UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. __)*
CDBEAT.COM, INC.
(Name of Issuer)
Common Stock, par value $.001 per share
(Title of Class of Securities)
784495103
(CUSIP Number)
Robert Miller Ivan W. Dreyer, Esq.
Cakewalk LLC Baer Marks & Upham LLP
250 West 57th Street, Suite 720 805 Third Avenue
New York, New York 10107 New York, New York 10022
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
October 29, 1999
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box
|_|.
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d-7(b) for other
parties to whom copies are to be sent.
(Continued on following pages)
(Page 1 of 8 pages)
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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SCHEDULE 13D
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CUSIP No. 784495103 Page 2 of 1 Pages
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NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
Cakewalk LLC
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |_|
(b) |_|
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SEC USE ONLY
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SOURCE OF FUNDS See Item 3
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CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e) |_|
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CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
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SOLE VOTING POWER: 17,592,957 shares
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY EACH
REPORTING
PERSON WITH
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SHARED VOTING POWER 0
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SOLE DISPOSITIVE POWER 17,592,957 shares
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SHARED DISPOSITIVE POWER 0
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AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 17,592,957
shares
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CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES |_|
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PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 90%
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TYPE OF REPORTING PERSON OO
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CUSIP No. 784495103 Page 11 of 1 Pages
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Item 1. Security and Issuer
This statement on Schedule 13D (the "Schedule 13D") relates to the common
stock, $.001 par value per share (the "Common Stock") of CDBeat.com, Inc., a
Delaware corporation f/k/a SMD Group, Inc. (the "Company"). The address of the
principal executive office of the Company is 444 Bedford Street, Suite 8-S,
Stamford, Connecticut 06901.
Item 2. Identity and Background
This Schedule 13D is being submitted by Cakewalk LLC (the "Reporting
Person"). The Supervisory Board of the Reporting Person (the "Supervisory
Board")consists of those individuals listed on Exhibit 1 attached hereto.
Information with respect to the Reporting Person is as follows:
(a) The name of the Reporting Person is Cakewalk LLC.
(b) The address of the Reporting Person is 250 West 57th Street, Suite
720, New York, New York 10107.
(c) The Reporting Person is a limited liability company whose principal
business is the development, creation, ownership and exploitation of recorded
music, record production, music publishing, music-related merchandising and
music video production.
(d) Neither the Reporting Person, and to the knowledge of the Reporting
Person, no member of the Supervisory Board, has been convicted during the past
five years in a criminal proceeding (excluding traffic violations or similar
misdemeanors).
(e) During the last five years, neither the Reporting Person, and to the
knowledge of the Reporting Person, no member of the Supervisory Board, has been
party to a civil proceeding of a judicial or administration body of competent
jurisdiction and has not and is not subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, Federal or State securities laws or finding any violation with respect to
such laws.
(f) The Reporting Person is a Delaware limited liability company.
Item 3. Source and Amount of Funds or Other Consideration
The summaries of the agreements discussed in this Item are not intended
to be complete and are qualified in their entirety by reference to the full text
of such agreements, copies of which are attached hereto and are incorporated
herein by reference.
The source of consideration for the acquisition of the Common Stock will
consist of substantially all of the assets of the Reporting Person, including
cash. In connection with a Contribution Agreement dated as of October 29, 1999
between the Reporting Person and the Company (the "Contribution Agreement"), the
Reporting Person agreed to contribute and assign, and the Company agreed to
acquire, substantially all of the assets and liabilities relating to the
business of the Reporting Person in exchange for 17,592,957 shares of the Common
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Stock of the Company, which number of shares shall equal 90% of the issued and
outstanding Common Stock of the Company (after giving effect to the transactions
contemplated by the Contribution Agreement). Following the closing of the
transactions contemplated by the Contribution Agreement (the "Closing"), the
Reporting Person intends to distribute the Common Stock of the Company to its
members in accordance with the terms of the Reporting Person's Operating
Agreement. A copy of the Contribution Agreement is attached to this report as
Exhibit 2 and is incorporated herein by reference.
Pursuant to the terms of a Membership Interest Subscription Agreement, at
the Closing, (i) Atlantis Equities, Inc. ("Atlantis") has agreed to transfer to
Dylan LLC ("Dylan"), an affiliate of Atlantis, that certain warrant to purchase
80% of the Common Stock of the Company (the "Warrant"), and (ii) the Warrant
shall be amended to (A) eliminate the right of Dylan to acquire 7,819,092 shares
of the Common Stock of the Company, and (B) require Dylan to pay the Company
$100,000 to acquire 762,064 options from the Company exercisable at $2.50 per
share until December 31, 2000. In addition, Dylan has agreed to purchase,
acquire and accept a membership interest in the Reporting Person pursuant to a
Membership Interest Subscription Agreement with the Reporting Person, for a
purchase price of $900,000. A copy of the Subscription Agreement is attached to
this report as Exhibit 3 and is incorporated herein by reference. As a result,
immediately following the Closing, Dylan, as a member of the Reporting Person,
shall be entitled to receive a distribution of 7,819,092 shares of the Common
Stock of the Company.
Item 4. Purpose of Transaction
The purpose of the acquisition by the Reporting Person of the Common Stock
of the Company is to have a substantial ownership position in a public entity
which, among other things, can be used as an acquisition vehicle. The
consummation of the transactions described in Item 3 will result in a change in
control of the Company, as 90% of the Common Stock will be owned by the
Reporting Person. In addition, the Board of Directors of the Company will be
expanded from one member to two members, and Robert Miller ("Miller") will be
appointed to fill the vacancy on the Board of Directors created by such
expansion. The Board of Directors is expected thereafter, after compliance with
applicable securities laws, to be expanded to seven members. Except as provided
herein and in Item 3 and Item 6, the Reporting Person has no plans or proposals
which would relate to or would result in:
(a) the acquisition by any person of additional securities of the
Company, or the disposition of securities of the Company;
(b) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Company;
(c) a sale or transfer of a material amount of assets of the Company;
(d) any change in the present board of directors or management of the
Company;
(e) any material change in the present capitalization or dividend policy
of the Company;
(f) any other material change in the Company's business or corporate
structure;
(g) changes in the Company's charter, bylaws or instruments corresponding
thereto or other actions which may impede the acquisition of control of the
Company by any person;
(h) causing a class of securities of the Company to be delisted from a
national securities exchange or cease to be authorized to be quoted on an
inter-dealer quotation system of a registered national securities association;
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(i) a class of equity securities of the Company becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Securities Act
of 1933; or
(j) any action similar to those enumerated above.
Item 5. Interest in Securities of the Issuer
(a) Between the date of the execution of the Contribution Agreement and
the Closing Date (and immediately prior to the distribution by the Reporting
Person of the Common Stock of the Company to its members), the Reporting Person
beneficially owns, 17,592,957 shares of the Common Stock of the Company, which
represents 90% of the total issued and outstanding shares of the Common Stock of
the Company.
(b) Between the date of the execution of the Contribution Agreement and
the Closing Date (and immediately prior to the distribution by the Reporting
Person of the Common Stock of the Company to its members), the Reporting Person
has the sole power to vote and dispose of 17,592,957 shares of the Common Stock
of the Company.
(c) The Reporting Person did not consummate any transactions in respect
of the Common Stock of the Company during the past sixty days.
(d) Not applicable
(e) Not applicable
Item 6. Contracts, Arrangements, Understandings or
Relationships with Respect to Securities of the Issuer
The summaries of the agreements discussed in this Item are not intended to
be complete and are qualified in their entirety by reference to the full text of
such agreements, copies of which are attached hereto and are incorporated herein
by reference.
In addition to the transactions described in Item 3, above, pursuant to
the Subscription Agreement, in the event that the Board of Directors of the
Company is expanded to seven members following the Closing, Dylan shall have the
right to designate two representatives out of seven to the Board of Directors of
the Company. Dylan has also agreed to vote all shares of the Common Stock of the
Company owned by it in favor of the election to the Board of Directors of the
Company of Miller or any designee of Miller, while Miller has agreed to vote all
of the shares of the Common Stock of the Company owned by him in favor of the
election to the Board of Directors of the Company of the Dylan designees.
The Company has also established a financial advisory relationship with
Atlantis pursuant to that certain Engagement Letter between Atlantis and the
Reporting Person dated October 29, 1999 (the "Engagement Letter"). This
engagement will take effect at the closing of the transactions contemplated by
the Contribution Agreement (the "Closing"). In consideration for the services to
be provided by Atlantis under the Engagement Letter, Atlantis shall receive
$50,000 at the Closing and shall be paid a monthly fee of $12,500 (plus
reimbursement of reasonable and actual out-of-pocket expenses). The term of the
Engagement Letter shall be three years, and shall automatically renew for
successive one year terms (subject to the right of any party to terminate the
engagement upon 90 days' written notice before the end of any such term). A copy
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of the Engagement Letter is attached to this report as Exhibit 4 and is
incorporated herein by reference.
Item 7. Material to be filed as Exhibits
Exhibit 1. Supervisory Board of the Reporting Person
Exhibit 2. Contribution Agreement, dated October 29, 1999, between
CDBeat.com, Inc. and Cakewalk LLC.
Exhibit 3. Membership Interest Subscription Agreement, dated October 29,
1999, between Dylan LLC and Cakewalk LLC.
Exhibit 4. Engagement Letter, dated October 29, 1999, between Atlantis
Equities, Inc. and Cakewalk LLC
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SIGNATURE
After reasonable inquiry and to the best of our knowledge and belief, the
undersigned certify that the information set forth in this statement is true,
complete and correct.
Dated: November 8, 1999
Cakewalk LLC
By:/s/ Robert Miller
Name: Robert Miller
Title: President
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Exhibit 1
Name Occupation Business Address
Robert Miller President and Chief Cakewalk LLC
Executive Officer 250 West 57th Street, Suite
700
New York, NY 10107
Peter Ezersky Managing Director Lazard Freres & Co. LLC
30 Rockefeller Plaza, 63rd
Floor
New York, NY 10020
Joel Dorn Creative Director Cakewalk LLC
250 West 57th Street, Suite
700
New York, NY 10107
Jonathan Foster Managing Director Lazard Freres & Co. LLC
30 Rockefeller Plaza, 63rd
Floor
New York, NY 10020
David Goddard Senior Vice President Bear Stearns & Co., Inc.
245 Park Avenue, New York,
New York, 10167
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Exhibit 2
CONTRIBUTION AGREEMENT
CONTRIBUTION AGREEMENT, dated as of October 29, 1999, by and between
CDBEAT.COM, INC., a Delaware corporation ("CDBeat"), and CAKEWALK LLC, a
Delaware limited liability company ("Cakewalk").
WHEREAS, Cakewalk is the owner of certain assets utilized in connection
with the development, creation, ownership and exploitation of recorded music,
record production, music publishing, CD-ROM, music-related merchandising and
music video production (the "Business");
WHEREAS, Cakewalk desires to contribute and assign, and CDBeat desires to
acquire, substantially all of the assets and liabilities relating to the
Business in exchange for 90% of the issued and outstanding voting shares of the
common stock, par value $.001, of CDBeat (the "CDBeat Stock") in a transaction
intended to qualify under ss. 351 of the Code, upon and subject to the terms and
conditions hereinafter set forth;
WHEREAS, Dylan LLC ("Dylan") has entered into that certain subscription
agreement, dated the date hereof, with Cakewalk (the "Dylan Subscription
Agreement"), attached hereto as Exhibit A, pursuant to which Dylan has
subscribed for a membership interest in Cakewalk; and
WHEREAS, certain terms used herein have the meanings set forth in Article
IX,
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants hereinafter set forth, the parties hereto agree as
follows:
ARTICLE I
TRANSFER AND ACQUISITION
Section 1.1 Assets to be Transferred and Acquired.
(a) Subject to Section 1.1(b) hereof and to the other terms and conditions
of this Agreement, at the Closing (as hereinafter defined), Cakewalk
will contribute, assign, transfer and convey to CDBeat, free and clear
of all Liens (other than Permitted Liens), and CDBeat shall acquire
from Cakewalk, all of the tangible and intangible assets used, held for
use or useful in the Business (collectively, the "Assets") including:
(i) the membership interests of Cakewalk in Cakewalk BRE LLC;
(ii) all of the capital stock of Cakewalk Productions, Inc. and Cakewalk
Productions II, Inc.;
(iii) all of Cakewalk's rights, title and interest in and to property, plant and
equipment;
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(iv) all of Cakewalk's rights in, to and under the Intellectual Property
Rights, whether or not used in the Business, and all of Cakewalk's
books, records and computer programs relating thereto;
(v) all of Cakewalk's rights in, to and under the goodwill of the Business;
(vi) Cakewalk's rights under all Contracts and all prepaid expenses, claims
and other prepayments, including security deposits and other retentions
held by third parties, with respect to the Contracts as of the Closing
Date;
(vii) all of Cakewalk's rights under all governmental licenses, certificates,
permits and approvals (the "Permits"), if any, relating to or necessary
to the lawful conduct of the Business as of the Closing Date, to the
extent such Permits are transferable;
(viii) all warranties, Claims, causes of action, guarantees or similar rights
of Cakewalk pertaining to the Assets;
(ix) cash on hand, cash equivalents, investments (including, without
limitation, stock, debt instruments, options and other instruments and
securities) and bank deposits of Cakewalk as of the Closing Date
including, without limitation, the moneys received by Cakewalk from
Dylan under the Dylan Subscription Agreement;
(x) all of the accounts receivable of Cakewalk as of the Closing Date as
well as all reserve amounts with licensors and distributors;
(xi) all of Cakewalk's rights under any insurance policies; and
(xii) all books and records relating to the Business and the Assets (whether
kept or maintained by Cakewalk or any third party) including, without
limitation, copies of lists of customers and suppliers; records with
respect to costs and equipment; business development plans; advertising
materials, catalogues, correspondence, mailing lists, photographs,
sales materials and records; purchasing materials and records;
personnel records with respect to employees of the Business; media
materials and plates; sales order files; ledgers and other books of
account of Cakewalk; plans, specifications, surveys, appraisals,
reports and other materials relating to the Assets; other records
required to continue the Business as heretofore and now being conducted
by Cakewalk; and all software programs, computer printouts, databases
and related items used in the Business.
(b) The Assets shall exclude all corporate records of Cakewalk including,
without limitation, the member ledger of Cakewalk and the minute books
regarding meetings of the members, managers and manager committees of
Cakewalk (the "Excluded Assets").
Section 1.2 Assumed Liabilities.
(a) At the Closing, CDBeat shall assume all liabilities and obligations
(including contingent liabilities and obligations) of Cakewalk
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pertaining to or arising out of the ownership of the Assets and the
operation of the Business, whether incurred or existing on or prior to
the Closing Date or arising thereafter, including, but not limited to:
(i) All Liabilities of Cakewalk relating to the ownership of the Assets or
operation of the Business;
(ii) All Liabilities in respect of borrowed moneys;
(iii) All accounts payable relating to the Business;
(iv) Liabilities and obligations under Contracts;
(v) Liabilities and obligations with respect to any Claims, arising out of
ownership of the Assets or the operation of the Business;
(vi) Liabilities and obligations to persons employed by Cakewalk (or any of
such employee's beneficiaries, heirs or assignees) arising out of such
employee's employment by Cakewalk; and
(vii) All liabilities of Cakewalk under the Dylan Subscription Agreement
including the tax indemnity.
All such duties, responsibilities, obligations or Liabilities described in
this Section 1.2 being referred to herein as "Assumed Liabilities."
(b) Notwithstanding the provisions of Section 1.2(a), except as set forth
in (vii) CDBeat shall not assume, and Cakewalk shall retain, any income
Tax Liability of Cakewalk.
Section 1.3 Consideration. In consideration for the contribution, assignment,
transfer and conveyance by Cakewalk to CDBeat of the Assets, at the
Closing, CDBeat shall issue 17,592,957 shares, being such number of
shares of CDBeat Stock as shall equal, after giving effect to such
issuance, the conversion of CDBeat's outstanding shares of Preferred
Stock and the cancellation of certain other shares all as hereinafter
described, 90% of the issued and outstanding common stock of CDBeat.
Section 1.4 Closing. Subject to the terms and conditions of this Agreement, the
sale and purchase of the Assets contemplated hereby (the "Closing")
shall take at the offices of Baer Marks & Upham LLP, 805 Third Avenue,
New York, New York 10022, at 10:00 a.m., local time on November 5,
1999, or at such other date, time or place as the parties may agree
(the "Closing Date").
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ARTICLE II
REPRESENTATIONS AND
WARRANTIES OF CAKEWALK
Cakewalk represents and warrants to CDBeat that:
Section 2.1 Authority Relative to this Agreement. Cakewalk has full power,
capacity and authority to execute and deliver this Agreement and each
other Transaction Document to which it is or, at the Closing, will be a
party and to consummate the transactions contemplated hereby and
thereby (the "Contemplated Transactions"). The execution and delivery
of this Agreement and the consummation of the Contemplated Transactions
to which Cakewalk is or, at the Closing, will be a party have been duly
and validly authorized by Cakewalk, and no other proceedings on the
part of Cakewalk (or any other person) are necessary to authorize the
execution and delivery by Cakewalk of this Agreement or the
consummation of the Contemplated Transactions to which Cakewalk is or,
at the Closing, will be a party. This Agreement has been and, at the
Closing, the other Transaction Documents to which Cakewalk is a party
will have been, duly and validly executed and delivered by Cakewalk,
and (assuming the valid execution and delivery thereof by the other
parties thereto) constitute or will at the Closing constitute, as the
case may be, the legal, valid and binding agreements of Cakewalk
enforceable against Cakewalk in accordance with their respective terms,
except as such obligations and their enforceability may be limited by
applicable bankruptcy and other similar laws affecting the enforcement
of creditors' rights generally and except that the availability of
equitable remedies is subject to the discretion of the court before
which any proceeding therefor may be brought (whether at law or in
equity).
Section 2.2 No Conflicts; Consents. The execution, delivery and performance by
Cakewalk of this Agreement and each other Transaction Document to which
it is or will be a party or the consummation of the Contemplated
Transactions does not and will not (i) violate any provision of the
Articles of Organization or the Amended and Restated Operating
Agreement (or comparable instruments) of Cakewalk; (ii) except for any
filings that may be required by applicable securities laws, require
Cakewalk or any other Affiliate of Cakewalk to obtain any material
consent, approval or action of or waiver from, or make any filing with,
or give any notice to, any Governmental Body or any other person,
except as set forth on Schedule 2.2 ("Cakewalk Required Consents");
(iii) if Cakewalk Required Consents are obtained prior to Closing,
violate, conflict with or result in a breach or default under (after
the giving of notice or the passage of time or both), or permit the
termination of, any Contract of a type required to be listed on
Schedule 2.8 to which Cakewalk is a party or by which it or any of its
assets may be bound or subject, or result in the creation of any Lien
upon the Assets pursuant to the terms of any such Contract; (iv) if
Cakewalk Required Consents are obtained prior to Closing, violate any
Law or Order of any Governmental Body against, or binding upon,
Cakewalk or upon the Assets or the Business; or (v) if Cakewalk
Required Consents are obtained prior to Closing, violate or result in
the revocation or suspension of any Permit, except where (A) the
failure to obtain any Cakewalk Required Consent, or (B) any violation,
breach or default that would not reasonably be expected to have a
Material Adverse Effect.
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Section 2.3 Corporate Existence and Power. Cakewalk is a limited liability
company duly organized, validly existing and in good standing under the
laws of the State of Delaware, and has all requisite powers and all
material Permits required to carry on the Business as now conducted.
Except for Cakewalk BRE LLC, a New York limited liability company,
Cakewalk Productions, Inc., a New York corporation, and Cakewalk
Productions II, Inc., a New York corporation, Cakewalk does not have
any Subsidiaries or own any equity interest or equity investment in any
other person.
Section 2.4 Charter Documents and Corporate Records. (a) Cakewalk has
heretofore delivered to CDBeat true and complete copies of the Articles
of Organization and Amended and Restated Operating Agreement of
Cakewalk as in effect on the date hereof.
(b) All financial, business and accounting books, ledgers, accounts and
official and other records relating to Cakewalk and the Business have
been properly and accurately kept and completed in all material
respects, and there are no material inaccuracies or discrepancies
contained or reflected therein.
Section 2.5 Financial Information. Cakewalk has previously furnished to CDBeat
true and complete copies of (i) Cakewalk's audited financial statements
(the "Audited Statements") at and for the year ended December 31, 1998,
(ii) the audited balance sheet of Cakewalk at December 31, 1997
(collectively with the Audited Statements, the "Annual Statements"),
and (iii) Cakewalk's unaudited balance sheet, income statements, and
cash flows at and for the period ended March 31, 1999 (with the Annual
Statements, the "Financial Statements"). Each delivered financial
statement has been prepared in accordance with GAAP consistently
applied and presents fairly in all material respects the financial
condition, results of operations and cash flows of Cakewalk as of its
date and the period covered thereby.
Section 2.6 Subsequent Events. Except as contemplated by this Agreement or
disclosed in Schedule 2.6, none of the following has occurred since the
date of the most recent Financial Statements: (a) any event that had,
or is reasonably likely to have, a Material Adverse Effect on Cakewalk;
(b) any change by Cakewalk in its accounting methods, practices, or
principles, except as required to comply with applicable Law or a
change in GAAP; (c) any commitment or transaction by Cakewalk that had,
or is reasonably likely to have, a Material Adverse Effect on Cakewalk
and was not in the usual and ordinary course of business; (d) any
distributions in respect of, or redemption of, membership interests; or
(e) any event, action, or condition that (i) constitutes an agreement
by Cakewalk to do anything described in clauses (a)-(d) above, or (ii)
if it had occurred before the date of this Agreement, would have made
any representation or warranty by Cakewalk in this Agreement inaccurate
in any material respect.
Section 2.7 The Assets. Cakewalk has good and marketable title to the Assets,
free and clear of all Liens, except for (i) liens set forth on Schedule
2.7, (ii) mechanic's, materialmen's, and similar liens, (iii) liens
arising under worker's compensation, unemployment insurance, social
security, retirement, and similar legislation, (iv) liens, easements,
covenants, restrictions and other similar encumbrances of record listed
on Schedule 2.7, and (v) liens for Taxes not yet due and payable, in
each case arising in the ordinary course of business of Cakewalk and
not material to Cakewalk (collectively, "Permitted Liens").
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Section 2.8 Contracts. (a) Schedule 2.8 sets forth an accurate and complete
list of all Contracts material to the Business. True and correct copies
of all written Contracts listed on such Schedule and summaries of the
material provisions of all oral Contracts so listed have been made
available to CDBeat.
(b) All Contracts listed on Schedule 2.8 are valid, subsisting, in full
force and effect and binding upon Cakewalk, as the case may be, and, to
the knowledge of Cakewalk, the other parties thereto in accordance with
their terms. Cakewalk is not in default (or alleged default) under any
such Contract in any material respect, nor, to the knowledge of
Cakewalk, is any other party thereto in default thereunder in
any material respect, and, to Cakewalk's knowledge, there is no
condition that with notice or the lapse of time or both would
constitute a material default (or give rise to a termination right)
under any such Contract. To the knowledge of Cakewalk, none of the
other parties to any Contract intends to terminate or materially alter
the provisions thereof by reason of the Contemplated Transactions
or otherwise. Except as set forth on Schedule 2.2, no approval or
consent of any person is required in order for the Contracts to
continue in full force and effect after the Closing.
Section 2.9 Claims and Proceedings. Except as set forth on Schedule 2.9, there
are no outstanding Orders of any Governmental Body against or involving
Cakewalk, the Assets or the Business. Except as set forth on Schedule
2.9, there are no material actions, suits, claims or counterclaims or
legal, administrative, governmental, arbitral or other proceedings or
investigations (if the defense thereof or Liabilities in respect
thereof are not covered by insurance) (collectively, "Claims"), pending
or to the knowledge of Cakewalk threatened on the date hereof, against
or involving Cakewalk, the Assets or the Business. Except as set forth
on Schedule 2.9, at the Closing there will be no such Claims pending
or, to the knowledge of Cakewalk, threatened, other than Claims that,
individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect. Except as set forth on Schedule 2.9, to
the knowledge of Cakewalk, on the date hereof, there is no fact, event
or circumstances that would give rise to any such Claim.
Section 2.10 Compliance with Laws. Cakewalk is not in violation in any material
respect of any order, judgment, injunction, award, citation, decree,
consent decree or writ (collectively, "Orders"), or any material law,
statute, code, ordinance, rule, regulation or other requirement
(collectively, "Laws"), of any government or political subdivision
thereof, whether federal, state, local or foreign, or any agency or
instrumentality of any such government or political subdivision, or any
court or arbitrator (collectively, "Governmental Bodies") affecting the
Assets or the Business, except for violations which would not
reasonably be expected to have a Material Adverse Effect.
Section 2.11 Finders' Fees. There is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act
on behalf of Cakewalk who might be entitled to any fee or commission
from Cakewalk upon consummation of the Contemplated Transactions.
Section 2.12 Investment Intent. Cakewalk is acquiring the CDBeat Shares for its
members own account for investment and not with a view towards resale,
transfer or distribution in a manner that would be in violation of
applicable securities laws, but subject, nevertheless, to any
requirement of law that the disposition of Cakewalk's property shall at
all times be within Cakewalk's control, and without prejudice to
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Cakewalk's or its members right at all times to sell or otherwise
dispose of all or any part of such securities under a registration
under the Securities Act or under an exemption from said registration
available under the Securities Act.
Section 2.13 Tax Matters. Since its inception, Cakewalk has been treated as a
partnership for Federal Income tax purposes, has filed all Tax Returns
required to be filed by it and has paid the Taxes reflected thereon.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF CDBEAT
CDBeat represents and warrants to Cakewalk that:
Section 3.1 Authority Relative to this Agreement. CDBeat has full power,
capacity and authority to execute and deliver this Agreement and each
other Transaction Document to which it is or, at the Closing, will be a
party and to consummate the Contemplated Transactions. The execution
and delivery of this Agreement and the consummation of the Contemplated
Transactions to which CDBeat is or, at the Closing, will be a party
have been duly and validly authorized and approved by the board of
directors of CDBeat and no other corporate proceedings on the part of
CDBeat are necessary to authorize the execution and delivery by CDBeat
of this Agreement or the consummation of the Contemplated Transactions
to which it is or, at the Closing, will be a party. This Agreement has
been and, at the Closing, the other Transaction Documents to which
CDBeat is a party will have been duly and validly executed and
delivered by CDBeat and (assuming the valid execution and delivery
thereof by the other parties thereto) constitutes or will at the
Closing constitute the legal, valid and binding agreement of CDBeat,
enforceable against CDBeat in accordance with their respective terms,
except as such obligations and their enforceability may be limited by
applicable bankruptcy and other similar laws affecting the enforcement
of creditors' rights generally and except that the availability of
equitable remedies is subject to the discretion of the court before
which any proceeding therefor may be brought (whether at law or in
equity).
Section 3.2 No Conflicts; Consents. The execution, delivery and performance by
CDBeat of this Agreement and each other Transaction Document to which
it is or, at the Closing, will be a party and the consummation of the
Contemplated Transactions to which it is or, at the Closing, will be a
party do not and will not (i) violate any provision of the Certificate
of Incorporation or By-laws of CDBeat; (ii) except for any filings that
may be required to be made under applicable securities laws, require
CDBeat to obtain any material consent, approval or action of or waiver
from, or make any filing with, or give any notice to, any Governmental
Body or any other person, and except as set forth in Schedule 3.2
("CDBeat Required Consents"); (iii) if CDBeat Required Consents are
obtained prior to the Closing, violate, conflict with or result in the
breach or default under (after the giving of notice or the passage of
time); or permit the termination of, any material Contract to which
CDBeat is a party or by which CDBeat or its assets may be bound or
subject; or (iv) if CDBeat Required Consents are obtained prior to the
Closing, violate any Law or Order of any Governmental Body against, or
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binding upon, CDBeat or upon its assets or business, except where any
such violation would not reasonably be expected to have a Material
Adverse Effect.
Section 3.3 Corporate Existence and Power. CDBeat is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate powers and all
material governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted.
Section 3.4 Charter Documents and Corporate Records. (a) CDBeat has heretofore
delivered to Cakewalk true and complete copies of the Certificate of
Incorporation and By-laws of CDBeat as in effect on the date hereof.
(b) All financial, business and accounting books, ledgers, accounts and
official and other records relating to CDBeat have been properly and
accurately kept and completed in all material respects, and there are
no material inaccuracies or discrepancies contained or reflected
therein.
Section 3.5 Capitalization. The authorized capital stock of CDBeat consists of
(i) 20,000,000 shares of its common stock, par value $.001 (the "Common
Stock"), and (ii) 10,000,000 shares of convertible preferred stock (the
"Preferred Stock"), which has been designated as "Series A", "Series B"
and "Series C." As of the date hereof, the issued and outstanding
capital stock of CDBeat consists of (A) 4,504,197 shares of Common
Stock, (B) 8.75 shares of "Series A" Preferred Stock, and (C) 50,000
shares of "Series C" Preferred Stock. There are currently no shares of
"Series B" Preferred Stock issued and outstanding. In addition, as of
the date hereof not including the Atlantis Warrant, CDBeat has reserved
up to 190,516 shares of Common Stock for issuance upon exercise of
presently outstanding warrants and options. Except as set forth on
Schedule 3.5, CDBeat does not, and at the Closing CDBeat will not, have
outstanding any capital stock or other securities or any rights,
warrants, or options to acquire securities of CDBeat or any convertible
or exchangeable securities other than pursuant to this Agreement.
Except as set forth on Schedule 3.5, no person has or, at the Closing
will have, any right to purchase or otherwise acquire any securities of
CDBeat. Except as set forth on Schedule 3.5, there are, and at Closing
will be, no outstanding obligations of CDBeat to repurchase, redeem or
otherwise acquire any securities of CDBeat.
Section 3.6 CDBeat Stock. Immediately prior to the Closing, CDBeat will have
duly authorized and reserved for issuance the shares of CDBeat Stock to
be issued in connection herewith, and, when issued, such shares of
CDBeat Stock will be validly issued, fully paid and nonassessable and
free of preemptive rights. The issuance of the CDBeat Stock pursuant to
this Agreement will not violate or conflict with any agreement of
CDBeat with any third party and will not result in a breach or default
under the governing documents of CDBeat.
Section 3.7 Filings. CDBeat has filed with the SEC all forms, reports,
schedules, and statements that were required to be filed by it with the
SEC since its registration statement was declared effective (the "SEC
Documents"), and previously has furnished to Cakewalk accurate and
complete copies of all the SEC Documents. As of their respective dates,
the SEC Documents were prepared in accordance with the Exchange Act and
the Securities Act and did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated in
those documents or necessary to make the statements in those documents
not misleading, in light of the circumstances under which they were
made. CDBeat shall deliver to Cakewalk as soon as they become available
accurate and complete copies of any report or statement that it mails
to its shareholders generally or files with the SEC during the period
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after the date of this Agreement and before the Closing Date. As of
their respective dates, these reports and statements will not contain
any untrue statement of a material fact or omit to state a material
fact required to be stated in them or necessary to make the statements
in them not misleading, in light of the circumstances under which they
are made and these reports and statements will comply in all material
respects with all applicable requirements of the Exchange Act and the
Securities Act.
Section 3.8 Financial Statements. The audited financial statements and
unaudited interim financial statements of CDBeat that are included or
incorporated in the SEC Documents were prepared in accordance with GAAP
applied on a consistent basis during the periods involved (except as
otherwise indicated in the notes to them) and fairly present the
financial position, results of operations, and cash flows from
operating, investing, and financing activities of CDBeat as of the
dates and for the periods indicated, except that the unaudited interim
financial statements in the SEC Documents are subject to normal
year-end adjustments and were prepared in accordance with the
instructions to SEC Form 10-Q and, accordingly, omit or condense
certain footnotes and other information normally included in financial
statements prepared in accordance with GAAP. The financial statements
of CDBeat that are included or incorporated in any subsequent report or
statement that CDBeat mails to its shareholders generally or files with
the SEC during the period after the date of this Agreement and before
the Closing Date will be prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as otherwise
indicated in them, the notes to them, or any related report of CDBeat's
independent accountants) and will fairly present the financial
information that they purport to present, except that the unaudited,
interim financial statements will be subject to normal year-end
adjustments and will omit or condense certain footnotes and other
information normally included in financial statements prepared in
accordance with GAAP.
Section 3.9 Subsequent Events. Except as contemplated by this Agreement or
disclosed in Schedule 3.9, none of the following has occurred since the
date of the most recent consolidated balance sheet of CDBeat that is
included in the SEC Documents: (a) any event that had, or is reasonably
likely to have, a Material Adverse Effect on CDBeat; (b) any change by
CDBeat in its accounting methods, practices, or principles, except as
required to comply with applicable Law or a change in GAAP; (c) any
commitment or transaction by CDBeat that had, or is reasonably likely
to have, a material adverse effect on CDBeat and was not in the usual
and ordinary course of business; (d) any declaration, payment, or
setting aside for payment of any dividends or other distributions
(whether in cash, stock, or property) in respect of the CDBeat's stock;
or (e) any event, action, or condition that (i) constitutes an
agreement by CDBeat to do anything described in clauses (a)-(d) above,
or (ii) if it had occurred before the date of this Agreement, would
have made any representation or warranty by CDBeat in this Agreement
inaccurate in any material respect.
Section 3.10 Assets of CDBeat. The assets of CDBeat consist of all the assets
which are necessary for the conduct of CDBeat's business as presently
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conducted. Except as set forth in Schedule 3.10, CDBeat's assets are in
good operating condition and repair subject to ordinary wear and tear
and to requirements for periodic maintenance. CDBeat does not own any
real property.
Section 3.11 Contracts. (a) Schedule 3.11 sets forth an accurate and complete
list of all Contracts material to the business of the CDBeat. True and
correct copies of all written Contracts listed on such Schedule and
summaries of the material provisions of all oral Contracts so listed
have been made available to Cakewalk.
(b) All Contracts listed on Schedule 3.11 are valid, subsisting, in full
force and effect and binding upon CDBeat, as the case may be, and, to
the knowledge of CDBeat, the other parties thereto in accordance with
their terms. Except for payment defaults, CDBeat is not in default (or
alleged default) under any such Contract in any material respect, nor,
to the knowledge of CDBeat, is any other party thereto in default
thereunder in any material respect, and, to CDBeat's knowledge, there
is no condition that with notice or the lapse of time or both would
constitute a material default (or give rise to a termination right)
under any such Contract. To the knowledge of CDBeat, none of the other
parties to any Contract intends to terminate or materially alter the
provisions thereof by reason of the Contemplated Transactions or
otherwise. Except as set forth on Schedule 3.2, no approval or
consent of any person is required in order for the Contracts to
continue in full force and effect after the Closing.
Section 3.12 Intangible Property. Set forth on Schedule 3.12 is a description
of all material Intellectual Property Rights owned, licensed or used by
CDBeat in its business, whether or not such intellectual property
rights have been currently afforded patent, copyright or trademark
protection. The Contemplated Transactions will not have a material
adverse effect on the right, title and interest of the CDBeat as of the
Closing Date in and to the Intellectual Property Rights. Except as
disclosed in Schedule 3.12, (i) CDBeat has not received any written
Claim of material invalidity, interference, infringement or
misappropriation from any third party with respect to any of CDBeat's
Intellectual Property Rights; (ii) to the knowledge of CDBeat, CDBeat
has not interfered with, infringed upon, misappropriated or otherwise
come into conflict with any intellectual property or other rights of
any third parties; and (iii) to the knowledge of CDBeat, no third party
is interfering with, infringing upon, misappropriating, or otherwise
coming into conflict with any Intellectual Property Rights of CDBeat.
Section 3.13 Compliance with Laws. CDBeat is not in violation in any material
respect of any Order or Law of any Governmental Bodies affecting the
its assets or its business, except for violations which are not
reasonably expected to have a Material Adverse Effect.
Section 3.14 Claims . Except as set forth on Schedule 3.14, there are no
outstanding Orders of any Governmental Body against or involving
CDBeat. Except as set forth on Schedule 3.15, there are no material
Claims (if the defense thereof or Liabilities in respect thereof are
not covered by insurance), pending or to the knowledge of CDBeat
threatened on the date hereof, against or involving CDBeat. Except as
set forth on Schedule 3.15, at the Closing there will be no such Claims
pending or, to the knowledge of CDBeat, threatened, other than Claims
that, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on CDBeat. Except as set
forth on Schedule 3.15, to the knowledge of CDBeat, on the date hereof,
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there is no fact, event or circumstances that would give rise to any
such Claim.
Section 3.15 Finders' Fees. Except for Cliff Berger, who will receive 293,215
shares of CDBeat Common Stock as soon as additional shares of Common
Stock are authorized, there is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act
on behalf of CDBeat who might be entitled to any fee or commission from
CDBeat upon consummation of the Contemplated Transactions.
Section 3.16 Tax Matters. Except as disclosed on Schedule 3.16, all Tax Returns
required to be filed by CDBeat on or before the Closing Date have been
or shall be timely filed and all Taxes which are due have been or shall
be paid. All Taxes of CDBeat attributable to periods ending on or
before the Closing Date which are not yet due have been adequately and
accurately reserved against and entered upon the books and records of
CDBeat. As of the time of filing, the Tax Returns correctly reflected
(and, as to any Tax Returns not filed as of the date thereof will
correctly reflect) the facts regarding the income, business, assets,
operations, activities and status of CDBeat. There are no Tax Liens
upon any assets of CDBeat except for Liens for current Taxes not yet
due and payable. All amounts required to be withheld by CDBeat from
employees for income Taxes, social security and other payroll Taxes
have been collected and withheld, and either paid to the respective
Governmental Bodies, set aside in accounts for such purpose, or have
been or will be accrued, reserved against and entered upon the books
and records of CDBeat. CDBeat has maintained and has in its possession
all records, supporting documents and exemption certificates required
by applicable sales Tax statutes and regulations to be retained in
connection with the collection and remittance of sales and use Taxes
for all periods up to and including the Closing Date. CDBeat is not a
party to nor has it received any notice with respect to any proposed or
pending examination, investigation, audit, action or Claim by any Tax
Authority relating to Taxes, nor is CDBeat a party to any dispute or,
to CDBeat's knowledge, threatened dispute with respect thereto and no
Claim for assessment or collection of Taxes has been made upon CDBeat.
Schedule 3.16 includes a description of all such past examinations,
investigations, audits, actions or Claims within the past three years.
ARTICLE IV
COVENANTS AND AGREEMENTS
Section 4.1 Conduct of Business of Cakewalk and CDBeat. (a) From the date
hereof through the Closing Date, each of Cakewalk and CDBeat agrees:
(i) To conduct its operations according to the ordinary and usual course of
its business consistent with past practice, to preserve intact its
present business organization and structure, to use reasonable efforts
to keep available the services of its officers, agents and full-time
employees, to use reasonable efforts to preserve and maintain its
assets and the good will of its business and to use reasonable efforts
to preserve its relationships with customers and suppliers.
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(ii) To maintain in the ordinary course of business, consistent with past
practice and in accordance with all Contracts to which each is a party,
its tangible assets in their present repair, order and condition,
subject to ordinary wear and tear and to the requirements of such
Contracts.
(iii) Not to incur any Liability (other than Liabilities incurred in the
ordinary course of business, consistent with past practice, which are
not in the aggregate material thereto), nor enter into any Contract of
a type required to be included on any Schedule hereto.
(b) From the date hereof through the Closing Date, each of Cakewalk and
CDBeat agrees that it will use reasonable efforts to conduct its
respective business in such a manner so that its representations and
warranties contained herein shall continue to be true and correct on
and as of the Closing Date as if made on and as of the Closing Date.
(c) From the date hereof through the Closing Date, each of Cakewalk and
CDBeat agrees that it will consult with the other prior to any renewal,
amendment, extension or termination of, waiver of any material right
under, or any failure to renew, any Contract and will not take any such
action if such other party objects thereto in writing.
Section 4.2 Corporate Examinations and Investigations. Prior to the Closing
Date, each party hereto shall be entitled, through its directors,
officers, Affiliates, employees, attorneys, accountants,
representatives, lenders, consultants and other agents (collectively,
"Representatives") to make such investigation of the assets, the
business and operations of the other party, and such examination of the
books, records and financial condition of the other party, as each
party hereto reasonably deems necessary. Any such investigation and
examination shall be conducted at reasonable times, under reasonable
circumstances and upon reasonable notice, and the parties hereto shall
cooperate fully therein. In that connection, each party hereto shall
make available to Representatives of the other party during such
period, without however causing any unreasonable interruption in the
operations of such other party, all such information and copies of such
documents and records concerning the affairs of such party as such
Representatives may reasonably request, shall permit Representatives of
such party access to the assets and all parts thereof and to such
party's employees, customers, suppliers, contractors and others, and
shall cause such party's respective Representatives to cooperate fully
in connection with such review and examination. No investigation by
either party hereto shall diminish or obviate any of the
representations, warranties, covenants or agreements of either party
contained in this Agreement.
Section 4.3 Filings and Authorizations. Cakewalk and CDBeat, as promptly as
practicable, shall make, or cause to be made, all filings and
submissions under such Laws as are applicable to them or to their
respective Affiliates as may be required for them to consummate the
Contemplated Transactions in accordance with the terms of this
Agreement and shall furnish copies thereof to the other party prior to
such filing and shall not make any such filing or submission to which
CDBeat or Cakewalk, as the case may be, reasonably objects in writing.
All such filings shall comply in form and content in all material
respects with applicable Law.
Section 4.4 Efforts to Consummate. Subject to the terms and conditions herein,
each of Cakewalk and CDBeat, without payment or further consideration,
shall use its good faith efforts to take or cause to be taken all
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action and to do or cause to be done all things necessary, proper or
advisable under applicable Laws, Contracts, Permits and Orders to
consummate and make effective, as soon as reasonably practicable, the
Contemplated Transactions, including, but not limited to, the obtaining
of all Cakewalk Required Consents and CDBeat Required Consents and
Permits or consents of any third party, whether private or
governmental, required in connection with such party's performance of
such transactions and each party hereto shall cooperate with the other
in all of the foregoing.
Section 4.5 Notices of Certain Events. Prior to the Closing Date, Cakewalk and
CDBeat shall promptly notify the other of:
(a) any notice or other communication delivered or received by such party
(or its Representatives) to or from any other person (other than
notices or other communications solely between Cakewalk and CDBeat)
with respect to the Contemplated Transactions (including, without
limitation, any notice or other communication to or from any person
objecting to, or alleging that the consent of any person is or may be
required in connection with, the Contemplated Transactions);
(b) any notice or other communication from any Governmental Body in
connection with the Contemplated Transactions; and
(c) any event, condition or circumstance occurring from the date hereof
through the Closing Date that would constitute a violation or breach of
any representation or warranty, whether made as of the date hereof or
as of the Closing Date, or that would constitute a violation or breach
of any covenant of any party contained in this Agreement.
Section 4.6 Public Announcements. Prior to the Closing Date, Cakewalk and
CDBeat will consult with each other before issuing any press release or
otherwise making any public statement with respect to the Contemplated
Transactions, and no party hereto will issue any such press release or
make any such public statement without the prior approval of CDBeat or
Cakewalk, as the case may be, except as may be required by applicable
Law in which event the other party shall have the right to review and
comment upon (but not approve) any such press release or public
statement prior to its issuance.
Section 4.7 Expenses. Except as otherwise specifically provided in this
Agreement, CDBeat and Cakewalk shall bear their respective expenses, in
each case, incurred in connection with the preparation, execution and
performance of this Agreement and the Contemplated Transactions,
including, without limitation, all fees and expenses of their
respective Representatives.
Section 4.8 Tax Considerations. The parties contemplate that the Contemplated
Transactions shall qualify under Section 351 of the Code. Each party
shall report the transactions contemplated hereunder as they apply to
such party on its appropriate tax return consistent with such
treatment.
Section 4.9 Negotiations With Others. (a) From and after the date hereof and
until this Agreement shall have been terminated in accordance with its
terms, each party agrees that it will not, directly or indirectly,
encourage or solicit any inquiries or proposals by or engage in any
discussions or negotiations with, or enter into any Contract or
understanding with, any person concerning an Acquisition Proposal
subject, however, to such actions which, in the good faith judgment of
the Board of Directors of CDBeat and the management of Cakewalk, based
upon the advice of counsel, are required under applicable Law to be
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taken in the exercise of its fiduciary duties. Each party shall advise
the other of any unsolicited written proposal or offer to enter into an
Acquisition Proposal.
(b) If: (i) Cakewalk is willing and able to consummate the Contemplated
Transactions and the conditions to such consummation, not within the control of
CDBeat, have been satisfied or waived, and (ii) CDBeat enters into a contract or
consummates an Acquisition Proposal with any person other than Cakewalk or any
of its Affiliates on or before November 30, 1999, CDBeat shall pay to Cakewalk a
fee of $1,000,000 as compensation for its efforts hereunder. In addition, CDBeat
shall reimburse Cakewalk for the expenses of negotiating the terms of this
Agreement including the reasonable fees and expenses due to its investors,
lawyers and advisors; provided, however, that such reimbursement shall not
exceed $100,000, in the aggregate.
(c) If: (i) CDBeat is willing and able to consummate the Contemplated
Transactions and the conditions to such consummation, not within the control of
Cakewalk, have been satisfied or waived, and (ii) Cakewalk enters into a
contract or consummates an Acquisition Proposal with any person other than
CDBeat or any of its Affiliates on or before November 30, 1999, Cakewalk shall
pay to CDBeat a fee of $1,000,000 as compensation for its efforts hereunder. In
addition, Cakewalk shall reimburse CDBeat for the expenses of negotiating the
terms of this Agreement including the reasonable fees and expenses due to its
investors, lawyers and advisors; provided, however, that such reimbursement
shall not exceed $100,000, in the aggregate.
Section 4.10 Past-Closing Matters. (a) Promptly after the Closing of the
Contemplated transactions, CD Beat intends to (i) transfer all its
existing business into a wholly owned subsidiary; and (ii) transfer the
business of Cakewalk into a wholly owned subsidiary, so that CD Beat
will then operate as a holding company.
(b) Cakewalk hereby agrees on behalf of itself and its members that if it
seeks to elect a majority of the Board of Directors of CDBeat other than at a
meeting of stockholders of CDBeat, it will cause CDBeat to comply with the
provisions of Section 14(f) of the Securities Exchange Act of 1934, as amended.
ARTICLE V
CONDITIONS TO CLOSING
Section 5.1 Conditions to the Obligations of the Parties. The obligations of
Cakewalk and CDBeat to consummate the Contemplated Transactions are
subject to the satisfaction of the following conditions, which, in the
case of Section 5.1(b), may be waived by CDBeat and Cakewalk acting
together:
(a) No Injunction. No provision of any applicable Law and no Order shall
prohibit the consummation of the Contemplated Transactions.
(b) No Proceeding or Litigation. No Claim instituted by any person (other
than CDBeat, Cakewalk or their respective Affiliates), shall have been
commenced or pending against Cakewalk, CDBeat or any of their
respective Affiliates, officers or directors which Claim seeks to
restrain, prevent, change or delay in any material respect the
Contemplated Transactions or seeks to challenge any of the material
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terms or provisions of this Agreement or seeks material damages in
connection with any of such transactions.
(c) Dylan Subscription Agreement. The transactions contemplated by the
Dylan Subscription Agreement shall have been consummated which shall
include, without limitation, the amendment of the stock purchase
warrant originally held by Atlantis Equities, Inc. dated September 23,
1999.
Section 5.2 Conditions to the Obligations of Cakewalk. All obligations of
Cakewalk hereunder are subject, at the option of Cakewalk, to the
fulfillment prior to or at the Closing of each of the following further
conditions:
(a) Performance. CDBeat shall have performed and complied in all material
respects with all agreements, obligations and covenants required by
this Agreement to be performed or complied with by CDBeat at or prior
to the Closing Date.
(b) Representations and Warranties. The representations and warranties of
CDBeat contained in this Agreement and in any certificate or other
writing delivered by CDBeat pursuant hereto shall be true in all
material respects at and as of the Closing Date as if made at and as of
such time.
(c) Consideration. CDBeat shall have delivered to Cakewalk certificates
representing the CDBeat Stock.
(d) Director Appointment. The Board of Directors of CDBeat shall have been
expanded to two members and Robert Miller shall have been elected to
fill the vacancy resulting from such expansion.
(e) CDBeat Required Consents. All CDBeat Required Consents shall have been
obtained.
(f) Options. At the Closing, the only options or warrants that shall be
outstanding to acquire any securities of CDBeat shall be those options
or warrants described in Schedule 3.5 hereto.
(g) Conversion and Cancellation of Stock; Waiver of Severance Payments. On
or prior to the Closing Date, all of the issued and outstanding
Preferred Stock shall have been converted into Common Stock. In
addition, Joel Arberman and Bryan Eggers shall have (i) surrendered
2,727,450 and 321,974 shares, respectively, of CDBeat Common Stock to
CDBeat for cancellation; and (ii) waived the right to receive any
severance payments under their respective employment agreements as a
result of the consummation of the Contemplated Transactions.
(h) Documentation. There shall have been delivered to Cakewalk the following:
(i) A certificate, dated the Closing Date, of the Chairman of the Board,
the President or Chief Financial Officer of CDBeat confirming the
matters set forth in Sections 5.2(a) and (b) hereof.
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(ii) A certificate, dated the Closing Date, of the Secretary or Assistant
Secretary of CDBeat certifying, among other things, that attached or
appended to such certificate (A) is a true and correct copy of its
Certificate of Incorporation and all amendments if any thereto as of the
date thereof; (B) is a true and correct copy of its By-laws as of the date
thereof; (C) is a true copy of all corporate actions taken by it, including
resolutions of its board of directors authorizing the execution, delivery
and performance of this Agreement, and each other Transaction Document to
be delivered by CDBeat pursuant hereto; and (D) are the names and
signatures of its duly elected or appointed officers who are authorized to
execute and deliver this Agreement and any certificate, document or other
instrument in connection herewith.
(iii) Evidence of the good standing and corporate existence of CDBeat
reasonably requested by Cakewalk.
(iv) Copies of all CDBeat Required Consents.
(i) Due Diligence. The continuing due diligence investigation by Cakewalk of
the business, financial condition and prospects of CDBeat shall not have
disclosed to Cakewalk any event, condition or matter that may reasonably be
likely to result in a Material Adverse Effect of CDBeat or cast any doubt
on CDBeat's ownership or right to use its Intellectual Property Rights.
Without derogating from the generality of the foregoing, Cadnetics, Inc.
and its employees, consultants and independent contractors shall have
assigned to CDBeat any rights that they may have to CDBeat's Intellectual
Property Rights.
(j) Amendment of Prudential Warrant. The Warrant to Purchase Equity Units in
Cakewalk LLC dated June, 1999 held by Entertainment Finance International,
LLC shall have been amended to eliminate therefrom the antidilution
protection relating to additional issuances of securities or changes in the
exercise price or conversion ratio of any existing securities.
(k) Employment of Robert Miller. CDBeat shall have entered into an Employment
Agreement with Robert Miller, effective as of the Closing Date, in form and
substance reasonably satisfactory to him under which (i) Mr. Miller will
serve as the Chairman, President and Chief Executive Officer of CDBeat,
(ii) he will receive an initial base annual salary of $200,000 subject to
such increases or bonuses as the new Board of Directors of CDBeat shall
authorize; (iii) he will receive such other benefits and prerequisites as
shall be consistent with his positions, (iv) he will receive options to
purchase, for such consideration as may be agreed upon by him and by the
new Board of Directors of CDBeat, 1,955,750 shares of CDBeat Common Stock
(out of 2, 932,159 stock options to be reserved for management of CDBeat),
of which one-third of such options will vest upon the signing of the
Employment Agreement and one-third will vest after each anniversary
thereof; (v) all unvested options will immediately vest upon a change of
control of CDBeat; (vi) upon a change of control, Mr. Miller will have the
right to resign and (vii) if Mr. Miller resigns upon a change of control or
he is removed without cause he will receive a severance benefit equal to
the greater of (A) the unexpired term of the Employment Agreement or (B)
twice his then annual salary plus the immediate vesting of all unvested
options.
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(l) Tax Free Treatment. Neither Cakewalk nor any member of
Cakewalk will be required to report any income as a result of the Contemplated
Transactions.
Section 5.3 Conditions to the Obligations of CDBeat. All obligations of CDBeat
hereunder are subject, at the option of CDBeat, to the fulfillment
prior to or at the Closing of each of the following further conditions:
(a) Performance. Cakewalk shall have performed and complied in all material
respects with all agreements, obligations and covenants required by
this Agreement to be performed or complied with by it at or prior to
the Closing Date.
(b) Representations and Warranties. The representations and warranties of
the Cakewalk contained in this Agreement and in any certificate or
other writing delivered by Cakewalk pursuant hereto shall be true in
all material respects at and as of the Closing Date as if made at and
as of such time.
(c) Cakewalk Required Consents. All Cakewalk Required Consents shall have been
obtained.
(d) Documentation. There shall have been delivered to CDBeat the following:
(i) A certificate dated the Closing Date, of a Manager of Cakewalk,
confirming the matters relating to it set forth in Sections 5.3(a) and
(b).
(ii) A certificate, dated the Closing Date, of the Managers of Cakewalk
certifying, among other things, that attached or appended to such
certificate (A) is a true and correct copy of its Articles of Organization
and all amendments if any thereto as of the date thereof; (B) is a true and
correct copy of its Amended and Restated Operating Agreement as of the date
thereof; (C) is a true copy of all actions taken by it, authorizing the
execution, delivery and performance of this Agreement, and each other
Transaction Document to be delivered by such party pursuant hereto; and (D)
are the names and signatures of its duly elected or appointed members who
are authorized to execute and deliver this Agreement and any certificate,
document or other instrument in connection herewith.
(iii) Evidence of the good standing of Cakewalk reasonably requested by CDBeat.
(iv) Copies of all Cakewalk Required Consents.
(v) Such instruments of conveyance as may be needed to convey the Assets
from Cakewalk to CDBeat.
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ARTICLE VI
TERMINATION
Section 6.1 Termination. This Agreement may be terminated and the Contemplated
Transactions may be abandoned at any time prior to the Closing:
(a) By mutual written consent of Cakewalk and CDBeat;
(b) By Cakewalk if (i) there has been a material misrepresentation or breach of
warranty on the part of CDBeat in the representations and warranties
contained herein and such material misrepresentation or breach of warranty,
if curable, is not cured within 30 days after written notice thereof from
Cakewalk; (ii) CDBeat has committed a material breach of any covenant
imposed upon it hereunder and fails to cure such breach within 30 days
after written notice thereof from Cakewalk; or (iii) any condition to
Cakewalk's obligations hereunder becomes incapable of fulfillment through
no fault of Cakewalk and is not waived by Cakewalk; provided that, on the
date of termination, the conditions to CDBeat's obligations hereunder
specified in Section 5.3 hereof shall have been satisfied, and Cakewalk
shall be otherwise ready, willing and able to proceed with the Closing
hereunder;
(c) By CDBeat, if (i) there has been a material misrepresentation or breach of
warranty on the part of Cakewalk in the representations and warranties
contained herein and such material misrepresentation or breach of warranty,
if curable, is not cured within 30 days after written notice thereof from
CDBeat; (ii) Cakewalk has committed a material breach of any covenant
imposed upon it hereunder and fails to cure such breach within 30 days
after written notice thereof from CDBeat; or (iii) any condition to
CDBeat's obligations hereunder becomes incapable of fulfillment through no
fault of CDBeat and is not waived by CDBeat; provided that, on the date of
termination, the conditions to Cakewalk's obligations hereunder specified
in Section 5.2 hereof shall have been satisfied, and CDBeat shall be
otherwise ready, willing and able to proceed with the Closing hereunder; or
(d) By Cakewalk or by CDBeat, if there shall be any Law that makes consummation
of the Contemplated Transactions illegal or otherwise prohibited, or if any
Order enjoining Cakewalk or CDBeat from consummating the Contemplated
Transactions is entered and such Order shall have become final and
nonappealable.
(e) By Cakewalk if the Contemplated Transactions shall not have been
consummated on or before November 30, 1999.
Section 6.2 Effect of Termination; Right to Proceed. Subject to the provisions
of Section 6.1 hereof, in the event that this Agreement shall be
terminated pursuant to Section 6.2, all further obligations of the
parties under the Agreement shall terminate without further liability
of any party hereunder; provided, however, that a party shall remain
liable for its breach of any of its representations, warranties or
obligations under this Agreement. In the event that a condition
precedent to its obligation is not met, nothing contained herein shall
be deemed to require any party to terminate this Agreement, rather than
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to waive such condition precedent and proceed with the Contemplated
Transactions.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Notices. (a) Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered
personally by hand or by recognized overnight courier, telecopied or
mailed (by registered or certified mail, postage prepaid) as follows:
(i) If to CDBeat, one copy to:
CDBeat.com, Inc.
Bedford Towers
444 Bedford Street, Suite 8S
Stamford, Connecticut
Telecopier: (203) 602-9995
Attn: Joel Arberman, President
with a copy to:
Squadron Ellenoff Plesent & Sheinfeld
551 Fifth Avenue
New York, New York, 10176
Telecopier (212) 697-6686
Attention: Kenneth R. Koch, Esq.
(ii) If to Cakewalk, one copy to:
Cakewalk LLC.
250 West 57th Street, Suite 720
New York, New York 10107
Telecopier: (212) 265-1067
Attn: Robert Miller, President
with a copy to:
Baer Marks & Upham LLP
805 Third Avenue
New York, New York 10022
Telecopier: (212) 702-5941
Attn: Ivan W. Dreyer, Esq.
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(b) Each such notice or other communication shall be effective (i) if given
by telecopier, when such telecopy is transmitted to the telecopier
number specified in Section 7.1(a) (with confirmation of transmission)
or (ii) if given by any other means, when delivered at the address
specified in Section 7.1(a). Any party by notice given in accordance
with this Section 7.1 to the other party may designate another address
(or telecopier number) or person for receipt of notices hereunder.
Notices by a party may be given by counsel to such party.
Section 7.2 Entire Agreement. This Agreement (including the Schedules and
Exhibits hereto) and the collateral agreements executed in connection
with the consummation of the Contemplated Transactions contain the
entire agreement among the parties with respect to the subject matter
hereof and related transactions and supersede all prior agreements,
written or oral, with respect thereto.
Section 7.3 Waivers and Amendments; Non-Contractual Remedies; Preservation of
Remedies. This Agreement may be amended, superseded, cancelled, renewed
or extended only by a written instrument signed by Cakewalk and CDBeat.
The provisions hereof may be waived in writing by the party to be
charged therewith. No delay on the part of any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof,
nor shall any waiver on the part of any party of any such right, power
or privilege, nor any single or partial exercise of any such right,
power or privilege, preclude any further exercise thereof or the
exercise of any other such right, power or privilege. Except as
otherwise provided herein, the rights and remedies herein provided are
cumulative and are not exclusive of any rights or remedies that any
party may otherwise have at law or in equity.
Section 7.4 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely within such State, without
regard to the conflict of laws rules thereof.
Section 7.5 Binding Effect; No Assignment. This Agreement and all of its
provisions, rights and obligations shall be binding upon and shall
inure to the benefit of the parties hereto and their respective
successors, heirs and legal representatives. This Agreement may not be
assigned (including by operation of Law) by a party without the express
written consent of CDBeat (in the case of assignment by Cakewalk) or
Cakewalk (in the case of assignment by CDBeat) and any purported
assignment, unless so consented to, shall be void and without effect.
Nothing herein express or implied is intended or shall be construed to
confer upon or to give anyone other than the parties hereto and their
respective heirs, legal representatives and successors any rights or
benefits under or by reason of this Agreement and no other party shall
have any right to enforce any of the provisions of this Agreement.
Section 7.6 Exhibits. All Exhibits and Schedules attached hereto are hereby
incorporated by reference into, and made a part of, this Agreement.
Section 7.7 Severability. If any provision of this Agreement for any reason
shall be held to be illegal, invalid or unenforceable, such illegality
shall not affect any other provision of this Agreement, but this
Agreement shall be construed as if such illegal, invalid or
unenforceable provision had never been included herein.
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Section 7.8 Counterparts. The Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of which
shall together constitute one and the same instrument. This Agreement
shall become binding when one or more counterparts hereof, individually
or taken together, shall bear the signatures of all of the parties
reflected hereon as the signatories.
Section 7.9 Third Parties. Except as specifically set forth or referred to
herein, nothing herein express or implied is intended or shall be
construed to confer upon or give to any person other than the parties
hereto and their permitted successors or assigns, any rights or
remedies under or by reason of this Agreement or the Contemplated
Transactions.
Section 7.10 Title and Risk of Loss. Legal title, equitable title and risk of
loss with respect to the Assets and rights to be transferred hereunder
shall not pass to CDBeat until the Assets or rights are transferred at
the Closing hereunder.
Section 7.11 Survival. None of the representations or warranties contained
in this Agreement shall survive the Closing of the Contemplated Transactions.
ARTICLE VIII
DEFINITIONS
Section 8.1 Definitions. (a) The following terms, as used herein, have the
following meanings:
"Acquisition Proposal" shall mean any proposal for the acquisition of, or
merger or other business combination involving CDBeat or Cakewalk or the sale of
any controlling equity interest in, CDBeat or Cakewalk, other than the
transactions contemplated by this Agreement.
"Affiliate" of any person shall mean any other person directly or
indirectly through one or more intermediary persons, controlling, controlled by
or under common control with such person.
"Agreement" or "this Agreement" shall mean, and the words "herein,"
"hereof" and "hereunder" and words of similar import shall refer to, this
agreement as it from time to time may be amended.
The term "audit" or "audited" when used in regard to financial statements
shall mean an examination of the financial statements by a firm of independent
certified public accountants in accordance with generally accepted auditing
standards for the purpose of expressing an opinion thereon.
"Certificate of Incorporation" shall mean, in the case of any corporation,
the certificate of incorporation, articles of incorporation or charter of a
corporation, howsoever denominated under the laws of the jurisdiction of its
incorporation.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
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"Contract" shall mean any contract, agreement, indenture, note, bond,
lease, conditional sale contract, mortgage, license, franchise, instrument,
commitment or other binding arrangement, whether written or oral, and all
modifications and amendments thereto and substitutions thereof.
The term "control," with respect to any person, shall mean the power to
direct the management and policies of such person, directly or indirectly, by or
through stock ownership, agency or otherwise, or pursuant to or in connection
with an agreement, arrangement or understanding (written or oral) with one or
more other persons by or through stock ownership, agency or otherwise; and the
terms "controlling" and "controlled" shall have meanings correlative to the
foregoing.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"GAAP" shall mean generally accepted accounting principles in effect on
the date hereof as set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as may be
approved by a significant segment of the accounting profession of the United
States.
"Intellectual Property Rights" shall mean all patents, patent
applications, trade names, trademarks, copyrights, servicemarks, trademark and
servicemark registrations and applications, trade secrets, formulae and
specifications and technical know-how, whether currently being used or under
development, including engineering and other drawings, data, design and
specifications, product literature and related materials, in each case whether
owned or licensed.
"IRS" shall mean the Internal Revenue Service.
"Liability" shall mean any direct or indirect indebtedness, liability,
assessment, claim, loss, damage, deficiency, obligation or responsibility, fixed
or unfixed, choate or inchoate, liquidated or unliquidated, secured or
unsecured, accrued, absolute, actual or potential, contingent or otherwise
(including any liability under any guaranties, letters of credit, performance
credits or with respect to insurance loss accruals).
"Lien" shall mean, with respect to any asset, any mortgage, lien
(including mechanics, warehousemen, laborers and landlords liens), claim,
pledge, charge, security interest, preemptive right, right of first refusal,
option, judgment, title defect, or encumbrance of any kind in respect of or
affecting such asset.
The term "person" shall mean an individual, corporation, partnership,
joint venture, association, trust, unincorporated organization or other entity,
including a government or political subdivision or an agency or instrumentality
thereof.
"Subsidiary" of Cakewalk or CDBeat shall mean any person of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
are owned directly or indirectly through one or more intermediaries, or both, by
Cakewalk or CDBeat.
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"Material Adverse Effect" with reference to a person shall mean a material
adverse effect on the business, properties or financial condition of such person
and its subsidiaries taken as whole.
"Tax" (including, with correlative meaning, the terms "Taxes" and
"Taxable") shall mean (i)(A) any net income, gross income, gross receipts,
sales, use, ad valorem, transfer, transfer gains, franchise, profits, license,
withholding, payroll, employment, excise, severance, stamp, rent, recording,
occupation, premium, real or personal property, intangibles, environmental or
windfall profits tax, alternative or add-on minimum tax, customs duty or other
tax, fee, duty, levy, impost, assessment or charge of any kind whatsoever
(including but not limited to taxes assessed to real property and water and
sewer rents relating thereto), together with (B) any interest, penalty, addition
to tax, fine or other additional amount imposed thereon or with respect thereto
by any Governmental Body (domestic or foreign) (a "Tax Authority") responsible
for the imposition of any such tax and interest in respect of such penalties,
additions to tax, fines or additional amounts, in each case, with respect to
Cakewalk, CDBeat, the Business or the Assets (or the transfer thereof); (ii) any
liability for the payment of any amount of the type described in the immediately
preceding clause (i) as a result of Cakewalk or CDBeat being a member of an
affiliated or combined group with any other corporation at any time on or prior
to the Closing Date and (iii) any liability of Cakewalk or CDBeat for the
payment of any amounts of the type described in the immediately preceding clause
(i) as a result of a contractual obligation to indemnify any other person.
"Tax Return" shall mean any return or report (including elections,
declarations, disclosures, schedules, estimates and information returns)
required to be supplied to any Tax Authority.
"Transaction Documents" shall mean, collectively, this Agreement, and each
of the other agreements and instruments to be executed and delivered by all or
some of the parties hereto in connection with the consummation of the
transactions contemplated hereby.
(b) The following terms are defined in the following sections of this Agreement:
Term Section
- ---- -------
Annual Statements 2.5
Assets 1.1(a)
Assumed Liabilities 1.2(a)
Dylan Recital
Dylan Subscription Agreement Recital
Audited Statements 2.5
Business Recital
Cakewalk Recital
CDBeat Recital
CDBeat Required Consents 3.2
CDBeat Stock Recital
Claims 2.9
Closing 1.4
Closing Date 1.4
Common Stock 3.5
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Contemplated Transactions 2.1
Excluded Assets 1.1(b)
Financial Statements 2.5
Governmental Bodies 2.10
Laws 2.10
New Board Members 4.9
Orders 2.10
Permits 1.1(a)
Permitted Liens 2.7
Preferred Stock 3.5
Representatives 4.2
SEC Documents 3.7
Section 8.2 Interpretation. Unless the context otherwise requires, the terms
defined in Section 8.1 shall have the meanings herein specified for all
purposes of this Agreement, applicable to both the singular and plural
forms of any of the terms defined herein. All accounting terms defined
in Section 8.1, and those accounting terms used in this Agreement not
defined in Section 8.1, except as otherwise expressly provided herein,
shall have the meanings customarily given thereto in accordance with
GAAP. When a reference is made in this Agreement to Sections, such
reference shall be to a Section of this Agreement unless otherwise
indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation."
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IN WITNESS WHEREOF, the undersigned have executed this Contribution
Agreement as of the date set forth above.
CAKEWALK LLC
By: /s/ Robert Miller
Robert Miller
President
CDBEAT.COM, INC.
By: /s/ Joel Arberman
Joel Arberman
President
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EXHIBIT 3
CAKEWALK MEMBERSHIP INTEREST
SUBSCRIPTION AGREEMENT
CAKEWALK MEMBERSHIP INTEREST SUBSCRIPTION AGREEMENT (the "Agreement"),
dated as of October 29, 1999 by and between DYLAN LLC, a Delaware limited
liability company ("Dylan"), and CAKEWALK LLC, a Delaware limited liability
company ("Cakewalk"):
W I T N E S S E T H:
WHEREAS, Atlantis Equities, Inc., a Delaware corporation and an affiliate
of Dylan, is the holder of a stock purchase warrant, dated September 23, 1999
(the "Atlantis Warrant"), issued by CDBeat.com, Inc., a Delaware corporation
("CDBeat"), pursuant to which Atlantis has the right to purchase eighty (80%)
percent of the issued and outstanding voting shares of the common stock, par
value $.001 (the "CDBeat Stock"), of CDBeat; and
WHEREAS, Cakewalk has entered into that certain contribution agreement,
dated the date hereof, with CDBeat (the "Contribution Agreement"), pursuant to
which Cakewalk has agreed to contribute and assign to CDBeat substantially all
of the assets of Cakewalk in exchange for 90% of the CDBeat stock in a
transaction intended to qualify under ss. 351 of the Internal Revenue Code of
1986, as amended (the "Code");
WHEREAS, Dylan desires to acquire and Cakewalk desires to sell to Dylan a
membership interest (the "Membership Interest") in Cakewalk consisting of Class
A Units, as that term is defined in the Amended and Restated Operating Agreement
(the "Operating Agreement") of Cakewalk dated as of February 13, 1998, a copy of
which has been reviewed by Dylan;
NOW, THEREFORE, in consideration of the premises and the respective mutual
agreements, covenants, representations and warranties herein contained, and for
other good and valuable consideration, the receipt and sufficiency of which
hereby are acknowledged, the parties agree as follows:
1. Purchase and Sale of Membership Interest. Subject to all of the terms and
conditions of this Agreement, Cakewalk agrees to sell, transfer and deliver to
Dylan the Membership Interest and Dylan agrees to purchase, acquire and accept
from Cakewalk, the Membership Interest at the Closing (as hereinafter defined),
free and clear of all liens, pledges and encumbrances.
2. Consideration. The purchase price (the "Purchase Price") for the Membership
Interest shall be $900,000, payable on the Closing Date by wire transfer of
immediately available funds to an account designated by Cakewalk.
3. Closing. The closing ("Closing") shall take place at the offices of Baer
Marks & Upham LLP, 805 Third Avenue, New York, New York 10022 at 10:00 a.m.
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local time on the date on which the closing under the Contribution Agreement
occurs, or at such other date, time or place as the parties may agree (the
"Closing Date").
4. Admission of Dylan as Member; Amendment of Operating Agreement; Use of
Subscription Funds.
(a) At the Closing, the Atlantis Warrant will be transferred to Dylan and
Dylan will be admitted as a Member of Cakewalk holding a Class A Unit
pursuant to an amendment to the Operating Agreement (the "Amendment")
under which:
(i) The Membership Interest will entitle Dylan to be allocated and
thereafter to receive a distribution, immediately following a
closing under the Contribution Agreement, of 7,819,092 shares of
CDBeat Stock;
(ii) The current members of Cakewalk (the "Existing Members") will
agree that gain ("Gain") recognized by Cakewalk, if any, as a
result of the transactions contemplated by this Agreement and the
Contribution Agreement will be allocated to the Existing Members
and not to Dylan;
Cakewalk acknowledges and agrees that, at the Closing, the Atlantis
Warrant will be amended to (A) eliminate the right of Dylan to acquire 7,819,092
shares of CDBeat Stock; (B) require Dylan to pay CDBeat $100,000 on or prior to
the Closing to acquire 762,064 options from CDBeat exercisable at $2.50 each
until December 31, 2000 and (C) retain the registration rights reflected therein
with respect to all securities of CDBeat owned by Dylan, it being understood by
Dylan that all principal stockholders of CDBeat will be entitled to
substantially similar registration rights; and
Dylan will agree to be bound by and observe all the terms of the
Operating Agreement.
(b) Cakewalk hereby agrees to indemnify and hold Atlantis, Dylan and the
members of Dylan harmless from and against any cost, damages or loss
(including reasonable accounting and legal fees) as a result of any
Gain that may be allocated to it by Cakewalk, and any taxable income
relating to the amendment (but not the assignment, transfer, or other
disposition) of the Atlantis Warrant, the acquisition of the Membership
Interest or the distribution of the CDBeat Stock to Dylan,
notwithstanding the provisions of Section 4(a)(ii) hereof.
(c) Cakewalk agrees to contribute the proceeds of the Purchase Price to
CDBeat pursuant to the Contribution Agreement.
5. Representations and Warranties of Cakewalk. Cakewalk represents and warrants
to Dylan as follows:
(a) Due Execution. Cakewalk has full power, capacity and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby (the "Contemplated Transactions"). This Agreement has been duly and
validly executed and delivered by Cakewalk and constitutes the valid and
binding agreement of Cakewalk, enforceable against Cakewalk in accordance
with its terms, except as may be limited by applicable bankruptcy,
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insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally or by the principles governing the availability of
equitable remedies.
(b) No Conflicts. The execution and delivery of this Agreement, the
consummation of the Contemplated Transactions and the fulfillment of the
terms thereof will not (i) violate any provision of the Certificate of
Formation or the Operating Agreement of Cakewalk (the "Cakewalk
Organizational Documents"); (ii) constitute a breach of or result in a
termination or modification of, or constitute a default under, or conflict
with or cause any acceleration of any obligation under, or permit any other
party to modify or terminate, any agreement or other instrument relating to
Cakewalk; or (iii) violate any judgment, decree, order or award of any
court, governmental body or arbitrator relating to Cakewalk.
(c) Consents. Except for any filings that may be necessary under applicable
securities laws, no consent, approval or authorization of, or registration
or filing with, any governmental authority or other regulatory agency or
any other person is required to be made by Cakewalk in connection with the
execution or delivery of this Agreement or the consummation of the
Contemplated Transactions.
6. Representations and Warranties of Dylan. Dylan represents and warrants to
Cakewalk as follows:
(a) Due Execution. Dylan has full power, capacity and authority to execute
and deliver this Agreement and to consummate the Contemplated
Transactions. This Agreement has been duly and validly executed and
delivered by Dylan and constitutes the valid and binding agreement of
Dylan, enforceable against Dylan in accordance with its terms, except
as may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally or by
the principles governing the availability of equitable remedies.
(b) No Conflicts. The execution and delivery of this Agreement, the
consummation of the Contemplated Transactions and the fulfillment of the
terms thereof will not (i) violate any provision of the Certificate of
Incorporation or By-laws of Dylan; (ii) constitute a breach of or result in
a termination or modification of, or constitute a default under, or
conflict with or cause any acceleration of any obligation under, or permit
any other party to modify or terminate, any agreement or other instrument
relating to Dylan; or (iii) violate any judgment, decree, order or award of
any court, governmental body or arbitrator relating to Dylan.
(c) Consents. Except for any filings that may be necessary under applicable
securities laws, no consent, approval or authorization of, or
registration or filing with, any governmental authority or other
regulatory agency or any other person is required to be made by Dylan
in connection with the execution or delivery of this Agreement or the
consummation of the Contemplated Transactions.
(d) Investment Intention. Dylan is acquiring the Membership Interest for
its own account and not with a present intention to make any sale,
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disposition, distribution or other transfer of the Membership Interest
in a manner that would be in violation of any applicable securities
laws.
(e) Investigation by Dylan. Dylan has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits
and risks of the subscription for the Membership Interest contemplated
hereby and it is able to bear the economic risk of such subscription for an
indefinite period of time. It has been furnished access to such information
and documents as it has requested and has been afforded an opportunity to
ask questions of and receive answers from representatives of Cakewalk
concerning the terms and conditions of this Agreement and the subscription
for the Membership Interest contemplated hereby.
7. Notices of Certain Events. Each of Cakewalk and Dylan shall promptly notify
the other of:
(a) any notice or other communication from any person alleging that the
consent of such person is or may be required in connection with the
Contemplated Transactions;
(b) any notice or other communication from any governmental body in
connection with the Contemplated Transactions; and
(c) any event, condition or circumstance occurring from the date hereof
through the Closing Date that would constitute a violation or breach of
any representation or warranty, whether made as of the date hereof or
as of the Closing Date, or that would constitute a violation or breach
of any covenant of any party contained in this Agreement.
8. Public Announcements. Cakewalk and Dylan will consult with each other before
issuing any press release or otherwise making any public statement with respect
to the Contemplated Transactions, and will not issue any such press release or
make any such public statement without the prior approval of the other party,
except as may be required by applicable law in which event the other party shall
have the right to review and comment upon any such press release or public
statement prior to its issuance.
9. Expenses. Cakewalk agrees to bear and pay for all of its own and Dylan's and
Atlantis's expenses in connection with the preparation, execution and delivery
of this Agreement and the Contemplated Transactions including the expenses
incurred by Atlantis and Dylan in connection with obtaining and amending the
Atlantis Warrant and preparing the related reports on Schedule 13D, Securities
and Exchange Commission Forms 3 and 4 and any amendments thereto.
10. Board Representation. If, following the closing, the Board of Directors of
CDBeat (the "CDBeat Board") is expanded to seven members, Dylan shall have the
right to designate two representatives out of seven to the CDBeat Board, and
must consent to any expansion of the CDBeat Board. The parties agree to cause
CDBeat promptly to obtain D&O insurance with a minimum of $3 million of
coverage, and use its best efforts to obtain $5 million of such coverage in the
near future. CDBeat Board members designated by Dylan shall be entitled to
receive the same compensation (stock options, fees, etc.) as are received by
other non-management CDBeat Board members. By signing this Agreement where
indicated below, Robert Miller agrees to vote all shares beneficially owned by
him in favor of the election of the Dylan designees, and Dylan agrees to vote
all shares owned by it in favor of the election of Robert Miller or his
designee.
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11. Mutual Conditions. The obligations of the parties hereunder are subject to
the fulfillment of each of the following conditions: (a) Closing Under the
Contribution Agreement. The closing under the Contribution
Agreement shall occur concurrently with the closing hereunder.
(b) Amendment. Dylan and the Existing Members shall have entered into the
Amendment and such Amendment shall be in form and substance reasonably
satisfactory to Cakewalk and Dylan.
(c) No Injunction. No injunction, judgment or order, nor any provision of
any applicable law, statute, code, ordinance, rule, regulation or other
requirement of any governmental body, shall prohibit the consummation
of the Contemplated Transactions.
12. Conditions to the Obligations of Cakewalk. All obligations of Cakewalk
hereunder are subject to the fulfillment of each of the following conditions:
(a) Performance. Dylan shall have performed in all material respects all of
its obligations hereunder required to be performed by it at or prior to
the Closing Date.
(b) Representations and Warranties. The representations and warranties of
Dylan contained in this Agreement and in any certificate or other
writing delivered by Dylan pursuant hereto shall be true in all
material respects at and as of the Closing Date as if made at and as of
such time.
(c) Purchase Price. In accordance with the provisions of Section 2 hereof,
Dylan shall have paid the Purchase Price by wire transfer of
immediately available funds to Cakewalk (or in such other manner
acceptable to Cakewalk).
(d) Amendment of Warrant. The Atlantis Warrant shall be amended as
contemplated by the provisions of Section 4(a)(iii) and such amendment
shall be in form and substance reasonably satisfactory to Dylan.
13. Conditions to the Obligations of Dylan. All obligations of Dylan hereunder
are subject, at its option, to the fulfillment of each of the following
conditions:
(a) Performance. Cakewalk shall have performed in all material respects all
of its obligations hereunder required by it at or prior to the Closing
Date.
(b) Representations and Warranties. The representations and warranties of
Cakewalk contained in this Agreement and in any certificate or other
writing delivered by Cakewalk pursuant hereto shall be true in all
material respects at and as of the Closing Date as if made at and as of
such time.
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(c) Engagement of Atlantis. At the Closing, CDBeat shall have confirmed the
retention of Atlantis as its exclusive financial advisor pursuant to
the letter agreement dated the date hereof between Atlantis and
Cakewalk.
(d) Material Changes. No amendment shall have occurred, without the prior
consent of Dylan, in the Cakewalk Organizational Documents, the
Certificate of Incorporation or By-Laws of CDBeat, or the Contribution
Agreement.
14. Termination. If the Contribution Agreement is terminated, this Agreement
shall be terminated concurrently therewith.
15. Miscellaneous
(a) Captions. The section and other headings contained in this Agreement
are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
(b) Cooperation. Subject to the terms and conditions herein provided, each
of the parties hereto shall use its diligent efforts to take, or cause
to be taken, such action, to execute and deliver, or cause to be
executed and delivered, such additional documents and instruments and
to do, or cause to be done, all things necessary, proper or advisable
under the provisions of this Agreement and under applicable law, to
effectuate the purpose of this Agreement.
(c) Notices. (i) Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally by
hand, telecopied, or mailed, certified or registered, return receipt
requested, postage prepaid as follows:
if to Dylan, to:
Dylan LLC
750 Lexington Avenue, 23rd Floor
New York, NY 10022
Telecopier: (212) 750-6667
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with a copy to:
Squadron Ellenoff Plesent & Sheinfeld
551 Fifth Avenue
New York, NY 10176
Telecopier: (212) 697-6686
Attention: Kenneth R. Koch, Esq.
if to Cakewalk, to:
Cakewalk LLC
250 West 57th Street, Suite 720
New York, New York 10107
Attention: Robert Miller, President
Telecopier: (212) 265-1667
with a copy to:
Baer Marks & Upham LLP
805 Third Avenue
New York, New York 10022-7513
Telecopier: (212) 702-5941
Attention: Ivan W. Dreyer, Esq.
(ii) Each notice or other communication shall be deemed given (A) on
the date of delivery if delivered by messenger, overnight courier
or other similar personal delivery; (B) on the date of
transmission, if transmitted by telecopier; or (C) three days
after the date of deposit in the mails, if mailed by certified or
registered mail, return receipt requested.
(iii) Any party, by notice given in accordance with this Section to the
other parties, may designate another address (or telecopier
number) or person for receipt of notices hereunder. Notices by a
party may be given by counsel to such party.
(d) Entire Agreement. This Agreement contains the entire agreement among
the parties with respect to the subject matter hereof and supersedes
all prior agreements or undertakings, written or oral, of any nature
whatsoever.
(e) Amendments. This Agreement may not be amended nor shall any waiver,
change, modification, consent or discharge be effected except by an
instrument in writing executed by or on behalf of the party seeking or
against whom enforcement of any amendment, waiver, change,
modification, consent or discharge is sought.
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(f) No Waiver. Any failure or delay on the part of a party in exercising
any power or right hereunder shall not operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power
preclude any other or further exercise thereof or the exercise of any
other right or power hereunder or otherwise available in law or in
equity. Any waiver of any default hereunder shall not be effective
unless in writing.
(g) Severability. If any provisions of this Agreement for any reason shall
be held to be illegal, invalid or unenforceable, such illegality shall
not affect any other provision of this Agreement, but this Agreement
shall be construed as if such illegal, invalid or unenforceable
provision had never been herein.
(h) Governing Law. This agreement shall be governed and construed in
accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely within such state.
(i) Binding Effect. This Agreement and all of its provisions, rights and
obligations shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
Nothing herein express or implied is intended or shall be construed to
confer upon or give anyone other than the parties hereto and their
respective successors and permitted assigns any rights or benefits
under of by reason of this Agreement.
(j) Counterparts. The Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of which
shall together constitute one and the same instrument. This Agreement
shall become binding when one or more counterparts hereof, individually
or taken together, shall bear the signatures of all of the parties
reflected hereon as the signatories.
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IN WITNESS WHEREOF, the parties hereto have executed this Cakewalk
Membership Interest Subscription Agreement as of the date set forth above.
CAKEWALK LLC
By:/s/ Robert Miller
Robert Miller
President
DYLAN LLC
By:/s/ Nancy Ellin
Nancy Ellin
Chairman
The undersigned are signing this Agreement solely to agree to the provisions of
Section 10 hereof.
/s/ Robert Miller
Robert Miller
DYLAN LLC
By: /s/ Nancy Ellin
Nancy Ellin
Chairman
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EXHIBIT 4
ATLANTIS EQUITIES, INC.
750 Lexington Avenue
New York, New York 10022
Tel: (212) 750-5858
Fax:(212)750-6667
October 29, 1999
Cakewalk LLC
250 W. 57 St.
Suite 620
New York, N.Y. 10107
Attn: Robert Miller, President and CEO
Re: Engagement Letter
Dear Robert:
Atlantis Equities, Inc., including its affiliated entities (collectively,
"Atlantis"), proposes to establish a comprehensive merchant banking and advisory
relationship with the Combined Company (as hereinafter defined), for the purpose
of assisting the Combined Company in implementing its business strategy.
Prior hereto, Atlantis introduced Cakewalk LLC, one of the country's
leading independent music companies ("Cakewalk"), to CDbeat.com, Inc., a leading
Internet music technology company ("CDbeat"), for the purpose of effectuating a
business combination between the two companies. On September 28, 1999, Atlantis
acquired a warrant to purchase 80% of CDbeat's equity for $1 million. Also on
September 28, 1999, Cakewalk and CDbeat signed (a) a letter of intent calling
for a merger of the two companies (the "Letter"), and (b) a loan agreement
pursuant to which Cakewalk loaned CDbeat $50,000 for working capital purposes
pending the merger. For tax purposes, the transaction is being structured as an
acquisition of Cakewalk's assets by CDbeat, and Atlantis's investment will be
made through Cakewalk. As used herein, the term "Combined Company" will refer to
the combination of Cakewalk and CDbeat.
Upon consummation of the transaction, Atlantis and/or its associates will
own 40% of the Combined Company's equity. Robert Miller, President and CEO of
Cakewalk, will become President and CEO of the Combined Company. It is
contemplated that definitive documentation between the two companies and
Atlantis will be executed imminently or concurrently with this engagement
letter.
Based upon the foregoing, and assuming the consummation of the transaction
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between Cakewalk and CDbeat forming the Combined Company, the parties agree that
the Combined Company shall engage Atlantis as its exclusive financial advisor.
In such capacity, Atlantis shall perform the following services:
1. M&A. Atlantis will introduce the Combined Company to potential
acquisition candidates, will assist the Combined Company in the due diligence,
structuring and implementation phases of the acquisition process, and will
assist in monitoring acquired portfolio companies.
2. Consulting. Atlantis will consult with the Combined Company as to its
business plans, management, and capital structure.
3. Senior Management. Atlantis will assist the Combined Company in
locating and recruiting qualified senior management personnel, including a COO,
CTO and CFO with appropriate experience. Atlantis will also assist the Combined
Company in locating several qualified members for its Advisory Board.
4. Other Services. Atlantis shall provide additional advisory,
consultation and related services to the Combined Company as requested by the
Company.
In consideration of the foregoing services, the Combined Company shall pay
Atlantis a monthly cash consulting fee of $12,500, plus reimbursement of
reasonable and actual out-of-pocket expenses, including attorneys' fees, in
connection with Atlantis' investment in CDBeat, including filing of Schedules
13D and Forms 3 and 4, and negotiation of warrants, membership subscription and
related documents. All monthly expenses over $1,500 will require the prior
approval of the Combined Company, provided that it is acknowledged that the
expenses incurred prior to the date hereof exceed $1,500 and such expenses are
hereby approved. Atlantis shall also receive $50,000 at the closing.
The Combined Company shall indemnify Atlantis in accordance with the
indemnification provisions attached hereto as Schedule II, which provisions are
incorporated herein by reference.
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The term of this engagement letter shall be for three (3) years from and
after the effective date hereof, and shall automatically renew for successive
one (1) year terms, subject to the right of any party to terminate the
engagement upon written notice to the other party no less than ninety (90) days
prior to the end of any such term.
In consideration of the foregoing, and as Cakewalk's advisor and the
beneficial holder of a controlling interest in CDbeat, Atlantis agrees to
support the combination of CDbeat and Cakewalk, and further agrees not to
support or vote for a merger, combination or any similar transaction involving
CDbeat with any other party, nor to introduce any other party to CDbeat for
purposes of a merger, combination or any similar transaction; provided, however,
that Cakewalk's Supervisory Board approves the merger transaction. The
provisions of this paragraph shall terminate if the Contribution Agreement,
dated as of even date herewith, is terminated in accordance with its terms.
[Balance of page intentionally left blank]
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If the foregoing accurately reflects our understanding, kindly sign below
and fax back a copy of this letter to the undersigned.
Sincerely yours,
/s/ Nancy Ellin
Nancy Ellin,
Chairman
ACCEPTED AND AGREED TO:
CAKEWALK LLC, ON BEHALF OF
THE COMBINED COMPANY
/s/ Robert Miller
Robert Miller, President & CEO
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