EXHIBIT 3
CAKEWALK MEMBERSHIP INTEREST
SUBSCRIPTION AGREEMENT
CAKEWALK MEMBERSHIP INTEREST SUBSCRIPTION AGREEMENT (the "Agreement"),
dated as of October 29, 1999 by and between DYLAN LLC, a Delaware limited
liability company ("Dylan"), and CAKEWALK LLC, a Delaware limited liability
company ("Cakewalk"):
W I T N E S S E T H:
WHEREAS, Atlantis Equities, Inc., a Delaware corporation and an affiliate
of Dylan, is the holder of a stock purchase warrant, dated September 23, 1999
(the "Atlantis Warrant"), issued by XXXxxx.xxx, Inc., a Delaware corporation
("CDBeat"), pursuant to which Atlantis has the right to purchase eighty (80%)
percent of the issued and outstanding voting shares of the common stock, par
value $.001 (the "CDBeat Stock"), of CDBeat; and
WHEREAS, Cakewalk has entered into that certain contribution agreement,
dated the date hereof, with CDBeat (the "Contribution Agreement"), pursuant to
which Cakewalk has agreed to contribute and assign to CDBeat substantially all
of the assets of Cakewalk in exchange for 90% of the CDBeat stock in a
transaction intended to qualify under ss. 351 of the Internal Revenue Code of
1986, as amended (the "Code");
WHEREAS, Dylan desires to acquire and Cakewalk desires to sell to Dylan a
membership interest (the "Membership Interest") in Cakewalk consisting of Class
A Units, as that term is defined in the Amended and Restated Operating Agreement
(the "Operating Agreement") of Cakewalk dated as of February 13, 1998, a copy of
which has been reviewed by Dylan;
NOW, THEREFORE, in consideration of the premises and the respective mutual
agreements, covenants, representations and warranties herein contained, and for
other good and valuable consideration, the receipt and sufficiency of which
hereby are acknowledged, the parties agree as follows:
1. Purchase and Sale of Membership Interest. Subject to all of the terms and
conditions of this Agreement, Cakewalk agrees to sell, transfer and deliver to
Dylan the Membership Interest and Dylan agrees to purchase, acquire and accept
from Cakewalk, the Membership Interest at the Closing (as hereinafter defined),
free and clear of all liens, pledges and encumbrances.
2. Consideration. The purchase price (the "Purchase Price") for the Membership
Interest shall be $900,000, payable on the Closing Date by wire transfer of
immediately available funds to an account designated by Cakewalk.
3. Closing. The closing ("Closing") shall take place at the offices of Xxxx
Marks & Xxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 at 10:00 a.m.
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local time on the date on which the closing under the Contribution Agreement
occurs, or at such other date, time or place as the parties may agree (the
"Closing Date").
4. Admission of Dylan as Member; Amendment of Operating Agreement; Use of
Subscription Funds.
(a) At the Closing, the Atlantis Warrant will be transferred to Dylan and
Dylan will be admitted as a Member of Cakewalk holding a Class A Unit
pursuant to an amendment to the Operating Agreement (the "Amendment")
under which:
(i) The Membership Interest will entitle Dylan to be allocated and
thereafter to receive a distribution, immediately following a
closing under the Contribution Agreement, of 7,819,092 shares of
CDBeat Stock;
(ii) The current members of Cakewalk (the "Existing Members") will
agree that gain ("Gain") recognized by Cakewalk, if any, as a
result of the transactions contemplated by this Agreement and the
Contribution Agreement will be allocated to the Existing Members
and not to Dylan;
Cakewalk acknowledges and agrees that, at the Closing, the Atlantis
Warrant will be amended to (A) eliminate the right of Dylan to acquire 7,819,092
shares of CDBeat Stock; (B) require Dylan to pay CDBeat $100,000 on or prior to
the Closing to acquire 762,064 options from CDBeat exercisable at $2.50 each
until December 31, 2000 and (C) retain the registration rights reflected therein
with respect to all securities of CDBeat owned by Dylan, it being understood by
Dylan that all principal stockholders of CDBeat will be entitled to
substantially similar registration rights; and
Dylan will agree to be bound by and observe all the terms of the
Operating Agreement.
(b) Cakewalk hereby agrees to indemnify and hold Atlantis, Dylan and the
members of Dylan harmless from and against any cost, damages or loss
(including reasonable accounting and legal fees) as a result of any
Gain that may be allocated to it by Cakewalk, and any taxable income
relating to the amendment (but not the assignment, transfer, or other
disposition) of the Atlantis Warrant, the acquisition of the Membership
Interest or the distribution of the CDBeat Stock to Dylan,
notwithstanding the provisions of Section 4(a)(ii) hereof.
(c) Cakewalk agrees to contribute the proceeds of the Purchase Price to
CDBeat pursuant to the Contribution Agreement.
5. Representations and Warranties of Cakewalk. Cakewalk represents and warrants
to Dylan as follows:
(a) Due Execution. Cakewalk has full power, capacity and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby (the "Contemplated Transactions"). This Agreement has been duly and
validly executed and delivered by Cakewalk and constitutes the valid and
binding agreement of Cakewalk, enforceable against Cakewalk in accordance
with its terms, except as may be limited by applicable bankruptcy,
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insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally or by the principles governing the availability of
equitable remedies.
(b) No Conflicts. The execution and delivery of this Agreement, the
consummation of the Contemplated Transactions and the fulfillment of the
terms thereof will not (i) violate any provision of the Certificate of
Formation or the Operating Agreement of Cakewalk (the "Cakewalk
Organizational Documents"); (ii) constitute a breach of or result in a
termination or modification of, or constitute a default under, or conflict
with or cause any acceleration of any obligation under, or permit any other
party to modify or terminate, any agreement or other instrument relating to
Cakewalk; or (iii) violate any judgment, decree, order or award of any
court, governmental body or arbitrator relating to Cakewalk.
(c) Consents. Except for any filings that may be necessary under applicable
securities laws, no consent, approval or authorization of, or registration
or filing with, any governmental authority or other regulatory agency or
any other person is required to be made by Cakewalk in connection with the
execution or delivery of this Agreement or the consummation of the
Contemplated Transactions.
6. Representations and Warranties of Dylan. Dylan represents and warrants to
Cakewalk as follows:
(a) Due Execution. Dylan has full power, capacity and authority to execute
and deliver this Agreement and to consummate the Contemplated
Transactions. This Agreement has been duly and validly executed and
delivered by Dylan and constitutes the valid and binding agreement of
Dylan, enforceable against Dylan in accordance with its terms, except
as may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally or by
the principles governing the availability of equitable remedies.
(b) No Conflicts. The execution and delivery of this Agreement, the
consummation of the Contemplated Transactions and the fulfillment of the
terms thereof will not (i) violate any provision of the Certificate of
Incorporation or By-laws of Dylan; (ii) constitute a breach of or result in
a termination or modification of, or constitute a default under, or
conflict with or cause any acceleration of any obligation under, or permit
any other party to modify or terminate, any agreement or other instrument
relating to Dylan; or (iii) violate any judgment, decree, order or award of
any court, governmental body or arbitrator relating to Dylan.
(c) Consents. Except for any filings that may be necessary under applicable
securities laws, no consent, approval or authorization of, or
registration or filing with, any governmental authority or other
regulatory agency or any other person is required to be made by Dylan
in connection with the execution or delivery of this Agreement or the
consummation of the Contemplated Transactions.
(d) Investment Intention. Dylan is acquiring the Membership Interest for
its own account and not with a present intention to make any sale,
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disposition, distribution or other transfer of the Membership Interest
in a manner that would be in violation of any applicable securities
laws.
(e) Investigation by Dylan. Dylan has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits
and risks of the subscription for the Membership Interest contemplated
hereby and it is able to bear the economic risk of such subscription for an
indefinite period of time. It has been furnished access to such information
and documents as it has requested and has been afforded an opportunity to
ask questions of and receive answers from representatives of Cakewalk
concerning the terms and conditions of this Agreement and the subscription
for the Membership Interest contemplated hereby.
7. Notices of Certain Events. Each of Cakewalk and Dylan shall promptly notify
the other of:
(a) any notice or other communication from any person alleging that the
consent of such person is or may be required in connection with the
Contemplated Transactions;
(b) any notice or other communication from any governmental body in
connection with the Contemplated Transactions; and
(c) any event, condition or circumstance occurring from the date hereof
through the Closing Date that would constitute a violation or breach of
any representation or warranty, whether made as of the date hereof or
as of the Closing Date, or that would constitute a violation or breach
of any covenant of any party contained in this Agreement.
8. Public Announcements. Cakewalk and Dylan will consult with each other before
issuing any press release or otherwise making any public statement with respect
to the Contemplated Transactions, and will not issue any such press release or
make any such public statement without the prior approval of the other party,
except as may be required by applicable law in which event the other party shall
have the right to review and comment upon any such press release or public
statement prior to its issuance.
9. Expenses. Cakewalk agrees to bear and pay for all of its own and Dylan's and
Atlantis's expenses in connection with the preparation, execution and delivery
of this Agreement and the Contemplated Transactions including the expenses
incurred by Atlantis and Dylan in connection with obtaining and amending the
Atlantis Warrant and preparing the related reports on Schedule 13D, Securities
and Exchange Commission Forms 3 and 4 and any amendments thereto.
10. Board Representation. If, following the closing, the Board of Directors of
CDBeat (the "CDBeat Board") is expanded to seven members, Dylan shall have the
right to designate two representatives out of seven to the CDBeat Board, and
must consent to any expansion of the CDBeat Board. The parties agree to cause
CDBeat promptly to obtain D&O insurance with a minimum of $3 million of
coverage, and use its best efforts to obtain $5 million of such coverage in the
near future. CDBeat Board members designated by Dylan shall be entitled to
receive the same compensation (stock options, fees, etc.) as are received by
other non-management CDBeat Board members. By signing this Agreement where
indicated below, Xxxxxx Xxxxxx agrees to vote all shares beneficially owned by
him in favor of the election of the Dylan designees, and Dylan agrees to vote
all shares owned by it in favor of the election of Xxxxxx Xxxxxx or his
designee.
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11. Mutual Conditions. The obligations of the parties hereunder are subject to
the fulfillment of each of the following conditions: (a) Closing Under the
Contribution Agreement. The closing under the Contribution
Agreement shall occur concurrently with the closing hereunder.
(b) Amendment. Dylan and the Existing Members shall have entered into the
Amendment and such Amendment shall be in form and substance reasonably
satisfactory to Cakewalk and Dylan.
(c) No Injunction. No injunction, judgment or order, nor any provision of
any applicable law, statute, code, ordinance, rule, regulation or other
requirement of any governmental body, shall prohibit the consummation
of the Contemplated Transactions.
12. Conditions to the Obligations of Cakewalk. All obligations of Cakewalk
hereunder are subject to the fulfillment of each of the following conditions:
(a) Performance. Dylan shall have performed in all material respects all of
its obligations hereunder required to be performed by it at or prior to
the Closing Date.
(b) Representations and Warranties. The representations and warranties of
Dylan contained in this Agreement and in any certificate or other
writing delivered by Dylan pursuant hereto shall be true in all
material respects at and as of the Closing Date as if made at and as of
such time.
(c) Purchase Price. In accordance with the provisions of Section 2 hereof,
Dylan shall have paid the Purchase Price by wire transfer of
immediately available funds to Cakewalk (or in such other manner
acceptable to Cakewalk).
(d) Amendment of Warrant. The Atlantis Warrant shall be amended as
contemplated by the provisions of Section 4(a)(iii) and such amendment
shall be in form and substance reasonably satisfactory to Dylan.
13. Conditions to the Obligations of Dylan. All obligations of Dylan hereunder
are subject, at its option, to the fulfillment of each of the following
conditions:
(a) Performance. Cakewalk shall have performed in all material respects all
of its obligations hereunder required by it at or prior to the Closing
Date.
(b) Representations and Warranties. The representations and warranties of
Cakewalk contained in this Agreement and in any certificate or other
writing delivered by Cakewalk pursuant hereto shall be true in all
material respects at and as of the Closing Date as if made at and as of
such time.
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(c) Engagement of Atlantis. At the Closing, CDBeat shall have confirmed the
retention of Atlantis as its exclusive financial advisor pursuant to
the letter agreement dated the date hereof between Atlantis and
Cakewalk.
(d) Material Changes. No amendment shall have occurred, without the prior
consent of Dylan, in the Cakewalk Organizational Documents, the
Certificate of Incorporation or By-Laws of CDBeat, or the Contribution
Agreement.
14. Termination. If the Contribution Agreement is terminated, this Agreement
shall be terminated concurrently therewith.
15. Miscellaneous
(a) Captions. The section and other headings contained in this Agreement
are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
(b) Cooperation. Subject to the terms and conditions herein provided, each
of the parties hereto shall use its diligent efforts to take, or cause
to be taken, such action, to execute and deliver, or cause to be
executed and delivered, such additional documents and instruments and
to do, or cause to be done, all things necessary, proper or advisable
under the provisions of this Agreement and under applicable law, to
effectuate the purpose of this Agreement.
(c) Notices. (i) Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally by
hand, telecopied, or mailed, certified or registered, return receipt
requested, postage prepaid as follows:
if to Dylan, to:
Dylan LLC
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Telecopier: (000) 000-0000
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with a copy to:
Squadron Ellenoff Plesent & Xxxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telecopier: (000) 000-0000
Attention: Xxxxxxx X. Xxxx, Esq.
if to Cakewalk, to:
Cakewalk LLC
000 Xxxx 00xx Xxxxxx, Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxx, President
Telecopier: (000) 000-0000
with a copy to:
Xxxx Marks & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Telecopier: (000) 000-0000
Attention: Xxxx X. Xxxxxx, Esq.
(ii) Each notice or other communication shall be deemed given (A) on
the date of delivery if delivered by messenger, overnight courier
or other similar personal delivery; (B) on the date of
transmission, if transmitted by telecopier; or (C) three days
after the date of deposit in the mails, if mailed by certified or
registered mail, return receipt requested.
(iii) Any party, by notice given in accordance with this Section to the
other parties, may designate another address (or telecopier
number) or person for receipt of notices hereunder. Notices by a
party may be given by counsel to such party.
(d) Entire Agreement. This Agreement contains the entire agreement among
the parties with respect to the subject matter hereof and supersedes
all prior agreements or undertakings, written or oral, of any nature
whatsoever.
(e) Amendments. This Agreement may not be amended nor shall any waiver,
change, modification, consent or discharge be effected except by an
instrument in writing executed by or on behalf of the party seeking or
against whom enforcement of any amendment, waiver, change,
modification, consent or discharge is sought.
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(f) No Waiver. Any failure or delay on the part of a party in exercising
any power or right hereunder shall not operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power
preclude any other or further exercise thereof or the exercise of any
other right or power hereunder or otherwise available in law or in
equity. Any waiver of any default hereunder shall not be effective
unless in writing.
(g) Severability. If any provisions of this Agreement for any reason shall
be held to be illegal, invalid or unenforceable, such illegality shall
not affect any other provision of this Agreement, but this Agreement
shall be construed as if such illegal, invalid or unenforceable
provision had never been herein.
(h) Governing Law. This agreement shall be governed and construed in
accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely within such state.
(i) Binding Effect. This Agreement and all of its provisions, rights and
obligations shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
Nothing herein express or implied is intended or shall be construed to
confer upon or give anyone other than the parties hereto and their
respective successors and permitted assigns any rights or benefits
under of by reason of this Agreement.
(j) Counterparts. The Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of which
shall together constitute one and the same instrument. This Agreement
shall become binding when one or more counterparts hereof, individually
or taken together, shall bear the signatures of all of the parties
reflected hereon as the signatories.
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IN WITNESS WHEREOF, the parties hereto have executed this Cakewalk
Membership Interest Subscription Agreement as of the date set forth above.
CAKEWALK LLC
By:/s/ Xxxxxx Xxxxxx
Xxxxxx Xxxxxx
President
DYLAN LLC
By:/s/ Xxxxx Xxxxx
Xxxxx Xxxxx
Chairman
The undersigned are signing this Agreement solely to agree to the provisions of
Section 10 hereof.
/s/ Xxxxxx Xxxxxx
Xxxxxx Xxxxxx
XXXXX LLC
By: /s/ Xxxxx Xxxxx
Xxxxx Xxxxx
Chairman
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