Exhibit 10.39
Execution Copy
WARNER MUSIC GROUP
CORP.
STOCK OPTION
AGREEMENT
THIS STOCK OPTION
AGREEMENT (this “Agreement”),
is entered into as of this 15 th day of November 2008 (the
“ Date of Grant ”), by and between Warner Music
Group Corp., a Delaware corporation (“ Parent
”), and Michael Fleisher (the “ Executive
”).
WHEREAS, WMG Acquisition Corp., a
Delaware corporation (the “ Company ”), an
indirect subsidiary of Parent, or one of Parent’s other
direct or indirect subsidiaries, employs the Executive;
and
WHEREAS, the Parent has adopted the
Amended and Restated Warner Music Group Corp. 2005 Omnibus Award
Plan (the “ Plan ”), pursuant to which awards of
options to purchase shares of the Parent’s Common Stock may
be granted to persons, including persons regularly employed by the
Parent or its Affiliates; and
WHEREAS, the Board of Directors of
Parent (the “ Board ”) has determined that it is
in the best interests of Parent and its stockholders to grant to
the Executive as of the Date of Grant an option to purchase shares
of 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 . Parent hereby
grants on the Date of Grant to the Executive an option (the “
Option ”) to purchase 450,000 shares of Common Stock
(such shares of Common Stock, the “ Option Shares
”), on the terms and conditions set forth in the Plan and
this Agreement. This Option is not intended to be treated as an
incentive stock option under Section 422 of the Code. The
number and type of Option Shares purchasable hereunder shall be
subject to adjustment as and in the manner provided in
Section 11 below. The Option shall vest and become exercisable
in accordance with Section 5 hereof; provided ,
however , that the Option in respect of 150,000 of the
Option Shares (such shares, the “ Bonus Option Shares
”) shall be subject to the special additional vesting terms
set forth in Section 5(f) hereof.
2. Incorporation by Reference,
Etc . The provisions of the Plan are hereby incorporated herein
by reference. Except as otherwise expressly set forth herein, this
Agreement shall be construed in accordance with the provisions of
the Plan and any capitalized terms not otherwise defined in this
Agreement shall have the definitions set forth in the Plan. As used
herein with respect to any person, the term “
Affiliate ” shall mean any entity that directly or
indirectly is controlled by, controls or is under common control
with such person. The Board shall have final authority to interpret
and construe the Plan and this Agreement and to make any and all
determinations under them, and its decision shall be binding and
conclusive upon the Executive and his legal representative in
respect of any questions arising under the Plan or this
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 $2.77 per share, representing the Fair Market Value of the
Common Stock as of the Date of Grant. Such exercise price shall be
subject to adjustment as and in the manner provided in
Section 11 below.
4. Expiration Date . Subject
to Section 6 hereof, the Option shall expire at the end of the
period commencing on the Date of Grant and ending at 11:59 p.m.
Eastern Time (“ ET ”) on the day preceding the
tenth anniversary of the Date of Grant (the “ Option
Period ”).
5. Exercisability of the
Option .
(a) General . Except as may
otherwise be provided herein, the Option shall become vested and
exercisable in five equal installments on the day prior to each of
the first, second, third, fourth and fifth
B-1
anniversaries of the Date of Grant
(i.e., the vesting dates shall be November 14 of 2009, 2010,
2011, 2012 and 2013, respectively) (the “ Vesting
Dates ”) provided that (i) the Executive remains
employed with the Company on each such date and (ii) with
respect to the Bonus Option Shares (which shall be eligible to vest
in equal installments on each of the Vesting Dates), the vesting
terms set forth in Section 5(f) hereof are met.
(b) Effect of Certain
Terminations of Employment . Upon the Executive’s
cessation of employment with the Company or any Affiliate of the
Parent for any reason, any then remaining portion of the Unvested
Option shall be immediately terminated without the receipt of
consideration by the Executive, as more fully set out below, except
as set out in clauses (iv) and (v) below:
(i) Termination for Cause .
Upon the Executive’s cessation of employment with the Company
or any Affiliate of the Parent due to a termination for Cause at
any time, the entire Option (regardless of whether then vested)
shall be immediately terminated without the receipt of
consideration by the Executive.
(ii) Termination without Cause or
for Good Reason . Except as provided in Section 5(b)(v)
below, upon the Executive’s cessation of employment with the
Company or any Affiliate of the Parent due to a termination without
Cause or for Good Reason, any then remaining portion of the
Unvested Option shall be immediately terminated without the receipt
of consideration by the Executive.
(iii) Voluntary Termination
without Good Reason . Upon the Executive’s cessation of
employment with the Company or any Affiliate of the Parent due to a
voluntary termination without Good Reason, any then remaining
portion of the Unvested Option shall be immediately terminated
without the receipt of consideration by the Executive.
(iv) Termination Due to Death or
Disability . In the event of the Executive’s cessation of
employment with the Company or any Affiliate of the Parent by
reason of the Executive’s death or Disability, the additional
portion, if any, of the Option that would have become vested and
exercisable if the Executive had remained employed by the Company
for 12 months following such termination date will become
immediately vested and exercisable as of such termination date. Any
remaining portion of the Unvested Option (after giving effect to
the preceding sentence) shall be immediately terminated without the
receipt of consideration by the Executive.
(v) Termination without Cause or
for Good Reason in Connection with a Change in Control . Upon
the Executive’s cessation of employment with the Company or
any Affiliate of the Parent due to a termination without Cause or
for Good Reason, in each case, provided that such termination
occurs on or after, or in anticipation of, a Change in Control, the
remaining portion of the Option other than with respect to the
Bonus Option Shares (which Bonus Option Shares shall remain subject
to Section 5(f) unless otherwise determined pursuant to
Section 5(g)) shall become fully vested and
exercisable.
(c) The term “ Vested
Option ,” as used herein, shall mean the portion of the
Option on and following the time that the vesting condition set
forth in Section 5(a), 5(b) or 5(f) hereof has been satisfied
as to such portion. 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 using the
applicable form provided by Parent delivered in person or by mail
in accordance with Section 12(a) hereof and accompanied by
payment therefor. The purchase price of the Option Shares shall be
paid by the Executive to Parent (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) by a broker-assisted “cashless exercise”
procedure if and in the manner approved by the Committee, or
(D) by any other method approved in writing by the Committee.
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
B-2
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.
(e) In the event that the Common
Stock ceases to be traded on an Exchange following a transaction or
other event that does not constitute a Change in Control, then,
notwithstanding any provision of the Plan, the Option shall be
treated in the same manner as Parent and the Company treat stock
options then held by the employees of the Company generally. For
the avoidance of doubt, the vesting of the portion of the Option
covering the Bonus Option Shares shall remain subject to
Section 5(f) following a transaction described in this
Section 5(e), unless otherwise determined pursuant to
Section 5(g).
(f) Vesting of Portion of the
Option Covering Bonus Option Shares . The portion of the Option
covering Bonus Option Shares which is scheduled to vest on any
particular date shall not vest or become exercisable if,
notwithstanding the achievement of the vesting conditions set forth
above, the Committee affirmatively determines, in its sole and
absolute discretion within 45 days following such scheduled vesting
date, that such portion of the Option (or any portion thereof)
shall not be permitted to vest and become exercisable on such
scheduled vesting date. In making such determination, the Committee
may take into consideration such factors as it deems appropriate,
including, without limitation, whether any additional performance
goals established by the Committee from time to time with respect
to the vesting of such Bonus Option Shares have been met. Such
performance goals may inclu
