Exhibit 10.40


 


 


[RESTRICTED STOCK AWARDS]


 


 


As of January
28, 2005


 


WMG Parent Corp.


75 Rockefeller Plaza


New York, New York 10019


 


Ladies and Gentlemen:


 


Reference is
made to the Restricted Stock Award Agreement, dated as of January 28, 2005 (the
“Award Agreement”), by and between WMG Parent Corp. (“Parent”)
and the undersigned (the “Executive”), pursuant to which Parent issued
and sold, upon the terms and subject to the conditions set forth therein, the “Restricted
Shares” (as defined therein) to the Executive.


 


In connection
with the execution and delivery of the Award Agreement, the Executive was
provided with a copy of the Stockholders Agreement, dated as of February 29,
2004 (as amended, supplemented or otherwise modified from time to time, the “Stockholders
Agreement”), by and among Parent, WMG Holdings Corp., WMG Acquisition Corp.
and certain stockholders of Parent and WMG Holdings Corp.


 


The Executive
hereby acknowledges and agrees to be bound by the terms and conditions of, and
shall be entitled to enforce, the Stockholders Agreement to the extent of, and
in the capacity as, a “Manager” thereunder, other than as explicitly stated in
the Award Agreement. The Executive further acknowledges and agrees that this
letter shall be deemed to be an execution of the Stockholders Agreement for
purposes of the Award Agreement.


 


Except for the
parties from time to time to the Stockholders Agreement, this letter is not
intended to and does not confer upon any person other than the parties hereto
any rights, claims or remedies hereunder. Without the prior written consent of
each other party hereto or as provided in the Stockholders Agreement, none of
the parties hereto may assign any of its rights or delegate any of its
obligations under this letter. Any purported assignment or delegation in
violation of this provision shall be void.


 


This letter
and all claims arising out of or based upon this letter or relating to the
subject matter hereof shall be governed by and construed in accordance with the
domestic substantive laws of the State of Delaware without giving effect to any
choice or conflict of law provision or rule that would cause the application of
the domestic substantive laws of any other jurisdiction.


 





















 


This letter
may be executed in counterparts, which, taken together, shall constitute a
single original document.


 


	
   

  	
  Very truly
  yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ David H.
  Johnson

  	
   

  
	
   

  	
  Name: DAVID
  H. JOHNSON

  



 


 


ACKNOWLEDGED AND AGREED:


 




	
  WMG PARENT
  CORP.

  
	
   

  
	
   

  
	
  By:

  	
  /s/ [ILLEGIBLE]

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  






 


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RESTRICTED STOCK AWARD AGREEMENT


 


THIS RESTRICTED STOCK AWARD AGREEMENT (this “Agreement”), is entered
into on January 28, 2005, by and between WMG Parent Corp., a Delaware
corporation (“Parent”), and David H. Johnson (the “Executive”).
Capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the “Employment Agreement” (as defined
herein).


 


R  E  C  I
T  A  L  S:


 


WHEREAS, Warner
Music Group Inc., a Delaware corporation (the “Company”), an indirect
majority owned subsidiary of Parent, or one of its direct or indirect
subsidiaries, and the Executive have entered into an employment agreement,
dated as of December 15, 1998 (such employment agreement, as it may be amended,
superceded or replaced from time to time, the “Employment Agreement”);
and


 


WHEREAS, the Board
of Directors of Parent (the “Board”) has determined to sell to the
Executive on the date hereof (the “Effective Date”) the restricted stock
provided for herein (the “Restricted Stock Award”), such sale to be
subject to the terms and conditions set forth herein.


 


NOW THEREFORE, in
consideration of the mutual covenants hereinafter set forth, the parties hereto
agree as follows:


 


1.                                       Purchase
of Restricted Stock. Subject to the terms and conditions set forth in this
Agreement, Parent hereby sells to the Executive, and the Executive hereby
purchases from Parent, effective as of the Effective Date (which is the date
hereof), 104.9382716 shares of Class A Common Stock of Parent (the “Restricted
Shares”) for an aggregate purchase price of $123,722.22. The Board
acknowledges to the Executive that such purchase price is the fair market value
of the Restricted Shares on the Effective Date (the “Initial Value”),
determined without regard to any restrictions applicable thereto other than
restrictions which by their terms do not lapse. The Restricted Shares shall
vest in accordance with Section 2 and Section 5 hereof.


 





















 


2.                                       Vesting.


 


(a)                                  Service-Based
Restricted Stock. Except as otherwise provided in this Agreement, one-third
of the Restricted Shares (the “Service-Based Restricted Stock”), shall
vest and become non-forfeitable in four equal installments on the day prior to
each of the first, second, third and fourth anniversaries of the Vesting Commencement
Date provided that the Executive remains employed with the Company on each such
date, such that one hundred percent (100%) of the Service-Based Restricted Stock
shall be vested and non-forfeitable on the day prior to the fourth anniversary
of the Vesting Commencement Date; provided that any unvested Service-Based
Restricted Stock shall become vested and non-forfeitable upon a termination of
the Executive’s employment with the Company (A) due to his death, (B) by the
Company due to his Disability or without Cause or (C) by the Executive for Good
Reason, in each case on or after a “Change in Control” (as defined in Section
2(b)(iii)(6)) or, in the case of a termination by the Company without Cause or
a termination by the Executive for Good Reason, in anticipation of a Change in
Control (a termination described in the foregoing proviso being referred to
hereinafter as a “CIC Termination”). For purposes of this Agreement, the
“Vesting Commencement Date” shall mean October 1, 2004.


 


(b)                                 Performance-Based
Restricted Stock. Except as otherwise provided in this Agreement,
two-thirds of the Restricted Shares (the “Performance-Based Restricted Stock”)
shall contingently vest in equal installments on the day prior to each of the
first, second, third and fourth anniversary of the Vesting Commencement Date provided
that the Executive remains employed with the Company on each such date (the “Service
Condition”), but shall not be considered to be fully vested until and
unless the condition described in Section 2(b)(i) or 2(b)(ii), as applicable,
has been satisfied (each such condition, a “Performance Condition”).


 


(i)                                     With respect to
one-half of the Performance-Based Restricted Stock, the Performance Condition
shall be the occurrence of a 2X Restricted Stock Liquidity Event.


 


(ii)                                  With respect to the
other one-half of the Performance-Based Restricted Stock, the Performance
Condition shall be the occurrence of a 3X Restricted Stock Liquidity Event.


 


(iii)                               For purposes of this
Section 2(b), and also as and if used elsewhere in this Agreement, the
following terms shall have the following meanings:


 


(1)  “2X
Investor Equity Value” shall mean (X) two times the Investment minus
(Y) the aggregate amount of cash and “Fair Market Value” (as defined below) of
readily marketable securities or other assets (determined at the time of
receipt) received by the Investors in respect of the Investor Equity prior to
or coincident with the time of determination.


 


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(2)                                “3X
Investor Equity Value” shall mean (X) three times the Investment minus
(Y) the aggregate amount of cash and Fair Market Value of readily marketable
securities or other assets (determined at the time of receipt) received by the
Investors in respect of the Investor Equity prior to or coincident with the time
of determination.


 


(3)                                “2X Restricted Stock
Liquidity Event” shall mean (A) the first sale in an underwritten offering
of Parent’s Class A Common Stock pursuant to a registration statement on Securities
and Exchange Commission (“SEC”) Form S-l or otherwise under the
Securities Act of 1933, as amended (the “Securities Act”) (an “IPO”),
at a per share price which implies an aggregate value of the Investor Equity at
the time of the IPO of at least the 2X Investor Equity Value, (B) following an
IPO, or any transaction other than an IPO which causes Parent’s Class A Common
Stock, or all or substantially all of the securities into which such Class A
Common Stock is converted or for which it is exchanged, to be listed for
trading on a national securities exchange or quoted on an automated quotation
system, the average closing price of Parent’s Class A Common Stock, or such securities
into which Class A Common Stock is converted or for which it is exchanged, on
the primary exchange on which, or system over which, it is traded over any 20
consecutive trading days is such that the implied aggregate value of the
Investor Equity at the end of such 20 consecutive trading days, based on such average
price, is at least the 2X Investor Equity Value, determined as of the first of
such 20 consecutive trading days, or (C) a Bonus Liquidity Event occurs which
results in a combination of cash and readily marketable securities being paid
or provided to the Investors having an aggregate value (as determined by the
Board in good faith as of the time of receipt) of at least the 2X Investor Equity
Value.


 


(4)                                “3X Restricted Stock
Liquidity Event” has the same meaning as a 2X Restricted Stock Liquidity
Event, except that the term “2X Investor Equity Value” each time it appears in
Section 2(b)(iii)(3) above shall be replaced with “3X Investor Equity Value.”


 


(5)                                “Bonus Liquidity
Event” shall mean a Change in Control, or other event (e.g., a
leveraged recapitalization in which the proceeds are paid out to the Investors
as dividends and/or redemptions), in which consideration is paid to Investors
in respect of the Investor Equity in the form of cash, readily marketable
securities or a combination of both.


 


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(6)                                “Change in Control”
shall mean a “Change of Control,” as defined in the certificate of
incorporation of Parent, as amended from time to time.


 


(7)                                “Fair Market Value”
shall mean the price at which the asset in question would change hands in an
arms’ length sale between a willing buyer and a willing seller, with neither
being under any compunction to buy or sell and each with full knowledge of all
relevant facts, as determined by the Board in good faith; provided that, in
determining Fair Market Value of the securities of any member of the Parent
Group, the Board shall take into account the free cash flow, revenue and EBITDA
and such other methodologies and characteristics as it may determine to be
relevant, and shall (A) adjust the Fair Market Value of the securities to take
into account the illiquidity of securities which are not publicly traded and
(B) make no adjustment on account of any control premium. Notwithstanding the
above, the Fair Market Value of any freely tradable security which is of a
class listed for trading on an established securities market or established
trading system shall be the average of the high and low trading prices of such
class of securities, as reported on the primary market or trading system on
which such securities are listed on the date Fair Market Value is determined.


 


(8)                                “Investment”
shall mean $1.25 billion.


 


(9)                                “Investor Equity”
shall mean all equity securities of all members of the Parent Group, including
common and preferred stock and warrants, options and other instruments convertible
or exercisable into, or redeemable for, common or preferred stock, either (A)
purchased or otherwise received by the Investors on or prior to the Effective
Date or (B) received by the Investors following the Effective Date, without
cost to the Investors, in respect of the equity securities described in the preceding
clause (A).


 


(10)                          “Investors” shall mean
all of (i) Thomas H. Lee Equity Fund V, L.P., (ii) Thomas H. Lee Parallel Fund
V, L.P., (iii) Thomas H. Lee Equity (Cayman) Fund V, L.P., (iv) Putnam
Investments Holdings, LLC, (v) Putnam Investments Employees’ Securities Company
I LLC, (vi) Putnam Investments Employees’ Securities Company II LLC, (vii) 1997
Thomas H. Lee Nominee Trust, (viii) Thomas H. Lee Investors Limited Partnership,
(ix) Bain Capital Partners Integral Investors, LLC, (x) Bain Capital VII
Coinvestment Fund, LLC, (xi) BCIP TCV, LLC, (xii) Providence Equity Partners
IV, L.P., (xiii) Providence Equity Operating Partners IV, L.P. and (xiv) Lexa
Partners LLC, or any


 


4





















affiliate of any of them, in each case which purchases Investor Equity
on or prior to the Effective Date.


 


(11)                          “Parent Group” shall
mean Parent, the Company and each direct or indirect subsidiary of any of them.


 


Notwithstanding anything in this Agreement to the contrary, the Service
Condition applicable to each share of Performance-Based Restricted Stock shall
be deemed to have been attained upon a CIC Termination.


 


(c)                                  The
term “Vested Restricted Shares,” as used herein, shall mean (i) each
share of Service-Based Restricted Stock on and following the time that the
vesting condition set forth in Section 2(a) hereof has been actually or deemed
satisfied as to such share, (ii) each share of Performance-Based Restricted
Stock on and following the time that both the Service Condition and the
Performance Condition have been actually or deemed satisfied as to such share
and (iii) each share of Performance-Based Restricted Stock not described in the
immediately preceding clause (ii) on an following the day prior to the seventh
anniversary of the Effective Date, so long as the Executive remains employed by
the Company on such day. Restricted Shares which have not become Vested
Restricted Shares are hereinafter referred to as “Unvested Restricted Shares.”


 


3.                                       Taxes.
The Executive shall pay to the Company or Parent promptly upon request, and in
any event at the time the Executive recognizes taxable income in respect of the
Restricted Stock Award, an amount equal to the taxes the Company or Parent
determines it is required to withhold under applicable tax laws with respect to
the Restricted Shares. Such payment shall be made in the form of cash. As a condition
to the effectiveness of the Restricted Stock Award, the Executive shall make a timely
and valid election pursuant to Section 83(b) of the Internal Revenue Code of
1986, as amended (the “Code”) to realize taxable income in respect of
the grant of the Restricted Stock Award, in an amount equal to the Initial
Value less the purchase price paid for the Restricted Shares. Notwithstanding
the above, because the Company and the Executive acknowledge that the purchase
price for the Restricted Shares is equal to the Initial Value, so long as the
Executive makes a timely and valid Code Section 83(b) election in respect of
the Restricted Shares the Company and the Executive agree that no tax is due,
and no withholding is necessary, upon or on account of the Executive’s purchase
of the Restricted Shares.


 


4.                                       Certificates.
Certificates evidencing the Restricted Shares shall be issued by Parent and
shall be registered in the Executive’s name on the stock transfer books of
Parent promptly after the date hereof, but shall remain in the physical custody
of Parent or its designee at all times prior to, in the case of any particular
Restricted Shares, the date such Restricted Shares become Vested Restricted
Shares. As a condition to the receipt of this Restricted Stock Award, the
Executive shall deliver to Parent a stock power, duly endorsed in blank,
relating to the Restricted Shares.


 


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5.                                       Effect
of Termination of Employment.


 


(a)                                  Upon
the termination of the Executive’s employment with the Company for any reason,
the Restricted Shares shall be subject to the Call Option described in Section
5(b) below. For purposes of this Agreement, such a termination may be (i) by
the Company for Cause or on account of the Executive’s Disability, by the Executive
without Good Reason or on account of the Executive’s death (a “5(a)(i) Termination”)
or (ii) by the Company without Cause or by the Executive for Good Reason (a “5(a)(ii)
Termination”).


 


(b)                                 Call
Option.


 


(i)                                     Other than as set
forth in the second sentence of Section 5(b)(ix), upon the termination of the
Executive’s employment with the Company for any reason (or no reason), Parent
shall have the right and option (the “Call Option”), but not the
obligation, to purchase, or to cause any member of the Parent Group designated
by Parent (the “Call Assignee”) to purchase, from the Executive, on and
after the Initial Call Date any or all of the Restricted Shares. The purchase
price (the “Call Price”) of the Restricted Shares subject to purchase
under this provision (the “Called Shares”) shall be as follows:


 


(1)   In the event of a 5(a)(i)
Termination, (A) as to each Called Share which is an Unvested Restricted Share immediately
prior to the Initial Call Date of such share, the lower of the Fair Market
Value of such share on the date of the applicable “Call Notice” (as defined
below) or the Initial Value of such share, and (B) as to each Called Share
which is a Vested Restricted Share immediately prior to the Initial Call Date
of such share, the Fair Market Value of such share on the date of the applicable
Call Notice.


 


(2)   In the event of a 5(a)(ii)
Termination, as to each Called Share of Service-Based Restricted Stock and
Performance-Based Restricted Stock which is a Vested Restricted Share immediately
prior to the Initial Call Date of such share, or which becomes a Vested
Restricted Share upon termination of employment solely because such termination
is a CIC Termination, the Fair Market Value of such share on the date of the
applicable Call Notice


 


(3)   In the event of a 5(a)(ii)
Termination, as to each Called Share of Service-Based Restricted Stock and
Performance-Based Restricted Stock which is an Unvested Restricted Share immediately
prior to the Initial Call Date of such share (other than such a share which
becomes a Vested Restricted Share upon termination of employment solely because
such termination is a


 


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CIC
Termination), the lower of the Fair Market Value of such share on the date of
the applicable Call Notice or the Initial Value of such share.


 


(ii)                                  The “Initial Call
Date” shall mean (A) with respect to each share of Performance-Based
Restricted Stock as to which the Service Condition, but not the Performance
Condition, has been attained at the time of a 5(a)(ii) Termination, the earlier
of (I) the date the Performance Condition is first attained with respect to
such share and (II) the six-month anniversary of the 5(a)(ii) Termination, or
(B) in all other cases, the date of termination of the Executive’s employment
with the Company.


 


(iii)                               For purposes of Section
5(b)(i), (A) the termination of the Executive’s employment at the end of the
term of the Employment Agreement following the failure of the Company to offer
the Executive continued employment at a base salary not less than that in
effect at the end of such term shall be deemed to be a 5(a)(ii) Termination and
(B) the termination of the Executive’s employment at the end of the term of the
Employment Agreement following the Company’s offering the Executive continued
employment at a base salary not less than that in effect at the end of such
term shall be deemed to be a 5(a)(i) Termination.


 


(iv)                              Parent or the Call
Assignee, as applicable, may exercise the Call Option by delivering or mailing
to the Executive (or to his estate, if applicable), in accordance with Section
16 of this Agreement, written notice of exercise (a “Call Notice”) at
any time following the Initial Call Date. The Call Notice shall specify the
date thereof, the number of Called Shares and the Call Price.


 


(v)                                 Within ten (10) days
after his receipt of the Call Notice, the Executive (or his estate) shall
tender to Parent or the Call Assignee, as applicable, at its principal office
the certificate or certificates representing the Called Shares, duly endorsed
in blank by the Executive (or his estate) or with duly endorsed stock powers
attached thereto, all in form suitable for the transfer of such shares to
Parent or the Call Assignee, as applicable. Upon its receipt of such shares,
Parent or the Call Assignee, as applicable, shall pay to the Executive the
aggregate Call Price therefore, in cash.


 


(vi)                              Parent or the Call
Assignee, as applicable, will be entitled to receive customary representations
and warranties from the Executive regarding the sale of the Called Shares
pursuant to the exercise of the Call Option as may reasonably requested by
Parent or the Call Assignee, as applicable, including but not limited to the
representation that the Executive has good and marketable title to the Called
Shares to be transferred free and clear of all liens, claims and other
encumbrances.


 


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(vii)                           If Parent or the Call
Assignee, as applicable, delivers a Call Notice, then from and after the time
of delivery of the Call Notice the Executive shall no longer have any rights as
a holder of the Called Shares subject thereto (other than the right to receive
payment of the Call Price as described above), and such Called Shares shall be
deemed purchased in accordance with the applicable provisions hereof and Parent
or the Call Assignee, as applicable, shall be deemed to be the owner and holder
of such Called Shares.


 


(viii)                        Any Restricted Shares as to
which the Call Option is not exercised will remain subject to all terms and
conditions of this Agreement, including the continuation of Parent’s or the
Call Assignee’s, as applicable, right to exercise the Call Option.


 


(ix)                                This Section 5(b) is in
addition to, and not in lieu of, any rights and obligations of the Executive
and Parent in respect of the Restricted Shares contained in the “Stockholders’
Agreement” (as defined below). Notwithstanding the above, this Section 5(b)
shall be ineffective as to each Vested Restricted Share on and following the
later of (I) an IPO or any other event which causes the Class A Common Stock,
or other securities for which all or substantially all of the Class A Common
Stock may have been exchanged, to be or become listed for trading on or over an
established securities market or established trading system and (II) the date
on which such share becomes a Vested Restricted Share.


 


6.                                       Rights
as a Stockholder; Dividends.


 


(a)                                  The
Executive shall be the record owner of the Restricted Shares unless and until
such shares are sold or otherwise disposed of, and as record owner shall be
entitled to all rights of a common stockholder of Parent, including, without
limitation, voting rights, if any, with respect to the Restricted Shares; provided
that (i) any cash or in-kind dividends paid with respect to Restricted
Shares which are not Vested Restricted Shares shall be withheld by Parent and
shall be paid to the Executive, without interest, only when, and if, such
Restricted Shares shall become Vested Restricted Shares (provided, however,
that in the event of a rights offering in which the Restricted Shares are
entitled to participate, the Executive shall be entitled to subscribe for and
purchase any securities made available in such rights offering with respect to
all Restricted Shares, whether or not such Restricted Shares are Vested Restricted
Shares), and (ii) the Restricted Shares shall be subject to the limitations on
transfer and encumbrance set forth in this Agreement and the stockholders’
agreement executed and entered into by and between Parent, the Investors and
the other parties thereto prior to the Effective Date (such stockholders’
agreement, as it may be amended, superceded or replaced from time to time, the “Stockholders’
Agreement”). A copy of the Stockholders’ Agreement, as in effect on the
date hereof, is annexed hereto as Exhibit A. As soon as practicable following
the vesting of any Restricted Shares, certificates for such Vested Restricted
Shares shall be delivered to the Executive or to the Executive’s legal
representative along with the stock powers relating thereto.


 


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(b)                                 At
or promptly following an IPO or any other transaction which makes Parent
eligible to use SEC Form S-8, Parent shall register all of the Restricted
Shares (whether or not vested) on Form S-8 or an equivalent registration
statement (including, at Parent’s option, on the Form S-1 filed in connection
with an IPO), and use reasonable commercial efforts to keep such registration
effective so long as the Executive continues to hold any of the Restricted
Shares.


 


7.                                       Restrictive
Legend. All certificates representing Restricted Shares shall have affixed
thereto a legend in substantially the following form, in addition to any other
legends that may be required under federal or state securities laws, unless and
to the extent determined inapplicable or unnecessary by Parent:


 


THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER AND AN OPTION TO PURCHASE SET FORTH IN A CERTAIN
RESTRICTED STOCK AWARD AGREEMENT BETWEEN WMG PARENT CORP. AND THE REGISTERED
OWNER OF THIS CERTIFICATE (OR HIS PREDECESSOR IN INTEREST) AND A STOCKHOLDERS’
AGREEMENT TO WHICH WMG PARENT CORP. AND THE REGISTERED OWNER OF THIS
CERTIFICATE (OR HIS PREDECESSOR IN INTEREST) ARE PARTIES, WHICH AGREEMENTS ARE
BINDING UPON ANY AND ALL OWNERS OF ANY INTEREST IN SAID SHARES. SAID AGREEMENTS
ARE AVAILABLE FOR INSPECTION WITHOUT CHARGE AT THE PRINCIPAL OFFICE OF WMG
PARENT CORP. AND COPIES THEREOF WILL BE FURNISHED WITHOUT CHARGE TO ANY OWNER
OF SAID SHARES UPON REQUEST.


 


THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO
DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD, MORTGAGED, PLEDGED, HYPOTHECATED
OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND ANY APPLICABLE
STATE SECURITIES LAWS, UNLESS WMG PARENT CORP. HAS RECEIVED AN OPINION OF
COUNSEL, WHICH OPINION IS REASONABLY SATISFACTORY TO IT, TO THE EFFECT THAT
SUCH REGISTRATIONS ARE NOT REQUIRED.


 


8.                                       Transferability.


 


(a)                                  The
Restricted Shares may not, at any time prior to becoming Vested Restricted
Shares, be assigned, alienated, pledged, attached, sold or otherwise
transferred or encumbered by the Executive and any such purported assignment,
alienation, pledge, attachment, sale, transfer or encumbrance shall be void


 


9





















 


and
unenforceable against the Parent; provided that the designation of a
beneficiary shall not constitute an assignment, alienation, pledge, attachment,
sale, transfer or encumbrance; and provided further that the foregoing
restriction shall not apply to a sale of Restricted Shares in compliance with
the obligations, if any, of the holder thereof to sell such shares pursuant to
the “drag along” provisions of the Stockholders’ Agreement.


 


(b)                                 Prior to an IPO, neither the Executive nor
any transferee of the Executive (including any beneficiary, executor or
administrator) shall assign, alienate, pledge, attach, sell or otherwise
transfer or encumber the Restricted Shares upon or subsequent to their vesting,
except in accordance with the applicable provisions of this Agreement and the
Stockholders’ Agreement; provided, that, subject to the
provisions of the Stockholders’ Agreement, Vested Restricted Shares may be
transferred (i) by will or the laws of descent, or (ii) with the Board’s
approval (which may be granted or withheld at its sole discretion), by the
Executive without consideration to (A) any person who is a “family member” of
the Executive, as such term is used in the instructions to SEC Form S-8
(collectively, the “Immediate Family Members”): (B) a trust solely for
the benefit of the Executive and/or Immediate Family Members; or (C) any other
transferee as may be approved by the Board in its sole discretion
(collectively, the “Permitted Transferees”); provided, that,
the Executive gives the Board advance written notice describing the terms and
conditions of the proposed transfer and the Board notifies the Executive in
writing that such a transfer is in compliance with the terms of this Agreement;
provided, further, that, the restrictions upon any Vested
Restricted Shares transferred in accordance with this Section 8(b) shall apply
to the Permitted Transferee, such transfer shall be subject to the acceptance
by the Permitted Transferee of the terms and conditions hereof and of the
Stockholders’ Agreement, and any reference in this Agreement or the
Stockholders’ Agreement to the Executive shall be deemed to refer to the
Permitted Transferee, except that (a) prior to an IPO, Permitted Transferees
shall not be entitled to transfer any Vested Restricted Shares other than by
will or the laws of descent and distribution or, with the Board’s approval
(which may be granted or withheld at its sole discretion), to a trust solely
for the benefit of the Permitted Transferee, and (b) the consequences of the termination
of the Executive’s employment with the Company under the terms of this
Agreement shall continue to be applied with respect to the Permitted Transferee
to the extent specified in this Agreement.


 


9.                                       Securities Laws. The Executive represents, warrants and
covenants as follows:


 


(a)                                  The Executive is acquiring the Restricted
Shares for his own account and not with a view to, or for sale in connection
with, any distribution of the Restricted Shares in violation of the Securities
Act or any rule or regulation under the Securities Act or in violation of any
applicable state securities law. 


 


(b)                                 The Executive has had such opportunity as he
has deemed adequate to obtain from representatives of
Parent such information as is necessary to permit him to evaluate the merits and risks of his investment in the Parent.


 


10





















 


(c)                                  The
Executive has sufficient experience in business, financial and investment
matters to be able to evaluate the risks involved in acquiring of the
Restricted Shares and to make an informed investment decision with respect to
such investment.


 


(d)                                 The
Executive can afford the complete loss of the value of the Restricted Shares and is able to bear the economic
risk of holding such shares for an indefinite period.


 


(e)                                  The Executive understands that (i) the
Restricted Shares have not been registered under the Securities Act and are “restricted
securities” within the meaning of Rule 144 under the Securities Act; (ii) the Restricted Shares cannot be sold, transferred or
otherwise disposed of unless they are subsequently registered under the
Securities Act or an exemption from registration is then available; (iii) in
any event, the exemption from registration under Rule 144 will not be available
for at least one (1) year and even then will not be available unless a public
market then exists for such shares, adequate information concerning Parent is
then available to the public, and other terms and conditions of Rule 144 are
complied with and (iv) there is now no registration statement on file with the
SEC with respect to the Restricted Shares and, except as set forth in Section
6(b) hereof or in the Stockholders’ Agreement, there is no commitment on the
part of Parent to make any such filing.


 


(f)                                    In
addition, upon any Restricted Shares becoming Vested Restricted Shares, the Executive will make or enter into
such other written representations, the warranties and agreements as the Board
may reasonably determine are legally required in order to comply with
applicable securities laws.


 


10.                                 Adjustments
for Stock Splits, Stock Dividends, etc.


 


(a)                                  If from time to time during the term of this
Agreement there is any stock split-up, stock dividend, stock
distribution or other reclassification of Parent’s Class A Common Stock, any
and all new, substituted or additional securities to which the Executive is
entitled by reason of his ownership of the Restricted Shares shall be
immediately subject to the terms of this Agreement.


 


(b)                              If the Parent’s Class A
Common Stock is converted into
or exchanged for, or stockholders of Parent receive by reason of any
distribution in total or partial liquidation, securities of another
corporation, or other property (including cash), pursuant to any merger of
Parent or acquisition of its assets, then the rights of Parent under this
Agreement shall inure to the benefit of Parent’s successor and this Agreement shall
apply to the securities or other property received upon such conversion,
exchange or distribution in the same manner and to the same extent as the
Restricted Shares.


 


11.                                 Confidentiality
of the Agreement. The Executive agrees to keep confidential the terms of
this Agreement. This provision does not prohibit the Executive from providing
this information on a confidential and privileged basis to the Executive’s


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attorneys or
accountants for purposes of obtaining legal or tax advice or as otherwise
required by law, regulation or stock exchange rule.


 


12.                                 Severability.
The invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement,
and each other provision of the Agreement shall be severable and enforceable to
the extent permitted by law.


 


13.                                 Waiver.
Any right of Parent contained in the Agreement may be waived in writing by the
Board. No waiver of any right hereunder by any party shall operate as a waiver
of any other right, or as a waiver of the same right with respect to any subsequent
occasion for its exercise, or as a waiver of any right to damages. No waiver by
any party of any breach of this Agreement shall be held to constitute a waiver
of any other breach or a waiver of the continuation of the same breach.


 


14.                                 No
Rights to Employment. Nothing contained in this Agreement shall be
construed as giving the Executive any right to be retained, in any position, as
an employee, consultant or director of the Company or its affiliates or shall
interfere with or restrict in any way the right of the Company or its
affiliates, which are hereby expressly reserved, to remove, terminate or
discharge the Executive at any time for any reason whatsoever.


 


15.                                 Entire
Agreement. This Agreement contains the entire agreement and understanding
of the parties hereto with respect to the subject matter contained herein and
supersedes all prior communications, representations and negotiations in
respect thereto. No change, modification or waiver of any provision of this
Agreement shall be valid unless the same be in writing and signed by the
parties hereto.


 


16.                                 Notices.
Any notice, consent, request or other communication made or given in accordance
with this Agreement shall be in writing and shall be deemed to have been duly
given when actually received or, if mailed, three days after mailing by registered
or certified mail, return receipt requested, or one business day after mailing
by a nationally recognized express mail delivery service with instructions for
next-day delivery, to those persons listed below at their following respective
addresses or at such other address or person’s attention as each may specify by
notice to the others:


 


To
Parent:


 


WMG Parent Corp.


75 Rockefeller Plaza


New York, New York 10019


Attention: General Counsel


 


with a copy to:


 


Paul, Weiss, Rifkind, Wharton & Garrison LLP


1285 Avenue of the Americas


New York, New York 10019


 


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Attention: Michael J, Segal, Esq.


 


To the Executive:


 


The most recent address for the Executive in the records of Parent or
the Company. The Executive hereby agrees to promptly provide Parent and the
Company with written notice of any change in the Executive’s address for so
long as this Agreement remains in effect.


 


17.                                 Beneficiary.
The Executive may file with the Board a written designation of a beneficiary on
such form as may be prescribed by the Board and may, from time to time, amend
or revoke such designation. If no designated beneficiary survives the
Executive, the executor or administrator of the Executive’s estate shall be deemed
to be the Executive’s beneficiary. The Executive’s beneficiary shall succeed to
the rights and obligations of the Executive hereunder upon the Executive’s
death, except as maybe otherwise described herein.


 


18.                                 Successors.
The terms of this Agreement shall be binding upon and inure to the benefit of
Parent, its successors and assigns, and of the Executive and the beneficiaries,
executors, administrators, heirs and successors of the Executive.


 


19.                                 Modifications.
No change, modification or waiver of any provision of this Agreement shall be
valid unless the same be in writing and signed by the parties hereto.


 


20.                                Restricted
Stock Award Subject to the Stockholders’ Agreement. By entering into this
Agreement the Executive agrees and acknowledges that the Executive has received
and read the Stockholders’ Agreement. The Stockholders’ Agreement as it may be
amended from time to time is hereby incorporated herein by reference. In the
event of a conflict between any term or provision contained herein and any
terms or provisions of the Stockholders’ Agreement, the applicable terms and
provisions of the Stockholders’ Agreement will govern and prevail except with
respect to Section 5(b) hereof.  Notwithstanding
the above, Section 4.1 of the Stockholders’ Agreement (“Tag-Along”) shall not
apply to Unvested Restricted Shares.


 


21.                                 GOVERNING
LAW; CONSENT TO JURISDICTION. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO AGREEMENTS
MADE AND TO BE WHOLLY PERFORMED WITHIN THAT STATE. ANY ACTION TO ENFORCE THIS
AGREEMENT MUST BE BROUGHT IN A COURT SITUATED IN, AND THE PARTIES HEREBY
CONSENT TO THE JURISDICTION OF, COURTS SITUATED IN NEW YORK COUNTY, NEW YORK. EACH
PARTY HEREBY WAIVES THE RIGHTS TO CLAIM THAT ANY SUCH COURT IS AN INCONVENIENT
FORUM FOR THE RESOLUTION OF ANY SUCH ACTION.


 


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22.                                 JURY
TRIAL WAIVER. THE PARTIES EXPRESSLY AND KNOWINGLY WAIVE ANY RIGHT TO A JURY
TRIAL IN THE EVENT ANY ACTION ARISING UNDER OR IN CONNECTION WITH THIS
AGREEMENT IS LITIGATED OR HEARD IN ANY COURT.


 


23.                                 Interpretation.
The headings of the Sections hereof are provided for convenience only and are
not to serve as a basis for interpretation or construction, and shall not
constitute a part, of this Agreement. The term “Company” as used herein with reference
to the employment of the Executive or the termination thereof shall refer to
the Company and each member of the “Parent Group” (as defined in Section
2(b)(11).


 


24.                                 Signature
in Counterparts. This Agreement may be signed in counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. The parties hereto confirm that any facsimile
copy of another party’s executed counterpart of this Agreement (or its
signature page thereof) will be deemed to be an executed original thereof.


 


IN WITNESS
WHEREOF, the
parties hereto have executed this Agreement as of the date first set forth above.


 


	
   

  	
  WMG PARENT
  CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ [ILLEGIBLE]

  	
   

  
	
   

  	
  By:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  /s/ David H.
  Johnson

  	
   

  
	
   

  	
  David H.
  Johnson

  



 


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