Document:

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                                                                    EXHIBIT 10.1

                      SETTLEMENT AND SEPARATION AGREEMENT
                      -----------------------------------

             This Settlement and Separation Agreement ("Agreement"), executed on
the 18th day of October, 2001, between CD Warehouse, Inc., (the "Company") and
Jerry W. Grizzle ("Grizzle"), is effective as of October 5, 2001 ("Effective
Date"), and is intended to effect the settlement and extinguishment of disputes,
differences, claims and obligations as herein designated, provide for the
separation of Grizzle from the employment of the Company, and establish the
severance compensation and benefits from the Company to Grizzle.

                                    RECITALS
                                    --------

             1. Disputes and differences have arisen between the parties with
respect to the matters, duties, and obligations in connection with that certain
Employment Agreement dated October 26, 1996, as amended by the First Addendum To
The Grizzle Employment Agreement dated August 30, 2000 (sometimes collectively
referred to herein as the "Employment Agreements"), between the Company and
Grizzle.

             2. The parties have agreed to execute this Agreement in settlement
of such disputes and differences in connection with the Employment Agreements,
and by the execution of this Agreement the parties intend to effect the
cancellation of the Employment Agreements, provide for certain continuing duties
and obligations between the parties, and set forth the severance compensation
and benefits from the Company to Grizzle.

             3. The signatories hereof represent that they are authorized and
empowered to execute this Agreement on behalf of their respective parties.

             In consideration of the mutual covenants contained herein, the
Company and Grizzle agree as follows:
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                            COVENANTS OF THE COMPANY

             4. The Company will pay to Grizzle bi-monthly severance
compensation payments (the "Severance Compensation Payments") for thirty (30)
months (the "Severance Period") salary at the annualized rate of $120,000.00,
minus all taxes and withholdings required by law (the "Severance Pay"). The
Severance Compensation Payments shall commence on October, 19, 2001, the first
normal pay period following the Effective Date; and shall be made in the
ordinary course of the Company's payroll without exception or special
consideration to Grizzle.

             5. The Company will pay on behalf of Grizzle, for a period of
eighteen (18) months from the Effective Date, his Cobra payments for
continuation coverage for the group life, hospitalization, medical, dental,
health, accident or disability insurance ("Group Insurance") the Company
provides to its then current Officers during the first eighteen (18) months of
the Severance Period. Grizzle shall not be entitled to any benefits, expenses,
other "perks" or pay that Grizzle previously enjoyed as an employee of the
Company, other than the Severance Pay and Cobra payments to be made on behalf of
Grizzle for Group Insurance.

             6. Indemnification. (a) Right to Indemnification. During the
Severance Period, the Company will indemnify Grizzle and hold him harmless from
and against any claim, loss or cause of action arising from or out of Grizzle's
performance as an officer, director, or employee of the Company or its
subsidiaries, if any, or in any other capacity, including any fiduciary
capacity, in which Grizzle served at the request of the Company to the maximum
extent permitted by the Delaware General Corporation Act and the Company's
Certificate of Incorporation and By Laws ("Governing Documents"), provided that
in no event will the protection afforded to Grizzle hereunder be less than that
afforded under the Governing Documents as in effect on the Effective Date of
this Agreement.
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(b) Culpable Action:

(i)   Notwithstanding the provisions of Paragraph 6(a), Grizzle will not be
      entitled to indemnification if (A) the Company is prohibited from paying
      such indemnification under applicable law, or (B) Grizzle's actions or
      omissions involved intentional misconduct or knowing violation of law (any
      existence or occurrence described in the foregoing clauses (A) and (B),
      individually, is a "Culpable Action").

(ii)  The existence or occurrence of a Culpable Action will be conclusively
      determined by a non appealable, final decision of the court having
      jurisdiction over the applicable proceeding. Such determination will be
      final and binding upon the parties hereto.

(iii) If a proceeding involves more than one claim, issue or matter, the
      determination as to whether a Culpable Action exists or has occurred will
      be severable as to each and every claim, issue and matter.

(iv)  The termination of any proceeding by judgment, order, settlement or
      conviction, or upon a plea of nolo contendere or its equivalent, does not
      affect the provisions of Paragraph 6(a) for indemnification hereunder and
      does not create a presumption that there exists a Culpable Action.

        7. The Company hereby withdraws and cancels its letters and notices
regarding the termination of Grizzle's employment dated September 13, 2001;
September 25, 2001; and October 1,2001.

        8. The Company will release Grizzle as set forth in the mutual release
contained herein.

                             COVENANTS OF GRIZZLE

        9. Grizzle agrees to be bound by the following terms of confidentiality,
non-competition,
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and non-solicitation provisions, for a period of thirty (30) months from the
Effective Date.

        10. Confidentiality. Without the prior written consent of the Company,
except to the extent required by an order of a court having competent
jurisdiction or under a subpoena from an appropriate government agency, Grizzle
will not communicate or disclose to any third person, or use for the benefit of
himself or any third person, (a) trade secrets, customer or supplier lists or
information, marketing plans, sales plans, management organization information
(including data and other information relating to members of the Board and
management), operating policies or manuals, business plans, processes and
techniques, financial records, or other financial, commercial, or business
information relating to the Company or its investors or the purchase and sale of
its securities or any of its subsidiaries, or (b) information designated as
confidential or proprietary that the Company or its subsidiaries, if any, may
receive from its suppliers, customers or others who do business with the Company
or any of its subsidiaries (collectively, "Confidential Information") to any
third person unless such Confidential Information has been previously disclosed
to the public by the Company or is in the public domain (other than by reason of
Grizzle's breach of this Paragraph).

        11. Competition with The Company. Grizzle agrees that during the term of
the Severance's Period he will not, directly or indirectly, for his own benefit
or on behalf of others, compete with, or be an officer, director, employee or
holder of more than 5% of the capital stock or other equity interest of any
corporation or other entity which competes with the Company or any of its
subsidiaries as of the Effective Date ("Competitive Activity"). The limitations
imposed by this Paragraph will extend to all geographic areas in which the
Company conducts business as of the Effective Date.

        12. Grizzle resigns as Chairman Emeritus of the Company as of the
Effective Date.
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       13. Grizzle will release the Company as set forth in the mutual release
contained herein.

                               ADDITIONAL TERMS

       14. Mutual Release. In consideration of the mutual relinquishment of
their respective legal rights with reference to the above-mentioned disputes,
differences, and Employment Agreements, and in consideration of the execution of
this Agreement, each party, for himself or itself and their officers, agents,
employees, assigns, heirs, and any predecessors or successors in interest,
expressly releases the other and their officers, agents, employees, assigns,
heirs, and any predecessors or successors in interest from any and all
obligations, duties, warranties, claims, demands, disputes, and any liability
related thereto, arising out of, or in connection with, the above-described
disputes, differences, and Employment Agreements.

       15. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement will be resolved by binding arbitration. The
arbitration will be held in the city of Oklahoma City, Oklahoma and except to
the extent inconsistent with this Agreement, will be conducted in accordance
with the Rules of the American Arbitration Association then in effect at the
time of the arbitration, and otherwise in accordance with principles which would
be applied by a court of law or equity. The arbitrator will be acceptable to
both the Company and Grizzle. If the parties cannot agree on an acceptable
arbitrator, the dispute will be heard by a panel of three arbitrators one
appointed by each of the parties and the third appointed by the other two
arbitrators.

        16. Nothing in this Agreement shall affect Grizzle's stock options
regarding the Company, and Grizzle shall retain all stock options previously
granted.

        17. The parties acknowledge that the e-commerce business model, for
which the Company has pursued a patent and/or other intellectual property
protection, was devised by and is the sole idea
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of Grizzle. Grizzle may hold himself out as the inventor of the e-commerce
business model and/or may use the same in any books or other publications and is
hereby granted a non-exclusive license for such purpose, which he may freely
grant to others as he sees fit.

             18. The Company and Grizzle agree that they are entering into this
Agreement as a compromise of disputed claims. By entering into this Agreement,
no fault, liability, or wrongdoing is admitted.

             19. The covenants of this Agreement shall be specifically
enforceable. In the event that either party shall file an action to enforce the
obligations imposed on the other party, the prevailing party shall be entitled
to its costs and expenses, including a reasonable attorney's fee, incurred in
connection with enforcement of such obligations.

             20. This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their successors, assigns, heirs, and personal
representatives.

             21. The validity, construction and enforcement of this Agreement
shall be governed by the laws of the State of Oklahoma without reference to
principles of conflicts of law or choice of law.

             22. This Agreement embodies the entire agreement between the
parties hereto with respect to the matters involved herein and supersedes any
previous negotiations or agreements between the parties. This Agreement was not
executed in reliance upon any statement or representation by either party other
than those set forth herein. This Agreement may not be modified or amended
except by a subsequent agreement in writing signed by all parties.

             23. The Parties agree that as of October 5, 2001, the Employment
Agreements shall be canceled and terminated, and all duties, obligations, and
liabilities with respect thereto shall cease.

             24. The parties agree that they shall hold the terms of this
Severance and Separation Agreement confidential, and will not divulge the terms
of the same to any third party except as
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required by law or for the purposes of reporting taxes. The parties shall
refrain from making any public statements regarding the separation of Grizzle
from the employment of the Company, but to the extent any statement is
necessary, the parties shall state only that the Company and Grizzle reached a
mutually beneficial and amicable agreement regarding the expiration of Grizzle's
employment with the Company, or words to that effect.

             25. The invalidity or unenforceability of any particular provision
of this Agreement shall not affect the other provisions hereof, and this
Agreement shall be construed in all respects as if such invalid or unenforceable
provision were omitted.

             26. Agreement may be executed in counterparts.

             In witness whereof, the parties have executed this Settlement and
Separation Agreement on the date first above written.

NOTE: READ THIS AGREEMENT CAREFULLY BEFORE SIGNING; IT CONTAINS A RELEASE OF
CLAIMS.

                                        Jerry W. Grizzle

                                        /s/ Jerry W. Grizzle
                                        -----------------------------------

                                        CD Warehouse, Inc.

                                    By: /s/ Christopher M. Salyer
                                        -----------------------------------
                                           Christopher M. Salyer, Chairman<PAGE>

                                                                    EXHIBIT 10.2

                               Djangos.com Inc.
                              2544 NW 21st Place
                              Portland, OR 97010

                               October 24, 2001

Board of Directors
CD Warehouse, Inc.
1204 Sovereign Row
Oklahoma City, OK 73108

        This letter sets forth certain terms and conditions of the proposed
acquisition (the "Acquisition") by Djangos.com Inc., an Oregon corporation
("Djangos"), of all of the outstanding stock of CD Warehouse, Inc., a Delaware
corporation ("CD Warehouse"). This letter is intended as a good faith expression
of our mutual intent and not as a binding contract, except that paragraphs 4, 5,
7, 8, 9, 10, 11 and 12 will be binding.

1.  Structure of Transaction

        The Acquisition will be effected through a cash tender offer to the
shareholders of CD Warehouse by a Djangos subsidiary ("Acquisition Sub"),
followed by a merger (the "Merger") of Acquisition Sub with CD Warehouse. The
Merger Agreement shall provide that if the cash tender offer is completed first,
then the Merger must be completed without delay or any other conditions
restricting its completion. Following the Merger, CD Warehouse would be a wholly
owned subsidiary of Djangos.

2.  Merger Consideration

        The consideration to be paid to the stockholders of CD Warehouse in both
the cash tender offer and the Merger will be $1.50 cash per share outstanding,
or an aggregate of approximately $5.5 million (the "Merger Consideration"), plus
holders of options and warrants to purchase shares of CD Warehouse Common Stock
should receive the positive difference in cash, if any, between the exercise
price per share of their options or warrants and the per share purchase price of
the Merger Consideration, with such consideration payable to the holders of the
options and warrants upon completion of the earlier of (i) cash tender offer and
(ii) the Merger. Options and warrants that are outstanding as of the date of
this letter but which are scheduled to expire pursuant to its terms prior to
completion of the Merger, shall be extended by CD Warehouse and be considered
outstanding for all purposes, including, without limitation, payment of the
Merger Consideration as provided above.
<PAGE>

CD Warehouse, Inc.
October 24, 2001
Page 2

3.  Due Diligence Review

        Between the date of this letter of intent and December 31, 2001, Djangos
will have the right, at reasonable times and in a reasonable manner and during
normal business hours of CD Warehouse, to undertake a due diligence review of
the financial condition, results of operations, business prospects, employees,
systems, books and records and other properties of CD Warehouse. Among other
matters, Djangos will review the assets (tangible and intangible), liabilities
(including contingent liabilities) and stockholders' equity of CD Warehouse.
Djangos's satisfaction, in its sole discretion, with the results of its due
diligence review will be a condition of its obligation to enter into the Merger
Agreement (defined below).

4.  Confidentiality

        On December 28, 2000, CD Warehouse and Djangos entered into a
Confidentiality Agreement ("Confidentiality Agreement"). All data,
interpretations, reports, forecasts, records and other information which Djangos
receives or obtains from CD Warehouse or others in connection with the parties
hereto performing due diligence as provided in Section 3 hereof shall be
considered for all purposes as Confidential Information (as defined in the
Confidentiality Agreement). The parties hereto agree that the Confidentiality
Agreement is incorporated by reference into this letter as if fully embodied
herein, and the parties hereto acknowledge and agree that the Confidentiality
Agreement is in full force and effect. Djangos and the other Recipients (as
defined in the Confidentiality Agreement) are bound and obligated by and shall
perform all of the terms, provisions, agreements, conditions and covenants
contained in the Confidentiality Agreement and the parties hereto shall have all
of the rights and remedies in the event of a breach or violation of the
Confidentiality Agreement as provided in the Confidentiality Agreement. The
parties hereto agree that if any of the other provisions in this letter conflict
with the Confidentiality Agreement, the terms and provisions of the
Confidentiality Agreement shall control in all respects.

5.  Reimbursement of Expenses

        (a) In reliance upon this letter of intent, Djangos will incur
significant expenses during its due diligence investigation of CD Warehouse. CD
Warehouse agrees to reimburse Djangos within 10 days of invoice all reasonable
expenses incurred by Djangos and its advisors (including, without limitation,
its attorneys) in connection with such due diligence in the event subsequent to
this letter of intent and before entering into the Merger Agreement described in
paragraph 6 hereof, if (i) CD Warehouse accepts an offer from another party to
acquire CD Warehouse for a value or purchase price higher than the Merger
Consideration, or (ii) Djangos abandons the Acquisition due to breach by CD
Warehouse or any of its directors, officers or representatives of the provisions
of this letter of intent. In no event will CD Warehouse's reimbursement
obligation under this paragraph 5(a) exceed $75,000.

<PAGE>

        (b) In reliance upon this letter of intent, CD Warehouse will incur
significant expenses in connection with the transactions contemplated by this
letter of intent. Djangos agrees to reimburse CD Warehouse within 10 days of
invoice all reasonable expenses incurred by CD Warehouse and its advisors
(including, without limitation, its attorneys but excluding its investment
banking firm) in the event subsequent to this letter of intent and before
entering into the Merger Agreement described in paragraph 6 hereof, if CD
Warehouse abandons the Acquisition due to breach by Djangos or any of its
directors, officers or representatives of the provisions of this letter of
intent. In no event will CD Warehouse's reimbursement obligation under this
paragraph 5(b) exceed $50,000; provided, however, nothing contained herein shall
limit CD Warehouse's rights and remedies under the Confidentiality Agreement.

        (c) In reliance upon this letter of intent, CD Warehouse will retain a
reputable, nationally-recognized investment banking firm to formally opine that
the Merger Consideration is fair, from a financial point of view, to the
shareholders of CD Warehouse (the "Fairness Opinion"). If such investment
banking firm is unable to give the Fairness Opinion and the failure to give the
                                                    ---
Fairness Opinion results in the termination of the transaction contemplated by
this letter of intent, Djangos agrees to reimburse CD Warehouse within 10 days
of invoice all reasonable expenses incurred by CD Warehouse in connection with
attempting to obtain the Fairness Opinion. In no event will Djangos's
reimbursement obligation under this paragraph 5(c) exceed $35,000 plus
reasonable out-of-pocket expenses incurred by the investment banking firm.

6.  Definitive Merger Agreement

        Subject to the provisions of this letter of intent, CD Warehouse and
Djangos will by December 31, 2001, enter into a definitive merger and plan of
reorganization ("Merger Agreement") with terms, conditions, representations and
warranties typical of transactions similar to the Merger. Djangos's attorneys
will prepare the initial draft of the Merger Agreement for review and changes by
CD Warehouse and its attorneys. The Merger Agreement must be in form and
substance satisfactory to both Djangos and CD Warehouse and their respective
counsel.

7.  Termination

        Unless extended by mutual agreement of the Board of Directors of both CD
Warehouse and Djangos, this letter of intent will terminate if the Merger
Agreement is not signed by both Djangos and CD Warehouse on or before December
31, 2001. In addition, either party may terminate this letter and abandon the
Acquisition if the other party hereto or any of their officers, directors or
representatives breach or violate any of the terms of this letter or the
Confidentiality Agreement. After termination, the parties will be bound only by
paragraphs 4, 5, and 11 of this letter and the Confidentiality Agreement.

8.  Approval of Respective Boards of Directors and Other Conditions

        Each party's obligation to execute the Merger Agreement is conditioned
upon approval of the transaction by the Board of Directors of the other party.
Each party
<PAGE>

CD Warehouse, Inc.
October 24, 2001
Page 4

will use its reasonable commercial efforts to obtain such approval. It is also
understood that, among other things, (i) approval of the Merger Agreement by the
CD Warehouse Board of Directors is subject to obtaining the Fairness Opinion;
and (ii) that the Merger Agreement is subject to approval by the shareholders of
CD Warehouse pursuant to the requirements of the Delaware Law and Section 14(a)
of the Securities Exchange Act of 1934, as amended. In addition, the parties
contemplate that a condition to closing of the Merger and the tender offer will
be the dismissal with prejudice of the lawsuit brought by Brent Gaylon against
CD Warehouse and certain of its directors, pending in the District Court of
Oklahoma County, Oklahoma, Case No. CJ-2001-7605.

9.    Usual and Ordinary Course

          Between the date of this letter and the earlier of the termination of
this letter or execution by the parties hereto of the Merger Agreement, CD
Warehouse will operate in the ordinary course of business and will not, without
the prior written consent of Djangos which will not be unreasonably withheld:

   a) make any change in its authorized capital stock by amending its
      Certificate of Incorporation;

   b) issue any stock options or stock appreciation rights or similar benefits,
      except pursuant to CD Warehouse's existing plans and consistent with past
      practices and not to exceed, in the aggregate, 50,000 stock options or
      equivalent stock appreciation rights with exercise prices at or above
      fair market value of the underlying stock at the time of issuance;

   c) make any reclassification in respect of its capital stock;

   d) issue or sell any shares of its capital stock, except in connection with
      the exercise of options rights or warrants outstanding as of the date of
      this letter of intent;

   e) sell, transfer, mortgage, encumber or otherwise dispose of a substantial
      amount of its properties except for transactions in the usual and ordinary
      course of business;

   f) declare or pay or set apart in respect of any capital stock any cash
      dividend or other distribution; or

   g) enter into or commit to any new pension, retirement, profit sharing or
      welfare plan or employment agreement (collectively, "Plans") with or for
      the benefit of any employee, officer or director, except in the usual and
      ordinary course of business and in any event with aggregate cost or
      expense to CD Warehouse, when combined with all existing Plans, not to
      exceed the current aggregate cost or expense to CD Warehouse of all
      existing Plans.

<PAGE>

10.   Brokers/Finders

        CD Warehouse represents and warrants that is has incurred no broker or
finder's commissions or fees in connection with the transactions contemplated by
this letter of intent, except the parties hereto understand and acknowledge that
CD Warehouse has or will retain a financial advisor in connection with the
transactions contemplated by this letter of intent and will incur fees and
expenses in connection therewith.

11.   Expenses

        Except as provided in paragraph 5 hereof or the Confidentiality
Agreement, each party will be responsible for its own expenses in connection
with a tender offer, Merger and the transactions contemplated by this letter and
the Merger Agreement.

12.   Publicity

        CD Warehouse and Djangos will coordinate all publicity relating to this
letter of intent and no party will issue any press release, publicity statement
or other public notice relating to this letter of intent and the matters
contemplated herein without prior consent of the other party, which consent will
not be unreasonably withheld.

        If this letter of intent correctly sets forth our understanding, please
sign and return to me the enclosed copy to reflect your agreement to the terms
hereof. This letter of intent will terminate and be of no further force or
effect if not accepted and agreed to by CD Warehouse by 5:00 p.m., Pacific Time,
on Thursday, October 25, 2001.

        This letter of intent can be signed in one or more counterparts, each of
which will be deemed an original but all of which together will constitute one
and the same instrument. For purposes of this letter of intent, signatures
transmitted by facsimile transmission will be deemed original signatures.

                                        Very truly yours,

                                        /s/ STEPHEN M. WOOD
                                        ------------------------------------
                                        Stephen M. Wood
                                        Chairman and Chief Executive Officer

ACCEPTED AND AGREED

CD WAREHOUSE, INC.

By: /s/ CHRISTOPHER M. SALYER
    ------------------------------------
    Christopher M. Salyer
    President and Chief Executive Officer

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