EXHIBIT 8.1
February 16, 1999
CDnow, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇. Washington, Pennsylvania 19034
Ladies and Gentlemen:
Pursuant to an Agreement and Plan of Merger dated as of October 22, 1998 as
amended as of January 29, 1999 (the "Merger Agreement") among N2K, a Delaware
corporation ("N2K"), CDnow, Inc., a Pennsylvania corporation ("CDnow") and Exit
8 Holding Company, a Pennsylvania corporation ("CDnow/N2K"), CDnow Acquisition
Corp., a wholly owned subsidiary of CDnow/N2K will merge with and into CDnow
(the "CDnow Merger") and N2K Acquisition Corp., a separate wholly owned
subsidiary of CDnow/N2K will merge with and into N2K (the "N2K Merger" and
together with the N2K Merger the "Mergers").
We have acted as counsel to CDnow in connection with the CDnow Merger and in
that connection, you have requested our opinion as to the material federal
income tax consequences to holders of shares of CDnow common stock ("CDnow
Common Stock"). Our opinion only addresses holders of CDnow Common Stock that
hold their shares as capital assets and does not address all aspects of federal
income taxation that may be important to such holders in light of their
particular circumstances. Further, our opinion does not address all aspects of
federal income taxation that may be applicable to holders subject to special
rules, such as: (i) holders who are not United States persons; (ii) financial
institutions; (iii) tax- exempt organizations; (iv) insurance companies; (v)
dealers or brokers in securities; (vi) holders who held their CDnow stock as
part of a hedge, appreciated financial position, straddle, or conversion
transaction; or (vii)holders who acquired their CDnow stock pursuant to the
exercise of employee stock options or otherwise as compensation. In rendering
our opinion, we have examined the Merger Agreement, the Registration Statement,
the Proxy
CDnow, Inc.
February 16, 1999
Page 2
Statement and such other documents and corporate records as we have deemed
necessary representation letters of CDnow and N2K dated today which have been
delivered to us for purposes of this opinion (the "Officer's Certificates"), and
such other documents and corporate records as we have deemed necessary or
appropriate for purposes of this opinion or appropriate. In addition, we have
assumed: (i) the Mergers will be consummated in the manner contemplated in the
Proxy Statement and in accordance with the provisions of the Merger Agreement,
(ii) the statements concerning the Mergers set forth in the Proxy Statement are
accurate and complete, (iii) the representations set forth in the Officer's
Certificates are accurate and complete and (iv) any representations in the
Officer's Certificates that are qualified by the phrases "to the best of the
knowledge," "has no knowledge," or similar such phrases are, in each case,
correct without such qualification.
Under current law, and on the basis and subject to (i) the accuracy of the
statements and representations contained in the materials referred to above and
the above assumptions and (ii) our considerations of such other matters as we
have deemed necessary, our opinion of the material federal income tax
consequences to certain holders of CDnow Common Stock is as follows:
. The CDnow Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code
and/or, taken together with the N2K Merger, as a transfer of property
to CDnow/N2K by holders of CDnow common stock described in Section 351
of the Code;
. Holders of CDnow Common Stock who exchange their CDnow Common Stock
solely for CDnow/N2K Common Stock in the CDnow Merger will not
recognize gain or loss for federal income tax purposes with respect to
this exchange;
. The aggregate tax basis of CDnow/N2K Common Stock received by a CDnow
shareholder as a result of the CDnow Merger will be the same as the
shareholder's aggregate tax basis in the CDnow Common Stock
surrendered in the exchange;
CDnow, Inc.
February 16, 1999
Page 3
. The holding period of the CDnow/N2K Common Stock held by former CDnow
shareholders as a result of the exchange will include the period
during which the shareholder held the CDnow Common Stock exchanged;
and
. A CDnow shareholder who exercises dissenters' rights of appraisal with
respect to CDnow Common Stock and who receives payment for such stock
in cash should generally recognize capital gain or loss measured by
the difference between the amount of cash received and the
SHAREHOLDER'S basis in the share.
You have not requested, and we do not express, an opinion concerning any other
tax consequences of the Mergers.
Our opinion expresses our views only as to U.S. federal income tax laws in
effect as of the date hereof. It represents our best legal judgment as to the
matters addressed in our opinion, but is not binding on the Internal Revenue
Service or the courts. Accordingly, no assurance can be given that our opinion,
if contested, would be sustained by a court. Furthermore, the authorities upon
which we rely are subject to change either prospectively or retroactively, and
any change in such authorities or variation or difference in the facts from
those on which we rely and assume as correct, as set forth above, might affect
the conclusions stated.
Our opinion is not to be used, circulated, quoted or otherwise referred to for
any purpose without our express written permission. We hereby consent to the
filing of our opinion as an exhibit to the Registration Statement and to the
reference to us in the section captioned "The Merger -- Material Federal Income
Tax Consequences" in the Proxy Statement constituting a part of the Registration
Statement. In giving this consent we do not hereby admit that we come within
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
/s/ ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
