As Amended through
July 18, 1996
1988 Stock Incentive Plan
of Time Warner Inc.
1. PURPOSE OF THE PLAN.
Time Incorporated, a Delaware corporation, hereby adopts this stock
incentive plan, providing for the granting of stock options, stock appreciation
rights and restricted shares to key employees (including officers) of the
Company and its subsidiaries. The general purpose of the Plan is to promote the
interests of the Company and its stockholders by providing to key employees of
the Company and its subsidiaries additional incentives to continue and increase
their efforts with respect to, and to remain in the employ of, the Company or
its subsidiaries.
2. CERTAIN DEFINITIONS.
The following terms shall have the meanings set forth below when used in
this Plan:
(a) "Award" means grants of an Option, SAR and/or Restricted
Shares under this Plan.
(b) "Board" means the Board of Directors of the
Company.
(c) "Cash Award" means the amount of cash, if any, to be paid to
an employee pursuant to paragraph 7D hereof.
(d) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, or any successor statute or statutes thereto.
(e) "Committee" means the Committee of the Board
appointed pursuant to paragraph 4 hereof.
(f) "Common Stock" means the Common Stock, par value
$1 per share, of the Company.
(g) "Company" means Time Warner Inc., a Delaware
corporation.
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(h) "Composite Tape" means the New York Stock
Exchange Composite Tape.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor statute or statutes thereto.
(j) "Exercise Period" shall have the meaning ascribed thereto in
paragraph 6E hereof.
(k) "Fair Market Value" of a share of Common Stock shall mean the
mean between 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 paragraph 6E hereof.
(l) "Holder" means an employee of the Company or a Subsidiary who
has received an Award under this Plan.
(m) "ISO" means an incentive stock option within the meaning of
Section 422A(b), or any successor section, of the Code.
(n) "Limited Rights" shall have the meaning ascribed thereto in
paragraph 6F hereof.
(o) "Maturity Value" means, unless the Board shall determine
otherwise, the average (rounded to the nearest cent) of the means
between the high and low sales prices of a share of Common Stock on the
Composite Tape on the sixty consecutive trading days ending on the
Valuation Date with respect to each award of Restricted Shares, or if
the Valuation Date is not a trading day, the sixty consecutive trading
days prior thereto.
(p) "Nonqualified Stock Option" means a stock option that does
not qualify as an ISO.
(q) "Option" means any option granted under this
Plan.
(r) "Plan" means this 1988 Incentive Stock Plan of
the Company.
(s) "Restricted Shares" means shares of Common Stock
or the right to receive shares of Common Stock, as the
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case may be, awarded to an employee of the Company or a
Subsidiary, pursuant to paragraph 7 hereof.
(t) "Restricted Shares Agreement" means the
agreement specified in paragraph 12 hereof.
(u) "Restriction Period" means a period of time beginning on the
date of each award of Restricted Shares and ending on the Valuation Date
with respect to each such award.
(v) "Retained Distributions" means distributions with respect to
Restricted Shares that are retained by the Company pursuant to paragraph
7C hereof.
(w) "SARs" shall mean stock appreciation rights as defined in
paragraph 6E hereof.
(x) "SEC" means the Securities and Exchange
Commission.
(y) "Stock Option Agreement" means the agreement
specified in paragraph 12 hereof.
(z) "Subsidiary" means any present or future subsidiary of the
Company as such term is defined in Section 425, or any successor
section, of the Code.
(aa) "Total Disability" means a permanent and total disability as
defined in Section 22(e)(3), or any successor section, of the Code.
(bb) "Valuation Date" with respect to any Restricted Shares
awarded hereunder means the date designated in the Restricted Shares
Agreement with respect to each award of Restricted Shares pursuant to
paragraph 7A hereof.
(cc) "Dividend Equivalents" means an amount equal to the cash
dividend payable on each share of Common Stock on any dividend payment
date multiplied by the number of shares of Common Stock covered by an
award of Restricted Shares hereunder but only to the extent the shares
of Common Stock covered by such award are not issued until the end of
the Restriction Period.
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(dd) "Employee of an Affiliated Entity" means an employee of any
entity other than the Company or a Subsidiary, whether or not
incorporated, which is controlled by or under common control with the
Company (an "Affiliated Entity"); provided, however, that no director,
officer or holder of ten percent or more of any class or equity
securities of the Company who was subject, directly or indirectly, to
Section 16(b) of the Exchange Act at any time on or after May 14, 1991,
shall be considered an Employee of an Affiliated Entity.
3. STOCK SUBJECT TO THE PLAN.
Subject to the provisions of paragraph 13 hereof and this paragraph 3,
the maximum aggregate number of shares of Common Stock which may be issued upon
exercise of Options and SARs and which may be granted as Restricted Shares or
issued at the end of the Restriction Period with respect to an award of
Restricted Shares hereunder shall be 1,500,000. Such shares may be, in whole or
in part, authorized and unissued shares of Common Stock or issued shares of
Common Stock which shall have been reacquired by the Company. If any Option
shall expire or terminate for any reason without having been exercised (or
without having been considered to have been exercised as provided in paragraphs
6E and 6F hereof) in full, the unexercised shares subject thereto shall again be
available for purposes of the Plan. In addition, any Restricted Shares which are
forfeited by the terms of the Plan or any Restricted Shares Agreement shall
again become available for purposes of the Plan.
4. ADMINISTRATION.
A. 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 Options and award Restricted Shares under the Plan and to
determine the terms and conditions (which need not be identical), of all Options
and Restricted Shares granted or awarded under the Plan, including, without
limitation, (i) the purchase price, if any, of each Restricted Share, (ii) the
individuals to whom, and the time or times at which, Options and Restricted
Shares shall be granted or awarded, (iii) the number of shares to be subject to
each Option or award of Restricted Shares, (iv) whether an Option shall be an
ISO or a Nonqualified Stock
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Option, (v) when an Option can be exercised and whether in whole or in
installments, (vi) the time or times and the conditions subject to which
Restricted Shares shall become vested and any Cash Awards shall become payable,
and (vii) the form, terms and provisions of any Stock Option Agreement and
Restricted Shares Agreement evidencing a grant of Options or awards of
Restricted Shares hereunder (which terms may be amended, subject to paragraph 15
hereof). In making such determinations, the Board may take into account the
nature of the services rendered by the respective employees, their present and
potential contributions to the success of the Company and its subsidiaries, and
such other factors as the Board in its discretion shall deem relevant. 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 paragraph 4 shall be conclusive.
B. Delegation to Committee. Notwithstanding anything to the contrary
contained herein, the Board may at any time, or from time to time, appoint a
Committee of at least three members, who shall be members of the Compensation
Committee of the Board (or such other persons as the Board may designate), and
delegate to such Committee the authority of the Board to administer the Plan.
Upon such appointment and delegation, the Committee shall have all the powers,
privileges and duties of the Board in the administration of the Plan, except 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 the Committee and may discharge the Committee. The Committee shall
select one of its members as its chairman and shall hold its meetings at such
times and places as it shall deem advisable. A majority of its 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 a majority 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.
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5. ELIGIBILITY.
Options and Restricted Shares may be awarded only to key salaried
employees (including officers) of the Company and its Subsidiaries who are at
the time of the Award regularly employed by the Company or a Subsidiary on a
full-time basis. A director of the Company or of a Subsidiary who is not also an
employee of the Company or of one of its Subsidiaries will not be eligible to
receive any Awards under the Plan. No ISO shall be granted to any employee who,
at the time the ISO is granted, owns (or is considered as owning within the
meaning of Section 425(d), or any successor section, of the Code) stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or of 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. Awards may be made to
employees who hold or have held Options and/or Restricted Shares under this Plan
or any other plans of the Company. An employee who has received Awards under
this Plan may be granted additional Options and Restricted Shares under this
Plan or any other plan.
6. OPTIONS.
A. Option Prices. Except as otherwise specifically provided in paragraph
5 hereof, the purchase price of the Common Stock under each Option shall be
determined by the Board, but shall not be less than 100% of the Fair Market
Value of the Common Stock at the time of the granting of such Option.
B. Term of Options. The term of each Option shall be for such period as
the Board shall determine, but not more than ten years from the date of grant in
the case of each ISO, and, except as set forth in paragraph 9 hereof, shall
expire upon termination of employment with the Company or any Subsidiary.
C. Exercise of Options. Unless otherwise provided in the Stock Option
Agreement, an Option granted under the Plan shall be exercisable in whole, or in
part, at any time during the term of the Option. Payment shall be made in cash
or, unless otherwise provided in the Stock Option Agreement, in whole shares of
Common Stock already owned by the person exercising the Option or, unless
otherwise provided in the Stock Option Agreement, partly in cash and partly in
such Common Stock. An
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Option shall be exercised by written notice to the Company. Such notice shall
state that the person exercising the Option elects to exercise the Option, the
number of shares in respect of which it is being exercised and the manner of
payment for such shares, and shall either (i) be accompanied by payment of the
full purchase price of such shares or (ii) fix a date (not more than 10 business
days from the date of exercise) for the payment of the full purchase price of
such shares. Cash payments shall be made by wire transfer, certified or bank
check or personal check, in each case payable to the order of the Company;
provided, however, that the Company shall not be required to deliver
certificates for shares with respect to which an Option is exercised until the
Company has confirmed the receipt of good and available funds in payment of the
purchase price thereof. Common Stock payments (valued at the Fair Market Value
of a share of Common Stock on the date of exercise) shall be made by delivery of
stock certificates in negotiable form. If certificates representing Common Stock
are used to pay all or part of the purchase price of an Option, separate
certificates shall be delivered by the Company representing the same number of
shares as each certificate so used, and an additional certificate shall be
delivered representing any additional shares to which the person exercising the
Option is entitled as a result of the exercise of the Option. Except as provided
in paragraph 9 hereof, no Option may be exercised at any time unless the Holder
thereof is then an employee of the Company or of a Subsidiary or, if the option
agreement so provides, is an Employee of an Affiliated Entity. No Holder or
other person exercising the Option shall have any of the rights of a stockholder
with respect to the shares subject to the Option until such shares shall be
transferred to the Holder or such other person upon the exercise of the Option.
D. ISOs. Notwithstanding anything to the contrary contained herein, but
subject to paragraph 8 hereof, in the case of ISOs, the aggregate Fair Market
Value (determined at the time the Option is granted) of the shares of Common
Stock covered by ISOs which first become exercisable in any calendar year under
the Plan by any individual employee (and under all other plans of the Company or
any Subsidiary which provide for the granting of ISOs) shall not exceed
$100,000.
E. SARs. The Board may (but shall not be obligated to) grant SARs
pursuant to the provisions of this subparagraph 6E to the Holder of any Option
granted under the Plan (hereinafter in this subparagraph 6E called a related
Option) with respect
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to all or a portion of the shares subject to the related Option. An SAR may only
be granted concurrently with the grant of the related Option. Subject to the
terms and provisions of this subparagraph 6E, each SAR shall be exercisable only
at the same time and to the same extent the related Option is exercisable, and
in no event after the termination or exercise of the related Option.
Notwithstanding the foregoing, no SAR may be exercised within a period of six
months after the date of grant of the SAR. SARs granted under the Plan shall be
exercisable in whole or in part by notice to the Company. Such notice shall
state that the person exercising the SARs elects to exercise the SARs, the
number of shares in respect of which the SARs are being exercised and the form
of payment requested.
Subject to the terms and provisions of this subparagraph 6E, upon the
exercise of SARs, the person exercising the SARs shall be entitled to receive
from the Company consideration (in the form hereinafter provided) equal in value
to the excess of the Fair Market Value as of the date of exercise of the SARs of
each share of Common Stock with respect to which such SARs have been exercised
over the option price per share of Common Stock subject to the related Option.
Upon the exercise of an SAR, the person exercising the SARs may specify the form
of consideration to be received, which shall be in shares of Common Stock
(valued at Fair Market Value on the date of exercise of the SAR), or in cash, or
partly in cash and partly in shares of Common Stock as the person exercising the
SARs shall request; provided, however, that the Board in its sole discretion may
disapprove the form of consideration requested and instead authorize the payment
of such consideration in shares of Common Stock (valued as aforesaid), or in
cash, or partly in cash and partly in shares of Common Stock. Any election by
the person exercising the SARs to receive cash in full or partial settlement of
the SAR, as well as any exercise of an SAR for such cash, shall be made only
during the period beginning on the third business day following the date of
release for publication of quarterly or annual summary statements of sales and
earnings and ending on the twelfth business day following such date (the
"Exercise Period"). Unless the Board determines otherwise, the number of SARs
which may be exercised for cash, or partly for cash and partly for shares of
Common Stock, during any Exercise Period may not exceed twenty percent 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 by
application of the adjustment(s), if any,
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determined in accordance with paragraph 13 hereof or the corresponding
provisions of any outstanding Stock Option Agreement), but such SARs shall be
exercisable only to the extent the related Option is exercisable. For purposes
of this subparagraph 6E, the date of exercise of an SAR shall mean the date on
which the Company shall have received notice from the person exercising the SARs
of the exercise of such SAR, except that, upon exercise during the Exercise
Period of an SAR granted in tandem with a Nonqualified Stock Option, the date of
exercise of such SAR shall be deemed to be the date during the Exercise Period
on which the highest reported closing sales price of a share of Common Stock as
reported on the Composite Tape occurred and the Fair Market Value of such shares
shall be deemed to be such highest reported closing sales price.
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 available for the grant of Options under the Plan. Upon the
exercise or termination of the related Option, the SARs with respect to such
related Option 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 paragraphs 4, 6B and 9 through 22 of the Plan (to the
extent that such provisions are applicable to Options) shall also be applicable
to SARs unless the context otherwise requires. The effective date of the grant
of an SAR shall be the date on which the Board approves the grant of such SAR.
Each grantee of an SAR shall be notified promptly of the grant of an SAR.
Notwithstanding anything to the contrary contained in this subparagraph
6E, SARs shall not be exercisable unless at the time of such exercise (i) the
Holder or other person exercising the SARs is directly or indirectly subject to
Section 16 of the Exchange Act or (ii) sales of Common Stock by the person
exercising the SARs would be reportable under Section 16 by the original Holder
of the related Option.
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F. Limited Rights. The Board may (but shall not be obligated to) grant
Limited Rights pursuant to the provisions of this subparagraph 6F to the Holder
of any Option (hereinafter in this subparagraph 6F called a related Option) with
respect to all or a portion of the shares subject to the related Option. A
Limited Right may only be granted concurrently with the grant of the related
Option. A Limited Right may be exercised only during the period (a) beginning on
the first day following either (i) the date of approval by the stockholders of
the Company of an Approved Transaction (as defined in the last paragraph of
paragraph 8 hereof), (ii) the date of a Control Purchase (as defined in the last
paragraph of paragraph 8 hereof), or (iii) the date of a Board Change (as
defined in the last paragraph of paragraph 8 hereof), and (b) ending on the
thirtieth day (or such other date specified in the Stock Option Agreement)
following such date. Each Limited Right shall be exercisable only to the extent
the related Option is exercisable, and in no event after the termination of the
related Option. Notwithstanding the provisions of the two immediately preceding
sentences, no Limited Right may be exercised within a period of six months after
the date of grant of the Limited Right.
Upon the exercise of Limited Rights, 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 Limited Rights are exercised, and shall
be considered to have been exercised to that extent for purposes of determining
the number of shares of Common Stock available for the grant of Options under
the Plan. Upon the exercise or termination of the related Option, the Limited
Rights with respect to such related Option 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 paragraphs 4, 6B and 9 through 22 of the Plan (to the
extent that such provisions are applicable to Options) shall also be applicable
to Limited Rights unless the context otherwise requires. The effective date of
the grant of a Limited Right shall be the date on which the Board approves the
grant of such Limited Right. Each grantee of a Limited Right shall be notified
promptly of the grant of the Limited Right.
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Limited Rights granted under the Plan shall be exercisable in whole or
in part by notice to the Company. Such notice shall state that the person
exercising the Limited Rights elects to exercise the Limited Rights and the
number of shares in respect of which the Limited Rights are being exercised. The
effective date of exercise of a Limited Right shall be deemed to be the date on
which the Company shall have received such notice. Upon the exercise of Limited
Rights granted in tandem with an ISO, except as otherwise provided in the Stock
Option Agreement, the person exercising the Limited Rights shall receive in cash
an amount equal to the excess of the Fair Market Value on the date of exercise
of such Limited Rights of each share of Common Stock with respect to which such
Limited Right shall have been exercised over the option price per share of
Common Stock subject to the related ISO.
Upon the exercise of Limited Rights granted in tandem with a
Nonqualified Stock Option, except as otherwise provided in the Stock Option
Agreement, the person exercising the Limited Rights shall receive in cash an
amount equal to the product computed by multiplying (i) the excess of (a) the
higher of (x) the Minimum Price Per Share (as hereinafter defined), or (y) 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 Rights are exercised and ending on the
date on which such Limited Rights are exercised, over (b) the option price per
share of Common Stock subject to the related Nonqualified Stock Option, by (ii)
the number of shares of Common Stock with respect to which such Limited Rights
are being exercised.
For purposes of this subparagraph 6F, the term "Minimum Price Per Share"
shall mean 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 (as such terms are defined in paragraph 8 hereof) which occurs at any
time during the period beginning on the sixtieth day prior to the date on which
such Limited Rights are exercised and ending on the date on which such Limited
Rights are exercised. For purposes of this definition, 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
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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.
Notwithstanding anything to the contrary contained in this subparagraph
6F, Limited Rights shall not be exercisable unless at the time of the occurrence
of an Approved Transaction, Control Purchase or Board Change (as such terms are
defined in paragraph 8 hereof) (i) the Holder or other person exercising the
Limited Rights is directly or indirectly subject to Section 16(b) of the
Exchange Act or (ii) sales of Common Stock by the person exercising the Limited
Rights would be reportable under Section 16 by the original Holder of the
related Option. The Stock Option Agreement evidencing an Option may contain such
provisions limiting the exercise of Limited Rights as the Board deems
appropriate to ensure that the penalty provisions of Section 4999 of the Code,
or any successor thereto in effect at the time of such exercise, will not apply
to any stock or cash received from the Company by the Holder or other person
exercising the Limited Rights.
G. Nontransferability of Options. Except as set forth in this
subparagraph 6G, no Options shall be transferable otherwise than by will or the
laws of descent and distribution, and an Option may be exercised during the
lifetime of the Holder thereof only by such Holder. A breach by the Holder of
any of the restrictions, terms or conditions provided in the Plan or in the
Holder's Stock Option Agreements will cause the Options covered thereby to be
terminated. The Stock Option Agreement may provide that Nonqualified Stock
Options and SARs are transferable by gift to such persons or entities and upon
such terms and conditions as specified in the Holder's Stock Option Agreement.
7. RESTRICTED SHARES.
A. Valuation Date, Issuance and Price. The Board shall determine whether
certificates representing shares of Common Stock covered by awards of Restricted
Shares will be issued at the beginning or the end of the Restriction Period,
whether Dividend Equivalents will be paid during the Restriction Period in the
event shares of Common Stock are to be issued at the end of the Restriction
Period and shall designate a Valuation Date with respect to each award of
Restricted Shares and may prescribe restrictions, terms and conditions
applicable to the
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vesting of such Restricted Shares in addition to those provided in this Plan.
The Board shall determine the price, if any, to be paid by the Holder for the
Restricted Shares.
B. Issuance of Stock at Beginning of the Restriction Period. If
certificates representing shares of Common Stock are issued at the beginning of
the Restriction Period, the stock certificate or certificates representing such
shares shall be registered in the name of the Holder to whom such Restricted
Shares shall have been awarded. During the Restriction Period, certificates
representing the Restricted Shares and any securities constituting Retained
Distributions shall bear a restrictive legend to the effect that ownership of
the Restricted Shares (and such Retained Distributions), and the enjoyment of
all rights appurtenant thereto, are subject to the restrictions, terms and
conditions provided in the Plan and the applicable Restricted Shares Agreement.
Such certificates shall be deposited by such Holder with the Company, together
with stock powers or other instruments of assignment, each endorsed in blank,
which will permit transfer to the Company of all or any portion of the
Restricted Shares and any securities constituting Retained Distributions that
shall be forfeited or that shall not become vested in accordance with the Plan
and the applicable Restricted Shares Agreement.
C. Restrictions. If certificates representing shares of Common Stock
covered by an award of Restricted Shares are issued at the beginning of the
Restriction Period, the Restricted Shares shall constitute issued and
outstanding shares of Common Stock for all corporate purposes. The Holder will
have the right to vote such Restricted Shares, to receive and retain all regular
cash dividends, and such other distributions as the Board may in its sole
discretion designate, paid or distributed on such Restricted Shares and to
exercise all other rights, powers and privileges of a Holder of Common Stock
with respect to such Restricted Shares, with the exception that (i) the Holder
will not be entitled to delivery of the stock certificate or certificates
representing such Restricted Shares until the Restriction Period shall have
expired and unless all other vesting requirements with respect thereto shall
have been fulfilled; (ii) the Company will retain custody of the stock
certificate or certificates representing such Restricted Shares during the
Restriction Period; (iii) other than regular cash dividends and such other
distributions as the Board may in its sole discretion designate, the Company
will retain custody of all distributions ("Retained Distributions") made or
declared with respect to such
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Restricted Shares (and such Retained Distributions will be subject to the same
restrictions, terms and conditions as are applicable to such Restricted Shares)
until such time, if ever, as the Restricted Shares with respect to which such
Retained Distributions shall have been made, paid or declared shall have become
vested, and such Retained Distributions shall not bear interest or be segregated
in separate accounts; (iv) the Holder may not sell, assign, transfer, pledge,
exchange, encumber or dispose of such Restricted Shares or any Retained
Distributions during the Restriction Period; and (v) a breach of any
restrictions, terms or conditions provided in the Plan or established by the
Board with respect to such Restricted Shares or Retained Distributions will
cause a forfeiture of such Restricted Shares and any Retained Distributions with
respect thereto.
D. Issuance of Stock at End of the Restriction Period. If certificates
representing shares of Common Stock covered by an award of Restricted Shares are
to be issued at the end of the Restriction Period, the Holder shall have none of
the rights of a stockholder with respect to the shares of Common Stock covered
by an award of Restricted Shares until such shares have been transferred to the
Holder at the end of the Restriction Period. If shares of Common Stock are to be
issued at the end of the Restriction Period, the Holder, unless otherwise
determined by the Board, shall be entitled to receive Dividend Equivalents
during the Restriction Period with respect to the shares of Common Stock covered
thereby.
E. Cash Awards. In connection with any award of Restricted Shares, the
Board may authorize the payment of a cash amount to the Holder of such
Restricted Shares at any time after such Restricted Shares shall have become
vested; provided, however, that the amount of the cash payment, if any, that a
Holder shall be entitled to receive shall not exceed 100% of the aggregate
Maturity Value of the Restricted Shares awarded to such Holder hereunder. Such
Cash Awards shall be payable in accordance with such additional restrictions,
terms and conditions as shall be prescribed by the Board and shall be in
addition to any other salary, incentive, bonus or other compensation payments
which Holders shall be otherwise entitled or eligible to receive from the
Company.
F. Completion of Restriction Period. On the Valuation Date with respect
to each award of Restricted Shares, and the satisfaction of any other applicable
restrictions, terms and conditions (i) all or part of such Restricted Shares
shall
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become vested, (ii) any Retained Distributions with respect to such Restricted
Shares shall become vested to the extent that the Restricted Shares related
thereto shall have become vested, and (iii) any Cash Award to be received by the
Holder with respect to such Restricted Shares shall become payable, all in
accordance with the terms of the applicable Restricted Shares Agreement. Any
such Restricted Shares and Retained Distributions that shall not have become
vested shall be forfeited to the Company and the Holder shall not thereafter
have any rights with respect to such Restricted Shares and Retained
Distributions that shall have been so forfeited.
8. ACCELERATION OF OPTIONS AND RESTRICTED SHARES.
Notwithstanding any contrary waiting period or installment period in any
Stock Option Agreement or any Restriction Period in any Restricted Share
Agreement or in the Plan, each outstanding Option granted under the Plan shall,
except as otherwise provided in the Stock Option Agreement, become exercisable
in full for the aggregate number of shares covered thereby, and each Restricted
Share, except as otherwise provided in the Restricted Shares Agreement, shall
vest unconditionally, in the event (i) the Board (or, if approval of the Board
is not required as a matter of law, the stockholders of the Company) shall
approve (a) any consolidation or merger of the Company (x) as contemplated in
the Amended and Restated Agreement and Plan of Merger dated as of September 22,
1995 among Time Warner Inc., TW Inc., Time Warner Acquisition Corp., TW
Acquisition Corp. and Turner Broadcasting System, Inc., as the same may be
amended from time to time, or (y) in which the Company 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 the
Company 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 (b) 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 the Company, or (c) the adoption of any
plan or proposal for the liquidation or dissolution of the Company, or (ii) 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 the Company or any
employee benefit plan sponsored by the Company or any Subsidiary) (a) shall
purchase any Common Stock of the Company (or securities convertible into the
Company's Common Stock) for
15
cash, securities or any other consideration pursuant to a tender offer or
exchange offer, without the prior consent of the Board, or (b) shall become the
"beneficial owner" (as such term is defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing 20
percent or more of the combined voting power of the then outstanding securities
of the Company ordinarily (and apart from rights accruing under special
circumstances) having the right to vote in the election of directors (calculated
as provided in paragraph (d) of such Rule 13d-3 in the case of rights to acquire
the Company's securities), or (iii) during any period of two consecutive years,
individuals who at the beginning of such period constitute the entire Board
shall cease for any reason to constitute a majority thereof unless the election,
or the nomination for election by the Company'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. Any
transaction referred to in the foregoing clause (i) is herein called an Approved
Transaction, any purchase pursuant to a tender offer or exchange offer or
otherwise as described in the foregoing clause (ii) is herein called a Control
Purchase and the cessation of individuals constituting a majority of the Board
as described in the foregoing clause (iii) is herein called a Board Change. The
Stock Option Agreement and Restricted Shares Agreement evidencing Options or
Restricted Shares granted under the Plan may contain such provisions limiting
the acceleration of the exercise of Options and the acceleration of the vesting
of Restricted Shares as provided in this paragraph 8 as the Board deems
appropriate to ensure that the penalty provisions of Section 4999 of the Code,
or any successor thereto in effect at the time of such acceleration, will not
apply to any stock or cash received from the Company by the Holder or such
Holder's permitted transferee pursuant to subparagraph 6G.
9. TERMINATION OF EMPLOYMENT.
A. Death of Holder. If a Holder shall die during the Restriction Period
with respect to any Restricted Shares or prior to the exercise of any Option,
then:
(i) unless otherwise provided in a Restricted Shares
Agreement, the Restriction Period applicable to each award of Restricted
Shares shall be deemed to have expired and all such Restricted Shares
and Retained Distributions shall become vested and any Cash Award
16
payable pursuant to the applicable Restricted Shares Agreement shall be
adjusted in such manner as provided in the Restricted Shares Agreement;
(ii) in the case of either an ISO or a Nonqualified Stock
Option, if the Holder dies while employed by the Company or a Subsidiary
or while the Holder is an Employee of an Affiliated Entity, then such
Option (subject to clause (vi) below) may be exercised by the legatee(s)
or personal representative or by a permitted transferee pursuant to
subparagraph 6G of such Holder at any time within five years after such
Holder's death;
(iii) in the case of either an ISO or a Nonqualified
Option, if the Holder ceases to be an employee of the Company or any
Subsidiary or ceases to be an Employee of an Affiliated Entity due to
Total Disability and such Holder dies within one year after such
termination of employment, then such Option (subject to clause (vi)
below) may be exercised by the legatee(s) or personal representative or
by a permitted transferee pursuant to subparagraph 6G of such Holder at
any time during the remainder of the period during which such Holder
would have been able to exercise such Option had the Holder not died;
(iv) in the case of either an ISO or a Nonqualified Stock
Option, if the Holder ceases to be an employee of the Company or a
Subsidiary or ceases to be an Employee of an Affiliated Entity as a
result of retirement pursuant to any retirement plan of the Company, a
Subsidiary or such Affiliated Entity and such Holder dies during the
period after retirement when such Option was still exercisable by such
Holder, then such Option (subject to clause (vi) below) may be exercised
by the legatee(s) or personal representative or by a permitted
transferee pursuant to subparagraph 6G of such Holder at any time during
the remainder of the period during which such Holder would have been
able to exercise such Option had the Holder not died;
(v) in the case of either an ISO or a Nonqualified Stock
Option, if the Holder dies within three months after termination of
employment with the Company or a Subsidiary or after ceasing to be an
Employee of an Affiliated Entity and clauses (iii) and (iv) are not
17
applicable, then such Option (subject to clause (vi) below) may be
exercised by the legatee(s) or personal representative or by a permitted
transferee pursuant to subparagraph 6G of such Holder at any time within
one year after such Holder's death, and;
(vi) the exercise of Options after the termination of
employment with the Company or a Subsidiary or after ceasing to be an
Employee of an Affiliated Entity for any reason is subject to the
following: (a) no Option may be exercised after the expiration date of
such Option; (b) only Options exercisable by the Holder or such Holder's
permitted transferee pursuant to subparagraph 6G at the time of such
termination may be exercised after such termination; and (c) any Stock
Option Agreement may provide a shorter period of time for the exercise
of Options than provided in clauses (ii) through (v) above.
B. Total Disability. If a Holder shall cease to be an employee of the
Company or any Subsidiary or ceases to be an Employee of an Affiliated Entity
during the Restriction Period with respect to any Restricted Shares or prior to
the exercise of any Option as a result of Total Disability; then:
(i) in the case of Restricted Shares, clause
A(i) above shall apply; and
(ii) in the case of either an ISO or a Nonqualified Stock
Option, such Option (subject to clause A(vi) above) may be exercised by
such Holder (or his or her personal representative or permitted
transferee pursuant to subparagraph 6G) at any time within one year
after such termination of employment.
C. Retirement. If a Holder ceases to be an employee of the Company or
any Subsidiary or ceases to be an Employee of an Affiliated Entity during the
Restriction Period with respect to any Restricted Shares or prior to the
exercise of any Option as a result of retirement pursuant to any retirement plan
of the Company, any Subsidiary or such Affiliated Entity, then:
(i) unless the Board determines otherwise, in the case of
Restricted Shares, all Restricted Shares, Retained Distributions and
rights to any Cash Awards will be forfeited;
(ii) in the case of an ISO, such ISO (subject
18
to clause A(vi) above) may be exercised at any time within
three months after such Holder's termination of
employment; and
(iii) in the case of a Nonqualified Stock Option, such
Option (subject to clause A(vi) above) may be exercised at any time
within five years after such Holder's termination of employment.
D. Termination by Company for Cause. If during the Restriction Period
with respect to any Restricted Shares or prior to the exercise of any Option, a
Holder's employment with the Company or any Subsidiary shall be terminated by
the Company or such Subsidiary for cause or an Affiliated Entity shall cause the
Holder to cease to be an Employee of an Affiliated Entity for cause (for these
purposes, cause shall have the meaning ascribed thereto in any employment
agreement to which such Holder is a party or, in the absence thereof, shall
include but not be limited to, insubordination, dishonesty, incompetence, moral
turpitude, other misconduct of any kind and the refusal to perform his or her
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
shall only mean a felony conviction for fraud, misappropriation or
embezzlement), then:
(i) all options held by such Holder and any
permitted transferee pursuant to subparagraph 6G shall
immediately terminate; and
(ii) such Holder's rights to all Restricted Shares,
Retained Distribution and any Cash Awards shall be forfeited
immediately.
E. Termination by Holder for Cause or by Company without Cause. If
during the Restriction Period with respect to any Restricted Shares or prior to
the exercise of any Option, a Holder's employment with the Company or any
Subsidiary shall be terminated by the Holder for cause or by the Company or
Subsidiary without cause or an Affiliated Entity shall cause the Holder to cease
to be an Employee of an Affiliated Entity without cause or the Holder shall
terminate his or her employment as an Employee of an Affiliated Entity for cause
(for these purposes, cause shall have the meaning ascribed thereto in any
employment agreement to which the Holder is a
19
party or in the absence thereof, as determined by the Board)
then:
(i) in the case of Restricted Shares, the
provisions of clause A(i) above shall apply; and
(ii) in the case of either an ISO or a Nonqualified Stock
Option, such Option (subject to clause A(vi) above) may be exercised at
any time within three months after such Holder's termination of
employment.
F. Termination for Other Reason. If during the Restriction Period with
respect to any Restricted Shares or prior to the exercise of any Option, a
Holder shall cease to be an employee of the Company or any Subsidiary or shall
cease to be an Employee of an Affiliated Entity for any reason other than as set
forth in subparagraphs A through E above, then:
(i) all such Holder's rights to Restricted
Shares, Retained Distributions and any Cash Awards shall
be forfeited immediately; and
(ii) in the case of an ISO or a Nonqualified Stock Option,
the provisions of clause E(ii) above shall apply.
G. General. A leave of absence, unless otherwise determined by the Board
prior to the commencement thereof, shall not be considered a termination of
employment. Awards made under this Plan shall not be affected by any change of
employment so long as the Holder continues to be an employee of the Company or a
Subsidiary or an Employee of an Affiliated Entity.
10. RIGHT OF THE EMPLOYER 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 the Company or any of its Subsidiaries or
to continue as an Employee of an Affiliated Entity or interfere in any way with
the right of the Company or a Subsidiary or an Affiliated Entity to terminate
the employment of the Holder at any time, with or without cause.
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11. NONALIENATION OF BENEFITS.
Except as provided in subparagraph 6G, 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 benefit.
12. WRITTEN AGREEMENT.
Each award of Restricted Shares and any right to a Cash Award hereunder
shall be evidenced by a Restricted Shares Agreement and each grant of an Option
shall be evidenced by a Stock Option 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. The effective date of the granting of
an Option shall be the date on which the Board approves the granting of such
Option. Each grantee of an Option or Restricted Shares shall be notified
promptly of such grant and a written Stock Option Agreement and/or Restricted
Shares Agreement shall be promptly executed and delivered by the Company and the
grantee, provided that such grant of Options or Restricted Shares shall
terminate if such written Agreement is not signed by such grantee (or his or her
attorney) and delivered to the Company within 60 days after the date the Board
approved such grant. Any such written Agreement may contain such provisions as
the Board deems appropriate to ensure that the penalty provisions of Section
4999 of the Code, or any successor thereto, will not apply to any stock or cash
received from the Company by the Holder or such Holder's permitted transferee
pursuant to subparagraph 6G.
13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
The Stock Option Agreements and Restricted Shares Agreements evidencing
Awards may contain such provisions as the Board shall determine to be
appropriate for the adjustment of the number and class of all Restricted Shares
and the terms applicable to any Cash Awards and the number and class of shares
subject to each outstanding Option and the option prices in the event of changes
in the outstanding Common Stock of the
21
Company by reason of any stock dividend, distribution, split-up,
recapitalization, combination or exchange of shares, merger, consolidation or
liquidation and the like, and, in the event of any such change in the
outstanding Common Stock of the Company, the aggregate number and class of
shares available under the Plan shall be appropriately adjusted by the Board,
whose determination shall be conclusive.
14. RIGHT OF FIRST REFUSAL.
The Stock Option Agreements and Restricted Shares Agreements may contain
such provisions as the Board shall determine to the effect that if a Holder, or
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
or upon the vesting of Restricted Shares awarded under this 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 the Company at
Fair Market Value on a date specified in such offer (which date shall be at
least three business days and not more than ten business days following the date
of such offer). In any such event, certificates representing shares issued upon
exercise of Options and the vesting of Restricted Shares shall bear a
restrictive legend to the effect that transferability of such shares are subject
to the restrictions contained in the Plan and the applicable Stock Option
Agreement or Restricted Shares Agreement and the Company may cause the registrar
of its Common Stock to place a stop transfer order with respect to such shares.
15. TERMINATION AND AMENDMENT.
Unless the Plan shall theretofore have been terminated as hereinafter
provided, no Awards may be made under the Plan after December 31, 1997. The
Board may at any time prior to December 31, 1997 terminate the Plan, and the
Board may at any time also modify or amend the Plan in such respects as it shall
deem advisable; provided, however, that the Board may not, without approval of
the Holders of a majority of the voting securities of the Company present,
either in person or by proxy, and entitled to vote at a meeting (i) materially
increase (except as provided in paragraph 13 hereof) the maximum number of
shares which may be issued under the Plan, (ii) materially modify the
requirements as to eligibility for
22
participation in the Plan, or (iii) materially increase the benefits accruing to
participants under the Plan. No termination, modification or amendment of the
Plan or any outstanding Restricted Shares Agreement or Stock Option Agreement
may, without the consent of the employee (or a transferee of such employee if
the Award, or any part thereof, has been transferred pursuant to subparagraph
6G) to whom any Award shall theretofore have been granted, adversely affect the
rights of such employee (or a transferee of such employee if the Award, or any
part thereof, has been transferred pursuant to subparagraph 6G) with respect to
such Award.
16. EFFECTIVENESS OF THE PLAN.
The Plan shall become effective upon approval by the vote of a majority
of the voting securities of the Company present, either in person or by proxy,
and entitled to vote at the 1988 Annual Meeting of Stockholders to be held on
April 21, 1988, or any adjournment thereof. Prior to such approval, the Board
may, in its discretion, grant or authorize the making of Awards under the Plan
provided that the exercise of Options and the vesting of Restricted Shares shall
be expressly subject to the condition that the Plan shall have been so approved.
Unless the Plan shall be so approved, the Plan and all Awards theretofore made
thereunder shall be and become null and void.
17. GOVERNMENT AND OTHER REGULATIONS.
The obligation of the Company with respect to Awards shall be subject to
(i) all applicable laws, rules and regulations and such approvals by any
governmental agencies as may be required, including, without limitation, the
effectiveness of a registration statement under the Securities Act of 1933, and
(ii) the rules and regulations of any securities exchange on which the Common
Stock may be listed.
18. WITHHOLDING.
The Company's obligation to deliver shares of Common Stock or to pay
cash upon the exercise of any Nonqualified Stock Option or any SAR granted under
the Plan and to deliver stock certificates or to pay cash upon the vesting of
Restricted Shares or Cash Awards shall be subject to applicable Federal, state
and local tax withholding requirements. Federal, state
23
and local withholding tax paid upon the exercise of any Nonqualified Stock
Option and upon the vesting of Restricted Shares 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.
19. SEPARABILITY.
If any of the terms or provisions of this Plan conflict with the
requirements of Rule 16b-3 under the Exchange Act (as the same shall be amended
from time to time) and/or Section 422A of the Code (as the same shall be amended
from time to time), then such terms or provisions shall be deemed inoperative to
the extent they so conflict with the requirements of said Rule 16b-3, and/or
with respect to ISO's, Section 422A of the Code.
With respect to ISOs, if this Plan does not contain any provision
required to be included herein under Section 422A of the Code (as the same shall
be amended from time to time), 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.
20. NON-EXCLUSIVITY OF THE PLAN.
Neither the adoption of the Plan by the Board nor the submission of the
Plan to the stockholders of the Company 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.
21. EXCLUSION FROM PENSION AND PROFIT-SHARING COMPUTATION.
By acceptance of an Award, each Holder shall be deemed to have agreed
that the award of Restricted Shares and any right to a Cash Award and the grant
of any Option and the exercise thereof or of any SAR or Limited Right are
special incentive compensation and that they will not be taken into account as
24
"salary" or "compensation" or "bonus" in determining the amount of any payment
under any pension, retirement or other qualified employee benefit plan of the
Company or any Subsidiary or any Affiliated Entity. 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 provided by the
Company on the life of the Holder which is payable to such beneficiary under any
life insurance plan covering employees of the Company or any Subsidiary or any
Affiliated Entity.
22. GOVERNING LAW.
The Plan shall be governed by, and construed in accordance with, the
laws of the State of New York.
25