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Am. #3 To Loan And Security Agreement

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Sectors: Specialty Retail
Governing Law: North Carolina, View North Carolina State Laws
Effective Date: March 27, 2002
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EXHIBIT 10.12


AMENDMENT NO. 3
TO
LOAN AND SECURITY AGREEMENT


THIS AMENDMENT NO. 3 TO LOAN AND SECURITY AGREEMENT (this "Amendment"), dated as of March 27, 2002, made by and among


GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation, successor by merger to General Electric Capital Corporation, a New York corporation (the "Lender"), and


CD WAREHOUSE, INC. (the "Leading Borrower") and COMPACT DISCS MANAGEMENT, INC. (the "Second Borrower" and, together with the Leading Borrower, the "Borrowers"), CD WAREHOUSE FINANCE COMPANY, CD WAREHOUSE.COM, INC., and COMPACT DISCS DISTRIBUTION, INC., each a Delaware corporation (all collectively referred to as the "Credit Parties"),


to the Loan and Security Agreement, dated as of December 28, 1999, as previously amended by Amendment No. 1 thereto dated March 27, 2000, by Amendment No. 2 thereto dated as of March 8, 2001, and by letter amendment thereto dated November 21, 2001 (such Loan and Security Agreement, as amended, modified, restated or supplemented from time to time, the "Loan Agreement"). All capitalized terms used herein without definition shall have the meanings ascribed to such terms in the Loan Agreement.


RECITALS


A. Pursuant to the Loan Agreement, the Lender has agreed to make loans and extend credit to the Credit Parties secured by the Collateral.


B. The Credit Parties and the Lender have agreed, contingent upon the terms and subject to the conditions and limitations set forth herein, to amend the Loan Agreement to (i) extend the term thereof, (ii) modify certain financial covenants contained therein, (iii) adjust the Revolving Credit Rate and the Default Rate, (iv) provide a temporary overadvance facility, (v) ensure compliance with revised article 9 of the Uniform Commercial Code, and (vi) waive certain Events of Default which have occurred as set forth herein.


STATEMENT OF AGREEMENT


NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby expressly acknowledged, the Credit Parties and the Lender hereby agree as follows:


ARTICLE I


AMENDMENTS TO LOAN AGREEMENT


The Loan Agreement is hereby amended as follows:


1.1 Interest.
---------


(a) Section (a) of Section 1.5, Interest, is amended by
--------
deleting the first sentence thereof in its entirety and by
substituting in lieu thereof the following:


"(a) Each Borrower shall pay interest to Lender on the
aggregate outstanding Revolving Credit Advances attributable
to such Borrower at a floating rate equal to the Index Rate
plus four and seventy five hundredths percent (4.75 %) per
annum (the "Revolving Credit Rate")."


(b) Section (c) of Section 1.5, Interest, is amended in its
--------
entirety to read as follows:


1


"(c) Effective upon the occurrence of any Event of Default and
for so long as any Event of Default shall be continuing, the Revolving
Credit Rate and the Letter of Credit Fee shall automatically be
increased by four percentage points (4%) per annum (such increased
rate, the "Default Rate"), and all outstanding Obligations, including
unpaid interest and Letter of Credit Fees, shall continue to accrue
interest from the date of such Event of Default at the Default Rate
applicable to such Obligations."


1.2. Representations and Warranties. The first sentence of
------------------------------ Section 3.2 of the Loan Agreement is hereby deleted in its entirety and the following new sentence is hereby inserted in lieu thereof:


"(a) Each Corporate Credit Party's name as it appears in
official filing in the state of its incorporation or
organization, (b) the type of entity of each Corporate Credit
Party, (c) the organizational identification number issued by
each such Credit Party's state of incorporation or
organization or a statement that no such number has been
issued, (d) each Corporate Credit Party's state of
organization or incorporation, and (e) the location of each
Corporate Credit Party's chief executive office, corporate
offices, warehouses, other locations of Collateral and
locations where records with respect to Collateral are kept
(including in each case the county of such locations) are as
set forth in Disclosure Schedule (3.2) and, except as set
------------------------
forth in such Disclosure Schedule, such locations have not
changed during the preceding twelve months."


1.3 Reports, Notices. Section 4.1, Reports and Notices, is
----------------- ------------------- amended by adding a new subsection (j) at the end thereof as follows:


"(j) not less than 10 days prior to the end of each Fiscal
Month, an updated weekly cash flow projection for the
following thirteen weeks in form and substance satisfactory to
Lender in its sole discretion."


1.4. Negative Covenants. Section 5(g) of the Loan Agreement
------------------ is hereby amended and restated in its entirety to read as follows:


"(g) change (i) its name as it appears in official filings in
the state of its incorporation or organization, (ii) its chief
executive office, corporate offices, warehouses or other
Collateral locations, or location of its records concerning
the Collateral, (iii) the type of legal entity that it is,
(iv) its organization identification number, if any, issued by
its state of incorporation or organization, or (v) its state
of incorporation or organization, or acquire, lease or use any
real estate after the Closing Date without such Person, in
each instance, giving thirty (30) days' prior written notice
thereof to Lender and taking all actions deemed necessary or
appropriate by Lender to continuously protect and perfect
Lender's Liens upon the Collateral;


1.5 Grant of Security Interest.
--------------------------


(a) Section 6.1(a) of the Loan Agreement is hereby amended and restated in its entirety to read as follows:


"(a) As collateral security for the prompt and complete
payment and performance of the Obligations, each of the
Borrower and any other Credit Party executing this Agreement
hereby grants to the Lender a security interest in and Lien
upon all of its property and assets, whether real or personal,
tangible or intangible, and whether now owned or hereafter
acquired, or in which it now has or at any time in the future
may acquire any right, title, or interest, including all of
the following property in which it now has or at any time in
the future may acquire any right, title or interest: all
Accounts; all Deposit Accounts, other bank accounts and all
funds on deposit therein; all money, cash and cash
equivalents; all Investment Property; all Stock; all Goods
(including Inventory, Equipment and Fixtures); all Chattel
Paper, Documents and Instruments; all Books and Records; all
General Intangibles (including all Intellectual Property,
contract rights,


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choses in action, Payment Intangibles and Software); all
Letter-of-Credit Rights; all Supporting Obligations; and to
the extent not otherwise included, all Proceeds, tort claims,
insurance claims and other rights to payment not otherwise
included in the foregoing and products of all and any of the
foregoing and all accessions to, substitutions and
replacements for, and rents and profits of, each of the
foregoing, but excluding in all events Hazardous Waste (all of
the foregoing, together with any other collateral pledged to
the Lender pursuant to any other Loan Document, collectively,
the "Collateral")."


(b) Section 6.1(b) of the Loan Agreement is hereby amended by inserting the following new sentence at the end thereof:


"Each Credit Party executing this Agreement shall promptly,
and in any event within two (2) Business Days after the same
is acquired by it, notify Lender of any commercial tort claim
(as defined in the Code) acquired by it and unless otherwise
consented by Lender, such Credit Party shall enter into a
supplement to this Loan Agreement granting to Lender a Lien
in such commercial tort claim."


1.6. Attorney-in-Fact. The last sentence of Section 6.3 of
---------------- the Loan Agreement is hereby deleted in its entirety and the following new sentences are hereby inserted in lieu thereof:


"Borrower and each other Credit Party executing this Agreement
also hereby (i) authorizes Lender to file any financing
statements, continuation statements or amendments thereto that
(x) indicate the Collateral (1) as all assets of such Credit
Party (or any portion of such Credit Party's assets) or words
of similar effect, regardless of whether any particular asset
comprised in the Collateral falls within the scope of Article
9 of the Code of such jurisdiction, or (2) as being of an
equal or lesser scope or with greater detail, and (y) contain
any other information required by Part 5 of Article 9 of the
Code for the sufficiency or filing office acceptance of any
financing statement, continuation statement or amendment and
(ii) ratifies its authorization for Lender to have filed any
initial financial statements, or amendments thereto if filed
prior to the date hereof. Borrower and each other Credit Party
executing this Agreement acknowledges that it is not
authorized to file any financing statement or amendment or
termination statement with respect to any financing statement
without the prior written consent of Lender and agrees that it
will not do so without the prior written consent of Lender,
subject to such Credit Party's rights under Section
9-509(d)(2) of the Code."


1.7. Definitions.
------------


(a) Each definition from Schedule A to the Loan Agreement set forth on Schedule A hereto is hereby amended and restated in its entirety to read as set forth on Schedule A hereto.


(b) The definition of "Borrowing Base" is amended by adding the following sentence at the end thereof:


"plus
----


(c) the Permitted Additional Amount."


(c) The definition of "Stated Expiry Date" is amended in its entirety to read as follows:


"Stated Expiry Date' shall mean July 1, 2003."


(d) The following defined terms are hereby added to Schedule A to the Loan Agreement in appropriate alphabetical order:


3


"Deposit Accounts" means all "deposit accounts" as such term
is defined in the Code, now or hereafter held in the name of
any Person.


"Fixtures" means all "fixtures" as such term is defined in the
Code, now owned or hereafter acquired by any Person.


"Letter-of-Credit Rights" means "letter-of-credit rights" as
such term is defined in the Code, now owned or hereafter
acquired by any Person, including rights to payment or
performance under a letter of credit, whether or not such
Person, as beneficiary, has demanded or is entitled to demand
payment or performance.


"Payment Intangibles" means all "payment intangibles" as such
term is defined in the Code, now owned or hereafter acquired
by any Person.


"Permitted Additional Amount" shall mean, at any date of
determination thereof (i) during the period from the execution
of Amendment No. 3 to this Agreement through but not including
April 1, 2002, an amount up to a maximum of $200,000; (ii)
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