<PAGE> 1
EXHIBIT 10.30
***TEXT OMITTED AND FILED SEPARATELY
CONFIDENTIAL TREATMENT REQUESTED
UNDER 17 C.F.R. SECTIONS 200.80(B)(4),
200.83 AND 240.24B-2
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
This Settlement Agreement and Mutual Release (together with the exhibits
and schedules attached hereto, the "Settlement Agreement") is entered into
effective as of August 17, 2000 by and between MP3.COM, INC. ("MP3" herein), on
the one hand, and Sony Music Entertainment Inc. ("Company"), on the other hand,
both of which are sometimes collectively referred to as the "Parties" and each
of which is sometimes individually referred to as a "Party" and is made with
reference to the following:
1. RECITALS:
a) Company is a Plaintiff and MP3 is the defendant in the following
litigation (the "Litigation"): UMG RECORDINGS, INC., SONY MUSIC
ENTERTAINMENT INC., WARNER BROS. RECORDS INC., ARISTA RECORDS
INC., ATLANTIC RECORDING CORPORATION, BMG MUSIC D/B/A THE RCA
RECORDS LABEL, CAPITOL RECORDS, INC., ELEKTRA ENTERTAINMENT
GROUP, INC., INTERSCOPE RECORDS, AND SIRE RECORDS GROUP INC.,
Plaintiffs, vs. MP3.COM, INC., Defendant, Case No. 00 Civ. 0472
(JSR).
b) Each of the Parties to this Settlement Agreement desire to
permanently settle and resolve any and all claims, disputes,
issues or matters that exist between them as of the date of this
Settlement Agreement and to dismiss with prejudice the
Litigation.
c) NOW, THEREFORE, in consideration of the mutual promises,
covenants and agreements set forth herein, and subject to the
terms and conditions set forth below, the Parties desire to, and
hereby do, resolve their differences and agree as follows:
2. SETTLEMENT TERMS:
a) In consideration hereof, concurrently with the execution hereof
and of the License Agreement referred to in subparagraph (f)
below, and the execution by counsel for the Parties hereto and
delivery of a copy to MP3 for filing of the Dismissal With
Prejudice of the Litigation as described hereinbelow MP3 will
pay Company the sum of [...***...] plus [...***...].
* CONFIDENTIAL TREATMENT REQUESTED
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Bank Address: [...***...]
Bank Contact: [...***...]
b) [...***...]
i) [...***...]
ii) [...***...]
a) BMG Entertainment, - [...***...];
b) Warner Music Group, Inc. - [...***...];
c) UMG Recordings, Inc. - [...***...]; and
* CONFIDENTIAL TREATMENT REQUESTED
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d) EMI Records Group - [...***...].
iii) [...***...]
c) For no additional consideration, Company also hereby agrees that
the master recordings and phonorecord copyrights, excluding the
musical compositions or literary or dramatic works embodied
therein, previously copied by MP3 which are owned or controlled
by Company shall be deemed to have been copied with Company's
consent.
d) [...***...]
e) It specifically is understood that the term "Company" shall
include any corporation or other entity controlling, or
controlled by, or under common control therewith, [...***...]
f) Concurrently herewith, Company and MP3 are entering into a
License Agreement in the form annexed hereto as Exhibit A (the
"License Agreement").
* CONFIDENTIAL TREATMENT REQUESTED
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3. RELEASES
a) Company Release. Company, on behalf of itself and its heirs,
agents, employees, representatives, partners, owners, related
entities, officers, parents, shareholders, directors,
subsidiaries, affiliates, attorneys, transferees, predecessors,
successors, and assigns does hereby irrevocably release, acquit
and forever discharge MP3 and each of its respective heirs,
agents, employees, representatives, partners, owners, related
entities, officers, parents, shareholders, directors,
subsidiaries, parents, subsidiaries, divisions, affiliates,
officers, directors, shareholders, investors, family members,
attorneys, transferees, predecessors, successors, and assigns,
jointly and severally in their representative capacities (the
"MP3 Releasees"), of and from any and all debts, suits, claims,
actions, causes of action, controversies, demands, rights,
damages, losses, expenses, costs, attorneys' fees, compensation,
liabilities and obligations whatsoever (hereinafter referred to
collectively as "Company Claims"), suspected or unsuspected,
known or unknown, foreseen or unforeseen, arising at any time up
to and including the date of this Settlement Agreement, which
Company may now have or at any time heretofore may have had, or
which at any time hereafter may have or claim to have against
the MP3 Releasees, relating to, arising from, or concerning the
MyMP3 Service or the Litigation (hereinafter "Company Released
Claims").
b) MP3 Release. MP3, on behalf of itself and its heirs, agents,
employees, representatives, partners, owners, related entities,
officers, parents, shareholders, directors, subsidiaries,
affiliates, attorneys, transferees, predecessors, successors,
and assigns does hereby irrevocably release, acquit and forever
discharge Company and each of its respective heirs, agents,
employees, representatives, partners, owners, related entities,
officers, parents, shareholders, directors, subsidiaries,
affiliates, attorneys, transferees, predecessors, successors,
and assigns, jointly and severally in their representative
capacities (the "Company Releasees"), of and from any and all
debts, suits, claims, actions, causes of action, controversies,
demands, rights, damages, losses, expenses, costs, attorneys'
fees, compensation, liabilities and obligations whatsoever
(hereinafter referred to collectively as "MP3 Claims"),
suspected or unsuspected, known or unknown, foreseen or
unforeseen, arising at any time up to and including the date of
this Settlement Agreement, which MP3 may now have or at any time
heretofore may have had, or which at any time hereafter may have
or claim to have against the Company Releasees, relating to,
arising from, or concerning the MyMP3 Service or the Litigation
(hereinafter "MP3 Released Claims").
c) Statutory Waiver. With respect to the Company Released Claims
and the MP3 Released Claims (collectively, the "Released
Claims"), all rights under
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California Civil Code Section 1542 (and any other law of similar
effect), are hereby expressly waived by the Parties, and each of
them, notwithstanding any provision to the contrary. Section
1542 provides as follows:
"A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at
the time of executing the Release, which if known by him
must have materially affected his settlement with the
debtor."
d) The Parties, and each of them, and their representatives, heirs
and assigns expressly waive and release any right or benefit
which they have or may have under Section 1542 of the Civil Code
of the State of California, to the fullest extent that they may
waive all such rights and benefits pertaining to the matters
released herein. It is the intention of the Parties, and each of
them, through this Settlement Agreement, and with the advice of
counsel, to fully, finally and forever settle and release all
such matters, and all claims relative thereto, in furtherance of
such intention.
e) Dismissal With Prejudice. Company, concurrently with the
execution and delivery hereof and payment of the sum described
in 2(a) above, shall execute, file and deliver to MP3 a
Dismissal With Prejudice of the Litigation, in the form annexed
hereto as Exhibit B.
4. NOTICES
a) Any notice, demand, request, consent, approval, or communication
that either Party desires or is required to give to the other
Party is ordered to be addressed and served on or delivered to
the other Party at the address set forth below. Any Party may
change his/his/its address by notifying the other Parties of
their change of address(es) in writing.
i) The addresses for MP3 are as follows:
MP3.com, Inc.
4790 Eastgate Mall
San Diego, CA 92121
Attn: General counsel and VP Legal
With simultaneous copies to:
Gary Stiffelman, Esq.
Ziffren, Brittenham, Branca & Fischer LLP
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1801 Century Park West
Los Angeles, California 90067
ii) The address for Company is as follows:
Sony Music Entertainment Inc.
550 Madison Avenue
New York, NY 10022-3211
Attn: Senior Vice President and General Counsel
With simultaneous copies to:
Sony Music Entertainment Inc.
550 Madison Avenue
New York, NY 10022-3211
Attn: Senior Vice-President, Business Affairs &
Administration
5. MISCELLANEOUS PROVISIONS
a) In order to carry out the terms and conditions of this
Settlement Agreement, the Parties agree to promptly execute upon
reasonable request any and all documents and instruments
consistent herewith necessary to effectuate the terms of this
Settlement Agreement.
b) By entering into this Settlement Agreement, no Party admits or
acknowledges that they committed any wrongdoing on their part.
c) This Settlement Agreement and any controversy which might arise
therefrom shall in all respects be interpreted, enforced and
governed by the laws of the State of New York applicable to
agreements made and to be fully performed therein. All parties
consent to the sole and exclusive personal jurisdiction and
venue in the United States District Court for the Southern
District New York, and agree that all disputes or litigation
regarding this Settlement Agreement shall be submitted to and
determined by said court which shall have sole and exclusive
jurisdiction.
d) This Settlement Agreement, together with the License Agreement,
is the entire agreement between the Parties with respect to the
Released Claims or subject matter of this Settlement Agreement
and supersedes all prior and contemporaneous oral and written
agreements and discussions pertaining to the Released Claims or
subject matter of this Settlement Agreement. This Settlement
Agreement may be amended only by a written agreement executed by
each of the Parties hereto. No breach of the License Agreement
may or
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shall be deemed a breach of this Settlement Agreement.
e) No breach of any provision hereof can be waived unless in
writing signed by the party to be charged with such a waiver.
Waiver of any one breach of any provision hereof shall not be
deemed to be a waiver of any other breach of the same or any
other provision hereof.
f) This Settlement Agreement shall be binding upon and inure to the
benefit of the Parties hereto and his/his/its respective heirs,
agents, employees, representatives, partners, parents,
subsidiaries, divisions, affiliates, officers, related entities,
licensees, directors, shareholders, investors, attorneys,
transferors, transferees, predecessors, successors, trustees in
bankruptcy, and assigns and each and every entity which now or
ever was a division, parent, successor, predecessor, division,
affiliate, officer, director, shareholder, investor, employee,
attorney, transferor, transferee, or subsidiary for each Party
and its respective legal successors and assigns.
g) The Parties represent and warrant that each of them have not
assigned all or any portion of any claim pertaining to the
Released Claims to any person or entity. In the event any claims
are made by any third persons or entities based upon any
purported assignment or any such liens or claims are asserted in
connection with the Released Claims or proceeds of the
Settlement Agreement, then the Party who has breached his
representation or warranty contained herein agrees to indemnify
and hold harmless the other Party from any said claims being
made.
h) In the event that any covenant, condition or other provision
herein contained is held to be invalid, void or illegal by any
court of competent jurisdiction, the same shall be deemed
severable from the remainder of this Settlement Agreement and
shall in no way affect, impair or invalidate any other covenant,
condition or other provision herein contained. If such
condition, covenant or other provisions shall be deemed invalid
due to its scope or breadth, such covenant, condition or other
provision shall be deemed valid to the extent of the scope or
breadth permitted by law.
i) Each of the Parties hereto represent and declare that in
executing this Settlement Agreement, they rely solely upon their
own judgment, belief and knowledge, and on the advice and
recommendations of their own independently selected legal
counsel, concerning the nature, extent and duration of their
rights and claims and that they have not been influenced to any
extent whatsoever in executing the same by any representations
or statements covering any matters made by any of the Parties
hereto or by any person representing them or any of them. The
Parties acknowledge that
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neither any Party hereto nor any of their representatives have
made any promise, representation or warranty whatsoever, written
or oral to any other party, as any inducement to enter into this
Settlement Agreement, except as expressly set forth in this
Settlement Agreement or in the License Agreement.
j) The Parties hereto or responsible officer or representative
thereof, and each of them, further represent and warrant that
they have carefully read this Settlement Agreement and know and
understand the contents hereof, and that they signed this
Settlement Agreement freely and voluntarily and have had the
benefit of the advice of legal counsel before executing this
Settlement Agreement. Each of the representatives executing this
Settlement Agreement on behalf of their respective corporations
or partnerships is empowered to do so and thereby binds his
respective corporation or partnership.
k) This Settlement Agreement may be executed in counterparts and
when each Party has signed and delivered at least one such
counterpart to each of the other Parties, each counterpart shall
be deemed an original, and all counterparts taken together shall
constitute one and the same agreement, which shall be binding
and effective as to all Parties. This Settlement Agreement may
be executed via facsimile signatures, which shall have the same
force and effect as if they were original signatures to be
followed by executed originals.
l) Each party hereto warrants and represents that it has all
necessary right, title, and authority to enter into this
Settlement Agreement, to grant the rights and interests herein
granted, and to perform all of its obligations under this
Settlement Agreement.
m) Company, MP3 and each of their respective affiliates agree that
they shall, and they shall instruct in writing their respective
attorneys, accountants and other professional advisors
(collectively, "Advisors") to, hold in confidence and not
communicate, transmit, publish, disseminate or otherwise
disclose any of the terms and conditions of this Agreement or
any fact, matter, event or surrounding circumstance leading to
or relating to the negotiation thereof to which such Party was
privy or of which they were otherwise made aware (e.g., by being
copied on correspondence or by being advised of such fact,
matter, event or circumstance by another party to the
negotiation) (collectively, "Confidential Information");
provided, however, that nothing in this subparagraph (m) shall
prohibit disclosure of such Confidential Information: (a) by
Company, MP3 or any Affiliate to its respective financial
officers, management, bankers or others as may be reasonably
necessary in the operation of its respective business or by
Company to any of its Affiliates; (b) by Company, MP3 or any
Affiliate to its respective
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Advisors to the extent that such disclosure is in the opinion of
such Advisors required to enable such Advisors fully to
represent the person or entity concerned (or by any of Company's
Affiliates or licensees to their respective attorneys,
accountants and other professional advisors); (c) in connection
with any legal or governmental proceeding; or (d) to any
judicial, governmental or regulatory body. [...***...]
n) Company and MP3 and each of their respective affiliates agree
that the disclosure of the existence of this agreement or any of
the transactions contemplated in this Agreement, including,
without limitation, any Confidential Information, in the context
of any formal public communication to a third party of any kind,
including, for the avoidance of doubt and without limitation, in
the context of a formal press announcement or press conference,
shall be subject to MP3's and Company's mutual approval.
Attached hereto as Exhibit C to this Agreement is a formal press
announcement which is deemed mutually approved by both MP3 and
Sony (the "Agreed Statement").
* CONFIDENTIAL TREATMENT REQUESTED
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IN WITNESS WHEREOF, the Parties hereto have executed this Settlement
Agreement on the date(s) written beside his/his/its name, respectively.
Sony Music Entertainment Inc.
Dated: By: /s/ Ron Wilcox
--------------------------- ----------------------------------
Its: Senior Vice President Business
Affairs and Administration
Dated: MP3.com, Inc.
---------------------------
By: /s/ Robin Richards
----------------------------------
Its: President
APPROVED AND ACCEPTED INSOFAR AS THE UNDERSIGNED IS CONCERNED:
Sony/ATV Music Publishing LLC
By: /s/ Signature Illegible
----------------------------------
Its: Executive Vice President
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EXHIBIT A
LICENSE AGREEMENT
11
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***TEXT OMITTED AND FILED SEPARATELY
CONFIDENTIAL TREATMENT REQUESTED
UNDER 17 C.F.R. SECTIONS 200.80(B)(4),
200.83 AND 240.24B-2
MP3.com, Inc.
4790 Eastgate Mall
San Diego, CA 92121
August __, 2000
Sony Music, a Group of Sony Music Entertainment Inc.
550 Madison Avenue
New York, NY 10022-3211
Gentlepersons:
This letter, when and if fully executed, will set forth the terms of the
license agreement between Sony Music, a Group of Sony Music Entertainment Inc.
("Sony" or "Company") and MP3.com, Inc. ("MP3", "us" or "we"), with respect to
Sony licensing certain rights to MP3 on the following terms:
1. DEFINITIONS:
a) [...***...]
i) [...***...]
ii) [...***...]
iii) [...***...]
* CONFIDENTIAL TREATMENT REQUESTED
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iv) [...***...]
v) [...***...]
vi) [...***...]
vii) [...***...]
* CONFIDENTIAL TREATMENT REQUESTED
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b) "Affiliate": Any corporation or other person or entity
controlling, or controlled by, or under common control with a
party or Person, as the case may be, and any joint ventures in
which any of the foregoing participate.
c) "Artist": A recording artist, record producer, or other third
party entitled to a royalty or other participation in revenues
derived from the exploitation of Company Recordings ("Record
Revenue Participation"). [...***...]
d) "Beam It": [...***...]
* CONFIDENTIAL TREATMENT REQUESTED
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e) "Company Album": [...***...]
f) "Company Master": [...***...]
g) "Company Recordings": [...***...]
i) [...***...]
* CONFIDENTIAL TREATMENT REQUESTED
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ii) [...***...]
iii) [...***...]
* CONFIDENTIAL TREATMENT REQUESTED
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h) "Company Shelf" [...***...]
* CONFIDENTIAL TREATMENT REQUESTED
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i) "Composition" - [...***...]
j) "Download" or Downloading" - [...***...]
k) "Electronic Digital Copy" - [...***...]
l) [...***...]
m) "Home Page" - the individual Web Page of a Web Site intended by
the Person maintaining the Web Site concerned to be the first
Web Page viewed by new end-users the first time they access such
Web Site.
n) "Instant Listen": [...***...]
* CONFIDENTIAL TREATMENT REQUESTED
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o) "Internet": A medium consisting of wired or wireless electronic
or electromagnetic networks (including without limitation, fiber
optic, microwave, twisted-pair copper wires, coaxial cable,
satellite, wireless transmission, cellular networks, and
combinations thereof) and collections thereof now or hereafter
existing, wherever, located, for the transmission from a distant
location of digital data (e.g., text, information, graphics,
audio, video, or combination of the foregoing), through the use
of any protocols or standards now known or hereafter devised
(including without limitation, Transmission Control
Protocol/Internet Protocol ["TCP/IP"] and subsequent extensions
or modifications thereof) from or to electronic devices (e.g.,
computers [mainframe, desktop, laptop, handheld, etc.], set-top
boxes, cable modems, handheld devices, cell phones, televisions,
etc.) capable of transmitting or receiving digital data or
digital information, irrespective of whether such networks are
open or proprietary, public or private, or whether a fee is
charged or a subscription or membership is required in order to
access such networks. "Internet" also includes without
limitation the computer network comprising inter-connected
networks commonly referred to as the "Internet" and the "World
Wide Web." [...***...]
p) "Link" - an embedded icon, object, graphic or text within a Web
Page that consists of a hypertext pointer to the URL of another
Web Page.
q) "Locker": [...***...]
* CONFIDENTIAL TREATMENT REQUESTED
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r) "Locker Owner": an individual end-user who:
i) has registered for and has been assigned by MP3 a unique
"account" for access to MyMP3 (a "User Account");
ii) has had a unique password approved by MP3 in respect of
each User Account, which must be correctly entered prior
to the commencement of any session during which such
end-user is permitted to access MyMP3 (i.e., Persons
that do not have such a unique password cannot access
MyMP3.
s) "Mechanical Royalties" - [...***...]
t) "MP3 Site" - [...***...]
u) "MyMP3": [...***...]
v) "Person": any natural person, legal entity, or other organized
group of persons or entities. (All pronouns, whether personal or
impersonal, which refer to Persons include natural persons and
other Persons.)
w) A "Phonograph Record" is a Record as embodied by the
manufacturer and/or distributor in a physical, audio-only Record
configuration (e.g., vinyl LP's, cassettes and compact discs).
x) "Record": Any and all forms of reproductions, transmissions or
communications of audio Recordings (e.g., Albums, singles,
etc.), now or hereafter known, manufactured, distributed,
transmitted or communicated primarily for home use, school use,
juke box use, or use in means of transportation.
* CONFIDENTIAL TREATMENT REQUESTED
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y) "Record Labels" [...***...]
z) "Recording": every recording of sound, not coupled with a visual
image, by any method and on any substance or material, or in any
other form or format, whether now or hereafter known, which is
used or useful in the recording, production and/or manufacture
of Records.
aa) "Company Site" - [...***...]
bb) (A) "Stream" - [...***...]
cc) "Title List(s)": [...***...]
dd) "Web Page" - a document that is either (a) written in HTML
(i.e., Hypertext Markup Language), or another industry standard
mark-up language, that is made available for viewing by end
users at a single URL or domain name via the World Wide Web
portion of the Internet by server software using HTTP (i.e.,
Hypertext Transfer Protocol) to effectuate data transmission (or
server software using any other generally accepted protocols
utilized to effectuate data transmissions via the World Wide Web
portion of the Internet); or (b) written in any computer
programming language other than HTML, that is intended to be
accessible, directly or indirectly, simultaneously to end users
throughout the world via a computer or any other electronic
device on any public data network that uses Transmission Control
Protocol/Internet Protocol (i.e., TCP/IP) or Wireless
Application Protocol (i.e., WAP) to effectuate data transmission
(or any other generally accepted protocols utilized to
effectuate data transmissions via public data networks). For
purposes of the preceding sentence, only, the requirement that
end users pay a subscription fee or other charge in
consideration of accessing a data network
* CONFIDENTIAL TREATMENT REQUESTED
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shall not, by that reason alone, mean that such data network is
not a public data network.
ee) "Web Site" - a collection of Web Pages with a common theme or
subject matter which are (a) organized hierarchically, (b)
owned, managed and operated by the same Person or at the
direction of such Person, and (c) interconnected via Links..
2. LICENSE:
a) Subject to the terms and conditions of this agreement, Company
hereby licenses to MP3 during the Term the non-exclusive,
non-sublicensable right:
i) To reproduce one or a reasonable number of copies of the
Company Recordings, solely to the extent necessary to
enable the digital audio transmission of the Company
Recordings in accordance with the terms and conditions
prescribed elsewhere in this Agreement; and
ii) To make digital audio transmissions of the Company
Recordings solely by means of Streaming in accordance
with paragraph 12 and the Exhibits hereto, from MP3's
servers, to Locker Owners solely as part of MyMP3.
iii) To use the names and tradenames of Company (as and
solely to the extent that same appear on Company
Recordings), the titles of Company Albums and Company
Masters, the names of any Artists or other Persons
rendering services or granting rights to Company with
respect to Company Recordings, and any front Company
Album cover artwork utilized by Company and its
Affiliates in the United States, in connection with
Company Recordings solely for informational purposes to
identify Company Recordings in Lockers as part of MyMP3,
e.g., on Title Lists and on display during Streaming.
MP3 shall have the right to use such front album cover
art only to the extent that Company can license such
rights. Except as provided above, MP3 shall not have the
right to use any of said materials, without Company's
approval, which it can withhold in its absolute
discretion. [...***...]
* CONFIDENTIAL TREATMENT REQUESTED
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iv) [...***...]
b) Company Recordings can be added to or inserted in an individual
Locker solely:
i) Via MP3's "Instant Listen" system, or
ii) Via MP3's "Beam-it" system, or
iii) [...***...]
iv) [...***...]
c) [...***...]
* CONFIDENTIAL TREATMENT REQUESTED
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d) [...***...]
e) [...***...]
f) It is agreed that no rights whatsoever to Compositions or other
dramatic, literary or other works other than sound recordings
that are embodied in Company Recordings are being conveyed
herein and that MP3 separately shall secure any rights required
in connection with the use of same in connection with MyMP3.
g) [...***...]
h) The license granted in this Section 2 is limited to the use of
the Company Recordings and the materials described in 2(a)(iii)
above solely in the manner set forth in this Agreement. Any and
all other rights in connection with the Company Recordings and
the materials described in 2(a)(iii) above are specifically
reserved by Company. Nothing herein shall be construed as
permitting MP3 to otherwise exploit the Company Recordings and
the
* CONFIDENTIAL TREATMENT REQUESTED
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materials described in 2(a)(iii) above, and/or engage in the
sale or distribution of any Electronic Digital Copies of any
Company Recordings.
i) [...***...]
j) Except as expressly provided herein or permitted under
applicable law: (a) neither MP3 nor any Person deriving rights
from MP3 shall have any right to edit, modify or otherwise alter
any of the Company Recordings; and (b) neither MP3 nor any
Person deriving rights from MP3 will include the Company
Recordings in computer files other than computer files created
for use exclusively MyMP3 in accordance with this Agreement.
3. EXCLUSIVITY: The rights granted to MP3 hereunder shall be non-exclusive.
4. TERM AND TERRITORY:
a) The territory shall be [...***...]
i) [...***...]
ii) [...***...]
iii) Notwithstanding subparagraphs (i) and (ii) above:
* CONFIDENTIAL TREATMENT REQUESTED
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a) [...***...]
b) [...***...]
* CONFIDENTIAL TREATMENT REQUESTED
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b) The term of this license (the "Term") shall commence forthwith
and shall continue until [...***...]
5. CONSIDERATION:In consideration of this license, Company shall receive
the following:
a) [...***...]
* CONFIDENTIAL TREATMENT REQUESTED
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b) [...***...]
c) [...***...]
d) [...***...]
e) [...***...]
f) [...***...]
* CONFIDENTIAL TREATMENT REQUESTED
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g) [...***...]
* CONFIDENTIAL TREATMENT REQUESTED
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h) [...***...]
6. ACCOUNTINGS:
a) MP3 will compute the sums due Company under paragraphs 5(a),
5(b) and 5(d) as of each March 31, June 30, September 30 and
December 31 after the date hereof. Within sixty-(60) days after
each calendar quarterly period, MP3 will send Company a
statement covering sums due hereunder and shall concurrently pay
Company all sums shown due thereunder.
b) MP3 will maintain (for at least 5 years after the end of the
Term) books and records with respect to sums payable to Company
hereunder. Company may, at its own expense no more than once per
calendar year, examine and copy those books and records, as
provided in this paragraph. Company may make such an examination
for a particular statement within three and one-half (3-1/2)
years after the date when MP3 sends Company the statement
concerned. Company shall only have the right to institute suit
with respect to a particular statement within three years after
the close of the Term hereof. As an alternative, Company shall
have the right to conduct a single audit of MP3, otherwise as
set forth herein, at any time within eighteen (18) months after
the end of the Term. Company may make those examinations only
during MP3's usual business hours, and at the place where it
keeps the books and records. Such books and records shall be
kept at the MP3 office in San Diego, California, unless
otherwise notified. Company will be required to notify MP3 at
least ten (10) days before the date of planned examination. In
the event that an audit proves (as a result of a mutually
approved settlement or a
* CONFIDENTIAL TREATMENT REQUESTED
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binding judgment) an underpayment to Company of greater than
[...***...] of sums properly due for the audited period, MP3
shall reimburse Company for its reasonable audit costs.
c) The statements referred to paragraph 7(a) above shall provide
Company information, sorted by both artist and title, setting
forth [...***...] MP3 will work in good faith with Company to
develop formats for MP3's accounting statements, including
computer-sensible formats, which will assist Company in
accounting to Artists with respect to the exploitation by MP3 of
Company Recordings and incorporating the information directly
into Company's accounting systems.
d) If Company does not receive any accounting statement as and when
required hereunder for more than three accounting periods in any
one (1) year period, then with respect to the next accounting
period(s), MP3 shall submit License Fee payments that are
[...***...] than the quarterly payments due for the preceding
quarter, and payments shall continue at that increased rate,
until Company receives the late accounting statement. If the
amount paid pursuant to this subparagraph is more than the
amount actually due, the overpayment shall be credited against
future license fees due to Company under this agreement.
7. WARRANTIES; AUTHORITY TO CONTRACT:
a) MP3 warrants and represents that:
i) [...***...]
ii) [...***...]
iii) [...***...]
* CONFIDENTIAL TREATMENT REQUESTED
20
<PAGE> 32
iv) [...***...]
v) [...***...]
vi) [...***...]
vii) [...***...]
viii) [...***...]
ix) [...***...]
x) [...***...]
* CONFIDENTIAL TREATMENT REQUESTED
21
<PAGE> 33
xi) [...***...]
xii) [...***...]
b) Company represents and warrants:
i) [...***...]
ii) [...***...]
iii) [...***...]
iv) [...***...]
v) [...***...]
c) Either Party may terminate the Term of this Agreement upon a
material breach of any of the material agreements made by the
other Party hereto, including without limitation a failure to
account for more than three (3) consecutive accounting periods
in any year, which breach is not cured within thirty (30) days
from date of detailed written notice by the non-breaching Party
of any such breach.
d) [...***...]
8. INDEMNITY:
* CONFIDENTIAL TREATMENT REQUESTED
22
<PAGE> 34
a) MP3 shall at all times indemnify and hold harmless Company and
its Affiliates from and against any and all claims, losses,
damages, liabilities, costs and expenses, including, without
limitation, legal expenses and reasonable counsel fees arising
out of any breach or alleged breach by MP3 or any MP3 Affiliate
of any of warranty, representation, covenant or obligation by
MP3 or any MP3 Affiliate hereunder (individual and collectively,
"MP3 Claims"). In the event of any MP3 Claim: (i) Company shall
notify MP3 of the MP3 Claim concerned promptly following the
date that Company or any Company Affiliate becomes aware of it;
(ii) MP3 shall defend against the MP3 Claim concerned (at MP3's
own expense) through legal counsel selected by MP3 with
Company's consent, which consent Company shall not unreasonably
withhold; and (iii) each Party shall reasonably cooperate with
the other in the defense of the MP3 Claim concerned. MP3 shall
be solely responsible for the amount of any settlement approved
by MP3 or judgment for such MP3 Claim and all legal expenses and
counsel fees incurred by MP3 in connection therewith, subject to
section 8(b) below.
b) In the event that MP3 or any MP3 Affiliate is failing for any
reason to defend against the MP3 Claim concerned, Company shall
have the right to assume the defense and settlement of the MP3
Claim concerned through legal counsel selected by Company, but
MP3 shall be solely responsible at all times for the amount of
any settlement or judgment for such MP3 Claim, as well as all
reasonable legal expenses and reasonable counsel fees incurred
by Company in connection therewith. Any settlement of an MP3
Claim shall be subject to MP3's consent, which consent MP3 shall
not unreasonably withhold. Notwithstanding the foregoing, in the
event that MP3 defends against the MP3 Claim concerned (at MP3's
own expense) through legal counsel selected by MP3 in accordance
with and subject to clause (ii) of section 8(a) above, Company
shall have the right at all times to actively participate in the
defense thereof, and to employ legal counsel selected by Company
at Company's own expense [separate from the counsel employed by
MP3], it being understood that MP3 shall have the right at all
times, in MP3's sole discretion, to maintain control of the
conduct of the defense.
c) Company shall at all times indemnify and hold harmless MP3 and
its Affiliates from and against any and all claims, losses,
damages, liabilities, costs and expenses, including, without
limitation, legal expenses and reasonable counsel fees arising
out of any breach or alleged breach by Company of any warranty,
representation, covenant or obligation by Company hereunder
(individually and collectively, "Company Claims"). In the event
of any Company Claim: (i) MP3 shall notify Company of the
Company Claim concerned promptly following the date that MP3
becomes aware of it; (ii) Company shall defend against the
Company Claim concerned (at Company's own expense) through legal
counsel selected by Company
23
<PAGE> 35
with MP3's consent, which consent MP3 shall not unreasonably
withhold; and (iii) each Party shall reasonably cooperate with
the other in the defense of the Company Claim concerned. Company
shall be solely responsible for the amount of any settlement or
judgment for such Company Claim and all legal expenses and
counsel fees incurred by Company in connection therewith,
subject to section 8(d) below.
d) In the event that Company or any Company Affiliate is failing
for any reason to defend against the Company Claim concerned,
MP3 shall have the right to assume the defense and settlement of
the Company Claim concerned through legal counsel selected by
MP3, but Company shall be solely responsible at all times for
the amount of any settlement or judgment for such Company Claim,
as well as all reasonable legal expenses and reasonable counsel
fees incurred by MP3 in connection therewith. Any settlement of
a Company Claim shall be subject to Company's consent, which
consent Company shall not unreasonably withhold. Notwithstanding
the foregoing, in the event that Company defends against the
Company Claim concerned (at Company's own expense) through legal
counsel selected by Company in accordance with and subject to
clause (ii) of section 8(c) above, MP3 shall have the right at
all times to actively participate in the defense thereof, and to
employ legal counsel selected by MP3 at MP3's own expense
[separate from the counsel employed by Company], it being
understood that Company shall have the right at all times, in
Company's sole discretion, to maintain control of the conduct of
the defense.
9. INJUNCTIVE RELIEF: MP3 acknowledges that the rights licensed by Company
hereunder have a special, unique and extraordinary character which gives them a
peculiar value, and that, in the event of a material breach of any material
term, condition, representation, warranty, covenant or agreement contained in
this agreement, Sony may be caused irreparable injury, which cannot be
adequately compensated in monetary damages. Accordingly, in the event of any
such breach, actual or threatened, Company shall have, in addition to any other
legal remedies, the right to seek injunctive or other equitable relief. (The
preceding sentence shall not be construed to preclude MP3 from opposing any
application for such relief based upon contest of other facts alleged by Company
in support of the application.).
10. NOTICES: All notices to be given hereunder shall be in writing and shall be
sent by courier or other personal delivery or by registered or certified mail to
the applicable address set forth on page 1 hereof or at such other address as
shall be designated in writing from time to time by the party receiving notice.
Company shall send a copy of each such notice to MP3 to Ziffren, Brittenham,
Branca & Fischer, LLP., 1801 Century Park West, Los Angeles, California 90067,
Attn: Gary Stiffelman, Esq. MP3 shall send a copy of each notice to Company to
its Senior Vice President of Business Affairs and Administration and its Senior
Vice President and General Counsel. Except as otherwise provided herein, such
notices shall be deemed
24
<PAGE> 36
given when personally delivered or mailed, except that notices of change of
address shall be effective only after the actual receipt thereof.
11. MISCELLANEOUS:
a) This Agreement sets forth the entire understanding of the
parties hereto relating to the subject matter hereof and
supersedes all prior and contemporaneous agreements and
understandings, whether oral or written. This Agreement may be
amended, modified, superseded, canceled, renewed or extended,
and the terms hereof may be waived, only by a written instrument
signed by the parties hereto or, in the case of a waiver, by the
party waiving compliance.
b) Company may assign its rights under this agreement in whole or
in part to any subsidiary, affiliated or controlling
corporation, to any Person owning or acquiring a substantial
portion of the stock or assets of Company, or to any partnership
or other venture in which Company participates, and such rights
may be similarly assigned by any assignee. No such assignment
shall relieve Company of any of its obligations hereunder.
Company may also assign its rights to any of its Licensees if
advisable in Company's sole discretion to implement the license
granted. MP3 shall not have the right to assign this agreement
or any of its rights hereunder other than to a Person owning or
acquiring a substantial portion of its stock or assets without
Company's prior written consent; provided no such assignment
shall relieve MP3 of any of its obligations hereunder. Any
purported assignment by MP3 in violation of this paragraph shall
be void.
c) 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. The New
York courts (State and Federal), only, will have jurisdiction of
any controversies regarding this agreement; any action or other
proceeding which involves such a controversy will be brought in
those courts and not elsewhere. Except as is specifically
provided herein, nothing in this Agreement is intended to confer
on any person not a party hereto any rights or remedies under
this Agreement.
d) Neither party shall be deemed to be in breach of any of its
obligations hereunder unless and until the other party shall
have given specific written notice describing in reasonable
detail the breach and the allegedly breaching party shall have
failed to cure that breach within a reasonable time after its
receipt of that written notice.
e) This agreement may not be modified except by an instrument in
writing executed by each party hereto. The invalidity or
unenforceability of any provision hereof shall not affect the
validity or enforceability of any other provision hereof.
25
<PAGE> 37
f) MP3 acknowledges that Company shall have the right to license or
establish businesses similar to MyMP3.
g) In entering into this agreement, and in providing services
pursuant hereto, MP3 and Company have and shall have the status
of independent contractors and nothing herein contained shall
contemplate or constitute MP3 or Company as each other's agents
or employees.
h) A waiver by either party of any provision of this agreement in
any instance shall not be deemed to waive it for the future.
i) All remedies, rights, undertakings, and obligations contained in
this agreement shall be cumulative and none of them shall be in
limitation of any other remedy, right, undertaking or obligation
of either party. No exercise of any of a Party's options or
remedies under this Agreement will limit a Party's right to
recover damages by reason of any default by the other Party, a
Party's right to exercise any of its other options or remedies
under this Agreement, or any of any Party's other rights or
remedies. The captions of the Articles in this agreement are
included for convenience only and will not affect the
interpretation of any provision.
j) MP3 will bear and pay any and all taxes, duties and customs of
any kind, however designated, levied or based in any way
anywhere in the Territory upon the performance of this agreement
or the sale or resale of any products or services by MP3 and its
Affiliates, including, for the avoidance of doubt and without
limitation, all sales, use, excise, purchase, value added or
similar taxes but excluding income or similar taxes on sums
payable to Company, which income or similar taxes, for the
avoidance of doubt, Company shall bear. If any claim is made
against Company for such taxes, MP3 will promptly remit to
Company such sums together with any penalties and interest
assessed immediately, unconditionally and without offset.
12. [...***...]
a) [...***...]
* CONFIDENTIAL TREATMENT REQUESTED
26
<PAGE> 38
b) [...***...]
* CONFIDENTIAL TREATMENT REQUESTED
27
<PAGE> 39
c) [...***...]
13. CONFIDENTIALITY; PRESS RELEASE:
a) Company, MP3 and each of their respective Affiliates agree that
they shall, and they shall instruct in writing their respective
attorneys, accountants and other professional advisors
(collectively, "Advisors") to, hold in confidence and not
communicate, transmit, publish, disseminate or otherwise
disclose any of the terms and conditions of this Agreement or
any fact, matter, event or surrounding circumstance leading to
or relating to the negotiation thereof to which such Party was
privy or of which they were otherwise made aware (e.g., by being
copied on correspondence or by being advised of such fact,
matter, event or circumstance by another party to the
negotiation) (collectively, "Confidential Information");
provided, however, that nothing in this paragraph 13 shall
prohibit disclosure of such Confidential Information: (a) by
Company, MP3 or any Affiliate to its respective financial
officers, management, bankers or others as may be reasonably
necessary in the
* CONFIDENTIAL TREATMENT REQUESTED
28
<PAGE> 40
operation of its respective business or by Company to any of its
Affiliates; (b) by Company, MP3 or any Affiliate to its
respective Advisors to the extent that such disclosure is in the
opinion of such Advisors required to enable such Advisors fully
to represent the Person concerned (or by any of Company's
Affiliates or licensees to their respective attorneys,
accountants and other professional advisors); (c) in connection
with any legal or governmental proceeding; or (d) to any
judicial, governmental or regulatory body. [...***...]
b) Company, MP3 and each of MP3's Affiliates agree that the
disclosure of the existence of this agreement or any of the
transactions contemplated in this Agreement, including, without
limitation, any Confidential Information, in the context of any
formal public communication to a third party of any kind,
including, for the avoidance of doubt and without limitation, in
the context of a formal press announcement or press conference,
shall be subject to MP3's and Company's mutual approval.
Attached hereto as Exhibit C to this Agreement is a formal press
announcement which is deemed mutually approved by both MP3 and
Sony (the "Agreed Statement").
Please indicate your acceptance of the above terms by signing in the
space indicated below.
Very truly yours,
MP3.COM, INC.
By: /s/ Robin Richards
--------------------------------
AGREED AND ACCEPTED:
Sony Music, A Group of Sony Music Entertainment Inc.
By: /s/ Ron Wilcox
--------------------------------
Senior Vice President Business Affairs and Administration
* CONFIDENTIAL TREATMENT REQUESTED
29
<PAGE> 41
EXHIBIT A
[...***...]
* CONFIDENTIAL TREATMENT REQUESTED
A-1
<PAGE> 42
EXHIBIT B
[...***...]
* CONFIDENTIAL TREATMENT REQUESTED
A-11
<PAGE> 43
EXHIBIT C
Exemplar of MyMP3 Web Page
[GRAPHIC DEPICTING A MY.MP3.COM WEB PAGE]
<PAGE> 44
EXHIBIT B
STIPULATION
UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK
UMG RECORDINGS, INC., SONY MUSIC
ENTERTAINMENT INC., WARNER BROS. RECORDS Case No.: 00 Civ. 0472 (JSR)
INC., ARISTA RECORDS INC., ATLANTIC
RECORDING CORPORATION, BMG MUSIC d/b/a THE
RCA RECORDS LABEL, CAPITOL RECORDS, INC., Stipulation and Order
ELEKTRA ENTERTAINMENT GROUP, INC., of Discontinuance
INTERSCOPE RECORDS, and SIRE RECORDS GROUP With Prejudice
INC.,
Plaintiffs,
v.
MP3.COM, INC.,
Defendant.
IT IS HEREBY STIPULATED AND AGREED, by and among the undersigned counsel for
Plaintiff Sony Music Entertainment Inc. (the "Settling Plaintiff") and Defendant
MP3.com, Inc. that, pursuant to said parties' settlement agreement, the
Complaint in the above-captioned action is hereby dismissed with prejudice
pursuant to Fed.R.Civ.P. Rule 41 as to the claims of the Settling Plaintiff.
Dated: August 15, 2000
ARNOLD & PORTER
By: /s/ Hadrian R. Katz
--------------------------------
Hadrian R. Katz
555 Twelfth Street, N.W.
Washington, D.C. 20004
(202) 942-5000
<PAGE> 45
Counsel for Plaintiff
Sony Music Entertainment Inc.
COOLEY GODWARD LLP
By: /s/ Michael B. Carlinsky
--------------------------------
Michael G. Rhodes (MR 0426)
4365 Executive Drive
Suite 1100
San Diego, CA 92121-2128
Tel: (858) 550-6000
Fax: (858) 453-3555
-and-
ORRICK, HERRINGTON & SUTCLIFFE LLP
Michael B. Carlinsky (MC-6594)
666 Fifth Avenue
Suite 1100
San Diego, CA 92121
(212) 506-5000
Counsel for Defendant
MP3.com, Inc.
SO ORDERED.
--------------------------------
Hon. Jed Rakoff
U.S.D.J.
<PAGE> 46
EXHIBIT C (PAGE 1 OF 3)
FOR MP3.COM
GREG WILFAHRT
(858) 623-7280
[email protected]
FOR SONY MUSIC ENTERTAINMENT:
LAURIE JAKOBSEN
(212) 833-5047
[email protected]
MP3.COM AND SONY MUSIC ENTERTAINMENT SETTLE COPYRIGHT INFRINGEMENT SUIT
SONY MUSIC ENTERTAINMENT GRANTS MP3.COM LICENSE FOR MY.MP3.COM SERVICE
SAN DIEGO and NEW YORK, Aug. XX, 2000 -- MP3.com, Inc. (Nasdaq: MPPP) and Sony
Music Entertainment (SME) announced today that they have settled the copyright
infringement suit brought by Sony Music Entertainment in connection with
MP3.com's My.MP3.com system. In addition to a payment by MP3.com for past acts,
the companies announced that MP3.com has entered into a non-exclusive, North
American license with SME for use of SME-controlled recordings with the
My.MP3.com system, including the "Beam-It(TM)" and "Instant Listening(TM)"
software services. These services are designed to require, among other things,
users to verify the CDs they own in order to access that music in their
My.MP3.com Music Manager (i.e. personal digital locker).
"It is clear that Sony Music Entertainment understands and embraces the Internet
and values responsible technologies that excite consumers and reward content
owners," said Michael Robertson, chairman and chief executive officer of
MP3.com. "MP3.com respects the rights of copyright holders, and now, with this
settlement and license, we can offer consumers an avenue to access music online
from CDs they have purchased."
"Sony Music Entertainment strongly enforces its copyrights. This settlement
affirms and upholds the right of copyright owners to be paid for the use of
their works on the Internet," said Al Smith, Senior Vice President, Sony Music
Entertainment. "Sony Music has always understood that changes in technology
create new ways for consumers to experience entertainment. This licensing
agreement with MP3.com is one of a number of initiatives that we have underway
to enhance music fans' experience in an environment that protects intellectual
property rights."
About MP3.com
<PAGE> 47
Exhibit C (page 2 of 3)
MP3.com, Inc. has created what it believes is a unique and robust technology
infrastructure for the storage, management, promotion and delivery of digital
music. As the Internet's premier Music Service Provider (MSP), the company is
dedicated to providing consumers with anytime, anywhere access to their music
using any web-enabled device. The company's web site hosts what it believes is
the largest collection of digital music available on the Internet, with more
than 562,000 songs and audio files from over 87,000 digital artists and record
labels. Dedicated to growing the digital music space, the company's products and
services include on-demand Subscription Music Channels, an innovative Retail
Music Program, a Syndicated Radio Division and others. Additionally, through the
company's MSP initiative, MP3.com is partnering with a variety of
forward-looking technology companies to expand its digital music strategy.
MP3.com common stock is traded on the Nasdaq National Market under the ticker
symbol MPPP. The company is based in San Diego, California. For more information
on MP3.com, visit www.mp3.com.
About Sony Music Entertainment
Sony Music Entertainment (SME), a leading global producer, manufacturer, and
marketer of recorded music and video, has a presence in 60 countries. In 1994,
the company created the New Technology and Business Development division, which
operates companies, directs investments and provides incubation facilities for
early stage digital media companies from three principal locations in San
Francisco, New York and Los Angeles. The group's holdings include over 30
companies in the digital media infrastructure, technology, wireless, service and
digital content areas, reflecting SME's strategy for the broadband era. These
companies include AllStarCharity.com, AudioBase, C4, Digital On-Demand, Emazing,
Exactis/ 24/7 Media, Gig.com, Indimi (the parent company of AdTools and
InfoBeat), i3 Mobile, lastminute.com, Launch Media, Listen.com, MongoMusic,
NetGen, Palm, Inc, Quintus, Reciprocal, Redband Broadcasting, Spinner.com, T-10,
Urbanworld and Yupi.com.
Statements in this press release that are not strictly historical are
forward-looking statements within the meaning of section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such
statements include references to activities expected to occur in connection with
MP3.com's settlement and license arrangement with Sony Music Entertainment.
These statements involve a high degree of risk and uncertainty, are only
predictions, and actual events or results may differ materially from those
projected in such forward-looking statements. Factors that could cause or
contribute to differences include risks related to: implementation of MP3.com's
license arrangement with Sony Music Entertainment; MP3.com's current litigation
proceedings, including without limitation the inability to reach settlement with
all parties to such litigation proceedings; MP3.com's new and uncertain business
model; acceptance of MP3.com's products and services; MP3.com's limited
operating history, and MP3.com's rapid growth, as well as other risks detailed
from time-to-time in MP3.com's reports to the Securities and Exchange
Commission, including its report on
<PAGE> 48
Exhibit C (page 2 of 3)
Form 10-K for the year ended December 31, 1999 and its most recent report on
Form 10-Q.
