EMPLOYMENT
AGREEMENT made November 5, 2001, effective as of
October 15, 2001 (the “Effective Date”), between
TIME WARNER ENTERTAINMENT COMPANY, L.P., a Delaware limited
partnership (the “Company”), and JOHN
BILLOCK.
You and the
Company desire to set forth the terms and conditions of your
employment by the Company and 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 the Effective Date and ending on October 14, 2006
(the “Term Date”), subject, however, to earlier
termination as set forth in this Agreement.
2.
Employment . During the term of employment, you shall serve
as Vice Chairman and Chief Operating Officer of the Time Warner
Cable division of the Company (“Time Warner Cable”) 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 position. Among other things, it is
agreed that the President of Time Warner Cable shall report to you,
and that the following business functions shall report to you:
Cable Operations, Marketing, Advertising Sales, Public Affairs, and
Local News. 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 (“CEO”) of Time
Warner Cable, (iii) you shall have no other employment and,
without the prior written consent of the CEO of Time Warner Cable,
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 Time Warner Cable in the greater Stamford, Connecticut
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 . The Company shall pay you a base salary at the
rate of not less than $900,000 per annum during the term of
employment (“Base Salary”). The Company may 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, your target annual
Bonus as a percentage of Base Salary is 200%, which shall be
pro-rated for partial years. 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 in accordance with Time Warner Cable’s bonus plan
for its most senior executives. 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. With
respect to 2001, your Bonus shall be pro-rated taking into account
that portion of the year you shall been employed at Time Warner
Cable and that portion of the year at its sister division, Home Box
Office, based on your target and performance rating at each
division. With respect to 2002, you shall receive a guaranteed
minimum bonus of no less than $1,350,000.
3.3
Stock Options . In connection with your appointment as Chief
Operating Officer of Time Warner Cable, you will be granted an
option to purchase 400,000 shares of Common Stock of AOL Time
Warner Inc. (“AOLTW”), subject to your execution of
this Agreement and the approval of the Compensation Committee of
the AOLTW Board of Directors, which approval shall be recommended
by the Company within 45 days following the Effective Date.
Without limiting the Company’s discretion, commencing in 2003
you will be eligible to receive annual grants of stock options and,
although the Company does not commit to do so, you will have a
target annual award of an option to purchase 400,000 shares of
AOLTW Common Stock. Each such stock option grant shall be at an
exercise price equal to the fair
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market value of
the Common Stock of AOLTW on the date of grant and shall be
reflected in a separate AOLTW Stock Option Agreement in accordance
with AOLTW’s customary practices.
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 Agreement of Limited Partnership of the Company (not
including any amendments or additions after the date hereof that
limit or narrow, but including any that add to or broaden, the
protection afforded to you by those provisions).
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 because of
(a) your 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 with respect to
the Company or its assets, or (d) your breach of any of the
covenants provided for in Section 9, which breach is
reasonably likely to adversely impact the Company. 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 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 30 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
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termination,
(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 date of such termination, 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 effective 15 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 15-day period the
Company shall have cured all such material breaches. A material
breach by the Company shall include, but not be limited to,
(i) the Company violating Section 2 with respect to your
title, reporting lines and functions, 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,
to terminate your employment under this Agreement without cause,
which notice shall specify the effective date of such
termination.
4.2.1
After the effective date of a termination 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 date of
termination. 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 full calendar
years preceding the year of termination; provided, however, if the
Company has previously paid you no annual Bonus with respect to
your employment as Chief Operating Officer of Time
Warner
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Cable, then
your Average Annual Bonus shall equal your target Bonus and, if the
Company has previously paid you one full-year annual Bonus in
respect of such employment, then your Average Annual Bonus shall
equal the average of such Bonus and your target Bonus.
4.2.2
After the effective date of a termination without cause, you shall
remain an employee of the Company for a period ending on the 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 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 second succeeding
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 an employee of the Company effective upon the
commencement of such other employment or the effective date of such
termination as specified by you in such notice, whichever is
applicable, and you shall be entitled to receive, as severance, a
lump sum payment within 30 days after such commencement or
such effective date, discounted as provided in the immediately
following sentence, equal to the balance of the payments you would
have received pursuant to this Section 4.2.2 had you remained
on the Company’s payroll. That lump sum shall be discounted
to present value as of the date of payment from the times at which
such amounts would otherwise have become payable absent such
commencement or 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, as amended (the “Code”), in
effect on the date of such commencement or termination, compounded
semi-annually. Notwithstanding the foregoing, if you accept
employment with any not-for-profit entity, then you shall be
entitled to remain an employee of the Company and receive the
payments as provided in the first sentence of this
Section 4.2.2; 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 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.
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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, 4.2.2, 4.4 and 4.5 shall
apply.
4.4
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) twelve months
thereafter or (b) the date you continence 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.
4.5
Release . A condition precedent to the Company’s
obligation to make 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. If you shall fail to execute
and deliver such release, or if you revoke such release as provided
therein, then in lieu of the
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payments
provided for herein, you shall receive a severance payment
determined in accordance with the Company’s policies relating
to notice and severance.
4.6
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.
4.7
Mitigation . In the event of a termination without cause
under this Agreement, you shall not be required to seek other
employment in order to mitigate your damages hereunder unless
Section 280G of 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, you 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 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 4.7 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.
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4.8
Payments . So long as you remain on the payroll of the
Company or any subsidiary or division of the Company, payments of
Base Salary and Bonus required to be made after a termination
without cause shall be made at the same times as similar payments
are made to other senior executives of the Company.
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”). If you have not resumed your usual duties on or prior
to the Disability Date, the Company shall pay you any unpaid Bonus
for any year prior to the year in which your employment is
terminated (and if the amount of such Bonus has not been determined
prior to such termination, the amount shall be equal to your
Average Annual Bonus) and 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) one year after the Disability date or
(ii) the Term Date (the “Disability Period”), in
an annual amount equal to 75% of (a) your Base Salary at the
time you become disabled and (b) your Average Annual
Bonus.
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
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