Document:

Exhibit 10.41

 

WMG PARENT CORP.

STOCK OPTION AGREEMENT

 

THIS STOCK OPTION AGREEMENT (this “Agreement”), is entered into as of this 30th
day of September, 2004, by and between WMG Parent Corp., a Delaware corporation
(“Parent”), and Les Bider (the “Executive”).  Capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the “Employment
Agreement” (as defined herein).

 

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 March 22, 1999, as thereafter amended, the “Employment
Agreement”); and

 

WHEREAS, the Board of Directors of Parent (the “Board”)
has determined that it is in the best interests of the Company and its
stockholders to grant to the Executive as of the date hereof (the “Effective
Date”) an option to purchase shares of Class A Common Stock of Parent (“Common
Stock”), as provided for herein (the “Stock Option Award”);

 

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

1.                                       Grant.  The Company hereby grants to
the Executive an option (the “Option”) to purchase 262.345679 shares of
Common Stock (such shares of Common Stock, the “Option Shares”), on the
terms and conditions set forth in this Agreement.  This Option is not intended to be treated as
an incentive stock option under Section 422 of the Internal Revenue Code
of 1986, as amended.  This grant is
subject to the Executive having executed the Stockholders’ Agreement entered
into by and between Parent, the “Investors” (as defined below) and the other
parties thereto prior to the Effective Date, as it may be amended 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.  The
number and type of Option Shares purchasable hereunder shall be subject to adjustment
as and in the manner provided in Section 9(a) below.

 

2.                                       Incorporation by Reference, Etc. 
Capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Employment Agreement.

 

3.                                       Option Price.  The
price at which the Executive shall be entitled to purchase the Option Shares
upon the exercise of all or any portion of this Option shall be $1,000.00 per
share.  Such exercise price shall be
subject to adjustment as and in the manner provided in Section 9(a) below.

 

4.                                       Expiration Date. 
Subject to Section 6 hereof, the Option shall expire at the end of
the period commencing on the Effective Date and ending at 11:59 p.m. Eastern
Time (“ET”) on the day preceding the tenth anniversary of the Effective
Date (the “Option Period”).

 

 

5.                                       Exercisability of the Option.

 

(a)                                  Service-Based Option. 
Except as may otherwise be provided herein, the Option shall become
vested and exercisable as to one-third of the shares subject thereto (the “Service-Based
Option”) in four equal installments on the day prior to each of the first,
second, third and fourth anniversaries of the Effective Date provided that the
Executive remains employed with the Company on each such date, such that one
hundred percent (100%) of the Service-Based Option shall be vested and
exercisable on the day prior to the fourth anniversary of the Effective Date;
provided that the unvested portion of the Service-Based Option shall become
vested and exercisable 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 of (C) by the Executive for Good Reason, in each case on or after
a “Change in Control” (as defined in Section 5(b)(iii)(6)) or, in the case
of 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”).

 

(b)                                 Performance-Based Option. 
Except as otherwise provided in this Agreement, the Option shall become
contingently vested as to two-thirds of the shares subject thereto (the “Performance-Based
Option”) in four equal installments on the day prior to each of the first, second,
third and fourth anniversaries of the Effective 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 and exercisable until and unless
the condition described in Section 5(b)(i) or 5(b)(ii), as applicable, has
been satisfied (each such condition, a “Performance Condition”).

 

(i)                                     With respect to one-half of the
Performance-Based Option, the Performance Condition shall be the actual or
deemed occurrence of a 2X Option Vesting Event.

 

(ii)                                  With respect to the other one-half of the
Performance-Based Option, the Performance Condition shall be the actual or
deemed occurrence of a 3X Option Vesting Event.

 

(iii)                               For purposes of this Section 5(b), and
also as and if used elsewhere in this Agreement, the following terms shall have
the following meanings:

 

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

 

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

 

(3)                                  “2X
Option Vesting 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-1 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 Coomon 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 Vesting 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
Option Vesting Event” has the same meaning as a 2X Option Vesting Event
except that the term “2X Investor Equity Value” each time it appears in Section 5(b)(iii)(3)
above shall be replaced with “3X Investor Equity Value.”

 

(5)                                  “Bonus
Vesting 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.

 

(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

 

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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 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 on trading system on which such securities are
listed on the date Fair Market Value is determined.

 

(8)                                  “Investment”
means the aggregate investment by the Investors in the equity securities of any
member of Parent Group on the prior to the Effective Date, including expenses,
which is approximately $1.25 billion.

 

(9)                                  “Investor
Equity” shall mean all equity securities of all members of 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 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.

 

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

 

(c)                                  The
term “Vested Option,” as used herein, shall mean (i) the portion of the
Service-Based Option on and following the time that the vesting condition set
forth in Section 5(a) hereof has been 
actually or deemed satisfied as to such portion.  (ii) the portion of the Performance-Based
Option on and following the time that both the Service Condition and the
Performance Condition have been actually or are deemed to have been satisfied
as to such portion and (iii) the portion of the Performance-Based Option not
described in the immediately preceding clause (ii) on and 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.  The portion of the Option which has not
become the Vested Option is hereinafter referred to as the “Unvested Option.”

 

(d)                                 The
Option may be exercised only as to the Vested Option, and only by written
notice, substantially in the form attached hereto as Exhibit B (or a
successor form provided by Parent) delivered in person or by mail in accordance
with Section 11 (a) hereof and accompanied by payment therefor.  The purchase price of the Option Shares shall
be paid by the Executive to the Company (A) by certified check or wire transfer
(using such wire transfer instructions as are provided by Parent or the
Company), (B) by transferring to Parent shares of Common Stock, if and in the
manner approved by Parent, (C) on or after an IPO, by a broker-assisted “cashless
exercise” procedure if and in the manner approved by the Board or a designated
committee thereof, or (D) by any other method approved in writing by the Board
or a designated committee thereof.  If
requested by Parent, the Executive shall promptly deliver his copy of this
Agreement evidencing the Option to the Secretary of Parent who shall endorse
thereon a notation of such exercise and promptly return such Agreement to the
Executive.  Upon payment of the
applicable purchase price and the issuance of the Option Shares in accordance
with the terms and conditions of this Agreement, the Option Shares shall be
validly issued, fully paid and nonassessable.

 

6.                                       Effect of
Termination of Employment on Option.

 

(a)                                  For
purposes of this Agreement, the Executive’s employment may be terminated (i) by
the Company for Cause (a “6(a)(i) Termination”), (ii) by the Executive
without Good Reason, other than a Retirement (a “6(a)(ii) Termination”),
(iii) by the Company without Cause (including on account of Disability), by the
Executive for Good Reason or on account of the Executive’s death (a “6(a)(iii)
Termination”) or (iv) by the Executive on account of Retirement (a “6(a)(iv)
Termination”)  For purposes of the
preceding sentence.  (A) “Retirement”
shall mean the Executive’s voluntary termination of employment with the Company
and all of its affiliates on or after the age of 62, after no less than 10
years of employment with the Company and it affiliates, (B) the termination of
the Executive’s employment at the end of the term of the

 

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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 Section 6(a)(iii)
Termination and (C) 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 6(a)(ii) Termination..

 

(b)                                 The
Unvested Option, if any, shall immediately terminate upon the termination of
the Executive’s employment with the Company and its affiliates for any reason; provided,
however, that the portion of the Unvested Option which is the portion of
the Performance Based Option as to which the Service Condition, but not the
Performance Condition, has been attained at the time of a 6(a)(iii) Termination
or a 6(a)(iv) Termination (the “Tail Option”) shall terminate upon the
six-month anniversary of the termination to the extent that the applicable
Performance Condition has not been attained as of such six-month anniversary.

 

(c)                                  The
Vested Option shall remain exercisable by the Executive until, as applicable,
(i) the date of 6(a)(i) Termination, (ii) thirty (30)days following the date of
a 6(a)(ii) Termination, (iii) one hundred and twenty (120) days following the
date of a 6(a)(iii) Termination and (iv) the last day of the Option Period, in
the case of a 6(a)(iv) Termination. 
Notwithstanding the above, the portion of the Tail Option as to which
the Performance Condition is attained on or prior to the six-month anniversary
of a 6(a)(iii) Termination or 6(a)(iv) Termination shall remain exercisable by
the Executive until (A) one hundred and twenty (120) days following the
attainment of the applicable Performance Condition, in the case of a 6(a)(iii)
Termination, and (B) the last day of the Option Period, in the case of a
6(a)(iv) Termination.

 

(d)                                 Any
Option Shares purchased by the Executive through the exercise of the Option
shall be subject to the Call Option described in this Section 6(d).

 

(i)                                     Other
than as set forth in the second sentence of Section 6(d)(vii), upon and
following 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
Parent Group designated by Parent (the “Call Assignee”) to purchase,
from the Executive any or all of the Option Shares (whether purchased pursuant
to the exercise of the Vested Option prior to, on or following such termination
of employment).  The purchase price (the “Call
Price”) of the Option Shares subject to purchase under this provision (the “Called
Shares”) shall be (i) in the case of a 6(a)(i) Termination, the lower of
the purchase price of such Called Shares or the Fair Market Value of such
Called Shares on the date of the applicable “Call Notice” (as defined below and
(ii) in the case of any other termination of employment, the Fair Market Value
of such Called Shares on the date of the applicable Call Notice.

 

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(ii)                                  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 9 of this Agreement, written notice of exercise (a “Call
Notice”). The Call Notice shall specify the date thereof, the number of
Called Shares and the Call Price.

 

(iii)                               Within
ten (10) days after his receipt of the Call Notice, the Executive (or his
estate) shall render 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 therefor, in cash.

 

(iv)                              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.

 

(v)                                 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.

 

(vi)                              Any
Option 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.

 

(vii)                           This Section 6(d)
is in addition to, and not in lieu of, any rights and obligations of the
Executive and Parent in respect of the Option Shares contained in the “Stockholders’
Agreement” (as defined below). Notwithstanding the above, this Section 6(d)
shall be ineffective as to each Option Share on and following 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.

 

(e)                                  Compliance
with Legal Requirements.  The
granting and exercising of the Option, and any other obligations of the Company
under this

 

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Agreement shall be subject to all applicable
federal and state laws, rules and regulations and to such approvals by any
regulatory or governmental agency as may be required. Parent, in its sole
discretion, may postpone the issuance or delivery of Option Shares as Parent
may consider appropriate and may require the Executive to make such representations
and furnish such information as it may consider appropriate in connection with
the issuance or delivery of Option Shares in compliance with applicable laws,
rules and regulations.

 

(f)                                    Transferability.

 

(i)                                     The
Option shall not be transferable by the Executive other than by will or the
laws of descent and distribution, and any such purported transfer shall be void
and unenforceable against the Company; provided that the designation of a
beneficiary shall not constitute a transfer or encumbrance.

 

(ii)                                  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 Option Shares, except in accordance
with the applicable provisions of this Agreement; provided, that,
Option 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 to 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 compliance with the terms of this Agreement; provided,
further, that, the restrictions upon any Option Shares
transferred in accordance with this Section 6(f)(ii) 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 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 Option 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.

 

(g)                                 Rights
as Stockholder

 

(i)                                     The
Executive shall not be deemed for any purpose to be the owner of any shares of
Common Stock to this Option unless, until and

 

8

 

to the extent that (A) this Option shall have
been exercised pursuant to its terms, (B) the Executive shall have executed the
Stockholders’ Agreement, (C) the Company shall have issued and delivered to the
Executive the Option Shares, and (D) the Executive’s name shall have been
entered as a stockholder of record with respect to such Option Shares on the
books of the Company.  The Executive
acknowledges that the Option and the Option Shares shall be subject to the
Stockholders’ Agreement and, 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 Sections 6(d) and 9(c) hereof.

 

(ii)                                  At
or promptly following a IPO or any other transaction which makes Parent
eligible to use SEC Form S-8, Parent shall register all of the Option 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 Option Shares.

 

(h)                                 Tax
Withholding.  Prior to the delivery
of a certificate or certificates representing the Option Shares, the Executive
must pay in the form of a certified check to Parent any such additional amount
as Parent determines that it is required to withhold under applicable federal,
state or local tax laws in respect of the exercise or the transfer of Option
Shares; provided that the Board or an authorized committee thereof may, in its
sole discretion, allow such withholding obligation to be satisfied by
withholding Option Shares otherwise deliverable upon exercise of the Option or
by any other method.

 

7.                                       Restrictive
Legend.  Unless otherwise determined
by the Company, all certificates representing Stock 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:

 

THE SHARES OF STOCK REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO RESTRICTION ON TRANSFER AND AN OPTION TO PURCHASE
SET FORTH IN A CERTAIN STOCK OPTION 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

 

9

 

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, AND ANY APPLICABLE STATE SECURITIES LAWS, UNLESS WMG PARENT CORP.
HAS RECEIVED AN OPINION OF COUNSEL, WHICH OPINION IS SATISFACTORY TO IT, TO THE
EFFECT THAT SUCH REGISTRATIONS ARE NOT REQUIRED.

 

8.                                       Securities
Laws.  As a condition to the exercise
of the Option, unless otherwise determined by the Company, the Executive will
be required to represent, warrant and covenant as follows:

 

(a)                                  The
Executive is acquiring the Option Shares for his own account and not with a
view to, or for sale in connection with, any distribution of the Option Shares
in violation of the Securities Act of 1933, as amended, 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 the Company such information as is necessary to permit him
to evaluate the merits and risks of his investment in the Company.

 

(c)                                  The
Executive has sufficient experience in business, financial and investment
matters to be able to evaluate the risks involved in acquiring the Option
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 Option Shares and is
able to bear the economic risk of holding such Option Shares for an indefinite
period.

 

(e)                                  The
Executive understands that (i) the Option Shares have not been registered under
the Securities Act and constitute “restricted securities” within the meaning of
Rule 144 under the Securities Act; (ii) the Option 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;
and (iii) there is now no registration statement on file with the Securities
and Exchange Commission with respect to the Option Shares and there is no
commitment on the part of the Company to make any such filing.

 

(f)                                    In
addition, upon, the exercise of any Option, and as a condition thereof,
Executive will make or enter into such other written representations,
warranties and agreements as Parent may reasonably request in order to comply
with applicable securities laws or with this Agreement.

 

10

 

9.                                       Adjustments
for Stock Splits, Stock Dividends, etc.; Change in Control.

 

(a)                                  The Option shall be
subject to adjustment or substitution as to the number, price, kind or class of
a share of stock subject thereto, the exercise price thereof and otherwise, in
each case as determined by the Board to be equitable and necessary to preserve
the rights of the Executive hereunder, (i) in the event of changes in the
Common Stock or in the capital structure of Parent by reason of stock or
extraordinary cash dividends, stock splits, reverse stock splits,
recapitalizations, reorganizations, mergers, consolidations, combinations,
exchanges, or other relevant changes in capitalization occurring after the
Effective Date or (ii) in the event of any change in applicable laws or any change
in circumstances which results in or would result in any substantial dilution
or enlargement of the rights granted to, or available for, the Executive
hereunder, or which otherwise warrants equitable adjustment because it
interferes with the intended operation of this Agreement; provided that any
such adjustment shall be made by the Board with the intent of preserving the
value of the Option.  The Board shall
give the Executive notice of any and all adjustments hereunder and, upon
notice, such adjustment shall be conclusive and binding for all purposes absent
manifest error.

 

(b)                                 If 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 Option Shares.

 

(c)                                  Notwithstanding
anything in this Agreement to the contrary, in the event of a Change in Control
the Board may in its discretion and upon at least 10 days’ advance notice to
the Executive, cancel any portion or all of the Option and pay to the
Executive, in cash or stock, or any combination thereof, the value of the
cancelled portion of the Option based upon the excess, if any, of the price per
share of Common Stock received or to be received by other shareholders of the
Company in the event over the per share exercise price of the Option.

 

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

 

11.                                 Miscellaneous

 

(a)                                  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

 

11

 

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

Attention: Michael J. Segal, Esq.

 

To the Executive:

 

Les Bider

1017 North Roxbury Drive

Beverly Hills, CA 90210

 

with a copy to:

 

Don Passman

Gang, Tyre & Brown

132 South Rodeo Drive

Beverly Hills, CA 90212

 

(b)                                 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 this
Agreement shall be severable and enforceable to the extent permitted by law.

 

(c)                                  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.

 

(d)                                 Beneficiary.  The Executive may file with Parent a written
designation of a beneficiary on such form as may be prescribed by Parent and
may, from time to time, amend to 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.

 

12

 

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

 

(f)                                    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.

 

(g)                                 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.

 

(h)                                 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.

 

(i)                                     Headings.
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.

 

(j)                                     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/ Edgar
  Bronfman. Jr.

  	
   

  

 

13

 

 

	
   

  	
  By:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  /s/ LES BIDER

  	
   

  
	
   

  	
  LES BIDER

  

 

14

 

Exhibit B

 

NOTICE OF
OPTION EXERCISE

 

To exercise your option to purchase shares of WMG Parent Corp. (“Parent”)
common stock (“Shares”), please fill out this form and return it to the
Corporate Secretary of Parent, together with a certified check in the amount of
the exercise price due, which is the product of the number of Shares with
respect to which you are exercising the Option and the per share exercise price
of $1,000.00. At its option, Parent may provide for the exercise price to be
paid in a different manner. You are not required to exercise your option with
respect to all Shares thereunder. You also must include a certified check in
the amount of any required payroll taxes and income tax withholding due in
connection with your exercise, unless Parent specifically provides for such
obligation to be satisfied in a different manner.

 

I hereby exercise my right to purchase
            Shares
under the option granted to me pursuant to the Stock Option Agreement between
myself and Parent, dated as of                ,
2004. My option is vested and exercisable as to the Shares being purchased
hereunder. I have enclosed either one or more certified checks covering both
the exercise price of $            
and the required payroll taxes and income tax withholding of
$             .
(Please contact the office of the Chief Executive Officer of WMG Acquisition
Corp. to determine the amount of any required payroll taxes and income tax
withholding.) I hereby represent that, to the best of my knowledge and belief,
I am legally entitled to exercise this option. I hereby represent and warrant
that I have signed the Stockholders Agreement by and among Parent and the
stockholders who are party thereto, as described in the Stock Option Agreement.

 

	
  Signature:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Printed Name:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Social
  Security Number:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Date:QuickLinks
 -- Click here to rapidly navigate through this document

 
 

Exhibit 10.1    
    

January 20,
2005 

Coastal
Bancshares Acquisition Corp.

9821 Katy Freeway, Suite 500

Houston, Texas 77024 

I-Bankers
Securities, Incorporated

Newbridge Securities Corporation

c/o I-Bankers Securities, Incorporated

1560 East Southlake Boulevard, Suite 232

Southlake, Texas 76092 

Re:
Initial Public Offering 

Gentlemen:

        The
undersigned stockholder, officer and director of Coastal Bancshares Acquisition Corp. (the "Company"), in consideration of I-Bankers Securities Corporation and Newbridge
Securities Corporation (the "Representatives") entering into a letter of intent (the "Letter of Intent") to underwrite (the "Representatives") an initial public offering of the securities of the
Company ("IPO") and embarking on the IPO process, hereby agrees as follows (certain capitalized terms used herein are defined in paragraph 12 hereof): 

        1.     If
the Company solicits approval of its stockholders of a Business Combination, the undersigned will vote all Insider Shares owned by him in accordance with the majority
of the votes cast by the holders of the IPO Shares. 

        2.     In
the event that the Company fails to consummate a Business Combination within 18 months from the effective date (the "Effective Date") of the registration
statement relating to the IPO (or 24 months under the circumstances described in the prospectus relating to the IPO), the undersigned will take all reasonable actions within his power to cause
the Company to liquidate as soon as reasonably practicable. The undersigned waives any and all rights he may have to receive any distribution of cash, property or other assets as a result of such
liquidation with respect to his Insider Shares. The undersigned agrees to indemnify and hold harmless the Company against any and all loss, liability, claims, damage and expense whatsoever (including,
but not limited to, any and all legal or other expenses reasonably incurred in investigating, preparing or defending against any litigation, whether pending or threatened, or any claim whatsoever) to
which the Company may become subject as a result of any claim by any vendor or other person who is owed money by the Company for services rendered or products sold, or by any target business, but only
to the extent necessary to ensure that such loss, liability, claim, damage or expense does not reduce the amount in the trust fund maintained by American Stock Transfer &Trust Company. 

        3.     In
order to minimize potential conflicts of interest which may arise from multiple affiliations, the undersigned agrees to present to the Company for its consideration,
prior to presentation to any other person or entity, any suitable opportunity to acquire an operating business, until the earlier of the consummation by the Company of a Business Combination, the
liquidation of the Company or until such time as the undersigned ceases to be an officer or director of the Company, subject to any pre-existing fiduciary obligations the undersigned might
have. 

        4.     The
undersigned acknowledges and agrees that the Company will not consummate any Business Combination that involves a company which is affiliated with any of the Insiders
unless the Company obtains an opinion from an independent investment banking firm reasonably acceptable to the Representatives that the business combination is fair to the Company's stockholders from
a financial perspective. 

        5.     Neither
the undersigned, any member of the family of the undersigned, nor any Affiliate of the undersigned will be entitled to receive and will not accept any
compensation for services rendered 

 

to
the Company prior to the consummation of the Business Combination; provided that, commencing on the Effective Date, Coastal Acquisition, LLC, a limited liability company ("Related Party"), shall be
allowed to charge the Company an allocable share of Related Party's overhead, up to $7,500 per month, to compensate it for the Company's use of Related Party's offices, utilities and personnel.
Related Party and the undersigned shall also be entitled to reimbursement from the Company for their out-of-pocket expenses incurred in connection with seeking and consummating
a Business Combination. 

        6.     Neither
the undersigned, any member of the family of the undersigned, nor any Affiliate of the undersigned will be entitled to receive or accept a finder's fee or any
other compensation in the event the undersigned, any member of the family of the undersigned or any Affiliate of the undersigned originates a Business Combination. 

        7.     The
undersigned will escrow his Insider Shares for the three year period commencing on the Effective Date subject to the terms of a Stock Escrow Agreement which the
Company will enter into with the undersigned and American Stock Transfer & Trust Company as escrow agent. 

        8.     The
undersigned agrees that, during the three year period terminating on January 31, 2007, he will not become involved (whether as owner, manager, operator,
creditor, partner, shareholder, joint venturer, member, employee, officer, director, consultant or otherwise) with any Acquisition Fund (as defined in Section 12(v) below), unless such
Acquisition Fund engages the Representatives to be the managing underwriters of the initial public offering of the Acquisition Fund's securities. 

        The
undersigned hereby agrees and acknowledges that (i) the Representatives would be irreparably injured in the event of a breach by the undersigned of any of his obligations
under this paragraph 8, (ii) monetary damages would not be an adequate remedy for any such breach, and (iii) the Representatives shall be entitled to injunctive relief, in
addition to any other remedy they may have, in the event of such breach. 

        9.     I
agree to serve as the Co-Chief Executive Officer and Chairman of the Board of Directors of the Company until the earlier of the consummation by the Company
of a Business Combination or the liquidation of the Company. The undersigned's biographical information furnished to the Company and the Representatives included in the S-1 Registration
Statement is true and accurate in all respects, does not omit any material information with respect to the undersigned's background and contains all of the information required to be disclosed
pursuant to Section 401 of Regulation S-K, promulgated under the Securities Act of 1933, as amended. The undersigned's Questionnaire furnished to the Company and the
Representatives and annexed as Exhibit A hereto is true and accurate in all respects. The undersigned represents and warrants that: 

        (a)   he
is not subject to or a respondent in any legal action for, any injunction, cease-and-desist order or order or stipulation to desist or refrain
from any act or practice relating to the offering of securities in any jurisdiction; 

        (b)   he
has never been convicted of or pleaded guilty to any crime (i) involving any fraud or (ii) relating to any financial transaction or handling of funds of
another person, or (iii) pertaining to any dealings in any securities and he is not currently a defendant in any such criminal proceeding; and 

        (c)   he
has never been suspended or expelled from membership in any securities or commodities exchange or association or had a securities or commodities license or
registration denied, suspended or revoked. 

        10.   I
have full right and power, without violating any agreement by which I am bound, to enter into this letter agreement and to serve as an officer of the Company. 

        11.   I
authorize any employer, financial institution, or consumer credit reporting agency to release to the Representatives and their respective legal representatives or
agents (including any investigative 

2

 

search
firm retained by the Representatives) any information they may have about my background and finances (the "Information"). Neither the Representatives nor their respective agents shall be
violating my right of privacy in any manner in requesting and obtaining the Information and I hereby release them from liability for any damage whatsoever in that connection. 

        12.   As
used herein, 

        (i)    "Business
Combination" shall mean an acquisition by merger, capital stock exchange, asset or stock acquisition, reorganization or otherwise, of an operating business
selected by the Company; 

        (ii)   "Insiders"
shall mean all officers, directors and stockholders of the Company immediately prior to the IPO; 

        (iii)  "Insider
Shares" shall mean all of the shares of Common Stock of the Company owned by an Insider prior to the IPO; 

        (iv)  "IPO
Shares" shall mean the shares of Common Stock issued in the Company's IPO; and 

        (v)   "Acquisition
Fund" shall mean any company formed with the intent to offer securities to the public and use the proceeds to consummate one or more Business Combinations
which are unspecified at the time of the securities offering. 

	 	/s/  CARY M. GROSSMAN      
 Cary M. Grossman

3

QuickLinks

Exhibit 10.1

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