1988 Restricted Stock Plan for Non-Employee Directors - Time Warner Inc.
As Amended Through
January 18, 2001
TIME WARNER INC.
1988 Restricted Stock Plan For
Non-Employee Directors
1. PURPOSE. The purpose of the Plan is to supplement the compensation
paid to Outside Directors and to increase their proprietary interest in the
Company and their identification with the interests of the Company's
stockholders, by grants of annual awards of Common Stock.
2. CERTAIN DEFINITIONS.
(a) "Average Market Price" shall mean the average (rounded to the
nearest cent) of the means between the high and low sales prices of a share of
Common Stock as reported on the New York Stock Exchange Composite Tape for the
ten consecutive trading days ending on the date of the annual meeting of
stockholders of the Company for the year with respect to which an annual grant
of Restricted Shares is automatically made pursuant to paragraph 5 of the Plan.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Commission" shall mean the Securities and Exchange
Commission.
(d) "Common Stock" shall mean the Common Stock, par value $1 per
share, of the Company.
(e) "Company" shall mean Time Warner Inc., a Delaware corporation.
(f) "Grant Date" shall have the meaning set forth in paragraph 5
of the Plan.
(g) "Outside Director" shall mean a member of the Board of
Directors of the Company who, as of the close of business on the date of the
annual meeting of stockholders of the Company, is not an employee of the Company
or any subsidiary of the Company. For the purposes hereof, a "subsidiary" of the
Company shall mean any corporation, partnership or other entity in which the
Company owns, directly or indirectly, an equity interest of 50% or more.
(h) "Plan" shall mean this 1988 Restricted Stock Plan for
Non-Employee Directors of the Company.
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(i) "Retained Distributions" shall mean distributions which are
retained by the Company pursuant to paragraph 6(b) of the Plan.
(j) "Restricted Shares" shall mean shares of Common Stock
automatically granted to an Outside Director pursuant to paragraph 5 of the
Plan.
(k) "Restriction Period" shall mean the period of time specified
in paragraph 6(a) hereof applicable to all Restricted Shares granted under the
Plan.
3. SHARES SUBJECT TO THE PLAN. Subject to the provisions of paragraph 9
hereof, the maximum aggregate number of Restricted Shares which may be issued
under the Plan in any calendar year, commencing with calendar year 1999, shall
be equal to .003% of the shares of Common Stock outstanding on December 31st of
the preceding calendar year. Any Restricted Shares available for grant in any
calendar year which are not granted in that calendar year shall not be available
for grant in any subsequent calendar year and any Restricted Shares awarded in
any calendar year that are forfeited by the terms of the Plan in any subsequent
calendar year shall not again be available for awards. No fractional shares of
Common Stock shall be granted or issued under the Plan.
The Restricted Shares may be, in whole or in part, authorized but
unissued shares of Common Stock or shares of Common Stock previously issued and
outstanding and reacquired by the Company.
4. ELIGIBILITY. Subject to the last sentence of paragraph 5
hereof, the only persons eligible to participate in the Plan shall be Outside
Directors.
5. ANNUAL GRANTS. Subject to the provisions of paragraph 3 hereof, each
Outside Director shall automatically be granted under the Plan, as of the
conclusion of each annual meeting of stockholders of the Company (the "Grant
Date"), that number of Restricted Shares equal to (a) for Grant Dates occurring
during calendar years 1990 through 1998, $30,000 divided by the Average Market
Price of the Common Stock on the Grant Date and (b) for Grant Dates occurring
during calendar year 1999 and ending with the annual meeting of stockholders to
be held in 2000, that number of Restricted Shares equal to a dollar amount
determined by the Board of Directors on or before the Grant Date divided by the
Average Market Price of the Common Stock on the Grant Date, and except as
hereinafter provided, the Company shall promptly thereafter issue such shares,
in each case without any further action required to be taken by the Board or any
committee thereof. The Company shall not be required to issue fractions of
Restricted Shares and in lieu thereof any fractional Restricted Share shall be
rounded to the next whole number. Notwithstanding the foregoing, in the case of
an Outside Director who, as of any Grant Date, has not continuously served as
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a member of the Board for a period of at least six consecutive months (a "new
Outside Director"), the Restricted Shares granted to such new Outside Director
on such Grant Date shall not be issued in such new Outside Director's name until
six months after such new Outside Director shall have first become a new Outside
Director. An individual who shall become an Outside Director subsequent to the
date of the annual meeting of stockholders of the Company for any year shall
first become eligible to participate in the Plan commencing on the date of the
next annual meeting of stockholders of the Company.
6. RESTRICTION PERIOD; RESTRICTIONS APPLICABLE TO RESTRICTED
SHARES; CERTIFICATES REPRESENTING RESTRICTED SHARES.
(a) All Restricted Shares granted to an Outside Director pursuant
to the Plan shall be subject to the possibility of forfeiture and the
restrictions set forth in paragraph 6(b) below for a period (the "Restriction
Period") commencing on the date such Restricted Shares shall have been
automatically granted to such Outside Director pursuant to paragraph 5 of the
Plan and ending on the earliest of the following events:
(i) the date such Outside Director ceases to be a
director of the Company by reason of mandatory retirement pursuant to
any policy or plan of the Company applicable to Outside Directors;
(ii) the date such Outside Director, having been
nominated for reelection, is not reelected by the stockholders of the
Company to serve as a member of the Board;
(iii) the date of death of such Outside Director;
(iv) the date such Outside Director terminates
service on the Board on account of medical or health reasons which
render such Outside Director unable to continue to serve as a member of
the Board; or
(v) the occurrence of a Change in Control of the
Company (as defined in paragraph 6(c) below).
provided, however, that, in the discretion of the Board on a case by case basis,
the Restriction Period applicable to all Restricted Shares granted to an Outside
Director shall end and be deemed completed for all purposes of the Plan in the
event an Outside Director (a "withdrawing Outside Director") terminates his or
her service as a member of the Board (A) for reasons of personal or financial
hardship; (B) to serve in any governmental, diplomatic or
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any other public service position or capacity; (C) to avoid or protect against a
conflict of interest of any kind; (D) on the advice of legal counsel; or (E) for
any other extraordinary circumstance that the Board determines to be comparable
to the foregoing. The withdrawing Outside Director shall abstain from
participating in any determination made by the Board with respect to any matter
relating to the foregoing.
(b) Restricted Shares, when issued, will be represented by a
stock certificate or certificates registered in the name of the Outside Director
to whom such Restricted Shares shall have been granted. Each such certificate
shall bear a legend in substantially the following form:
"The shares represented by this certificate are subject to the
terms and conditions (including forfeiture and restrictions
against transfer) contained in the Time Warner Inc. 1988
Restricted Stock Plan for Non-Employee Directors. A copy of
such Plan is on file in the Office of the Secretary of Time
Warner Inc."
Such certificates shall be deposited by such Outside Director
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. Restricted Shares shall constitute issued and
outstanding shares of Common Stock for all corporate purposes. The Outside
Director will have the right to vote such Restricted Shares, to receive and
retain all regular cash dividends paid 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 Outside Director 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 the Restricted Shares during the
Restriction Period; (iii) other than regular cash dividends the Company will
retain custody of all distributions ("Retained Distributions") made or declared
with respect to the Restricted Shares (and such Retained Distributions will be
subject to the same restrictions, terms and conditions as are applicable to the
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) an Outside Director
may not sell, assign, transfer, pledge, exchange, encumber or dispose of any
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
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Board with respect to any Restricted Shares or Retained Distributions will cause
a forfeiture of such Restricted Shares and any Retained Distributions with
respect thereto.
(c) A "Change in Control" of the Company shall be deemed to have
occurred on the date upon which (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 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 Section 13(d)(3) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), corporation,
or other entity shall purchase any Common Stock of the Company (or securities
convertible into the 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 any such person, corporation or other entity (other
than the Company or any benefit plan sponsored by the Company or any subsidiary)
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 directions then still in office who were directors at the beginning of
the period; provided, however, that, as to Restricted Shares granted after
January 9, 2000, the consummation of the mergers and the other transactions
contemplated in the Agreement and Plan of Merger dated as of January 10, 2000
between America Online, Inc. and Time Warner Inc., as the same may be amended
from time to time, shall not constitute a Change in Control under the foregoing
clauses (ii) or (iii).
7. COMPLETION OF RESTRICTION PERIOD; FORFEITURE. Upon the completion of
the Restriction Period with respect to an Outside Director's Restricted Shares,
and the satisfaction of any other applicable restrictions, terms and conditions,
all Restricted Shares issued to such Outside Director and any Retained
Distributions with respect to such Restricted Shares shall become vested. The
Company shall promptly thereafter issue and
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deliver to the Outside Director new stock certificates or instruments
representing the Restricted Shares and other distributions registered in the
name of the Outside Director or, if deceased, his or her legatee, personal
representative or distributee, which do not contain the legend set forth in
paragraph 6(b) hereof.
If an Outside Director ceases to be a member of the Board for any
reason other than as set forth in clauses (i) through (v) of paragraph 6(a)
hereof or as the Board may otherwise approve in accordance with paragraph 6(a),
then all Restricted Shares issued to such Outside Director and all Retained
Distributions with respect thereto shall be forfeited to the Company and the
Outside Director shall not thereafter have any rights (including dividend and
voting rights) with respect to such Restricted Shares and Retained
Distributions.
8. STATEMENT OF ACCOUNT. Each Outside Director shall receive an annual
statement, on or about June 1st, showing the number of Restricted Shares granted
to such Outside Director for that year and the aggregate number of Restricted
Shares that have been granted to such Outside Director under the Plan.
9. ADJUSTMENT IN EVENT OF CHANGES IN COMMON STOCK. In the event of a
recapitalization, stock split, stock dividend, combination or exchange of
shares, merger, consolidation or liquidation or the like, the aggregate number
and class of Restricted Shares available for grant under the Plan shall be
appropriately adjusted by the Board, whose determination shall be conclusive.
10. NO RIGHT TO NOMINATION. Nothing contained in the Plan shall confer
upon any Outside Director the right to be nominated for reelection to the Board.
11. NONALIENATION OF BENEFITS. 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. If any Outside Director or beneficiary
hereunder should become bankrupt or attempt to anticipate, alienate, sell,
assign, hypothecate, pledge, exchange, transfer, encumber or charge any right or
benefit hereunder, then such right or benefit shall, in the discretion of the
Board, cease and terminate, and in such event, the Board in its discretion may
hold or apply the same or any part thereof for the benefit of the Outside
Director, his or her beneficiary, spouse, children or other dependents, or any
of them, in such manner and in such proportion as the Board may deem proper.
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12. APPOINTMENT OF ATTORNEY-IN-FACT. Upon the issuance of any
Restricted Shares hereunder and the delivery by an Outside Director of the stock
power referred to in paragraph 6(b) hereof, such Outside Director shall be
deemed to have appointed the Company, its successors and assigns, the
attorney-in-fact of the Outside Director, with full power of substitution, for
the purpose of carrying out the provisions of this Plan and taking any action
and executing any instruments which such attorney-in-fact may deem necessary or
advisable to accomplish the purposes hereof, which appointment as
attorney-in-fact shall be irrevocable and coupled with an interest. The Company
as attorney-in-fact for the Outside Director may in the name and stead of the
Outside Director make and execute all conveyances, assignments and transfers of
the Restricted Shares and Retained Distributions deposited with the Company
pursuant to paragraph 6(b) of the Plan and the Outside Director hereby ratifies
and confirms all that the Company, as said attorney-in-fact, shall do by virtue
thereof.
Nevertheless, the Outside Director shall, if so requested by the
Company, execute and deliver to the Company all such instruments as may, in the
judgment of the Company, be advisable for the purpose.
13. SECTION 4999 RULES. Notwithstanding any provisions to the contrary
contained in the Plan, if the Payment (as hereinafter defined) due to the
Outside Director hereunder upon the occurrence of a Change in Control of the
Company would be subject to the excise tax imposed by Section 4999 (or any
successor thereto) of the Internal Revenue Code of 1986 (the "Code"), then any
such Payment hereunder payable to the Outside Director shall be reduced to the
largest amount that will result in no portion of the aggregate of the Payments
from the Company being subject to such excise tax. The term "Payment" shall mean
any transfer of property within the meaning of Section 280G (or any successor
thereto) of the Code.
The determination of any reduction in Payments under the Plan shall be
made by the Outside Director in good faith, and such determination shall be
conclusive and binding on the Company. The Outside Director shall have the right
to determine the extent to which the aggregate amount of any such reduction
shall be applied against any cash or any shares of stock of the Company or any
other securities or property to which the Outside Director would otherwise have
been entitled under the Plan, the extent to which the Payments hereunder and any
other payments due to the Outside Director from the Company shall be reduced,
and whether to waive the right to the acceleration of any portion of the Payment
due hereunder or otherwise due to the Outside Director from the Company, and any
such determination shall be conclusive and binding on the Company. To the extent
that Payments hereunder are not paid as a consequence of the limitation
contained in this paragraph 13, then the Restricted Shares and Retained
Distributions not so accelerated shall be deemed to
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remain outstanding and shall be subject to the provisions of the Plan as if no
acceleration had occurred.
If (a) the Company shall make any Payments pursuant to the Plan to the
Outside Director, (b) an excise tax under Section 4999 (or any successor
thereto) of the Code is in fact paid by the Outside Director (or is claimed by
the Internal Revenue Service to be due) as a result of any such Payment, either
alone or together with any other Payments received or to be received by the
Outside Director from the Company, and (c) if nationally recognized counsel to
the Outside Director or the Company shall have given an opinion of counsel that
repayment of all or a portion of such Payments would result in such excise tax
being refunded to the Outside Director (or, if not paid, in such excise tax not
being imposed), then the Outside Director shall repay to the Company all or such
portion of such Payments so that such excise tax will be refunded (or will not
apply).
The Company shall pay all legal fees and expenses which the Outside
Director may incur in any contest of the Outside Director's interpretation of,
or determinations under, the provisions of this paragraph 13.
14. WITHHOLDING TAXES.
(a) At the time any Restricted Shares or Retained
Distributions become vested or payable, each Outside Director shall pay to the
Company the amount of any Federal, state or local taxes of any kind required by
law to be withheld with respect thereto.
(b) If an Outside Director properly elects (which, apart from
any other notice required by law, shall require that the Outside Director notify
the Company of such election at the time it is made) within 30 days after the
Company issues the certificate or certificates representing the Restricted
Shares to the Outside Director to include in gross income for Federal income tax
purposes an amount equal to the fair market value of such Restricted Shares at
the time of such issuance, he or she shall pay to the Company in the year of
award of such Restricted Shares the amount of any Federal, state or local taxes
required to be withheld with respect to such Restricted Shares.
(c) If an Outside Director shall fail to make the payments
required hereunder, the Company shall, to the extent permitted by law, have the
right to deduct from any payment of any kind otherwise due to such Outside
Director any Federal, state or local taxes of any kind required by law to be
withheld with respect to such Restricted Shares.
15. AMENDMENT AND TERMINATION OF PLAN. The Board may at any time
terminate the Plan or make such amendments to the Plan as it shall deem
advisable;
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provided, however, that no termination or amendment of the Plan shall
adversely affect the right of any Outside Director (without his or her consent)
under any grant previously made and any amendment shall comply with all
applicable laws and regulations and stock exchange listing requirements.
16. GOVERNMENT AND OTHER REGULATIONS. Notwithstanding any other
provisions of the Plan, the obligations of the Company with respect to
Restricted Shares shall be subject to all applicable laws, rules and
regulations, and such approvals by any governmental agencies as may be required
or deemed appropriate by the Company. The Company reserves the right to delay or
restrict, in whole or in part, the issuance or delivery of Common Stock pursuant
to any grants of Restricted Shares under the Plan until such time as:
(a) any legal requirements or regulations shall have been met
relating to the issuance of such Restricted Shares or to their registration,
qualification or exemption from registration or qualification under the
Securities Act of 1933 or any applicable state securities laws; and
(b) satisfactory assurances shall have been received that such
Restricted Shares when delivered will be duly listed on any applicable stock
exchange.
17. NONEXCLUSIVITY OF 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 awarding of stock otherwise than under the
Plan, and such arrangements may be either generally applicable or applicable
only in specific cases.
18. GOVERNING LAW. The Plan shall be governed by, and construed in
accordance with, the laws of the State of New York.
19. EFFECTIVE DATE OF THE PLAN. The Plan shall become effective on a
date which is the latter of (i) the date the Plan is approved by the
stockholders of the Company entitled to vote at the annual meeting of
stockholders of the Company to be held in 1988, or any adjournment thereof; and
(ii) the date on which the Company receives a favorable interpretative letter
from the Commission to the effect that (x) the grant of Restricted Shares under
the Plan is exempt from the operation of Section 16(b) of the Exchange Act and
(y) Outside Directors who receive Restricted Shares under the Plan will continue
to be "disinterested persons" within the meaning of Rule 16b-3 under the
Exchange Act with respect to administration of the Company's other stock related
plans in which only
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employees of the Company (including officers, whether or not they are directors)
and its subsidiaries may participate.
20. BENEFICIARIES. Each Outside Director 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 Corporation or his or her designee and may be revoked or
changed by an Outside Director at any time by filing written notice of such
revocation or change with the Secretary of the Corporation or his or her
designee. If no person shall be designated by an Outside Director as his or her
beneficiary or if no person designated by such Outside Director as his or her
beneficiary survives such Outside Director, the Outside Director's beneficiary
shall be his or her estate.
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