Document:

Exhibit 10.21

 

 

EMPLOYMENT AGREEMENT

by and between

WMG ACQUISITION CORP.

and

Edgar Bronfman, Jr.

 

THIS EMPLOYMENT AGREEMENT (this
“Agreement”) is entered into as of this 1st day of March, 2004 by and
between WMG Acquisition Corp., a Delaware corporation (the “Company”),
and Edgar Bronfman, Jr. (the “Executive”).

 

RECITALS:

 

WHEREAS, the Company, which is a direct or
indirect wholly owned subsidiary of WMG Holdings Corp., a Delaware corporation
(“Midco”), and an indirect majority owned subsidiary of WMG-Parent Corp., a
Delaware corporation (“Parent”), has entered into a Purchase Agreement (the “Purchase
Agreement”) with Time Warner Inc. dated as of November 24, 2003, whereby
the Company will purchase the “Warner Recorded Music Business” and the “WMG
Publishing Business” (as such terms are defined in the Purchase Agreement and
as referred to hereafter as the “Business”) from Time Warner Inc.; and

 

WHEREAS, the Company wishes to engage the
Executive to serve as its Chairman of the Board and Chief Executive Officer on
the terms and conditions contained herein and the Executive wishes to accept
such engagement on the terms and conditions contained herein.

 

AGREEMENT:

 

NOW, THEREFORE, for good and valuable
consideration, including the mutual covenants herein, the parties hereby agree
as follows:

 

1.                                       Employment
Period. This Agreement and the Executive’s employment with the Company
hereunder (hereinafter referred to as the “Employment Period”) shall be
effective on the “Closing Date” (as defined in the Purchase Agreement;
the Closing Date is hereinafter referred to as the “Effective Date,” and
is the date hereof) and, unless earlier terminated pursuant to Section 4
hereof, shall expire on the fourth anniversary of the Effective Date; provided
that the Employment Period shall be automatically extended by one year upon the
fourth anniversary of the Effective Date and upon each subsequent anniversary
of the Effective Date unless, no less than ninety (90) days prior to the fourth
anniversary of the Effective Date or any such subsequent anniversary either the
Company or the Executive gives the other party written notice of non-renewal in
accordance with Section 10(f) hereof, in which case the Employment Period shall
end on the anniversary of the Effective Date immediately following the receipt
of such notice.

 

 

2.                                  Position,
Duties and Representations.

 

(a)                             During
the Employment Period, the Executive shall be employed as the Chairman of the
Board and Chief Executive Officer of the Company and shall report solely to the
Board of Directors of the Company (the “Board”). The Executive shall be
responsible for oversight and management of all operations and activities of
the Company, Parent, Midco and the direct or indirect subsidiaries and
controlled affiliates of each of them (the “Company Group”), and all
employees of any member of the Company Group shall report, directly or
indirectly, to the Executive. The Executive’s services to the Company shall be
performed primarily at the offices of the Company located in New York City, subject
to travel requirements necessary to discharge the responsibilities and duties
assigned to the Executive hereunder.

 

(b)                            Excluding
periods of vacation, sick leave and disability to which the Executive is
entitled during the Employment Period, the Executive agrees, to the extent
necessary to discharge the responsibilities and duties assigned to the
Executive hereunder, to use the Executive’s best efforts to perform faithfully
and efficiently such responsibilities. During the Employment Period and the “Non-Competition
Period” (as defined in Section 6(a)), the Executive may (i) serve on corporate,
civic, educational, philanthropic or charitable boards or committees, (ii)
passively own not more than three percent (3%) of the outstanding capital stock
of any corporation whose stock is publicly traded, or (iii) manage personal
investments. In addition, during the Employment Period, the Executive may
engage in any other activity (other than as an employee) which is not
competitive with any activity of the Company Group (other than a de  minimis
activity of the Company Group) at the time the Executive commences engaging in
such activity, so long as such activity does not interfere with the performance
of the Executive’s responsibilities and duties hereunder, and the amount of
time the Executive spends on all such activities is insignificant.

 

(c)                             The
Executive represents and warrants to the Company that, other than prohibitions
generally imposed by law, there is no “Contract” (as defined in Section 6(d))
or other restriction or agreement in effect that would prohibit or otherwise
limit the Executive’s ability to enter into or negotiate this Agreement, become
an employee or officer of the Company or to discharge the responsibilities and
duties assigned to the Executive hereunder.

 

3.                                  Compensation.

 

(a)                             Base
Salary. During the Employment Period, the Company shall pay to the
Executive a base salary at an annual rate equal to $1,000,000 (“Base Salary”),
payable in regular installments in accordance with the Company’s usual payroll
practices; provided, however, that Base Salary shall be reviewed
for discretionary increases by the Board or the Compensation Committee thereof
no less often than annually commencing no later than the first anniversary of
the Effective Date.

 

(b)                            Annual
Bonus. During the Employment Period, the Executive shall be eligible to
receive an annual cash bonus (the “Annual Bonus”) in

 

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respect of each full or partial fiscal year of the Company (a “Fiscal
Year” which, as
of the Effective Date, is the period December 1 through November 30)
ending during the Employment Period, with a target of 300% of Base Salary, a
minimum of $0 and a maximum of 600% of Base Salary (pro rated for partial
Fiscal Years of employment), based on the attainment of Company, individual,
Company Group or other performance targets established by the Board or the
Compensation Committee thereof in consultation with the Executive.

 

(c)                             Special
Bonus. The Company expects to implement a special bonus plan or arrangement
(the “Special Bonus Plan”) for senior management based upon costs
savings attained in respect of the Company Group and/or members or operations
thereof, in amounts and in accordance with criteria established by the Board or
Compensation Committee thereof. The Executive shall be eligible to participate
in the Special Bonus Plan, if so established, on terms and conditions
substantially the same as those applicable to other senior executives of the
Company determined by the Board or the Compensation Committee; provided that
the Executive acknowledges that the amount awarded to any particular executive
may depend, wholly or in part, on the cost savings within the such executive’s
area of responsibility.

 

(d)                            Equity.
On the Effective Date, the Executive shall purchase from the Company, and the
Company shall sell to the Executive, shares of Parent’s Class A Common Stock
(the “Restricted Stock Award”) representing as of the Effective Date
3.02% of the fully diluted Class A Common Stock of Parent (2.75% of the fully
diluted Common Stock of the Parent, including both Class A and Class L Common
Stock of Parent), which award shall be governed by the Restricted Stock Award
Agreement annexed hereto as Exhibit A.

 

(e)                             Benefit
Plans. During the Employment Period, the Executive shall be eligible to
participate in the employee benefit plans and arrangements of the Company and
its affiliates on terms and conditions no less favorable in the aggregate than
those generally provided to other senior executive officers of the Company.

 

(f)                               Business
Expenses. During the Employment Period, the Executive shall be entitled to
receive prompt reimbursement for all reasonable out-of-pocket expenses incurred
by the Executive in the performance of his duties hereunder, subject to the
submission of such written documentation as the Company may reasonably require
in accordance with its standard expense reimbursement practices and policies.
Without limiting the generality of the foregoing, the Company will reimburse
the Executive for first class travel and first class hotel accommodations in
connection with travel undertaken in the performance of his duties hereunder.

 

(g)                            Vacation.
During the Employment Period, the Executive shall be entitled to no less paid
vacation for each year commencing with the Effective Date as is made available
generally to senior executives of the Company; provided that such paid vacation
shall be no less than four weeks per year; and provided further that unused
vacation pay in any year may not be carried forward.

 

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4.                                  Termination.
The Employment Period and the Executive’s employment with the Company shall
terminate under the following circumstances:

 

(a)                             Death
or Disability. The Executive’s employment and the Employment Period shall
terminate automatically upon the Executive’s death. The Company may terminate
the Executive’s employment and the Employment Period after having established
the Executive’s Disability, by giving to the Executive a “Notice of Termination”
(as defined in Section 4(d)). For purposes of this Agreement, “Disability”
means personal injury, illness or other cause which has rendered the Executive
unable to substantially perform his material duties and responsibilities hereunder
for a period of 120 consecutive days, or 120 out of 180 consecutive days, as
determined jointly by a physician selected by the Company reasonably acceptable
to the Executive (or, if he is incapacitated, his legal representative) and a
physician selected by the Executive (or, if he is incapacitated, his legal
representative) and reasonably acceptable to the Company. If such physicians
cannot agree as to whether the Executive has suffered a Disability, they shall
jointly select a third physician who shall make such determination.

 

(b)                            With
or Without Cause. The Company may terminate the Executive’s employment and
the Employment Period with or without “Cause” (as defined below) by giving to
the Executive a Notice of Termination. For purposes of this Agreement, “Cause”
means (i) the willful and continued failure of the Executive to perform
substantially his material duties with the Company (other than any such failure
resulting from the Executive’s incapacity due to physical or mental illness)
after a written demand for performance is delivered to the Executive by the
Board which identifies the manner in which the Board believes that the
Executive has not performed the Executive’s duties and the Executive, after a
period established by the Board and communicated in writing to the Executive
(which period may be no less than 20 days), has failed to cure such failure to
the reasonable satisfaction of the Board, (ii) the willful engaging by the
Executive in gross misconduct which is demonstrably and materially injurious to
the Company or its affiliates, (iii) the Executive’s conviction of, or pleading
guilty to, a felony involving moral turpitude or dishonesty or (iv) a
determination by the Board that any of the Executive’s representations made in
Section 2(c) of this Agreement were untrue when made. A termination of the
Executive by the Company for Cause shall not be effective unless and until the
Company has delivered to the Executive, along with the Notice of Termination, a copy of a resolution duly adopted by
a majority of the Board (excluding the Executive, if he is a member of the
Board) stating that the Board has determined to terminate the Executive for
Cause; provided, however, that no such resolution shall be
permitted to be adopted without the Company having afforded the Executive the
opportunity to make a presentation to the Board and to answer any questions its
members may ask him.

 

(c)                             With
or Without Good Reason. The Executive may terminate his employment and the
Employment Period with or without “Good Reason” (as defined below) by giving to
the Company a Notice of Termination. For purposes of this Agreement, “Good
Reason” means, without the Executive’s express written consent:

 

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(i)                                (x)
a change in the duties or responsibilities (including reporting
responsibilities) of the Executive that is inconsistent in any material and
adverse respect with the Executive’s position(s), duties, responsibilities or
status with the Company and its affiliates on the Effective Date, or (y) an
adverse change in the Executive’s title or offices, including but not limited
to the Executive no longer serving as Chief Executive Officer of the Company;

 

(ii)                             any
failure by the Company to comply with any of the provisions of Section 3 of
this Agreement, including but not limited to any reduction in the target or
maximum attainable Annual Bonus;

 

(iii)                          any
willful breach by the Company of any other
material obligation of the Company under this Agreement;

 

(iv)                         the
Company requiring the Executive to be based at any office or location other
than at an office commensurate with the Executive’s position at the
headquarters of the Company in the Borough of Manhattan, New York;

 

(v)                            any
purported termination by the Company of the Executive’s employment otherwise
than as permitted by this Agreement, it being understood that any such
purported termination shall not be effective for any purpose of this Agreement;

 

(vi)                         a failure
of Executive to be elected or reelected to the Board, or as Chairman thereof;
or

 

(vii)                      a failure by
the Company to cause any successor to expressly assume this Agreement pursuant
to Section 8(c) hereof.

 

A termination by the Executive with Good Reason shall be effective only
if the Executive delivers to the Company a Notice of Termination for Good
Reason within 60 days after learning of the circumstances constituting Good
Reason. Notwithstanding the above, if (A) such Notice of Termination describes,
as Good Reason, only one or more of the circumstances described in clause (i),
(ii), (iii), (iv) and (vi) of this Section 4(c) and (B) within 30 days
following the delivery of such Notice of Termination, the Company has cured
such circumstances to the reasonable satisfaction of the Executive, then such
Notice of Termination shall be ineffective and no Good Reason shall be deemed
to exist. The parties agree and acknowledge that, solely for purposes of this
Agreement, the cessation of the Executive’s employment with the Company at the
end of the Employment Period (or such other time as the Company and the
Executive may agree) following Executive’s provision to the Company of a
written notice of non-renewal of the Employment Period, as provided in Section
1 of this Agreement, shall be deemed to be a termination by the Executive
without Good Reason.

 

(d)                                 Notice
of Termination. Any termination by the Company with or without Cause or on
account of Disability, or by the Executive with or without

 

5

 

Good Reason, shall be communicated by a Notice of Termination to the
other party given in accordance with Section 10(f). For purposes of this
Agreement, a “Notice of Termination “ means a written notice which (i)
indicates the specific termination provision of this Agreement relied upon, (ii)
sets forth in reasonable detail the facts and circumstances claimed to provide
a basis for termination of the Executive’s employment under the provision so
indicated and (iii) if the termination date is other than the date of receipt
of such notice, specifies the proposed termination date; provided, however,
that the information in clause (ii) shall not be required in the event of any
termination by the Company without Cause or by the Executive without Good
Reason.

 

5.                                       Obligations
of the Company Upon Termination.

 

(a)                             Death
or Disability. If the Executive’s employment is terminated by reason of the Executive’s death or on account
of Disability, the Company shall:

 

(i)                                pay
to the Executive or the Executive’s estate, as applicable, a lump sum cash
payment within ten (10) days after such termination equal to, to the extent not
previously paid: (A) the Executive’s Base Salary through the end of the month
in which such termination occurred, (B) any earned and accrued but unpaid
Annual Bonus for any Fiscal Year ending prior to such termination, (C) any
earned and accrued but unpaid Special Bonus, (D) any accrued vacation pay, (E)
any unpaid reimbursable business expenses due to the Executive in accordance
with Section 3(h) (the amounts described in the preceding clauses (A) - (E),
the “Accrued Amounts”), (F) the Executive’s Base Salary for an
additional twelve month period and (G) a pro-rated target Annual Bonus for the
Fiscal Year of termination determined by multiplying (x) such target Annual
Bonus by (y) a fraction, the numerator of which is the number of days in the
Fiscal Year that the Executive was employed by the Company and the denominator
of which is 365;

 

(ii)                             provide
those death or disability benefits to which the Executive is entitled at the
date of the Executive’s death or Disability under any benefit plans, policies
or arrangements of the Company; and

 

(iii)                          in
the case of a termination on account of Disability, provide to the Executive
and the Executive’s spouse and dependents, as applicable, at the Company’s
expense, continued participation in the Company’s group health plan (or
comparable medical coverage) until the earlier of the date the Executive
attains age 65 or the date the Executive becomes eligible for coverage under
the group health plan of another employer.

 

(b)                                 Cause
or Without Good Reason. If the Executive’s employment shall be terminated
(i) by the Company with Cause, or (ii) by the Executive without Good Reason,
the Company shall pay to the Executive a lump sum cash payment

 

6

 

within ten (10) days after such termination equal to, to the extent not
previously paid, the Accrued Amounts.

 

(c)                                  Without
Cause or With Good Reason. If the Executive’s employment shall be
terminated (i) by the Company without Cause or (ii) by the Executive with Good
Reason, the Executive shall be entitled to receive the following payments and
benefits:Amounts;

 

(i)                                     to
the extent not previously paid, the Accrued

 

(ii)                                  an
amount equal to the sum of: (i) the Executive’s Base Salary and (ii) the target
Annual Bonus for the Fiscal Year of such termination, payable in substantially
equal monthly installments on the first day of each of the first 12 calendar
months following termination (subject to the Executive’s continued compliance
with the covenants contained in Section 6 during such payment period);

 

(iii)                               a
pro-rated Annual Bonus for the Fiscal Year of termination determined by
multiplying (x) the actual Annual Bonus which the Executive would have earned
in respect of such Fiscal Year had he remained employed for the entire such
Fiscal Year by (y) a fraction, the numerator of which is the number of days in
such Fiscal Year that the Executive was employed by the Company and the
denominator of which is 365, payable at the time bonuses are generally payable
to the Company’s senior executives in respect of such Fiscal Year; and

 

(iv)                              The
Executive and the Executive’s spouse and dependents, as applicable, shall
continue to participate in the Company’s group health and life insurance plans
(or be provided comparable medical and life insurance coverage), at Company
expense, until the earlier of the first anniversary of such termination or the
date the Executive becomes eligible for coverage under the group health or life
insurance plan, as applicable, of another employer.

 

(d)                                 In
General. The Executive shall have no rights upon his termination of
employment with the Company, other than those set forth in each of Section
5(a), (b) or (c), as applicable, to any compensation or any other benefits from
the Company under this Agreement, provided that amounts which the Executive is
otherwise entitled to receive under any plan, program or arrangement of the
Company or any of its affiliates available to employees generally (other than
any severance plan or program), shall be payable in accordance with such plan,
program or arrangement.

 

6.                                       Restrictive
Covenants. Without in any way limiting or waiving any right or remedy
accorded to the Company or any limitation placed upon the Executive by law, the
Executive hereby agrees as follows:

 

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(a)                                  Non-Solicitation;
Non-Competition. The Executive agrees that during the Employment Period and
for 12 months after the expiration or termination thereof (the “Non-Competition
Period”), the Executive shall not, directly or indirectly:

 

(i)                                     hire,
make an offer of employment to, attempt to hire or assist in the hiring of, or
supervise, any employee at the level of Vice President or above, or any
employee whose primary responsibility is A&R or promotion irrespective of
level (each, a “Restricted Employee”), of any member of the Company
Group on the Executive’s own behalf, or on behalf or any person, firm or entity
(other than a member of the Company Group);

 

(ii)                                  attempt
to persuade or encourage any Restricted Employee to (1) terminate his
employment with any member of the Company Group, (2) refrain from extending his
employment with any member of the Company Group, (3) refrain from entering into
a new employment arrangement with any member of the Company Group or (4) enter
into any employment arrangement with any competitor of any member of the
Company Group;

 

(iii)                               hire,
make an offer of employment to, attempt to hire or assist in the hiring of, or
enter into, or solicit or offer to enter into, any “Contract” (as
hereinafter defined) with, any vendor or customer of the Company Group,
including any “Artist” (as hereinafter defined), on the Executive’s own
behalf or on behalf of any person, firm or entity, if the activities which are
the subject of such hiring, employment or Contract are in any way competitive
with any member of the Company Group; or

 

(iv)                              attempt
to persuade or encourage any vendor or customer of the Company Group, including
any Artist, to (1) terminate his or her relationship or Contract with any
member of the Company Group, (2) refrain from extending his or her relationship
or Contract with any member of the Company Group, (3) refrain from entering
into a new Contract with any member of the Company Group or (4) enter into any
relationship or Contract with any competitor of any member of the Company
Group; or

 

(v)                                 whether
as owner, partner, investor, consultant, agent, employee, co-venturer or
otherwise, compete with any member of the Company Group or take active steps
with others to plan for any business competitive with any member of the Company
Group. Specifically, but without limiting the foregoing, the Executive agrees
not to engage in any manner in any activity that is directly or indirectly competitive
with the business of any member of the Company Group as conducted or under
consideration (as represented by a written proposal) at the time of the
termination of the Executive’s employment.

 

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(b)                                 Confidentiality.
The Executive shall not at any time disclose or reveal to any person, firm or
entity, or make use of (otherwise than for the benefit of the Company or its
affiliates), any trade secrets or information of a secret or confidential
nature, including without limitation, matters of a business nature, such as
information about costs, profits, markets, leases, details of recording
agreements, distribution agreements, customer Contracts, manufacturing
processes, financial information, technical and production know-how,
developments, inventions, processes or administrative procedures, concerning
the business or affairs of any member of the Company Group, which the Executive
may have acquired in the course of or incident to the Executive’s employment
with the Company, and the Executive confirms that all such information (“Confidential
Information”) is the exclusive property of the Company and/or such member
of the Company Group. This paragraph shall not apply to disclosures by the
Executive (i) in the proper performance of his obligations under this Agreement
during the Employment Period or to officers, employees, lawyers and accountants
of any member of the Company Group, (ii) to the Executive’s legal counsel in
connection with seeking legal advice related hereto, (iii) to the Executive’s
accountants in connection with seeking financial or tax advice related hereto,
or (iv) as required by law, a court of competent jurisdiction or regulatory
agency or other governmental authority. Nothing herein shall prevent the
Executive, subsequent to the termination or expiration of his employment
hereunder, from using or availing himself of general technical skills,
knowledge and experience, including that pertaining to or derived from the
non-confidential aspects of any member of the Company Group. The term “Confidential
Information” shall not include information generally available and known to the
public other than as a result of a breach of this Section 6(b) by the
Executive. The Executive agrees to hold as Company property all Confidential
Information and all books, papers and other data, and all copies thereof and
therefrom, in any way relating to the businesses of any member of the Company
Group, whether made or received by the Executive, and, on termination of employment,
or upon demand by the Company, to deliver the same to the Company.

 

(c)                                  Intellectual
Property. Any copyrights, “Musical Compositions” (as hereinafter
defined), trademarks, patents, patent applications, inventions, developments
and processes which the Executive during the Employment Period may develop
which may reasonably be expected to be usable by any member of the Company
Group in the ordinary course of its business shall belong to Company and/or the
relevant member of the Company Group. Furthermore, the Executive agrees to
execute any copyright assignment or other instruments as any member of the
Company Group may deem reasonably necessary (at such member’s expense) to
evidence, establish, maintain, protect, enforce, and/or defend any and all of member
of the Company Group’s interests under this Section 6(c). All such interests
shall vest in the relevant member of the Company Group whether or not such
instrument is requested, executed or delivered. If the Executive shall not so
execute and deliver any such instrument after reasonable notice and opportunity
to do so, the Company shall have the right to do so in the Executive’s name and
the Company is hereby irrevocably appointed the Executive’s attorney-in-fact
for such purposes, which power is coupled with an interest.

 

9

 

(d)                                 Definitions.
For the purposes of Section 6 of this Agreement, the following definitions
shall apply:

 

(i)                                     “Artists”
means (A) any singer or musician, or other person furnishing the services or
works of an artist to any member of the Company Group pursuant to a Contract
with any member of the Company Group pursuant to which such singer, musician or
other person is required to provide exclusive services for the making or
delivering of master “Recordings” (as hereinafter defined) to such
Restricted Operation or (B) any writer, producer or other talent who has
entered into a Contract with any member of the Company Group or who has
otherwise provided services to any member of the Company Group excepting, in
the case of both clauses (A) and (B) above, any such person who is required to
provide services to any person or party other than any member of the Company
Group on an exclusive basis pursuant to a Contract that was not entered into in
connection with any violation by the Executive of this Agreement.

 

(ii)                                  “Contract”
means any contract, other agreement, commitment; binding arrangement, binding
understanding or binding relationship (whether written or oral and whether
express or implied).

 

(iii)                               “Musical
Compositions” means a musical composition or medley consisting of words
and/or music, or any dramatic material and bridging passages whether in form of
instrumental and/or vocal music, prose or otherwise, irrespective of length.

 

(iv)                              “Recordings”
means any recording of sound, whether or not coupled with a visual image, by
any method or format and on any substance or material, whether now or hereafter
known, which is used or useful in the
recording, production and/or manufacture of Records or for any other
exploitation of sound, excluding television and movies (other than music videos
or the promotion thereof), consumer electronics and electronic games.

 

(v)                                 “Records”
means gramophone discs, magnetic tapes, compact discs, other storage media and
any other device or appliance used for emitting sounds (whether or not
accompanied by visual images) incorporating the Recordings.

 

(e)                                  Severability;
Blue-Pencilling. Each section, subsection or part thereof under this
Section 6 constitutes an entirely separate and independent restriction. If any
of such covenants or such other provisions of this Agreement are found to be
invalid or unenforceable by a final determination of a court of competent
jurisdiction (i) the remaining terms and provisions hereof shall be unimpaired
and (ii) the invalid or unenforceable term or provision shall be deemed
replaced by a term or

 

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provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision.

 

(f)                                    Necessity;
Enforcement. The parties hereto have considered carefully the necessity for
protection of each member of the Company Group against the Executive’s
disclosures of Confidential Information and other actions referred to in this
Section 6, and the nature and scope of such protection. The parties agree and
acknowledge that the duration and scope applicable to the covenants set forth
in this Section 6 are fair, reasonable and necessary, and that the Executive
has received adequate consideration for such obligations. Accordingly, the
Executive agrees that, in addition to any other relief to which the Company
maybe entitled, the Company shall be entitled to seek injunctive relief
(without the requirement of posting any bond or other security) from a court of
competent jurisdiction for the purpose of restraining the Executive from any
actual or threatened breach of the covenants contained in this Section 6.

 

7.                                       Indemnity.
To the fullest extent permitted by applicable law, the Company shall indemnify,
defend and hold the Executive harmless from and against any and all claims,
demands, actions, causes of action, liabilities, losses, judgments, fines,
costs and expenses (including, without limitation, the reimbursement of
reasonable attorneys’ fees, settlement expenses, punitive damages and the
advancement of legal fees and expenses, as such fees and expenses are incurred
by the Executive) arising from or relating to (a) claims relating to any member
of the Company Group (other than claims by a member of the Company Group) or
(b) the Executive’s service with or status as an officer, director, employee,
agent or representative of any member of the Company Group or in any other
capacity in which the Executive serves or have served at the request of the
Board or the CEO for the benefit of any member of the Company Group. Without
limiting the foregoing, in connection with any such claim, demand, action,
cause of action, liability, loss, judgment or fine, the Executive shall have
the right (i) to be represented by separate counsel reasonably acceptable to
the Company, at the Company’s sole cost and expense, and (ii) to have the
Company pay the cost and expense of any bond that the Executive may be required
to post in order to appeal an adverse decision. The Company’s obligations under
this Section 7 shall be in addition to, and not in derogation of, any other
rights the Executive may have against the Company to indemnification or
advancement of expenses, whether by statute, contract or otherwise (including,
without limitation, the Executive’s entitlement to indemnification and the
payment or reimbursement of expenses (including attorneys’ fees and
expenses) to the extent provided in and/or permitted by the Certificate of
Incorporation and By-Laws of the Company. The Company shall maintain directors
and officers liability insurance in commercially reasonably amounts (as
reasonably determined by the Board), and the Executive shall be covered under
such insurance to the same extent as any other senior executive of the Company.
The Executive hereby undertakes to repay any advances paid to him pursuant to
this Section 7 if a final judgment adverse to the Executive establishes that he
is not entitled to be indemnified under this Agreement or otherwise. The
Company hereby acknowledges that the undertaking set forth in the previous
sentence satisfies all requirements for any similar undertakings in the by-laws
or other corporate documents of the Company. The Company shall not take any
action that would impair the Executive’s right to indemnification, other than
in connection with a claim by the

 

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Company that the Executive is not entitled to indemnification in
accordance with the standards set forth in this Section 7.

 

8.                                       Successors.

 

(a)                                  This
Agreement is personal to the Executive and without the prior written consent of
the Company shall not be assignable by the Executive otherwise than by will or
the laws of descent and distribution. This Agreement shall inure to the benefit
of and be enforceable by the Executive’s legal representatives.

 

(b)                                 This
Agreement shall inure to the benefit of and be binding upon the Company and its
successors and, other than as set forth in Section 8(c), shall not be
assignable by the Company without the prior written consent of the Executive
(which shall not be unreasonable withheld).

 

(c)                                  The
Company will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. As used in this
Agreement, “Company” shall mean the Company as hereinbefore defined and
any successor to its business and/or assets as aforesaid which assumes and
agrees to perform this Agreement by operation of law, or otherwise.

 

9.                                       [Deleted]

 

10.                                 Miscellaneous.

 

(a)                                  This
Agreement shall be governed by and construed in accordance with the laws of the
State of Delaware applicable to contracts made and performed entirely therein.
The parties hereto agree that exclusive jurisdiction of any dispute regarding
this Agreement shall be the state or federal courts located in New York, New
York.

 

(b)                                 Each
party hereto shall be responsible for its own fees and costs incurred in
connection with any action brought to enforce or avoid this Agreement or any provision
hereof.

 

(c)                                  In
the event of any termination of the Executive’s employment hereunder, the
Executive shall be under no obligation to seek other employment or otherwise
mitigate the obligations of the Company under this Agreement, and there shall
be no offset against amounts due the Executive under this Agreement on account
of future earnings by the Executive. Any amounts due to the Executive under
this Agreement upon termination of employment are considered to be reasonable
by the Company and are not in the nature of a penalty.

 

(d)                            The
captions of this Agreement are not part of the provisions hereof and shall have
no force or effect.

 

12

 

(e)                                  This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.

 

(f)                                    All
notices required or permitted by this Agreement to be given to any party shall
be in writing and shall be delivered personally, or sent by certified mail, return receipt
requested, or by Federal Express or similar overnight service, prepaid recorded
delivery, addressed as follows:

 

If to the Executive:

 

c/o Lexa Partners LLC 390 Park Avenue

New York, New York 10022

 

If to the Company:

 

WMG Acquisition Corp.

75 Rockefeller Plaza

New York, New York 10019

Attention: Board of Directors and General Counsel

 

and shall be deemed to have been duly given when so delivered
personally or, if mailed or sent by overnight courier, upon delivery; provided,
that, a refusal by a party to accept delivery shall be deemed to constitute
receipt.

 

(g)                                 The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement.

 

(h)                                 The
Company may withhold from any amounts payable under this Agreement such
Federal, state or local taxes as shall be required to be withheld pursuant to
any applicable law or regulation.

 

(i)                                     This
Agreement is the joint product of the Company and the Executive and each
provision hereof has been subject to the mutual consultation, negotiation and
agreement of the Company and the Executive and shall not be construed for or
against either party hereto.

 

(j)                                     Subject
to any other documents which may be entered into by the Executive and the
Company on or after the Effective Date (including without limitation the
Restricted Stock Award Agreement), this Agreement contains the entire agreement
and understanding of the parties hereto with respect to the subject matter
contained herein and, upon this Agreement becoming effective, supersedes all
prior communications, representations and negotiations in respect thereto,
whether or not in writing.

 

13

 

(k)                                  Notwithstanding
anything herein contained to the contrary, this Agreement shall not become
effective until and unless the Closing Date occurs, at which time it shall
become the binding and legal obligation of the parties hereto. If the Purchase
Agreement shall be abandoned in accordance with its terms then this Agreement
shall never become effective and shall be null and void.

 

(1)                                  This
Agreement has been approved by the shareholders of Parent in an effort to
satisfy the shareholder approval requirements of Section 280G of the Internal
Revenue Code of 1986, as amended. Neither the Company nor the Executive makes
any representation or warranty as to. whether such approval does in
fact satisfy such requirements.

 

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

 

 

	
   

  	
   

  	
   

  
	
   

  	
  Edgar Bronfinan, Jr.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  WMG ACQUISITION CORP.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
					

 

14Exhibit 10.22

 

 

EXECUTION VERSION

 

EMPLOYMENT AGREEMENT

by and between

WMG ACQUISITION CORP.

and

Lyor Cohen

 

THIS EMPLOYMENT AGREEMENT (this
“Agreement”) is entered into as of this 25th day of January, 2004 by and
between WMG Acquisition Corp., a Delaware corporation (the “Company”),
and Lyor Cohen (the “Executive”).

 

RECITALS:

 

WHEREAS, the Company, which is a direct or indirect wholly owned
subsidiary of WMG Holdings Corp., a Delaware corporation (“Midco”), and
an indirect wholly owned subsidiary of WMG Parent Corp., a Delaware corporation
(“Parent”), has entered into a Purchase Agreement (the “Purchase Agreement”)
with Time Warner Inc. dated as of November 24, 2003, whereby the Company will
purchase the “Warner Recorded Music Business” and the “Warner Music Publishing
Business” (as such terms are defined in the Purchase Agreement and as referred
to hereafter as the “Business”) from Time Warner Inc.; and

 

WHEREAS, the Company wishes to engage the Executive to serve as
Chairman and Chief Executive Officer of the United States recorded music
operation of the Warner Recorded Music Business (the “Division”) on the
terms and conditions contained herein and the Executive wishes to accept such
engagement on the terms and conditions contained herein.

 

AGREEMENT:

 

NOW, THEREFORE, for good and valuable consideration, including the
mutual covenants herein, the parties hereby agree as follows:

 

1.                                       Employment
Period. This Agreement and the Executive’s employment with the Company
hereunder (hereinafter referred to as the “Employment Period”) shall be
effective on the “Closing  Date” (as defined in the Purchase
Agreement; the Closing Date is hereinafter referred to as the “Effective Date”)
and, unless earlier terminated pursuant to Section 4 hereof, shall expire on
the fourth anniversary of the Effective Date; provided that the
Employment Period shall be automatically extended by one year upon the fourth
anniversary of the Effective Date and upon each subsequent anniversary of the
Effective Date unless, no less than ninety (90) days prior to the fourth
anniversary of the Effective Date or any such subsequent anniversary either the
Company or the Executive gives the other party written notice of non-renewal in
accordance with Section 9(e) hereof, in which case the Employment Period shall
end on the anniversary of the Effective Date immediately following the receipt
of such notice.

 

 

2.                                       Position,
Duties  and  Representations.

 

(a)                                  During
the Employment Period, the Executive shall be employed as the Chairman and
Chief Executive Officer of the Division and shall report solely to the Chief
Executive Officer of the Company (the “CEO”). The Executive shall be
responsible for oversight and management of all operations and activities of
the Division and any activities consistent therewith and related thereto
assigned to the Executive by the CEO, and all employees of the Division shall
report, directly or indirectly, to the Executive (and, through the Executive,
to the CEO), and to no other direct report of the CEO. The Executive’s services
to the Company shall be performed primarily at the offices of the Company
located in New York City, subject to travel requirements necessary to discharge
the responsibilities and duties assigned to the Executive hereunder.

 

(b)                                 Excluding
periods of vacation, sick leave and disability to which the Executive is
entitled during the Employment Period, the Executive agrees, to the extent
necessary to discharge the responsibilities and duties assigned to the
Executive hereunder, to use the Executive’s best efforts to perform faithfully
and efficiently such responsibilities. During the Employment Period, the
Executive may (i) serve on corporate, civic, educational, philanthropic or
charitable boards or committees, (ii) passively own not more than three percent
(3%) of the outstanding capital stock or any corporation whose stock is
publicly traded, (iii) manage personal investments or (iv) engage in any other
activity (other than as an employee) which is not competitive with any activity
of the Company, and Division or the Business (other than a de  minimis
activity of the Company, and Division or the Business) at the time the
Executive commences engaging in such activity, so long as such activity does
not interfere with the performance of the Executive’s responsibilities and
duties hereunder, and the amount of time the Executive spends on all such
activities is insignificant.

 

(c)                                  The
Executive represents and warrants to the Company that, other than prohibitions
generally imposed by law, there is no “Contract” (as defined in Section 6(d))
or other restriction or agreement in effect that would prohibit or otherwise
limit the Executive’s ability to enter into or negotiate this Agreement, become
an employee or officer of the Company or to discharge the responsibilities and
duties assigned to the Executive hereunder, other than as set forth in Section
5(e) of the Employment Agreement entered into in July 1999 between the
Executive and Universal Music Group, Inc. (the “UMG Agreement”). The
Executive further represents and warrants to the Company that the only
restrictions, whether in a Contract or otherwise, prohibiting or limiting him
from soliciting, retaining, hiring or entering into a Contract of any type with
employees, writers, producers, recording artists or other talent on or after the Effective Date are
contained in Section 5(e) of the UMG Agreement, and that a complete and accurate copy of such
Section 5(e) has been disclosed to the Company.

 

3.                                       Compensation.

 

(a)                                  Base
Salary. During the Employment Period, the Company shall pay to the
Executive a base salary at an annual rate equal to (i) $1,000,000 during

 

2

 

the first twelve months of the Employment Period and (ii) $1,500,000
for the remainder of the Employment Period (“Base  Salary”),
payable in regular installments in accordance with the Company’s usual payroll
practices; provided, however, that Base Salary shall be reviewed
for discretionary increases by the Board of Directors of the Company (the “Board”)
or the Compensation Committee thereof no less often than annually commencing in
respect of the third year following the Effective Date.

 

(b)                                 Signing
Bonus. On or immediately following the Effective Date the Company shall
pay to the Executive a cash signing bonus equal to the greater of (i) $1
million or (ii) 59% of the “Initial Value” (as defined in Section 1 of the
Restricted Stock Award Agreement annexed hereto as Exhibit A) of the “Restricted
Stock Award” (as defined in Section 3(f) of this Agreement) on the date of
grant, as reported to the Executive by the Board in accordance with the second
sentence of Section 1 of such Restricted Stock Award Agreement. The signing
bonus is not contingent on the performance of services by the Executive.

 

(c)                                  Annual
Bonus. During the Employment Period, the Executive shall be eligible to
receive an annual cash bonus (the “Annual Bonus”) in respect of each
full or partial fiscal year of the Company (a “Fiscal Year” which, as of
the Effective Date, is the period December 1 through November 30) ending during
the Employment Period, with a target of $2.5 million, a minimum of $0 and a
maximum of $5 million (pro rated for partial Fiscal Years of employment), based
on the attainment of Company, individual, Division and/or Business performance
targets established by the Board or the Compensation Committee thereof in
consultation with the Executive; provided; however, that the
Annual Bonus in respect of the first Fiscal Year ending after the Effective
Date shall be no less than $2.5 million, and shall not be subject to
pro-ration.

 

(d)                                 Special
Bonus. The Company expects to implement a special bonus plan or arrangement
(the “Special Bonus Plan”) for senior management based upon costs
savings attained in respect of the Division, the Company and/or the Business,
in amounts and in accordance with criteria established by the Board or
Compensation Committee thereof. The Executive shall be eligible to participate
in the Special Bonus Plan, if so established, on terms and conditions
substantially the same as those applicable to other senior executives of the
Company determined by the Board or the Compensation Committee; provided that
the Executive acknowledges that the amount awarded to any particular executive
may depend, wholly or in part, on the cost savings within the such executive’s
area of responsibility.

 

(e)                                  Liquidity
Event  Bonus.

 

(i)                                     The
Executive shall receive a one-time cash bonus (the “Liquidity Event Bonus”)
upon the occurrence of a Bonus Liquidity Event which results in a cash return to
the Investors in respect of Investor Equity, after taking into account the
Pre-Event Investor Cash Return, equal to or in excess of one and one-half times
the Investment and less

 

3

 

than three times the Investment, in accordance with the following
schedule:

 

	
  Investor Return

  	
   

  	
  Liquidity
  Event Bonus Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  At least 1.5x Investment but less than 2.0x Investment

  	
   

  	
  $5.0 million

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  At least 2.0x Investment but less than 2.5x Investment

  	
   

  	
  $7.5 million

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  At least 2.5x Investment but less than 3.0x Investment

  	
   

  	
  $10 million

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  3x Investment or above

  	
   

  	
  $0

  	
   

  

 

(ii)                                  Notwithstanding
Section 3(e)(i) above, if a Liquidity Event Bonus is paid to the Executive, and
subsequent to the Bonus Liquidity Event resulting in such payment a 3X
Restricted Stock Liquidity Event occurs, then the amount previously paid to the
Executive as the Liquidity Event Bonus shall be repaid by the Executive to the
Company upon the consummation of such 3X Restricted Stock Liquidity Event in
the form, as elected by the Executive, of cash, securities of the Company or
any consideration received by the Executive in connection with the 3X
Restricted Stock Liquidity Event (the Fair Market Value of any such form of
payment other than cash shall be as set forth in Section 3(e)(iii)(3) below); provided,
however, that if the Executive demonstrates to the reasonable
satisfaction of the Company that the after-tax cost to him of such repayment or
reduction is greater than the portion of the previously paid Liquidity Event
Bonus retained by the Executive after payment of all taxes thereon, the
repayment or reduction obligation shall be reduced accordingly until such
after-tax cost equals such retained portion of the previously paid Liquidity
Event Bonus.

 

(iii)                               For
purposes of this Section 3(e), and also as and if used elsewhere in this
Agreement, the following terms shall have the following meanings:

 

(1)                                  “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 cash consideration is paid
to Investors in respect of the Investor Equity.

 

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

 

4

 

(3)                                  “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, in the Executive’s sole
discretion, an investment bank or other valuation firm chosen by the Executive
from among a list of no less than five such banks and/or firms (all of which
must be experienced in the valuation of privately held companies) provided to
the Executive by the Company; provided that, in determining Fair Market Value
of the securities of any member of the “Parent Group” (as defined below), the
chosen investment bank or valuation firm shall be instructed to use a
methodology which takes into account the free cash flow, revenue and EBITDA and
such other methodologies and characteristics as may be relevant.

 

(4)                                  “Investment”
means the aggregate investment by the Investors in the equity securities of any
member of the Parent Group on and prior to the Effective Date, including
expenses, which is anticipated to be approximately $1.4 billion.

 

(5)                                  “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 (i) purchased or otherwise received by the Investors on
or prior to the Effective Date or (ii) received by the Investors following the
Effective Date, without cost to the Investors, in respect of the equity
securities described in the preceding clause (i).

 

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

 

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

 

5

 

(8)                                  “Pre-Event
Investor Cash Return” shall mean all cash received by the Investors in
respect of the Investor Equity prior to the applicable Bonus Liquidity Event

 

(9)                                  “3X
Restricted Stock Liquidity Event” shall have the meaning set forth in the
Restricted Stock Award Agreement annexed hereto as Exhibit A.

 

(f)                                    Equity.
On the Effective Date, the Company shall cause to be granted to the Executive,
without cost to the Executive, shares of Parent’s Class A Common Stock (the “Restricted
Stock Award”) representing as of the Effective Date 2.198% of the fully
diluted Class A Common Stock of the Company (2.0% of the fully diluted Common
Stock of the Parent, including both Class A and Class L Common Stock of
Parent), which award shall be governed by the Restricted Stock Award Agreement
annexed hereto as Exhibit A; provided that the Company and the Executive
acknowledge that the Stockholders’ Agreement described in the Restricted Stock
Award Agreement as Exhibit A thereto has not been prepared as of the date of
this Agreement.

 

(g)                                 Benefit
Plans. During the Employment Period, the Executive shall be eligible to
participate in the employee benefit plans and arrangements of the Company and
its affiliates on terms and conditions no less favorable in the aggregate than
those generally provided to other senior executive officers of the Company.

 

(h)                                 Business
Expenses. During the Employment Period, the Executive shall be entitled to
receive prompt reimbursement for all reasonable out-of-pocket expenses incurred
by the Executive in the performance of his duties hereunder, subject to the
submission of such written documentation as the Company may reasonably require
in accordance with its standard expense reimbursement practices and policies.
Without limiting the generality of the foregoing, the Company will reimburse
the Executive for first class travel and first class hotel accommodations in
connection with travel undertaken in the performance of his duties hereunder.

 

(i)                                     Vacation.
During the Employment Period, the Executive shall be entitled to no less paid
vacation for each year commencing with the Effective Date as is made available
generally to senior executives of the Company; provided that such paid vacation
shall be no less than four weeks per year; and provided further that unused
vacation pay in any year may not be carried forward.

 

4.                                       Termination.
The Employment Period and the Executive’s employment with the Company shall
terminate under the following circumstances:

 

(a)                                  Death
or Disability. The Executive’s employment and the Employment Period shall
terminate automatically upon the Executive’s death. The Company may terminate
the Executive’s employment and the Employment Period after having established
the Executive’s Disability, by giving to the Executive a “Notice of Termination” (as defined in Section 4(d)). For
purposes of this Agreement, “Disability”

 

6

 

means personal injury, illness or other cause which has rendered the
Executive unable to substantially perform his material duties and
responsibilities hereunder for a period of 120 consecutive days, or 120 out of
180 consecutive days, as determined jointly by a physician selected by the
Company reasonably acceptable to the Executive (or, if he is incapacitated, his
legal representative) and a physician selected by the Executive (or, if he is
incapacitated, his legal representative) and reasonably acceptable to the
Company. If such physicians cannot agree as to whether the Executive has
suffered a Disability, they shall jointly select a third physician who shall
make such determination.

 

(b)                                 With
or Without Cause. The Company may terminate the Executive’s employment and
the Employment Period with or without “Cause” (as defined below) by giving to
the Executive a Notice of Termination. For purposes of this Agreement, “Cause”
means (i) the willful and continued failure of the Executive to perform
substantially his material duties with the Company (other than any such failure
resulting from the Executive’s incapacity due to physical or mental illness)
after a written demand for performance is delivered to the Executive by the
Board which identifies the manner in which the Board believes that the
Executive has not performed the Executive’s duties and the Executive, after a
period established by the Board and communicated in writing to the Executive
(which period may be no less than 20 days), has failed to cure such failure to
the reasonable satisfaction of the Board, (ii) the willful engaging by the
Executive in gross misconduct which is demonstrably and materially injurious to
the Company or its affiliates, (iii) the Executive’s conviction of, or pleading
guilty to, a felony involving moral turpitude or dishonesty or (iv) a
determination by the Board that any of the Executive’s representations made in
Section 2(c) of this Agreement were untrue when made (provided that the Company
informs the Executive within ninety (90) days of the majority of the members of
the Board having actual knowledge of such breach). A termination of the
Executive by the Company for Cause shall not be effective unless and until the
Company has delivered to the Executive, along with the Notice of Termination, a
copy of a resolution duly adopted by a majority of the Board (excluding the
Executive, if he is a member of the Board) stating that the Board has
determined to terminate the Executive for Cause; provided, however,
that no such resolution shall be permitted to be adopted without the Company
having afforded the Executive the opportunity to make a presentation to the Board and to answer any questions its
members may ask him.

 

(c)                                  With
or Without Good Reason. The Executive may terminate his employment and the
Employment Period with or without “Good Reason” (as defined below) by giving to
the Company a Notice of Termination. For purposes of this Agreement, “Good
Reason” means, without the Executive’s express written consent:

 

(i)                           (x)
a change in the duties or responsibilities (including reporting
responsibilities) of the Executive that is inconsistent in any material and
adverse respect with the Executive’s position(s), duties, responsibilities or
status with the Company and its affiliates on the Effective Date, or (y) an
adverse change in the Executive’s title or offices;

 

7

 

(ii)                             any
failure by the Company to comply with any of the provisions of Section 3 of
this Agreement, including but not limited to any reduction in the target or
maximum attainable Annual Bonus;

 

(iii)                          any
willful breach by the Company of any other material obligation of the Company
under this Agreement;

 

(iv)                         the
Company requiring the Executive to be based at any office or location other
than at an office commensurate with the Executive’s position at the
headquarters of the Company in the Borough of Manhattan, New York;

 

(v)                            any
purported termination by the Company of the Executive’s employment otherwise
than as permitted by this Agreement, it being understood that any such
purported termination shall not be effective for any purpose of this Agreement;

 

(vi)                         a
failure by the Company to cause any successor to expressly assume this
Agreement pursuant to Section 8(c) hereof; or

 

(vii)                      any
United States recorded music operations of the Company, Parent, Midco or any of
their respective directly or indirectly owned subsidiaries shall not be
included within the Division.

 

Without limiting the generality of any of the foregoing, any change in
reporting line such that the Executive no longer reports to the CEO and any
appointment of any co-Chief Executive Officer of the Division shall constitute
Good Reason, but the appointment of a President or Chief Operating Officer of
the Company shall not constitute Good Reason so long as the Executive continues
to report to the CEO and so long as subparagraphs (i) through (vii) above are
not implicated by such appointment.

 

A termination by the Executive with Good Reason shall be effective only
if the Executive delivers to the Company a Notice of Termination for Good
Reason within 60 days after learning of the circumstances constituting Good
Reason; provided, however, that if such Notice of Termination
describes, as Good Reason, only one or more of the circumstances described in
clause (i), (ii), (iii) and (iv) of this Section 4(c) and, within 30 days
following the delivery of such Notice of Termination, the Company has cured
such circumstances to the reasonable satisfaction of the Executive, then such
Notice of Termination shall be ineffective and no Good Reason shall be deemed
to exist. The parties agree and acknowledge that, solely for purposes of this
Agreement, the Executive’s provision of a written notice of non-renewal of the
Employment Period, as provided in Section 1 of this Agreement, shall be deemed
to be a termination by the Executive without Good Reason.

 

(d)                                 Notice
of Termination. Any termination by the Company with or without Cause or on account
of Disability, or by the Executive with or without Good Reason, shall be
communicated by a Notice of Termination to the other party given

 

8

 

in accordance with Section 9(e). For purposes of this Agreement, a “Notice
of Termination” means a written notice which (i) indicates the specific
termination provision of this Agreement relied upon, (ii) sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive’s employment under the provision so indicated and
(iii) if the termination date is other than the date of receipt of such notice,
specifies the proposed termination date; provided, however, that
the information in clause (ii) shall not be required in the event of any
termination by the Company without Cause or by the Executive without Good
Reason.

 

5.                                       Obligations
of the Company Upon Termination.

 

(a)                                  Death
or Disability. If the Executive’s employment is terminated by reason of the
Executive’s death or on account of Disability, the Company shall:

 

(i)                                     pay
to the Executive or the Executive’s estate, as applicable, a lump sum cash
payment within ten (10) days after such termination equal to, to the extent not
previously paid: (A) the Executive’s Base Salary through the end of the month
in which such termination occurred, (B) any earned and accrued but unpaid
Annual Bonus for any Fiscal Year ending prior to such termination, (C) any
earned and accrued but unpaid Special Bonus and Liquidity Event Bonus, (D) any
accrued vacation pay, (E) any unpaid reimbursable business expenses due to the
Executive in accordance with Section 3(h) (the amounts described in the
preceding clauses (A) - (E), the “Accrued Amounts”), (F) the Executive’s
Base Salary for an additional twelve month period and (G) a pro-rated target
Annual Bonus for the Fiscal Year of termination determined by multiplying (x)
such target Annual Bonus by (y) a fraction, the numerator of which is the
number of days in the Fiscal Year that the Executive was employed by the
Company and the denominator of which is 365;

 

(ii)                                  provide
those death or disability benefits to which the Executive is entitled at the
date of the Executive’s death or Disability under any benefit plans, policies
or arrangements of the Company; and

 

(iii)                               in
the case of a termination on account of Disability, provide to the Executive
and the Executive’s spouse and dependents, as applicable, at the Company’s
expense, continued participation in the Company’s group health plan (or comparable
medical coverage) until the earlier of the date the Executive attains age 65 or
the date the Executive becomes eligible for coverage under the group health
plan of another employer.

 

(b)                                 Cause
or Without Good Reason. If the Executive’s employment shall be terminated
(i) by the Company with Cause, or (ii) by the Executive without Good Reason,
the Company shall pay to the Executive a lump sum cash payment

 

9

 

within ten (10) days after such termination equal to, to the extent not
previously paid, the Accrued Amounts.

 

(c)                                  Without
Cause or With Good Reason. If the Executive’s employment shall be
terminated (i) by the Company without Cause or (ii) by the Executive with Good
Reason, the Executive shall be entitled to receive the following payments and
benefits:

 

(i)                                     to
the extent not previously paid, the Accrued Amounts;

 

(ii)                                  an
amount equal to the sum of: (i) the Executive’s Base Salary and (ii) the target
Annual Bonus for the Fiscal Year of such termination, payable in substantially
equal monthly installments on the first day of each of the first 12 calendar
months following termination (subject to the Executive’s continued compliance
with the covenants contained in Section 6 during such payment period);

 

(iii)                               a
pro-rated Annual Bonus for the Fiscal Year of termination determined by
multiplying (x) the actual Annual Bonus which the Executive would have earned
in respect of such Fiscal Year had he remained employed for the entire such
Fiscal Year by (y) a fraction, the numerator of which is the number of days in
such Fiscal Year that the Executive was employed by the Company and the
denominator of which is 365, payable at the time bonuses are generally payable
to the Company’s senior executives in respect of such Fiscal Year; and

 

(iv)                              The
Executive and the Executive’s spouse and dependents, as applicable, shall
continue to participate in the Company’s group health and life insurance plans
(or be provided comparable medical and life insurance coverage), at Company
expense, until the earlier of the first anniversary of such termination or the
date the Executive becomes eligible for coverage under the group health or life
insurance plan, as applicable, of another employer.

 

(d)                                 In
General. The Executive shall have no rights upon his termination of
employment with the Company, other than those set forth in each of Section
5(a), (b) or (c), as applicable, to any compensation or any other benefits from
the Company under this Agreement, provided that amounts which the Executive is
otherwise entitled to receive under any plan, program or arrangement of the
Company or any of its affiliates available to employees generally (other than
any severance plan or program), shall be payable in accordance with such plan,
program or arrangement.

 

6.                                  Restrictive
Covenants. Without in any way limiting or waiving any right or remedy
accorded to the Company or any limitation placed upon the Executive by law, the
Executive hereby agrees as follows:

 

10

 

(a)                                  Non-Solicitation.
The Executive agrees that during the Employment Period and for six months after
the expiration or termination thereof (the “Non-Solicitation Period”),
the Executive shall not, directly or indirectly:

 

(i)                                     hire
or make an offer of employment to, or supervise, any employee at the level of
Vice President or above (each, a “Restricted Executive”) of (x) the
Company, Parent, Midco, the Division or the Business or (y) any other direct or
indirect subsidiary or controlled affiliate of the Company (the Company,
Parent, Midco, the Division, the Business and all such other subsidiaries or
controlled affiliates being referred to hereinafter as the “Restricted Operations”)
on the Executive’s own behalf, or on behalf or any person, firm or entity
(other than a Restricted Operation);

 

(ii)                                  attempt
to persuade any Restricted Executive to (1) terminate his employment with a
Restricted Operation, (2) refrain from extending his employment with a
Restricted Operation, (3) refrain from entering into a new employment
arrangement with a Restricted Operation or (4) enter into any employment
arrangement with any competitor of a Restricted Operation;

 

(iii)                               hire,
or make an offer of employment to, or enter into, or solicit or offer to enter
into, any “Contract” (as hereinafter defined) with, any “Artist”
(as hereinafter defined) on the Executive’s own behalf or on behalf of any
person, firm or entity, if the activities which are the subject of such hiring,
employment or Contract are in any way competitive with a Restricted Operation;
or

 

(iv)                              attempt
to persuade any Artist to (1) terminate his or her relationship or Contract
with a Restricted Operation, (2) refrain from extending his or her relationship
or Contract with a Restricted Operation, (3) refrain from entering into a new
Contract with a Restricted Operation or (4) enter into any relationship or
Contract with any competitor of a Restricted Operation.

 

(b)                                 Confidentiality.
The Executive shall not at any time disclose or reveal to any person, firm or
entity, or make use of (otherwise than for the benefit of the Company or its
affiliates), any trade secrets or information of a secret or confidential
nature, including without limitation, matters of a business nature, such as
information about costs, profits, markets, leases, details of recording
agreements, distribution agreements, customer Contracts, manufacturing
processes, financial information, technical and production know-how,
developments, inventions, processes or administrative procedures, concerning
the business or affairs of a Restricted Operation, which the Executive may have
acquired in the course of or incident to the Executive’s employment with the
Company, and the Executive confirms that all such information (“Confidential
Information”) is the exclusive property of the Company and/or such
Restricted Operation. This paragraph shall not apply to disclosures by the
Executive (i)

 

11

 

in the proper performance of his obligations under this Agreement
during the Employment Period or to officers, employees, lawyers and accountants
of a Restricted Operation, (ii) to the Executive’s legal counsel in connection
with seeking legal advice related hereto, (iii) to the Executive’s accountants
in connection with seeking financial or tax advice related hereto, or (iv) as
required by law, a court of competent jurisdiction or regulatory agency or
other governmental authority. Nothing herein shall prevent the Executive,
subsequent to the termination or expiration of his employment hereunder, from
using or availing himself of general technical skills, knowledge and
experience, including that pertaining to or derived from the non-confidential
aspects of a Restricted Operation. The term “Confidential Information” shall
not include information generally available and known to the public other than
as a result of a breach of this Section 6(b) by the Executive. The Executive
agrees to hold as Company property all Confidential Information and all books,
papers and other data, and all copies thereof and therefrom, in any way relating to the businesses
of a Restricted Operation, whether made or received by the Executive, and, on
termination of employment, or upon demand by the Company, to deliver the same
to the Company.

 

(c)                                  Intellectual
Property. Any copyrights, “Musical Compositions” (as hereinafter
defined), trademarks (other than the “Reserved Trademarks” (as
hereinafter defined)), patents, patent applications, inventions, developments
and processes which the Executive during the Employment Period may develop
which may reasonably be expected to be usable by a Restricted Operation in the
ordinary course of its business shall belong to Company and/or the relevant
Restricted Operation. Furthermore, the Executive agrees to execute any
copyright assignment or other instruments as any Restricted Operation may deem
reasonably necessary (at such Restricted Operation’s expense) to evidence,
establish, maintain, protect, enforce, and/or defend any and all of such
Restricted Operation’s interests under this Section 6(c). All such interests
shall vest in the relevant Restricted Operation whether or not such instrument
is requested, executed or delivered. If the Executive shall not so execute and
deliver any such instrument after reasonable notice and opportunity to do so,
the Company shall have the right to do so in the Executive’s name and the
Company is hereby irrevocably appointed the Executive’s attorney-in-fact for
such purposes, which power is coupled with an interest.

 

(d)                                 Definitions.
For the purposes of Section 6 of this Agreement, the following definitions
shall apply:

 

(i)                                     “Artists”
means (A) any singer or musician, or other person furnishing the services or
works of an artist to a Restricted Operation pursuant to a Contract with a
Restricted Operation pursuant to which such singer, musician or other person is
required to provide exclusive services for the making or delivering of master “Recordings”
(as hereinafter defined) to such Restricted Operation or (B) any writer, producer
or other talent who has entered into a Contract with a Restricted Operation or
who has otherwise provided services to a Restricted Operation excepting, in the
case of both clauses (A) and (B) above, any such person who is required to
provide services to any person or party

 

12

 

other than a Restricted Operation on an exclusive basis pursuant to a
Contract that was not entered into in connection with any violation by the
Executive of this Agreement.

 

(ii)                                  “Contract”
means any contract, other agreement, commitment, binding arrangement, binding
understanding or binding relationship (whether written or oral and whether
express or implied).

 

(iii)                               “Musical
Compositions” means a musical composition or medley consisting of words
and/or music, or any dramatic material and bridging passages whether in form of
instrumental and/or vocal music, prose or otherwise, irrespective of length.

 

(iv)                              “Recordings”
means any recording of sound, whether or not coupled with a visual image, by
any method or format and on any substance or material, whether now or hereafter
known, which is used or useful in the recording, production and/or manufacture
of Records or for any other exploitation of sound, excluding television and
movies (other than music videos or the promotion thereof), consumer electronics
and electronic games.

 

(v)                                 “Records”
means gramophone discs, magnetic tapes, compact discs, other storage media and
any other device or appliance used for emitting sounds (whether or not
accompanied by visual images) incorporating the Recordings.

 

(vi)                              “Reserved
Trademarks” means the Phat Farm trademark, Baby Phat trademark, RUSH
trademark, Vendetta trademark and Def Jam trademark and any variation,
derivation, modification or extension thereof and/or any visual representation
or logos thereof.

 

(e)                                  Severability;
Blue-Pencilling. Each section, subsection or part thereof under this
Section 6 constitutes an entirely separate and independent restriction. If any
of such covenants or such other provisions of this Agreement are found to be
invalid or unenforceable by a final determination of a court of competent
jurisdiction (i) the remaining terms and provisions hereof shall be unimpaired
and (ii) the invalid or unenforceable term or provision shall be deemed
replaced by a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision.

 

(f)                                    Necessity;
Enforcement. The parties hereto have considered carefully the necessity
for protection of each Restricted Operation against the Executive’s disclosures
of Confidential Information and other actions referred to in this Section 6,
and the nature and scope of such protection. The parties agree and acknowledge
that the duration and scope applicable to the covenants set forth in this
Section 6 are fair, reasonable and necessary, and that the Executive has
received adequate consideration for such obligations. Accordingly, the
Executive agrees that, in addition to

 

13

 

any other relief to which the Company may be entitled, the Company
shall be entitled to seek injunctive relief (without the requirement of posting
any bond or other security). from a court of competent jurisdiction for the
purpose of restraining the Executive from any actual or threatened breach of
the covenants contained in this Section 6.

 

7.                                       Indemnity.
To the fullest extent permitted by applicable law, the Company shall indemnify,
defend and hold the Executive harmless from and against any and all claims,
demands, actions, causes of action, liabilities, losses, judgments, fines,
costs and expenses (including, without limitation, the reimbursement of
reasonable attorneys’ fees, settlement expenses, punitive damages and the
advancement of legal fees and expenses, as such fees and expenses are incurred
by the Executive) arising from or relating to (a) claims relating to the
Company, Parent, Midco, the Division or the Business or (b) the Executive’s
service with or status as an officer, director, employee, agent or
representative of the Company, Midco, Parent and/or any of their respective
directly or indirectly owned subsidiaries or in any other capacity in which the
Executive serves or have served at the request of the Board or the CEO for the
benefit of the Company, Midco, Parent and/or their respective directly or
indirectly owned subsidiaries. Without limiting the foregoing, in connection
with any such claim, demand, action, cause of action, liability, loss, judgment
or fine, the Executive shall have the right (i) to be represented by separate
counsel reasonably acceptable to the Company, at the Company’s sole cost and
expense, and (ii) to have the Company pay the cost and expense of any bond that
the Executive may be required to post in order to appeal an adverse decision.
The Company’s obligations under this Section 7 shall be in addition to, and not
in derogation of, any other rights the Executive may have against the Company
to indemnification or advancement of expenses, whether by statute, contract or
otherwise (including, without limitation, the Executive’s entitlement to
indemnification and the payment or reimbursement of expenses (including
attorneys’ fees and expenses) to the extent provided in and/or permitted by the
Certificate of Incorporation and By-Laws of the Company. The Company shall
maintain directors and officers liability insurance in commercially reasonably
amounts (as reasonably determined by the Board), and the Executive shall be
covered under such insurance to the same extent as any other senior executive
of the Company. The Executive hereby undertakes to repay any advances paid to
him pursuant to this Section 7 if a final judgment adverse to the Executive
establishes that he is not entitled to be indemnified under this Agreement or
otherwise. The Company hereby acknowledges that the undertaking set forth in
the previous sentence satisfies all requirements for any similar undertakings
in the by-laws or other corporate documents of the Company. The Company shall
not take any action that would impair the Executive’s right to indemnification,
other than in connection with a claim by the Company that the Executive is not
entitled to indemnification in accordance with the standards set forth in this
Section 7.

 

8.                                       Successors.

 

(a)                                  This
Agreement is personal to the Executive and without the prior written consent of
the Company shall not be assignable by the Executive otherwise than by will or
the laws of descent and distribution. This Agreement shall inure to the benefit
of and be enforceable by the Executive’s legal representatives.

 

14

 

(b)                                 This
Agreement shall inure to the benefit of and be binding upon the Company and its
successors and, other than as set forth in Section 8(c), shall not be
assignable by the Company without the prior written consent of the Executive
(which shall not be unreasonable withheld).

 

(c)                                  The
Company will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. As used in this
Agreement, “Company” shall mean the Company as hereinbefore defined and
any successor to its business and/or assets as aforesaid which assumes and
agrees to perform this Agreement by operation of law, or otherwise.

 

9.                                       Miscellaneous.

 

(a)                                  This
Agreement shall be governed by and construed in accordance with the laws of the
State of Delaware applicable to contracts made and performed entirely therein.
The parties hereto agree that exclusive jurisdiction of any dispute regarding
this Agreement shall be the state or federal courts located in New York, New
York.

 

(b)                                 In
the event of any termination of the Executive’s employment hereunder, the
Executive shall be under no obligation to seek other employment or otherwise mitigate
the obligations of the Company under this Agreement, and there shall be no
offset against amounts due the Executive under this Agreement on account of
future earnings by the Executive. Any amounts due to the Executive under this
Agreement upon termination of employment are considered to be reasonable by the
Company and are not in the nature of a penalty.

 

(c)                                  The
captions of this Agreement are not part of the provisions hereof and shall have
no force or effect.

 

(d)                                 This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.

 

(e)                                  All
notices required or permitted by this Agreement to be given to any party shall
be in writing and shall be delivered personally, or sent by certified mail,
return receipt requested, or by Federal Express or similar overnight service,
prepaid recorded delivery, addressed as follows:

 

If to the Executive:

 

1 East 94th Street

New York, New York 10028

 

15

 

with a copy to:

 

Robinson Brog Leinwand Greene
Genovese & Gluck,

P.C.

1345 Avenue of the Americas, 31st floor

New York, New York 10105

Attention: Neil S. Goldstein

 

If to the Company:

 

WMG Acquisition Corp.

75 Rockefeller Plaza

New York, New York 10019

Attention: Chief Executive
Officer and General Counsel

 

with a copy to:

 

Paul, Weiss, Rifkind, Wharton
& Garrison

1285 Avenue of the Americas

New York, New York 10019

Attention: Michael J. Segal,
Esq.

 

and shall be deemed to have been duly given when so delivered
personally or, if mailed or sent by overnight courier, upon delivery; provided,
that, a refusal by a party to accept delivery shall be deemed to
constitute receipt.

 

(f)                                    The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement.

 

(g)                                 The
Company may withhold from any amounts payable under this Agreement such
Federal, state or local taxes as shall be required to be withheld pursuant to
any applicable law or regulation.

 

(h)                                 This
Agreement is the joint product of the Company and the Executive and each
provision hereof has been subject to the mutual consultation, negotiation and
agreement of the Company and the Executive and shall not be construed for or
against either party hereto.

 

(i)                                     Subject
to any other documents which may be entered into by the Executive and the
Company on or after the Effective Date (including without limitation the
Restricted Stock Award Agreement), this Agreement contains the entire agreement
and understanding of the parties hereto with respect to the subject matter
contained herein and, upon this Agreement becoming effective, supersedes all
prior communications, representations and negotiations in respect thereto,
whether or not in writing.

 

16

 

(j)                                     Notwithstanding
anything herein contained to the contrary, this Agreement shall not become
effective until and unless the Closing Date occurs, at which time it shall
become the binding and legal obligation of the parties hereto. If the Purchase
Agreement shall be abandoned in accordance with its terms then this Agreement
shall never become effective and shall be null and void.

 

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

 

 

	
   

  	
  /s/ Lyor Cohen

  	
   

  
	
   

  	
  Lyor Cohen

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  WMG ACQUISITION CORP.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
					

 

17

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