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.
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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
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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
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ACCEPTED AND AGREED TO:
CDbeat.com, Inc.
By: /s/ Joel Arberman
Joel Arberman
President & CEO
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