CONFORMED COPY
AMENDMENT dated as of March 13, 2000 (this
"Amendment"), to the Convertible Loan Agreement dated as of
July 12, 1999 (the "Convertible Loan Agreement"), among
CDNOW, INC., a Pennsylvania corporation (the "Borrower"),
SONY MUSIC ENTERTAINMENT INC. ("Sony Music") and TIME WARNER
INC. ("Time Warner", and together with Sony Music, the
"Lenders").
WHEREAS the Borrower and the Lenders have entered into the Convertible
Loan Agreement;
WHEREAS the Borrower and the Lenders desire to amend the Convertible
Loan Agreement to make certain modifications and clarifications to the
provisions contained therein;
NOW, THEREFORE, in consideration of the premises, mutual promises,
representations, warranties and covenants contained in this Amendment, the
parties hereto hereby agree:
SECTION 1. Amendment of Section 1. (a) The definition of the term
"Conversion Price" in Section 1 of the Convertible Loan Agreement is hereby
deleted in its entirety and such definition is hereby replaced with the
following definition:
"'Conversion Price' shall mean $10.00.".
(b) The definition of the term "Final Maturity Date" in Section 1 of
the Convertible Loan Agreement is hereby deleted in its entirety and such
definition is hereby replaced with the following definition:
"'Final Maturity Date' shall mean the earlier of (a) such time as the
Loan Commitment is reduced to zero pursuant to the terms hereof and
(b) January 15, 2003.".
(c) The definition of the term "Indebtedness" in Section 1 of the
Convertible Loan Agreement is hereby amended to delete clause (iv) thereof in
its entirety and such clause is hereby replaced with the following clause:
"(iv) any obligation of such Person issued or assumed as the deferred
purchase price of Property or services (but excluding trade accounts
payable or accrued liabilities arising in the ordinary course of
business,
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which in either case are not more than 120 days overdue, or
alternative terms of which have been agreed to by the parties (so long
as such terms do not provide for any amounts to be more than 366 days
overdue) or which are being contested in good faith)".
(d) The definition of the term "Interest Rate" in Section 1 of the
Convertible Loan Agreement is hereby deleted in its entirety and such definition
is hereby replaced with the following definition:
"'Interest Rate' shall mean a rate per annum equal to the Eurodollar
Rate plus 3%.".
(e) The definition of the term "Net Debt Proceeds" in Section 1 of the
Convertible Loan Agreement is hereby deleted in its entirety.
(f) The definition of the term "Permitted Interim Financing" in
Section 1 of the Convertible Loan Agreement is hereby deleted in its entirety
and such definition is hereby replaced with the following definition:
"'Permitted Interim Financing' shall mean Indebtedness for borrowed
money incurred by the Borrower provided that (i) the maturity date
thereof extends to at least 366 days beyond the Final Maturity Date,
(ii) such Indebtedness (A) is unsecured or is secured by a Lien that
is junior to any Lien securing any amounts outstanding under this
Agreement and (B) is not guaranteed by any Subsidiary of the Borrower,
(iii) such Indebtedness contains representations, warranties,
covenants and agreements which are not more restrictive, individually
or taken as a whole, than those in effect hereunder and (iv) such
Indebtedness is subject to subordination and intercreditor
arrangements satisfactory to the Lenders (and appropriate to reflect
the senior, secured nature of the Obligations).".
(g) The definition of the term "Third Party Tender Offer" in Section 1
of the Convertible Loan Agreement is hereby amended to add to the end thereof
the phrase "(and replacing every reference to "Company" therein with "Borrower",
the reference to "Purchaser" therein with "Lender" and the reference to "Common
Stock" therein with "common stock, without par value, of the Borrower")".
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SECTION 2. Amendment of Section 2.6. Section 2.6 of the Convertible
Loan Agreement is hereby amended to delete clause (i) thereof in its entirety
and such clause is hereby replaced with the following clause:
(i) the Borrower shall give the Lenders written notice (or telephonic
notice promptly confirmed in writing), which notice shall be
irrevocable, of its intent to prepay the Loans, at least five Business
Days prior to a prepayment, which notice shall specify the date (which
shall be a Business Day), the Loans and the amount of such prepayment
and".
SECTION 3. Amendment of Section 2.7. Section 2.7(a) of the Convertible
Loan Agreement is hereby deleted in its entirety and such section is hereby
replaced with the following two sentences:
"If the Borrower or any of its Subsidiaries shall receive any proceeds
from any sale, lease, transfer or disposition to any Person of any of
its Property or Equity Securities then the Borrower shall immediately
upon receipt thereof apply in accordance with Section 2.9 an amount in
cash equal to 100% of the Net Sale Proceeds from such sale, lease,
transfer or disposition to the Lenders as a mandatory repayment of
outstanding Loans and reduction in the remaining Loan Commitment in
accordance with the requirements of Section 2.8; provided, however,
that this Section 2.7(a) shall not apply to (i) sales of inventory in
the ordinary course of business, (ii) permitted Sale and Leaseback
Transactions, (iii) sales of shares of CDnow Common Stock to Time
Warner and Sony Corporation of America ("Sony"), or any of their
respective Subsidiaries, pursuant to the Termination Agreement dated
as of the date hereof among Time Warner, Sony, the Borrower, Delaware
Holdco Corporation, Pennsylvania Subsidiary, Inc., Delaware Sub I
L.L.C., Delaware Sub II L.L.C., (iv) sales of shares of Liquid Audio,
Inc. held by the Borrower or any of its subsidiaries in accordance
with the terms of the Consent dated as of the date hereof among the
Borrower, Time Warner and Sony Music or (v) the issuance of Equity
Securities for fair market value representing up to 19.9% of
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the then outstanding shares of CDnow Common Stock in connection with
any Permitted Interim Financing. For the avoidance of doubt, if the
Borrower or any of its Subsidiaries shall receive any proceeds from
any Permitted Interim Financing, such proceeds shall not be applied as
a mandatory repayment of outstanding Loans or a reduction in the
remaining Loan Commitment."
Section 2.7(b) of the Convertible Loan Agreement is hereby deleted in
its entirety and Section 2.7(c) of the Convertible Loan Agreement is hereby
denoted Section 2.7(b).
SECTION 4. Amendment of Section 2.8. Section 2.8 of the Convertible
Loan Agreement is hereby amended to delete the second sentence of such section
in its entirety and such sentence is hereby replaced with the following
sentence:
"The excess of any Net Sale Proceeds over amounts required to repay
principal and Interest shall reduce the remaining unused Loan
Commitment.".
SECTION 5. Amendment of Section 5.1. Section 5.1(h) of the Convertible
Loan Agreement is hereby deleted in its entirety and such section is hereby
replaced
with the following:
" - five Business Days prior to the Borrower or any Subsidiary
entering into any transaction or taking any action which would result
in a mandatory prepayment under Section 2.7, a written notice
specifying the nature thereof.".
SECTION 6. Amendment of Section 6.3. Section 6.3 of the Convertible
Loan Agreement is hereby deleted in its entirety and such section is hereby
replaced with the following sentence:
"The Borrower will not, and will not permit its Subsidiaries to,
directly or indirectly, incur any Indebtedness other than Permitted
Indebtedness, and the Borrower will not issue any Disqualified Stock
or permit any of its Subsidiaries to issue any Disqualified Stock.".
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SECTION 7. Amendment of Section 8.1 Section 8.1 of the Convertible
Loan Agreement is hereby deleted in its entirety and such section is hereby
replaced with the following sentence:
"Subject to and upon compliance with the provisions of this Section 8,
each Lender, at its sole option, may, at any time and from time to
time, irrespective of whether the Borrower shall have delivered any
notice pursuant to Section 2.6 or Section 5.1, convert (a) each Note
or any portion of the principal amount thereof which equals $500,000
or any integral multiple thereof, and (b) the amount of accrued and
unpaid Interest on the Loan represented by such Note (including
without limitation any overdue Interest accruing at the Default Rate),
into a number of fully paid and nonassessable shares (calculated as to
each conversion to the nearest 1/100 of a share) of CDnow Common Stock
equal to the quotient obtained by dividing (i) the aggregate of such
principal amount and accrued and unpaid interest to be so converted by
(ii) the Conversion Price, determined as hereinafter provided, in
effect at the time of conversion.
SECTION 8. Representations and Warranties. (a) The Borrower represents
and warrants to each of the Lenders that (i) the Borrower has all requisite
power and authority to execute and deliver this Amendment, (ii) the execution
and delivery by the Borrower of this Amendment have been duly authorized by all
necessary action on the part of the Borrower, (iii) the Borrower has duly
executed and delivered this Amendment, and, assuming the due authorization,
execution and delivery by each person other than the Borrower party hereto, this
Amendment constitutes its legal, valid and binding obligation, enforceable
against it in accordance with its terms and (iv) the representations and
warranties set forth in the Section 4 of the Convertible Loan Agreement are true
and correct in all material respects on and as of the date of this Amendment
with the same effect as though made on and as of the date hereof, except to the
extent such representations and warranties expressly relate to an earlier date.
(b) Time Warner represents and warrants to the Borrower and Sony Music
that (i) Time Warner has all requisite power and authority to execute and
deliver this Amendment, (ii) the execution and delivery by Time Warner of
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this Amendment have been duly authorized by all necessary action on the part of
Time Warner and (iii) Time Warner has duly executed and delivered this
Amendment, and, assuming the due authorization, execution and delivery by each
person other than Time Warner party hereto, this Amendment constitutes its
legal, valid and binding obligation, enforceable against it in accordance with
its terms.
(c) Sony Music represents and warrants to the Borrower and Time Warner
that (i) Sony Music has all requisite power and authority to execute and deliver
this Amendment, (ii) the execution and delivery by Sony Music of this Amendment
has been duly authorized by all necessary action on the part of Sony Music and
(iii) Sony Music has duly executed and delivered this Amendment, and, assuming
the due authorization, execution and delivery by each person other than Sony
Music party hereto, this Amendment constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms.
SECTION 9. Governing Law, Submission to Jurisdiction. (a) THIS
AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS OF
LAW).
(b) Any legal action or proceeding with respect to this Amendment and
any action for enforcement of any judgment in respect hereof may be brought in
the courts of the State of New York in New York County or of the United States
of America for the Southern District of New York, and, by execution and delivery
of this Amendment, the Borrower hereby accepts for itself and in respect of its
property, generally and unconditionally, the non-exclusive jurisdiction of the
aforesaid courts and appellate courts from any thereof. The Borrower irrevocably
consents to the service of process out of any of the aforementioned courts in
any such action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to the Borrower at its address set forth in
Section 10.3 of the Convertible Loan Agreement. The Borrower hereby irrevocably
waives any objection which it may now or hereafter have to the laying of venue
of any of the aforesaid actions or proceedings arising out of or in connection
with this Amendment brought in the courts referred to above and hereby further
irrevocably waives and agrees not to plead or claim in any such court that any
such action or proceeding brought in any such court has been brought in an
inconvenient forum. Nothing herein shall affect the right of the Lenders or any
holder of a Note (as defined in the Convertible Loan
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Agreement) to serve process in any other manner permitted by law or to commence
legal proceedings or otherwise proceed against the Borrower in any other
jurisdiction.
SECTION 10. Counterparts. This Amendment may be executed in any number
of counterparts and by the different parties hereto on separate counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument.
SECTION 11. Headings Descriptive. The headings of the several Sections
of this Amendment are inserted for convenience only and shall not in any way
affect the meaning or construction of any provision of this Amendment.
SECTION 12. Waiver of Trial by Jury. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, EACH OF THE BORROWER AND EACH LENDER HEREBY IRREVOCABLY WAIVES
ALL RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT
OF OR IN CONNECTION WITH THIS AMENDMENT OR ANY OTHER LOAN DOCUMENT OR ANY MATTER
ARISING HEREUNDER OR THEREUNDER.
SECTION 13. Full Force and Effect. Except as expressly set forth in
this Amendment, this Amendment shall not by implication or otherwise limit,
impair, constitute a waiver of, or otherwise affect the rights and remedies of
the Lenders or the Borrower under the Convertible Loan Agreement or any other
Loan Document (as defined in the Convertible Loan Agreement), and shall not
alter, modify, amend or in any way affect any of the terms, conditions,
obligations, covenants or agreements contained in the Convertible Loan Agreement
or any other Loan Document, all of which are ratified and affirmed in all
respects and shall continue in full force and effect. Nothing contained in this
Amendment shall be deemed to entitle the Borrower to a consent to, or a waiver,
amendment, modification or other change of, any of the terms, conditions,
obligations, covenants or agreements contained in the Convertible Loan Agreement
or any other Loan Document in similar or different circumstances. This Amendment
shall constitute a "Loan Document" for all purposes of the Convertible Loan
Agreement and the other Loan Documents. As used in the Convertible Loan
Agreement, the terms "hereof" and "hereto", and words of similar import, shall,
unless the context otherwise requires, refer to the Convertible Loan Agreement
as amended by this Amendment. Any reference in any document to the Convertible
Loan Agreement shall be deemed to be a reference to the Convertible Loan
Agreement as amended by this Amendment.
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SECTION 14. Fees and Expenses. All fees and expenses incurred in
connection with this Amendment shall be borne by the party incurring such fees
and expenses.
IN WITNESS WHEREOF, each of the parties hereto have duly executed this
Amendment, all as of the date first written above.
CDNOW, INC.,
by /s/ Xxxxx Xxxx
---------------------------
Name: Xxxxx Xxxx
Title: President and
Chief Executive
Officer
SONY MUSIC ENTERTAINMENT INC.,
by /s/ Xxxxxx X. Xxxxxx
---------------------------
Name: Xxxxxx X. Xxxxxx
Title: Senior Vice
President and
General Counsel
TIME WARNER INC.,
by /s/ Xxxxxxx X. Xxxx
---------------------------
Name: Xxxxxxx X. Xxxx
Title: Vice President and
Deputy General
Counsel
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The undersigned guarantors
under the Guarantee and
Collateral Agreement
entered into in connection
with the Convertible Loan
Agreement hereby consent to
the Amendment and acknowledge
and agree that the Guarantee
and Collateral Agreement
(including the guarantee
provided by such guarantor
thereunder) remains in full
force and effect.
CDNOW ONLINE, INC.,
by
/s/ Xxxxx X. Xxxxxxx
----------------------------
Name: Xxxxx X. Xxxxxxx
Title: President
N2K INC.,
by
/s/ Xxxxx X. Xxxxxxx
---------------------------
Name: Xxxxx X. Xxxxxxx
Title: President
CDNOW INVESTMENTS, INC.,
by
/s/ Xxxxx X. Xxxxxxx
---------------------------
Name: Xxxxx X. Xxxxxxx
Title: President
CDNOW TRADEMARKS, INC.,
by
/s/ Xxxxx X. Xxxxxxx
---------------------------
Name: Xxxxx X. Xxxxxxx
Title: President
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SUPERSONIC BOOM, INC.,
by
/s/ Xxxxx X. Xxxxxxx
---------------------------
Name: Xxxxx X. Xxxxxxx
Title: President
TSI LICENSING, INC.,
by
/s/ Xxxxx X. Xxxxxxx
---------------------------
Name: Xxxxx X. Xxxxxxx
Title: President
