Document:

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:

  	
   

  

 

2

 

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.

 

2

 

(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.

 

3

 

(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

 

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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.

 

5

 

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

 

6

 

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.

 

7

 

(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.

 

8

 

(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

11

 

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

 

12

 

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.

 

13

 

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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Exhibit 10(d)  

 
 

CONSTELLATION ENERGY GROUP, INC.
  DEFERRED COMPENSATION PLAN
  FOR NON-EMPLOYEE DIRECTORS    
    

        1.    Objective.    The objective of this Plan is to offer a portion of the Compensation of non-employee
Directors of Constellation Energy Group in the form of Stock Units, thereby promoting a greater identity of interest between Constellation Energy Group's non-employee Directors and its
stockholders, and to enable such Directors to defer receipt of their Compensation that is payable in cash. 

        2.    Definitions.    As used herein, the following terms will have the meaning specified below: 

        "Annual Retainer" means the amount payable by Constellation Energy Group to a Director as annual compensation for performance of services
as a Director, and includes Committee Chair retainers. All other amounts (including without limitation Board/committee meeting fees, and expense reimbursements) shall be excluded in calculating the
amount of the Annual Retainer. 

        "Board" means the Board of Directors of Constellation Energy Group. 

        "Cash Account" means an account by that name established pursuant to Section 7. The maintenance of Cash Accounts is for bookkeeping
purposes only. 

        "Change in Control" means the occurrence of any one of the following events: 

          (i)  individuals
who, on January 24, 2003, constitute the Board (the "Incumbent Directors") cease for any reason to
constitute at least a majority of the Board, provided that any person becoming a director subsequent to January 24, 2003, whose election or nomination for election was approved by a vote of at
least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of Constellation Energy Group (the
"Company") in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director;  provided, however, that no individual initially elected or nominated as a director of the Company as a
result of an actual or threatened election contest with respect to directors or as a result of any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board
shall be deemed to be an Incumbent Director; 

         (ii)  any
"person" (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities eligible to vote for the election of the
Board (the "Company Voting Securities"); provided,  however, that the event described in this
paragraph (ii) shall not be deemed to be a Change in Control by virtue of any of the following
acquisitions: (a) by the Company or any corporation with respect to which the Company owns a majority of the outstanding shares of common stock or has the power to vote or direct the voting of
sufficient securities to elect a majority of the directors (a "Subsidiary Company"), (b) by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any Subsidiary Company, (c) by any underwriter temporarily holding securities pursuant to an offering of such securities, (d) pursuant to a
Non-Qualifying Transaction (as defined in paragraph (iii)), or (e) pursuant to any acquisition by Plan participant or any group of persons including Plan participant (or any
entity controlled by Plan participant or any group of persons including Plan participant); 

        (iii)  consummation
of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or any of its Subsidiary Companies, (a  "Business Combination"), unless immediately following such Business Combination: (a) more than 60% of the total voting
power of (x) the corporation resulting from such Business Combination (the "Surviving Corporation"), or (y) if applicable, the ultimate
parent corporation that directly or indirectly has beneficial ownership of at least 95% of the voting securities eligible to elect directors of the Surviving Corporation (the
"Parent Corporation"), is represented by Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if
applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in
substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination, (b) no person (other than any
employee benefit plan (or related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation), is or 

 

becomes the beneficial owner, directly or indirectly, of 20% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there
is no Parent Corporation, the Surviving Corporation) and (c) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the
Surviving Corporation) following the consummation of the Business Combination were Incumbent Directors at the time of the Board's approval of the execution of the initial agreement providing for such
Business Combination (any Business Combination which satisfies all of the criteria specified in (A), (B), and (c) above shall be deemed to be a
"Non-Qualifying Transaction"); or 

         (iv)  the
stockholders of the Company approve a plan of complete liquidation or dissolution of the Company, or the consummation of a sale of all or substantially all of the
Company's assets. 

        Notwithstanding
the foregoing, a Change in Control of the Company shall not be deemed to occur solely because any person acquires beneficial ownership of more than 20% of the Company
Voting Securities as a result of the acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding;  provided, that if after such acquisition by the Company such person becomes the beneficial owner of
additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control of the Company shall then occur. 

        "Committee" means the Compensation Committee of the Board. 

        "Common Stock" means the common stock, without par value, of Constellation Energy Group. 

        "Compensation" means any Annual Retainer and meeting fees payable by Constellation Energy Group to a participant in his/her capacity as a
Director. Compensation excludes expense reimbursements paid by Constellation Energy Group to a participant in his/her capacity as a Director. 

        "Constellation Energy Group" means Constellation Energy Group, Inc., a Maryland corporation, or its successor. 

        "Deferred Cash Compensation" means any cash Compensation that is voluntarily deferred by a participant pursuant to Section 6. 

        "Director" means a member of the Board who is not an employee of Constellation Energy
Group or any of its subsidiaries/affiliates. 

        "Disability" or "Disabled" means that the Plan Administrator has determined that the
participant is unable to fulfill his/her responsibilities of Board membership because of illness or injury. For purposes of this Plan, a participant's eligibility to participate shall be deemed to
have terminated on the date he/she is determined by the Plan Administrator to be Disabled. 

        "Earnings" means, with respect to the Cash Account, hypothetical interest credited to the Cash Account. 

        "Earnings" means, with respect to the Stock Account, hypothetical dividends credited to the Stock Account. 

        "Fair Market Value" means, as of any specified date, the average closing price of a share of Common Stock, reported in "New York Stock
Exchange Composite Transactions" as published in the Eastern Edition of The Wall Street Journal averaged for the most recent 20 days during which
Common Stock was traded on the New York Stock Exchange (including such valuation date if a trading date). 

        "Plan Accounts" means a participant's Cash Account and/or Stock Account. The maintenance of Plan Accounts is for bookkeeping purposes
only. 

        "Plan Administrator" means, as set forth in Section 3, the Board. 

        "Stock Account" means an account by that name established pursuant to Section 8. The maintenance of Stock Accounts is for
bookkeeping purposes only. 

        "Stock Unit(s)" means the share equivalents credited to a Participant's Stock Account pursuant to Section 8. The use of Stock Units
is for bookkeeping purposes only; the Stock Units are not actual shares of Common Stock. Constellation Energy Group will not reserve or otherwise set aside any Common Stock for or to any Stock
Account. 

        3.    Plan Administration.    

          (i)  Plan
Administrator—The Plan is administered by the Board, who has sole authority to interpret the Plan, and, in general, to make all other determinations
advisable for the administration of the Plan to achieve its stated 

2

 

objective.
Decisions by the Plan Administrator shall be final and binding upon all persons for all purposes. The Plan Administrator shall have the power to delegate all or any part of its
non-discretionary duties to one or more designees, and to withdraw such authority, by written designation. 

         (ii)  Amendment—This Plan may be amended from time to time or suspended or terminated at any time, at the written
direction of the Plan Administrator. However, amendments required to keep the Plan in compliance with applicable laws and regulations may be made by the Vice President—Human Resources of
Constellation Energy Group (or other vice president succeeding to that function) on advice of counsel. Nothing herein creates a vested right. 

        (iii)  Indemnification—The Plan Administrator (and its designees), Chairman of the Board, Chief Executive Officer,
President, and Vice President—Human Resources of Constellation Energy Group and all other employees of Constellation Energy Group or its subsidiaries/affiliates whose assigned duties
include matters under the Plan, shall be indemnified by Constellation Energy Group or its subsidiaries/affiliates or from proceeds under insurance policies purchased by Constellation Energy Group or
its subsidiaries/affiliates, against any and all liabilities arising by reason of any act or failure to act made in good faith pursuant to the provisions of the Plan, including expenses reasonably
incurred in the defense of any related claim. 

        4.    Eligibility and Participation.    

          (i)  Mandatory
participation—A Director, at the discretion of the Board, may be required at such times designated by the Board to participate in this Plan with
respect to the receipt of all or part of his/her Compensation in the form of Stock Units under Section 5 of the Plan. 

         (ii)  Voluntary participation—A Director is eligible to participate in the Plan by electing to defer all or
certain portions of the participant's Compensation, that is payable in cash, under Section 6 of the Plan, while so classified. 

        (iii)  Termination of participation—Eligibility to participate shall terminate on the date the participant ceases
to be a Director. Notwithstanding termination of eligibility, such person with Plan Accounts will remain a participant of the Plan, solely for purposes of the administration of existing Plan Accounts,
and no additional Stock Units will be granted and no further deferrals of cash Compensation under the Plan will be permitted. 

        5.    Mandatory Stock Units.    To the extent designated from time to time by the Board as set forth in
Section 4(i), the Stock Account of a participant will be credited on January 1 of each applicable calendar year with Stock Units equal to the number of shares of Common Stock (including
fractions of a share) that could have been purchased, with the applicable percentage (as designated by the Board) of the participant's Annual Retainer for such calendar year, at Fair Market Value on
January 1. 

        If
a participant initially becomes a Director during such applicable calendar year, the Stock Account of the participant for such calendar year will be credited, on the date that is the
first day of the calendar month after the participant initially becomes a Director, with Stock Units equal to the number of shares of Common Stock (including fractions of a share) that could have been
purchased at Fair Market Value on such date, with an amount equal to (i) the applicable percentage (as designated by the Board) of the participant's Annual Retainer multiplied by (ii) a
fraction the numerator of which is the number of calendar months in the calendar year on and after the date the participant initially becomes a Director (counting a partial month as a full month), and
the denominator of which is 12. 

        The
Stock Account will be maintained pursuant to Section 8. 

        6.    Cash Compensation Deferral Election.    A participant may elect to defer none, all, fifty percent (50%), or
seventy-five percent (75%) of his/her other Compensation that is payable in cash (i.e., one hundred percent (100%) of all other Compensation that is not subject to any mandatory Stock
Units). A participant's cash Compensation deferral election with respect to the Annual Retainer shall specify whether the deferred Annual Retainer
is to be credited to the Cash Account or to the Stock Account. All other Cash Compensation that a participant elects to defer will be credited to the Cash Account. 

        Such
election shall be made by written notification to the Vice President—Human Resources of Constellation Energy Group (or other vice president succeeding to that function).
Such election shall be made prior to the calendar year during which the applicable cash Compensation is payable, and shall be effective as of the first day of such calendar year. If a participant
initially becomes a Director during a calendar year, the election for such calendar year must be made within thirty (30) calendar days after the date the participant initially becomes a
Director, and shall be effective with respect to Compensation earned after the date the election is received by the Vice President—Human Resources of Constellation Energy Group (or other
vice president succeeding to that function). Elections under this Section shall remain in effect for all succeeding calendar years until revoked. Elections may be revoked by written notification to
the Vice President—Human Resources of Constellation Energy Group (or other vice president 

3

 

succeeding
to that function), and shall be effective as of the first day of the calendar year following the calendar year during which the revocation is received by such Vice President. 

        Notwithstanding
anything herein contained to the contrary, the Plan Administrator shall have the right in its sole discretion to permit a participant to defer other percentages of
his/her Annual Retainer and/or other Compensation that is payable in cash. 

        7.    Cash Accounts.    The Board may specify that cash Compensation that consists of the Annual Retainer that a
participant has elected to defer into the Cash Account is credited to the participant's Cash Account on January 1 (or if later, the first day of the first month after the participant becomes a
Director). All other cash Compensation that a participant has elected to defer is credited to the participant's Cash Account on each date such cash Compensation would otherwise have been paid to the
Director. A participant's Cash Account shall be credited with earnings at the rate earned by the Interest Income Fund under the Constellation Energy Group, Inc. Employee Savings Plan, and
computed in the same manner as under such plan. Earnings are credited to the Cash Account commencing on the date the applicable Deferred Cash Compensation is credited to the Cash Account. If a
participant ceases to be a Director prior to December 31 of any calendar year, the participant will forfeit a pro-rated amount of the Annual Retainer that was credited to the Cash
Account during the calendar year. The amount forfeited shall equal the Annual Retainer amount credited during the calendar year times a fraction, the numerator of which is the number of full calendar
months in the calendar year after the participant's Board membership ceased, and the denominator of which is 12 (or, for a participant who became a Director during the calendar year, the number of
months during the calendar year after the participant became a Director (including the month Board membership commenced). 

        8.    Stock Accounts.    The Board may specify that cash Compensation that consists of the Annual Retainer that a
participant has elected to defer into the Stock Account is credited to the participant's Stock Account on January 1 (or if later, the first day of the first month after the participant becomes
a Director). A participant's Stock Account shall be credited with Stock Units equal to the number of shares of Common Stock (including fractions of a share) that could have been purchased with such
Deferred Cash Compensation, at Fair Market Value on such date. Grants of mandatory Stock Units are credited to the Stock Account as set forth in Section 5. 

        If
a participant ceases to be a Director prior to December 31 of any calendar year, the participant will forfeit a pro-rated amount of the Annual Retainer that was
credited to the Stock Account during the calendar
year. The amount forfeited shall equal the Annual Retainer amount credited during the calendar year times a fraction, the numerator of which is the number of full calendar months in the calendar year
after the participant's Board membership ceased, and the denominator of which is 12 (or, for a participant who became a Director during the calendar year, the number of months during the calendar year
after the participant became a Director (including the month Board membership commenced)). 

        As
of any dividend distribution date for the Common Stock, the participant's Stock Account shall be credited with additional Stock Units equal to the number of shares of Common Stock
(including fractions of a share) that could have been purchased, at the closing price of a share of Common Stock on such date as reported in "New York Stock Exchange Composite Transactions" as
published in the Eastern Edition of The Wall Street Journal, with the amount which would have been paid as dividends on that number of shares (including
fractions of a share) of Common Stock which is equal to the number of Stock Units then credited to the participant's Stock Account. 

        In
the event of any change in the outstanding shares of Common Stock by reason of any stock dividend or split, recapitalization, combination or exchange of shares or other similar
changes in the Common Stock, then appropriate adjustments shall be made in the number of Stock Units in each participant's Stock Account. Such adjustments shall be made effective on the date of the
change related to the Common Stock. 

        9.    Distributions of Plan Accounts.    Distributions of Plan Accounts shall be made in cash only, from the general
assets of Constellation Energy Group. 

        A
participant may elect (by notification in the form and manner established by the Vice President—Human Resources of Constellation Energy Group (or other Vice President
succeeding to that function) from time to time) to begin distributions (i) in the calendar year following the calendar year that eligibility to participate terminates, (ii) in the
calendar year following the calendar year in which a participant attains age 70, if later, or (iii) any calendar year between (i) and (ii). Such election must be made prior to the end of
the calendar year in which eligibility to participate terminates. Alternatively, a participant who reaches age 70 while still a Director may elect to begin distributions, in the calendar year
following the calendar year that the participant reaches age 70, of amounts in his/her Plan Accounts as of the end of the calendar year the participant reaches age 70. Such election must be made prior
to the end of the calendar year in which the participant reaches age 70, and a distribution election to receive any 

4

 

subsequently
deferred amounts beginning in the calendar year following the calendar year that eligibility to participate terminates, must be made prior to the end of the calendar year in which
eligibility to participate terminates. 

        A
participant may elect (by notification in the form and manner established by the Vice President—Human Resources of Constellation Energy Group (or other vice president
succeeding to that function) from time to time) to receive distributions in a single payment or in annual installments during a period not to exceed fifteen years. The single payment or the first
installment payment, whichever is applicable, shall be made within the first sixty (60) calendar days of the calendar year elected for distribution. Subsequent installments, if any, shall be
made within the first sixty (60) calendar days of each succeeding calendar year until the participant's Plan Accounts have been paid out. 

        In
the event applicable elections are not timely made, a participant shall receive a distribution in a single payment within the first sixty (60) calendar days of the calendar
year following the calendar year that eligibility to participate terminates. 

        Earnings
are credited to the Cash Account through the date of distribution, and amounts held for installment payments shall continue to be credited with Earnings. The value of the Cash
Account that is payable in cash on the date of the single payment distribution is equal to the balance in the Cash Account on the date that is no earlier than five (5) calendar days prior to
the day of such distribution ("Distribution Valuation Date"). The amount of any cash distribution to be made in installments from the Cash Account will be determined by multiplying (i) the
balance in such Cash Account on the Distribution Valuation Date by (ii) a fraction, the numerator of which is one and the denominator of which is the number of installments in which
distributions remain to be made (including the current distribution). 

        If
a participant dies or becomes Disabled, the entire unpaid balance of his/her Plan Accounts shall be paid to the beneficiary(ies) designated by the participant by notification in the
form and manner established by the Vice President—Human Resources of Constellation Energy Group (or other vice president succeeding to that function) from time to time or, if no
designation was made, in the event of death, to the estate of the participant, and in the event of Disability, to the participant. Payment shall be made within sixty (60) calendar days after
notice of death or Disability is received by such Vice President, unless prior to the participant's death or Disability, the participant elected (in the form and manner established by the Vice
President—Human Resources of Constellation Energy Group (or other vice president succeeding to that function) from time to time) a delayed and/or installment distribution option for such
beneficiary(ies); provided, however that (i) such a distribution option election shall be effective only if the value of the participant's Plan Accounts is more than $50,000 on the date of the
participant's death or Disability; and (ii) the final distribution must be made to such beneficiary(ies) no later than 15 years after the participant's death or Disability. After the end
of the calendar year that a participant's eligibility to participate terminates, a distribution option election for a particular beneficiary is irrevocable; provided, however, that the participant may
make a distribution option election for a new beneficiary who is initially designated after the participant's eligibility to participate terminates, and such election is irrevocable with respect to
the new beneficiary. 

        The
value of the Stock Account, which is equal to the number of Stock Units in the Stock Account multiplied by the Fair Market Value on the date of the participant's death or Disability,
is transferred to the Cash Account on such date. Earnings are credited to the Cash Account through the date of distribution, and amounts held for installment payments shall continue to be credited
with Earnings. The value of the Cash Account that is payable in cash on the date of the single payment distribution is equal to the balance in the Cash Account on the date that is no earlier than five
(5) calendar days prior to the day of such distribution ("Beneficiary Distribution Valuation Date"). The amount of any cash distribution to be made in installments from the Cash Account will be
determined by multiplying (i) the balance in such Cash Account on the Beneficiary Distribution Valuation Date by (ii) a fraction, the numerator of which is one and the denominator of
which is the number of installments in which distributions remain to be made (including the current distribution). 

        Upon
the death of a participant's beneficiary for whom a delayed and/or installment distribution option was elected, the entire unpaid balance of the participant's Cash Account shall be
paid to the beneficiary(ies) designated by the participant's beneficiary by notification in the form and manner established by the Vice President—Human Resources of Constellation Energy
Group (or other vice president succeeding to that function) from time to time or, if no designation was made, to the estate of the participant's beneficiary. Payment shall be made within sixty
(60) calendar days after notice of death is received by such Vice President. The value of the Cash Account that is payable in cash is equal to the balance in the Cash Account on the date that
is no earlier than five (5) calendar days prior to the day of such distribution. 

        Notwithstanding
anything herein contained to the contrary, the Plan Administrator shall have the right in its sole discretion to (i) vary the manner and timing of distributions of
a participant or beneficiary entitled to a distribution 

5

 

under
this Section 9, and may make such distributions in a single payment or over a shorter or longer period of time than that elected by a participant; and (ii) vary the period during
which the closing price of Common Stock is referenced to determine the value of the Stock Account that is transferred to the Cash Account on the date on which the participant's eligibility to
participate terminates. Any affected participants will not participate in exercising such discretion. 

        10.    Beneficiaries.    A participant shall have the right to designate, change or rescind a beneficiary(ies) who is
to receive a distribution(s) pursuant to Section 9 in the event of the death or Disability of the participant. A participant's beneficiary(ies) for whom a delayed and/or installment
distribution option was elected shall have the right to designate a beneficiary(ies) who is to receive a distribution pursuant to Section 9 in the event of the death of the participant's
beneficiary(ies). 

        Any
designation, change or recision of the designation of beneficiary shall be made by notification in the form and manner established by the Vice President—Human Resources
of Constellation Energy Group (or other vice president succeeding to that function) from time to time. The last designation of beneficiary received by such Vice President shall be controlling over any
testamentary or purported disposition by the participant (or, if applicable, the participant's beneficiary(ies)), provided that no designation, recision or change thereof shall be effective unless
received by such Vice President prior to the death or Disability (whichever is applicable) of the participant (or, if applicable, the death of the participant's beneficiary(ies)). 

        If
the designated beneficiary is the estate, or the executor or administrator of the estate, of the participant (or, if applicable, the participant's beneficiary(ies)), a distribution
pursuant to Section 9 may be made to the person(s) or entity (including a trust) entitled thereto under the will of the participant (or, if applicable, the participant's beneficiary(ies)), or,
in the case of intestacy, under the laws relating to intestacy. 

        11.    Valuation of Plan Accounts.    The Plan Administrator shall cause the value of a participant's Plan Accounts to
be determined and reported to Constellation Energy Group and the participant at least once per year as of the last business day of the calendar year. The value of the Stock Account will equal the
number of Stock Units in the Stock Account multiplied by the closing price of a share of Common Stock on the last business day of the calendar year as reported in "New York Stock Exchange Composite
Transactions" as published in the Eastern Edition of The Wall Street Journal. The value of the Cash Account will equal the balance in the Cash Account on the last business day of the calendar year. 

        12.    Withdrawals.    No withdrawals of Plan Accounts may be made, except a participant may at any time request a
hardship withdrawal from his/her Plan Accounts if he/she has incurred an unforeseeable financial emergency. An unforeseeable financial emergency is defined as severe financial hardship to the
participant resulting from a sudden and unexpected illness or accident of the participant (or of his/her dependents), loss of the participant's property due to casualty, or other similar extraordinary
and unforeseeable circumstances arising as a result of events beyond the control of the participant. The need to send a child to college or the desire to purchase a home are not considered to be
unforeseeable emergencies. The circumstance that will constitute an unforeseeable emergency will depend upon the facts of each case. 

        A
hardship withdrawal will be permitted by the Plan Administrator only as necessary to satisfy an immediate and heavy financial need. A hardship withdrawal may be permitted only to the
extent reasonably necessary to satisfy the financial need. Payment may not be made to the extent that such hardship is or may be relieved (i) through reimbursement or compensation by insurance
or otherwise, (ii) by liquidation of the participant's assets, to the extent the liquidation of such assets would not itself cause severe financial hardship, or (iii) by cessation of
deferrals under the Plan. 

        The
request for hardship withdrawal shall be made by notification in the form and manner established by the Plan Administrator from time to time. Such hardship withdrawal will be
permitted only with approval of the Plan Administrator. The participant will receive a lump sum payment after the Plan Administrator has had reasonable time to consider and then approve the request. 

        The
value of the Stock Account for purposes of processing a hardship cash withdrawal is equal to the number of Stock Units in the Stock Account multiplied by the Fair Market Value on the
date on which the hardship withdrawal is processed. The value of the Cash Account for purposes of processing a hardship cash withdrawal is equal to the balance in the Cash Account on the date on which
the hardship withdrawal is processed. 

        13.    Change in Control.    The terms of this Section 13 shall immediately become operative, without further
action or consent by any person or entity, upon a Change in Control, and once operative shall supersede and control over any other provisions of this Plan. Upon the occurrence of a Change in Control
followed within one year of the date of such Change in Control by the participant's cessation of Board membership for any reason, such participant 

6

 

shall
be paid the value of his/her Plan Accounts in a single, lump sum cash payment. The value of the Stock Account, which is equal to the number of Stock Units in the Stock Account multiplied by the
Fair Market Value on the date of the participant's cessation of Board membership, is transferred to the Cash Account on such date. Earnings are credited to the Cash Account through the date of
distribution. The value of the Cash Account that is payable in cash on the date of the single lump sum cash payment is equal to the balance in the Cash Account on the date that is no earlier than five
(5) calendar days prior to the day of such distribution. Such payment shall be made as soon as practicable, but in no event later than thirty (30) calendar days after the date of the
participant's cessation of Board membership. On or after a Change in Control, no action, including, but not by way of limitation, the amendment, suspension or termination of the Plan, shall be taken
which would affect the rights of any participant or the operation of this Plan with respect to the balance in the participant's Plan Accounts. 

        14.    Withholding.    Constellation Energy Group may withhold to the extent required by law all applicable income and
other taxes from amounts deferred or distributed under the Plan. 

        15.    Copies of Plan Available.    Copies of the Plan and any and all amendments thereto shall be made available to
all participants during normal business hours at the office of the Plan Administrator. 

        16.    Miscellaneous.    

          (i)  Inalienability of benefits—Except as may otherwise be required by law or court order, the interest of each
participant or beneficiary under the Plan cannot be sold, pledged, assigned, alienated or transferred in any manner or be subject to attachment or other legal process of whatever nature; provided,
however, that any applicable taxes may be withheld from any cash benefit payment made under this Plan. 

         (ii)  Controlling law—The Plan and its administration shall be governed by the laws of the State of Maryland,
except to the extent preempted by federal law. 

        (iii)  Gender and number—A masculine pronoun when used herein refers to both men and women and words used in the
singular are intended to include the plural, and vice versa, whenever appropriate. 

         (iv)  Titles and headings—Titles and headings to articles and sections in the Plan are placed herein solely for
convenience of reference and in any case of conflict, the text of the Plan rather than such titles and headings shall control. 

          (v)  References to law—All references to specific provisions of any federal or state law, rule or regulation
shall be deemed to also include references to any successor provisions or amendments. 

         (vi)  Funding and expenses—Benefits under the Plan are not vested or funded, and shall be paid out of the general
assets of Constellation Energy Group. To the extent that any person acquires a right to receive payments from Constellation Energy Group under this Plan, such rights shall be no greater than the right
of any unsecured general creditor of Constellation Energy Group. The expenses of administering the Plan will be borne by Constellation Energy Group. 

        (vii)  Not a contract—Participation in this Plan shall not constitute a contract of employment or Board membership
between Constellation Energy Group and any person and shall not be deemed to be consideration for, or a condition of, continued employment or Board membership of any person. 

       (viii)  Successors—In the event Constellation Energy Group becomes a party to a merger, consolidation, sale of
substantially all of its assets or any other corporate reorganization in which Constellation Energy Group will not be the surviving corporation or in which the holders of the common stock of
Constellation Energy Group will receive securities of another corporation (in any such case, the "New Company"), then the New Company shall assume the rights and obligations of Constellation Energy
Group under this Plan. 

7

 
 
 

Constellation Energy Group, Inc.
  Deferred Compensation Plan
  For Non-Employee Directors    
    
    Addendum    
    

The Board of Directors of Constellation Energy Group, Inc. has authorized an amendment to the Constellation Energy Group, Inc. Deferred Compensation Plan for
Non-Employee Directors, to be made effective January 1, 2005, to allow non-employee directors to defer all of their restricted stock award into deferred stock units. The
amount deferred is credited to the participant's Stock Account on January 1 (or, if later, the first day of the first month after the participant becomes a Director). A participant's Stock
Account shall be credited with Stock Units equal to the number of shares of Common Stock (including fractions of a share) that could have been purchased with the value of such deferred restricted
stock award, at Fair Market Value on such date. 

        If
a participant ceases to be a Director prior to December 31 of any calendar year, the participant will forfeit a pro-rated amount of the deferred restricted stock
award that was credited to the Stock Account during the calendar year. The amount forfeited shall equal the amount of the deferred restricted stock award credited during the calendar year times a
fraction, the numerator of which is the number of full calendar months in the calendar year after the participant's Board membership ceased, and the denominator of which is 12 (or, for a participant
who became a Director during the calendar year, the number of months during the calendar year after the participant became a Director (including the month Board membership commenced)). 

8

QuickLinks

CONSTELLATION ENERGY GROUP, INC. DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS

Constellation Energy Group, Inc. Deferred Compensation Plan For Non-Employee Directors Addendum

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