Afiidavit of Brian N. Spector in Support of
Petition for Approval of Good Faith Settlement Agreement
Case 2:02-cv-02405-HRH Document 286-3 Filed 11/21/2005 Page 1 of 4
1
1 Douglas F. Behm - 014727
Brian N. Spector - 010112
2 J ENNINGS, STROUSS & SALMON, P.L.C.
1 A Professional Limited Liability Company
3 The Collier Center, ll Floor
201 East Washington Street
4 1 Phoenix, Arizona 85004-2385
1 Telephone: (602) 262-5911
`
Attomeys for Defendant MP3.com, Inc.
6
1 IN THE UNITED STATES DISTRICT COURT
7
FOR THE DISTRICT OF ARIZONA
8
1 BILTMORE ASSOCIATES, as Trustee Case No. 02-2405 PHX—HRH
9 for the Visitalk Creditors’ Trust,
1
io Plaintiff
ll vs. AFFIDAVIT OF BRIAN N.
SPECTOR IN SUPPORT OF
12 PETER THIMMESCH and CYNTHIA PETITION FOR APPROVAL OF
1 THIMMESCH, husband and wife; GOOD FAITH SETTLEMENT
13 MICHAEL O'DONNELL and AGREEMENT
MARSHA O'DONNELL, husband and
14 wife; et al.,
15 Defendants.
16 l STATE OF ARIZONA
17 County of Maricopa
18 Brian N. Spector, being first duly sworn upon his oath, states:
19 1. I am a member of Jennings, Strouss & Salmon, P.L.C., attorneys for
20 defendant MP3.com, Inc. (MP3.com). I have been directly involved in litigating this
21 matter and in settlement negotiations and analysis of the settlement agreement
22 ("Agreement") entered into in this case between Biltmore Associates and Defendant
23 1 MP3.com, Inc. ("MP3.com").
24 2. Plaintiff in this case, Visitalk.com ("Visitalk"), is an Arizona
1
25 1 corporation formed to provide long distance voice and video calls over the Internet.
26 In late 1999, MP3.com was a prominent Intemet company that provided a forum for
J s1gl2;Q_2B%¥Z5Q2‘4l05—HRH Document 286-3 Filed 11/21/2005 Page 2 of 4
1 i music sharing. At about that time, MP3.com engaged in transactions with Visitalk
2 that form the basis of the allegations against it in this case. On December 31, 1999,
3 MP3.com and Visitalk entered into two agreements: the "Marketing and Promotion
4 I Agreement," whereby Visitalk agreed to pay MP3.com $15 million for promotional
5 A and advertising services for 2000 and additional amounts in years thereafter, and the
6 "Directory and Premium Services Agreement," whereby Visitalk was to make its
7 services available on the MP3.com web site for potential payments to Visitalk of
8 between approximately $2.5 million and $3.125 million a year from 2000 - 2002.
9 A Pursuant to these agreements, Visitalk paid MP3.com $5,303,000, in 2000. In
10 addition, on January 6, 2000, MP3.com purchased $15 million worth of Visitalk
1; Series E preferred stock. MP3.com still holds that stock. In November 2000,
Visitalk filed a Chapter 11 bankruptcy petition. MP3.com filed a claim in the
13 Visitalk bankruptcy for $4 million it was owed under the agreements with Visitalk.
14 That claim is still pending.
15 i 3. MP3.com was acquired by Vivendi Universal in 2001 and Vivendi sold
16 1 assets of MP3.com to CNET in December 2003. MP3.com currently has no active
17 employees, no operations, and substantial liabilities. Accordingly, there are serious
18 issues regarding the collectibility of any significant judgment against MP3.com.
19 . 4. The Agreement is the culmination of extensive, arrns’ length
20 negotiations that began almost one year ago, in September 2004. It resolves
21 expensive, time consuming, and difficult litigation between plaintiff and MP3.com.
22 MP3.com has contended throughout this case that it is not liable for or in connection
23 A with any of the claims alleged in this action. Proof of plaintiff’ s claims against
24 MP3.com would require lengthy, costly litigation.
25 5. The Agreement calls for MP3.com to pay plaintiff $125,000; for
26 MP3.com’s Claim and Subordinated Claim in the Visitalk bankruptcy case to be
Casgl2i02?gi/$50624405-HRH Document 286-3_ 2 Filed 11/21/2005 Page 3 of 4
1 allowed by tl1e Bankruptcy Court ir1 their full amounts; and for the parties to
2 i otherwise mutually release each other. It was the product of extensive negotiations
3 between Plaintiff and MP3.com. These negotiations occurred in the context of the
4 , parties’ respective views of the merits of the claims against MP3.com (which, in turn,
5 i was based on the parties’ respective factual investigations and legal analysis), the
6 likelihood of success, and the collectibility of those claims. The parties agreed to the
7 terms of the Agreement after considering (i) the above factors; (ii) the additional cost
8 of litigation; and (ii) the amount of consideration to be exchanged under the
9 Agreement.
10 i 6. In summary, the Agreement resolves expensive, time consuming, and
ll , difficult litigation between plaintiff and MP3.com. The Agreement was entered into
12 after bona fide, arms’ length negotiations between the parties, which negotiations
13 eliminated the possibility of collusion, fraud or tortious conduct aimed to injure the
14 interests of the non—settling defendants.
l5
16
1 FURT NT SAYETH NOT.
17
is 1
SUBSCRIBED AND SWORN to before me é day of
3 2005, by ,6 @//941) M. ,§?£éj@[07€ .
21 5f
22 My Commission Expires: mary Publm
25 1
26 1
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Case 2:02-cv-02405-HRH
Document 286-3
Filed 11/21/2005
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Case 2:02-cv-02405-HRH
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Case 2:02-cv-02405-HRH
Document 286-3
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Case 2:02-cv-02405-HRH
Document 286-3
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