Document:

Exhibit 10.37

 

EXECUTION
COPY

 

EMPLOYMENT AGREEMENT

by and between

WARNER MUSIC GROUP INC.

and 

Michael D. Fleisher

 

THIS EMPLOYMENT AGREEMENT (this “Agreement’’)
is entered into as of this 21st day of December, 2004 by and between Warner
Music Group Inc., a Delaware corporation (the “Company”), and Michael D.
Fleisher (the “Executive”).

 

RECITALS:

 

WHEREAS, the Company wishes to engage the Executive to serve as
Executive Vice President and Chief Financial Officer of the Company 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 January 1, 2005 (the “Effective Date”) and, unless
earlier terminated pursuant to Section 4 hereof, shall expire on the
fourth anniversary of the Effective Date.

 

2.                                       Position,
Duties and Representations.

 

(a)                                  During
the Employment Period, the Executive shall be employed as the Executive Vice
President and Chief Financial Officer of the Company and shall report solely to
the Chief Executive Officer of the Company (the “CEO”). Subject to the
ultimate authority of the CEO, the Executive shall have direct management
responsibility for, and authority for the operations of, the treasury, tax,
accounting, investor relations, financial analysis, information technology and
real estate departments of the Company. 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 boards or committees with the consent of
the CEO, which consent shall not be

 

 

unreasonably
withheld, (ii) serve on civic, educational, philanthropic or charitable boards
or committees, (iii) passively own not more than three percent (3%) of the
outstanding capital stock or any corporation whose stock is publicly traded and
(iv) manage personal investments.

 

(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 $800,000 (“Base Salary”),
payable in regular installments in accordance with the Company’s usual payroll
practices.

 

(b)                                 Annual
Bonus. The Executive shall be eligible to receive an annual cash bonus (the
“Annual Bonus”) in respect of each calendar year ending during the
Employment Period, with a target of $800,000. The amount of each Annual Bonus
shall be established by the Board or the Compensation Committee thereof in
consultation with the CEO and shall be based on individual and Company
performance. The Annual Bonus may be higher or lower than the target using
criteria consistent with that applicable to the annual bonuses of other senior
executives of the Company other than the CEO and the Chairman of United States
recorded music operation of the Warner Recorded Music Business. Notwithstanding
the above, the Annual Bonus in respect of the first 2005 calendar year shall be
no less than $800,000. For the avoidance of doubt, if the Employment Period
ends due to the expiration of the Agreement on the fourth anniversary of the
Effective Date, the Executive shall nevertheless be eligible to receive an
Annual Bonus in respect of the last calendar year of the Employment Term, and
the amount of such Annual Bonus shall be determined using criteria consistent
with those generally used in respect of prior calendar years.

 

(c)                                  Equity.
On the Effective Date, the Executive shall purchase from WMG Parent Corp.
shares of Parent’s Class A Common Stock (the “Restricted Stock Award”)
pursuant to the Restricted Stock Award Agreement annexed hereto as Exhibit A.

 

(d)                                 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.

 

2

 

(e)                                  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.

 

(f)                                    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”
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 or misdemeanor 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

 

3

 

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 “Good Reason” (as defined below) or, on and after the
first anniversary of the Effective Date, without Good Reason, in each case 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;

 

(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)                               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;

 

(iv)                              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; or

 

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

 

Without limiting the generality of any of the foregoing, Good Reason
shall include (i) any change in reporting line such that the Executive no
longer reports to the CEO, (ii) the appointment of any person other than the
Executive or Lyor Cohen as the Company’s President, Chief Operating Officer or
the equivalent or (iii) the appointment of a Co-Chief Financial Officer.

 

4

 

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.

 

(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 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. lf 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 accrued
vacation pay, (D) any unpaid reimbursable business expenses due to the
Executive in accordance with Section 3(e) (the amounts described in the
preceding clauses (A) – (D), the “Accrued Amounts”), (E) the Executive’s
Base Salary for an additional twelve month period and (F) 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; and

 

(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.

 

5

 

(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 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

 

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:

 

(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 the Company or
other direct or indirect subsidiary or controlled affiliate of the Company (the
Company 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

 

7

 

(“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) 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, 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

 

8

 

such person who is required to provide services to any person or party
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.

 

(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 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.

 

9

 

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 or
any or direct or indirect parents or subsidiaries or (b) the Executive’s
service with or status as an officer, director, employee, agent or
representative of the Company or any of its direct or indirect parents or
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 any such
entity. 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.

 

(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).

 

10

 

(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 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:

  	
   

  
	
   

  	
  Michael
  Fleisher

  	
   

  
	
   

  	
  181 Hudson
  st, Apt 8D

  	
   

  
	
   

  	
  New York, NY
  10013

  	
   

  

 

11

 

	
   

  	
  If to the
  Company:

  
	
   

  	
   

  
	
   

  	
  Warner Music
  Group Inc.

  
	
   

  	
  75
  Rockefeller Plaza

  
	
   

  	
  New York,
  New York 10019

  
	
   

  	
  Attention:
  Chief Executive Officer 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.

 

(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.

 

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

 

	
   

  	
  /s/ Michael
  D. Fleisher

  	
   

  
	
   

  	
  Michael D.
  Fleisher

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WARNER MUSIC
  GROUP INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    [ILLEGIBLE]

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
    CEO

  	
   

  
						

 

12Exhibit 10.38

 

RESTRICTED STOCK AWARD AGREEMENT

 

THIS RESTRICTED STOCK AWARD AGREEMENT (this “Agreement”),
is entered into as of this 1st day of October, 2004, by and between WMG Parent
Corp., a Delaware corporation ( “Parent”), and David H. Johnson (the “Executive”).
Capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the “Employment Agreement” (as defined
herein).

 

R  E  C  I  T  A  L  S:

 

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

 

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

 

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

 

1.                                       Purchase
of Restricted Stock. Subject to the terms and conditions set forth in this
Agreement, Parent hereby sells to the Executive, and the Executive hereby
purchases from Parent, effective as of the Effective Date (which is the date
hereof), 104,9382716 shares of Class A Common Stock of Parent (the “Restricted
Shares”) for an aggregate purchase price of S123,722,22. The Board
acknowledges to the Executive that such purchase price is the fair market value
of the Restricted Shares on the Effective Date (the “Initial Value”),
determined without regard to any restrictions applicable thereto other than
restrictions which by their terms do not lapse. The Restricted Shares shall
vest in accordance with Section 2 and
Section 5 hereof.

 

 

2.                                       Vesting.

 

(a)          Service-Based Restricted Stock. 
Except as otherwise provided in this Agreement, one-third of the
Restricted Shares (the “Service-Based Restricted Stock”), shall vest and become non-forfeitable in
four equal installments on the day prior to each of the first, second, third
and fourth anniversaries of the 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 Restricted Stock shall be vested and
non-forfeitable on the day prior to the fourth anniversary of the Effective
Date; provided that any unvested Service-Based Restricted Stock shall become
vested and non-forfeitable upon a termination of the Executive’s employment
with the Company (A) due to his death, (B) by the Company due to his Disability
or without Cause or (C) by the Executive for Good Reason, in each case on or
after a “Change in Control” (as
defined in Section 2(b)(iii)(6)) or, in the case of a termination by the
Company without Cause or a termination by the Executive for Good Reason, in
anticipation of a Change in Control (a termination described in the foregoing
proviso being referred to hereinafter as a “C1C Termination”).

 

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

 

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

 

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

 

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

 

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

 

2

 

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

 

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

 

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

 

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

 

3

 

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

 

(7)                                  “Fair Market Value” shall mean the
price at which the closet in question would change hands in an arms’ length
sale between a willing buyer and a willing seller, with neither being under any
compunction to buy or sell and each with full knowledge of all relevant facts,
as determined by the Board in good faith; provided that, in determining Fair
Market Value of the securities of any member of the Parent Group, the Board
shall take into account the free cash flow, revenue and EB1TDA and such other
methodologies and characteristics as it may determine to be relevant, and shall
(A) adjust the Fair Market Value of the securities to take into account the
illiquidity of securities which are not publicly traded and (B) make no
adjustment on account of any control premium, Notwithstanding the above, the
Fair Market Value of any freely tradable security which is of a class listed
for trading on an established securities market or established trading system
shall be the average of the high and low trading prices of such class of
securities, as reported on the primary market or trading system on which such
securities are listed on the date Fair Market Value is determined.

 

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

 

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

 

(10)                            “Investors” shall mean all of (i)
Thomas H. Lee Equity Fund V, L.P., (ii) Thomas H. Lee Parallel Fund V, L.P.,
(iii) Thomas H. Lee Equity (Cayman) Fund V, L.P., (iv) Putnam Investments
Holdings, LLC, (v) Putnam Investments Employees’ Securities Company 1 LLC, (vi)
Putnam Investments Employees’ Securities Company II LLC, (vii) 1.997 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
FV, L.P., (xiii) Providence Equity Operating Partners IV, L.P. and (xiv) Lexa
Partners LLC, or any

 

4

 

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

 

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

 

Notwithstanding anything in this Agreement to the contrary, the Service
Condition applicable to each share of Performance-Based Restricted Stock shall
be deemed to have been attained upon a C1C Termination.

 

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

 

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

 

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

 

5

 

5.                                         Effect of
Termination of Employment.

 

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

 

(b)          Call Option.

 

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

 

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

 

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

 

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

 

6

 

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

 

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

 

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

 

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

 

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

 

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

 

7

 

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

 

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

 

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

 

6.                                       Rights
as a Stockholder: Dividends.

 

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

 

8

 

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

 

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

 

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

 

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

 

8.                                       Transferability.

 

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

 

9

 

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

 

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

 

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

 

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

 

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

 

10

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

11

 

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

 

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

 

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

 

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

 

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

 

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

 

To Parent:

 

WMG
Parent Corp.

75 Rockefeller Plaza

New York, New York 10019

Attention: General Counsel

 

with a copy to:

 

Paul, Weiss, Rifkind, Wharton & Garrison LLP

1285 Avenue of the Americas

New York, New York 10019

 

12

 

Attention: Michael J. Segal, Esq.

 

To the Executive:

 

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

 

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

 

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

 

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

 

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

 

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

 

13

 

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

 

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

 

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

 

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

 

	
   

  	
  WMG PARENT CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Edgar
  Bronfman. Jr.

  	
   

  
	
   

  	
  By: 

  	
  Edgar Bronfman. Jr.

  
	
   

  	
  Title:

  	
  CEO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ David H. Johnson

  	
   

  
	
   

  	
  David H. Johnson

  
				

 

14

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