1996 Stock Option Plan For Non-Employee Directors - Time Warner Inc.
As Amended Through
January 18, 2001
TIME WARNER 1996 STOCK OPTION
PLAN FOR NON-EMPLOYEE DIRECTORS
1. PURPOSE OF THE PLAN
The purpose of the Time Warner 1996 Stock Option Plan for Non-Employee
Directors (hereinafter the "Plan") is to provide for the granting of
nonqualified stock options and limited stock appreciation rights to Outside
Directors and to increase their proprietary interest in Time Warner and their
identification with the interests of Time Warner's stockholders through annual
grants of stock options.
2. CERTAIN DEFINITIONS
The following terms (whether used in the singular or plural) have the
meanings indicated when used in the Plan:
(a) "Agreement" means the stock option and Limited SARs agreement
specified in Section 10.
(b) "Approved Transaction" means any transaction in which the Board
(or, if approval of the Board is not required as a matter of law, the
stockholders of Time Warner) shall approve (i) any consolidation or merger
of Time Warner in which Time Warner is not the continuing or surviving
corporation or pursuant to which shares of Common Stock would be converted
into cash, securities or other property, other than a merger of Time Warner
(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 holders of Common Stock immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation
immediately after the merger, or (ii) any sale, lease, exchange, or other
transfer (in one transaction or a series of related transactions) of all,
or substantially all, of the assets of Time Warner, or (iii) the adoption
of any plan or proposal for the liquidation or dissolution of Time Warner.
(c) "Award" means grants of Options and Limited SARs under this Plan.
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(d) "Board" means the Board of Directors of Time Warner.
(e) "Board Change" means, during any period of two consecutive years,
individuals who at the beginning of such period constituted the entire
Board ceased for any reason to constitute a majority thereof unless the
election, or the nomination for election by Time Warner's stockholders, of
each new director was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the beginning of the
period.
(f) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, or any successor statute or statutes thereto. Reference to
any specific Code section shall include any successor section.
(g) "Common Stock" means, subject to Section 11 hereof, the common
stock, par value $1.00 per share, of Time Warner.
(h) "Composite Tape" means the New York Stock Exchange Composite Tape.
(i) "Control Purchase" means any transaction in which any person (as
such term is defined in Sections 13(d)(3) and 14(d)(2) of the Exchange
Act), corporation or other entity (other than Time Warner or any employee
benefit plan sponsored by Time Warner or any of its Subsidiaries) (i) shall
purchase any Common Stock (or securities convertible into Common Stock) for
cash, securities or any other consideration pursuant to a tender offer or
exchange offer, without the prior consent of the Board, or (ii) shall
become the "beneficial owner" (as such term is defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of Time Warner
representing 20% or more of the combined voting power of the then
outstanding securities of Time Warner ordinarily (and apart from the rights
accruing under special circumstances) having the right to vote in the
election of directors (calculated as provided in Rule 13d-3(d) in the case
of rights to acquire Time Warner's securities).
(j) "Effective Date" means the date the Plan becomes effective pursuant
to Section 13.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor statute or statutes thereto.
Reference to any specific Exchange Act section shall include any successor
section.
(l) "Fair Market Value" of a share of Common Stock means the average of
the high
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and low sales prices of a share of Common Stock on the Composite
Tape on the date in question.
(m) "Holder" means an Outside Director who has received an Award under
this Plan.
(n) "Limited SARs" means limited stock appreciation rights subject to
the terms of Section 7.6.
(o) "Minimum Price Per Share" means the highest gross price (before
brokerage commissions, soliciting dealers' fees and similar charges) paid
or to be paid for any share of Common Stock (whether by way of exchange,
conversion, distribution, liquidation or otherwise) in, or in connection
with, any Approved Transaction or Control Purchase which occurs at any time
during the period beginning on the sixtieth day prior to the date on which
Limited SARs are exercised and ending on the date on which Limited SARs are
exercised. If the consideration paid or to be paid in any such Approved
Transaction or Control Purchase shall consist, in whole or in part, of
consideration other than cash, the cash value of such consideration shall
be the same as established by the Board under the provisions of Time
Warner's 1994 Stock Option Plan or any successor thereto.
(p) "Option" means any nonqualified stock option granted pursuant to
this Plan.
(q) "Outside Directors" shall mean a member of the Board who, as of the
close of business on the date of the grant of any Option hereunder, is not
an employee of Time Warner or any Subsidiary.
(r) "Plan" has the meaning ascribed thereto in Section 1.
(s) "Subsidiary" of a person means any present or future subsidiary
corporation (as such term is defined in section 424 of the Code) of such
person and any present or future trade or business, whether or not
incorporated, controlled by or under common control with such person. An
entity shall be deemed a Subsidiary of a person only for such periods as
the requisite ownership or control relationship is maintained.
(t) "Time Warner" means Time Warner Inc., a Delaware corporation, and
any successor thereto.
(u) "Trading Day" means any day on which the New York Stock Exchange is
open for business.
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(v) "Total Disability" means a permanent and total disability as
defined in section 22(e)(3) of the Code.
3. STOCK SUBJECT TO THE PLAN
3.1. Number of Shares. Subject to the provisions of Section 11 and this
Section 3, the maximum number of shares of Common Stock in respect of which
Awards may be granted is 250,000. If and to the extent that an Option shall
expire, terminate or be cancelled for any reason without having been exercised
(or without having been considered to have been exercised as provided in Section
7.6), the shares of Common Stock subject to such expired, terminated or
cancelled portion of the Option shall again become available for purposes of the
Plan.
3.2. Character of Shares. Shares of Common Stock deliverable under the
terms of the Plan may be, in whole or in part, authorized and unissued shares of
Common Stock or issued shares of Common Stock held in Time Warner's treasury, or
both.
3.3 Reservation of Shares. Time Warner shall at all times reserve a number
of shares of Common Stock (authorized and unissued Common Stock, issued Common
Stock held in Time Warner's treasury, or both) equal to the maximum number of
shares that may be subject to outstanding Awards and future Awards under the
Plan.
4. ADMINISTRATION
4.1. Interpretation. Subject to the express provisions of the Plan, the
Board shall have plenary authority to interpret the Plan, to prescribe, amend
and rescind the rules and regulations relating to it and to make all other
determinations deemed necessary or advisable for the administration of the Plan.
The determinations of the Board on the matters referred to in this Section 4
shall be conclusive.
4.2. Delegation to Committee. Notwithstanding anything to the contrary
contained herein, the Board may at any time, or from time to time, appoint a
Committee and delegate to such Committee the authority of the Board to
administer the Plan. Upon such appointment and delegation, any such Committee
shall have all the powers, privileges and duties of the Board, and shall be
substituted for the Board, in the administration of the Plan to the extent
provided in such delegation, except for the power to appoint members of the
Committee and to terminate, modify or amend the Plan. The Board may from time to
time appoint members
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of any such Committee in substitution for or in addition to members previously
appointed, may fill vacancies in such Committee and may discharge such
Committee.
Any such Committee shall 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 members shall constitute a quorum and all determinations shall be
made by a majority of such quorum. Any determination reduced to writing and
signed by all of the members shall be fully as effective as if it had been made
by a majority vote at a meeting duly called and held.
5. ELIGIBILITY
The only persons eligible to participate in the Plan shall be Outside
Directors.
6. ANNUAL GRANTS
Each Outside Director shall automatically be granted 1,500 Options and
related Limited SARs under the Plan on the day that is 10 Trading Days after
each annual meeting of stockholders of Time Warner, commencing with the annual
meeting to be held in 1996 and ending with the annual meeting of stockholders to
be held in 2000, and, except as hereinafter provided, the Company shall promptly
thereafter execute and deliver to each Outside Director, an Agreement evidencing
the grant of such Options and Limited SARs, in each case without any further
action required to be taken by the Board or any committee thereof. An individual
who shall become an Outside Director subsequent to the date of the annual
meeting of stockholders of Time Warner for any year shall first become eligible
to participate in the Plan commencing on the date of the next annual meeting of
stockholders of Time Warner.
7. OPTIONS AND LIMITED SARS
7.1. Option Prices. The purchase price of the Common Stock under each
Option shall be equal to 100% of the Fair Market Value of the Common Stock on
the date of grant.
7.2. Terms of Options. The term of each Option shall be ten years from the
date of grant.
7.3. Exercisability of Options. Subject to adjustment as provided in
Section 11, each Option granted under the Plan shall be exercisable (a) on and
after the first anniversary of the
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date of grant, to the extent of 500 shares, (b) on and after the second
anniversary of the date of grant, to the extent of 1,000 shares and (c) on and
after the third anniversary of the date of grant, to the extent of 1,500 shares.
Notwithstanding the foregoing, each Option granted under the Plan shall become
exercisable in full (a) on the date the Holder ceases to be a director of Time
Warner for any reason other than as described in Section 7.5(d) and (b) in the
event of any Approved Transaction, Board Change or Control Purchase; provided,
however, that, as to Options 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 Board
Change or Control Purchase.
7.4. Manner of Exercise. Payment of the Option purchase price shall be made
in cash or in whole shares of Common Stock already owned by the Holder or partly
in cash and partly in such Common Stock in accordance with the provisions of the
Agreement. An Option shall be exercised by written notice to Time Warner upon
such terms and conditions as provided in the Agreement. Time Warner shall effect
the transfer of the shares of Common Stock purchased under the Option as soon as
practicable, and within a reasonable time thereafter such transfer shall be
evidenced on the books of Time Warner. No Holder or other person exercising an
Option shall have any of the rights of a stockholder of Time Warner with respect
to shares of Common Stock subject to an Option granted under the Plan until due
exercise and full payment has been made. No adjustment shall be made for cash
dividends or other rights for which the record date is prior to the date of such
due exercise and full payment.
7.5. Termination of Options. The unexercised portion of each Option shall
automatically and without notice irrevocably terminate and become null and void
at the time of the earliest to occur of (a) ten years from the date of grant of
such Option, (b) five years from the date the Holder ceases to be a director of
Time Warner by reason of retirement, Total Disability or any reason other than
as described in the succeeding clauses (c) and (d), (c) one year from the date
the Holder dies or (d) the date the Holder is removed from the Board for cause.
7.6. Limited SARs. Limited SARs shall be granted pursuant to the provisions
of this Section 7.6 with respect to each grant of Options under the Plan
(hereinafter called a "related Option"). Subject to the terms and provisions of
this Section 7.6, each Limited SAR shall be exercisable to the extent the
related Option is then exercisable and in no event after the complete
termination or full exercise of the related Option. Limited SARs shall be
exercisable in whole or in part upon notice to Time Warner upon such terms and
conditions as provided in the Agreement.
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Upon the exercise of Limited 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 Limited SARs are exercised and shall be considered to
have been exercised to that extent for purposes of determining the number of
shares of Common Stock in respect of which other Awards may be granted. Upon the
exercise or termination of the related Option, the Limited SARs with respect
thereto shall be considered to have been exercised or terminated to the extent
of the number of shares of Common Stock with respect to which the related Option
was so exercised or terminated.
The provisions of Sections 7 through 19 (to the extent that such provisions
are applicable to Options) shall also be applicable to Limited SARs unless the
context otherwise requires.
Limited SARs may be exercised only during the period (a) beginning on the
first day following either (i) the date of an Approved Transaction, (ii) the
date of a Control Purchase, or (iii) the date of a Board Change, and (b) ending
on the ninetieth day following such date. The effective date of exercise of a
Limited SAR shall be deemed to be the date on which Time Warner shall have
received notice from the Holder of the exercise thereof.
Upon the exercise of Limited SARs granted in connection with an Option,
except as otherwise provided in the Agreement and the immediately succeeding
sentence, the Holder thereof shall receive in cash an amount equal to the
product computed by multiplying (a) the excess of (i) the higher of (A) the
Minimum Price Per Share, or (B) the highest reported closing sales price of a
share of Common Stock as reported on the Composite Tape at any time during the
period beginning on the sixtieth day prior to the date on which such Limited
SARs are exercised and ending on the date on which such Limited SARs are
exercised over (ii) the per share Option price of the related Option, by (b) the
number of shares of Common Stock with respect to which such Limited SARs are
being exercised. The Board shall have the discretion to settle Limited SARs by
the delivery of Common Stock rather than cash if in the judgment of the Board
such action is necessary or advisable to preserve pooling of interests
accounting treatment for any proposed transaction involving Time Warner.
7.7. Nontransferability of Options and Limited SARs. Options and Limited
SARs shall not be transferable other than by will or the laws of descent and
distribution, and Options and Limited SARs may be exercised during the lifetime
of the Holder thereof only by such Holder (or his or her court appointed legal
representative).
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8. NO RIGHT TO NOMINATION
Nothing contained in the Plan or in any Award shall confer on any
Outside Director the right to be nominated for reelection to the Board.
9. 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
benefits.
10. WRITTEN AGREEMENT
Each grant of an Option and Limited SARs shall be evidenced by an Agreement
consistent with the terms of the Plan.
11. ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC.
In the event of any stock split, dividend, distribution, combination,
reclassification or recapitalization that changes the character or amount of the
Common Stock while any portion of any Award theretofore granted under the Plan
is outstanding but unexercised, the character and number of shares subject to
such Award and the option price shall be appropriately adjusted by the Board,
whose determination shall be conclusive. If any such change or transaction shall
occur, the number and kind of shares for which Awards may thereafter be granted
under the Plan shall be adjusted to give effect thereto.
Notwithstanding anything to the contrary contained in this Plan, upon
consummation of the mergers contemplated by the Amended and Restated Agreement
and Plan of Merger dated as of September 22, 1995 among Time Warner, Turner
Broadcasting System, Inc., TW Inc. ("New Time Warner"), Time Warner Acquisition
Corp. and TW Acquisition Corp. and the assumption of this Plan by New Time
Warner: (i) New Time Warner shall be substituted for Time Warner for all
purposes of this Plan, (ii) Common Stock as used in this Plan shall mean the
common stock, par value $.01 per share, of New Time Warner ("New Time Warner
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Common Stock"), (iii) the Board shall mean the Board of New Time Warner, and
(iv) each outstanding Option and Limited SAR shall automatically become an
Option to purchase and a Limited SAR with respect to New Time Warner Common
Stock on a one-for-one basis at the same exercise price.
12. TERMINATION AND AMENDMENT
The Board may at any time terminate the Plan or make such amendments to the
Plan as it shall deem advisable; provided, however, that the Plan may not be
amended more than once every six months (other than to comply with changes to
the Code or the Employee Retirement Income Security Act of 1974, as amended),
and any amendment to the Plan shall comply with all applicable laws and stock
exchange listing requirements, including without limitation, Rule 16b-3 under
the Exchange Act. No termination, modification or amendment of the Plan may,
without the consent of the person to whom any Award shall theretofore have been
granted, adversely affect the rights of such person with respect to such Award.
No modification, extension, renewal or other change in any Award granted under
the Plan shall be made after the grant of such Award, unless the same is
consistent with the provisions of the Plan.
13. EFFECTIVENESS OF THE PLAN
The Plan shall become effective upon approval by the stockholders of Time
Warner entitled to vote at the annual meeting of such stockholders to be held in
1996, or any adjournment thereof.
14. GOVERNMENT AND OTHER REGULATIONS
The obligation of Time Warner with respect to Awards shall be subject to
all applicable laws, rules and regulations and such approvals by any
governmental agencies as may be required, including, without limitation, the
effectiveness of any registration statement required under the Securities Act of
1933, and the rules and regulations of any securities exchange on which the
Common Stock may be listed. For so long as the Common Stock is registered under
the Exchange Act, Time Warner shall use its reasonable efforts to comply with
any legal requirements (a) to maintain a registration statement in effect under
the Securities Act of 1933 with respect to all shares of Common Stock that may
be issued to Holders under the Plan, and (b) to file in a timely manner all
reports required to be filed by it
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under the Exchange Act.
15. WITHHOLDING
Time Warner's obligation to deliver shares of Common Stock or pay cash in
respect of any Award under the Plan shall be subject to applicable federal,
state and local tax withholding requirements. Federal, state and local
withholding taxes paid by a Holder upon the exercise of any Option may be paid
in shares of Common Stock upon such terms and conditions as the Board shall
determine; provided, however, that the Board in its sole discretion may
disapprove such payment and require that such taxes be paid in cash.
16. SEPARABILITY
If any of the terms or provisions of this Plan conflict with the
requirements of applicable law or Rule 16b-3 under the Exchange Act, then such
terms or provisions shall be deemed inoperative to the extent necessary to avoid
the conflict with applicable law or such Rule without invalidating the remaining
provisions hereof.
17. NON-EXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board nor the submission of the
Plan to the stockholders of Time Warner for approval shall be construed as
creating any limitations on the power of the Board to adopt such other incentive
arrangements for Outside Directors as it may deem desirable.
18. GOVERNING LAW
The Plan shall be governed by, and construed in accordance with, the laws
of the State of New York.
19. 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
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writing on a form filed with the Secretary of Time Warner 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 Time Warner 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.