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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
CDBEAT.COM, INC.
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(Name of Issuer)
COMMON STOCK ($.001 PAR VALUE)
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(TITLE OF CLASS OF SECURITIES)
784495103
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(CUSIP Number)
Kenneth R. Koch, Esq.
Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue, New York, NY 10176
(212) 476 - 8362
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(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications)
November 16, 1999
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(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 which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box: /_/
NOTE: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
* 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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CUSIP NO.
1 Name of Reporting Person Dylan, LLC
S.S. or I.R.S. Identification No.
of Above Person
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2 Check the Appropriate Box if (a) / /
a Member of a Group (b) /x/
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3 SEC Use Only
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4 Source of Funds WC
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5 Check if Disclosure of Legal Proceedings is Required Pursuant to Items
2(d) or 2(e) / /
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6 Citizenship or Place of Organization Delaware
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7 Sole Voting Power 7,037,183 shares
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Number of Shares 8 Shared Voting Power 0
Beneficially Owned -----------------------------------------------
Reporting Person With
9 Sole Dis ositive 7,037,183 shares
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10 Shared Dispositive Power 0
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11 Aggregate Amount Beneficially 7,037,183 shares
Owned By Each Reporting Person
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12 Check box if the aggregate Amount in Row (11) Excludes Certain Shares
/ /
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13 Percent of Class Represented
Amount in Row (11) 38.9%
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14 Type of Reporting Person CO
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Item 1. SECURITY AND ISSUER
The title of the class of equity securities to which the statement on
Schedule 13D relates is the common stock, $.001 per share par value (the "Common
Stock") of CDbeat.com, Inc., a Delaware corporation F/K/A SMD Group, Inc. (the
"Company"). The principal executive offices of the Company are located at 444
Bedford Street, Suite 8s, Stamford, Connecticut 06901.
Item 2. IDENTITY AND BACKGROUND.
(a) The name of the person filing (the "Filing Person") this Schedule
13D is Dylan, LLC ("Dylan"). Nancy J. Ellin ("Ellin") is the Managing
Member of Dylan.
(b) The business address of the Filing Person and Ellin is c/o Dylan,
LLC 750 Lexington Avenue, New York, New York 10022.
(c) To date, Dylan has not conducted any business other than in
connection with the acquisition of Shares.
(d) Neither the Filing Person nor Ellin has been convicted during the
past five years in a criminal proceeding (excluding traffic violations
or similar misdemeanors).
(e) Neither the Filing Person nor Ellin has been, during the last five
years, a party to a civil proceeding of a judicial or administrative
body of competent jurisdiction and has not been 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) Dylan is a Delaware limited liability company and Ellin is a
United States citizen.
Item 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The source of funds used for the exercise of the warrants at the
Closing was working capital of Dylan.
Item 4. PURPOSE OF TRANSACTION.
The purpose of the acquisition of the Company's securities was to gain
a substantial ownership position in the Company.
The Filing Person has the following plans and proposals:
(a) Not applicable.
(b) On November 16, 1999, pursuant to that certain contribution
agreement dated as of October 29, 1999, as amended (the "Contribution
Agreement") by and among the Company, Atlantis Equities, Inc., a New
York Corporation ("Atlantis"), Dylan, Cakewalk, LLC, a Delaware limited
liability corporation ("Cakewalk"), and 32 Records, LLC, a wholly-owned
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subsidiary of the Company and a Delaware limited liability company
("32 Records"), Cakewalk contributed substantially all of its assets
and liabilities, as such terms are defined in the Contribution
Agreement, to 32 Records in exchange for 8,307,785 Shares and the
issuance of a stock purchase warrant representing the right to
purchase 1,466,080 Shares to Eminent Financial International, LLC, a
Delaware limited liability corporation holding a $5,500,000
royalty-backed promissory note issued by Cakewalk on June 29, 1999
(the "Closing"). Also upon the Closing, the stock purchase warrant
issued to Atlantis on September 23, 1999 (the "Atlantis Warrant"), was
amended and divided into two (2) separate warrants, both of which were
simultaneously issued to and exercised by Atlantis and Dylan,
respectively, resulting in the issuance to Atlantis for $100,000 of
781,909 Shares, and 762,064 options, exercisable at $2.50 each until
December 31, 2000, and the issuance to Dylan for $900,000 of
7,037,183 Shares. In light of the fact that Nancy Ellin controls
both Dylan and Atlantis, Dylan and Atlantis may be deemed a group.
Atlantis has filed a separate Schedule 13D. Dylan and Atlantis
disclaim that they are such a group and disclaim beneficial
ownership of each other's Shares.
(c) Not applicable.
(d) Avi Kerbs resigned his position as a director of the Company
effective October 28, 1999. Upon the Closing, Robert Miller ("Miller")
was elected as a director of the Company. Pursuant to a voting
agreement dated as of the Closing, if the Board of Directors is
expanded to seven members, Dylan has the right to designate two
representatives of the Board, and must consent to any expansion of the
Board. Miller, a member of Cakewalk, has agreed to vote all shares
beneficially owned by him in favor of the election of the Dylan
designees, and Dylan has agreed to vote all shares owned by it in favor
of Miller or his designee. The Dylan designees, if elected, shall be
entitled to receive the same compensation as other non-management Board
members of the Company.
(e) It is the understanding of the Filing Person that pursuant to the
Contribution Agreement, the Company will seek to increase its
authorized Common Stock.
(f) Not applicable
(g) See section (e) above. In addition, the Company amended its by-laws
in connection with the transaction described in Section 4(b) herein.
(h) Not applicable.
(i) Not applicable.
(j) Not applicable.
Dylan intends to review its investment in the Company from time to time
and may increase such position or dispose of Shares.
Item 5. INTEREST IN SECURITIES OF THE ISSUER.
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(a) Upon exercise of the warrants at the Closing, the Company issued to
Dylan 7,037,183 shares, representing beneficial ownership of
approximately 38.9% of the outstanding Common Stock of the Company.
Together, Dylan and Atlantis hold beneficial ownership of an aggregate
of approximately 47% of the Company.
(b) Dylan has sole voting power, and the sole power to dispose of,
7,037,183 shares. Ellin has the sole power to direct the voting and
disposition of the Shares owned by Dylan.
(c) During the 60 days preceding the filing of this report, the only
transaction involving Common Stock made by the Filing Persons was as
described in Section 4(b) herein.
(d) Not applicable.
(e) Not applicable.
Item 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
Pursuant to the Voting Agreement dated November 16, 1999, between Dylan
and Robert Miller, if the Board of Directors is expanded to seven
members, Dylan has the right to designate two representatives of the
Board, and must consent to any expansion of the Board. Robert Miller, a
member of Cakewalk, has agreed to vote all shares beneficially owned by
him in favor of the election of the Dylan designees, and Dylan has
agreed to vote all shares owned by it in favor of Miller or his
designee. The Dylan designees, if elected, shall be entitled to receive
the same compensation as other non-management Board members of the
Company
Item 7. MATERIALS TO BE FILED AS EXHIBITS.
1.Contribution Agreement dated October 29, 1999, as amended November
16, 1999.
2.Voting Agreement between Robert Miller and Dylan, LLC.
3.Warrant Amendment Agreement dated November 16, 1999 by and among the
Company, Atlantis Equities, Inc., and Dylan, LLC.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief,
the undersigned certifies that the information set forth in this statement is
true, correct and complete.
Dated: November 24, 1999
DYLAN, LLC
By: /s/ Nancy J. Ellin
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Nancy J. Ellin, Managing Member
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Exhibit 99.1
CONTRIBUTION AGREEMENT
BETWEEN
CDBEAT.COM., INC.
AND
CAKEWALK LLC
OCTOBER 29, 1999
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TABLE OF CONTENTS
<TABLE>
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PAGE
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ARTICLE I TRANSFER AND ACQUISITION 1
Section 1.1 Assets to be Transferred and Acquired.........................1
Section 1.2 Assumed Liabilities...........................................2
Section 1.3 Consideration.................................................3
Section 1.4 Closing.......................................................3
ARTICLE II REPRESENTATIONS AND WARRANTIES OF CAKEWALK..............................4
Section 2.1 Authority Relative to this Agreement..........................4
Section 2.2 No Conflicts; Consents........................................4
Section 2.3 Corporate Existence and Power.................................5
Section 2.4 Charter Documents and Corporate Records.......................5
Section 2.5 Financial Information.........................................5
Section 2.6 Subsequent Events.............................................5
Section 2.7 The Assets....................................................5
Section 2.8 Contracts.....................................................6
Section 2.9 Claims and Proceedings........................................6
Section 2.10 Compliance with Laws.........................................6
Section 2.11 Finders' Fees................................................6
Section 2.12 Investment Intent............................................6
Section 2.13 Tax Matters..................................................7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF CDBEAT...............................7
Section 3.1 Authority Relative to this Agreement..........................7
Section 3.2 No Conflicts; Consents........................................7
Section 3.3 Corporate Existence and Power.................................8
Section 3.4 Charter Documents and Corporate Records.......................8
Section 3.5 Capitalization................................................8
Section 3.6 CDBeat Stock..................................................8
Section 3.7 Filings.......................................................8
Section 3.8 Financial Statements..........................................9
Section 3.9 Subsequent Events.............................................9
Section 3.10 Assets of CDBeat............................................10
Section 3.11 Contracts...................................................10
Section 3.12 Intangible Property.........................................10
Section 3.13 Compliance with Laws........................................10
Section 3.14 Claims......................................................10
Section 3.15 Finders' Fees...............................................11
Section 3.16 Tax Matters.................................................11
ARTICLE IV COVENANTS AND AGREEMENTS...............................................11
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Section 4.1 Conduct of Business of Cakewalk and CDBeat...................11
Section 4.2 Corporate Examinations and Investigations....................12
Section 4.3 Filings and Authorizations...................................12
Section 4.4 Efforts to Consummate........................................12
Section 4.5 Notices of Certain Events....................................13
Section 4.6 Public Announcements.........................................13
Section 4.7 Expenses.....................................................13
Section 4.8 Tax Considerations...........................................13
Section 4.9 Negotiations With Others.....................................13
Section 4.10 Past-Closing Restructuring..................................14
ARTICLE V CONDITIONS TO CLOSING...................................................14
Section 5.1 Conditions to the Obligations of the Parties.................14
Section 5.2 Conditions to the Obligations of Cakewalk....................15
Section 5.3 Conditions to the Obligations of CDBeat......................16
ARTICLE VI TERMINATION............................................................17
Section 6.1 Termination..................................................17
Section 6.2 Effect of Termination; Right to Proceed......................18
ARTICLE VII MISCELLANEOUS.........................................................18
Section 7.1 Notices......................................................18
Section 7.2 Entire Agreement.............................................19
Section 7.3 Waivers and Amendments; Non-Contractual Remedies;
Preservation of Remedies.....................................19
Section 7.4 Governing Law................................................20
Section 7.5 Binding Effect; No Assignment................................20
Section 7.6 Exhibits.....................................................20
Section 7.7 Severability.................................................20
Section 7.8 Counterparts.................................................20
Section 7.9 Third Parties................................................20
Section 7.10 Title and Risk of Loss......................................20
Section 7.11 Survival....................................................20
ARTICLE VIII DEFINITIONS..........................................................21
Section 8.1 Definitions..................................................21
Section 8.2 Interpretation...............................................23
</TABLE>
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SCHEDULES
Schedule 2.2 - Cakewalk Required Consents
Schedule 2.6 - Subsequent Events - Cakewalk
Schedule 2.7 - Liens of Cakewalk
Schedule 2.8 - Contracts of Cakewalk
Schedule 2.9 - Claims and Proceedings - Cakewalk
Schedule 3.2 - CDBeat Required Consents
Schedule 3.5 - Capitalization of CDBeat
Schedule 3.9 - Subsequent Events - CDBeat
Schedule 3.10 - Assets of CDBeat
Schedule 3.11 - Contracts of CDBeat
Schedule 3.13 - Intangible Property of CDBeat
Schedule 3.15 - Claims and Proceedings - CDBeat
Schedule 3.17 - Tax Matters - CDBeat
EXHIBITS
Exhibit A - Dylan Subscription Agreement
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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 Section 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
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:
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(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").
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
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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.
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. 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.
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(a) 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").
Section 2.8 CONTRACTS. 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.
(a) 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
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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 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
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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 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. 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.
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(a) 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 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
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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
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. 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.
(a) 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
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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, 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
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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. 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.
(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.
(a) 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.
(b) 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
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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 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.
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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 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;
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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 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.
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(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.
(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.
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(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.
(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).
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(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.
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
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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 to waive such condition precedent and proceed with the Contemplated
Transactions.
ARTICLE VII
MISCELLANEOUS
Section 7.1 NOTICES. 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:
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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.
(a) 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
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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.
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. 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.
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"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.
"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).
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"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.
"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.
(a) The following terms are defined in the following sections of this
Agreement:
<TABLE>
<CAPTION>
Term Section
- ---- -------
<S> <C>
Annual Statements 2.5
ASSETS 1.1(a)
Assumed Liabilities 1.2(a)
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<CAPTION>
TERM SECTION
- ---- -------
<S> <C>
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
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
</TABLE>
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
------------------------------
Name: Robert Miller
Title: President
CDBEAT.COM, INC.
By: /s/ Joel Arberman
------------------------------
Name: Joel Arberman
Title: President
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AMENDMENT AGREEMENT
AMENDMENT AGREEMENT (the "AGREEMENT"), dated as of November 16, 1999 by
and among ATLANTIS EQUITIES, INC., a New York corporation ("ATLANTIS"), DYLAN
LLC, a Delaware limited liability company ("DYLAN"), CDBEAT.COM, INC., a
Delaware corporation ("CDBEAT"), CAKEWALK LLC, a Delaware limited liability
company ("CAKEWALK") and 32 RECORDS LLC, a Delaware limited liability company
("32 RECORDS").
W I T N E S S E T H:
WHEREAS, Atlantis is the holder of a stock purchase warrant, dated
September 23, 1999 (the "ATLANTIS WARRANT"), issued by CDBeat, pursuant to which
Atlantis has the right to purchase (i) eighty (80%) percent of the issued and
outstanding voting shares of the common stock, par value $.001 per share (the
"CDBEAT STOCK"), of CDBeat, and (ii) options exercisable for 762,064 shares of
CDBeat Stock; and
WHEREAS, Cakewalk has entered into that certain contribution agreement,
dated as of October 29, 1999, 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 Section 351 of the Internal
Revenue Code of 1986, as amended (the "CODE");
WHEREAS, Dylan, an affiliate of Atlantis, has entered into that certain
subscription agreement, dated as of October 29, 1999, with Cakewalk (the "DYLAN
SUBSCRIPTION AGREEMENT"), pursuant to which Dylan has subscribed for a
membership interest in Cakewalk;
WHEREAS, in lieu of CDBeat directly acquiring the Assets of Cakewalk
and assuming substantially all of its Liabilities, CDBeat wishes to have 32
Records, a limited liability company wholly owned by CDBeat, acquire such Assets
and assume such Liabilities;
WHEREAS, Cakewalk and Dylan desire to cancel the Subscription Agreement
and terminate their respective rights and obligations thereunder; and
WHEREAS, Atlantis desires to transfer the portion of the Atlantis
Warrant, as amended (as set forth in Section 1, hereto) to Dylan, and Dylan
desires to exercise such portion;
WHEREAS, Atlantis desires to exercise the balance of the Atlantis
Warrant, as amended; and
WHEREAS, Cakewalk, 32 Records, Atlantis and Dylan agree that the
acquisition of CDBeat Stock in exchange for the Assets of Cakewalk pursuant to
the terms and conditions of the Contribution Agreement, as amended hereby, shall
occur simultaneously at the Closing and immediately after such Closing,
Cakewalk, Atlantis and Dylan will own in the aggregate approximately 89.20%
percent of the CDBeat Stock;
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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. AMENDMENT AND EXERCISE OF ATLANTIS WARRANT. Concurrently with the
closing of the transactions contemplated by the Contribution Agreement (the
"CLOSING"), the Atlantis Warrant will be amended and split into two warrants,
one of which will be assigned to Dylan and will require Dylan to pay to CDBeat
$900,000 for 7,037,183 shares of CDBeat Stock issuable upon exercise of such
warrant (the "DYLAN STOCK"), and the other of which will be retained by Atlantis
and will require Atlantis to pay to CDBeat $100,000 to acquire 781,909 shares of
CDBeat Stock (the "ATLANTIS STOCK") and 762,064 options from CDBeat which shall
be exercisable at $2.50 each until December 31, 2000 (the "OPTIONS"). At the
Closing, CDBeat shall deliver to Dylan certificates representing the Dylan Stock
and shall deliver to Atlantis certificates representing the Atlantis Stock.
2. CANCELLATION OF SUBSCRIPTION AGREEMENT. The Subscription Agreement
is hereby terminated and shall be of no further force and effect.
3. MODIFICATION OF CONTRIBUTION AGREEMENT. The Contribution Agreement
is hereby modified as follows:
(a) The text of the second recital shall be deleted and
replaced with the following: "Cakewalk desires to contribute and assign to 32
Records LLC, a wholly owned limited liability company of CDBeat ("32 RECORDS"),
and 32 Records desires to acquire from Cakewalk, substantially all of the assets
and liabilities relating to the Business in exchange for the issuance to
Cakewalk of approximately 46% of the issued and outstanding voting shares of the
common stock, par value $.001, of CDBeat (the "CDBEAT STOCK") in a transaction,
which in conjunction with the concurrent acquisition of CDBeat Stock by Dylan
and Atlantis is, intended to qualify under Section 351 of the Code, upon and
subject to the terms and conditions hereinafter set forth".
(b) The text of the third recital shall be deleted and
replaced with the following: "Atlantis Equities, Inc., a Delaware corporation
("ATLANTIS"), 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 (i)
eighty (80%) percent of the issued and outstanding voting shares of the common
stock, par value $.001 per share (the "CDBEAT STOCK"), of CDBeat, and (ii)
options exercisable for 762,064 shares of CDBeat Stock";
(c) The words "including, without limitation, the moneys
received by Cakewalk from Dylan under the Dylan Subscription Agreement"
contained in Section 1.1 (a) (ix) shall be deleted;
(d) The first paragraph of Section 1.1 (a) shall be amended to
read: "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 32
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Records, free and clear of all Liens (other than Permitted Liens), and 32
Records shall acquire from Cakewalk, all of the tangible and intangible assets
used, held for use or useful in the Business (collectively, the "ASSETS")
including:";
(e) Section 1.1(a)(ii) is deleted in its entirety;
(f) Section 1.1(b) shall be modified to add the following
after the words "including, without limitation": "all of the capital stock of
Cakewalk Productions, Inc. and Cakewalk Productions II, Inc., each of which is
in the process of being dissolved";
(g) The first paragraph of Section 1.2 (a) shall be amended to
read: "At the Closing, 32 Records shall assume all liabilities and obligations
(including contingent liabilities and obligations) of Cakewalk 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:";
(h) Section 1.2 (a)(vii) is deleted in its entirety;
(i) The text of Section 1.2 (b) shall be deleted in its
entirety and replaced with the following: "Notwithstanding the provisions of
Section 1.2(a), except as set forth in (vii), above, 32 Records shall not
assume, and Cakewalk shall retain, any income Tax Liability of Cakewalk, nor
shall 32 Records assume or guaranty any liability or obligation of Cakewalk BRE
LLC.";
(j) The text of Section 1.3 shall be deleted in its entirety
and replaced with the following: "In consideration for the contribution,
assignment, transfer and conveyance by Cakewalk to 32 Records of the Assets, at
the Closing, CDBeat shall issue to Cakewalk 8,307,785 shares of CDBeat Stock,
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,
approximately 46% of the issued and outstanding common stock of CDBeat.";
(k) Section 3.3 shall be modified to add the following: "32
Records 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
corporate powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted.";
(l) The second and third sentences of Section 3.5 shall be
deleted in their entirety and replaced with the following: "As of the date
hereof, the issued and outstanding capital stock of CDBeat consists of (A)
4,504,197 shares of Common Stock, and (B) 50,000 shares of "Series C" Preferred
Stock. There are currently no shares of "Series A" Preferred Stock or "Series B"
Preferred Stock issued and outstanding.";
(m) The text of Section 5.1(c) is deleted in its entirety and
shall be replaced with the following: "EXERCISE OF ATLANTIS WARRANT.
Concurrently with the Closing, in connection with the exercise by Dylan of a
portion of the Atlantis Warrant, Dylan shall have paid $900,000 to CDBeat and
shall have received 7,037,183 shares of CDBeat Stock, and in connection with
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the exercise by Atlantis of a portion of the Atlantis Warrant, Atlantis shall
have paid $100,000 and received 781,909 shares of CDBeat Stock and 762,064
options from CDBeat exercisable at $2.50 each until December 31, 2000.";
(n) Section 5.3 (d) (v) is deleted in its entirety and shall
be replaced with the following: "Such instruments of conveyance as may be needed
to convey the Assets from Cakewalk to 32 Records"; and
(o) The reference to the definition of the "Dylan Subscription
Agreement" contained in Section 8.1 (b) shall be deleted in its entirety.
4. POST-CLOSING CAPITALIZATION OF CDBEAT. The parties agree that after
giving effect to the transactions contemplated by the Amendment Agreement as
amended hereby, CDBeat's outstanding shares of Common Stock, options and
warrants shall be held as reflected on Schedule A hereto with such schedule also
reflecting the shares of Common Stock currently planned to be reserved for
senior management of CDBeat.
5. CONFIRMATION OF ENGAGEMENT. Concurrently with the Closing, CDBeat
shall assume all obligations of Cakewalk pursuant to the Engagement Letter dated
as of October 29, 1999 between Atlantis and Cakewalk.
6. REAFFIRMATION. Except as expressly modified herein, all other terms
and conditions contained in the Contribution Agreement are the same and shall
remain in full force and effect. Any capitalized terms used herein and not
otherwise defined shall have the meanings ascribed to them in the Contribution
Agreement.
7. 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.
8. 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. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally by
hand, telecopied, or mailed,
4
<PAGE>
certified or registered, return receipt requested, postage prepaid as follows:
if to Atlantis or to Dylan, to:
Atlantis Equities, Inc.
750 Lexington Avenue, 23rd Floor
New York, NY 10022
Telecopier: (212) 750-6667
Attention: Nancy Ellin, President
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 CDBeat or 32 Records, 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, NY 10176
Telecopier: (212) 697-6686
Attention: Kenneth R. Koch, Esq.
if to Cakewalk, to:
Cakewalk LLC
250 West 57th Street, Suite 620
New York, New York 10107
Attention: Robert Miller, President
Telecopier: (212) 265-1667
5
<PAGE>
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.
(i) 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.
(ii) 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) 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.
(e) 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.
(f) 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.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
Agreement as of the date set forth above.
CAKEWALK LLC
By: /s/ Robert Miller
-----------------------------------
Name: Robert Miller
Title: President
ATLANTIS EQUITIES, INC
By: /s/ Nancy Ellin
-----------------------------------
Name: Nancy Ellin
Title: President
DYLAN LLC
By: /s/ Nancy Ellin
-----------------------------------
Name: Nancy Ellin
Title: President
CDBEAT.COM, INC.
By: /s/ Joel Arberman
-----------------------------------
Name: Joel Arberman
Title: President
32 RECORDS LLC
By: CDBeat.com, Inc.
By: /s/ Joel Arberman
-----------------------------------
Name: Joel Arberman
Title:
7
<PAGE>
CDBEAT.COM, INC.
<TABLE>
<CAPTION>
SHARES
OUTSTANDING
NAME AS OF CLOSING WARRANTS OPTIONS TOTAL
---- ------------- -------- ------- -----
<S> <C> <C> <C> <C>
CdBeat (including 1,954,773 ------- 190,516 2,145,289
Arberman, Eggers &
public)
Dylan/Atlantis 7,819,092 ------- 762,064 8,581,156
Cakewalk
Lazard Group 3,751,358 ------- ------- 3,751,358
Bank Boston 2,134,499 ------- ------- 2,134,499
R. Miller 1,554,731 ------- 1,955,750 3,510,481
J. Dorn 612,332 ------- ------- 612,332
Signet/MCG 254,865 ------- ------- 254,865
---------
8,307,785
EFI --------- 1,466,080 ------- 1,466,080
Cliff Berger --------- ---------- 293,215 293,215
--------- ----------
TOTAL 18,081,650 1,466,080 3,201,545 22,749,275
</TABLE>
<PAGE>
Exhibit 99.2
VOTING AREEMENT
VOTING AGREEMENT, ("AGREEMENT") dated as of November 16, 1999 by and
between ROBERT MILLER ("MILLER") and DYLAN LLC ("DYLAN").
W I T N E S S E T H
WHEREAS, Cakewalk LLC ("CAKEWALK") has entered into that certain
Contribution Agreement, dated as of October 29, 1999 (the "CONTRIBUTION
AGREEMENT") with CDBeat.com, Inc. ("CDBEAT"), pursuant to which Cakewalk has
agreed to contribute and assign to CDBeat substantially all of the assets of
Cakewalk in exchange for 90% shares of the common stock of CDBeat; and
WHEREAS, upon the closing of the transactions contemplated by the
Contribution Agreement (the "CLOSING"), Miller shall be elected to the Board of
Directors of CDBeat;
WHEREAS, Dylan has entered into that certain Amendment Agreement, dated
as of November __, 1999, among and Atlantis Equities, Inc., an affiliate of
Dylan ("ATLANTIS"), Cakewalk and CDBeat, pursuant to which that certain Stock
Purchase Warrant, dated as of September 23, 1999 owned by Atlantis (the
"ATLANTIS WARRANT") will be amended and split into two warrants, one of which
will be assigned to Dylan and will require Dylan to pay to CDBeat $900,000 for
7,037,183 shares of CDBeat Stock issuable upon exercise of such warrant (the
"DYLAN STOCK"), and the other of which will be retained by Atlantis and will
require Atlantis to pay to CDBeat $100,000 to acquire 781,909 shares of CDBeat
Stock (the "ATLANTIS STOCK") and 762,064 options from CDBeat which shall be
exercisable at $2.50 each until December 31, 2000 (the "OPTIONS");
NOW, THEREFORE, in consideration of the foregoing, and of the mutual
promises and covenants contained herein, it is hereby agreed as follows:
1. BOARD REPRESENTATION. If, following the Closing, the Board of
Directors of CDBeat (the "CDBEAT BOARD") is expanded to seven (7) members, Dylan
shall have the right to designate two (2) representatives to the CDBeat Board
(the "DYLAN DESIGNEES"), and must consent to any expansion of the CDBeat Board.
Miller agrees to vote all shares beneficially owned by him in favor of the
election of the Dylan Designees to the CDBeat Board , and Dylan agrees to vote
all shares owned by it in favor of the election of Miller or his designee to the
CDBeat Board. The Dylan Designees shall be entitled to receive the same
compensation (stock options, fees, etc.) as are received by other non-management
CDBeat Board members.
2. DIRECTOR AND OFFICER INSURANCE. The parties agree to cause CDBeat
promptly to obtain Director and Officer insurance with a minimum of $3 million
of coverage, and use its best efforts to obtain $5 million of such coverage.
1
<PAGE>
3. 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.
4. 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.
IN WITNESS WHEREOF, the parties hereto have executed this Voting Agreement on
the date set forth above.
/s/ Robert Miller
------------------------------
Robert Miller
DYLAN LLC
By: /s/ Nancy Ellin
------------------------------
Name: Nancy Ellin
Title: President
2
<PAGE>
Exhibit 99.3
WARRANT AMENDMENT AGREEMENT
WARRANT AMENDMENT AGREEMENT, (the "Agreement"), dated as of November
16, 1999 by and among ATLANTIS EQUITIES, INC., a New York Corporation
("Atlantis"), DYLAN, LLC, a Delaware limited liability company ("Dylan"), and
CDBEAT.COM, INC., a Delaware corporation ("CDbeat").
WHEREAS, Atlantis is the holder of a stock purchase warrant, dated
September 23, 1999 (the "Atlantis Warrant"), issued by CDbeat, pursuant to which
Atlantis has the right to purchase (i) 80% of the issued and outstanding voting
shares of the common stock, par value $.001 per share, of CDbeat, and (ii)
options exercisable for 762,064 shares of CDbeat stock; and
WHEREAS, Atlantis desires to transfer a portion of the Atlantis Warrant
to Dylan, and Dylan desires to exercise such portion; and
WHEREAS, Atlantis desires to exercise the balance of the Atlantis
Warrant;
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. AMENDMENT AND EXERCISE OF ATLANTIS WARRANT. The Atlantis Warrant is
hereby amended and replaced by two warrants, one of which shall be exercisable
for 7,037,183 shares of CDbeat Common Stock for an aggregate of $900,000 and
shall be owned by Dylan, LLC, and the other of which shall be exercisable for
781,909 shares of CDbeat Common Stock, and options to purchase an aggregate of
762,064 shares of CDbeat Common Stock exercisable at $2.50 per share, expiring
December 31, 2000, for an aggregate of $100,000 and shall be owned by Atlantis.
Both of such warrants are hereby exercised at the closing of the transaction
contemplated by the Contribution Agreement, dated as of October 29, 1999, as
amended.
2. REGISTRATION RIGHTS. CDbeat acknowledges and agrees that both Dylan
and Atlantis are Holders within the meaning of the Atlantis Warrant entitled to
the registration rights provided therein.
<PAGE>
IN WITNESS WHEREOF, the parties hereto hereby execute this Agreement
this 16 day of November, 1999.
ATLANTIS EQUITIES, INC.
/s/ Nancy Ellin
- ------------------------
By: Nancy Ellin
DYLAN, LLC
/s/ Nancy Ellin
- -------------------------
By: Nancy Ellin
CDBEAT.COM, INC.
/s/ Joel Arberman
- -------------------------
By: Joel Arberman
