Document:

Exhibit 4.1

 

SPECIMEN
OF STOCK CERTIFICATE

 

	
  NUMBER
COMMON STOCK

  	
   

  	
  [Warner
  Music Group Corp. Logo]

  	
   

  	
  SHARES
COMMON STOCK

  
	
   

  	
   

  	
  Warner
  Music Group Corp.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  INCORPORATED UNDER THE
  LAWS OF

  THE STATE OF DELAWARE

  	
   

  	
  SEE REVERSE SIDE FOR

  CERTAIN DEFINITIONS
CUSIP

  

 

THIS CERTIFICATE IS
TRANSFERABLE IN NEW YORK, NEW YORK

 

	
  This Certifies that

  	
   

  
	
   

  	
   

  
	
  is the owner of

  	
   

  

 

FULLY PAID AND
NON-ASSESSABLE SHARES OF THE COMMON STOCK, PAR VALUE $0.001, OF

 

WARNER MUSIC GROUP CORP.

transferable on the books of
the Corporation by the holder hereof in person, or by duly authorized attorney,
upon the surrender of this Certificate properly endorsed.  This Certificate is not valid until
countersigned by the Transfer Agent and registered by the Registrar.

WITNESS the facsimile seal
of the Corporation and the facsimile signatures of its duly authorized
officers.

	
  Dated:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ David H. Johnson

  	
  /s/ Edgar Bronfman, Jr.

  
	
   

  	
   

  
	
  SECRETARY

  	
  CHAIRMAN AND CHIEF
  EXECUTIVE OFFICER

  
	
   

  	
   

  
	
   

  	
   

  	
  Countersigned and Registered:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  AMERICAN STOCK TRANSFER & TRUST COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TRANSFER AGENT AND REGISTRAR

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  BY: 

  	
  [Signature]

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Authorized Signature

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Warner Music Group
  Corp.

  CORPORATE SEAL

  

 

 

WARNER MUSIC GROUP CORP.

The
Corporation will furnish without charge to each stockholder who so requests, a
copy of the designations, powers, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights.  Any such requests may be
addressed to the Secretary of the Corporation or to the Transfer Agent and
Registrar named on the face of this certificate.

The
following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws and regulations:

	
  TEN COM

  	
  —

  	
  as tenants in common

  	
   

  	
  UNIF GIFT MIN ACT -

  	
   

  	
   Custodian

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  (Cust)

  	
   

  	
  (Minor)

  
	
  TEN ENT

  	
  —

  	
  as tenant by the entireties

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  under Uniform Gifts to
  Minors Act

  
	
  JT TEN

  	
  —

  	
  as joint tenants with right of survivorship and not as tenants in
  common

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  (State)

  

Additional
abbreviations may also be used though not in the above list.

For value received,
_____________________________ hereby sell, assign and transfer unto

	
  PLEASE
  INSERT SOCIAL SECURITY OR OTHER

  IDENTIFYING NUMBER OF ASSIGNEE

  
	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  (PLEASE
  PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE)

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  	
    Shares of the Common Stock represented by
  the within Certificate, and do 

  
	
   

  	
   

  
	
  hereby
  irrevocably constitute and appoint

  
			

 

 

Attorney, to transfer such
stock registered on the books of the within-named Corporation with full power
of substitution in the premises.

	
  Dated 

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SIGNATURE(S) GUARANTEED:

  	
   

  	
  Notice: The signature(s)
  to this assignment must correspond with the name(s) as written upon the face
  of the certificate in every particular, without alteration or enlargement, or
  any change whatever. 

  
	
   

  	
   

  	
   

  
	
  THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR
  INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOANS ASSOCIATIONS AND CREDIT
  UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM),
  PURSUANT TO RULE 17Ad-15 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS
  AMENDED.Exhibit
10.49

 

EXECUTION
COPY

 

 

WMG HOLDINGS CORP.,

as the Issuer,

 

 

and

 

 

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Trustee

 

 

 

 

INDENTURE

 

 

 

Dated as of December 23,
2004

 

 

Floating Rate Senior Notes due
2011

 

9.5% Senior Discount Notes due
2014

 

Floating Rate Senior PIK Notes
due 2014

 

 

 

CROSS-REFERENCE TABLE

 

	
  TIA

  Section

  	
   

  	
   

  	
  Indenture

  Section

  
	
   

  	
   

  	
   

  
	
  310(a)(1)

  	
   

  	
  7.10

  
	
   

  	
  (a)(2)

  	
   

  	
  7.10

  
	
   

  	
  (a)(3)

  	
   

  	
  N.A.

  
	
   

  	
  (a)(4)

  	
   

  	
  N.A.

  
	
   

  	
  (a)(5)

  	
   

  	
  7.08; 7.10

  
	
   

  	
  (b)

  	
   

  	
  7.08; 7.10; 12.02

  
	
   

  	
  (c)

  	
   

  	
  N.A.

  
	
  311(a)

  	
   

  	
  7.11

  
	
   

  	
  (b)

  	
   

  	
  7.11

  
	
   

  	
  (c)

  	
   

  	
  N.A.

  
	
  312(a)

  	
   

  	
  2.06

  
	
   

  	
  (b)

  	
   

  	
  12.03

  
	
   

  	
  (c)

  	
   

  	
  12.03

  
	
  313(a)

  	
   

  	
  7.06

  
	
   

  	
  (b)(1)

  	
   

  	
  7.06

  
	
   

  	
  (b)(2)

  	
   

  	
  7.06

  
	
   

  	
  (c)

  	
   

  	
  7.06; 12.02

  
	
   

  	
  (d)

  	
   

  	
  7.06

  
	
  314(a)

  	
   

  	
  4.06; 4.17

  
	
   

  	
  (b)

  	
   

  	
  N.A.

  
	
   

  	
  (c)(1)

  	
   

  	
  7.02; 12.04; 12.05

  
	
   

  	
  (c)(2)

  	
   

  	
  7.02; 12.04; 12.05

  
	
   

  	
  (c)(3)

  	
   

  	
  N.A.

  
	
   

  	
  (d)

  	
   

  	
  N.A.

  
	
   

  	
  (e)

  	
   

  	
  12.05

  
	
   

  	
  (f)

  	
   

  	
  N.A.

  
	
  315(a)

  	
   

  	
  7.01(b)

  
	
   

  	
  (b)

  	
   

  	
  7.05

  
	
   

  	
  (c)

  	
   

  	
  7.01

  
	
   

  	
  (d)

  	
   

  	
  6.05; 7.01(c)

  
	
   

  	
  (e)

  	
   

  	
  6.11

  
	
  316(a)(last sentence)

  	
   

  	
  2.09

  
	
   

  	
  (a)(1)(A)

  	
   

  	
  6.02

  
	
   

  	
  (a)(1)(B)

  	
   

  	
  6.04

  
	
   

  	
  (a)(2)

  	
   

  	
  9.02

  
	
   

  	
  (b)

  	
   

  	
  6.07

  
	
   

  	
  (c)

  	
   

  	
  9.05

  
	
  317(a)(1)

  	
   

  	
  6.08

  
	
   

  	
  (a)(2)

  	
   

  	
  6.09

  
	
   

  	
  (b)

  	
   

  	
  2.04

  
	
  318(a)

  	
   

  	
  12.01

  
	
   

  	
  (c)

  	
   

  	
  12.01

  
					

 

N.A. means Not Applicable

 

 

Note:                                     This
Cross-Reference Table shall not, for any purpose, be deemed to be a part of the
Indenture.

 

 

TABLE OF CONTENTS

 

	
  ARTICLE
  ONE

  	
   

  
	
   

  	
   

  
	
  DEFINITIONS AND INCORPORATION BY REFERENCE

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 1.01.

  	
  Definitions.

  	
   

  
	
  SECTION 1.02.

  	
  Other Definitions.

  	
   

  
	
  SECTION 1.03.

  	
  Incorporation by Reference of TIA.

  	
   

  
	
  SECTION 1.04.

  	
  Rules of Construction.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  TWO

  	
   

  
	
   

  	
   

  	
   

  
	
  THE
  SECURITIES

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2.01.

  	
  Amount of Securities.

  	
   

  
	
  SECTION 2.02.

  	
  Form and Dating.

  	
   

  
	
  SECTION 2.03.

  	
  Execution and Authentication.

  	
   

  
	
  SECTION 2.04.

  	
  Registrar, Calculation Agent and Paying
  Agent.

  	
   

  
	
  SECTION 2.05.

  	
  Paying Agent To Hold Assets in Trust.

  	
   

  
	
  SECTION 2.06.

  	
  Holder Lists.

  	
   

  
	
  SECTION 2.07.

  	
  Transfer and Exchange.

  	
   

  
	
  SECTION 2.08.

  	
  Replacement Securities.

  	
   

  
	
  SECTION 2.09.

  	
  Outstanding Securities.

  	
   

  
	
  SECTION 2.10.

  	
  Treasury Securities.

  	
   

  
	
  SECTION 2.11.

  	
  Temporary Securities.

  	
   

  
	
  SECTION 2.12.

  	
  Cancellation.

  	
   

  
	
  SECTION 2.13.

  	
  Defaulted Interest.

  	
   

  
	
  SECTION 2.14.

  	
  CUSIP, ISIN and “Common Code” Numbers.

  	
   

  
	
  SECTION 2.15.

  	
  Deposit of Moneys.

  	
   

  
	
  SECTION 2.16.

  	
  Book-Entry Provisions for Global
  Securities.

  	
   

  
	
  SECTION 2.17.

  	
  Special Transfer Provisions.

  	
   

  
	
  SECTION 2.18.

  	
  Computation of Interest.

  	
   

  
	
  SECTION 2.19.

  	
  Issuance of Additional Senior PIK
  Securities.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  THREE

  	
   

  
	
   

  	
   

  	
   

  
	
  REDEMPTION

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 3.01.

  	
  Notices to Trustee.

  	
   

  
	
  SECTION 3.02.

  	
  Selection of Securities To Be Redeemed.

  	
   

  
	
  SECTION 3.03.

  	
  Notice of Redemption.

  	
   

  

 

i

 

	
  SECTION 3.04.

  	
  Effect of Notice of Redemption.

  	
   

  
	
  SECTION 3.05.

  	
  Deposit of Redemption Price.

  	
   

  
	
  SECTION 3.06.

  	
  Securities Redeemed in Part.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  FOUR

  	
   

  
	
   

  	
   

  	
   

  
	
  COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 4.01.

  	
  Payment of Securities.

  	
   

  
	
  SECTION 4.02.

  	
  Maintenance of Office or Agency.

  	
   

  
	
  SECTION 4.03.

  	
  Corporate Existence.

  	
   

  
	
  SECTION 4.04.

  	
  Payment of Taxes and Other Claims.

  	
   

  
	
  SECTION 4.05.

  	
  Maintenance of Properties and Insurance.

  	
   

  
	
  SECTION 4.06.

  	
  Compliance Certificate; Notice of Default.

  	
   

  
	
  SECTION 4.07.

  	
  Compliance with Laws.

  	
   

  
	
  SECTION 4.08.

  	
  Waiver of Stay, Extension or Usury Laws.

  	
   

  
	
  SECTION 4.09.

  	
  Change of Control.

  	
   

  
	
  SECTION 4.10.

  	
  Incurrence of Indebtedness and Issuance of
  Preferred Stock.

  	
   

  
	
  SECTION 4.11.

  	
  Restricted Payments.

  	
   

  
	
  SECTION 4.12.

  	
  Liens.

  	
   

  
	
  SECTION 4.13.

  	
  Asset Sales.

  	
   

  
	
  SECTION 4.14.

  	
  Transactions with Affiliates.

  	
   

  
	
  SECTION 4.15.

  	
  Dividend and Other Payment Restrictions
  Affecting Subsidiaries.

  	
   

  
	
  SECTION 4.16.

  	
  Guarantees.

  	
   

  
	
  SECTION 4.17.

  	
  Reports to Holders.

  	
   

  
	
  SECTION 4.18.

  	
  Business Activities.

  	
   

  
	
  SECTION 4.19.

  	
  Payments for Consent.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  FIVE

  	
   

  
	
   

  	
   

  	
   

  
	
  SUCCESSOR CORPORATION

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 5.01.

  	
  Merger, Consolidation, or Sale of Assets.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  SIX

  	
   

  
	
   

  	
   

  
	
  DEFAULT AND REMEDIES

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 6.01.

  	
  Events of Default.

  	
   

  
	
  SECTION 6.02.

  	
  Acceleration.

  	
   

  
	
  SECTION 6.03.

  	
  Other Remedies.

  	
   

  
	
  SECTION 6.04.

  	
  Waiver of Defaults.

  	
   

  

 

ii

 

	
  SECTION 6.05.

  	
  Control by Majority.

  	
   

  
	
  SECTION 6.06.

  	
  Limitation on Suits.

  	
   

  
	
  SECTION 6.07.

  	
  Rights of Holders To Receive Payment.

  	
   

  
	
  SECTION 6.08.

  	
  Collection Suit by Trustee.

  	
   

  
	
  SECTION 6.09.

  	
  Trustee May File Proofs of Claim.

  	
   

  
	
  SECTION 6.10.

  	
  Priorities. 

  	
   

  
	
  SECTION 6.11.

  	
  Undertaking for Costs.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  SEVEN

  	
   

  
	
   

  	
   

  
	
  TRUSTEE

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 7.01.

  	
  Duties of Trustee.

  	
   

  
	
  SECTION 7.02.

  	
  Rights of Trustee.

  	
   

  
	
  SECTION 7.03.

  	
  Individual Rights of Trustee.

  	
   

  
	
  SECTION 7.04.

  	
  Trustee’s Disclaimer.

  	
   

  
	
  SECTION 7.05.

  	
  Notice of Default.

  	
   

  
	
  SECTION 7.06.

  	
  Reports by Trustee to Holders.

  	
   

  
	
  SECTION 7.07.

  	
  Compensation and Indemnity.

  	
   

  
	
  SECTION 7.08.

  	
  Replacement of Trustee.

  	
   

  
	
  SECTION 7.09.

  	
  Successor Trustee by Merger, Etc.

  	
   

  
	
  SECTION 7.10.

  	
  Eligibility; Disqualification.

  	
   

  
	
  SECTION 7.11.

  	
  Preferential Collection of Claims Against
  the Issuer.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  EIGHT

  	
   

  
	
   

  	
   

  
	
  DISCHARGE OF INDENTURE; DEFEASANCE

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 8.01.

  	
  Termination of the Issuer’s Obligations.

  	
   

  
	
  SECTION 8.02.

  	
  Legal Defeasance and Covenant Defeasance.

  	
   

  
	
  SECTION 8.03.

  	
  Conditions to Legal Defeasance or Covenant
  Defeasance.

  	
   

  
	
  SECTION 8.04.

  	
  Application of Trust Money.

  	
   

  
	
  SECTION 8.05.

  	
  Repayment to the Issuer.

  	
   

  
	
  SECTION 8.06.

  	
  Reinstatement.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  NINE

  	
   

  
	
   

  	
   

  
	
  AMENDMENTS, SUPPLEMENTS AND WAIVERS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 9.01.

  	
  Without Consent of Holders.

  	
   

  
	
  SECTION 9.02.

  	
  With Consent of Holders.

  	
   

  
	
  SECTION 9.03.

  	
  [Reserved].

  	
   

  
	
  SECTION 9.04.

  	
  Compliance with TIA.

  	
   

  

 

iii

 

	
  SECTION 9.05.

  	
  Revocation and Effect of Consents.

  	
   

  
	
  SECTION 9.06.

  	
  Notation on or Exchange of Securities.

  	
   

  
	
  SECTION 9.07.

  	
  Trustee To Sign Amendments, Etc.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  TEN

  	
   

  
	
   

  	
   

  
	
  [RESERVED]

  	
   

  
	
   

  	
   

  
	
  ARTICLE
  ELEVEN

  	
   

  
	
   

  	
   

  
	
  GUARANTEES

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 11.01.

  	
  Unconditional Guarantee.

  	
   

  
	
  SECTION 11.02.

  	
  [Reserved].

  	
   

  
	
  SECTION 11.03.

  	
  Limitation on Guarantor Liability.

  	
   

  
	
  SECTION 11.04.

  	
  Execution and Delivery of Subsidiary
  Guarantee.

  	
   

  
	
  SECTION 11.05.

  	
  Release of a Guarantor.

  	
   

  
	
  SECTION 11.06.

  	
  Waiver of Subrogation.

  	
   

  
	
  SECTION 11.07.

  	
  Immediate Payment.

  	
   

  
	
  SECTION 11.08.

  	
  No Setoff.

  	
   

  
	
  SECTION 11.09.

  	
  Guarantee Obligations Absolute.

  	
   

  
	
  SECTION 11.10.

  	
  Guarantee Obligations Continuing.

  	
   

  
	
  SECTION 11.11.

  	
  Guarantee Obligations Not Reduced.

  	
   

  
	
  SECTION 11.12.

  	
  Guarantee Obligations Reinstated.

  	
   

  
	
  SECTION 11.13.

  	
  Guarantee Obligations Not Affected.

  	
   

  
	
  SECTION 11.14.

  	
  Waiver.

  	
   

  
	
  SECTION 11.15.

  	
  No Obligation To Take Action Against the
  Issuer.

  	
   

  
	
  SECTION 11.16.

  	
  Dealing with the Issuer and Others.

  	
   

  
	
  SECTION 11.17.

  	
  Default and Enforcement.

  	
   

  
	
  SECTION 11.18.

  	
  Amendment, Etc.

  	
   

  
	
  SECTION 11.19.

  	
  Acknowledgment.

  	
   

  
	
  SECTION 11.20.

  	
  Costs and Expenses.

  	
   

  
	
  SECTION 11.21.

  	
  No Merger or Waiver; Cumulative Remedies.

  	
   

  
	
  SECTION 11.22.

  	
  Survival of Guarantee Obligations.

  	
   

  
	
  SECTION 11.23.

  	
  Guarantee in Addition to Other Guarantee
  Obligations.

  	
   

  
	
  SECTION 11.24.

  	
  Severability.

  	
   

  
	
  SECTION 11.25.

  	
  Successors and Assigns.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  TWELVE

  	
   

  
	
   

  	
   

  
	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 12.01.

  	
  TIA Controls.

  	
   

  

 

iv

 

	
  SECTION 12.02.

  	
  Notices.

  	
   

  
	
  SECTION 12.03.

  	
  Communications by Holders with Other
  Holders.

  	
   

  
	
  SECTION 12.04.

  	
  Certificate and Opinion as to Conditions
  Precedent.

  	
   

  
	
  SECTION 12.05.

  	
  Statements Required in Certificate or
  Opinion.

  	
   

  
	
  SECTION 12.06.

  	
  Rules by Trustee, Paying Agent, Registrar.

  	
   

  
	
  SECTION 12.07.

  	
  Legal Holidays.

  	
   

  
	
  SECTION 12.08.

  	
  Governing Law.

  	
   

  
	
  SECTION 12.09.

  	
  No Adverse Interpretation of Other
  Agreements.

  	
   

  
	
  SECTION 12.10.

  	
  No Recourse Against Others.

  	
   

  
	
  SECTION 12.11.

  	
  Successors.

  	
   

  
	
  SECTION 12.12.

  	
  Duplicate Originals.

  	
   

  
	
  SECTION 12.13.

  	
  Severability.

  	
   

  
	
   

  	
   

  	
   

  
	
  Signatures

  	
   

  	
   

  

 

	
  EXHIBITS

  
	
   

  	
   

  	
   

  	
   

  
	
  Exhibit
  A

  	
  -

  	
  Form
  of Discount Security

  	
   

  
	
  Exhibit
  B

  	
  -

  	
  Form
  of Senior Security

  	
   

  
	
  Exhibit
  C

  	
  -

  	
  Form
  of Senior PIK Security

  	
   

  
	
  Exhibit
  D

  	
  -

  	
  Form
  of Legend for 144A Securities and Other Securities That Are Restricted
  Securities

  	
   

  
	
  Exhibit
  E

  	
  -

  	
  Form
  of Legend for Regulation S Securities

  	
   

  
	
  Exhibit
  F

  	
  -

  	
  Form
  of Legend for Global Securities

  	
   

  
	
  Exhibit
  G

  	
  -

  	
  Form
  of Certificate To Be Delivered in Connection with Transfers to Non-QIB
  Accredited Investors

  	
   

  
	
  Exhibit
  H

  	
  -

  	
  Form
  of Certificate To Be Delivered in Connection with Transfers Pursuant to
  Regulation S

  	
   

  

 

Note:                                           This
Table of Contents shall not, for any purpose, be deemed to be part of the Indenture.

 

v

 

INDENTURE
dated as of December 23, 2004 between WMG HOLDINGS CORP., a Delaware
corporation (the “Issuer”), as
issuer, and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking
association, as trustee (the “Trustee”).

 

Each party
hereto agrees as follows for the benefit of each other party and for the equal
and ratable benefit of the Holders.

 

ARTICLE ONE

 

DEFINITIONS AND INCORPORATION BY REFERENCE

 

SECTION 1.01.                                              Definitions.

 

Set forth
below are certain defined terms used in this Indenture.

 

“Accreted Value” means, as of any date (the “Specified Date”), the amount provided below for each $1,000
principal amount at maturity of Discount Securities:

 

(1)           if the Specified Date occurs on one
of the following dates (each, a “Semi-Annual Accrual Date”),
the Accreted Value will equal the amount set forth below for such Semi-Annual Accrual
Date:

 

	
  Semi-Annual Accrual Date

  	
   

  	
  Accreted
  Value

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  June 15, 2005

  	
   

  	
  $

  	
  658.59

  	
   

  
	
  December 15, 2005

  	
   

  	
  $

  	
  689.87

  	
   

  
	
  June 15, 2006

  	
   

  	
  $

  	
  722.64

  	
   

  
	
  December 15, 2006

  	
   

  	
  $

  	
  756.97

  	
   

  
	
  June 15, 2007

  	
   

  	
  $

  	
  792.92

  	
   

  
	
  December 15, 2007

  	
   

  	
  $

  	
  830.58

  	
   

  
	
  June 15, 2008

  	
   

  	
  $

  	
  870.04

  	
   

  
	
  December 15, 2008

  	
   

  	
  $

  	
  911.36

  	
   

  
	
  June 15, 2009

  	
   

  	
  $

  	
  954.65

  	
   

  
	
  December 15, 2009

  	
   

  	
  $

  	
  1,000.00

  	
   

  

 

The foregoing
Accreted Values may be increased, if necessary, to reflect any accretion of
premium payable as described in the Discount Registration Rights
Agreement.  As a result, in the event
that additional interest or premium accrues on the Discount Securities, the
principal amount at maturity of the Discount Securities will be in excess of
$1,000;

 

 

(2)           if the Specified Date occurs before
the first Semi-Annual Accrual Date, the Accreted Value will equal the sum of
(A) the original issue price of a Discount Security and (B) an amount equal to
the product of (x) the Accreted Value for the first Semi-Annual Accrual Date
less such original issue price multiplied by (y) a fraction, the numerator of
which is the number of days from the Issue Date to the Specified Date, using a
360-day year of twelve 30-day months, and the denominator of which is the
number of days elapsed from the Issue Date to the first Semi-Annual Accrual
Date, using a 360-day year of twelve 30-day months;

 

(3)           if the Specified Date occurs between
two Semi-Annual Accrual Dates, the Accreted Value will equal the sum of (A) the
Accreted Value for the Semi-Annual Accrual Date immediately preceding such
Specified Date and (B) an amount equal to the product of (x) the Accreted Value
for the immediately preceding Semi-Annual Accrual Date multiplied by (y) a
fraction, the numerator of which is the number of days from the immediately
preceding Semi-Annual Accrual Date to the Specified Date, using a 360-day year
of twelve 30-day months, and the denominator of which is 180; or

 

(4)           if the Specified Date occurs after
the last Semi-Annual Accrual Date, the Accreted Value for each $1,000 principal
amount of Discount Securities will equal $1,000 (increased, if necessary, to
reflect any accretion of additional interest or premium payable as described in
the Discount Registration Rights Agreement.

 

“Acquired Debt” means, with respect to any specified Person:

 

(1)           Indebtedness of any other Person
existing at the time such other Person is merged with or into or became a
Restricted Subsidiary of such specified Person, including Indebtedness incurred
in connection with, or in contemplation of, such other Person merging with or
into, or becoming a Restricted Subsidiary of, such specified Person; and

 

(2)           Indebtedness secured by an existing
Lien encumbering any asset acquired by such specified Person.

 

“Additional Interest” has the meaning set forth in the
Registration Rights Agreements.

 

“Affiliate” of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person.  For
purposes of this definition, “control”
(including, with correlative meanings, the terms “controlling,”
“controlled by” and “under common control with”), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise.

 

2

 

“Agent” means any Registrar, Paying Agent or co-Registrar.

 

“amend” means amend, modify, supplement, restate or amend and
restate, including successively; and “amending” and “amended” have correlative meanings.

 

“asset” means any asset or property, whether real, personal
or other, tangible or intangible.

 

“Asset Sale” means (i) the sale, conveyance, transfer or
other disposition (whether in a single transaction or a series of related
transactions) of property or assets (including by way of a sale and leaseback)
of the Issuer or any Restricted Subsidiary (each referred to in this definition
as a “disposition”) or (ii) the issuance or
sale of Equity Interests of any Restricted Subsidiary (whether in a single
transaction or a series of related transactions), in each case, other than:

 

(1)           a disposition of Cash Equivalents or obsolete or worn out
property or equipment in the ordinary course of business or inventory (or other
assets) held for sale in the ordinary course of business and dispositions of
property no longer used or useful in the conduct of business of the Issuer and
its Restricted Subsidiaries;

 

(2)           the disposition of all or substantially all of the assets
of the Issuer in a manner permitted pursuant to Section 5.01 or any
disposition that constitutes a Change of Control pursuant to this Indenture;

 

(3)           the making of any Restricted Payment or Permitted
Investment that is permitted to be made, and is made, pursuant to Section 4.11
or the granting of a Lien permitted by Section 4.12;

 

(4)           any disposition of assets or issuance or sale of Equity
Interests of any Restricted Subsidiary in any transaction or series of
transactions with an aggregate fair market value of less than $10.0 million;

 

(5)           any disposition of property or assets or issuance of
securities by a Restricted Subsidiary to the Issuer or by the Issuer or a
Restricted Subsidiary to another Restricted Subsidiary;

 

(6)           the lease, assignment, sublease, license or sublicense of
any real or personal property in the ordinary course of business;

 

(7)           any sale of Equity Interests in, or Indebtedness or other
securities of, an Unrestricted Subsidiary (with the exception of Investments in
Unrestricted Subsidiaries acquired pursuant to clause (11) of the definition of
“Permitted Investments”);

 

(8)           foreclosures on assets;

 

3

 

(9)           disposition of an account receivable in connection with
the collection or compromise thereof;

 

(10)         sales of Securitization Assets and related assets of the
type specified in the definition of “Securitization Financing” to a
Securitization Subsidiary in connection with any Qualified Securitization
Financing; and

 

(11)         a transfer of Securitization Assets and related assets of
the type specified in the definition of “Securitization Financing” (or a
fractional undivided interest therein) by a Securitization Subsidiary in a
Qualified Securitization Financing.

 

“Bank Debt” means any and all amounts payable under or in
respect of the Credit Agreement, and the documents related thereto, as amended,
restated, supplemented, waived, replaced, restructured, repaid, refunded,
refinanced or otherwise modified from time to time (including after termination
of the Credit Agreement), including principal, premium (if any), interest
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Issuer whether or not a claim
for post-filing interest is allowed in such proceedings), fees, charges,
expenses, reimbursement obligations, guarantees and all other amounts payable
thereunder or in respect thereof.

 

“Bankruptcy Law” means Title 11, U.S. Code or any similar
Federal, state or foreign law for the relief of debtors.

 

“Beneficial Owner” has the meaning assigned to such term in
Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating
the beneficial ownership of any particular “person” (as that term is used in
Section 13(d)(3) of the Exchange Act), such “person” will be deemed to have
beneficial ownership of all securities that such “person” has the right to
acquire by conversion or exercise of other securities, whether such right is
currently exercisable or is exercisable only upon the occurrence of a subsequent
condition.  The terms “Beneficially Owns” and “Beneficially Owned”
have a corresponding meaning.

 

“Board of Directors” means:

 

(1)           with respect to a corporation, the
board of directors of the corporation;

 

(2)           with respect to a partnership, the Board
of Directors of the general partner of the partnership; and

 

(3)           with respect to any other Person, the
board or committee of such Person serving a similar function.

 

“Board Resolution” means, with respect to any Person, a copy
of a resolution certified by the Secretary or an Assistant Secretary of such
Person to have been duly adopted

 

4

 

by the Board of Directors of such Person and to be in full force and
effect on the date of such certification, and delivered to the Trustee.

 

“Business Day” means any day other than a Saturday, Sunday or
any other day on which banking institutions in the City of New York and in the
city in which the Corporate Trust Office is located from time to time are
required or authorized by law or other governmental action to be closed.

 

“Capital Stock” means:

 

(1)           in the case of a corporation, capital
stock;

 

(2)           in the case of an association or
business entity, any and all shares, interests, participations, rights or other
equivalents (however designated) of capital stock;

 

(3)           in the case of a partnership or
limited liability company, partnership or membership interests (whether general
or limited); and

 

(4)           any other interest or participation
that confers on a Person the right to receive a share of the profits and losses
of, or distributions of assets of, the issuing Person.

 

“Capitalized Lease Obligation” means, at the time any
determination thereof is to be made, the amount of the liability in respect of
a capital lease that would at such time be required to be capitalized and
reflected as a liability on a balance sheet (excluding the footnotes thereto)
in accordance with GAAP.

 

“Cash Contribution Amount” means the aggregate amount of cash
contributions made to the capital of the Issuer or any Restricted Subsidiary
described in the definition of “Contribution Indebtedness.”

 

“Cash Equivalents” means:

 

(1)           U.S.
dollars, pounds sterling, euros, or, in the case of any Foreign Subsidiary,
such local currencies held by it from time to time in the ordinary course of
business;

 

(2)           securities
issued or directly and fully and unconditionally guaranteed or insured by the
government or any agency or instrumentality of the United States having
maturities of not more than 12 months from the date of acquisition;

 

(3)           certificates
of deposit, time deposits and eurodollar time deposits with maturities of 12
months or less from the date of acquisition, bankers’ acceptances with maturities
not exceeding 12 months and overnight bank deposits, in each case, with

 

5

 

any lender party to the Credit Agreement or with any commercial bank
having capital and surplus in excess of $500,000,000;

 

(4)           repurchase
obligations for underlying securities of the types described in clauses (2) and
(3) above entered into with any financial institution meeting the
qualifications specified in clause (3) above;

 

(5)           commercial
paper maturing within 12 months after the date of acquisition and having a
rating of at least A-1 from Moody’s or P-1 from S&P;

 

(6)           investment
funds at least 95% of the assets of which constitute Cash Equivalents of the
kinds described in clauses (1) through (5) of this definition; and

 

(7)           readily marketable direct obligations issued by any state
of the United States or any political subdivision thereof having one of the two
highest rating categories obtainable from either Moody’s or S&P with
maturities of 12 months or less from the date of acquisition.

 

“Change of Control” means the occurrence of any of the
following:

 

(1)           the sale, lease, transfer or other conveyance, in one or a
series of related transactions, of all or substantially all of the assets of
the Issuer and its Subsidiaries, taken as a whole, to any Person other than a
Permitted Holder;

 

(2)           the Issuer becomes aware of (by way of a report or any
other filing pursuant to Section 13(d) of the Exchange Act, proxy, vote,
written notice or otherwise) the acquisition by any Person or group (within the
meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act,
or any successor provision), including any group acting for the purpose of
acquiring, holding or disposing of securities (within the meaning of
Rule 13d-5(b)(1) under the Exchange Act), other than the Permitted
Holders, in a single transaction or in a related series of transactions, by way
of merger, consolidation or other business combination or purchase of
beneficial ownership (within the meaning of Rule 13d-3 under the Exchange
Act, or any successor provision), of 50% or more of the total voting power of
the Voting Stock of the Issuer or any of its direct or indirect parent
corporations;

 

(3)           (A) prior to the first public offering of common stock of
either Parent or the Issuer, the first day on which the Board of Directors of
Parent shall cease to consist of a majority of directors who (i) were
members of the Board of Directors of Parent on the Issue Date or (ii) were
either (x) nominated for election by the Board of Directors of Parent, a
majority of whom were directors on the Issue Date or whose election or
nomination for election was previously approved by a majority of such
directors, or (y) designated or appointed by a Permitted Holder (each of
the directors selected pursuant to clauses (A)(i) and (A)(ii), “Continuing Directors”) and (B) after

 

6

 

the first public offering of common stock of
either Parent or the Issuer, (i) if such public offering is of Parent
common stock, the first day on which a majority of the members of the Board of
Directors of Parent are not Continuing Directors or (ii) if such public
offering is of the Issuer’s common stock, the first day on which a majority of
the members of the Board of Directors of the Issuer are not Continuing
Directors; or

 

(4)           the Issuer ceases to legally and beneficially own,
directly or indirectly, 100% of the issued and outstanding common stock of
Warner Music.

 

“Cinram Adjustment” means cost savings and other adjustments
to the Issuer from the disposition of its DVD and CD manufacturing, printing,
packaging, physical distribution and merchandising businesses to Cinram
International, Inc., which was consummated on October 24, 2003, and the
associated long-term supply contract with Cinram for physical product and
distribution.

 

“Code” means the United States Internal Revenue Code of 1986,
as amended from time to time, and the regulations promulgated and rulings
issued thereunder. 
Section references to the Code are to the Code, as in effect on April 8,
2004, and any subsequent provisions of the Code, amendatory thereof,
supplemental thereto or substituted therefor.

 

“Commission” means the
Securities and Exchange Commission.

 

“Consolidated Depreciation and Amortization Expense” means,
with respect to any Person for any period, the total amount of depreciation and
amortization expense, including the amortization of deferred financing fees and
other noncash charges (excluding any noncash item that represents an accrual or
reserve for a cash expenditure for a future period) of such Person and its
Restricted Subsidiaries for such period on a consolidated basis and otherwise
determined in accordance with GAAP.

 

“Consolidated Interest Expense” means, with respect to any
Person for any period, the sum, without duplication, of:  (a) consolidated interest expense of
such Person and its Restricted Subsidiaries for such period (including
amortization of original issue discount, noncash interest payments (other than
imputed interest as a result of purchase accounting), the interest component of
Capitalized Lease Obligations, net payments (if any) pursuant to interest rate
Hedging Obligations, but excluding amortization of deferred financing fees or
expensing of any bridge or other financing fees relating to the Specified
Financings) and (b) consolidated capitalized interest of such Person and
its Restricted Subsidiaries for such period, whether paid or accrued, less
(c) interest income actually received in cash for such period; provided, however, that
Securitization Fees shall not be deemed to constitute Consolidated Interest Expense.

 

“Consolidated Net Income” means, with respect to any Person
for any period, the aggregate of the Net Income of such Person and its
Restricted Subsidiaries for such period,

 

7

 

on a consolidated basis, and otherwise determined in accordance with
GAAP; provided, however,
that

 

(1)           any net after-tax extraordinary, unusual or nonrecurring
gains or losses (including, without limitation, severance, relocation,
transition and other restructuring costs) (less all fees and expenses relating
thereto) shall be excluded;

 

(2)           the Net Income for such period shall not include the
cumulative effect of a change in accounting principle(s) during such period;

 

(3)           any net after-tax gains or losses (less all fees and
expenses relating thereto) attributable to asset dispositions other than in the
ordinary course of business (as determined in good faith by the Board of
Directors of the Issuer) shall be excluded;

 

(4)           the Net Income for such period of any Person that is not a
Subsidiary, or that is an Unrestricted Subsidiary, or that is accounted for by
the equity method of accounting, shall be excluded; provided
that, to the extent not already included, Consolidated Net Income of the Issuer
shall be increased by the amount of dividends or distributions or other
payments that are actually paid in cash (or to the extent converted into cash)
to the referent Person or a Restricted Subsidiary thereof in respect of such
period;

 

(5)           solely for the purpose of determining the amount available
for Restricted Payments under clause (3) of Section 4.11(a), the Net Income for
such period of any Restricted Subsidiary (other than any Guarantor, if
applicable) shall be excluded if the declaration or payment of dividends or in
similar distributions by that Restricted Subsidiary of its Net Income is not
permitted at the date of determination without any prior governmental approval
(which has not been obtained) or, directly or indirectly, by the operation of
the terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Restricted
Subsidiary or its stockholders, unless (x) such restriction with respect
to the payment of dividends or similar distributions has been legally waived or
(y) as permitted by Section 4.15; provided that
Consolidated Net Income of such Person shall be increased by the amount of
dividends or distributions or other payments that are actually paid in cash (or
to the extent converted into cash) to such Person or a Restricted Subsidiary
thereof in respect of such period, to the extent not already included therein;

 

(6)           any noncash impairment charges resulting from the
application of Statements of Financial Accounting Standards No. 142 and No. 144
and the amortization of intangibles arising pursuant to Statement of Financial
Accounting Standards No. 141 shall be excluded;

 

(7)           solely for purposes of determining the amount available
for Restricted Payments under clause (3) of Section 4.11(a), an amount equal to
any reduction in current

 

8

 

taxes recognized during the applicable period
by the Issuer and its Restricted Subsidiaries as a direct result of deductions
arising from (A) the amortization allowed under Section 167 or 197 of
the Code for the goodwill and other intangibles arising from the Transactions
and (B) employee termination and related restructuring reserves established
pursuant to purchase accounting for the two-year period commencing with the
Issue Date, in each case, will be included in the calculation of “Consolidated
Net Income” so long as such addition will not result in double-counting;

 

(8)           noncash compensation charges, including any such charges
arising from stock options, restricted stock grants or other equity-incentive
programs shall be excluded;

 

(9)           any net after-tax gains or losses (less all fees and
expenses or charges relating thereto) attributable to the early extinguishment
of Indebtedness shall be excluded; and

 

(10)         any noncash charges resulting from mark-to-market accounting
in accordance with Statements of Financial Accounting Standards No. 133 and No.
150 and Emerging Issues Task Force Issue No. 00-19 relating to warrants owned
by Time Warner Inc. shall be excluded.

 

Notwithstanding
the foregoing, for the purpose of Section 4.11 only (other than clause
(3)(d) of subsection (a) thereof), there shall be excluded from Consolidated
Net Income any income arising from any sale or other disposition of Restricted
Investments made by the Issuer and the Restricted Subsidiaries, any repurchases
and redemptions of Restricted Investments by the Issuer and the Restricted
Subsidiaries, any repayments of loans and advances which constitute Restricted
Investments by the Issuer and any Restricted Subsidiary, any sale of the stock
of an Unrestricted Subsidiary or any distribution or dividend from an
Unrestricted Subsidiary, in each case only to the extent such amounts increase
the amount of Restricted Payments permitted under clause (3)(d) of
Section 4.11(a).

 

“Consolidated Tangible Assets” means, with respect to any
Person, the consolidated total assets of such Person and its Restricted
Subsidiaries determined in accordance with GAAP, less
all goodwill, trade names, trademarks, patents, organization expense and other
similar intangibles properly classified as intangibles in accordance with GAAP.

 

“Contingent Obligations” means, with respect to any Person,
any obligation of such Person guaranteeing any leases, dividends or other
obligations that do not constitute Indebtedness (“primary obligations”) of any other Person (the “primary obligor”) in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent, (i) to purchase any such primary obligation or
any property constituting direct or indirect security therefor, (ii) to
advance or supply funds (A) for the purchase or payment of any such primary
obligation or (B) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency of the primary

 

9

 

obligor, or (iii) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make payment of such primary
obligation against loss in respect thereof.

 

“Contribution Indebtedness” means Indebtedness of the Issuer
or any Restricted Subsidiary in an aggregate principal amount not greater than
twice the aggregate amount of cash contributions (other than Excluded
Contributions) made to the capital of the Issuer or such Restricted Subsidiary
after the Issue Date; provided that
such Contribution Indebtedness:

 

(1)           if the aggregate principal amount of
such Contribution Indebtedness is greater than one times such cash
contributions to the capital of the Issuer or such Restricted Subsidiary, as
applicable, the amount of such excess shall be (A) (x) Subordinated
Indebtedness (other than Secured Indebtedness) or (y) Indebtedness that
ranks pari passu with the Securities (other
than Secured Indebtedness) and (B) Indebtedness with a Stated Maturity
later than the Stated Maturity of the Securities, and

 

(2)           (a) is incurred within 180 days after
the making of such cash contributions and (b) is so designated as
Contribution Indebtedness pursuant to an Officers’ Certificate on the date of
the incurrence thereof.

 

“Corporate Trust Office” means the corporate trust office of
the Trustee located at Sixth Street and Marquette Avenue, N9303-20,
Minneapolis, Minnesota 55479, Attention: 
Corporate Trust Department, or such other office, designated by the
Trustee by written notice to the Issuer, at which at any particular time its
corporate trust business shall be administered.

 

“Credit Agreement” means that certain Amended and Restated
Credit Agreement, dated as of April 8, 2004, by and among the Issuer, the other
borrowers from time to time party thereto, Warner Music, 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 Co-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, Swing Line Lender and L/C
Issuer and the lenders party thereto from time to time, including any related
notes, guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, restated, supplemented,
modified, renewed, refunded, replaced or refinanced from time to time in one or
more agreements or indentures (in each case with the same or new lenders or
institutional investors), including any agreement extending the maturity
thereof or otherwise restructuring all or any portion of the Indebtedness
thereunder or increasing the amount loaned or issued thereunder or altering the
maturity thereof.

 

10

 

“Custodian” means any receiver, trustee, assignee,
liquidator, sequestrator or similar official under any Bankruptcy Law.

 

“Default” means any event that is, or with the passage of
time or the giving of notice or both would be, an Event of Default.

 

“Depositary” shall mean The Depository Trust Company, New
York, New York, or a successor thereto registered under the Exchange Act or
other applicable statute or regulation.

 

“Designated Noncash Consideration” means the fair market
value of noncash consideration received by the Issuer or one of its Restricted
Subsidiaries in connection with an Asset Sale that is so designated as
Designated Noncash Consideration pursuant to an Officers’ Certificate setting
forth the basis of such valuation, less the amount of cash or Cash Equivalents
received in connection with a subsequent sale of such Designated Noncash
Consideration.

 

“Designated Preferred Stock” means Preferred Stock of the
Issuer or any direct or indirect parent company of the Issuer (other than
Disqualified Stock) that is issued for cash (other than to the Issuer or any of
its Subsidiaries or an employee stock ownership plan or trust established by
the Issuer or any of its Subsidiaries) and is so designated as Designated
Preferred Stock, pursuant to an Officers’ Certificate, on the issuance date
thereof, the cash proceeds of which are excluded from the calculation set forth
in clause (3) of Section 4.11(a).

 

“Discount Exchange Securities” means any Discount Securities
issued in exchange for Initial Discount Securities or Discount Securities
without a legend.

 

“Discount Registration Rights Agreement” means (a) the
Registration Rights Agreement dated as of December 23, 2004, among the
Issuer and the Initial Purchasers relating to the Discount Securities and
(b) any other similar Exchange and Registration Rights Agreement relating
to Additional Discount Securities.

 

“Discount Securities” means the U.S. Dollar-denominated 9.5%
Senior Discount Notes due 2014 issued by the Issuer, including, without
limitation, the Discount Exchange Securities and the Additional Discount
Securities, treated as a single class of securities, as amended from time to
time in accordance with the terms hereof, that are issued pursuant to this Indenture.

 

“Disqualified Stock” means, with respect to any Person, any
Capital Stock of such Person which, by its terms (or by the terms of any
security into which it is convertible or for which it is putable or
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable (other than as a result of a change of control or asset sale),
pursuant to a sinking fund obligation or otherwise, or is redeemable at the option
of the holder thereof (other than as a result of a change of control or asset
sale), in whole or in part, in each case

 

11

 

prior to the date 91 days after the earlier of the final maturity date
of the Securities or the date the Securities are no longer outstanding; provided, however, that if such Capital Stock is issued to
any plan for the benefit of employees of Parent or its Subsidiaries or by any
such plan to such employees, such Capital Stock shall not constitute Disqualified
Stock solely because it may be required to be repurchased by Parent or its
Subsidiaries in order to satisfy applicable statutory or regulatory obligations.

 

“Domestic Subsidiary” means any Subsidiary of the Issuer that
was formed under the laws of the United States, any state of the United States,
the District of Columbia or any territory of the United States.

 

“EBITDA” means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus, without duplication,

 

(1)           provision for taxes based on income or profits, plus
franchise or similar taxes of such Person for such period deducted in computing
Consolidated Net Income, plus

 

(2)           Consolidated Interest Expense of such Person for such
period to the extent the same was deducted in calculating such Consolidated Net
Income, plus

 

(3)           Consolidated Depreciation and Amortization Expense of such
Person for such period to the extent such depreciation and amortization were
deducted in computing Consolidated Net Income, plus

 

(4)           any reasonable expenses or charges related to any Equity
Offering, Permitted Investment, acquisition, recapitalization or Indebtedness
permitted to be incurred under this Indenture or to the Transactions and, in
each case, deducted in such period in computing Consolidated Net Income, plus

 

(5)           the amount of any restructuring charges or reserves
(which, for the avoidance of doubt, shall include retention, severance, systems
establishment cost, excess pension charges, contract termination costs,
including future lease commitments, and costs to consolidate facilities and
relocate employees) deducted in such period in computing Consolidated Net Income,
plus

 

(6)           without duplication, any other noncash charges (including
any impairment charges and the impact of purchase accounting, including, but
not limited to, the amortization of inventory step-up) reducing Consolidated
Net Income for such period (excluding any such charge that represents an
accrual or reserve for a cash expenditure for a future period), plus

 

(7)           any net gain or loss resulting from Hedging Obligations
relating to currency exchange risk, plus

 

12

 

(8)           the amount of management, monitoring, consulting and
advisory fees and related expenses paid to the Sponsors (or any accruals
relating to such fees and related expenses) during such period; provided that such amount shall not exceed $10.0 million in
any four-quarter period, plus

 

(9)           Securitization Fees to the extent deducted in calculating
Consolidated Net Income for such period, plus

 

(10)         the Cinram Adjustment, plus

 

(11)         any net after-tax income or loss from discontinued
operations and any net after-tax gains or losses on disposal of discontinued
operations, plus

 

(12)         without duplication, pension curtailment expenses,
transaction costs and executive contract expenses incurred by affiliated
entities of the Issuer (other than Parent and its Subsidiaries) on behalf of
Parent or any of its Subsidiaries and reflected in the combined financial
statements of the Issuer as capital contributions, less

 

(13)         without duplication, noncash items increasing Consolidated
Net Income of such Person for such period (excluding any items which represent
the reversal of any accrual of, or cash reserve for, anticipated cash charges
or asset valuation adjustments made in any prior period).

 

“Equity Interests” means Capital Stock and all warrants,
options or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock).

 

“Equity Offering” means any public or private sale of common
stock (including, with respect to the Senior PIK Securities only, any debt
security convertible or exchangeable into common stock) or Preferred Stock of
the Issuer or any of its direct or indirect parent corporations (excluding
Disqualified Stock), other than (i) public offerings with respect to common
stock of the Issuer or of any direct or indirect parent corporation of the
Issuer registered on Form S-8, (ii) any such public or private sale that
constitutes an Excluded Contribution or (iii) an issuance to any
Subsidiary.

 

“Exchange Act” means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated
thereunder.

 

“Exchange Securities” means the Discount Exchange Securities,
the Senior Exchange Securities and the Senior PIK Exchange Securities.

 

“Excluded Contribution” means net cash proceeds, marketable
securities or Qualified Proceeds, in each case received by the Issuer and its
Restricted Subsidiaries from:

 

13

 

(1)           contributions to its common equity
capital; and

 

(2)           the sale (other than to a Subsidiary
or to any management equity plan or stock option plan or any other management
or employee benefit plan or agreement of the Issuer or any Subsidiary) of
Capital Stock (other than Disqualified Stock and Designated Preferred Stock),

 

in each case
designated as Excluded Contributions pursuant to an Officers’ Certificate on the
date such capital contributions are made or the date such Equity Interests are
sold, as the case may be, which are excluded from the calculation set forth in
clause (3) of Section 4.11(a).

 

“Existing Indebtedness” means Indebtedness of the Issuer and
its Subsidiaries (other than Indebtedness under the Credit Agreement) in
existence on the date of this Indenture.

 

“Existing Notes” means the dollar-denominated 7 3/8%
Senior Subordinated Notes due 2014 and the pounds sterling-denominated
8 1/8% Senior Subordinated Notes due 2014, in each case, of Warner Music.

 

“Fixed Charge Coverage Ratio” means, with respect to any
Person for any period consisting of such Person and its Restricted Subsidiaries’
most recently ended four fiscal quarters for which internal financial
statements are available, the ratio of EBITDA of such Person for such period to
the Fixed Charges of such Person for such period.  In the event that the Issuer or any
Restricted Subsidiary incurs, assumes, guarantees or redeems any Indebtedness
or issues or repays Disqualified Stock or Preferred Stock subsequent to the
commencement of the period for which the Fixed Charge Coverage Ratio is being
calculated but prior to the event for which the calculation of the Fixed Charge
Coverage Ratio is made (the “Calculation Date”),
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, guarantee
or repayment of Indebtedness, or such issuance or redemption of Disqualified
Stock or Preferred Stock, as if the same had occurred at the beginning of the
applicable four-quarter period.  For
purposes of making the computation referred to above, Investments,
acquisitions, dispositions, mergers or consolidations (as determined in
accordance with GAAP) that have been made by the Issuer or any Restricted Subsidiary
during the four-quarter reference period or subsequent to such reference period
and on or prior to or simultaneously with the Calculation Date shall be
calculated on a pro forma basis assuming that all
such Investments, acquisitions, dispositions, mergers or consolidations (and
the change in any associated fixed charge obligations and the change in EBITDA
resulting therefrom) had occurred on the first day of the four-quarter
reference period.  If since the beginning
of such period any Person (that subsequently became a Restricted Subsidiary or
was merged with or into the Issuer or any Restricted Subsidiary since the
beginning of such period) shall have made any Investment, acquisition,
disposition, merger or consolidation that would have required adjustment
pursuant to this definition, then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect thereto for such
period as if such Investment,

 

14

 

acquisition, disposition, merger or consolidation had occurred at the
beginning of the applicable four-quarter period.

 

For purposes
of this definition, whenever pro forma
effect is to be given to an Investment, acquisition, disposition, merger or
consolidation (including the Transactions and the related restructuring
initiatives) and the amount of income or earnings relating thereto, the pro forma calculations shall be determined in good faith by
a responsible financial or accounting officer of the Issuer and shall comply
with the requirements of Rule 11-02 of Regulation S-X promulgated by the
Commission, except that such pro forma
calculations may include operating expense reductions for such period resulting
from such transaction that is being given pro forma
effect that have been realized or (A) for which the steps necessary for
realization have been taken (or are taken concurrently with such transaction)
or (B) with respect to any transactions other than the Transaction (and
the related restructuring initiatives), for which the steps necessary for
realization are reasonably expected to be taken within the six-month period
following such transaction and, in each case, including, but not limited to,
(a) reduction in personnel expenses, (b) reduction of costs related to
administrative functions, (c) reduction of costs related to leased or
owned properties and (d) reductions from the consolidation of operations
and streamlining of corporate and record label overhead; provided
that, in either case, such adjustments are set forth in an Officers’
Certificate signed by the Issuer’s chief financial officer and another Officer
which states (i) the amount of such adjustment or adjustments, (ii) that
such adjustment or adjustments are based on the reasonable good faith beliefs
of the Officers executing such Officers’ Certificate at the time of such
execution and (iii) that any related incurrence of Indebtedness is permitted
pursuant to this Indenture.  If any Indebtedness
bears a floating rate of interest and is being given pro forma
effect, the interest on such Indebtedness shall be calculated as if the rate in
effect on the Calculation Date had been the applicable rate for the entire
period (taking into account any Hedging Obligations applicable to such
Indebtedness).  Interest on a Capitalized
Lease Obligation shall be deemed to accrue at an interest rate reasonably
determined by a responsible financial or accounting officer of the Issuer to be
the rate of interest implicit in such Capitalized Lease Obligation in accordance
with GAAP.  For purposes of making the
computation referred to above, interest on any Indebtedness under a revolving
credit facility computed on a pro forma basis
shall be computed based upon the average daily balance of such Indebtedness
during the applicable period.  Interest
on Indebtedness that may optionally be determined at an interest rate based
upon a factor of a prime or similar rate, a eurocurrency interbank offered
rate, or other rate, shall be deemed to have been based upon the rate actually
chosen, or, if none, then based upon such optional rate chosen as the Issuer
may designate.

 

“Fixed Charges” means, with respect to any Person for any
period, the sum of, without duplication, (a) Consolidated Interest Expense
(excluding all noncash interest expense and amortization/accretion of original
issue discount in connection with the Specified Financings (including any
original issue discount created by fair value adjustments to the Issuer’s
Existing Indebtedness as a result of purchase accounting)) of such Person for
such period, (b) all cash dividends paid, accrued and/or scheduled to be
paid or accrued during such

 

15

 

period (excluding items eliminated in consolidation) on any series of
Preferred Stock of such Person and (c) all cash dividends paid, accrued
and/or scheduled to be paid or accrued during such period (excluding items
eliminated in consolidation) on any series of Disqualified Stock.

 

“Foreign Subsidiary” means any Subsidiary of the Issuer that
is not a Domestic Subsidiary.

 

“GAAP” means generally accepted accounting principles in the
United States in effect on April 8, 2004. 
For purposes of this Indenture, the term “consolidated”
with respect to any Person means such Person consolidated with its Restricted
Subsidiaries and does not include any Unrestricted Subsidiary.

 

“Global Security” has the meaning set forth in Section 2.16.

 

“Government Securities” means securities that are

 

(a)           direct obligations of the United
States of America for the timely payment of which its full faith and credit is
pledged or

 

(b)           obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States
of America the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America,

 

which, in
either case, are not callable or redeemable at the option of the issuers
thereof, and shall also include a depository receipt issued by a bank (as
defined in Section 3(a)(2) of the Securities Act), as custodian with respect to
any such Government Securities or a specific payment of principal of or
interest on any such Government Securities held by such custodian for the
account of the holder of such depository receipt; provided
that (except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depository receipt from
any amount received by the custodian in respect of the Government Securities or
the specific payment of principal of or interest on the Government Securities
evidenced by such depository receipt.

 

“guarantee” means a guarantee other than by endorsement of
negotiable instruments for collection in the ordinary course of business,
direct or indirect, in any manner including, without limitation, through
letters of credit or reimbursement agreements in respect thereof, of all or any
part of any Indebtedness or other obligations.

 

“Guarantee” means any guarantee of the obligations of the
Issuer under this Indenture and the Securities by a Guarantor in accordance
with the provisions of this Indenture. 
When used as a verb, “Guarantee”
shall have a corresponding meaning.

 

16

 

“Guarantor” means any Person that incurs a Guarantee of the
Securities; provided that upon the release and
discharge of such Person from its Guarantee in accordance with this Indenture,
such Person shall cease to be a Guarantor.

 

“Hedging Obligations” means, with respect to any Person, the
obligations of such Person under:

 

(1)           currency exchange, interest rate or
commodity swap agreements, currency exchange, interest rate or commodity cap
agreements and currency exchange, interest rate or commodity collar agreements;
and

 

(2)           other agreements or arrangements
designed to protect such Person against fluctuations in currency exchange,
interest rates or commodity prices.

 

“Holder” or “Securityholder”
means the registered holder of any Security.

 

“incur” means to directly or indirectly create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to any Indebtedness (including Acquired
Debt) and “incurrence” shall have a
correlative meaning.

 

“Indebtedness” means, with respect to any Person,

 

(a)           any
indebtedness (including principal and premium) of such Person, whether or not
contingent,

 

(i)            in
respect of borrowed money,

 

(ii)           evidenced
by bonds, notes, debentures or similar instruments or letters of credit (or,
without double counting, reimbursement agreements in respect thereof),

 

(iii)          representing
the balance deferred and unpaid of the purchase price of any property
(including Capitalized Lease Obligations), except any such balance that
constitutes a trade payable or similar obligation to a trade creditor, in each
case accrued in the ordinary course of business or

 

(iv)          representing
any Hedging Obligations,

 

if and to the
extent that any of the foregoing Indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet
(excluding the footnotes thereto) of such Person prepared in accordance with
GAAP,

 

(b)           Disqualified
Stock of such Person,

 

17

 

(c)           to
the extent not otherwise included, any obligation by such Person to be liable
for, or to pay, as obligor, guarantor or otherwise, the Indebtedness of another
Person (other than by endorsement of negotiable instruments for collection in
the ordinary course of business) and

 

(d)           to
the extent not otherwise included, Indebtedness of another Person secured by a
Lien on any asset owned by such Person (whether or not such Indebtedness is
assumed by such Person);

 

provided,
however, that Contingent Obligations incurred in the
ordinary course of business and not in respect of borrowed money shall be
deemed not to constitute Indebtedness.

 

“Indenture” means this Indenture, as amended, restated or
supplemented from time to time in accordance with the terms hereof.

 

“Independent Financial Advisor” means an accounting,
appraisal or investment banking firm or consultant to Persons engaged in a
Permitted Business of nationally recognized standing that is, in the good faith
judgment of the Issuer, qualified to perform the task for which it has been
engaged.

 

“Initial Purchasers” means, with respect to the Securities,
Banc of America Securities LLC, Goldman, Sachs & Co. and Deutsche Bank
Securities Inc. and such other initial purchasers party to the Securities
Purchase Agreement entered into in connection with the offer and sale of the
Securities.

 

“Interest” means, with respect to the Securities, interest
and any Additional Interest on the Securities.

 

“Interest Payment Date” means the stated maturity of an
installment of interest on the Securities.

 

“Investments” means, with respect to any Person, all direct
or indirect investments by such Person in other Persons (including Affiliates)
in the forms of loans (including guarantees or other obligations), advances or
capital contributions (excluding accounts receivable, trade credit, advances to
customers, commission, travel and similar advances to officers and employees,
in each case made in the ordinary course of business), purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other
securities issued by any other Person and investments that are required by GAAP
to be classified on the balance sheet (excluding the footnotes) of such Person
in the same manner as the other investments included in this definition to the
extent such transactions involve the transfer of cash or other property.  If the Issuer or any Subsidiary of the Issuer
sells or otherwise disposes of any Equity Interests of any direct or indirect
Subsidiary of the Issuer such that, after giving effect to any such sale or
disposition, such Person is no longer a Subsidiary of the Issuer, the Issuer
will be deemed to have made an Investment on the date of any such sale or
disposition equal

 

18

 

to the fair market value of the Equity Interests of such Subsidiary not
sold or disposed of in an amount determined as provided in Section 4.11(c).

 

For purposes
of the definition of “Unrestricted Subsidiary” and Section 4.11, (i) ”Investments”
shall include the portion (proportionate to the Issuer’s equity interest in
such Subsidiary) of the fair market value of the net assets of a Subsidiary of
the Issuer at the time that such Subsidiary is designated an Unrestricted Subsidiary;
provided, however,
that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the
Issuer shall be deemed to continue to have a permanent “Investment” in an
Unrestricted Subsidiary in an amount (if positive) equal to (x) the Issuer’s
“Investment” in such Subsidiary at the time of such redesignation less (y) the
portion (proportionate to the Issuer’s equity interest in such Subsidiary) of
the fair market value of the net assets of such Subsidiary at the time of such
redesignation; (ii) any property transferred to or from an Unrestricted Subsidiary
shall be valued at its fair market value at the time of such transfer, in each
case as determined in good faith by the Issuer; and (iii) any transfer of
Capital Stock that results in an entity which became a Restricted Subsidiary
after the Issue Date ceasing to be a Restricted Subsidiary shall be deemed to
be an Investment in an amount equal to the fair market value (as determined by
the Board of Directors of the Issuer in good faith as of the date of initial
acquisition) of the Capital Stock of such entity owned by the Issuer and the
Restricted Subsidiaries immediately after such transfer.

 

“Issue Date” means December 23, 2004, the date of original
issuance of the Securities.

 

“Lien” means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law, including any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction; provided that in no event shall
an operating lease be deemed to constitute a Lien.

 

“Management Agreement” means the Management Agreement by and
among Warner Music, the Issuer and the Sponsors and/or their Affiliates as in
effect on the Issue Date.

 

“Maturity Date” means, with respect to the Senior Securities,
December 15, 2011 and with respect to the Discount Securities and the Senior
PIK Securities, December 15, 2014.

 

“Moody’s” means Moody’s Investors Service, Inc.

 

“Net Income” means, with respect to any Person, the net
income (loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of Preferred Stock dividends or accretion of any Preferred
Stock.

 

19

 

“Net Indebtedness to EBITDA Ratio” means, with respect to any
Person, the ratio of: (a) the Indebtedness (which, for purposes of any
calculations of the Net Indebtedness to EBITDA Ratio, shall include, without
duplication, any Qualified Securitization Financing, Non-Recourse Acquisition
Financing Indebtedness and Non-Recourse Product Financing Indebtedness) of such
Person and its Restricted Subsidiaries, as of the end of the most recently
ended fiscal quarter, plus the amount of any Indebtedness incurred subsequent
to the end of such fiscal quarter, less the amount of
cash and Cash Equivalents that would be stated on the balance sheet of such
Person and held by such Person as of such date of determination, as determined
in accordance with GAAP, to (b) such Person’s EBITDA for the most recently
ended four full fiscal quarters for which internal financial statements are
available immediately preceding the date on which such event for which such
calculation is being made shall occur (the “Measurement
Period”); provided, however,
that:  (i) in making such computation,
Indebtedness shall include the greater of (x) the average daily balance
outstanding under any revolving credit facility during the most recently ended
fiscal quarter and (y) the actual amount of Indebtedness outstanding under any
revolving credit facility as of the date for which such calculation is being
made; and (ii) if such Person or any of its Restricted Subsidiaries consummates
a material acquisition or an Asset Sale or other disposition of assets
subsequent to the commencement of the Measurement Period but prior to the event
for which the calculation of the Net Indebtedness to EBITDA Ratio is made, then
the Net Indebtedness to EBITDA Ratio shall be calculated giving pro forma effect to such material acquisition or Asset Sale
or other disposition of assets as if the same had occurred at the beginning of
the applicable period.  Any pro forma calculations necessary pursuant to this “Net
Indebtedness to EBITDA Ratio” shall be made in accordance with the provisions
set forth in the second paragraph of the definition of “Fixed Charge Coverage
Ratio.”

 

“Net Proceeds” means the aggregate cash proceeds received by
the Issuer or any Restricted Subsidiary in respect of any Asset Sale,
including, without limitation, legal, accounting and investment banking fees,
and brokerage and sales commissions, any relocation expenses incurred as a
result thereof, taxes paid or payable as a result thereof (after taking into
account any available tax credits or deductions and any tax sharing
arrangements), repayment of Indebtedness that is secured by the property or
assets that are the subject of such Asset Sale and any deduction of appropriate
amounts to be provided by the Issuer as a reserve in accordance with GAAP
against any liabilities associated with the asset disposed of in such transaction
and retained by the Issuer after such sale or other disposition thereof,
including, without limitation, pension and other post-employment benefit
liabilities and liabilities related to environmental matters or against any
indemnification obligations associated with such transaction.

 

“Non-Recourse Acquisition Financing Indebtedness”
means any Indebtedness incurred by the Issuer or any Restricted Subsidiary to
finance the acquisition, exploitation or development of assets (including
directly or through the acquisition of entities holding such assets) not owned
by the Issuer or any of
its Restricted Subsidiaries prior to such acquisition, exploitation or
development, which assets are used for the creation or development of Product
for the benefit of the Issuer, and in respect of which the Person to whom such Indebtedness

 

20

 

is owed has no recourse
whatsoever to the Issuer or any of its Restricted Subsidiaries for the
repayment of or payment of such Indebtedness other than recourse to the
acquired assets or assets that are the subject of such exploitation or
development for the purpose of enforcing any Lien given by the Issuer or such Restricted Subsidiary over
such assets, including the receivables, inventory, intangibles and other rights
associated with such assets and the proceeds thereof.

 

“Non-Recourse Product Financing Indebtedness” means any Indebtedness incurred by the Issuer or any
Restricted Subsidiary solely for the purpose of financing (whether directly or
through a partially-owned joint venture) the production, acquisition,
exploitation, creation or development of items of Product produced, acquired,
exploited, created or developed after the Issue Date (including any
Indebtedness assumed in connection with the production, acquisition, creation
or development of any such items of Product or secured by a Lien on any such
items of Product prior to the production, acquisition, creation or development
thereof) where the recourse of the creditor in respect of that Indebtedness is
limited to Product revenues generated by such items of Product or any rights
pertaining thereto and where the Indebtedness is unsecured save for Liens over
such items of Product or revenues and such rights and any extension, renewal,
replacement or refinancing of such Indebtedness.  “Non-Recourse Product Financing Indebtedness”
excludes, for the avoidance of doubt, any Indebtedness raised or secured
against Product where the proceeds are used for any other purposes.

 

“Non-U.S. Person” has the meaning assigned to such term in
Regulation S.

 

“Obligations” means any principal, interest, penalties, fees,
indemnifications, reimbursements (including, without limitation, reimbursement
obligations with respect to letters of credit), damages and other liabilities,
and guarantees of payment of such principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities, payable under
the documentation governing any Indebtedness.

 

“Offering Memorandum” means the offering memorandum of the
Issuer dated December 17, 2004 relating to the Securities.

 

“Officer” means the Chairman of the Board, the Chief
Executive Officer, the Chief Financial Officer, the President, any Executive
Vice President, Senior Vice President or Vice President, the Treasurer or the
Secretary or Assistant Secretary or General Counsel or Deputy General Counsel
of the Issuer.

 

“Officers’ Certificate” means a certificate signed on behalf
of the Issuer by two Officers of the Issuer, one of whom is the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Issuer, that meets the requirements set
forth in this Indenture.

 

21

 

“Opinion of Counsel” means a written opinion from legal
counsel who is reasonably acceptable to the Trustee.  The counsel may be an employee of or counsel
to the Issuer, a Guarantor or the Trustee.

 

“Parent” means any existing or future, direct or indirect
parent company of the Issuer.

 

“Permitted Asset Swap” means any
transfer of property or assets by the Issuer or any of its Restricted
Subsidiaries in which at least 90% of the consideration received by the
transferor consists of properties or assets (other than cash) that will be used
in a Permitted Business; provided that
the aggregate fair market value of the property or assets being transferred by
the Issuer or such Restricted Subsidiary is not greater than the aggregate fair
market value of the property or assets received by the Issuer or such
Restricted Subsidiary in such exchange (provided, however, that in the event such aggregate fair market value
of the property or assets being transferred or received by the Issuer is (x) less
than $50.0 million, such determination shall be made in good faith by the Board
of Directors of the Issuer and (y) greater than or equal to $50.0 million, such
determination shall be made by an Independent Financial Advisor).

 

“Permitted Business” means the media and entertainment
business and any services, activities or businesses incidental or directly
related or similar thereto, any line of business engaged in by the Issuer on
the Issue Date or any business activity that is a reasonable extension, development
or expansion thereof or ancillary thereto.

 

“Permitted Debt” is defined in Section 4.10(b).

 

“Permitted Holders” means (i) the Sponsors and their
Affiliates (not including, however, any portfolio companies of any of the
Sponsors); (ii) Edgar Bronfman Jr.; (iii) immediate family members (including
spouses and direct descendants) of the Person described in clause (ii); (iv) any
trusts created for the benefit of the Person described in clause (ii) or (iii) or
any trust for the benefit of any such trust; (v) in the event of the incompetence
or death of any Person described in clauses (ii) and (iii), such Person’s
estate, executor, administrator, committee or other personal representative or
beneficiaries, in each case who at any particular date shall beneficially own
or have the right to acquire, directly or indirectly, Capital Stock of the
Issuer; or (vi) Time Warner Inc. if at such time as Time Warner Inc. owns 50%
or more of the total voting power of the Voting Stock of the Issuer or any
direct or indirect parent company of the Issuer and after giving pro forma effect to the acquisition of such Voting Stock and
the incurrence of any Indebtedness used to finance the acquisition thereof, (x)
Time Warner Inc. has a rating of at least “investment grade” status from
S&P and Moody’s and (y) neither S&P, Moody’s nor any other nationally
recognized rating agency shall have downgraded, or indicated an intention to
downgrade, the corporate rating of Time Warner Inc. to a level below its then
existing corporate rating by any such agency.

 

22

 

“Permitted Investments” means

 

(1)           any
Investment by the Issuer in any Restricted Subsidiary or by a Restricted
Subsidiary in another Restricted Subsidiary;

 

(2)           any
Investment in cash and Cash Equivalents;

 

(3)           any
Investment by the Issuer or any Restricted Subsidiary of the Issuer in a Person
that is engaged in a Permitted Business if as a result of such Investment (A) such
Person becomes a Restricted Subsidiary or (B) such Person, in one transaction
or a series of related transactions, is merged, consolidated or amalgamated
with or into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Issuer or a Restricted Subsidiary;

 

(4)           any
Investment in securities or other assets not constituting cash or Cash
Equivalents and received in connection with an Asset Sale made pursuant to Section
4.13 or any other disposition of assets not constituting an Asset Sale;

 

(5)           any
Investment existing on the Issue Date and any modification, replacement,
renewal or extension thereof; provided that
the amount of any such Investment may be increased (x) as required by the terms
of such Investment as in existence on the Issue Date or (y) as otherwise
permitted under this Indenture;

 

(6)           loans
and advances to employees and any guarantees not in excess of $15.0 million in
the aggregate outstanding at any one time;

 

(7)           any
Investment acquired by the Issuer or any Restricted Subsidiary (A) in exchange
for any other Investment or accounts receivable held by the Issuer or any such
Restricted Subsidiary in connection with or as a result of a bankruptcy,
workout, reorganization or recapitalization of the issuer of such other
Investment or accounts receivable or (B) as a result of a foreclosure by the
Issuer or any Restricted Subsidiary with respect to any secured Investment or
other transfer of title with respect to any secured Investment in default;

 

(8)           Hedging
Obligations permitted under clause (9) of the definition of “Permitted Debt” in
Section 4.10(b);

 

(9)           loans
and advances to officers, directors and employees for business-related travel
expenses, moving expenses and other similar expenses, in each case incurred in
the ordinary course of business;

 

(10)         any
advance directly or indirectly related to royalties or future profits (whether
or not recouped), directly or indirectly (including through capital
contributions or loans to an entity or joint venture relating to such artist(s)
or writer(s)), to one

 

23

 

or more artists or writers pursuant to label and license agreements,
agreements with artists/writers and related ventures, pressing and distribution
agreements, publishing agreements and any similar contract or agreement entered
into from time to time in the ordinary course of business;

 

(11)         any
Investment by the Issuer or a Restricted Subsidiary in a Permitted Business
having an aggregate fair market value, taken together with all other
Investments made pursuant to this clause (11) that are at that time outstanding
(without giving effect to the sale of an Unrestricted Subsidiary to the extent
the proceeds of such sale do not consist of cash and/or marketable securities),
not to exceed the greater of $75.0 million and 8.0% of Consolidated Tangible
Assets (with the fair market value of each Investment being measured at the
time made and without giving effect to subsequent changes in value);

 

(12)         Investments
the payment for which consists of Equity Interests of the Issuer or any of its
direct or indirect parent corporations (exclusive of Disqualified Stock);

 

(13)         guarantees
(including any Guarantees) of Indebtedness permitted under Section 4.10 and
performance guarantees consistent with past practice;

 

(14)         any
transaction to the extent it constitutes an Investment that is permitted and
made in accordance with Section 4.14 (except transactions described in clauses
(2), (6) and (7) of Section 4.14(b));

 

(15)         Investments
by the Issuer or a Restricted Subsidiary in joint ventures engaged in a
Permitted Business having an aggregate fair market value, taken together with
all other Investments made pursuant to this clause (15) that are at that time
outstanding amount, not to exceed the greater of $50.0 million and 4.0% of
Consolidated Tangible Assets (with the fair market value of each Investment
being measured at the time made and without giving effect to subsequent changes
in value);

 

(16)         Investments
consisting of licensing or contribution of intellectual property pursuant to
joint marketing arrangements with other Persons; and

 

(17)         any
Investment in a Securitization Subsidiary or any Investment by a Securitization
Subsidiary in any other Person in connection with a Qualified Securitization
Financing, including Investments of funds held in accounts permitted or
required by the arrangements governing such Qualified Securitization Financing
or any related Indebtedness; provided, however, that any Investment in a Securitization Subsidiary
is in the form of a Purchase Money Note, contribution of additional
Securitization Assets or an equity interest.

 

24

 

“Permitted Liens” means the following types of Liens:

 

(1)           deposits
of cash or government bonds made in the ordinary course of business to secure
surety or appeal bonds to which such Person is a party;

 

(2)           Liens
in favor of issuers of performance, surety, bid, indemnity, warranty, release,
appeal or similar bonds or with respect to other regulatory requirements or
letters of credit or bankers’ acceptances issued, and completion guarantees
provided for, in each case pursuant to the request of and for the account of
such Person in the ordinary course of its business or consistent with past
practice;

 

(3)           Liens
on property or shares of stock of a Person at the time such Person becomes a
Subsidiary; provided, however,
that such Liens are not created or incurred in connection with, or in
contemplation of, such other Person becoming such a Subsidiary; provided, further, however, that such Liens may not extend to any other
property owned by the Issuer or any Restricted Subsidiary;

 

(4)           Liens
on property at the time the Issuer or a Restricted Subsidiary acquired the
property, including any acquisition by means of a merger or consolidation with
or into the Issuer or any Restricted Subsidiary; provided,
however, that such Liens are not created
or incurred in connection with, or in contemplation of, such acquisition; provided, further, however, that such Liens may not extend to any other
property owned by the Issuer or any Restricted Subsidiary;

 

(5)           Liens
securing Indebtedness or other obligations of a Restricted Subsidiary owing to
the Issuer or another Restricted Subsidiary permitted to be incurred in
accordance with Section 4.10;

 

(6)           Liens
securing Hedging Obligations so long as the related Indebtedness is permitted
to be incurred under this Indenture and is secured by a Lien on the same
property securing such Hedging Obligation;

 

(7)           Liens
on specific items of inventory or other goods and proceeds of any Person
securing such Person’s obligations in respect of bankers’ acceptances issued or
created for the account of such Person to facilitate the purchase, shipment or
storage of such inventory or other goods;

 

(8)           Liens
in favor of the Issuer or any Restricted Subsidiary;

 

(9)           Liens
to secure any Indebtedness that is incurred to refinance any Indebtedness that
has been secured by a Lien existing on the Issue Date or referred to in clauses
(3), (4) and (19)(B) of this definition; provided, however, that such Liens (x) are no less favorable to the
Holders and are not more favorable to the lienholders with respect to such
Liens than the Liens in respect of the Indebtedness being refinanced;

 

25

 

and (y) do not extend to or cover any property or assets of the Issuer
not securing the Indebtedness so refinanced;

 

(10)         Liens
on Securitization Assets and related assets of the type specified in the
definition of “Securitization Financing” incurred in connection with any
Qualified Securitization Financing;

 

(11)         Liens
for taxes, assessments or other governmental charges or levies not yet delinquent,
or which are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted or for property taxes on property that the
Issuer or one of its Subsidiaries has determined to abandon if the sole
recourse for such tax, assessment, charge, levy or claim is to such property;

 

(12)         judgment
liens in respect of judgments that do not constitute an Event of Default so
long as such Liens are adequately bonded and any appropriate legal proceedings
that may have been duly initiated for the review of such judgment have not been
finally terminated or the period within which such proceedings may be initiated
has not expired;

 

(13)         pledges,
deposits or security under workmen’s compensation, unemployment insurance and
other social security laws or regulations, or deposits to secure the
performance of tenders, contracts (other than for the payment of Indebtedness)
or leases, or deposits to secure public or statutory obligations, or deposits
as security for contested taxes or import or customs duties or for the payment
of rent, or deposits or other security securing liabilities to insurance
carriers under insurance or self-insurance arrangements, in each case incurred
in the ordinary course of business or consistent with past practice;

 

(14)         Liens
imposed by law, including carriers’, warehousemen’s, materialmen’s, repairmen’s
and mechanics’ Liens, in each case for sums not overdue by more than 30 days or,
if more
than 30 days overdue, are unfiled and no other action has been taken to enforce such
Lien or which are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted;

 

(15)         encumbrances,
ground leases, easements or reservations of, or rights of others for, licenses,
rights of way, sewers, electric lines, telegraph and telephone lines and other
similar purposes, or zoning, building codes or other restrictions (including,
without limitation, minor defects or irregularities in title and similar
encumbrances) as to the use of real properties or Liens incidental to the
conduct of business or to the ownership of properties that do not in the
aggregate materially adversely affect the value of said properties or materially
impair their use in the operation of the business;

 

26

 

(16)         leases,
licenses, subleases or sublicenses granted to others in the ordinary course of
business that do not (x) interfere in any material respect with the business of
the Issuer or (y) secure any Indebtedness;

 

(17)         banker’s
Liens, rights of set-off or similar rights and remedies as to deposit accounts
or other funds maintained with a depositary institution, provided
that (a) such deposit account is not a dedicated cash collateral account and is
not subject to restrictions against access by the Issuer in excess of those set
forth by regulations promulgated by the Federal Reserve Board or other
applicable law and (b) such deposit account is not intended by the Issuer to
provide collateral to the depositary institution;

 

(18)         Liens
arising from Uniform Commercial Code financing statement filings regarding
operating leases or consignments entered into by the Issuer and its Restricted
Subsidiaries in the ordinary course of business;

 

(19)         (A)
other Liens securing Indebtedness for borrowed money with respect to property
or assets with an aggregate fair market value (valued at the time of creation
thereof) of not more than $15.0 million at any time and (B) Liens securing
Indebtedness incurred to finance the construction, purchase or lease of, or
repairs, improvements or additions to, property of such Person; provided, however, that
(x) the Lien may not extend to any other property (except for accessions to
such property) owned by such Person or any of its Restricted Subsidiaries at
the time the Lien is incurred, (y) such Liens attach concurrently with or within 270 days after
the acquisition, repair, replacement, construction or improvement (as applicable)
of the property subject to such Liens and (z) with respect to Capitalized Lease
Obligations, such Liens do not at any time extend to or cover any assets
(except for accessions to such assets) other than the assets subject to such
Capitalized Lease Obligations; provided that
individual financings of equipment provided by one lender may be
cross-collateralized to other financings of equipment provided by such lender;

 

(20)         Liens
to secure Non-Recourse Product Financing Indebtedness permitted to be incurred
pursuant to clause (18) of the definition of “Permitted Debt” in Section
4.10(b), which Liens may not secure Indebtedness other than Non-Recourse
Product Financing Indebtedness and which Liens may not attach to assets other
than the items of Product acquired, exploited, created or developed with the
proceeds of such Indebtedness and Liens to secure Non-Recourse Acquisition
Financing Indebtedness permitted to be incurred pursuant to clause (18) of the
definition of “Permitted Debt” in Section 4.10(b), which Liens may not secure
Indebtedness other than Non-Recourse Acquisition Financing Indebtedness and
which Liens may not attach to assets other than the assets acquired, exploited,
created or developed with the proceeds of such Indebtedness;

 

27

 

(21)         Liens (i) of a collection bank
arising under Section 4-210 of the Uniform Commercial Code on items in the
course of collection, (ii) attaching to commodity trading accounts or other
commodities brokerage accounts incurred in the ordinary course of business and
(iii) in favor of a banking institution arising as a matter of law encumbering
deposits (including the right of set-off) and which are within the general
parameters customary in the banking industry;

 

(22)         Liens encumbering reasonable
customary initial deposits and margin deposits and similar Liens attaching to
commodity trading accounts or other brokerage accounts incurred in the ordinary
course of business and not for speculative purposes;

 

(23)         Liens that are contractual rights
of set-off (i) relating to the establishment of depository relations with banks
not given in connection with the issuance of Indebtedness, (ii) relating to
pooled deposit or sweep accounts of the Issuer or any Restricted Subsidiary to permit
satisfaction of overdraft or similar obligations incurred in the ordinary
course of business of the Issuer and its Restricted Subsidiaries or (iii)
relating to purchase orders and other agreements entered into with customers of
the Issuer or any Restricted Subsidiary in the ordinary course of business; and

 

(24)         Liens solely on any cash earnest
money deposits made by the Issuer or any of its Restricted Subsidiaries in
connection with any letter of intent or purchase agreement permitted under this
Indenture.

 

“Person” means any individual, corporation, partnership,
joint venture, association, joint-stock company, trust, unincorporated
organization, limited liability company or government or other entity.

 

“Preferred Stock” means any Equity Interest with preferential
rights of payment of dividends upon liquidation, dissolution or winding up.

 

“Private Placement Legend” means the legends initially set
forth on the Securities in the form set forth in Exhibit D.

 

“Product” means any music (including musical and audio visual
recordings, musical performance, songs and compositions and also includes mail
order music and activities relating or incidental to music such as touring,
merchandising and artist management), music copyright, motion picture,
television programming, film, videotape, digital file, video clubs, DVD
manufactured or distributed or any other product produced for theatrical,
non-theatrical or television release or for release in any other medium, in
each case whether recorded on film, videotape, cassette, cartridge, disc or on
or by any other means, method, process or device, whether now known or
hereafter developed, with respect to which the Issuer or any Restricted Subsidiary:

 

(1)           is an initial
copyright owner; or

 

28

 

(2)           acquires (or will
acquire upon delivery) an equity interest, license, sublicense or
administration or distribution right.

 

“Purchase Agreement” means the Purchase Agreement dated
November 24, 2003, as amended by the amendment to the Purchase Agreement dated
February 29, 2004, between Time Warner Inc. and WMG Acquisition Corp.

 

“Purchase Money Note” means a promissory note of a
Securitization Subsidiary evidencing a line of credit, which may be
irrevocable, from Parent or any Subsidiary of Parent to a Securitization
Subsidiary in connection with a Qualified Securitization Financing, which note
is intended to finance that portion of the purchase price that is not paid in
cash or a contribution of equity and which (a) shall be repaid from cash
available to the Securitization Subsidiary, other than (i) amounts required to
be established as reserves, (ii) amounts paid to investors in respect of
interest, (iii) principal and other amounts owing to such investors and (iv)
amounts paid in connection with the purchase of newly generated receivables and
(b) may be subordinated to the payments described in clause (a).

 

“Qualified Capital Stock” means any Capital Stock of the
Issuer that is not Disqualified Stock.

 

“Qualified Institutional Buyer” or “QIB”
shall have the meaning specified in Rule 144A under the Securities Act.

 

“Qualified Proceeds” means assets
that are used or useful in, or Capital Stock of any Person engaged in, a
Permitted Business; provided that
the fair market value of any such assets or Capital Stock shall be determined
by the Board of Directors of the Issuer in good faith, except that in the event
the value of any such assets or Capital Stock exceeds $25.0 million, the fair
market value shall be determined by an Independent Financial Advisor.

 

“Qualified Securitization Financing” means any Securitization
Financing of a Securitization Subsidiary that meets the following
conditions:  (i) the Board of Directors
of the Issuer shall have determined in good faith that such Qualified
Securitization Financing (including financing terms, covenants, termination
events and other provisions) is in the aggregate economically fair and
reasonable to the Issuer and the Securitization Subsidiary, (ii) all sales of
Securitization Assets and related assets to the Securitization Subsidiary are
made at fair market value (as determined in good faith by the Issuer) and (iii)
the financing terms, covenants, termination events and other provisions thereof
shall be market terms (as determined in good faith by the Issuer) and may
include Standard Securitization Undertakings. 
The grant of a security interest in any Securitization Assets of the
Issuer or any of its Restricted Subsidiaries (other than a Securitization
Subsidiary) to secure Indebtedness under the Credit Agreement and any
Refinancing Indebtedness with respect thereto shall not be deemed a Qualified
Securitization Financing.

 

29

 

“Record Date” means the applicable Record Date specified in
the Securities; provided that if any such date is
not a Business Day, the Record Date shall be the first day immediately
preceding such specified day that is a Business Day.

 

“Redemption Date,” when used with respect to any Security to
be redeemed, means the date fixed for such redemption pursuant to this
Indenture and the Securities.

 

“Redemption Price,” when used with respect to any Security to
be redeemed, means the price fixed for such redemption, payable in immediately
available funds, pursuant to this Indenture and the Securities.

 

“refinance” means to extend, refinance, renew, replace,
defease or refund, including successively; and “refinancing”
and “refinanced” shall have correlative
meanings.

 

“Registration Rights Agreements” means the Discount
Registration Rights Agreement, the Senior Registration Rights Agreement and the
Senior PIK Registration Rights Agreement.

 

“Regulation S” means Regulation S under the Securities Act.

 

“Responsible Officer” means, when used with respect to the
Trustee, any officer in the Corporate Trust Office of the Trustee to whom any
corporate trust matter is referred because of such officer’s knowledge of and
familiarity with the particular subject and shall also mean any officer who
shall have direct responsibility for the administration of this Indenture.

 

“Restricted Investment” means an Investment other than a
Permitted Investment.

 

“Restricted Security” means a Security that constitutes a
“Restricted Security” within the meaning of Rule 144(a)(3) under the Securities
Act; provided, however,
that the Trustee shall be entitled to request and conclusively rely on an
Opinion of Counsel with respect to whether any Security constitutes a Restricted
Security.

 

“Restricted Subsidiary” means, at any time, any direct or
indirect Subsidiary of the Issuer (including Warner Music and any Foreign
Subsidiary) that is not then an Unrestricted Subsidiary; provided,
however, that upon the occurrence of an Unrestricted Subsidiary
ceasing to be an Unrestricted Subsidiary, such Subsidiary shall be included in
the definition of “Restricted Subsidiary”.

 

“Rule 144A” means Rule 144A under the Securities Act.

 

“S&P” means Standard & Poor’s Ratings Services, a
division of The McGraw-Hill Companies, Inc.

 

30

 

“Secured Indebtedness” means any Indebtedness secured by a
Lien.

 

“Securities” means the Discount Securities, the Senior
Securities and the Senior PIK Securities.

 

“Securities Act” means the Securities Act of 1933, as
amended, and the rules and regulations of the Commission promulgated
thereunder.

 

“Securities Purchase Agreement” means (a) the Purchase
Agreement dated December 17, 2004, among the Issuer and the Initial Purchasers
and (b) any other similar purchase agreement relating to the Additional Securities.

 

“Securitization Assets” means any accounts receivable or
catalog, royalty or other revenue streams from Product subject to a Qualified
Securitization Financing.

 

“Securitization Fees” means
reasonable distributions or payments made directly or by means of discounts
with respect to any participation interest issued or sold in connection with,
and other fees paid to a Person that is not a Securitization Subsidiary in
connection with, any Qualified Securitization Financing.

 

“Securitization Financing” means any transaction or series of
transactions that may be entered into by Parent or any of its Subsidiaries
pursuant to which Parent or any of its Subsidiaries may sell, convey or
otherwise transfer to (a) a Securitization Subsidiary (in the case of a transfer
by Parent or any of its Subsidiaries) and (b) any other Person (in the case of
a transfer by a Securitization Subsidiary), or may grant a security interest
in, any Securitization Assets (whether now existing or arising in the future)
of Parent or any of its Subsidiaries, and any assets related thereto including,
without limitation, all collateral securing such Securitization Assets, all
contracts and all guarantees or other obligations in respect of such
Securitization Assets, proceeds of such Securitization Assets and other assets
which are customarily transferred or in respect of which security interests are
customarily granted in connection with asset securitization transactions
involving Securitization Assets and any Hedging Obligations entered into by
Parent or any such Subsidiary in connection with such Securitization Assets.

 

“Securitization Repurchase Obligation” means any obligation
of a seller of Securitization Assets in a Qualified Securitization Financing to
repurchase Securitization Assets arising as a result of a breach of a
representation, warranty or covenant or otherwise, including as a result of a
receivable or portion thereof becoming subject to any asserted defense,
dispute, offset or counterclaim of any kind as a result of any action taken by,
any failure to take action by or any other event relating to the seller.

 

“Securitization Subsidiary” means a Wholly Owned Subsidiary
of Parent (or another Person formed for the purposes of engaging in a Qualified
Securitization Financing in which Parent or any Subsidiary of Parent makes an
Investment and to which Parent or any

 

31

 

Subsidiary of Parent transfers Securitization Assets and related
assets) which engages in no activities other than in connection with the
financing of Securitization Assets of Parent or its Subsidiaries, all proceeds
thereof and all rights (contractual and other), collateral and other assets
relating thereto, and any business or activities incidental or related to such business,
and which is designated by the Board of Directors of Parent or such other
Person (as provided below) as a Securitization Subsidiary and (a) no portion of
the Indebtedness or any other obligations (contingent or otherwise) of which
(i) is guaranteed by Parent or any other Subsidiary of Parent (excluding
guarantees of obligations (other than the principal of, and interest on,
Indebtedness) pursuant to Standard Securitization Undertakings), (ii) is
recourse to or obligates Parent or any other Subsidiary of Parent in any way
other than pursuant to Standard Securitization Undertakings or (iii) subjects
any property or asset of Parent or any other Subsidiary of Parent, directly or
indirectly, contingently or otherwise, to the satisfaction thereof, other than
pursuant to Standard Securitization Undertakings, (b) with which neither Parent
nor any other Subsidiary of Parent has any material contract, agreement,
arrangement or understanding other than on terms which Parent reasonably
believes to be no less favorable to Parent or such Subsidiary than those that
might be obtained at the time from Persons that are not Affiliates of Parent
and (c) to which neither Parent nor any other Subsidiary of Parent has any
obligation to maintain or preserve such entity’s financial condition or cause
such entity to achieve certain levels of operating results.  Any such designation by the Board of Directors
of Parent or such other Person shall be evidenced to the Trustee by filing with
the Trustee a certified copy of the resolution of the Board of Directors of
Parent or such other Person giving effect to such designation and an Officer’s
certificate certifying that such designation complied with the foregoing
conditions.

 

“Senior Exchange Securities” means any Senior Securities issued
in exchange for Initial Senior Securities or Senior Securities without a
legend.

 

“Senior PIK Exchange Securities” means any Senior PIK
Securities issued in exchange for Initial Senior PIK Securities or Senior PIK
Securities without a legend.

 

“Senior PIK Registration Rights Agreement” means (a) the
Registration Rights Agreement dated as of December 23, 2004, among the Issuer
and the Initial Purchasers relating to the Senior PIK Securities and (b) any
other similar Exchange and Registration Rights Agreement relating to Additional
Senior PIK Securities.

 

“Senior PIK Securities” means the U.S. Dollar-denominated
Floating Rate Senior PIK Notes due 2014 issued by the Issuer, including,
without limitation, the Senior PIK Exchange Securities and the Additional
Senior PIK Securities, treated as a single class of securities, as amended from
time to time in accordance with the terms hereof, that are issued pursuant to
this Indenture.

 

“Senior Registration Rights Agreement” means (a) the
Registration Rights Agreement dated as of December 23, 2004, among the Issuer
and the Initial Purchasers relating

 

32

 

to the Senior Securities and (b) any other similar Exchange and
Registration Rights Agreement relating to Additional Senior Securities.

 

“Senior Securities” means the U.S. Dollar-denominated
Floating Rate Senior Notes due 2011 issued by the Issuer, including, without
limitation, the Senior Exchange Securities and the Additional Senior
Securities, treated as a single class of securities, as amended from time to
time in accordance with the terms hereof, that are issued pursuant to this Indenture.

 

“Significant Subsidiary” means any Restricted Subsidiary that
would be a “significant subsidiary” as defined in Article 1, Rule 1-02 of
Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation
is in effect on the date hereof.

 

“Specified Financings” means the financings included in the
Transactions (other than the offering of the Securities) and the offering of
the Existing Securities.

 

“Sponsors” means Thomas
H. Lee Partners, L.P. (together with any limited partner thereof, whether or
not such investment in the Issuer is made through the same entity), Bain
Capital Partners, LLC, Providence Equity Partners and Music Capital Partners,
L.P.

 

“Standard Securitization Undertakings” means representations,
warranties, covenants and indemnities entered into by Parent or any Subsidiary
of Parent which Parent has determined in good faith to be customary in a
Securitization Financing, including, without limitation, those relating to the
servicing of the assets of a Securitization Subsidiary, it being understood
that any Securitization Repurchase Obligation shall be deemed to be a Standard
Securitization Undertaking.

 

“Stated Maturity” means, with respect to any installment of
interest or principal on any series of Indebtedness, the date on which the
payment of interest or principal was scheduled to be paid in the original
documentation governing such Indebtedness, and will not include any contingent
obligations to repay, redeem or repurchase any such interest or principal prior
to the date originally scheduled for the payment thereof.

 

“Stockholders Agreement” means the Stockholders Agreement by
and among Parent, the Sponsors and/or their Affiliates and the other
stockholders party thereto in effect on April 8, 2004.

 

“Subordinated Indebtedness” means (a) with respect to the
Issuer, any Indebtedness of the Issuer that is by its terms subordinated in
right of payment to the Securities and (b) with respect to any Guarantor of the
Securities, any Indebtedness of such Guarantor that is by its terms
subordinated in right of payment to its Guarantee of the Securities.

 

33

 

“Subsidiary” means, with respect to any specified Person:

 

(1)           any corporation,
association or other business entity, of which more than 50% of the total
voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers
or trustees thereof is at the time owned or controlled, directly or indirectly,
by that Person or one or more of the other Subsidiaries of that Person (or a
combination thereof); and

 

(2)           any partnership, joint venture,
limited liability company or similar entity of which (x) more than 50% of the
capital accounts, distribution rights, total equity and voting interests or
general or limited partnership interests, as applicable, are owned or
controlled, directly or indirectly, by such Person or one or more of the other
Subsidiaries of that Person or a combination thereof whether in the form of
membership, general, special or limited partnership or otherwise and (y) such
Person or any Wholly Owned Restricted Subsidiary of such Person is a
controlling general partner or otherwise controls such entity.

 

“Tax” means any tax, duty, levy, impost, assessment or other
governmental charge (including penalties, interest and any other liabilities
related thereto).

 

“Taxing Authority” means any government or political
subdivision or territory or possession of any government or any authority or
agency therein or thereof having power to tax.

 

“TIA” means the Trust Indenture Act of 1939 (15 U.S.C. §§
77aaa-77bbbb), as amended, as in effect on the date of the execution of this
Indenture until such time as this Indenture is qualified under the TIA, and
thereafter as in effect on the date on which this Indenture is qualified under
the TIA, except as otherwise provided in Section 9.04.

 

“Transactions” means the transactions contemplated by (i) the
Purchase Agreement, (ii) the Credit Agreement, (iii) the offering of the
Existing Notes and (iv) the offering of the Securities.

 

“Trustee” means the party named as such in this Indenture
until a successor replaces it in accordance with the provisions of this
Indenture and thereafter means such successor.

 

“Unrestricted Securities” means one or more Securities that
do not and are not required to bear the legends in the form set forth in Exhibit
D, including, without limitation, the Exchange Securities.

 

“Unrestricted Subsidiary” means (i) any Subsidiary of the
Issuer that at the time of determination is an Unrestricted Subsidiary (as
designated by the Board of Directors of the Issuer, as provided below) and (ii)
any Subsidiary of an Unrestricted Subsidiary. 
The

 

34

 

Board of Directors of the Issuer may designate any Subsidiary of the
Issuer (including any existing Subsidiary and any newly acquired or newly
formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or
any of its Subsidiaries owns any Equity Interests or Indebtedness of, or owns
or holds any Lien on, any property of, the Issuer or any Subsidiary of the
Issuer (other than any Subsidiary of the Subsidiary to be so designated), provided that (a) any Unrestricted Subsidiary must be an
entity of which shares of the Capital Stock or other equity interests
(including partnership interests) entitled to cast at least a majority of the votes
that may be cast by all shares or equity interests having ordinary voting power
for the election of directors or other governing body are owned, directly or
indirectly, by the Issuer, (b) such designation complies with Section 4.11 and
(c) each of (I) the Subsidiary to be so designated and (II) its Subsidiaries
has not at the time of designation, and does not thereafter, create, incur,
issue, assume, guarantee or otherwise become directly or indirectly liable with
respect to any Indebtedness pursuant to which the lender has recourse to any of
the assets of the Issuer or any Restricted Subsidiary.  The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided
that, immediately after giving effect to such designation, no Default or Event
of Default shall have occurred and (1)(x) in the case of Warner Music and any
Restricted Subsidiary of Warner Music, Warner Music and any Restricted
Subsidiary of Warner Music would have been permitted to incur at least $1.00 of
additional Indebtedness pursuant to Section 4.10(a)(ii) or (y) in the case of
any subsidiary of the Issuer that is not also a Subsidiary of Warner Music, the
Issuer would have been permitted to incur at least $1.00 of additional
Indebtedness pursuant to Section 4.10(a)(i) or (2)(x) the Fixed Charge Coverage
Ratio for Warner Music and its Restricted Subsidiaries would be greater than
such ratio for Warner Music and its Restricted Subsidiaries immediately prior
to such designation or (y) the Fixed Charge Coverage Ratio for the Issuer and
its Restricted Subsidiaries would be greater than such ratio for the Issuer and
its Restricted Subsidiaries immediately prior to such designation, in each case
on a pro forma basis taking into account such
designation.  Any such designation by the
Board of Directors shall be notified by the Issuer to the Trustee by promptly
filing with the Trustee a copy of the Board Resolution giving effect to such
designation and an Officers’ Certificate certifying that such designation complied
with the foregoing provisions.

 

“U.S. Dollar Equivalent” means, with respect to any monetary
amount in a currency other than U.S. Dollars, at any time for the determination
thereof, the amount of U.S. Dollars obtained by converting such foreign
currency involving in such computation into U.S. Dollars at the spot rate for
the purchase of U.S. Dollars with the applicable foreign currency as quoted by
Reuters at approximately 10:00 A.M., New York City time, on such date of determination
(or if no such quote is available on such date, on the immediately preceding
Business Day for which such a quote is available).

 

“U.S. Government Securities” means securities that are

 

(a)           direct
obligations of the United States of America for the timely payment of which its
full faith and credit is pledged or

 

35

 

(b)           obligations
of a Person controlled or supervised by and acting as an agency or instrumentality
of the United States of America the timely payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States of
America,

 

which, in
either case, are not callable or redeemable at the option of the issuers
thereof, and shall also include a depository receipt issued by a bank (as defined
in Section 3(a)(2) of the Securities Act), as custodian with respect to any
such Government Securities or a specific payment of principal of or interest on
any such Government Securities held by such custodian for the account of the
holder of such depository receipt; provided that
(except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depository receipt from
any amount received by the custodian in respect of the Government Securities or
the specific payment of principal of or interest on the Government Securities
evidenced by such depository receipt.

 

“U.S. Legal Tender” means such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts.

 

“Voting Stock” of any Person as of any date means the Capital
Stock of such Person that is at the time entitled to vote in the election of
the Board of Directors of such Person.

 

“Warner Music” means Warner Music Group, a Delaware
corporation.

 

“Weighted Average Life to Maturity” means, when applied to
any Indebtedness at any date, the number of years obtained by dividing:

 

(1)           the sum of the products obtained by
multiplying (a) the amount of each then remaining installment, sinking fund,
serial maturity or other required payment of principal, including payment at
final maturity, in respect of the Indebtedness, by (b) the number of years
(calculated to the nearest one-twelfth) that will elapse between such date and the
making of such payment; by

 

(2)           the then outstanding principal amount
of such Indebtedness.

 

“Wholly Owned Restricted Subsidiary” is any Wholly Owned
Subsidiary that is a Restricted Subsidiary.

 

“Wholly Owned Subsidiary” of any Person means a Subsidiary of
such Person, 100% of the outstanding Capital Stock or other ownership interests
of which (other than directors’ qualifying shares) shall at the time be owned
by such Person or by one or more Wholly Owned Subsidiaries of such Person or by
such Person and one or more Wholly Owned Subsidiaries of such Person.

 

36

 

SECTION 1.02.                                              Other
Definitions.

 

	
  Term

  	
   

  	
  Defined in Section

  
	
   

  	
   

  	
   

  
	
  “Additional Discount Securities”

  	
   

  	
  2.01

  
	
   

  	
   

  	
   

  
	
  “Additional Securities”

  	
   

  	
  2.01

  
	
   

  	
   

  	
   

  
	
  “Additional Senior Securities”

  	
   

  	
  2.01

  
	
   

  	
   

  	
   

  
	
  “Additional Senior PIK Securities”

  	
   

  	
  2.01

  
	
   

  	
   

  	
   

  
	
  “Affiliate Transaction”

  	
   

  	
  4.14

  
	
   

  	
   

  	
   

  
	
  “Agent Members”

  	
   

  	
  2.16

  
	
   

  	
   

  	
   

  
	
  “Alternate Offer”

  	
   

  	
  4.09

  
	
   

  	
   

  	
   

  
	
  “Asset Sale Offer”

  	
   

  	
  4.13

  
	
   

  	
   

  	
   

  
	
  “Asset Sale Offer Amount”

  	
   

  	
  4.13

  
	
   

  	
   

  	
   

  
	
  “Asset Sale Payment”

  	
   

  	
  4.13

  
	
   

  	
   

  	
   

  
	
  “Asset Sale Payment Date”

  	
   

  	
  4.13

  
	
   

  	
   

  	
   

  
	
  “Base Currency”

  	
   

  	
  12.14

  
	
   

  	
   

  	
   

  
	
  “Change of Control Offer”

  	
   

  	
  4.09

  
	
   

  	
   

  	
   

  
	
  “Change of Control Payment”

  	
   

  	
  4.09

  
	
   

  	
   

  	
   

  
	
  “Change of Control Payment Date”

  	
   

  	
  4.09

  
	
   

  	
   

  	
   

  
	
  “Covenant Defeasance”

  	
   

  	
  8.02

  
	
   

  	
   

  	
   

  
	
  “Coverage Ratio Exception”

  	
   

  	
  4.10

  
	
   

  	
   

  	
   

  
	
  “Event of Default”

  	
   

  	
  6.01

  
	
   

  	
   

  	
   

  
	
  “Excess Proceeds”

  	
   

  	
  4.13

  
	
   

  	
   

  	
   

  
	
  “Guarantee Obligations”

  	
   

  	
  11.01

  
	
   

  	
   

  	
   

  
	
  “incur”

  	
   

  	
  4.10

  
	
   

  	
   

  	
   

  
	
  “Judgment Currency”

  	
   

  	
  12.14

  
	
   

  	
   

  	
   

  
	
  “Legal Defeasance”

  	
   

  	
  8.02

  
	
   

  	
   

  	
   

  
	
  “Other Securities”

  	
   

  	
  2.02

  
	
   

  	
   

  	
   

  
	
  “Paying Agent”

  	
   

  	
  2.04

  
	
   

  	
   

  	
   

  
	
  “Permitted Debt”

  	
   

  	
  4.10

  
	
   

  	
   

  	
   

  
	
  “Physical Securities”

  	
   

  	
  2.02

  

 

37

 

	
  Term

  	
   

  	
  Defined in Section

  
	
   

  	
   

  	
   

  
	
  “Refunding Capital Stock”

  	
   

  	
  4.11

  
	
   

  	
   

  	
   

  
	
  “Registrar”

  	
   

  	
  2.04

  
	
   

  	
   

  	
   

  
	
  “Regulation S Discount Securities”

  	
   

  	
  2.16

  
	
   

  	
   

  	
   

  
	
  “Regulation S Global Discount Security”

  	
   

  	
  2.16

  
	
   

  	
   

  	
   

  
	
  “Regulation S Global Securities”

  	
   

  	
  2.16

  
	
   

  	
   

  	
   

  
	
  “Regulation S Global Senior PIK Security”

  	
   

  	
  2.16

  
	
   

  	
   

  	
   

  
	
  “Regulation S Global Senior Security”

  	
   

  	
  2.16

  
	
   

  	
   

  	
   

  
	
  “Regulation S Securities”

  	
   

  	
  2.02

  
	
   

  	
   

  	
   

  
	
  “Regulation S Senior PIK Securities”

  	
   

  	
  2.16

  
	
   

  	
   

  	
   

  
	
  “Regulation S Senior Securities”

  	
   

  	
  2.16

  
	
   

  	
   

  	
   

  
	
  “Restricted Global Securities”

  	
   

  	
  2.16

  
	
   

  	
   

  	
   

  
	
  “Restricted Period”

  	
   

  	
  2.16

  
	
   

  	
   

  	
   

  
	
  “Retired Capital Stock”

  	
   

  	
  4.11

  
	
   

  	
   

  	
   

  
	
  “Rule 144A Discount Securities”

  	
   

  	
  2.16

  
	
   

  	
   

  	
   

  
	
  “Rule 144A Global Discount Security”

  	
   

  	
  2.16

  
	
   

  	
   

  	
   

  
	
  “Rule 144A Global Securities”

  	
   

  	
  2.16

  
	
   

  	
   

  	
   

  
	
  “Rule 144A Global Senior PIK Security”

  	
   

  	
  2.16

  
	
   

  	
   

  	
   

  
	
  “Rule 144A Global Senior Security”

  	
   

  	
  2.16

  
	
   

  	
   

  	
   

  
	
  “Rule 144A Securities”

  	
   

  	
  2.02

  
	
   

  	
   

  	
   

  
	
  “Rule 144A Senior PIK Securities”

  	
   

  	
  2.02

  
	
   

  	
   

  	
   

  
	
  “Rule 144A Senior Securities”

  	
   

  	
  2.02

  

 

SECTION 1.03.                                              Incorporation
by Reference of TIA.

 

Whenever this
Indenture refers to a provision of the TIA, such provision is incorporated by
reference in, and made a part of, this Indenture.  The following TIA terms used in this
Indenture have the following meanings:

 

“indenture securities” means the Securities.

 

“indenture security holder” means a Holder or a
Securityholder.

 

38

 

“indenture to be qualified” means this Indenture.

 

“indenture trustee” or “institutional trustee”
means the Trustee.

 

“obligor” on the indenture securities means the Issuer or any
other obligor on the Securities.

 

All other TIA
terms used in this Indenture that are defined by the TIA, defined by the TIA
reference to another statute or defined by Commission rule and not otherwise defined
herein have the meanings assigned to them therein.

 

SECTION 1.04.                                              Rules
of Construction.Unless the context otherwise requires:

 

(1)           a
term has the meaning assigned to it herein, whether defined expressly or by
reference;

 

(2)           an
accounting term not otherwise defined has the meaning assigned to it in accordance
with GAAP;

 

(3)           “or”
is not exclusive;

 

(4)           words
in the singular include the plural, and words in the plural include the
singular;

 

(5)           words
used herein implying any gender shall apply to both genders;

 

(6)           provisions
apply to successive events and transactions;

 

(7)           “herein,”
“hereof” and other words of similar import refer to this Indenture as a whole
and not to any particular Article, Section or other subdivision;

 

(8)           the
words “including,” “includes” and similar words shall be deemed to be followed
by “without limitation”;

 

(9)           the
principal amount of any non-interest bearing or other discount security at any
date shall be the principal amount thereof that would be shown on a balance
sheet of the issuer dated such date prepared in accordance with GAAP;

 

(10)         the
principal amount of any Preferred Stock shall be (i) the maximum liquidation
value of such Preferred Stock or (ii) the maximum mandatory redemption or
mandatory repurchase price with respect to such Preferred Stock, whichever is
greater;

 

(11)         unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all financial

 

39

 

statements required to be delivered hereunder shall be prepared in accordance
with GAAP;

 

(12)         “$”
and “U.S. Dollars” each refer to United States dollars, or such other money of
the United States of America that at the time of payment is legal tender for
payment of public and private debts;

 

(13)         whenever
in this Indenture there is mentioned, in any context, principal, interest or
any other amount payable under or with respect to any Securities, such mention
shall be deemed to include mention of the payment of Additional Interest, to
the extent that, in such context, Additional Interest is, was or would be
payable in respect thereof; and

 

(14)         any
references to “Security” shall include, to the extent applicable, any Guarantee
thereof.

 

ARTICLE TWO

 

THE SECURITIES

 

SECTION 2.01.                                              Amount
of Securities.

 

The Trustee
shall initially authenticate Securities for original issue on the Issue Date in
an aggregate principal amount at maturity of $396,810,000 of Discount
Securities (the “Initial Discount Securities”), an
aggregate principal amount of $250,000,000 of Senior Securities (the “Initial Senior Securities”) and an aggregate principal
amount of $200,000,000 of Senior PIK Securities (the “Initial Senior
PIK Securities” and, together with the Initial Discount Securities
and the Initial Senior Securities, the “Initial Securities”)
upon a written order of the Issuer in the form of an Officers’ Certificate of
the Issuer (other than as provided in Section 2.08).  The Trustee shall authenticate Discount
Securities (the “Additional Discount Securities”),
Senior Securities (the “Additional Senior
Securities”) and Senior PIK Securities (the “Additional
Senior PIK Securities”) thereafter in unlimited amount (so long as
permitted by the terms of this Indenture, including, without limitation,
Section 4.10) (any such Securities, the “Additional Securities”)
for original issue upon a written order of the Issuer in the form of an
Officers’ Certificate in aggregate principal amount as specified in such order
(other than as provided in Section 2.08). 
Each such written order shall specify the principal amount of Additional
Discount Securities, Additional Senior Securities and/or Additional Senior PIK
Securities to be authenticated and the date on which the Additional Discount
Securities, Additional Senior Securities and/or Additional Senior PIK
Securities are to be authenticated. 
Notwithstanding the foregoing, Additional Senior PIK Securities may be
issued from time to time as payment of interest on the Senior PIK Securities in
accordance with the terms of the Senior PIK Securities.

 

40

 

SECTION 2.02.                                              Form
and Dating.

 

The Discount
Securities and the Trustee’s certificate of authentication shall be
substantially in the form of Exhibit A hereto, the Senior Securities and
the Trustee’s certificate of authentication shall be substantially in the form
of Exhibit B hereto, and the Senior PIK Securities and the Trustee’s
certification of authentication shall be substantially in the form of Exhibit
C hereto, each of which are incorporated in and form a part of this
Indenture.  The Securities may have
notations, legends or endorsements required by law, rule or usage to which the
Issuer is subject.  Without limiting the
generality of the foregoing, Securities offered and sold to Qualified
Institutional Buyers in reliance on Rule 144A (“Rule 144A
Securities”) shall bear the legend and include the form of
assignment set forth in Exhibit D, Securities offered and sold in
offshore transactions in reliance on Regulation S (“Regulation S
Securities”) shall bear the legend and include the form of
assignment set forth in Exhibit E, and Securities offered and sold to
Institutional Accredited Investors in transactions exempt from registration
under the Securities Act not made in reliance on Rule 144A or Regulation S (“Other Securities”) may be represented by a Restricted Global
Security or, if such an investor may not hold an interest in the Restricted
Global Security, a Physical Security, in each case, bearing the Private
Placement Legend.  The Issuer shall
approve the form of the Securities and any notation, legend or endorsement on
them.  Each Security shall be dated the
date of its issuance and show the date of its authentication.

 

The terms and
provisions contained in the Securities shall constitute, and are hereby
expressly made, a part of this Indenture and, to the extent applicable, the
Issuer and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and agree to be bound thereby.

 

The Securities
may be presented for registration of transfer and exchange at the offices of
the Registrar.

 

Securities
issued in exchange for interests in a Global Security pursuant to Section 2.16
may be issued in the form of permanent certificated Securities in registered
form in substantially the form set forth in Exhibit A in the case of
Discount Securities, Exhibit B in the case of Senior Securities and Exhibit
C in the case of Senior PIK Securities (the “Physical
Securities”).

 

SECTION 2.03.                                              Execution
and Authentication.

 

One Officer,
who shall have been duly authorized by all requisite corporate actions, shall
sign the Securities for the Issuer by manual or facsimile signature.

 

If the Officer
whose signature is on a Security was an Officer at the time of such execution
but no longer holds that office at the time the Trustee authenticates the
Security, the Security shall be valid nevertheless.

 

41

 

No Security
shall be entitled to any benefit under this Indenture or be valid or obligatory
for any purpose unless there appears on such Security a certificate of
authentication substantially in the form provided for herein executed by the
Trustee by manual signature, and such certificate upon any Security shall be
conclusive evidence, and the only evidence, that such Security has been duly
authenticated and delivered hereunder. 
Notwithstanding the foregoing, if any Security shall have been
authenticated and delivered hereunder but never issued and sold by the Issuer,
and the Issuer shall deliver such Security to the Trustee for cancellation as
provided in Section 2.12, for all purposes of this Indenture such Security shall
be deemed never to have been authenticated and delivered hereunder and shall
never be entitled to the benefits of this Indenture.

 

The Trustee
may appoint one or more authenticating agents with the consent of the Issuer to
authenticate the Securities.  Unless
otherwise provided in the appointment, an authenticating agent may authenticate
the Securities whenever the Trustee may do so. 
Each reference in this Indenture to authentication by the Trustee
includes authentication by such agent. 
An authenticating agent has the same rights as an Agent to deal with the
Issuer and Affiliates of the Issuer. 
Each Paying Agent is designated as an authenticating agent for purposes
of this Indenture.

 

The Securities
shall be issuable only in registered form without coupons in denominations of
$1,000 and any integral multiples of $1,000;  provided, however, that Additional
Senior PIK Securities issued in payment of interest or Additional Interest will
be issued in denominations of $1 and integral multiples of $1.

 

SECTION 2.04.                                              Registrar,
Calculation Agent and Paying Agent.

 

The Issuer
shall maintain an office or agency in the Borough of Manhattan, The City of New
York, where (a) Securities may be presented or surrendered for registration of
transfer or for exchange (“Registrar”),
(b) Securities may be presented or surrendered for payment (“Paying Agent”) and (c) notices and demands to or upon the
Issuer in respect of the Securities and this Indenture may be served.  The Issuer may also from time to time
designate one or more other offices or agencies where the Securities may be
presented or surrendered for any or all such purposes and may from time to time
rescind such designations; provided, however, that no such designation or rescission shall in any
manner relieve the Issuer of its obligation to maintain an office or agency in
the Borough of Manhattan, The City of New York, for such purposes.  The Issuer may act as its own Registrar or
Paying Agent, except that for the purposes of Articles Three and Eight and
Sections 4.09 and 4.13, neither the Issuer nor any Affiliate of the Issuer
shall act as Paying Agent.  The Issuer
initially appoints the Trustee as Registrar, Paying Agent and Calculation Agent
(as defined in Exhibits B and C) until such time as the Trustee has resigned
and a successor has been appointed.  The
Issuer may change the paying agents, the registrars or the transfer agents
without prior notice to the Holders.

 

The Registrar
shall keep a register of the Securities and of their transfer and
exchange.  The Issuer, upon notice to the
Trustee, may have one or more co-Registrars and

 

42

 

one or more additional paying agents reasonably acceptable to the
Trustee.  The term “Paying Agent”
includes any additional paying agent.

 

SECTION 2.05.                                              Paying
Agent To Hold Assets in Trust.

 

Each Paying
Agent shall hold in trust for the benefit of the Holders or the Trustee all
money held by the Paying Agent for the payment of principal of or premium or
interest on the Securities (whether such money has been paid to it by the
Issuer, one or more of the Guarantors or any other obligor on the Securities),
and the Issuer and each Paying Agent shall notify the Trustee of any Default by
the Issuer (or any other obligor on the Securities) in making any such
payment.  Money held in trust by a Paying
Agent need not be segregated except as required by law and in no event shall a
Paying Agent be liable for any interest on any money received by it
hereunder.  The Issuer at any time may
require a Paying Agent to pay all money held by it to the Trustee and account
for any funds disbursed and the Trustee may at any time during the continuance
of any Event of Default specified in Section 6.01(1) or (2), upon written
request to a Paying Agent, require such Paying Agent to pay forthwith all money
so held by it to the Trustee and to account for any funds disbursed.  Upon making such payment, such Paying Agent
shall have no further liability for the money delivered to the Trustee

 

SECTION 2.06.                                              Holder
Lists.

 

The Trustee
shall preserve in as current a form as is reasonably practicable the most
recent list available to it of the names and addresses of Holders.  If the Trustee is not the Registrar, the
Issuer shall furnish to the Trustee at least two (2) Business Days prior to
each Interest Payment Date and at such other times as the Trustee may request
in writing a list in such form and as of such date as the Trustee may
reasonably require of the names and addresses of Holders, which list may be
conclusively relied upon by the Trustee.

 

SECTION 2.07.                                              Transfer
and Exchange.

 

Subject to
Sections 2.16 and 2.17, when Securities are presented to the Registrar or a
co-Registrar with a request to register the transfer of such Securities or to
exchange such Securities for an equal principal amount of Securities of other
authorized denominations, the Registrar or co-Registrar shall promptly register
the transfer or make the exchange as requested if its requirements for such
transaction are met; provided, however, that the Securities surrendered for transfer or
exchange shall be duly endorsed or accompanied by a written instrument of transfer
in form satisfactory to the Issuer and the Registrar or co-Registrar, duly
executed by the Holder thereof or his or her attorney duly authorized in
writing.  To permit registrations of
transfers and exchanges, the Issuer shall execute and the Trustee shall
authenticate Securities at the Registrar’s or co-Registrar’s request.  No service charge shall be made for any
registration of transfer or exchange, but the Issuer may require payment of a
sum sufficient to cover any transfer tax or similar governmental charge payable
in connection therewith.

 

43

 

The Registrar
or co-Registrar shall not be required to register the transfer of or exchange
of any Security (i) during a period beginning at the opening of business
15 days before the mailing of a notice of redemption of Securities and ending
at the close of business on the day of such mailing, (ii) selected for
redemption in whole or in part pursuant to Article Three, except the unredeemed
portion of any Security being redeemed in part, and (iii) during a Change
of Control Offer, an Alternate Offer or an Asset Sale Offer if such Security is
tendered pursuant to such Change of Control Offer, Alternate Offer or Asset
Sale Offer and not withdrawn.

 

Any Holder of
a beneficial interest in a Global Security shall, by acceptance of such
beneficial interest, agree that transfers of beneficial interests in such
Global Securities may be effected only through a book-entry system maintained
by the Holder of such Global Security (or its agent), and that ownership of a
beneficial interest in the Security shall be required to be reflected in a
book-entry system.

 

SECTION 2.08.                                              Replacement
Securities.

 

If a mutilated
Security is surrendered to the Registrar or the Trustee, or if the Holder of a
Security claims that the Security has been lost, destroyed or wrongfully taken,
the Issuer shall issue and the Trustee shall authenticate a replacement
Security (and the Guarantors, if any, shall execute the guarantee thereon) if
the Holder of such Security furnishes to the Issuer and the Trustee evidence
reasonably acceptable to them of the ownership and the destruction, loss or
theft of such Security and if the requirements of Section 8-405 of the New York
Uniform Commercial Code as in effect on the date of this Indenture are
met.  If required by the Trustee or the
Issuer, an indemnity bond shall be posted, sufficient in the judgment of all to
protect the Issuer, the Guarantors, if any, the Trustee or any Paying Agent
from any loss that any of them may suffer if such Security is replaced.  The Issuer may charge such Holder for the
Issuer’s reasonable out-of-pocket expenses in replacing such Security and the
Trustee may charge the Issuer for the Trustee’s expenses (including, without
limitation, attorneys’ fees and disbursements) in replacing such Security.  Every replacement Security shall constitute a
contractual obligation of the Issuer.

 

SECTION 2.09.                                              Outstanding
Securities.

 

The Securities
outstanding at any time are all the Securities that have been authenticated by
the Trustee except (a) those canceled by it, (b) those delivered to it for
cancellation, (c) to the extent set forth in Sections 9.01 and 9.02, on or
after the date on the conditions set forth in Section 9.01 or 9.02 have been
satisfied and (d) those Securities theretofore authenticated by the Trustee
hereunder and those described in this Section as not outstanding.  A Security does not cease to be outstanding
because the Issuer or any of its Affiliates holds the Security (subject to the
provisions of Section 2.10).

 

If a Security
is replaced pursuant to Section 2.08 (other than a mutilated Security surrendered
for replacement), it ceases to be outstanding unless the Trustee receives proof

 

44

 

satisfactory to it that the replaced Security is held by a bona fide purchaser in whose hands such Security is a legal,
valid and binding obligation of the Issuer. 
A mutilated Security ceases to be outstanding upon surrender of such
Security and replacement thereof pursuant to Section 2.08.

 

If the
principal amount of any Security is considered paid under Section 4.01, it
ceases to be outstanding and interest ceases to accrue.  If on a Redemption Date or the Maturity Date
the Trustee or Paying Agent (other than the Issuer or an Affiliate thereof)
holds U.S. Legal Tender or U.S. Government Securities sufficient to pay all of
the principal and interest due on the Securities payable on that date, then on
and after that date such Securities cease to be outstanding and interest on
them ceases to accrue.

 

SECTION 2.10.                                              Treasury
Securities.

 

In determining
whether the Holders of the required principal amount of Securities have concurred
in any direction, waiver or consent, Securities owned by the Issuer or any of
its Affiliates shall be disregarded, except that, for the purposes of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Securities that a Responsible Officer of the Trustee actually
knows are so owned shall be disregarded.

 

SECTION 2.11.                                              Temporary
Securities.

 

Until
definitive Securities are ready for delivery, the Issuer may prepare and the
Trustee shall authenticate temporary Securities.  Temporary Securities shall be substantially
in the form of definitive Securities but may have variations that the Issuer considers
appropriate for temporary Securities. 
Without unreasonable delay, the Issuer shall prepare and the Trustee
shall authenticate definitive Securities in exchange for temporary
Securities.  Until such exchange,
temporary Securities shall be entitled to the same rights, benefits and
privileges as definitive Securities. 
Notwithstanding the foregoing, so long as the Securities are represented
by a Global Security, such Global Security may be in typewritten form.

 

SECTION 2.12.                                              Cancellation.

 

The Issuer at
any time may deliver Securities to the Trustee for cancellation.  The Registrar and the Paying Agent shall
forward to the Trustee any Securities surrendered to them for transfer,
exchange or payment.  The Trustee or, at
the direction of the Trustee, the Registrar or the Paying Agent (other than the
Issuer or a Subsidiary), and no one else, shall cancel and, at the written
direction of the Issuer, shall dispose of all Securities surrendered for
transfer, exchange, payment or cancellation in accordance with its customary
procedures.  Subject to Section 2.08, the
Issuer may not issue new Securities to replace Securities that it has paid or
delivered to the Trustee for cancellation. 
If the Issuer or any Guarantor shall acquire any of the Securities, such
acquisition shall not operate as a redemption or satisfaction of the
Indebtedness represented by such Securities unless and until the same are
surrendered to the Trustee for cancellation pursuant to this Section 2.12.

 

45

 

SECTION 2.13.                                              Defaulted
Interest.

 

If the Issuer
defaults in a payment of interest on the Securities, it shall, unless the
Trustee fixes another record date pursuant to Section 6.10, pay the defaulted
interest then borne by the Securities, plus (to the extent lawful) any interest
payable on the defaulted interest, in accordance with the terms hereof.  The Issuer may pay the defaulted interest to
the persons who are Holders on a subsequent special record date, which special
record date shall be the fifteenth day next preceding the date fixed by the Issuer
for the payment of defaulted interest or the next succeeding Business Day if
such date is not a Business Day.  At
least 15 days before any such subsequent special record date, the Issuer shall
mail to each Holder, with a copy to the Trustee, a notice that states the subsequent
special record date, the payment date and the amount of defaulted interest, and
interest payable on such defaulted interest, if any, to be paid.  The Issuer may make payment of any defaulted
interest in any other lawful manner not inconsistent with the requirements (if
applicable) of any securities exchange on which the Securities may be listed
and, upon such notice as may be required by such exchange, if, after written
notice given by the Issuer to the Trustee of the proposed payment pursuant to
this sentence, such manner of payment shall be deemed practicable by the
Trustee.

 

SECTION 2.14.                                              CUSIP,
ISIN and “Common Code” Numbers.

 

The Issuer in
issuing the Securities may use CUSIP numbers, ISINs and “Common Code” numbers
(if then generally in use) and, if so, the Trustee shall use, as applicable,
CUSIP numbers, ISINs and “Common Code” numbers in notices of redemption as a
convenience to Holders; provided, however, that any such notice may state that no
representation is made as to the correctness or accuracy of such numbers,
either as printed on the Securities or as contained in any notice of a
redemption, that reliance may be placed only on the other identification
number(s) printed on the Securities.  The
Issuer shall advise the Trustee of any change in the CUSIP numbers, ISINs and
“Common Code” numbers.

 

SECTION 2.15.                                              Deposit
of Moneys.

 

Prior to 10:00
a.m. New York City time, on each Interest Payment Date, Maturity Date, Redemption
Date, Change of Control Payment Date and Asset Sale Offer Payment Date, the
Issuer shall have deposited with the Paying Agent in immediately available
funds U.S. Legal Tender sufficient to make cash payments, if any, due on such
Interest Payment Date, Maturity Date, Redemption Date, Change of Control Payment
Date and Asset Sale Offer Payment Date, as the case may be, in a timely manner
which permits the Paying Agent to remit payment to the Holders on such Interest
Payment Date, Maturity Date, Redemption Date, Change of Control Payment Date
and Asset Sale Offer Payment Date, as the case may be.  The principal and interest on Global
Securities shall be payable to the Depository or its nominee, as the case may
be, as the sole registered owner and the sole Holder of the Global Securities
represented thereby.  The principal and
interest on Physical Securities shall be payable, either in person or by mail,
at the office of the Paying Agent.

 

46

 

SECTION 2.16.                                              Book-Entry
Provisions for Global Securities.

 

(a)           Rule 144A Securities that are
Discount Securities (“Rule 144A Discount
Securities”) initially shall be represented by one or more
Securities in registered, global form without interest coupons (collectively,
the “Rule 144A Global Discount Security”).  Rule 144A Securities that are Senior
Securities (“Rule 144A Senior Securities”)
initially shall be represented by one or more Securities in registered, global
form without interest coupons (collectively, the “Rule 144A
Global Senior Security”) and Rule 144A Securities that are Senior
PIK Securities (“Rule 144A Senior PIK Securities”)
initially shall be represented by one or more Securities in registered, global
form without interest coupons (collectively, the “Rule 144A
Global Senior PIK Security” and, together with the Rule 144A Global
Discount Security and the Rule 144A Global Senior Security, the “Rule 144A Global Securities”).  Regulation S Securities that are
Discount Securities (“Regulation S Discount
Securities”) initially shall be represented by one or more Securities
in registered, global form without interest coupons (collectively, the “Regulation S Global Discount Security”).  Regulation S Securities that are Senior
Securities (“Regulation S Senior Securities”)
initially shall be represented by one or more Securities in registered, global
form without interest coupons (collectively, the “Regulation S
Global Senior Security”). 
Regulation S Securities that are Senior PIK Securities (“Regulation S Senior PIK Securities”) initially shall be
represented by one or more Securities in registered, global form without
interest coupons (collectively, the “Regulation S Global
Senior PIK Security” and, together with the Regulation S Global
Discount Security and the Regulation S Global Senior Security, the “Regulation S Global Securities”).  The term “Global
Discount Securities” means the Rule 144A Global Discount Securities
and the Regulation S Global Discount Securities.  The term “Global
Senior Securities” means, collectively, the Rule 144A Global Senior
Securities and the Regulation S Senior Securities.  The term “Global
Securities” means, collectively, the Rule 144A Global Securities and
the Regulation S Global Securities. 
The Global Securities shall bear legends as set forth in Exhibit F.  The Global Securities initially shall (i) be
registered in the name of the Depositary or the nominee of such Depositary for
credit to an account of an Agent Member, (ii) be delivered to the Trustee as
custodian for such Depositary and (iii) bear legends as set forth in Exhibit D
with respect to Restricted Global Securities and Exhibit E with
respect to Regulation S Global Securities.

 

Members of, or
direct or indirect participants in, the Depositary (“Agent
Members”) shall have no rights under this Indenture with respect to
any Global Security held on their behalf by the Depositary or the Trustee as
its custodian, or under the Global Securities, and the Depositary may be
treated by the Issuer, the Trustee and any agent of the Issuer or the Trustee
as the absolute owner of the Global Security for all purposes whatsoever.  Notwithstanding the foregoing, nothing herein
shall prevent the Issuer, the Trustee or any agent of the Issuer or the Trustee
from giving effect to any written certification, proxy or other authorization
furnished by the Depositary or impair, as between the Depositary and its Agent
Members, the operation of customary practices governing the exercise of the
rights of a Holder of any Security.

 

47

 

(b)           Transfers of Global Securities shall
be limited to transfer in whole, but not in part, to the Depositary, its
successors or their respective nominees. 
Interests of beneficial owners in the Global Securities may be
transferred or exchanged for Physical Securities in accordance with the rules
and procedures of the Depositary and the provisions of Section 2.17.  In addition, a Global Security shall be
exchangeable for Physical Securities if (i) the Depositary
(x) notifies the Issuer that it is unwilling or unable to continue as depository
for such Global Security and the Issuer thereupon fail to appoint a successor
depository or (y) has ceased to be a clearing agency registered under the
Exchange Act, (ii) the Issuer, at its option, notifies the Trustee in
writing that it elects to cause the issuance of such Physical Securities or
(iii) in the case of any Global Note, there shall have occurred and be
continuing an Event of Default with respect to such Global Note.  In all cases, Physical Securities delivered
in exchange for any Global Security or beneficial interests therein shall be registered
in the names, and issued in any approved denominations, requested by or on
behalf of the Depositary in accordance with its customary procedures.

 

(c)           In connection with any transfer or
exchange of a portion of the beneficial interest in any Global Security to
beneficial owners pursuant to paragraph (b), the Registrar shall (if one or
more Physical Securities are to be issued) reflect on its books and records the
date and a decrease in the principal amount of the Global Security in an amount
equal to the principal amount of the beneficial interest in the Global Security
to be transferred, and the Issuer shall execute, and the Trustee shall upon
receipt of a written order from the Issuer authenticate and make available for
delivery, one or more Physical Securities of like tenor and amount.

 

(d)           In connection with the transfer of
Global Securities as an entirety to beneficial owners pursuant to paragraph
(b), the Global Securities shall be deemed to be surrendered to the Trustee for
cancellation, and the Issuer shall execute, and the Trustee shall authenticate
and deliver, to each beneficial owner identified by the Depositary in writing
in exchange for its beneficial interest in the Global Securities, an equal
aggregate principal amount of Physical Securities of authorized denominations.

 

(e)           Any Physical Security constituting a
Restricted Security delivered in exchange for an interest in a Global Security
pursuant to paragraph (b), (c) or (d) shall, except as otherwise provided by
paragraphs (a)(i)(x) and (c) of Section 2.17, bear the Private Placement Legend
or, in the case of the Regulation S Global Security, the legend set forth in Exhibit
E, in each case, unless the Issuer determines otherwise in compliance with
applicable law.

 

(f)            On or prior to the 40th day after
the later of the commencement of the offering of the Securities represented by
the Regulation S Global Security and the issue date of such Securities (such
period through and including such 40th day, the “Restricted Period”),
a beneficial interest in a Regulation S Global Security may be transferred to a
Person who takes delivery in the form of an interest in the corresponding Restricted
Global Security

 

48

 

only upon receipt by the Trustee of a written certification from the
transferor to the effect that such transfer is being made (i)(a) to a Person
that the transferor reasonably believes is a Qualified Institutional Buyer in a
transaction meeting the requirements of Rule 144A or (b) pursuant to another
exemption from the registration requirements under the Securities Act which is
accompanied by an Opinion of Counsel regarding the availability of such
exemption and (ii) in accordance with all applicable securities laws of
any state of the United States or any other jurisdiction.

 

(g)           Beneficial interests in the
Restricted Global Security may be transferred to a Person who takes delivery in
the form of an interest in the Regulation S Global Security, whether before or
after the expiration of the Restricted Period, only if the transferor first
delivers to the Trustee a written certificate to the effect that such transfer
is being made in accordance with Regulation S or Rule 144 (if available).

 

(h)           Any beneficial interest in one of the
Global Securities that is transferred to a Person who takes delivery in the
form of an interest in another Global Security shall, upon transfer, cease to
be an interest in such Global Security and become an interest in such other
Global Security and, accordingly, shall thereafter be subject to all transfer
restrictions and other procedures applicable to beneficial interests in such
other Global Security for as long as it remains such an interest.

 

(i)            The Holder of any Global Security
may grant proxies and otherwise authorize any Person, including Agent Members
and Persons that may hold interests through Agent Members, to take any action
which a Holder is entitled to take under this Indenture or the Securities.

 

SECTION 2.17.                                              Special
Transfer Provisions.

 

(a)           Transfers to Non-QIB Institutional
Accredited Investors and Non-U.S. Persons. 
The following provisions shall apply with respect to the registration of
any proposed transfer of a Security constituting a Restricted Security to any
Institutional Accredited Investor which is not a QIB or to any Non-U.S. Person:

 

(i)            the Registrar shall register the transfer of any Security
constituting a Restricted Security, whether or not such Security bears the
Private Placement Legend, if (x) the requested transfer is after the second
anniversary of the date of original issuance thereof or such other date as such
Security shall be freely transferable under Rule 144 as certified in an Officers’
Certificate or (y) (1) in the case of a transfer to an Institutional
Accredited Investor which is not a QIB (excluding Non-U.S. Persons), the
proposed transferee has delivered to the Registrar a certificate substantially
in the form of Exhibit G hereto or (2) in the case of a transfer to a
Non-U.S. Person (including a QIB), the proposed transferor has delivered to the
Registrar a certificate substantially in the form of Exhibit H hereto; provided that in the case of any transfer of a Security
bearing the Private Placement

 

49

 

Legend for a Security not bearing the Private
Placement Legend, the Registrar has received an Officers’ Certificate
authorizing such transfer; and

 

(ii)           if the proposed transferor is an Agent Member holding a
beneficial interest in a Global Security, upon receipt by the Registrar of (x)
the certificate, if any, required by paragraph (i) above and (y) instructions
given in accordance with the Depositary’s and the Registrar’s procedures,

 

whereupon (a)
the Registrar shall reflect on its books and records the date and (if the
transfer does not involve a transfer of outstanding Physical Securities) a
decrease in the principal amount of a Global Security in an amount equal to the
principal amount of the beneficial interest in a Global Security to be
transferred, and (b) the Registrar shall reflect on its books and records
the date and an increase in the principal amount of a Global Security in an
amount equal to the principal amount of the beneficial interest in the Global
Security transferred or the Issuer shall execute and the Trustee shall
authenticate and make available for delivery one or more Physical Securities of
like tenor and amount.

 

(b)           Transfers to QIBs.  The following provisions shall apply with
respect to the registration or any proposed registration of transfer of a
Security constituting a Restricted Security to a QIB (excluding transfers to
Non-U.S. Persons):

 

(i)            the Registrar shall register the transfer if such
transfer is being made by a proposed transferor who has checked the box
provided for on such Holder’s Security stating, or to a transferee who has
advised the Issuer and the Registrar in writing, that it is purchasing the
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a QIB within the
meaning of Rule 144A, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding the Issuer as it has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that the
transferor is relying upon its foregoing representations in order to claim the
exemption from registration provided by Rule 144A; and

 

(ii)           if the proposed transferee is an Agent Member, and the
Securities to be transferred consist of Physical Securities which after
transfer are to be evidenced by an interest in the Global Security, upon
receipt by the Registrar of instructions given in accordance with the
Depositary’s and the Registrar’s procedures, the Registrar shall reflect on its
books and records the date and an increase in the principal amount of the
Global Security in an amount equal to the principal amount of the Physical
Securities to be transferred, and the Trustee shall cancel the Physical
Securities so transferred.

 

(c)           Private Placement
Legend.  Upon the registration of
transfer, exchange or replacement of Securities not bearing the Private
Placement Legend, the Registrar shall deliver Securities that do not bear the
Private Placement Legend.  Upon the
registration of transfer,

 

50

 

exchange or replacement of Securities bearing the Private Placement
Legend, the Registrar shall deliver only Securities that bear the Private
Placement Legend unless (i) it has received the Officers’ Certificate
required by paragraph (a)(i)(y) of this Section 2.17, (ii) there is
delivered to the Registrar an Opinion of Counsel reasonably satisfactory to the
Issuer and the Trustee to the effect that neither such legend nor the related
restrictions on transfer are required in order to maintain compliance with the
provisions of the Securities Act or (iii) such Security has been sold pursuant
to an effective registration statement under the Securities Act and the
Registrar has received an Officers’ Certificate from the Issuer to such effect.

 

(d)           General.  By its acceptance of any Security bearing the
Private Placement Legend, each Holder of such Security acknowledges the restrictions
on transfer of such Security set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such Security only as
provided in this Indenture.

 

The Registrar
shall retain for a period of two years copies of all letters, notices and other
written communications received pursuant to Section 2.16 or this Section
2.17.  The Issuer shall have the right to
inspect and make copies of all such letters, notices or other written
communications at any reasonable time upon the giving of reasonable notice to
the Registrar.

 

SECTION 2.18.                                              Computation
of Interest.

 

Interest on
the Securities shall be computed on the basis of a 360-day year of twelve
30-day months and actual days elapsed.

 

SECTION 2.19.                                              Issuance
of Additional Senior PIK Securities.

 

(a)           The Issuer shall be entitled to issue
Additional Senior PIK Securities under this Indenture which shall have
identical terms as the Senior PIK Securities issued on the Issue Date.  The Senior PIK Securities issued on the Issue
Date and any Additional Senior PIK Securities shall be treated as a single
class for all purposes under this Indenture.

 

(b)           Unless otherwise agreed to between
the Issuer and the Trustee, with respect to any Additional Senior PIK
Securities, the Issuer shall deliver to the Trustee and the Paying Agent:

 

(1)           no later than the record date for the relevant interest
payment date, a written notice setting forth the extent to which such interest
payment will be made in the form of cash, if an election is made to pay in
cash, and if no such election is made, such interest payment shall otherwise be
payable in Additional Senior PIK Securities; and

 

(2)           no later than two Business Days prior to the relevant
interest payment date, (i) if such securities are in definitive form, the
required amount of new definitive

 

51

 

Additional Senior PIK Securities and an order
to authenticate and deliver such Additional Senior PIK Securities or
(ii) if such Senior PIK Securities are in global form, an order to
increase the principal amount of such Senior PIK Securities by the relevant
amount (or, if necessary, to authenticate a new Global Senior PIK Security
executed by the Issuer with such increased principal amounts).

 

(c)           Any Additional Senior PIK Securities
shall, after being executed and authenticated pursuant to Section 2.03, be
(i) mailed to the person entitled thereto as shown on the register for the
definitive Senior PIK Securities as of the relevant Record Date or (ii) deposited
into the account specified by the Holder or Holders thereof as of the relevant
Record Date if the Senior PIK Securities are held in global form.  Alternatively, the Issuer may direct the
Paying Agent to make the appropriate amendments to the schedule of principal
amounts of the relevant Global Senior PIK Securities outstanding and arrange
for deposit into the account specified by the Holder or Holders thereof as of
the relevant Record Date.  Payment shall
be made in such form and upon such terms as specified herein and the Issuer
shall and Paying Agent may take additional steps as is necessary to effect such
payment.

 

(d)           With respect to any Additional Senior
PIK Securities issued after the Issue Date (except for Senior PIK Securities
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other Senior PIK Securities pursuant to Sections 2.07,
2.08, 2.09, 2.11, 3.06 and Exhibit C), the aggregate principal amount of such
Additional Senior PIK Securities which may be authenticated and delivered under
this Indenture shall be (i) established in or pursuant to a resolution of
the Board of Directors of the Issuer (provided that any such resolution may
authorize authentication of up to a maximum aggregate principal amount from time
to time without referring to aggregate principal amounts for specific interest
periods) and (ii) set forth or determined in an Officers’ Certificate of
the Issuer.  If any of the terms of any
Additional Senior PIK Securities are established by action taken pursuant to a
resolution of the Board of Directors, a copy of an appropriate record of such
action shall be certified by an Officers’ Certificate of the Issuer and
delivered to the Trustee at or prior to the delivery of the Officers’
Certificate of the Issuer in accordance with Section 2.19(d)(ii).

 

ARTICLE THREE

 

REDEMPTION

 

SECTION 3.01.                                              Notices
to Trustee.

 

If the Issuer
elects to redeem any Securities pursuant to Section 5 or Section 6 of the Securities,
it shall notify the Trustee in writing of the Redemption Date, the Redemption
Price and the principal amount (or principal amount at maturity, as the case
may be) of such Securities to be redeemed. 
The Issuer shall give notice of redemption to the Paying Agent and
Trustee at least 30 days (or, in the case of a redemption pursuant to Section 5
or 6

 

52

 

of the Senior PIK Securities, three Business Days) but not more than 60
days before the Redemption Date (unless a shorter notice shall be agreed to by
the Trustee in writing), together with an Officers’ Certificate stating that
such redemption will comply with the conditions contained herein.

 

SECTION 3.02.                                              Selection
of Securities To Be Redeemed.

 

If less than
all of the applicable Securities are to be redeemed at any time, the Trustee
will select Securities for redemption as follows:

 

(1)           if
the applicable Securities are listed on a national securities exchange, in
compliance with the requirements of the principal national securities exchange
on which such Securities are listed; or

 

(2)           if
such Securities are not listed on any securities exchange, on a pro rata basis, by lot or by such method as the Trustee
deems fair and appropriate.

 

No Securities
of $1,000 or less shall be redeemed in part (or, in the case of the Discount
Securities, $1,000 principal amount at maturity or less).

 

If a partial
redemption is made on any series of Securities with the proceeds of an Equity
Offering in accordance with Section 6 of the Securities, forms of which are
attached hereto as Exhibit A, Exhibit B and Exhibit C,
the Trustee will select the applicable Securities on a pro rata basis
or on as nearly a pro rata basis as is practicable
(subject to DTC procedures).

 

SECTION 3.03.                                              Notice
of Redemption.

 

At least 30
days (or, in the case of a redemption pursuant to Section 5 or 6 of the Senior
PIK Securities, three Business Days) but not more than 60 days before a
Redemption Date, the Issuer shall mail a notice of redemption by first class
mail, postage prepaid, to each Holder whose Securities are to be redeemed at
its registered address, except that redemption notices may be mailed more than
60 days prior to a Redemption Date if the notice is issued in connection with a
defeasance of the Securities or a satisfaction and discharge of this
Indenture.  At the Issuer’s request, the
Trustee shall forward the notice of redemption in the Issuer’s name and at the
Issuer’s expense; provided that in such case, the
Trustee has received notice from the Issuer at least 31 days, but not more than
60 days, before a Redemption Date (unless a shorter notice shall be agreed to
in writing by the Trustee).  Securities
called for redemption become due on the date fixed for redemption.  On and after the Redemption Date, interest
ceases to accrue on Securities or portions of them called for redemption.  Each notice of redemption shall identify the
Securities (including the CUSIP number) to be redeemed and shall state:

 

(1)           the
Redemption Date;

 

53

 

(2)           the
Redemption Price and the amount of accrued interest, if any, to be paid;

 

(3)           the
name and address of the Paying Agent;

 

(4)           that
Securities called for redemption must be surrendered to the Paying Agent to collect
the Redemption Price, plus accrued interest, if any;

 

(5)           that,
unless the Issuer defaults in making the redemption payment, interest on
Securities called for redemption ceases to accrue on and after the Redemption
Date, and the only remaining right of the Holders of such Securities is to receive
payment of the Redemption Price upon surrender to the Paying Agent of the
Securities redeemed;

 

(6)           if
any Senior Security or Senior PIK Security is being redeemed in part, the
portion of the principal amount of such Security to be redeemed and that, after
the Redemption Date, and upon surrender of such Security, a new Security or Securities
in aggregate principal amount equal to the unredeemed portion thereof will be
issued;

 

(7)           if
fewer than all the Senior Securities or Senior PIK Securities are to be redeemed,
the identification of the particular Securities (or portion thereof) to be redeemed,
as well as the aggregate principal amount of Senior Securities or Senior PIK
Securities to be redeemed and the aggregate principal amount of Senior
Securities or Senior PIK Securities to be outstanding after such partial redemption;

 

(8)           if
any Discount Security is being redeemed in part, the Accreted Value and the portion
of the principal amount at maturity of such Discount Security to be redeemed
and that, after the Redemption Date, and upon surrender of such Discount
Security, a new Discount Security or Securities in aggregate principal amount
at maturity equal to the unredeemed portion thereof will be issued;

 

(9)           if
fewer than all of the Discount Securities are to be redeemed, the identification
of the particular Discount Securities (or portion thereof) to be redeemed, as
well as the Accreted Value, the aggregate principal amount at maturity of Discount
Securities to be redeemed and the aggregate principal amount at maturity of
Discount Securities to be outstanding after such partial redemption;

 

(10)         the
CUSIP Number and/or ISIN number, if any, printed on the Securities being redeemed;

 

(11)         that
no representation is made as to the correctness or accuracy of the CUSIP number
or ISIN number, if any, listed in such notice or printed on the Securities; and

 

54

 

(12)         the
Section of the Securities pursuant to which the Securities are to be redeemed.

 

The notice, if
mailed in a manner herein provided, shall be conclusively presumed to have been
given, whether or not the Holder receives such notice.  In any case, failure to give such notice by
mail or any defect in the notice to the Holder of any Security designated for
redemption in whole or in part shall not affect the validity of the proceedings
for the redemption of any other Security. 
Notices of redemption may not be conditional.

 

SECTION 3.04.                                              Effect
of Notice of Redemption.

 

Once notice of
redemption is mailed in accordance with Section 3.03, Securities called
for redemption become due and payable on the Redemption Date and at the
Redemption Price plus accrued interest, if any. 
Upon surrender to the Trustee or Paying Agent, such Securities called
for redemption shall be paid at the Redemption Price (which shall include
accrued interest thereon to the Redemption Date), but installments of interest,
the maturity of which is on or prior to the Redemption Date, shall be payable
to Holders of record at the close of business on the relevant Record
Dates.  On and after the Redemption Date
interest shall cease to accrue on Securities or portions thereof called for
redemption.

 

SECTION 3.05.                                              Deposit
of Redemption Price.

 

On or prior to
10:00 a.m., New York time, on the Redemption Date, the Issuer shall
deposit with the Paying Agent (or, if the Issuer or a Wholly Owned Subsidiary
is a Paying Agent, shall segregate and hold in trust) U.S. Legal Tender and/or
U.S. Government Securities sufficient to pay the redemption price of and accrued
interest on all Securities or portions thereof to be redeemed on that date
other than Securities or portions of Securities called for redemption that have
been delivered by the Issuer to the Trustee for cancellation.  On and after the Redemption Date,
(a) with respect to any Senior Securities or Senior PIK Securities called
for redemption, interest shall cease to accrue on Securities or portions
thereof called for redemption so long as the Issuer has deposited with the
Paying Agent funds sufficient to pay the principal of, plus accrued and unpaid
interest on, the Securities and (b) with respect to any Discount
Securities called for redemption, Accreted Value shall cease to accrete or
interest shall cease to accrue, as the case may be, on Securities or portions
thereof called for redemption so long as the Issuer has deposited with the
Paying Agent funds sufficient to pay the Accreted Value or principal of, plus
accrued and unpaid interest, if any, on, the Securities to be redeemed, unless
the Paying Agent is prohibited from making any such payment pursuant to the
terms of this Indenture.

 

SECTION 3.06.                                              Securities
Redeemed in Part.

 

If any
Security is to be redeemed in part only, the notice of redemption that relates
to such Security shall state the portion of the principal amount thereof to be
redeemed.

 

55

 

A new Security in principal amount equal to the unredeemed portion of
the original Security shall be issued in the name of the Holder thereof upon
cancellation of the original Security.

 

ARTICLE FOUR

 

COVENANTS

 

SECTION 4.01.                                              Payment
of Securities.

 

(a)           The Issuer shall pay the principal of
(and premium, if any) and interest on the Securities on the dates and in the
manner provided in the Securities and this Indenture.  An installment of principal of or interest on
the Securities shall be considered paid on the date it is due if the Trustee or
Paying Agent (other than the Issuer or an Affiliate thereof) holds on that date
U.S. Legal Tender and/or U.S. Government Securities designated for and
sufficient to pay the installment. 
Interest on the Securities will be computed on the basis of a 360-day
year comprised of twelve 30-day months and actual days elapsed.

 

(b)           The Issuer shall pay interest on
overdue principal (including, without limitation, post petition interest in a
proceeding under any Bankruptcy Law), and overdue interest, to the extent
lawful, at the same rate per annum borne
by the Securities.

 

SECTION 4.02.                                              Maintenance
of Office or Agency.

 

(a)           The Issuer shall maintain the offices
or agencies required under Section 2.04. 
The Issuer shall give prompt written notice to the Trustee of the
location, and any change in the location, of such offices or agencies.  If at any time the Issuer shall fail to maintain
any such required office or agency or shall fail to furnish the Trustee with
the address thereof, such presentations, surrenders, notices and demands may be
made or served at the address of the Trustee set forth in Section 12.02.

 

(b)           The Issuer may also from time to time
designate one or more other offices or agencies where the Securities may be
presented or surrendered for any or all such purposes and may from time to time
rescind such designations.  The Issuer
will give prompt written notice to the Trustee of any such designation or
rescission and of any change in the location of any such other office or
agency.

 

(c)           The Issuer hereby initially
designates the Corporate Trust Office of the Trustee as one such office or
agency of the Issuer in accordance with Section 2.04.

 

SECTION 4.03.                                              Corporate
Existence.

 

Except as
otherwise permitted by Article Five, the Issuer shall do or cause to be done
all things necessary to preserve and keep in full force and effect its
corporate existence

 

56

 

in accordance with its organizational documents and the rights (charter
and statutory) and material franchises of the Issuer.

 

SECTION 4.04.                                              Payment
of Taxes and Other Claims.

 

The Issuer
shall, and shall cause each of its Subsidiaries to, pay or discharge or cause
to be paid or discharged, before the same shall become delinquent, (a) all
material taxes, assessments and governmental charges levied or imposed upon it
or any of its respective Subsidiaries or upon the income, profits or property
of it or any of its respective Subsidiaries and (b) all lawful claims for
labor, materials and supplies which, in each case, if unpaid, might by law
become a material liability or Lien upon the property of it or any of its
Restricted Subsidiaries; provided, however, that the Issuer shall not be required to pay or discharge
or cause to be paid or discharged any such tax, assessment, charge or claim
whose amount, applicability or validity is being contested in good faith by
appropriate proceedings.

 

SECTION 4.05.                                              Maintenance
of Properties and Insurance.

 

(a)           The Issuer shall cause all material
properties owned by or leased by it or any of its Restricted Subsidiaries used
or useful to the conduct of its business or the business of any of its
Restricted Subsidiaries to be maintained and kept in normal condition, repair
and working order and supplied with all necessary equipment and shall cause to
be made all repairs, renewals, replacements, and betterments thereof, all as in
its judgment may be necessary, so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided, however, that
nothing in this Section 4.05 shall prevent the Issuer or any of its Restricted
Subsidiaries from discontinuing the use, operation or maintenance of any of
such properties, or disposing of any of them, if such discontinuance or
disposal is, in the judgment of the Board of Directors of the Issuer or any
such Restricted Subsidiary desirable in the conduct of the business of the
Issuer or any such Restricted Subsidiary; provided, further, that nothing in this Section 4.05 shall prevent the
Issuer or any of its Restricted Subsidiaries from discontinuing or disposing of
any properties to the extent otherwise permitted by this Indenture.

 

(b)           The Issuer shall maintain, and shall
cause its Restricted Subsidiaries to maintain, insurance with responsible
carriers against such risks and in such amounts, and with such deductibles,
retentions, self insured amounts and co-insurance provisions, as are
appropriate for a business of this type and size as determined in good faith by
the Issuer, including property and casualty loss, workers’ compensation and
interruption of business insurance.

 

SECTION 4.06.                                              Compliance
Certificate; Notice of Default.

 

(a)           The Issuer shall deliver to the
Trustee, within 90 days after the close of each fiscal year commencing with the
fiscal year ending September 30, 2005, an Officers’ Certificate stating that a
review of the activities of the Issuer and its Restricted Subsidiaries has been
made under the supervision of the signing Officers with a view to determining

 

57

 

whether the Issuer has kept, observed, performed and fulfilled its
obligations under this Indenture and further stating, as to each such Officer
signing such certificate, that to the best of such Officer’s knowledge, the
Issuer during such preceding fiscal year has kept, observed, performed and
fulfilled each and every such covenant and no Default occurred during such year
and at the date of such certificate there is no Default that has occurred and
is continuing or, if such signers do know of such Default, the certificate
shall describe its status with particularity. 
The Officers’ Certificate shall also notify the Trustee should the
Issuer elect to change the manner in which it fixes its fiscal year end.

 

(b)           The Issuer shall deliver to the
Trustee as soon as possible, and in any event within five days after the Issuer
becomes aware of the occurrence of any Default, an Officers’ Certificate
specifying the Default and describing its status with particularity and the
action proposed to be taken thereto.

 

(c)           The Issuer’s fiscal years currently
end on September 30.  The Issuer
will provide written notice to the Trustee of any change in its fiscal year.

 

SECTION 4.07.                                              Compliance
with Laws.

 

The Issuer
shall comply, and shall cause each of its Restricted Subsidiaries to comply,
with all applicable statutes, rules, regulations, orders and restrictions of
the United States, all states and municipalities thereof, and of any
governmental department, commission, board, regulatory authority, bureau,
agency and instrumentality of the foregoing, in respect of the conduct of their
respective businesses and the ownership of their respective properties, except,
in any such case, to the extent the failure to so comply would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the business, financial condition or results of operations of
the Issuer and its Restricted Subsidiaries taken as a whole.

 

SECTION 4.08.                                              Waiver
of Stay, Extension or Usury Laws.

 

The Issuer
covenants (to the extent permitted by applicable law) that it will not at any
time insist upon, plead, or in any manner whatsoever claim or take the benefit
or advantage of, any stay or extension law or any usury law or other law that
would prohibit or forgive the Issuer from paying all or any portion of the
principal of and/or interest on the Securities as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Indenture, and (to the extent permitted by
applicable law) the Issuer hereby expressly waives all benefit or advantage of
any such law, and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and
permit the execution of every such power as though no such law had been enacted.

 

58

 

SECTION 4.09.                                              Change
of Control.

 

(a)           If a Change of Control occurs, each
Holder will have the right to require the Issuer to repurchase all or any part
(equal to $1,000 or an integral multiple of $1,000) of that Holder’s Securities
pursuant to a Change of Control Offer (the “Change of
Control Offer”) on the terms set forth in this Indenture.  In the Change of Control Offer, the Issuer
will offer to pay an amount in cash (the “Change of Control Payment”)
equal to 101% (or, with respect to a Change of Control set forth in clause (4)
of the definition of “Change of Control”, 100%) of the aggregate principal
amount at maturity of Securities repurchased (or, in the case of purchases of
Discount Securities prior to the Full Accretion Date, a purchase price equal to
101% (or, with respect to a Change of Control set forth in clause (4) of the
definition of “Change of Control”, 100%) of the Accreted Value thereof as of
the date of purchase), plus accrued and unpaid interest and Additional Interest
thereon, if any, on the Securities repurchased to the date of purchase.

 

(b)           Within 60 days following any Change
of Control, the Issuer will mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase Securities on the date (the “Change of Control Payment
Date”) specified in such notice, which date shall be a Business Day
no earlier than 30 days and no later than 60 days from the date such notice is
mailed, pursuant to the procedures required by this Indenture and described in
such notice.  Such notice shall state:

 

(1)           that the Change of Control Offer is being made pursuant to
this Section 4.09 and that all Securities tendered and not withdrawn will be accepted
for payment;

 

(2)           the purchase price (including the amount of accrued
interest) and the Change of Control Payment Date;

 

(3)           that any Security not tendered will continue to accrue
interest;

 

(4)           that, unless the Issuer defaults in making payment
therefor, any Security accepted for payment pursuant to the Change of Control
Offer shall cease to accrue interest after the Change of Control Payment Date;

 

(5)           that Holders electing to have a Security purchased
pursuant to a Change of Control Offer will be required to surrender the
Security, with the form entitled “Option of Holder to Elect Purchase” on the
reverse of the Security completed, to the Paying Agent at the address specified
in the notice prior to the close of business on the third Business Day prior to
the Change of Control Payment Date;

 

(6)           that Holders will be entitled to withdraw their election
if the Paying Agent receives, not later than the second Business Day prior to
the Change of Control Payment Date, a telegram, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the
Securities the Holder delivered for purchase and a

 

59

 

statement that such Holder is withdrawing his
election to have such Security purchased;

 

(7)           that Holders whose Securities are purchased only in part
will be issued new Securities in a principal amount equal to the unpurchased
portion of the Securities surrendered; and

 

(8)           the circumstances and relevant facts regarding such Change
of Control.

 

(c)           On
or before the Change of Control Payment Date, the Issuer will, to the extent lawful:

 

(1)           accept for payment all Securities or portions thereof
properly tendered pursuant to the Change of Control Offer;

 

(2)           deposit with the Paying Agent U.S. Legal Tender and/or
U.S. Government Securities in an amount equal to the Change of Control Payment
in respect of all Securities or portions thereof properly tendered; and

 

(3)           deliver or cause to be delivered to the Trustee the
Securities properly accepted together with an Officers’ Certificate stating the
aggregate principal amount of Senior Securities or Senior PIK Securities or,
the aggregate principal amount at maturity of Discount Securities being
purchased by the Issuer.

 

(d)           The
Paying Agent will, upon receipt of the Change of Control Payment, promptly mail
to each Holder of Securities properly tendered the Change of Control Payment
for such Securities, and the Trustee will promptly authenticate and mail (or
cause to be transferred by book entry) to each Holder, as applicable, a new
Senior Security or Senior PIK Security equal in principal amount, or a new
Discount Security equal in principal amount at maturity, to any unpurchased
portion of the Securities surrendered, if any; provided
that each such new Senior Security or Senior PIK Security will be in a
principal amount of $1,000 and each new Discount Security will be in a principal
amount at maturity of $1,000 or, in each case, an integral multiple of $1,000.

 

Prior to
complying with any of the provisions of this Section 4.09, but in any event
within 90 days following a Change of Control, to the extent required to permit
the Issuer to comply with this Section 4.09, the Issuer will either repay all
outstanding Bank Debt or obtain the requisite consents, if any, under all agreements
governing outstanding Bank Debt.  The
Issuer will publicly announce the results of the Change of Control Offer on or
as soon as practicable after the Change of Control Payment Date. However, if
the Change of Control Payment Date is on or after an interest record date and
on or before the related interest payment date, any accrued and unpaid interest
shall be paid to the Person in whose name a Security is registered at the close
of business on such record date, and no additional interest shall be payable to
Holders who tender Securities pursuant to the Change of Control Offer.

 

60

 

(e)           Notwithstanding the foregoing, the
Issuer shall not be required to make a Change of Control Offer, as provided
above, if, in connection with or in contemplation of any Change of Control, it
or a third party has made an offer to purchase (an “Alternate Offer”)
any and all Securities validly tendered at a cash price equal to or higher than
the Change of Control Payment and has purchased all Securities properly tendered
in accordance with the terms of such Alternate Offer.  The Alternate Offer must comply with all the
other provisions applicable to the Change of Control Offer, shall remain, if
commenced prior to the Change of Control, open for acceptance until the
consummation of the Change of Control and must permit Holders to withdraw any
tenders of Securities made into the Alternate Offer until the final expiration
or consummation thereof.

 

(f)            The Issuer will comply, and will use
its commercially reasonable best efforts to cause any third party making a
Change of Control Offer or an Alternate Offer to comply, with the requirements
of Rule 14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with a Change of Control Offer or an Alternate Offer.  To the extent the provisions of any
applicable securities laws or regulations conflict with the provisions of this
Indenture relating to a Change of Control Offer, the Issuer will not be deemed
to have breached its obligations under the provisions of this Indenture
relating to a Change of Control by virtue of complying with such laws or regulations.

 

SECTION 4.10.                                              Incurrence
of Indebtedness and Issuance of Preferred Stock.

 

(a)           The Issuer will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, create,
incur, issue, assume, guarantee or otherwise become directly or indirectly or
directly liable, contingently or otherwise, with respect to (collectively “incur”) any Indebtedness (including Acquired Debt), and the
Issuer will not permit any of its Restricted Subsidiaries to issue any shares
of Preferred Stock; provided, however, that (i) the Issuer and any Restricted
Subsidiary of the Issuer other than Warner Music and its Restricted
Subsidiaries may incur Indebtedness (including Acquired Debt) if the Fixed
Charge Coverage Ratio for the Issuer’s most recently ended four full fiscal
quarters for which internal financial statements are available immediately
preceding the date on which such additional Indebtedness is incurred would have
been at least 2.0 to 1 and (ii) Warner Music and any Restricted Subsidiary
of Warner Music may incur Indebtedness (including Acquired Debt) and any Restricted
Subsidiary may issue Preferred Stock if the Fixed Charge Coverage Ratio for
Warner Music’s most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Preferred Stock is issued would
have been at least 2.0 to 1, in each case, determined on a pro forma
basis (including a pro forma
application of the net proceeds therefrom) (the “Coverage
Ratio Exception”), as if the additional Indebtedness had been incurred
or the Preferred Stock had been issued, as the case may be, and the application
of proceeds therefrom had occurred at the beginning of such four-quarter period.

 

61

 

(b)           Section 4.10(a) will not prohibit the
incurrence of any of the following (collectively, “Permitted
Debt”):

 

(1)           the existence of Indebtedness under the Credit Agreement
together with the incurrence of the guarantees thereunder and the issuance and
creation of letters of credit and bankers’ acceptances thereunder (with letters
of credit and bankers’ acceptances being deemed to have a principal amount
equal to the face amount thereof), up to an aggregate principal amount,
together with amounts outstanding under a Qualified Securitization Financing
incurred pursuant to clause (17) below, of $1,550.0 million outstanding at
any one time, less the amount of all mandatory principal payments (with respect
to revolving borrowings and letters of credit, only to the extent revolving
commitments are correspondingly reduced) actually made by the borrower thereunder
in respect of Indebtedness thereunder with Net Proceeds from Asset Sales;

 

(2)           the incurrence by the Issuer and its Restricted
Subsidiaries of Indebtedness represented by (x) the Securities (including
any Guarantee) issued on the Issue Date and (y) Additional Senior PIK
Securities issued from time to time in payment of accrued interest on the
Senior PIK Securities;

 

(3)           Existing Indebtedness (other than Indebtedness described
in clauses (1) and (2) of this Section 4.10(b));

 

(4)           Indebtedness (including Capitalized Lease Obligations)
incurred by the Issuer or any Restricted Subsidiary to finance the purchase,
lease or improvement of property (real or personal) or equipment that is used
or useful in a Permitted Business (whether through the direct purchase of
assets or the Capital Stock of any Person owning such assets) in an aggregate
principal amount that, when aggregated with the principal amount of all other
Indebtedness then outstanding and incurred pursuant to this clause (4), does
not exceed the greater of (x) $50.0 million and (y) 4.0% of
Consolidated Tangible Assets;

 

(5)           Indebtedness incurred by the Issuer or any Restricted
Subsidiary constituting reimbursement obligations with respect to letters of
credit issued in the ordinary course of business, including without limitation
letters of credit in respect of workers’ compensation claims, health,
disability or other employee benefits or property, casualty or liability insurance
or self-insurance or other Indebtedness with respect to reimbursement-type
obligations regarding workers’ compensation claims; provided,
however, that upon the drawing of such
letters of credit or the incurrence of such Indebtedness, such obligations are
reimbursed within 30 days following such drawing or incurrence;

 

(6)           Indebtedness arising from agreements of the Issuer or a
Restricted Subsidiary providing for indemnification, adjustment of purchase
price or similar obligations, in each case, incurred or assumed in connection
with the disposition of any

 

62

 

business, assets or a Subsidiary, other than
guarantees of Indebtedness incurred by any Person acquiring all or any portion
of such business, assets or a Subsidiary for the purpose of financing such
acquisition; provided, however,
that (A) such Indebtedness is not reflected on the balance sheet of the
Issuer or any Restricted Subsidiary (contingent obligations referred to in a
footnote to financial statements and not otherwise reflected on the balance
sheet will not be deemed to be reflected on such balance sheet for purposes of
this clause (A)) and (B) the maximum assumable liability in respect of all
such Indebtedness shall at no time exceed the gross proceeds including noncash
proceeds (the fair market value of such noncash proceeds being measured at the
time received and without giving effect to any subsequent changes in value)
actually received by the Issuer and any Restricted Subsidiaries in connection
with such disposition;

 

(7)           Indebtedness of the Issuer owed to and held by any
Restricted Subsidiary or Indebtedness of a Restricted Subsidiary owed to and
held by the Issuer or any Restricted Subsidiary; provided,
however, that (A) any subsequent
issuance or transfer of any Capital Stock or any other event that results in
any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any
subsequent transfer of any such Indebtedness (except to the Issuer or a Restricted
Subsidiary) shall be deemed, in each case, to constitute the incurrence of such
Indebtedness by the issuer thereof and (B) if the Issuer is the obligor on
such Indebtedness, such Indebtedness is expressly subordinated to the prior
payment in full in cash of all obligations of the Issuer with respect to the
Securities;

 

(8)           shares of Preferred Stock of a Restricted Subsidiary
issued to the Issuer or a Restricted Subsidiary; provided
that any subsequent issuance or transfer of any Capital Stock or any other
event which results in any such Restricted Subsidiary ceasing to be a
Restricted Subsidiary or any other subsequent transfer of any such shares of
Preferred Stock (except to the Issuer or a Restricted Subsidiary) shall be deemed
in each case to be an issuance of such shares of Preferred Stock;

 

(9)           Hedging Obligations of the Issuer or any Restricted
Subsidiary (excluding Hedging Obligations entered into for speculative
purposes) for the purpose of limiting (A) interest rate risk with respect
to any Indebtedness that is permitted by the terms of this Indenture to be
outstanding or (B) exchange rate risk with respect to any currency
exchange;

 

(10)         obligations in respect of performance and surety bonds and
performance and completion guarantees provided by the Issuer or any Restricted
Subsidiary or obligations in respect of letters of credit related thereto, in
each case in the ordinary course of business or consistent with past practice;

 

(11)         Indebtedness of the Issuer or any Restricted Subsidiary or
Preferred Stock of any Restricted Subsidiary not otherwise permitted hereunder
in an aggregate

 

63

 

principal amount or liquidation preference
which, when aggregated with the principal amount and liquidation preference of
all other Indebtedness and Preferred Stock then outstanding and incurred
pursuant to this clause (11), does not at any one time outstanding exceed
$150.0 million (it being understood that any Indebtedness or Preferred Stock
incurred pursuant to this clause (11) shall cease to be deemed incurred or
outstanding for purposes of this clause (11) but shall be deemed incurred for
the purposes of Section 4.10(a) from and after the first date on which the
Issuer or such Restricted Subsidiary could have incurred such Indebtedness or
Preferred Stock under Section 4.10(a) without reliance on this clause (11));

 

(12)         any guarantee by the Issuer or a Restricted Subsidiary of
Indebtedness or other obligations of the Issuer or any Restricted Subsidiary so
long as the incurrence of such Indebtedness incurred by the Issuer or such
Restricted Subsidiary is permitted under the terms of this Indenture;

 

(13)         the incurrence by the Issuer or any Restricted Subsidiary of
Indebtedness or Preferred Stock that serves to refund or
refinance any Indebtedness incurred as permitted by Section 4.10(a) and clauses
(2), (3) and (4) above, this clause (13) and clause (14) below or any
Indebtedness issued to so refund or refinance such Indebtedness including additional
Indebtedness incurred to pay premiums and fees in connection therewith (the “Refinancing Indebtedness”) prior to its respective maturity;
provided, however,
that such Refinancing Indebtedness (A) has a Weighted Average Life to
Maturity at the time such Refinancing Indebtedness is incurred which is not
less than the remaining Weighted Average Life to Maturity of the Indebtedness
being refunded or refinanced, (B) to the extent such Refinancing
Indebtedness refinances Indebtedness subordinated or pari passu
to the Securities, such Refinancing Indebtedness is subordinated or pari passu to the Securities at least to the same extent as
the Indebtedness being refinanced or refunded, (C) shall not include
(x) to the extent applicable, Indebtedness or Preferred Stock of a
Subsidiary that is not a Guarantor that refinances Indebtedness or Preferred
Stock of the Issuer or (y) Indebtedness or Preferred Stock of the Issuer
or a Restricted Subsidiary that refinances Indebtedness or Preferred Stock of
an Unrestricted Subsidiary, (D) shall not be in a principal amount in
excess of the principal amount of, premium, if any, accrued interest on, and
related fees and expenses of, the Indebtedness being refunded or refinanced and
(E) shall not have a stated maturity date prior to the Stated Maturity of
the Indebtedness being refunded or refinanced; and provided,
further, that subclauses (A), (B) and
(E) of this clause (13) will not apply to any refunding or refinancing of Bank
Debt or Indebtedness of a Restricted Subsidiary;

 

(14)         Indebtedness or Preferred Stock of Persons that are acquired
by the Issuer or any Restricted Subsidiary or merged into the Issuer or a
Restricted Subsidiary in accordance with the terms of this Indenture; provided that such Indebtedness or Preferred Stock is not
incurred in connection with or in contemplation of such acquisition

 

64

 

or merger; and provided,
further, that after giving effect to
such incurrence of Indebtedness either (A) (i) in the case of Indebtedness
of the Issuer or any of its Restricted Subsidiaries other than Warner Music and
its Restricted Subsidiaries, the Issuer would be permitted to incur at least
$1.00 of additional Indebtedness pursuant to clause (i) of Section 4.10(a) and (ii) in
the case of Indebtedness of Warner Music or any of its Restricted Subsidiaries,
Warner Music would be permitted to incur at least $1.00 of additional Indebtedness
pursuant to clause (ii) of Section 4.10(a) or (B) the Fixed Charge
Coverage Ratio would be greater than immediately prior to such acquisition;

 

(15)         Indebtedness arising from the honoring by a bank or
financial institution of a check, draft or similar instrument drawn against
insufficient funds in the ordinary course of business, provided
that such Indebtedness is extinguished within five Business Days of its
incurrence;

 

(16)         Indebtedness of the Issuer or any Restricted Subsidiary of
the Issuer supported by a letter of credit issued pursuant to the Credit
Agreement in a principal amount not in excess of the stated amount of such
letter of credit;

 

(17)         Indebtedness incurred by a Securitization Subsidiary in a
Qualified Securitization Financing that is not recourse to the Issuer or any
Restricted Subsidiary of the Issuer other than a Securitization Subsidiary
(except for Standard Securitization Undertakings);

 

(18)         the incurrence of (A) Non-Recourse Acquisition
Financing Indebtedness and (B) Non-Recourse Product Financing
Indebtedness;

 

(19)         Contribution Indebtedness;

 

(20)         (a) (1) in the case of Foreign Subsidiaries of the
Issuer that are not Subsidiaries of Warner Music, if the Issuer or any of its
Restricted Subsidiaries other than Warner Music and its Restricted Subsidiaries
could incur $1.00 of additional Indebtedness pursuant to clause (i) of Section
4.10(a) and (2) in the case of Foreign Subsidiaries of Warner Music, if
Warner Music or any of its Restricted Subsidiaries could incur $1.00 of
additional Indebtedness pursuant to clause (ii) of Section 4.10(a) after giving
effect to such borrowing, Indebtedness of such Foreign Subsidiaries not
otherwise permitted hereunder or (b) if neither the Issuer nor Warner
Music could not incur $1.00 of additional Indebtedness pursuant to the Coverage
Ratio Exception hereof after giving effect to such borrowing, Indebtedness of
Foreign Subsidiaries of the Issuer or Warner Music, as the case may be,
incurred for working capital purposes; provided, however, that the aggregate principal amount of
Indebtedness incurred under this clause (20) which, when aggregated with the
principal amount of all other Indebtedness then outstanding and incurred pursuant
to this clause (20), does not exceed the greater of
(x) $100.0 million and (y) 10% of the Consolidated Tangible
Assets of the Foreign Subsidiaries; and

 

65

 

(21)         Indebtedness consisting of promissory notes issued by the Issuer to current or
former officers, directors and employees or their respective estates, spouses
or former spouses to finance the purchase or redemption of Equity Interests of
the Issuer or Parent permitted by Section 4.11.

 

(c)           For purposes of determining
compliance with this Section 4.10, in the event that an item of proposed Indebtedness
meets the criteria of more than one of the categories of Permitted Debt described
in clauses (1) through (21) above, or is entitled to be incurred pursuant to
the first paragraph of this covenant, the Issuer will be permitted to classify
and later reclassify such item of Indebtedness in any manner that complies with
this covenant, and such item of Indebtedness will be treated as having been
incurred pursuant to only one of such categories.  Accrual of interest, the accretion of
accreted value (including of the Discount Securities) and the payment of
interest in the form of additional Indebtedness (including the issuance of
Additional Senior PIK Securities in payment of interest on the Senior PIK
Securities) will not be deemed to be an incurrence of Indebtedness for purposes
of this covenant.  Notwithstanding the foregoing,
Indebtedness under the Credit Agreement outstanding on the date on which
Securities are first issued and authenticated under this Indenture will be
deemed to have been incurred on such date in reliance on the exception provided
by clause (1) of the definition of “Permitted Debt” in Section 4.10(b) and the
Issuer shall not be permitted to reclassify all or any portion of such
Indebtedness.  The maximum amount of
Indebtedness that the Issuer and its Restricted Subsidiaries may incur pursuant
to this covenant shall not be deemed to be exceeded, with respect to any
outstanding Indebtedness, solely as a result of fluctuations in the exchange
rate of currencies.

 

SECTION 4.11.                                              Restricted
Payments.

 

(a)           The Issuer will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly:

 

(A)          declare or pay any dividend or make any other payment or distribution
on account of the Issuer’s or any of its Restricted Subsidiaries’ Equity
Interests, including any dividend or distribution payable in connection with
any merger or consolidation (other than (x) dividends or distributions by
the Issuer payable in Equity Interests (other than Disqualified Stock) of the
Issuer or in options, warrants or other rights to purchase such Equity
Interests (other than Disqualified Stock) or (y) dividends or
distributions by a Restricted Subsidiary to the Issuer or any other Restricted
Subsidiary so long as, in the case of any dividend or distribution payable on
or in respect of any class or series of securities issued by a Restricted
Subsidiary (other than a Wholly Owned Subsidiary), the Issuer or a Restricted
Subsidiary receives at least its pro rata share
of such dividend or distribution in accordance with its Equity Interests in
such class or series of securities);

 

66

 

(B)           purchase, redeem or otherwise acquire or retire for value
any Equity Interests of the Issuer or any direct or indirect parent corporation
of the Issuer, including in connection with any merger or consolidation
involving the Issuer;

 

(C)           make any principal payment on, or redeem, repurchase,
defease or otherwise acquire or retire for value, in each case prior to any
scheduled repayment, sinking fund payment or maturity, any Indebtedness
subordinated or junior in right of payment to the Securities (other than
(x) Indebtedness permitted under clauses (7) and (8) of the definition of
“Permitted Debt” in Section 4.10(b) or (y) the purchase, repurchase or
other acquisition of Indebtedness subordinated or junior in right of payment to
the Securities, purchased in anticipation of satisfying a sinking fund
obligation, principal installment or final maturity, in each case due within
one year of the date of purchase, repurchase or acquisition); or

 

(D)          make any Restricted Investment (all such payments and other
actions set forth in these clauses (A) through (D) being collectively referred
to as “Restricted Payments”),

 

unless, at the
time of and after giving effect to such Restricted Payment:

 

(1)           no Default or Event of Default has occurred and is
continuing or would occur as a consequence of such Restricted Payment;

 

(2)           (A)  with respect to
a Restricted Payment by the Issuer or any Restricted Subsidiary of the Issuer
other than Warner Music and its Restricted Subsidiaries, the Issuer would, at
the time of such Restricted Payment and after giving pro forma
effect thereto as if such Restricted Payment had been made at the beginning of
the applicable four-quarter period, have been permitted to incur at least $1.00
of additional Indebtedness pursuant to clause (i) of Section 4.10(a) (it being
understood that for purposes of calculating the Fixed Charge Coverage Ratio for
this purpose only, any of the Issuer’s noncash interest expense with respect to
the Senior PIK Securities and amortization of original issue discount with
respect to the Discount Securities shall be excluded) or

 

(B)           with respect to a Restricted Payment by Warner Music or
any Restricted Subsidiary of Warner Music, Warner Music and any Restricted Subsidiary
of Warner Music would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to clause
(ii) of Section 4.10(a); and

 

(3)           such Restricted Payment, together with the aggregate
amount of all other Restricted Payments made by the Issuer and its Restricted
Subsidiaries after April 8, 2004 (excluding Restricted Payments permitted by
clauses (3), (4), (5), (6), 

 

67

 

(8), (10), (11), (12), (13), (16) and (17) of Section 4.11(b)), is less
than the sum, without duplication, of

 

(a)           50%
of the Consolidated Net Income of the Issuer (it being understood that for
purposes of calculating Consolidated Net Income pursuant to this clause 3(a)
only, any of the Issuer’s noncash interest expense with respect to the Senior
PIK Securities and amortization of original issue discount with respect to the
Discount Securities shall be excluded) for the period (taken as one accounting
period) from the beginning of the first fiscal quarter commencing after April
8, 2004 to the end of the Issuer’s most recently ended fiscal quarter for which
internal financial statements are available at the time of such Restricted
Payment (or, in the case such Consolidated Net Income for such period is a
deficit, minus 100% of such deficit), plus

 

(b)           100%
of the aggregate net cash proceeds and the fair market value, as determined in
good faith by the Board of Directors of the Issuer, of property and marketable
securities received by the Issuer after April 8, 2004 from the issue or sale of
(x) Equity Interests of the Issuer (including Retired Capital Stock) (but
excluding (i) Excluded Contributions, (ii)  the Cash Contribution
Amount, (iii) cash proceeds and marketable securities received from the
sale of Equity Interests to members of management, directors or consultants of
the Issuer, any direct or indirect parent corporation of the Issuer and its
Subsidiaries after April 8, 2004 to the extent such amounts have been applied
to Restricted Payments made in accordance with clause (4) of Section 4.11(b)
and, to the extent actually contributed to the Issuer, Equity Interests of the
Issuer’s direct or indirect parent corporations, (iv) Designated Preferred
Stock and (v) Disqualified Stock) or (y) debt securities of the
Issuer that have been converted into such Equity Interests of the Issuer (other
than Refunding Capital Stock or Equity Interests or convertible debt securities
of the Issuer sold to a Restricted Subsidiary or the Issuer, as the case may
be, and other than Disqualified Stock or Designated Preferred Stock or debt
securities that have been converted into Disqualified Stock or Designated
Preferred Stock), plus

 

(c)           100%
of the aggregate amount of cash and the fair market value, as determined in
good faith by the Board of Directors of the Issuer, of property and marketable
securities contributed to the capital of the Issuer after April 8, 2004 (other
than (i) by a Restricted Subsidiary, (ii) any Excluded Contributions,
(iii) any Disqualified Stock, (iv) any Designated Preferred Stock and
(v) the Cash Contribution Amount), plus

 

(d)           100%
of the aggregate amount received in cash and the fair market value, as
determined in good faith by the Board of Directors of the Issuer, of property
and marketable securities received by means of (A) the sale

 

68

 

or other disposition (other than to the
Issuer or a Restricted Subsidiary) of Restricted Investments made by the Issuer
or its Restricted Subsidiaries and repurchases and redemptions of such
Restricted Investments from the Issuer or its Restricted Subsidiaries and
repayments of loans or advances which constitute Restricted Investments by the
Issuer or its Restricted Subsidiaries or (B) the sale (other than to the
Issuer or a Restricted Subsidiary) of the Capital Stock of an Unrestricted
Subsidiary or a distribution from an Unrestricted Subsidiary (other than in
each case to the extent the Investment in such Unrestricted Subsidiary was made
by a Restricted Subsidiary pursuant to clause (7) or (11) of Section 4.11(b) or
to the extent such Investment constituted a Permitted Investment) or a dividend
from an Unrestricted Subsidiary, plus

 

(e)           in
the case of the redesignation of an Unrestricted Subsidiary as a Restricted
Subsidiary or the merger or consolidation of an Unrestricted Subsidiary into
the Issuer or a Restricted Subsidiary or the transfer of assets of an
Unrestricted Subsidiary to the Issuer or a Restricted Subsidiary, the fair
market value of the Investment in such Unrestricted Subsidiary, as determined
by the Board of Directors of the Issuer in good faith at the time of the
redesignation of such Unrestricted Subsidiary as a Restricted Subsidiary or at
the time of such merger, consolidation or transfer of assets (other than an
Unrestricted Subsidiary to the extent the Investment in such Unrestricted
Subsidiary was made by a Restricted Subsidiary pursuant to clause (7) or
(11) of Section 4.11(b) or to the extent such Investment constituted
a Permitted Investment).

 

(b)           Notwithstanding
the foregoing, the provisions set forth in Section 4.11(a) do not prohibit:

 

(1)           the
payment of any dividend within 60 days after the date of declaration thereof,
if at the date of declaration such payment would have complied with the provisions
of this Indenture;

 

(2)           (A)
the redemption, repurchase, retirement or other acquisition of any Equity
Interests of the Issuer or any direct or indirect parent corporation (“Retired Capital Stock”) or Indebtedness subordinated to the
Securities in exchange for or out of the proceeds of the substantially
concurrent sale (other than to a Subsidiary or the Issuer) of Equity Interests
of the Issuer or any direct or indirect parent corporation thereof or
contributions to the equity capital of the Issuer (in each case, other than
Disqualified Stock) (“Refunding Capital Stock”)
and (B) the declaration and payment of dividends on the Retired Capital
Stock out of the proceeds of the substantially concurrent sale (other than to a
Subsidiary of the Issuer or to an employee stock ownership plan or any trust
established by the Issuer or any of its Subsidiaries) of Refunding Capital
Stock;

 

69

 

(3)           the
redemption, repurchase or other acquisition or retirement of Indebtedness subordinated
to the Securities made by exchange for, or out of the proceeds of the substantially
concurrent sale of, new Indebtedness of the borrower thereof which is incurred
in compliance with Section 4.10 so long as (A) the principal amount of
such new Indebtedness does not exceed the principal amount of the Indebtedness
subordinated to the Securities being so redeemed, repurchased, acquired or
retired for value plus related fees and expenses and the amount of any
reasonable premium required to be paid under the terms of the instrument
governing the Indebtedness subordinated to the Securities being so redeemed,
repurchased, acquired or retired, (B) such new Indebtedness is
subordinated to such Securities and any Guarantees thereof at least to the same
extent as such Indebtedness subordinated to such Securities so purchased,
exchanged, redeemed, repurchased, acquired or retired for value, (C) such new
Indebtedness has a final scheduled maturity date equal to or later than the
final scheduled maturity date of the Indebtedness subordinated to such
Securities being so redeemed, repurchased, acquired or retired and
(D) such new Indebtedness has a Weighted Average Life to Maturity equal to
or greater than the remaining Weighted Average Life to Maturity of the
Indebtedness subordinated to such Securities being so redeemed, repurchased,
acquired or retired;

 

(4)           a
Restricted Payment to pay for the repurchase, retirement or other acquisition
or retirement for value of common Equity Interests of the Issuer or any of its
direct or indirect parent corporations held by any future, present or former
employee, director or consultant of the Issuer, any of its Subsidiaries or any
of its direct or indirect parent corporations pursuant to any management equity
plan or stock option plan or any other management or employee benefit plan or
agreement; provided, however,
that the aggregate amount of Restricted Payments made under this clause
(4) does not exceed in any calendar year $20.0 million (with unused
amounts in any calendar year being carried over to the two succeeding calendar
years); and provided, further,
that such amount in any calendar year may be increased by an amount not to
exceed (A) the cash proceeds from the sale of Equity Interests (other than
Disqualified Stock) of the Issuer and, to the extent contributed to the Issuer,
Equity Interests of any of its direct or indirect parent corporations, in each
case to members of management, directors or consultants of the Issuer, any of
its Subsidiaries or any of its direct or indirect parent corporations that
occurs after April 8, 2004 plus (B) the amount of any cash bonuses otherwise
payable to members of management, directors or consultants of the Issuer or any
of its Subsidiaries or any of its direct or indirect parent corporations in
connection with the Transactions that are foregone in return for the receipt of
Equity Interests of the Issuer or any direct or indirect parent corporation of
the Issuer pursuant to a deferred compensation plan of such corporation plus
(C) the cash proceeds of key man life insurance policies received by the
Issuer or its Restricted Subsidiaries after April 8, 2004 (provided
that the Issuer may elect to apply all or any portion of the aggregate increase
contemplated by clauses (A), (B) and (C) above in any calendar year)

 

70

 

less (D) the amount of any Restricted
Payments previously made pursuant to clauses (A), (B) and (C) of this
clause (4);

 

(5)           the
declaration and payment of dividends to holders of any class or series of
Disqualified Stock of the Issuer or any Restricted Subsidiary issued or
incurred in accordance with this Section 4.11 to the extent such dividends are
included in the definition of “Fixed Charges” for such entity;

 

(6)           the
declaration and payment of dividends or distributions to holders of any class
or series of Designated Preferred Stock (other than Disqualified Stock) issued
after the Issue Date and the declaration and payment of dividends to any direct
or indirect parent company of the Issuer, the proceeds of which will be used to
fund the payment of dividends to holders of any class or series of Designated
Preferred Stock (other than Disqualified Stock) of any direct or indirect
parent company of the Issuer issued after the Issue Date; provided,
however, that (A) for the most
recently ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date of issuance of such
Designated Preferred Stock, after giving effect to such issuance (and the
payment of dividends or distributions) on a pro forma
basis, (i) in the case of Capital Stock of the Issuer, the Issuer would
have been permitted to incur at least $1.00 of additional Indebtedness pursuant
to the Fixed Charge Coverage Ratio test set forth in clause (i) of Section
4.10(a) (it being understood that for purposes of calculating the Fixed Charge
Coverage Ratio for this purpose only, any of the Issuer’s noncash interest
expense with respect to the Senior PIK Securities and amortization of original
issue discount with respect to the Discount Securities shall be excluded) or
(ii) in the case of Capital Stock of Warner Music and any Restricted
Subsidiary of Warner Music, Warner Music and any Restricted Subsidiary of
Warner Music would have been permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in
clause (ii) of Section 4.10(a) and (B) the aggregate amount of dividends
declared and paid pursuant to this clause (6) does not exceed the net cash
proceeds actually received by the Issuer from any such sale of Designated
Preferred Stock (other than Disqualified Stock) issued after the Issue Date;

 

(7)           Investments
in Unrestricted Subsidiaries having an aggregate fair market value, taken
together with all other Investments made pursuant to this clause (7) that are
at the time outstanding, without giving effect to the sale of an Unrestricted
Subsidiary to the extent the proceeds of such sale do not consist of cash
and/or marketable securities, not to exceed the greater of $25.0 million
and 2.0% of Consolidated Tangible Assets at the time of such Investment (with
the fair market value of each Investment being measured at the time made and
without giving effect to subsequent changes in value);

 

71

 

(8)           repurchases
of Equity Interests deemed to occur upon exercise of stock options or warrants
if such Equity Interests represent a portion of the exercise price of such
options or warrants;

 

(9)           the
payment of dividends on the Issuer’s common stock following the first public offering
of the Issuer’s common stock or the common stock of any of its direct or
indirect parent corporations after the Issue Date, of up to 6% per annum of the
net cash proceeds received by or contributed to the Issuer in any past or
future public offering, other than public offerings with respect to the Issuer’s
common stock registered on Form S-8 and other than any public sale constituting
an Excluded Contribution;

 

(10)         Investments
that are made with Excluded Contributions;

 

(11)         other
Restricted Payments in an aggregate amount not to exceed $75.0 million;

 

(12)         the
declaration and payment of dividends to, or the making of loans to, Parent in
amounts required for such party to pay:

 

(A)          franchise
taxes and other fees, taxes and expenses required to maintain its corporate
existence;

 

(B)           federal,
state and local income taxes to the extent such income taxes are attributable
to the income of the Issuer and the Restricted Subsidiaries and, to the extent
of the amount actually received from the Unrestricted Subsidiaries, in amounts
required to pay such taxes to the extent attributable to the income of the
Unrestricted Subsidiaries, provided, however, that in each case the amount of such payments in
any fiscal year does not exceed the amount that the Issuer and the Restricted
Subsidiaries would be required to pay in respect of federal, state and local
taxes for such fiscal year were the Issuer and the Restricted Subsidiaries to
pay such taxes as a stand-alone taxpayer;

 

(C)           customary
salary, bonus and other benefits payable to officers and employees of any
direct or indirect parent corporation of the Issuer to the extent such
salaries, bonuses and other benefits are attributable to the ownership or
operation of the Issuer and its Restricted Subsidiaries;

 

(D)          general
corporate overhead expenses (including professional expenses) for any direct or
indirect parent corporation of the Issuer to the extent such expenses are
solely attributable to the ownership or operation of the Issuer and its Restricted
Subsidiaries; and

 

72

 

(E)           fees
and expenses other than to Affiliates related to any unsuccessful equity or
debt offering permitted by this Indenture;

 

(13)         cash
dividends or other distributions on Parent’s, the Issuer’s or any Restricted
Subsidiary’s Capital Stock used to, or the making of loans, the proceeds of
which will be used to, fund the payment of fees and expenses incurred in
connection with the Transactions, or owed to Affiliates, in each case to the
extent permitted by Section 4.14;

 

(14)         distributions
or payments of Securitization Fees and purchases of Securitization Assets
pursuant to a Securitization Repurchase Obligation in connection with a
Qualified Securitization Financing;

 

(15)         the
repurchase, redemption or other acquisition or retirement for value of any
Subordinated Indebtedness pursuant to Sections 4.09 and 4.13; provided that a Change of Control Offer or Asset Sale Offer,
as applicable, has been made and all Securities tendered by Holders in
connection with a Change of Control Offer or Asset Sale Offer, as applicable,
have been repurchased, redeemed or acquired for value;

 

(16)         any
Restricted Payment by the Issuer at any time prior to April 15, 2009 with the
proceeds received from Warner Music if immediately after giving pro forma effect to such Restricted Payment by Warner Music
and the incurrence of any Indebtedness the net proceeds of which are used to
finance such Restricted Payment, the Net Indebtedness to EBITDA Ratio of the
Issuer would not have exceeded 4.25 to 1; or

 

(17)         the
declaration and payment of dividends to Parent of, or repurchases of Capital
Stock with, the net proceeds received by the Issuer from the sale of Securities
on the Issue Date, the proceeds of which will be used as described in the
Offering Memorandum;

 

provided,
however, that at the time of, and after
giving effect to, any Restricted Payment permitted under clauses (2), (5), (6),
(7), (9), (11), (14), (15) and (16) above, no Default or Event of Default shall
have occurred and be continuing or would occur as a consequence thereof.

 

(c)           The
amount of all Restricted Payments (other than cash) will be the fair market
value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Issuer or such Subsidiary, as the
case may be, pursuant to the Restricted Payment.  The fair market value of any assets or
securities that are required to be valued by this Section 4.11 will be
determined in good faith by the Board of Directors of the Issuer.  The Issuer’s determination must be based upon
an opinion or appraisal issued by an Independent Financial Advisor if the fair
market value exceeds $25.0 million.

 

73

 

(d)           As
of the Issue Date, all of the Issuer’s Subsidiaries will be Restricted
Subsidiaries, including Warner Music. 
The Issuer will not permit any Unrestricted Subsidiary to become a
Restricted Subsidiary except pursuant to the second to last sentence of the
definition of “Unrestricted Subsidiary.” 
For purposes of designating any Restricted Subsidiary as an Unrestricted
Subsidiary, all outstanding investments by the Issuer and the Restricted
Subsidiaries (except to the extent repaid) in the Subsidiary so designated will
be deemed to be Restricted Payments in an amount determined as set forth in the
second paragraph of the definition of “Investments.” Such designation will be
permitted only if a Restricted Payment in such amount would be permitted at
such time under this Section 4.11 or the definition of “Permitted Investments”
and if such Subsidiary otherwise meets the definition of an “Unrestricted
Subsidiary.”  Unrestricted Subsidiaries
will not be subject to any of the restrictive covenants described in this
Indenture.

 

SECTION 4.12.                                              Liens.

 

(a)           The
Issuer will not, directly or indirectly, create, incur, assume or suffer to
exist any Lien (other than Permitted Liens) that secures obligations under any
Indebtedness of the Issuer ranking pari passu with
or subordinated to the Securities on any asset or property of the Issuer, or
any income or profits therefrom, or assign or convey any right to receive income
therefrom, unless:

 

(1)           in
the case of Liens securing Indebtedness subordinated to the Securities, the
Securities are secured by a Lien on such property, assets or proceeds that is
senior in priority to such Liens; or

 

(2)           in
all other cases, the Securities are equally and ratably secured,

 

(b)           Notwithstanding
the foregoing, Section 4.12(a) shall not apply to:

 

(i)            Liens
existing on the Issue Date to the extent and in the manner such Liens are in effect
on the Issue Date;

 

(ii)           Liens
securing the Securities (and any related Guarantees, if any), Liens securing
Bank Debt and the related guarantees of such Bank Debt; and

 

(iii)          Permitted
Liens.

 

SECTION 4.13.                                              Asset
Sales.

 

(a)           The
Issuer will not, and will not permit any of its Restricted Subsidiaries to,
consummate an Asset Sale unless:

 

74

 

(1)           the
Issuer (or such Restricted Subsidiary, as the case may be) receives
consideration at the time of the Asset Sale at least equal to the fair market
value of the assets or Equity Interests issued or sold or otherwise disposed
of;

 

(2)           in
the case of Asset Sales involving consideration in excess of $10.0 million,
the fair market value is determined by the Issuer’s Board of Directors and
evidenced by a Board Resolution set forth in an Officers’ Certificate delivered
to the Trustee; and

 

(3)           except
for any Permitted Asset Swap, at least 75% of the consideration received in the
Asset Sale by the Issuer or such Restricted Subsidiary is in the form of cash
or Cash Equivalents.

 

For purposes
of clause (2) above, the amount of (i) any liabilities (as shown on the
Issuer’s or such Restricted Subsidiary’s most recent balance sheet or in the
notes thereto) of the Issuer or any Restricted Subsidiary (other than
liabilities that are by their terms subordinated to the Securities) that are
assumed by the transferee of any such assets and from which the Issuer and all
Restricted Subsidiaries have been validly released by all creditors in writing,
(ii) any securities received by the Issuer or such Restricted Subsidiary
from such transferee that are converted by the Issuer or such Restricted
Subsidiary into cash (to the extent of the cash received) within 180 days
following the closing of such Asset Sale and (iii) any Designated Noncash
Consideration received by the Issuer or any of its Restricted Subsidiaries in
such Asset Sale having an aggregate fair market value (as determined in good
faith by the Board of Directors of the Issuer), taken together with all other
Designated Noncash Consideration received pursuant to this clause
(iii) that is at that time outstanding, not to exceed the greater of
(x) $75.0 million and (y) 5.0% of Consolidated Tangible Assets
at the time of the receipt of such Designated Noncash Consideration (with the
fair market value of each item of Designated Noncash Consideration being
measured at the time received without giving effect to subsequent changes in
value), shall be deemed to be cash for purposes of this paragraph and for no
other purpose.

 

(b)           Within
395 days after the receipt of any Net Proceeds from an Asset Sale, the Issuer
may apply those Net Proceeds at its option:

 

(1)           to
permanently reduce Obligations under Bank Debt (and to correspondingly reduce
commitments with respect thereto) or Indebtedness of the Issuer that ranks pari  passu with the
Securities (provided that if the Issuer shall so
reduce Obligations under such Indebtedness of the Issuer that ranks pari passu with the Securities it will equally and ratably
reduce Obligations under the Securities by making an offer (in accordance with
the procedures set forth below for an Asset Sale Offer) to all Holders to
purchase at a purchase price equal to 100% of the principal amount (or, in the
case of purchases of Discount Securities, of the Accreted Value) thereof, plus
accrued and unpaid interest and Additional Interest, if any, the pro rata principal amount (or, in the case of purchases of
Discount Securities, of the Accreted Value) of Securities)

 

75

 

or Indebtedness of a Restricted Subsidiary,
in each case, other than Indebtedness owed to the Issuer or an Affiliate of the
Issuer; provided that, if an offer to purchase
any Indebtedness of Warner Music or any of its Restricted Subsidiaries is made
in accordance with the terms of such Indebtedness, the obligation to
permanently reduce Indebtedness of a Restricted Subsidiary will be deemed to be
satisfied to the extent of the amount of the offer, whether or not accepted by
the holders thereof, and no Excess Proceeds in the amount of such offer will be
deemed to exist following such offer;

 

(2)           to
an investment in (A) any one or more businesses; provided
that such investment in any business is in the form of the acquisition of
Capital Stock and results in the Issuer or a Restricted Subsidiary owning an
amount of the Capital Stock of such business such that it constitutes a
Restricted Subsidiary, (B) capital expenditures or (C) other assets,
in each of (A), (B) and (C), used or useful in a Permitted Business; and/or

 

(3)           to
an investment in (A) any one or more businesses; provided
that such investment in any business is in the form of the acquisition of Capital
Stock and it results in the Issuer or a Restricted Subsidiary owning an amount
of the Capital Stock of such business such that it constitutes a Restricted
Subsidiary, (B) properties or (C) assets that, in each of (A), (B) and
(C), replace the businesses, properties and assets that are the subject of such
Asset Sale.

 

(c)           When
the aggregate amount of Net Proceeds not applied or invested in accordance with
the preceding paragraph (“Excess Proceeds”)
exceeds $20.0 million, the Issuer will make an offer (an “Asset Sale Offer”) to all Holders and holders of
Indebtedness that ranks pari passu with
the Securities and contains provisions similar to those set forth in this
Indenture with respect to offers to purchase with the proceeds of sales of
assets to purchase, on a pro rata basis,
the maximum principal amount (or, in the case of purchases of Discount
Securities, the Accreted Value or the principal amount at maturity, as the case
may be) of Securities and such other pari passu Indebtedness
that may be purchased out of the Excess Proceeds (the “Asset Sale
Offer Amount”).  The offer
price in any Asset Sale Offer will be equal to 100% of aggregate principal
amount (or, in the case of purchases of Discount Securities, of the Accreted
Value or the principal amount at maturity, as the case may be) thereof, plus
accrued and unpaid interest and Additional Interest, if any, to the date of purchase
(the “Asset Sale Payment”), and will be
payable in cash.

 

(d)           Pending
the final application of any Net Proceeds, the Issuer may temporarily reduce
revolving credit borrowings or otherwise invest the Net Proceeds in any manner
that is not prohibited by this Indenture.

 

(e)           If
any Excess Proceeds remain after consummation of an Asset Sale Offer, the
Issuer may use those Excess Proceeds for any purpose not otherwise prohibited
by this Indenture.  If the aggregate
principal amount (or, in the case of Discount Securities, the Accreted Value or
principal amount at maturity, as the case may be) of Securities tendered

 

76

 

into such Asset Sale Offer
exceeds the amount of Excess Proceeds, the Trustee will select the Securities
to be purchased on a pro rata
basis.  Upon completion of each Asset
Sale Offer, the amount (or, in the case of Discount Securities, the Accreted
Value or principal amount at maturity, as the case may be) of Excess Proceeds
will be reset at zero.

 

(f)            Upon
the commencement of an Asset Sale Offer, the Issuer shall send, by first class
mail, a notice to the Trustee and to each Holder at its registered
address.  The notice shall contain all
instructions and materials necessary to enable such Holder to tender Securities
pursuant to the Asset Sale Offer.  Any
Asset Sale Offer shall be made to all Holders. 
The notice, which shall govern the terms of the Asset Sale Offer, shall
state:

 

(1)           that
the Asset Sale Offer is being made pursuant to this Section 4.13;

 

(2)           the
Asset Sale Offer Amount, the Asset Sale Payment and the date on which
Securities tendered and accepted for payment shall be purchased, which date
shall be at least 30 days and no later than 60 days from the date such notice
is mailed (the “Asset Sale Payment Date”);

 

(3)           that
any Securities not tendered or accepted for payment shall continue to accrete
or accrue interest;

 

(4)           that,
unless the Issuer defaults in making such payment, any Securities accepted for
payment pursuant to the Asset Sale Offer shall cease to accrete or accrue
interest after the Asset Sale Payment Date;

 

(5)           that
Holders electing to have a Security purchased pursuant to the Asset Sale Offer
may only elect to have all of such Security purchased and may not elect to have
only a portion of such Security purchased;

 

(6)           that
Holders electing to have a Security purchased pursuant to any Asset Sale Offer
shall be required to surrender the Security, with the form entitled “Option of
Holder To Elect Purchase” on the reverse of the Securities completed, or
transfer such Security by book-entry transfer, to the Issuer, a depository, if
appointed by the Issuer, or the Paying Agent at the address specified in the
notice at least three days before the Asset Sale Payment Date;

 

(7)           that
Holders shall be entitled to withdraw their election if the Issuer, the
Depositary or the Paying Agent, as the case may be, receives, not later than
the Asset Sale Payment Date, a notice setting forth the name of the Holder, the
principal amount of the Security the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to have such Security purchased;

 

(8)           that,
if the aggregate principal amount of Securities surrendered by Holders exceeds
the Asset Sale Offer Amount, the Issuer shall select the Securities to

 

77

 

be purchased on a pro rata
basis (with such adjustments as may be deemed appropriate by the Issuer so that
only Securities in denominations of $1,000 or integral multiples thereof shall
be purchased); and

 

(9)           that
Holders whose Securities were purchased only in part shall be issued new Securities
equal in principal amount to the unpurchased portion of the Securities
surrendered (or transferred by book-entry transfer); provided
that such Securities shall be in denominations of $1,000 or integral multiples
thereof.

 

(g)           On
the Asset Sale Payment Date, the Issuer shall, to the extent lawful:  (1) accept for payment all Securities or
portions thereof properly tendered pursuant to the Asset Sale Offer; (2)
deposit with the Paying Agent U.S. Legal Tender and/or, U.S. Government
Securities sufficient to pay the Asset Sale Payment in respect of all
Securities or portions thereof so tendered; and (3) deliver or cause to be
delivered to the Trustee the Securities so accepted together with an Officers’
Certificate stating the aggregate principal amount of Securities or portions
thereof being repurchased by the Issuer. 
The Issuer shall publicly announce the results of the Asset Sale Offer
on the Asset Sale Payment Date.

 

(h)           The
Paying Agent shall, upon receipt of the Asset Sale Payment, promptly mail to
each Holder so tendered the Asset Sale Payment for such Securities, and the
Trustee shall promptly authenticate pursuant to an Authentication Order and
mail (or cause to be transferred by book entry) to each Holder a new Security
equal in principal amount to any unrepurchased portion of the Securities
surrendered, if any; provided that
each such new Security shall be in a principal amount of $1,000 or an integral
multiple thereof.   However, if the Asset
Sale Payment Date is on or after an interest record date and on or before the
related interest payment date, any accrued and unpaid interest shall be paid to
the Person in whose name a Security is registered at the close of business on
such record date, and no additional interest shall be payable to Holders who
tender Securities pursuant to the Asset Sale Offer.

 

(i)            The
Issuer will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent those
laws and regulations are applicable in connection with each repurchase of Securities
pursuant to an Asset Sale Offer.  To the
extent that the provisions of any securities laws or regulations conflict with
this Section 4.13, the Issuer will comply with the applicable securities
laws and regulations and will not be deemed to have breached its obligations
under this Section 4.13 by virtue of such conflict.

 

SECTION 4.14.                                              Transactions
with Affiliates.

 

(a)           The
Issuer will not, and will not permit any of its Restricted Subsidiaries to,
make any payment to, or sell, lease, transfer or otherwise dispose of any of
its properties or assets to, or purchase any property or assets from, or enter
into or make or amend any transaction, contract, agreement, understanding,
loan, advance or guarantee with, or for the

 

78

 

benefit of, any Affiliate
(each, an “Affiliate Transaction”) involving
aggregate consideration in excess of $5.0 million, unless:

 

(1)           the
Affiliate Transaction is on terms that are no less favorable to the Issuer or
the relevant Restricted Subsidiary than those that would have been obtained in
a comparable transaction by the Issuer or such Restricted Subsidiary with an
unrelated Person; and

 

(2)           the
Issuer delivers to the Trustee:

 

(a)           with
respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $15.0 million, a
Board Resolution of the Board of Directors of the Issuer approving such
Affiliate Transaction set forth in an Officers’ Certificate certifying that
such Affiliate Transaction complies with this Section 4.14 and that such
Affiliate Transaction has been approved by a majority of the disinterested members
of the Board of Directors of the Issuer; and

 

(b)           with
respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $75.0 million, an
opinion as to the fairness to the Issuer of such Affiliate Transaction from a
financial point of view issued by an Independent Financial Advisor.

 

(b)           The
restrictions set forth in Section 4.14(a) do not apply to:

 

(1)           transactions
between or among the Issuer and/or any Restricted Subsidiary or any entity that
becomes a Restricted Subsidiary as a result of such transaction;

 

(2)           Restricted
Payments (other than pursuant to clause (7) of Section 4.11(b)) and Permitted
Investments (other than pursuant to clauses (10), (11) and (15) of the
definition thereof) permitted by this Indenture;

 

(3)           the
payment to the Sponsors and any of their Affiliates of annual management, consulting,
monitoring and advisory fees pursuant to the Management Agreement in an
aggregate amount in any fiscal year not to exceed $10.0 million and related reasonable
expenses;

 

(4)           the
payment of reasonable and customary fees paid to, and indemnities provided on
behalf of, officers, directors, employees or consultants of the Issuer, any of
its direct or indirect parent corporations or any Restricted Subsidiary;

 

(5)           the
payments by the Issuer or any Restricted Subsidiary to the Sponsors and any of
their Affiliates made for any financial advisory, financing, underwriting or

 

79

 

placement services or in respect of other
investment banking activities, including, without limitation, in connection
with acquisitions or divestitures, which payments are approved by a majority of
the members of the Board of Directors of the Issuer in good faith;

 

(6)           transactions
in which the Issuer or any Restricted Subsidiary delivers to the Trustee a
letter from an Independent Financial Advisor stating that such transaction is
fair to the Issuer or such Restricted Subsidiary from a financial point of
view;

 

(7)           payments
or loans (or cancellations of loans) to employees or consultants of the Issuer
or any of its direct or indirect parent corporations or any Restricted
Subsidiary which are approved by a majority of the Board of Directors of the
Issuer in good faith and which are otherwise permitted under this Indenture;

 

(8)           payments
made or performance under any agreement as in effect on the Issue Date (other
than the Management Agreement and Stockholders Agreement, but including,
without limitation, each of the other agreements entered into in connection
with the Transactions) or any amendment thereto (so long as any such amendment
is not less advantageous to the Holders in any material respect than the
original agreement as in effect on the Issue Date);

 

(9)           the
existence of, or the performance by the Issuer or any of its Restricted Subsidiaries
of its obligations under the terms of, the Stockholders Agreement (including
any registration rights agreement or purchase agreements related thereto to
which it is a party as of the Issue Date and any similar agreement that it may
enter into thereafter); provided, however, that the existence of, or the performance by the
Issuer or any of its Restricted Subsidiaries of its obligations under, any
future amendment to the Stockholders Agreement or under any similar agreement
entered into after the Issue Date shall only be permitted by this clause (9) to
the extent that the terms of any such existing agreement, together with all
amendments thereto, taken as a whole, or new agreement are not otherwise more
disadvantageous to Holders in any material respect than the original agreement
as in effect on the Issue Date;

 

(10)         the
Transactions and the payment of all fees and expenses related to the
Transactions and the prepayment of $10.0 million in management fees for
the fiscal year ended November 30, 2004, in each case, to the extent not yet
paid as of the Issue Date;

 

(11)         transactions
with customers, clients, suppliers, or purchasers or sellers of goods or
services, in each case in the ordinary course of business and otherwise in
compliance with the terms of this Indenture that are fair to the Issuer or the
Restricted Subsidiaries, in the reasonable determination of the members of the
Board of Directors of the Issuer or the senior management thereof, or are on
terms at least as favorable as might reasonably have been obtained at such time
from an unaffiliated party;

 

80

 

(12)         if
otherwise permitted hereunder, the issuance of Equity Interests (other than
Disqualified Stock) of Parent to any Permitted Holder or to any director,
officer, employee or consultant of the Issuer or Parent or their Subsidiaries
or of the Issuer to Parent or to any Permitted Holder or to any director,
officer, employee or consultant of the Issuer or Parent or their Subsidiaries;
and

 

(13)         any
transaction with a Securitization Subsidiary effected as part of a Qualified
Securitization Financing.

 

SECTION 4.15.                                              Dividend
and Other Payment Restrictions Affecting Subsidiaries.

 

(a)           The
Issuer will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, create or permit to exist or become effective any
consensual encumbrance or restriction on the ability of any such Restricted
Subsidiary to:

 

(1)           pay
dividends or make any other distributions on its Capital Stock to the Issuer or
any of its Restricted Subsidiaries, or with respect to any other interest or
participation in, or measured by, its profits, or pay any Indebtedness owed to
the Issuer or any of its Restricted Subsidiaries;

 

(2)           make
loans or advances to the Issuer or any of its Restricted Subsidiaries; or

 

(3)           sell,
lease or transfer any of its properties or assets to the Issuer or any of its Restricted
Subsidiaries.

 

(b)           However,
the preceding restrictions in Section 4.15(a) will not apply to
encumbrances or restrictions existing under or by reason of:

 

(1)           contractual
encumbrances or restrictions in effect (x) pursuant to the Credit
Agreement or related documents or (y) on the Issue Date, including,
without limitation, pursuant to the Existing Notes, or other Existing
Indebtedness and its related documentation;

 

(2)           this
Indenture and the Securities;

 

(3)           purchase
money obligations for property acquired in the ordinary course of business that
impose restrictions of the nature discussed in clause (3) of
Section 4.15(a) on the property so acquired;

 

(4)           applicable
law or any applicable rule, regulation or order;

 

(5)           any
agreement or other instrument of a Person acquired by the Issuer or any
Restricted Subsidiary in existence at the time of such acquisition (but not
created in contemplation thereof), which encumbrance or restriction is not applicable
to any

 

81

 

Person, or the properties or assets of any
Person, other than the Person, or the property or assets of the Person, so
acquired;

 

(6)           contracts
for the sale of assets, including, without limitation, customary restrictions
with respect to a Subsidiary pursuant to an agreement that has been entered
into for the sale or disposition of all or substantially all of the Capital
Stock or assets of such Subsidiary;

 

(7)           secured
Indebtedness otherwise permitted to be incurred pursuant to Sections 4.10 and
4.12 that limits the right of the debtor to dispose of the assets securing such
Indebtedness;

 

(8)           restrictions
on cash or other deposits or net worth imposed by customers under contracts
entered into in the ordinary course of business;

 

(9)           other
Indebtedness or Preferred Stock (i) of the Issuer or any Restricted
Subsidiary that is incurred subsequent to the Issue Date pursuant to Section
4.10 or (ii) that is incurred by a Foreign Subsidiary of the Issuer or
Warner Music subsequent to the Issue Date pursuant to clause (1), (4), (11) or
(20) of Section 4.10(b); provided that
either (A) the provisions relating to such encumbrance or restriction
contained in such Indebtedness are no less favorable to the Issuer, taken as a
whole, as determined by the Board of Directors of the Issuer in good faith than
the provisions contained in the Credit Agreement or in the indenture governing
the Existing Notes, in each case, as in effect on the Issue Date or
(B) any encumbrance or restriction contained in such Indebtedness does not
prohibit (except upon a default or event of default thereunder) the payment of
dividends in an amount sufficient, as determined by the Board of Directors of
the Issuer in good faith, to make scheduled payments of cash interest on the
Securities when due;

 

(10)         customary
provisions in joint venture agreements and other similar agreements entered
into in the ordinary course of business;

 

(11)         customary
provisions contained in leases, subleases, licenses or asset sale agreements
and other agreements;

 

(12)         any
encumbrances or restrictions of the type referred to in clauses (1),
(2) and (3) of Section 4.15(a) imposed by any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings of the contracts, instruments or obligations
referred to in clauses (1) through (11) of this Section 4.15(b), provided that such amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacements or refinancings are,
in the good faith judgment of the Issuer’s Board of Directors, no more
restrictive with respect to such dividend and other payment restrictions than
those contained in the dividend or

 

82

 

other payment restrictions prior to such
amendment, modification, restatement, renewal, increase, supplement, refunding,
replacement or refinancing;

 

(13)         any
encumbrance or restriction of a Securitization Subsidiary effected in
connection with a Qualified Securitization Financing; provided,
however, that such restrictions apply
only to such Securitization Subsidiary; or

 

(14)         any
encumbrance or restriction in connection with Non-Recourse Product Financing
Indebtedness or Non-Recourse Acquisition Financing Indebtedness.

 

SECTION 4.16.                                              Guarantees.

 

(a)           The
Issuer will cause each Restricted Subsidiary that is a Domestic Subsidiary
(unless such Subsidiary is a Securitization Subsidiary) that guarantees any
Indebtedness of the Issuer to execute and deliver to the Trustee a supplemental
indenture pursuant to which such Subsidiary will guarantee payment of the
Securities.  Each Guarantee will be
limited to an amount not to exceed the maximum amount that can be guaranteed by
that Restricted Subsidiary without rendering the Guarantee, as it relates to
such Restricted Subsidiary, voidable under applicable law relating to
fraudulent conveyance or fraudulent transfer or similar laws affecting the
rights of creditors generally.

 

(b)           Any
Guarantor may consolidate with or merge into or sell its assets to the Issuer
or another Guarantor that is a Wholly Owned Restricted Subsidiary of the Issuer
without limitation, or with other Persons upon the terms and conditions set
forth in this Indenture.  The Guarantee
of a Guarantor will be released in the event that:

 

(1)           the
sale, disposition or other transfer (including through merger or consolidation)
of all of the Capital Stock (or any sale, disposition or other transfer of
Capital Stock following which the applicable Guarantor is no longer a
Restricted Subsidiary), or all or substantially all the assets, of the
applicable Guarantor if such sale, disposition or other transfer is made in compliance
with the applicable provisions of this Indenture,

 

(2)           the
Issuer designates any Restricted Subsidiary that is a Guarantor as an
Unrestricted Subsidiary in accordance with Section 4.11 and the definition of “Unrestricted
Subsidiary,” or

 

(3)           in
the case of any Restricted Subsidiary which after the Issue Date is required to
guarantee the Securities pursuant to this Section 4.16, the release or
discharge of the guarantee by such Restricted Subsidiary of Indebtedness of the
Issuer or the repayment of the Indebtedness or Disqualified Stock, in each
case, which resulted in the obligation to guarantee the Securities.

 

83

 

SECTION 4.17.                                              Reports
to Holders.

 

(a)           Whether
or not required by the Commission, so long as any Securities are outstanding,
the Issuer will furnish to the Holders and the Trustee, within the time periods
specified in the Commission’s rules and regulations:

 

(1)           all
quarterly and annual financial information that would be required to be contained
in a filing with the Commission on Forms 10-Q and 10-K if the Issuer were
required to file such Forms, including a “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” and, with respect to the
annual information only, a report on the annual financial statements by the
Issuer’s certified independent accountants; and

 

(2)           all
current reports that would be required to be filed with the Commission on Form
8-K if the Issuer were required to file such reports.

 

(b)           In
addition, whether or not required by the Commission, the Issuer will file a
copy of all of the information and reports referred to in clauses (1) and (2)
above with the Commission for public availability within the time periods
specified in the Commission’s rules and regulations (unless the Commission will
not accept such a filing) and make such information available to securities
analysts and prospective investors upon request.

 

(c)           In
addition, if at any time Parent becomes a Guarantor (there being no obligation
of Parent to do so), holds no material assets other than cash, Cash Equivalents
and the Capital Stock of the Issuer (and performs the related incidental
activities associated with such ownership) and complies with the requirements
of Rule 3-10 of Regulation S-X promulgated by the Commission (or any successor
provision), the reports, information and other documents required to be filed
and furnished to Holders pursuant to this Section 4.17 may, at the option of
the Issuer, be filed by and be those of Parent rather than the Issuer.

 

(d)           Notwithstanding
the foregoing, such requirements shall be deemed satisfied prior to the
commencement of the Exchange Offer (as defined in the Registration Rights
Agreements) or the effectiveness of the Shelf Registration Statement (as
defined in the Registration Rights Agreements) by the filing with the
Commission of the Exchange Offer Registration Statement (as defined in the
Registration Rights Agreements) and/or Shelf Registration Statement, and any
amendments thereto, with such financial information that satisfies Regulation
S-X of the Securities Act.

 

(e)           In
addition, the Issuer has agreed that, for so long as any Securities remain outstanding,
it will furnish to the Holders of the Securities and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.

 

84

 

SECTION 4.18.                                              Business
Activities.

 

The Issuer
will not, and will not permit any Restricted Subsidiary (other than a
Securitization Subsidiary) to, engage in any business other than Permitted
Businesses, except to such extent as would not be material to the Issuer and
its Subsidiaries taken as a whole.

 

SECTION 4.19.                                              Payments
for Consent.

 

The Issuer
will not, and will not permit any of its Subsidiaries to, directly or
indirectly, pay or cause to be paid any consideration to or for the benefit of
any Holder for or as an inducement to any consent, waiver or amendment of any
of the terms or provisions of this Indenture or the Securities unless such
consideration is offered to be paid and is paid to all Holders that consent,
waive or agree to amend in the time frame set forth in the solicitation
documents relating to such consent, waiver or agreement.

 

ARTICLE FIVE

SUCCESSOR CORPORATION

 

SECTION 5.01.                                              Merger,
Consolidation, or Sale of Assets.

 

(a)           The
Issuer may not, directly or indirectly: 
(1) consolidate or merge with or into another Person (whether or not the
Issuer is the surviving corporation); or (2) sell, assign, transfer, convey or
otherwise dispose of all or substantially all of the properties or assets of
the Issuer and its Subsidiaries taken as a whole, in one or more related
transactions, to another Person, unless:

 

(1)           either:  (a) the Issuer is the surviving corporation;
or (b) the Person formed by or surviving any such consolidation or merger (if
other than the Issuer) or to which such sale, assignment, transfer, conveyance
or other disposition has been made is a corporation organized or existing under
the laws of the United States, any state of the United States, the District of
Columbia or any territory thereof (the Issuer or such Person, as the case may
be, being herein called the “Successor Company”);

 

(2)           the
Successor Company (if other than the Issuer) or the Person to which such sale,
assignment, transfer, conveyance or other disposition has been made assumes all
the obligations of the Issuer under the Securities, this Indenture and the
applicable Registration Rights Agreement;

 

(3)           immediately
after such transaction no Default or Event of Default exists; and

 

85

 

(4)           immediately
after giving pro forma effect to such
transaction and any related financing transactions, as if the same had occurred
at the beginning of the applicable four-quarter period, either

 

(a)           the
Successor Company or the Person to which such sale, assignment, transfer,
conveyance or other disposition has been made would be permitted to incur at
least $1.00 of additional Indebtedness pursuant to clause (i) of Section
4.10(a); or

 

(b)           such
Fixed Charge Coverage Ratio for the Successor Company and its Restricted
Subsidiaries would be greater than such ratio for the Issuer and its Restricted
Subsidiaries immediately prior to such transaction.

 

This Section
5.01 will not apply to a sale, assignment, transfer, conveyance or other
disposition of assets between or among the Issuer and its Restricted
Subsidiaries.  Notwithstanding the
foregoing clauses (3) and (4), (i) any Restricted Subsidiary may
consolidate with, merge into or transfer all or part of its properties and
assets to the Issuer or to another Restricted Subsidiary and (ii) the
Issuer may merge with an Affiliate incorporated solely for the purpose of
reincorporating the Issuer in another state of the United States so long as the
amount of Indebtedness of the Issuer and its Restricted Subsidiaries is not
increased thereby.

 

In the event
of any transaction described in and complying with the conditions listed in the
preceding paragraph in which the Issuer is not the continuing corporation, the
successor Person formed or remaining shall succeed to, and be substituted for,
and may exercise every right and power of, the Issuer and the Issuer will be
discharged from all obligations and covenants under this Indenture and the
Securities.

 

(b)           The
Issuer will deliver to the Trustee prior to the consummation of each proposed
transaction an Officers’ Certificate certifying that the conditions set forth
above are satisfied and an Opinion of Counsel, which opinion may contain
customary exceptions and qualifications, that the proposed transaction and the
supplemental indenture, if any, comply with this Indenture.

 

86

 

ARTICLE SIX

DEFAULT AND REMEDIES

 

SECTION 6.01.                                              Events
of Default.

 

Each of the
following is an “Event of Default”:

 

(1)           the
Issuer defaults in payment when due and payable, upon redemption, acceleration
or otherwise, of principal of, or premium, if any, on the Securities;

 

(2)           the
Issuer defaults in the payment when due of interest or Additional Interest, if
any, on or with respect to the Securities and such default continues for a period
of 30 days;

 

(3)           the
Issuer defaults in the performance of, or breaches any covenant, warranty or
other agreement contained in, this Indenture (other than a default in the
performance or breach of a covenant, warranty or agreement which is
specifically dealt with in clauses (1) or (2) above) and such default or breach
continues for a period of 60 days after the notice specified below;

 

(4)           default
under any mortgage, indenture or instrument under which there is issued or by
which there is secured or evidenced any Indebtedness for money borrowed by the
Issuer or any Restricted Subsidiary or the payment of which is guaranteed by
the Issuer or any Restricted Subsidiary (other than Indebtedness owed to the
Issuer or a Restricted Subsidiary), whether such Indebtedness or guarantee now
exists or is created after the Issue Date, if (A) such default either
(1) results from the failure to pay any such Indebtedness at its stated
final maturity (after giving effect to any applicable grace periods) or
(2) relates to an obligation other than the obligation to pay principal of
any such Indebtedness at its stated final maturity and results in the holder or
holders of such Indebtedness causing such Indebtedness to become due prior to
its stated maturity and (B) the principal amount of such Indebtedness,
together with the principal amount of any other such Indebtedness in default
for failure to pay principal at stated final maturity (after giving effect to
any applicable grace periods), or the maturity of which has been so
accelerated, aggregate $25.0 million (or its foreign currency equivalent)
or more at any one time outstanding;

 

(5)           the
Issuer or any Significant Subsidiary pursuant to or within the meaning of any
Bankruptcy Law:

 

(A)          commences
a voluntary case,

 

87

 

(B)           consents
to the entry of an order for relief against it in an involuntary case,

 

(C)           consents
to the appointment of a Custodian of it or for all or substantially all of its
property,

 

(D)          makes
a general assignment for the benefit of its creditors,

 

(E)           takes
any comparable action under any foreign laws relating to insolvency,

 

(F)           generally
is not able to pay its debts as they become due, or

 

(G)           takes
any corporate action to authorize or effect any of the foregoing;

 

(6)           a
court of competent jurisdiction enters an order or decree under any Bankruptcy
Law that:

 

(A)          is
for relief against the Issuer or any Significant Subsidiary in an involuntary
case,

 

(B)           appoints
a Custodian of the Issuer or any Significant Subsidiary or for all or
substantially all of the property of the Issuer or any Significant Subsidiary,
or

 

(C)           orders
the liquidation of the Issuer or any Significant Subsidiary,

 

and the order or decree remains unstayed and
in effect for 60 days; or

 

(7)           the
failure by the Issuer or any Significant Subsidiary to pay final judgments
(other than any judgments covered by insurance policies issued by reputable and
creditworthy insurance companies) aggregating in excess of $25.0 million,
which final judgments remain unpaid, undischarged and unstayed for a period of
more than 60 days after such judgment becomes final, and, with respect to any
judgments covered by insurance, an enforcement proceeding has been commenced by
any creditor upon such judgment or decree which is not promptly stayed.

 

SECTION 6.02.                                              Acceleration.

 

If an Event of
Default specified in Sections 6.01(5) and (6) above occurs with respect to the
Issuer and is continuing, then all unpaid principal (or, in the case of the
Discount Securities, the Accreted Value) of, and premium, if any, and accrued
and unpaid interest, if any, on all of the outstanding Securities shall ipso facto become and be immediately

 

88

 

due and
payable without any declaration or other act on the part of each Trustee or any
Holder.

 

If any other
Event of Default shall occur and be continuing, the Trustee or the Holders of
at least 25% in principal amount (or, in the case of the Discount Securities,
the aggregate principal amount at maturity) of outstanding Securities under
this Indenture may declare the principal of (or, in the case of the Discount
Securities, the Accreted Value) and accrued and unpaid interest, if any, on
such Securities to be due and payable by notice in writing to the Issuer and
the Trustee specifying the respective Event of Default and that it is a “notice
of acceleration” (the “Acceleration Notice”),
and the same:

 

(1)           shall
become immediately due and payable; or

 

(2)           shall
become immediately due and payable upon the first to occur of an acceleration
under the Credit Agreement and five Business Days after receipt by the Issuer
and the representative under the Credit Agreement of such Acceleration Notice
but only if such Event of Default is then continuing.

 

At any time
after a declaration of acceleration with respect to the Securities as described
in the two preceding paragraphs, the Holders of a majority in principal amount
(or, in the case of the Discount Securities, the aggregate principal amount at
maturity) of the Securities may rescind and cancel such declaration and its
consequences:

 

(1)           if
the rescission would not conflict with any judgment or decree;

 

(2)           if
all existing Events of Default have been cured or waived except nonpayment of
principal or interest that has become due solely because of the acceleration;

 

(3)           to
the extent the payment of such interest is lawful, interest on overdue
installments of interest and overdue principal (or Accreted Value), which has
become due otherwise than by such declaration of acceleration, has been paid;

 

(4)           if
the Issuer has paid the Trustee its reasonable compensation and reimbursed the
Trustee for its expenses, disbursements and advances; and

 

(5)           in
the event of the cure or waiver of an Event of Default of the type described in
Sections 6.01(5) and (6), the Trustee shall have received an Officers’ Certificate
and an Opinion of Counsel that such Event of Default has been cured or waived.

 

No such
rescission shall affect any subsequent Default or impair any right consequent
thereto.

 

89

 

SECTION 6.03.                                              Other
Remedies.

 

(a)           If
a Default occurs and is continuing, the Trustee may pursue any available remedy
by proceeding at law or in equity to collect the payment of principal of or
interest on the Securities or to enforce the performance of any provision of
the Securities or this Indenture.

 

(b)           The
Trustee may maintain a proceeding even if it does not possess any of the Securities
or does not produce any of them in the proceeding.  A delay or omission by the Trustee or any
Securityholder in exercising any right or remedy accruing upon a Default shall
not impair the right or remedy or constitute a waiver of or acquiescence in the
Default.  No remedy is exclusive of any
other remedy.  All available remedies are
cumulative to the extent permitted by law.

 

(c)           In
the event of any Event of Default specified in clause (4) of Section 6.01,
such Event of Default and all consequences thereof (excluding, however, any
resulting payment default) will be annulled, waived and rescinded, automatically
and without any action by the Trustee or the Holders, if within 20 days after
such Event of Default arose the Issuer delivers an Officers’ Certificate to the
Trustee stating that (x) the Indebtedness or guarantee that is the basis for
such Event of Default has been discharged or (y) the holders thereof have
rescinded or waived the acceleration, notice or action (as the case may be)
giving rise to such Event of Default or (z) the default that is the basis for
such Event of Default has been cured, it being understood that in no event
shall an acceleration of the principal amount of the Securities as described
above be annulled, waived or rescinded upon the happening of any such events.

 

(d)           Holders
may not enforce this Indenture or the Securities except as provided in this Indenture
and under the TIA.  Subject to the
provisions of this Indenture relating to the duties of the Trustee, the Trustee
is under no obligation to exercise any of its rights or powers under this
Indenture at the request, order or direction of any of the Holders, unless such
Holders have offered to the Trustee reasonable indemnity.  Subject to all provisions of this Indenture
and applicable law, the Holders of a majority in (x) aggregate principal amount
at maturity of the then outstanding Discount Securities or (y) principal amount
of the then outstanding Senior Securities or Senior PIK Securities, as the case
may be, issued under this Indenture have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on the Trustee.

 

SECTION 6.04.                                              Waiver
of Defaults.

 

Provided the
Securities are not then due and payable by reason of a declaration of
acceleration, the Holders of a majority in aggregate principal amount (or, in
the case of the Discount Securities, the aggregate principal amount at
maturity) of Securities at the time outstanding may on behalf of the Holders of
all the Securities waive any Default with respect to such Securities and its consequences
by providing written notice thereof to the Issuer and the

 

90

 

Trustee,
except a Default (1) in the payment of interest on or the principal of any Security
or (2) in respect of a covenant or provision hereof which under this Indenture
cannot be modified or amended without the consent of the Holder of each
outstanding Security affected.  In the
case of any such waiver, the Issuer, the Trustee and the Holders will be
restored to their former positions and rights under this Indenture,
respectively; provided that no such waiver
shall extend to any subsequent or other Default or impair any right consequent
thereto.  provided,
however, that if any amendment, waiver
or other modification will only affect the Discount Securities, the Senior
Securities or the Senior PIK Securities, only the consent of the Holders of at
least (a) a majority in principal amount of the then outstanding Senior
Securities or Senior PIK Securities or (b) a majority in principal amount
at maturity of the then outstanding Discount Securities (and not the consent of
at least a majority of all Securities), as the case may be, shall be required.

 

SECTION 6.05.                                              Control
by Majority.

 

The Holders of
not less than a majority in principal amount of the outstanding Securities may
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on it.  Subject to Section 7.01, however, the
Trustee may refuse to follow any direction that conflicts with any law or this
Indenture, that the Trustee determines may be unduly prejudicial to the rights
of another Securityholder, or that may involve the Trustee in personal
liability; provided that the Trustee may take any
other action deemed proper by the Trustee which is not inconsistent with such
direction.

 

In the event
the Trustee takes any action or follows any direction pursuant to this
Indenture, the Trustee shall be entitled to indemnification against any loss or
expense caused by taking such action or following such direction.

 

SECTION 6.06.                                              Limitation
on Suits.

 

A Holder may
not pursue any remedy with respect to this Indenture or the Securities unless:

 

(1)           the
Holder gives to the Trustee written notice of a continuing Event of Default;

 

(2)           the
Holder or Holders of at least 25% in principal amount of the outstanding
Securities make a written request to the Trustee to pursue the remedy;

 

(3)           such
Holder or Holders offer and provide to the Trustee indemnity reasonably satisfactory
to the Trustee against any loss, liability or expense;

 

(4)           the
Trustee does not comply with the request within 45 days after receipt of the
request and the offer and the provision of indemnity; and

 

91

 

 

(5)           during
such 45-day period the Holder or Holders of a majority in principal amount of
the outstanding Securities do not give the Trustee a direction which, in the
opinion of the Trustee, is inconsistent with the request.

 

A Holder may
not use this Indenture to prejudice the rights of another Holder or to obtain a
preference or priority over such other Holder.

 

SECTION 6.07.                                              Rights
of Holders To Receive Payment.

 

Notwithstanding
any other provision of this Indenture, the right of any Holder to receive payment
of principal of and interest on a Security, on or after the respective due
dates expressed in such Security, or to bring suit for the enforcement of any
such payment on or after such respective dates, shall not be impaired or
affected without the consent of the Holder.

 

SECTION 6.08.                                              Collection
Suit by Trustee.

 

If a Default
in payment of principal or interest specified in Section 6.01(1) or (2)
occurs and is continuing, the Trustee may recover judgment in its own name and
as trustee of an express trust against the Issuer or any other obligor on the
Securities for the whole amount of principal and accrued interest and fees remaining
unpaid, together with interest on overdue principal and, to the extent that
payment of such interest is lawful, interest on overdue installments of
interest, in each case at the rate per annum borne
by the Securities and such further amount as shall be sufficient to cover the
costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.

 

SECTION 6.09.                                              Trustee
May File Proofs of Claim.

 

The Trustee
may file such proofs of claim and other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee (including any claim
for the compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel) and the Holders allowed in any judicial proceedings
relating to the Issuer, its creditors or its property and shall be entitled and
empowered to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same, and any Custodian in
any such judicial proceedings is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due to it for the compensation, expenses, disbursements and advances of
the Trustee, its agent and counsel, and any other amounts due the Trustee under
Section 7.07.  Nothing herein
contained shall be deemed to authorize the Trustee to authorize or consent to
or accept or adopt on behalf of any Holder any plan of reorganization,
arrangement, adjustment or composition affecting the Securities or the rights
of any Holder thereof, or to authorize the Trustee to vote in respect of the
claim of

 

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any Holder in
any such proceeding.  The Trustee shall
be entitled to participate as a member of any officer committee of creditors in
the matters as it deems necessary or advisable.

 

SECTION 6.10.                                              Priorities.

 

If the Trustee
collects any money or property pursuant to this Article Six, it shall pay out
the money or property in the following order:

 

FIRST:  to the Trustee for amounts due under
Section 7.07;

 

SECOND:  to Holders for interest accrued on the
Securities, ratably, without preference or priority of any kind, according to
the amounts due and payable on the Securities for interest;

 

THIRD:  to Holders for principal amounts due and
unpaid on the Securities, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Securities for principal; and

 

FOURTH:  to the Issuer or, if applicable, the Guarantors,
as their respective interests may appear.

 

The Trustee,
upon prior notice to the Issuer, may fix a record date and payment date for any
payment to Holders pursuant to this Section 6.10.

 

SECTION 6.11.                                              Undertaking
for Costs.

 

In any suit
for the enforcement of any right or remedy under this Indenture or in any suit
against the Trustee for any action taken or omitted by it as Trustee, a court
in its discretion may require the filing by any party litigant in the suit of
an undertaking to pay the costs of the suit, and the court in its discretion
may assess reasonable costs, including reasonable attorneys’ fees and expenses,
against any party litigant in the suit, having due regard to the merits and
good faith of the claims or defenses made by the party litigant.  This Section 6.11 does not apply to a suit by
the Trustee, a suit by a Holder pursuant to Section 6.07, or a suit by a
Holder or Holders of more than 10% in principal amount of the outstanding Securities.

 

93

 

ARTICLE SEVEN

TRUSTEE

 

SECTION 7.01.                                              Duties
of Trustee.

 

(a)           If
a Default has occurred and is continuing, the Trustee shall exercise such of
the rights and powers vested in it by this Indenture and use the same degree of
care and skill in their exercise as a prudent person would exercise or use
under the circumstances in the conduct of his or her own affairs.

 

(b)           Except
during the continuance of a Default:

 

(1)           The
Trustee need perform only those duties as are specifically set forth herein or
in the TIA and no duties, covenants, responsibilities or obligations shall be
implied in this Indenture against the Trustee.

 

(2)           In
the absence of bad faith on its part, the Trustee may conclusively rely, as to
the truth of the statements and the correctness of the opinions expressed
therein, upon certificates (including Officers’ Certificates) or opinions
(including Opinions of Counsel) furnished to the Trustee and conforming to the
requirements of this Indenture.  However,
in the case of any such certificates or opinions which by any provision hereof
are specifically required to be furnished to the Trustee, the Trustee shall
examine the certificates and opinions to determine whether or not they conform
to the requirements of this Indenture.

 

(c)           Notwithstanding
anything to the contrary herein, the Trustee may not be relieved from liability
for its own negligent action, its own negligent failure to act, or its own
willful misconduct, except that:

 

(1)           This
paragraph does not limit the effect of paragraph (b) of this Section 7.01.

 

(2)           The
Trustee shall not be liable for any error of judgment made in good faith by a Responsible
Officer, unless it is proved that the Trustee was negligent in ascertaining the
pertinent facts.

 

(3)           The
Trustee shall not be liable with respect to any action it takes or omits to
take in good faith in accordance with a direction received by it pursuant to
Section 6.05.

 

(d)           No
provision of this Indenture shall require the Trustee to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of
its

 

94

 

duties hereunder or to take or
omit to take any action under this Indenture or take any action at the request
or direction of Holders if it shall have reasonable grounds for believing that
repayment of such funds is not assured to it.

 

(e)           Whether
or not therein expressly so provided, every provision of this Indenture that in
any way relates to the Trustee is subject to this Section 7.01.

 

(f)            The
Trustee shall not be liable for interest on any money received by it except as
the Trustee may agree in writing with the Issuer.  Money held in trust by the Trustee need not
be segregated from other funds except to the extent required by law.

 

(g)           In
the absence of bad faith, negligence or willful misconduct on the part of the
Trustee, the Trustee shall not be responsible for the application of any money
by any Paying Agent other than the Trustee.

 

SECTION 7.02.                                              Rights
of Trustee.

 

Subject to
Section 7.01:

 

(a)           The
Trustee may rely conclusively on any document believed by it to be genuine and
to have been signed or presented by the proper Person.  The Trustee need not investigate any fact or
matter stated in the document.

 

(b)           Before
the Trustee acts or refrains from acting, it may require an Officers’
Certificate and an Opinion of Counsel, which shall conform to the provisions of
Section 12.05.  The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such certificate or opinion.

 

(c)           The
Trustee may act through its attorneys and agents and shall not be responsible
for the misconduct or negligence of any agent (other than an agent who is an
employee of the Trustee) appointed with due care.

 

(d)           The
Trustee shall not be liable for any action it takes or omits to take in good
faith which it reasonably believes to be authorized or within its rights or
powers.

 

(e)           The
Trustee may consult with counsel of its selection and the advice or opinion of
such counsel as to matters of law shall be full and complete authorization and
protection from liability in respect of any action taken, omitted or suffered
by it hereunder in good faith and in accordance with the advice or opinion of
such counsel.

 

(f)            The
Trustee shall be under no obligation to exercise any of the rights or powers
vested in it by this Indenture at the request, order or direction of any of the
Holders pursuant to the provisions of this Indenture, unless such Holders shall
have

 

95

 

offered to the Trustee reasonable security or indemnity satisfactory to
it against the costs, expenses and liabilities which may be incurred therein or
thereby.

 

(g)           The
Trustee shall not be bound to make any investigation into the facts or matters
stated in any resolution, certificate (including any Officers’ Certificate),
statement, instrument, opinion (including any Opinion of Counsel), notice,
request, direction, consent, order, bond, debenture, or other paper or
document, but the Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit and, if the Trustee
shall determine to make such further inquiry or investigation, it shall be
entitled, upon reasonable notice to the Issuer, to examine the books, records,
and premises of the Issuer, personally or by agent or attorney at the sole cost
of the Issuer.

 

(h)           The
Trustee shall not be required to give any bond or surety in respect of the
performance of its powers and duties hereunder.

 

(i)            The
permissive rights of the Trustee to do things enumerated in this Indenture
shall not be construed as duties.

 

(j)            The
Trustee shall not be deemed to have notice of any Default unless a Responsible
Officer of the Trustee has actual knowledge thereof or unless written notice of
any event which is in fact such a default is received by the Trustee at the
Corporate Trust Office of the Trustee, and such notice references the
Securities and this Indenture.

 

(k)           The
rights, privileges, protections, immunities and benefits given to the Trustee,
including, without limitation, its right to be indemnified, are extended to,
and shall be enforceable by, the Trustee in each of its capacities hereunder,
and to each agent, custodian and other Person employed to act hereunder.

 

SECTION 7.03.                                              Individual
Rights of Trustee.

 

The Trustee in
its individual or any other capacity may become the owner or pledgee of
Securities and may otherwise deal with the Issuer, its Subsidiaries or their
respective Affiliates with the same rights it would have if it were not
Trustee.  Any Agent may do the same with
like rights.  However, the Trustee must
comply with Sections 7.10 and 7.11.

 

SECTION 7.04.                                              Trustee’s
Disclaimer.

 

The Trustee
shall not be responsible for and makes no representation as to the validity or
adequacy of this Indenture or the Securities, it shall not be accountable for
the Issuer’s use of the proceeds from the Securities, and it shall not be
responsible for any statement of the Issuer in this Indenture or any document
issued in connection with the sale of Securities or any statement in the
Securities other than the Trustee’s certificate of authentication.  The

 

96

 

Trustee makes
no representations with respect to the effectiveness or adequacy of this Indenture.

 

SECTION 7.05.                                              Notice
of Default.

 

If a Default
occurs and is continuing and the Trustee receives actual notice of such
Default, the Trustee shall mail to each Holder notice of the uncured Default
within 60 days after such Default occurs. 
Except in the case of a Default in payment of principal of, or interest
on, any Security, including an accelerated payment and the failure to make
payment on the Change of Control Payment Date pursuant to a Change of Control
Offer or the Asset Sale Offer Payment Date pursuant to an Asset Sale Offer, the
Trustee may withhold the notice if and so long as the Board of Directors, the
executive committee, or a trust committee of directors and/or Responsible
Officers, of the Trustee in good faith determines that withholding the notice
is in the interest of the Holders.

 

SECTION 7.06.                                              Reports
by Trustee to Holders.

 

Within 60 days
after each May 1, beginning with May 1, 2005, the Trustee shall, to
the extent that any of the events described in TIA § 313(a) occurred
within the previous twelve months, but not otherwise, mail to each Holder a
brief report dated as of such date that complies with TIA § 313(a).  The Trustee also shall comply with TIA
§§ 313(b), 313(c) and 313(d).

 

A copy of each
report at the time of its mailing to Holders shall be mailed to the Issuer and
filed with the Commission and each securities exchange, if any, on which the
Securities are listed.

 

The Issuer
shall notify the Trustee if the Securities become listed on any securities
exchange or of any delisting thereof and the Trustee shall comply with TIA
§ 313(d).

 

SECTION 7.07.                                              Compensation
and Indemnity.

 

The Issuer
shall pay to the Trustee from time to time such compensation as the Issuer and
the Trustee shall from time to time agree in writing for its services
hereunder.  The Trustee’s compensation
shall not be limited by any law on compensation of a trustee of an express
trust.  The Issuer shall reimburse the
Trustee upon request for all reasonable disbursements, expenses and advances
(including reasonable fees and expenses of counsel) incurred or made by it in
addition to the compensation for its services, except any such disbursements,
expenses and advances as may be attributable to the Trustee’s negligence, bad faith
or willful misconduct.  Such expenses
shall include the reasonable fees and expenses of the Trustee’s agents and
counsel.

 

The Issuer
shall indemnify each of the Trustee or any predecessor Trustee and its agents,
employees, officers, stockholders and directors for, and hold them harmless

 

97

 

against, any
and all loss, damage, claims including taxes (other than taxes based upon, measured
by or determined by the income of the Trustee), liability or expense incurred
by them except for such actions to the extent caused by any negligence, bad
faith or willful misconduct on their part, arising out of or in connection with
the acceptance or administration of this Indenture including the costs and
expenses of enforcing this Indenture against the Issuer (including this Section
7.07) and the reasonable costs and expenses of defending themselves against or
investigating any claim or liability in connection with the exercise or performance
of any of the Trustee’s rights, powers or duties hereunder (whether asserted by
the Issuer, any Holder or any other Person). 
The Trustee shall notify the Issuer promptly of any claim asserted
against the Trustee or any of its agents, employees, officers, stockholders and
directors for which it may seek indemnity. 
The Issuer may, subject to the approval of the Trustee (which approval
shall not be unreasonably withheld), defend the claim and the Trustee shall
cooperate in the defense.  The Trustee
and its agents, employees, officers, stockholders and directors subject to the
claim may have separate counsel and the Issuer shall pay the reasonable fees
and expenses of such counsel; provided, however, that the Issuer will not be required to pay such
fees and expenses if, subject to the approval of the Trustee (which approval
shall not be unreasonably withheld), it assumes the Trustee’s defense and there
is no conflict of interest between the Issuer and the Trustee and its agents,
employees, officers, stockholders and directors subject to the claim in
connection with such defense as reasonably determined by the Trustee.  The Issuer need not pay for any settlement
made without its written consent.  The
Issuer need not reimburse any expense or indemnify against any loss or liability
to the extent incurred by the Trustee through its negligence, bad faith or
willful misconduct.

 

To secure the
Issuer’s payment obligations in this Section 7.07, the Trustee shall have a
Lien prior to the Securities against all money or property held or collected by
the Trustee, in its capacity as Trustee, except assets or money held in trust
to pay Accreted Value, premium, principal of or interest, if any, on particular
Securities.

 

When the
Trustee incurs expenses or renders services after a Default specified in Section
6.01(5) or (6) occurs, such expenses and the compensation for such services
shall be paid to the extent allowed under any Bankruptcy Law and are intended
to constitute expenses of administration under any Bankruptcy Law.

 

Notwithstanding
any other provision in this Indenture, the foregoing provisions of this Section
7.07 shall survive the satisfaction and discharge of this Indenture or the appointment
of a successor Trustee.

 

SECTION 7.08.                                              Replacement
of Trustee.

 

The Trustee
may resign at any time by so notifying the Issuer in writing.  The Holders of a majority in principal amount
of the outstanding Securities may remove the Trustee by so notifying the Issuer
and the Trustee and may appoint a successor Trustee.  The Issuer may remove the Trustee if:

 

98

 

(1)           the
Trustee fails to comply with Section 7.10;

 

(2)           the
Trustee is adjudged a bankrupt or an insolvent;

 

(3)           a
receiver or other public officer takes charge of the Trustee or its property;
or

 

(4)           the
Trustee becomes incapable of acting.

 

If the Trustee
resigns or is removed or if a vacancy exists in the office of Trustee for any
reason, the Issuer shall notify each Holder of such event and shall promptly
appoint a successor Trustee.  Within one
year after the successor Trustee takes office, the Holders of a majority in
principal amount of the Securities may appoint a successor Trustee to replace
the successor Trustee appointed by the Issuer.

 

A successor
Trustee shall deliver a written acceptance of its appointment to the retiring
Trustee and to the Issuer.  Immediately
after that, the retiring Trustee shall transfer, after payment of all sums then
owing to the Trustee pursuant to Section 7.07, all property held by it as
Trustee to the successor Trustee, subject to the Lien provided in
Section 7.07, the resignation or removal of the retiring Trustee shall
become effective, and the successor Trustee shall have all the rights, powers
and duties of the Trustee under this Indenture. 
A successor Trustee shall mail notice of its succession to each Holder.

 

If a successor
Trustee does not take office within 60 days after the retiring Trustee resigns
or is removed, the retiring Trustee, the Issuer or the Holders of at least 10%
in principal amount of the outstanding Securities may petition any court of
competent jurisdiction for the appointment of a successor Trustee at the expense
of the Issuer.

 

If the Trustee
fails to comply with Section 7.10, any Holder may petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.

 

Notwithstanding
replacement of the Trustee pursuant to this Section 7.08, the Issuer’s obligations
under Section 7.07 shall continue for the benefit of the retiring Trustee.

 

SECTION 7.09.                                              Successor
Trustee by Merger, Etc.

 

If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all of its corporate trust business to, another corporation, the resulting,
surviving or transferee corporation without any further act shall, if such
resulting, surviving or transferee corporation is otherwise eligible hereunder,
be the successor Trustee; provided that
such corporation shall be otherwise qualified and eligible under this Article
Seven.

 

99

 

SECTION 7.10.                                              Eligibility;
Disqualification.

 

This Indenture
shall always have a Trustee who satisfies the requirement of TIA
§§ 310(a)(1), 310(a)(2) and 310(a)(5). 
The Trustee shall have a combined capital and surplus of at least
$150,000,000 as set forth in its most recent published annual report of
condition.  In addition, if the Trustee
is a corporation included in a bank holding company system, the Trustee, independently
of the bank holding company, shall meet the capital requirements of TIA
§ 310(a)(2).  The Trustee shall
comply with TIA § 310(b); provided, however, that there shall be excluded from the operation of
TIA § 310(b)(1) any indenture or indentures under which other securities,
or certificates of interest or participation in other securities, of the Issuer
are outstanding, if the requirements for such exclusion set forth in TIA
§ 310(b)(1) are met.  The provisions
of TIA § 310 shall apply to the Issuer and any other obligor of the
Securities.

 

SECTION 7.11.                                              Preferential
Collection of Claims Against the Issuer.

 

The Trustee,
in its capacity as Trustee hereunder, shall comply with TIA § 311(a),
excluding any creditor relationship listed in TIA § 311(b).  A Trustee who has resigned or been removed
shall be subject to TIA § 311(a) to the extent indicated.

 

ARTICLE EIGHT

DISCHARGE OF INDENTURE;
DEFEASANCE

 

SECTION 8.01.                                              Termination
of the Issuer’s Obligations.

 

The Issuer may
terminate its obligations under any of the Securities and this Indenture,
except those obligations referred to in the penultimate paragraph of this
Section 8.01, if all such Securities previously authenticated and delivered
(other than destroyed, lost or stolen Securities which have been replaced or
paid or Securities for whose payment U.S. Legal Tender or U.S. Government
Securities or a combination thereof, in such amount as is, in the opinion of a
nationally recognized firm of independent public accountants, sufficient
without consideration of reinvestment of such interest, to pay principal of,
premium, if any, and interest on such outstanding Securities to maturity or
redemption, has theretofore been deposited with the Trustee or the Paying Agent
in trust or segregated and held in trust by the Issuer and thereafter repaid to
the Issuer, as provided in Section 8.05) have been delivered to the Trustee for
cancellation and the Issuer has paid all sums payable by it hereunder, or if:

 

(a)           either
(i) pursuant to Article Three, the Issuer shall have given notice to the
Trustee and mailed a notice of redemption to each Holder of the redemption of
all of such Securities in accordance with the provisions hereof or
(ii) all such Securities

 

100

 

have otherwise become or will become due and payable by reason of the
mailing of a notice of redemption or otherwise within one (1) year hereunder;

 

(b)           the
Issuer shall have irrevocably deposited or caused to be deposited with the
Trustee or a trustee satisfactory to the Trustee, under the terms of an
irrevocable trust agreement in form and substance satisfactory to the Trustee,
as trust funds in trust solely for the benefit of the Holders of that purpose,
U.S. Legal Tender or U.S. Government Securities or a combination thereof, in
such amount as is, in the opinion of a nationally recognized firm of
independent public accountants, sufficient without consideration of
reinvestment of such interest, to pay principal of, premium, if any, and
interest on such outstanding Securities to maturity or redemption; provided that the Trustee shall have been irrevocably
instructed to apply such U.S. Legal Tender or U.S. Government Securities or a
combination thereof, to the payment of said principal, premium, if any, and
interest with respect to such Securities;

 

(c)           no
Default with respect to this Indenture or such Securities shall have occurred
and be continuing on the date of such deposit or shall occur as a result of
such deposit (other than a Default resulting from borrowing of funds to be
applied to such deposit) and such deposit will not result in a breach or
violation of, or constitute a default under, the Credit Agreement or any other
material agreement or instrument to which the Issuer or any of its Subsidiaries
is a party or by which it is bound;

 

(d)           the
Issuer shall have paid or caused to be paid all other sums payable by it
hereunder; and

 

(e)           the
Issuer shall have delivered to the Trustee an Officers’ Certificate and an
Opinion of Counsel, each stating that all conditions precedent providing for or
relating to the termination of the Issuer’s obligations under such Securities
and this Indenture have been complied with. 
Such Opinion of Counsel shall also state that such satisfaction and
discharge does not result in a default under the Credit Agreement or any other
material agreement or instrument then known to such counsel that binds or affects
the Issuer.

 

Subject to the
next sentence and notwithstanding the foregoing paragraph, the Issuer’s obligations
in Sections 2.06, 2.07, 2.08, 2.09, 4.01, 4.02, 7.07, 8.05 and 8.06 shall survive
until the applicable Securities are no longer outstanding pursuant to the last
paragraph of Section 2.08.  After the
applicable Securities are no longer outstanding, the Issuer’s obligations in
Sections 7.07, 8.05 and 8.06 shall survive.

 

After such delivery
or irrevocable deposit, the Trustee upon request shall acknowledge in writing
the discharge of the Issuer’s obligations under the applicable Securities and
this Indenture except for those surviving obligations specified above.

 

101

 

SECTION 8.02.                                              Legal
Defeasance and Covenant Defeasance.

 

(a)           The
Issuer may, at its option and at any time, elect to have either paragraph (b)
or (c) below applied to all outstanding Discount Securities, Senior Securities
and/or Senior PIK Securities, as applicable, upon compliance with the conditions
set forth in Section 8.03.

 

(b)           Upon
the Issuer’s exercise under paragraph (a) hereof of the option applicable to
this paragraph (b), the Issuer shall, subject to the satisfaction of the
conditions set forth in Section 8.03, be deemed to have been discharged from
its obligations with respect to all outstanding Discount Securities, Senior
Securities and/or Senior PIK Securities, as applicable, on the date the
conditions set forth below are satisfied (hereinafter, “Legal
Defeasance”).  For this purpose,
Legal Defeasance means that the Issuer shall be deemed to have paid and
discharged the entire Indebtedness represented by the outstanding Discount
Securities, Senior Securities and/or Senior PIK Securities, as applicable,
which shall thereafter be deemed to be “outstanding” only for the purposes of
Section 8.04 hereof and the other Sections of this Indenture (with respect
to such Securities) referred to in (i) and (ii) below, and to have satisfied
all its other obligations under such Discount Securities, Senior Securities
and/or Senior PIK Securities, as applicable, and this Indenture (with respect
to such Securities) and any Guarantor shall be deemed to have satisfied all of
their obligations under the Subsidiary Guarantees and this Indenture (and the
Trustee, on demand of and at the expense of the Issuer, shall execute proper
instruments acknowledging the same), except for the following provisions which
shall survive until otherwise terminated or discharged hereunder:

 

(i)            the
rights of Holders of the applicable outstanding Securities issued hereunder to
receive payments in respect of the principal of, or interest or premium and
Additional Interest, if any, on such Securities when such payments are due from
the trust referred to below;

 

(ii)           the
Issuer’s obligations with respect to the applicable Securities issued hereunder
concerning issuing temporary Securities, registration of Securities, mutilated,
destroyed, lost or stolen Securities and the maintenance of an office or agency
for payment and money for security payments held in trust;

 

(iii)          the
rights, powers, trusts, duties and immunities of the Trustee, and the Issuer’s
obligations in connection therewith; and

 

(iv)          this
Article Eight.

 

Subject to
compliance with this Article Eight, the Issuer may exercise its option under
this Section 8.02(b) notwithstanding the prior exercise of its option under
Section 8.02(c) hereof.

 

102

 

(c)           Upon
the Issuer’s exercise under paragraph (a) hereof of the option applicable to
this paragraph (c), the Issuer shall, subject to the satisfaction of the
conditions set forth in Section 8.03 hereof, be released from its obligations
under the covenants contained in Sections 4.03 (with respect to Restricted
Subsidiaries only), 4.04, 4.05, 4.06, 4.07 and 4.09 through 4.19 and
clauses (3) and (4) of Section 5.01(a) hereof with respect to the outstanding
Discount Securities, Senior Securities and/or Senior PIK Securities, as
applicable, on and after the date the conditions set forth in Section 8.03 are
satisfied (hereinafter, “Covenant Defeasance”),
and the Discount Securities, Senior Securities and/or Senior PIK Securities, as
applicable, shall thereafter be deemed not “outstanding” for the purposes of
any direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed “outstanding” for all other purposes hereunder (it being
understood that such Securities shall not be deemed outstanding for accounting
purposes).  For this purpose, Covenant
Defeasance means that, with respect to the outstanding Discount Securities,
Senior Securities and/or Senior PIK Securities, as applicable, the Issuer may
omit to comply with and shall have no liability in respect of any term, condition
or limitation set forth in any such covenant, whether directly or indirectly,
by reason of any reference elsewhere herein to any such covenant or by reason
of any reference in any such covenant to any other provision herein or in any
other document and such omission to comply shall not constitute an Event of
Default under Section 6.01 hereof, but, except as specified above, the
remainder of this Indenture and such Securities shall be unaffected
thereby.  In addition, upon the Issuer’s
exercise under paragraph (a) hereof of the option applicable to this paragraph
(c), subject to the satisfaction of the conditions set forth in Section 8.03
hereof, clauses (3), (4), (5), (6) and (7) of Section 6.01 hereof shall not
constitute Events of Default.

 

SECTION 8.03.                                              Conditions
to Legal Defeasance or Covenant Defeasance.

 

The following
shall be the conditions to the application of either Section 8.02(b) or 8.02(c)
hereof to the applicable outstanding Securities:

 

In order to
exercise either Legal Defeasance or Covenant Defeasance:

 

(1)           the
Issuer must irrevocably deposit with the Trustee, in trust, for the benefit of
the holders of the applicable Securities issued hereunder, cash in U.S. Legal
Tender, non-callable U.S. Government Securities, or a combination of cash in
U.S. Legal Tender and non-callable U.S. Government Securities, in amounts as
will be sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of (or, in the case of the Discount
Securities, the Accreted Value of), or interest and premium and Additional
Interest, if any, on the outstanding Discount Securities, Senior Securities or
Senior PIK Securities, as the case may be, issued hereunder on the stated
maturity or on the applicable redemption date, as the case may be, and the
Issuer must specify whether the Discount Securities, Senior Securities

 

103

 

or Senior PIK Securities, as the case may be, are being defeased to
maturity or to a particular redemption date;

 

(2)           in
the case of an election under Section 8.02(b) hereof, the Issuer has delivered
to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee
confirming that (a) the Issuer has received from, or there has been published
by, the Internal Revenue Service a ruling or (b) since the date of this
Indenture, there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such Opinion of Counsel will
confirm that, the holders of the respective outstanding Securities will not
recognize income, gain or loss for federal income tax purposes as a result of
such Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such Legal Defeasance had not occurred;

 

(3)           in
the case of an election under Section 8.02(c) hereof, the Issuer has delivered
to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee
confirming that the holders of the respective outstanding Securities will not
recognize income, gain or loss for federal income tax purposes as a result of
such Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such Covenant Defeasance had not occurred;

 

(4)           no
Default or Event of Default has occurred and is continuing on the date of such
deposit (other than a Default or Event of Default resulting from the borrowing
of funds to be applied to such deposit) or insofar as Events of Default
resulting from the borrowing of funds or insolvency events are concerned, at
any time in the period ending on the 91st day after the date of deposit;

 

(5)           such
Legal Defeasance or Covenant Defeasance will not result in a breach or
violation of, or constitute a default under any material agreement or instrument
(other than this Indenture) to which the Issuer or any of its Restricted
Subsidiaries is a party or by which the Issuer or any of its Restricted
Subsidiaries is bound;

 

(6)           the
Issuer must deliver to the Trustee an Officers’ Certificate stating that the
deposit was not made by the Issuer with the intent of preferring the Holders
over the other creditors of the Issuer with the intent of defeating, hindering,
delaying or defrauding creditors of the Issuer or others; and

 

(7)           the
Issuer must deliver to the Trustee an Officers’ Certificate and an Opinion of
Counsel, each stating that all conditions precedent relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.

 

104

 

SECTION 8.04.                                              Application
of Trust Money.

 

The Trustee or
Paying Agent shall hold in trust U.S. Legal Tender and U.S. Government Securities,
deposited with it pursuant to this Article Eight, and shall apply the deposited
U.S. Legal Tender and the money from U.S. Government Securities in accordance
with this Indenture to the payment of principal of and interest on the
applicable Securities.  The Trustee shall
be under no obligation to invest said U.S. Legal Tender and U.S. Government
Securities, except as it may agree with the Issuer.

 

The Issuer
shall pay and indemnify the Trustee against any tax, fee or other charge
imposed on or assessed against the U.S. Legal Tender and U.S. Government
Securities deposited pursuant to Section 8.03 or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the applicable outstanding
Securities.

 

Anything in
this Article Eight to the contrary notwithstanding, the Trustee shall deliver
or pay to the Issuer from time to time upon the Issuer’s request any U.S. Legal
Tender and U.S. Government Securities held by it as provided in Section 8.03
which, in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the Trustee,
are in excess of the amount thereof that would then be required to be deposited
to effect an equivalent Legal Defeasance or Covenant Defeasance.

 

SECTION 8.05.                                              Repayment
to the Issuer.

 

Subject to
this Article Eight, the Trustee and the Paying Agent shall promptly pay to the
Issuer upon request any excess U.S. Legal Tender and U.S. Government Securities
held by them at any time and thereupon shall be relieved from all liability
with respect to such money.  The Trustee
and the Paying Agent shall pay to the Issuer upon request any money held by
them for the payment of principal or interest that remains unclaimed for two
years; provided that the Trustee or such Paying
Agent, before being required to make any payment, may at the expense of the
Issuer cause to be published once in a newspaper of general circulation in the
City of New York or mail to each Holder entitled to such money notice that such
money remains unclaimed and that after a date specified therein which shall be
at least 30 days from the date of such publication or mailing any unclaimed
balance of such money then remaining will be repaid to the Issuer.  After payment to the Issuer, Holders entitled
to such money must look to the Issuer for payment as general creditors unless
an applicable law designates another Person.

 

SECTION 8.06.                                              Reinstatement.

 

If the Trustee
or Paying Agent is unable to apply any U.S. Legal Tender and U.S. Government
Securities in accordance with this Article Eight by reason of any legal proceeding
or by reason of any order or judgment of any court or governmental authority
enjoining,

 

105

 

restraining or otherwise prohibiting such application, the Issuer’s
obligations under this Indenture and the applicable Securities shall be revived
and reinstated as though no deposit had occurred pursuant to this Article Eight
until such time as the Trustee or Paying Agent is permitted to apply all such
U.S. Legal Tender and U.S. Government Securities in accordance with this
Article Eight; provided that if the Issuer has
made any payment of interest on or principal of any such Securities because of
the reinstatement of its obligations, the Issuer shall be subrogated to the
rights of the Holders of such Securities to receive such payment from the U.S.
Legal Tender or U.S. Government Securities held by the Trustee or Paying Agent.

 

ARTICLE NINE

AMENDMENTS, SUPPLEMENTS AND
WAIVERS

 

SECTION 9.01.                                              Without
Consent of Holders.

 

Subject to
Section 9.03, the Issuer and the Trustee, together, may amend or supplement
this Indenture or the Securities without notice to or consent of any Holder:

 

(1)           to
cure any ambiguity, defect or inconsistency;

 

(2)           to
provide for uncertificated Securities in addition to or in place of
certificated Securities;

 

(3)           to
provide for the assumption of the Issuer’s obligations to Holders in the case
of a merger or consolidation or sale of all or substantially all of the Issuer’s
assets;

 

(4)           to
make any change that would provide any additional rights or benefits to the
Holders or that does not adversely affect the legal rights under this Indenture
of any Holder;

 

(5)           to
comply with requirements of the Commission in order to effect or maintain the
qualification of this Indenture under the TIA; or

 

(6)           to
add a Guarantee of the Securities, including, without limitation, by Parent;

 

provided
that the Issuer has delivered to the Trustee an Opinion of Counsel and an
Officers’ Certificate, each stating that such amendment or supplement complies
with the provisions of this Section 9.01.

 

106

 

SECTION 9.02.                                              With
Consent of Holders.

 

(a)           Subject
to Sections 6.07 and 9.03, the Issuer and the Trustee, together, with the written
consent of the Holder or Holders of a majority in aggregate principal amount at
maturity of the outstanding Securities, may amend or supplement this Indenture
or the Securities without notice to any other Holders.  Subject to Sections 6.07 and 9.03, the Holder
or Holders of a majority in aggregate principal amount at maturity of the
outstanding Securities may waive compliance with any provision of this
Indenture or the Securities without notice to any other Holders; provided, however, that
if any amendment, waiver or other modification will only affect the Discount
Securities, the Senior Securities or the Senior PIK Securities, only the
consent of the Holders of at least a majority in aggregate principal amount at
maturity of the then outstanding Discount Securities or at least a majority in
principal amount of the then outstanding Senior Securities or Senior PIK
Securities (and not the consent of at least a majority of all Securities), as
the case may be, shall be required.

 

(b)           Notwithstanding
Section 9.02(a), without the consent of each Holder affected, an
amendment, supplement or waiver, including a waiver pursuant to Section 6.04,
may not (with respect to any Securities held by a non-consenting Holder):

 

(1)           reduce
the principal amount of Securities whose Holders must consent to an amendment,
supplement or waiver;

 

(2)           reduce
the principal of the Senior Securities or Senior PIK Securities, reduce the
aggregate principal at maturity of the Discount Securities or change the fixed
maturity of any Security or alter the provisions with respect to the redemption
of the Securities issued hereunder (other than provisions of Sections 4.09 and
4.13 and the optional redemption provisions contained in the Securities);

 

(3)           reduce
the rate of or change the time for payment of interest on any Security;

 

(4)           waive
a Default or Event of Default in the payment of principal of, or interest or
premium, or Additional Interest, if any, on the Securities issued hereunder
(except a rescission of acceleration of the Securities issued hereunder by the
Holders of at least a majority in (x) aggregate principal amount at maturity of
the outstanding Discount Securities issued hereunder or (y) aggregate principal
amount of the Senior Securities or Senior PIK Securities, as the case may be,
issued hereunder and a waiver of the payment default that resulted from such acceleration);

 

(5)           make
any Security payable in money other than that stated in the Securities;

 

107

 

(6)           make
any change in the provisions of this Indenture relating to waivers of past Defaults
or the rights of Holders to receive payments of principal of, or interest or
premium or Additional Interest, if any, on the Securities issued hereunder;

 

(7)           waive
a redemption payment with respect to any Security (other than a payment
required by one of the provisions of Section 4.09 or Section 4.13 and the
optional redemption provisions contained in the Securities);

 

(8)           with
respect to the Discount Securities, change the method of calculation of
Accreted Value in a manner adverse to the Holders; or

 

(9)           make
any change in the preceding amendment and waiver provisions.

 

(c)           It
shall not be necessary for the consent of the Holders under this Section to
approve the particular form of any proposed amendment, supplement or waiver but
it shall be sufficient if such consent approves the substance thereof.

 

(d)           After
an amendment, supplement or waiver under this Section 9.02 becomes effective,
the Issuer shall mail to the Holders affected thereby a notice briefly describing
the amendment, supplement or waiver.  Any
failure of the Issuer to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amendment,
supplement or waiver.

 

SECTION 9.03.                                              [Reserved].

 

SECTION 9.04.                                              Compliance
with TIA.

 

From the date
on which this Indenture is qualified under the TIA, every amendment, waiver or
supplement of this Indenture, the Securities or the Subsidiary Guarantees shall
comply with the TIA as then in effect.

 

SECTION 9.05.                                              Revocation
and Effect of Consents.

 

(a)           Until
an amendment, waiver or supplement becomes effective, a consent to it by a
Holder is a continuing consent by the Holder and every subsequent Holder of a
Security or portion of a Security that evidences the same debt as the consenting
Holder’s Security, even if notation of the consent is not made on any
Security.  However, any such Holder or
subsequent Holder may revoke the consent as to his Security or portion of his
Security by notice to the Trustee or the Issuer received before the date on
which the Trustee receives an Officers’ Certificate certifying that the Holders
of the requisite principal amount of Securities have consented (and not
theretofore revoked such consent) to the amendment, supplement or waiver.

 

108

 

(b)           The
Issuer may, but shall not be obligated to, fix a record date for the purpose of
determining the Holders entitled to consent to any amendment, supplement or
waiver which record date shall be at least 30 days prior to the first
solicitation of such consent.  If a
record date is fixed, then notwithstanding the last sentence of the immediately
preceding paragraph, those Persons who were Securityholders at such record date
(or their duly designated proxies), and only those Persons, shall be entitled
to revoke any consent previously given, whether or not such Persons continue to
be Holders after such record date.  No
such consent shall be valid or effective for more than 90 days after such
record date.  The Issuer shall inform the
Trustee in writing of the fixed record date if applicable.

 

(c)           After
an amendment, supplement or waiver becomes effective, it shall bind every Securityholder,
unless it makes a change described in any of clauses (1) through (8) of Section
9.02(b), in which case, the amendment, supplement or waiver shall bind only
each Holder of a Security who has consented to it and every subsequent Holder
of a Security or portion of a Security that evidences the same debt as the
consenting Holder’s Security; provided that
any such waiver shall not impair or affect the right of any Holder to receive
payment of principal of and interest on a Security, on or after the respective
due dates expressed in such Security, or to bring suit for the enforcement of
any such payment on or after such respective dates without the consent of such
Holder.

 

SECTION 9.06.                                              Notation
on or Exchange of Securities.

 

If an
amendment, supplement or waiver changes the terms of a Security, the Issuer may
require the Holder of the Security to deliver it to the Trustee.  The Issuer shall provide the Trustee with an
appropriate notation on the Security about the changed terms and cause the Trustee
to return it to the Holder at the Issuer’s expense.  Alternatively, if the Issuer or the Trustee
so determines, the Issuer in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms.  Failure to make the appropriate notation or
issue a new Security shall not affect the validity and effect of such
amendment, supplement or waiver.

 

SECTION 9.07.                                              Trustee
To Sign Amendments, Etc.

 

The Trustee
shall execute any amendment, supplement or waiver authorized pursuant to this
Article Nine; provided that the Trustee may,
but shall not be obligated to, execute any such amendment, supplement or waiver
which affects the Trustee’s own rights, duties or immunities under this
Indenture.  The Trustee shall be entitled
to receive, and shall be fully protected in relying upon, an Opinion of Counsel
and an Officers’ Certificate each stating that the execution of any amendment,
supplement or waiver authorized pursuant to this Article Nine is authorized or
permitted by this Indenture and constitutes the legal, valid and binding obligations
of the Issuer enforceable in accordance with its terms.  Such Opinion of Counsel shall be at the
expense of the Issuer.

 

109

 

ARTICLE TEN

[RESERVED]

 

ARTICLE ELEVEN

GUARANTEES

 

SECTION 11.01.                                        Unconditional
Guarantee.

 

Subject to the
provisions of this Article Eleven, each of the Guarantors, if any, hereby,
jointly and severally, unconditionally and irrevocably guarantees, on a senior
subordinated basis to each Holder of a Security authenticated and delivered by
the Trustee and to the Trustee and its successors and assigns, irrespective of
the validity and enforceability of this Indenture, the Securities or the
obligations of the Issuer or any other Guarantors to the Holders or the Trustee
hereunder or thereunder: 
(a) (x) the due and punctual payment of the principal of,
premium, if any, and interest on the Securities when and as the same shall
become due and payable, whether at maturity, upon redemption or repurchase, by
acceleration or otherwise, (y) the due and punctual payment of interest on
the overdue principal and (to the extent permitted by law) interest, if any, on
the Securities and (z) the due and punctual payment and performance of all
other obligations of the Issuer and all other obligations of the other
Guarantors (including under the Guarantees), in each case, to the Holders or
the Trustee hereunder or thereunder (including amounts due the Trustee under
Section 7.07 hereof), all in accordance with the terms hereof and thereof
(collectively, the “Guarantee Obligations”);
and (b) in case of any extension of time of payment or renewal of any
Securities or any of such other obligations, the due and punctual payment and
performance of Guarantee Obligations in accordance with the terms of the
extension or renewal, whether at maturity, upon redemption or repurchase, by
acceleration or otherwise.  Failing
payment when due of any amount so guaranteed, or failing performance of any
other obligation of the Issuer to the Holders under this Indenture or under the
Securities, for whatever reason, each Guarantor shall be obligated to pay, or
to perform or cause the performance of, the same immediately.  An Event of Default under this Indenture or
the Securities shall constitute an event of default under the Subsidiary
Guarantees, and shall entitle the Holders to accelerate the obligations of the
Guarantors thereunder in the same manner and to the same extent as the
obligations of the Issuer.

 

Each of the
Guarantors, if any, hereby agrees that its obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of
the Securities or this Indenture, the absence of any action to enforce the
same, any waiver or consent by any Holder with respect to any provisions hereof
or thereof, any release of any other Guarantor, the recovery of any judgment
against the Issuer, any action to enforce the same, whether or not a Guarantee
is affixed to any particular Security, or any other circumstance which

 

110

 

might otherwise
constitute a legal or equitable discharge or defense of a Guarantor.  Each of the Guarantors hereby waives the
benefit of diligence, presentment, demand of payment, filing of claims with a
court in the event of insolvency or bankruptcy of the Issuer, any right to
require a proceeding first against the Issuer, protest, notice and all demands
whatsoever and covenants that its Subsidiary Guarantee shall not be discharged
except by complete performance of the obligations contained in the Securities,
this Indenture and the Guarantee.  The
Guarantee is a guarantee of payment and not of collection.  If any Holder or the Trustee is required by
any court or otherwise to return to the Issuer or to any Guarantor, or any
custodian, trustee, liquidator or other similar official acting in relation to
the Issuer or such Guarantor, any amount paid by the Issuer or such Guarantor
to the Trustee or such Holder, the Guarantee, to the extent theretofore
discharged, shall be reinstated in full force and effect.  Each Guarantor further agrees that, as between
it, on the one hand, and the Holders of Securities and the Trustee, on the
other hand, (a) subject to this Article Eleven, the maturity of the obligations
guaranteed hereby may be accelerated as provided in Article Six for the
purposes of the Guarantee, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (b) in the event of any acceleration of such
obligations as provided in Article Six hereof, such obligations (whether or not
due and payable) shall forthwith become due and payable by the Guarantors for
the purpose of the Guarantee.

 

SECTION 11.02.                                        [Reserved].

 

SECTION 11.03.                                        Limitation
on Guarantor Liability.

 

Each
Guarantor, and by its acceptance of Securities, each Holder, hereby confirms
that it is the intention of all such parties that the Guarantee of such
Guarantor not constitute a fraudulent transfer or conveyance for purposes of
Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer
Act or any similar federal or state law to the extent applicable to any
Guarantee.  To effectuate the foregoing
intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree
that the obligations of such Guarantor under its Guarantee and this Article
Eleven shall be limited to the maximum amount as will, after giving effect to
such maximum amount and all other contingent and fixed liabilities of such
Guarantor that are relevant under such laws, and after giving effect to any
collections from, rights to receive contribution from or payments made by or on
behalf of any other Guarantor in respect of the obligations of such other
Guarantor under this Article Eleven, result in the obligations of such
Guarantor under its Guarantee not constituting a fraudulent transfer or
conveyance.

 

SECTION 11.04.                                        Execution
and Delivery of Subsidiary Guarantee.

 

To further
evidence its Guarantee set forth in Section 11.01, each Guarantor hereby agrees
to execute a supplement to this Indenture or a Guarantee, substantially in the
form of Exhibit I hereto, and deliver it to the Trustee.  Such Guarantee or supplement to this
Indenture shall be executed on behalf of each Guarantor by either manual or
facsimile signature

 

111

 

of one Officer
or other person duly authorized by all necessary corporate action of each
Guarantor who shall have been duly authorized to so execute by all requisite
corporate action.  The validity and
enforceability of any Guarantee shall not be affected by the fact that it is
not affixed to any particular Security.

 

Each of the
Guarantors hereby agrees that its Guarantee set forth in Section 11.01 shall
remain in full force and effect notwithstanding any failure to endorse on each
Security a notation of such Guarantee.

 

If an Officer
of a Guarantor whose signature is on this Indenture or a Guarantee no longer
holds that office at the time the Trustee authenticates the Security on which
such Guarantee is endorsed or at any time thereafter, such Guarantor’s
Guarantee of such Security shall nevertheless be valid.

 

The delivery
of any Security by the Trustee, after the authentication thereof hereunder,
shall constitute due delivery of any Guarantee set forth in this Indenture on
behalf of each Guarantor.

 

SECTION 11.05.                                        Release
of a Guarantor.

 

The Guarantee
of a Guarantor will be released:

 

(a)           upon
the sale, disposition or other transfer (including through merger or consolidation)
of all of the Capital Stock (or any sale, disposition or other transfer of
Capital Stock following which the applicable Guarantor is no longer a Restricted
Subsidiary), or all or substantially all the assets, of the applicable
Guarantor if such sale, disposition or other transfer is made in compliance
with the applicable provisions of this Indenture;

 

(b)           if
the Issuer designates any Restricted Subsidiary that is a Guarantor as an
Unrestricted Subsidiary in accordance with Section 4.11 and the definition of “Unrestricted
Subsidiary”; or

 

(c)           in
the case of any Restricted Subsidiary which after the Issue Date is required to
guarantee the Securities pursuant to Section 4.16, upon the release or
discharge of the guarantee by such Restricted Subsidiary of Indebtedness of the
Issuer or any Restricted Subsidiary of the Issuer or such Restricted Subsidiary
or the repayment of the Indebtedness or Disqualified Stock, in each case, which
resulted in the obligation to guarantee the Securities;

 

provided,
however, in any case that any such
termination shall occur only to the extent that all obligations of such
Guarantor under all of its Guarantees of any Indebtedness of the Issuer or any
Indebtedness of any other Guarantor shall also terminate upon such release and
none of

 

112

 

its Equity
Interests are pledged for the benefit of any holder of any Indebtedness of the
Issuer or any Indebtedness of any Restricted Subsidiary of the Issuer.

 

The Trustee
shall execute an appropriate instrument prepared by the Issuer evidencing the release
of a Guarantor from its obligations under its Guarantee upon receipt of a
request by the Issuer or such Guarantor accompanied by an Officers’ Certificate
and an Opinion of Counsel certifying as to the compliance with this Section
11.05; provided, however,
that the legal counsel delivering such Opinion of Counsel may rely as to
matters of fact on one or more Officers’ Certificates of the Issuer.

 

Except as set
forth in Articles Four and Five and this Section 11.05, nothing contained in
this Indenture or in any of the Securities shall prevent any consolidation or
merger of a Guarantor with or into the Issuer or another Guarantor or shall
prevent any sale or conveyance of the property of a Guarantor as an entirety or
substantially as an entirety to the Issuer or another Guarantor.

 

SECTION 11.06.                                        Waiver
of Subrogation.

 

Until this
Indenture is discharged and all of the Securities are discharged and paid in
full, each Guarantor hereby irrevocably waives and agrees not to exercise any
claim or other rights which it may now or hereafter acquire against the Issuer
that arise from the existence, payment, performance or enforcement of the
Issuer’s obligations under the Securities or this Indenture and such Guarantor’s
obligations under the Guarantee and this Indenture, in any such instance
including, without limitation, any right of subrogation, reimbursement,
exoneration, contribution, indemnification, and any right to participate in any
claim or remedy of the Holders against the Issuer, whether or not such claim,
remedy or right arises in equity, or under contract, statute or common law, including,
without limitation, the right to take or receive from the Issuer, directly or
indirectly, in cash or other assets or by set-off or in any other manner,
payment or security on account of such claim or other rights.  If any amount shall be paid to any Guarantor
in violation of the preceding sentence and any amounts owing to the Trustee or
the Holders under the Securities, this Indenture, or any other document or instrument
delivered under or in connection with such agreements or instruments, shall not
have been paid in full, such amount shall have been deemed to have been paid to
such Guarantor for the benefit of, and held in trust for the benefit of, the
Trustee or the Holders and shall forthwith be paid to the Trustee for the
benefit of itself or such Holders to be credited and applied to the obligations
in favor of the Trustee or the Holders, as the case may be, whether matured or
unmatured, in accordance with the terms of this Indenture.  Each Guarantor acknowledges that it will
receive direct and indirect benefits from the financing arrangements contemplated
by this Indenture and that the waiver set forth in this Section 11.06 is
knowingly made in contemplation of such benefits.

 

113

 

SECTION 11.07.                                        Immediate
Payment.

 

Each Guarantor
agrees to make immediate payment to the Trustee on behalf of the Holders of all
Guarantee Obligations owing or payable to the respective Holders upon receipt
of a demand for payment therefor by the Trustee to such Guarantor in writing.

 

SECTION 11.08.                                        No
Setoff.

 

Each payment
to be made by a Guarantor hereunder in respect of the Guarantee Obligations
shall be payable in the currency or currencies in which such Guarantee
Obligations are denominated, and shall be made without set-off, counterclaim,
reduction or diminution of any kind or nature.

 

SECTION 11.09.                                        Guarantee
Obligations Absolute.

 

Subject to the
provisions of Section 11.02, the obligations of each Guarantor hereunder
are and shall be absolute and unconditional and any monies or amounts expressed
to be owing or payable by each Guarantor hereunder which may not be recoverable
from such Guarantor on the basis of a Guarantee shall be recoverable from such
Guarantor as a primary obligor and principal debtor in respect thereof.

 

SECTION 11.10.                                        Guarantee
Obligations Continuing.

 

The
obligations of each Guarantor hereunder shall be continuing and shall remain in
full force and effect until all such obligations have been paid and satisfied
in full.  Each Guarantor agrees with the
Trustee that it will from time to time deliver to the Trustee suitable
acknowledgments of this continued liability hereunder and under any other instrument
or instruments in such form as counsel to the Trustee may advise and as will
prevent any action brought against it in respect of any default hereunder being
barred by any statute of limitations now or hereafter in force and, in the
event of the failure of a Guarantor so to do, it hereby irrevocably appoints
the Trustee the attorney and agent of such Guarantor to make, execute and
deliver such written acknowledgment or acknowledgments or other instruments as
may from time to time become necessary or advisable, in the judgment of the Trustee
on the advice of counsel, to fully maintain and keep in force the liability of
such Guarantor hereunder.

 

SECTION 11.11.                                        Guarantee
Obligations Not Reduced.

 

The
obligations of each Guarantor hereunder shall not be satisfied, reduced or
discharged solely by the payment of such principal, premium, if any, interest,
fees and other monies or amounts as may at any time prior to discharge of this
Indenture pursuant to Article Eight be or become owing or payable under or by
virtue of or otherwise in connection with the Securities or this Indenture.

 

114

 

SECTION 11.12.                                        Guarantee
Obligations Reinstated.

 

The
obligations of each Guarantor hereunder shall continue to be effective or shall
be reinstated, as the case may be, if at any time any payment which would
otherwise have reduced the obligations of any Guarantor hereunder (whether such
payment shall have been made by or on behalf of the Issuer or by or on behalf
of a Guarantor) is rescinded or reclaimed from any of the Holders upon the
insolvency, bankruptcy, liquidation or reorganization of the Issuer or any
Guarantor or otherwise, all as though such payment had not been made.  If demand for, or acceleration of the time
for, payment by the Issuer or any other Guarantor is stayed upon the
insolvency, bankruptcy, liquidation or reorganization of the Issuer or such
Guarantor, all such Indebtedness otherwise subject to demand for payment or
acceleration shall nonetheless be payable by each Guarantor as provided herein.

 

SECTION 11.13.                                        Guarantee
Obligations Not Affected.

 

The
obligations of each Guarantor hereunder shall not be affected, impaired or
diminished in any way by any act, omission, matter or thing whatsoever,
occurring before, upon or after any demand for payment hereunder (and whether
or not known or consented to by any Guarantor or any of the Holders) which, but
for this provision, might constitute a whole or partial defense to a claim
against any Guarantor hereunder or might operate to release or otherwise
exonerate any Guarantor from any of its obligations hereunder or otherwise
affect such obligations, whether occasioned by default of any of the Holders or
otherwise, including, without limitation:

 

(a)           any
limitation of status or power, disability, incapacity or other circumstance
relating to the Issuer or any other Person, including any insolvency,
bankruptcy, liquidation, reorganization, readjustment, composition,
dissolution, winding-up or other proceeding involving or affecting the Issuer
or any other Person;

 

(b)           any
irregularity, defect, unenforceability or invalidity in respect of any
indebtedness or other obligation of the Issuer or any other Person under this
Indenture, the Securities or any other document or instrument;

 

(c)           any
failure of the Issuer or any other Guarantor, whether or not without fault on
its part, to perform or comply with any of the provisions of this Indenture,
the Securities or any Guarantee, or to give notice thereof to a Guarantor;

 

(d)           the
taking or enforcing or exercising or the refusal or neglect to take or enforce
or exercise any right or remedy from or against the Issuer or any other Person
or their respective assets or the release or discharge of any such right or
remedy;

 

(e)           the
granting of time, renewals, extensions, compromises, concessions, waivers, releases,
discharges and other indulgences to the Issuer or any other Person;

 

115

 

(f)            any
change in the time, manner or place of payment of, or in any other term of, any
of the Securities, or any other amendment, variation, supplement, replacement
or waiver of, or any consent to departure from, any of the Securities or this
Indenture, including, without limitation, any increase or decrease in the
principal amount of or premium, if any, or interest on any of the Securities;

 

(g)           any
change in the ownership, control, name, objects, businesses, assets, capital
structure or constitution of the Issuer or a Guarantor;

 

(h)           any
merger or amalgamation of the Issuer or a Guarantor with any Person or Persons;

 

(i)            the
occurrence of any change in the laws, rules, regulations or ordinances of any jurisdiction
by any present or future action of any governmental authority or court
amending, varying, reducing or otherwise affecting, or purporting to amend,
vary, reduce or otherwise affect, any of the Guarantee Obligations or the
obligations of a Guarantor under its Guarantee; and

 

(j)            any
other circumstance, including release of the Guarantor pursuant to Section
11.05 (other than by complete, irrevocable payment) that might otherwise
constitute a legal or equitable discharge or defense of the Issuer under this
Indenture or the Securities or of a Guarantor in respect of its Guarantee
hereunder.

 

SECTION 11.14.                                        Waiver.

 

Without in any
way limiting the provisions of Section 11.01, each Guarantor hereby waives
notice of acceptance hereof, notice of any liability of any Guarantor
hereunder, notice or proof of reliance by the Holders upon the obligations of
any Guarantor hereunder, and diligence, presentment, demand for payment on the
Issuer, protest, notice of dishonor or non-payment of any of the Guarantee
Obligations, or other notice or formalities to the Issuer or any Guarantor of
any kind whatsoever.

 

SECTION 11.15.                                        No
Obligation To Take Action Against the Issuer.

 

Neither the
Trustee nor any other Person shall have any obligation to enforce or exhaust
any rights or remedies against the Issuer or any other Person or any property
of the Issuer or any other Person before the Trustee is entitled to demand payment
and performance by any or all Guarantors of their liabilities and obligations
under their Guarantees or under this Indenture.

 

116

 

SECTION 11.16.                                        Dealing
with the Issuer and Others.

 

The Holders,
without releasing, discharging, limiting or otherwise affecting in whole or in
part the obligations and liabilities of any Guarantor hereunder and without the
consent of or notice to any Guarantor, may

 

(a)           grant
time, renewals, extensions, compromises, concessions, waivers, releases,
discharges and other indulgences to the Issuer or any other Person;

 

(b)           take
or abstain from taking security or collateral from the Issuer or from
perfecting security or collateral of the Issuer;

 

(c)           release,
discharge, compromise, realize, enforce or otherwise deal with or do any act or
thing in respect of (with or without consideration) any and all collateral,
mortgages or other security given by the Issuer or any third party with respect
to the obligations or matters contemplated by this Indenture or the Securities;

 

(d)           accept
compromises or arrangements from the Issuer;

 

(e)           apply
all monies at any time received from the Issuer or from any security upon such
part of the Guarantee Obligations as the Holders may see fit or change any such
application in whole or in part from time to time as the Holders may see fit;
and

 

(f)            otherwise
deal with, or waive or modify their right to deal with, the Issuer and all
other Persons and any security as the Holders or the Trustee may see fit.

 

SECTION 11.17.                                        Default
and Enforcement.

 

If any
Guarantor fails to pay in accordance with Section 11.07 hereof, the Trustee
may proceed in its name as trustee hereunder in the enforcement of the
Subsidiary Guarantee of any such Guarantor and such Guarantor’s obligations
thereunder and hereunder by any remedy provided by law, whether by legal
proceedings or otherwise, and to recover from such Guarantor the obligations.

 

SECTION 11.18.                                        Amendment,
Etc.

 

No amendment,
modification or waiver of any provision of this Indenture relating to any
Guarantor or consent to any departure by any Guarantor or any other Person from
any such provision will in any event be effective unless it is signed by such
Guarantor and the Trustee.

 

117

 

SECTION 11.19.                                        Acknowledgment.

 

Each
Guarantor, if any, hereby acknowledges communication of the terms of this
Indenture and the Securities and consents to and approves of the same.

 

SECTION 11.20.                                        Costs
and Expenses.

 

Each Guarantor
shall pay on demand by the Trustee any and all costs, fees and expenses
(including, without limitation, legal fees on a solicitor and client basis)
incurred by the Trustee, its agents, advisors and counsel or any of the Holders
in enforcing any of their rights under any Guarantee.

 

SECTION 11.21.                                        No
Merger or Waiver; Cumulative Remedies.

 

No Guarantee
shall operate by way of merger of any of the obligations of a Guarantor under
any other agreement, including, without limitation, this Indenture.  No failure to exercise and no delay in
exercising, on the part of the Trustee or the Holders, any right, remedy, power
or privilege hereunder or under this Indenture or the Securities, shall operate
as a waiver thereof; nor shall any single or partial exercise of any right,
remedy, power or privilege hereunder or under this Indenture or the Securities
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege.  The
rights, remedies, powers and privileges in the Guarantee and under this
Indenture, the Securities and any other document or instrument between a
Guarantor and/or the Issuer and the Trustee are cumulative and not exclusive of
any rights, remedies, powers and privilege provided by law.

 

SECTION 11.22.                                        Survival
of Guarantee Obligations.

 

Without
prejudice to the survival of any of the other obligations of each Guarantor
hereunder, the obligations of each Guarantor under Section 11.01 shall survive
the payment in full of the Guarantee Obligations and shall be enforceable
against such Guarantor without regard to and without giving effect to any
defense, right of offset or counterclaim available to or which may be asserted
by the Issuer or any Guarantor.

 

SECTION 11.23.                                        Guarantee
in Addition to Other Guarantee Obligations.

 

The
obligations of each Guarantor under its Guarantee and this Indenture are in
addition to and not in substitution for any other obligations to the Trustee or
to any of the Holders in relation to this Indenture or the Securities and any
guarantees or security at any time held by or for the benefit of any of them.

 

SECTION 11.24.                                        Severability.

 

Any provision
of this Article Eleven which is prohibited or unenforceable in any jurisdiction
shall not invalidate the remaining provisions and any such prohibition or unenforceability

 

118

 

in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction unless its removal would substantially defeat the basic
intent, spirit and purpose of this Indenture and this Article Eleven.

 

SECTION 11.25.                                        Successors
and Assigns.

 

Each Guarantee
shall be binding upon and inure to the benefit of each Guarantor and the
Trustee and the other Holders and their respective successors and permitted assigns,
except that no Guarantor may assign any of its obligations hereunder or
thereunder.

 

ARTICLE TWELVE

MISCELLANEOUS

 

SECTION 12.01.                                        TIA
Controls.

 

If any
provision of this Indenture limits, qualifies, or conflicts with another
provision which is required or deemed to be included in this Indenture by the
TIA, such required or deemed provision shall control.

 

SECTION 12.02.                                        Notices.

 

Any notices or
other communications required or permitted hereunder shall be in writing, and
shall be sufficiently given if made by hand delivery, by telex, by nationally
recognized overnight courier service, by telecopier or registered or certified
mail, postage prepaid, return receipt requested, addressed as follows:

 

if to the Issuer:

 

WMG Holdings Corp.

c/o Warner Music Group, Inc.

75 Rockefeller Plaza, 

New York, NY  10019

Attention:  General Counsel

	
  Telephone:

  	
  (212) 275-2030

  
	
  Facsimile:

  	
  (212) 258-3092

  

 

 

119

 

with a copy to:

 

Simpson Thacher & Bartlett LLP

425 Lexington Avenue

New York, NY  10017

Attention:  Edward P. Tolley III

	
  Telephone:

  	
  (212) 455-2000

  
	
  Facsimile:

  	
  (212) 455-2502

  

 

 

if to the Trustee:

 

Wells Fargo Bank, National Association

Corporate Trust Department

Sixth Street and Marquette Avenue

N9303-120

Minneapolis, MN  55479

Attention:  Jeffery Rose 

	
  Telephone:

  	
  (612) 667-0337

  
	
  Facsimile:

  	
  (612) 667-9825

  

 

Each of the
Issuer and the Trustee by written notice to each other such Person may
designate additional or different addresses for notices to such Person.  Any notice or communication to the Issuer and
the Trustee, shall be deemed to have been given or made as of the date so
delivered if personally delivered; when answered back; when receipt is
acknowledged, if telecopied; five (5) calendar days after mailing if sent by
registered or certified mail, postage prepaid (except that a notice of change
of address shall not be deemed to have been given until actually received by
the addressee); and next Business Day if by nationally recognized overnight courier
service.

 

Any notice or
communication mailed to a Securityholder shall be mailed to him by first class
mail or other equivalent means at his address as it appears on the registration
books of the Registrar and shall be sufficiently given to him if so mailed
within the time prescribed.

 

Failure to
mail a notice or communication to a Securityholder or any defect in it shall
not affect its sufficiency with respect to other Securityholders.  If a notice or communication is mailed in the
manner provided above, it is duly given, whether or not the addressee receives
it.

 

120

 

SECTION 12.03.                                        Communications
by Holders with Other Holders.

 

Securityholders
may communicate pursuant to TIA § 312(b) with other Securityholders with
respect to their rights under this Indenture, the Securities or the Subsidiary
Guarantees.  The Issuer, the Trustee, the
Registrar and any other Person shall have the protection of TIA § 312(c).

 

SECTION 12.04.                                        Certificate
and Opinion as to Conditions Precedent.

 

Upon any
request or application by the Issuer to the Trustee to take any action under
this Indenture, the Issuer shall furnish to the Trustee at the request of the
Trustee:

 

(1)           an
Officers’ Certificate, in form and substance satisfactory to the Trustee,
stating that, in the opinion of the signers, all conditions precedent to be
performed or effected by the Issuer, if any, provided for in this Indenture
relating to the proposed action have been complied with; and

 

(2)           an
Opinion of Counsel stating that, in the opinion of such counsel, any and all
such conditions precedent have been complied with.

 

SECTION 12.05.                                        Statements
Required in Certificate or Opinion.

 

Each
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture, other than the Officers’ Certificate required
by Section 4.06, shall include:

 

(1)           a
statement that the Person making such certificate or opinion has read such
covenant or condition;

 

(2)           a
brief statement as to the nature and scope of the examination or investigation
upon which the statements or opinions contained in such certificate or opinion
are based;

 

(3)           a
statement that, in the opinion of such Person, he has made such examination or
investigation as is necessary to enable him to express an informed opinion as
to whether or not such covenant or condition has been complied with or satisfied;
and

 

(4)           a
statement as to whether or not, in the opinion of each such Person, such
condition or covenant has been complied with; provided,
however, that with respect to matters of
fact an Opinion of Counsel may rely on an Officers’ Certificate or certificates
of public officials.

 

121

 

SECTION 12.06.                                        Rules
by Trustee, Paying Agent, Registrar.

 

The Trustee,
Paying Agent or Registrar may make reasonable rules for its functions.

 

SECTION 12.07.                                        Legal
Holidays.

 

If a payment
date is not a Business Day, payment may be made on the next succeeding day that
is a Business Day.

 

SECTION 12.08.                                        Governing
Law.

 

This
Indenture, the Securities and the Guarantees, if any, will be governed by and
construed in accordance with the laws of the State of New York.

 

SECTION 12.09.                                        No
Adverse Interpretation of Other Agreements.

 

This Indenture
may not be used to interpret another indenture, loan or debt agreement of the
Issuer or any of its Subsidiaries.  Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.

 

SECTION 12.10.                                        No
Recourse Against Others.

 

No director,
officer, employee, incorporator or stockholder of the Issuer or any direct or
indirect parent corporation, as such, shall have any liability for any
obligations of the Issuer under the Securities or this Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation.  Each Holder by accepting a
Security waives and releases all such liability.  Such waiver and release are part of the
consideration for issuance of the Securities.

 

SECTION 12.11.                                        Successors.

 

All agreements
of the Issuer in this Indenture and the Securities shall bind its
successors.  All agreements of the
Trustee in this Indenture shall bind its successor.

 

SECTION 12.12.                                        Duplicate
Originals.

 

All parties
may sign any number of copies of this Indenture.  Each signed copy or counterpart shall be an
original, but all of them together shall represent the same agreement.

 

SECTION 12.13.                                        Severability.

 

In case any
one or more of the provisions in this Indenture or in the Securities shall be
held invalid, illegal or unenforceable, in any respect for any reason, the
validity, legality

 

122

 

and
enforceability of any such provision in every other respect and of the
remaining provisions shall not in any way be affected or impaired thereby, it
being intended that all of the provisions hereof shall be enforceable to the
full extent permitted by law.

 

123

 

SIGNATURES

 

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

 

	
   

  	
  WMG HOLDINGS
  CORP.,

  
	
   

  	
    as
  the Issuer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

S-1

 

	
   

  	
  WELLS FARGO
  BANK,

  
	
   

  	
  NATIONAL
  ASSOCIATION,

  
	
   

  	
    as
  Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

S-2

 

EXHIBIT A

 

[FORM OF INITIAL DISCOUNT SECURITY]

 

WMG HOLDINGS CORP.

9.5% Senior Discount Notes due 2014

 

 

	
   

  	
  CUSIP No.

  	
   

  
	
   

  	
  ISIN No.

  	
   

  
	
  No. 
      

  	
  Principal
  Amount at Maturity:  $[                 ]

  	
   

  

 

THIS NOTE IS
ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR PURPOSES OF SECTION 1271 ET SEQ. OF THE
INTERNAL REVENUE CODE.  FOR EACH $1,000
PRINCIPAL AMOUNT AT MATURITY OF THIS NOTE, THE ISSUE PRICE IS $630.02.  THE ISSUE DATE OF THIS NOTE IS DECEMBER 23,
2004 AND THE YIELD TO MATURITY IS 9.5%.

 

WMG HOLDINGS
CORP., a Delaware corporation (the “Company,” which term includes any successor
corporation), for value received promises to pay to CEDE & CO. or its
registered assigns, the principal sum of
[                       ]
dollars
($[                       ])
on December 15, 2014.

 

Interest
Payment Dates:  June 15 and December 15,
with cash interest payments commencing June 15, 2010.

 

Record
Dates:  June 1 and December 1.

 

Reference is
made to the further provisions of this Discount Security contained herein,
which will for all purposes have the same effect as if set forth at this place.

 

A-1

 

IN WITNESS
WHEREOF, the Company has caused this Security to be signed manually or by
facsimile by its duly authorized officers.

 

	
   

  	
  WMG HOLDINGS
  CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

A-2

 

CERTIFICATE OF AUTHENTICATION

 

This is one of
the 9.5% Senior Discount Notes due 2014 described in the within-mentioned Indenture.

 

	
  Dated:

  	
  WELLS FARGO BANK,

  
	
   

  	
  NATIONAL ASSOCIATION,

  
	
   

  	
    as Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Authorized
  Signatory

  

 

A-3

 

(Reverse of Discount Security)

WMG Holdings Corp.

9.5% Senior Discount Notes due 2014

 

[Insert the Global Security Legend, if applicable pursuant to the
provisions of the Indenture]

 

[Insert the Private Placement Legend, if applicable pursuant to the
provisions of the Indenture]

 

Capitalized
terms used herein shall have the meanings assigned to them in the Indenture
referred to below unless otherwise indicated.

 

SECTION
1.  Interest.  WMG Holdings Corp., a Delaware corporation
(the “Company”), promises to pay interest on
this Discount Security at the rate per annum set forth above.  Prior to December 15, 2009,
interest on this Discount Security will accrue in the form of an increase in
the Accreted Value of the Discount Security, and no cash interest shall be
paid.  The Accreted Value of the Discount
Security will increase from the date of issuance until
December 15, 2009 at a rate of 9.5% per annum
compounded semiannually as provided in the definition of “Accreted Value” in
the Indenture such that the Accreted Value will equal the principal amount at
maturity on December 15, 2009.  The
Company shall pay cash interest semi-annually on June 15 and
December 15 of each year thereafter, commencing June 15, 2010,
or if any such day is not a Business Day, on the next succeeding Business Day
(each an “Interest Payment Date”).  Cash interest on the Discount Securities will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid from and including June 15, 2010; provided that if there is no existing Default in the payment
of interest, and if this Discount Security is authenticated between a record
date referred to on the face hereof and the next succeeding Interest Payment
Date, interest shall accrue from such next succeeding Interest Payment Date; provided, further, that
the first Interest Payment Date shall be June 15, 2010.  The Company shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
principal and premium, if any, from time to time on demand to the extent lawful
at the interest rate applicable to the Discount Securities; it shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest (without regard to any
applicable grace periods) from time to time on demand at the same rate to the
extent lawful.  Interest will be computed
on the basis of a 360-day year comprised of twelve 30 day months and actual
days elapsed.

 

SECTION
2.  Method of Payment.  The Company will pay interest on the Discount
Securities (except defaulted interest) to the Persons who are registered
Holders of Discount Securities at the close of business on the June 1 or
December 1 next preceding the Interest Payment Date, even if such Discount
Securities are canceled after such record date and on or before such Interest
Payment Date, except as provided in Section 2.13 of the Indenture with respect
to defaulted interest.  The Discount
Securities will be issued in denominations of $1,000 and integral multiples of
$1,000.  The Company shall pay principal,
premium, if any

 

A-4

 

and interest
on the Discount Securities in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts (“U.S. Legal Tender”).  Principal, premium, if any, and interest on
the Discount Securities will be payable at the office or agency of the Company
maintained for such purpose or, at the option of the Company, payment of
interest may be made by check mailed to the Holders at their respective
addresses set forth in the register of Holders; provided
that all payments of principal, premium and interest with respect to Discount
Securities the Holders of which have given wire transfer instructions to the
Company prior to the Record Date will be required to be made by wire transfer
of immediately available funds to the accounts specified by the Holders
thereof.  Until otherwise designated by
the Company, the Company’s office or agency in New York will be the office of
the Trustee maintained for such purpose.

 

SECTION
3.  Paying Agent and Registrar.  Initially, Wells Fargo Bank, National
Association, the Trustee under the Indenture, will act as Paying Agent and
Registrar.  The Company may change any Paying
Agent or Registrar without prior notice to any Holder.  The Company or any of its Subsidiaries may
act as Paying Agent or Registrar.

 

SECTION
4.  Indenture.  The Company issued the Securities under an
Indenture dated as of December 23, 2004 (“Indenture”)
between the Company and the Trustee.  The
terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code §§ 77aaa-77bbbb) (the “TIA”).  The Securities are subject to all such terms,
and Holders are referred to the Indenture and the TIA for a statement of such
terms.  To the extent any provision of
this Security conflicts with the express provisions of the Indenture, the
provisions of the Indenture shall govern and be controlling.

 

SECTION
5.  Optional Redemption.  The Discount Securities may be redeemed, in
whole or in part, at any time prior to December 15, 2009, at the
option of the Company upon not less than 30 nor more than 60 days’ prior notice
mailed by first-class mail to each Holder’s registered address, at a redemption
price equal to 100% of the Accreted Value of the Discount Securities redeemed
plus the Applicable Premium as of, and accrued and unpaid interest to, the
applicable redemption date (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date).

 

For purposes
of the preceding paragraph, the following terms will have the following definitions:

 

“Applicable Premium” means, with respect to any Discount
Security on any applicable redemption date, the greater of:

 

(1)           1.0%
of the then Accreted Value of the Discount Security; and

 

(2)           the
excess of:

 

(a)           the
present value at such redemption date of (i) the redemption price of the
Discount Security at December 15, 2009 such redemption price being

 

A-5

 

set forth in the table
appearing under paragraph (b) plus (ii) all required interest payments due on
the Discount Security through December 15, 2009 (excluding accrued but
unpaid interest), computed using a discount rate equal to the Treasury Rate as
of such redemption date plus 50 basis points; over

 

(b)           the
then Accreted Value of the Discount Security; and

 

“Treasury Rate” means, as of the applicable redemption date,
the yield to maturity as of such redemption date of United States Treasury
securities with a constant maturity (as compiled and published in the most
recent Federal Reserve Statistical Release H.15 (519) that has become publicly
available at least two business days prior to such redemption date (or, if such
Statistical Release is no longer published, any publicly available source of
similar market data)) most nearly equal to the period from such redemption date
to December 15, 2009; provided, however, that if the period from such redemption date to
December 15, 2009 is less than one year, the weekly average yield on
actually traded United States Treasury securities adjusted to a constant
maturity of one year will be used.

 

(b)           On
or after December 15, 2009, the Discount Securities will be subject to
redemption at any time at the option of the Company, in whole or in part, upon
not less than 30 nor more than 60 days’ notice, at the redemption prices
(expressed as percentages of the Accreted Value thereof) set forth below plus accrued
and unpaid interest on the Discount Securities redeemed, to the applicable
redemption date, if redeemed during the twelve-month period beginning on
December 15 of the years indicated below:

 

	
  Year

  	
   

  	
  Percentage

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2009

  	
   

  	
  104.750

  	
  %

  
	
  2010

  	
   

  	
  103.167

  	
  %

  
	
  2011

  	
   

  	
  101.583

  	
  %

  
	
  2012 and thereafter

  	
   

  	
  100.000

  	
  %

  

 

SECTION
6.  Optional Redemption upon Equity
Offering.  At any time on or prior to
December 15, 2007, the Company may on any one or more occasions redeem
with the net cash proceeds of one or more Equity Offerings up to 35% of the
original aggregate principal amount at maturity of Discount Securities issued
under the Indenture (calculated after giving effect to any issuance of
Additional Discount Securities) at a redemption price of 109.50% of the
Accreted Value thereof at the redemption date (subject to the rights of holders
of record on the relevant record date to receive interest due, if any, on the
relevant interest payment date); provided that
(1) at least 65% of the original aggregate principal amount at maturity of
Discount Securities issued under the Indenture (calculated after giving effect
to any issuance of Additional Discount Securities) remains outstanding
immediately after the occurrence of such redemption (excluding Discount
Securities held by the Company and its Subsidiaries) and (2) such
redemption shall occur within 90 days of the date of the closing of such Equity
Offering (disregarding the date of the closing of any over-allotment option
with respect thereto).

 

A-6

 

SECTION
7.  Mandatory Redemption.  For the avoidance
of doubt, an offer to purchase pursuant to Section 8 hereof shall not be deemed
a redemption.  The Company shall not be
required to make mandatory redemption or sinking fund payments with respect to
the Discount Securities.

 

SECTION
8.  Offers To Purchase.  The Indenture provides that upon the
occurrence of a Change of Control or an Asset Sale and subject to further limitations
contained therein, the Company shall make an offer to purchase outstanding
Discount Securities in accordance with the procedures set forth in the
Indenture.

 

SECTION
9.  Notice of Redemption.  Notice of redemption will be mailed by first
class mail at least 30 days but not more than 60 days before the redemption
date to each Holder of Securities to be redeemed at its registered
address.  Discount Securities in
denominations larger than $1,000 may be redeemed in part.  If any Security is to be redeemed in part
only, the notice of redemption that relates to such Security shall state the
portion of the principal amount at maturity thereof to be redeemed.  A new Security in principal amount at
maturity equal to the unredeemed portion thereof will be issued in the name of
the Holder thereof upon cancellation of the original Security.  On and after the redemption date interest
ceases to accrue on Securities or portions thereof called for redemption.

 

SECTION
10.  Denominations, Transfer, Exchange.  The Discount Securities are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000.  The transfer of Securities may
be registered and Securities may be exchanged as provided in the Indenture.  The Registrar and the Trustee may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and the Company may require a Holder to pay any taxes and fees
required by law or permitted by the Indenture. 
The Company or the Registrar is not required to transfer or exchange any
Security selected for redemption.  Also,
the Company or the Registrar is not required to transfer or exchange any
Securities for a period of 15 days before a selection of Securities to be
redeemed.

 

SECTION
11.  Persons Deemed Owners.  The registered Holder of a Security may be
treated as its owner for all purposes.

 

SECTION
12.  Amendment, Supplement and Waiver.  Subject to certain exceptions, the Indenture
and the Securities may be amended or supplemented with the written consent of
the Holders of at least a majority in aggregate principal amount at maturity of
the Securities then outstanding, and any existing Default or compliance with
any provision may be waived with the consent of the Holders of a majority in
aggregate principal amount at maturity of the Securities then outstanding.  Without notice to or consent of any Holder,
the parties thereto may amend or supplement the Indenture and the Securities
to, among other things, cure any ambiguity, defect or inconsistency in the
Indenture, provide for uncertificated Securities in addition to certificated
Securities, comply with any requirements of the Commission in connection with
the qualification of the Indenture under the TIA, or make any change that does
not adversely affect the rights of any Holder of a Security;  provided, however, that if any amendment, waiver or other modification
will only affect the Discount Securities, Senior Securities or the Senior PIK
Securities, only the consent of the Holders of at least a majority

 

A-7

 

in aggregate
principal amount at maturity of the then outstanding Discount Securities or at
least a majority in principal amount of Senior Securities or Senior PIK
Securities (and not the consent of at least a majority of all Securities), as
the case may be, shall be required.

 

SECTION
13.  Defaults and Remedies.  If a Default occurs and is continuing, the
Trustee or the Holders of at least 25% in aggregate principal amount at
maturity of the then outstanding Securities generally may declare all the
Securities to be due and payable immediately. 
Notwithstanding the foregoing, in the case of a Default arising from
certain events of bankruptcy or insolvency as set forth in the Indenture, with
respect to the Company, all outstanding Securities will become due and payable
without further action or notice. 
Holders of the Securities may not enforce the Indenture or the
Securities except as provided in the Indenture. 
Subject to certain limitations, Holders of a majority in aggregate
principal amount at maturity of the then outstanding Securities may direct the
Trustee in its exercise of any trust or power. 
The Trustee may withhold from Holders notice of any continuing Default
(except a Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest.  The Holders of a majority in aggregate
principal amount at maturity of the Securities then outstanding by notice to
the Trustee may on behalf of the Holders of all of the Securities waive any
Default and its consequences under the Indenture except a continuing Default in
the payment of interest on, or the principal of the Securities or in respect of
certain covenants set forth in the Indenture.

 

SECTION
14.  Restrictive Covenants.  The Indenture contains certain covenants
that, among other things, limit the ability of the Company and its Restricted
Subsidiaries to make restricted payments, to incur indebtedness, to create
liens, to sell assets, to permit restrictions on dividends and other payments
by Restricted Subsidiaries of the Company, to consolidate, merge or sell all or
substantially all of its assets or to engage in transactions with
affiliates.  The limitations are subject
to a number of important qualifications and exceptions.  The Company must annually report to the
Trustee on compliance with such limitations.

 

SECTION
15.  No Recourse Against Others.  No director, officer, employee, incorporator
or stockholder of the Company or any direct or indirect parent corporation, as
such, shall have any liability for any obligations of the Company under the
Securities, the Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. 
Each Holder of Securities by accepting a Security waives and releases
all such liability.  The waiver and
release are part of the consideration for issuance of the Securities.

 

SECTION
16.  Trustee Dealings with the Company.  The Trustee under the Indenture, in its
individual or any other capacity, may become the owner or pledgee of Securities
and may otherwise deal with the Company, its Subsidiaries or their respective
Affiliates as if it were not the Trustee.

 

SECTION
17.  Authentication.  This Security shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.

 

SECTION
18.  Abbreviations.  Customary abbreviations may be used in the
name of a Holder or an assignee, such as: 
TEN COM (= tenants in common), TEN ENT

 

A-8

 

(= tenants by
the entirety), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).

 

SECTION
19.  Additional Rights of Holders of
Restricted Global Securities and Restricted Definitive Securities.  Pursuant to, but subject to the exceptions
in, the Discount Registration Rights Agreement, the Company will be obligated
to consummate an exchange offer pursuant to which the Holder of this Security
shall have the right to exchange this Initial Security for a 9.5% Senior
Discount Note due 2014 of the Company which shall have been registered under
the Securities Act, in like principal amount and having terms identical in all
material respects to this Initial Security (except that such note shall not be
entitled to Additional Interest).  The
Holders shall be entitled to receive certain Additional Interest in the event
such exchange offer is not consummated or the Securities are not offered for
resale and upon certain other conditions, all pursuant to and in accordance
with the terms of the Discount Registration Rights Agreement.(a)

 

SECTION
20.  CUSIP Numbers.  Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Securities and the Trustee may use
CUSIP numbers in notices of redemption as a convenience to Holders.  No representation is made as to the accuracy
of such numbers either as printed on the Securities or as contained in any
notice of redemption and reliance may be placed only on the other
identification numbers placed thereon.

 

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

 

The Company
will furnish to any Holder upon written request and without charge a copy of
the Indenture.

 

(a)                                  This Section not to
appear on Exchange Securities.

 

A-9

 

ASSIGNMENT FORM

 

I or we assign
and transfer this Security to:

 

	
   

  
	
  (Insert assignee’s social security or tax
  I.D. number)

  

 

	
   

  
	
  (Print or type name, address and zip code
  of assignee)

  

 

and
irrevocably appoint:

 

Agent to
transfer this Security on the books of the Company.  The Agent may substitute another to act for
him.

 

	
  Date:

  	
   

  	
   

  	
  Your Signature:

  	
   

  
	
   

  	
   

  	
  (Sign exactly as your name appears on

  the other side of this Security)

  
	
   

  	
   

  
	
   

  	
   

  
	
  Signature Guarantee:

  	
   

  	
   

  
							

 

SIGNATURE GUARANTEE

 

Signatures
must be guaranteed by an “eligible guarantor institution” meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program (“STAMP”) or
such other “signature guarantee program” as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.

 

A-10

 

OPTION OF HOLDER TO ELECT
PURCHASE

 

If you want to
elect to have this Security purchased by the Company pursuant to Section 4.09
or Section 4.13 of the Indenture, check the appropriate box:

 

	
  Section 4.09 [     ]

  	
  Section 4.13 [     ]

  

 

If you want to
elect to have only part of this Security purchased by the Company pursuant to
Section 4.09 or Section 4.13 of the Indenture, state the amount:  $                     

 

	
  Dated:

  	
   

  	
   

  	
  Signed:

  	
   

  
	
   

  	
   

  	
  (Sign exactly as name appears on the

  other side of this Security)

  

 

	
  Signature Guarantee:

  	
   

  
	
   

  	
  Participant in a recognized Signature Guarantee Medallion Program

  (or other signature guarantor program reasonably acceptable to the Trustee)

  

 

A-11

 

EXHIBIT B

 

[FORM OF INITIAL SENIOR SECURITY]

 

WMG HOLDINGS CORP.

Floating Rate Senior Notes due 2011

 

 

	
   

  	
  CUSIP No.

  	
   

  
	
   

  	
  ISIN No.

  	
   

  
	
  No. 
      

  	
  $[                      ]

  	
   

  

 

WMG HOLDINGS
CORP., a Delaware corporation (the “Company,” which term includes any successor
corporation), for value received promises to pay to CEDE & CO. or its
registered assigns, the principal sum of
[                       ]
dollars
($[                       ])
on December 15, 2011.

 

Interest
Payment Dates:  March 15, June 15,
September 15 and December 15, commencing March 15, 2005.

 

Record
Dates:  March 1, June 1, September 1 and
December 1.

 

Reference is
made to the further provisions of this Senior Security contained herein, which
will for all purposes have the same effect as if set forth at this place.

 

B-1

 

IN WITNESS
WHEREOF, the Company has caused this Security to be signed manually or by
facsimile by its duly authorized officers.

 

	
   

  	
  WMG HOLDINGS
  CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

B-2

 

CERTIFICATE OF AUTHENTICATION

 

This is one of
the Floating Rate Senior Notes due 2011 described in the within-mentioned Indenture.

 

	
  Dated:

  	
  WELLS FARGO BANK,

  
	
   

  	
  NATIONAL ASSOCIATION,

  
	
   

  	
    as Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Authorized
  Signatory

  

 

B-3

 

(Reverse of Senior Security)

WMG Holdings Corp.

Floating Rate Senior Notes due 2011

 

[Insert the Global Security Legend, if applicable pursuant to the
provisions of the Indenture]

 

[Insert the Private Placement Legend, if applicable pursuant to the
provisions of the Indenture]

 

Capitalized
terms used herein shall have the meanings assigned to them in the Indenture
referred to below unless otherwise indicated.

 

SECTION
1.  Interest.  WMG Holdings Corp., a Delaware corporation
(the “Company”), promises to pay interest at
a rate per annum, reset quarterly equal to LIBOR plus 4.375%, as determined by
an agent appointed by the Company to calculate LIBOR for purposes of the
Indenture (the “Calculation Agent”), which shall
initially be the Trustee.  Interest will
be payable quarterly on each March 15, June 15, September 15 and December
15.  The Company will make each interest
payment to the holders of record of the Senior Securities on the immediately
preceding March 1, June 1, September 1 and December 1.  The Senior Securities will bear interest from
the Issue Date or, if interest has already been paid, from the date it was most
recently paid.

 

For purposes
of this Section 1, the following terms shall have the meanings indicated below:

 

“Determination Date,” with respect to an Interest Period,
will be the second London Banking Day preceding the first day of the Interest
Period.

 

“Interest Period” means the period commencing on and
including an interest payment date and ending on and including the day
immediately preceding the next succeeding interest payment date, with the
exception that the first Interest Period shall commence on and include the
Issue Date and end on and include March 14, 2005.

 

“LIBOR,” with respect to an Interest Period, will be the rate
(expressed as a percentage per annum) for deposits in United States dollars for
a three-month period beginning on the second London Banking Day after the
Determination Date that appears either on Telerate Page 3750 or Bloomberg page
BBAM1 as of 11:00 a.m., London time, on the Determination Date.  If Telerate Page 3750 and Bloomberg page
BBAM1 do not include such a rate or are unavailable on a Determination Date,
the Calculation Agent will request the principal London office of each of four
major banks in the London interbank market, as selected by the Calculation
Agent, to provide such bank’s offered quotation (expressed as a percentage per
annum), as of approximately 11:00 a.m., London time, on such Determination
Date, to prime banks in the London interbank market for deposits in a
Representative Amount in United States dollars for

 

B-4

 

a three-month period beginning on the second London Banking Day after
the Determination Date.  If at least two
such offered quotations are so provided, LIBOR for the Interest Period will be
the arithmetic mean of such quotations. 
If fewer than two such quotations are so provided, the Calculation Agent
will request each of three major banks in New York City, as selected by the
Calculation Agent, to provide such bank’s rate (expressed as a percentage per
annum), as of approximately 11:00 a.m., New York City time, on such
Determination Date, for loans in a Representative Amount in United States
dollars to leading European banks for a three-month period beginning on the
second London Banking Day after the Determination Date.  If at least two such rates are so provided,
LIBOR for the Interest Period will be the arithmetic mean of such rates.  If fewer than two such rates are so provided,
then LIBOR for the Interest Period will be LIBOR in effect with respect to the
immediately preceding Interest Period.

 

“London Banking Day” is any day in which dealings in United
States dollars are transacted or, with respect to any future date, are expected
to be transacted in the London interbank market.

 

“Representative Amount” means a principal amount of not less
than U.S.$1,000,000 for a single transaction in the relevant market at the
relevant time.

 

“Telerate Page 3750” means the display designated as “Page 3750”
on the Moneyline Telerate service (or such other page as may replace Page 3750
on that service).

 

The amount of
interest for each day that the Senior Securities are outstanding (the “Daily Interest Amount”) will be calculated by dividing the
interest rate in effect for such day by 360 and multiplying the result by the
principal amount of the Senior Securities. 
The amount of interest to be paid on the Senior Securities for each
Interest Period will be calculated by adding the Daily Interest Amounts for
each day in the Interest Period.

 

All
percentages resulting from any of the above calculations will be rounded, if
necessary, to the nearest one hundred-thousandth of a percentage point, with
five one-millionths of a percentage point being rounded upwards (e.g.,
9.876545% (or 0.09876545) being rounded to 9.87655% (or 0.0987655)) and all
dollar amounts used in or resulting from such calculations will be rounded to
the nearest cent (with one-half cent being rounded upwards).

 

The interest
rate on the Senior Securities will in no event be higher than the maximum rate
permitted by New York law as the same may be modified by United States law of
general application.

 

SECTION
2.  Method of Payment.  The Company will pay interest on the Senior
Securities (except defaulted interest) to the Persons who are registered
Holders of Senior Securities at the close of business on the March 1,
June 1, September 1 or December 1 next preceding the Interest
Payment Date, even if such Senior Securities are canceled after such

 

B-5

 

record date and on or before such Interest
Payment Date, except as provided in Section 2.13 of the Indenture with
respect to defaulted interest.  The
Senior Securities will be issued in denominations of $1,000 and integral
multiples of $1,000.  The Company shall
pay principal, premium, if any and interest on the Senior Securities in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts (“U.S. Legal
Tender”).  Principal, premium,
if any, and interest on the Senior Securities will be payable at the office or
agency of the Company maintained for such purpose or, at the option of the Company,
payment of interest may be made by check mailed to the Holders at their respective
addresses set forth in the register of Holders; provided
that all payments of principal, premium and interest with respect to Senior
Securities the Holders of which have given wire transfer instructions to the
Company prior to the Record Date will be required to be made by wire transfer
of immediately available funds to the accounts specified by the Holders
thereof.  Until otherwise designated by
the Company, the Company’s office or agency in New York will be the office of
the Trustee maintained for such purpose.

 

SECTION 3.  Paying Agent, Calculation Agent and
Registrar.  Initially, Wells Fargo
Bank, National Association, the Trustee under the Indenture, will act as Paying
Agent, Calculation Agent and Registrar. 
The Company may change any Paying Agent or Registrar without prior
notice to any Holder.  The Company or any
of its Subsidiaries may act as Paying Agent or Registrar.

 

SECTION 4.  Indenture.  The Company issued the Securities under an
Indenture dated as of December 23, 2004 (“Indenture”)
between the Company and the Trustee.  The
terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code §§ 77aaa-77bbbb) (the “TIA”).  The Securities
are subject to all such terms, and Holders are referred to the Indenture and
the TIA for a statement of such terms. 
To the extent any provision of this Security conflicts with the express
provisions of the Indenture, the provisions of the Indenture shall govern and
be controlling.

 

SECTION 5.  Optional Redemption.  The Senior Securities may be redeemed, in
whole or in part, at any time prior to December 15, 2006, at the
option of the Company upon not less than 30 nor more than 60 days’ prior notice
mailed by first-class mail to each Holder’s registered address, at a redemption
price equal to 100% of the principal amount of the Senior Securities redeemed
plus the Applicable Premium as of, and accrued and unpaid interest and
Additional Interest, if any, to, the applicable redemption date (subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date).

 

For purposes of the preceding paragraph, the
following terms will have the following definitions:

 

“Applicable Premium”
means, with respect to any Senior Security on any applicable redemption date,
the greater of:

 

B-6

 

(1)           1.0% of the then outstanding
principal amount of the Senior Security; and

 

(2)           the excess of:

 

(a)           the present value at such redemption date of (i) the
redemption price of the Senior Security at December 15, 2006 (such
redemption price being set forth in the table appearing under paragraph (b))
plus (ii) all required interest payments due on the Senior Security
(assuming that the interest rate per annum on the Senior Securities applicable
on the date of which notice of redemption was given was in effect for the
entire period) through December 15, 2006 (excluding accrued but unpaid
interest), computed using a discount rate equal to the Treasury Rate as of such
redemption date plus 50 basis points; over

 

(b)           the then outstanding principal amount of the Senior
Security.

 

“Treasury Rate” means, as of the applicable redemption date,
the yield to maturity as of such redemption date of United States Treasury
securities with a constant maturity (as compiled and published in the most
recent Federal Reserve Statistical Release H.15 (519) that has become publicly
available at least two business days prior to such redemption date (or, if such
Statistical Release is no longer published, any publicly available source of
similar market data)) most nearly equal to the period from such redemption date
to December 15, 2006; provided, however, that if the period from such redemption date to December 15, 2006
is less than one year, the weekly average yield on actually traded United
States Treasury securities adjusted to a constant maturity of one year will be
used.

 

(b)           On or after December 15, 2006,
the Company may redeem all or a part of the Senior Securities at its option,
upon not less than 30 nor more than 60 days’ notice, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest and Additional Interest, if any, on the Senior Securities to be
redeemed to the applicable redemption date, if redeemed during the twelve-month
period beginning on December 15 of the years indicated below:

 

	
  Year

  	
   

  	
  Percentage

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2006

  	
   

  	
  102.00

  	
  %

  
	
  2007

  	
   

  	
  101.00

  	
  %

  
	
  2008 and thereafter

  	
   

  	
  100.00

  	
  %

  

 

SECTION 6.  Optional Redemption upon Equity Offering.  At any time prior to December 15, 2006,
the Company may on one or more occasions redeem with the net cash proceeds of
one or more Equity Offerings at a redemption price of 104.00% of the principal
amount of the Senior Securities, plus accrued and unpaid interest and
Additional Interest, if any, to the redemption date:

 

B-7

 

(1)           up to 35% of the aggregate principal
amount of the Senior Securities issued under the Indenture (calculated after
giving effect to any issuance of Additional Senior Securities); provided that (x) at least 65% of the aggregate
principal amount of Senior Securities issued under the Indenture (calculated
after giving effect to any issuance of Additional Senior Securities) must
remain outstanding immediately after the occurrence of each such redemption
(excluding Senior Securities held by the Company and its Subsidiaries) and
(y) such redemption shall occur within 90 days of the closing of such Equity
Offering (disregarding the date of the closing of any over-allotment option
with respect thereto); or

 

(2)           all, but not less than all, of the
aggregate principal amount of the Senior Securities issued under the Indenture
then outstanding; provided that such redemption
shall occur within 90 days of the date of the closing of such Equity Offering
(disregarding the date of the closing of any over-allotment option with respect
thereto).

 

SECTION 7.  Mandatory Redemption.  For the avoidance
of doubt, an offer to purchase pursuant to Section 8 hereof shall not be
deemed a redemption.  The Company shall
not be required to make mandatory redemption or sinking fund payments with
respect to the Securities.

 

SECTION 8.
 Offers To Purchase.  The Indenture provides that upon the
occurrence of a Change of Control or an Asset Sale and subject to further
limitations contained therein, the Company shall make an offer to purchase
outstanding Securities in accordance with the procedures set forth in the
Indenture.

 

SECTION 9.  Notice of Redemption.  Notice of redemption will be mailed by first
class mail at least 30 days but not more than 60 days before the redemption
date to each Holder of Securities to be redeemed at its registered
address.  Senior Securities in
denominations larger than $1,000 may be redeemed in part.  If any Security is to be redeemed in part
only, the notice of redemption that relates to such Security shall state the portion
of the principal amount thereof to be redeemed. 
A new Security in principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original Security.  On and after the
redemption date interest ceases to accrue on Securities or portions thereof
called for redemption.

 

SECTION 10.  Denominations, Transfer, Exchange.  The Senior Securities are in registered form
without coupons in denominations of $1,000 and integral multiples of
$1,000.  The transfer of Securities may
be registered and Securities may be exchanged as provided in the
Indenture.  The Registrar and the Trustee
may require a Holder, among other things, to furnish appropriate endorsements
and transfer documents and the Company may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture.  The Company or the Registrar is not required
to transfer or exchange any Security selected for redemption.  Also, the Company or the Registrar is not
required to transfer or exchange any Securities for a period of 15 days before
a selection of Securities to be redeemed.

 

B-8

 

SECTION 11.  Persons Deemed Owners.  The registered Holder of a Security may be
treated as its owner for all purposes.

 

SECTION 12.
 Amendment, Supplement and Waiver.  Subject to certain exceptions, the Indenture
and the Securities may be amended or supplemented with the written consent of
the Holders of at least a majority in aggregate principal amount of the
Securities then outstanding, and any existing Default or compliance with any
provision may be waived with the consent of the Holders of a majority in
aggregate principal amount of the Securities then outstanding.  Without notice to or consent of any Holder,
the parties thereto may amend or supplement the Indenture and the Securities
to, among other things, cure any ambiguity, defect or inconsistency in the
Indenture, provide for uncertificated Securities in addition to certificated
Securities, comply with any requirements of the Commission in connection with
the qualification of the Indenture under the TIA, or make any change that does
not adversely affect the rights of any Holder of a Security;  provided, however, that if any amendment, waiver or other modification
will only affect the Discount Securities, Senior Securities or the Senior PIK
Securities, only the consent of the Holders of at least a majority in aggregate
principal amount at maturity of the then outstanding Discount Securities or at
least a majority in principal amount of Senior Securities or Senior PIK
Securities (and not the consent of at least a majority of all Securities), as
the case may be, shall be required.

 

SECTION 13.  Defaults and Remedies.  If a Default occurs and is continuing, the
Trustee or the Holders of at least 25% in aggregate principal amount of the
then outstanding Securities generally may declare all the Securities to be due
and payable immediately.  Notwithstanding
the foregoing, in the case of a Default arising from certain events of
bankruptcy or insolvency as set forth in the Indenture, with respect to the
Company, all outstanding Securities will become due and payable without further
action or notice.  Holders of the
Securities may not enforce the Indenture or the Securities except as provided in
the Indenture.  Subject to certain
limitations, Holders of a majority in aggregate principal amount of the then
outstanding Securities may direct the Trustee in its exercise of any trust or
power.  The Trustee may withhold from
Holders notice of any continuing Default (except a Default relating to the
payment of principal or interest) if it determines that withholding notice is
in their interest.  The Holders of a
majority in aggregate principal amount of the Securities then outstanding by
notice to the Trustee may on behalf of the Holders of all of the Securities
waive any Default and its consequences under the Indenture except a continuing
Default in the payment of interest on, or the principal of the Securities or in
respect of certain covenants set forth in the Indenture.

 

SECTION 14.  Restrictive Covenants.  The Indenture contains certain covenants
that, among other things, limit the ability of the Company and its Restricted
Subsidiaries to make restricted payments, to incur indebtedness, to create liens,
to sell assets, to permit restrictions on dividends and other payments by Restricted
Subsidiaries of the Company, to consolidate, merge or sell all or substantially
all of its assets or to engage in transactions with affiliates.  The limitations are subject to a number of
important qualifications and exceptions. 
The Company must annually report to the Trustee on compliance with such
limitations.

 

B-9

 

SECTION 15.  No Recourse Against Others.  No director, officer, employee, incorporator
or stockholder of the Company or any direct or indirect parent corporation, as
such, shall have any liability for any obligations of the Company under the
Securities, the Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. 
Each Holder of Securities by accepting a Security waives and releases
all such liability.  The waiver and
release are part of the consideration for issuance of the Securities.

 

SECTION 16.  Trustee Dealings with the Company.  The Trustee under the Indenture, in its individual
or any other capacity, may become the owner or pledgee of Securities and may
otherwise deal with the Company, its Subsidiaries or their respective
Affiliates as if it were not the Trustee.

 

SECTION 17.  Authentication.  This Security shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.

 

SECTION 18.  Abbreviations.  Customary abbreviations may be used in the
name of a Holder or an assignee, such as: 
TEN COM (= tenants in common), TEN ENT (= tenants by the entirety), JT
TEN (= joint tenants with right of survivorship and not as tenants in common),
CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).

 

SECTION 19.  Additional Rights of Holders of Restricted
Global Securities and Restricted Definitive Securities.  Pursuant to, but subject to the exceptions
in, the Senior Registration Rights Agreement, the Company will be obligated to
consummate an exchange offer pursuant to which the Holder of this Security
shall have the right to exchange this Initial Security for a Floating Rate
Senior Note due 2011 of the Company which shall have been registered under the
Securities Act, in like principal amount and having terms identical in all material
respects to this Initial Security (except that such note shall not be entitled
to Additional Interest).  The Holders
shall be entitled to receive certain Additional Interest in the event such
exchange offer is not consummated or the Securities are not offered for resale
and upon certain other conditions, all pursuant to and in accordance with the
terms of the Senior Registration Rights Agreement.(a)

 

SECTION 20.  CUSIP Numbers.  Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Securities and the Trustee may use
CUSIP numbers in notices of redemption as a convenience to Holders.  No representation is made as to the accuracy
of such numbers either as printed on the Securities or as contained in any
notice of redemption and reliance may be placed only on the other
identification numbers placed thereon.

 

SECTION 21.  Governing Law.  This Security shall be
governed by, and construed in accordance with, the laws of the State of New
York

 

(a)           This Section not to
appear on Exchange Securities.

 

B-10

 

The Company
will furnish to any Holder upon written request and without charge a copy of
the Indenture.

 

B-11

 

ASSIGNMENT FORM

 

I or we assign
and transfer this Security to:

 

	
   

  
	
  (Insert assignee’s social security or tax
  I.D. number)

  
	
   

  
	
   

  
	
  (Print or type name, address and zip code
  of assignee)

  

 

and irrevocably
appoint:

 

Agent to
transfer this Security on the books of the Company.  The Agent may substitute another to act for
him.

 

	
  Date:

  	
   

  	
   

  	
  Your Signature:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  (Sign exactly as your name appears on

  the other side of this Security)

  
	
   

  
	
  Signature Guarantee:

  	
   

  	
   

  
							

 

SIGNATURE GUARANTEE

 

Signatures
must be guaranteed by an “eligible guarantor institution” meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program (“STAMP”) or such
other “signature guarantee program” as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.

 

B-12

 

OPTION OF HOLDER TO ELECT
PURCHASE

 

If you want to
elect to have this Security purchased by the Company pursuant to Section 4.09
or Section 4.13 of the Indenture, check the appropriate box:

 

	
  Section 4.09 [       ]

  	
  Section 4.13 [       ]

  

 

If you want to
elect to have only part of this Security purchased by the Company pursuant to Section 4.09
or Section 4.13 of the Indenture, state the amount:  $                        

 

	
  Dated:

  	
   

  	
   

  	
  Signed:

  	
   

  
	
   

  	
   

  	
  (Sign exactly as name appears on the

  other side of this Security)

  
	
   

  	
   

  
	
  Signature Guarantee:

  	
   

  
	
   

  	
  Participant in a recognized Signature Guarantee Medallion Program

  (or other signature guarantor program reasonably acceptable to the Trustee)

  
						

 

B-13

 

EXHIBIT C

 

[FORM OF INITIAL SENIOR PIK SECURITY]

 

WMG HOLDINGS CORP.

Floating Rate Senior PIK Notes due 2014

 

	
   

  	
   

  	
  CUSIP No.

  	
           

  
	
   

  	
   

  	
  ISIN No.

  	
           

  
	
  No.

  	
   

  	
  $[                      ]

  	
           

  

 

THIS NOTE IS
ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR PURPOSES OF SECTION 1271 ET SEQ.
OF THE INTERNAL REVENUE CODE AND IS SUBJECT TO TREAS. REG. SEC. 1.1275-4
(THE “CONTINGENT PAYMENT REGULATIONS”). 
A BENEFICIAL HOLDER OF A BENEFICIAL OWNERSHIP INTEREST IN THE SENIOR PIK
SECURITIES MAY OBTAIN THE ISSUE PRICE, AMOUNT OF ORIGINAL ISSUE DISCOUNT,
ISSUE DATE, YIELD TO MATURITY, COMPARABLE YIELD AND PROJECTED PAYMENT SCHEDULE FOR
SUCH SECURITIES BY SUBMITTING A WRITTEN REQUEST FOR SUCH INFORMATION TO THE
ISSUER AT THE FOLLOWING ADDRESS: WMG HOLDINGS CORP., C/O WARNER MUSIC GROUP,
INC., 75 ROCKEFELLER PLAZA, NEW YORK, NY 
10019, ATTENTION: CHIEF FINANCIAL OFFICER.

 

WMG HOLDINGS
CORP., a Delaware corporation (the “Company,” which term includes any successor
corporation), for value received promises to pay to CEDE & CO. or its
registered assigns, the principal sum of
[                       ]
dollars
($[                       ])
on December 15, 2014.

 

Interest
Payment Dates:  June 15 and December 15,
commencing June 15, 2005.

 

Record
Dates:  June 1 and December 1.

 

Reference is
made to the further provisions of this Senior PIK Security contained herein,
which will for all purposes have the same effect as if set forth at this place.

 

C-1

 

IN WITNESS
WHEREOF, the Company has caused this Security to be signed manually or by
facsimile by its duly authorized officers.

 

	
   

  	
  WMG HOLDINGS
  CORP.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

C-2

 

CERTIFICATE OF AUTHENTICATION

 

This is one of
the Floating Rate Senior PIK Notes due 2014 described in the within-mentioned
Indenture.

 

	
  Dated:

  	
  WELLS FARGO BANK,

  
	
   

  	
  NATIONAL ASSOCIATION,

  
	
   

  	
   as Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Authorized
  Signatory

  

 

C-3

 

(Reverse of Senior PIK Security)

WMG Holdings Corp.

 

Floating Rate Senior PIK Notes due 2014

 

[Insert the Global Security Legend, if applicable pursuant to the
provisions of the Indenture]

 

[Insert the Private Placement Legend, if applicable pursuant to the
provisions of the Indenture]

 

Capitalized
terms used herein shall have the meanings assigned to them in the Indenture
referred to below unless otherwise indicated.

 

SECTION 1.  Interest.  WMG Holdings Corp., a Delaware corporation
(the “Company”), promises to pay interest at
a rate per annum, reset semi-annually, equal to LIBOR plus 7.00%, as determined
by the Calculation Agent, plus the Ratchet Margin (if any).  Interest on the Senior PIK Securities will be
payable semi-annually in arrears on June 15 and December 15,
commencing on June 15, 2005. 
Interest will be payable, at the election of the Company (made prior to
the relevant record date in the case of cash interest), either in cash or
through the issuance of Additional Senior PIK Securities in a principal amount
equal to such interest amount.  The Additional
Senior PIK Securities will be identical to the originally issued Senior PIK
Securities, except that interest will begin to accrue from the date they are issued
rather than the Issue Date.

 

On December 15,
2014, the Company will redeem the Senior PIK Securities that have not been
previously redeemed or purchased and canceled at 100.00% of their principal
amount plus accrued and unpaid interest thereon, if any, to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date).

 

The Senior PIK
Securities will be issued in denominations of $1,000 and integral multiples of
$1,000; provided, however, that Additional
Senior PIK Securities issued in payment of interest or Additional Interest will
be issued in denominations of $1 and integral multiples of $1.

 

For purposes
of this Section 1, the following terms shall have the meanings indicated
below:

 

“Determination Date,” with respect to an Interest Period,
will be the second London Banking Day preceding the first day of the Interest
Period.

 

“Interest Period” means the period commencing on and
including an interest payment date and ending on and including the day
immediately preceding the next succeeding interest payment date, with the
exception that the first Interest Period shall commence on and include the
Issue Date and end on and include June 14, 2005.

 

C-4

 

“LIBOR,” with respect to an Interest Period, will be the rate
(expressed as a percentage per annum) for deposits in United States dollars for
a six-month period beginning on the second London Banking Day after the
Determination Date that appears either on Telerate Page 3750 or Bloomberg page BBAM1
as of 11:00 a.m., London time, on the Determination Date.  If Telerate Page 3750 and Bloomberg page BBAM1
do not include such a rate or are unavailable on a Determination Date, the
Calculation Agent will request the principal London office of each of four
major banks in the London interbank market, as selected by the Calculation
Agent, to provide such bank’s offered quotation (expressed as a percentage per
annum), as of approximately 11:00 a.m., London time, on such Determination
Date, to prime banks in the London interbank market for deposits in a
Representative Amount in United States dollars for a six-month period beginning
on the second London Banking Day after the Determination Date.  If at least two such offered quotations are
so provided, LIBOR for the Interest Period will be the arithmetic mean of such
quotations.  If fewer than two such
quotations are so provided, the Calculation Agent will request each of three
major banks in New York City, as selected by the Calculation Agent, to provide
such bank’s rate (expressed as a percentage per annum), as of approximately
11:00 a.m., New York City time, on such Determination Date, for loans in a
Representative Amount in United States dollars to leading European banks for a
six-month period beginning on the second London Banking Day after the
Determination Date.  If at least two such
rates are so provided, LIBOR for the Interest Period will be the arithmetic
mean of such rates.  If fewer than two
such rates are so provided, then LIBOR for the Interest Period will be LIBOR in
effect with respect to the immediately preceding Interest Period.

 

“London Banking Day” is any day in which dealings in United
States dollars are transacted or, with respect to any future date, are expected
to be transacted in the London interbank market.

 

“Ratchet Margin” means for each Interest Period commencing on
or after December 15, 2007, an amount equal to 1.0% if, on the
Determination Date with respect to such Interest Period, the Net Indebtedness
to EBITDA Ratio of Warner Music exceeds or equals 3.00 to 1.00, and shall
otherwise be an amount equal to zero, in each case, as certified to the
Calculation Agent on such Determination Date by an Officers’ Certificate.

 

“Representative Amount” means a principal amount of not less
than US$1,000,000 for a single transaction in the relevant market at the
relevant time.

 

“Telerate Page 3750” means the display designated as “Page 3750”
on the Moneyline Telerate service (or such other page as may replace Page 3750
on that service).

 

The amount of
interest for each day that the Senior Securities are outstanding (the “Daily Interest Amount”) will be calculated by dividing the
interest rate in effect for such day by 360 and multiplying the result by the
principal amount of the Senior PIK Securities.

 

C-5

 

The amount of
interest to be paid on the Senior PIK Securities for each Interest Period will
be calculated by adding the Daily Interest Amounts for each day in the Interest
Period.

 

All
percentages resulting from any of the above calculations will be rounded, if
necessary, to the nearest one hundred-thousandth of a percentage point, with
five one-millionths of a percentage point being rounded upwards (e.g.,
9.876545% (or 0.09876545) being rounded to 9.87655% (or 0.0987655)) and all
dollar amounts used in or resulting from such calculations will be rounded to
the nearest cent (with one-half cent being rounded upwards).

 

The interest
rate on the Senior PIK Securities will in no event be higher than the maximum
rate permitted by New York law as the same may be modified by United States law
of general application.

 

SECTION 2.  Method of Payment.  The Company will pay interest on the Senior
PIK Securities (except defaulted interest) to the Persons who are registered
Holders of Senior PIK Securities at the close of business on the June 1 or
December 1 next preceding the Interest Payment Date, even if such Senior
PIK Securities are canceled after such record date and on or before such
Interest Payment Date, except as provided in Section 2.13 of the Indenture
with respect to defaulted interest.  The
Senior PIK Securities will be issued in denominations of $1,000 and integral
multiples of $1,000; provided, however,
that Additional Senior PIK Securities issued in payment of interest or Additional
Interest will be issued in denominations of $1 and integral multiples of
$1.  With respect to any cash payments,
the Company shall pay principal, premium, if any and interest on the Senior PIK
Securities in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts (“U.S. Legal Tender”). 
Principal, premium, if any, and interest on the Senior PIK Securities
will be payable at the office or agency of the Company maintained for such
purpose or, at the option of the Company, payment of cash interest may be made
by check mailed to the Holders at their respective addresses set forth in the
register of Holders; provided that
all cash payments of principal, premium and cash interest with respect to
Senior PIK Securities the Holders of which have given wire transfer
instructions to the Company prior to the Record Date will be required to be
made by wire transfer of immediately available funds to the accounts specified
by the Holders thereof.  With respect to
any payments of principal, interest and premium and Additional Interest, if
any, in the form of Additional Senior PIK Securities, payments shall be made by
deposit of such Additional Senior PIK Securities into the account specified by
the Holder or Holders thereof to the Company, through the Paying Agent or
otherwise.  Until otherwise designated by
the Company, the Company’s office or agency in New York will be the office of
the Trustee maintained for such purpose.

 

SECTION 3.  Paying Agent, Calculation Agent and
Registrar.  Initially, Wells Fargo
Bank, National Association, the Trustee under the Indenture, will act as Paying
Agent, Calculation Agent and Registrar. 
The Company may change any Paying Agent or Registrar without prior
notice to any Holder.  The Company or any
of its Subsidiaries may act as Paying Agent or Registrar.

 

C-6

 

SECTION 4.  Indenture.  The Company issued the Securities under an
Indenture dated as of December 23, 2004 (“Indenture”)
between the Company and the Trustee.  The
terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code §§ 77aaa-77bbbb) (the “TIA”).  The Securities
are subject to all such terms, and Holders are referred to the Indenture and
the TIA for a statement of such terms. 
To the extent any provision of this Security conflicts with the express
provisions of the Indenture, the provisions of the Indenture shall govern and
be controlling.

 

SECTION 5.  Optional Redemption.  Except as set forth in Section 6, the
Senior PIK Securities are not redeemable until June 15, 2005.  On and after June 15, 2005 and before June 15,
2006, the Senior PIK Securities will be redeemable at 100.00% of their principal
amount, plus accrued and unpaid interest to, but not including the redemption
date.  On and after June 15, 2006
and before December 15, 2007, the Senior PIK Securities will be redeemable
at 102.00% of the principal amount, plus accrued and unpaid interest to, but
not including, the redemption date.  On
and after December 15, 2007 and before December 15, 2008, the
Senior PIK Securities will be redeemable at 101.00% of the principal amount,
plus accrued and unpaid interest to, but not including, the redemption
date.  On and after December 15, 2008,
the Senior PIK Securities will be redeemable at 100.00% of the principal
amount, plus accrued and unpaid interest to, but not including the redemption
date.  Any such redemption may be made in
whole or in part following not less than three Business Days prior notice.  If the option redemption date is on or after
an interest record date and on or before the related interest payment date, the
accrued and unpaid interest will be paid to the Person in whose name the Senior
PIK Security is registered at the close of business on such record date, and no
additional interest will be payable to Holders whose Senior PIK Securities will
be subject to redemption by the Company.

 

SECTION 6.  Optional Redemption upon Equity Offering.  On or after March 15, 2005 and
prior to June 15, 2005, the Company may redeem any and all of the aggregate
principal amount of the Senior PIK Securities issued under the Indenture then
outstanding with the net cash proceeds of one or more Equity Offerings at a
redemption price of 100.00% of the principal amount of the Senior PIK
Securities, plus accrued and unpaid interest and Additional Interest, if any,
to the redemption date; provided that
such redemption shall occur within 90 days of the date of the closing of such
Equity Offering (disregarding the date of the closing of any over-allotment
option with respect thereto).

 

SECTION 7.  Mandatory Redemption.  For the avoidance
of doubt, an offer to purchase pursuant to Section 8 hereof shall not be
deemed a redemption.  The Company shall
not be required to make mandatory redemption or sinking fund payments with
respect to the Securities.

 

SECTION 8.  Offers To Purchase.  The Indenture provides that upon the
occurrence of a Change of Control or an Asset Sale and subject to further
limitations contained therein, the Company shall make an offer to purchase
outstanding Securities in accordance with the procedures set forth in the
Indenture.

 

C-7

 

SECTION 9.  Notice of Redemption.  Notice of redemption will be mailed by first
class mail at least three business days before the redemption date to each
Holder of Securities to be redeemed at its registered address.  Senior PIK Securities in denominations larger
than $1,000 may be redeemed in part.  If
any Security is to be redeemed in part only, the notice of redemption that
relates to such Security shall state the portion of the principal amount
thereof to be redeemed.  A new Security
in principal amount equal to the unredeemed portion thereof will be issued in
the name of the Holder thereof upon cancellation of the original Security.  On and after the redemption date interest
ceases to accrue on Securities or portions thereof called for redemption.

 

SECTION 10.  Denominations, Transfer, Exchange.  The Senior PIK Securities are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000.  The transfer of Securities may
be registered and Securities may be exchanged as provided in the
Indenture.  The Registrar and the Trustee
may require a Holder, among other things, to furnish appropriate endorsements
and transfer documents and the Company may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture.  The Company or the Registrar is not required
to transfer or exchange any Security selected for redemption.  Also, the Company or the Registrar is not
required to transfer or exchange any Securities for a period of 15 days before
a selection of Securities to be redeemed.

 

SECTION 11.  Persons Deemed Owners.  The registered Holder of a Security may be
treated as its owner for all purposes.

 

SECTION 12.  Amendment, Supplement and Waiver.  Subject to certain exceptions, the Indenture
and the Securities may be amended or supplemented with the written consent of
the Holders of at least a majority in aggregate principal amount of the
Securities then outstanding, and any existing Default or compliance with any provision
may be waived with the consent of the Holders of a majority in aggregate
principal amount of the Securities then outstanding.  Without notice to or consent of any Holder,
the parties thereto may amend or supplement the Indenture and the Securities
to, among other things, cure any ambiguity, defect or inconsistency in the
Indenture, provide for uncertificated Securities in addition to certificated
Securities, comply with any requirements of the Commission in connection with
the qualification of the Indenture under the TIA, or make any change that does
not adversely affect the rights of any Holder of a Security; provided, however, that
if any amendment, waiver or other modification will only affect the Discount
Securities, Senior Securities or the Senior PIK Securities, only the consent of
the Holders of at least a majority in aggregate principal amount at maturity of
the then outstanding Discount Securities or at least a majority in principal
amount of Senior Securities or Senior PIK Securities (and not the consent of at
least a majority of all Securities), as the case may be, shall be required.

 

SECTION 13.  Defaults and Remedies.  If a Default occurs and is continuing, the
Trustee or the Holders of at least 25% in aggregate principal amount of the then
outstanding Securities generally may declare all the Securities to be due and
payable immediately.  Notwithstanding the
foregoing, in the case of a Default arising from certain events of bankruptcy
or insolvency as set forth in the Indenture, with respect to the Company, all outstanding

 

C-8

 

Securities
will become due and payable without further action or notice.  Holders of the Securities may not enforce the
Indenture or the Securities except as provided in the Indenture.  Subject to certain limitations, Holders of a
majority in aggregate principal amount of the then outstanding Securities may
direct the Trustee in its exercise of any trust or power.  The Trustee may withhold from Holders notice
of any continuing Default (except a Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest.  The Holders of a majority in
aggregate principal amount of the Securities then outstanding by notice to the
Trustee may on behalf of the Holders of all of the Securities waive any Default
and its consequences under the Indenture except a continuing Default in the payment
of interest on, or the principal of the Securities or in respect of certain
covenants set forth in the Indenture.

 

SECTION 14.  Restrictive Covenants.  The Indenture contains certain covenants
that, among other things, limit the ability of the Company and its Restricted
Subsidiaries to make restricted payments, to incur indebtedness, to create liens,
to sell assets, to permit restrictions on dividends and other payments by Restricted
Subsidiaries of the Company, to consolidate, merge or sell all or substantially
all of its assets or to engage in transactions with affiliates.  The limitations are subject to a number of
important qualifications and exceptions. 
The Company must annually report to the Trustee on compliance with such
limitations.

 

SECTION 15.  No Recourse Against Others.  No director, officer, employee, incorporator
or stockholder of the Company or any direct or indirect parent corporation, as
such, shall have any liability for any obligations of the Company under the
Securities, the Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. 
Each Holder of Securities by accepting a Security waives and releases
all such liability.  The waiver and
release are part of the consideration for issuance of the Securities.

 

SECTION 16.  Trustee Dealings with the Company.  The Trustee under the Indenture, in its individual
or any other capacity, may become the owner or pledgee of Securities and may
otherwise deal with the Company, its Subsidiaries or their respective
Affiliates as if it were not the Trustee.

 

SECTION 17.  Authentication.  This Security shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.

 

SECTION 18.  Abbreviations.  Customary abbreviations may be used in the
name of a Holder or an assignee, such as: 
TEN COM (= tenants in common), TEN ENT (= tenants by the entirety), JT
TEN (= joint tenants with right of survivorship and not as tenants in common),
CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).

 

SECTION 19.  Additional Rights of Holders of Restricted
Global Securities and Restricted Definitive Securities.  Pursuant to, but subject to the exceptions
in, the Senior PIK Registration Rights Agreement, the Company will be obligated
to consummate an exchange offer pursuant to which the Holder of this Security
shall have the right to exchange this Initial Security for a Floating Rate
Senior PIK Security due 2014 of the Company which shall have been registered
under the Securities Act, in like principal amount and having terms

 

C-9

 

identical in
all material respects to this Initial Security (except that such note shall not
be entitled to Additional Interest).  The
Holders shall be entitled to receive certain Additional Interest in the event
such exchange offer is not consummated or the Securities are not offered for
resale and upon certain other conditions, all pursuant to and in accordance
with the terms of the Senior PIK Registration Rights Agreement.(a)

 

SECTION 20.  CUSIP Numbers.  Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Securities and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders.  No representation is made as to the accuracy
of such numbers either as printed on the Securities or as contained in any
notice of redemption and reliance may be placed only on the other
identification numbers placed thereon.

 

SECTION 21.  Governing Law.  This Security shall be
governed by, and construed in accordance with, the laws of the State of New
York

 

The Company
will furnish to any Holder upon written request and without charge a copy of
the Indenture.

 

(a)           This Section not to
appear on Exchange Securities.

 

C-10

 

ASSIGNMENT FORM

 

I or we assign
and transfer this Security to:

 

	
   

  
	
  (Insert assignee’s social security or tax
  I.D. number)

  
	
   

  
	
   

  
	
  (Print or type name, address and zip code
  of assignee)

  

 

and
irrevocably appoint:

 

Agent to
transfer this Security on the books of the Company.  The Agent may substitute another to act for
him.

 

	
  Date:

  	
   

  	
   

  	
  Your Signature:

  	
   

  
	
   

  	
   

  	
  (Sign exactly as your name appears on

  the other side of this Security)

  
	
   

  	
   

  	
   

  
	
  Signature Guarantee:

  	
   

  	
   

  
							

 

SIGNATURE GUARANTEE

 

Signatures
must be guaranteed by an “eligible guarantor institution” meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program (“STAMP”) or
such other “signature guarantee program” as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.

 

C-11

 

OPTION OF HOLDER TO ELECT
PURCHASE

 

If you want to
elect to have this Security purchased by the Company pursuant to Section 4.09
or Section 4.13 of the Indenture, check the appropriate box:

 

	
  Section 4.09 [         ]

  	
  Section 4.13 [         ]

  

 

If you want to
elect to have only part of this Security purchased by the Company pursuant to Section 4.09
or Section 4.13 of the Indenture, state the amount:  $               

 

	
  Dated: 

  	
   

  	
   

  	
  Signed:

  	
   

  
	
   

  	
   

  	
  (Sign exactly as name appears on the

  other side of this Security)

  
	
   

  	
   

  
	
  Signature Guarantee:

  	
   

  
	
   

  	
  Participant in a recognized Signature Guarantee Medallion Program

  (or other signature guarantor program reasonably acceptable to the Trustee)

  
						

 

C-12

 

EXHIBIT D

 

[FORM OF LEGEND FOR 144A SECURITIES AND

OTHER SECURITIES THAT ARE RESTRICTED SECURITIES]

 

The
Securities evidenced hereby have not been registered under the United States
Securities Act of 1933, as amended (the “Securities Act”), and may not be
offered, sold, pledged or otherwise transferred except (a) (1) to a
person who the seller reasonably believes is a qualified institutional buyer
within the meaning of Rule 144A under the Securities Act purchasing for
its own account or for the account of a qualified institutional buyer in a
transaction meeting the requirements of Rule 144A, (2) in an offshore
transaction complying with Rule 903 or Rule 904 of Regulation S
under the Securities Act, (3) pursuant to an exemption from registration
under the Securities Act provided by Rule 144 thereunder (if available), (4) to
an institutional accredited investor in a transaction exempt from the
registration requirements of the Securities Act or (5) pursuant to an
effective registration statement under the Securities Act and (b) in accordance
with all applicable securities laws of the United States and other
jurisdictions.

 

D-1-1

 

[FORM OF ASSIGNMENT FOR
144A SECURITIES

AND OTHER SECURITIES THAT ARE RESTRICTED SECURITIES]

 

I or we assign
and transfer this Security to:

 

	
   

  
	
  (Insert assignee’s social security or tax
  I.D. number)

  
	
   

  
	
   

  
	
  (Print or type name, address and zip code
  of assignee)

  

 

and
irrevocably appoint:

 

Agent to
transfer this Security on the books of the Issuer.  The Agent may substitute another to act for
him.

 

[Check One]

 

[  ]  (a)     this
Security is being transferred in compliance with the exemption from
registration under the Securities Act provided by Rule 144A thereunder.

 

or

 

[  ]  (b)  
this Security is being transferred other than in accordance with (a) above
and documents are being furnished which comply with the conditions of transfer
set forth in this Security and the Indenture.

 

If none of the
foregoing boxes is checked, the Trustee or Registrar shall not be obligated to
register this Security in the name of any person other than the Holder hereof
unless and until the conditions to any such transfer of registration set forth
herein and in Sections 2.16 and 2.17 of the Indenture shall have been satisfied.

 

	
  Date:

  	
   

  	
   

  	
  Your
  Signature:

  	
   

  
	
   

  	
   

  	
  (Sign
  exactly as your name

  appears on the face of this Security)

  
	
   

  	
   

  	
   

  
	
  Signature
  Guarantee:

  	
   

  
						

 

SIGNATURE GUARANTEE

 

Signatures
must be guaranteed by an “eligible guarantor institution” meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program (“STAMP”) or
such other “signature guarantee program” as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.

 

D-1-2

 

TO BE COMPLETED BY TRANSFEROR
IF (a) ABOVE IS CHECKED

 

The Transfer
is being effected pursuant to and in accordance with Rule 144A under the
Securities Act, and, accordingly, the Transferor hereby further certifies that
the beneficial interest or certificated Security is being Transferred to a
Person that the Transferor reasonably believed and believes is purchasing the
beneficial interest or certificated Security for its own account, or for one or
more accounts with respect to which such Person exercises sole investment
discretion, and such Person and each such account is a “qualified institutional
buyer” within the meaning of Rule 144A in a transaction meeting the
requirements of Rule 144A and such Transfer is in compliance with any
applicable securities laws of any state of the United States.  Upon consummation of the proposed Transfer in
accordance with the terms of the Indenture, the Transferred beneficial interest
or certificated Security will be subject to the restrictions on transfer
enumerated on the Rule 144A Securities and/or the certificated Security
and in the Indenture and the Securities Act.

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  NOTICE:

  	
  To be executed by an executive officer

  

 

D-1-3

 

EXHIBIT E

 

[FORM OF LEGEND FOR REGULATION S
SECURITY]

 

This
Security has not been registered under the U.S. Securities Act of 1933, as
amended (the “Act”), and, unless so registered, may not be offered, sold or
otherwise transferred within the United States or to, or for the account or
benefit of, U.S. Persons unless registered under the Act or except pursuant to
an exemption from, or in a transaction not subject to, the registration
requirements of the Act.

 

In
connection with any transfer, the holder will deliver to the Registrar and
Transfer Agent such certificates and other information as such Transfer Agent
may reasonably require to confirm that the transfer complies with the foregoing
restrictions.

 

E-1

 

[FORM OF
ASSIGNMENT FOR REGULATION S SECURITY]

 

I or we assign
and transfer this Security to:

 

	
   

  
	
  (Insert assignee’s social security or tax
  I.D. number)

  
	
   

  
	
   

  
	
  (Print or type name, address and zip code
  of assignee)

  

 

and
irrevocably appoint:

 

Agent to
transfer this Security on the books of the Issuer.  The Agent may substitute another to act for
him.

 

[Check One]

 

o  (a)  
this Security is being transferred in compliance with the exemption from
registration under the Securities Act provided by Regulation S thereunder.

 

or

 

o  (b)  
this Security is being transferred other than in accordance with (a) above
and documents are being furnished which comply with the conditions of transfer
set forth in this Security and the Indenture.

 

If none of the
foregoing boxes is checked, the Trustee or Registrar shall not be obligated to
register this Security in the name of any person other than the Holder hereof
unless and until the conditions to any such transfer of registration set forth
herein and in Sections 2.16 and 2.17 of the Indenture shall have been satisfied.

 

	
  Date:

  	
   

  	
   

  	
   

  	
  Your
  Signature:

  	
   

  
	
   

  	
   

  	
   

  	
  (Sign exactly as your name appears on the

  face of this Security)

  
	
   

  	
   

  	
   

  	
   

  
	
  Signature
  Guarantee:

  	
   

  
							

 

SIGNATURE GUARANTEE

 

Signatures
must be guaranteed by an “eligible guarantor institution” meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program (“STAMP”) or
such other “signature guarantee program” as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.

 

E-2

 

TO BE COMPLETED BY TRANSFEROR
IF (a) ABOVE IS CHECKED

 

The Transfer
is being effected pursuant to and in accordance with Rule 903 or Rule 904
under the Securities Act and, accordingly, the Transferor hereby further
certifies that (i) the Transfer is not being made to a person in the
United States and (x) at the time the buy order was originated, the Transferee
was outside the United States or such Transferor and any Person acting on its
behalf reasonably believed and believes that the Transferee was outside the
United States or (y) the transaction was executed in, on or through the facilities
of a designated offshore securities market and neither such Transferor nor any
Person acting on its behalf knows that the transaction was prearranged with a
buyer in the United States, (ii) no directed selling efforts have been
made in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S under the Securities Act, (iii) the transaction is not part
of a plan or scheme to evade the registration requirements of the Securities
Act and (iv) if the proposed Transfer is being made prior to the
expiration of the restricted period under Regulation S, the Transfer is not
being made to a U.S. Person or for the account or benefit of a U.S. Person
(other than an initial purchaser).  Upon
consummation of the proposed Transfer in accordance with the terms of the
Indenture, the Transferred beneficial interest or certificated Security will be
subject to the restrictions on Transfer enumerated on the Regulation S
Securities and/or the certificated Security and in the Indenture and the
Securities Act.

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
  NOTICE:

  	
  To be executed by an executive officer

  

 

E-3

 

EXHIBIT F

 

[FORM OF LEGEND FOR GLOBAL SECURITY]

 

Any Global
Security authenticated and delivered hereunder shall bear a legend (which would
be in addition to any other legends required in the case of a Restricted
Security) in substantially the following form:

 

This
Security is a Global Security within the meaning of the Indenture hereinafter
referred to and is registered in the name of a Depository or a nominee of a
Depository.  This Security is not
exchangeable for Securities registered in the name of a person other than the
Depository or its nominee except in the limited circumstances described in the
Indenture, and no transfer of this Security (other than a transfer of this
Security as a whole by the Depository to a nominee of the Depository or by a
nominee of the Depository to the Depository or another nominee of the
Depository) may be registered except in the limited circumstances described in
the Indenture.

 

Unless
this Certificate is presented by an authorized representative of The Depository
Trust Company (a New York corporation) (“DTC”) to the issuer or its agent for
registration of transfer, exchange, or payment, and any Certificate issued is
registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or such other entity as is requested by an authorized
representative of DTC), any transfer, pledge or other use hereof for value or
otherwise by or to any person is wrongful inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.

 

F-1-1

 

EXHIBIT G

 

Form of Certificate To Be

Delivered in Connection with

Transfers to Non-QIB Accredited Investors

 

[             ],
[    ]

 

Wells Fargo Bank, National Association 

Sixth Street and Marquette Avenue

N9303-120

Minneapolis, MN  55179

 

Ladies and Gentlemen:

 

In connection
with our proposed purchase of 9.5% Senior Discount Notes due 2014, Floating
Rate Senior Notes due 2011 and Floating Rate Senior PIK Notes due 2014 (the “Securities”)
of WMG HOLDINGS CORP., a Delaware corporation (“the Issuer”), we confirm that:

 

1.             We have received a copy of the
Offering Memorandum (the “Offering Memorandum”), dated December 17, 2004,
relating to the Securities and such other information as we deem necessary in
order to make our investment decision. 
We acknowledge that we have read and agreed to the matters stated in the
section entitled “Notice to Investors” of such Offering Memorandum,
including the restrictions on duplication and circulation of the Offering
Memorandum.

 

2.             We understand that any subsequent
transfer of the Securities is subject to certain restrictions and conditions
set forth in the Indenture relating to the Securities (the “Indenture”) as
described in the Offering Memorandum and the undersigned agrees to be bound by,
and not to resell, pledge or otherwise transfer the Securities except in
compliance with, such restrictions and conditions and the Securities Act of
1933, as amended (the “Securities Act”), and all applicable State securities
laws.

 

3.             We understand that the offer and
sale of the Securities have not been registered under the Securities Act, and
that the Securities may not be offered or sold except as permitted in the
following sentence.  We agree, on our own
behalf and on behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell any Securities, we will do so only (i) to
the Issuer or any of its subsidiaries, (ii) inside the United States in
accordance with Rule 144A under the Securities Act to a “qualified
institutional buyer” (as defined in Rule 144A under the Securities Act), (iii) inside
the United States to an institutional “accredited investor” (as defined below)
that, prior to such transfer, furnishes (or has furnished on its behalf by a
U.S. broker-dealer) to the Trustee (as defined in the Indenture) a

 

G-1

 

signed letter
containing certain representations and agreements relating to the restrictions
on transfer of the Securities (the form of which letter can be obtained from
the Trustee), (iv) outside the United States in accordance with Regulation
S promulgated under the Securities Act to non-U.S. persons, (v) pursuant
to the exemption from registration provided by Rule 144 under the
Securities Act (if available), (vi) in accordance with another exemption
from the registration requirements of the Securities Act (and based upon an
opinion of counsel if the Issuer so requests) or (vii) pursuant to an
effective registration statement under the Securities Act, and we further agree
to provide to any person purchasing any of the Securities from us a notice
advising such purchaser that resales of the Securities are restricted as stated
herein.

 

4.             We are not acquiring the Securities
for or on behalf of, and will not transfer the Securities to, any pension or
welfare plan (as defined in Section 3 of the Employee Retirement Income
Security Act of 1974, as amended) or plan (as defined in Section 4975 of
the Internal Revenue Code of 1986, as amended), except as permitted in the section entitled
“Notice to Investors” of the Offering Circular.

 

5.             We understand that, on any proposed
resale of any Securities, we will be required to furnish to the Trustee and the
Issuer such certification, legal opinions and other information as the Trustee
and the Issuer may reasonably require to confirm that the proposed sale
complies with the foregoing restrictions. 
We further understand that the Securities purchased by us will bear a
legend to the foregoing effect.

 

6.             We are an institutional “accredited
investor” (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation
D under the Securities Act) and have such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of our
investment in the Securities, and we and any accounts for which we are acting
are each able to bear the economic risk of our or their investment, as the case
may be.

 

7.             We are acquiring the Securities
purchased by us for our account or for one or more accounts (each of which is
an institutional “accredited investor”) as to each of which we exercise sole
investment discretion.

 

G-2

 

You, the
Issuer, the Trustee and others are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.

 

	
   

  	
  Very truly
  yours,

  
	
   

  	
   

  
	
   

  	
  [Name of
  Transferee]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

G-3

 

EXHIBIT H

 

Form of Certificate To Be
Delivered

in Connection
with Transfers

Pursuant to
Regulation S

 

Wells Fargo Bank, National Association 

Sixth Street and Marquette Avenue

N9303-120

Minneapolis, MN  55179

 

	
  Re:

  	
   

  	
  WMG Holdings Corp. (“the Issuer”) 9.5%
  Senior Discount

  Notes due 2014, Floating Rate Senior Notes due 2011 and

  Floating Rate Senior PIK Notes due 2014 (the “Securities”)

  

 

Ladies and Gentlemen:

 

In connection
with our proposed sale of $[        ]
aggregate principal amount, or aggregate principal amount at maturity, as
applicable, of the Securities, we confirm that such sale has been effected pursuant
to and in accordance with Regulation S under the U.S. Securities Act of 1933,
as amended (the “Securities Act”), and, accordingly, we represent that:

 

(1)           the offer of the Securities was not
made to a person in the United States;

 

(2)           either (a) at the time the buy
offer was originated, the transferee was outside the United States or we and
any person acting on our behalf reasonably believed that the transferee was
outside the United States, or (b) the transaction was executed in, on or
through the facilities of a designated offshore securities market and neither
we nor any person acting on our behalf knows that the transaction has been prearranged
with a buyer in the United States;

 

(3)           no directed selling efforts have been
made in the United States in contravention of the requirements of Rule 903(b) or
Rule 904(b) of Regulation S, as applicable;

 

(4)           the transaction is not part of a plan
or scheme to evade the registration requirements of the Securities Act; and

 

(5)           we have advised the transferee of the
transfer restrictions applicable to the Securities.

 

H-1

 

You, the
Issuer and counsel for the Issuer are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. 
Terms used in this certificate have the meanings set forth in Regulation
S.

 

	
   

  	
  Very truly
  yours,

  
	
   

  	
   

  
	
   

  	
  [Name of
  Transferor]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Authorized Signature

  

 

H-2

 

EXHIBIT I

 

GUARANTEE

 

Each of the
undersigned (the “Guarantors”) hereby jointly and severally unconditionally guarantees,
to the extent set forth in the Indenture dated as of December 23, 2004 by
and among WMG Holdings Corp., a Delaware corporation, as issuer (the “Company”),
the Guarantors, as guarantors, and Wells Fargo Bank, National Association, as
Trustee (as amended, restated or supplemented from time to time, the “Indenture”),
and subject to the provisions of the Indenture, (a) the due and punctual
payment of the principal of, and premium, if any, and interest on the
Securities, when and as the same shall become due and payable, whether at
maturity, by acceleration or otherwise, the due and punctual payment of
interest on overdue principal of, and premium and, to the extent permitted by
law, interest, and the due and punctual performance of all other obligations of
the Issuer to the Holders or the Trustee, all in accordance with the terms set
forth in Article Eleven of the Indenture, and (b) in case of any
extension of time of payment or renewal of any Securities or any of such other
obligations, that the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise.

 

The
obligations of the Guarantors to the Holders and to the Trustee pursuant to
this Guarantee and the Indenture are expressly set forth in Article Eleven
of the Indenture, and reference is hereby made to the Indenture for the precise
terms and limitations of this Guarantee. 
Each Holder of the Security to which this Guarantee is endorsed, by
accepting such Security, agrees to and shall be bound by such provisions.

 

[Signatures on Following Pages]

 

I-1

 

IN WITNESS
WHEREOF, each of the Guarantors has caused this Guarantee to be signed by a
duly authorized officer.

 

	
   

  	
  [                                               ]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

I-2

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