Employment Agreement - Time Warner Inc. and Gerald M. Levin
AMENDED AND RESTATED EMPLOYMENT AGREEMENT made as of March 19,
1998 effective as of January 1, 1998 (the "Effective Date"), as amended on
December 2, 1998, April 20, 2001, and March 26, 2002 between TIME WARNER INC., a
Delaware corporation (the "Company"), and Gerald M. Levin (the "Executive").
The Executive is currently employed by the Company pursuant to
an Employment Agreement dated as of November 15, 1990, as amended by an
amendment dated as of May 22, 1992 (the "Prior Agreement"). The Company wishes
to restate the Prior Agreement and secure the services of the Executive on a
full-time basis for an extended period to and including December 31, 2005 (the
"Term Date") on and subject to the terms and conditions set forth in this
Agreement, and the Executive is willing for the Prior Agreement to be so
restated and to provide such services on and subject to the terms and conditions
set forth in this Agreement. The parties therefore agree as follows:
1. Term of Employment. The Executive's "term of employment",
as this phrase is used throughout this Agreement, shall be for the period
beginning on the Effective Date and ending on the Term Date, subject, however,
to the terms and conditions set forth in this Agreement. Notwithstanding the
foregoing or anything to the contrary contained in this Agreement, the "term of
employment", as used in Section 3.6, 3.7, 3.8 and 8 through 12 shall include the
term of any Advisory Period (as defined in Section 13).
2. Employment. During the term of employment, the Company
shall employ the Executive, and the Executive shall serve, as Chief Executive
Officer of the Company and shall have the authority, functions, duties, powers
and responsibilities normally associated with such position and as the Board of
Directors of the Company may from time to time delegate to the Executive in
addition thereto. The Executive shall, subject to his election as such from time
to time and without additional compensation, serve during the term of employment
in such additional offices of comparable or greater stature and responsibility
in the Company and its subsidiaries and as a director and as a member of any
committee of the Board of Directors of the Company and its subsidiaries, to
which he may be elected from time to time. During the term of employment, (i)
the Executive's services shall be rendered on a substantially full-time,
exclusive basis and he will apply on a full-time basis all of his skill and
experience to the performance of his duties in such employment, (ii) the
Executive shall report only to the Company's Board of Directors; (iii) the
Executive shall have no other employment and, without the prior consent of a
majority of the members of the Company's Board of Directors, no outside business
activities which require the devotion of substantial amounts of the Executive's
time and (iv) the place for the performance of the Executive's services shall be
the principal executive offices of the Company which shall be in the New York
City metropolitan area, subject to such reasonable travel as may be appropriate
or required in the
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performance of the Executive's duties in the business of the Company. The
foregoing shall be subject to the Company's written policies, as in effect from
time to time, regarding vacations, holidays, illness and the like and shall not
prevent the Executive from devoting such time to his personal affairs as shall
not interfere with the performance of his duties hereunder, provided that the
Executive complies with the provisions of Sections 9 and 10 and any of the
Company's written policies on conflicts of interest and service as a director of
another corporation, partnership, trust or other entity ("Entity").
3. Compensation.
3.1 Base Salary. The Company shall pay or cause to
be paid to the Executive a base salary of not less than $1,000,000 per annum
during the term of employment (the "Base Salary"). The Company may increase, but
not decrease, the Base Salary at any time and from time to time during the term
of employment and upon each such increase the term "Base Salary" shall mean such
increased amount. Base Salary shall be payable in monthly or more frequent
installments in accordance with the Company's then current practices and
policies with respect to senior executives. For the purposes of this Agreement
"senior executives" shall mean the executive officers of the Company.
3.2 Intentionally left blank.
3.3 Deferred Compensation. In addition to Base
Salary and bonus as set forth in Sections 3.1 and 3.2, the Executive shall be
credited with a defined contribution which shall be determined and paid out on a
deferred basis ("deferred compensation") as provided in this Agreement,
including Annex A hereto. Unless the Executive shall make the election described
in the last sentence of this Section 3.3, during the term of employment through
December 31, 2000, the Company shall pay to the trustee (the "Trustee") of a
Company grantor trust (the "Rabbi Trust") for credit to a special account
maintained on the books of the Rabbi Trust for the Executive (the "Trust
Account"), monthly, an amount equal to 50% of one-twelfth of the Executive's
then current Base Salary. If a lump sum payment is made pursuant to Section
4.2.2 or 4.2.3, the Company shall pay to the Trustee for credit to the Trust
Account at the time of such payment an amount equal to 50% of the Base Salary
portion of such lump sum payment; provided, however, that the Executive may
elect by written notice to the Company no later than the date the Executive
makes the election provided for in the first paragraph of Section 4.2 to have
such amount credited instead to the Deferred Compensation Plan established by
the Company on November 18, 1998, as the same may be amended from time to time
(as so amended, the "Deferred Plan"). The Trust Account shall be maintained by
the Trustee in accordance with the terms of this Agreement, including Annex A,
and the trust agreement (the "Trust Agreement") establishing the Rabbi Trust
(which Trust Agreement shall in all respects be in furtherance of, and not
inconsistent with, the terms of
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this Agreement, including Annex A), until the full amount which the Executive is
entitled to receive therefrom has been paid in full. Effective April 1, 1998,
the Company shall establish and maintain the Rabbi Trust as a grantor trust
within the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of
the Code and shall pay all fees and expenses of the Trustee and shall enforce
the provisions of the Trust Agreement for the benefit of the Executive. Prior to
April 1, 1998, the Company shall credit the Executive with deferred compensation
in accordance with the provisions of Section 3.3 of the Prior Agreement. The
Executive may elect by written notice delivered to the Company at least 15 days
prior to the commencement of any calendar year during the term of employment
(except that for calendar year 1999, such election shall be made no later than
January 31, 1999) to have (a) all of the payments to be made to the Rabbi Trust
pursuant to the second sentence of this Section 3.3 to be credited instead to
the Deferred Plan or (b) to have 50% of the payments to be made by the Company
pursuant to the second sentence of this Section 3.3 to be credited instead to
the Deferred Plan and the remaining 50% to be paid to the Rabbi Trust. The
Company shall have no obligation to pay the Executive deferred compensation
pursuant to this Section 3.3 for any period after December 31, 2000. Any
deferred compensation paid to the Trust Account prior to January 1, 2001 will
continue to be governed by the terms of this Section 3.3 and Annex A.
3.4 Deferred Salary and Bonus. In addition to any
other deferred salary or deferred bonus plan in which the Executive may be
entitled to participate, the Executive may elect by written notice delivered to
the Company at least 15 days prior to the commencement of any calendar year
during the term of employment (except that for calendar year 1999, such election
shall be made no later than January 31, 1999), to defer payment of and to have
the Company credit all or any portion of the Executive's salary and/or bonus for
such year to either the Trust Account or the Deferred Plan, or a combination of
both, subject in the case of a deferral to the Deferred Plan to the terms and
conditions of the Deferred Plan. Any such election shall only apply to the
calendar year during the term of employment with respect to which such election
is made and a new election shall be required with respect to each successive
calendar year during the term of employment. Notwithstanding the foregoing, the
Executive hereby elects to defer payment of and have the Company pay to the
Trustee for credit to the Trust Account $300,000 of the Base Salary payable to
the Executive for the period beginning on the Effective Date and ending on the
Term Date. The Executive may change the election provided in the preceding
sentence for any calendar year by written notice delivered to the Company at
least 10 days prior to the commencement of any such calendar year.
3.5 Prior Account. The parties confirm that the
Company has maintained a deferred compensation account (the "Prior Account") for
the Executive in accordance with the Prior Agreement. The Prior Account shall be
promptly transferred to, and shall for all purposes be deemed part of, the Trust
Account and shall be maintained by the
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Trustee in accordance with this Agreement and the Trust Agreement. All prior
credits to the Prior Account shall be deemed to be credits made under this
Agreement, all "Account Retained Income" thereunder shall be deemed to be
Account Retained Income under this Agreement and all increases or decreases to
the Prior Account as a result of income, gains, losses and other changes shall
be deemed to have been made under this Agreement.
3.6 Reimbursement. The Company shall reasonably
promptly pay or reimburse the Executive for all reasonable travel, entertainment
and other business expenses actually incurred or paid by the Executive during
the term of employment in the performance of his services under this Agreement
provided such expenses are incurred or paid in accordance with the Company's
then current written practices and policies with respect to senior executives of
the Company and upon presentation of expense statements or vouchers or such
other supporting information as the Company may customarily require of its
senior executives.
3.7 No Anticipatory Assignments. Except as
specifically contemplated in Section 12.8 or under the life insurance policies
and benefit plans referred to in Sections 7 and 8, respectively, neither the
Executive, his legal representative nor any beneficiary designated by him shall
have any right, without the prior written consent of the Company, to assign,
transfer, pledge, hypothecate, anticipate or commute to any person or Entity any
payment due in the future pursuant to any provision of this Agreement, and any
attempt to do so shall be void and shall not be recognized by the Company.
3.8 Indemnification. The Executive shall be entitled
throughout the term of employment in his capacity as an officer or director of
the Company or any of its subsidiaries or an officer or member of the Board of
Representatives or other governing body of any partnership or joint venture in
which the Company has an equity interest (and after the term of employment, to
the extent relating to his service as such officer, director or member) to the
benefit of the indemnification provisions contained on the date hereof in the
Certificate of Incorporation and By-Laws of the Company (not including any
amendments or additions after the date of execution hereof that limit or narrow,
but including any that add to or broaden, the protection afforded to the
Executive by those provisions), to the extent not prohibited by applicable law
at the time of the assertion of any liability against the Executive.
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4. Termination.
4.1 Termination for Cause. The Company may terminate
the term of employment, the Advisory Period (if any) and all of the Company's
obligations under this Agreement, other than its obligations set forth below in
this Section 4.1, for "cause" but only if the term of employment or any Advisory
Period has not previously been terminated pursuant to any other provision of
this Agreement. Termination by the Company for "cause" shall mean termination by
action of the Company's Board of Directors, or a committee thereof, because of
the Executive's 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) or
willful refusal without proper cause to perform his obligations under this
Agreement or because of the Executive's breach of any of the covenants provided
for in Section 9. Such termination shall be effected by written notice thereof
delivered by the Company to the Executive and shall be effective as of the date
of such notice; provided, however, that if (i) such termination is because of
the Executive's willful refusal without proper cause to perform any one or more
of his obligations under this Agreement, (ii) such notice is the first such
notice of termination for any reason delivered by the Company to the Executive
under this Section 4.1, and (iii) within 15 days following the date of such
notice the Executive shall cease his refusal and shall use his best efforts to
perform such obligations, the termination shall not be effective.
In the event of such termination by the Company for
cause, without prejudice to any other rights or remedies that the Company may
have at law or in equity, the Company shall have no further obligations to the
Executive other than (i) to pay Base Salary and make credits of deferred
compensation as provided in Sections 3.1 and 3.3, or to pay Advisory Period
compensation, if applicable, accrued through the effective date of termination,
(ii) to pay any annual bonus pursuant to Section 3.2 to the Executive in respect
of the calendar year prior to the calendar year in which such termination is
effective, in the event such annual bonus has been determined but not yet paid
as of the date of such termination and (iii) with respect to any rights the
Executive has in respect of amounts credited to the Trust Account or pursuant to
any insurance or other benefit plans or arrangements of the Company maintained
for the benefit of its senior executives. The Executive hereby disclaims any
right to receive a pro rata portion of the Executive's annual bonus with respect
to the year in which such termination occurs. The fourth sentence of Section 3.3
and the provisions of Sections 3.8, 8.2, 8.3 and 9 through 12 and Annex A shall
survive any termination pursuant to this Section 4.1.
4.2 Termination by Executive for Material Breach by
the Company and Termination by the Company Without Cause. Unless previously
terminated pursuant to any other provision of this Agreement and unless a
Disability Period shall be in effect, the Executive shall have the right,
exercisable by written notice to the Company, to terminate the
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term of employment or, if applicable, the Advisory Period, effective 15 days
after the giving of such notice, if, at the time of the giving of such notice,
the Company shall be in material breach of its obligations under this Agreement;
provided, however, that, with the exception of clause (i) below, this Agreement
shall not so terminate if such notice is the first such notice of termination
delivered by the Executive pursuant to this Section 4.2 and within such 15-day
period the Company shall have cured all such material breaches of its
obligations under this Agreement. A material breach by the Company shall
include, but not be limited to, (i) the Company failing to cause the Executive
to retain the title specified in the first sentence of Section 2 during the term
of employment; (ii) the Executive being required to report to persons other than
those specified in Section 2 during the term of employment; (iii) the Company
violating the provisions of Section 2 with respect to the Executive's authority,
functions, duties, powers or responsibilities (whether or not accompanied by a
change in title) during the term of employment; (iv) the Company requiring the
Executive's primary services to be rendered at a place other than at the
Company's principal executive offices in the New York City metropolitan area;
and (v) the Company failing to cause the 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.
The Company shall have the right, exercisable by
written notice to the Executive, to terminate the Executive's employment under
this Agreement without cause, effective at least 30 days after the giving of
such notice, which notice shall specify the effective date of such termination.
In the event of a termination pursuant to this
Section 4.2, the Executive shall be entitled to elect by delivery of written
notice to the Company, within 30 days after written notice of such termination
is given pursuant to this Section 4.2, either (A) to cease being an employee of
the Company and receive a lump sum payment as provided in Section 4.2.2 or (B)
to remain an employee of the Company as provided in Section 4.2.3. After the
Executive makes such election, the following provisions shall apply:
4.2.1 Regardless of the election made by the
Executive pursuant to the preceding paragraph, (i) after the effective date of
such termination, the Executive shall have no further obligations or liabilities
to the Company whatsoever, except that Sections 4.4 and 4.5 and Sections 6
through 12 shall survive such termination, and (ii) the Executive shall be
entitled to receive any earned and unpaid Base Salary or Advisory Period
compensation, as the case may be, accrued through the effective date of such
termination.
4.2.2 In the event the Executive shall make the
election provided in clause (A) above, the Company shall pay to the Executive as
damages in a lump sum within 30 days thereafter (provided that if the Executive
was named in the compensation
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table in the Company's then most recent proxy statement, such lump sum payment
shall be made within 30 days after the end of the calendar year in which such
notice of termination is given) an amount (discounted as provided in the
immediately following sentence) equal to (a) in the event such termination
occurs during the term of employment, all amounts otherwise payable pursuant to
Section 3.1 for the year in which such termination occurs and for each
subsequent year through the Term Date and (b) in the event such termination
occurs during the Advisory Period, all amounts otherwise payable pursuant to
Section 13 from the date of such termination through the Term Date. Any payments
required to be made to the Executive pursuant to this Section 4.2.2 upon such
termination shall be discounted to present value as of the date of payment from
the times at which such amounts would have become payable absent any such
termination at an annual discount rate for the relevant periods equal to 120% of
the "applicable Federal rate" (within the meaning of Section 1274(d) of the
Internal Revenue Code of 1986 (the "Code")), in effect on the date of such
termination, compounded semi-annually, the use of which rate is hereby elected
by the parties hereto pursuant to Treas. Reg. ss.1.280G-1 Q/A 32 (provided that,
in the event such election is not permitted under Section 280G of the Code and
the regulations thereunder, such other rate determined as of such other date as
is applicable for determining present value under Section 280G of the Code shall
be used).
4.2.3 In the event the Executive shall make the
election provided in clause (B) above, the term of employment or, if applicable,
the Advisory Period shall continue and the Executive shall remain an employee of
the Company through the Term Date and during such period the Executive shall be
entitled to receive, whether or not he becomes disabled during such period but
subject to Section 6, (a) in the event such termination occurs during the term
of employment, Base Salary (all or a portion of which may be deferred by the
Executive pursuant to Section 3.4) at an annual rate equal to his Base Salary in
effect immediately prior to the notice of termination as provided in Section 3.1
and (b) in the event such termination occurs during the Advisory Period,
Advisory Period compensation as provided in Section 13. Except as provided in
the next sentence, if the Executive accepts full-time employment with any other
Entity during such period or notifies the Company in writing of his intention to
terminate his status as an employee during such period, then the term of
employment or, if applicable, the Advisory Period shall cease and the Executive
shall cease to be an employee of the Company effective upon the commencement of
such employment or the effective date of such termination as specified by the
Executive in such notice, whichever is applicable, and the Executive shall be
entitled to receive as severance in a lump sum within 30 days after such
commencement or such effective date (provided that if the Executive was named in
the compensation table in the Company's then most recent proxy statement, such
lump sum payment shall be made within 30 days after the end of the calendar year
in which such commencement or effective date occurred) an amount (discounted as
provided in the second sentence of Section 4.2.2, except that the "applicable
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Federal rate" shall be determined as of the date the Executive shall cease to be
an employee of the Company) for the balance of (x) the Base Salary (assuming no
deferral pursuant to Section 3.4) or (y) the Advisory Period compensation, as
the case may be, the Executive would have been entitled to receive pursuant to
this Section 4.2.3 had the Executive remained on the Company's payroll until the
Term Date. Notwithstanding the preceding sentence, if the Executive accepts
employment with any charitable or not-for-profit Entity, or any family-owned
corporation, trust or partnership, then the Executive shall be entitled to
remain an employee of the Company and receive the payments as provided in the
first sentence of this Section 4.2.3; and if the Executive accepts full-time
employment with any affiliate of the Company, then the payments provided for in
this Section 4.2.3 and the term of employment or, if applicable, the Advisory
Period shall cease and the Executive shall not be entitled to any such lump sum
payment. For purposes of this Agreement, the term "affiliate" shall mean any
Entity which, directly or indirectly, controls, is controlled by, or is under
common control with, the Company.
4.3 Office Facilities. In the event the Executive
shall make the election provided in clause (B) of Section 4.2, then for the
period beginning on the day the Executive makes such election and ending one
year thereafter, the Company shall, without charge to the Executive, make
available to the Executive office space at the Executive's principal job
location immediately prior to his termination of employment, or other location
reasonably close to such location, together with secretarial services, office
facilities, services and furnishings, in each case reasonably appropriate to an
employee of the Executive's position and responsibilities prior to such
termination of employment but taking into account the Executive's reduced need
for such office space, secretarial services and office facilities, services and
furnishings as a result of the Executive no longer being a full-time employee.
4.4 Release. In partial consideration for the
Company's obligation to make the payments described in Section 4.2, the
Executive shall execute and deliver to the Company a release in substantially
the form attached hereto as Annex B. The Company shall deliver such release to
the Executive within 10 days after the written notice of termination is
delivered pursuant to Section 4.2 and the Executive shall execute and deliver
such release to the Company within 21 days after receipt thereof. If the
Executive shall fail to execute and deliver such release to the Company within
such 21 day period, or if the Executive shall revoke his consent to such release
as provided therein, the Executive's term of employment shall terminate as
provided in Section 4.2, but the Executive shall receive, in lieu of the
payments provided for in said Section 4.2, a lump sum cash payment in an amount
determined in accordance with the written personnel policies of the Company
relating to notice and severance then generally applicable to employees with
length of service and compensation level of the Executive.
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4.5 Mitigation. In the event of termination of the
term of employment or, if applicable, the Advisory Period pursuant to Section
4.2, the Executive shall not be required to seek other employment in order to
mitigate his damages hereunder unless Section 280G of the Code would apply to
any payments by the Company to the Executive and the Executive's failure to
mitigate would result in the Company losing tax deductions to which it would
otherwise have been entitled. In such an event, the Executive will engage in
whatsoever mitigation is necessary to preserve the Company's tax deductions.
With respect to the preceding sentences, any payments or rights to which the
Executive is entitled by reason of the termination of the term of employment and
the Advisory Period by the Executive or the Company pursuant to Section 4.2
shall be considered as damages hereunder. Any obligation of the Executive to
mitigate his damages pursuant to this Section 4.5 shall not be a defense or
offset to the Company's obligation to pay the Executive in full the amounts
provided in Section 4.2.2 or 4.2.3, as the case may be, at the time provided
therein or the timely and full performance of any of the Company's other
obligations under this Agreement.
4.6 Payments. So long as the Executive remains on the
payroll of the Company or any subsidiary of the Company, payments of salary,
deferred compensation and bonus required to be made pursuant to Section 4.2
shall be made at the same times as such payments are made to senior executives
of the Company or such subsidiary.
5. Disability. If during the term of employment and
prior to any termination of this Agreement under Section 4.2, the Executive
shall become physically or mentally disabled, whether totally or partially, so
that he is prevented from performing his usual duties for a period of six
consecutive months, or for shorter periods aggregating six months in any
twelve-month period, the Company shall, nevertheless, continue to pay the
Executive his full compensation, when otherwise due, as provided in Section 3,
through the last day of the sixth consecutive month of disability or the date on
which the shorter periods of disability shall have equaled a total of six months
in any twelve-month period (such last day or date being referred to herein as
the "Disability Date"). If the Executive has not resumed his usual duties on or
prior to the Disability Date, the Company shall pay the Executive disability
benefits for the period ending on the Term Date (the "Disability Period"), in an
annual amount equal to 75% of the Executive's Base Salary at the time the
Executive becomes disabled. If during the Disability Period the Executive shall
fully recover from his disability, the Company shall have the right (exercisable
within 60 days after notice from the Executive of such recovery), but not the
obligation, to restore the Executive to full-time service at full compensation.
If the Company elects to restore the Executive 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 shall not be extended by virtue of the occurrence
of the Disability Period. If the Company elects not to restore the Executive to
full-time service, the Executive shall be entitled to obtain other employment,
subject, however, to the following: (i) the Executive shall be obligated to
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perform advisory services during any balance of the Disability Period; and (ii)
the provisions of Sections 9 and 10 shall continue to apply to the Executive
during the Disability Period. The advisory services referred to in clause (i) of
the immediately preceding sentence shall consist of rendering advice concerning
the business, affairs and management of the Company as requested by the Board of
Directors or the Chief Executive Officer of the Company but the Executive shall
not be required to devote more than five days (up to eight hours per day) each
month to such services, which shall be performed at a time and place mutually
convenient to both parties. Any income from such other employment shall not be
applied to reduce the Company's obligations under this Agreement. The Company
shall be entitled to deduct from all payments to be made to the Executive during
the Disability Period pursuant to this Section 5 an amount equal to all
disability payments received by the Executive during the Disability Period from
Workmen's Compensation, Social Security and disability insurance policies
maintained by the Company; provided, however, that for so long as, and to the
extent that, proceeds paid to the Executive from such disability insurance
policies are not includible in his income for federal income tax purposes, the
Company's deduction with respect to such payments shall be equal to the product
of (i) such payments and (ii) a fraction, the numerator of which is one and the
denominator of which is one less the maximum marginal rate of federal income
taxes applicable to individuals at the time of receipt of such payments. All
payments made under this Section 5 after the Disability Date are intended to be
disability payments, regardless of the manner in which they are computed. If a
Disability Date occurs during the Advisory Period, the Company shall pay to the
Executive the full amount of the Advisory Period compensation in accordance with
Section 13 through the Term Date without regard to the preceding two sentences.
Except as otherwise provided in this Section 5, the during the Disability Period
and the Advisory Period, the Executive shall be entitled to all of the rights
and benefits provided for in this Agreement, except that Section 4.2 shall not
apply during the Disability Period and the term of employment or, if applicable,
the Advisory Period shall end and the Executive shall cease to be an employee of
the Company on the Term Date and shall not be entitled to notice and severance
or to receive or be paid for any accrued vacation time or unused sabbatical.
6. Death. Upon the death of the Executive during the term of
employment or, if applicable, the Advisory Period, this Agreement and all
obligations of the Company to make any payments under Sections 3, 4, 5 and 13
shall terminate except that (i) the Executive's estate (or a designated
beneficiary) shall be entitled to receive, to the extent being received by the
Executive immediately prior to his death, Base Salary or, if applicable,
Advisory Period compensation, to the last day of the month in which his death
occurs and (ii) the Trust Account shall be liquidated and revalued as provided
in Annex A as of the date of the Executive's death (except that all taxes shall
be computed and charged to the Trust Account as of such date of death to the
extent not theretofore so computed and charged) and the entire balance thereof
(plus any amount due under the last paragraph of Section A.6 of
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Annex A) shall be paid to the Executive's estate (or a designated beneficiary)
in a single payment not later than 75 days following such date of death.
7. Life Insurance. The Company shall maintain $6,000,000 face
amount of split ownership life insurance on the life of the Executive, to be
owned by the Executive or the trustees of a trust for the benefit of the
Executive's spouse and/or descendants. Until the death of the Executive, and
irrespective of any termination of this Agreement except pursuant to Section
4.1, the Company shall pay all premiums on such policy and shall maintain such
policy (without reduction of the face amount of the coverage). The Company shall
not borrow from the cash value of such policy. At the death of the Executive, or
on the earlier surrender of such policy by the owner, the Executive agrees that
the owner of the policy shall promptly pay to the Company an amount equal to the
premiums on such policy paid by the Company (net of (i) tax benefits, if any, to
the Company in respect of payments of such premiums, (ii) any amounts payable by
the Company which had been paid by or on behalf of the Executive with respect to
such insurance, (iii) dividends received by the Company in respect of such
premiums, but only to the extent such dividends are not used to purchase
additional insurance on the life of the Executive, and (iv) any unpaid
borrowings by the Company on the policy), whether before, during or after the
term of this Agreement. The owner of the policy from time to time shall execute,
deliver and maintain a customary split dollar insurance and collateral
assignment form, assigning to the Company the proceeds of such policy but only
to the extent necessary to secure the reimbursement obligation contained in the
preceding sentence. In addition to the foregoing, during the Executive's
employment with the Company, the Company shall (x) provide the Executive with
$50,000 of group life insurance and (y) pay to the Executive annually an amount
equal to the premium that the Executive would have to pay to obtain life
insurance under the Group Universal Life ("GUL") insurance program made
available by the Company in an amount equal to (i) twice the Executive's Base
Salary minus (ii) $50,000. The Executive shall be under no obligation to use the
payments made by the Company pursuant to the preceding sentence to purchase GUL
insurance or to purchase any other life insurance. If the Company discontinues
its GUL insurance program, the Company shall nevertheless make the payments
required by this Section 7 as if such program were still in effect. The payments
made to the Executive pursuant to this Section 7 shall not be considered as
"salary" or "compensation" or "bonus" in determining the amount of any payment
under any pension, retirement, profit-sharing or other benefit plan of the
Company or any subsidiary of the Company.
8. Other Benefits.
8.1 General Availability. To the extent that (a) the
Executive is eligible under the general provisions thereof and (b) the Company
maintains such plan or program for the benefit of its senior executives, during
the term of employment and any
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Advisory Period and so long as the Executive is an employee of the Company, the
Executive shall be eligible to participate in any pension, profit-sharing, stock
option or similar plan or program and in any group life insurance (to the extent
set forth in Section 7), hospitalization, medical, dental, accident, disability
or similar plan or program of the Company now existing or established hereafter.
In addition, so long as the Executive is an employee of the Company the
Executive shall be entitled to receive other benefits generally available to all
senior executives of the Company to the extent the Executive is eligible under
the general provisions thereof, including, without limitation, to the extent
maintained in effect by the Company for its senior executives, an automobile
allowance and financial services.
8.2 Benefits After a Termination or Disability.
During the period the Executive remains on the payroll of the Company after a
termination pursuant to Section 4.2 and during the Disability Period and any
Advisory Period, the Executive shall continue to be eligible to participate in
the benefit plans and to receive the benefits required to be provided to the
Executive under Sections 7 and 8.1 to the extent such benefits are maintained in
effect by the Company for its senior executives; provided, however, the
Executive shall not be entitled to any additional awards or grants under any
stock option, restricted stock or other stock based incentive plan. The
Executive shall continue to be an employee of the Company for purposes of any
stock option and restricted shares agreements and any other incentive plan
awards during the term of employment and any Advisory Period and until such time
as the Executive shall leave the payroll of the Company. At the time the
Executive's term of employment and any Advisory Period terminates and he leaves
the payroll of the Company pursuant to the provisions of Section 4.1, 4.2, 5 or
6, the Executive's rights to benefits and payments under any benefit plans or
any insurance or other death benefit plans or arrangements of the Company or
under any stock option, restricted stock, stock appreciation right, bonus unit,
management incentive or other plan of the Company shall be determined, subject
to the other terms and provisions of this Agreement, in accordance with the
terms and provisions of such plans and any agreements under which such stock
options, restricted stock or other awards were granted; provided, however, that
notwithstanding the foregoing or any more restrictive provisions of any such
plan or agreement (but without affecting any less restrictive or more favorable
to the Executive provisions of any such plan or agreement), if the Executive
leaves the payroll of the Company as a result of a termination pursuant to
Section 4.2, then (i) all stock options granted to the Executive by the Company
shall vest and become immediately exercisable at the time the Executive shall
leave the payroll of the Company pursuant to Section 4.2, (ii) all stock options
granted to the Executive by the Company shall remain exercisable (but not beyond
the term thereof) during the remainder of the term of employment and any
Advisory Period and for a period of three months thereafter or such longer
period as shall be specified in any applicable stock option agreement and (iii)
the Company shall not be permitted to determine that the Executive's employment
was terminated for "unsatisfactory
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13
performance" within the meaning of any stock option agreement between the
Company and the Executive.
8.3 Payments in Lieu of Other Benefits. In the event
the term of employment and the Executive's employment with the Company is
terminated pursuant to Sections 4.1, 4.2, 5 or 6 (and regardless of whether the
Executive elects clause (A) or (B) as provided in Section 4.2), the Executive
shall not be entitled to notice and severance or to be paid for any accrued
vacation time or unused sabbatical, the payments provided for in such Sections
being in lieu thereof.
9. Protection of Confidential Information; Non-Compete. The
provisions of Section 9.2 shall continue to apply through the latest of (i) the
date the Executive ceases to be an employee of the Company and leaves the
payroll of the Company for any reason and (ii) for twelve months after the
effective date of any notice of termination of the Executive's employment
pursuant to Section 4.1, 4.2 or 4.3. The provisions of Sections 9.1 and 9.3
shall continue to apply until three years after the latest of the events
described in the preceding sentence.
9.1 Confidentiality Covenant. The Executive
acknowledges that his employment by the Company (which, for purposes of this
Section 9 shall mean Time Warner Inc. and its affiliates) will, throughout the
term of employment and any Advisory Period, bring him into close contact with
many confidential affairs of the Company, including information about costs,
profits, markets, sales, products, key personnel, pricing policies, operational
methods, technical processes and other business affairs and methods and other
information not readily available to the public, and plans for future
development. The Executive further acknowledges that the services to be
performed under this Agreement are of a special, unique, unusual, extraordinary
and intellectual character. The Executive further acknowledges that the business
of the Company is international in scope, that its products are marketed
throughout the world, that the Company competes in nearly all of its business
activities with other Entities that are or could be located in nearly any part
of the world and that the nature of the Executive's services, position and
expertise are such that he is capable of competing with the Company from nearly
any location in the world. In recognition of the foregoing, the Executive
covenants and agrees:
9.1.1 The Executive shall keep secret all
confidential matters of the Company and shall not intentionally disclose such
matters to anyone outside of the Company, either during or after the term of
employment and any Advisory Period, except with the Company's written consent,
provided that (i) the Executive shall have no such obligation to the extent such
matters are or become publicly known other than as a result of the Executive's
breach of his obligations hereunder and (ii) the Executive may, after giving
prior
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14
notice to the Company to the extent practicable under the circumstances,
disclose such matters to the extent required by applicable laws or governmental
regulations or judicial or regulatory process;
9.1.2 The Executive shall deliver promptly to the
Company on termination of his employment by the Company, or at any other time
the Company may so request, at the Company's expense, all memoranda, notes,
records, reports and other documents (and all copies thereof) relating to the
Company's business, which he obtained while employed by, or otherwise serving or
acting on behalf of, the Company and which he may then possess or have under his
control; and
9.1.3 If the term of employment is terminated
pursuant to Section 4.1 or 4.2, for a period of one year after such termination,
without the prior written consent of the Company, the Executive shall not
employ, and shall not cause any Entity of which he is an affiliate to employ,
any person who was a full-time exempt employee of the Company at the date of
such termination or within six months prior thereto.
9.2 Non-Compete. The Executive shall not, directly or
indirectly, without the prior consent of a majority of the members of the
Company's Board of Directors, render any services to any person or Entity or
acquire any interest of any type in any Entity, that might be deemed in
competition with the Company; provided, however, that the foregoing shall not be
deemed to prohibit the Executive from (a) acquiring, solely as an investment and
through market purchases, securities of any Entity which are registered under
Section 12(b) or 12(g) of the Securities Exchange Act of 1934 and which are
publicly traded, so long as he is not part of any control group of such Entity
and such securities, if converted, do not constitute more than one percent (1%)
of the outstanding voting power of that Entity, (b) acquiring, solely as an
investment, any securities of an Entity (other than an Entity that has
outstanding securities covered by the preceding clause (a)) so long as he
remains a passive investor in such Entity and does not become part of any
control group thereof and so long as such Entity is not, directly or indirectly,
in competition with the Company, (c) serving as a director of any Entity that is
not in competition with the Company or (d) during the Advisory Period, being a
partner in or of counsel to a law firm that represents any person or Entity that
is in competition with the Company so long as the Executive does not personally
provide or assist in the provision of services to any such person or Entity. For
purposes of the foregoing, a person or Entity shall be deemed to be in
competition with the Company if such person or it engages in any line of
business that is substantially the same as either (i) any line of operating
business which the Company engages in, conducts or, to the knowledge of the
Executive, has definitive plans to engage in or conduct or (ii) any operating
business that is engaged in or conducted by the Company and as to which, to the
knowledge of the Executive, the Company covenants in writing, in connection with
the disposition of such business, not to compete
<Page>
15
therewith. Notwithstanding the preceding sentences, following the effective
date of any termination under Section 4 of this Agreement (including during the
Advisory Period contemplated by Section 13), only the following Entities shall
be deemed to be in competition with the Company: AT&T Corporation, Bertelsmann
A.G., The Walt Disney Company, EarthLink, Inc., General Electric Corporation,
Microsoft Corporation, The News Corporation, Sony Corporation, Viacom Inc.,
Vivendi Universal, S.A., Yahoo! Inc. and their respective subsidiaries and
affiliates and any affiliates and any successor to any of the internet service
provider, media or entertainment businesses thereof.
9.3 Specific Remedy. In addition to such other rights
and remedies as the Company may have at equity or in law with respect to any
breach of this Agreement, if the Executive commits a material breach of any of
the provisions of Section 9.1, the Company shall have the right and remedy to
have such provisions specifically enforced by any court having equity
jurisdiction, it being acknowledged and agreed that any such breach or
threatened breach will cause irreparable injury to the Company and that money
damages will not provide an adequate remedy to the Company.
9.4 Liquidated Damages. If the Executive commits a
material breach of the provisions of Section 9.2, the Executive shall pay to the
Company as liquidated damages an amount equal to two and one-half times the
Executive's then current Base Salary, or if the Executive is not employed by the
Company at the time of such breach, an amount equal to two and one-half times
the most recent Base Salary paid to the Executive by the Company. The Company
shall be entitled to offset any amounts owed by the Executive to the Company
under this Section 9.4 against any amounts owed by the Company to the Executive
under any provision of this Agreement or otherwise, including without
limitation, amounts payable to the Executive under Section 4.2. The Company and
the Executive agree that it is impossible to determine with any reasonable
accuracy the amount of prospective damages to the Company upon a breach of
Section 9.2 by the Executive and further agree that the damages set forth in
this Section 9.4 are reasonable, and not a penalty, based upon the facts and
circumstances of the parties and with due regard to future expectations.
10. Ownership of Work Product. The Executive acknowledges that
during the term of employment, he may conceive of, discover, invent or create
inventions, improvements, new contributions, literary property, material, ideas
and discoveries, whether patentable or copyrightable or not (all of the
foregoing being collectively referred to herein as "Work Product"), and that
various business opportunities shall be presented to him by reason of his
employment by the Company. The Executive acknowledges that all of the foregoing
shall be owned by and belong exclusively to the Company and that he shall have
no personal interest therein, provided that they are either related in any
manner to the business (commercial or experimental) of the Company, or are, in
the case of Work Product, conceived
<Page>
16
or made on the Company's time or with the use of the Company's facilities or
materials, or, in the case of business opportunities, are presented to him for
the possible interest or participation of the Company. The Executive shall (i)
promptly disclose any such Work Product and business opportunities to the
Company; (ii) assign to the Company, upon request and without additional
compensation, the entire rights to such Work Product and business opportunities;
(iii) sign all papers necessary to carry out the foregoing; and (iv) give
testimony in support of his inventorship or creation in any appropriate case.
The Executive agrees that he will not assert any rights to any Work Product or
business opportunity as having been made or acquired by him prior to the date of
this Agreement except for Work Product or business opportunities, if any,
disclosed to and acknowledged by the Company in writing prior to the date
hereof.
11. Notices. All notices, requests, consents and other
communications required or permitted to be given under this Agreement shall be
effective only if given in writing and shall be deemed to have been duly given
if delivered personally or sent by prepaid telegram, or mailed first-class,
postage prepaid, by registered or certified mail, as follows (or to such other
or additional address as either party shall designate by notice in writing to
the other in accordance herewith):
11.1 If to the Company:
Time Warner Inc.
75 Rockefeller Plaza
New York, New York 10019
Attention: President
(with a copy, similarly addressed
but Attention: General Counsel)
11.2 If to the Executive, to his residence address
set forth on the records of the Company.
12. General.
12.1 Governing Law. This Agreement shall be governed
by and construed and enforced in accordance with the substantive laws of the
State of New York applicable to agreements made and to be performed entirely in
New York.
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17
12.2 Captions. The section headings contained herein
are for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
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 of this Agreement and supersedes all
prior agreements, arrangements and understandings, written or oral, between the
parties, including without limitation, the Prior Agreement.
12.4 No Other Representations. No representation,
promise or inducement has been made by either party that is not embodied in this
Agreement, and neither party shall be bound by or be liable for any alleged
representation, promise or inducement not so set forth.
12.5 Assignability. This Agreement and the
Executive's rights and obligations hereunder may not be assigned by the
Executive. The Company may assign its rights together with its obligations
hereunder, in connection with any sale, transfer or other disposition of all or
substantially all of its business and assets; and such rights and obligations
shall inure to, and be binding upon, any successor to all or substantially all
of the business and assets of the Company, whether by merger, purchase of stock
or assets or otherwise. The Company shall cause such successor expressly to
assume such obligations.
12.6 Amendments; Waivers. This Agreement may be
amended, modified, superseded, cancelled, renewed or extended and the terms or
covenants hereof may be waived only by written instrument executed by both of
the parties hereto, or in the case of a waiver, by the party waiving compliance.
The failure of either party at any time or times to require performance of any
provision hereof shall in no manner affect such party's right at a later time to
enforce the same. No waiver by either party of the breach of any term or
covenant contained in this Agreement, in any one or more instances, shall be
deemed to be, or construed as, a further or continuing waiver of any such
breach, or a waiver of the breach of any other term or covenant contained in
this Agreement.
12.7 Resolution of Disputes. Any dispute or
controversy arising with respect to this Agreement shall, at the election of
either the Company or the Executive, be submitted to JAMS/ENDISPUTE for
resolution in arbitration in accordance with the rules and procedures of
JAMS/ENDISPUTE. Either party shall make such election by delivering written
notice thereof to the other party at any time (but not later than 45 days after
such party receives notice of the commencement of any administrative or
regulatory proceeding or the filing of any lawsuit relating to any such dispute
or controversy) and thereupon any such dispute or controversy shall be resolved
only in accordance with the provisions of this Section
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18
12.7. Any such proceedings shall take place in New York City before a single
arbitrator (rather than a panel of arbitrators), pursuant to any streamlined or
expedited (rather than a comprehensive) arbitration process, before a
nonjudicial (rather than a judicial) arbitrator, and in accordance with an
arbitration process which, in the judgment of such arbitrator, shall have the
effect of reasonably limiting or reducing the cost of such arbitration. The
resolution of any such dispute or controversy by the arbitrator appointed in
accordance with the procedures of JAMS/ENDISPUTE shall be final and binding.
Judgment upon the award rendered by such arbitrator may be entered in any court
having jurisdiction thereof, and the parties consent to the jurisdiction of the
New York courts for this purpose. The prevailing party shall be entitled to
recover the costs of arbitration (including reasonable attorneys fees and the
fees of experts) from the losing party. If at the time any dispute or
controversy arises with respect to this Agreement, JAMS/ENDISPUTE is not in
business or is no longer providing arbitration services, then the American
Arbitration Association shall be substituted for JAMS/ENDISPUTE for the purposes
of the foregoing provisions of this Section 12.7. If the Executive shall be the
prevailing party in such arbitration, the Company shall promptly pay, upon
demand of the Executive, all legal fees, court costs and other costs and
expenses incurred by the Executive in any legal action seeking to enforce the
award in any court.
12.8 Beneficiaries. Whenever this Agreement provides
for any payment to the Executive's estate, such payment may be made instead to
such beneficiary or beneficiaries as the Executive may designate by written
notice to the Company. The Executive shall have the right to revoke any such
designation and to redesignate a beneficiary or beneficiaries by written notice
to the Company (and to any applicable insurance company) to such effect.
12.9 No Conflict. The Executive represents and
warrants to the Company that this Agreement is legal, valid and binding upon the
Executive and the execution of this Agreement and the performance of the
Executive's obligations hereunder does not and will not constitute a breach of,
or conflict with the terms or provisions of, any agreement or understanding to
which the Executive is a party (including, without limitation, any other
employment agreement). The Company represents and warrants to the Executive that
this Agreement is legal, valid and binding upon the Company and the execution of
this Agreement and the performance of the Company's obligations hereunder does
not and will not constitute a breach of, or conflict with the terms or
provisions of, any agreement or understanding to which the Company is a party.
12.10 Withholding Taxes. Payments made to the
Executive pursuant to this Agreement shall be subject to withholding and social
security taxes and other ordinary and customary payroll deductions.
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19
12.11 No Offset. Except as provided in Section 9.4 of
this Agreement, neither the Company nor the Executive shall have any right to
offset any amounts owed by one party hereunder against amounts owed or claimed
to be owed to such party, whether pursuant to this Agreement or otherwise, and
the Company and the Executive shall make all the payments provided for in this
Agreement in a timely manner.
12.12 Severability. If any provision of this
Agreement shall be held invalid, the remainder of this Agreement shall not be
affected thereby; provided, however, that the parties shall negotiate in good
faith with respect to equitable modification of the provision or application
thereof held to be invalid. To the extent that it may effectively do so under
applicable law, each party hereby waives any provision of law which renders any
provision of this Agreement invalid, illegal or unenforceable in any respect.
12.13 Definitions. The following terms are defined in
this Agreement in the places indicated:
Account Retained Income - Section A.6 of Annex A
Advisory Period - Section 13
affiliate - Section 4.2.3
Applicable Tax Law - Section A.5 of Annex A
Base Salary - Section 3.1
cause - Section 4.1
Code - Section 4.2.2
Company - the first paragraph on page 1 and Section 9.1
deferred compensation - Section 3.3
Disability Date - Section 5
Disability Period - Section 5
Effective Date - the first paragraph on page 1
eligible securities - Section A.1 of Annex A
Entity - Section 2
Executive - the first paragraph in page 1
fair market value - Section A.1 of Annex A
Investment Advisor - Section A.1 of Annex A
Pay-Out Period - Section A.6 of Annex A
Prior Account - Section 3.5
Prior Agreement - the second paragraph on page 1
Rabbi Trust - Section 3.3
senior executives - Section 3.1
Term Date - the second paragraph on page 1
term of employment - Section 1
Trust Account - Section 3.3
Trust Agreement - Section 3.3
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20
Trustee - Section 3.3
Valuation Date - Section A.6 of Annex A
Work Product - Section 10
13. Advisory Services. Notwithstanding anything to the
contrary contained in this Agreement (except the last sentence of Section 1),
the Executive shall have the right to elect by delivery of written notice to the
Company, which notice may be delivered at any time on or after December 1, 2001,
to terminate the term of employment and his position as Chief Executive Officer
of the Company effective not earlier than five months after the delivery of such
notice and to serve as an advisor to the Company for the period from the
effective date of such notice through December 31, 2005 (the "Advisory Period").
During the Advisory Period, the Executive will provide such advisory services
concerning the business, affairs and management of the Company as may be
required by the Board of Directors or the Chief Executive Officer of the
Company, but shall not be required to devote more than five days (up to eight
hours per day) each month to such service, which shall be performed at a time
and place mutually convenient to both parties and consistent with the
Executive's other activities. If at any time during the Advisory Period, the
Executive engages in other full-time employment, the Executive shall not be
deemed to be in breach of this Section 13, but unless such employment consists
of the Executive providing services to one or more (i) charitable or non-profit
organizations or (ii) family-owned corporations, trusts, or partnerships, the
Advisory Period shall terminate, the Executive shall leave the payroll of the
Company and the Company shall have no further obligations under this agreement
other than with respect to earned and unpaid compensation and benefits.
Notwithstanding the foregoing, but subject to Section 9 of this Agreement,
during the Advisory Period the Executive may provide part-time services to third
parties (including serving as a member of the Board of Directors of any such
party). During the Advisory Period, the Executive shall be entitled to receive
annual compensation in an amount equal to the Base Salary being received by the
Executive pursuant to Section 3.1 at the time the Executive delivers the notice
provided for in this Section 13 and shall continue to be entitled to the
benefits described in Sections 7 and 8 hereof; provided, however, that the
Executive shall not be entitled to any additional grants of stock options during
the Advisory Period, shall not accrue any vacation time during the Advisory
Period and shall not be entitled to any severance pay at the end thereof. In
addition, during the Advisory Period the Company shall provide the Executive
with an office, office facilities and a secretary in accordance with the
provisions of Section 4.3.
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21
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first above written.
TIME WARNER INC.
By
-----------------------------------------------
Richard D. Parsons
President
-----------------------------------------------
Gerald M. Levin
<Page>
ANNEX A
Deferred Compensation Account
A.1 Investments. Funds credited to the Trust Account shall be
actually invested and reinvested in an account in securities selected from time
to time by an investment advisor designated from time to time by the Company
(the "Investment Advisor"), substantially all of which securities shall be
"eligible securities". The designation from time to time by the Company of an
Investment Advisor shall be subject to the approval of the Executive, which
approval shall not be withheld unreasonably. "Eligible securities" are common
and preferred stocks, warrants to purchase common or preferred stocks, put and
call options, and corporate or governmental bonds, notes and debentures, either
listed on a national securities exchange or for which price quotations are
published in newspapers of general circulation, including The Wall Street
Journal, and certificates of deposit. Eligible securities shall not include the
common or preferred stock, any warrants, options or rights to purchase common or
preferred stock or the notes or debentures of the Company or any corporation or
other entity of which the Company owns directly or indirectly 5% or more of any
class of outstanding equity securities. The Investment Advisor shall have the
right, from time to time, to designate eligible securities which shall be
actually purchased and sold for the Trust Account on the date of reference. Such
purchases may be made on margin; provided that the Company may, from time to
time, by written notice to the Executive, the Trustee and the Investment
Advisor, limit or prohibit margin purchases in any manner it deems prudent and,
upon three business days written notice to the Executive, the Trustee and the
Investment Advisor, cause all eligible securities theretofore purchased on
margin to be sold. The Investment Advisor shall send notification to the
Executive and the Trustee in writing of each transaction within five business
days thereafter and shall render to the Executive and the Trustee written
quarterly reports as to the current status of his or her Trust Account. In the
case of any purchase, the Trust Account shall be charged with a dollar amount
equal to the quantity and kind of securities purchased multiplied by the fair
market value of such securities on the date of reference and shall be credited
with the quantity and kind of securities so purchased. In the case of any sale,
the Trust Account shall be charged with the quantity and kind of securities
sold, and shall be credited with a dollar amount equal to the quantity and kind
of securities sold multiplied by the fair market value of such securities on the
date of reference. Such charges and credits to the Trust Account shall take
place immediately upon the consummation of the transactions to which they
relate. As used herein "fair market value" means either (i) if the security is
actually purchased or sold by the Rabbi Trust on the date of reference, the
actual purchase or sale price per security to the Rabbi Trust or (ii) if the
security is not purchased or sold on the date of reference, in the case of a
listed security, the closing
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A-2
price per security on the date of reference, or if there were no sales on such
date, then the closing price per security on the nearest preceding day on which
there were such sales, and, in the case of an unlisted security, the mean
between the bid and asked prices per security on the date of reference, or if no
such prices are available for such date, then the mean between the bid and asked
prices per security on the nearest preceding day for which such prices are
available. If no bid or asked price information is available with respect to a
particular security, the price quoted to the Trustee as the value of such
security on the date of reference (or the nearest preceding date for which such
information is available) shall be used for purposes of administering the Trust
Account, including determining the fair market value of such security. The Trust
Account shall be charged currently with all interest paid by the Trust Account
with respect to any credit extended to the Trust Account. Such interest shall be
charged to the Trust Account, for margin purchases actually made, at the rates
and times actually paid by the Trust Account. The Company may, in the Company's
sole discretion, from time to time serve as the lender with respect to any
margin transactions by notice to the then Investment Advisor and the Trustee and
in such case interest shall be charged at the rate and times then charged by an
investment banking firm designated by the Company with which the Company does
significant business. Brokerage fees shall be charged to the Trust Account at
the rates and times actually paid.
A.2 Dividends and Interest. The Trust Account shall be
credited with dollar amounts equal to cash dividends paid from time to time upon
the stocks held therein. Dividends shall be credited as of the payment date. The
Trust Account shall similarly be credited with interest payable on interest
bearing securities held therein. Interest shall be credited as of the payment
date, except that in the case of purchases of interest-bearing securities the
Trust Account shall be charged with the dollar amount of interest accrued to the
date of purchase, and in the case of sales of such interest-bearing securities
the Trust Account shall be credited with the dollar amount of interest accrued
to the date of sale. All dollar amounts of dividends or interest credited to the
Trust Account pursuant to this Section A.2 shall be charged with all taxes
thereon deemed payable by the Company (as and when determined pursuant to
Section A.5). The Investment Advisor shall have the same right with respect to
the investment and reinvestment of net dividends and net interest as he has with
respect to the balance of the Trust Account.
A.3 Adjustments. The Trust Account shall be equitably adjusted
to reflect stock dividends, stock splits, recapitalizations, mergers,
consolidations, reorganizations and other changes affecting the securities held
therein.
A.4 Obligation of the Company. Without in any way limiting the
obligations of the Company otherwise set forth in the Agreement or this Annex A,
the Company shall have the obligation to establish, maintain and enforce the
Rabbi Trust and to make payments
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A-3
to the Trustee for credit to the Trust Account in accordance with the provisions
of Section 3.3 of the Agreement, to use due care in selecting the Trustee or any
successor trustee and to in all respects work cooperatively with the Trustee to
fulfill the obligations of the Company and the Trustee to the Executive. The
Trust Account shall be charged with all taxes (including stock transfer taxes),
interest, brokerage fees and investment advisory fees, if any, payable by the
Company and attributable to the purchase or disposition of securities designated
by the Investment Advisor (in all cases net after any tax benefits that the
Company would be deemed to derive from the payment thereof, as and when
determined pursuant to Section A.5) and only in the event of a default by the
Company of its obligation to pay such fees and expenses, the fees and expenses
of the Trustee in accordance with the terms of the Trust Agreement, but no other
costs of the Company. Subject to the terms of the Trust Agreement, the
securities purchased for the Trust Account as designated by the Investment
Advisor shall remain the sole property of the Company, subject to the claims of
its general creditors, as provided in the Trust Agreement. Neither the Executive
nor his legal representative nor any beneficiary designated by the Executive
shall have any right, other than the right of an unsecured general creditor,
against the Company or the Trust in respect of any portion of the Trust Account.
A.5 Taxes. The Trust Account shall be charged with all
federal, state and local taxes deemed payable by the Company with respect to
income recognized upon the dividends and interest received by the Trust Account
pursuant to Section A.2 and gains recognized upon sales of any of the securities
which are sold pursuant to Sections A.1, A.6 or A.7. The Trust Account shall be
credited with the amount of the tax benefit received by the Company as a result
of any payment of interest actually made pursuant to Section A.1 or A.2 and as a
result of any payment of brokerage fees and investment advisory fees made
pursuant to Section A.1. If any of the sales of the securities which are sold
pursuant to Sections A.1, A.6 or A.7 results in a loss to the Trust Account,
such net loss shall be deemed to offset the income and gains referred to in the
second preceding sentence (and thus reduce the charge for taxes referred to
therein) to the extent then permitted under the Internal Revenue Code of 1986,
as amended from time to time, and under applicable state and local income and
franchise tax laws (collectively referred to as "Applicable Tax Law"); provided,
however, that for the purposes of this Section A.5 the Trust Account shall,
except as provided in the third following sentence, be deemed to be a separate
corporate taxpayer and the losses referred to above shall be deemed to offset
only the income and gains referred to in the second preceding sentence. Such
losses shall be carried back and carried forward within the Trust Account to the
extent permitted by Applicable Tax Law in order to minimize the taxes deemed
payable on such income and gains within the Trust Account. For the purposes of
this Section A.5, all charges and credits to the Trust Account for taxes shall
be deemed to be made as of the end of the Company's taxable year during which
the transactions, from which the liabilities for such taxes are deemed to have
arisen, are deemed to have occurred. Notwithstanding the foregoing, if and to
the extent that in any year there is a net loss in the Trust Account that
<Page>
A-4
cannot be offset against income and gains in any prior year, then an amount
equal to the tax benefit to the Company of such net loss (after such net loss is
reduced by the amount of any net capital loss of the Trust Account for such
year) shall be credited to the Trust Account on the last day of such year. If
and to the extent that any such net loss of the Trust Account shall be utilized
to determine a credit to the Trust Account pursuant to the preceding sentence,
it shall not thereafter be carried forward under this Section A.5. For purposes
of determining taxes payable by the Company under any provision of this Annex A
it shall be assumed that the Company is a taxpayer and pays all taxes at the
maximum marginal rate of federal income taxes and state and local income and
franchise taxes (net of assumed federal income tax benefits) applicable to
business corporations and that all of such dividends, interest, gains and losses
are allocable to its corporate headquarters, which are currently located in New
York City.
A.6 One-Time Transfer to Deferred Plan. So long as the
Executive is an employee of the Company, the Executive shall have the right to
elect at any time, but only once during the Executive's lifetime, by written
notice to the Company to transfer to the Deferred Plan all or a portion of the
Net Transferable Balance (determined as provided in the next sentence) of the
Trust Account. If the Executive shall make such an election, the Net
Transferable Balance shall be determined as of the end of the calendar quarter
following the date of such election (unless such election is made during the ten
calendar days following the end of a calendar quarter, in which case such
determination shall be made as of the end of such preceding calendar quarter) by
adjusting all of the securities held in the Trust Account to their fair market
value (net of the tax adjustment that would be made thereon if sold, as
estimated by the Company or the Trustee) and by deducting from such value the
amount of all outstanding indebtedness and any other amounts payable by the
Trust Account. Transfers to the Deferred Plan shall be made in cash as promptly
as reasonably practicable after the end of such calendar quarter and the
Investment Advisor (or the Company or the Trustee if the Investment Advisor
shall fail to act in a timely manner) shall cause securities held in the Trust
Account to be sold to provide cash equal to the portion of the Net Transferable
Balance of the Trust Account selected to be transferred by the Executive. If the
Executive elects to transfer more than 75% of the Net Transferable Balance of
the Trust Account to the Deferred Plan, the Company or the Trustee shall be
permitted to take such action as they may deem reasonably appropriate, including
but not limited to, retaining a portion of such Net Transferable Balance in the
Trust Account, to ensure that the Trust Account will have sufficient assets to
pay the Company the amount of taxes payable on such sales of securities at the
end of the year in which such sales are made.
A.7 Payments. Payments of deferred compensation shall be made
as provided in this Section A.7. Unless the Executive makes the election
referred to in the next succeeding sentence, deferred compensation shall be paid
bi-weekly for a period of ten years
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A-5
(the "Pay-Out Period") commencing on the first Company payroll date in the month
following the later of (i) the Term Date and (ii) the date the Executive ceases
to be an employee of the Company and leaves the payroll of the Company for any
reason, provided, however, that if the Executive was named in the compensation
table in the Company's then most recent proxy statement, such payments shall
commence on the first Company payroll date in January of the year following the
year in which the latest of such events occurs. The Executive may elect a
shorter Pay-Out Period by delivering written notice to the Company or the
Trustee at least one-year prior to the commencement of the Pay-Out Period, which
notice shall specify the shorter Pay-Out Period. On each payment date, the Trust
Account shall be charged with the dollar amount of such payment. On each payment
date, the amount of cash held in the Trust Account shall be not less than the
payment then due and the Company or the Trustee may select the securities to be
sold to provide such cash if the Investment Advisor shall fail to do so on a
timely basis. The amount of any taxes payable with respect to any such sales
shall be computed, as provided in Section A.5 above, and deducted from the Trust
Account, as of the end of the taxable year of the Company during which such
sales are deemed to have occurred. Solely for the purpose of determining the
amount of payments during the Pay-Out Period, the Trust Account shall be valued
on the fifth trading day prior to the end of the month preceding the first
payment of each year of the Pay-Out Period, or more frequently at the Company's
or the Trustee's election (the "Valuation Date"), by adjusting all of the
securities held in the Trust Account to their fair market value (net of the tax
adjustment that would be made thereon if sold, as estimated by the Company or
the Trustee) and by deducting from the Trust Account the amount of all
outstanding indebtedness. The extent, if any, by which the Trust Account, valued
as provided in the immediately preceding sentence, plus any amounts that have
been transferred to the Deferred Plan pursuant to section A.6 hereof and not
theretofore distributed or deemed distributed therefrom, exceeds the aggregate
amount of credits to the Trust Account pursuant to Sections 3.3, 3.4 and 3.5 of
the Agreement as of each Valuation Date and not theretofore distributed or
deemed distributed pursuant to this Section A.7 is herein called "Account
Retained Income". The amount of each payment for the year, or such shorter
period as may be determined by the Company or the Trustee, of the Pay-Out Period
immediately succeeding such Valuation Date, including the payment then due,
shall be determined by dividing the aggregate value of the Trust Account, as
valued and adjusted pursuant to the second preceding sentence, by the number of
payments remaining to be paid in the Pay-Out Period, including the payment then
due; provided that each payment made shall be deemed made first out of Account
Retained Income (to the extent remaining after all prior distributions thereof
since the last Valuation Date). The balance of the Trust Account, after all the
securities held therein have been sold and all indebtedness liquidated, shall be
paid to the Executive in the final payment, which shall be decreased by
deducting therefrom the amount of all taxes attributable to the sale of any
securities held in the Trust Account since the end of the preceding taxable year
of the Company, which taxes shall be computed as of the date of such payment.
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A-6
If this Agreement is terminated by the Company pursuant to
Section 4.1 or if the Executive terminates this Agreement in breach of this
Agreement, the Trust Account shall be valued as of the later of (i) the Term
Date or (ii) twelve months after termination of the Executive's employment with
the Company, and the balance of the Trust Account, after the securities held
therein have been sold and all related indebtedness liquidated, shall be paid to
the Executive as soon as practicable and in any event within 75 days following
the later of such dates in a final lump sum payment, which shall be decreased by
deducting therefrom the amount of all taxes attributable to the sale of any
securities held in the Trust Account since the end of the preceding taxable year
of the Company, which taxes shall be computed as of the date of such payment.
Payments made pursuant to this paragraph shall be deemed made first out of
Account Retained Income.
If the Executive becomes disabled within the meaning of
Section 5 of the Agreement and is not thereafter returned to full-time
employment with the Company as provided in said Section 5, then deferred
compensation shall be paid bi-weekly during the Pay-Out Period commencing on the
first Company payroll date in the month following the end of the Disability
Period in accordance with the provisions of the first paragraph of this Section
A.7.
If the Executive shall die at any time whether during or after
the term of employment, the Trust Account shall be valued as of the date of the
Executive's death and the balance of the Trust Account shall be paid to the
Executive's estate or beneficiary within 75 days of such death in accordance
with the provisions of the second preceding paragraph.
Notwithstanding the foregoing provisions of this Section A.7,
if the Rabbi Trust shall terminate in accordance with the provisions of the
Trust Agreement, the Trust Account shall be valued as of the date of such
termination and the balance of the Trust Account shall be paid to the Executive
within 15 days of such termination in accordance with the provisions of the
third preceding paragraph.
If a transfer to the Deferred Plan has been made pursuant to
Section A.6 hereof, payments made to the Executive from the Deferred Plan (a)
shall be deemed made first from the amounts transferred to the Deferred Plan
pursuant to Section A.6 and (b) shall be deemed made first out of Account
Retained Income.
Within 90 days after the end of each taxable year of the
Company in which payments are made, directly or indirectly, to the Executive
from the Trust Account or from the Deferred Plan with respect to amounts
transferred to the Deferred Plan from the Trust
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A-7
Account pursuant to Section A.6 and at the time of the final payment from the
Trust Account, the Company or the Trustee shall compute and the Company shall
pay to the Trustee for credit to the Trust Account, the amount of the tax
benefit assumed to be received by the Company from the payment to the Executive
of amounts of Account Retained Income during such taxable year or since the end
of the last taxable year, as the case may be. No additional credits shall be
made to the Trust Account pursuant to the preceding sentence in respect of the
amounts credited to the Trust Account pursuant to the preceding sentence.
Notwithstanding any provision of this Section A.7, the Executive shall not be
entitled to receive pursuant to this Annex A (including any amounts that have
been transferred to the Deferred Plan pursuant to Section A.6 hereof) an
aggregate amount that shall exceed the sum of (i) all credits made to the Trust
Account pursuant to Sections 3.3, 3.4 and 3.5 of the Agreement, (ii) the net
cumulative amount (positive or negative) of all income, gains, losses, interest
and expenses charged or credited to the Trust Account pursuant to this Annex A
(excluding credits made pursuant to the second preceding sentence), after all
credits and charges to the Trust Account with respect to the tax benefits or
burdens thereof, and (iii) an amount equal to the tax benefit to the Company
from the payment of the amount (if positive) determined under clause (ii) above;
and the final payment(s) otherwise due may be adjusted or eliminated
accordingly. In determining the tax benefit to the Company under clause (iii)
above, the Company shall be deemed to have made the payments under clause (ii)
above with respect to the same taxable years and in the same proportions as
payments of Account Retained Income were actually made from the Trust Account.
Except as otherwise provided in this paragraph, the computation of all taxes and
tax benefits referred to in this Section A.7 shall be determined in accordance
with Section A.5 above.
<Page>
ANNEX B
RELEASE
Pursuant to the terms of the Employment Agreement made as of
_____________, between TIME WARNER INC., a Delaware corporation (the "Company"),
75 Rockefeller Plaza, New York, New York 10019 and the undersigned (the
"Agreement"), and in consideration of the payments made to me and other benefits
to be received by me pursuant thereto, I, [Name], being of lawful age, do hereby
release and forever discharge the Company and its officers, shareholders,
subsidiaries, agents, and employees, from any and all actions, causes of action,
claims, or demands for general, special or punitive damages, attorney's fees,
expenses, or other compensation, which in any way relate to or arise out of my
employment with the Company or any of its subsidiaries or the termination of
such employment, which I may now or hereafter have under any federal, state or
local law, regulation or order, including without limitation, under the Age
Discrimination in Employment Act, as amended, through and including the date of
this Release; provided, however, that the execution of this Release shall not
prevent the undersigned from bringing a lawsuit against the Company to enforce
its obligations under the Agreement.
I acknowledge that I have been given at least 21 days from the
day I received a copy of this Release to sign it and that I have been advised to
consult an attorney. I understand that I have the right to revoke my consent to
this Release for seven days following my signing. This Release shall not become
effective or enforceable until the expiration of the seven-day period following
the date it is signed by me.
I further state that I have read this document and the
Agreement referred to herein, that I know the contents of both and that I have
executed the same as my own free act.
WITNESS my hand this ____ day of ___________ , ____.
---------------------------
[Name]