO is not exercisable after the expiration of five years from the date it is
granted.
The Company does not intend to grant any General SARs (as defined below)
while the financial reporting consequences of granting General SARs differ from
the consequences associated with Options. If any SARs are granted, it is
anticipated that their appreciation bases will be the same as the exercise
prices of the related Options; however, the Committee may provide for higher
appreciation bases.
Term and Exercise. The duration of each Option (including any related SAR)
will be for a period of up to ten years as the Committee determines at the time
of grant and may be exercised in whole or in part at any time or only after a
period of time or in installments, as determined by the Committee at the time
of grant, or by the Committee's subsequent acceleration. Under the terms of
the 1997 Option Plan, Options and SARs become immediately exercisable in full
if the optionee's employment terminates by reason of death or total disability.
28
The Committee will establish Option exercise procedures. Payment may be
made in cash or, unless otherwise determined by the Committee, in shares of
Common Stock already owned by the optionee or partly in cash and partly in
Common Stock.
Options (including any related SARs) may be exercised after termination of
employment only to the extent provided in the Award Agreement; provided,
however, that (i) if employment terminates by reason of death or total
disability, Options (including any related SARs) will remain exercisable for a
period of at least one year after such termination (but not later than the
scheduled expiration of such Options) and (ii) if employment terminates for
cause, then all such Options (including any related SARs) will terminate
immediately. Notwithstanding any other provision of the 1997 Option Plan, the
Committee may provide at the time of the grant of an Award that it will become
and/or remain exercisable, at rates and at times at variance with the 1997
Option Plan's rules, but only if reflected in the terms of an employment
agreement approved or ratified by the Board of Directors or the Committee.
SARs. Under the 1997 Option Plan, SARs may be granted simultaneously with
the grant of a related Option or at any later time prior to its complete
exercise, termination, expiration or cancellation. An officer may be granted
General SARs ('General SARs'), Limited SARs ('Limited SARs') or both. General
SARs permit the holder to receive an amount (in cash, Common Stock or a
combination of both, as requested by the holder) equal to the number of shares
of Common Stock with respect to which such SARs are exercised, multiplied by the
excess of the fair market value of the Common Stock on the exercise date over
the related SAR appreciation base. General SARs may be exercised only to the
extent the related Option is exercisable. Unless otherwise provided in the
applicable Award agreement, the number of General SARs which may be exercised
for cash, or partly for cash and partly for shares of Common Stock, during any
calendar quarter may not exceed 20% of the aggregate number of shares subject to
such related Option.
Limited SARs are similar to General SARs, except that they may be exercised
only during a prescribed period following the occurrence of one or more
'change-of-control' transactions described below. Upon the exercise of Limited
SARs granted in connection with an ISO, unless otherwise determined by the
Committee at the time of grant, the holder will receive in cash an amount equal
to the number of Limited SARs exercised multiplied by the excess of (i) the fair
market value of the Common Stock on the date of exercise over (ii) the
appreciation base. Upon the exercise of Limited SARs granted in connection with
an NSO, unless otherwise determined by the Committee at the time of grant, the
holder will receive in cash an amount equal to the number of shares of Common
Stock with respect to which such Limited SARs are exercised multiplied by the
excess of (a) the highest per share price paid or to be paid in connection with
certain change-of-control transactions which occur at any time during the 60-day
period preceding the exercise of such Limited SARs, or, if higher, the highest
reported closing sales price of a share of Common Stock on the New York Stock
Exchange Composite Listing at any time during such 60-day period, over (b) the
SAR appreciation base.
The exercise of any Options will cause a corresponding reduction in the
number of shares of Common Stock remaining subject to the related SARs, and the
exercise of any SARs will cause a corresponding reduction in the number of
shares remaining subject to the related Options, in either case, maintaining a
balance between outstanding Options and SARs. Any such reduction will reduce the
number of shares available for future Awards under the 1997 Option Plan.
Transferability. To the extent permitted by the Award Agreement, Options
and SARs will be transferable by gift to members of a holder's immediate family.
Options and SARs will also be transferable to a designated beneficiary or by
will or the laws of descent and distribution upon the death of the holder.
29
ACCELERATION OF OPTIONS AND SARS
Unless otherwise provided in the Award Agreement, each Award will vest upon
the occurrence of any of the following change-of-control transactions: (i) the
Board of Directors (or stockholders if required) approves a consolidation or
merger in which the Company is not the surviving corporation, the sale of all or
substantially all of the assets of the Company, or the liquidation or
dissolution of the Company, (ii) any person or other entity (other than the
Company or any Company-sponsored employee benefit plan) purchases any shares of
Common Stock (or securities convertible or exchangeable into Common Stock)
pursuant to a tender or exchange offer without the prior consent of the Board of
Directors, or becomes the beneficial owner of securities of the Company
representing 20% or more of the voting power of the Company's outstanding
securities, or (iii) during any two-year period, individuals who at the
beginning of such period constitute the entire Board of Directors cease to
constitute a majority of the Board, unless the election, or the nomination for
election, of each new director is approved by at least two-thirds of the
directors then still in office who were directors at the beginning of the
period.
Under Section 4999 of the Code, an optionee may be required to pay an
excise tax on certain cash or stock received in connection with the optionee's
termination of employment following any such change-of-control transaction, and,
under Section 280G of the Code, the Company may not be entitled to a deduction
for Federal income tax purposes for certain of such cash or stock paid to an
employee. However, the 1997 Option Plan provides that Award Agreements may
contain provisions relating to the applicability of the penalty provisions of
Section 4999 of the Code to any such cash or stock received by an optionee.
ADDITIONAL PROVISIONS
Changes in Capitalization. In the event of a stock split, stock dividend,
recapitalization, merger, consolidation or other similar transaction which
affects the character or amount of the outstanding shares of Common Stock, the
Committee will equitably adjust the purchase price of each Award and the number
of shares subject to each such Award, and the number of shares for which Awards
may be granted under the Stock Plan will be appropriately adjusted.
Other. The obligations of the Company with respect to Awards granted under
the 1997 Option Plan are subject to all applicable laws. Unless otherwise
provided by the Committee, the payment of withholding taxes due in respect of an
Award under the 1997 Option Plan may be made with shares of Common Stock.
AMENDMENT AND TERMINATION
No Awards may be granted under the 1997 Option Plan on or after the fifth
anniversary of the date of approval of the 1997 Option Plan by the stockholders
of the Company. The Board of Directors may terminate or amend the 1997 Option
Plan at any time, provided that the Board of Directors must comply with all
applicable laws, applicable stock exchange listing requirements and applicable
requirements for the 1997 Option Plan to qualify as 'performance based' under
the Act and Section 162(m) of the Code. Termination or amendment of the 1997
Option Plan or any outstanding Award may not adversely affect the rights of any
holder without his or her consent.
AWARDS UNDER THE 1997 OPTION PLAN
No Awards have been made under the 1997 Option Plan. As stated above, any
Awards under the 1997 Option Plan will be determined by the Committee in its
discretion. It is, therefore, not possible to predict the Awards that will be
made to particular officers in the future under the 1997 Option Plan, except
that, if the 1997 Option Plan is approved by stockholders, it is expected that
Mr. Turner will receive Awards under the 1997 Option Plan pursuant the terms of
his employment agreement. See 'Employment Arrangements.' Stock options awarded
to the named
30
executive officers in 1996 under the Company's existing plans are set forth
under 'Stock Option Grants During 1996.' In addition, nonqualified stock options
covering an aggregate of 77,500 shares of Common Stock were awarded to three
other executive officers during 1996.
OTHER INFORMATION
On March , 1997, the closing sale price of the Common Stock, as reported
on the New York Stock Exchange Composite Listing, was $ per share.
FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS AND SARS
The following summary generally describes the principal Federal (and not
state and local) income tax consequences of Awards granted under the 1997 Option
Plan. It is general in nature and is not intended to cover all tax consequences
that may apply to a particular officer or to the Company. The provisions of the
Code and the regulations thereunder relating to these matters are complicated
and their impact in any one case may depend upon the particular circumstances.
If an Option is granted in accordance with the terms of the 1997 Option
Plan, no income will be recognized by the recipient thereof at the time the
Option is granted.
On exercise of an NSO, the amount by which the fair market value of the
shares of Common Stock on the date of exercise exceeds the purchase price of
such shares will generally be taxable to the optionee as ordinary income, and
will be deductible for tax purposes by the Company in the year in which the
optionee recognized the ordinary income. The disposition of shares acquired upon
exercise of an NSO will ordinarily result in long-term or short-term capital
gain or loss (depending on the applicable holding period) in an amount equal to
the difference between the amount realized on such disposition and the sum of
the purchase price and the amount of ordinary income recognized in connection
with the exercise of the NSO.
On exercise of an ISO, an optionee will generally not recognize any income
and the Company will generally not be entitled to a deduction for tax purposes.
However, the difference between the exercise price and the fair market value of
the shares received on the date of exercise will be treated as a positive
adjustment in determining alternative minimum taxable income, which may subject
the optionee to the alternative minimum tax. The disposition of shares acquired
upon exercise of an ISO will ordinarily result in long-term or short-term
capital gain or loss (depending on the applicable holding period). However, if
the optionee disposes of shares acquired upon exercise of an ISO within two
years after the date of grant or within one year after the date of exercise (a
'disqualifying disposition'), the optionee will generally recognize ordinary
income, and the Company will generally be entitled to a deduction for tax
purposes in the amount of the excess of the fair market value of the shares of
Common Stock on the date the ISO is so exercised over the purchase price (or, in
certain circumstances, the gain on sale, if less). Any excess of the amount
realized by the optionee on the disqualifying disposition over the fair market
value of the shares on the date of exercise of the ISO will ordinarily
constitute capital gain.
If an Option is exercised through the use of Common Stock previously owned
by the optionee, such exercise generally will not be considered a taxable
disposition of the previously owned shares and thus no gain or loss will be
recognized with respect to such shares upon such exercise. However, if the
previously owned shares were acquired on the exercise of an ISO or other tax-
qualified stock option and the holding period requirement for those shares was
not satisfied at the time they were used to exercise an Option intended to
qualify as an ISO, such use would constitute a disqualifying disposition of such
previously owned shares resulting in the recognition of ordinary income (but,
under proposed Treasury Regulations, not any additional capital gain) in the
amount described above. If an otherwise qualifying ISO becomes first exercisable
in any one year for shares having a value in excess of $100,000 (grant date
value), the portion of the Option in respect of such excess shares will be
treated as an NSO.
31
The amount of any cash (or the fair market value of any Common Stock)
received upon the exercise of SARs under the 1997 Option Plan will be includible
in the optionee's ordinary income and the Company will be entitled to a
deduction for such amount.
VOTE REQUIRED FOR APPROVAL OF THE 1997 OPTION PLAN
The affirmative vote of a majority of the votes cast on the proposal,
either in person or by proxy, by the holders of Common Stock and Voting
Preferred Stock entitled to vote at the Annual Meeting, voting together as a
single class, is required to approve the 1997 Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE TIME WARNER
1997 STOCK OPTION PLAN.
APPROVAL OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Ernst & Young LLP as independent
auditors of the Company to audit its consolidated financial statements for 1997
and has determined that it would be desirable to request that the stockholders
approve such appointment.
Ernst & Young LLP has served the Company and its subsidiaries as
independent auditors for many years. Representatives of Ernst & Young LLP will
be present at the Annual Meeting with the opportunity to make a statement if
they desire to do so and to respond to appropriate questions from stockholders.
VOTE REQUIRED FOR APPROVAL
Stockholder approval is not required for the appointment of Ernst & Young
LLP, since the Board of Directors has the responsibility for selecting auditors.
However, the appointment is being submitted for approval at the Annual Meeting.
No determination has been made as to what action the Board of Directors would
take if stockholders do not approve the appointment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE APPOINTMENT OF
ERNST & YOUNG LLP AS INDEPENDENT AUDITORS.
STOCKHOLDER PROPOSAL
PROPOSAL REGARDING THE USE OF CHLORINE-BLEACHED PAPER
The Ancilla Domini Sisters, Donaldson, Indiana 46513, beneficial owners of
1,000 shares of Common Stock, joined by nine other organizations whose names,
addresses and stockholdings will be provided by the Company upon request, have
advised the Company that they intend to propose a resolution at the Annual
Meeting. The proposed resolution and statement in support thereof are set forth
below:
WHEREAS the Environmental Protection Agency, in the finding of its
three-year study on dioxins, declared that dioxins probably cause cancer and are
linked to numerous other health disorders, including hormone disorders and
dysfunctions in immune systems. This threat to human health and the environment
has been recognized by a number of international conventions;
WHEREAS exposure to dioxin poses a risk of getting cancer between 1 in
1,000 and 1 in 10,000, which is at least 100 times greater than the usual
acceptable risk level of 1 in 1,000,000 EPA uses for regulating exposure to
toxic substances;
WHEREAS dioxin is bio-accumulative which means it remains in the tissue of
living organisms that consume it. Contamination levels increase at every step of
the food chain;
32
WHEREAS in October 1993, the American Public Health Association (APHA), the
nation's premier public health organization, stated in a public resolution that
'virtually all chlorinated organic compounds that have been studied exhibit at
least one of a wide range of serious toxic effects such as endocrine
dysfunction, developmental impairment, birth defects, reproductive dysfunction
and infertility, immunosuppression and cancer, often at extremely low doses;'
The September 12, 1996 New England Journal of Medicine reported results of
a study indicating lower IQ scores, memory and attention effects still
significant for children eleven years after exposure in utero to
organochlorines;
WHEREAS production of chlorine-bleached paper is a major source of dioxin.
The use of chlorine dioxide instead of chlorine bleach, the process used to
produce most of the paper TIME now purchases, does not eliminate the production
of dioxins; incineration merely turns a water pollution problem into an air
pollution problem. A report released in May 1995 by the Center for the Biology
of Natural Systems at the City University of New York found that dioxins from
waste incineration travel distances as far as 1,250 miles;
WHEREAS TIME, the largest magazine publisher, is such a large
private-sector user of paper (800 tons a week), that the paper industry will
adjust bleaching processes to fill TIME's demands;
WHEREAS in an editorial which appeared in TIME magazine in January 1992,
the magazine pledged to use alternative paper as soon as it is practical to do
so;
WHEREAS clean alternatives, such as oxygen, ozone and hydrogen peroxide are
currently being used around the world to produce high quality paper products
without adding dangerous poisons to the environments in which those products are
made; Totally chlorine-free mills are currently at commercial scale, while the
closed loop bleaching for elemental chlorine-free mills is in earlier stages of
development;
RESOLVED: The shareholders request the Board of Directors to report on its
plans to convert to the use of alternative, totally chlorine-free paper. The
report should be available to all shareholders within six months of the 1997
annual meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL FOR THE
FOLLOWING REASONS:
The Company takes its concern about the environment seriously. Its Time
Inc. publishing subsidiary has been a leader within the magazine publishing
industry in promoting environmentally sound practices in the paper manufacturing
industry. At the end of 1995, after almost three years of extensive research and
financial and personnel commitment by Time Inc., it along with three other major
corporations, Duke University and the Environmental Defense Fund (the 'Paper
Task Force') released their Paper Task Force Recommendations for Purchasing and
Using Environmentally Preferable Paper (the 'Task Force Report'). This 246-page
Report is intended to provide a road map on how companies, including the
Company, can minimize the environmental impact of the paper they buy and use.
Rather than considering only a single or a few attributes of paper, for example,
how it is bleached, the Paper Task Force chose to examine the entire lifecycle
of paper, literally from the forest to the landfill. In so doing, the Task Force
Report provides guidelines for integrating environmental criteria into paper
purchasing. These guidelines point the way to improved forest management,
cleaner manufacturing and less waste in landfills. A copy of the Task Force
Report is available from the Company upon request.
The Task Force Report recommends that paper purchasers give preference to
paper manufactured by suppliers who demonstrate continuous improvement toward
'minimum impact mills' by installing pollution-prevention technologies. The
Company, through its Time Inc. unit, has announced its commitment to promote in
its paper purchases the Paper Task Force's concept of the 'minimum impact mill,'
a holistic manufacturing concept that encompasses environmental management
systems, compliance with environmental laws and regulations and process
technologies. Moreover, to aid in implementing the Task Force Report's
recommendations, Time
33
Inc. has already undertaken rigorous and thorough environmental reviews of
several of its major paper suppliers. These reviews are on-going. Environmental
considerations remain an important factor in supplier selection and in the
evaluation of the Company's relationships with these suppliers. The preparation
of the report requested by the proposal would be redundant and wasteful since
the Company continues to commit substantial time and resources to the subject
matter of the proposal.
As the Task Force Report recommends, the Company integrates environmental
criteria into its paper purchasing decisions along with other criteria such as
cost, availability and functionality. Currently, a substantial amount of the
paper purchased by the Company is elemental chlorine-free and a majority of this
paper is bleached with oxygen, which represents a key step toward the minimum
impact mill. There are several ways to achieve the minimum impact mill in terms
of low-effluent bleaching processes; a totally chlorine-free process is just
one. The Company is working with its suppliers toward the goal of the minimum
impact mill and is encouraging the development of technologies that it believes
will enable its suppliers to achieve that goal. In fact, Time Inc. is buying
some paper that is bleached using a variety of alternatives, such as ozone and
hydrogen peroxide. Other environmentally responsive methods, including bleached
filtrate recycling, are also being tested. Because of the possibility of
developing technologies and new scientific breakthroughs, the Board of Directors
believes that the Company should remain flexible in its approach to its paper
purchases and is not well served by setting rigid deadlines and technological
goals as the proponents seem to request. The Board of Directors believes that
the Company, and the environment, would be better served by using the Company's
resources to implement the Task Force Report's recommendations than in the
creation of the requested report.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of a majority of the votes cast on this proposal,
either in person or by proxy, by holders of Common Stock and Voting Preferred
Stock entitled to vote and voting as a single class is required to adopt such
proposal.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than ten percent of a registered class of
the Company's equity securities, to file reports of ownership and changes in
ownership with the SEC and the New York Stock Exchange. Officers, directors and
greater than ten-percent stockholders are required by SEC regulations to furnish
the Company with copies of all Section 16(a) forms they file. Based solely on a
review of the copies of such forms furnished to the Company, or written
representations that no Forms 5 were required, the Company believes that during
1996, its officers, directors and greater than ten-percent beneficial owners
complied with all applicable Section 16(a) filing requirements, except Mr.
Buttenwieser inadvertently failed to report, prior to the termination and
distribution of the assets thereof, his indirect beneficial interest in Common
Stock held in a trust of which he was a co-trustee and an income and remainder
beneficiary.
EXPENSES OF SOLICITATION
All expenses of this solicitation, including the cost of preparing and
mailing this Proxy Statement, will be borne by the Company. In addition to
solicitation by use of the mails, proxies and voting instructions may be
solicited by directors, officers and employees of the Company in person or by
telephone, telegram or other means of communication. Such directors, officers
and employees will not be additionally compensated but may be reimbursed for
reasonable out-of-pocket expenses in connection with such solicitation. The
Company has retained D. F. King & Co., Inc. at an estimated cost of $20,000,
plus reimbursement of expenses, to assist in its solicitation of
34
proxies from brokers, nominees, institutions and individuals. Arrangements will
also be made with custodians, nominees and fiduciaries for forwarding proxy
solicitation materials to beneficial owners of shares held of record by such
custodians, nominees and fiduciaries, and the Company will reimburse such
custodians, nominees and fiduciaries for reasonable expenses incurred in
connection therewith.
PROCEDURE FOR SUBMITTING STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 under the Exchange Act, stockholders may present
proper proposals for inclusion in the Company's proxy statement and for
consideration at the next annual meeting of its stockholders by submitting their
proposals to the Company in a timely manner. In order to be so included for the
1998 Annual Meeting, stockholder proposals must be received by the Company no
later than December 1, 1997, and must otherwise comply with the requirements of
Rule 14a-8. In addition, the Company's By-laws establish an advance notice
procedure with regard to certain matters, including stockholder proposals not
included in the Company's proxy statement, to be brought before an annual
meeting of stockholders. In general, notice must be received by the Secretary of
the Company not less than 70 days nor more than 120 days prior to the
anniversary date of the immediately preceding annual meeting and must contain
specified information concerning the matters to be brought before such meeting
and concerning the stockholder proposing such matters. If the date of the annual
meeting is more than 30 days earlier or more than 60 days later than such
anniversary date, notice must be received not earlier than the 120th day prior
to such annual meeting and not later than the close of business on the later of
the 70th day prior to such annual meeting or the 10th day following the day on
which public announcement of the date of such meeting is first made. If a
stockholder who has notified the Company of his intention to present a proposal
at an annual meeting does not appear or send a qualified representative to
present his proposal at such meeting, the Company need not present the proposal
for a vote at such meeting.
All notices of proposals by stockholders, whether or not to be included in
the Company's proxy materials, should be sent to the attention of the Secretary
of the Company at 75 Rockefeller Plaza, New York, New York 10019.
GENERAL
The Board of Directors does not know of any other matters to be presented
at the Annual Meeting. If any additional matters are properly presented, the
persons named in the proxy will have discretion to vote in accordance with their
own judgment on such matters.
BY ORDER OF THE BOARD OF DIRECTORS,
GERALD M. LEVIN
Chairman of the Board and
Chief Executive Officer
March 28, 1997
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ANNEX A
TIME WARNER
1997 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN
The purpose of the Time Warner 1997 Stock Option Plan (hereinafter the
'Plan') is to provide for the granting of stock options and stock appreciation
rights to certain employees (principally executive officers) of Time Warner Inc.
and its Subsidiaries in recognition of the valuable services provided, and
contemplated to be provided, by such employees. The Plan is intended to preserve
the tax deduction of Time Warner and its Subsidiaries for the ordinary income
recognized by executive officers of Time Warner upon exercise of Nonqualified
Stock Options granted under the Plan in light of the Omnibus Budget
Reconciliation Act of 1993. The general purpose of the Plan is to promote the
interests of Time Warner and its stockholders and to reward dedicated employees
of Time Warner and its Subsidiaries by providing them additional incentives to
continue and increase their efforts with respect to, and to remain in the employ
of, Time Warner or its Subsidiaries.
2. CERTAIN DEFINITIONS
The following terms (whether used in the singular or plural) have the
meanings indicated when used in the Plan:
(a) 'Act' means the Omnibus Budget Reconciliation Act of 1993, as
amended.
(b) 'Agreement' means the stock option agreement and stock
appreciation rights agreement specified in Section 11, both individually
and collectively, as the context so requires.
(c) 'Approved Transaction' means any transaction in which the Board
(or, if approval of the Board is not required as a matter of law, the
stockholders of Time Warner) shall approve (i) any consolidation or merger
of Time Warner in which Time Warner is not the continuing or surviving
corporation or pursuant to which shares of Common Stock would be converted
into cash, securities or other property, other than a merger of Time Warner
in which the holders of Common Stock immediately prior to the merger have
the same proportionate ownership of common stock of the surviving
corporation immediately after the merger, or (ii) any sale, lease,
exchange, or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of Time Warner,
or (iii) the adoption of any plan or proposal for the liquidation or
dissolution of Time Warner.
(d) 'Award' means grants of Options and/or SARs under this Plan.
(e) 'Board' means the Board of Directors of Time Warner.
(f) 'Board Change' means, during any period of two consecutive years,
individuals who at the beginning of such period constituted the entire
Board ceased for any reason to constitute a majority thereof unless the
election, or the nomination for election by Time Warner's stockholders, of
each new director was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the beginning of the
period.
(g) 'Code' means the Internal Revenue Code of 1986, as amended from
time to time, or any successor statute or statutes thereto. Reference to
any specific Code section shall include any successor section.
(h) 'Committee' means the Committee comprised of members of the Board
appointed pursuant to Section 4.
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(i) 'Common Stock' means the common stock, par value $.01 per share,
of Time Warner.
(j) 'Composite Tape' means the New York Stock Exchange Composite Tape.
(k) 'Control Purchase' means any transaction in which any person (as
such term is defined in Sections 13(d)(3) and 14(d)(2) of the Exchange
Act), corporation or other entity (other than Time Warner or any employee
benefit plan sponsored by Time Warner or any of its Subsidiaries) (i) shall
purchase any Common Stock (or securities convertible into or exchangeable
for Common Stock) for cash, securities or any other consideration pursuant
to a tender offer or exchange offer, without the prior consent of the
Board, or (ii) shall become the 'beneficial owner' (as such term is defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of Time Warner representing 20% or more of the combined voting
power of the then outstanding securities of Time Warner ordinarily (and
apart from the rights accruing under special circumstances) having the
right to vote in the election of directors (calculated as provided in Rule
13d-3(d) in the case of rights to acquire Time Warner's securities).
(l) 'Effective Date' means the date the Plan becomes effective
pursuant to Section 15.
(m) 'Exchange Act' means the Securities Exchange Act of 1934, as
amended from time to time, or any successor statute or statutes thereto.
Reference to any specific Exchange Act section shall include any successor
section.
(n) 'Fair Market Value' of a share of Common Stock means the average
of the high and low sales prices of a share of Common Stock on the
Composite Tape on the date in question, except as otherwise provided in
Section 6.5.
(o) 'General SARs' means stock appreciation rights subject to the
terms of Section 6.5(b).
(p) 'Holder' means an employee of Time Warner or any of its
Subsidiaries who has received an Award under this Plan.
(q) 'ISO' means an incentive stock option within the meaning of
section 422A(b) of the Code.
(r) 'Limited SARs' means stock appreciation rights subject to the
terms of Section 6.5(c).
(s) 'Minimum Price Per Share' means the highest gross price (before
brokerage commissions, soliciting dealers' fees and similar charges) paid
or to be paid for any share of Common Stock (whether by way of exchange,
conversion, distribution, liquidation or otherwise) in, or in connection
with, any Approved Transaction or Control Purchase which occurs at any time
during the period beginning on the sixtieth day prior to the date on which
Limited SARs are exercised and ending on the date on which Limited SARs are
exercised. If the consideration paid or to be paid in any such Approved
Transaction or Control Purchase shall consist, in whole or in part, of
consideration other than cash, the Board shall take such action, as in its
judgment it deems appropriate, to establish the cash value of such
consideration, but such valuation shall not be less than the value, if any,
attributed to such consideration by any other party to such Approved
Transaction or Control Purchase.
(t) 'Nonqualified Stock Option' means a stock option that is
designated as a nonqualified stock option.
(u) 'Option' means any ISO or Nonqualified Stock Option granted
pursuant to this Plan.
(v) 'Plan' has the meaning ascribed thereto in Section 1.
(w) 'SARs' means General SARs and Limited SARs.
(x) 'Subsidiary' of a person means any present or future subsidiary of
such person as such term is defined in section 425 of the Code and any
present or future trade or business, whether or not incorporated,
controlled by or under common control with such person. An
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entity shall be deemed a Subsidiary of a person only for such periods as
the requisite ownership or control relationship is maintained.
(y) 'Time Warner' means Time Warner Inc., a Delaware corporation, and
any successor thereto.
(z) 'Total Disability' means a permanent and total disability as
defined in section 22(e)(3) of the Code.
3. STOCK SUBJECT TO THE PLAN
3.1. Number of Shares. Subject to the provisions of Section 12 and this
Section 3, the maximum number of shares of Common Stock in respect of which
Awards may be granted under the Plan is 6,250,000 and the maximum number of
shares that may be granted to any one individual under the Plan is 2,500,000. If
and to the extent that an Option shall expire, terminate or be canceled for any
reason without having been exercised (or without having been considered to have
been exercised as provided in Section 6.5(a)), the shares of Common Stock
subject to such expired, terminated or canceled portion of the Option shall
again become available for purposes of the Plan.
3.2. Character of Shares. Shares of Common Stock deliverable under the
terms of the Plan may be, in whole or in part, authorized and unissued shares of
Common Stock or issued shares of Common Stock held in Time Warner's treasury, or
both.
3.3. Reservation of Shares. Time Warner shall at all times reserve a number
of shares of Common Stock (authorized and unissued Common Stock, issued Common
Stock held in Time Warner's treasury, or both) equal to the maximum number of
shares that may be subject to outstanding Awards and future Awards under the
Plan.
4. ADMINISTRATION
4.1. Powers. The Plan shall be administered by the Board. Subject to the
express provisions of the Plan, the Board shall have plenary authority, in its
discretion, to grant Awards under the Plan and to determine the terms and
conditions (which need not be identical) of all Awards so granted, including
without limitation, (a) the individuals to whom, and the time or times at which,
Awards shall be granted or awarded, (b) the number of shares to be subject to
each Award, (c) whether an Option shall be an ISO or a Nonqualified Stock
Option, (d) when an Option or SAR can be exercised and whether in whole or in
installments, and (e) the form, terms and provisions of any Agreement (which
terms may be amended, subject to Section 14).
4.2. Factors to Consider. In making determinations hereunder, the Board may
take into account the nature of the services rendered by the respective
employees, their dedication and past contributions to Time Warner and its
Subsidiaries, their present and potential contributions to the success of Time
Warner and its Subsidiaries and such other factors as the Board in its
discretion shall deem relevant.
4.3. Interpretation. Subject to the express provisions of the Plan, the
Board shall have plenary authority to interpret the Plan, to prescribe, amend
and rescind the rules and regulations relating to it and to make all other
determinations deemed necessary or advisable for the administration of the Plan.
The determinations of the Board on the matters referred to in this Section 4
shall be conclusive.
4.4. Delegation to Committee. Notwithstanding anything to the contrary
contained herein, the Board may at any time, or from time to time, appoint a
Committee and delegate to such Committee the authority of the Board to
administer the Plan, including to the extent provided by the Board, the power to
further delegate such authority. Upon such appointment and delegation, any such
Committee shall have all the powers, privileges and duties of the Board in the
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administration of the Plan to the extent provided in such delegation, except for
the power to appoint members of the Committee and to terminate, modify or amend
the Plan. The Board may from time to time appoint members of any such Committee
in substitution for or in addition to members previously appointed, may fill
vacancies in such Committee and may discharge such Committee.
Any such Committee shall hold its meetings at such times and places as it
shall deem advisable. A majority of members shall constitute a quorum and all
determinations shall be made by a majority of such quorum. Any determination
reduced to writing and signed by all of the members shall be fully as effective
as if it had been made by a majority vote at a meeting duly called and held.
5. ELIGIBILITY
5.1. General. Awards may be made only to (a) employees, including officers
and directors who are also employees, of Time Warner or any of its Subsidiaries
and (b) prospective employees of Time Warner or any of its Subsidiaries. The
exercise of Options and SARs granted to a prospective employee shall be
conditioned upon such person becoming an employee of Time Warner or any of its
Subsidiaries. For purposes of the Plan, the term 'prospective employee' shall
mean any person who holds an outstanding offer of employment on specific terms
from Time Warner or any of its Subsidiaries. Awards may be made to employees who
hold or have held Awards under this Plan or any similar or other awards under
any other plan of Time Warner or its Subsidiaries.
5.2. Special ISO Rule. No ISO shall be granted to an employee who, at the
time the ISO is granted, owns (or is considered as owning within the meaning of
section 425(d) of the Code) stock possessing more than 10% of the total combined
voting power of all classes of stock of Time Warner or any Subsidiary, unless at
the time the ISO is granted the option price is at least 110% of the Fair Market
Value of the Common Stock subject to the ISO and the ISO by its terms is not
exercisable after the expiration of five years from the date it is granted.
6. OPTIONS AND SARS
6.1. Option Prices. Subject to Section 5.2, the purchase price of the
Common Stock under each Option shall be determined by the Board and set forth in
the applicable Agreement, but shall not be less than 100% of the Fair Market
Value of the Common Stock on the date of grant.
6.2. Term of Options. The term of each Option shall be for such period as
the Board shall determine, as set forth in the applicable Agreement, but not
more than 10 years from the date of grant (except as provided in Section 5.2).
6.3. Exercise of Options. An Option granted under the Plan shall become
(and remain) exercisable during the term of the Option to the extent provided in
the applicable Agreement and this Plan and, unless the Agreement otherwise
provides, may be exercised to the extent exercisable, in whole or in part, at
any time and from time to time during such term; provided, however, that
subsequent to the grant of an Option, the Board, at any time before complete
termination of such Option, may accelerate the time or times at which such
Option may be exercised in whole or in part (without reducing the term of such
Option). The Agreement may contain conditions precedent to the exercisability of
Options, including without limitation, the achievement of minimum performance
criteria.
6.4. Manner of Exercise. Payment of the Option purchase price shall be made
in cash or in whole shares of Common Stock already owned by the person
exercising an Option or, partly in cash and partly in such Common Stock;
provided, however, that such payment may be made in whole or in part in shares
of Common Stock only if and to the extent permitted by the applicable Agreement.
An Option shall be exercised by written notice to Time Warner upon such terms
and conditions as provided in the Agreement. Time Warner shall effect the
transfer of the shares of
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Common Stock purchased under the Option as soon as practicable, and within a
reasonable time thereafter such transfer shall be evidenced on the books of Time
Warner. No Holder or other person exercising an Option shall have any of the
rights of a stockholder of Time Warner with respect to shares of Common Stock
subject to an Option granted under the Plan until due exercise and full payment
has been made. No adjustment shall be made for cash dividends or other rights
for which the record date is prior to the date of such due exercise and full
payment.
6.5. SARs. (a) General Conditions. The Board may (but shall not be
obligated to) grant General SARs and/or Limited SARs pursuant to the provisions
of this Section 6.5 to a Holder of any Option (hereinafter called a 'related
Option'), with respect to all or a portion of the shares of Common Stock subject
to the related Option.
A SAR may be granted either concurrently with the grant of the related
Option or at any time thereafter prior to the complete exercise, termination,
expiration or cancellation of such related Option. Subject to the terms and
provisions of this Section 6.5, each SAR shall be exercisable to the extent the
related Option is then exercisable (and may be subject to such additional
limitations on exercisability as the Agreement may provide), and in no event
after the complete termination or full exercise of the related Option. SARs
shall be exercisable in whole or in part upon notice to Time Warner upon such
terms and conditions as provided in the Agreement.
Upon the exercise of SARs, the related Option shall be considered to have
been exercised to the extent of the number of shares of Common Stock with
respect to which such SARs are exercised and shall be considered to have been
exercised to that extent for purposes of determining the number of shares of
Common Stock in respect of which other Awards may be granted. Upon the exercise
or termination of the related Option, the SARs with respect thereto shall be
considered to have been exercised or terminated to the extent of the number of
shares of Common Stock with respect to which the related Option was so exercised
or terminated.
The provisions of Sections 4 and 6 through 22 (to the extent that such
provisions are applicable to Options) shall also be applicable to SARs unless
the context otherwise requires.
(b) General SARs. General SARs shall be exercisable only at the time the
related Option is exercisable and, subject to the terms and provisions of this
Section 6.5, upon the exercise of General SARs, the person exercising the
General SAR shall be entitled to receive consideration (in the form hereinafter
provided) equal in value to the excess of the Fair Market Value on the date of
exercise of the shares of Common Stock with respect to which such General SARs
have been exercised over the aggregate related Option purchase price for such
shares; provided, however, that the Board may, in any Agreement granting General
SARs provide that the appreciation realizable upon exercise thereof shall be
measured from a base higher than the related Option purchase price.
Upon the exercise of a General SAR, the person exercising the General SAR
may specify the form of consideration to be received by such person exercising
the General SAR, which shall be in shares of Common Stock (valued at Fair Market
Value on the date of exercise of such General SAR), or in cash, or partly in
cash and partly in shares of Common Stock. Any election by the person exercising
the General SAR to receive cash in full or partial settlement of such General
SAR shall comply with all applicable laws and shall be subject to the discretion
of the Board to settle General SARs only in shares of Common Stock if necessary
or advisable in the judgment of the Board to preserve pooling of interests
accounting treatment for any proposed transaction involving Time Warner. Unless
otherwise specified in the applicable Agreement, the number of General SARs
which may be exercised for cash, or partly for cash and partly for shares of
Common Stock, during any calendar quarter, may not exceed 20% of the aggregate
number of shares of Common Stock originally subject to the related Option (as
such original number, without giving effect to the exercise of any portion of
the related Option, shall have been retroactively adjusted in accordance with
Section 12 or any corresponding provisions of an applicable Agreement).
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For purposes of this Section 6.5, the date of exercise of a General SAR
shall mean the date on which Time Warner shall have received notice from the
person exercising the General SAR of the exercise thereof.
(c) Limited SARs. Limited SARs may be exercised only during the period (a)
beginning on the first day following either (i) the date of an Approved
Transaction, (ii) the date of a Control Purchase, or (iii) the date of a Board
Change, and (b) ending on the ninetieth day (or such other date specified in the
Agreement) following such date. The effective date of exercise of a Limited SAR
shall be deemed to be the date on which Time Warner shall have received notice
from the person exercising the Limited SAR of the exercise thereof.
Upon the exercise of Limited SARs granted in connection with an ISO, except
as otherwise provided in the Agreement and subject to the last paragraph of this
Section 6.5(c), the person exercising the Limited SAR shall receive in cash an
amount equal to the excess of the Fair Market Value on the date of exercise of
such Limited SARs of the shares of Common Stock with respect to which such
Limited SARs shall have been exercised over the aggregate related Option
exercise price for such shares.
Upon the exercise of Limited SARs granted in connection with a Nonqualified
Stock Option, except as otherwise provided in the Agreement and subject to the
last paragraph of this Section 6.5(c), the person exercising the Limited SAR
shall receive in cash an amount equal to the product computed by multiplying (a)
the excess of (i) the higher of (A) the Minimum Price Per Share, or (B) the
highest reported closing sales price of a share of Common Stock as reported on
the Composite Tape at any time during the period beginning on the sixtieth day
prior to the date on which such Limited SARs are exercised and ending on the
date on which such Limited SARs are exercised over (ii) the per share Option
price of the related Nonqualified Stock Option, by (b) the number of shares of
Common Stock with respect to which such Limited SARs are being exercised.
The Board shall have the discretion to settle Limited SARs by the delivery
of Common Stock rather than cash if in the judgment of the Board such action is
necessary or advisable to preserve pooling of interests accounting treatment for
any proposed transaction involving Time Warner.
6.6. Limited Transferability of Options and SARs. Except as set forth in
this Section 6.6 and Section 21, Options and SARs shall not be transferable
other than by will or the laws of descent and distribution, and Options and SARs
may be exercised during the lifetime of the Holder thereof only by such Holder
(or his or her court appointed legal representative). The Agreement may provide
that Options and SARs are transferable by gift to such persons or entities and
upon such terms and conditions specified in the Agreement.
7. ACCELERATION OF OPTIONS AND SARS
If a Holder's employment shall terminate by reason of death or Total
Disability, notwithstanding any contrary waiting period or installment period in
any Agreement or in the Plan, or in the event of any Approved Transaction, Board
Change or Control Purchase, unless the applicable Agreement provides otherwise,
each outstanding Option or SAR granted under the Plan shall immediately become
exercisable in full in respect of the aggregate number of shares covered
thereby.
8. TERMINATION OF EMPLOYMENT
8.1. General. If a Holder's employment shall terminate prior to the
complete exercise of an Option (or deemed exercise thereof, as provided in
Section 6.5(a)), then such Option shall thereafter be exercisable in accordance
with the provisions of the applicable Agreement (including the provisions of any
other agreement referred to in the Agreement); provided, however, that (a) no
Option may be exercised after the scheduled expiration date of such Option; (b)
if the Holder's employment terminates by reason of death or Total Disability,
the Option shall remain exercisable
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for a period of at least one year following such termination (but not later than
the scheduled expiration of such Option); and (c) any termination by the
employing company for cause will be treated in accordance with the provisions of
Section 8.2.
8.2. Termination for Cause. If a Holder's employment with Time Warner or
any of its Subsidiaries shall be terminated by Time Warner or such Subsidiary
prior to the exercise of any Option for cause then all Options held by such
Holder and any permitted transferee pursuant to Section 6.6 shall immediately
terminate. For the purposes of this Section 8.2, cause shall have the meaning
ascribed thereto in any employment agreement to which such Holder is a party. In
the absence of an employment agreement, cause shall include but not be limited
to, insubordination, dishonesty, incompetence, moral turpitude, other misconduct
of any kind and the refusal to perform his duties and responsibilities for any
reason other than illness or incapacity; provided, however, that if such
termination occurs within 12 months after an Approved Transaction, Control
Purchase or Board Change, termination for cause in the absence of an employment
agreement shall mean only a felony conviction for fraud, misappropriation or
embezzlement.
8.3. Special Rule. Notwithstanding any other provision of the Plan, the
Board may provide in the applicable Agreement that the Award shall become and/or
remain exercisable at rates and times at variance with the rules otherwise
herein set forth; provided, however, that any such Agreement provisions at
variance with the exercisability rules otherwise set forth herein shall be
effective only if reflected in the terms of an employment agreement approved or
ratified by the Board.
8.4. Miscellaneous. The Board may determine whether any given leave of
absence constitutes a termination of employment. Awards made under the Plan
shall not be affected by any change of employment so long as the Holder
continues to be an employee of Time Warner or one of its Subsidiaries.
9. RIGHT OF COMPANY TO TERMINATE EMPLOYMENT
Nothing contained in the Plan or in any Award shall confer on any Holder
any right to continue in the employ of Time Warner or any of its Subsidiaries or
interfere in any way with the right of Time Warner or a Subsidiary to terminate
the employment of the Holder at any time, with or without cause; subject,
however, to the provisions of any employment agreement between the Holder and
Time Warner or any of its Subsidiaries.
10. NONALIENATION OF BENEFITS
Except as specifically provided in Section 6.6 and 21, no right or benefit
under the Plan shall be subject to anticipation, alienation, sale, assignment,
hypothecation, pledge, exchange, transfer, encumbrance or charge, and any
attempt to anticipate, alienate, sell, assign, hypothecate, pledge, exchange,
transfer, encumber or charge the same shall be void. No right or benefit
hereunder shall in any manner be liable for or subject to the debts, contracts,
liabilities or torts of the person entitled to such benefits.
11. WRITTEN AGREEMENT
Each grant of an Option shall be evidenced by a stock option agreement,
which shall designate the Options granted thereunder as ISOs or Nonqualified
Stock Options, and each SAR shall be evidenced by a stock appreciation rights
agreement, each in such form and containing such terms and provisions not
inconsistent with the provisions of the Plan as the Board from time to time
shall approve; provided, however, that such Awards may be evidenced by a single
agreement. The effective date of the granting of an Award shall be the date on
which the Board approves such grant. Each grantee of an Option or SAR shall be
notified promptly of such grant and a written Agreement shall be promptly
executed and delivered by Time Warner and the
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grantee, provided that such grant of Options or SARs shall terminate if such
written Agreement is not signed by such grantee (or his attorney) and delivered
to Time Warner within 90 days after the date the Agreement is sent to such
grantee for signature. Any such written Agreement may contain (but shall not be
required to contain) such provisions as the Board deems appropriate to ensure
that the penalty provisions of section 4999 of the Code will not apply to any
stock or cash received from Time Warner or any of its Subsidiaries by the Holder
or a transferee of such Holder if the Award, or any part thereof, has been
transferred pursuant to Section 6.6 or 21.
12. ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC.
In the event of any stock split, dividend, distribution, combination,
reclassification or recapitalization that changes the character or amount of the
Common Stock while any portion of any Award theretofore granted under the Plan
is outstanding but unexercised, the Board shall make such adjustments in the
character and number of shares subject to such Award and, in the option price,
as shall be applicable, equitable and appropriate in order to make such Award,
immediately after any such change, as nearly as may be practicable, equivalent
to such Award, immediately prior to any such change. If any merger,
consolidation or similar transaction affects the Common Stock subject to any
unexercised Award theretofore granted under the Plan, the Board or any surviving
or acquiring corporation shall take such action as is equitable and appropriate
to substitute a new award for such Award or to assume such Award in order to
make such new or assumed Award, as nearly as may be practicable, equivalent to
the old Award. If any such change or transaction shall occur, the number and
kind of shares for which Awards may thereafter be granted under the Plan shall
be adjusted to give effect thereto.
13. RIGHT OF FIRST REFUSAL
The Agreements may contain such provisions as the Board shall determine to
the effect that if a Holder, or such other person exercising an Option, elects
to sell all or any shares of Common Stock that such Holder or other person
acquired upon the exercise of an Option awarded under the Plan, then such Holder
or other person shall not sell such shares unless such Holder or other person
shall have first offered in writing to sell such shares to Time Warner at Fair
Market Value on a date specified in such offer (which date shall be at least
three business days and not more than 10 business days following the date of
such offer). In any such event, certificates representing shares issued upon
exercise of Options shall bear a restrictive legend to the effect that
transferability of such shares is subject to the restrictions contained in the
Plan and the applicable Agreement and Time Warner may cause the registrar of its
Common Stock to place a stop transfer order with respect to such shares.
14. TERMINATION AND AMENDMENT
14.1. General. Unless the Plan shall theretofore have been terminated as
hereinafter provided, no Awards may be made under the Plan on or after the fifth
anniversary of the Effective Date. The Board may at any time prior to the fifth
anniversary of the Effective Date terminate the Plan, and the Board may at any
time modify or amend the Plan in such respects as it shall deem advisable;
provided, however, that any such modification or amendment shall comply with all
applicable laws, applicable stock exchange listing requirements and applicable
requirements for the Plan to qualify as 'performance based' under the Act and
section 162(m) of the Code.
14.2. Modification. No termination, modification or amendment of the Plan
may, without the consent of the person to whom any Award shall theretofore have
been granted (or a transferee of such person if the Award, or any part thereof,
has been transferred pursuant to Section 6.6 or 21), adversely affect the rights
of such person with respect to such Award. No modification, extension, renewal
or other change in any Award granted under the Plan shall be made after the
grant of
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such Award, unless the same is consistent with the provisions of the Plan. With
the consent of the Holder (or a transferee of such Holder if the Award, or any
part thereof, has been transferred pursuant to Section 6.6 or 21) and subject to
the terms and conditions of the Plan (including Section 14.1), the Board may
amend outstanding Agreements with any Holder (or any such transferee),
including, without limitation, any amendment which would (a) accelerate the time
or times at which the Award may be exercised and/or (b) extend the scheduled
expiration date of the Award. Without limiting the generality of the foregoing,
the Board may but solely with the Holder's consent, agree to cancel any Award
under the Plan held by such Holder and issue a new Award in substitution
therefor, provided that the Award so substituted shall satisfy all of the
requirements of the Plan as of the date such new Award is made.
15. EFFECTIVENESS OF THE PLAN
The Plan shall become effective upon approval by the affirmative vote of a
majority of the votes duly cast thereon, either in person or by proxy, by the
holders of voting securities of Time Warner entitled to vote thereon, voting
together as a single class, at a duly called and held meeting of stockholders of
Time Warner.
16. GOVERNMENT AND OTHER REGULATIONS
The obligation of Time Warner with respect to Awards shall be subject to
all applicable laws, rules and regulations and such approvals by any
governmental agencies as may be required, including, without limitation, the
effectiveness of any registration statement required under the Securities Act of
1933, and the rules and regulations of any securities exchange on which the
Common Stock may be listed. For so long as the Common Stock is registered under
the Exchange Act, Time Warner shall use its reasonable efforts to comply with
any legal requirements (a) to maintain a registration statement in effect under
the Securities Act of 1933 with respect to all shares of Common Stock that may
be issued to Holders under the Plan, and (b) to file in a timely manner all
reports required to be filed by it under the Exchange Act.
17. WITHHOLDING
Time Warner's obligation to deliver shares of Common Stock or pay cash in
respect of any Award under the Plan shall be subject to applicable federal,
state and local tax withholding requirements. Federal, state and local
withholding taxes paid upon the exercise of any Option may be paid in shares of
Common Stock upon such terms and conditions as the Board shall determine;
provided, however, that the Board in its sole discretion may disapprove such
payment and require that such taxes be paid in cash.
18. SEPARABILITY
If any of the terms or provisions of this Plan conflict with the
requirements of applicable law or applicable rules and regulations thereunder,
including the requirements of section 162(m) of the Code, Rule 16b-3 under the
Exchange Act and/or section 422A of the Code, then such terms or provisions
shall be deemed inoperative to the extent necessary to avoid the conflict with
applicable law, or applicable rules and regulations, without invalidating the
remaining provisions hereof. With respect to ISOs, if this Plan does not contain
any provision required to be included herein under section 422A of the Code,
such provision shall be deemed to be incorporated herein with the same force and
effect as if such provision had been set out at length herein; provided,
further, that to the extent any Option which is intended to qualify as an ISO
cannot so qualify, such Option, to that extent, shall be deemed to be a
Nonqualified Stock Option for all purposes of the Plan.
A-9
19. NON-EXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board nor the submission of the
Plan to the stockholders of Time Warner for approval shall be construed as
creating any limitations on the power of the Board to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and the awarding of stock and cash otherwise than
under the Plan, and such arrangements may be either generally applicable or
applicable only in specific cases.
20. EXCLUSION FROM PENSION AND PROFIT-SHARING COMPUTATION
By acceptance of an Award, each Holder shall be deemed to have agreed that
such Award is special incentive compensation that will not be taken into
account, in any manner, as salary, compensation or bonus in determining the
amount of any payment under any pension, retirement or other employee benefit
plan of Time Warner or any of its Subsidiaries. In addition, each beneficiary of
a deceased Holder shall be deemed to have agreed that such Award will not affect
the amount of any life insurance coverage, if any, provided by Time Warner or
any of its Subsidiaries on the life of the Holder which is payable to such
beneficiary under any life insurance plan covering employees of Time Warner or
any of its Subsidiaries.
21. BENEFICIARIES
Each Holder may designate any person(s) or legal entity(ies), including his
or her estate, as his or her beneficiary under the Plan. Such designation shall
be made in writing on a form filed with the Secretary of Time Warner or his or
her designee and may be revoked or changed by such Holder at any time by filing
written notice of such revocation or change with the Secretary of Time Warner or
his or her designee. If no person shall be designated by a Holder as his or her
beneficiary or if no person designated as a beneficiary survives such Holder,
the Holder's beneficiary shall be his or her estate.
22. GOVERNING LAW
The Plan shall be governed by, and construed in accordance with, the laws
of the State of New York.
A-10
APPENDIX 1
P
R
O
X
Y
TIME WARNER INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
TIME WARNER INC. FOR THE ANNUAL MEETING ON MAY 15, 1997
The undersigned hereby constitutes and appoints Richard J. Bressler, Peter
R. Haje and Philip R. Lochner, Jr., and each of them, its true and lawful
agents and proxies, with full power of substitution in each, to attend the
Annual Meeting of Stockholders of TIME WARNER INC. on Thursday, May 15,
1997, and any adjournment thereof, and to vote on the matters indicated all
the shares of Common Stock which the undersigned would be entitled to vote
if personally present.
ELECTION OF DIRECTORS FOR TERMS EXPIRING IN 1998 (or 2000 if PLEASE MARK, SIGN AND DATE THIS PROXY
proposal 2 is not approved) -- J. Carter Bacot, Stephen F. CARD ON THE REVERSE SIDE AND RETURN IT
Bollenbach, Gerald Greenwald, Gerald M. Levin and Richard D. PROMPTLY USING THE ENCLOSED REPLY
Parsons, nominees. ENVELOPE.
(CONTINUED ON REVERSE SIDE)
This proxy when properly executed will be voted in the manner [X] Please mark
directed herein. If no direction is made, this proxy will your votes
be voted FOR all nominees listed, FOR proposals 2 through 4 this way
and AGAINST proposal 5.
The Board of Directors recommends a vote FOR all nominees
in item 1 and FOR proposals 2 through 4.
FOR WITHHELD
1. Election of Directors [ ] [ ]
(see reverse).
For, except vote withheld from the following nominee(s):
--------------------------------------------------------
FOR AGAINST ABSTAIN
2. Approval of Charter [ ] [ ] [ ]
Amendment for annual
election of directors.
FOR AGAINST ABSTAIN
3. Approval of the 1997 [ ] [ ] [ ]
Stock Option Plan.
4. Approval of Auditors. [ ] [ ] [ ]
The Board of Directors recommends a vote AGAINST proposal 5.
FOR AGAINST ABSTAIN
5. Stockholder proposal [ ] [ ] [ ]
regarding chlorine-
bleached paper.
6. In their discretion, upon such other
matters as may properly come before
the Meeting.
MEETING ATTENDANCE
Please mark this box if you plan [ ]
to attend the Meeting.
ADDRESS CHANGE
Please mark this box if you have [ ]
indicated an address change.
Receipt is hereby acknowledged of the Time Warner Inc.
Notice of Meeting and Proxy Statement.
Signature(s)_________________________________________________ Date ___________
NOTE. Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
APPENDIX 2
TIME WARNER INC.
VOTING INSTRUCTIONS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
TIME WARNER INC. FOR THE ANNUAL MEETING ON MAY 15, 1997
The Bank of New York, as Exchange Agent, is requesting your instructions as
to how the shares of Time Warner Common Stock which you are entitled to
receive as a result of the merger of Time Warner Inc. and Turner
Broadcasting System, Inc. are to be voted at the Time Warner Annual Meeting
of Stockholders scheduled to be held on May 15, 1997. If The Bank of New
York does not receive your instructions on or prior to May 13, 1997, these
shares will not be voted.
ELECTION OF DIRECTORS FOR TERMS EXPIRING IN 1998 (or 2000 if PLEASE MARK, SIGN AND DATE THIS
proposal 2 is not approved) -- J. Carter Bacot, Stephen F. INSTRUCTION CARD ON THE REVERSE SIDE AND
Bollenbach, Gerald Greenwald, Gerald M. Levin and Richard D. RETURN IT PROMPTLY USING THE ENCLOSED
Parsons, nominees. REPLY ENVELOPE.
(CONTINUED ON REVERSE SIDE)
The undersigned hereby instructs The Bank of New York to direct [X] Please mark
the vote as follows at the Time Warner Annual Meeting of your votes
Stockholders to be held on May 15, 1997, and at any adjournment this way
thereof, of all shares of Time Warner Common Stock that the
undersigned is entitled to receive.
The Board of Directors recommends a vote FOR all nominees
in item 1 and FOR proposals 2 through 4.
FOR WITHHELD
1. Election of Directors [ ] [ ]
(see reverse).
For, except vote withheld from the following nominee(s):
--------------------------------------------------------
FOR AGAINST ABSTAIN
2. Approval of Charter [ ] [ ] [ ]
Amendment for annual
election of directors.
FOR AGAINST ABSTAIN
3. Approval of the 1997 [ ] [ ] [ ]
Stock Option Plan.
4. Approval of Auditors. [ ] [ ] [ ]
The Board of Directors recommends a vote AGAINST proposal 5.
FOR AGAINST ABSTAIN
5. Stockholder proposal [ ] [ ] [ ]
regarding chlorine-
bleached paper.
6. To grant discretionary voting authority
to management persons regarding such
other matters as may properly come
before the Meeting.
MEETING ATTENDANCE
Please mark this box if you plan [ ]
to attend the Meeting.
ADDRESS CHANGE
Please mark this box if you have [ ]
indicated an address change.
Receipt is hereby acknowledged of the Time Warner Inc.
Notice of Meeting and Proxy Statement.
Signature(s)_________________________________________________ Date ___________
NOTE. Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
APPENDIX 3
PLEASE MARK, SIGN AND DATE THIS PROXY AND RETURN IT
PROMPTLY USING THE ENCLOSED REPLY ENVELOPE.
PROXY
TIME WARNER INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
TIME WARNER INC. FOR THE ANNUAL MEETING ON MAY 15, 1997
The undersigned hereby constitutes and appoints Richard J. Bressler,
Peter R. Haje and Philip R. Lochner, Jr., and each of them, its true and lawful
agents and proxies, with full power of substitution in each, to attend the
Annual Meeting of Stockholders of TIME WARNER INC. on Thursday, May 15, 1997,
and any adjournment thereof, and to vote on the matters indicated all the shares
of Preferred Stock which the undersigned would be entitled to vote if personally
present.
This proxy when properly executed will be voted in the manner directed
herein. If no direction is made, this proxy will be voted FOR all nominees
listed in item 1, FOR proposals 2 through 4 and AGAINST proposal 5.
- --------------------- -------------------------- -------------------
Name of Holder Series of Preferred Stock Number of Shares
THE TIME WARNER INC. BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES
IN ITEM 1 AND FOR PROPOSALS 2 THROUGH 4.
1. Election of Directors for terms expiring in 1998 (or 2000 if proposal 2 is
not approved) - J. Carter Bacot, Stephen F. Bollenbach, Gerald Greenwald,
Gerald M. Levin and Richard D. Parsons, nominees.
FOR [ ] WITHHELD [ ]
[ ] FOR, except vote withheld from the following nominee(s):___________
________________________________________________________________________
2. Approval of charter amendment for annual election of directors.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Approval of the 1997 Stock Option Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. Approval of Auditors.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSAL 5.
5. Stockholder proposal regarding chlorine-bleached paper.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
6. In their discretion, upon such other matters as may properly come before
the meeting.
Please check this box if you plan to attend the meeting. [ ]
Signature(s) ____________________________
--------------------------------- -------
Note: Please sign exactly Date
as name appears hereon.
When signing as attorney,
officer, administrator or
trustee, please give full
title as such.
APPENDIX 4
CONFIDENTIAL VOTING INSTRUCTIONS
TIME WARNER SAVINGS PLAN
TIME WARNER THRIFT PLAN
CABLE EMPLOYEES SAVINGS PLAN
SOUTHERN PROGRESS EMPLOYEES' SAVINGS PLAN
INSTRUCTIONS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE TIME WARNER
INC. ANNUAL MEETING ON MAY 15, 1997.
Under the provisions of the Trusts relating to these Plans, Fidelity Management
Trust Company ("Fidelity"), as Trustee, is required to request your confidential
instructions as to how your proportionate interest in the shares of Time Warner
Common Stock held in the respective Time Warner Common Stock fund under each of
those Plans (an "interest") is to be voted at the Annual Meeting of Stockholders
scheduled to be held on May 15, 1997. Your instructions to Fidelity will not be
divulged or revealed to anyone at Time Warner Inc. If Fidelity does not receive
your instructions on or prior to May 12, 1997, your interest, if any,
attributable to (a) accounts transferred from the Time Incorporated
Payroll-Based Employee Stock Ownership Plan ("PAYSOP") and the WCI Employee
Stock Ownership Plan ("WCI ESOP") will not be voted and (b) the remainder of
your Plan accounts, if any, will be voted at the Annual Meeting in the same
proportion as other participants' interests in each such respective Plan for
which Fidelity has received voting instructions (excluding PAYSOP and WCI ESOP
accounts).
This instruction must be
signed exactly as name
appears hereon.
------------------------------
------------------------------
Signature(s) Date
(CONTINUED ON REVERSE SIDE)
The undersigned hereby instructs Fidelity, as Trustee, to vote as follows by
proxy at the Annual Meeting of Stockholders of Time Warner Inc. to be held on
May 15, 1997 and at any adjournment thereof, the undersigned's proportionate
interest in the shares of Time Warner Common Stock held in the Time Warner
Common Stock fund under each of the Plans.
THE TIME WARNER INC. BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES IN
ITEM 1 AND FOR PROPOSALS 2 THROUGH 4.
1. Election of Directors for terms expiring in 1998 (or 2000 if proposal
2 is not approved) - J. Carter Bacot, Stephen F. Bollenbach, Gerald
Greenwald, Gerald M. Levin and Richard D. Parsons, nominees.
FOR [ ] WITHHELD [ ]
[ ] FOR, except vote withheld from the following nominee(s):___________
_________________________________________
2. Approval of charter amendment for annual election of directors.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Approval of the 1997 Stock Option Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. Approval of Auditors.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSAL 5.
5. Stockholder proposal regarding chlorine-bleached paper.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
6. To grant discretionary voting authority to management persons
regarding such other matters as may properly come before the meeting.
Please check this box if you plan to attend the meeting. [ ]
PLEASE SIGN AND DATE ON REVERSE SIDE
APPENDIX 5
PLEASE MARK, SIGN AND DATE THIS PROXY AND RETURN IT
PROMPTLY USING THE ENCLOSED REPLY ENVELOPE.
PROXY
TIME WARNER INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
TIME WARNER INC. FOR THE ANNUAL MEETING ON MAY 15, 1997
The undersigned hereby constitutes and appoints Richard J. Bressler,
Peter R. Haje and Philip R. Lochner, Jr., and each of them, its true and lawful
agents and proxies, with full power of substitution in each, to attend the
Annual Meeting of Stockholders of TIME WARNER INC. on Thursday, May 15, 1997,
and any adjournment thereof, and to vote on the matters indicated all the shares
of SERIES LMCN-V COMMON STOCK which the undersigned would be entitled to vote if
personally present.
This proxy when properly executed will be voted in the manner directed
herein. If no direction is made, this proxy will be voted FOR all nominees
listed in item 1 and FOR proposal 2.
- ---------------------------- ---------------------
Name of Holder Number of Shares
THE TIME WARNER INC. BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES
IN ITEM 1 AND FOR PROPOSAL 2.
1. Election of Directors for terms expiring in 1998 (or 2000 if proposal 2 is
not approved) - J. Carter Bacot, Stephen F. Bollenbach, Gerald Greenwald,
Gerald M. Levin and Richard D. Parsons, nominees.
FOR [ ] WITHHELD [ ]
[ ] FOR, except vote withheld from the following nominee(s):
-----------------------------------------------------------
2. Approval of charter amendment for annual election of directors.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. In their discretion, upon such other matters as may properly come before
the meeting.
Please check this box if you plan to attend the meeting. [ ]
Signature(s) ____________________________
_________________________________ _______
Note: Please sign exactly Date
as name appears hereon.
When signing as
attorney, officer,
administrator or
trustee, please give
full title as such.
APPENDIX 6
March 28, 1997
Dear Holder of Series LMCN-V Common Stock:
You are cordially invited to attend the 1997 Annual Meeting of
Stockholders of Time Warner Inc. on Thursday, May 15, 1997, beginning at 10:00
A.M., local time, at the Apollo Theatre, 253 West 125th Street, New York, NY
10027.
As a holder of Series LMCN-V Common Stock, you are being asked to vote
only on the election of directors and the amendment to Time Warner's restated
certificate of incorporation, listed as items 1 and 2, respectively, in the
enclosed Notice of Annual Meeting of Stockholders. Your Board of Directors
recommends a vote "FOR" these proposals.
At the Annual Meeting, among other things, stockholders will consider a
proposed amendment to Time Warner's restated certificate of incorporation to
change the way we elect directors. If this proposal is approved, in the future,
all of our directors will be elected annually instead of our current system
under which three classes of directors have staggered three-year terms.
Whether or not you plan to attend in person, it is important that your
shares be represented and voted at the Meeting. After reading the enclosed
Notice and Proxy Statement, please sign, date and mail the enclosed proxy card
in the envelope provided.
If you plan to attend the Meeting in person, please bring the Admission
Ticket included with the enclosed Notice and Proxy Statement to facilitate your
admission. If you have not received an Admission Ticket, please contact the
Shareholder Relations Department at (212) 484-6971.
Sincerely,
GERALD M. LEVIN
Chairman of the Board
and Chief Executive Officer
APPENDIX 7
March 28, 1997
To: Holders of certificates formerly representing
securities of Turner Broadcasting System, Inc.
As you know, on October 10, 1996, Time Warner Inc. ("Time Warner")
completed its merger with Turner Broadcasting System, Inc. ("TBS"). As a result,
you have the right to receive shares of common stock of Time Warner ("Common
Stock") and the cash dividends paid thereon after October 10, 1996 upon exchange
of your certificates formerly representing capital stock of TBS.
Enclosed is a copy of the Notice of Annual Meeting and Proxy Statement
relating to Time Warner's 1997 Annual Meeting of Stockholders. Also enclosed is
a voting instruction card for you to use to direct the voting at this meeting of
the shares of Common Stock which you are entitled to receive. If you do not
provide instructions, these shares will not be voted at the meeting.
Please indicate your instructions, sign and date the enclosed
instruction card and return it using the enclosed envelope.
If you have any questions about how to exchange your certificates
formerly representing shares of TBS capital stock for the shares of Common Stock
to which you are entitled, please contact The Bank of New York, as Exchange
Agent, at 800- 507-9357.
Sincerely,
Gerald M. Levin
Chairman and
Chief Executive Officer