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:
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"(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, 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).".
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(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")".
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
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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 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.".
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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.".
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
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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
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 Xxxxxxxx Xxxxxxxx xx Xxx Xxxx,
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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 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,
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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.
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
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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
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
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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
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
