SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities and Exchange Act of 1934
Date of Report (Date of Earliest Event Reported):
September 23, 1999
CDBEAT.COM, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 333-70663
06-1529524
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification
incorporation) No.)
444 Bedford Street, Suite 8s
Stamford, CT 06901
(Address of principal executive offices)
Registrant's Telephone Number, including
area code: (203) 602-9994
(Former Address, if changed since last report)
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312396 v.3 [6P1_03!.WPD]
Item 1. Changes in Control of Registrant
On September 23, 1999, Atlantis Equities, Inc., a New York corporation
("Atlantis"), entered into a warrant agreement (the "Warrant") with CDbeat.com,
Inc., a Delaware corporation (the "Company"). The Warrant entitles Atlantis, or
its registered assignee ("Holder"), to purchase from the Company, (a) 7,819,092
shares of the Common Stock of the Company ("Common Stock"), representing 80% of
the fully diluted Common Stock of the Company after giving effect to the
exercise of the Warrant, except for options to purchase 190,516 shares of Common
Stock at $2.50 per share (the "Outstanding Options"), and (b) options
exercisable for 762,064 shares of Common Stock at $2.50 per share and expiring
December 31, 2000, representing 80% of the shares of Common Stock underlying the
Outstanding Options. The Warrant is exercisable, in whole or in part, during the
period commencing on September 23, 1999 and ending on September 29, 1999,
provided, however, that if the Company receives a $50,000 loan from Holder or a
source arranged by Holder on or before September 29, 1999 such exercise period
shall be extended to October 30, 1999 and provided, further, that if the Company
enters into an agreement for a merger or acquisition (the "Acquisition") on or
prior to October 30, 1999, the period during which this Warrant may be exercised
shall be extended to the earlier of the closing or termination of the
Acquisition, and provided, further, that if the Company has not closed a merger
or acquisition by October 30, 1999, the Warrant shall expire unless the Company
receives, by November 1, 1999, an additional $50,000 loan from Holder or a
source arranged by Holder. The exercise price of the Warrant is an aggregate of
$1,000,000. The $50,000 loan made by Cakewalk LLC, as described below, met the
requirement for extending the expiration date of the Warrant to at least October
30, 1999.
Atlantis is solely owned by Nancy J. Ellin. If Atlantis were to
exercise the Warrant, Atlantis would control the Company.
The above description of the Warrant is incomplete and is qualified in its
entirety by reference to the copy of such agreement filed as Exhibit 1.1 annexed
hereto.
Subsequent to the acquisition of the Warrant, Atlantis introduced to the
Company an entity, Cakewalk LLC ("Cakewalk"), which Atlantis proposed as a
potential acquisition candidate. On September 28, 1999, the Company entered into
a letter of intent (the "Letter of Intent") with Cakewalk contemplating the
acquisition of Cakewalk in a transaction in which the stockholders of Cakewalk
would receive approximately 50% of the Company. The Letter of Intent
contemplates certain changes to the management and capital structure of the
Company. After the contemplated acquisition, the Company will be managed by
Robert Miller as President and Chief Executive Officer, together with such other
officers, including a chief operating officer and a chief financial officer, as
shall be selected by Robert Miller with the consent of the Company's board of
directors. Joel Arberman will become the Company's Internet Officer. The initial
board of directors will consist of the following seven members plus one
observer: Joel Arberman, Adam Blumenkranz, Robert Ellin, Peter Ezersky, Jonathan
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Foster, David Goddard, Robert Miller (as Chairman), and Thomas Cyrana (as
observer). Upon the closing of the contemplated acquisition the Letter of Intent
contemplates that the Company's and Cakewalk's equity owners will each own
9,773,865 shares of Common Stock, constituting 50% each of the post-acquisition
common shares. The shares owned by the Company's current equity owners assuming
the exercise by Atlantis of the Warrant, the cancellation of 2,227,450 shares
and 321,974 shares owned by Joel Arberman and Bryan Eggers, respectively, and
the conversion of all outstanding preferred stock to Common Stock, will be
substantially as follows:
CDbeat Common Shares
Public shareholders 561,600
Consultants 42,597
Bryan Eggers 178,026
Joel Arberman 1,172,550
Atlantis Equities, Inc. 7,819,092
Total 9,773,865
In addition, the Company will issue 2,932,159 management stock options, at
an exercise price per share to be agreed upon prior to closing of such
acquisition, 1,955,750 will be issued to Robert Miller, with the balance
reserved to other officers of the Company and to be awarded by the Company's
board of directors. The proposed acquisition is subject to numerous conditions
including, among other things: approval by Cakewalk's supervisory board and the
Company's board of directors; satisfactory mutual legal and financial due
diligence; all necessary approvals; completion of the acquisition on a tax-free
basis to Cakewalk's owners; and execution of definitive documentation, including
representations and warranties, covenants, conditions and other customary terms.
There can be no assurance that the contemplated acquisition will be consummated
on the terms set forth in the Letter of Intent or at all.
The above description of the Letter of Intent is incomplete and is
qualified in its entirety by reference to the copy of such letter filed as
Exhibit 1.2 annexed hereto.
In connection with the Letter of Intent, Cakewalk loaned the Company the
principal amount of $50,000. In connection with such loan, Cakewalk and the
Company entered into a note and security agreement dated September 28, 1999 (the
"Note"). The loan bears interest at 10% per annum and is due on December 28,
1999 (the "Maturity Date"); The loan is secured by substantially all assets of
the Company.
The above description of the Note and Security Agreement is incomplete and
is qualified in its entirety by reference to the copy of such agreement filed as
Exhibit 1.3 annexed hereto.
In addition, the Company and Joel Arberman, the principal stockholder of
the Company entered into an agreement dated September 28, 1999 whereby he
pledged 3,390,000 shares of Common Stock to Cakewalk to secure the Company's
obligations to Cakewalk under the Note (the "Share Pledge Agreement").
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The above description of the Share Pledge Agreement is incomplete and is
qualified in its entirety by reference to the copy of such agreement filed as
Exhibit 1.4 annexed hereto.
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Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
(a) Not applicable
(b) Not applicable
(c) Exhibits
10.1 Warrant Agreement dated September 23, 1999 between the Company
and Atlantis Equities, Inc.
10.2 Letter of Intent dated September 28, 1999 between the Company
and Cakewalk LLC.
10.3 Note and Security Agreement dated September 28, 1999 between
the Company and Cakewalk LLC.
10.4 Share Pledge Agreement dated September 28, 1999 between
Joel Arberman and Cakewalk LLC
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312396 v.3 [6P1_03!.WPD]
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.
Dated: October 7, 1999
CDBEAT.COM, INC.
By: /s/ Joel Arberman
Name: Joel Arberman
Title: President and CEO
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312396 v.3 [6P1_03!.WPD]
Index to Exhibits
Exhibit No. Description
10.1 Warrant Agreement dated September 23, 1999 between
the Company and Atlantis Equities, Inc.
10.2 Letter of Intent dated September 28, 1999 between
the Company and Cakewalk LLC.
10.3 Note and Security Agreement dated September 28,
1999 between the Company and Cakewalk LLC.
10.4 Share Pledge Agreement dated September 28, 1999
between Joel Arberman and Cakewalk LLC.
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310020 v.1 [6N7_01!.WPD]
Exhibit 10.1
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY
STATE SECURITIES LAWS OF ANY STATE (THE "ACTS") AND MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN
EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACTS OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
No. W-1 Date: September 23, 1999
WARRANT TO PURCHASE COMMON STOCK
OF
CDBEAT.COM, INC.
This certifies that, for value received, Atlantis Equities, Inc., a
Delaware corporation, or its registered assignee ("Holder"), is entitled,
subject to the terms set forth below, to purchase from CDBEAT.COM, INC. (the
"Company"), a Delaware corporation (a) 7,819,092 shares (the "shares") of the
Common Stock of the Company ("Common Stock"), representing 80% of the fully
diluted Common Stock of the Company as constituted on the date hereof after
giving effect to the exercise of this Warrant (the "Warrant Issue Date"), except
for options to purchase 190,516 shares of Common Stock at $2.50 per share (the
"Outstanding Options"), and (b) options (the "Options") exercisable for 762,064
shares of Common Stock at $2.50 per share and expiring December 31, 2000,
representing 80% of the shares of Common Stock underlying the Outstanding
Options, with the Notice of Exercise attached hereto duly exercised, and
simultaneous payment therefor in lawful money of the United States, at the
Exercise Price as set forth in Section 2 below. The number, character and
Exercise Price of such shares of Common Stock are subject to adjustment as
provided below.
1. Term of Warrant and Price of Warrant.
This Warrant shall be exercisable, in whole or in part, during the
period commencing on the date hereof and ending on September 29, 1999, provided,
however, that if the Company receives a $50,000 loan from Holder or a source
arranged by Holder on or before September 29, 1999 such exercise period shall be
extended to October 30, 1999 and provided, further, that if the Company enters
into an agreement for a merger or acquisition (the "Acquisition") on or prior to
October 30, 1999, the period during which this Warrant may be exercised shall be
extended to the earlier of the closing or termination of the Acquisition, and
provided, further, that if the Company has not closed a merger or acquisition by
October 30, 1999, the Warrant shall expire unless the Company receives, by
November 1, 1999, an additional $50,000 loan from Holder or a source arranged by
Holder.
2. Exercise Price and Number of Shares.
2.1 Exercise Price. The exercise price at which this Warrant may be exercised
shall be an aggregate of $1,000,000 (the "Exercise Price").
2.2 Number of Shares and Options. The number of shares of Common Stock which may
be purchased pursuant to this Warrant shall equal 7,819,092, or 80% of the
fully-diluted capital stock, except for the Outstanding Options, as adjusted
from time to time pursuant to Section 11 hereof. The number of Options which
shall be received upon exercise in full of this Warrant shall equal 762,064 and
represent 80% of the total of the Outstanding Options which can be exercised at
$2.50 each and shall expire on December 31, 2000 and shall otherwise be on the
same terms as such Options.
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310020 v.1 [6N7_01!.WPD]
3. Exercise of Warrant.
(a) The purchase rights represented by this Warrant are exercisable
by the Holder in whole or in part at any time during the term of this Warrant,
or from time to time, by the surrender of this Warrant and the Exercise Form.
(b) This Warrant shall be deemed to have been exercised immediately
prior to the close of business on the date of its surrender for exercise, as
provided above, and the person entitled to receive the shares of Common Stock
and Options issuable upon such exercise shall be treated for all purposes as the
holder of record of such shares and Options as of the close of business on such
date. As promptly as practicable on or after such date, the Company at its
expense shall issue and deliver to the person or persons entitled to receive the
same a certificate or certificates for the number of shares and Options issuable
upon such exercise. In the event that this Warrant is exercised in part, the
Company at its expense will execute and deliver a new Warrant of like tenor
exercisable for the number of shares and Options for which this Warrant may then
be exercised.
(c) If this Warrant is exercised in part this Warrant must be
exercised for a number of whole shares of the Common Stock.
4. Replacement of Warrant. On receipt of evidence reasonably satisfactory to the
Company of the loss, theft destruction or mutilation of this Warrant and, in the
case of loss, theft or destruction, on delivery of an indemnity agreement
reasonably satisfactory in form and substance to the Company or, in the case of
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense shall execute and deliver, in lieu of this Warrant, a new warrant of
like tenor and amount.
5. Rights of Stockholders. The Holder shall not be entitled to vote or receive
dividends or be deemed the holder of Common Stock, nor shall anything contained
herein be construed to confer upon the Holder, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action (whether upon any recapitalization,
issuance of stock, reclassification of stock, change of par value, or change of
stock to no par value, consolidation, merger, conveyance or otherwise) or to
receive notice of meetings, or to receive dividends or subscription rights or
otherwise until and to the extent the Warrant shall have been exercised as
provided herein.
6. Transfer of Warrant.
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6.1 Exchange of Warrant Upon a Transfer. Upon delivery by the transferee of a
written agreement to be bound by the terms of this Warrant and surrender of this
Warrant for exchange, properly endorsed and transferred in accordance with this
Section 6, the Company at its expense shall issue to or on the order of the
Holder a new warrant or warrants of like tenor, in the name of the Holder or as
the Holder (on payment by the Holder of any applicable transfer taxes) may
direct, of the number of shares issuable upon exercise hereof.
6.2 Restrictions on Transfer; Compliance with Securities Laws.
(a) The Holder of this Warrant, by acceptance hereof, acknowledges
that this Warrant and the shares of Common Stock and Options to be issued upon
exercise hereof are being acquired solely for the Holder's own account and not
as a nominee for any other party, and for investment and agrees to comply with
the transfer restrictions contained in this Section 6.2. The Holder will not
offer, sell or otherwise dispose of this Warrant or any shares of Common Stock
or Options to be issued upon exercise hereof ("Securities"), except under
circumstances that will not result in a violation of applicable federal and
state securities laws. Prior to offering, selling or otherwise disposing of the
Securities, the holder hereof or thereof will give the Company a written notice
describing the manner and circumstances of the transfer accompanied by, if
requested by the Company, a written opinion of legal counsel satisfactory to the
Company to the effect, as amended, that the proposed transfer may be effected
without registration under the Securities Act of 1933 or any state blue sky law.
Any Securities transferred in violation of applicable federal and state
securities laws shall be void and not recognized by the Company. Any transferee
of this Warrant or Shares shall execute an agreement agreeing to be bound by the
terms of this Section 6.
(b) All shares of Common Stock or Options issued upon exercise
hereof shall be stamped or imprinted with a legend in substantially the
following form (in addition to any legend required by state securities laws):
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
UNITED STATES FEDERAL OR STATE SECURITIES LAWS AND MAY NOT BE
OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED OR ASSIGNED FOR
VALUE, DIRECTLY OR INDIRECTLY, NOR MAY THE SECURITIES BE TRANSFERRED
ON THE BOOKS OF THE COMPANY, WITHOUT REGISTRATION OF SUCH SECURITIES
UNDER ALL APPLICABLE UNITED STATES FEDERAL SECURITIES LAWS OR
COMPLIANCE WITH AN APPLICABLE EXEMPTION THEREFROM, SUCH COMPLIANCE
AT THE OPTION OF THE COMPANY, TO BE EVIDENCED BY AN OPINION OF
SHAREHOLDER'S COUNSEL, IN FORM ACCEPTABLE TO THE COMPANY, THAT NO
VIOLATION OF SUCH REGISTRATION PROVISIONS WOULD RESULT FROM ANY
PROPOSED TRANSFER OR ASSIGNMENT."
7. Registration Rights.
7.1 Certain Definitions.
As used in this Section 7, the following terms shall have the
following respective meanings:
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"Commission" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Form S-1" shall mean Form S- I issued by the Commission or any substantially
similar form then in effect.
"Form S-2" shall mean Form S-2 issued by the Commission or any substantially
similar form then in effect.
"Form S-3" shall mean Form S-3 issued by the Commission or any substantially
similar form then in effect.
"Holder" shall mean the record owner or owners of Registrable Securities.
"Material Adverse Event" shall mean an occurrence having a consequence that
either (a) is materially adverse as to the business, properties, prospects or
financial condition of the Company taken as a whole or (b) is reasonably
foreseeable, has a reasonable likelihood of occurring and, if it were to occur,
would materially adversely affect the business, properties, prospects or
financial condition of the Company taken as a whole.
The terms "Register" "Registered" and "Registration" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act ("Registration Statement"), and the declaration or ordering of
the effectiveness of such Registration Statement.
"Registrable Securities" shall mean all Common Stock not previously sold to the
public and issued to the Holder pursuant to the exercise of this Warrant, or
Common Stock issued or Options with respect to such shares pursuant to stock
splits, stock dividends and similar distributions with respect to such shares,
provided, however, that shares of Common Stock which are Registrable Securities
shall cease to be Registrable Securities at such time, and for so long as, such
shares are eligible for sale pursuant to Rule 144(k) under the Securities Act.
"Registration Expenses" shall mean all expenses incurred by the Company in
complying with Section 7(b) of this Agreement, including, without limitation,
all federal and state registration, qualification and filing fees, printing
expenses, fees and disbursements of counsel for the Company, blue sky fees and
expenses, and the expense of any special audits incident to or required by any
such registration, but shall not include Selling Expenses.
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
7.2 Piggyback Registration.
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7.2.1 Notice of Piggyback Registration and Inclusion of Registrable
Securities. Subject to the terms of this Agreement, in the
event the Company decides to Register any of its Common Stock
for cash (either for its own account or the account of a
security holder), other than pursuant to (i) a Registration
Statement which exclusively relates to the Registration of
securities under an employee stock option, purchase, bonus or
other benefit plan, or (ii) a Registration relating solely to
a transaction under Rule 145 promulgated by the Commission,
then at any time following an Initial Public Offering and for
so long as the Holder holds Registrable Securities, the
Company will: (1) promptly give the Holder written notice
thereof (which shall include a list of the jurisdictions in
which the Company intends to attempt to qualify such
securities under the applicable Blue Sky or other state
securities laws) and (2) include in such Registration (and any
related qualification under Blue Sky laws or other
compliance), and in any underwriting involved therein, all the
Registrable Securities specified in a written request
delivered to the Company by the Holder within 10 days after
delivery of such written notice from the Company.
7.2.2 Underwriting in Piggyback Registration. If the Registration of
which the Company gives notice is a Registered public offering
involving an underwriting, the Company shall so advise the
Holder as a part of the written notice given pursuant to
Subsection 7.2.1. In such event the right of the Holder to
Registration shall be conditioned upon such underwriting and
the inclusion of a Holder's Registrable Securities in such
underwriting to the extent provided in this Section 7.2. The
Holder shall, together with the Company, enter into an
underwriting agreement with the Underwriter's Representative
for such offering. The Holder shall have no right to
participate in the selection of the underwriters for an
offering pursuant to this Section.
7.2.3 Marketing, Limitation in Piggyback Registration. In the event
the Underwriter's Representative advises the Company and the
Holder engaged in a Registration under Subsection 7.2.1 in
writing that market factors (including, without limitation,
the aggregate number of shares of Common Stock requested
to be Registered, the general condition of the market and
the status of the persons proposing to sell securities
pursuant to the Registration) require a limitation of the
number of shares to be underwritten, the Underwriter's
Representative (subject to the allocation priority set forth
in clause (iii) below) may exclude some or all of the
Registrable Securities from such Registration and
underwriting.
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7.2.4 Allocation of Shares in Piggyback Registration. In the event
that the Underwriter's Representative limits the number of
shares to be included in a Registration pursuant to Subsection
7.2.1, the Holder shall be entitled to include a portion of
the Registrable Securities requested to be included in such
Registration pro rata (based on the number of shares
requested to be included) with all other persons currently
holding similar written piggyback registration rights
requesting Registration. Unless all Registrable Securities
and such other piggybacking shares requested to be included
in such Registration are so included, no other securities may
be included in the Registration Statement in addition to
those securities being sold on behalf of the Company.
7.2.5 Withdrawal in Piggyback Registration. If the Holder
disapproves of the terms of any such underwriting, it may
elect to withdraw therefrom by written notice to the Company
and the underwriter delivered at least seven days prior to the
effective date of the Registration Statement. Any Registrable
Securities or other securities excluded or withdrawn from such
underwriting shall be withdrawn from such Registration.
7.3 Demand Registration.
Subject to Section 7.5.3 below, if, the Company shall receive
a written request (specifying that it is being made pursuant
to this Section 7(c)) from persons holding more than fifty
percent (50%) of the Registrable Securities that the Company
file a registration statement or similar document under the
Securities Act, then the Company shall promptly notify in
writing all other Holders holding Registrable Securities of
such request and shall use its best efforts to cause all
Registrable Securities that Holders have requested be so
registered within 20 days after written notice from the
Company of the proposed registration to be registered under
the Securities Act. Notwithstanding the foregoing, if the
Company shall furnish to such Holders a certificate signed by
the President of the Company stating that in good faith
judgment of the Company's Board of Directors it would be
seriously detrimental to the Company or its shareholders for a
registration statement to be filed in the near future, then
the Company's obligation to use its best efforts to file a
registration statement shall be deferred for a period not to
exceed four (4) months; provided, however, that the Company
shall not obtain such a deferral more than once in any
12-month period.
The Company shall be obligated to effect only two
registrations pursuant to this Section 7.3.
7.4 Form S-3 Registration Rights.
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In the event the Company is eligible to register securities on
Form S-3 and receives from Holders holding more than 50
percent (50%) of the Registrable Securities a written request
that the Company effect a registration statement on Form S-3
for an offering of Registrable Securities covering the
registration of not less than 50 percent (50%) of the
Registrable Securities held by all holders of Registrable
Securities, the expected aggregate price to the public of
which exceeds $1,000,000, net of any underwriting discounts
and commissions, then the Company will promptly give written
notice of the proposed Form S-3 registration to all Holders of
Registrable Securities and will, as soon as practicable, use
its best efforts to effect registration of the Registrable
Securities on Form S-3, together with all or such portion of
the Registrable Securities of any holder joining in such
request as are specified in a written request delivered to the
Company within 20 days after written notice from the Company
of the proposed registration.
These rights are in addition to, and not in lieu of, the
rights granted under Sections 7.2 and 7.3 hereof.
7.5 Obligations of the Company and Holders.
7.5.1 Obligations of the Company. Whenever required under Section
7.3 or Section 7.4 to use its best efforts to the effect the
registration of any Registrable Securities, the Company shall,
as expeditiously as reasonably possible:
7.5.1.1 Prepare and file with the Commission a registration statement
with respect to such Registrable Securities and use its best
efforts to cause such registration statement to become and
remain effective until the contemplated distribution is over.
7.5.1.2 Prepare and file with the Commission, in a timely manner, such
amendments and supplements to such registration statement and
the prospectus used in connection with such registration
statement as may be necessary to comply with the provisions of
the Securities Act with respect to the disposition of all
securities covered by such registration statement.
7.5.1.3 Furnish to the Holders and deliver as directed such numbers of
copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and
such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned
by them.
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7.5.1.4 Use its best efforts to register and qualify the securities
covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be
reasonably appropriate for the distribution of the securities
covered by the registration statement, provided that the
Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a
general consent to service of process in any such states or
jurisdictions, and further provided that (anything in this
Agreement to the contrary notwithstanding with respect to the
bearing of expenses) if any jurisdiction in which the
securities shall be qualified shall require that expenses
incurred in connection with the qualification of the
securities in that jurisdiction be borne by selling
shareholders, then such expenses shall be payable by selling
shareholder pro rata, to the extent required by such
jurisdiction.
7.5.2 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to
Section 7.3 or Section 7.4 that the Holders shall furnish to
the Company such information regarding them, the Registrable
Securities held by them, and the intended method of
disposition of such securities as the Company shall reasonably
request and as shall be required in connection with the action
to be taken by the Company.
7.5.3 Underwriting Requirements. In connection with any offering
involving an underwriting of shares pursuant to Sections 7.2,
7.3 or 7.4 hereof the Company shall not be required to include
any of the Holders' Registrable Securities in such
underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters
selected by it. If the managing underwriter or underwriters of
such public offering advise the Company that, in their
opinion, the amount of the Registrable Securities to be
included in any such offering pursuant to the request of the
Holders would adversely affect the success of such offering,
the Company will include in such offering on behalf of such
Holders, the amount of Registrable Securities equal to the
total amount which, in the opinion of such managing
underwriter or underwriters, can be sold without such adverse
effect, and such Registrable Securities shall be allocated on
a pro-rata basis among the Holders of the Registrable
Securities requested to be included in such offering.
7.5.4 Delay of Registration. No Holder shall have any right to take
any action to restrain, enjoin, or otherwise delay any
registration as the result of any controversy that might arise
with respect to the interpretation or implementation of
Section 7.3 or Section 7.4.
7.5.5 Expenses of Registration. All Registration Expenses incurred
in connection with all Registrations pursuant to Sections 7.2,
7.3 and 7.4 shall be borne by the Company, except the Holder
shall bear the underwriting discounts or commissions relating
to Registrable Securities sold by such Holder.
7.5.6 Registration Procedures. The Company will keep the Holder
advised as to the initiation and completion of such
Registration. At its expense the Company will use its best
efforts to keep such Registration effective (a) until the
registering Holder has completed the distribution described in
the Registration Statement relating thereto or (b) until the
Holder can register their Registrable Securities under Rule
144(k) of the Securities Act, whichever first occurs.
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7.6 Indemnification.
7.6.1 Company's Indemnification of the Holder. The Company will
indemnify the Holder, and each of its directors, officers,
stockholders, partners or other beneficial owners, and each
person controlling the Holder, with respect to which
Registration, qualification or compliance of Registrable
Securities has been effected pursuant to this Warrant, and
each underwriter, if any, and each person who controls any
underwriter against all claims, losses, damages or
liabilities, including reasonable legal fees and expenses (or
actions in respect thereof) to the extent such claims,
losses, damages or liabilities arise out of or are based
upon any untrue statement (or alleged untrue statement) of
a material fact contained in any prospectus or other document
(including any related Registration Statement) incident to any
such Registration, qualification or compliance, or are based
on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to
make the statements therein not misleading, or any violation
by the Company of any rule or regulation promulgated under
the Securities Act applicable to the Company and relating to
action or inaction required of the Company in connection with
any such Registration, qualification or compliance; and the
Company will reimburse the Holder, each of its directors,
officers, stockholders, partners or other beneficial owners,
each such underwriter and each person who controls the Holder
or underwriter for any legal and any other expenses
reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action;
provided, however, that the indemnity contained in this
Subsection 7.6 shall not apply to amounts paid in settlement
of any such claim, loss, damage, liability or action if
settlement is effected without the consent of the Company
(which consent shall not unreasonably be withheld); and
provided, further, that the Company will not be liable in any
such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based upon any
untrue statement or omission based upon written information
furnished to the Company by the Holder, underwriter or
controlling person and stated to be for use in connection
with the offering of securities of the Company.
16
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7.6.2 The Holder's Indemnification of Company. The Holder will, if
Registrable Securities held by the Holder are included in the
securities as to which such Registration, qualification or
compliance is being effected pursuant to this Warrant,
indemnify the Company, each of its directors and officers,
each legal counsel and independent accountant of the Company,
each underwriter, if any, of the Company's securities covered
by such a Registration Statement, and each person who controls
the Company or such underwriter within the meaning of the
Securities Act against all claims, losses, damages and
liabilities, including legal fees and expenses (or actions in
respect thereof), arising out of or based upon any untrue
statement (or alleged untrue statement) of a material fact
contained in any such Registration Statement, prospectus,
offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to
be stated therein or necessary to make the statements therein
not misleading, or any violation by the Holder of any rule or
regulation promulgated under the Securities Act applicable to
the Holder and relating to action or inaction required of the
Holder in connection with any such Registration, qualification
or compliance; and will reimburse the Company, such directors,
officers, partners, persons, law and accounting firms,
underwriters or control persons for any legal and any other
expenses reasonably incurred in connection with investigating
or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such Registration
Statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information
furnished to the Company by the Holder and stated to be
specifically for use in connection with the offering of
securities of the Company; provided, however, that the
Holders' liability under this Section 7(f)(2) shall not exceed
the Holder's proceeds from the offering of securities made in
connection with such Registration.
7.6.3 Indemnification Procedure. Promptly after receipt by an
indemnified party under this Section 7.6 of notice of the
commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying
party under this Section 7.6, notify the indemnifying party in
writing of the commencement thereof and generally summarize
such action. The indemnifying party shall have the right to
participate in and to assume the defense of such claim;
provided, however, that the indemnifying party shall be
entitled to select counsel for the defense of such claim with
the approval of any parties entitled to indemnification, which
approval shall not be unreasonably withheld; provided further,
however, that if either party reasonably determines that there
may be a conflict between the position of the Company and the
Holders in conducting the defense of such action, suit or
proceeding by reason of recognized claims for indemnity under
this Section 7.6, then counsel for such party shall be
entitled to conduct the defense to the extent reasonably
determined by such counsel to be necessary to protect the
interest of such party. The failure to notify an indemnifying
party promptly of the commencement of any such action, if
prejudicial to the ability of the indemnifying party to defend
such action, shall relieve such indemnifying party, to the
extent so prejudiced, of any liability to the indemnified
party under this Section 7.6, but the omission so to notify
the indemnifying party will not relieve such party of any
liability that such party may have to any indemnified party
otherwise other than under this Section 7.6.
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<PAGE>
7.6.4 Subsequent Transferees. The provisions of this Section 7.6
applicable to the Holder shall apply with equal force and
effect to each subsequent transferee to whom any of the
Registrable Securities are transferred with the consent of the
Company.
7.7 Current Public Information.
At all times after the Company has filed a Registration
Statement pursuant to the Securities Act, the Company will
file all reports required under the Securities Act or the
Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder, and will take such further action as
may be reasonably required to enable any Holder of "restricted
securities" (as defined in Rule 144 adopted by the Commission
under the Securities Act) to sell such securities pursuant to
Rule 144, as amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission.
8. Reservation of Stock. The Company covenants that during the term that this
Warrant is exercisable, the Company will not issue or sell any Common Stock or
any options, warrants or other securities exercisable or exchangeable for, or
convertible into, Common Stock and will all of its current remaining authorized
and unissued Common Stock for purposes of this Agreement. The Company also
covenants and agrees that it shall use its best efforts to cause a sufficient
number of shares to be available to provide for the issuance of Common Stock
upon the exercise of this Warrant and the Options and, from time to time, will
take all steps necessary to amend its Certificate of Incorporation (the
"Certificate") to provide sufficient reserves of shares of Common Stock issuable
upon the exercise of the Warrant and the Options. The Company further covenants
that all shares that may be issued upon the exercise of rights represented by
this Warrant and the Options, upon exercise of the rights represented by this
Warrant and the Options and payment of the Exercise Price of this Warrant and
the Options, all as set forth herein, will be free from all taxes, liens and
charges in respect of the issue thereof (other than taxes in respect of any
transfer occurring contemporaneously or otherwise specified herein), and will be
validly issued, fully paid and nonassessable.
9. Notices. Whenever the Exercise Price or number of shares purchasable
hereunder shall be adjusted pursuant to Section 11 hereof, the Company shall
issue a certificate signed by its Chief Financial Officer setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated, and the Exercise
Price and number of shares purchasable hereunder after giving effect to such
adjustment, and shall cause a copy of such certificate to be mailed (by
first-class mail, postage prepaid) to the Holder of this Warrant.
10. Amendments.
(a) Any term of this Warrant may be amended with the written consent
of the Company and the Holder. Any amendment effected in accordance with this
Section 10 shall be binding upon the Holder, each future Holder and the Company.
(b) No waivers of, or exceptions to, any term, condition or
provision of this Warrant, in any one or more instances, shall be deemed to be,
or construed as, a further or continuing waiver of any such term, condition or
provision.
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<PAGE>
312396 v.3 [6P1_03!.WPD]
11. Adjustments. The number of shares purchasable hereunder is subject to
adjustment so that at all times up to the termination of the exercise period it
shall equal 80% of all shares of the Company's capital stock outstanding or
which could become outstanding upon the exercise, conversion or exchange of any
commitment or security directly or indirectly exercisable or exchangeable for or
convertible into capital stock of the Company (including this Warrant) except
for the Outstanding Options. In addition, the number of shares of Common Stock
underlying the Options shall be adjusted so that at all times during the
exercise period such shares shall represent 80% of the number of shares of
Common Stock issuable upon the exercise of such Options and the Outstanding
Options. Upon any such adjustment, the Exercise Price shall be adjusted so that
the aggregate exercise price of $1,000,000 is allocated over the total number of
shares then purchasable.
11.1 No Impairment. The Company will not, by any voluntary action, avoid or seek
to avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Company, but will at all times in good faith assist
in the carrying out of all the provisions of this Section 11 and in the taking
of all such action as may be necessary or appropriate in order to protect the
rights of the Holders of this Warrant against impairment.
12. Notice of Acquisition. The Company shall give Holder at least
five business days prior written notice of the closing of the Acquisition and of
its execution of an agreement as to an Acquisition.
13. Entire Understanding. This letter sets forth the entire
understanding of the parties relating to the subject matter hereof, and
supersedes and cancels the prior Warrant issued on September 22, 1999.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officers thereunto duly authorized.
Dated: September 23, 1999
CDBEAT.COM, INC.
By: /s/ Joel Arberman
Name: Joel Arberman
Title: President and CEO
ATLANTIS EQUITIES, INC.
By: /s/ Nancy Ellin
Name: Nancy Ellin
Title: President
312396 v.3 [6P1_03!.WPD]
Exhibit 10.2
Cakewalk LLC
250 W. 57 St., Suite 620
New York, N.Y. 10107
September 28, 1999
Mr. Joel Arberman, President
CDbeat.com, Inc.
444 Bedford Street
Suite 8s
Stamford, Ct. 06901
Re: Letter of Intent
Dear Joel:
The purpose of this letter is to set forth in writing our mutual intent to
consummate a merger between CDbeat.com, Inc. ("CDbeat") and Cakewalk LLC
("Cakewalk") on the terms and conditions set forth herein.
Cakewalk desires to use its status as one of the country's leading
independent record labels, together with its premier roster of
shareholders/investors including senior members of Lazard Freres, BankBoston and
Prudential Insurance, as a platform for effectuating a content-oriented,
niche-oriented consolidation/rollup within the independent segment of the record
business under a parent public holding company structure. An important component
of Cakewalk's strategy is the incorporation of a distinctive and effective
Internet strategy in order to take advantage of existing and new methods of
distributing music content. Cakewalk's game plan therefore is to incorporate a
dual content and technology strategy.
CDbeat owns proprietary disc/digital recognition software that allows
users who are listening to music on their computer simultaneously to access
various artist and genre-related Internet sites and other information. CDbeat's
software also has the ability to deliver music via the Internet by means of
digital download, custom CDs and related technologies. CDbeat's shares are
quoted on the NASDAQ Bulletin Board under the symbol CDBT.
In view of the foregoing, Cakewalk and CDbeat agree as follows:
1. CDbeat and Cakewalk will merge in a manner to be determined which shall
be tax-free to the investors in Cakewalk. CDbeat will maintain its public
company status, and the parties agree to make any required filings with the
Securities and Exchange Commission including, without limitation, the filing
required by the provisions of Section 14(f) of the Securities Exchange Act of
1934, as amended (the "14(f) Notice"), in order to effectuate the merger.
20
<PAGE>
2. After the merger, the surviving company in the merger ("Newco") will
immediately change its name to such new name as its new board of directors shall
select.
3. Newco will be managed by Robert Miller as President and Chief Executive
Officer, together with such other officers, including a chief operating officer
and a chief financial officer, as shall be selected by Mr. Miller with the
consent of the Newco board of directors. Joel Arberman will become Newco's
Internet Officer.
4. The initial Newco board of directors will consist of the following
seven members plus one observer:
Joel Arberman
Adam Blumenkranz
Robert Ellin
Peter Ezersky
Jonathan Foster
David Goddard
Robert Miller (Chairman)
Thomas Cyrana (observer)
5. Newco will also have an Advisory Board consisting of various music and
technology luminaries.
6. Upon the closing of the merger, each company's equity owners will own
9,773,865 Newco common shares, constituting 50% each of the post-merger common
shares, substantially as follows:
CDbeat Common Shares
Public shareholders 561,600
Consultants 42,597
Bryan Eggers 178,026
Joel Arberman 1,172,550
Atlantis Equities 7,819,092
Total 9,773,865
Cakewalk Common Shares
-------- -------------
Lazard Freres group 3,751,209
BankBoston 2,138,751
Robert Miller 1,540,821
Prudential/EFI 1,471,829
Joel Dorn 620,928
Signet/MCG 250,327
--------
Total 9,773,865
21
<PAGE>
7. In addition to the foregoing shares, upon the closing of the merger the
following additional option shares will be outstanding:
CDbeat Options ($2.50/sh. exp. 12/31/00)
Director/Employees 33,280
Consultants 113,486
Shareholders 43,750
Atlantis Equities 762,064
-------
Total 952,580
8. In addition, Newco will issue 2,932,159 management stock options, at an
exercise price per share to be agreed upon prior to closing; 1,955,750 of such
options will be issued to Robert Miller, with the balance reserved to other
officers of Newco and to be awarded by the Newco board of directors.
9. Cakewalk's record label, 32 Records, will continue to be managed by
Joel Dorn (Music Director), Michael Weiner (General Manager) and Fran Saporito
(Controller).
10. CDbeat represents that Joel Arberman and Atlantis Equities, Inc., who
together beneficially own in excess of 90% of CDbeat's existing shares, have
committed to vote their shares in favor of the merger. Cakewalk represents that
the Investor Representatives from Lazard Freres and BankBoston, as well as
Prudential Insurance/EFI, have preliminarily approved the merger. All major
shareholders of Newco will agree to a one-year lockup on their post-merger
shares.
11. The parties intend that the merger close as soon as practicable, and
have agreed upon November 1, 1999 as the intended closing date. The parties
agree to work expeditiously towards completing due diligence and the drafting of
a definitive merger agreement, which the parties intend to execute on or before
October 15, 1999. Thereafter, CDbeat will give the required 14(f) Notice.
12. CDbeat has prepared the attached press release regarding the
transaction covered hereby, which Cakewalk consents to.
13. This letter of intent shall not create any legally binding
obligations, and the contemplated merger shall be subject to the following
conditions, among other things:
- Approval of Cakewalk's Supervisory Board and CDbeat's board of
directors
- Satisfactory mutual legal and financial due diligence
- All necessary approvals
- Completion of the merger on a tax-free basis to Cakewalk's owners
- Execution of definitive documentation, including representations
and warranties, covenants, conditions and other customary terms
14. Each party will bear its own expenses, and will cooperate to provide
access to all records and corporate documents.
Please indicate your agreement to the foregoing by signing a copy of this
letter.
Sincerely,
/s/ Robert Miller
Robert Miller
President & CEO
22
<PAGE>
ACCEPTED AND AGREED TO:
CDbeat.com, Inc.
By: /s/ Joel Arberman
Joel Arberman
President & CEO
23
<PAGE>
312396 v.3 [6P1_03!.WPD]
Exhibit 10.3
NOTE AND SECURITY AGREEMENT
$50,000 September 28, 1999
FOR VALUE RECEIVED, CDBEAT.COM, INC., a Delaware corporation (the
"Borrower"), having an office at 444 Bedford Street, Suite 8S, Stamford,
Connecticut 06901, hereby promises to pay to the order of CAKEWALK LLC (the
"Lender"), at its principal executive office at 250 West 57th Street, New York,
New York 10107, or at such other place as Lender may, from time to time,
designate, the principal sum of $50,000 in lawful money of the United States due
and payable as set forth below.
1. Interest. The unpaid principal amount of this Note, outstanding from time to
time, shall bear interest at 10% per annum, commencing on the date hereof
through the Maturity Date specified in Paragraph 2 below. Such interest shall
accrue and be due and payable on the Maturity Date. Overdue principal and, to
the extent permitted by law, overdue interest on this Note, shall bear interest,
payable on demand, at 12% per annum. In no event shall the interest charged
hereunder exceed the maximum permitted by applicable law.
2. Principal. Except as otherwise provided, no principal payments hereunder need
be made until December 28, 1999 when the entire unpaid principal balance
evidenced by this Note and all accrued interest thereon shall be due and payable
(the "Maturity Date").
3. Prepayment. Borrower shall have the right to prepay this Note in whole or in
part, from time to time, with all accrued interest to the date of prepayment on
the amount being so prepaid, without premium or penalty.
4. Security Interest. (a) Borrower hereby grants to the Lender a continuing
first priority security interest in and lien upon all of the following, whether
now owned or hereafter acquired and wherever located (collectively, the
"Collateral"):
(i) all accounts receivable, accounts, chattel paper, contract rights
(including, without limitation, royalty agreements, license agreements and
distribution agreements), documents, instruments, money, deposit accounts and
general intangibles including, without limitation, returns, repossessions, books
and records relating thereto, and equipment containing said books and records,
all investment property including securities and securities entitlements;
(ii) all software, computer source codes and other computer programs
(collectively, the "Software Products"), and all common law and statutory
copyrights and copyright registrations, applications for registration, now
existing or hereafter arising, in the United States of America and foreign,
obtained or to be obtained on or in connection with the Software Products, or
any parts thereof or any underlying or component elements of the Software
Products together with the right to copyright and all rights to renew or extend
such copyrights and the right (but not the obligation) of Lender to sue in its
own name and/or in the name of the Borrower for past, present and future
infringements of copyright;
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<PAGE>
(iii) all goods including, without limitation, equipment and inventory
(including, without limitation, all export inventory);
(iv) all guarantees and other security therefor;
(v) all trademarks, service marks, trade names and service names and the
goodwill associated therewith;
(vi) (a) all patents and patent applications filed in the United States Patent
and Trademark Office or any similar office of any foreign jurisdiction, and
interests under patent license agreements, including, without limitation, the
inventions and improvements described and claimed therein;
(b) licenses pertaining to any patent whether the
Borrower is licensor or licensee;
(c) all income, royalties, damages, payments,
accounts and accounts receivable now or hereafter due and/or payable under and
with respect thereto, including, without limitation, damages and payments for
past, present or future infringements thereof;
(d) the right (but not the obligation) to sue for
past, present and future infringements thereof;
(e) all rights corresponding thereto throughout the
world in all jurisdictions in which such patents have been issued or applied
for;
(f) the reissues, divisions, continuations, renewals,
extensions and continuations-in-part with any of the foregoing (all of the
foregoing patents and applications and interests under patent license
agreements, together with the items described in clauses (a) through (f) in this
paragraph are sometimes herein individually and collectively referred to as the
"Patents");
(vii) all products and proceeds including, without limitation, insurance
proceeds, of any of the foregoing; and
(viii) any and all additions, improvements and accessions to the foregoing, all
substitutions and replacements therefor and all products and proceeds thereof
and proceeds of insurance thereon and all other records relating thereto;
all to secure performance and payment of (i) this Note, and (ii) all other
obligations and indebtedness of Borrower to Lender of whatever kind and whenever
or however created or incurred, whether absolute or contingent, matured or
unmatured, direct or indirect (all of the foregoing being the "Secured
Indebtedness"). The security interest granted herein shall continue in full
force and effect until all of the Secured Indebtedness has been discharged.
25
<PAGE>
In addition, the word "Collateral" includes all the following, whether now owned
or hereafter acquired, whether now existing or hereafter arising, and wherever
located: (a) All attachments, accessions, accessories, tools, parts, supplies,
increases, and additions to and all replacements of and substitutions for any
property described above; (b) All products and produce of any of the property
described in this Collateral section; (c) All accounts, general intangibles,
instruments, rents, monies, payments, and all other rights, arising out of a
sale, lease, or other disposition of any of the property described in this
Collateral section; (d) All proceeds (including insurance proceeds) from the
sale, destruction, loss, or other disposition of any of the property described
in this Collateral section; and (e) All records and data relating to any of the
property described in this Collateral section whether in the form of a writing,
photograph, microfilm, microfiche, or electronic media, together with all of the
Borrower's right, title, and interest in and to all computer software required
to utilize, create, maintain, and process any such records or data on electronic
media.
5. Covenants. For as long as any obligations pursuant to this Note remain
outstanding, Borrower agrees as follows:
(a) Financial Reports. Borrower shall provide to the Lender the following
financial information and reports, which information and reports shall be kept
confidential by Lender:
(i) A monthly balance sheet of Borrower within ten (10) days after the end of
each month, certified by its chief executive or chief financial officer;
(ii) quarterly financial statements of Borrower including a balance sheet and
income statement within thirty (30) days after the end of each quarter certified
by its chief executive or chief financial officer;
(iii) written advice as to any occurrence of the following within ten (10) days
of each such event, such notice to include reasonable detail with respect
thereto: (A) the occurrence of any Event of Default specified in Paragraph 7
hereof; (B) any event which affects the value of the Collateral, the ability of
Borrower or Lender to dispose of the Collateral, or the rights and remedies of
Lender in relation thereto including, without limitation, the levy of any legal
process against the Collateral and a casualty loss with respect to the
Collateral of significant value; (C) the institution or threatened commencement
of any action or proceeding against the Borrower involving amounts equal to or
greater than $25,000 individually or in the aggregate; and (D) any other event
which, in the reasonable judgement of management of Borrower, could have a
material adverse effect on Borrower or its business, operations or the
Collateral; and
(iv) such other information as Lender may reasonably request.
(b) Liens. Borrower shall not, without the prior written consent of Lender,
create, incur, assume or suffer to exist (collectively, "incur") any mortgage,
pledge, security interest, assignment, lien (statutory or other), claim,
encumbrance, license or sublicense or security interest (collectively, "Lien")
in or upon any of the Collateral, except for:
26
<PAGE>
(i) Liens for taxes, assessments or similar charges incurred in the ordinary
course of business that are not yet due and payable;
(ii) pledges or deposits made in the ordinary course of business to secure
payment of worker's compensation such as participating in any funding in
connection with worker's compensation, unemployment insurance, old age, pension
or other social security programs; or
(iii) Liens of mechanics, material men, warehouse men, carriers or other like
Liens securing obligations incurred in the ordinary course of business;
(c) Indebtedness. Except for secured indebtedness incurred to financial
institutions on the date hereof described on Exhibit A annexed hereto (the
"Permitted Financing"), Borrower shall not, without the prior written consent of
Lender, incur any liability in respect of borrowed moneys in excess of $50,000.
(d) Name and Address. Borrower will not change its principal address, or any
other place of business, or the location of any Collateral (including the
location of its business records), or make any change in the Borrower's name or
conduct the Borrower's business operations under any fictitious business name or
trade name, without, in any such case, at least thirty (30) days' prior written
notice to the Lender.
(e) Maintenance of Collateral. Borrower will maintain the Collateral in good
operating condition and repair. Borrower shall defend the Collateral against all
claims and demands of all persons or entities at any time claiming the same or
any interest therein. In addition, Borrower shall not amend, modify or
supplement, or waive any condition or provision of the License without Lender's
prior written consent.
(f) Sale or Disposition. Borrower will not sell, contract for sale or otherwise
dispose of any of the Collateral or any interest therein, other than in the
ordinary course of business.
(g) Taxes. Borrower will pay promptly when due all taxes and assessments on the
Collateral or for its use or operation, except for taxes and assessments which
are being contested in good faith. The Lender may at its option discharge any
taxes or Liens to which any Collateral is at any time subject, and may, upon the
failure of the Borrower so to do, purchase insurance on any Collateral and pay
such amounts as may be reasonably necessary for the repair, maintenance or
preservation thereof, and the Borrower agrees to reimburse the Lender on demand
for any payments or expenses incurred by the Lender pursuant to the foregoing
authorization and any unreimbursed amounts shall constitute Secured Indebtedness
for all purposes hereof.
(h) Further Assurances. Borrower will promptly execute and deliver to the Lender
such financing statements, certificates, notices and other documents or
instruments as may be necessary to enable the Lender to perfect or from time to
time perfect, renew or continue the security interest granted herein, including,
without limitation, such financing statements, certificates and other documents
as may be necessary to perfect a security interest in any additional Collateral
hereafter acquired by the Borrower or in any replacements or proceeds thereof.
Borrower hereby authorizes Lender to take all action (including, without
limitation, the filing of any Uniform Commercial Code Financing Statements or
amendments thereto without the signature of Borrower or the notification of any
account debtor or payor) that Lender may deem necessary or desirable to perfect
or otherwise protect the security interest described hereunder and to obtain the
benefits of this Note.
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<PAGE>
6. Representations and Warranties. The Borrower hereby represents and warrants
as follows, which representations and warranties shall continue to be true while
any obligations pursuant to this Note remain outstanding:
(a) Status. It is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation and has the power and
authority to carry on its business as it is now being conducted and to own,
operate and lease its properties and assets. It is duly qualified and in good
standing in each jurisdiction in which the character or location of its
properties or nature of its business makes such qualification necessary.
(b) Authority. It has full power and authority to execute and deliver this Note
and to grant the security interest granted herein, and the execution and
delivery by the Borrower of this Note, and the performance if its obligations
hereunder, have been duly authorized by all necessary corporate or other action.
This Note is the legal, valid and binding obligation of Borrower enforceable
against it in accordance with the terms hereof.
(c) No Conflict. It is not in default under any indenture, mortgage, deed of
trust, agreement or other instrument to which it is a party or by which it or
any of its assets may be bound. The execution and delivery of this Note and
compliance with the provisions hereof shall not violate any provision of law
applicable to Borrower nor shall the same conflict with or result in a breach of
any of the terms, conditions or provisions of, or constitute a default under,
the certificate of incorporation or by-laws of Borrower, or result in the breach
of, constitute any default under, or conflict with the terms of any indenture,
mortgage, agreement or other instrument to which it is party or by which it or
any of its assets may be bound, or result in the creation or imposition of any
Lien upon any of its assets, other than for the security interest granted
hereunder.
(d) Consents. Except as may be required by applicable securities laws, no
consent, approval, order, authorization of, or registration, qualification or
filing with, any governmental authority or any other party is required on the
part of Borrower in connection with the execution and delivery of this Note, the
granting of the security interest granted herein, and the performance and
consummation of the transactions contemplated hereby, other than (i) such
consents that have been obtained and (ii) the filing of any financing statement
that is required to perfect Lender's security interest.
(e) Litigation. There are no suits, proceedings or investigations pending or, to
its knowledge, threatened against it which questions the validity of this Note
or which, individually or in the aggregate, if determined adversely, at have a
material adverse effect on it, its business, operation or assets.
(f) Title. It is the sole owner of, and has good title to, the Collateral, free
and clear of any Lien, except for the security interest granted hereby, Liens of
contractors and material men, and the Liens created by the Permitted Financing.
There is no financing statement or similar filing now on file in any public
office covering any part of the Collateral except for those financing statements
filed in connection with the Permitted Financing.
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<PAGE>
(g) Locations. The chief executive office of Borrower is located at the address
first set forth above. All inventory and equipment held on the date hereof by
Borrower is located in Brossard, Quebec.
7. Default - Each of the following shall constitute an event of default (an
"Event of Default") hereunder:
(a) the Borrower's committing an act of bankruptcy, making an assignment for the
benefit of creditors or making or sending a notice of intended bulk transfer, or
if a meeting of creditors is convened or a committee of creditors is appointed
for, or any petition or proceeding for any relief under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, receivership,
liquidation or dissolution law or statute now or hereinafter in effect (whether
at law or in equity) is filed or commenced by or against Borrower or any of its
properties or the appointment of a receiver or trustee for Borrower or any of
its properties;
(b) any merger, consolidation or other business combination involving the
Borrower or the sale of all or substantially all of the assets of Borrower,
other than a merger, consolidation or business combination between the Lender
and the Borrower;
(c) the issuance of a levy or execution, or the seizure, attachment or
garnishment, or the entry of judgment on or against Borrower or any of its
properties which, individually or in the aggregate, exceeds $50,000 and which
shall not be released, satisfied of record or bonded within thirty (30) days
thereafter;
(d) the failure to pay the principal amount of this Note when due (whether at
maturity, by reason of acceleration or otherwise);
(e) the occurrence of a default of any kind or the breach of any covenant under
this Note (other than the payment of the interest payments required hereunder)
or any present or future document, instrument or agreement between the Borrower
and the Lender;
(f) should any representation or warranty made by Borrower in this Note or any
other present or future document, instrument or agreement between Borrower and
the Lender prove to be untrue or inaccurate in any material respect as of the
date on which such representation or warranty is made; or
(g) the default in payment of principal of or interest on any other indebtedness
for borrowed money owed by Borrower or default in the performance or observance
of the terms of any instrument pursuant to which such indebtedness was created
or secured, the effect of which default is to cause or permit any holder of any
such indebtedness to cause the same to become due prior to its stated maturity
(and whether or not such default is waived by the holder thereof).
8. Rights and Remedies (a) Upon the occurrence of any Event of Default, such
default not having previously been remedied or waived, the Lender shall have the
following rights and remedies:
(i) The right, at its option, by written notice to the Borrower, to declare the
entire unpaid balance of this Note to be immediately due and payable and
thereupon such amount together with all costs, fees and expenses incurred in
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connection herewith, shall be immediately due and payable, except that upon an
occurrence of an Event of Default provided for in paragraph 7 (a) hereof, no
declaration or notice shall be required.
(ii) All rights and remedies provided by law, including, without limitation,
those provided by the Uniform Commercial Code as in effect in the State of New
York from time to time (the "UCC").
(iii) The right to take possession of the Collateral and, in addition thereto,
the right to enter upon any premises on which the Collateral or any part thereof
may be situated, without notice, and remove the same therefrom. The Lender may
require the Borrower to make the Collateral (to the extent the same is moveable)
available to the Lender at a place to be designated by the Lender which is
reasonably convenient to both parties. Unless the Collateral threatens to
decline speedily in value or is of a type customarily sold on a recognized
market, the Lender will give the Borrower at least ten (10) days' prior written
notice at the address of the Borrower set forth above (or at such other address
or addresses as the Borrower shall specify in writing to the Lender) of the time
and place of any public sale thereof or of the time after which any private sale
or any other intended disposition thereof is to be made. Any such notice shall
be deemed to meet any requirement hereunder or under any applicable law
(including the UCC) that reasonable notification be given of the time and place
of such sale or other disposition. After deducting all costs and expenses of
collection, storage, custody, sale or other disposition and delivery (including
legal costs and attorneys' fees, expenses and disbursements) and all other
charges against the Collateral, the remaining proceeds of any such sale or
disposition shall be applied to the payment of the Secured Indebtedness in such
order of priority as the Lender shall determine and any surplus shall be
returned to the Borrower or to any person or party lawfully entitled thereto. In
the event the proceeds of any sale, lease or other disposition of the Collateral
hereunder are insufficient to pay all of the Secured Indebtedness in full, the
Borrower will be liable for the deficiency, together with interest thereon at
the highest rate of interest provided in this Note, and the costs and expenses
of collection of such deficiency, including (to the extent permitted by law),
without limitation, attorneys' fees, expenses and disbursements.
(b) All rights and remedies available to the Lender pursuant to the provisions
of this Note, applicable law and otherwise are cumulative, not exclusive, and
are enforceable alternatively, successively and/or concurrently by Lender.
9. Waivers. Borrower waives demand, presentment, protest and notice of any kind
and consents to the extension of time of payments, the release, surrender or
substitution of any and all security or guarantees for the obligations evidenced
hereby or other indulgence with respect to this Note, all without notice.
10. Governing Law. This Note shall be shall be governed by, and construed in
accordance with, the laws of the State of New York, without regard to its rules
on conflicts of laws.
11. Notices, Etc. All notices and other communications provided for under this
Note shall be in writing (including facsimile transmissions) and mailed,
transmitted or delivered, if to Borrower, at Borrower's address indicated in
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Lender's records as of the date of such notice, and if to Lender, at its address
specified above or, as to each party, at such other address as shall be
designated by such party in a written notice to the other party complying as to
delivery with the terms of this paragraph. Except as otherwise provided in this
Note, all such notices and communications shall be effective when delivered, on
the date telecopied or deposited in the mails addressed as aforesaid, except
that notices to Lender shall not be effective until received by Lender.
12. No Waiver. No failure or delay on the part of Lender in exercising any
right, power, or remedy hereunder shall operate as a waiver thereof; nor shall
any single or partial exercise of any such right, power, or remedy preclude any
other or further exercise thereof or the exercise of any other right, power, or
remedy hereunder. The rights and remedies provided herein are cumulative, and
are not exclusive of any other rights, powers, privileges, or remedies, now or
hereafter existing, at law or in equity or otherwise. 13. Costs and Expenses.
Upon an Event of Default, Borrower shall reimburse Lender for all costs and
expenses incurred by Lender and shall pay the reasonable fees and disbursements
of counsel to Lender in connection with the preparation, negotiation, execution
and delivery of this Note and the enforcement of Lender's rights hereunder.
Borrower shall also pay any and all taxes (other than taxes on or measured by
net income of the holder of this Note), recording fees, filing charges, search
fees and similar items incurred or payable in connection with the execution and
delivery of this Note. At the election of Lender, any payment received from
Borrower hereunder shall be applied by Lender first in the payment of all fees,
charges, costs and expenses, then to accrued and unpaid interest and then to
principal.
14. Indemnification. Borrower shall indemnify, defend and save Lender harmless
from and against any and all claims, liabilities, losses, costs and expenses
(including, without limitation, reasonable attorneys' fees and expenses) of any
nature whatsoever which may be asserted against or incurred by Lender arising
out of or in any manner occasioned by the ownership, collection, possession, use
or operation of any collateral held by Lender belonging to Borrower or any
failure by Borrower to perform any of its obligations hereunder; excluding,
however, from said indemnity all such claims, liabilities, losses, costs and
expenses arising directly out of the intentional misconduct or active gross
negligence of Lender. This indemnity shall survive the expiration and
termination of the Note.
15. Further Assurances. Borrower agrees to do such further acts and to execute
and deliver to Lender such additional agreements, instruments and documents as
Lender may reasonably require or deem advisable to effectuate the purposes of
this Note, or to confirm to Lender its rights, powers and remedies under this
Note.
16. Amendments. No amendment, modification, or waiver of any provision of this
Note nor consent to any departure by Borrower therefrom shall be effective
unless the same shall be in writing and signed by Lender and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
17. Successors and Assigns. This Note shall be binding upon Borrower and its
heirs, legal representatives, successors and assigns and the terms hereof shall
inure to the benefit of Lender and its successors and assigns, including
subsequent holders hereof.
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18. Severability. The provisions of this Note are severable, and if any
provision shall be held invalid or unenforceable in whole or in part in any
jurisdiction, then such invalidity or unenforceability shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Note in any jurisdiction.
19. Entire Agreement. This Note sets forth the entire agreement of Borrower and
Lender with respect to this Note and may be modified only by a written
instrument executed by Borrower and Lender.
20. Headings. The headings herein are for convenience only and shall not limit
or define the meaning of the provisions of this Note.
21. Jurisdiction; Service of Process. Borrower agrees that in any action or
proceeding brought on or in connection with this Note (i) the Supreme Court of
the State of New York for the County of New York, or (in a case involving
diversity of citizenship) the United States District Court of the Southern
District of New York, shall have jurisdiction of any such action or proceeding,
(ii) service of any summons and complaint or other process in any such action or
proceeding may be made by Lender upon Borrower by registered or certified mail
directed to Borrower at its address referenced in paragraph 11 above, Borrower
is hereby waiving, personal service thereof, and (iii) within thirty (30) days
after receipt of such mailing Borrower shall appear or answer to any summons and
complaint or other process, and should Borrower fail to appear to answer within
said thirty (30) day period, it shall be deemed in default and judgment may be
entered by Lender against Borrower for the amount as demanded in any summons or
complaint or other process so served.
22. WAIVER OF THE RIGHT TO TRIAL BY JURY. BORROWER AND, BY ITS ACCEPTANCE
HEREOF, LENDER, HEREBY IRREVOCABLY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING, CLAIM, OR COUNTERCLAIM, WHETHER IN CONTRACT OR TORT, AT LAW
OR IN EQUITY, IN ANY MANNER CONNECTED WITH THIS NOTE OR ANY TRANSACTIONS
HEREUNDER. NO OFFICER OF LENDER HAS AUTHORITY TO WAIVE, CONDITION, OR MODIFY
THIS PROVISION.
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IN WITNESS WHEREOF, Borrower has executed this Note and Security
Agreement as of the date first set forth above.
CDBEAT.COM, INC.
By: /s/ Joel Arberman
Name: Joel Arberman
Title: President and CEO
ACCEPTED AND AGREED:
As of the date first
written above.
CAKEWALK, LLC
By: /s/ Robert Miller
Name: Robert Miller
Title: President
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312396 v.3 [6P1_03!.WPD]
Exhibit 10.4
SHARE PLEDGE AGREEMENT
SHARE PLEDGE AGREEMENT, dated as of September 28, 1999, made by Joel
Arberman, having an address at 444 Bedford Street, Suite 8S, Stamford,
Connecticut 06901 (the "Pledgor"), to Cakewalk LLC, having an office at 250 West
57th Street, New York, New York 10107 (the "Lender").
W I T N E S S E T H:
WHEREAS, the Pledgor is the owner beneficially and of record of 3,390,000
shares of Common Stock, $.001 par value per share (the "Shares"), of the capital
stock of CDbeat.com, Inc., a Delaware corporation (the "Company");
WHEREAS, the Company is indebted to the Lender pursuant to the terms and
provisions of a Note and Security Agreement (the "Note") of even date herewith;
WHEREAS, the Pledgor has agreed to secure the Company's obligations to the
Lender under the Note by making the pledge contemplated by this Agreement;
NOW, THEREFORE, in consideration of the Lender's having made the loan
evidenced by the Note and for other good and valuable consideration and the
mutual covenants herein contained, the Pledgor and the Lender hereby agree as
follows:
23. Pledge. The Pledgor hereby pledges to the Lender, and grants to the Lender a
security interest in, the following (the "Pledged Collateral"):
(a) the Shares together with the certificates evidencing the same (collectively,
the "Pledged Shares").
(b) all shares, securities, moneys or property representing a dividend on any of
the Pledged Shares, or representing a distribution or return of capital upon or
in respect of the Pledged Shares, or resulting from a split-up, revision,
reclassification or other like change of the Pledged Shares or otherwise
received in exchange therefor, and any subscription warrants, rights or options
issued to the holders of, or otherwise in respect of, the Pledged Shares;
(c) all proceeds, products and accessions of and to any of the property of the
Pledgor described in Paragraphs 1(a) and (b) above.
24. Security for Obligations. This Agreement secures the payment, performance
and observance of all indebtedness, obligations, liabilities and agreements of
any kind of the Company to Lender, now existing or hereafter arising, direct or
indirect (including participation or any interest of Lender in obligations of
the Company to others), acquired outright, conditionally, or as collateral
security from another, absolute or contingent, joint or several, secured or
unsecured, due or not, contractual or tortious, liquidated or unliquidated,
arising by operation of law or otherwise, and of all loan agreements, documents
and instruments evidencing any of the foregoing obligations or under which any
of the foregoing obligations may have been issued, created, assumed or
guaranteed including without limitation, the Note (all of the foregoing being
herein referred to collectively as the "Obligations").
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<PAGE>
25. Delivery of Pledged Collateral. All certificates or instruments representing
or evidencing the Pledged Collateral shall be delivered to and held by or on
behalf of the Lender pursuant hereto and shall be in suitable form for transfer
by delivery, or shall be accompanied by duly executed instruments of transfer or
assignment in blank, all in form and substance satisfactory to the Lender. The
Lender shall have the right, at any time in its discretion and without notice to
the Pledgor, to transfer to or to register in the name of the Lender or any of
its nominees any or all of the Pledged Collateral, subject only to the revocable
rights specified in Paragraph 6(a). In addition, the Lender shall have the right
at any time to exchange certificates or instruments representing or evidencing
Pledged Collateral for certificates or instruments of smaller or larger
denominations.
26. Representations and Warranties. The Pledgor represents and warrants as
follows:
(a) The Pledged Shares have been duly authorized and validly issued and are
fully paid and non-assessable and represent at least 74% of the issued and
outstanding Shares of the Company.
(b) The Pledgor is the legal and beneficial owner of the Pledged Collateral free
and clear of any lien, security interest, option or other charge or encumbrance
(collectively, "Lien") except for the security interest created by this
Agreement.
(c) The pledge of the Pledged Shares pursuant to this Agreement creates a valid
and perfected first priority security interest in the Pledged Collateral,
securing the payment of the Obligations.
(d) No authorization, approval, or other action by, and no notice to or filing
with, any governmental authority or regulatory body is required either (i) for
the pledge by the Pledgor of the Pledged Collateral pursuant to this Agreement
or for the execution, delivery or performance of the Agreement by the Pledgor or
(ii) for the exercise by the Lender of the voting or other rights provided for
in this Agreement or the remedies in respect of the Pledged Collateral pursuant
to this Agreement (except as may be required in connection with such disposition
by laws affecting the offering and sale of securities generally).
(e) Except for the Lender, no person or entity has any warrant, option, call or
other right or interest to acquire any stock of the Company.
27. Further Assurances. The Pledgor agrees that at any time and from time to
time, at the expense of the Pledgor, the Pledgor will promptly execute and
deliver all further instruments and documents, and take all further action, as
may be necessary or desirable, or that the Lender may request, in order to
perfect and protect any security interest granted or purported to be granted
hereby or to enable the Lender to exercise and enforce its rights and remedies
hereunder with respect to any Pledged Collateral.
28. Voting Rights; Dividends; Etc. (a) So long as no Event of Default or event
which, with the giving of notice or the lapse of time, or both, would become an
Event of Default shall have occurred and be continuing:
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(i) The Pledgor shall be entitled to exercise any and all voting and other
consensual rights pertaining to the Pledged Collateral or any part thereof for
any purpose not inconsistent with the terms of this Agreement; provided,
however, that, the Pledgor shall not exercise or refrain from exercising any
such right if, in the Lender's judgment, such action would have a material
adverse effect on the value of the Pledged Collateral or any part thereof.
(ii) The Pledgor shall be entitled to receive and retain any and all dividends
paid in respect of the Pledged Collateral, provided, however, that any and all:
(1) dividends paid or payable other than in cash in respect of, and instruments
and other property received, receivable or otherwise distributed in respect of,
or in exchange for, any Pledged Collateral,
(2) dividends and other distributions paid or payable in cash in respect of any
Pledged Collateral in connection with a partial or total liquidation or
dissolution or in connection with a reduction of capital, capital surplus or
paid-in-surplus, and
(3) cash paid, payable or otherwise distributed in respect of principal of, or
in redemption of, or in exchange for, any Pledged Collateral,
shall be, and shall forthwith be delivered to the Lender to hold as, Pledged
Collateral and, if received by the Pledgor, shall be received in trust for the
benefit of the Lender, be segregated from the other property or funds of the
Pledgor, and be forthwith delivered to the Lender as Pledged Collateral in the
same form as so received (with any necessary endorsement).
(b) Upon the occurrence and during the continuance of an Event of Default or an
event which, with the giving of notice or the lapse of time, or both, would
become an Event of Default:
(i) All rights of the Pledgor to exercise the voting and other consensual rights
which it would otherwise be entitled to exercise pursuant to Paragraph 6(a)(i)
and to receive the dividends payments which it would otherwise be authorized to
receive and retain pursuant to Paragraph 6(a)(ii) shall cease, and all such
rights shall thereupon become vested in the Lender, who shall thereupon have the
sole right to exercise such voting and other consensual rights and to receive
and hold as Pledged Collateral such dividend payments.
(ii) All dividend payments which are received by the Pledgor contrary to the
provisions of Paragraph 6(b)(i) shall be received in trust for the benefit of
the Lender, shall be segregated from other funds of the Pledgor and shall be
forthwith paid over to the Lender as Pledged Collateral in the same form as so
received (with any necessary endorsement).
29. Transfers and Other Liens. The Pledgor agrees that it will not, nor will it
attempt in any manner to, (i) sell or otherwise dispose of any of the Pledged
Collateral, or (ii) create or permit to exist any Lien upon or with respect to
any of the Pledged Collateral, except for the security interest under this
Agreement.
30. Lender Appointed Attorney-in-Fact. The Pledgor hereby appoints the Lender
the Pledgor's attorney-in-fact, with full authority in the place and stead of
the Pledgor and in the name of the Pledgor or otherwise, from time to time in
the Lender's discretion to take any action and to execute any instrument which
the Lender may deem necessary or advisable to accomplish the purposes of this
Agreement.
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31. Lender May Perform. If the Pledgor fails to perform any agreement contained
herein, the Lender may itself perform, or cause performance of, such agreement,
and the expenses of the Lender incurred in connection therewith shall be payable
by the Pledgor under Paragraph 13.
32. Reasonable Care. In the event the Pledged Collateral is in the actual
possession of the Lender, the Lender shall be deemed to have exercised
reasonable care in the custody and preservation of the Pledged Collateral if the
Pledged Collateral is accorded treatment substantially equal to that which the
Lender accords its own property, it being understood that the Lender shall not
have any responsibility for (i) ascertaining or taking action with respect to
calls, conversions, exchanges, maturities, tenders or other matters relative to
any Pledged Shares, whether or not the Lender has or is deemed to have knowledge
of such matters, or (ii) the taking or failure to take any action to preserve
rights against any parties with respect to any Pledged Collateral.
33. Events of Default. An "Event of Default" shall exist if one or more of the
following events (herein collectively called "Events of Default"), shall occur
and be continuing:
(a) Any default shall have occurred under any present or future agreement
between the Company and the Lender which default has not been cured within the
applicable grace period specified therein, if any;
(b) Any default shall occur in the performance of any of the covenants or
agreements of the Pledgor contained herein, or any other document or agreement
to which the Pledgor is a party for the benefit of or with the Lender which
default is not remedied within 30 days after the Pledgor becomes aware of or
reasonably or should have become aware of such default whether through notice
from the Lender or otherwise; or
(c) Any representation or warranty made under this Agreement or in any
certificate or statement furnished or made to the Lender pursuant hereto or in
connection herewith shall prove to be untrue or inaccurate in any material
respect as of the date on which such representation or warranty is made.
34. Remedies Upon Default. (a) If any uncured Event of Default shall
have occurred and be continuing:
(i) in addition to other rights and remedies provided for herein or otherwise
available to it, the Lender, without notice except as specified below, may sell
the Pledged Collateral or any part thereof in one or more parcels at public or
private sale, at any exchange, broker's board or at any of the Lender's offices
or elsewhere, for cash and at such price or prices and upon such other terms as
the Lender may deem commercially reasonable. The Pledgor agrees that, to the
extent notice to sale shall be required by law, at least ten (10) days' notice
to the Pledgor of the time and place of any public sale or the time after which
any private sale is to be made shall constitute reasonable notification. The
Lender shall not be obligated to make any sale of Pledged Collateral regardless
of notice of sale having been given. The Lender may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned; and
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(ii) any cash held by the Lender as Pledged Collateral and all cash proceeds
received by the Lender in respect of any sale of, collection from, or other
realization upon all or any part of the Pledged Collateral, in the discretion of
the Lender, may be held by the Lender as collateral for, and/or then or at any
time thereafter applied (after payment of any amounts payable to the Lender
pursuant to Paragraph13) in whole or in part by the Lender against, all or any
part of the Obligations in such order as the Lender shall elect. Any surplus of
such cash or cash proceeds held by the Lender and remaining after payment in
full of all the Obligations shall be paid over to the Pledgor or to whomsoever
may be lawfully entitled to receive such surplus.
(b) Borrower acknowledges and recognizes that Lender may be unable to effect a
public sale of all or a part of the Pledged Collateral and may be compelled to
resort to one or more private sales to a restricted group of purchasers who will
be obligated to agree, among other things, to acquire the Pledged Collateral for
their own account, for investment and not with a view to the distribution or
resale thereof. Borrower acknowledges that any such private sales may be at
prices and on terms less favorable to Lender than those of public sales, and
agrees that such private sales will not necessarily be deemed not to have been
made in a commercially reasonable manner solely by virtue of being a private
sale for a price or on terms less favorable than a public sale, and that Lender
has no obligation to delay sale of any Pledged Collateral to permit the issuer
thereof to register it for public sale under the Securities Act of 1933, as from
time to time amended, even if the Company is willing to do so.
35. Expenses. Upon an Event of Default, as defined in the Note, the Pledgor will
pay to the Lender upon demand the amount of any and all reasonable expenses,
including the reasonable fees and expenses of its counsel and of any experts and
agents, which the Lender may incur in connection with (i) the preparation and
administration of this Agreement or any amendment, or supplement thereto, (ii)
the custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Pledged Collateral, (iii) the exercise or
enforcement of any of the rights of the Lender hereunder, or (iv) the failure by
the Pledgor to perform or observe any of the provisions hereof or the waiver
thereof.
36. Security Interest Absolute. All rights of the Lender and the security
interests hereunder, and all obligations of the Pledgor hereunder, shall be
absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Obligations;
(b) any change in the time, manner or place of payment of, or in any other term
of, all or any of the Obligations, or any other amendment or waiver of or any
consent to any departure from any instrument evidencing the Obligations;
(c) any exchange, release or non-perfection of any other collateral, or any
release or amendment or waiver of or consent to departure from any guaranty, for
all or any of the Obligations; or
(d) any other circumstance which might otherwise constitute a defense available
to, or a discharge of, the Company in respect of the Obligations or the Pledgor
in respect of this Agreement.
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37. Amendments, Etc. No amendment or waiver of any provision of this Agreement
nor consent to any departure by the Pledgor herefrom, shall in any event be
effective unless the same shall be in writing and signed by the Lender, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.
38. Continuing Security Interest; Termination. This Agreement shall create a
continuing security interest in the Pledged Collateral and shall remain in full
force and effect until the payment in full of the Obligations. Upon such
termination, the Pledgor shall be entitled to the return, upon its request and
at its expense, of such of the Pledged Collateral as shall not have been sold or
otherwise applied pursuant to the terms hereof.
39. Miscellaneous
(a) Notices, Etc. All notices and other communications provided for under this
Agreement shall be in writing (including facsimile transmissions) and mailed,
transmitted or delivered, if to Pledgor, at Pledgor's address indicated in
Lender's records as of the date of such notice, and if to Lender, at its address
specified above or, as to each party, at such other address as shall be
designated by such party in a written notice to the other party complying as to
delivery with the terms of this paragraph. Except as otherwise provided in this
Agreement, all such notices and communications shall be effective when
delivered, on the date telecopied or deposited in the mails addressed as
aforesaid, except that notices to Lender shall not be effective until received
by Lender.
(b) No Waiver. No failure or delay on the part of Lender in exercising any
right, power, or remedy hereunder shall operate as a waiver thereof; nor shall
any single or partial exercise of any such right, power, or remedy preclude any
other or further exercise thereof or the exercise of any other right, power, or
remedy hereunder. The rights and remedies provided herein are cumulative, and
are not exclusive of any other rights, powers, privileges, or remedies, now or
hereafter existing, at law or in equity or otherwise.
(c) Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York (without giving effect to
conflicts of laws), except as required by mandatory provisions of law and except
to the extent that the validity or perfection of the security interest
hereunder, or remedies hereunder, in respect of any particular Pledged
Collateral are governed by the laws of a jurisdiction other than the State of
New York. Unless otherwise defined herein or in the Note, terms defined in
Article 9 of the Uniform Commercial Code in the State of New York are used
herein as therein defined.
(d) Entire Agreement. This Agreement as read with the Note represents the
complete and entire agreement and understanding of the parties hereto with
respect to the matters covered herein and supersede any and all previous written
or oral negotiations, undertakings and commitments of any nature whatsoever.
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(e) Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the respective successors and assigns of the parties hereto
provided, however, that the Pledgor shall not assign or transfer any of its
rights hereunder without the prior written consent of the Lender.
(f) Further Assurances. Pledgor agrees to do such further acts and to execute
and deliver to Lender such additional agreements, instruments and documents as
Lender may reasonably require or deem advisable to effectuate the purposes of
this Agreement, or to confirm to Lender its rights, powers and remedies under
this Agreement.
(g) Headings. The headings herein are for convenience only and shall not limit
or define the meaning of the provisions of this Agreement.
(h) Severability. The provisions of this Agreement are severable, and if any
provision shall be held invalid or unenforceable in whole or in part in any
jurisdiction, then such invalidity or unenforceability shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Agreement in any jurisdiction.
(i) Counterparts. This Agreement may be executed in one or more counterparts but
all such separate counterparts shall constitute but one and the same instrument;
provided that, although executed in counterparts, the executed signature pages
of each such counterpart may be affixed to a single copy of this Agreement which
shall constitute an original.
(j) Jurisdiction; Service of Process. Pledgor agrees that in any action or
proceeding brought on or in connection with this Agreement (i) the Supreme Court
of the State of New York for the County of New York, or (in a case involving
diversity of citizenship) the United States District Court of the Southern
District of New York, shall have jurisdiction of any such action or proceeding,
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(ii) service of any summons and complaint or other process in any such action or
proceeding may be made by Lender upon Pledgor by registered or certified mail
directed to Pledgor at its address referenced in above, Pledgor is hereby
waiving, personal service thereof, and (iii) within thirty (30) days after
receipt of such mailing Pledgor shall appear or answer to any summons and
complaint or other process, and should Pledgor fail to appear to answer within
said thirty (30) day period, it shall be deemed in default and judgment may be
entered by Lender against Pledgor for the amount as demanded in any summons or
complaint or other process so served.
(k) WAIVER OF THE RIGHT TO TRIAL BY JURY. PLEDGOR AND, BY ITS ACCEPTANCE HEREOF,
LENDER, HEREBY IRREVOCABLY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING, CLAIM, OR COUNTERCLAIM, WHETHER IN CONTRACT OR TORT, AT LAW OR IN
EQUITY, IN ANY MANNER CONNECTED WITH THIS AGREEMENT OR ANY TRANSACTIONS
HEREUNDER. NO OFFICER OF LENDER HAS AUTHORITY TO WAIVE, CONDITION, OR MODIFY
THIS PROVISION.
IN WITNESS WHEREOF, the parties hereto have caused this Share Pledge
Agreement to be executed on the date first above written
/s/ Joel Arberman
Joel Arberman
CAKEWALK LLC
By: /s/ Robert Miller
Name: Robert Miller
Title: President and CEO
42
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