-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EUUjlFliwBHa1fsTlFRpyI6u+WWwHI+SYNw0jhFCH+OEazjMrI13u3E6j5oOxqgA OTLkeS5YhiENvV4eEt56hQ== 0001070876-99-000092.txt : 19991018 0001070876-99-000092.hdr.sgml : 19991018 ACCESSION NUMBER: 0001070876-99-000092 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19990923 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19991008 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CDBEAT COM INC CENTRAL INDEX KEY: 0001076682 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL- COMPUTER & PRERECORDED TAPE STORES [5735] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 333-70663 FILM NUMBER: 99725415 BUSINESS ADDRESS: STREET 1: BEDFORD TOWERS STREET 2: 444 BEDFORD STREET SUITE 8 CITY: STAMFORD STATE: CT ZIP: 06901 BUSINESS PHONE: 2036029994 MAIL ADDRESS: STREET 1: BEDFORD TOWERS STREET 2: 444 BEDFORD STREET SUITE 8 CITY: STAMFORD STATE: CT ZIP: 06901 FORMER COMPANY: FORMER CONFORMED NAME: SMD GROUP INC DATE OF NAME CHANGE: 19990113 8-K 1 FORM 8-K FOR CDBEAT.COM, INC. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 Date of Report (Date of Earliest Event Reported): September 23, 1999 CDBEAT.COM, INC. (Exact Name of Registrant as Specified in its Charter) Delaware 333-70663 06-1529524 (State or other (Commission File (IRS Employer jurisdiction of Number) Identification incorporation) No.) 444 Bedford Street, Suite 8s Stamford, CT 06901 (Address of principal executive offices) Registrant's Telephone Number, including area code: (203) 602-9994 (Former Address, if changed since last report) 1 - 5 - 312396 v.3 [6P1_03!.WPD] Item 1. Changes in Control of Registrant On September 23, 1999, Atlantis Equities, Inc., a New York corporation ("Atlantis"), entered into a warrant agreement (the "Warrant") with CDbeat.com, Inc., a Delaware corporation (the "Company"). The Warrant entitles Atlantis, or its registered assignee ("Holder"), to purchase from the Company, (a) 7,819,092 shares of the Common Stock of the Company ("Common Stock"), representing 80% of the fully diluted Common Stock of the Company after giving effect to the exercise of the Warrant, except for options to purchase 190,516 shares of Common Stock at $2.50 per share (the "Outstanding Options"), and (b) options exercisable for 762,064 shares of Common Stock at $2.50 per share and expiring December 31, 2000, representing 80% of the shares of Common Stock underlying the Outstanding Options. The Warrant is exercisable, in whole or in part, during the period commencing on September 23, 1999 and ending on September 29, 1999, provided, however, that if the Company receives a $50,000 loan from Holder or a source arranged by Holder on or before September 29, 1999 such exercise period shall be extended to October 30, 1999 and provided, further, that if the Company enters into an agreement for a merger or acquisition (the "Acquisition") on or prior to October 30, 1999, the period during which this Warrant may be exercised shall be extended to the earlier of the closing or termination of the Acquisition, and provided, further, that if the Company has not closed a merger or acquisition by October 30, 1999, the Warrant shall expire unless the Company receives, by November 1, 1999, an additional $50,000 loan from Holder or a source arranged by Holder. The exercise price of the Warrant is an aggregate of $1,000,000. The $50,000 loan made by Cakewalk LLC, as described below, met the requirement for extending the expiration date of the Warrant to at least October 30, 1999. Atlantis is solely owned by Nancy J. Ellin. If Atlantis were to exercise the Warrant, Atlantis would control the Company. The above description of the Warrant is incomplete and is qualified in its entirety by reference to the copy of such agreement filed as Exhibit 1.1 annexed hereto. Subsequent to the acquisition of the Warrant, Atlantis introduced to the Company an entity, Cakewalk LLC ("Cakewalk"), which Atlantis proposed as a potential acquisition candidate. On September 28, 1999, the Company entered into a letter of intent (the "Letter of Intent") with Cakewalk contemplating the acquisition of Cakewalk in a transaction in which the stockholders of Cakewalk would receive approximately 50% of the Company. The Letter of Intent contemplates certain changes to the management and capital structure of the Company. After the contemplated acquisition, the Company will be managed by Robert Miller as President and Chief Executive Officer, together with such other officers, including a chief operating officer and a chief financial officer, as shall be selected by Robert Miller with the consent of the Company's board of directors. Joel Arberman will become the Company's Internet Officer. The initial board of directors will consist of the following seven members plus one observer: Joel Arberman, Adam Blumenkranz, Robert Ellin, Peter Ezersky, Jonathan 2 Foster, David Goddard, Robert Miller (as Chairman), and Thomas Cyrana (as observer). Upon the closing of the contemplated acquisition the Letter of Intent contemplates that the Company's and Cakewalk's equity owners will each own 9,773,865 shares of Common Stock, constituting 50% each of the post-acquisition common shares. The shares owned by the Company's current equity owners assuming the exercise by Atlantis of the Warrant, the cancellation of 2,227,450 shares and 321,974 shares owned by Joel Arberman and Bryan Eggers, respectively, and the conversion of all outstanding preferred stock to Common Stock, will be substantially as follows: CDbeat Common Shares Public shareholders 561,600 Consultants 42,597 Bryan Eggers 178,026 Joel Arberman 1,172,550 Atlantis Equities, Inc. 7,819,092 Total 9,773,865 In addition, the Company will issue 2,932,159 management stock options, at an exercise price per share to be agreed upon prior to closing of such acquisition, 1,955,750 will be issued to Robert Miller, with the balance reserved to other officers of the Company and to be awarded by the Company's board of directors. The proposed acquisition is subject to numerous conditions including, among other things: approval by Cakewalk's supervisory board and the Company's board of directors; satisfactory mutual legal and financial due diligence; all necessary approvals; completion of the acquisition on a tax-free basis to Cakewalk's owners; and execution of definitive documentation, including representations and warranties, covenants, conditions and other customary terms. There can be no assurance that the contemplated acquisition will be consummated on the terms set forth in the Letter of Intent or at all. The above description of the Letter of Intent is incomplete and is qualified in its entirety by reference to the copy of such letter filed as Exhibit 1.2 annexed hereto. In connection with the Letter of Intent, Cakewalk loaned the Company the principal amount of $50,000. In connection with such loan, Cakewalk and the Company entered into a note and security agreement dated September 28, 1999 (the "Note"). The loan bears interest at 10% per annum and is due on December 28, 1999 (the "Maturity Date"); The loan is secured by substantially all assets of the Company. The above description of the Note and Security Agreement is incomplete and is qualified in its entirety by reference to the copy of such agreement filed as Exhibit 1.3 annexed hereto. In addition, the Company and Joel Arberman, the principal stockholder of the Company entered into an agreement dated September 28, 1999 whereby he pledged 3,390,000 shares of Common Stock to Cakewalk to secure the Company's obligations to Cakewalk under the Note (the "Share Pledge Agreement"). 3 The above description of the Share Pledge Agreement is incomplete and is qualified in its entirety by reference to the copy of such agreement filed as Exhibit 1.4 annexed hereto. 4 Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (a) Not applicable (b) Not applicable (c) Exhibits 10.1 Warrant Agreement dated September 23, 1999 between the Company and Atlantis Equities, Inc. 10.2 Letter of Intent dated September 28, 1999 between the Company and Cakewalk LLC. 10.3 Note and Security Agreement dated September 28, 1999 between the Company and Cakewalk LLC. 10.4 Share Pledge Agreement dated September 28, 1999 between Joel Arberman and Cakewalk LLC 5 312396 v.3 [6P1_03!.WPD] SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: October 7, 1999 CDBEAT.COM, INC. By: /s/ Joel Arberman Name: Joel Arberman Title: President and CEO 6 - 7 - 312396 v.3 [6P1_03!.WPD] Index to Exhibits Exhibit No. Description 10.1 Warrant Agreement dated September 23, 1999 between the Company and Atlantis Equities, Inc. 10.2 Letter of Intent dated September 28, 1999 between the Company and Cakewalk LLC. 10.3 Note and Security Agreement dated September 28, 1999 between the Company and Cakewalk LLC. 10.4 Share Pledge Agreement dated September 28, 1999 between Joel Arberman and Cakewalk LLC. 7 EX-10 2 EX10.1 WARRANT AGREEMENT 310020 v.1 [6N7_01!.WPD] Exhibit 10.1 THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS OF ANY STATE (THE "ACTS") AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACTS OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. No. W-1 Date: September 23, 1999 WARRANT TO PURCHASE COMMON STOCK OF CDBEAT.COM, INC. This certifies that, for value received, Atlantis Equities, Inc., a Delaware corporation, or its registered assignee ("Holder"), is entitled, subject to the terms set forth below, to purchase from CDBEAT.COM, INC. (the "Company"), a Delaware corporation (a) 7,819,092 shares (the "shares") of the Common Stock of the Company ("Common Stock"), representing 80% of the fully diluted Common Stock of the Company as constituted on the date hereof after giving effect to the exercise of this Warrant (the "Warrant Issue Date"), except for options to purchase 190,516 shares of Common Stock at $2.50 per share (the "Outstanding Options"), and (b) options (the "Options") exercisable for 762,064 shares of Common Stock at $2.50 per share and expiring December 31, 2000, representing 80% of the shares of Common Stock underlying the Outstanding Options, with the Notice of Exercise attached hereto duly exercised, and simultaneous payment therefor in lawful money of the United States, at the Exercise Price as set forth in Section 2 below. The number, character and Exercise Price of such shares of Common Stock are subject to adjustment as provided below. 1. Term of Warrant and Price of Warrant. This Warrant shall be exercisable, in whole or in part, during the period commencing on the date hereof and ending on September 29, 1999, provided, however, that if the Company receives a $50,000 loan from Holder or a source arranged by Holder on or before September 29, 1999 such exercise period shall be extended to October 30, 1999 and provided, further, that if the Company enters into an agreement for a merger or acquisition (the "Acquisition") on or prior to October 30, 1999, the period during which this Warrant may be exercised shall be extended to the earlier of the closing or termination of the Acquisition, and provided, further, that if the Company has not closed a merger or acquisition by October 30, 1999, the Warrant shall expire unless the Company receives, by November 1, 1999, an additional $50,000 loan from Holder or a source arranged by Holder. 2. Exercise Price and Number of Shares. 2.1 Exercise Price. The exercise price at which this Warrant may be exercised shall be an aggregate of $1,000,000 (the "Exercise Price"). 2.2 Number of Shares and Options. The number of shares of Common Stock which may be purchased pursuant to this Warrant shall equal 7,819,092, or 80% of the fully-diluted capital stock, except for the Outstanding Options, as adjusted from time to time pursuant to Section 11 hereof. The number of Options which shall be received upon exercise in full of this Warrant shall equal 762,064 and represent 80% of the total of the Outstanding Options which can be exercised at $2.50 each and shall expire on December 31, 2000 and shall otherwise be on the same terms as such Options. 8 -18- 310020 v.1 [6N7_01!.WPD] 3. Exercise of Warrant. (a) The purchase rights represented by this Warrant are exercisable by the Holder in whole or in part at any time during the term of this Warrant, or from time to time, by the surrender of this Warrant and the Exercise Form. (b) This Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise, as provided above, and the person entitled to receive the shares of Common Stock and Options issuable upon such exercise shall be treated for all purposes as the holder of record of such shares and Options as of the close of business on such date. As promptly as practicable on or after such date, the Company at its expense shall issue and deliver to the person or persons entitled to receive the same a certificate or certificates for the number of shares and Options issuable upon such exercise. In the event that this Warrant is exercised in part, the Company at its expense will execute and deliver a new Warrant of like tenor exercisable for the number of shares and Options for which this Warrant may then be exercised. (c) If this Warrant is exercised in part this Warrant must be exercised for a number of whole shares of the Common Stock. 4. Replacement of Warrant. On receipt of evidence reasonably satisfactory to the Company of the loss, theft destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and substance to the Company or, in the case of mutilation, on surrender and cancellation of this Warrant, the Company at its expense shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor and amount. 5. Rights of Stockholders. The Holder shall not be entitled to vote or receive dividends or be deemed the holder of Common Stock, nor shall anything contained herein be construed to confer upon the Holder, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, or change of stock to no par value, consolidation, merger, conveyance or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until and to the extent the Warrant shall have been exercised as provided herein. 6. Transfer of Warrant. 9 6.1 Exchange of Warrant Upon a Transfer. Upon delivery by the transferee of a written agreement to be bound by the terms of this Warrant and surrender of this Warrant for exchange, properly endorsed and transferred in accordance with this Section 6, the Company at its expense shall issue to or on the order of the Holder a new warrant or warrants of like tenor, in the name of the Holder or as the Holder (on payment by the Holder of any applicable transfer taxes) may direct, of the number of shares issuable upon exercise hereof. 6.2 Restrictions on Transfer; Compliance with Securities Laws. (a) The Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant and the shares of Common Stock and Options to be issued upon exercise hereof are being acquired solely for the Holder's own account and not as a nominee for any other party, and for investment and agrees to comply with the transfer restrictions contained in this Section 6.2. The Holder will not offer, sell or otherwise dispose of this Warrant or any shares of Common Stock or Options to be issued upon exercise hereof ("Securities"), except under circumstances that will not result in a violation of applicable federal and state securities laws. Prior to offering, selling or otherwise disposing of the Securities, the holder hereof or thereof will give the Company a written notice describing the manner and circumstances of the transfer accompanied by, if requested by the Company, a written opinion of legal counsel satisfactory to the Company to the effect, as amended, that the proposed transfer may be effected without registration under the Securities Act of 1933 or any state blue sky law. Any Securities transferred in violation of applicable federal and state securities laws shall be void and not recognized by the Company. Any transferee of this Warrant or Shares shall execute an agreement agreeing to be bound by the terms of this Section 6. (b) All shares of Common Stock or Options issued upon exercise hereof shall be stamped or imprinted with a legend in substantially the following form (in addition to any legend required by state securities laws): "THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER UNITED STATES FEDERAL OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE, DIRECTLY OR INDIRECTLY, NOR MAY THE SECURITIES BE TRANSFERRED ON THE BOOKS OF THE COMPANY, WITHOUT REGISTRATION OF SUCH SECURITIES UNDER ALL APPLICABLE UNITED STATES FEDERAL SECURITIES LAWS OR COMPLIANCE WITH AN APPLICABLE EXEMPTION THEREFROM, SUCH COMPLIANCE AT THE OPTION OF THE COMPANY, TO BE EVIDENCED BY AN OPINION OF SHAREHOLDER'S COUNSEL, IN FORM ACCEPTABLE TO THE COMPANY, THAT NO VIOLATION OF SUCH REGISTRATION PROVISIONS WOULD RESULT FROM ANY PROPOSED TRANSFER OR ASSIGNMENT." 7. Registration Rights. 7.1 Certain Definitions. As used in this Section 7, the following terms shall have the following respective meanings: 10 "Commission" shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. "Form S-1" shall mean Form S- I issued by the Commission or any substantially similar form then in effect. "Form S-2" shall mean Form S-2 issued by the Commission or any substantially similar form then in effect. "Form S-3" shall mean Form S-3 issued by the Commission or any substantially similar form then in effect. "Holder" shall mean the record owner or owners of Registrable Securities. "Material Adverse Event" shall mean an occurrence having a consequence that either (a) is materially adverse as to the business, properties, prospects or financial condition of the Company taken as a whole or (b) is reasonably foreseeable, has a reasonable likelihood of occurring and, if it were to occur, would materially adversely affect the business, properties, prospects or financial condition of the Company taken as a whole. The terms "Register" "Registered" and "Registration" refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act ("Registration Statement"), and the declaration or ordering of the effectiveness of such Registration Statement. "Registrable Securities" shall mean all Common Stock not previously sold to the public and issued to the Holder pursuant to the exercise of this Warrant, or Common Stock issued or Options with respect to such shares pursuant to stock splits, stock dividends and similar distributions with respect to such shares, provided, however, that shares of Common Stock which are Registrable Securities shall cease to be Registrable Securities at such time, and for so long as, such shares are eligible for sale pursuant to Rule 144(k) under the Securities Act. "Registration Expenses" shall mean all expenses incurred by the Company in complying with Section 7(b) of this Agreement, including, without limitation, all federal and state registration, qualification and filing fees, printing expenses, fees and disbursements of counsel for the Company, blue sky fees and expenses, and the expense of any special audits incident to or required by any such registration, but shall not include Selling Expenses. "Securities Act" shall mean the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. 7.2 Piggyback Registration. 11 7.2.1 Notice of Piggyback Registration and Inclusion of Registrable Securities. Subject to the terms of this Agreement, in the event the Company decides to Register any of its Common Stock for cash (either for its own account or the account of a security holder), other than pursuant to (i) a Registration Statement which exclusively relates to the Registration of securities under an employee stock option, purchase, bonus or other benefit plan, or (ii) a Registration relating solely to a transaction under Rule 145 promulgated by the Commission, then at any time following an Initial Public Offering and for so long as the Holder holds Registrable Securities, the Company will: (1) promptly give the Holder written notice thereof (which shall include a list of the jurisdictions in which the Company intends to attempt to qualify such securities under the applicable Blue Sky or other state securities laws) and (2) include in such Registration (and any related qualification under Blue Sky laws or other compliance), and in any underwriting involved therein, all the Registrable Securities specified in a written request delivered to the Company by the Holder within 10 days after delivery of such written notice from the Company. 7.2.2 Underwriting in Piggyback Registration. If the Registration of which the Company gives notice is a Registered public offering involving an underwriting, the Company shall so advise the Holder as a part of the written notice given pursuant to Subsection 7.2.1. In such event the right of the Holder to Registration shall be conditioned upon such underwriting and the inclusion of a Holder's Registrable Securities in such underwriting to the extent provided in this Section 7.2. The Holder shall, together with the Company, enter into an underwriting agreement with the Underwriter's Representative for such offering. The Holder shall have no right to participate in the selection of the underwriters for an offering pursuant to this Section. 7.2.3 Marketing, Limitation in Piggyback Registration. In the event the Underwriter's Representative advises the Company and the Holder engaged in a Registration under Subsection 7.2.1 in writing that market factors (including, without limitation, the aggregate number of shares of Common Stock requested to be Registered, the general condition of the market and the status of the persons proposing to sell securities pursuant to the Registration) require a limitation of the number of shares to be underwritten, the Underwriter's Representative (subject to the allocation priority set forth in clause (iii) below) may exclude some or all of the Registrable Securities from such Registration and underwriting. 12 7.2.4 Allocation of Shares in Piggyback Registration. In the event that the Underwriter's Representative limits the number of shares to be included in a Registration pursuant to Subsection 7.2.1, the Holder shall be entitled to include a portion of the Registrable Securities requested to be included in such Registration pro rata (based on the number of shares requested to be included) with all other persons currently holding similar written piggyback registration rights requesting Registration. Unless all Registrable Securities and such other piggybacking shares requested to be included in such Registration are so included, no other securities may be included in the Registration Statement in addition to those securities being sold on behalf of the Company. 7.2.5 Withdrawal in Piggyback Registration. If the Holder disapproves of the terms of any such underwriting, it may elect to withdraw therefrom by written notice to the Company and the underwriter delivered at least seven days prior to the effective date of the Registration Statement. Any Registrable Securities or other securities excluded or withdrawn from such underwriting shall be withdrawn from such Registration. 7.3 Demand Registration. Subject to Section 7.5.3 below, if, the Company shall receive a written request (specifying that it is being made pursuant to this Section 7(c)) from persons holding more than fifty percent (50%) of the Registrable Securities that the Company file a registration statement or similar document under the Securities Act, then the Company shall promptly notify in writing all other Holders holding Registrable Securities of such request and shall use its best efforts to cause all Registrable Securities that Holders have requested be so registered within 20 days after written notice from the Company of the proposed registration to be registered under the Securities Act. Notwithstanding the foregoing, if the Company shall furnish to such Holders a certificate signed by the President of the Company stating that in good faith judgment of the Company's Board of Directors it would be seriously detrimental to the Company or its shareholders for a registration statement to be filed in the near future, then the Company's obligation to use its best efforts to file a registration statement shall be deferred for a period not to exceed four (4) months; provided, however, that the Company shall not obtain such a deferral more than once in any 12-month period. The Company shall be obligated to effect only two registrations pursuant to this Section 7.3. 7.4 Form S-3 Registration Rights. 13 In the event the Company is eligible to register securities on Form S-3 and receives from Holders holding more than 50 percent (50%) of the Registrable Securities a written request that the Company effect a registration statement on Form S-3 for an offering of Registrable Securities covering the registration of not less than 50 percent (50%) of the Registrable Securities held by all holders of Registrable Securities, the expected aggregate price to the public of which exceeds $1,000,000, net of any underwriting discounts and commissions, then the Company will promptly give written notice of the proposed Form S-3 registration to all Holders of Registrable Securities and will, as soon as practicable, use its best efforts to effect registration of the Registrable Securities on Form S-3, together with all or such portion of the Registrable Securities of any holder joining in such request as are specified in a written request delivered to the Company within 20 days after written notice from the Company of the proposed registration. These rights are in addition to, and not in lieu of, the rights granted under Sections 7.2 and 7.3 hereof. 7.5 Obligations of the Company and Holders. 7.5.1 Obligations of the Company. Whenever required under Section 7.3 or Section 7.4 to use its best efforts to the effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible: 7.5.1.1 Prepare and file with the Commission a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become and remain effective until the contemplated distribution is over. 7.5.1.2 Prepare and file with the Commission, in a timely manner, such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement. 7.5.1.3 Furnish to the Holders and deliver as directed such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them. 14 7.5.1.4 Use its best efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably appropriate for the distribution of the securities covered by the registration statement, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, and further provided that (anything in this Agreement to the contrary notwithstanding with respect to the bearing of expenses) if any jurisdiction in which the securities shall be qualified shall require that expenses incurred in connection with the qualification of the securities in that jurisdiction be borne by selling shareholders, then such expenses shall be payable by selling shareholder pro rata, to the extent required by such jurisdiction. 7.5.2 Furnish Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to Section 7.3 or Section 7.4 that the Holders shall furnish to the Company such information regarding them, the Registrable Securities held by them, and the intended method of disposition of such securities as the Company shall reasonably request and as shall be required in connection with the action to be taken by the Company. 7.5.3 Underwriting Requirements. In connection with any offering involving an underwriting of shares pursuant to Sections 7.2, 7.3 or 7.4 hereof the Company shall not be required to include any of the Holders' Registrable Securities in such underwriting unless they accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by it. If the managing underwriter or underwriters of such public offering advise the Company that, in their opinion, the amount of the Registrable Securities to be included in any such offering pursuant to the request of the Holders would adversely affect the success of such offering, the Company will include in such offering on behalf of such Holders, the amount of Registrable Securities equal to the total amount which, in the opinion of such managing underwriter or underwriters, can be sold without such adverse effect, and such Registrable Securities shall be allocated on a pro-rata basis among the Holders of the Registrable Securities requested to be included in such offering. 7.5.4 Delay of Registration. No Holder shall have any right to take any action to restrain, enjoin, or otherwise delay any registration as the result of any controversy that might arise with respect to the interpretation or implementation of Section 7.3 or Section 7.4. 7.5.5 Expenses of Registration. All Registration Expenses incurred in connection with all Registrations pursuant to Sections 7.2, 7.3 and 7.4 shall be borne by the Company, except the Holder shall bear the underwriting discounts or commissions relating to Registrable Securities sold by such Holder. 7.5.6 Registration Procedures. The Company will keep the Holder advised as to the initiation and completion of such Registration. At its expense the Company will use its best efforts to keep such Registration effective (a) until the registering Holder has completed the distribution described in the Registration Statement relating thereto or (b) until the Holder can register their Registrable Securities under Rule 144(k) of the Securities Act, whichever first occurs. 15 7.6 Indemnification. 7.6.1 Company's Indemnification of the Holder. The Company will indemnify the Holder, and each of its directors, officers, stockholders, partners or other beneficial owners, and each person controlling the Holder, with respect to which Registration, qualification or compliance of Registrable Securities has been effected pursuant to this Warrant, and each underwriter, if any, and each person who controls any underwriter against all claims, losses, damages or liabilities, including reasonable legal fees and expenses (or actions in respect thereof) to the extent such claims, losses, damages or liabilities arise out of or are based upon any untrue statement (or alleged untrue statement) of a material fact contained in any prospectus or other document (including any related Registration Statement) incident to any such Registration, qualification or compliance, or are based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation by the Company of any rule or regulation promulgated under the Securities Act applicable to the Company and relating to action or inaction required of the Company in connection with any such Registration, qualification or compliance; and the Company will reimburse the Holder, each of its directors, officers, stockholders, partners or other beneficial owners, each such underwriter and each person who controls the Holder or underwriter for any legal and any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action; provided, however, that the indemnity contained in this Subsection 7.6 shall not apply to amounts paid in settlement of any such claim, loss, damage, liability or action if settlement is effected without the consent of the Company (which consent shall not unreasonably be withheld); and provided, further, that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based upon any untrue statement or omission based upon written information furnished to the Company by the Holder, underwriter or controlling person and stated to be for use in connection with the offering of securities of the Company. 16 7.6.2 The Holder's Indemnification of Company. The Holder will, if Registrable Securities held by the Holder are included in the securities as to which such Registration, qualification or compliance is being effected pursuant to this Warrant, indemnify the Company, each of its directors and officers, each legal counsel and independent accountant of the Company, each underwriter, if any, of the Company's securities covered by such a Registration Statement, and each person who controls the Company or such underwriter within the meaning of the Securities Act against all claims, losses, damages and liabilities, including legal fees and expenses (or actions in respect thereof), arising out of or based upon any untrue statement (or alleged untrue statement) of a material fact contained in any such Registration Statement, prospectus, offering circular or other document, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation by the Holder of any rule or regulation promulgated under the Securities Act applicable to the Holder and relating to action or inaction required of the Holder in connection with any such Registration, qualification or compliance; and will reimburse the Company, such directors, officers, partners, persons, law and accounting firms, underwriters or control persons for any legal and any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such Registration Statement, prospectus, offering circular or other document in reliance upon and in conformity with written information furnished to the Company by the Holder and stated to be specifically for use in connection with the offering of securities of the Company; provided, however, that the Holders' liability under this Section 7(f)(2) shall not exceed the Holder's proceeds from the offering of securities made in connection with such Registration. 7.6.3 Indemnification Procedure. Promptly after receipt by an indemnified party under this Section 7.6 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under this Section 7.6, notify the indemnifying party in writing of the commencement thereof and generally summarize such action. The indemnifying party shall have the right to participate in and to assume the defense of such claim; provided, however, that the indemnifying party shall be entitled to select counsel for the defense of such claim with the approval of any parties entitled to indemnification, which approval shall not be unreasonably withheld; provided further, however, that if either party reasonably determines that there may be a conflict between the position of the Company and the Holders in conducting the defense of such action, suit or proceeding by reason of recognized claims for indemnity under this Section 7.6, then counsel for such party shall be entitled to conduct the defense to the extent reasonably determined by such counsel to be necessary to protect the interest of such party. The failure to notify an indemnifying party promptly of the commencement of any such action, if prejudicial to the ability of the indemnifying party to defend such action, shall relieve such indemnifying party, to the extent so prejudiced, of any liability to the indemnified party under this Section 7.6, but the omission so to notify the indemnifying party will not relieve such party of any liability that such party may have to any indemnified party otherwise other than under this Section 7.6. 17 7.6.4 Subsequent Transferees. The provisions of this Section 7.6 applicable to the Holder shall apply with equal force and effect to each subsequent transferee to whom any of the Registrable Securities are transferred with the consent of the Company. 7.7 Current Public Information. At all times after the Company has filed a Registration Statement pursuant to the Securities Act, the Company will file all reports required under the Securities Act or the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, and will take such further action as may be reasonably required to enable any Holder of "restricted securities" (as defined in Rule 144 adopted by the Commission under the Securities Act) to sell such securities pursuant to Rule 144, as amended from time to time, or any similar rule or regulation hereafter adopted by the Commission. 8. Reservation of Stock. The Company covenants that during the term that this Warrant is exercisable, the Company will not issue or sell any Common Stock or any options, warrants or other securities exercisable or exchangeable for, or convertible into, Common Stock and will all of its current remaining authorized and unissued Common Stock for purposes of this Agreement. The Company also covenants and agrees that it shall use its best efforts to cause a sufficient number of shares to be available to provide for the issuance of Common Stock upon the exercise of this Warrant and the Options and, from time to time, will take all steps necessary to amend its Certificate of Incorporation (the "Certificate") to provide sufficient reserves of shares of Common Stock issuable upon the exercise of the Warrant and the Options. The Company further covenants that all shares that may be issued upon the exercise of rights represented by this Warrant and the Options, upon exercise of the rights represented by this Warrant and the Options and payment of the Exercise Price of this Warrant and the Options, all as set forth herein, will be free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously or otherwise specified herein), and will be validly issued, fully paid and nonassessable. 9. Notices. Whenever the Exercise Price or number of shares purchasable hereunder shall be adjusted pursuant to Section 11 hereof, the Company shall issue a certificate signed by its Chief Financial Officer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the Exercise Price and number of shares purchasable hereunder after giving effect to such adjustment, and shall cause a copy of such certificate to be mailed (by first-class mail, postage prepaid) to the Holder of this Warrant. 10. Amendments. (a) Any term of this Warrant may be amended with the written consent of the Company and the Holder. Any amendment effected in accordance with this Section 10 shall be binding upon the Holder, each future Holder and the Company. (b) No waivers of, or exceptions to, any term, condition or provision of this Warrant, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision. 18 312396 v.3 [6P1_03!.WPD] 11. Adjustments. The number of shares purchasable hereunder is subject to adjustment so that at all times up to the termination of the exercise period it shall equal 80% of all shares of the Company's capital stock outstanding or which could become outstanding upon the exercise, conversion or exchange of any commitment or security directly or indirectly exercisable or exchangeable for or convertible into capital stock of the Company (including this Warrant) except for the Outstanding Options. In addition, the number of shares of Common Stock underlying the Options shall be adjusted so that at all times during the exercise period such shares shall represent 80% of the number of shares of Common Stock issuable upon the exercise of such Options and the Outstanding Options. Upon any such adjustment, the Exercise Price shall be adjusted so that the aggregate exercise price of $1,000,000 is allocated over the total number of shares then purchasable. 11.1 No Impairment. The Company will not, by any voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Section 11 and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holders of this Warrant against impairment. 12. Notice of Acquisition. The Company shall give Holder at least five business days prior written notice of the closing of the Acquisition and of its execution of an agreement as to an Acquisition. 13. Entire Understanding. This letter sets forth the entire understanding of the parties relating to the subject matter hereof, and supersedes and cancels the prior Warrant issued on September 22, 1999. IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officers thereunto duly authorized. Dated: September 23, 1999 CDBEAT.COM, INC. By: /s/ Joel Arberman Name: Joel Arberman Title: President and CEO ATLANTIS EQUITIES, INC. By: /s/ Nancy Ellin Name: Nancy Ellin Title: President EX-10 3 EX 10.2 LETTER OF INTENT 312396 v.3 [6P1_03!.WPD] Exhibit 10.2 Cakewalk LLC 250 W. 57 St., Suite 620 New York, N.Y. 10107 September 28, 1999 Mr. Joel Arberman, President CDbeat.com, Inc. 444 Bedford Street Suite 8s Stamford, Ct. 06901 Re: Letter of Intent Dear Joel: The purpose of this letter is to set forth in writing our mutual intent to consummate a merger between CDbeat.com, Inc. ("CDbeat") and Cakewalk LLC ("Cakewalk") on the terms and conditions set forth herein. Cakewalk desires to use its status as one of the country's leading independent record labels, together with its premier roster of shareholders/investors including senior members of Lazard Freres, BankBoston and Prudential Insurance, as a platform for effectuating a content-oriented, niche-oriented consolidation/rollup within the independent segment of the record business under a parent public holding company structure. An important component of Cakewalk's strategy is the incorporation of a distinctive and effective Internet strategy in order to take advantage of existing and new methods of distributing music content. Cakewalk's game plan therefore is to incorporate a dual content and technology strategy. CDbeat owns proprietary disc/digital recognition software that allows users who are listening to music on their computer simultaneously to access various artist and genre-related Internet sites and other information. CDbeat's software also has the ability to deliver music via the Internet by means of digital download, custom CDs and related technologies. CDbeat's shares are quoted on the NASDAQ Bulletin Board under the symbol CDBT. In view of the foregoing, Cakewalk and CDbeat agree as follows: 1. CDbeat and Cakewalk will merge in a manner to be determined which shall be tax-free to the investors in Cakewalk. CDbeat will maintain its public company status, and the parties agree to make any required filings with the Securities and Exchange Commission including, without limitation, the filing required by the provisions of Section 14(f) of the Securities Exchange Act of 1934, as amended (the "14(f) Notice"), in order to effectuate the merger. 20 2. After the merger, the surviving company in the merger ("Newco") will immediately change its name to such new name as its new board of directors shall select. 3. Newco will be managed by Robert Miller as President and Chief Executive Officer, together with such other officers, including a chief operating officer and a chief financial officer, as shall be selected by Mr. Miller with the consent of the Newco board of directors. Joel Arberman will become Newco's Internet Officer. 4. The initial Newco board of directors will consist of the following seven members plus one observer: Joel Arberman Adam Blumenkranz Robert Ellin Peter Ezersky Jonathan Foster David Goddard Robert Miller (Chairman) Thomas Cyrana (observer) 5. Newco will also have an Advisory Board consisting of various music and technology luminaries. 6. Upon the closing of the merger, each company's equity owners will own 9,773,865 Newco common shares, constituting 50% each of the post-merger common shares, substantially as follows: CDbeat Common Shares Public shareholders 561,600 Consultants 42,597 Bryan Eggers 178,026 Joel Arberman 1,172,550 Atlantis Equities 7,819,092 Total 9,773,865 Cakewalk Common Shares -------- ------------- Lazard Freres group 3,751,209 BankBoston 2,138,751 Robert Miller 1,540,821 Prudential/EFI 1,471,829 Joel Dorn 620,928 Signet/MCG 250,327 -------- Total 9,773,865 21 7. In addition to the foregoing shares, upon the closing of the merger the following additional option shares will be outstanding: CDbeat Options ($2.50/sh. exp. 12/31/00) Director/Employees 33,280 Consultants 113,486 Shareholders 43,750 Atlantis Equities 762,064 ------- Total 952,580 8. In addition, Newco will issue 2,932,159 management stock options, at an exercise price per share to be agreed upon prior to closing; 1,955,750 of such options will be issued to Robert Miller, with the balance reserved to other officers of Newco and to be awarded by the Newco board of directors. 9. Cakewalk's record label, 32 Records, will continue to be managed by Joel Dorn (Music Director), Michael Weiner (General Manager) and Fran Saporito (Controller). 10. CDbeat represents that Joel Arberman and Atlantis Equities, Inc., who together beneficially own in excess of 90% of CDbeat's existing shares, have committed to vote their shares in favor of the merger. Cakewalk represents that the Investor Representatives from Lazard Freres and BankBoston, as well as Prudential Insurance/EFI, have preliminarily approved the merger. All major shareholders of Newco will agree to a one-year lockup on their post-merger shares. 11. The parties intend that the merger close as soon as practicable, and have agreed upon November 1, 1999 as the intended closing date. The parties agree to work expeditiously towards completing due diligence and the drafting of a definitive merger agreement, which the parties intend to execute on or before October 15, 1999. Thereafter, CDbeat will give the required 14(f) Notice. 12. CDbeat has prepared the attached press release regarding the transaction covered hereby, which Cakewalk consents to. 13. This letter of intent shall not create any legally binding obligations, and the contemplated merger shall be subject to the following conditions, among other things: - Approval of Cakewalk's Supervisory Board and CDbeat's board of directors - Satisfactory mutual legal and financial due diligence - All necessary approvals - Completion of the merger on a tax-free basis to Cakewalk's owners - Execution of definitive documentation, including representations and warranties, covenants, conditions and other customary terms 14. Each party will bear its own expenses, and will cooperate to provide access to all records and corporate documents. Please indicate your agreement to the foregoing by signing a copy of this letter. Sincerely, /s/ Robert Miller Robert Miller President & CEO 22 ACCEPTED AND AGREED TO: CDbeat.com, Inc. By: /s/ Joel Arberman Joel Arberman President & CEO 23 EX-10 4 EX 10.3 NOTE AND SECURITY AGREEMENT 312396 v.3 [6P1_03!.WPD] Exhibit 10.3 NOTE AND SECURITY AGREEMENT $50,000 September 28, 1999 FOR VALUE RECEIVED, CDBEAT.COM, INC., a Delaware corporation (the "Borrower"), having an office at 444 Bedford Street, Suite 8S, Stamford, Connecticut 06901, hereby promises to pay to the order of CAKEWALK LLC (the "Lender"), at its principal executive office at 250 West 57th Street, New York, New York 10107, or at such other place as Lender may, from time to time, designate, the principal sum of $50,000 in lawful money of the United States due and payable as set forth below. 1. Interest. The unpaid principal amount of this Note, outstanding from time to time, shall bear interest at 10% per annum, commencing on the date hereof through the Maturity Date specified in Paragraph 2 below. Such interest shall accrue and be due and payable on the Maturity Date. Overdue principal and, to the extent permitted by law, overdue interest on this Note, shall bear interest, payable on demand, at 12% per annum. In no event shall the interest charged hereunder exceed the maximum permitted by applicable law. 2. Principal. Except as otherwise provided, no principal payments hereunder need be made until December 28, 1999 when the entire unpaid principal balance evidenced by this Note and all accrued interest thereon shall be due and payable (the "Maturity Date"). 3. Prepayment. Borrower shall have the right to prepay this Note in whole or in part, from time to time, with all accrued interest to the date of prepayment on the amount being so prepaid, without premium or penalty. 4. Security Interest. (a) Borrower hereby grants to the Lender a continuing first priority security interest in and lien upon all of the following, whether now owned or hereafter acquired and wherever located (collectively, the "Collateral"): (i) all accounts receivable, accounts, chattel paper, contract rights (including, without limitation, royalty agreements, license agreements and distribution agreements), documents, instruments, money, deposit accounts and general intangibles including, without limitation, returns, repossessions, books and records relating thereto, and equipment containing said books and records, all investment property including securities and securities entitlements; (ii) all software, computer source codes and other computer programs (collectively, the "Software Products"), and all common law and statutory copyrights and copyright registrations, applications for registration, now existing or hereafter arising, in the United States of America and foreign, obtained or to be obtained on or in connection with the Software Products, or any parts thereof or any underlying or component elements of the Software Products together with the right to copyright and all rights to renew or extend such copyrights and the right (but not the obligation) of Lender to sue in its own name and/or in the name of the Borrower for past, present and future infringements of copyright; 24 (iii) all goods including, without limitation, equipment and inventory (including, without limitation, all export inventory); (iv) all guarantees and other security therefor; (v) all trademarks, service marks, trade names and service names and the goodwill associated therewith; (vi) (a) all patents and patent applications filed in the United States Patent and Trademark Office or any similar office of any foreign jurisdiction, and interests under patent license agreements, including, without limitation, the inventions and improvements described and claimed therein; (b) licenses pertaining to any patent whether the Borrower is licensor or licensee; (c) all income, royalties, damages, payments, accounts and accounts receivable now or hereafter due and/or payable under and with respect thereto, including, without limitation, damages and payments for past, present or future infringements thereof; (d) the right (but not the obligation) to sue for past, present and future infringements thereof; (e) all rights corresponding thereto throughout the world in all jurisdictions in which such patents have been issued or applied for; (f) the reissues, divisions, continuations, renewals, extensions and continuations-in-part with any of the foregoing (all of the foregoing patents and applications and interests under patent license agreements, together with the items described in clauses (a) through (f) in this paragraph are sometimes herein individually and collectively referred to as the "Patents"); (vii) all products and proceeds including, without limitation, insurance proceeds, of any of the foregoing; and (viii) any and all additions, improvements and accessions to the foregoing, all substitutions and replacements therefor and all products and proceeds thereof and proceeds of insurance thereon and all other records relating thereto; all to secure performance and payment of (i) this Note, and (ii) all other obligations and indebtedness of Borrower to Lender of whatever kind and whenever or however created or incurred, whether absolute or contingent, matured or unmatured, direct or indirect (all of the foregoing being the "Secured Indebtedness"). The security interest granted herein shall continue in full force and effect until all of the Secured Indebtedness has been discharged. 25 In addition, the word "Collateral" includes all the following, whether now owned or hereafter acquired, whether now existing or hereafter arising, and wherever located: (a) All attachments, accessions, accessories, tools, parts, supplies, increases, and additions to and all replacements of and substitutions for any property described above; (b) All products and produce of any of the property described in this Collateral section; (c) All accounts, general intangibles, instruments, rents, monies, payments, and all other rights, arising out of a sale, lease, or other disposition of any of the property described in this Collateral section; (d) All proceeds (including insurance proceeds) from the sale, destruction, loss, or other disposition of any of the property described in this Collateral section; and (e) All records and data relating to any of the property described in this Collateral section whether in the form of a writing, photograph, microfilm, microfiche, or electronic media, together with all of the Borrower's right, title, and interest in and to all computer software required to utilize, create, maintain, and process any such records or data on electronic media. 5. Covenants. For as long as any obligations pursuant to this Note remain outstanding, Borrower agrees as follows: (a) Financial Reports. Borrower shall provide to the Lender the following financial information and reports, which information and reports shall be kept confidential by Lender: (i) A monthly balance sheet of Borrower within ten (10) days after the end of each month, certified by its chief executive or chief financial officer; (ii) quarterly financial statements of Borrower including a balance sheet and income statement within thirty (30) days after the end of each quarter certified by its chief executive or chief financial officer; (iii) written advice as to any occurrence of the following within ten (10) days of each such event, such notice to include reasonable detail with respect thereto: (A) the occurrence of any Event of Default specified in Paragraph 7 hereof; (B) any event which affects the value of the Collateral, the ability of Borrower or Lender to dispose of the Collateral, or the rights and remedies of Lender in relation thereto including, without limitation, the levy of any legal process against the Collateral and a casualty loss with respect to the Collateral of significant value; (C) the institution or threatened commencement of any action or proceeding against the Borrower involving amounts equal to or greater than $25,000 individually or in the aggregate; and (D) any other event which, in the reasonable judgement of management of Borrower, could have a material adverse effect on Borrower or its business, operations or the Collateral; and (iv) such other information as Lender may reasonably request. (b) Liens. Borrower shall not, without the prior written consent of Lender, create, incur, assume or suffer to exist (collectively, "incur") any mortgage, pledge, security interest, assignment, lien (statutory or other), claim, encumbrance, license or sublicense or security interest (collectively, "Lien") in or upon any of the Collateral, except for: 26 (i) Liens for taxes, assessments or similar charges incurred in the ordinary course of business that are not yet due and payable; (ii) pledges or deposits made in the ordinary course of business to secure payment of worker's compensation such as participating in any funding in connection with worker's compensation, unemployment insurance, old age, pension or other social security programs; or (iii) Liens of mechanics, material men, warehouse men, carriers or other like Liens securing obligations incurred in the ordinary course of business; (c) Indebtedness. Except for secured indebtedness incurred to financial institutions on the date hereof described on Exhibit A annexed hereto (the "Permitted Financing"), Borrower shall not, without the prior written consent of Lender, incur any liability in respect of borrowed moneys in excess of $50,000. (d) Name and Address. Borrower will not change its principal address, or any other place of business, or the location of any Collateral (including the location of its business records), or make any change in the Borrower's name or conduct the Borrower's business operations under any fictitious business name or trade name, without, in any such case, at least thirty (30) days' prior written notice to the Lender. (e) Maintenance of Collateral. Borrower will maintain the Collateral in good operating condition and repair. Borrower shall defend the Collateral against all claims and demands of all persons or entities at any time claiming the same or any interest therein. In addition, Borrower shall not amend, modify or supplement, or waive any condition or provision of the License without Lender's prior written consent. (f) Sale or Disposition. Borrower will not sell, contract for sale or otherwise dispose of any of the Collateral or any interest therein, other than in the ordinary course of business. (g) Taxes. Borrower will pay promptly when due all taxes and assessments on the Collateral or for its use or operation, except for taxes and assessments which are being contested in good faith. The Lender may at its option discharge any taxes or Liens to which any Collateral is at any time subject, and may, upon the failure of the Borrower so to do, purchase insurance on any Collateral and pay such amounts as may be reasonably necessary for the repair, maintenance or preservation thereof, and the Borrower agrees to reimburse the Lender on demand for any payments or expenses incurred by the Lender pursuant to the foregoing authorization and any unreimbursed amounts shall constitute Secured Indebtedness for all purposes hereof. (h) Further Assurances. Borrower will promptly execute and deliver to the Lender such financing statements, certificates, notices and other documents or instruments as may be necessary to enable the Lender to perfect or from time to time perfect, renew or continue the security interest granted herein, including, without limitation, such financing statements, certificates and other documents as may be necessary to perfect a security interest in any additional Collateral hereafter acquired by the Borrower or in any replacements or proceeds thereof. Borrower hereby authorizes Lender to take all action (including, without limitation, the filing of any Uniform Commercial Code Financing Statements or amendments thereto without the signature of Borrower or the notification of any account debtor or payor) that Lender may deem necessary or desirable to perfect or otherwise protect the security interest described hereunder and to obtain the benefits of this Note. 27 6. Representations and Warranties. The Borrower hereby represents and warrants as follows, which representations and warranties shall continue to be true while any obligations pursuant to this Note remain outstanding: (a) Status. It is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation and has the power and authority to carry on its business as it is now being conducted and to own, operate and lease its properties and assets. It is duly qualified and in good standing in each jurisdiction in which the character or location of its properties or nature of its business makes such qualification necessary. (b) Authority. It has full power and authority to execute and deliver this Note and to grant the security interest granted herein, and the execution and delivery by the Borrower of this Note, and the performance if its obligations hereunder, have been duly authorized by all necessary corporate or other action. This Note is the legal, valid and binding obligation of Borrower enforceable against it in accordance with the terms hereof. (c) No Conflict. It is not in default under any indenture, mortgage, deed of trust, agreement or other instrument to which it is a party or by which it or any of its assets may be bound. The execution and delivery of this Note and compliance with the provisions hereof shall not violate any provision of law applicable to Borrower nor shall the same conflict with or result in a breach of any of the terms, conditions or provisions of, or constitute a default under, the certificate of incorporation or by-laws of Borrower, or result in the breach of, constitute any default under, or conflict with the terms of any indenture, mortgage, agreement or other instrument to which it is party or by which it or any of its assets may be bound, or result in the creation or imposition of any Lien upon any of its assets, other than for the security interest granted hereunder. (d) Consents. Except as may be required by applicable securities laws, no consent, approval, order, authorization of, or registration, qualification or filing with, any governmental authority or any other party is required on the part of Borrower in connection with the execution and delivery of this Note, the granting of the security interest granted herein, and the performance and consummation of the transactions contemplated hereby, other than (i) such consents that have been obtained and (ii) the filing of any financing statement that is required to perfect Lender's security interest. (e) Litigation. There are no suits, proceedings or investigations pending or, to its knowledge, threatened against it which questions the validity of this Note or which, individually or in the aggregate, if determined adversely, at have a material adverse effect on it, its business, operation or assets. (f) Title. It is the sole owner of, and has good title to, the Collateral, free and clear of any Lien, except for the security interest granted hereby, Liens of contractors and material men, and the Liens created by the Permitted Financing. There is no financing statement or similar filing now on file in any public office covering any part of the Collateral except for those financing statements filed in connection with the Permitted Financing. 28 (g) Locations. The chief executive office of Borrower is located at the address first set forth above. All inventory and equipment held on the date hereof by Borrower is located in Brossard, Quebec. 7. Default - Each of the following shall constitute an event of default (an "Event of Default") hereunder: (a) the Borrower's committing an act of bankruptcy, making an assignment for the benefit of creditors or making or sending a notice of intended bulk transfer, or if a meeting of creditors is convened or a committee of creditors is appointed for, or any petition or proceeding for any relief under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, receivership, liquidation or dissolution law or statute now or hereinafter in effect (whether at law or in equity) is filed or commenced by or against Borrower or any of its properties or the appointment of a receiver or trustee for Borrower or any of its properties; (b) any merger, consolidation or other business combination involving the Borrower or the sale of all or substantially all of the assets of Borrower, other than a merger, consolidation or business combination between the Lender and the Borrower; (c) the issuance of a levy or execution, or the seizure, attachment or garnishment, or the entry of judgment on or against Borrower or any of its properties which, individually or in the aggregate, exceeds $50,000 and which shall not be released, satisfied of record or bonded within thirty (30) days thereafter; (d) the failure to pay the principal amount of this Note when due (whether at maturity, by reason of acceleration or otherwise); (e) the occurrence of a default of any kind or the breach of any covenant under this Note (other than the payment of the interest payments required hereunder) or any present or future document, instrument or agreement between the Borrower and the Lender; (f) should any representation or warranty made by Borrower in this Note or any other present or future document, instrument or agreement between Borrower and the Lender prove to be untrue or inaccurate in any material respect as of the date on which such representation or warranty is made; or (g) the default in payment of principal of or interest on any other indebtedness for borrowed money owed by Borrower or default in the performance or observance of the terms of any instrument pursuant to which such indebtedness was created or secured, the effect of which default is to cause or permit any holder of any such indebtedness to cause the same to become due prior to its stated maturity (and whether or not such default is waived by the holder thereof). 8. Rights and Remedies (a) Upon the occurrence of any Event of Default, such default not having previously been remedied or waived, the Lender shall have the following rights and remedies: (i) The right, at its option, by written notice to the Borrower, to declare the entire unpaid balance of this Note to be immediately due and payable and thereupon such amount together with all costs, fees and expenses incurred in 30 connection herewith, shall be immediately due and payable, except that upon an occurrence of an Event of Default provided for in paragraph 7 (a) hereof, no declaration or notice shall be required. (ii) All rights and remedies provided by law, including, without limitation, those provided by the Uniform Commercial Code as in effect in the State of New York from time to time (the "UCC"). (iii) The right to take possession of the Collateral and, in addition thereto, the right to enter upon any premises on which the Collateral or any part thereof may be situated, without notice, and remove the same therefrom. The Lender may require the Borrower to make the Collateral (to the extent the same is moveable) available to the Lender at a place to be designated by the Lender which is reasonably convenient to both parties. Unless the Collateral threatens to decline speedily in value or is of a type customarily sold on a recognized market, the Lender will give the Borrower at least ten (10) days' prior written notice at the address of the Borrower set forth above (or at such other address or addresses as the Borrower shall specify in writing to the Lender) of the time and place of any public sale thereof or of the time after which any private sale or any other intended disposition thereof is to be made. Any such notice shall be deemed to meet any requirement hereunder or under any applicable law (including the UCC) that reasonable notification be given of the time and place of such sale or other disposition. After deducting all costs and expenses of collection, storage, custody, sale or other disposition and delivery (including legal costs and attorneys' fees, expenses and disbursements) and all other charges against the Collateral, the remaining proceeds of any such sale or disposition shall be applied to the payment of the Secured Indebtedness in such order of priority as the Lender shall determine and any surplus shall be returned to the Borrower or to any person or party lawfully entitled thereto. In the event the proceeds of any sale, lease or other disposition of the Collateral hereunder are insufficient to pay all of the Secured Indebtedness in full, the Borrower will be liable for the deficiency, together with interest thereon at the highest rate of interest provided in this Note, and the costs and expenses of collection of such deficiency, including (to the extent permitted by law), without limitation, attorneys' fees, expenses and disbursements. (b) All rights and remedies available to the Lender pursuant to the provisions of this Note, applicable law and otherwise are cumulative, not exclusive, and are enforceable alternatively, successively and/or concurrently by Lender. 9. Waivers. Borrower waives demand, presentment, protest and notice of any kind and consents to the extension of time of payments, the release, surrender or substitution of any and all security or guarantees for the obligations evidenced hereby or other indulgence with respect to this Note, all without notice. 10. Governing Law. This Note shall be shall be governed by, and construed in accordance with, the laws of the State of New York, without regard to its rules on conflicts of laws. 11. Notices, Etc. All notices and other communications provided for under this Note shall be in writing (including facsimile transmissions) and mailed, transmitted or delivered, if to Borrower, at Borrower's address indicated in 31 Lender's records as of the date of such notice, and if to Lender, at its address specified above or, as to each party, at such other address as shall be designated by such party in a written notice to the other party complying as to delivery with the terms of this paragraph. Except as otherwise provided in this Note, all such notices and communications shall be effective when delivered, on the date telecopied or deposited in the mails addressed as aforesaid, except that notices to Lender shall not be effective until received by Lender. 12. No Waiver. No failure or delay on the part of Lender in exercising any right, power, or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power, or remedy preclude any other or further exercise thereof or the exercise of any other right, power, or remedy hereunder. The rights and remedies provided herein are cumulative, and are not exclusive of any other rights, powers, privileges, or remedies, now or hereafter existing, at law or in equity or otherwise. 13. Costs and Expenses. Upon an Event of Default, Borrower shall reimburse Lender for all costs and expenses incurred by Lender and shall pay the reasonable fees and disbursements of counsel to Lender in connection with the preparation, negotiation, execution and delivery of this Note and the enforcement of Lender's rights hereunder. Borrower shall also pay any and all taxes (other than taxes on or measured by net income of the holder of this Note), recording fees, filing charges, search fees and similar items incurred or payable in connection with the execution and delivery of this Note. At the election of Lender, any payment received from Borrower hereunder shall be applied by Lender first in the payment of all fees, charges, costs and expenses, then to accrued and unpaid interest and then to principal. 14. Indemnification. Borrower shall indemnify, defend and save Lender harmless from and against any and all claims, liabilities, losses, costs and expenses (including, without limitation, reasonable attorneys' fees and expenses) of any nature whatsoever which may be asserted against or incurred by Lender arising out of or in any manner occasioned by the ownership, collection, possession, use or operation of any collateral held by Lender belonging to Borrower or any failure by Borrower to perform any of its obligations hereunder; excluding, however, from said indemnity all such claims, liabilities, losses, costs and expenses arising directly out of the intentional misconduct or active gross negligence of Lender. This indemnity shall survive the expiration and termination of the Note. 15. Further Assurances. Borrower agrees to do such further acts and to execute and deliver to Lender such additional agreements, instruments and documents as Lender may reasonably require or deem advisable to effectuate the purposes of this Note, or to confirm to Lender its rights, powers and remedies under this Note. 16. Amendments. No amendment, modification, or waiver of any provision of this Note nor consent to any departure by Borrower therefrom shall be effective unless the same shall be in writing and signed by Lender and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. 17. Successors and Assigns. This Note shall be binding upon Borrower and its heirs, legal representatives, successors and assigns and the terms hereof shall inure to the benefit of Lender and its successors and assigns, including subsequent holders hereof. 32 18. Severability. The provisions of this Note are severable, and if any provision shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall not in any manner affect such provision in any other jurisdiction or any other provision of this Note in any jurisdiction. 19. Entire Agreement. This Note sets forth the entire agreement of Borrower and Lender with respect to this Note and may be modified only by a written instrument executed by Borrower and Lender. 20. Headings. The headings herein are for convenience only and shall not limit or define the meaning of the provisions of this Note. 21. Jurisdiction; Service of Process. Borrower agrees that in any action or proceeding brought on or in connection with this Note (i) the Supreme Court of the State of New York for the County of New York, or (in a case involving diversity of citizenship) the United States District Court of the Southern District of New York, shall have jurisdiction of any such action or proceeding, (ii) service of any summons and complaint or other process in any such action or proceeding may be made by Lender upon Borrower by registered or certified mail directed to Borrower at its address referenced in paragraph 11 above, Borrower is hereby waiving, personal service thereof, and (iii) within thirty (30) days after receipt of such mailing Borrower shall appear or answer to any summons and complaint or other process, and should Borrower fail to appear to answer within said thirty (30) day period, it shall be deemed in default and judgment may be entered by Lender against Borrower for the amount as demanded in any summons or complaint or other process so served. 22. WAIVER OF THE RIGHT TO TRIAL BY JURY. BORROWER AND, BY ITS ACCEPTANCE HEREOF, LENDER, HEREBY IRREVOCABLY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM, OR COUNTERCLAIM, WHETHER IN CONTRACT OR TORT, AT LAW OR IN EQUITY, IN ANY MANNER CONNECTED WITH THIS NOTE OR ANY TRANSACTIONS HEREUNDER. NO OFFICER OF LENDER HAS AUTHORITY TO WAIVE, CONDITION, OR MODIFY THIS PROVISION. 33 IN WITNESS WHEREOF, Borrower has executed this Note and Security Agreement as of the date first set forth above. CDBEAT.COM, INC. By: /s/ Joel Arberman Name: Joel Arberman Title: President and CEO ACCEPTED AND AGREED: As of the date first written above. CAKEWALK, LLC By: /s/ Robert Miller Name: Robert Miller Title: President 34 EX-10 5 EX. 10.4 SHARE PLEDY AGREEMENT 312396 v.3 [6P1_03!.WPD] Exhibit 10.4 SHARE PLEDGE AGREEMENT SHARE PLEDGE AGREEMENT, dated as of September 28, 1999, made by Joel Arberman, having an address at 444 Bedford Street, Suite 8S, Stamford, Connecticut 06901 (the "Pledgor"), to Cakewalk LLC, having an office at 250 West 57th Street, New York, New York 10107 (the "Lender"). W I T N E S S E T H: WHEREAS, the Pledgor is the owner beneficially and of record of 3,390,000 shares of Common Stock, $.001 par value per share (the "Shares"), of the capital stock of CDbeat.com, Inc., a Delaware corporation (the "Company"); WHEREAS, the Company is indebted to the Lender pursuant to the terms and provisions of a Note and Security Agreement (the "Note") of even date herewith; WHEREAS, the Pledgor has agreed to secure the Company's obligations to the Lender under the Note by making the pledge contemplated by this Agreement; NOW, THEREFORE, in consideration of the Lender's having made the loan evidenced by the Note and for other good and valuable consideration and the mutual covenants herein contained, the Pledgor and the Lender hereby agree as follows: 23. Pledge. The Pledgor hereby pledges to the Lender, and grants to the Lender a security interest in, the following (the "Pledged Collateral"): (a) the Shares together with the certificates evidencing the same (collectively, the "Pledged Shares"). (b) all shares, securities, moneys or property representing a dividend on any of the Pledged Shares, or representing a distribution or return of capital upon or in respect of the Pledged Shares, or resulting from a split-up, revision, reclassification or other like change of the Pledged Shares or otherwise received in exchange therefor, and any subscription warrants, rights or options issued to the holders of, or otherwise in respect of, the Pledged Shares; (c) all proceeds, products and accessions of and to any of the property of the Pledgor described in Paragraphs 1(a) and (b) above. 24. Security for Obligations. This Agreement secures the payment, performance and observance of all indebtedness, obligations, liabilities and agreements of any kind of the Company to Lender, now existing or hereafter arising, direct or indirect (including participation or any interest of Lender in obligations of the Company to others), acquired outright, conditionally, or as collateral security from another, absolute or contingent, joint or several, secured or unsecured, due or not, contractual or tortious, liquidated or unliquidated, arising by operation of law or otherwise, and of all loan agreements, documents and instruments evidencing any of the foregoing obligations or under which any of the foregoing obligations may have been issued, created, assumed or guaranteed including without limitation, the Note (all of the foregoing being herein referred to collectively as the "Obligations"). 35 25. Delivery of Pledged Collateral. All certificates or instruments representing or evidencing the Pledged Collateral shall be delivered to and held by or on behalf of the Lender pursuant hereto and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to the Lender. The Lender shall have the right, at any time in its discretion and without notice to the Pledgor, to transfer to or to register in the name of the Lender or any of its nominees any or all of the Pledged Collateral, subject only to the revocable rights specified in Paragraph 6(a). In addition, the Lender shall have the right at any time to exchange certificates or instruments representing or evidencing Pledged Collateral for certificates or instruments of smaller or larger denominations. 26. Representations and Warranties. The Pledgor represents and warrants as follows: (a) The Pledged Shares have been duly authorized and validly issued and are fully paid and non-assessable and represent at least 74% of the issued and outstanding Shares of the Company. (b) The Pledgor is the legal and beneficial owner of the Pledged Collateral free and clear of any lien, security interest, option or other charge or encumbrance (collectively, "Lien") except for the security interest created by this Agreement. (c) The pledge of the Pledged Shares pursuant to this Agreement creates a valid and perfected first priority security interest in the Pledged Collateral, securing the payment of the Obligations. (d) No authorization, approval, or other action by, and no notice to or filing with, any governmental authority or regulatory body is required either (i) for the pledge by the Pledgor of the Pledged Collateral pursuant to this Agreement or for the execution, delivery or performance of the Agreement by the Pledgor or (ii) for the exercise by the Lender of the voting or other rights provided for in this Agreement or the remedies in respect of the Pledged Collateral pursuant to this Agreement (except as may be required in connection with such disposition by laws affecting the offering and sale of securities generally). (e) Except for the Lender, no person or entity has any warrant, option, call or other right or interest to acquire any stock of the Company. 27. Further Assurances. The Pledgor agrees that at any time and from time to time, at the expense of the Pledgor, the Pledgor will promptly execute and deliver all further instruments and documents, and take all further action, as may be necessary or desirable, or that the Lender may request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable the Lender to exercise and enforce its rights and remedies hereunder with respect to any Pledged Collateral. 28. Voting Rights; Dividends; Etc. (a) So long as no Event of Default or event which, with the giving of notice or the lapse of time, or both, would become an Event of Default shall have occurred and be continuing: 36 (i) The Pledgor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Pledged Collateral or any part thereof for any purpose not inconsistent with the terms of this Agreement; provided, however, that, the Pledgor shall not exercise or refrain from exercising any such right if, in the Lender's judgment, such action would have a material adverse effect on the value of the Pledged Collateral or any part thereof. (ii) The Pledgor shall be entitled to receive and retain any and all dividends paid in respect of the Pledged Collateral, provided, however, that any and all: (1) dividends paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, any Pledged Collateral, (2) dividends and other distributions paid or payable in cash in respect of any Pledged Collateral in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in-surplus, and (3) cash paid, payable or otherwise distributed in respect of principal of, or in redemption of, or in exchange for, any Pledged Collateral, shall be, and shall forthwith be delivered to the Lender to hold as, Pledged Collateral and, if received by the Pledgor, shall be received in trust for the benefit of the Lender, be segregated from the other property or funds of the Pledgor, and be forthwith delivered to the Lender as Pledged Collateral in the same form as so received (with any necessary endorsement). (b) Upon the occurrence and during the continuance of an Event of Default or an event which, with the giving of notice or the lapse of time, or both, would become an Event of Default: (i) All rights of the Pledgor to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to Paragraph 6(a)(i) and to receive the dividends payments which it would otherwise be authorized to receive and retain pursuant to Paragraph 6(a)(ii) shall cease, and all such rights shall thereupon become vested in the Lender, who shall thereupon have the sole right to exercise such voting and other consensual rights and to receive and hold as Pledged Collateral such dividend payments. (ii) All dividend payments which are received by the Pledgor contrary to the provisions of Paragraph 6(b)(i) shall be received in trust for the benefit of the Lender, shall be segregated from other funds of the Pledgor and shall be forthwith paid over to the Lender as Pledged Collateral in the same form as so received (with any necessary endorsement). 29. Transfers and Other Liens. The Pledgor agrees that it will not, nor will it attempt in any manner to, (i) sell or otherwise dispose of any of the Pledged Collateral, or (ii) create or permit to exist any Lien upon or with respect to any of the Pledged Collateral, except for the security interest under this Agreement. 30. Lender Appointed Attorney-in-Fact. The Pledgor hereby appoints the Lender the Pledgor's attorney-in-fact, with full authority in the place and stead of the Pledgor and in the name of the Pledgor or otherwise, from time to time in the Lender's discretion to take any action and to execute any instrument which the Lender may deem necessary or advisable to accomplish the purposes of this Agreement. 37 31. Lender May Perform. If the Pledgor fails to perform any agreement contained herein, the Lender may itself perform, or cause performance of, such agreement, and the expenses of the Lender incurred in connection therewith shall be payable by the Pledgor under Paragraph 13. 32. Reasonable Care. In the event the Pledged Collateral is in the actual possession of the Lender, the Lender shall be deemed to have exercised reasonable care in the custody and preservation of the Pledged Collateral if the Pledged Collateral is accorded treatment substantially equal to that which the Lender accords its own property, it being understood that the Lender shall not have any responsibility for (i) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Pledged Shares, whether or not the Lender has or is deemed to have knowledge of such matters, or (ii) the taking or failure to take any action to preserve rights against any parties with respect to any Pledged Collateral. 33. Events of Default. An "Event of Default" shall exist if one or more of the following events (herein collectively called "Events of Default"), shall occur and be continuing: (a) Any default shall have occurred under any present or future agreement between the Company and the Lender which default has not been cured within the applicable grace period specified therein, if any; (b) Any default shall occur in the performance of any of the covenants or agreements of the Pledgor contained herein, or any other document or agreement to which the Pledgor is a party for the benefit of or with the Lender which default is not remedied within 30 days after the Pledgor becomes aware of or reasonably or should have become aware of such default whether through notice from the Lender or otherwise; or (c) Any representation or warranty made under this Agreement or in any certificate or statement furnished or made to the Lender pursuant hereto or in connection herewith shall prove to be untrue or inaccurate in any material respect as of the date on which such representation or warranty is made. 34. Remedies Upon Default. (a) If any uncured Event of Default shall have occurred and be continuing: (i) in addition to other rights and remedies provided for herein or otherwise available to it, the Lender, without notice except as specified below, may sell the Pledged Collateral or any part thereof in one or more parcels at public or private sale, at any exchange, broker's board or at any of the Lender's offices or elsewhere, for cash and at such price or prices and upon such other terms as the Lender may deem commercially reasonable. The Pledgor agrees that, to the extent notice to sale shall be required by law, at least ten (10) days' notice to the Pledgor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Lender shall not be obligated to make any sale of Pledged Collateral regardless of notice of sale having been given. The Lender may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned; and 38 (ii) any cash held by the Lender as Pledged Collateral and all cash proceeds received by the Lender in respect of any sale of, collection from, or other realization upon all or any part of the Pledged Collateral, in the discretion of the Lender, may be held by the Lender as collateral for, and/or then or at any time thereafter applied (after payment of any amounts payable to the Lender pursuant to Paragraph13) in whole or in part by the Lender against, all or any part of the Obligations in such order as the Lender shall elect. Any surplus of such cash or cash proceeds held by the Lender and remaining after payment in full of all the Obligations shall be paid over to the Pledgor or to whomsoever may be lawfully entitled to receive such surplus. (b) Borrower acknowledges and recognizes that Lender may be unable to effect a public sale of all or a part of the Pledged Collateral and may be compelled to resort to one or more private sales to a restricted group of purchasers who will be obligated to agree, among other things, to acquire the Pledged Collateral for their own account, for investment and not with a view to the distribution or resale thereof. Borrower acknowledges that any such private sales may be at prices and on terms less favorable to Lender than those of public sales, and agrees that such private sales will not necessarily be deemed not to have been made in a commercially reasonable manner solely by virtue of being a private sale for a price or on terms less favorable than a public sale, and that Lender has no obligation to delay sale of any Pledged Collateral to permit the issuer thereof to register it for public sale under the Securities Act of 1933, as from time to time amended, even if the Company is willing to do so. 35. Expenses. Upon an Event of Default, as defined in the Note, the Pledgor will pay to the Lender upon demand the amount of any and all reasonable expenses, including the reasonable fees and expenses of its counsel and of any experts and agents, which the Lender may incur in connection with (i) the preparation and administration of this Agreement or any amendment, or supplement thereto, (ii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Pledged Collateral, (iii) the exercise or enforcement of any of the rights of the Lender hereunder, or (iv) the failure by the Pledgor to perform or observe any of the provisions hereof or the waiver thereof. 36. Security Interest Absolute. All rights of the Lender and the security interests hereunder, and all obligations of the Pledgor hereunder, shall be absolute and unconditional irrespective of: (a) any lack of validity or enforceability of the Obligations; (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from any instrument evidencing the Obligations; (c) any exchange, release or non-perfection of any other collateral, or any release or amendment or waiver of or consent to departure from any guaranty, for all or any of the Obligations; or (d) any other circumstance which might otherwise constitute a defense available to, or a discharge of, the Company in respect of the Obligations or the Pledgor in respect of this Agreement. 39 37. Amendments, Etc. No amendment or waiver of any provision of this Agreement nor consent to any departure by the Pledgor herefrom, shall in any event be effective unless the same shall be in writing and signed by the Lender, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. 38. Continuing Security Interest; Termination. This Agreement shall create a continuing security interest in the Pledged Collateral and shall remain in full force and effect until the payment in full of the Obligations. Upon such termination, the Pledgor shall be entitled to the return, upon its request and at its expense, of such of the Pledged Collateral as shall not have been sold or otherwise applied pursuant to the terms hereof. 39. Miscellaneous (a) Notices, Etc. All notices and other communications provided for under this Agreement shall be in writing (including facsimile transmissions) and mailed, transmitted or delivered, if to Pledgor, at Pledgor's address indicated in Lender's records as of the date of such notice, and if to Lender, at its address specified above or, as to each party, at such other address as shall be designated by such party in a written notice to the other party complying as to delivery with the terms of this paragraph. Except as otherwise provided in this Agreement, all such notices and communications shall be effective when delivered, on the date telecopied or deposited in the mails addressed as aforesaid, except that notices to Lender shall not be effective until received by Lender. (b) No Waiver. No failure or delay on the part of Lender in exercising any right, power, or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power, or remedy preclude any other or further exercise thereof or the exercise of any other right, power, or remedy hereunder. The rights and remedies provided herein are cumulative, and are not exclusive of any other rights, powers, privileges, or remedies, now or hereafter existing, at law or in equity or otherwise. (c) Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York (without giving effect to conflicts of laws), except as required by mandatory provisions of law and except to the extent that the validity or perfection of the security interest hereunder, or remedies hereunder, in respect of any particular Pledged Collateral are governed by the laws of a jurisdiction other than the State of New York. Unless otherwise defined herein or in the Note, terms defined in Article 9 of the Uniform Commercial Code in the State of New York are used herein as therein defined. (d) Entire Agreement. This Agreement as read with the Note represents the complete and entire agreement and understanding of the parties hereto with respect to the matters covered herein and supersede any and all previous written or oral negotiations, undertakings and commitments of any nature whatsoever. 39 (e) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of the parties hereto provided, however, that the Pledgor shall not assign or transfer any of its rights hereunder without the prior written consent of the Lender. (f) Further Assurances. Pledgor agrees to do such further acts and to execute and deliver to Lender such additional agreements, instruments and documents as Lender may reasonably require or deem advisable to effectuate the purposes of this Agreement, or to confirm to Lender its rights, powers and remedies under this Agreement. (g) Headings. The headings herein are for convenience only and shall not limit or define the meaning of the provisions of this Agreement. (h) Severability. The provisions of this Agreement are severable, and if any provision shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall not in any manner affect such provision in any other jurisdiction or any other provision of this Agreement in any jurisdiction. (i) Counterparts. This Agreement may be executed in one or more counterparts but all such separate counterparts shall constitute but one and the same instrument; provided that, although executed in counterparts, the executed signature pages of each such counterpart may be affixed to a single copy of this Agreement which shall constitute an original. (j) Jurisdiction; Service of Process. Pledgor agrees that in any action or proceeding brought on or in connection with this Agreement (i) the Supreme Court of the State of New York for the County of New York, or (in a case involving diversity of citizenship) the United States District Court of the Southern District of New York, shall have jurisdiction of any such action or proceeding, 40 (ii) service of any summons and complaint or other process in any such action or proceeding may be made by Lender upon Pledgor by registered or certified mail directed to Pledgor at its address referenced in above, Pledgor is hereby waiving, personal service thereof, and (iii) within thirty (30) days after receipt of such mailing Pledgor shall appear or answer to any summons and complaint or other process, and should Pledgor fail to appear to answer within said thirty (30) day period, it shall be deemed in default and judgment may be entered by Lender against Pledgor for the amount as demanded in any summons or complaint or other process so served. (k) WAIVER OF THE RIGHT TO TRIAL BY JURY. PLEDGOR AND, BY ITS ACCEPTANCE HEREOF, LENDER, HEREBY IRREVOCABLY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM, OR COUNTERCLAIM, WHETHER IN CONTRACT OR TORT, AT LAW OR IN EQUITY, IN ANY MANNER CONNECTED WITH THIS AGREEMENT OR ANY TRANSACTIONS HEREUNDER. NO OFFICER OF LENDER HAS AUTHORITY TO WAIVE, CONDITION, OR MODIFY THIS PROVISION. IN WITNESS WHEREOF, the parties hereto have caused this Share Pledge Agreement to be executed on the date first above written /s/ Joel Arberman Joel Arberman CAKEWALK LLC By: /s/ Robert Miller Name: Robert Miller Title: President and CEO 42 -----END PRIVACY-ENHANCED MESSAGE-----