Exhibit 4.3
TERMS AND CONDITIONS GOVERNING EMPLOYEE STOCK OPTIONS 2019/2024 IN SPOTIFY TECHNOLOGY S.A.
1. | Employee stock option issuer and holder |
1.1 | Spotify Technology S.A., a Luxembourg société anonyme, with registered address at 42-44, avenue de la Gare, L-1610 Luxembourg, registered with the Luxembourg Trade and Companies’ Register under number B 123.052 (the “Company”). |
1.2 | Employee of the Company or of any company controlled by the Company (the “Group”) in accordance with an individual notice of grant (the “Holder”). |
2. | Background |
2.1 | The Company’s board of directors (the “Board”) considers the existence of efficient share-related incentive programs for employees of the Group to be of material importance for the development of the Group. By connecting employees’ economic interest to the Group’s results and value trend, a long-term increase in value is promoted. Accordingly, the interests of participating employees and shareholders will coincide. |
Subject to the terms and conditions set out herein, the Holder is entitled to delivery of one share in the Company (a “Share”) per employee stock option (an “Employee Stock Option”) at the exercise price communicated to the Holder (the “Exercise Price”). The Exercise Price may be re-calculated under certain circumstances pursuant to clause 8. Subject to the provisions of clauses 8 and 9.3.3, the maximum aggregate number of Shares that may be subject to Employee Stock Options under the Employee Stock Option Program is 9,200,000 Shares. Shares available for grant or sale under the Employee Stock Option Program will be reduced by the net Shares granted under the Terms and Conditions Governing Restricted Stock Units 2019/2024 and the Terms and Conditions Governing Employee Stock Options 2019/2024 Interim in Spotify Technology S.A.
4. | Implementation and grant |
4.1 | The Employee Stock Option Program shall be effective as per 1 January 2019 (the “Implementation Date”). |
2(13)
(a) initially, 3/48 shall vest on the third calendar month following the Date of Grant; and
(b) thereafter, 1/48 shall vest each calendar month.
Notwithstanding the foregoing, if there is no such date specified in (a) or (b) in the relevant calendar month, vesting shall occur on the last day of such month. The vesting schedule set out in this clause 5.1.1 may be amended pursuant to clause 5.2, 5.3 and 9.
5.1.2 | Notwithstanding the aforesaid, the Board shall be entitled, in its sole discretion, to resolve that some or all unvested Employee Stock Options shall vest in advance. |
5.2.1 | If the Holder goes on leave of absence, such Holder’s Employee Stock Options will not vest during the leave of absence, except as set forth below in this clause 5.2. The Employee Stock Options that do not vest during the leave of absence as a consequence of the Holder’s leave of absence shall lapse immediately, if not otherwise determined by the Board. |
3(13)
5.3.1 | If (i) the Holder resigns, or (ii) the employer terminates the employment of the Holder with the Group (for whatever reason), or (iii) the Holder retires pursuant to the terms of his/her employment contract or regulatory requirements, all unvested Employee Stock Options shall cease vesting as of the date of termination of employment and shall immediately lapse. |
5.3.3 | If a Holder changes the entity for which he or she is employed, but remains employed by the Group, such change will not be deemed a termination of employment for purposes of his/her Employee Stock Options, provided that there is no other interruption or termination of the Holder’s employment, unless the Board, in its sole discretion, determines that the entity to which the Holder transfers is not a qualified affiliate of the Group. If a Holder changes the capacity in which he/she provides service to the Group from an employee to an independent contractor or consultant, such change will be deemed a termination of employment for purposes of his/her Employee Stock Options. |
5.3.4 | If the Holder, when he/she commences his/her employment with the Group, is subject to a probationary or trial employment and, at the end of such probationary or trial employment, the employment with the Group is terminated (for whatever reason), all vested and unvested Employee Stock Options shall lapse on the date of termination of employment, meaning, for the avoidance of doubt, that the Holder will not be entitled to exercise any Employee Stock Options. |
6.1 | General |
6.1.1 | The Holder is entitled to exercise his/her rights under the Employee Stock Options to the extent the Employee Stock Options have vested pursuant to these terms and conditions by requesting exercise at any time up to and including the fifth anniversary of the Date of Grant in the manner set forth below (“Exercise”), provided such Employee Stock Options have not previously lapsed. |
6.1.2 | In the event the Holder has not requested Exercise on or before the fifth anniversary of the Date of Grant (such date, or an earlier date set for the expiration of the term of the Employee Stock Options as provided for in clause 9, the “Expiration Date”), all rights under the Employee Stock Options shall lapse. |
4(13)
to a personal account on the electronic platform. Once the Holder will have logged-in and accepted the terms and conditions of the Employee Stock Option Program applicable to her/him, she/he will have the possibility (i) to place requests on the said electronic platform in order to exercise some or all of her/his vested Employee Stock Options (the “Exercise Request”) and (ii) carry out any actions required to settle the Holder’s Payment Obligations (as defined in clause 7.1). |
6.1.4 | The Exercise Request placed by the Holder must be placed not later than on the Expiration Date and state the number of Employee Stock Options that the Holder wishes to Exercise. An Exercise Request is binding and irrevocable. |
6.1.5 | If the Holder’s Employee Stock Options at Exercise entitle the Holder to subscribe for a number of Shares which is not an integer, the number of Shares to which the entitlement relates shall be rounded down to the nearest integer. |
6.1.6 | Exercise may not take place in the event the Company is declared bankrupt. However, Exercise may take place in the event the bankruptcy order is subsequently overturned on appeal. |
6.1.7 | The Expiration Date and the periods during which Exercise can take place may be amended pursuant to this clause 6, clause 9, or by other express action of the Board as provided for in these terms and conditions. |
6.2 | Termination of employment |
6.2.1 | If the Holder resigns, the employer terminates the employment of the Holder with the Group or the Holder is exempt from work in connection with an anticipated termination of employment, in any such case other than as a result of death or a physical disability and other than as a result of (i) the Holder’s wilful failure to perform, or serious negligence in the performance of his/her duties and responsibilities as an employee; or (ii) any other breach of any material provision of these terms and conditions and/or any breach of any material provision of his/her employment agreement; or (iii) the commission of fraud, embezzlement, theft or other dishonesty with respect to the employer or any of its associated companies, made by the Holder; or (iv) the commission of a felony or other crime involving moral turpitude or affecting the employer or any of its associated companies; or (v) any other circumstance constituting just cause for dismissal due to personal grounds (Sw. saklig grund för uppsägning på grund av personliga skäl) under Swedish law or similar under other applicable law (each of (i) through (v) a “Cause”), or if the Holder retires pursuant to the terms of his/her employment contract or regulatory requirements, the new Expiration Date shall be the 90th calendar day following the termination of employment (as determined pursuant to clause 5.3.2) or such later dates as determined by the Company (but in no event later than the fifth anniversary of the Date of Grant or such date as follows pursuant to clause 9). |
5(13)
under the Employee Stock Options which have not been subject to Exercise shall lapse. In the event of the Holder’s death, the rights and obligations in accordance with these terms and conditions shall be binding upon and inure to the Holder’s estate. |
6.2.3 | Notwithstanding the foregoing, should the Holder’s employment be terminated for Cause, all the Holder’s Employee Stock Options shall immediately lapse and may not be subject to Exercise. |
(i) placing a market sell order with a broker acceptable to the Board covering the minimum number of Shares (rounded up to the nearest whole Share) then being distributed in respect of vested Employee Stock Options as are sufficient to satisfy such Holder’s Payment Obligations. The net proceeds of such sale shall be delivered to the Company or its applicable Subsidiary upon the settlement of such sale, and any excess proceeds resulting from rounding up to the nearest whole Share shall be deposited into the Holder’s account on the electronic platform; or
(ii) a “net settlement” arrangement pursuant to which the Company will reduce the number of Shares deliverable to the Holder upon vesting or settlement by the minimum number of Shares (rounded up to the nearest whole Share, without any consideration to the Holder for such rounding) as are sufficient to satisfy Holder’s Payment Obligations.
7.3 | If the Company receives a valid Exercise Request and all actions required by the Holder to settle the Holder’s Payment Obligation have been completed, the Company shall deliver Shares to the Holder within 10 days on which banks are open for business generally (and not for internet banking only) in Luxembourg and the U.S (a “Business Day”) (less any Shares reduced or sold pursuant to this clause 7). |
7.4 | As a condition to the exercise of an Employee Stock Option, the Holder shall make such arrangements as the Board may require for the satisfaction of any Holder’s Payment Obligations that may arise in relation to the Employee Stock Options. |
7.5 | If the Holder does not complete any required actions to settle the Holder’s Payment Obligations with respect to any Employee Stock Option that become fully vested within 30 days following the applicable vesting date, then such Employee Stock Option will be cancelled with respect to those Shares that would otherwise have become issuable therefor, unless otherwise decided by the Board. |
6(13)
The Exercise Price and the number of Shares to which each Employee Stock Option entitles the Holder to subscribe for shall be re-calculated in the event that there are changes in the Company’s share capital by way of a bonus issue of shares, share split, reverse share split, or a reduction of the share capital (a “Re-calculation Event”), in order not to affect the value of the Employee Stock Options. The re-calculation shall be carried out by the Board in accordance with the following formula:
where:
n1 = number of shares issued in the Company prior to the Re-calculation Event
n2 = number of shares issued/reduced in the Re-calculation Event
n3 = number of Shares which each Employee Stock Option entitled the Holder to subscribe for immediately prior to the Re-calculation Event
n4 = number of Shares that each Employee Stock Option gives the right to subscribe for after the Re-calculation Event
Consequently, the Exercise Price for the Employee Stock Option shall be re-calculated in accordance with the following formula:
where (in addition to the above definitions):
p1 =Exercise Price per Share prior to the Re-calculation Event
p2 = Exercise Price per Share after the Re-calculation Event
In the event that a Re-calculation Event would lead to an Exercise Price after the Re-calculation Event which is less than the par value of the Company’s shares, the Exercise Price at Exercise shall instead equal the par value of the Company’s shares.
7(13)
9.1.1 | In the event of a Change in Control the Board may, in its sole discretion, decide to (i) set a period during which the Holder may request Exercise (an “Exercise Period”) and, if determined by the Board, a new Expiration Date, in accordance with the provisions of clause 9.1.2, (ii) have these terms and conditions continue following the Change in Control in accordance with the provisions of clause 9.1.3, (iii) allow a grant of substantially equivalent rights (i.e., among other things, that preserve the intrinsic value and vesting schedule of the Employee Stock Options) to acquire securities in a new company as the Holder had in the Company immediately before the Change in Control in accordance with the provisions of clause 9.1.4, or (iv) allow an amendment of the terms and conditions to the effect that, following the Change in Control, a new company assumes the Company’s rights and obligations hereunder in accordance with the provisions of clause 9.1.5. |
(i) a transaction or series of transactions (other than an offering of Shares to the general public through a registration statement filed with the Securities and Exchange Commission) whereby any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended from time to time (the “Exchange Act”)) directly or indirectly acquires beneficial ownership (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act) of securities of the Company possessing more than 50% of the total combined voting power of the Company’s securities outstanding immediately after such acquisition; provided, however, that the following acquisitions shall not constitute a Change in Control: (w) any acquisition by the Company; (x) any acquisition by an employee benefit plan maintained by the Company, (y) any acquisition which complies with clauses 9.1.1.1(iii)(I)-(III); or (z) in respect of an Employee Stock Option held by a particular Holder, any acquisition by the Holder or any group of persons including the Holder (or any entity controlled by the Holder or any group of persons including the Holder);
(ii) the Incumbent Directors cease for any reason to constitute a majority of the Board;
(iii) the consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination, (y) a sale or other disposition of all or substantially all of the Company’s assets in any single transaction or series of related transactions or (z) the acquisition of assets or stock of another entity, in each case other than a transaction: (I) which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “Successor Entity”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction, and (II) after which no person or group beneficially owns voting securities representing 50% or more of the combined voting power of the Successor Entity; provided, however, that no person or group shall be treated for purposes of this clause (II) as beneficially owning 50% or more of the combined voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction; and (III) after which at
8(13)
least a majority of the members of the board of directors (or the analogous governing body) of the Successor Entity were Board members at the time of the Board's approval of the execution of the initial agreement providing for such transaction; or
(iv) the date which is 10 Business Days prior to the completion of a liquidation or dissolution of the Company.
9.1.4 | If the Board decides to allow a grant of substantially equivalent rights to acquire securities in a new company as the Holder had in the Company immediately before the Change in |
9(13)
Control, all vested and unvested Employee Stock Options shall lapse as of the closing of the Change in Control and, subject to the grant of such substantially equivalent rights, the Holder shall have no further rights pursuant to the Employee Stock Options after the closing of the Change in Control. |
9.1.6 | If the Group, or any successor thereto, in connection with or within a period of 6 months following the closing of a Change in Control, terminates the employment of the Holder, other than for Cause, and if any Employee Stock Options are subject to continued vesting after the Change in Control in accordance with this clause 9.1, all of the Holder’s unvested Employee Stock Options shall vest as of the date of his or her termination of employment. |
In the event of a merger through which the Company is absorbed into another company (other than a Change in Control) or a de-merger through which the Company is divided into two or more new entities (other than a Change in Control), the Board shall, before the adoption of any resolution in the aforementioned respects, determine an Exercise Period, the first day of which shall fall at least 20 calendar days after the date of the notice by the Board to the Holder of such Exercise Period. During such Exercise Period the Holder shall be entitled to Exercise any Employee Stock Options which have vested in accordance with these terms and conditions. At the conclusion of such Exercise Period, all Employee Stock Options which have not been subject to Exercise during the Exercise Period shall lapse and the Holder shall have no rights pursuant to the Employee Stock Options.
10(13)
11.2 | If the Holder commits a material breach of any of its obligations under these terms and conditions, the Company is entitled, in addition to any liquidated damages in accordance with the provisions of clause 11.1, to claim damages in an amount corresponding to the difference between the actual damage suffered and the liquidated damages (if any), if such damage exceeds the amount of the liquidated damages (if any). |
11.3 | The payment by the Holder of any liquidated damages and damages shall not affect the Company’s right to pursue other remedies that the Company may have against the Holder as a result of a breach. |
11(13)
14. | Data protection |
For the purposes of implementing, managing and administering the Employee Stock Option Program, and for the Holder to participate in the Employee Stock Option Program, it is necessary for the Company, acting as a data controller, and other companies in the Group to process the Holder’s personal data. For more information regarding the processing of the Holder’s personal data, see the Company’s separate privacy notice which can be found in the ESOP Portal, that can be reached through the Internal Services webpage.
15. | Miscellaneous |
15.1 | The Employee Stock Options may not be transferred, otherwise disposed, pledged, borrowed against or used as any form of security. |
15.2 | The Company shall be entitled to amend these terms and conditions to the extent required by legislation, court decisions, decisions by public authorities or agreements, or if such amendments, in the reasonable judgment of the Company, are otherwise necessary for practical reasons, and provided in all of the aforementioned cases that the Holder’s rights are in no material respects adversely affected. If the Holder’s rights would be materially adversely affected, the Holder’s written consent shall be necessary for such amendment. |
12(13)
15.4 | The Holder has no right to compensation or damages for any loss in respect of the Employee Stock Option where such loss arises (or is claimed to arise), in whole or in part, from the termination of the Holder’s employment; or notice to terminate employment given by or to the Holder. However, this exclusion of liability shall not apply however to termination of employment, or the giving of notice, where a competent tribunal or court, from which there can be no appeal (or which the relevant employing company has decided not to appeal), has found that the cessation of the Holder’s employment amounted to unfair or constructive dismissal of the Holder. |
16. | Term and Termination |
These terms and conditions shall enter into force on the Implementation Date and remain in force until close of business in Sweden on 31 December 2028. The parties shall, however, after such date continue to be bound by the provisions set out in clause 15.5 and 17.
17.1 | These terms and conditions shall be governed by and construed in accordance with the substantive law of Sweden (excluding its rules on conflict of laws). |
13(13)
17.3 | Any dispute, controversy or claim arising out of or in connection with these terms and conditions, or the breach, termination or invalidity thereof, shall be finally settled by arbitration in accordance with the Arbitration Rules of the Arbitration Institute of the Stockholm Chamber of Commerce. Unless otherwise agreed between the parties to such arbitration, the Arbitral Tribunal shall be composed of a sole arbitrator, the seat of arbitration shall be Stockholm and the language to be used in the arbitral proceedings shall be English. |
17.4 | The arbitral proceedings and all information and documentation related thereto shall be confidential, unless a disclosure is required under any applicable law, relevant stock exchange regulations or order of court, other tribunal or competition authority or as otherwise agreed between the Company and the Holder in writing. |
APPENDIX 1(a)
TO TERMS AND CONDITIONS GOVERNING Restricted
STOCK Units 2019/2024 in spotify technology s.a., terms and conditions governing Employee Stock options 2019/2024 in spotify technology s.a. and terms and conditions governing Retention compensation program 2019/2014 IN SPOTIFY TECHNOLOGY S.A.
This Appendix 1(a) to the Terms and Conditions Governing Restricted
Stock Units 2019/2024 in Spotify Technology S.A. (the “RSU Plan”), Terms and Conditions Governing Employee Stock Options 2019/2024 in Spotify Technology S.A. (the “ESOP”) and Terms and Conditions Governing Retention Compensation Program 2019/204 in Spotify Technology S.A. (the “Retention Program”) in Spotify Technology S.A. (together, the “Rules”) shall apply only to certain employees of the Group specified by the Company (the “Specified Individual[s]”). Capitalized terms contained herein shall have the same meanings given to them in the applicable Rules, unless otherwise provided by Appendix 1(a).
The Rules and this Appendix 1(a) shall be read together. In any case of an irreconcilable contradiction (as determined by the Board) between the provisions of this Appendix 1(a) and the Rules, the provisions of the Rules shall govern unless expressly stated otherwise in this Appendix 1(a).
This Appendix 1(a) is effective as of the Implementation Date.
18. | Vesting |
1.1 | Each of the Rules shall be amended such that, with respect to only the Specified Individual[s], clause 5.3.1 of each of the Rules shall instead have the following wording: |
“Notwithstanding anything set forth in these terms and conditions to the contrary, if (i) the employer terminates the employment of the [Holder][Employee] with the Group for any other reason than for Cause (as defined below); or (ii) the [Holder][Employee] resigns due to the employer’s material breach of the [Holder’s][Employee’s] employment contract, then (x) such number or portion of the [Holder’s][Employee’s] unvested awards granted hereunder (each, an “Award”) shall fully and non-contingently vest as of the date of termination of employment as would have vested had termination of employment occurred [___]1 months after the actual date of termination of employment; and (y) any remaining unvested Awards shall immediately lapse. A termination of employment described in clause 7.1.5 or 7.1.9 of the RSU Plan, 9.1.6 or 9.1.7 of the ESOP or 6.1.4 or 6.1.5 of the Retention Plan will not receive acceleration under this paragraph, and will instead be treated in accordance with such applicable clause.
If [Holder’s][Employee’s]employment terminates for any reason other than the specific exceptions specified in the previous paragraph, then all unvested Awards shall cease vesting as of the date of termination of employment and shall immediately lapse (in the case of the Retention Compensation, at the time set out in the table below).”
2.ChanGE IN CONTROL
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1 | To range between 6 and 12. |
APPENDIX 1(a)
“Notwithstanding anything set forth herein to the contrary, if there is a Change in Control and, in connection with or within a period of 6 months following the closing of the Change in Control, (a) the [Holder][Employee] is required to perform duties that are materially inconsistent with those normally performed by a [___]2 or is not [_____] of the entity resulting from the Change in Control, and the [Holder][Employee] elects to resign as a result of such requirement, or (b) the [Holder][Employee] otherwise experiences a constructive termination, and if any Awards are subject to continued vesting after the Change in Control, then all of the [Holder’s][Employee’s] unvested Awards shall fully vest as of the date of his or her termination of employment.”
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2 | To include Holder’s title. |