<PAGE>   1
                                                                    EXHIBIT 10.4

                                                              As Amended through
                                                               November 19, 1998

                                TIME WARNER INC.
                             1994 STOCK OPTION PLAN

1. PURPOSE OF THE PLAN

      The purpose of the Time Warner Inc. 1994 Stock Option Plan (hereinafter
the "Plan") is to provide for the granting of nonqualified stock options and
stock appreciation rights to certain employees of and consultants and advisors
to Time Warner Inc. and its Subsidiaries in recognition of the valuable services
provided, and contemplated to be provided, by such employees, consultants and
advisors. The general purpose of the Plan is to promote the interests of Time
Warner and its stockholders and to reward dedicated employees, consultants and
advisors of Time Warner and its Subsidiaries by providing them additional
incentives to continue and increase their efforts with respect to, and to remain
in the employ of, Time Warner or its Subsidiaries. This plan is being adopted in
connection with the development of an overall long-term compensation program for
Time Warner and its Subsidiaries.

2. CERTAIN DEFINITIONS

      The following terms (whether used in the singular or plural) have the
meanings indicated when used in the Plan:

            (a) "Agreement" means the stock option agreement and stock
      appreciation rights agreement specified in Section 12, both individually
      and collectively, as the context so requires.

            (b) "Approved Transaction" means any transaction in which the Board
      (or, if approval of the Board is not required as a matter of law, the
      stockholders of Time Warner) shall approve (i) any consolidation or merger
      of Time Warner in which Time Warner is not the continuing or surviving
      corporation or pursuant to which shares of Common Stock would be converted
      into cash, securities or other property, other than a merger of Time
      Warner (x) as contemplated in the Amended and Restated Agreement and Plan
      of Merger dated as of September 22, 1995 among Time Warner Inc., TW Inc.,
      Time Warner Acquisition Corp., TW Acquisition Corp. and Turner
      Broadcasting System, Inc., as 
<PAGE>   2

      the same may be amended from time to time, or (y) in which the holders of
      Common Stock immediately prior to the merger have the same proportionate
      ownership of common stock of the surviving corporation immediately after
      the merger, or (ii) any sale, lease, exchange, or other transfer (in one
      transaction or a series of related transactions) of all, or substantially
      all, of the assets of Time Warner, or (iii) the adoption of any plan or
      proposal for the liquidation or dissolution of Time Warner.

            (c) "Award" means grants of Options and/or SARs under this Plan.

            (d) "Board" means the Board of Directors of Time Warner.

            (e) "Board Change" means, during any period of two consecutive
      years, individuals who at the beginning of such period constituted the
      entire Board ceased for any reason to constitute a majority thereof unless
      the election, or the nomination for election by Time Warner's
      stockholders, of each new director was approved by a vote of at least
      two-thirds of the directors then still in office who were directors at the
      beginning of the period.

            (f) "Code" means the Internal Revenue Code of 1986, as amended from
      time to time, or any successor statute or statutes thereto. Reference to
      any specific Code section shall include any successor section.

            (g) "Committee" means the Committee comprised of members of the
      Board appointed pursuant to Section 4.

            (h) "Common Stock" means the common stock, par value $.01 per share,
      of Time Warner.

            (i) "Composite Tape" means the New York Stock Exchange Composite
      Tape.

            (j) "Control Purchase" means any transaction in which any person (as
      such term is defined in Sections 13(d)(3) and 14(d)(2) of the Exchange
      Act), corporation or other entity (other than Time Warner or any employee
      benefit plan sponsored by Time Warner or any of its Subsidiaries) (i)
      shall purchase any Common Stock (or securities convertible into Common
      Stock) for cash, 


                                       2
<PAGE>   3

      securities or any other consideration pursuant to a tender offer or
      exchange offer, without the prior consent of the Board, or (ii) shall
      become the "beneficial owner" (as such term is defined in Rule 13d-3 under
      the Exchange Act), directly or indirectly, of securities of Time Warner
      representing 20% or more of the combined voting power of the then
      outstanding securities of Time Warner ordinarily (and apart from the
      rights accruing under special circumstances) having the right to vote in
      the election of directors (calculated as provided in Rule 13d-3(d) in the
      case of rights to acquire Time Warner's securities).

            (k) "Effective Date" means the date the Plan becomes effective
      pursuant to Section 15.

            (l) "Exchange Act" means the Securities Exchange Act of 1934, as
      amended from time to time, or any successor statute or statutes thereto.
      Reference to any specific Exchange Act section shall include any successor
      section.

            (m) "Fair Market Value" of a share of Common Stock means the average
      of the high and low sales prices of a share of Common Stock on the
      Composite Tape on the date in question, except as otherwise provided in
      Section 6.5.

            (n) "General SARs" means stock appreciation rights subject to the
      terms of Section 6.5(b).

            (o) "Holder" means an employee of or a consultant or advisor to Time
      Warner or any of its Subsidiaries who has received an Award under this
      Plan.

            (p) "Limited SARs" means stock appreciation rights subject to the
      terms of Section 6.5(c).

            (q) "Minimum Price Per Share" means the highest gross price (before
      brokerage commissions, soliciting dealers' fees and similar charges) paid
      or to be paid for any share of Common Stock (whether by way of exchange,
      conversion, distribution, liquidation or otherwise) in, or in connection
      with, any Approved Transaction or Control Purchase which occurs at any
      time during the period beginning on the sixtieth day prior to the date on
      which Limited SARs are exercised and ending on the date on which Limited
      SARs are exercised. If the consideration paid or to be paid in any such
      Approved Transaction or Control Purchase shall consist, in whole or in
      part, of 


                                       3
<PAGE>   4

      consideration other than cash, the Board shall take such action, as in its
      judgment it deems appropriate, to establish the cash value of such
      consideration, but such valuation shall not be less than the value, if
      any, attributed to such consideration by any other party to such Approved
      Transaction or Control Purchase.

            (r) "Option" means any nonqualified stock option granted pursuant to
      this Plan.

            (s) "Plan" has the meaning ascribed thereto in Section 1.

            (t) "SARs" means General SARs and Limited SARs.

            (u) "SEC" means the Securities and Exchange Commission.

            (v) "Subsidiary" of a person means any present or future subsidiary
      of such person as such term is defined in section 425 of the Code and any
      present or future trade or business, whether or not incorporated,
      controlled by or under common control with such person. An entity shall be
      deemed a Subsidiary of a person only for such periods as the requisite
      ownership or control relationship is maintained.

            (w) "Time Warner" means Time Warner Inc., a Delaware corporation,
      and any successor thereto.

            (x) "Total Disability" means a permanent and total disability as
      defined in section 22(e)(3) of the Code.

3. STOCK SUBJECT TO THE PLAN

      3.1. Number of Shares. Subject to the provisions of Section 12 and this
Section 3, the maximum number of shares of Common Stock in respect of which
Awards may be granted is the sum of (a) 1.5% (one and one-half percent) of the
number of shares of Common Stock outstanding on December 31, 1993, (b) 1.25%
(one and one-quarter percent) of the number of shares of Common Stock
outstanding on December 31, 1994, (c) 1% (one percent) of the number of shares
of Common Stock outstanding on December 31, 1995, (d) 1.2% (one and two-tenths
percent) of the aggregate number of shares of Common Stock and Series LMCN-V
Common Stock, par value $.01 per share, outstanding on December 


                                       4
<PAGE>   5

31, 1996, (e) 1.4% (one and four-tenths percent) of the aggregate number of
shares of Common Stock and Series LMCN-V Common Stock, par value $.01 per share,
outstanding on December 31, 1997, (f) 1.05% (one and five-hundredths percent) of
the aggregate number of shares of Common Stock (including Series LMCN-V Common
Stock, par value $.01 per share, as if converted to Common Stock) outstanding on
December 31, 1998 and (g) two million. If and to the extent that an Option shall
expire, terminate or be canceled for any reason without having been exercised
(or without having been considered to have been exercised as provided in Section
6.5(a)), the shares of Common Stock subject to such expired, terminated or
canceled portion of the Option shall again become available for purposes of the
Plan.

      3.2. Character of Shares. Shares of Common Stock deliverable under the
terms of the Plan may be, in whole or in part, authorized and unissued shares of
Common Stock or issued shares of Common Stock held in Time Warner's treasury, or
both.

      3.3. Reservation of Shares. Time Warner shall at all times reserve a
number of shares of Common Stock (authorized and unissued Common Stock, issued
Common Stock held in Time Warner's treasury, or both) equal to the maximum
number of shares that may be subject to outstanding Awards and future Awards
under the Plan.

4. ADMINISTRATION

      4.1. Powers. The Plan shall be administered by the Board. Subject to the
express provisions of the Plan, the Board shall have plenary authority, in its
discretion, to grant Awards under the Plan and to determine the terms and
conditions (which need not be identical) of all Awards so granted, including
without limitation, (a) the individuals to whom, and the time or times at which,
Awards shall be granted or awarded, (b) the number of shares to be subject to
each Award, (c) when an Option or SAR can be exercised and whether in whole or
in installments, and (d) the form, terms and provisions of any Agreement (which
terms may be amended, subject to Section 14).

      4.2. Factors to Consider. In making determinations hereunder, the Board
may take into account the nature of the services rendered by the respective
employees, consultants or advisors, their dedication and past contributions to
Time Warner and its Subsidiaries, their present and potential 


                                       5
<PAGE>   6

contributions to the success of Time Warner and its Subsidiaries and such other
factors as the Board in its discretion shall deem relevant.

      4.3. Interpretation. Subject to the express provisions of the Plan, the
Board shall have plenary authority to interpret the Plan, to prescribe, amend
and rescind the rules and regulations relating to it and to make all other
determinations deemed necessary or advisable for the administration of the Plan.
The determinations of the Board on the matters referred to in this Section 4
shall be conclusive.

      4.4. Delegation to Committee. Notwithstanding anything to the contrary
contained herein, the Board may at any time, or from time to time, appoint a
Committee and delegate to such Committee the authority of the Board to
administer the Plan, including to the extent provided by the Board, the power to
further delegate such authority. Upon such appointment and delegation, any such
Committee shall have all the powers, privileges and duties of the Board in the
administration of the Plan to the extent provided in such delegation, except for
the power to appoint members of the Committee and to terminate, modify or amend
the Plan. The Board may from time to time appoint members of any such Committee
in substitution for or in addition to members previously appointed, may fill
vacancies in such Committee and may discharge such Committee.

      Any such Committee shall select one of its members as its chairman and
shall hold its meetings at such times and places as it shall deem advisable. A
majority of members shall constitute a quorum and all determinations shall be
made by a majority of such quorum. Any determination reduced to writing and
signed by all of the members shall be fully as effective as if it had been made
by a majority vote at a meeting duly called and held.

5. ELIGIBILITY

      Awards may be made only to (a) employees of Time Warner or any of its
Subsidiaries (including officers and directors of any of Time Warner's
Subsidiaries), other than officers or directors of Time Warner who are subject
to Section 16 of the Exchange Act, (b) prospective employees of Time Warner or
any of its Subsidiaries and (c) consultants or advisors to Time Warner or any of
its Subsidiaries. The exercise of Options and SARs granted to a prospective
employee shall be conditioned 


                                       6
<PAGE>   7

upon such person becoming an employee of Time Warner or any of its Subsidiaries.
For purposes of the Plan, the term "prospective employee" shall mean any person
who holds an outstanding offer of employment on specific terms from Time Warner
or any of its Subsidiaries. Awards may be made to employees, consultants and
advisors who hold or have held Awards under this Plan or any similar or other
awards under any other plan of Time Warner or its Subsidiaries.

6. OPTIONS AND SARS

      6.1. Option Prices. Subject to Section 5.2, the purchase price of the
Common Stock under each Option shall be determined by the Board and set forth in
the applicable Agreement, but shall not be less than 100% of the Fair Market
Value of the Common Stock on the date of grant.

      6.2. Term of Options. The term of each Option shall be for such period as
the Board shall determine, as set forth in the applicable Agreement.

      6.3. Exercise of Options. An Option granted under the Plan shall become
(and remain) exercisable during the term of the Option to the extent provided in
the applicable Agreement and this Plan and, unless the Agreement otherwise
provides, may be exercised to the extent exercisable, in whole or in part, at
any time and from time to time during such term; provided, however, that
subsequent to the grant of an Option, the Board, at any time before complete
termination of such Option, may accelerate the time or times at which such
Option may be exercised in whole or in part (without reducing the term of such
Option). The Agreement may contain conditions precedent to the exercisability of
Options, including without limitation, the achievement of minimum performance
criteria.

      6.4. Manner of Exercise. Payment of the Option purchase price shall be
made in cash or in whole shares of Common Stock already owned by the person
exercising an Option or, partly in cash and partly in such Common Stock;
provided, however, that such payment may be made in whole or in part in shares
of Common Stock only if and to the extent permitted by the applicable Agreement.
An Option shall be exercised by written notice to Time Warner upon such terms
and conditions as provided in the Agreement. Time Warner shall effect the
transfer of the shares of Common Stock purchased under the Option as soon as
practicable, and within a reasonable time 


                                       7
<PAGE>   8

thereafter such transfer shall be evidenced on the books of Time Warner. No
Holder or other person exercising an Option shall have any of the rights of a
stockholder of Time Warner with respect to shares of Common Stock subject to an
Option granted under the Plan until due exercise and full payment has been made.
No adjustment shall be made for cash dividends or other rights for which the
record date is prior to the date of such due exercise and full payment.

      6.5. SARs. (a) General Conditions. The Board may (but shall not be
obligated to) grant General SARs and/or Limited SARs pursuant to the provisions
of this Section 6.5 to a Holder of any Option (hereinafter called a "related
Option"), with respect to all or a portion of the shares of Common Stock subject
to the related Option.

      A SAR may be granted either concurrently with the grant of the related
Option or at any time thereafter prior to the complete exercise, termination,
expiration or cancellation of such related Option. Subject to the terms and
provisions of this Section 6.5, each SAR shall be exercisable to the extent the
related Option is then exercisable (and may be subject to such additional
limitations on exercisability as the Agreement may provide), and in no event
after the complete termination or full exercise of the related Option. SARs
shall be exercisable in whole or in part upon notice to Time Warner upon such
terms and conditions as provided in the Agreement.

      Upon the exercise of SARs, the related Option shall be considered to have
been exercised to the extent of the number of shares of Common Stock with
respect to which such SARs are exercised and shall be considered to have been
exercised to that extent for purposes of determining the number of shares of
Common Stock in respect of which other Awards may be granted. Upon the exercise
or termination of the related Option, the SARs with respect thereto shall be
considered to have been exercised or terminated to the extent of the number of
shares of Common Stock with respect to which the related Option was so exercised
or terminated.

      The provisions of Sections 4 and 6 through 21 (to the extent that such
provisions are applicable to Options) shall also be applicable to SARs unless
the context otherwise requires.

      (b) General SARs. General SARs shall be exercisable only at the time the
related Option is exercisable and subject to 


                                       8
<PAGE>   9

the terms and provisions of this Section 6.5, upon the exercise of General SARs,
the person exercising the General SAR shall be entitled to receive consideration
(in the form hereinafter provided) equal in value to the excess of the Fair
Market Value on the date of exercise of the shares of Common Stock with respect
to which such General SARs have been exercised over the aggregate related Option
purchase price for such shares; provided, however, that the Board may, in any
Agreement granting General SARs provide that the appreciation realizable upon
exercise thereof shall be measured from a base higher than the related Option
purchase price.

      Upon the exercise of a General SAR, the person exercising the General SAR
may specify the form of consideration to be received by such person exercising
the General SAR, which shall be in shares of Common Stock (valued at Fair Market
Value on the date of exercise of such General SAR), or in cash, or partly in
cash and partly in shares of Common Stock. Any election by the person exercising
the General SAR to receive cash in full or partial settlement of such General
SAR shall comply with all applicable laws and shall be subject to the discretion
of the Board to settle General SARs only in shares of Common Stock if necessary
or advisable in the judgment of the Board to preserve pooling of interests
accounting treatment for any proposed transaction involving the Company. Unless
otherwise specified in the applicable Agreement, the number of General SARs
which may be exercised for cash, or partly for cash and partly for shares of
Common Stock, during any calendar quarter, may not exceed 20% of the aggregate
number of shares of Common Stock originally subject to the related Option (as
such original number, without giving effect to the exercise of any portion of
the related Option, shall have been retroactively adjusted in accordance with
Section 13 or any corresponding provisions of an applicable Agreement).

      For purposes of this Section 6.5, the date of exercise of a General SAR
shall mean the date on which Time Warner shall have received notice from the
person exercising the General SAR of the exercise of such General SAR.

      (c) Limited SARs. Limited SARs may be exercised only during the period (a)
beginning on the first day following either (i) the date of an Approved
Transaction, (ii) the date of a Control Purchase, or (iii) the date of a Board
Change, and (b) ending on the ninetieth day (or such other date specified in the
Agreement) following such date. The effective date of exercise of a Limited SAR
shall be deemed to be the date on 


                                       9
<PAGE>   10

which Time Warner shall have received notice from the person exercising the
Limited SAR of the exercise thereof.

      Upon the exercise of Limited SARs granted in connection with an Option,
except as otherwise provided in the Agreement and the immediately succeeding
sentence, the person exercising the Limited SAR shall receive in cash an amount
equal to the product computed by multiplying (a) the excess of (i) the higher of
(A) the Minimum Price Per Share, or (B) the highest reported closing sales price
of a share of Common Stock as reported on the Composite Tape at any time during
the period beginning on the sixtieth day prior to the date on which such Limited
SARs are exercised and ending on the date on which such Limited SARs are
exercised over (ii) the per share Option price of the related Nonqualified Stock
Option, by (b) the number of shares of Common Stock with respect to which such
Limited SARs are being exercised. The Board shall have the discretion to settle
Limited SARs by the delivery of Common Stock rather than cash if in the judgment
of the Board such action is necessary or advisable to preserve pooling of
interests accounting treatment for any proposed transaction involving the
Company.

      6.6. Limited Transferability of Options and SARs. Except as set forth in
this Section 6.6 and Section 22, Options and SARs shall not be transferable
other than by will or the laws of descent and distribution, and Options and SARs
may be exercised during the lifetime of the Holder thereof only by such Holder
(or his or her court appointed legal representative). The Agreement may provide
that Options and SARs are transferable by gift to such persons or entities and
upon such terms and conditions specified in the Agreement.

7. ACCELERATION OF OPTIONS AND SARS

      If a Holder's employment shall terminate by reason of death or Total
Disability, notwithstanding any contrary waiting period or installment period in
any Agreement or in the Plan or in the event of any Approved Transaction, Board
Change or Control Purchase, unless the applicable Agreement provides otherwise,
each outstanding Option or SAR granted under the Plan shall immediately become
exercisable in full in respect of the aggregate number of shares covered
thereby.


                                       10
<PAGE>   11

8. TERMINATION OF EMPLOYMENT

      8.1. General. If a Holder's employment shall terminate prior to the
complete exercise of an Option (or deemed exercise thereof, as provided in
Section 6.5(a)), then such Option shall thereafter be exercisable solely to the
extent provided in the applicable Agreement; provided, however, that (a) no
Option may be exercised after the scheduled expiration date of such Option; (b)
if the Holder's employment terminates by reason of death or Total Disability,
the Option shall remain exercisable for a period of at least one year following
such termination (but not later than the scheduled expiration of such Option);
and (c) any termination by the employing company for cause will be treated in
accordance with the provisions of Section 8.2.

      8.2. Termination for Cause. If a Holder's employment with Time Warner or
any of its Subsidiaries shall be terminated by Time Warner or such Subsidiary
prior to the exercise of any Option for cause (for these purposes, cause shall
have the meaning ascribed thereto in any employment agreement to which such
Holder is a party or, in the absence thereof, shall include but not be limited
to, insubordination, dishonesty, incompetence, moral turpitude, other misconduct
of any kind and the refusal to perform his duties and responsibilities for any
reason other than illness or incapacity; provided, however, that if such
termination occurs within 12 months after an Approved Transaction, Control
Purchase or Board Change, termination for cause shall mean only a felony
conviction for fraud, misappropriation or embezzlement), then all Options held
by such Holder and any permitted transferee pursuant to Section 6.6 shall
immediately terminate.

      8.3. Special Rule. Notwithstanding any other provision of the Plan, the
Board may provide in the applicable Agreement that the Award shall become and/or
remain exercisable at rates and times at variance with the rules otherwise
herein set forth; provided, however, that any such Agreement provisions at
variance with the exercisability rules otherwise set forth herein shall be
effective only if reflected in the terms of an employment agreement approved or
ratified by the Board.

      8.4. Miscellaneous. The Board may determine whether any given leave of
absence constitutes a termination of employment. Awards made under the Plan
shall not be affected by any change of employment so long as the Holder
continues to be an employee of Time Warner or one of its Subsidiaries.


                                       11
<PAGE>   12

9. RIGHT OF COMPANY TO TERMINATE EMPLOYMENT

      Nothing contained in the Plan or in any Award shall confer on any Holder
any right to continue in the employ of Time Warner or any of its Subsidiaries or
interfere in any way with the right of Time Warner or a Subsidiary to terminate
the employment of the Holder at any time, with or without cause; subject,
however, to the provisions of any employment agreement between the Holder and
Time Warner or any of its Subsidiaries.

10. NONALIENATION OF BENEFITS

      Except as specifically provided in Section 6.6, no right or benefit under
the Plan shall be subject to anticipation, alienation, sale, assignment,
hypothecation, pledge, exchange, transfer, encumbrance or charge, and any
attempt to anticipate, alienate, sell, assign, hypothecate, pledge, exchange,
transfer, encumber or charge the same shall be void. No right or benefit
hereunder shall in any manner be liable for or subject to the debts, contracts,
liabilities or torts of the person entitled to such benefits.

11. WRITTEN AGREEMENT

      Each grant of an Option shall be evidenced by a stock option agreement and
each SAR shall be evidenced by a stock appreciation rights agreement, each in
such form and containing such terms and provisions not inconsistent with the
provisions of the Plan as the Board from time to time shall approve; provided,
however, that such Awards may be evidenced by a single agreement. The effective
date of the granting of an Award shall be the date on which the Board approves
such grant. Each grantee of an Option or SAR shall be notified promptly of such
grant and a written Agreement shall be promptly executed and delivered by Time
Warner and the grantee, provided that such grant of Options or SARs shall
terminate if such written Agreement is not signed by such grantee (or his
attorney) and delivered to Time Warner within 90 days after the date the
Agreement is sent to such grantee for signature. Any such written Agreement may
contain (but shall not be required to contain) such provisions as the Board
deems appropriate to ensure that the penalty provisions of section 4999 of the
Code will not apply to any stock or cash received by the Holder or 


                                       12
<PAGE>   13

such Holder's permitted transferee pursuant to Section 6.6 from Time Warner or
any of its Subsidiaries.

12. ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC.

      In the event of any stock split, dividend, distribution, combination,
reclassification or recapitalization that changes the character or amount of the
Common Stock while any portion of any Award theretofore granted under the Plan
is outstanding but unexercised, the Board shall make such adjustments in the
character and number of shares subject to such Award and, in the option price,
as shall be applicable, equitable and appropriate in order to make such Award,
immediately after any such change, as nearly as may be practicable, equivalent
to such Award, immediately prior to any such change. If any merger,
consolidation or similar transaction affects the Common Stock subject to any
unexercised Award theretofore granted under the Plan, the Board or any surviving
or acquiring corporation shall take such action as is equitable and appropriate
to substitute a new award for such Award or to assume such Award in order to
make such new or assumed Award, as nearly as may be practicable, equivalent to
the old Award. If any such change or transaction shall occur, the number and
kind of shares for which Awards may thereafter be granted under the Plan shall
be adjusted to give effect thereto.

13. RIGHT OF FIRST REFUSAL

      The Agreements may contain such provisions as the Board shall determine to
the effect that if a Holder, or such other person exercising an Option, elects
to sell all or any shares of Common Stock that such Holder or other person
acquired upon the exercise of an Option awarded under the Plan, then such Holder
or other person shall not sell such shares unless such Holder or other person
shall have first offered in writing to sell such shares to Time Warner at Fair
Market Value on a date specified in such offer (which date shall be at least
three business days and not more than 10 business days following the date of
such offer). In any such event, certificates representing shares issued upon
exercise of Options shall bear a restrictive legend to the effect that
transferability of such shares are subject to the restrictions contained in the
Plan and the applicable Agreement and Time Warner may cause the registrar of its
Common Stock to place a stop transfer order 


                                       13
<PAGE>   14

with respect to such shares.

14. TERMINATION AND AMENDMENT

      14.1. General. Unless the Plan shall theretofore have been terminated as
hereinafter provided, no Awards may be made under the Plan on or after the tenth
anniversary of the Effective Date. The Board may at any time prior to the tenth
anniversary of the Effective Date terminate the Plan, and the Board may at any
time modify or amend the Plan in such respects as it shall deem advisable;
provided, however, that any such modification or amendment shall comply with all
applicable laws and stock exchange listing requirements.

      14.2. Modification. No termination, modification or amendment of the Plan
may, without the consent of the person to whom any Award shall theretofore have
been granted (or a transferee of such person if the Award, or any part thereof,
has been transferred pursuant to Section 6.6), adversely affect the rights of
such person with respect to such Award. No modification, extension, renewal or
other change in any Award granted under the Plan shall be made after the grant
of such Award, unless the same is consistent with the provisions of the Plan.
With the consent of the Holder (or a transferee of such Holder if the Award, or
any part thereof, has been transferred pursuant to Section 6.6) and subject to
the terms and conditions of the Plan (including Section 14.1), the Board may
amend outstanding Agreements with any Holder (or any such transferee),
including, without limitation, any amendment which would (a) accelerate the time
or times at which the Award may be exercised and/or (b) extend the scheduled
expiration date of the Award. Without limiting the generality of the foregoing,
the Board may but solely with the Holder's consent, agree to cancel any Award
under the Plan held by such Holder and issue a new Award in substitution
therefor, provided that the Award so substituted shall satisfy all of the
requirements of the Plan as of the date such new Award is made.

15. EFFECTIVENESS OF THE PLAN

      The Plan shall become effective upon approval by the Board of Directors of
Time Warner.


                                       14
<PAGE>   15

16. GOVERNMENT AND OTHER REGULATIONS

      The obligation of Time Warner with respect to Awards shall be subject to
all applicable laws, rules and regulations and such approvals by any
governmental agencies as may be required, including, without limitation, the
effectiveness of any registration statement required under the Securities Act of
1933, and the rules and regulations of any securities exchange on which the
Common Stock may be listed. For so long as the Common Stock is registered under
the Exchange Act, Time Warner shall use its reasonable efforts to comply with
any legal requirements (a) to maintain a registration statement in effect under
the Securities Act of 1933 with respect to all shares of Common Stock that may
be issued to Holders under the Plan, and (b) to file in a timely manner all
reports required to be filed by it under the Exchange Act.

17. WITHHOLDING

      Time Warner's obligation to deliver shares of Common Stock or pay cash in
respect of any Award under the Plan shall be subject to applicable federal,
state and local tax withholding requirements. Federal, state and local
withholding taxes paid upon the exercise of any Option may be paid in shares of
Common Stock upon such terms and conditions as the Board shall determine;
provided, however, that the Board in its sole discretion may disapprove such
payment and require that such taxes be paid in cash.

18. SEPARABILITY

      If any of the terms or provisions of this Plan conflict with the
requirements of applicable law, then such terms or provisions shall be deemed
inoperative to the extent necessary to avoid the conflict with applicable law
without invalidating the remaining provisions hereof.

19. NON-EXCLUSIVITY OF THE PLAN

      The adoption of the Plan by the Board shall not be construed as creating
any limitations on the power of the Board to adopt such other incentive
arrangements as it may deem 


                                       15
<PAGE>   16

desirable, including, without limitation, the granting of stock options and the
awarding of stock and cash otherwise than under the Plan, and such arrangements
may be either generally applicable or applicable only in specific cases.

20. EXCLUSION FROM PENSION AND PROFIT-SHARING COMPUTATION

      By acceptance of an Award, each Holder shall be deemed to have agreed that
such Award is special incentive compensation that will not be taken into
account, in any manner, as salary, compensation or bonus in determining the
amount of any payment under any pension, retirement or other employee benefit
plan of Time Warner or any of its Subsidiaries. In addition, each beneficiary of
a deceased Holder shall be deemed to have agreed that such Award will not affect
the amount of any life insurance coverage, if any, provided by Time Warner or
any of its Subsidiaries on the life of the Holder which is payable to such
beneficiary under any life insurance plan covering employees of Time Warner or
any of its Subsidiaries.

21. GOVERNING LAW

      The Plan shall be governed by, and construed in accordance with, the laws
of the State of New York.

22. BENEFICIARIES

      Each Holder may designate any person(s) or legal entity(ies), including
his or her estate, as his or her beneficiary under the Plan. Such designation
shall be made in writing on a form filed with the Secretary of Time Warner or
his or her designee and may be revoked or changed by such Holder at any time by
filing written notice of such revocation or change with the Secretary of Time
Warner or his or her designee. If no person shall be designated by a Holder as
his or her beneficiary or if no person designated as a beneficiary survives such
Holder, the Holder's beneficiary shall be his or her estate.


                                       16