Non-qualified Directors’ Stock Option Agreement – Time Warner
TIME WARNER INC.NON-QUALIFIED STOCK OPTION
AGREEMENT
Time Warner Inc. (the “Company”), has granted the Participant an
option (the “Option”) to purchase shares of its common stock, $.01 par value per
share (the “Shares”), on the Date of Grant set forth on the Notice (as defined
below). The Option is not intended to qualify as an “incentive stock
option” under Section 422 of the Code and shall for all purposes be treated as a
nonstatutory stock option. 1. GRANT OF OPTION. The Company
hereby grants to the Participant the right and option to purchase the number of
Shares set forth in the Notice, on the terms and conditions and subject to all
the limitations set forth herein and in the Plan, which is incorporated herein
by reference. “Notice” means (i) the Notice of Grant of Stock Option that
accompanies this Agreement, if this Agreement is delivered to the Participant in
“hard copy,” and (ii) the screen of the website for the stock plan
administration with the heading “Vesting Schedule and Details,” which contains
the details of the grant governed by this Agreement, if this Agreement is
delivered electronically to the Participant. 2. EXERCISE PRICE.
The exercise price of the Shares covered by this Option shall be as set forth in
the Notice, subject to adjustment as provided in the Plan. 3.
VESTING AND EXERCISABILITY. Subject to the terms and conditions set forth
in this Agreement and the Plan, so long as the Participant remains an employee,
director or consultant of the Company or an Affiliate, this Option shall vest
and become exercisable ratably in four equal annual installments, on each of the
first, second, third and fourth anniversaries of the Date of Grant as set forth
in the Notice. As a condition to the exercise of any Option evidenced
by this Agreement, the Participant agrees to hold, for a period of twelve
(12) months following the date of such exercise, a number of Shares issued
pursuant to such exercise equal to 75% (rounded down to the nearest whole Share)
of the quotient of (A) and (B), where (A) is the product of (1) the number of
Shares exercised by the Participant multiplied by
(2) fifty percent (50%) of the excess of the Fair Market Value of a Share on
the date of exercise over the exercise price and (B) is the Fair Market Value of
a Share on the date of exercise. The holding requirement related to Shares that
is established in this Paragraph 3 shall terminate with respect to the Options
evidenced by this Agreement (as well as any Shares issued pursuant to the
exercise of such Options) on the first anniversary of the date the Participant
ceases to be a director of the Company. 4. TERM OF OPTION.
Unless earlier terminated pursuant to the provisions of this Agreement or the
Plan, the unexercised portion of the Option shall expire and cease to be
exercisable at the closing time of trading on the day preceding the tenth
anniversary of the Date of Grant (the “Expiration Date”) (or at 5:00 p.m.
Eastern time on the Expiration Date, if earlier). 5. TERMINATION OF
SERVICE. In the event of the termination of the Participant’s service
relationship (whether as an employee, director or consultant) with the Company
or an Affiliate before the Participant has exercised the Option in full or the
Option has terminated pursuant to Paragraph 4, the following rules shall apply:
(a) Cause. If the Participant is removed as a director of the
Company for “cause” (within the meaning of the Company’s Restated Certificate of
Incorporation and By-laws or the provisions of the General Corporation Law of
the State of Delaware), the unvested portion of the Option shall immediately
terminate, and the vested portion of the Option shall remain exercisable for one
(1) month following the Participant’s date of termination and shall not be
exercisable after the end of such one-month period; provided, that if the
Participant is removed for cause on account of one or more acts of fraud,
embezzlement or misappropriation committed by the Participant, the unvested and
vested portions of the Option shall immediately terminate. (b)
Retirement. If the Participant’s service relationship is voluntarily
terminated by the Participant at any time (i) following the attainment of age 55
with ten (10) years of service with the Company or any Affiliate or
(ii) pursuant to a mandatory retirement program for non-employee directors of
the Company, then the Option shall fully vest and become immediately
exercisable, and shall remain exercisable for five (5) years following the
Participant’s date of termination and shall not be exercisable after the end of
such five-year period; provided, that if the Company has given the
Participant notice that his or her service relationship is being terminated
under the circumstances described in Paragraph 5(a) above prior to the
Participant’s election to terminate under this Paragraph 5(b), then the
provisions of Paragraph 5(a) shall be controlling. (c) Disability.
If the Participant’s service relationship is terminated as a result of the
Participant’s Disability (as defined in the Plan), then the Option shall fully
vest and become immediately exercisable, and shall remain exercisable
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for three (3) years following the Participant’s date of termination and shall
not be exercisable after the end of such three-year period. (d)
Death. If the Participant’s service relationship is terminated as a
result of the Participant’s death, then the Option shall fully vest and become
immediately exercisable, and shall remain exercisable by the Participant’s
designated beneficiary or, if there is no designated beneficiary, the
Participant’s Survivors for three (3) years following the Participant’s date of
death and shall not be exercisable after the end of such three-year period.
(e) Not Re-elected as a Director. If the Participant’s service
relationship is terminated because (i) the Participant is not nominated by the
Company’s Board of Directors to stand for re-election at an annual stockholders’
meeting at which directors are to be elected, (ii) having been nominated for
re-election, is not re-elected by the stockholders at such stockholders’
meeting, (iii) having been re-elected by fewer than a majority “for” votes of
the votes cast by the stockholders at such stockholders’ meeting in an
uncontested election of directors, the Participant’s offer to resign from the
Board of Directors is accepted by the Board of Directors, or (iv) any similar
events that result in the Participant ceasing to serve as a director of the
Company, the Option shall fully vest and become immediately exercisable and
shall remain exercisable for three (3) years following the Participant’s date of
termination and shall not be exercisable after the end of such three-year
period; provided, that if at the time the Participant ceases to be a
director of the Company under this Paragraph 5(e), the Participant satisfies the
age and service requirements described in Paragraph 5(b), then the provisions of
Paragraph 5(b) shall be controlling. (f) Merger, Reorganization. If
the Participant’s service relationship is terminated by the Company as a result
of any corporate reorganization, merger or consolidation of the Company or
because of a reduction in the size of the Board of Directors, then the Option
shall fully vest and become immediately exercisable, and shall remain
exercisable for three (3) years following the Participant’s date of termination
and shall not be exercisable after the end of such three-year period;
provided that if at the time the Participant ceases to be a director of
the Company under this Paragraph 5(f), the Participant satisfies the age and
service requirements described in Paragraph 5(b), then the provisions of
Paragraph 5(b) shall be controlling. (g) Certain Resignations. If
the Participant’s service relationship is voluntarily terminated by the
Participant (i) for medical reasons, (ii) to accept a position with any federal,
state or local government or any agency thereof, (iii) on the advice of counsel,
due to a conflict of interest or (iv) in the discretion of the Committee, for
any reason the Committee determines to be similar to the foregoing, then the
Option shall fully vest and become immediately exercisable
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and shall remain exercisable for three (3) years following the Participant’s
date of termination and shall not be exercisable after the end of such
three-year period. (h) Other. If the Participant’s service
relationship is terminated other than under any of the circumstances described
in Paragraphs 5(a) through 5(g) above, then the unvested portion of the Option
shall immediately terminate (subject to Paragraph 6 below), and the vested
portion of the Option shall remain exercisable for three (3) months following
the Participant’s date of termination and shall not be exercisable after the end
of such three-month period; provided, that if the Participant’s service
relationship is terminated by the Company other than under the circumstances
described in Paragraphs 5(a), 5(c) or 5(d) above, and at the time the
Participant ceases to be a director of the Company, the Participant satisfies
the age and service requirements described in Paragraph 5(b), then the
provisions of Paragraph 5(b) shall be controlling. Notwithstanding
anything to the contrary in this Paragraph 5, in no event shall any portion of
this Option remain exercisable after the Expiration Date. If the Participant is
a party to any employment or consulting agreement with the Company or any of its
Affiliates, and such agreement provides for treatment of the Option that is
inconsistent with the provisions of this Paragraph 5, the more favorable
provisions shall control. A change in status of an Participant within or among
the Company and its Affiliates shall not affect the Option, except that a change
in status from employee of the Company or an Affiliate to a consultant of the
Company or an Affiliate shall be treated and have the same effect as if the
Participant had ceased to be an employee, director or consultant of the Company
or any Affiliate, unless the Committee determines otherwise. 6.
CHANGE IN CONTROL; DISSOLUTION AND LIQUIDATION. In the event a Change in
Control (as defined in the Plan) has occurred, the unvested portion of the
Option shall fully vest and become exercisable upon the earlier of (i) the
expiration of the one-year period immediately following the Change in Control,
provided that the Participant’s service relationship with the Company has not
been terminated or (ii) the termination of the Participant’s service
relationship by the Company under the circumstances described in Paragraph 5(h).
Upon the dissolution or liquidation of the Company, the Option shall terminate;
provided that to the extent the Option has not yet terminated pursuant to
Paragraph 4 or Paragraph 5, (i) the Participant or the Participant’s Survivors
shall have the right immediately prior to such dissolution or liquidation to
exercise the Option to the extent that the Option is then currently vested and
exercisable, and (ii) if a Change in Control shall have occurred within the
twelve months immediately prior to the date of such liquidation or dissolution,
the Participant or the Participant’s Survivors shall have the right immediately
prior to such dissolution and liquidation to exercise the Option in full whether
or not the Option is otherwise vested and exercisable as of such date.
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7. METHOD OF EXERCISING OPTION. Subject to the terms and
conditions of this Agreement, the Option may be exercised through an approved
broker/dealer by written notice on such form as is provided by the Company or
pursuant to other procedures established by the Company. Such notice shall state
the number of Shares with respect to which the Option is being exercised and
shall be signed (whether or not in electronic form) by the person exercising the
Option. Payment of the exercise price for such Shares shall be made (a) in
United States dollars in cash or by check or by wire transfer to the Company,
(b) at the discretion of the Committee, in accordance with procedures
established by the Company, by delivery of Shares, having a fair market value
equal as of the date of the exercise to the exercise price, (c) at the
discretion of the Company, in accordance with a cashless exercise program
established with a securities brokerage firm, and approved by the Company,
(d) through such other method of payment approved by the Company, (e) at the
discretion of the Company, by any combination of (a),(b),(c), and (d) above. The
Company shall deliver a certificate or certificates (or other evidence of
ownership) representing such Shares as soon as practicable after the notice, the
exercise price and any required withholding taxes have been received by the
Company, provided, that the Company may delay issuance of such Shares
until completion of any action or obtaining of any consent, which the Company
deems necessary or appropriate under any applicable law (including, without
limitation, state securities or “blue sky” laws) and such Shares shall be
subject to such restrictions as the Committee may determine in accordance with
the Plan. The certificate or certificates (or other evidence of ownership)
representing the Shares as to which the Option shall have been so exercised
shall be registered in the name of the Participant and if the Participant shall
so request in the notice exercising the Option, shall be registered in the name
of the Participant and another person jointly, with right of survivorship and
shall be delivered as provided above to or upon the written order of the person
or persons exercising the Option. In the event the Option shall be exercised by
any person or person other than the Participant, such notice shall be
accompanied by appropriate proof of the right of such person or persons to
exercise the Option. All Shares that shall be purchased upon the exercise of the
Option as provided herein shall be fully paid and nonassessable. 8.
PARTIAL EXERCISE. Exercise of vested Options in accordance with this
Agreement may be made in whole or in part at any time and from time to time,
except that no fractional Share shall be issued pursuant to the Option.
9. NON-ASSIGNABILITY. The Option shall not be transferable by
the Participant otherwise than by will or by the laws of descent and
distribution, or as may be permitted under policies that may be adopted from
time to time by the Committee in its sole discretion. The Option shall be
exercisable, during the Participant’s lifetime, only by the Participant (or, in
the event of legal incapacity or incompetency, by the Participant’s guardian or
representative) and shall not be assigned, pledged or hypothecated in any way
(whether by operation of law or otherwise) and shall not be subject to
execution, attachment or similar process. Any attempted transfer, assignment,
pledge, hypothecation or other disposition of the Option or of any rights
granted
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hereunder contrary to the provisions of this Paragraph 9, or the levy of any
attachment or similar process upon the Option or such rights shall be null and
void. 10. NO RIGHTS AS STOCKHOLDER UNTIL EXERCISE. The
Participant shall have no rights as a stockholder with respect to Shares subject
to this Agreement until the issuance of the Shares. Except as is expressly
provided in the Plan with respect to certain changes in the capitalization of
the Company, no adjustment shall be made for dividends or similar rights for
which the record date is prior to the date of such registration. 11.
CAPITAL CHANGES AND BUSINESS SUCCESSIONS. The Plan contains provisions
covering the treatment of Options in a number of contingencies such as stock
splits and mergers. Provisions in the Plan for adjustment with respect to Shares
subject to the Option and the related provisions with respect to successors to
the business of the Company are hereby made applicable hereunder and are
incorporated herein by reference. 12. TAXES. Upon exercise of
the Option, the Participant shall be required to pay to the Company the amount
of any applicable federal, state and local withholding taxes due as a result of
such exercise. The Participant agrees that the Company may withhold from the
Participant’s remuneration, if any, the appropriate amount of federal, state and
local withholding attributable to such amount that the Company believes it is
obligated to withhold under the Code, including, but not limited to, income and
employment taxes. Subject to the right of the Committee to disapprove any such
election and require the Participant to pay the required withholding taxes in
cash, the Participant shall have the right to elect to pay the withholding taxes
with Shares to be received upon exercise of the Option, in accordance with
procedures to be established by the Committee. Unless the Company shall permit
another valuation method to be elected by the Participant, Shares used to pay
any required withholding tax shall be valued at the closing price of a Share as
reported on the New York Stock Exchange Composite Tape on the date the
withholding tax becomes due. Any election to pay withholding taxes with Shares
must be made on or prior to the date the withholding tax becomes due and shall
be irrevocable once made. Any such election must be in conformity with the
conditions established by the Company from time to time. The Participant further
agrees that, if the Company does not withhold an amount from the Participant’s
remuneration sufficient to satisfy the Company’s income tax withholding
obligation, the Participant shall reimburse the Company, in cash, for the amount
under-withheld within thirty (30) days after the Company has given the
Participant notice of such under-withheld amount. 13. NO OBLIGATION
TO MAINTAIN RELATIONSHIP OR GRANT OPTIONS. The Company is not by the Plan or
this Option obligated to continue the Participant as an employee, director or
consultant of the Company. The Participant also agrees and acknowledges that
grants of Options under the Plan are
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discretionary and any grant of Options under the Plan does not imply any
obligation on the part of the Company to make any future option grants.
14. NOTICES. Any notices required or permitted by the terms of
this Agreement or the Plan shall be given by recognized courier service,
facsimile, registered or certified mail, return receipt requested, addressed as
follows:
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If to the Company: |
Time Warner Inc. |
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If to the Participant: |
at the most recent address information set forth in the Company’s records; |
or such other address or addresses of which notice in the same manner has
previously been given. Any such notice shall be deemed to have been given upon
the earlier of the receipt, one business day following delivery to a nationally
recognized overnight courier service or three business days following mailing by
registered or certified mail. 15. GOVERNING LAW; SUBMISSION TO
JURISDICTION. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to its
principles of conflicts of laws. The parties further agree that any and all
disputes related to the subject matter of this Agreement shall be brought only
in a state or federal court of competent jurisdiction sitting in Manhattan, New
York, and the parties hereby irrevocably submit to the jurisdiction of any such
court and irrevocably agree that venue for any such action shall be only in any
such court. 16. BENEFIT OF AGREEMENT. Subject to the provisions
of the Plan and the other provisions hereof, this Agreement shall be for the
benefit of and shall be binding upon the heirs, executors, administrators,
successors and assigns of the parties hereto. 17. ENTIRE
AGREEMENT. This Agreement, together with the Notice and the Plan, embodies
the entire agreement and understanding between the parties hereto with respect
to the subject matter hereof and supersedes all prior oral or written agreements
and understandings relating to the subject matter hereof. No statement,
representation, warranty, covenant or agreement not expressly set forth in this
Agreement or the Notice shall affect or be used to interpret, change or
restrict, the express terms and provisions of this Agreement or the Notice;
provided, that this Agreement and the Notice shall be subject to and
governed by the Plan, and in the event of any inconsistency between the
provisions of this Agreement or the Notice and the provisions of the Plan, the
provisions of the Plan shall govern.
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18. MODIFICATIONS AND AMENDMENTS. The terms and provisions
of this Agreement and the Notice may be modified or amended as provided in the
Plan. 19. WAIVERS AND CONSENTS. Except as provided in the Plan,
the terms and provisions of this Agreement and the Notice may be waived, or
consent for the departure therefrom granted, only by a written document executed
by the party entitled to the benefits of such terms or provisions. No such
waiver or consent shall be deemed to be or shall constitute a waiver or consent
with respect to any other terms or provisions of this Agreement or the Notice,
whether or not similar. Each such waiver or consent shall be effective only in
the specific instance and for the purpose for which it was given, and shall not
constitute a continuing waiver or consent. 20. REFORMATION;
SEVERABILITY. If any provision of this Agreement or the Notice (including
any provision of the Plan that is incorporated herein by reference) shall
hereafter be held to be invalid, unenforceable or illegal, in whole or in part,
in any jurisdiction under any circumstances for any reason, (i) such provision
shall be reformed to the minimum extent necessary to cause such provision to be
valid, enforceable and legal while preserving the intent of the parties as
expressed in, and the benefits of the parties provided by, this Agreement, the
Notice and the Plan or (ii) if such provision cannot be so reformed, such
provision shall be severed from this Agreement or the Notice and an equitable
adjustment shall be made to this Agreement or the Notice (including, without
limitation, addition of necessary further provisions) so as to give effect to
the intent as so expressed and the benefits so provided. Such holding shall not
affect or impair the validity, enforceability or legality of such provision in
any other jurisdiction or under any other circumstances. Neither such holding
nor such reformation or severance shall affect the legality, validity or
enforceability of any other provision of this Agreement, the Notice or the Plan.
21. ENTRY INTO FORCE. By entering into this Agreement, the
Participant agrees and acknowledges that the Participant has received and read a
copy of the Plan. This Agreement shall not constitute a valid and binding
obligation of the Company to the Participant until signed or electronically
acknowledged and agreed to by the Participant. The Participant acknowledges and
agrees that the Participant may be entitled from time to time to receive certain
other documents related to the Company, including the Company’s annual report to
stockholders and proxy statement related to its annual meeting of stockholders
(which become available each year approximately three months after the end of
the calendar year), and the Participant consents to receive such documents
electronically through the Internet or as the Company otherwise directs.
22. DEFINED TERMS. Any terms used but not defined herein shall
have the meanings given to such terms in the Plan.
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