| Item 5.02. | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
As previously disclosed, on June 22, 2022, Warner Music Group Corp. (the “Company”) announced that it had begun planning for the succession of the Company’s Chief Executive Officer (“CEO”) and director, Stephen Cooper. On September 21, 2022, the Company’s Board of Directors (the “Board”) announced that Mr. Robert Kyncl has been appointed to succeed Mr. Cooper as CEO and a director of the Company.
Mr. Cooper and Mr. Kyncl will serve as Co-CEOs of the Company from January 1, 2023 through January 31, 2023. On January 31, 2023, Mr. Cooper will retire from the Company and resign from the Board. Following his retirement, Mr. Cooper will provide consulting services to the Company through January 31, 2024. Effective as of February 1, 2023, Mr. Kyncl will become the Company’s sole CEO and will be appointed to the Board.
Mr. Kyncl, age 52, currently serves as the Chief Business Officer of YouTube, a division of Alphabet Inc., where he is responsible for YouTube’s creative and commercial partnerships, as well as its product operations and marketing. Mr. Kyncl has driven the development of YouTube’s creator ecosystem and original content initiatives, while helping lead the launch of its paid subscription services, YouTube Music and YouTube Premium. Prior to joining YouTube in 2010, Mr. Kyncl spent seven years at Netflix, Inc. where he led the company’s push into film and television content, playing an instrumental role in the company’s evolution as a streaming giant. Mr. Kyncl, together with his wife Luz, run the Kyncl Family Foundation, which provides financial assistance to students from underrepresented communities pursuing STEM degrees. Mr. Kyncl holds an MBA from Pepperdine University and a B.S. in International Relations from SUNY New Paltz. The Company believes that all of these experiences give Mr. Kyncl the qualifications and skills to serve as the Company’s CEO and as a director of the Company.
On September 20, 2022, the Company entered into an employment agreement (the “Employment Agreement”) with Mr. Kyncl. The Employment Agreement has an indefinite term, subject to termination by either party on nine months’ advance written notice, and includes non-competition covenants during Mr. Kyncl’s employment and non-solicitation covenants applicable during and for 12 months following Mr. Kyncl’s employment.
The Employment Agreement provides for a base salary of $2,000,000, a target annual cash bonus of $3,000,000 (with the actual award value to be determined by the Compensation Committee of the Board (the “Committee”) in its sole discretion based on factors including the strength of Mr. Kyncl’s performance and the performance of the Company) and an annual grant of performance share units with an aggregate pre-tax, grant date value of $10,000,000 (the “PSUs”), with the first grant to be made in January 2023. Each annual grant of PSUs will be prorated based on the length of Mr. Kyncl’s employment with the Company during such fiscal year, provided that the January 2023 grant will be prorated based on 10.5 out of 12 months of service. Each annual grant of PSUs will vest over a three-fiscal-year performance period subject to Mr. Kyncl’s continued employment and the achievement of performance goals set by the Committee. In addition, in January 2024, Mr. Kyncl will be eligible to receive a one-time award of options to purchase the Company’s stock with a target pre-tax, grant date value of $10,000,000, with the actual award value determined by the Committee in its sole discretion based on factors including the strength of Mr. Kyncl’s performance and the performance of the Company. The options will vest in annual installments over four years from the grant date subject to Mr. Kyncl’s continued employment with the Company. The PSUs and options will be granted under the Company’s 2020 Omnibus Incentive Plan (the “Plan”), and will be subject to the terms and conditions of the Plan. The Employment Agreement also provides that Mr. Kyncl will be employed in the greater New York metropolitan area and will receive reimbursement of his relocation expenses up to $500,000 (excluding a tax gross-up for any reimbursement which is taxable to him) as well as a one-time payment of $60,000.
The Employment Agreement further provides that, if Mr. Kyncl’s employment is terminated by the Company without “cause” or by Mr. Kyncl for “good reason,” subject to his execution of a release of claims in favor of the Company, he will receive a severance payment of $15,000,000 (which corresponds to the value of his total annual target cash and equity compensation), a pro rata annual bonus for the year of termination, an amount equal to the Company’s good faith estimate of Mr. Kyncl’s out-of-pocket cost for COBRA health plan continuation coverage for 12 months including a tax gross-up, and pro rata vesting of his outstanding PSUs and options, with any remaining unvested options to remain outstanding and subject to vesting on their original vesting schedule provided, for the
