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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 5, 1999
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CD Warehouse, Inc.
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
333-15139 73-1504999
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(Commission File Number) (I.R.S. Employer Identification No.)
1204 Sovereign Row, Oklahoma City, OK 73108
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(Address of principal executive offices) (Zip Code)
(405) 949-2422
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(Registrant's telephone, including area code)
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Item 5. Other Events.
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On October 5, 1999, Registrant and CD Plus.com Ltd. ("CD Plus") announced
the execution of a letter of intent to merge the operations of the two
companies. All aspects of the transaction, including the share exchange ratio,
the legal structure and other matters impacted by the regulatory approvals to be
obtained, are subject to the negotiation of a definitive merger document.
However, it is the present intention of the parties that both companies will
survive operationally, with Registrant continuing as a publicly traded company
listed on the Nasdaq National Market System.
A copy of the joint press release issued by Registrant and CD Plus on
October 5, 1999 is attached hereto as Exhibit 99.1 and is hereby incorporated by
reference in its entirety.
Item 7. Financial Statements and Exhibits.
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(c) Exhibits.
The following documents are filed as part of this Report:
99.1. Press Release issued by Registrant on October 5, 1999 with respect
to the execution of the letter of intent with CD Plus.com Ltd.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CD WAREHOUSE, INC.
(Registrant)
Date: October 7, 1999 By: /s/ Jerry W. Grizzle
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Jerry W. Grizzle,
President and Chief Executive Officer
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INDEX TO EXHIBITS
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Appears at
Sequentially
Exhibit Numbered
Number Description Page
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99.1 Press Release 5
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EXHIBIT 99.1
[CD Warehouse, Inc. Letterhead]
FOR IMMEDIATE RELEASE Desmond Towey
CONTACT: President & CEO
Desmond Towey & Associates
(212) 888-7600
Jerry W. Grizzle Lee Sienna
Chairman & CEO President and CEO
CD Warehouse, Inc. CD Plus.com Ltd.
(405) 949-2422 (905) 629-9255
CD WAREHOUSE, INC. and CD PLUS.COM LTD.
ANNOUNCE AGREEMENT TO COMBINE OPERATIONS
Combined Company will become 4th Largest Music Retailer in North America
Oklahoma City, OK- October 5, 1999 - CD Warehouse, Inc. (NASDAQ NMS: CDWI)
and CD Plus.com Ltd. (The Toronto Stock Exchange: CDW) announced today that they
have executed a letter of intent to merge the operations of the two companies.
CD Warehouse franchises and operates a total of 340 retail music stores in 40
states, the District of Columbia, Canada, England, France, Guatemala and
Venezuela under the names "CD Warehouse, Disc Go Round, CD Exchange and Music
Trader." CD Plus.com is one of Canada's leading retailers of music and
entertainment products, with over 150 stores in nine provinces and the Yukon
Territory operating under the banners CD Plus, AVE Entertainment, Big K and
Urban Sound Exchange. Both companies also operate leading e-commerce websites -
www.cdplus.com and www.cdwarehouse.com - which sell music products. The
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companies are also leaders in the sale of pre-owned music product, a unique
offering, which they believe will be a key part of their overall growth
strategy.
The combined entity will operate almost 500 stores (220 Company-owned, 274
Franchised) and have annualized system-wide sales of approximately $165 million.
Combined corporate revenue on an annualized basis is expected to exceed $85
million.
The share exchange ratio and all other aspects of the transaction will be
finalized in the definitive merger document. Based on the historical performance
of each company, when viewed as a combined operating entity, a dilutive effect
will result from the merger. However, considering recent acquisitions by CD
Plus.com Ltd., and the final structure of the transaction, management believes
the dilution, if any, should be minimal. The merger is dependent upon, among
other things, the completion of appropriate due diligence, the receipt of
fairness opinions from the financial advisors to the respective companies,
regulatory approvals, approval of the shareholders of both CD Warehouse, Inc.
and CD Plus.com Ltd. and the completion of definitive merger documents.
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Jerry W. Grizzle, Chairman, President and Chief Executive Officer of CD
Warehouse, Inc. states, "By combining the operations of our two strong
companies, this gives us the opportunity to further expand our strength in the
pre-owned music arena. In considering their current base of stores, their
operation of the first music retailing website in Canada and incorporating our
knowledge of the pre-owned music business, we believe presents a significant
advantage over other music retailers. CD Plus also has considerable experience
in operating internationally, which should be a tremendous benefit to our
continued growth. The merger will combine the market strengths of our respective
companies so that the future success of the merged company will be greatly
enhanced over those for either company alone."
"Joining forces with CD Warehouse is a very positive strategic step for CD
Plus," said Wayne Albo, Chairman of CD Plus.com Ltd. "We are very excited about
the opportunity that this presents to our shareholders and the future
development of our Company. We have been on a tremendous pace of growth. As we
looked at our industry and saw the emergence of CD Warehouse as the premier U.S.
retailer in the sale of pre-owned music, it became apparent that both companies
could derive significant benefit by being one."
The Companies intend to link their respective websites. CD Warehouse, Inc.
has recently announced the addition of over 1,000,000 available pre-owned CD's
to its website www.cdwarehouse.com. This e-commerce model, which is the subject
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of a pending process patent, routes an incoming order for a pre-owned CD to the
participating bricks-and-mortar CD Warehouse store which has the title and is
closest to the customer. The store then fills the order and ships it directly to
the consumer. Stated Grizzle, "Our business model is strategically different
from other online competitors. First, there are no added inventory costs for
either pre-owned or new titles. Secondly, because the closest local store ships
the product, the customer receives their order quickly. Finally, the website
reflects the pre-owned inventory from stores throughout the country, giving the
consumer a wider selection of titles available than what would normally be
offered by a single store."
The first on-line retailer of music launched in Canada was www.cdplus.com
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in 1996. Since its inception in 1992, CD Plus.com has realized strong, strategic
growth through the acquisition of retail chains in key geographical areas and
expansion into new services and markets, such as Internet music retailing, the
sale of digital music through the Internet, pre-owned CD retailing and catalogue
mail order. While CD Plus.com's online business is a key element in the
Company's growth strategy, its store locations represent the backbone of CD
Plus.com's music retail business.
Statements made in this press release, other than those concerning
historical information, should be considered forward-looking and subject to
various risks and uncertainties. Such forward-looking statements are made based
on management's belief as well as assumptions made by, and information currently
available to, management pursuant to the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. The Company's actual results may
differ materially from the results anticipated in these forward-looking
statements as a result of a variety of factors, including those contained in the
Company's periodic reports filed with the Securities and Exchange Commission
(available to the public at www.sec.gov). Additional information regarding the
merger of CD Warehouse, Inc. and CD Plus.com Ltd. may be obtained by contacting
Jerry Grizzle at CD Warehouse, Inc., at (405) 949-2422 or Lee Sienna at CD
Plus.com Ltd., at (905) 629-9255.
