AMENDED
and RESTATED EMPLOYMENT AGREEMENT made December 16, 2008
effective as of July 1, 2008 (the “Effective
Date”), between TIME WARNER INC., a Delaware corporation (the
“Company”), and PAUL T. CAPPUCCIO
(“You”).
You
are currently employed by the Company pursuant to an Employment
Agreement made March 20, 2001, effective as of March 1,
2001 (the “Prior Agreement”). The Company wishes to
amend and restate the terms of your employment with the Company and
to continue to secure your services on a full-time basis, on and
subject to the terms and conditions set forth in this Agreement,
and you are willing to provides such services on and subject to the
terms and conditions set forth in this Agreement. You and the
Company therefore agree as follows:
1.
Term of Employment . Your “term of employment”
as this phrase is used throughout this Agreement shall be for the
period beginning on March 1, 2001 and ending on June 30,
2005 (the “Term Date”), and, thereafter pursuant to
Section 4.3.
2.
Employment . During the term of employment, you shall serve
as Executive Vice President and General Counsel of the Company and
you shall have the authority, functions, duties, powers and
responsibilities normally associated with such position and such
additional authority, functions, duties, powers and
responsibilities as may be assigned to you from time to time by the
Company consistent with your senior position with the Company.
During the term of employment, (i) your services shall be rendered
on a substantially full-time, exclusive basis and you will apply on
a full-time basis all of your skill and experience to the
performance of your duties, (ii) you shall report to the Chief
Executive Officer of the Company, (iii) you shall have no
other employment and, without the prior written consent of your
manager or other more senior officer of the Company in your
reporting line, no outside business activities which require the
devotion of substantial amounts of your time, and (iv) the
place for the performance of your services shall be the principal
executive offices of the Company in the New York City metropolitan
area, subject to such reasonable travel as may be required in the
performance of your duties. 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.
3.1
Base Salary . Effective February 2, 2004, the Company
shall pay you a base salary at the rate of not less than $1,000,000
per annum during the remainder of the term of employment
(“Base Salary”). The Company may increase, but not
decrease, your Base Salary during the term of employment. Base
Salary shall be paid in accordance with the Company’s
customary payroll practices.
3.2
Bonus . In addition to Base Salary, the Company typically
pays its executives an annual cash bonus (“Bonus”).
Although your Bonus is fully discretionary, beginning in 2001 your
target annual Bonus is 200% of your Base Salary. Each year, your
personal performance will be considered in the context of your
executive duties and any individual goals set for you, and your
actual Bonus will be determined. Although as a general matter the
Company expects to pay bonuses at the target level in cases of
satisfactory individual performance, it does not commit to do so,
and your Bonus may be negatively affected by the exercise of the
Company’s discretion or by overall Company performance. Your
Bonus amount, if any, will be paid to you between January 1 and
March 15 of the calendar year immediately following the
performance year in respect of which such Bonus is
earned.
3.3
Long Term Incentive Compensation . So long as the term of
employment has not terminated the Company annually shall provide
you with long term incentive compensation with a target value of at
least $1,800,000 (based on the valuation method used by the Company
for its senior executives) through a combination of stock option
grants, restricted stock units, performance shares or other
equity-based awards, cash-based long-term plans or other components
as may be determined by the Compensation Committee of the
Company’s Board of Directors from time to time in its sole
discretion
3.4
Indemnification . You shall be entitled throughout the term
of employment (and after the end of the term of employment, to the
extent relating to service during the term of employment) to the
benefit of the indemnification provisions contained on the date
hereof in the Restated Certificate of Incorporation and By-laws of
the Company (not including any amendments or additions after the
Effective Date that limit or narrow, but including any that add to
or broaden, the protection afforded to you by those provisions).
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4.1
Termination for Cause . The Company may terminate the term
of employment and all of the Company’s obligations under this
Agreement, other than its obligations set forth below in this
Section 4.1, for “cause”. Termination by the
Company for “cause” shall mean termination by action of
the Company because of (a) conviction (treating a nolo
contendere plea as a conviction) of a felony (whether or not any
right to appeal has been or may be exercised), (b) willful
refusal without proper cause to perform your obligations under this
Agreement, (c) fraud, embezzlement or misappropriation or
(d) because of your breach of any of the covenants provided
for in Section 9 hereof. Such termination shall be effected by
written notice thereof delivered by the Company to you and shall be
effective as of the date of such notice; provided, however, that if
(i) such termination is because of your willful failure or
refusal without proper cause to perform any one or more of your
obligations under this Agreement, (ii) such notice is the
first such notice of termination for any reason delivered by the
Company to you under this Section 4.1, and (iii) within
15 days following the date of such notice you shall cease your
refusal and shall use your best efforts to perform such
obligations, the termination shall not be effective.
In
the event of 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 obligation
to you other than (i) to pay Base Salary through the effective
date of the termination of employment (the “Effective
Termination Date”), (ii) to pay any Bonus for any year
prior to the year in which such termination occurs that has been
determined but not yet paid as of the Effective Termination Date,
and (iii) with respect to any rights you have pursuant to any
insurance or other benefit plans or arrangements of the Company.
You hereby disclaim any right to receive a pro rata portion of any
Bonus with respect to the year in which such termination
occurs.
4.2
Termination by You 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, you shall have the
right, exercisable by written notice to the Company, to terminate
the term of employment under this Agreement with an Effective
Termination Date 30 days after the giving of such notice, if,
at the time of the giving of such notice, the Company is 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 you pursuant to this
Section 4.2 and within
such
30-day period the Company shall have cured all such material
breaches; and provided further, that such notice is provided to the
Company within 90 days after the occurrence of such material
breach. A material breach by the Company shall include, but not be
limited to, (i) the Company violating Section 2 with
respect to authority, reporting lines, duties, or place of
employment or (ii) the Company failing to cause any successor
to all or substantially all of the business and assets of the
Company expressly to assume the obligations of the Company under
this Agreement.
The
Company shall have the right, exercisable by written notice to you
delivered before the date which is 60 days prior to the Term
Date, to terminate your employment under this Agreement without
cause, which notice shall specify the Effective Termination Date.
If such notice is delivered on or after the date which is
60 days prior to the Term Date, the provisions of Section 4.3
shall apply.
4.2.1
In the event of a termination of employment pursuant to this
Section 4.2 (a “termination without cause”), you
shall receive Base Salary and a pro rata portion of your Average
Annual Bonus (as defined below) through the Effective Termination
Date. Your Average Annual Bonus shall be equal to the average of
the regular annual bonus amounts (excluding the amount of any
special or spot bonuses) in respect of the two calendar years
during the most recent five calendar years for which the annual
bonus received by you from the Company was the greatest. Your pro
rata Average Annual Bonus pursuant to this Section 4.2.1 shall
be paid to you at the times set forth in
Section 4.7.
4.2.2
In the event of a termination covered by Sections 4.2 or 4.3,
after the Effective Termination Date, you shall continue to be
treated as an employee of the Company for a period ending on the
date which is twenty-four months after the Effective Termination
Date (the “Severance Term Date”) and during such period
you shall be entitled to receive, whether or not you become
disabled during such period but subject to Section 6,
(a) Base Salary (on the Company’s normal payroll payment
dates as in effect immediately prior to the Effective Termination
Date) at an annual rate equal to your Base Salary in effect
immediately prior to the notice of termination, and (b) an
annual Bonus in respect of each calendar year or portion thereof
(in which case a pro rata portion of such Bonus will be payable)
during such period equal to your Average Annual Bonus. Except as
provided in the next sentence, if you accept other full-time
employment during such period or notify the Company in writing of
your intention to terminate your status as an employee during such
period, you shall cease to be treated as an employee of the Company
for purposes of your rights to receive certain post-termination
benefits under
Section 8.2
effective upon the commencement of such other employment or the
effective date specified by you in such notice, whichever is
applicable (the “Equity Cessation Date”), and you shall
receive the remaining payments of Base Salary and Bonus pursuant to
this Section 4.2.2 for the balance of the twenty-four months
after the Effective Termination Date at the times specified in
Section 4.7 of the Agreement. Notwithstanding the foregoing,
if you accept employment with any not-for-profit entity or
governmental entity, then you may continue to be treated as an
employee of the Company for purposes of your rights to receive
certain post-termination benefits pursuant to Section 8.2 and
you will continue to receive the payments as provided in the first
sentence of this Section 4.2.2; and if you accept full-time
employment with any affiliate of the Company, then the payments
provided for in this Section 4.2.2 shall immediately cease and
you shall not be entitled to any further payments. 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
After the Term Date . If at the Term Date, the term of
employment shall not have been previously terminated pursuant to
the provisions of this Agreement, no Disability Period is then in
effect and the parties shall not have agreed to an extension or
renewal of this Agreement or on the terms of a new employment
agreement, then the term of employment shall continue on a
month-to-month basis and you shall continue to be employed by the
Company pursuant to the terms of this Agreement, subject to
termination by either party hereto on 60 days written notice
delivered to the other party (which notice may be delivered by
either party at any time on or after the date which is 60 days
prior to the Term Date). If the Company shall terminate the term of
employment on or after the Term Date for any reason (other than for
cause as defined in Section 4.1, in which case Section 4.1
shall apply), which the Company shall have the right to do so long
as no Disability Date (as defined in Section 5) has occurred
prior to the delivery by the Company of written notice of
termination, then such termination shall be deemed for all purposes
of this Agreement to be a “termination without cause”
under Section 4.2 and the provisions of Sections 4.2.1 and
4.2.2 shall apply.
4.4
Release . A condition precedent to the Company’s
obligation to make or continue the payments associated with a
termination without cause shall be your execution and delivery of a
release in the form attached hereto as Annex A, as such form may be
updated in the discretion of the Company. If you shall fail to
execute and deliver such release, or if you revoke such release as
provided therein, then in lieu of the payments provided for herein,
you shall receive a severance payment determined in accordance with
the Company’s policies relating to notice and severance
reduced by the
aggregate
amount of severance payments paid pursuant to this Agreement, if
any, prior to the date of your refusal to deliver, or revocation
of, such release.
4.5
Retirement . Notwithstanding the provisions of this
Agreement relating to a termination without cause and Disability,
on the date you first become eligible for normal retirement as
defined in any applicable retirement plan (or, if none, any
applicable qualified employee benefit plan) of the Company or any
subsidiary of the Company (the “Retirement Date”), then
this Agreement shall terminate automatically on such date and your
employment with the Company shall thereafter be governed by the
policies generally applicable to employees of the Company, and you
shall not thereafter be entitled to the payments provided in this
Agreement to the extent not received by you on or prior to the
Retirement Date. In addition, no benefits or payments provided in
this Agreement relating to termination without cause and Disability
shall include any period after the Retirement Date and if the
provision of benefits or calculation of payments provided in this
Agreement with respect thereto would include any period subsequent
to the Retirement Date, such provision of benefits shall end on the
Retirement Date and the calculation of payments shall cover only
the period ending on the Retirement Date.
4.6
Mitigation . In the event of a termination without cause
under this Agreement, you shall not be required to take actions in
order to mitigate your damages hereunder, unless Section 280G
of the Internal Revenue Code of 1986, as amended (the
“Code”), would apply to any payments to you by the
Company and your failure to mitigate would result in the Company
losing tax deductions to which it would otherwise have been
entitled. In such an event, Section 4.8.1 shall govern. With
respect to the preceding sentences, any payments or rights to which
you are entitled by reason of the termination of employment without
cause shall be considered as damages hereunder. Any obligation to
mitigate your damages pursuant to this Section 4.6 shall not
be a defense or offset to the Company’s obligation to pay you
in full the amounts provided in this Agreement upon the occurrence
of a termination without cause, at the time provided herein, or the
timely and full performance of any of the Company’s other
obligations under this Agreement.
4.7
Payments . Payments of Base Salary and Bonus required to be
made to you after any termination shall be made at the same times
as such payments otherwise would have been paid to you pursuant to
Sections 3.1 and 3.2 if you had not been terminated, subject
to Section 12.17.
4.8
Limitation on Certain Payments . Notwithstanding any other
provision of this Agreement:
4.8.1.
In the event that part or all of the consideration, compensation or
benefits to be paid to you under this Agreement would constitute
“parachute payments” under Section 280G(b)(2) of
the Code, then, if the aggregate present value of such parachute
payments, singularly or together with the aggregate present value
of any consideration, compensation or benefits to be paid to you
under any other plan, arrangement or agreement which constitute
“parachute payments” (collectively, the
“Parachute Amount”) exceeds 2.99 times your “base
amount”, as defined in Section 280G(b)(3) of the Code
(the “Base Amount”), the amounts constituting
“parachute payments” which would otherwise be payable
to you or for your benefit shall be reduced to the extent necessary
so that the Parachute Amount is equal to 2.99 times the Base Amount
(the “Reduced Amount”); provided that such amounts
shall not be so reduced if, without such reduction, you would be
entitled to receive and retain, on a net after tax basis
(including, without limitation, any excise taxes payable under
Section 4999 of the Code), an amount which is greater than the
amount, on a net after tax basis, that you would be entitled to
retain upon receipt of the Reduced Amount.
4.8.2.
If the determination made pursuant to Section 4.8.1 results in
a reduction of the payments that would otherwise be paid to you
except for the application of Section 4.8.1, such reduction in
payments shall be first applied to reduce any cash severance
payments that you would otherwise be entitled to receive hereunder
and shall thereafter be applied to reduce other payments and
benefits in a manner that would not result in subjecting you to
additional taxation under Section 409A of the Code, unless you
elect to have the reduction in payments applied in a different
order. Within ten days following such determination, the Company
shall pay or distribute to you or for your benefit such amounts as
are then due to you under this Agreement and shall promptly pay or
distribute to you or for your benefit in the future such amounts as
become due to you under this Agreement.
4.8.3.
As a result of the uncertainty in the application of
Sections 280G and 4999 of the Code at the time of a
determination hereunder, it is possible that payments will be made
by the Company that should not have been made under
Section 4.8.1 (an “Overpayment”). In the event
that there is a final determination by the Internal Revenue
Service, or a final determination by a court of competent
jurisdiction, that an Overpayment has been made, the Company shall
have no further liability or obligation to you for any excise
taxes, interest or penalty that you are required to pay as a result
of such final determination.
4.9
Office Facilities . In the event of a termination without
cause, then for the period beginning on the effective date of such
termination and ending on the earlier of (a) six months
thereafter or (b) the date you commence other full-time
employment, the Company shall, without charge to you, make
available to you office space at or near your principal job
location immediately prior to such termination, together with
secretarial services, office facilities, services and furnishings,
in each case reasonably appropriate to an employee of your position
and responsibilities prior to such termination but taking into
account your reduced need for such office space, secretarial
services and office facilities, services and furnishings as a
result of you no longer being a full-time employee.
5.1
Disability Payments . If during the term of employment and
prior to the delivery of any notice of termination without cause,
you become physically or mentally disabled, whether totally or
partially, so that you are prevented from performing your 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 your full compensation
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”), subject to Section 12.17. If you have not
resumed your usual duties on or prior to the Disability Date, the
Company shall pay you a pro rata Bonus (based on your Average
Annual Bonus) for the year in which the Disability Date occurs and
thereafter shall pay you disability benefits for the period ending
on the later of (i) the Term Date or (ii) the date which
is two years after the Disability Date (in the case of either
(i) or (ii), the “Disability Period”), in an
annual amount equal to 75% of (a) your Base Salary at the time
you become disabled and (b) the Average Annual Bonus, in each
case, subject to Section 12.17.
5.2
Recovery from Disability . If during the Disability Period
you shall fully recover from your disability, the Company shall
have the right (exercisable within 60 days after notice from
you of such recovery), but not the obligation, to restore you to
full-time service at full compensation. If the Company elects to
restore you to full-time service, then this Agreement shall
continue in full force and effect in all respects and the Term Date
shall not be extended by virtue of the occurrence of the Disability
Period. If
the
Company elects not to restore you to full-time service, you shall
be entitled to obtain other employment, subject, however, to the
following: (i) you shall perform advisory services during any
balance of the Disability Period; and (ii) you shall comply
with the provisions of Sections 9 and 10 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 Chairman, the Chief Executive Officer or a Chief
Operating Officer but you 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.
5.3
Other Disability Provisions . The Company shall be entitled
to deduct from all payments to be made to you during the Disability
Period pursuant to this Section 5 an amount equal to all
disability payments received by you during the Disability Period
from Worker’s Compensation, Social Security and disability
insurance policies maintained by the Company; provided, however,
that for so long a
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