As Amended through
March 20, 1997
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
$.01 per share, of the Company.
(g) "Company" means Time Warner Inc., a Delaware
corporation.
(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 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
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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.
(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.
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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 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
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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.
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
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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 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
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entitled as a result of the exercise of the Option. Except as provided in
paragraphs 9 and 25 and subparagraph 6G 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 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
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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, 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.
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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.
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.
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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.
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
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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 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. Limited Transferability of Options. Except as set forth in this
subparagraph G and paragraph 23, Options shall not be transferable other than by
will or the laws of descent and distribution, and Options may be exercised
during the lifetime of the Holder thereof only by such Holder (or his or her
court appointed legal representative). The Stock Option Agreement may provide
that Options are transferable by gift to such persons or entities and upon such
terms and conditions 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 vesting of such Restricted
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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 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,
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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 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
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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 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
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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. General. If a Holder's employment shall be terminated by
the Company or any Subsidiary or the Holder shall cease to be an
Employee of an Affiliated Entity prior to the complete exercise of
an Option (or deemed exercise thereof, as provided in subparagraphs
6E and 6F), or prior to the complete vesting of any Restricted
Shares, then such Option shall thereafter be exercisable, and the
Restricted Shares shall vest, solely to the extent provided in the
applicable Stock Option Agreement or Restricted Shares 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 or the Holder ceases to be an Employee of an
Affiliated Entity by reason of death or Total Disability, the Option
shall remain exercisable for a period of at least one year following
such termination (but not later than the scheduled expiration of
such Option) and the Restricted Shares and any Retained
Distributions shall vest in full; and (c) any termination by the
employing company for cause will be treated in accordance with the
provisions of subparagraph 9B.
B. Termination for Cause. If a Holder's employment with the
Company or any of its Subsidiaries shall be terminated by the
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Company or such Subsidiary or the Holder shall cease to be an Employee of an
Affiliated Entity prior to the exercise of any Option, or the complete vesting
of any Restricted Shares, 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 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 mean only a felony
conviction for fraud, misappropriation or embezzlement), then all Options held
by such Holder and any permitted transferee pursuant to subparagraph 6G shall
immediately terminate and all Restricted Shares and Retained Distributions shall
be forfeited.
C. Special Rule. Notwithstanding any other provision of the Plan, the
Board may provide in the applicable Stock Option Agreement or Restricted Shares
Agreement that the Award shall become and/or remain exercisable or shall vest at
rates and times at variance with the rules otherwise herein set forth; provided,
however, that any such Stock Option Agreement or Restricted Shares Agreement
provisions at variance with the exercisability and vesting rules otherwise set
forth herein shall be effective only if reflected in the terms of an employment
agreement approved or ratified by the Board.
D. Miscellaneous. The Board may determine whether any given
leave of absence constitutes a termination of employment or the
termination of the Holder's status as an Employee of an Affiliated
Entity. 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 the Company or one of its Subsidiaries 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 Company by reason of any stock dividend,
distribution, split-up, recapitalization, combination or exchange of shares,
merger, consolidation or liquidation and the
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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 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)
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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 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.
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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
"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.
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22. GOVERNING LAW.
The Plan shall be governed by, and construed in accordance with, the
laws of the State of New York.
23. 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 the Company 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 the
Company 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.
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