Exhibit 10.4


 


AMENDMENT
NO. 3 TO CREDIT AGREEMENT


 


AMENDMENT dated as of April [    ],
2005 to the Amended and Restated Credit Agreement dated as of April 8, 2004 (as
amended from time to time, the “Credit
Agreement”) among WMG ACQUISITION CORP. (the “Company”), the Overseas Borrowers party
thereto, WMG HOLDINGS CORP. (“Holdings”), the
LENDERS party thereto (the “Lenders”),
BANC OF AMERICA SECURITIES LLC and DEUTSCHE BANK SECURITIES INC., as Joint Lead
Arrangers and Joint Book Managers, LEHMAN BROTHERS INC. and MERRILL LYNCH,
PIERCE, FENNER & SMITH INCORPORATED, as Co-Arrangers and Joint Book
Managers, DEUTSCHE BANK SECURITIES INC. and LEHMAN COMMERCIAL PAPER INC., as
Co-Syndication Agents, MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,
as Documentation Agent, and BANK OF AMERICA, N.A., as Administrative Agent (the
“Administrative Agent”), Swing Line
Lender and L/C Issuer.


 


PRELIMINARY STATEMENTS


 


(1)           WHEREAS,
the Company desires to refinance and replace all Term Loans outstanding under
the Credit Agreement immediately prior to giving effect to this Amendment (the “Existing Term Loans”) with a new class of term loans under
the Credit Agreement (the “Replacement Term Loans”),
in an amount equal to the aggregate principal amount of the Existing Term Loans
plus $250,000,000.  The Replacement Term
Loans shall have terms identical with, and have the same rights and obligations
under the Loan Documents as, the Existing Term Loans, except as such terms are
amended hereby.


 


(2)           WHEREAS,
each Term Lender who has an Existing Term Loan and who executes and delivers
this Amendment (each, a “Consenting Term Lender”)
shall be deemed, on the Third Amendment Effective Date (as defined in Section 15
of this Amendment), to have exchanged its Existing Term Loans for Replacement Term
Loans under the Credit Agreement in the same aggregate principal amount as such
Consenting Term Lender’s Existing Term Loans.


 


(3)           WHEREAS,
each Person who executes and delivers this Amendment as a term lender, other
than pursuant to an exchange of outstanding Term Loans described in paragraph
(2) above (the “Additional Term Lenders”), will
make the remaining Replacement Term Loans on the Third Amendment Effective Date
to the Company (the “Additional Term Loans”).
 The proceeds of the Additional Term
Loans will be used by the Company to, among other things, refinance in full the
outstanding principal amount of the Existing Term Loans of Existing Term
Lenders, if any, who do not execute and deliver this Amendment 


 





















 


(the “Non-Consenting Term Lenders”).  It is understood and agreed that an
Additional Term Lender may be a Person that is an Existing Term Lender.


 


(4)           WHEREAS,
the Company has requested that the Lenders amend the Credit Agreement to effect
the changes described above, and certain other changes described herein, and the
Lenders have agreed, subject to the terms and conditions hereinafter set forth,
to amend the Credit Agreement to effect such changes as set forth below.


 


NOW, THEREFORE, in consideration of the mutual
covenants and agreements herein contained and for other good and valuable
consideration, the sufficiency and receipt of which is hereby acknowledged, the
parties hereto hereby agree as follows:


 


SECTION 1. 
Defined Terms; References.  Unless otherwise specifically
defined herein, each term used herein that is defined in the Credit Agreement
has the meaning assigned to such term in the Credit Agreement.  Each reference to “hereof”, “hereunder”, “herein”
and “hereby” and each other similar reference and each reference to “this Agreement”
and each other similar reference contained in the Credit Agreement, and each
reference in any other Loan Document to “the Credit Agreement” or “thereunder”,
“thereof” or other similar reference to the Credit Agreement, shall, after the Third
Amendment Effective Date (as defined in Section 15 of this Amendment), refer to
the Credit Agreement as amended hereby.


 


SECTION 2.  Amendments to Definitions.


 


(a)   Section 1.01 of the Credit Agreement is amended by adding the
following definitions in appropriate alphabetical order:


 


““Approved Bank” has the meaning specified in clause (b) of
the definition of “Cash Equivalents”


 


“Canadian LC Obligations” means Indebtedness permitted by
Section 7.03(b)(xxiv).


 


“Debt Rating” means, as of any date of determination, the
senior secured debt rating for the Company, as determined
by either S&P or Moody’s.


 


“Third Amendment” means the Third Amendment to this
Agreement, dated as of April [   ], 2005, among Holdings, the
Company, the Administrative Agent and the Lenders party thereto.


 


“Third Amendment Effective Date” has the meaning specified in
Section 15 of the Third Amendment.”


 


2





















 


(b)   Section 1.01 of the Credit Agreement is further amended as
follows:


 


(i)       By
amending the following definitions to read in their entirety as follows:


 


““Cash Equivalents” means any of the following types of
Investments, to the extent owned by the Company or any of its Restricted
Subsidiaries free and clear of all Liens:


 


(a)           readily
marketable obligations issued or directly and fully guaranteed or insured by
the United States or any agency or instrumentality thereof having maturities of
not more than three hundred and sixty five (365) days from the date of
acquisition thereof;


 


(b)           time
deposits with, or insured certificates of deposit or bankers’ acceptances of,
any commercial bank that (i) (A) is a Lender or (B) is organized under the laws
of the United States, any state thereof or the District of Columbia or is the
principal banking subsidiary of a bank holding company organized under the laws
of the United States, any state thereof or the District of Columbia, and is a
member of the Federal Reserve System, (ii) issues (or the parent of which
issues) commercial paper rated at least P 1 (or the then equivalent grade) by
Moody’s or at least “A 1” (or the then equivalent grade) by S&P, and (iii)
has combined capital and surplus of at least $500,000,000 (any such bank being
an “Approved Bank”), in each case with
maturities of not more than three hundred and sixty five (365) days from the
date of acquisition thereof;


 


(c)           commercial
paper issued by an Approved Bank (or by the parent company thereof) or any note
issued by, or guaranteed by a corporation rated A 1 or A, as applicable (or the
equivalent thereof) or better by S&P or P 1 or A2, as applicable (or the
equivalent thereof) or better by Moody’s, in each case with maturities of not
more than three hundred and sixty five (365) days from the date of acquisition
thereof;


 


(d)           repurchase
agreements entered into by any Person with a bank or trust company (including
any of the Lenders) or recognized securities dealer having capital and surplus
in excess of $500,000,000 for direct obligations issued by or fully guaranteed
by the United States in which such Person shall have a perfected first priority
security interest (subject to no other Liens) and 


 


3





















 


having, on the date of
purchase thereof, a fair market value of at least 100% of the amount of the repurchase
obligations;


 


(e)           Investments,
classified in accordance with GAAP as Current Assets of the Company or any of
its Restricted Subsidiaries, in money market investment programs which are
administered by financial institutions having capital of at least $500,000,000,
and the portfolios of which are limited such that 95% of such investments are
of the character, quality and maturity described in clauses (a), (b), (c) and
(d) of this definition;


 


(f)            solely
with respect to any Foreign Subsidiary, (i) certificates of deposit of,
bankers acceptances of, or time deposits with, any commercial bank which is
organized and existing under the laws of the country in which such Foreign
Subsidiary maintains its chief executive office and principal place of business
provided such country is a member of the Organization for Economic Cooperation
and Development (any such bank being a “Qualifying Bank”),
and whose senior unsecured long-term debt is rated at least A by S&P or A2
by Moody’s or is assigned an equivalent rating in such country (any such bank
being an “Approved Foreign Bank”) and maturing
within twelve (12) months of the date of acquisition, (ii) equivalents of
demand deposit accounts which are maintained with an Approved Foreign Bank,
(iii) certificates of deposit of, bankers acceptances of, time deposits with,
or equivalents of demand deposit accounts maintained with, any Qualifying Bank
that is not an Approved Bank, to the extent that the aggregate amount thereof
for all Foreign Subsidiaries does not exceed $20,000,000, and (iv) any offshore
funds offered by any Approved Foreign Bank or any of its Affiliates so long as
such offshore fund’s senior unsecured long term debt is rated AAA by S&P or
Aaa by Moody’s or is assigned an equivalent rating in the applicable
jurisdiction; and


 


(g)           auction
rate securities having a credit rating of AAA from S&P or Aaa from Moody’s
and having a reset date of not more than 365 days from the date of acquisition
thereof.


 


“Term Commitment” means, as to each Term Lender, its obligation
to make a Term Loan to the Company pursuant to Section 2.01(a) in an aggregate
amount not to exceed the amount set forth opposite such Lender’s name on
Schedule 2.01 under the caption “Term Commitment.”


 


4





















 


(ii)   By
deleting the definitions of “Approved Domestic Bank” and “Specified Equity
Issuance”.


 


(iii)  By
amending paragraph (a) of the definition of “Applicable Rate” to read in its
entirety as follows:


 


“(a)           with respect to Term Loans, the following percentages per
annum based upon the Company’s Debt Rating:


 


	
  Applicable Rate

  	
   

  
	
  Pricing Level

  	
   

  	
  Eurodollar 

  Rate

  	
   

  	
  Base Rate

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1

  	
   

  	
  1.75

  	
  %

  	
  0.75

  	
  %

  
	
  2

  	
   

  	
  2.00

  	
  %

  	
  1.00

  	
  %

  



 


Pricing
Level 1 shall apply if the Debt Rating assigned by S&P is at least BB- and the Debt Rating assigned by Moody’s is at least Ba2.


 


Pricing
Level 2 shall apply if Level 1 does not apply.


 


Upon the Third Amendment Effective Date, the Applicable Rate with
respect to Term Loans shall be determined based upon the Debt Rating specified
in the certificate delivered pursuant to Section 15(j) of the Third
Amendment.  Thereafter, each change in
the Applicable Rate resulting from a publicly announced change in the Debt
Rating shall be effective, in the case of an upgrade, on the date of delivery
by a Responsible Officer of the Company to the Administrative Agent of notice
thereof and, in the case of a downgrade, on the date of the public announcement
thereof.”


 


(iv)  By
adding immediately after “the Company” in the definition of “Qualifying IPO”
the following new paranthetical:


 


“(or,
for the purposes of the definition of “Change of Control”, Warner Music Group
Corp.)”


 


(v)   By
(A) deleting the words “any fiscal year period of” in the first sentence of the
definition of “Excess Cash Flow”, (B) adding "and Section 7.06(m)"
immediately after the reference to Section 7.06(h) in clause (b)(v) thereof,
and (C) replacing the first occurrence of "such fiscal year" in clause
(b)(xxiii) thereof with "the period for which Excess Cash Flow is being
calculated" and replacing each subsequent reference in such clause to
"such fiscal year" with "such period."


 


(vi)  By
re-lettering clauses “(x)”, “(y)” and “(z)” of the definition of “Obligations”
as clauses “(w)”, “(x)” and “(y)” respectively, 


 


5





















 


replacing
“and” immediately prior to new clause (y) with a comma, and adding at the end
of new clause (y) the following new clause (z):


 


“and
(z) the Canadian LC Obligations”


 


SECTION 3.  Replacement of Term Loans.


 


(a)        Subject to the terms and conditions hereof, each Consenting
Term Lender severally agrees to exchange its Existing Term Loans for a like
principal amount in Dollars of Replacement Term Loans on the Third Amendment
Effective Date, and from and after the Third Amendment Effective Date such
Existing Term Loans shall be deemed refinanced in full and such Replacement
Term Loans shall be deemed to be “Term Loans” made under Section 2.01(a) of the
Credit Agreement.  The Replacement Term
Loans shall be of the same Type as such Consenting Term Lender’s Existing Term
Loans.  In the case of any Consenting
Term Lender’s Existing Term Loans that are Eurodollar Rate Loans, the Interest
Period in effect immediately prior to the Third Amendment Effective Date with
respect to such Existing Term Loans shall be deemed to continue on and after
the Third Amendment Effective Date with respect to such Consenting Term Lender’s
Replacement Term Loans, so that (i) such Consenting Term Lender’s Replacement
Term Loans shall bear interest based on the Eurodollar Rate in effect with
respect to such Consenting Term Lender’s Existing Term Loans immediately prior
to the Third Amendment Effective Date, (ii) the initial Interest Period for
such Consenting Term Lender’s Replacement Term Loans shall end on the last day
of the Interest Period with respect to such Consenting Term Lender’s Existing
Term Loans in effect immediately prior to the Third Amendment Effective Date,
(iii) interest on such Consenting Term Lender’s Existing Term Loans shall be
payable at the end of the initial Interest Period for such Consenting Term
Lender’s Replacement Term Loans and (iv) no amounts shall be payable on the
Third Amendment Effective Date pursuant to Section 3.05 of the Credit Agreement
as a result of the replacement of such Consenting Term Lender’s Existing Term
Loans with Replacement Term loans.


 


(b)        Subject to the terms and conditions hereof, each Additional
Term Lender severally agrees to make Replacement Term Loans in Dollars to the Company
on the Third Amendment Effective Date. 
The aggregate principal amount of each Additional Term Leader’s
Replacement Term Loans (including Replacement Term Loans deemed to have been
made by such Additional Term Lender under paragraph (a) above (if any)) shall
equal such Additional Term Lender’s Term Commitment as defined in the Credit
Agreement after giving effect to this Amendment.  The Company shall apply the proceeds of the
Additional Term Loans first, to refinance and replace in full all Existing
Term Loans of the Non-Consenting Term Lenders and second, to (a) repay
all or any portion of the Permitted Holdco Debt, (b) pay management and
monitoring fees to the Sponsors pursuant to Section 7.08(d) of the Credit
Agreement as amended 


 


6





















 


hereby, (c) make Restricted Payments pursuant to
Section 7.06(l)(z) of the Credit Agreement as amended hereby and/or (d)
repurchase from affiliates of Time Warner Inc. certain warrants to purchase
Equity Interests of Warner Music Group Corp. and Holdings.


 


(c)        Upon the Third Amendment Effective Date, the Replacement Term
Loans shall have the same terms, rights and obligations as the Term Loans as
set forth in the Loan Documents, except as modified by this Amendment, and all
references to (i) ”Term Lender” shall be deemed to be a reference to each Consenting
Term Lender and each Additional Term Lender and (ii) “Term Loan” shall be
deemed to be a reference to each Replacement Term Loan.


 


SECTION 4.  Amendments relating to
Replacement Term Loans.  (a)
Section 2.01(a) of the Credit Agreement is hereby amended by replacing the
reference to “ARCA Effective Date” therein with “Third Amendment Effective Date”.


 


(b)        Section 2.06(b) of the Credit Agreement is hereby amended by
replacing the reference to “ARCA Effective Date” therein with “Third Amendment
Effective Date”.


 


(c)        Section 2.07(a) of the Credit Agreement is amended by
replacing amortization schedule set forth therein with the following
amoritzation schedule:


 


	
  Date

  	
   

  	
  Aggregate Term 

  Loan Principal 

  Amortization Payment

  	
   

  
	
  May 2005

  	
   

  	
  $

  	
  4,220,200.00

  	
   

  
	
  August 2005

  	
   

  	
  $

  	
  4,220,200.00

  	
   

  
	
  November 2005

  	
   

  	
  $

  	
  4,220,200.00

  	
   

  
	
  February 2006

  	
   

  	
  $

  	
  4,220,200.00

  	
   

  
	
  May 2006

  	
   

  	
  $

  	
  4,220,200.00

  	
   

  
	
  August 2006

  	
   

  	
  $

  	
  4,220,200.00

  	
   

  
	
  November 2006

  	
   

  	
  $

  	
  4,220,200.00

  	
   

  
	
  February 2007

  	
   

  	
  $

  	
  4,220,200.00

  	
   

  
	
  May 2007

  	
   

  	
  $

  	
  4,220,200.00

  	
   

  
	
  August 2007

  	
   

  	
  $

  	
  4,220,200.00

  	
   

  
	
  November 2007

  	
   

  	
  $

  	
  4,220,200.00

  	
   

  
	
  February 2008

  	
   

  	
  $

  	
  4,220,200.00

  	
   

  
	
  May 2008

  	
   

  	
  $

  	
  4,220,200.00

  	
   

  
	
  August 2008

  	
   

  	
  $

  	
  4,220,200.00

  	
   

  
	
  November 2008

  	
   

  	
  $

  	
  4,220,200.00

  	
   

  
	
  February 2009

  	
   

  	
  $

  	
  4,220,200.00

  	
   

  
	
  May 2009

  	
   

  	
  $

  	
  4,220,200.00

  	
   

  
	
  August 2009

  	
   

  	
  $

  	
  4,220,200.00

  	
   

  
	
  November 2009

  	
   

  	
  $

  	
  4,220,200.00

  	
   

  
	
  February 2010

  	
   

  	
  $

  	
  4,220,200.00

  	
   

  
	
  May 2010

  	
   

  	
  $

  	
  4,220,200.00

  	
   

  
	
  August 2010

  	
   

  	
  $

  	
  4,220,200.00

  	
   

  
	
  November 2010

  	
   

  	
  $

  	
  4,220,200.00

  	
   

  
	
  February 2011

  	
   

  	
  $

  	
  1,340,935,400.00

  	
   

  



 


7





















 


SECTION 5.  Mandatory Prepayments Specified
Equity Issuances.  Section
2.05(b) of the Credit Agreement is amended  by amending clause (iii) thereof to read in
its entirety as follows:


 


“(iii)  [Intentionally Omitted].”


 


SECTION 6. Prepayment Premium. Section 2.09 of the Credit Agreement is
amended by adding the following new clasuse (c) thereto:


 


"(c)         Prepayment Premium. Upon any prepayment in whole or in part
of the Term Loans after the Third Amendemnt Effective Date and on or prior to
the first anniversary of the Third Amendment Effective Date in connection with
any Refinancing (as defined below), 
Company shall pay to the Administrative Agent for the account of each
Term Lender an amount equal to one percent (1.0%) of the amount of the Term
Loan so prepaid. For the purposes hereof, "Refinancing"
means any replacement, refinancing or prepayment of all or any portion of the
Term Loans with or from the proceeds of a new term loan having an
"Applicable Rate" (or other equivalent term) that is not equal to or
greater than the Applicable Rate for the Term Loans.''


 


SECTION 7.  Amendments to the Investments
Covenant. Section 7.02 of the Credit Agreement is amended as
follows:


 


(a)           By amending clause (i)(B) thereof to
read in its entirety as follows:


 


"(B)         The total cash consideration
(including, without limitation, earnouts and other contingent payment
obligations to the sellers thereof but excluding any Excluded Consideration) paid
by or on behalf of the Company and its Restricted Subsidiaries for any such
purchase or other acquisition, when aggregated with the total cash
consideration paid by or on behalf of the Company and its Restricted
Subsidiaries for all other purchases and other acqusitions made by the Company
and its Restricted Subsidiaries pursuant to this Section 7.02(i), shall not
exceed $250,000,000 in any fiscal year (with any unused amounts in any fiscal
year being carried forward to any succeeding fiscal year);"


 


(b)        By amending Clause (n) thereof to read in its entirety as
follows:


 


“(n)         so long as immediately after giving
effect to any such Investment, no Event of Default has occurred and is
continuing, other Investments that (net of any cash repayment of or return on
such Investments theretofore received) do not exceed $50,000,000 in any fiscal
year; provided that, such amounts may be
increased by (x) the Net Cash Proceeds of Permitted Equity Issuances which are
Not Otherwise Applied, (y) with respect to Investments other than Investments
in Joint Ventures, (i) the Net Cash Proceeds of Permitted Subordinated
Indebtedness permitted by Section 7.03(a)(iii)(A) which are Not Otherwise
Applied and (ii) the sum of the Rollover Amounts for the two preceding fiscal
years, to the extent that such Rollover Amounts have not been used to make
Capital Expenditures pursuant to Section 7.19(b); provided that
the Company shall promptly notify the Administrative Agent of any application
of any Rollover Amount pursuant to this clause (n) and (z) with respect to
Investments in Joint Ventures, the amount of any Investments made in Joint
Ventures in existence on the Closing Date as required by, or made pursuant to
buy/sell arrangements between the joint venture parties set forth in, joint
venture 


 


8





















 


agreements
and similar binding arrangements in effect on the Closing Date; provided  further that,
to the extent that any such Investment (or series of related Investments) made
pursuant to this clause (n) consists of the contribution(s) or other
transfer(s) of property (other than cash) having an aggregate net book value in
excess of $5,000,000 to a Joint Venture for consideration less than the fair
market value of such property, then the Company shall have delivered to the
Administrative Agent a pro forma Compliance Certificate demonstrating that,
after giving Pro Forma Effect to such
Investment(s), the Loan Parties would be in compliance with the financial
covenants set forth in Section 7.11;”


 


SECTION 8.  Amendments to the Indebtedness
Covenant.  Section 7.03 of the
Credit Agreement is amended as follows:


 


(a)        By replacing “$50,000,000” where it appears in clause (b)(vi)(A)
thereof with “$100,000,000”.


 


(b)        By replacing “125,000,000” where it appears in (b)(xv)
thereof with “$175,000,000”.


 


SECTION 9.  Amendments to the Restricted
Payments Covenant.  (a) The last sentence of Section 7.06(i) of the Credit
Agreement is amended to read in its entirety as follows:


 


“For the purpose of this clause (i), “Cumulative
Excess Cash Flow” means the sum of Excess Cash Flow for (x) the period
commencing on the Third Amendment Effective Date and ending on September 30,
2005 and (y) each subsequent fiscal year commencing with the fiscal year ending
September 30, 2006 and ending with the Company’s most recently ended fiscal
year;”


 


(b)  Section 7.06(l) of the Credit Agreement is
amended by deleting “and” immediately prior to clause (y) thereof, and adding
at the end of clause (y) the following new clause (z):


 


“and (z) additional Restricted Payments consisting of cash dividends to
Holdings in an aggregate amount up to $160,000,000, the proceeds of which may
be used by Holdings to make additional Restricted Payments consisting of cash
dividends in an amount up to the amount of such Restricted Payments made by the
Company to Holdings; provided that
all such Restricted Payments referred to in this clause (z) shall be made
substantially simultaneously; and”


 


(c)        Section 7.06 of the Credit Agreement is amended by deleting “and”
at the end of paragraph (k) thereof, and adding the following new clause (m):


 


9





















 


“(m)        In addition to the foregoing,
the Company may make additional Restricted Payments to Holdings and Holdings
may use the proceeds thereof to make additional Restricted Payments; provided that (i) the proceeds of such Restricted Payments
shall be applied solely to pay cash dividends on the common stock of Warner
Music Group Corp. and (ii) the amount of such Restricted Payments shall not
exceed $90,000,000 in any fiscal year.”


 


SECTION 10.  Management Fee Settlement.  (a) Section 7.08(d) of the Credit
Agreement is amended to read in its entirety as follows:


 


“(d) so long as no Event of Default shall have occurred and be
continuing under Section 8.01(f), the payment of management and monitoring fees
to the Sponsors in settlement of all amounts payable pursuant to the Sponsor
Management Agreement in an aggregate amount not to exceed $75,000,000,”.


 


SECTION 11.  Amendment to Restrictions on
Prepayments.  Section 7.14(a)
of the Credit Agreement is amended by replacing “and” immediately prior to
clause (ii) thereof with a comma and by adding immediately after clause (ii)
thereof the following new clause (iii):


 


“and
(iii)  the repayment of all or any
portion of the Permitted Holdco Debt with the proceeds of the Restricted
Payment permitted by Section 7.06(l)(z).”


 


SECTION 12.  Amendment to Application
of Funds.  Section 8.03 of the
Credit Agreement is amended by adding immediately after “Secured Hedge
Obligations” where it appears in paragraph Fourth thereof
the words “, the Canadian LC Obligations”.


 


SECTION 13.  Amendment to Schedule
2.01.  Upon the Third
Amendment Effective Date, Schedule 2.01 to the Credit Agreement shall be replaced
in its entirety by the new Schedule 2.01 attached hereto as Schedule I.


 


SECTION 14.  Technical Amendments.  (a) Section
10.01 of the Credit Agreement is hereby amended by replacing the words “Applicable
Margin” each time they appear with the words “Applicable Rate”.


 


(b)        Schedule 5.12 to the Credit Agreement is hereby amended by
adding “Warner Music Ireland Finance Limited” thereto under the heading “Newly
Created Subsidiaries”.


 


10





















 


(c)        Exhibit D to the Credit Agreement is amended by replacing
Schedule 2 to the Form of Compliance Certificate set forth therein with the
Schedule 2 attached hereto as Exhibit A.


 


SECTION 15.  Conditions to
Effectiveness.  This Amendment
shall become effective on the date (the “Third Amendment Effective Date”) when,
and only when, each of the following conditions shall have been satisfied to
the satisfaction of the Administrative Agent:


 


(a)        The Execution of Counterparts.  The Administrative Agent shall have received
from each of Holdings, the Company, the Required Lenders and the Requisite Term
Lenders (defined below) a counterpart hereof signed by such party or facsimile
or other written confirmation (in form reasonably satisfactory to the
Administrative Agent) that such party has signed a counterpart hereof.  For the purposes hereof “Requisite
Term Lenders” means Consenting Term Lenders and Additional Term
Lenders providing Replacement Term Loans in an amount equal to (i) an amount
sufficient to refinance the Existing Term Loans, plus (ii) $250,000,000.


 


(b)        Expenses.  The
Administrative Agent shall have received reimbursement for all costs and
expenses (including fees, charges and disbursements of counsel to the Administrative
Agent) incurred in connection with the preparation, negotiation and execution
of this Amendment for which the Company shall have received written notice.


 


(c)        Evidence of Debt. 
Each Consenting Term Lender and each Additional Term Leader shall have
received, if requested by it, one or more Term Notes payable to the order of
such Term Lender duly executed by the Company in substantially the form of
Exhibit C-1 to the Credit Agreement, evidencing the Replacement Term Loans.


 


(d)        Interest, Etc. 
Simultaneously with the making of the Replacement Term Loans, the Company
shall have paid to all the Non-Consenting Term Lenders accrued and unpaid
interest on the Existing Term Loans to the Third Amendment Effective Date plus
additional amounts, if any, owing pursuant to Section 3.05 of the Credit
Agreement.


 


(e)        Execution of Consent. The Administrative Agent shall
have received counterparts of a consent substantially in the form of Exhibit B
to this Amendment, duly executed by each Subsidiary Guarantor.


 


(f)         Representations. 
The representations and warranties of Holdings, the Company and each
other Loan Party contained in Article 5 of the Credit Agreement or any other
Loan Document shall be true and correct in all material respects on and as of
the Third Amendment Effective Date, except to the extent 


 


11





















 


that such representations and warranties
specifically refer to an earlier date, in which case they shall be true and
correct in all material respects as of such earlier date.


 


(g)        No Default.  No
Default or Event of Default shall exist on the Third Amendment Effective Date
after giving effect to this Amendment.


 


(h)        Consummation of Initial Public Offering.  On or prior to the earlier of (i) the Third
Amendment Effective Date and (ii) November 1, 2005, Warner Music Group Corp.
shall have consummated an initial public offering of its common stock generating
cash proceeds of not less than $500,000,000.


 


(i)         Leverage Ratio. 
After giving Pro Forma Effect
to the Replacement Term Loans and the application of proceeds thereof and the
initial public offering by Warner Music Group Corp and the application of
proceeds thereof, the Leverage Ratio shall be less than 4.25:1; provided that for the purpose of this paragraph (i) only, “Consolidated EBITDA” shall mean “EBITDA” as defined in the
Senior Subordinated Notes Indenture and as adjusted for the purpose of
calculating the “Fixed Charge Coverage Ratio” thereunder.


 


(j)         Debt Ratings Certificate.  The Administrative Agent shall have received
a certificate signed by a Responsible Officer of the Company certifying the current
Debt Ratings.


 


(k)        Mortgages.  The
Administrative Agent shall have received (x) evidence satisfactory to it that
mortgage amendments with respect to the Mortgages have been duly executed,
acknowledged and delivered by the Loan Party party thereto and are in form suitable
for filing and recording in all filing or recording offices that the
Administrative Agent may deem necessary or desirable, and that all filing and
recording taxes and fees have been paid or otherwise provided for in a manner
reasonably satisfactory to the Administrate Agent and (y) endorsement to title
insurance policies with respect to the mortgaged properties in form and
substances satisfactory to the Administrative Agent.


 


(l)         Responsible Officer’s Authority.  The Administrative Agent shall have received
such certificates of resolutions or other action, incumbency certificates
and/or other certificates of Responsible Officers of each Loan Party as the
Administrative Agent may reasonably require evidencing the identity, authority
and capacity of each Responsible Officer thereof authorized to act as a
Responsible Officer in connection with this Agreement and the other Loan
Documents to which such Loan Party is a party or is to be a party.


 


(m)       Existence, Authority, Good Standing etc.  The Administrative Agent shall have received
such documents and certifications as the Administrative Agent may reasonably
require to evidence that each Loan Party is duly organized or 


 


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formed, and that each of the Borrowers and the
Guarantors is validly existing, in good standing and qualified to engage in
business in each jurisdiction where its ownership, lease or operation of
properties or the conduct of its business requires such qualification, except to
the extent that failure to be so qualified could not reasonably be expected to
have a Material Adverse Effect.


 


(n)        Opinions.  The
Administrative Agent shall have received such opinions as may reasonably be
requested by it, including an opinion of (A) Simpson, Thacher & Bartlett
LLP, New York counsel to the Loan Parties and (B) Paul Robinson, internal
counsel to the Loan Parties, each dated as of the Third Amendment Effective
Date, and each reasonably satisfactory to the Administrative Agent.


 


(o)        Committed Loan Notice. 
A Committed Loan Notice, as applicable, relating to the Replacement Term
Loans be made on the Third Amendment Effective Date.


 


SECTION 16.  Certain Consequences Of
Effectiveness.  On and after
the Third Amendment Effective Date, the rights and obligations of the parties
hereto shall be governed by the Credit Agreement as amended by this Amendment; provided that the rights and obligations of the parties to
the Credit Agreement with respect to the period prior to the Third Amendment
Effective Date shall continue to be governed by the provisions of the Credit
Agreement prior to giving effect to this Amendment.  Each Loan Document, as specifically amended
hereby, is, and shall continue to be, in full force and effect and is hereby
ratified and confirmed in all respects. 
Without limiting the foregoing, the Collateral Documents and all of the
Collateral do and shall continue to secure the payment of all Secured
Obligations (except to the extent limited by the terms of the Collateral
Documents), as amended hereby.


 


SECTION 17. 
Governing Law.  This Amendment shall be governed
by and construed in accordance with the laws of the State of New York.


 


SECTION 18. 
Counterparts.  This Amendment may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.  Delivery by telecopier of an executed
counterpart of a signature page to this Amendment shall be effective as
delivery of an original executed counterpart of this Amendment.


 


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IN WITNESS WHEREOF, the parties hereto have caused
this Amendment to be duly executed as of the date first above written.


 


	
   

  	
  WMG
  ACQUISITION CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
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  WMG
  HOLDINGS CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
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  BANK
  OF AMERICA, N.A., as Administrative Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
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  BANK
  OF AMERICA, N.A., as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
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  DEUTSCHE
  BANK AG, NEW YORK BRANCH  

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
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  Name
  of Lender:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
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  Name
  of Lender: 

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
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