Exhibit 10.2
RESTRICTED STOCK AWARD
AGREEMENT
THIS RESTRICTED STOCK AWARD
AGREEMENT (this “ Agreement ”), is
entered into this 15th day of March, 2005, by and between Warner
Music Group Corp., a Delaware corporation (“ Parent
”), and Richard Blackstone (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 March
15, 2005 (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superceded or replaced from time to time, the “ Employment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 grant to the Executive on the date hereof (the
“ Effective Date ”) the restricted stock
provided for herein (the “ Restricted Stock Award
”), such grant 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 grants to
the Executive, and the Executive hereby accepts a grant from
Parent, effective as of the Effective Date (which is the date
hereof), 209.8765432 shares of Class A Common Stock of Parent, par
value $.001 per share (the “ Restricted Shares
”). 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 date on which the Executive commences full-time employment
with the Company (the “ Employment Commencement Date
”) provided that the Executive remains employed with the
Company on each such date, such that one hundred percent (100%) of
the Service-Based Restricted Stock shall be vested and
non-forfeitable on the day prior to the fourth anniversary of the
Employment Commencement Date; provided that any unvested
Service-Based Restricted Stock shall become vested and
non-forfeitable upon a termination of the Executive’s
employment with the Company (A) due to his death, (B) by the
Company due to his Disability or without Cause or (C) by the
Executive for Good Reason, in each case on or after a “Change
in Control” (as defined in Section 2(b)(iii)(6)) or, in the
case of a termination by the Company without Cause or a termination
by the Executive for Good Reason, in anticipation of a Change in
Control (a termination described in the foregoing proviso being
referred to hereinafter as a “ CIC Termination
”).
(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 Employment Commencement Date provided that the Executive
remains employed with the Company on each such date (the “
Service Condition ”), but shall not be considered to
be fully vested until and unless the condition described in Section
2(b)(i) or 2(b)(ii), as applicable, has been satisfied (each such
condition, a “ Performance Condition ”).
(i)
With respect to one-half of the Performance-Based Restricted Stock,
the Performance Condition shall be the occurrence of a 2X
Restricted Stock Liquidity Event.
(ii)
With respect to the other one-half of the Performance-Based
Restricted Stock, the Performance Condition shall be the occurrence
of a 3X Restricted Stock Liquidity Event.
(iii)
For purposes of this Section 2(b), and also as and if used
elsewhere in this Agreement, the following terms shall have the
following meanings:
(1)
“ 2X Investor Equity Value ” shall mean (X) two
times the Investment minus (Y) the aggregate amount of cash
and “Fair Market Value” (as defined below) of readily
marketable securities or other assets (determined at the time of
receipt) received by the Investors in respect of the Investor
Equity prior to or coincident with the time of
determination.
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(2)
“ 3X Investor Equity Value ” shall mean (X)
three times the Investment minus (Y) the aggregate amount of
cash and Fair Market Value of readily marketable securities or
other assets (determined at the time of receipt) received by the
Investors in respect of the Investor Equity prior to or coincident
with the time of determination.
(3)
“ 2X Restricted Stock Liquidity Event ” shall
mean (A) the first sale in an underwritten offering of
Parent’s Class A Common Stock pursuant to a registration
statement on Securities and Exchange Commission (“ SEC
”) Form S-l or otherwise under the Securities Act of 1933, as
amended (the “ Securities Act ”) (an “
IPO ”), at a per share price which implies an
aggregate value of the Investor Equity at the time of the IPO of at
least the 2X Investor Equity Value, (B) following an IPO, or any
transaction other than an IPO which causes Parent’s Class A
Common Stock, or all or substantially all of the securities into
which such Class A Common Stock is converted or for which it is
exchanged, to be listed for trading on a national securities
exchange or quoted on an automated quotation system, the average
closing price of Parent’s Class A Common Stock, or such
securities into which Class A Common Stock is converted or for
which it is exchanged, on the primary exchange on which, or system
over which, it is traded over any 20 consecutive trading days is
such that the implied aggregate value of the Investor Equity at the
end of such 20 consecutive trading days, based on such average
price, is at least the 2X Investor Equity Value, determined as of
the first of such 20 consecutive trading days, or (C) a Bonus
Liquidity Event occurs which results in a combination of cash and
readily marketable securities being paid or provided to the
Investors having an aggregate value (as determined by the Board in
good faith as of the time of receipt) of at least the 2X Investor
Equity Value.
(4)
“ 3X Restricted Stock Liquidity Event ” has the
same meaning as a 2X Restricted Stock Liquidity Event, except that
the term “2X Investor Equity Value” each time it
appears in Section 2(b)(iii)(3) above shall be replaced with
“3X Investor Equity Value.”
(5)
“ Bonus Liquidity Event ” shall mean a Change in
Control, or other event ( e.g., a leveraged recapitalization
in which the proceeds are paid out to the Investors as dividends
and/or redemptions), in which consideration is paid to Investors in
respect of the Investor Equity in the form of cash, readily
marketable securities or a combination of both.
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(6)
“ Change in Control ” shall mean a “Change
of Control,” as defined in the certificate of incorporation
of Parent, as amended from time to time.
(7)
“ Fair Market Value ” shall mean the price at
which the asset in question would change hands in an arms’
length sale between a willing buyer and a willing seller, with
neither being under any compunction to buy or sell and each with
full knowledge of all relevant facts, as determined by the Board in
good faith; provided that, in determining Fair Market Value of the
securities of any member of the Parent Group, the Board shall take
into account the free cash flow, revenue and EBITDA and such other
methodologies and characteristics as it may determine to be
relevant, and shall (A) adjust the Fair Market Value of the
securities to take into account the illiquidity of securities which
are not publicly traded and (B) make no adjustment on account of
any control premium. Notwithstanding the above, the Fair
Market Value of any freely tradable security which is of a class
listed for trading on an established securities market or
established trading system shall be the average of the high and low
trading prices of such class of securities, as reported on the
primary market or trading system on which such securities are
listed on the date Fair Market Value is determined.
(8)
“ Investment ” means $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 March 1, 2004 or (B) received by the
Investors following March 1, 2004, without cost to the Investors,
in respect of the equity securities described in the preceding
clause (A).
(10)
“ Investors ” shall mean all of (i) Thomas H.
Lee Equity Fund V, L.P., (ii) Thomas H. Lee Parallel Fund V, L.P.,
(iii) Thomas H. Lee Equity (Cayman) Fund V, L.P., (iv) Putnam
Investments Holdings, LLC, (v) Putnam Investments Employees’
Securities Company I LLC, (vi) Putnam Investments Employees’
Securities Company II LLC, (vii) 1997 Thomas H. Lee Nominee Trust,
(viii) Thomas H. Lee Investors Limited Partnership, (ix) Bain
Capital Partners Integral Investors, LLC, (x) Bain Capital VII
Coinvestment Fund, LLC, (xi) BCIP TCV, LLC, (xii) Providence Equity
Partners IV, L.P., (xiii) Providence Equity Operating Partners IV,
L.P..and (xiv) Lexa Partners LLC, or any
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affiliate of any of them, in each case which
purchases Investor Equity on or prior to the Effective
Date.
(11)
“ Parent Group ” shall mean Parent, the Company
and each direct or indirect subsidiary of any of them.
Notwithstanding anything in this Agreement to
the contrary, the Service Condition applicable to each share of
Performance-Based Restricted Stock shall be deemed to have been
attained upon a CIC Termination.
(c)
The term “ Vested Restricted Shares .” as used
herein, shall mean (i) each share of Service-Based Restricted Stock
on and following the time that the vesting condition set forth in
Section 2(a) hereof has been actually or deemed satisfied as to
such share, (ii) each share of Performance-Based Restricted Stock
on and following the time that both the Service Condition and the
Performance Condition have been actually or deemed satisfied as to
such share and (iii) each share of Performance-Based Restricted
Stock not described in the immediately preceding clause (ii) on an
following the day prior to the seventh anniversary of the
Employment Commencement 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. The Executive may, but shall not be
required to, make an 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.
4.
Certificates . Certificates evidencing the Restricted
Shares shall be issued by Parent and shall be registered in the
Executive’s name on the stock transfer books of Parent
promptly after the date hereof, but shall remain in the physical
custody of Parent or its designee at all times prior to, in the
case of any particular Restricted Shares, the date such Restricted
Shares become Vested Restricted Shares. As a condition to the
receipt of this Restricted Stock Award, the Executive shall deliver
to Parent a stock power, duly endorsed in blank, relating to the
Restricted Shares.
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5.
Effect of Termination of Employment .
(a)
Upon the termination of the Executive’s employment with the
Company for any reason, the Restricted Shares shall be subject to
forfeiture back to Parent without consideration, or to the Call
Option, in each case as 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)
Forfeiture; 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), Unvested Restricted Shares
shall be forfeited, and 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
Vested Restricted Shares, in each case as described below in this
Section 5(b). The purchase price (the “ Call
Price ”) of the Vested Restricted Shares subject to
purchase under this provision (the “ Called Shares
”) also is described below in this Section 5(b).
Notwithstanding anything in this Agreement to the contrary,
all of the Restricted Shares shall be forfeited on January 6, 2006
if the Employment Commencement Date does not occur on or prior to
that date.
(1) In the event of a 5(a)(i)
Termination, (A) each Restricted Share which is an Unvested
Restricted Share immediately prior to such termination shall be
forfeited, and (B) the Call Price of each Called Share which is a
Vested Restricted Share immediately prior to such termination shall
be the Fair Market Value of such share on the date of the
applicable “Call Notice” (as defined below).
(2) In
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