FIRST AMENDMENT TO
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EMPLOYMENT AGREEMENT
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Amendment (this "Amendment") to the employment agreement (the "Employment
Agreement") made February 27, 2003 and effective as of November 1, 2001, between
Time Warner Inc., formerly known as AOL Time Warner Inc. (the "Company") and
Wayne H. Pace (the "Executive" or "you"). This Amendment is made as of April 28,
2005 and is effective as of April 28, 2005.
The parties intending to be legally bound hereby agree as follows:
1. Section 1 of the Employment Agreement is amended to reflect that the
Term Date is changed from December 31, 2005 to December 31, 2007.
2. Section 4.1 of the Employment Agreement is amended by deleting the
second sentence thereof and replacing it with the following:
"Termination by the Company for `cause' shall mean termination because of
your (a) conviction (treating a nolo contendere plea as a conviction) of a
felony (whether or not any right to appeal has been or may be exercised),
(b) willful failure or refusal without proper cause to perform your duties
with the Company, including your obligations under this Agreement (other
than any such failure resulting from your incapacity due to physical or
mental impairment), (c) fraud, misappropriation, embezzlement or reckless
or willful destruction of Company property, (d) a material and willful
breach of any statutory or common law duty of loyalty to the Company; (e)
intentional and improper conduct materially prejudicial and detrimental to
the business of the Company or any of its affiliates, or (f) a willful and
material breach of any of the covenants provided for in Section 9 hereof.
For purposes of the foregoing, no act, or failure to act, on your part
shall be deemed "willful" or "intentional" unless done, or omitted to be
done, by you without reasonable belief that your action or omission was in
the best interests of the Company."
3. (a) Section 4.2 of the Employment Agreement is amended by deleting the
second sentence of the first paragraph of Section 4.2, and replacing it with the
following:
"A material breach by the Company shall include, but not be limited to, (i)
the Company violating Section 2 of this Agreement with respect to your
title, reporting lines, duties or place of employment, (ii) the Company
violating any provision of Section 3 of this Agreement, or (iii) the
Company failing to cause any successor to all or substantially all of the
business and assets of the Company expressly to assume the obligations of
the Company under this Agreement."
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(b) Section 4.2.2 of the Employment Agreement is amended by deleting the
first sentence there of and replacing it with the following:
"After the effective date of a termination without cause, you shall remain
an employee of the Company for a period ending on the date (the `Severance
Term Date') which is the Advisory Period Term Date and during such period
you shall be entitled to receive, whether or not you become disabled during
such period but subject to Section 6, (a) for the period ending on the Term
Date, (x) Base Salary at an annual rate equal to your Base Salary in effect
immediately prior to the notice of termination, and (y) an annual Bonus in
respect of each calendar year or portion thereof (in which case a pro rata
portion of such Bonus will be payable) during such period equal to your
Average Annual Bonus; and (b) for the period from the Term Date through the
Advisory Period Term Date, Advisory Services compensation equal to
$1,000,000 per annum."
(c) Section 4.2.2 of the Employment Agreement is amended by deleting the
phrase "the later of (x) July 1, 2003, or (y)" in the second sentence thereof.
4. Section 4.3 of the Employment Agreement is deleted and replaced with the
following:
"4.3 Intentionally deleted."
5. Section 4.7 of the Employment Agreement is amended to read in its
entirety as follows:
"4.7 Payments. So long as you remain on the payroll of the Company or
any subsidiary of the Company, payments of Base Salary, Bonus and Advisory
Services compensation required to be made after a termination without cause
shall be made at the same times as similar payments are made to other
senior executives of the Company.
6. Section 5.1 of the Employment Agreement is amended by deleting the
second sentence thereof and replacing it with the following:
"If you have not resumed your usual duties on or prior to the
Disability Date, the Company shall pay you a pro rata Bonus (based on your
Average Annual Bonus) for the year in which the Disability Date occurs, and
thereafter shall pay you disability benefits for the period ending on the
Advisory Period Term Date (the "Disability Period"), in an annual amount
equal to (a) for the period commencing on the Disability Date and ending on
the Term Date, 75% of the sum of (x) your Base Salary at the time you
become disabled plus (y) your Average Annual Bonus; and (b) for the period
from the Term Date through the Advisory Period Term Date, $750,000 per
annum."
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7. Section 5.2 of the Employment Agreement is amended by deleting the
second sentence thereof and replacing it with the following:
"If the Company elects to restore you to full-time service, then this
Agreement shall continue in full force and effect in all respects and the
Term Date and the Advisory Period Term Date shall not be extended by virtue
of the occurrence of the Disability Period."
8. Section 9.2 of the Employment Agreement is amended by deleting the term
"Term Date" in the first sentence thereof and replacing it with the term
"Advisory Period Term Date."
9. Section 11.1 of the Employment Agreement is amended to read in its
entirety as follows:
"11.1 If to the Company:
Time Warner Inc.
One Time Warner Center
New York, New York 10019
Attention: Senior Vice President - Global
Compensation and Benefits
(with a copy, similar addressed
but Attention: General Counsel)"
10. A new Section 11A of the Employment Agreement is added to the
Employment Agreement as follows:
"11A. Advisory Services.
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11A.1 Unless the term of employment has previously been terminated
pursuant to any provision of this Agreement, then following the Term Date,
you shall remain on the payroll of the Company and become a part-time
employee rendering Advisory Services to the Company as set forth in this
Section 11A for the `Advisory Period,' which shall be for the period
beginning on January 1, 2008 and ending on December 31, 2009 (the `Advisory
Period Term Date').
11A.2 During the Advisory Period, you shall provide services with
respect to the business, affairs and management of the Company as may be
reasonably requested by the Chief Executive Officer of the Company (the
`Advisory Services'). You may, subject to the restrictions set forth in
Sections 9.2, engage in
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other full-time employment, and engage in such other ventures and perform
such other services during the Advisory Period and your Advisory Services
hereunder shall be required only at times and places reasonably consistent
with such other employment, ventures or services.
11A.3 During the Advisory Period, you shall not enter into the employ
of, or render any services to, any person or entity in violation of the
restrictions set forth in Section 9.2 of the Agreement.
11A.4 In consideration of your agreement to furnish Advisory Services
as set forth herein, you shall be paid compensation in the amount of
$1,000,000 per annum. Compensation accruing to you during the Advisory
Period shall be payable in accordance with the regular payment practices of
the Company for such Advisory Services.
11A.5 During the Advisory Period, the Company shall reimburse you for
your reasonable out-of-pocket travel and expenses incurred in rendering
Advisory Services according to Company's travel and expense reimbursement
policy for its senior executives.
11A.6 Notwithstanding anything to the contrary herein, in the event
that you fail to provide Advisory Services as provided in Section 11A
hereof, in addition to any other remedies that the Company may have, the
Company shall have the right to cease, during the remainder of the Advisory
Period, making compensation payments to you."
12. A new Section 11B of the Employment Agreement is added to the
Employment Agreement as follows:
11B. Compliance With Section 409A of the Code. The Company and you
acknowledge and agree that if postponing payment of any amounts due
under the Agreement is necessary to comply with the requirements of
Section 409A of the Internal Revenue Code of 1986, as amended (the
"Code") in order to avoid adverse tax consequences for you, and you
agree to such postponement, payment of such amounts shall be postponed
to comply with Section 409A of the Code. Any and all payments that are
postponed under this section shall be paid to you in a lump sum at the
earliest time that does not result in adverse tax consequences to you
under section 409A of the Code.
13. Section 12.3 is amended to read in its entirety as follows:
"12.3 Entire Agreement. This Agreement, including Annexes A and B,
sets forth the entire agreement and understanding of the parties relating
to the subject matter
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of this Agreement and supersedes all prior agreements, arrangements and
understandings, written or oral, between the parties."
14. Sections 12.11, 12.12, 12.13, 12.14 and 12.15 are redesignated as
Sections 12.12, 12.13, 12.14, 12.15 and 12.16 respectively.
15. A new Section 12.11 is added to the Employment Agreement as follows:
"12.11 Conflict of Interest. Attached hereto as Annex B and made a
part of this Agreement is the Time Warner Corporate Standards of Business
Conduct. You confirm that you have read, understand and will comply with
the terms thereof and any reasonable amendments thereto. In addition, as a
condition of your employment under this Agreement, you understand that you
may be required periodically to confirm that you have read, understand and
will comply with the Standards of Business Conduct as the same may be
revised from time to time."
16. Redesignated Section 12.16 is amended by adding the following terms:
"Advisory Period - Section 11A.1
Advisory Period Term Date - Section 11A.1
Advisory Services - Section 11A.2
17. Annex B attached to this Amendment is incorporated by this reference
into the Employment Agreement as Annex B.
18. The Employment Agreement, as amended by this Amendment, shall remain in
full force and effect.
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
be duly executed as of the date first above written.
TIME WARNER INC.
By: /s/ Richard D. Parsons
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Name: Richard D. Parsons
Title: Chairman and Chief
Executive Officer
Agreed and Accepted:
WAYNE H. PACE
/s/ Wayne H. Pace
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ANNEX B
TIME WARNER INC. CORPORATE STANDARDS OF BUSINESS CONDUCT
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[omitted, posted on www.timewarner.com]
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