AF]WRecording,Industry Term Sheet - April 18, 2017

Subject to (l) the dismissal of American Federation of Musicians & Employers Pension Fxmd vs.Atlantic Recording Corp. et. al., l: 15-cv-6267-GHW, (2) the approval of each of UMGRecordings, Inc. and Capitol Records LLC, Hollywood Records, Sony Music Entertainment,Atlantic Recording Corp. and Warner Bros. Records, Inc., and (3) ratification by the AmericanFederation of Musicians, the parties wil? extend and modify the Sound Recording LaborAgreement to include the fol)owing terms:

1. Resolving Adrntnistrative ]Burdens and Issues. Agree to convene a committee of AFMand Industry i'nembers to work to resolve the following:

a. Iiidustry's proposals to delete the requirement to provide the AFM with copies ofphysical product and to require the provision of the digital equivalent of '!abelcopy" for new releases on a regular basis.

b. AFM's proposals to require the provision of the digital equivalent of Iabel copyand all associated metadata identifying al! producers, contractors, arrangers,orchestrators, copyists, leaders, instrumental musicians and instrumentsperformed, and to provide copies of physical product on request.

e. The provision of B-forms and other session repotting options. Discussion sha)liiiclude the UM(J session tracker system.

d. The language regarding i'iew use obligations that is used by the Cornpanies inlicenses for new uses.

e. The information the Companies provide the AFM about new uses licenses.

2. Use of Phonograph Records

Modify paragraph 7 of the SLRA as fo)lows:

Notwithstanding the restriction set forth in Paragraph 7 of the SLRA, and uponnotification to the Federation, a track or tracks without vocals may be used in a liveperformance which is not a drama, symphony, opera, ballet, chamber or theatricalperformance of any kind, where every musician -whose performance on the track or tracks:s used but who is allot participating in the live performance is paid in accordance witheither (a) or (b) below:

a, Each such musician receives a payment of $170 plus pension contribution at theSRLA rate for each Iive performance during which hi,s/her performance on thetrack or tracks is used, and each such payment arid pension contribution isreported on a month!y B-7 Form filed with the Federation; or

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b. Each such musician receives a lump-sum payment prior to the first performanceof a tour of eitber

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1. $5,000 plus pension contribution at the SRLA rate, which payi'nent shallcover all performances within a six-month period beginning on the day ofthe first performance of the tour, or

2. $9,000 plus pension contribution at the SRLA rate, which payment sha?lcover ah performances within a twelve-month period beginning on the dayof the first performance of the tour,

3. Such Iump-sum payment shall be reported on a B-7 %rm filed with theFederation at t}ie time of payment.

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c. In the event the Company was unaware of the use of a track or tracks on tour,payment under either (a) or (b) above can be made within thirty (30) days ofnotice to the Company.

3. NewUse

Modify Article 21(a) to provide as follows:

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A. Low Fee Tradtjional Uses

a. If a Compaiiy iicenses its covered recor6ing for use in the United States orCanada in a television broadcast, cab!e exhibition or motion picture at afee of $7,500 or less (each such Iicanse, a "Low Fee Traditional UseLicense"), the total new use payment payable in connection with eachsuch Iicense shall be the greater of 7% of the Company's revenue fromsuch license or $165. In addition, the Company also will make a pensionpayment at the applicable SRLA rate. Such AFM-EPF contributions shallnot constitute contributions on behalf of any particular individua).

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b.

C.

d.

Company (or its designee) shall condition the rights granted to the !icenseeunder each Low Fee Traditional Use License on such licensee's paymentof the new use fee and pension payment prescribed in subparagraph (a)above.

Company shall send each Iiceiisee under a Low Fee Traditional UseLicense a single invoice showing the license fee, the new use fee andpension payment payable in respect of such license, unless the licenseerequests that Coinpany send separate invoices-one showing the licensefee, and one showing the new use fee and pension payment. Companywill advise the Union of each licensee t?iat has requested separate invoices.

For each L6w Fee Traditionai Use License issued during the quartercoi'icerned, the Company will provide the Union with a quarterly reportshowing the recording name, featured attist name, the licensee, thespecific nature of the use (including the title, if possible), the date of thelicense and the amountaof the licensee fee.

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e. The Compaiiy sha)I remit 2/3 of any new use fees payable in connectionwith a Low Fee Traditional Use License that it receives under thisprovision to the Special Payments Fund ("SPF"), and l/3 of any new usefees payable in connection with a Low Fee Traditional Use License that itreceives under this provtston to the Music Performance Trust Fund(?MPTF"), on a semiannual basis. The fees the Company remitshereunder shall be accompanied by a report indicating the name of eachlicensed recording for which it is remitting such monies, the title of the useand the amount being remitted for each such recordiiig. Company'sefforts to collect lhe new use fees and pension payments payable pursuantto Low Fee Traditional Use Licenses l'iereunder will be comparable in allmaterial respects with the Company's efforts to collect the license feespayable pursuant to such licenses. Under no circumstances wi!l Compariybe required to pay any new use fees or pension payments pursuant to aLow Fee Traditional Use License if such fees have not been paid toCompany by the licensee. In the event Company receives the license feepayable pursuant to a given Low Fee Traditional Use License, but doesnot also receive the new use fee or pension payment payable in respect ofsuch Low Fee Traditional Use License, and-Company's efforts to collectthe new use fee and pension payment payable pursuant to such Iicensewere not comparable to Company's efforts to collect such license fee, thenin this limited circumstance only, Company shall be required to rei'nit tothe SPF and MPTF, pursuant to the aforementioned forrmila, and AFM-EPF, the full amount oF the unpaid new use fee and pension paymentpayable pursuant to such license despite the fact that Company did riotreceive such fees and payments from the Iicensee concerned.

B. Non-Traditional Uses

a. rf a Company licenses its covered recordiiig for use in the United States orCanada for Non-Traditional Uses (as defined be)ow), the new use feepayable for such uses shall be 3% of the Company's revenue from suchlicenses (including license fee, per unit royalty or other form of paymentfor such license).

b. "Non-Traditional Uses,? as used herein, shall be defined as the use in (i) adigital chip (or its equivalent) in connection with a consumer product, (ii)consumer-based Internet synch licensing, or (iii) an audio/visual programmade for initial exhibition in "new media" ( e.g., webisodes, videopodcasts, etc.) but not including uses in programs comparable totraditional full-length, scripted television programs that are produced forinitial exhibition on paid streaming services (e.g., "House of Cards,""Transparent").

e. The foregoing new use fee for Non-Traditional Uses wilt be a?located asfollows: 2/3 of the new use fee to the SPF and 1/3 of the new use fee tothe MPTF.

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C. ,Video Games (a/k/a Interaetive Media)

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a. Current contract )anguage regarding Video Ciarnes to remain, and willcover both Foreign and Doinestic uses of Video Games.

D. Mobile Applications

a. Notwithstanding any other provision of the SRLA, if a covered recordingis licensed for use in a Mobile Application (as defined below) in theUnited States or Canada, the Company will only be required to pay a newuse fee if Company receives revenue pursuant to such licenses. If aCompany licenses its covered recording for use in the United States orCanada for use in a Mobile Application (as defined below), the new usefee payable for such uses shall be 3% of revenue from such licenses.

b, A "Mobiie Application," as used herein, shall mean mobile applications ofairy kind ( other than music players or other applications designed for theprimary purpose of playing covered recordings) on the IOS and Androidmobile operating systems and any other similarly functioning mobileoperating systems requested by Company that the Federation approves,which approval Federation shall not unreasonably withhold.

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c. Such new use fees shall be payable 2/3 to the SPF and I/3 to the MPTF.l

d. The terms of this provision shall expire and have no further effect onJanuary 31, 2020, except that this sunset will not impact any licensegranted prior to January 31, 2020. All such licenses prior to January 31,2020 shall continue to be governed by the terms of this Agreement.

E. Low Fe;e L,ife Cycle and Similar Licenses

a. If a Company ?icenses its covered recording for use in the United Statesor Canada for $2,500 or Iess for use exclusively (i) in audio/visualproductions of life cycle or other similar personal or non-commercialsvideos (e.g., weddings, bar/bat mitzvalis, quinceafieras, yearbooks, photomontages, etc.) whether through direct licensing to consumers, third-pattyvideographers, aggregation services, or other means, or (ii) in or atbusiness conferences or presentations, where such Iicenses do not permitsuch uses to be made putiliciy available in any form, the new use feepayable shall be 3% of revenue from such licenses.

b. Such new use fees sl'iall be payable 2/3 to the SPF and l /3 to the MPTF.

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c. In the event that the SPF determines to make individual payments tomusicians for Iow Fee Life Cycle licenses, the SPF shall promptlyinform the Companies. Effective as of the first day of the six-monthreporting period that commences at least 30 days after the SPF informs

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the Companies, contributions to the SPF shall be subject to a pensioncontribution by the Companies. Companies shall make suchcontributions to the SPF, arid the SPF shall then remit such contributions 'to the AFM-EPF.

d. Con'ipany's efforts to collect the new use fees payable pursuant to LowFee Life Cycle Licenses hereunder will be comparable in all materialrespects with the Cotnpany's efforts to collect the ] icense fees payablepursuant to such licenses. Under no circumstances wilt Company berequired to pay any new use fees pursuant to a Low Fee Life CycleLicense if such fees have not been paid to Company by the licensee. Inthe event Company receives the license fee payable pursuant to a givenLow Fee Life Cycle License, but does not also receive the new use feepayable in respect of such Low Fee Life Cycle License, and Company'sefforts to collect the new use Fee payable pursuant to such Iicense werenot comparable to Company's efforts to col)ect such license fee, then inthis limited circumstance only, Company shall be required to remit to theSPF and MPTF, pursuant to the aforementioned formula, the full amountof the unpaid new use fee payable pursuant to such license despite thefact that Company did not receive such fees from the licensee concerned.

F. 7oreign Use Licenses

Effective upon ratification:

a. New use fees for covered recordings that are )icensed for use in programsfor television broadcast, programs for cable exhibition, motion picturesand commercials that are created and exploited exclusively outside theUnited States and its territories or Canada ("Foreign Traditional UseIicenses") shall be as set forth in this paragraph. The term "usedexclusively outside the United States or Canada" shall include availabilityon the Interiiet in the United States and/or Caiiada, provided that suchInternet availability in the United States and/or Canada is incidental to theprimary licensed use (e.g., a foreign television commercial that can beaccessed on an advertiser's Web site).

b. With respect to Foreign Traditional Use Licenses for commercials, thenew use fee payable shall be 4% of the Company's revenue from suchlicenses, subject to a minimum of $150 and a maximum of $3,500.Effective January 3 ], 2020, AFM-EPF contributions will be made inrespect of each such license at the applicable SRLA rate. Such AFM-EPFcontributions shall not constitute contributions on behalf of any particuiarindividual.

e. With respect to all other Foreign Traditional Use Licenses, the new use feepayable shall be 3% of the Company's revenue from such licenses, subject

to a minimum of $100 and a iriaximtim of $3,500, Effective January 31,2020, AFM-EPF contributions wilt be made in respect of each suchIicense at the applicab)e SRLA rate. Such AFM-EPF contributions shallnot constitute contributions on behalf of any particular individual.

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d. New use fees for covered recordings that are Iicensed ror any non-traditional use provided for in Paragraphs B and D above for use inproductiorxs created and exploited exclusively outside the United Statesand its territories and Canada, shall be under the same terms andconditions as set forth iii those paragraphs; however, the maximum newuse fee for any such use shaH be $3,500.

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e. With respect to all Iiznses under this provision, Coinpany shall provideits foreigri affiliates a ?Uiiion Qbligations Letter" in the form attachedhereto as Exhibit .? and shall work with the foreign affiliate to have theforeign affiliate provide the Union Obligations Letter with each license ofa covered recording.

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f, The Union Obligations Letter shall include language directing licensees topay such 2/3 of such new use fees to the SPF and l/3 of such new use feesto the MPTF.

G. For the avoidance of doubt, the foregoing new use fees sha)l be payable solely bythe Coiripany in the country where the covered record ing originates (i.e., by therepextoire owner in the United States or Canada, but not both), based on suchCompany's receipts.

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H. For all new use fees paid to the SPF, such payments shall be added to the generalpool of funds for distribution to avoid the Fund's administrative burden ofidentifying the individual musicians,

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I. There shall be no new use obligations with respect to music preparation work.

J, Company shall provide the AFM with copies of each payment report it providesto the SPF ai'id 'MPTF in connection with the payments remitted hereunder. I

K, Except as set forth in Paragraph A and E above, the new use payment may be paiddirectly by either the licensee or Coinpany. If a covered recording is licensed fora use other than those defined, in Paragraph A above and the AFM has beenprovided notice of the license, the AFM sha)l rook only to the licensee for suchpayment. The new use fee shall not be considered in determinin.g the amount ofthe license.

L, The AFM, on behalf of itself and its members, waives any claim against anyCompany for new use payments for licensing covered recordings for any usedescribed in paragraphs A-F at any time before the execution of this Agreement.

Nothing herein, however, precludes the AFM from collecting new use paymentsdirectly from any licensee.

4, Charitable Recording. Enter into a side letter whereby the Federation will entertain andpromptly respond to requests for a waiver of col?ective bargaining agreementapplication to a phonograph record when all proceeds received by the Company and ariyRoyalty Artists in connection with that phonograph record are donated to aacharitablenonprofit organization (e.g., 501(c)(3) organization), and all other performers in the eventare waiving payment. Tri the abserice of a response within 7 days, the request will bedeemed granted. For each such recording where syaiver is granted, proje-ct credits shallacknowledge the donation of the AFM and musicians to the pro3ect.-

5. Low Budget Location Recordings. Revise the first paragraph of section 6 of the LowBudget Location Recording Side letter to read as fol?ows:

?Low Budget Recordings shall apply to recordings oflive performances made inIocations other than traditional recording studios (e.g., AppIe Store, music conferencessuch as SXSW), provided that the recording is made to promote art artist or recording,and that tickets to the performance are riot purchased for the purpose of hearing anyparticular artist. A traditional recording studio does not include a performance or conpertvenue, a soundstage, or any other facility not desi@ned and established as a permanentrecording studio. Low Budget Location Recordings shall be subject to the terms of thecurrent Side Letter Agreement - Low Budget Recordings except as modified herein".

6. Streaming Payments. The following Streaming terms are intended to supersede thepayment terms of the 1994 MOA. Accordingly, the parties wi!I make all necessaryrevisions to the 1994 MOA payment obligation and the Digitai Exploitation provisions ofthe SRLA.

a, Effective as of January 1, 2017, each Company sha)l pay 0.36% of Receipts forAudio Streams exploited throughout the world, subject to the ?imits prescribed insubparagraph 6(b) below, and paid as described in Paragraph 6(c) below (the?Streaming Obligation"). Audio Streams that are s?ibject to the compulsorylicense created by 17 U.S.C. Section 114 will continue to be governed by theprovisions of section 114.

b. The Streaming Obligation shall be no greater than 0.55% of Receipts for AudioStreams exploited in the United States and no less than 0.5% of Receipts forAudio Streams exp)oited in the United States,

c. The Streaming Obligation shall be paid as follows:

t. The Companies shall make an aggregate, lump-sum payment to the AFM-EPF in each year of the contract ("Pension Lump Sum"), which shall bepaid in semiarinual iiistallments on August 15 and Febr?iary 15 of eachyear, beginning in August 2017,

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T!te Pension Lump Sum shall bc paid as follows:a l-Hollywood

Yeari(A=49andCapjtoJ j.Rea>rds?. ?..?' 1 "$1::H;:! S2,335,458.41 l s ias,s.az.oq

2017 ia---rsi3bg,o6p:zs a i 'sx-sx,is-s:aozoig --- - - .- --I-- - - -.-..

I ; $2,802,550.09 l S 166,2.38,51I

i2019!

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Sqny&.bisic?, . iqroi2p . .S 1.489,7?52.32: { $lj)36,257.18 i $5,000,004).00 :

---f jVarner&liisic'--i -yx;,,q,,,): .=..-..-.-,, -!% $'l-,g'j8Jii,56 l-$ (,ljg-,s:8z-.gg -i '$s',?sotj:6(x56o-,

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i sai,jfi'y,io>.yg-'l sT.z4'h,soa.'6r-i 's€.66o,66o:o6 i-iy.

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Nohxaitbs€anding the abova:

1. [n the event tht the Strt=aming Obligation of an7 Compart7 for atvyyear is Iess than its sbsre or the r%nsion I,urnp Sum for that year,that Company's share of €he Pension Lump Sum shall be reducedto its Stremning Obligation for tbat year and the Peiuiion LumpSum total shall be *duced by tbe same amount

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2. In the evcnt that the Strcaming Obligation or any Company t'or anyyear exceeds that Company's share of die Pension Lump Sum inthat year, 2!3 of the excess stuill be paid to the SPF and 1/3 of theexcess shall be paid to the MF'TF.

iii. If a new agreement is not reached by the expiration date, Lhts provisionshall continue, axcq>t that the Pension [ump 8um shall continue at therate of $6,000,000 per year, subject to 6(e%ii)(1) above, with eachCompany's share to be paid as descrtbed below, unul a new agreement isreached or the parties othetwise exercise their ri ghts under k Nationallabor ReJations Act.

?UhAG ;x;A - - ?a'Fjollyw?@'ct==-====.ii- - *? .= - *--? -- +s *(* -# -? ?--

SVarnet Music

(4pitol 4..?..{8onyMu....?sic . lqrpup. art 'e$2,802,350.09 ,238.5? l $ t,'187,'!01.1<) l $ I,i43,508,451

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Tolal$ 6,000,000.00

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d. For the purpose of tbis paragraph relaling to Streaming Payments, the €errn"Receipts" shall be defiited as the tees (without &ductions) actually receivod byCompany ixi connection ivith Audio Strearns. By 'way or illuslration, the partiesacknowledge that percenta@e of gross service revenue payments, peroentage of:advertising revenue payments, per-subsct'ber paymentg, per-un*t royalty, per-wpayments, unrecouped advaaces and unrecouped guarantees will generally bewithin the type of revcnues that are included uaithin the ca?culation of 'Receipts,'The parties further acknowled@e that content ori@tnation fees mid digil2zation teesare not generauy within the types of revenues that would be included witttiu tbecalculation or 'Receipts." For non-U.S. axploitaLioits, "Rexffipts? shall only

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include the amount received by the Company from its foreign affiliate for suchexploitation.

e. The definition of "Audio Stream" set forth in Section II( 10)(c) of the SpecialPayment Funds Agreement shall be modified to include Non-Permanent AudioDownloads (i.e., ?Tethered Downloads,"), which currently are defined in SectionII( 10)(b) of the Special Payment Funds Agreement. Going forward, al? referencesto Non-Permanent Audio Downloads or Tethered Downloads shall be deletedfrom the agreement.

f. The definition of Audio Streams sha!l include "ringbacks.?7. Additional SPF Contribution. in each of June 2017, June 2018, and June 2019 the

Companies shall make an aggregate, lump-sum supplementary payment of $700,000 (0the SPF and the MPTF, with 2/3 to the SPF and 1/3-to the MF'jF. Each Company's shareshall be paid as follows:

IUMG and HollywoodlCapitol Records Sony Music

$294,510 $16,640 $220,150

r Warner Music

aroup

f $l6n,700f?ffi

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8. Pension. Effective the 'first Monday of the month after ratification, increase the AFM-EPF "pre-xehab plan" rate to l L75%.

9. SPF and MPTF Audit Settlement, Each Company will pay, within 30 days of the dateof ratification, a lump sum of 9% of its total contrib'utions'paid to the SPF and MPTF forthe period of 2012 through 2016. The AFM, the SPF and the MPTF on behalf ofthemselves and all AFM members and Fund participants waive any claim under theSRLA for any payments to the SPF and MPTF for the period of 2012 through 2016. NoCompany shaJl have any claim to overpayment for any contributions due during this timeperiod with the exception of Sony's claim for a credit of $1 08,777 for amounts paid onringback revenues for 20 12 through the first half of 20 ) 6. This shall exclude AtlanticRe6ording Corp. and Warner Bros. Records, Inc., to be discussed separately.

10. Wages. Increase wages effective the first Monday of the momh following ratification asfollows:

a. ?

b,?

3.0%

3.0%

c.Year3 3.O%

11. Health and Welfare, tncrease contribution amount as follows, effective the firstMonday of the month following ratification:

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a. ? $26, and $20 for additional seiyice that day.b. ? $27, and $21 for additional service that day.c. ? $28, and $22 for additional service that day.

12. Cartage. Effective the first Monday of the month following ratification, increase cartagefees from $30 tO $35, and from $12 to $17, respectively,

13. Non-Symphonic Large Ensembles Wage Seale. The following )arge ensemblediscounts shall be available in the case of non-symphonic sessions: (a) Where theensemble of instrumental musicians present and on contract for the session equals orexceeds 35 musicians, there shall be a 15% discount on scale wages; (b) Where theensemble of instrumental musicians present and 011 contract for the session equals orexceeds 60 musicians, there shall be an additional I5% discount on scale wages. Thesediscounts shall not apply to a separate session of a smaller size, even if the session is forthe purpose of creating tracks for the same song material as a session to which thediscount did app)y. These discounts sha)l not apply to Uheme park sessions or low-budgetrecordings, and shall not affect new use rates collected by the AFM or to soundtrackreleases from film/television. This was a concept proposal and detailed language shall beprovided by the AFM.

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14. Withdrawal of Proposals. The parties agree that all proposals that have been made andwithdrawn in this negotiation have been done so without prejudice to any parties'position with respect to the interpretation of the current teriris of the collective bargainingagreement and such proposezl, withdrawals and any and all bargaining l'iistory related tothe fact that such proposals were made and withdrawn in negotiations for the 2017-2020SRLA shall not be cited by either party as evidence regarding the interpretation of theSRLA (or any of its provisions) in any future proceediiig, including, without limitation,as evidence of an "unachiaved bargaining demand."

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15, Term. The contract term shall be February ?, 20 }7 to January 31, 2020.16. Miscellaneous

a. Conform interna! dates as appropriate to reflect new Agreement term.b. Continue existing sideletters and conform internal dates as appropriate to reflect

term of the new Agreement.

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April 18, 2017

WARNER BROS. RECORDS, INC.ATLANTIC RECORDING CORP.SONY MUSIC ENTERTAINMENT

UMG R4'qORD}NGS, JNC.nor,t.,]w$oo RECORDSchprr?z?

tti/t'lB:Y:

B nard M. Plum, Proskauer Rose LLP N/ (I F'

AMERICAN FEDERATION OF MUSICIANS OF THE UNITED STATES AND CANADA

B)/: ?bs-g.Raymond M, Hair, Jr., President

+li4.lH7

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