1

JOSEPH W. COTCHETT (SBN 36324, jcotchett@cpmlegal. com)

PHILIP L. GREGORY ( SBN 95217, pgregory@cpmlegal com)

2

NANCI E. NISHIMURA (SBN 152621; nnishimura@cpmlegal. com)

CAMILO ARTIGA-PURCELL (SBN .273229; cartigapurcell@cpmlegal com) _SHAUNA R. MADISON ( SBN 299585;

smadison@cpmlegal. com)

COTCHETT, PITRE & MCCARTHY, LLP

SAN MATEO,M NTY

840 Malcolm Road, Suite 200

5

F I L E ID
JAN +

Burlingame, CA 94010
Telephone (

650) 697- 6000

Facsimile: (

650) 697- 0577

tlto i

alt

X015
c nor ;

ot r,

IV

Attorneys for Plaintiffs

SUPERIOR COURT FOR THE STATE OF CALIFORNIA

9

IN THE COUNTY OF SAN MATEO

10

11

MONSTER, LLC,

Nevada limited

liability

Case No.

corporation; and

COMPLAINT FOR:

12

NOEL LEE, individually and as TRUSTEE

13

14

OF THE NOEL LEE LIVING TRUST,

Plaintiffs,

1.

FRAUD AND DECEIT;

2.

AIDING AND ABETTING FRAUD AND

DECEIT;

15
V.

3.

16

BEATS ELECTRONICS LLC, a Delaware

17

18

BREACH OF DUTY OF TRUST AND

CONFIDENCE;

corporation;

4.

AIDING AND ABETTING BREACH OF

DUTY OF TRUST AND CONFIDENCE;

JIMMY IOVINE;

5.

BREACH OF FIDUCIARY DUTY;

PAUL D. WACHTER;

6.

AIDING AND ABETTING BREACH OF

ANDRE YOUNG a/ k/a Dr. DRE;

19
20

21

22

FIDUCIARY DUTY;
HTC AMERICA HOLDING, INC., a

Washington corporation; and

7.

UNFAIR COMPETITION; and

DOES 1 25,

8.

VIOLATIONS OF THE CALIFORNIA

23

24

CORPORATIONS CODE.
Defendants.

25

DEMAND FOR JURY TRIAL

26

27

28
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COMPLAINT

TABLE OF CONTENTS

I.

INTRODUCTION............................................................................................................
1

A.

BACKGROUND ON LEE

B.

LEE

C.

DEFENDANTS CONSPIRE

D.

ELIMINATING LEE

AND

AND

MONSTER.......................................................................

MONSTER ENGINEER

AS A

TO

THE ` BEATS

BETRAY LEE

BY DR. DRE" SUCCESS ........................

MONSTER.........................................

AND

BEATS SHAREHOLDER.......................................................

12

E.

APPLE ACQUIRES BEATS

F.

DEFENDANTS IMPROPERLY ERASE LEE

FOR $ 3. 2

BILLION............................................................. 14

10
AND

MONSTER FROM HISTORY ............... 14

11

II.

PARTIES............................................................................................................................
16

12

A.

PLAINTIFFS................................................................................................................

16

14

B.

DEFENDANTS.............................................................................................................

19

15

C.

DOE DEFENDANTS.....................................................................................................

21

D.

AGENCY; AIDING

21

13

16

AND

ABETTING; AND CONSPIRACY.............................................

17

III.

JURISDICTION AND VENUE..........................................................................................

22

IV.

STATEMENT OF FACTS..................................................................................................
24

18

19

A.
20

LEE ENGINEERS AND PROTOTYPES HIGH-PERFORMANCE HEADPHONES IN

SEARCHOF THE PERFECT SOUND.............................................................................

24

21

1.

DEVELOPING HIGH- PERFORMANCE HEADPHONES .....................................

2.

THE STATE

22
OF

HEADPHONES

AS OF

2008 ..................................................... 2

23

B.
24

MONSTER APPROACHES IOVINE AND DRE TO PARTNER WITH MONSTER TO

BRING HIGH- PERFORMANCE HEADPHONES TO MARKET .......................................

25

C.
26

IOVINE AND DRE ABSCOND WITH MONSTER' S IDEA FOR HIGH- PERFORMANCE
HEADPHONES.............................................................................................................

27

28

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COMPLAINT

D.

LACKING THE ENGINEERING ACUMEN AND PRODUCTION AND DISTRIBUTION

NETWORK TO COMMERCIALIZE " BEATS BY DR. DRE," IOVINE AND DRE REALIZE

THEY NEED

PARTNERSHIP WITH MONSTER.........................................................

29

E.

INTEREST IN BEATS...................................................................................................

TO STRENGTHEN THE MONSTER -BEATS PARTNERSHIP, LEE PURCHASES A 5%

F.

DEFENDANTS ORCHESTRATE A SHAM ACQUISITION BY HTC IN ORDER TO DIVEST

BEATS FROM MONSTER.............................................................................................

38

6
7

G.

DEFENDANTS MAKE SIGNIFICANT MISREPRESENTATIONS DURING THE

NEGOTIATIONS SURROUNDING

THE

HTC TRANSITION...........................................

41

H.
9

BEATS TAKES AGGRESSIVE STEPS

TO

ELIMINATE LEE' S 5% INTEREST IN THE

COMPANY BEFORE FINALIZING APPLE' S $ 3 BILLION ACQUISITION ......................

10

I.

DEFENDANTS' MISDEEDS ARE PART OF A COURSE OF CONDUCT BY BEATS,

IOVINE, DRE, AND WACHTER OF DEFRAUDING ENTREPRENEURS AND SMALL

11

BUSI NESSES................................................................................................................
12

FIRST CAUSE OF ACTION

13

FRAUDAND DECEIT...............................................................................................................

14

SECOND CAUSE OF ACTION

15

FRAUDAND DECEIT...........................................................................................................................

16

THIRD CAUSE OF ACTION

52

AIDINGAND ABETTING FRAUD AND DECEIT....................................................................................

54

17

18

FOURTH CAUSE OF ACTION

BREACH OF DUTY

OF

TRUST

AND

CONFIDENCE..............................................................................

55

19

FIFTH CAUSE OF ACTION

20

21

22

23

DUTY OF TRUST AND CONFIDENCE.......................................

57

BREACHOF FIDUCIARY DUTY..........................................................................................................

58

AIDING

AND

ABETTING BREACH

OF

SIXTH CAUSE OF ACTION

SEVENTH CAUSE OF ACTION

AIDING

AND

ABETTING BREACH

OF

FIDUCIARY DUTY...................................................................

60

24

EIGHTH CAUSE OF ACTION

25

UNFAIR COMPETITION......................................................................................................................

61

26

NINTH CAUSE OF ACTION

27

VIOLATIONS OF CALIFORNIA CORPORATIONS CODE 25400 AND 25500 ....................................

28
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COMPLAINT

ti

TENTH CAUSE OF ACTION

VIOLATIONS

OF

CALIFORNIA CORPORATIONS CODE 25401

AND

25501 .................................... 63

ELEVENTH CAUSE OF ACTION

VIOLATIONS

OF

CALIFORNIA CORPORATIONS CODE 25504. 1 ........

63

64
PRAYER FOR RELIEF.............................................................................................................
5

DEMAND FOR JURY TRIAL...............................................................................................

64
6

9
10

11

12

13

14

15

16

17

18

19
20

21

22

23

24

25

26

27

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COMPLAINT

III

IN

INTRODUCTION

This case arises out of deliberate acts of corporate betrayal in the consumer

1.

electronics industry. Defendants, including Jimmy Iovine and Andre Young, a/ k/a Dr. Dre
Dre"),

engaged in a conspiracy and course of conduct to improperly control Monster' s

incredibly successful engineering, manufacturing, marketing, distributing, and sales channels of

the " Beats By Dr. Dre" headphones, as well as Monster' s intellectual property.

2.

In January 2008, Iovine and Dre, acting as Beats, entered into a partnership with

Monster to develop and promote Monster' s " Beats By Dr. Dre" product line.
3.

In September 2011, months before Monster' s agreement with Beats was set to

10

expire, Defendants improperly terminated the arrangement through a " Change of Control"

11

provision,

12

claiming

51%

interest in Beats had been purchased by HTC. By exercising their

Change of Control" rights in a sham transaction with HTC, Defendants fraudulently acquired

13

Monster' s " Beats By Dr. Dre" product line, including all development, engineering,

14

manufacturing, marketing, distributing, and retail rights Had the partnership expired on its own

15

terms, there would have been no transfer of Monster' s " Beats By Dr. Dre" product line,

16

including all development, engineering, manufacturing, marketing, distributing, and retail rights.

17

Defendants also absconded with Monster' s global distribution chain, key retail relationships, and

18

intellectual property.

19

4.

In July 2012, less than thirty days after Beats took over Monster' s " Beats By Dr.

20

Dre" product line, Beats repurchased the shares that had allowed the sham " Change of Control"

21

transition to occur. At that point, Defendants had improperly acquired a company that had been

22

built in a partnership with Monster. Beats set about to deceptively re -write history by claiming

23

sole responsibility for the success of Monster' s " Beats By Dr. Dre" product line. Beats

24

manufactured a false narrative to erase the contributions of Monster and Noel Lee in the eyes of

25

the public, including dealers, Beats consumers, Monster consumers, and eventually Apple

26

shareholders. As a result of their corporate betrayal, Defendants were able to make hundreds of

27

millions of dollars on the sale of Monster' s " Beats By Dr. Dre" product line to Apple for $3. 2

28

billion in 2014, all to the monetary and reputational damage of Plaintiffs.

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COTCI-IETT, PURE
MCCAR-n IY, LLP

COMPLAINT

5.

As a company, Monster started when Lee recognized that not all audio cables

sound the same. Lee formed Monster to bring better audio cables to the market, improving the

sounds of all speakers, recording consoles, and video systems. Lee has proven his audio

expertise as a recording engineer and producer; he has been praised throughout the world by

internationally -recognized engineers, producers, and recording artists. Monster created ground

breaking, critically acclaimed audio products like the Turbine Pro In -Ear headphones.

6.

Monster and Lee operated in good faith in their dealings with Defendants about

Monster' s " Beats By Dr. Dre" product line and then found themselves the victims of

Defendants' scheme to misappropriate Monster' s " Beats By Dr Dre" know-how, engineering,

10

manufacturing, marketing, distributing, and sales channels that had been developed by Lee and

11

Monster. Monster designed and engineered Monster' s " Beats By Dr. Dre" product line; Monster

12

developed the sound and technology; Monster educated Defendants about developing,

13

engineering, manufacturing, marketing, distributing, and selling headphones; and Monster

14

leveraged all of its domestic and global distribution and retail relationships to successfully sell

15

Monster' s " Beats By Dr. Dre" product line. When Defendants had everything they needed, they

16

severed all ties with Monster and sold the Beats brand to Apple for $3. 2 billion. Defendants

17

made millions off the work of Lee and Monster. Because Defendants misappropriated the

18

19

20

Beats By Dr. Dre" technology and manufacturing and distribution channels, Monster and Lee
lost millions of dollars.
7.

This is not the first time Iovine, Dre, and others have engaged in this course of

21

conduct. These misdeeds are not isolated transgressions; rather, they exemplify a pattern and

22

practice

23

musicians, and electronic product developers with promises of growing a business as partners;

24

b) then extract the intellectual property, production, and supply mechanisms that underlie the

whereby taking the lead from Iovine

and

Dre- Defendants: ( a) lure entrepreneurs,

25

venture and

26

squeeze the trusting partner out of the equation; and (d) finally, sell the venture and take an

27

unfair share of the profits for themselves. This scenario is exactly what happened to Monster

that

create value; (

c) then, immediately before the enterprise is about to take -off,

28
LAW OFFICES
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MCCAIM1Y, LLP

COMPLAINT

and Lee. Defendants have engaged in these practices and been sued on numerous occasions for

I the same behavior set forth herein.

8.

Defendants not only stole Monster' s " Beats By Dr. Dre" product line, but they

also set about covering up the role of Lee and Monster and falsely claimed that Beats, through

Iovine and Dre, successfully spearheaded all of the designing, engineering, manufacturing,

production,

Dr. Dre" was a licensed marketing label for a line of Monster headphones. Defendants set about

recreating the

credit for the fundamental work done by Lee and Monster. Photographs showing the similarity

marketing,

and

distributing

of "Beats

By

Dr. Dre"

products.

Originally, "Beats By

history

of

the " Beats

By Dr. Dre"

brand

by

misinforming the

public and taking

10

between Monster' s " Beats By Dr. Dre" product line and the Beats Studio 2. 0 are attached hereto

11

as Exhibit 1.
9.

12

Beats, through Defendants Iovine, Dre, Paul Wachter, and Luke Wood, have

13

attempted to create the false public view that the company Beats, not Lee and Monster, was

14

responsible for designing, engineering, manufacturing, producing, marketing, and distributing

15

the " Beats By Dr. Dre" product line. Beats, through Iovine, Dre, Wachter, and Wood, asserts

16

that the entire success of the product line was due to Beats, giving no credit to Lee or Monster.

17

Beats, through Iovine, Dre, Wachter, Wood, and others, convinced Apple that Beats, not Lee and

18

Monster, was solely responsible for the success of the " Beats By Dr Dre" product line.
10.

19

Beats, through Iovine, Dre, Wachter, and Wood, has also engaged in unreasonable

false " Monster -bashing." In statements to Monster' s dealers, distributors, and retailers,

20

and

21

Beats has disparaged Lee and Monster, blaming them for issues concerning product development

22

and delivery. Beats did this to drive a wedge between Monster and its dealers, distributors, and

23

retailers for headphones and related audio products. As a direct result of Defendants' improper

24

conduct and misrepresentations, Monster and Lee have sustained millions of dollars in damages.

25

A.

BACKGROUND ON LEE AND MONSTER

26

11.

Plaintiff Noel Lee, Manager

of

Plaintiff Monster, LLC ("Monster"), based in

27

Brisbane, CA, is a musician, audiophile, and creator of various game changing technologies.

28

Lee has a love of music and a passion for the importance of sound. As an inventor of

LAW OFFICES

CO'I'CI-II!,,
rr, PI mE.
MCCAICI'I-IY, LLP

COMPLAINT

transformative technology, Lee is similar to Steve Wozniak and Ray Dolby. Lee started by

developing cables that put out incredible sound, and bringing better cables to market that

improved the sounds of all speakers, recording consoles, and video systems.
12.

According to five -time Grammy

winner

Bruce Swedien, " I won' t make a

recording without Monster cables. I was knocked out by the truly dramatic enhancement in

sonic quality, the outstanding clarity, the marked increase in dynamic range and the deep, tight

bass. When we heard the difference Monster made - the separation, the transparency, really, it

sounded as

Grammy

if Windex had been

nomination

10

went on

11

recorded music.

12

to

13.

put on a

for Frankie Valli

record and mix

filmy window." First publicly recognized in 1962 with

and

Michael Jackson'

the Four Seasons' "

s"

Thriller,"

Big Girls

Don't

Cry,"

Bruce

the best-selling album in the history of

In 1977, tinkering in his garage in San Francisco, CA, Lee discovered that copper

13

wires of different construction and material produced varying degrees of audio performance

14

when hooked up to loudspeakers. This insight resulted in a momentous breakthrough in audio

15

technology, from which Lee developed the first Monster Cable. The Monster Cable

1. 6

revolutionized the global audio market and changed the way producers, musicians, and the

17

public consumed music. For his efforts, Lee has been praised by internationally -recognized

18

recording engineers and producers.

19

14.

Lee founded Monster 35 years ago with his premium audio cables, creating a new

20

category of products for distribution that focused on putting the consumer and the retailer first

21

through innovation and education. He repeated the feat with power products, transforming the

22

category and making them an essential part of every home theater. Lee' s most recent

23

accomplishment was to disrupt the headphone industry when Monster launched " Beats By Dr.

24

Dre" headphones, endowing the Beats line with Monster designing, engineering, and

25

manufacturing know-how and

26

retailers to bring premium headphones to retail stores. Lee is an industry icon and innovator,

27

leading the way in marketing, designing products, and helping retailers reach profitability, while

28

simultaneously changing the way consumers listen to music. He also brought live music to the

LAW OFFICES
COTCIIFTT, PITRF,
MCCAinHY, LLP

COMPLAINT

leveraging Monster' s relationships and proven track record with

International Consumer Electronics Show (" CES"),

concert featuring music legends including James Brown, Ray Charles, Rod Stewart, Diana Ross,

Fleetwood Mac, Earth, Wind and Fire, John Legend, Alicia Keys, and Mary J. Blige. Lee

founded Monster based

15.

on

sponsoring an annual CES awards show and

the mantra, " Always Lead, Never Follow."

In 2006, Lee and Monster again revolutionized the audio market by redefining the

high-performance headphone industry. Lee had a vision of how to design and engineer

headphones that delivered exceptional sound quality and could reproduce today' s music, like hip

hop, rock, and dance. Lee also wanted headphones that could handle the power and bass, while

still having the audio precision of a recording studio. Through breakthroughs in engineering,

10

Lee and Monster developed the technology that ultimately became the acclaimed " Beats by Dr.

11

Dre" headphones, with the first headphone line aptly named " Studio."

12

B.

LEE AND MONSTER ENGINEER THE " BEATS By DR. DRE" SUCCESS

13

16.

As early as 2005, the success Lee and Monster engineered for headphones came

14

about as a result of Monster working with music labels on surround sound music. In parallel,

15

Lee and Monster had been developing ground breaking audio products like the critically

16

acclaimed Turbine Pro In -Ear headphones. The reviews for Monster' s Turbine Pro were viewed

17

as a breakthrough by consumers, audio reviewers, engineers, and producers and established Lee

18

and Monster as the " go -to" company for headphones.

17.

19

In October 2005, Iovine and Dre approached Lee in Brisbane, CA about

20

developing speaker technology Lee convinced Iovine and Dre that speakers were dead and the

21

future was high-end headphones. Photographs of the first meeting of Lee, Iovine, Dre, Kevin

22

Lee, and Monster employees at Monster' s offices in Brisbane in October 2005 are attached

23

hereto as Exhibit 2.

24

18.
Dre

In November 2005, Lee and his son Kevin went to Santa Monica to give Iovine
in

25

and

26

months of discussions, Iovine and Dre abandoned Monster to pursue a partnership with SLS

27

International, Inc., Pentagram California, and Jibe Audio in Los Angeles, CA. After the SLS

an " education

sound,"

explaining why it was not a big speaker world anymore. After

28
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COMPLAINT

arrangement fell apart due to the conduct of Iovine and Dre, they returned to Monster to see if

they could resurrect the partnership.

19.

Iovine and Dre presented Lee with an SLS Pentagram design drawing for

headphones, but no viable headphone technology. Lee informed them the SLS headphones, as

designed, would not work: they were too big, bulky, and boxy, with extremely poor sound

quality. Saddling the company with extraordinary risk, Lee agreed to take his years of

headphone research and speaker development and committed the Monster engineering team to a

massive headphone technology research and development effort. The Monster team working on

the " Beats By Dr. Dre" product line grew to 100 employees at the Company' s Brisbane offices.

10

Monster hired the internationally famous product designer and former Apple employee, Robert

11

Brunner, to develop the industrial design with Monster. Monster financed the entire effort and,

12

working on both audio engineering and industrial mockups, Monster built more than 30

13

handcrafted and tuned prototypes before the final version was ready to test. The final version

14

was able to successfully reproduce for the first time what today' s music artists and producers,

15

like Dr. Dre and willd am, wanted the listener to hear. For the first time a headphone had the

16

accuracy of a music studio, with the power of a nightclub or a live concert venue. There was

17

literally nothing like it before in the headphone market.

20.

18

When Dre put on the newly -designed final version of the Monster headphones

listened to them, Dre

19

and

20

wearing the Monster -designed Studio headphones is attached hereto as Exhibit 3. These

21

headphones went on to become the `Beats By Dr. Dre" Studio line of high-end headphones.

22

21.

shouted out

to

everyone available, "

That' s the

shit!"

A photo of Dre

In January 2008, as a result of Monster' s development efforts and discussions

23

with Iovine and Dre, Monster entered into a License and Promotion Agreement with Iovine and

24

Dre. However, this case is not about a breach of the 2008 License and Promotion Agreement.

25

After the deal was struck, Monster handled all designing, engineering, manufacturing,

26

production, marketing, and distribution of "Beats By Dr. Dre" headphones in exchange for a

27

license to the Beats brand

28

did all the work, financed the entire effort, and paid Iovine and Dre a royalty for their marketing

LAW OFFICES
CUIUM IT, PrI1tE
MCCAIVrHY, LLP

COMPLAINT

and some

celebrity marketing

by Iovine

and

Dre.

Simply put, Monster

efforts. At the time, Iovine and Dre had no employees, no engineers for headphone technology,

and had no role in engineering or developing the " Beats By Dr. Dre" high-end headphone line.

Lee and his Monster team did all the engineering and provided all the financing behind the

5'

Beats By Dr. Dre" sound.

22.

Also in January 2008, at the CES in Las Vegas, Monster announced its

6!

partnership with Iovine and Dre and Introduced the Monster line of "Beats By Dr. Dre" Studio

headphones. Photos of Lee, Iovine, and Dre at the 2008 Monster CES press conference are

attached hereto as Exhibit 4.

10

11

12

23.

In July 2008, the Studio headphones arrived at retail stores

A photo of

Monster' s " Beats By Dr. Dre" Studio headphones is attached hereto as Exhibit 5.
24.

Later, Monster introduced additional lines of "Beats By Dre" headphones,

including.

13

a. "

Beats Tour" in -ear headphones ( introduced at CES);

14

b. "

Beats Solo" ( introduced In New York);

15

C. "

HeartBeats

by Lady Gaga" the first artist line of headphones

introduced in New York);

16

17

d. "

Beats Solo Justin Bieber Edition";

18

e. "

Beats PRO," " Beats Solo HD Product ( RED),"

and "

Diddy Beats" ( all

introduced at CES);

19

f. "

20

Beats Solo HD Yao

Ming"

and "

Beats Studio Yao

Ming" ( introduced

in Asia);

21

22

g. "

Powerbeats" created with LeBron James; and

23

h. "

iBeats."

24

A photograph showing displays for Monster' s " Beats By Dr. Dre" product line is attached hereto

25

as Exhibit 6.

26

25.

In August 2009, the License and Promotion Agreement was amended and

27

restated

28

Over the ensuing two

LAW OFFICES
COTCHEXF, PITRF..
MCCAR:my, LLP

to

add

Beats Electronics LLC (" Beats")

COMPLAINT

years, "

as a party and to add products to the license.

Beats By Dr. Dre" headphones became a phenomenal success and

7

market -leader in the lifestyle, high-performance headphone industry, generating significant

revenue to Defendants. Monster revolutionized how headphones were made, sold, and marketed.

While

a product

line for Monster, " Beats

100+ headphone category

chart

By

Dr. Dre"

showing that,

gained over

as of

60% of the market in the

February 2012,

over

60%

of

the $ 100+

headphones were Monster' s " Beats By Dr. Dre" product line is attached hereto as Exhibit 7.
26.

interests

Lee'

offered a

In August 2009, to strengthen the Monster -Beats partnership and to further align
with

Iovine, Dre,

and

Wachter all

of whom owned

interests in Beats Lee was

5% interest in Beats. In purchasing that 5% interest, Lee reposed a great deal of trust
A

and confidence in Iovine, Dre, and Wachter. As a minority member of Beats, Lee expected that

10

Iovine, Dre, and Wachter would fulfill their fiduciary duties, including the duties of loyalty,

11

candor, and good faith and fair dealing. What ensued was a series of covert acts designed to

12

steal away the value created by the Monster -Beats partnership to the exclusive benefit of Beats,

13

Iovine, Dre, and Wachter, and to the detriment of Monster and Lee.

14

C.

DEFENDANTS CONSPIRE TO BETRAY LEE AND MONSTER

15

27.

From the beginning of their relationship with Lee and Monster, Iovine, Dre, and

16

Wachter intended to build a company, Beats, that they would then sell to a major technology

17

corporation for billions of dollars, to the exclusion of Monster and Lee. To succeed at that plan,

18

Iovine, Dre, and Wachter had to create an event (real or not) that would trigger Monster turning

19

all the technology and the product line over to Beats. In other words, if the contractual

20

arrangements between Beats and Monster terminated without a change of control, Beats would

21

not have gained control of Monster' s headphone engineering, manufacturing, and marketing

22

efforts, as well as Monster' s supplier, distribution, and sales networks. If Iovine and Dre entered

23

into an agreement that resulted in a Change of Control, then that event would allow Beats to

24

assume complete manufacturing, promotion, distribution, and sales of the " Beats By Dr. Dre"

25

product line, without any compensation to Monster or Lee.

26

28.

On Aueust 10, 2011, without first consulting Monster, Beats announced a

27

supposed strategic partnership and investment in Beats by HTC Corporation, HTC Europe

28

Co., LTD.,

LAW OFFICES
CorrCI-Iorr, PInu_;
MCCAR-nIY, LLP

and

COMPLAINT

HTC America

Holding, Inc.

(collectively, " HTC"),

whereby HTC allegedly

8

51%

acquired a

transaction triggered a " Change of Control" provision in the License and Promotion Agreement

that divested Monster of its license and business relationship with Beats, requiring Monster to

transfer virtually all intellectual property to Beats, and costing Monster millions in transition

membership interest in Beats, supposedly for $309 million. Conveniently, the

I costs and lost revenue.

29.

Neither Monster nor Lee were made aware of the Beats/ HTC strategic partnership

and investment before it was consummated, nor was Lee given the right to vote on or invest

further in Beats, when Lee had been told that he would have a first right of refusal for any new

investment opportunities.

10

30.

On September 9. 2011, one month later, Beats gave notice that it was terminating

11

the incredibly successful Amended License Agreement with Monster. Conveniently, the

12

Beats/ HTC transaction had triggered the " Change of Control" provision in the Amended License

13

Agreement that allowed Beats to assume complete manufacturing, promotion, distribution, and

14

sales of the " Beats By Dr. Dre" product line. Iovine explained the HTC transaction as one where

15

HTC supposedly

16

payable in stages.

17

31.

agreed

to

purchase a

51%

membership interest in Beats for $300 million,

The timing of the Beats/ HTC transaction that triggered the " Change of Control"

18

provision is significant: it occurred months before the Amended License Agreement was set to

19

expire. If Beats had not exercised the " Change of Control" provision in the Amended License

20

Agreement, the Amended License Agreement would have expired on its own terms and Beats

21

would have lost its ability to assume complete manufacturing, promotion, distribution, and sales

22

of the " Beats By Dr. Dre" product line.

23

32.

Since 2008, Monster had devoted a majority of the Company' s resources to

24

developing, engineering, manufacturing, marketing, and.distributing Beats products, as well as

25

growing the Beats brand. During the 2008-2012 timeframe, Monster put development,

26

distribution, and marketing of its own Monster -branded headphones as a low priority and

27

leveraged its research, development, manufacturing, marketing, and distribution networks to

28

make Beats successful. Under the agreement with Beats, Monster was restricted in its ability to

LAW OFFICES
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MCCARniY, LLP

COMPLAINT

11,

market and sell non -"Beats By Dr. Dre" Monster -branded headphones that had certain design

features ( e g.,

on -ear, over -ear, etc.) and were sold within certain price points.

33.

On October 6. 2011,, Lee met with Beats representatives TJ Grewal, Denise

Morales, and Luke Wood in London to discuss cooperation between Beats and Monster on sales

and channel issues, including co -approval of all new dealers, as well as domestic and

international distributors. It also was agreed that there would be partnership team meetings

between Monster and Beats every two weeks. Finally, it was agreed that Beats would not solicit

Monster employees.

10

11

34.

In the meetings and conference calls, the Beats representatives present often

stated that the transition issue also needed the approval of HTC.
35.

During the

Beats for

Monster -Beats

separation -

taking advantage of the fact that Monster

60% of its annual revenue and made its other standalone headphone

12

relied on

13

product

14

Monster' s relationships with contract manufacturers, distributors, and retailers. Beats took

15

Monster' s development efforts, patents, manufacturing contacts, distribution and retail channels

16

17

18

lines

over

low priority Beats

everything necessary to

promote

strong-armed Monster into concessions that compromised

the " Beats

By

Dr. Dre"

product

line all the while cutting

Monster out of the revenue stream.

36.

Beats demanded that Monster deliver immediate control of a majority of the

19

Monster accounts receivables for the " Beats By Dr. Dre" product line and the dealer list ahead of

20

schedule

21

receivables for the " Beats By Dr. Dre" product line to secure bank financing, because Beats had

22

no money ( despite the supposed infusion of capital from HTC) and HTC claimed it was not

23

willing to provide Beats with a loan. Representatives of Beats stated the Monster accounts

24

receivables of the " Beats By Dr. Dre" product line were necessary for Beats to stay in business

25

and without these receivables, Beats would suffer great harm.

26

27

37.

Representatives of Beats told Monster that Beats needed Monster' s accounts

From November 29 to December 1. 2011, Wachter and Iovine put intense

pressure on Lee to close on the transition plan, including stating that Matthew Costello of Beats

28
LAW OFFICES

COMPLAINT

10

Comi-n rr,Prriu:
MCCAM n,LLP

in San Francisco to " CLOSE this deal." Included in Iovine' s emails on this issue .

and

were statements such as:

HTC

was

a. "

I say to him???? s
( ic)"

b. "

I' m in Taiwan (sac)

to

C. "

get

this deal done

I really have had

met with peter ceo of

Friday

if we

enough ...

don' t it

htc...

this is me talking we have

all could unravel" ( sac);

we have to close today nothing else is

acceptable.." ( sic); and

d. "[

9
10

I don' t know what to say I' m meeting with peter the ceo of htc what do

38.

I]t has to close has to ."

In December 2011, the transition sheet was signed by representatives of Beats

11

and Monster at Monster' s offices in Brisbane, CA, with threats that, if Monster did not sign,

12

serious problems would arise with HTC.

13

39.

In January 2012, the Monster -Beats split was announced to the press at CES.

14

What Beats failed to tell Lee or Monster was that Beats engaged in the " Change of Control"

15

transaction solely to exclude Monster and Lee from future profits from the sale of the " Beats By

16

Dr. Dre" product line and, ultimately, the sale of Beats as a company, to Apple.

17

18

40.

On May 2. 2012, there was a significant transition plan meeting at Monster' s

headquarters in Brisbane, CA. Among the issues discussed were:

19

a.

Account logistic setup;

20

b.

Account transfers, including Amazon, InMotion, and Target Canada;

21

C.

Account transfer fees;

22

d.

Pricing;

23

e.

Payment terms;

24

f.

Inventory buy-back;

25

g.

Channel issues, including Monster' s ability to continue sales online; and

26

h.

Product allocation.

27

28
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41.

In June 2012, almost nine months after Beats exercised the " Change of Control"

provision and relying on the legitimacy of the HTC " Change of Control" transaction, Monster
COMPLAINT

11

executed a series of agreements memorializing the terms of the transition and separation from
I Beats.
42.

As part of the transition, Lee had to travel to China with Beats executives to

introduce Beats to the various Chinese companies and to authorize Beats to take over the supply

relationships for Monster' s " Beats By Dr. Dre" product line.

43.

Incredibly, on July 25, 2012, less than a month after signing the transition and

separation agreements, the founding members of Beats bought back half of the interest that HTC

had just

10

purchased

from Beats ( approximately 25. 5%

of

the

Company), thereby making the

Change of Control" excuse a complete sham.

44.

During the July 2012 time -frame, Monster also learned that HTC had provided

11

Beats with a $ 224 million loan, contrary to representations that Costello ( acting on behalf of

12

HTC) made to Monster in the previous Brisbane meetings.

13

14

15

45.

The Beats/ HTC supposed " Change of Control" transaction was a complete sham,

put in place so that Beats could acquire the entire " Beats By Dr. Dre" product line from Monster.
46.

In a Mal 27, 2014 conversation in Cambridge, Massachusetts, with Harvard

16

Business School Professor and HTC Corporation Board Member David Yoffie, David Tognotti

17

Monster' s General Counsel, General Manager, and Vice President of Operations) and Leo Lin

18

Monster' s Chief Financial Officer), learned that Beats orchestrated the HTC deal with one

19

purpose: to trigger the " Change of Control" provision and eliminate Monster and Lee from the

20

partnership. Yoffie

21

and Monster utilizing HTC in a sham transaction to trigger the ` Change of Control' provision to

22

get out of the relationship with Monster."

stated words

to the

effect: "

Iovine, Dre, and Wachter took advantage of Lee

23

D.

ELIMINATING LEE AS A BEATS SHAREHOLDER

24

47.

Beats took

aggressive steps

to

eliminate

Lee'

5%

interest in Beats. By

25

September 2012, on the heels of the HTC " Change of Control" transaction and sudden 25%

26

buyback by Beats, Lee was concerned that he was being kept in the dark by Beats about material

27

aspects of the business. Fearful that he did not have the required transparency vis-a-vis his

28
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COMPLAINT

12

investment in Beats, Lee

was pushed out.

48.

reduced

his interest in Beats from 5% to approximately 1. 25% as he

In September 201.3, Lee learned that Iovine, Dre, and Wachter had enlisted

Carlyle

private

and unbeknownst to Lee or Monster, Iovine, Dre, and Wachter were talking to Apple about a

potential sale. Carlyle paid $501 million for a 31 percent stake in Beats. Carlyle also invested

Group
equity

LP (" Carlyle"), the world' s second- largest manager of alternative assets, such as
and

property, to buyout HTC'

remaining 25%

interest in Beats. Simultaneously

13 million for a 5 percent interest in Beats Music, the company' s subscription music -streaming
service.

Thus, Carlyle effectively

replaced

HTC.

In public filings concerning the transaction,

10

HTC disclosed that it

11

Beats also repaid a $ 150 million note held by HTC.

49.

12

his

received $ 265 million

for

its

remaining 25% interest in Beats and that

On September 13, 2013, as part of the Carlyle acquisition, Wachter advised Lee
1. 25%

13

of

14

note from Lee to HTC as part of the " Change of Control" deal, Lee would have to immediately

15

pay HTC $ 3 to $ 5

16

Lee under the promissory note was much closer to $3 million, not $5 million. Wachter offered

17

Lee an alternative: Lee could cause Beats to purchase Lee' s remaining shares for gains of

18

approximately $5. 5 million. Lee asked Wachter whether Beats had any liquidity events on the

19

horizon. Wachter

20

on

21

obligations as a

the horizon."

50.

million

to

shareholder. Wachter informed Lee that, pursuant to a promissory

retain

responded: "

his 1. 25%

in Beats. In truth, Wachter knew any payment by

There will be no liquidity event in the next year or two; nothing is

This statement was false and Wachter knew it was false when he made it.

On September 30, 2013, Lee

asked

Luke Wood Beats' President whether

22

Beats had any liquidity events on the horizon. Echoing Wachter, Wood similarly responded that

23

there was nothing big in the near future. Wood said that his time was completely occupied by

24

working on Beats' supply chain.

25

26

51.

Based

on

these

representations,

Lee

sold

his remaining 125% interest in Beats

back to Beats.

27

28
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COMPLAINT

13

E.

APPLE ACQUIRES BEATS FOR $ 3. 2 BILLION

52.

In May 2014, less than eight months later, Lee learned that Apple was acquiring

Beats for a reported $3.2 billion, Apple' s largest acquisition as of that date. Lee' s interest in

I Beats would have been worth in the tens of millions of dollars. Monster also would have shared
in the purchase price of the Apple -Beats transaction
53.

Carlyle nearly doubling its investment for its timely, albeit short, stint as a Beats investor.

The investment of more than $500 million by the Carlyle Group resulted in

54.

Iovine and Dre made hundreds of millions of dollars as a result of the Beats -

Apple deal. Dre is now listed by Forbes Magazine as having an annual income of "an

10

astronomical $ 620 million

11

this year's Celeb 100, but the highest yearly earnings total of any entertainer ever evaluated by

12

FORBES."

13

deal would have been worth over $100 million. Iovine, Dre, Wachter, and Wood made hundreds

14

of millions of dollars on the Apple -Beats transaction.

not only the best year of his career and tops among the names on

15

Had Lee

55.

retained

his

original

5% interest in Beats, his total stake in the Beats -Apple

On May 28, 2014, belying the September 2013 statements by Wachter and Wood,

16

Apple Senior Vice President Eddy Cue and Iovine stated the Apple -Beats deal was several years

17

in the

18

19

were

20

President, respectively knew

21

inception to execution.

22

23

24

25

26

27

28
LAW OFFICES
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MCCAirn IY, LLP

making.

can achieve

In fact, Iovine publicly

this

at

Apple."

said

he

was

working

on

the Apple deal in 2012: " I know

The deal negotiations, including extensive due diligence by Apple,

underway in September 2013

and

Wachter

and

Wood a Beats Board Member and Beats

and actively participated in the Apple -Beats purchase, from

F.

DEFENDANTS IMPROPERLY ERASE LEE AND MONSTER FROM HISTORY

56.

Not only did Defendants seek to steal Monster' s " Beats By Dr. Dre" product line,

they also set about covering up the role of Lee and Monster in successfully spearheading all of

the designing, engineering, manufacturing, production, marketing, and distributing of "Beats By

Dr. Dre"

products.

Originally, " Beats By Dr. Dre" was essentially a marketing label for a line of

Monster headphones. Defendants set about to re- create the history of the " Beats By Dr. Dre"
brand without giving appropriate credit to Lee or Monster, all the while using Monster' s funds to
COMPLAINT

14

support their marketing effort. Defendants built the Beats name on Monster' s back, and then

attempted to re -write history by erasing Lee and Monster' s names from the product' s history.

Photographs showing the similarity between Monster' s " Beats By Dr. Dre" product line and the

Beats Studio 2. 0 are attached hereto as Exhibit 1.

57.

Trying to change history, Iovine, Dre, Wachter, and Wood have attempted to

create the false public view that the company Beats, not Lee and Monster, was responsible for

designing, engineering, manufacturing, producing, marketing, and distributing the " Beats By Dr.

Dre" product line. In public statements and interviews, including on the American Idol TV

show, Iovine, Dre, Wachter, and Wood have asserted that the entire success of the " Beats By Dr.

10

Dre" product line was due to Beats, giving no credit to Lee or Monster Beats, through Iovine,

11

Dre, Wachter, Wood, and others, attempted to convince Apple that Beats, not Lee and Monster,

12

was solely responsible for the success of the " Beats By Dr. Dre" product line.
58.

13

Not satisfied with removing Monster' s names from the products' successful

Defendants have constantly

14

history,

15

CES in 2012 and 2013, Defendants directly, and through their agents, attacked Monster in

16

meetings with Monsters' sales representative and dealers. Beats told Monster' s distributors and

17

retailers to drop Monster headphones as a product line, forcing them to choose between Beats

18

and Monster. These sales representatives and dealers were the same distributors and retailers

19

that Monster had introduced to Beats. A

20

take Monster down!"

21

59.

engaged

in

senior

unreasonable and

Beats

false " Monster -bashing." At

executive announced: "

We are going to

Based on the feedback Monster received from dealers, distributors, and retailers,

22

Beats also was making unreasonable stocking and sales demands, as well as unrealistic forecasts.

23

These dealers, distributors, and retailers grew to distrust Beats. This lack of trust came to

24

damage the sales channels for Monster' s other products.

25

60.

Beats, through Iovine, Dre, Wachter, and Wood, are not telling the truth to the

26

public, dealers, Beats' consumers, Monster consumers, and Apple shareholders. In interviews

27

with publications like the Wall Street Journal and on NBC News with Special Anchor, Maria

28

Shriver, and in speeches before consumer electronics groups, Beats, through Iovine, Dre,

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COMPLAINT

15

Wachter, and Wood are improperly claiming that they developed not only the " Beats By Dr.

Dre" headphones, but also the supply, dealer, and retail relationships necessary to make the

product line a success.

61.

Beats, through Iovine, Dre, Wachter, and Wood, made material misstatements to

Monster and Lee to substantially increase their personal profits. HTC, also driven by greed,

aided and abetted Beats and the Individual Defendants with full knowledge of the fraud. The

Beats/ HTC transaction was a sham so that Beats could acquire the " Beats By Dr. Dre" product

line from Monster. Lee and Monster were deceived and kept in the dark about important,

pending Beats corporate transactions. As a direct result of Defendants' improper conduct and

10

misrepresentations, Monster and Lee have sustained millions of dollars in damages. They have

11

brought this action to right the wrongs Defendants have committed against them.

12

II.

PARTIES

13

A.

PLAINTIFFS

14

62.

Plaintiff Monster, LLC is a Nevada limited liability corporation established in

15

2002, registered to do! business in California, with its primary place of business at 455 Valley

16

Drive, Brisbane, CA.

17

63.

Plaintiff Noel Lee is a resident of the County of San Mateo, California. At all

18

times alleged herein, Lee was the Manager of Monster. Further, at all times alleged herein, Lee

19

served as the sole Trustee for the Noel Lee Living Trust.

20

64.

Lee is an audio and sound genius. When Lee was 9, he realized he was a total

21

equipment geek, building his own amplifiers and speakers. At the age of 16, Lee started playing

22

the drums. In 1971, after graduating with a Bachelor of Science degree in engineering from

23

California Polytechnic State University in San Luis Obispo, CA, Lee went to work at Lawrence

24

Livermore National Laboratory, a government nuclear research center, as a laser -fusion engineer.

25

In addition to his work in engineering, Lee was an audiophile and musician. In 1974, after

26

several years at Lawrence -Livermore Labs, following his passion for music, Lee left the

27

laboratory and toured with his band, Asian Wood. When the band broke up, Lee followed his

28

other passion: audio technology.

LAW OFFICEI

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COMPLAINT

16

65.

In 1977, working in his garage in San Francisco, CA, Lee discovered that copper

wires of different constructions produced varying degrees of audio performance when hooked up

to loudspeakers. Lee found and proved that the distortion could be generated in a cable that was

not only due to questions of resistance or induction but that was due to the time domain. Lee

then worked on developments to the power supply, especially concerning the protection of

overvoltage and clean power filters. From this discovery, Lee developed a high performance

speaker cable: Monster Cable. Prior to Monster Cable, most stereo systems were wired with

ordinary " zip -cord,"

of Monster Cable created a market where none existed, a new product category that

the same cable used for electrical household and lamp wire. The invention

10

revolutionized the audio market. Lee began producing the cables in his San Francisco garage in

11

anticipation of the first public appearance of Monster Cable: the 1979 CES in Chicago.
66.

12

In 1978, to commercialize the invention of the Monster Cable, Lee founded what

then known

Audio Sales Associates, Inc. (" Audio Sales").

13

was

14

name, first to Monster Cable Products, Inc., and later to Monster, Inc., a California corporation.

15

16

17

67.

as

Audio Sales later changed its

In 1983, Monster received its first U. S. patent for the innovative Xterminator

I electrical connector.
68.

Thirty-six years later, Lee and Monster have reinvented power management

18

technology with their Monster Power line of products, consumer electronic cleaning with

19

Monster Screen Clean, fire -proof surge protectors, and the high-performance " Beats By Dr. Dre"

20

headphones. In 2012, Lee received the lifetime achievement award and 9 innovative technology

21

awards at the Plus X awards. The only other recipients of the award were Dr. Amar Bose of

22

Bose Corporation and Sir James Dyson of Dyson Vacuums. Attached hereto as Exhibit 8 is a

23

timeline summarizing Monster' s business history.

24

69.

Lee has a unique ability to take his understanding of the world of technology and

25

determine what products will revolutionize the industry. First, it was Monster Cables, starting

26

with advanced audio cables based on advanced technology and design. In 1985, Monster

27

introduced the world' s first computer speaker: the MacSpeaker, designed for the Apple Mac.

28

Next was Monster Power, where Lee revolutionized the world of power management (e g., surge

LAW OFFICES
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COMPLAINT

17

Monster Screen Clean followed, making a huge impact on

111

protectors, power conditioners, etc.).

the way consumers understood how to clean their digital screens ( e g., TV screens, smartphone
screens,

laptop

screens, camera

lenses,

etc.).

In 2000, Monster devised Monster Game products,

a whole new product line for the PS2, XBOX, and Gamecube, along with 3 new line level

interconnect cables designed for powered subwoofers, earning Lee the prestigious " Entrepreneur

of the

Year"
70.

award

from Ernst &

Young

Now holding over 540 U.S. and international patents, with over 100 applications

pending, Monster, under Lee' s leadership, continually strives to discover and develop advanced

and innovative technologies to meet the needs of the consumer electronics industry. Monster

10

11

now offers more than 5, 000 products in over 160 countries worldwide.
71.

In 2006, Lee realized that, due to the MP3 revolution, there were hundreds of

12

millions of portable media players ( e g., iPods, Whones, Android devices, etc.) that were attached

13

with white earbuds, delivering terrible sound quality. Lee recognized the headphone

14

opportunity: make high performance headphones with the best sound and design. Lee' s

15

realization of this dream, and the resulting misappropriation of his engineering developments by

16

Defendants, form the basis of this lawsuit.

17

18
19

72.

Lee was nominated for three Grammys, including the George/ Benson Al Jarreau

Givin' It Up" Surround Sound/ CD release for 2006. Lee won two Grammys. Lee is executive
producer on all of the following releases:

20

a.

Vince Guaraldi Trio A Charlie Brown Christmas ( 2006)

21

b.

Various Artists 40 Years: Charlie Brown Christmas ( 2006)

22

C.

3 Doors Down Away

23

d.

Anjulie Anjulie (2007)

24

e.

Lee Ritenour Six

25

f.

George Benson Songs

26

g.

Tron

27

h.

Miles Davis Sketches of Spain (2011)

from The Sun ( 2006)

String Theory (2008)

Legacy Movie

and Stories ( 2010)

Soundtrack w/Daft Punk (2010)

28

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COMPLAINT

18

B.

DEFENDANTS

73.

Defendant Beats Electronics LLC is, and at all times herein alleged was, a

limited liability company duly organized and existing under the laws of the State of Delaware,

registered to do business in California, and having its principal place of business in Santa

Monica, CA. In perpetrating the misdeeds complained of herein, Beats acted in the county of

San Mateo, California, including at 455 Valley Drive, Brisbane, CA 94005.

74.

Defendant Andre Young a/ k/a Dr. Dre is, and at all times herein alleged was, a

resident of the County of Los Angeles, California. In perpetrating the misdeeds complained of

herein, Dre acted in the county of San Mateo, California, including at 455 Valley Drive,

10

11

Brisbane, CA 94005
75.

Dre is a rapper,and record producer, credited with producing albums for and

12

overseeing.the careers of many A -list rappers, including Snoop Dogg, Eminem, Xzibit, 50 Cent,

13

The Game, and Kendrick Lamar. Other than his celebrity status as a rapper, Dre' s primary

14

contribution was

15

76.

to bless Monster'

headphones

when

he

exclaimed: "

That' s the shit!"

Defendant James " Jimmy" Iovine is, and at all times herein alleged was, a

16

resident of the County of Los Angeles, California. In perpetrating the misdeeds complained of

17

herein, Iovine acted in the county of San Mateo, California, including at 455 Valley Drive,

18

Brisbane, CA 94005.

19

77.

Iovine is a respected but ruthless music mogul, a man who helped mastermind the

20

works of Bruce Springsteen and 50 Cent alike and co- produced the blockbuster movie 8 Mile.

21

Iovine was the most senior executive of Beats, was employed by UMG Recordings, Inc., and sat

22

as the Chairman and most senior executive of media empire Interscope Geffen A&M Records

23

24

Interscope"),

78.

a subsidiary of Universal Music Group.

Defendant Paul D. Wachter is, and at all times herein alleged was, a resident of

25

the County of Los Angeles, California. In perpetrating the misdeeds complained of herein,

26

Wachter acted in the county of San Mateo, California, including at 455 Valley Drive, Brisbane,

27

CA 94005.

28
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COMPLAINT

19

79.

Defendant HTC America Holding, Inc. is, and at all times herein alleged was, a

Washington corporation, with its California principal place of business in San Francisco, CA.

HTC America Holding, Inc is an overseas subsidiary of HTC Europe Co., Ltd. In perpetrating

the misdeeds complained of herein, HTC America Holding, Inc. acted in the county of San

Mateo, California, including at 455 Valley Drive, Brisbane, CA 94005.

80.

While not named as a defendant, at all times herein alleged, HTC Corporation

acted as an agent, representative, and co- conspirator of HTC America Holding, Inc. HTC

Corporation is, and at all times herein alleged was, a Taiwanese company with its California

principal place of business in San Francisco, CA. HTC Corporation, formerly High -Tech

10

Computer Corporation, is a Taiwanese manufacturer of smartphones and tablets. In perpetrating

11

the misdeeds complained of herein, HTC Corporation acted in the County of San Mateo, CA,

12

Including at 455 Valley Drive, Brisbane, CA 94005. HTC Corporation is not named as a

13

Defendant herein.

14

81.

While not named as a defendant, at all times herein alleged, HTC Europe Co.,

15

Ltd. acted as an agent, representative, and co- conspirator of HTC America Holding, Inc. HTC

16

Europe Co., Ltd. is, and at all times herein alleged was, a corporation registered under the laws

17

of the United Kingdom, with its California principal place of business in San Francisco, CA.

18

HTC Europe Co., Ltd. is an overseas subsidiary of HTC Corporation. In perpetrating the

19

misdeeds complained of herein, HTC Europe Co., Ltd. acted in the county of San Mateo, CA,

20

including at 455 Valley Drive, Brisbane, CA 94005. HTC Europe Co., Ltd. is not named as a

21

Defendant herein.

22

82.

HTC America Holding, Inc., HTC Europe Co., Ltd., and HTC Corporation are

23

collectively

24

Co., Ltd. and HTC Corporation, and each of them, were acting as the agents, employees, and/ or

25

representatives of HTC America Holding, Inc., and were acting within the course and scope of

26

their agency and employment with the full knowledge, consent, permission, authorization, and

27

ratification, either express or implied, of each of the other Defendants in performing the acts

28

alleged in this Complaint.

LAW OFFICES
COT(:I-iETT, PITRE
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referred

COMPLAINT

to herein

as "

HTC." At all times relevant to this Complaint, HTC Europe

20

83.

As members of the conspiracies alleged more fully below, HTC America

Holding, Inc., HTC Europe Co., Ltd., and HTC Corporation participated and acted with or in

furtherance of said conspiracy, or aided or assisted in carrying out the purposes of the

conspiracy, and have performed acts and made statements in furtherance of the conspiracy and

I other violations of California law.

84.

HTC America Holding, Inc., HTC Europe Co., Ltd., and HTC Corporation acted

both individually and in alignment with the other Defendants with full knowledge of their

8'

respective wrongful conduct. As such, HTC America Holding, Inc., HTC Europe Co., Ltd., and

HTC Corporation conspired together with the other Defendants, building upon each other' s

10

wrongdoing, in order to accomplish the acts outlined in this Complaint.

11

C.

DOE DEFENDANTS

12

85.

The true names and capacities of the defendants named herein as Does 1 through

13

25, inclusive, whether individual, corporate, associate, or otherwise, are unknown to Plaintiffs

14

who therefore sue such defendants by fictitious names. Plaintiffs are informed and believe that

15

Doe Defendants are California residents, or individuals over whom this Court nevertheless has

16

jurisdiction. Plaintiffs will amend this Complaint to show such true names and capacities when

17

they are ascertained. Plaintiffs are also informed and believe, and based on such information and

18

belief, allege that defendants sued as Does 1 through 25, and each of them, are liable in whole or

19

part for the wrongful acts alleged herein.

20

D.

AGENCY; AIDING AND ABETTING, AND CONSPIRACY

21

86.

At all times relevant to this Complaint, Defendants, and each of them, were acting

22

as the agents, employees, and/ or representatives of each other, and were acting within the course

23

and scope of their agency and employment with the full knowledge, consent, permission,

24

authorization, and ratification, either express or implied, of each of the other Defendants in

25

performing the acts alleged in this Complaint.

26

27

87.

As members of the conspiracies alleged more fully below, each of the Defendants

participated and acted with or in furtherance of said conspiracy, or aided or assisted in carrying

28

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COMPLAINT

21

out the purposes of the conspiracy, and have performed acts and made statements in furtherance

of the conspiracy and other violations of California law.

88.

Each Defendant acted both individually and in alignment with the other

Defendants with full knowledge of their respective wrongful conduct. As such, Defendants

conspired together, building upon each other' s wrongdoing, in order to accomplish the acts

outlined in this Complaint.

89.

Defendants are individually sued as principals, participants, aiders and abettors,

and co- conspirators in the wrongful conduct complained of and the liability of each arises from

the fact that each has engaged in all or part of the improper acts, plans, schemes, conspiracies, or

10

transactions complained of herein.

11

III.

12

JURISDICTION AND VENUE

90.'

Defendants are subject to personal jurisdiction in California arising out of their

13

systematic and continuous contacts with this State and their purposeful acts and/ or transactions

14

directed toward California. Such contacts include, without limitation, their past

15

misrepresentations to Monster and Lee that were made in California, such as the exercise of

16

17

18

Change of Control" rights and the statements to induce Lee to sell his interests in Beats, and, on
information and belief, their presence and conduct of business in this State.
91.

Venue is proper in San Mateo County Superior Court pursuant to Code of Civil

19

Procedure sections 395 and 395. 5 because a substantial part of the events giving rise to the claim

20

occurred in this County. Defendants' course of conduct, as alleged herein, was to steal the

21

results of years of work by Plaintiffs in designing, engineering, manufacturing, producing,

22

marketing, and distributing the " Beats By Dr. Dre" product line. Defendants never intended to

23

honor their duties of trust and confidence that they owed to Plaintiffs. Defendants, and each of

24

them, were present in the County of San Mateo, including at 455 Valley Drive, Brisbane, CA

25

94005, for the following:

26

In October 2005, Iovine and Dre met with Monster and Lee in Bisbane, CA for deal

27

negotiations that ultimately proved unsuccessful.

28
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22

In June 2006, Iovine, Dre, and Wachter returned to Brisbane, CA to convince Monster

and Lee to partner with Iovine and Dre.

In Fall and Winter of 2011, to effectuate the sham HTC change in control, the following

representatives of Beats and HTC were present to negotiate and execute the transition

deal

counsel),

of

stated that Beats needed a substantial infusion of funds in order to successfully

accomplish the transition. As part of the negotiations, Costello and Wachter each stated

10

that HTC would not loan any funds to Beats. For example, Costello ( then a member of

11

Beat' s Board of Directors and COO of HTC Corporation) unequivocally stated that HTC

12

was not a bank and the HTC Board would not approve lending any funds to Beats. These

13

statements, made in Brisbane, CA, were untrue and Defendants knew they were untrue

14

when they made them.

15

In December 2011, Beats and Monster signed a transition deal sheet, premised on the

16

veracity of the sham HTC change in control, which set forth the preliminary duties of the

17

parties during the transition period. This transition deal sheet was executed by both Beats

18

and Monster at Brisbane, CA.

19

sheet:

Sales),

Costello, Wachter, Scott

Louis Wharton ( Beats'

and

Henry ( Beats'

outside counsel),

T. J. Grewal ( Beats' Vice President

CFO), Scott Galer ( Beats' outside

Denise Morales (Beats' Vice President

of

Products). The Beats representatives

In the Summer of 2012, again with Monster relying on the veracity of the sham HTC

20

change in control, Monster and Beats met in Brisbane, CA for negotiations to finalize the

21

Monster -Beats transition and separation.

22

On June 30, 2012, Monster and Beats executed a series of agreements memorializing the

23

terms of the final Monster -Beats transition and separation. These agreements were

24

executed by both Beats and Monster at Brisbane, CA.

25

92

The gravamen of this Complaint is Defendants' fraud and deceit and the aiding

26

and abetting thereof in Brisbane, CA, both in orchestrating and executing the HTC sham change

27

in

28

Defendants. But for Defendants' unabashed and repeated misstatements in Brisbane, CA,

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control and

in coercing Lee to

COMPLAINT

sell

his 5%

stake in Beats before the liquidity event known to

23

Monster would not have executed the transition and separation agreements, all of which

depended on the veracity of the sham HTC " Change in Control" transaction. Likewise, but for

Defendants' unabashed and repeated misstatements in Brisbane, CA, Lee would not have sold

his 5% stake in Beats and would have shared in the proceeds from the Apple acquisition of

I Beats.

93.

Despite HTC America Holding Inc.' s systematic and continuous contacts with

California and the County of San Mateo, it has not filed a statement with the California Secretary

of State that designates a principal office in California. Accordingly, venue is proper in any

county in the state, including San Mateo County. Plaintiffs' motives for filing in San Mateo
immaterial. Easton

10

County

are

11

shows [

HTC America

12

office in

13

in any county in the

this State . [

94.

14

Holding
It' s] []

Superior Court ( 1970) 12 Cal. App. 3d 243, 246- 247 (" Nothing

Inc.][] ever designated the location and address of its principal

status is that of a foreign corporation only. As such, it may be sued

state") ( internal citations omitted)

Where, as here, the relevant agreements were " affected by fraud, undue influence,
here, " enforcement would be unreasonable

15

or

16

and unjust,"

17

Corp (

18

Ca1.App.4th 217, 230. Venue in this Court is just and proper

19

IV.

overweening

bargaining

power," and where, as

any forum selection clauses are null and void. Hayes Children Leasing Co v NCR

1995) 37 Cal.AppAth 775, 787 fn. 5, see also Alan v Superior Court (2003) 111

STATEMENT OF FACTS

20

A.

LEE ENGINEERS AND PROTOTYPES HIGII- PERFORMANCE HEADPHONES IN

21

SEARCH OF THE PERFECT SOUND

22

1.

23

95.

DEVELOPING HIGII-PERFORMANCE HEADPHONES

Determining superior sound is more difficult with headphones than with speakers

24

Each ear is different, and even details that seem relatively insignificant, like ear cup fit, can

25

dramatically influence the results In order to understand the difficulty in developing

26

headphones, there are some absolute terms that can be used to describe the listening experience

27

that go beyond just numbers, like measuring frequency response, which is common among many

28

manufacturer' s headphone design. If it were that simple, two headphones that measured

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COMPLAINT

24

similarly would sound the same This is why headphones come in so many types and varieties

and sound so different. With so many choices, which one is the right one?
96.

High quality headphones will reproduce all music accurately and allow the

listener to enjoy the music as if they were transparent. They do not sound like headphones, but

like live music. The sound feels and sounds lifelike Unfortunately, extraordinary headphones

are extremely rare When Lee was in search of the perfect sound, and learning how to achieve it

in a headphone, he had to combine engineering and art.

97.

Headphones, speakers, and microphones are the same in that they are all

transducers. In other words, they turn mechanical energy into electrical signals, and vice a versa.

10

Headphones are similar to speakers in that they are both transducers on the reproduction end.

11

Their job is to recreate the music signal, without adding sounds of their own. But that is almost

12

impossible since every mechanical device has sounds, resonances, and distortions of their own.

13

For example, when reproducing a bass kick drum, the recorded sound may stop, but because of

14

the inertia of the speaker or headphone diaphragm, it keeps on going. This is known as " decay"

15

over a period of time. Think of decay like a tuning fork that keeps on ringing. This is bad. It is

16

easily measured today in the form of a " waterfall" graph. The " speed" at which the music signal

17

occurs is also important to create a sense of realism. In real life, when a guitar pick hits the

18

string,

19

same way a speaker or headphone has trouble stopping, it can also have trouble accelerating fast

20

enough to accurately capture the initial impact of the music.

21

or when one

98.

hits

triangle, how fast

is

the initial impact? It is immediate. But, in the

The microphone is a speaker in reverse. It captures the music as the airwaves hit

22

its diaphragm. This also has a stop and start factor, as well as frequency response. That is why

23

recording engineers are fanatic over their selection of microphones for various instruments.

24

Likewise, singers choose among different microphones to reproduce their voice in the way they

25

want to hear it.

26

99.

Various technologies have been invented over the years to optimize some of these

27

parameters. Dynamic speakers with huge magnets help bass speakers stop and start accurately,

28

along with different cone materials that stiffen the speaker. On the high end, metalized mid -

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COMPLAINT

25

range speakers and tweeters help rapid stop and starting of the signal, but may have " ringing"

distortions of their own. Electrostatic speakers with extremely light diaphragms are the reference

used by many headphone and speaker listeners because of their ability to start and stop, but

because they do not move great distances, they may lack power and dynamic range.

100.

In headphones there are designs that help one parameter, but they are often at the

expense of another. Electrostatic headphones are considered the best, but they cannot move a lot

of air so they lack bass response. Dynamic headphones are all over the map in their ability to

accurately reproduce music, but represent a good compromise if designed properly. Balanced

armatures are fast in reacting; but are bad in stopping and producing resonances and sounds of

10

11

their own as can be seen in their waterfall measurements.

101.

There is one last difference between speakers and headphones. Everyone knows

12

that a speaker sounds best in a tuned room that is designed for the speaker. That is how many

13

recording studios are designed. However, in a headphone, everyone' s ear is slightly different.

14

Obviously there is no room, but there is an ear cup on over -ear headphones, and an ear tip on in -

15

ear headphones. Both can dramatically affect the sound. Both are an " ecosystem" where a

16

number of parameters depend on one another to get the best results. That is why designing a

17

great headphone is knowing how to balance all of the parameters of the ecosystem to get the best

18

reproduction in sound. That is where the " art" and the " ear" are part of the design process.

19

102.

Two headphones that measure the same in frequency response can sound very

20

different. It is a combination of tests that will give us an indication of how a headphone will

21

sound. This is a simplified explanation Headphone housing, materials, driver design, and ear

22

cup design are only some of the other considerations in making a great headphone

23

103.

The final analysis is how it sounds to the critical human ear. How to " tune" all of

24

the parameters is the " art" in the design. Years of experience in knowing what to do and a

25

critical ear is a rare combination indeed. Lee has that rare combination of both years of

26

experience and a critical ear.

27

28
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26

I.

2.

104.

THE STATE OF HEADPHONES AS OF 2008

As of 2008, most people listened to music through some type of portable music

device, primarily headphones. The consumer was spending more money and time on their

portable music experience than on home or car audio. The devices that were driving the portable

music experience were iPods and mobile phones. For example, in 2007, over 40 million iPods

were sold. As part of this portable music experience, speaker sales were down and headphone

sales were growing dramatically.

9
10
11

105.
market

In late 2005, having pioneered the.high-performance speaker cable and led the

for high-performance

technology, Lee ever driven by the

itch sought to achieve new advancements in sound.

entrepreneurial

106.

power management

Lee brainstormed potential improvements to conventional speakers to increase

12

sound quality at low, medium, and high frequencies. First, Lee conceived of putting high-

13

definition speakers at critical points around a room to enhance the listening experience:

14

surround -sound. Still dissatisfied with the grandeur of the sound experience, the " eureka"

15

moment occurred when Lee envisioned surrounding the ear with rich, clear sound: high-

16

performance headphones. As with his development of the Monster Cable, Lee believed

17

headphones could be more than a conduit for sound, rather, they could be part of the music

18

19

experience.

107

To separate Monster from the competition, Lee envisioned a high-performance

20

headphone with superior sound and a " cool" factor with popular appeal. Lee immediately set

21

himself to prototyping high-performance headphones and surround -sound speakers. He

22

dispatched his son and Monster Vice President, Kevin Lee, to Los Angeles to find potential

23

celebrity product marketing and branding partners in rock, pop, and hip-hop for the projected

24

line of Monster Music.

25

B.

BRING HIGH- PERFORMANCE HEADPHONES TO MARKET

26

27

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MONSTER APPROACHES IOVINE AND DRE TO PARTNER WITH MONSTER TO

108.

In the second half of 2005, making the rounds in the upper echelons of the Los

Angeles popular music scene, Kevin pitched Monster' s ideas for surround -sound music to Steve
COMPLAINT

27

Berman of Interscope. After meeting with Kevin, Berman conveyed the business proposition to

Iovine

sneakers,

Kevin' s description of the Monster surround -sound concept. Iovme and Dre expressed interest

in " getting into" speakers and meeting in person with Lee at Monster.

and

Dre. At the time, Dre

do

speakers!"

109.

Speakers

Lee

his

to Iovine

build headphones together."

110.

line

of sneakers.

Iovine told him, " Don' t do

In October 2005, Iovine and Dre flew to Brisbane, CA, to discuss speaker

products.

10

considering

Iovine and Dre then learned about Monster and became fascinated by

vision

was

explained: "

and

are

dead; headphones

are

the

new speakers."

Lee described

Dre: " The future is not studio speakers. The future is headphones. Let' s

In November 2005, Kevin and Lee visited Iovine and Dre at Interscope' s offices

11

in Santa Monica to make a presentation on the future of speaker and headphone technology and

12

about how Iovine and Dre should partner with Monster, starting with headphones. Captivated by

13

Lee' s vision and the sheer sound quality of the Monster headphone prototypes, Iovine and Dre

14

were sold on the profitability of high-performance headphones. With the combination of Lee' s

15

engineering prowess, Monster' s entrenched production and distribution networks, and Iovine and

16

Dre' s A -list music, Hollywood, and sports connections, Lee, Dre, and Iovine sought to

17

revolutionize the way people consume music.

18
19
20

111.

branded headphones that did not involve either Iovine or Dre.

C. "

23
24

IOVINE AND DRE ABSCOND WITH MONSTER' S IDEA FOR HIGH- PERFORMANCE
HEADPHONES

21

22

In January 2006, at CES in Las Vegas, Monster introduced a line of Monster -

112.

In the first quarter of 2006, after successfully agreeing on the vision for high-

performance headphones, Monster, Iovine, and Dre sat down at the negotiating table to discuss
terms. From the outset, Iovine and Dre proposed onerous terms that put all the upfront risk on

25

Monster, while simultaneously purporting to give Iovine and Dre controlling rights to the front

26

end of the business and the vast majority of potential profits. Indeed, based on Iovine and Dre' s

27

negotiating posture, it was clear they did not intend to strike a deal with Monster.

28
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COMPLAINT

28

113.

and

Dre

Using Monster' s disagreement to outlandish proposed terms as a pretext, Iovine

severed negotiations with a phone call. "

We hate to do this to you, but we' re going with

I someone else."
114.

Iovine and Dre had abandoned Monster to pursue a deal with SLS International,

Inc., Pentagram California, Steve Lamar,

Los Angeles, CA. Starting in June 2006, using Lee' s blueprint and proposed business model,

Iovine and Dre enlisted the SLS Group to attempt to jumpstart their own high-performance

headphone business. To that end, Iovine and Dre trademarked " Beats By Dr. Dre" and

commissioned the design of a prototype headphone with giant ear cups, a thick, streamlined

and

Jibe Audio, LLC ( collectively the " SLS

Group")

in

10

headband, and enough gloss for a Formula 1 car. Unfortunately, this prototype and attempted

11

venture into high-performance headphones failed because Iovine, Dre, and the SLS Group lacked

12

Lee' s industrial design, mechanical engineering, and acoustical and electrical engineering

13

prowess and Monster' s manufacturing and distribution network.

14

15

16

115.

In October 2006, Iovine and Dre were sued by the SLS Group over their

improper attempt to take control of the headphone product.

116

After the SLS deal fell apart, Iovine and Dre returned to Monster. Iovine and Dre

17

presented Lee with the SLS Group' s design drawing for headphones, but no viable headphone

18

technology. Lee told them the SLS Group' s headphones, as designed, would not work: they

19

were too big, bulky, and boxy, with extremely poor sound quality.

20

D.

LACKING THE ENGINEERING ACUMEN AND PRODUCTION AND DISTRIBUTION

NETWORK

21

TO

COMMERCIALIZE " BEATS BY DR. DRE." IOVINE AND DRE

REALIZE THEY NEED A PARTNERSHIP WITH MONSTER

22

117.

Starting in the fourth quarter of 2006, Iovine and Dre had only the " Beats By Dr.

23

Dre" trademark and a mammoth, garish, very rough drawing of a " Beats By Dr. Dre" headphone.
24

To make matters worse, the prototype headphones had abysmal audio. Further, Iovine and Dre
25

had no engineering, production, or distribution network. Having unsuccessfully attempted to

26

commercialize Lee and Monster' s vision independently, Iovine and Dre returned to Monster to
27

convince Monster to partner with Iovine and Dre on audio, starting with headphones.
28
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29

118.

On January 7. 2008, after extensive negotiations dominated by Iovine and

Interscope, Dre, and Wachter, Monster, Iovine, and Dre entered into the original License and

Promotion Agreement ( the " License Agreement")

engineering, production, and distribution of "Beats By Dr. Dre" headphones in exchange for a

license to the Beats brand and certain marketing obligations by Iovine and Dre. Through their

celebrity connections, Iovine and Dre were going to infuse Monster' s " Beats By Dr. Dre"

product line with the glamor of sports and hip hop The term of the License Agreement was five

years. Plaintiffs are not suing for any breach of the License Agreement.

119.

whereby Monster agreed to handle

Saddling Monster with extraordinary risk, Lee took years of headphone research

10

and speaker development and committed the Monster engineering team to a massive headphone

11

technology research and development effort The Monster team working on the " Beats By Dr.

12

Dre" product line grew over time to 100 employees at the Company' s Brisbane offices. Monster

13

also hired the internationally famous product designer and former Apple employee, Robert

14

Brunner, to develop the industrial design with Monster. Monster financed the entire effort.

15

Working on both audio engineering and industrial mockups, Monster built more than 30

16

handcrafted and tuned prototypes before the final version was ready to test. Various prototypes

17

did not result in successful versions. For example, in February 2007, Monster worked on a " Dr.

18

Dre In Ear" earphone design. A copy of that design documentation is attached as Exhibit 9.

19

120.

The final version of the initial " Beats By Dr. Dre" headphones was able to

20

successfully reproduce for the first time the sound that today' s music artists and producers, like

21

Dr. Dre and will.i.am, wanted the listener to hear. For the first time a headphone had the

22

accuracy of a music studio, with the power of a nightclub or a live concert venue. There had

23

been literally nothing like the initial " Beats By Dr. Dre" product line in the headphone market.

24

121.

Using the

rough " Beats

By Dr. Dre"

headphone

prototype

essentially a hollow

25

protruding

26

including unprecedented bass to cater to sports and hiphop music consumers. Monster created

27

and designed the " Monster Red" cable, which became iconic. To scale down and refine the

28
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the Monster engineering team developed and inserted cutting edge audio,

shell

Beats By Dr. Dre" headphone design, Monster worked with Robert Brunner. Lee and Monster
COMPLAINT

30

took the Brunner design and did all the acoustical, mechanical, and electrical engineering in
order to make the headphones realistic to manufacture. Finally, after more than 8 months of
work, more than 30 painstakingly handcrafted, tuned, and retuned headphone prototypes were
prepared, analyzed, and improved upon. As a result, the Monster team produced the first

production model. Beats Studio Monster had brought the " Beats By Dr. Dre" product concept
to reality.
122.
and

When Dre put on the newly -designed final version of the Monster headphones

listened to them, Dre

shouted, "

That'

the

A photo of Dre wearing the Monster -

shit!"

designed Studio headphones is attached hereto as Exhibit 3

10

11

12

become part of Monster' s " Beats By Dr Dre" Studio line of high-end headphones.
123.

In his book Ninja Innovation, published January 8, 2013, New York Times

bestselling author and Leader of the Consumer Electronics Association, Gary Shapiro, wrote:

13

14

These headphones went on to

Before Monster arrived, people connected their component audio

and video equipment with cheap, unbranded, generic cables. Noel

believed that consumers did not recognize that their entertainment

15

systems were only as good as their weakest link, the cheap cables,
so he set out to upend the market with several innovations. First,

16

relying on his physics background and high quality raw materials,

he created a line of cables that promised better, clearer sound and

17
18

19

images. Second, he created a business model that enables retailers

to earn much more by selling his cables compared to the generic

ones Third, Noel and his team (who are all available twenty-four
hours a day) invest heavily in training retail salespeople on the
benefits to consumers of using Monster cables "

20

The
21

22

23

results

spectacular

for the company, its

exaggeration to say that Monster retailers love Noel, his brand, and
his merchandising wizardry, which includes a live rock concert for
them

at

dreams
24

have been

customers, its team, and its retailers. In fact, it' s not much of an

every International CES

should never

die.)

show

in Las Vegas. ( Some

Among Noel' s triumphs is that he was

the -first to partner with the famous Dr. Dre to launch the large headphone craze that has swept the world."

25

26

27

Also amazing is that Noel became disabled by a spinal condition

that requires him to use a Segway to get around, but it doesn' t stop
him from traveling the world and navigating vastly different
international cities, most of which are not as disabled -friendly as

28

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31

the United States. And he generously supports a foundation that

provides Segways to our military veterans."

124.
3

Monster' s " Beats By Dr. Dre" audio technology developed by Lee and his team at

Monster had a precise set of specifications for features and functionality to maximize audio
performance across mobile, laptop, and standalone applications. Monster' s " Beats By Dr. Dre"
audio technology processing system had seven major components that needed to work together:
a.

Equalization: to overcome and correct for the deficiencies in the

sound reproduction chain to yield the desired response to the

listener' s ears;
9

b.
10

Compressor/ Limiter: to ensure that the heavy loads on the drivers

and electronics of the playback system produced by big sound stay

11

within safe limits;

12
C.

13

Bass Enhancement: a powerful algorithm that allows the speaker to

make real bass, right up to the limits of the driver, extending the

14

bandwidth by well over an octave with rich, clean bass output;

15

d.
16

Transient Expansion: properly tuned, allows the system to

reproduce a signal close to the 24 -bit master;

17
e.

18

Spatial Enhancement: restores the original width of the recording,

even when using closely spaced drivers, by separating and

19

independently processing the time, level, and spectral differences

20

that create the spatial field;

21

f.
22

Noise Cancellation: traditionally, noise cancellation destroyed

23

deep bass and high octaves. Monster developed the art of getting a

24

headphone to achieve noise cancellation without damaging the

bass or high octaves; and

25

26

g.

High -Powered Digital Amplifier: to reproduce both the power and

the bass.

27

28
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32

124.

In January 2008, Monster, Lee, Iovine, and Dre announced their

partnership at the CES in Las Vegas, where they debuted the Monster line of "Beats By

Dr. Dre" Studio headphones. Attached hereto as Exhibit 4 are photographs from the

unveiling of Monster' s " Beats By Dr. Dre" Studio headphones at the 2008 Monster CES

I Press Conference
123.

In July 2008, the Studio headphones arrived at retail stores with an initial price of

over $300.
124.

The plan was to create excitement around the " Beats By Dr. Dre" brand of

Monster headphones by mobilizing Monster' s massive retail distribution and deep sales floor

10

relationships, along with leveraging cross -merchandising and promotion across product

11

categories and distribution channels Monster, Iovme, and Dre also would use the celebrity

12

assets of Monster and Interscope as endorsers, advocates, and product reviewers across retail,

13

media, and viral marketing

14

125.

Starting in January 2009, Monster introduced additional lines of "Beats By Dr

15

Dre" headphones,

16

also invented the tangle -free cable and, acting in good faith towards Beats, chose to use the

17

tangle -free cable on the " Beats By Dr Dre" product line before using it on Monster' s other

18

products.

19

126

including

the " Beats Tour" in -ear headphones ( introduced

at

CES). Monster

Monster also spent substantial time and money developing a relationship with

20

their distribution channel and retailers to change the way headphones were sold Monster trained

21

its distributors and retailers that the headphone experience began with the name, reinforced by

22

the packaging, both working to create an emotion. For example, the first Monster product,

23

Monster Cable," had

24

difference!"

25

127.

Big," "Powerful,"

evoked an emotion of `

and " It' s gonna make a

Monster' s " Beats By Dr. Dre" product line had a huge influence on the

26

headphone market. For example, sports figures are constantly seen getting off the team bus

27

wearing headphones. Monster went to great lengths to develop the sell -through channels at the

28

retail level for the " Beats By Dr. Dre" product line. Monster built off its strong relationship with

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33

1
1

distributors, dealers, and retailers worldwide

These relationships had taken decades to build and

nurture. During the years Monster was developing its " Beats By Dr. Dre" product line, Monster

made developing, manufacturing, and marketing of its other, Monster -branded headphones a low

41 priority.
5

128.

Retailers were skeptical about the ability to sell premium headphones. Due to

trust in Monster to successfully create new categories of products in the past, these retailers

supported the launch of "Beats By Dr. Dre" because Monster promised it would stand behind the

product line. Lee stood before the Best Buy National Sales Conference and announced that the

Monster/Beats partnership would result in Best Buy customers discovering that premium

10

headphones allowed sound to really matter. Photographs of Lee making his announcements are

11

attached hereto as Exhibit 10. Lee also brought Iovine to retailer meetings and introduced

12

Iovine as Monster' s partner in the " Beats By Dr. Dre" product line. A photograph of Lee

13

introducing Iovine at a national sales conference is attached hereto as Exhibit 11.

14

129.

To market headphones, Monster sought to promote the tuning of the unique sound

15

offered by the headphones, a sound previously found only in-person. Monster advertised that its

16

headphones were better because of.

17

a.

Technology/ Sound;

18

b.

State of the Art Driver Materials, including PEN Diaphragms (additional

19

stiffness

20

C.

to

eliminate

distortion);

and

Monster Cable with XLM Extra Low Noise Technology.

21

A photograph showing banners prepared by Monster for its " Beats By Dr. Dre" product line is

22

attached hereto as Exhibit 12.

23
24

25

130.

As a result, the Monster brand, an established name in high performance audio,

was extended from cable products to headphones.

131.

When the " Beats By Dr. Dre" headphones were first introduced, Monster had

26

several lines of headphones and related products Monster initially marketed the " Beats By Dr.

27

Dre" line of Monster headphones by emphasizing that this was Dre' s first product endorsement.

28

Monster also utilized Dre' s dedication to sound quality and big bass. Monster developed

LAW OFFICES

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MCCAR-n IY, LLP

COMPLAINT

34

materials to show that Monster' s PEN Diaphragm Technology delivered unequaled transient

response. Working with Lee' s ground breaking inventions concerning a deep bass sound,

Monster promoted the remarkably natural sound of "Beats By Dr. Dre."

132.

Monster also promoted " Beats By Dr. Dre" with a membership in " Beats Club,"

an in-store technology hub including access to VIP events, free downloads, and eligibility for

promotions.

133.

On August 20, 2009, Monster and Beats entered into the Amended and Restated

License

Beats to the partnership, the Amended License Agreement granted Beats the right, subject to the

and

Promotion Agreement (the " Amended License Agreement").

In addition to adding

10

covenant ofgoodfaith andfair dealing, to terminate the relationship with Monster upon the

11

closing of a transaction that resulted in a bona fide change of control (the " Change of Control

12

Provision").

13

28, 2010 and April 30, 2011, respectively, in order to add additional products to the license.

14

Plaintiffs are not suing for any breach of the Amended License Agreement.

15

134.

The Amended License Agreement was further amended and restated on February

In September 2009, Monster and Beats announced the Beats Solo model

16

headphones in New York. Photos of the Beats Solo headphones are attached hereto as Exhibit

17

13. That same month, Monster and Beats also announced the First Artist Line HeartBeats by

18

Lady Gaga in New York.

19

20

21

135.

In October 2009, the Just Beats Solo Justin Bieber Edition arrived in stores.

Photos of the Just Beats Solo headphones are attached hereto as Exhibit 14
136.

In January 2010, Monster and Beats introduced the Beats PRO, Beats Solo HD

22

Product ( RED),

23

and packaging are attached hereto as Exhibit 15.

24

137.

and Diddy Beats at the CES in Las Vegas. Photos of the Beats PRO headphones

Diddy Beats had new, cutting edge engineering allowing users to play music at

25

low volumes with extreme clarity. An April 17, 2010 email from Lee to Diddy and copying

26

Iovine on the " superior low level listening" of Diddy Beats is attached hereto as Exhibit 16.

27

28
LAW OFFICES
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138.

Lee and several Monster engineers spent months developing a BeatBox speaker

with an iPod dock. A photograph showing the Monster team working on the BeatBox speaker is
COMPLAINT

35

attached hereto as Exhibit 17 Also in January 2010, Iovine and Susan Paley of Beats were

aware that buyers at Apple loved the Monster -produced BeatBox speaker with an iPod dock,

believing it could replace the Bose SoundDock in all stores.

139.

In January 2010, Iovine and Susan Paley of Beats also learned that buyers at

Apple

to Lee and Kevin, among others, about the meeting at Apple is attached hereto as Exhibit 18.

wanted

140.

to

sell

the Beats Solo HD Product ( RED). A January 20, 2010 email from Iovine

In February 2010, Monster and Beats introduced the " Beats Solo HD Yao Ming"

and " Beats Studio Yao Ming" in Asia. Photos of the " Beats Solo HD Yao Ming" and " Beats

Studio Yao Ming" headphones are attached hereto as Exhibit 19.

141.

10

In addition to headphones, Monster made breakthroughs in portable speakers for

11

Beats. For example, in Aprii 2010, Monster demoed a sound dock for Dre and Iovine. At the

12

conclusion of the

13

it to

14

and Iovine were like kids with new toys. They loved the sound. A photograph of Iovine

15

relishing the Monster sound dock is attached hereto as Exhibit 20.

16

17

sound

demo, Dre

just like this

142.

one."

and

Iovine

said words

to the

Build it just like it is; we want

By August 2010, Monster had a prototype ready for market. Dre

In September 2010, Monster and Beats introduced THE NEXT GENERATION

OF SOUND at the Best Buy Theater in New York City, including:

18

a.

BeatBox,

19

b.

PowerBeats with LeBron James,

20

C.

Beats PRO;

21

d.

iBeats; and

22

e.

JustBeats with Justin Bieber.

23

effect: "

143.

Developing a new line of headphones required months of work by numerous

24

Monster engineers. For example, in May 2010, Monster worked on the Gaga HeartBeats v. 2. A

25

copy of design documentation for the Gaga HeartBeats v. 2 is attached hereto as Exhibit 21. It

26

was not until June 2011 that Monster and Beats introduced the Gaga HeartBeats v. 2 into stores.

27

28
LAW OFFICES
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MCCAM-HY, LLP

144.

Modifying an existing line of headphones also required months of careful design

review and planning. For example, in November 2010, Monster was working on changes to the
COMPLAINT

36

PowerBeats line, created with LeBron James. A copy of the OPG Changing Request design

documentation for the LeBron PowerBeats headphone is attached hereto as Exhibit 22.

145

From 2008- 2012, "

Beats By Dr. Dre" headphones became a huge success and

market -leader in the lifestyle, high-performance headphone category, generating approximately

1. 5 billion in revenue. Attached hereto as Exhibit 23 are images showing a selection of the

products that Monster made for the " Beats By Dr. Dre" product line during 2008-2012.
146.

Set forth below is a list of honors awarded to Monster from 2006- 2013 in the

headphone and audio categories:

10

YEAR .

HONOREE/ WI NER

AWARD/ CATEGORY

Honoree

Innovation Awards/ High

Monster Music

Performance Audio

Presents: Away From

PRODUCT "

11

2006
12

The Sun Live From

13

14

Houston

2007

Winner

Plus X Awards

2008

Ionoree

Innovation Awards/

Monster iFreePlay(tm)

Headphones

for iPod Shuffle

Stuff Magazine Award " Best

Monster' s Miles Davis

Monster Music
Concept

15

16

17

2010
2012

Winner
Winner

Of CES"

In -Ear Headphones

Accessories

Nokia PurityTM Pro

Wireless Stereo

18

Headset by Monster
19

2012

Winner

Plus X Award

Noel Lee

2012

Winner

Plus X Award (Design)

Beats

2012

Winner

Plus X Award (Design)

NCredible NTune

2012

Winner

Plus X Award (Design)

Gratitude

2012

Winner

Plus X Award (Design)

Hara' uku Lovers

2012

Winner

Plus X Award (Design)

VEKTR

26

2012

Winner

Plus X Award (Design)

Purity

27

2012

Winner

Plus X Award (Design)

Diamond Tears

28

2012

Winner

Plus X Award (Design)

Inspiration

20

21

22

23

24

25

LAW OFFICES
COTCI-IE 1', PI RI;

MCCAR'n-IY, LLP

COMPLAINT

37

YEAR

HONOREE/ WINNER

2012

Winner

2012

Winner

AWARD/ CATEGORY

PRODUCT

Techlicious " Best

of CES"

Black Enterprise " Best New

NCredible Line
NCredible Ntune Line

Device for Entertainment"

L.

TO STRENGTHEN THE MONSTER -BEATS PARTNERSHIP, LEE PURCIIASES A 5%

INTEREST IN BEATS

147.

his interests

Executive Officer), Dre ( an approximately 15% Member in Beats

In August 2009, to strengthen the Monster -Beats partnership and to further align
with

Iovine ( an approximately 15% Member in Beats and Beats' then Chief

and

Beats'

co-

founder),

and

10

Wachter ( an approximately 1%

11

personal

12

Company. Lee' s interest in Beats vested over three years, and would be accelerated in the event

13

of a bona fide change in control. Further, Lee was given the right to make additional

14

investments in Beats if further membership units were offered for sale in order to retain his 5%

15

interest in the Company ( and to avoid dilution)

16

trust,

148

purchased

Member in Beats

and a

5, 000 Class B membership

Beats Board Member), Lee, through his

units

in Beats, representing 5% of the

By investing in Beats, Lee reposed a great deal of trust in Iovine, Dre, and

17

Wachter and, as a minority member, expected that Iovine, Dre, Wachter, and Wood (Beats'

18

President) would fulfill their fiduciary duties to him, including their duties of loyalty, candor,

19

and good faith and fair dealing. As described infra, Lee' s trust was misplaced as Defendants

20

conspired in the shadows to abscond with the value created by the Monster -Beats partnership to

21

the exclusive benefit of Beats and the Individual Defendants

22

F.

DEFENDANTS ORCIIESTRATE A SHAM ACOUISI'TION BY HTC IN ORDER TO

DIVEST BEATS FROM MONSTER

23

149.
24

25

It is now clear that, all along, Iovine, Dre, Wachter, and Wood intended to build a

company, Beats, that they would then sell to a major corporation for billions of dollars to the
exclusion of Lee and Monster

To succeed at that plan, Iovme, Dre, Wachter, and Wood had to

26

27

create an event (real or not) that would trigger Monster turning everything over to Beats. In
other words, if the contractual arrangements between Beats and Monster terminated without a

28
LAW OFFICES
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MCCAM n,LLP

COMPLAINT

38

change of control, Beats would not have gained control of Monster' s pioneering engineering

efforts, as well as Monster' s distribution and sales networks. However, if lovine, Dre, Wachter,

and

allow Beats to assume rights to complete manufacture, market, distribute, and sell the " Beats By

Dr. Dre" product line, without compensation to Monster or Lee.

Wood

closed a

150.

transaction that

resulted

in

a "

Change

of

Control," then that event would

In January 2011, Beats started this process by recruiting away Monster

employees. On January 3, 2011, Denise Morales, then Vice President of Sales and Channel

Marketing of Monster, unexpectedly quit Monster to join Beats. Morales had been at Monster

since January 1997. At the time she quit Monster, Morales was one of the executives

10

responsible for the Monster -Beats relationship and had been taught significant confidential

11

information by Lee and Monster.

12

151.

The next step was to create a sham " Change of Control" event. In March 2011,

13

Beats entered into a marketing and license arrangement with HTC. Under the Beats/ HTC

14

marketing and license arrangement, Beats licensed the " Beats" brand to HTC for certain lines of

15

HTC phones, as well as provided " Beats Audio" sound enhancements to those HTC phones.

16

152.

Plaintiffs are informed and believe and thereon allege that, as early as 2010,

17

Iovine, acting on behalf of Beats, had been in discussions with HTC concerning a marketing and

18

licensing arrangement. At the time, Plaintiffs were not informed that these discussions were

19

taking place. Plaintiffs are also informed and believe and thereon allege that Iovine had

20

meetings with HTC at the January 2011 CES in Las Vegas, NV. At the time, Plaintiffs were not

21

informed that these meetings were taking place.

22

153.

On August 10, 2011, without first consulting Monster or Lee, Beats announced a

23

strategic partnership and investment in Beats by HTC, whereby HTC acquired a 51 %

24

membership interest in Beats, supposedly for $309 million. HTC was given a seat on the Beats

25

Board of Directors, which seat was filled by Matthew Costello, the then -COO of HTC

26

Corporation.

27

28
LAW OFFICES
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MCCARTHY, LLP

COMPLAINT

39

154.

Neither Monster nor Lee were made aware of the Beats/ HTC strategic partnership

and investment before it was consummated, nor was Lee given the right to invest further in
I Beats.
155.

On September 9, 2011, Beats gave notice that it was exercising its option to

terminate the incredibly successful Amended License Agreement with Monster. Conveniently,

the Beats/ HTC transaction had triggered the " Change of Control" provision in the Amended

License Agreement that:

i

a.

Divested Monster of its license and business relationship with Beats;

b.

Allowed Beats to assume complete manufacture, promotion, distribution,

10

and sales of the " Beats By Dr. Dre" product line; and

11

156.

12

13

14

Cost Monster millions in lost revenue and transition expenses.

To effectuate the divestiture, Iovine sent a letter to Monster and the Noel Lee

Living Trust reiterating that HTC

300

agreed

to

purchase a

51 %

membership interest in Beats for

240 million of which was to be paid at closing and $ 60 million of which was to

million, $

15

be held in escrow for 2 years. Iovine' s September 9, 2011 letter is attached hereto as Exhibit

16

24.
157.

17

Plaintiffs subsequently learned that the HTC acquisition was structured so that

18

two separate HTC entities acquired interests in Beats- HTC America Holding, Inc. acquired

19

26, 100 Class B Units ( which

20

interest); and HTC Europe Co., Ltd. acquired 26, 100 Class B Units (which represented a 25. 14%

21

ownership interest

158.

22

23

We

note

and

represented a

25. 57%

25. 14% ownership interest

and

25. 57% voting

voting interest).

Downplaying the magnitude of the supposed Change of Control, Iovine stated:

that ...

the transaction

with

HTC

will result

in

a ` Change of

Control' ...

between

24

Beats and Monster, LLC" such that Beats will "provide notice to Monster no later than January

25

7, 2012 to terminate the License Agreement in

26

159.

Next, in

a crude

showing

connection with

of self-interest,

Iovine

the Change
stated "

of

Control." Id.

We want to make the

27

transition

28

that HTC, Beats, and Monster meet during the period of30 to 60 daysfollowing the closing to

LAW OFFICES
COTCiErr, PURE
MCCAM-HY, LLP

as smooth as possible

COMPLAINT

to

minimize

any interruptions to the Beats business. We propose

40

discuss how best to effectuate the transition of the business and the role ofMonster and/or Noel

Lee

during and after

160.

the transition period."

Id. (emphasis in original).

The early termination of the Beats/ Monster relationship presented a great hardship

to Monster. Since early 2008, Monster had devoted a substantial amount of the Company' s

resources to developing, engineering, manufacturing, marketing, and distributing Beats products,

as well as growing the Beats brand. During the 2008-2012 timeframe, Monster put development,

distribution, and marketing of its own Monster -branded headphones as a low priority and

leveraged its research, development, manufacturing, marketing, and distribution networks to

make Beats successful. Also, under the Amended License Agreement with Beats, Monster was

10

restricted in its ability to market and sell non -"Beats By Dr. Dre" Monster -branded headphones

11

that had

12

points.

13

14

15

certain

161.

design features ( e g., on

In September 2011, the

-ear, over -ear, etc.) and were sold within certain price

product " HTC

Meats," which was designed, engineered,

manufactured, marketed, and distributed by Monster, was available in retail stores.

162.

In October 2011, the

products "

HTC

urBeats" and "

Beats Wireless,"

which also

16

were designed, engineered, manufactured, marketed, and distributed by Monster, were available

17

in retail stores.

18

19

20

163.

23

24

25

26

27

28
LAW OFFICES
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product " Mixr,"

which was designed, engineered,

manufactured, marketed, and distributed by Monster, was available in retail stores.

G.

DEFENDANTS MAKE SIGNIFICANT MISREPRESENTATIONS DURING THE

NEGOTIATIONS SURROUNDING THE HTC TRANSITION

21

22

In December 2011, the

164.

In January 2012, Monster and Beats publicly announced the termination of their

relationship.
165.

In the

Monster

relied on

revenue

for 2012)

course of this

Beats for $750

and

had

put

its

Monster -Beats

million

annually in

standalone

taking advantage of the fact that

separation

revenue ( over

headphone business

60% of Monster' s annual

on

hold Beats

strong- armed

Monster into concessions that compromised Monster' s relationships with contract manufacturers,
distributors, and retailers.

COMPLAINT

41

166.

Negotiations that culminated in the transition agreements of June 30, 2012

occurred at Monster' s offices in San Mateo County. During the course of those negotiations,

Beats ( through Iovine, Wachter, and Wood) and HTC (through Matthew Costello, then-HTC' s

Chief

plan that required Monster to hand over its international production and logistics connections

and, critically, hand over its domestic retailers and international distributors and retailers, all at

Monster' s expense.

167.

10

11

Operating

Officer

and a

Board

member of Beats),

pressed Monster to agree to a transition

During the negotiations at Monster' s headquarters in Brisbane, CA, the following

representatives of Beats and HTC were present: Costello, Wachter, Scott Henry (Beats' CFO),
Scott Galer ( Beats'

outside counsel),

Beats' Vice President

of

Sales),

and

Louis Wharton (Beats'

outside counsel),

T.J. Grewal ( Beats' Vice President

Denise Morales

of Products).

The Beats

12

representatives stated that Beats needed a substantial infusion of funds in order to successfully

13

accomplish the transition. These individuals each stated that HTC would not loan any funds to

14

Beats. For example, Matthew Costello unequivocally stated that HTC was not a bank and the

15

HTC Board would not approve lending any funds to Beats. A photo memorializing these

16

discussions in Monster' s conference room is attached hereto as Exhibit 25.

17

168.

Monster complied with each of its obligations during the transition period. For

18

example, in Ma 2012, Monster trained its national retailers on the transition, including Best

19

Buy and Fry' s Electronics.

20

169.

These misleading discussions concerning Beats' need for funds and the loan were

21

used as leverage to get Monster to agree to transfer thirteen of its largest dealers and distributors

22

to Beats on June 30, 2012, rather than December 31, 2012, costing Monster millions of dollars

23

24

25

170.

Plaintiffs subsequently learned from media reports that HTC had loaned Beats

224 million following the initial acquisition.

171.

During the course of negotiations, Beats and Monster signed a transition deal

26

sheet dated December 2, 2011, in Brisbane, CA, which set forth the preliminary duties of the

27

parties during the transition period and provided that, in exchange for Monster' s cooperation to

28

transition the business ( including transferring intellectual property, manufacturing sources,

LAW OFFICES
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MCCARnn, LLP

COMPLAINT

42

supply chain, distributors, and deals) to Beats, Monster was allowed to continue producing and

direct selling its " Beats By Dr. Dre" products until June 30, 2012, and continue distributing its

Beats By Dr. Dre" products to retailers through the end of 2012. Monster would also receive

royalties on " Beats By Dr. Dre" products that it developed, a g., Beatbox, Mixr, and Beats Pro,

but only through the end of 2013.

172.

In February 2012, both " Portable BeatBox"

and "

Beats Studio Yao

Ming,"

both

designed, engineered, manufactured, marketed, and distributed by Monster, became available in

retail stores.

10
11

173.

As of May 2012, the following Beats headphones were being manufactured and

distributed by Monster:
a.

StudioTM - $

299. Over -ear headphone with studio reference sound

12

quality. These headphones could be played loud with no distortion. The

13

Monster Control TalkTM cable offered built-in answer button and

14

microphone so a user could "

15

B1ackBerry, and Apple smart phones The Monster noise -canceling

16

technology made the StudioTM great for travel. The StudioTM came with a

17

Monster

18

Blue, Orange, Purple.) Photos of the Beats StudioTM headphones in red

19

are attached hereto as Exhibit 26.

20

b.

airline adapter and

MixrTM - $

stop

rockin' and start

talkin"' with Android,

full- sized jack. ( Colors: Black, White, Red,

249: Monster created MixrTM and the product was endorsed by

21

Grammy -Award-winning producer and DJ David Guetta. The ear cups

22

flipped -up to monitor the user' s environment, or to simply rest the user' s

23

head on an airplane, without compromising the Beats sound. The larger

24

cushions

25

on

26

Black, White.)

27

C.

28
LAW OFFICES
carol-I1" I' 1', WIRE
MCCAIVI-HY, LLP

the

than Solo HD

headphones

gave

allowed

Beats Wireless - $249:

the

the

MixrTM "

user

to

an over -ear

feel." In -out jacks

share music with a

friend. ( Colors:

The Beats Wireless was a product developed by

Monster that gave the user the Beats' signature high-definition audio
COMPLAINT

43

sound in a completely wireless design, connecting to the user' s phone via

the latest Bluetooth technology. A rechargeable battery was included.

The headphones also could be connected via a Monster headphone cable

microphone and convenient control buttons were on the ear cup for hands-

free,

d.

mobile

calling,

Solo HD - $ 199:

music control, and volume. (

Colors: Black, White.)

Monster developed the Solo HD to be a great sounding,

ultra -light, and comfortable on -ear headphone. Incredibly popular, the

Solo HD offered more bass than the in -ear Beats headphones. The Solo

10

HD was marketed to be a fashion statement. The Solo HD also had

11

ControlTalkTM

12

hands-free calling. Monster' s ingenious tri -fold design made for easy

13

storage when

14

Photos of the Beats Solo HD headphones are attached hereto as Exhibit

15

13.

16

for iPod playback control and iPhoneTM/ music phone

the SOLO HD

PowerBeatsTM - $

was not in use. (

Colors. Black, White, Red.)

149: Monster developed the PowerBeatsTM to be an

17

active headphone with ear -clip for stability, comfort, and Beats Tour

18

sound quality. A Monster renovation also allowed ambient sound in so

19

the user did not get run over while cycling or running. The PowerBeats

20

included

21

phone

22

included) for use on an airplane or when the battery died. A built-in

f.

ControlTalkTM

for

iPod

playback control and iPhoneTM/ music

hands- free calling ( Colors: Black, White, Red.)

TourTM - $

149: Monster crafted TourTM to be a step- up in -ear headphone

23

technology. TourTM had better sound quality than the iBeats product, with

24

deeper bass

25

as the difference between the loudest and quietest passages of music.)

26

Monster also invented a flat, tangle -free cord. TourTM also included

27

ControlTalkTM

28

hands- free calling. ( Colors: Black, White.)

LAW OFFICES
COTCI-IEIT, WIRE
MCCARTI IY, LLP

COMPLAINT

and

better dynamics

without

distortion. ( Dynamics is defined

for iPod playback control and iPhoneTM/ music phone

44

g.

iBeats - $ 99: The iBeats offered solid metal construction, with more

durable and significantly better sounding quality than the basic ear buds.

The iBeats included

iPhoneTM/

174.

ControlTalkTM

music phone

for iPod

playback control and

hands- free calling ( Colors - Black, White.)

On June 30, 2012, Monster and Beats executed a series of agreements

memorializing the terms of this transition and separation. Essentially, Monster gave up its

thirteen largest accounts, including domestic dealers and international dealers and distributors, as

well as international production and logistics connections, losing over $300 million in direct

sales in the second half of 2012 alone.

10

175.

During the transition period, Lee and other Monster representatives even met with

11

Wood in Brisbane, CA to explain Monster' s domestic dealers and international dealers and

12

distributors. A photograph of Lee and other Monster representatives meeting with Wood over

13

lunch is attached hereto as Exhibit 27.

14

15

16

176.

In signing these agreements, Monster relied on the authenticity of the HTC

Change of Control" acquisition in Beats.

177.

Incredibly, on July 25, 2012, less than a month after signing the transition and

17

separation agreements, the founding members of Beats bought back half of the interest that HTC

18

had just

19

the July 2012 time frame, Monster also learned that HTC had provided Beats with a $ 224 million

20

loan, contrary to representations that Costello ( acting on behalf of HTC) made to Monster in the

21

Brisbane meetings.

22

178.

23

purchased

from Beats ( approximately 25. 5%

of

the

Company) for $ 150 million. During

In November 2012, Monster executed all the licensing documents that were

necessary to license intellectual property to Beats. These documents included:

24

a.

Assignment of Red for cables trademark from Monster to Beats;

25

b.

License back of Red for cables trademark from Beats to Monster;

26

C.

Assignment ofjoint ownership of flat cable patent (with Tour earphone)

from Monster to Beats,

27

28
LAW OFFICES
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MCCAicmy, LLP

d.
COMPLAINT

License of flat cable trademark from Monster to Beats;

45

Assignment of copyrights from Monster to Beats;

f.

License of ROHS design trademark from Monster to Beats; and

g.

Copies of updated exhibits (A and B) to the main License Agreement.

A spreadsheet describing the various licensing arrangements between Monster and Beats is

f attached hereto as Exhibit 28.

179.

In November 2013, Costello, formerly Executive Vice President and Chief

Operating Officer of HTC Corporation, joined Beats as its Chief Operating Officer.
180.

In a May 27, 2014 conversation in Cambridge, Massachusetts, with Harvard

Business School Professor and HTC Corporation Board Member David Yoffie, David Tognotti

10

and Leo Lin learned that Beats orchestrated the HTC deal with one purpose: eliminate Monster.

11

In

12

advantage of Lee and Monster utilizing HTC in a sham transaction to trigger the ` Change of

13

Control' provision to get out of the relationship with Monster."

an off-the- cuff remark,

14

H.

19

22

23

26

Iovine, Dre, and Wachter took

Having removed Monster, Beats took aggressive steps to eliminate Lee' s 5%

and sudden

25%

buyback by Beats, Lee suspected he was being kept in the dark by Beats about

the future of the company.

182.
Beats, Lee
1. 25%

Fearful that he did not have the required transparency vis-a-vis his investment in

reduced

his interest in Beats from 5% to approximately 1. 25%. Lee retained this

interest so that he could profit from his hard work to create the " Beats By Dr. Dre"

product in any future acquisition or other liquidity event.

24

25

effect: "

interest in the Company. By late October 2012, on the heels of the HTC " Change of Control"

20

21

to the

BEATS TAKES AGGRESSIVE STEPS TO ELIMINATE LEES 5% INTEREST IN THE

181

16

18

stated words

COMPANY BEFORE FINALIZING APPLE' S $ 3 BILLION ACQUISITION

15

17

Yoffie

Carlyle

183.

In September 2013, Lee learned that Iovine, Dre, and Wachter had enlisted

Group

LP to buyout HTC'

remaining 25% interest in Beats. On September 13, 2013, as

part of this acquisition, Wachter called Lee to advise him of his obligations as a 1. 25%

27

shareholder in Beats. Wachter informed Lee that, pursuant to the promissory note from Lee to

28

HTC under the " Change of Control" deal, Lee would have to immediately pay HTC $3 to $5

LAW OFFICES
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MCCARTHY, LLP

COMPLAINT

46

his 1. 25%

million

the promissory note was much closer to $3 million, not $5 million. Alternatively, Wachter

feigning

to

retain

in Beats. In truth and as Wachter knew, any payment by Lee under

offered to cause Beats to purchase Lee' s remaining shares for approximately

altruism

5. 5 million. Weighing these two options, Lee asked Wachter whether Beats had any liquidity
the horizon: " Paul,

events on

Unflinching, Wachter responded: " There will be no liquidity event in the next year or two;

if I retain my interest in Beats, when do you think I can cash out?"

nothing is on the horizon."

184.

with

In addition to speaking directly with Wachter, Lee asked Dave Tognotti to speak

Wachter to " provide insight for [ Lee] []

Carlyle to talk to."

of the growth plan, or connect [ Lee]

10

at

11

Wachter

12

circumstances ...

13

we

14

Tognotti and Wachter is attached hereto as Exhibit 29.

have

stonewalled

185.

15

with someone

Instead of disclosing details regarding the forthcoming deal with Apple,

Tognotti, stating: " Dave we can' t give out confidential info under the

We

a problem."

[]

can'

give [

Lee[] projections for next year and then if we don' t make them

A true and correct copy of September 18, 2013 correspondence between

On September 30, 2013, Lee

asked

Luke Wood Beats' President whether

16

Beats had any liquidity events on the horizon. Echoing Wachter, Wood responded indicating he

17

foresaw no liquidity event on the horizon.

18
19

186.

Relying on the veracity of these representations, Lee sold his remaining 1. 25%

interest in Beats for approximately $5. 5 million.

20

187.

In May 2014, less than eight months later, Lee learned Apple was acquiring Beats

21

for

22

Beats

23

in Beats, his total stake in the Beats -Apple deal would have been worth over $100 million.

24

a reported $3. 2

would

188.

billion, Apple'

have been

worth

in

largest

acquisition as of

excess of $
30 million

that date. Lee'

Had Lee

retained

his

1. 25% interest in
original

5% interest

On May 28. 2014, at the Code Conference in Rancho Palos Verdes, CA, belying

25

the September 2013 statements by Wachter and Wood concerning no deals on the horizon, Apple

26

Senior Vice President Eddy Cue and Iovine said the Apple -Beats deal was several years in the

27

making. In fact, in an article in GQ Magazine, Iovine is quoted as saying he was working on the

28

Apple deal in 2012. Plaintiffs are informed on information and belief and thereon allege that the

LAW OFFICES
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COMPLAINT

47

deal work, including extensive due diligence by Apple, was underway in September 2013 and

Wachter

actively participated in the Apple -Beats deal, from inception to execution.

and

I.

Wood a Beats Board Member

and

Beats President, respectively knew and

DEFENDANTS' MISDEEDS ARE PART OF A COURSE OF CONDUCT BY BEATS,

IOVINE. DRE. AND WACHTER OF DEFRAUDING ENTREPRENEURS AND SMALL

BUSINESSES
6

189.

Unfortunately, the misdeeds complained of herein are not isolated transgressions,

rather, they exemplify a course of conduct of wrongdoing.

8

190.

For example, in June 2012, David Hyman sold his music -streaming business,

MOG, to Beats Music. As a condition of the acquisition, Beats required that Hyman and another
10

senior executive, T.J. Fowler, commit to remaining in executive positions at Beats. This
11

retention was to assuage concerns among Hyman' s roughly 40 " fiercely loyal" MOG employees
12

and to ensure that the bulk of them remained with Beats during the transition period and beyond.
13

191.

Enticed by the offer of broad leadership responsibilities, a respectable salary and,

14

most importantly, the promise of substantial equity in Beats Music through a vesting schedule,
15

Hyman and his lieutenant agreed to move to Southern California to serve directly under Wood,
16

who also served as President of Beats Music.

17

192.

Within a year, however, under false pretenses, Beats allegedly fired Hyman and

18

Fowler just before the first of their respective equity stakes vested. Hyman claims in the suit that
19

Beats dismissed him in bad faith,

knowing that he

would receive

2. 5%

of the Company under an

20,

incentive plan based on the duration of his employment. The suit names Daisy LLC as a co21

defendant ( Beats Music was code-named Project Daisy before its launch in January 2008).
22

Hyman claims that T.J. Fowler also was fired and deprived of his equity interest. According to
23

Hyman' s Complaint, it " was

always [ Beats']

plan, scheme and intent to induce" the two

24

executives to stay on in leadership capacities to allow Beats to acquire the company and its
25

close- knit, streamlined employee roster, only to jettison the pair in bad faith " at a seemingly
26
opportune

juncture,"

i e , before their equity vested. See David Hyman v Daisy LLC et al , Los

27

Angeles Superior Court, Case No. BC545798 ( May 14, 2014).

A true and correct copy of the

28

Hyman Complaint is attached hereto as Exhibit 30.

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48

193.

Defendants' practice of corporate raiding does not end with Monster and Hyman.

Beats, Iovine, and Dre have faced multiple suits arising out of their dealings with Steven Lamar,

founder of SLS Audio. In 2006, after absconding with Lee' s vision and business plan for high-

performance headphones, Iovine and Dre met with Lamar about partnering in a business to

produce and sell celebrity endorsed high-performance headphones. According to the allegations

in Jibe Audio, LLC et al v Pentagram Design, Inc et al, Los Angeles Superior Court, Case No.

BC533089 ( May 16, 2014),

identified and secured design firm Pentagram to help develop and design the headphones as well

as

the

associated

after

orally agreeing to

packaging, logos,

and

proceed

in

a joint venture,

Lamar: ( a)

trademarks; ( b) identified and secured a Chinese

10

manufacturer to engineer and produce headphone prototypes; and ( c) worked intimately with

11I

both the designer and manufacturer over several months to ensure the project' s success. A true

12

and correct copy of the Jibe Audio Cross -Complaint is attached hereto as Exhibit 31.

13

194.

After promising Lamar membership and royalty interests in Beats, Lamar alleges

14

that Iovine and Dre forced him to relinquish his leadership role in Beats and divested him of all

15

but

16

Pentagram ( the designer

17

Iovine, and Dre allegedly " surreptitiously negotiated" with Lamar' s former designer to hire him

18

away from Pentagram. At the same time, Lamar' s Cross -Complaint claims that Pentagram

19

assigned its royalty interest to a separate entity, apparently removing Pentagram from the

20

equation and "

2% membership interest
of

effectively

21

for [ Defendants'].

22

195.

own

in

the

cut[

original "

Beats

By

only through payments initially delivered to

Dr. Dre"

prototype).

Still not satisfied, Beats,

ting] [ Lamar and his business interests] out of the royalty stream . .

benefit

Pentagram

Beats recoverable

and

and

to the detriment [ of Lamar]."

Hinrichs &

Id. at 9: 6- 13

Associates are also suing Beats, Iovine, and Dre for a

23

declaratory judgment to determine the extent to which Defendants have deprived it of profits due

24

under a

25

Los Angeles Superior Court, Case No. BC533089 ( January 13, 2014).

26

of the Hinrichs Complaint is attached hereto as Exhibit 32.

27

28
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2007

196.

global settlement.

See Hinrichs & Associates et al v Beats Electronics LLC et al,

A true and correct copy

This is to say nothing of Iovine' s more recent alleged practice of undermining less

powerful music partners in order to extract valuable products they had developed.
COMPLAINT

49

197.

For example, in 2002, independent record label JCOR filed a lawsuit which

exposed Iovine' s practice of withholding payments from cash- strapped independent labels with

which Interscope had distribution deals. See JCOR Records, LLC v Interscope Records, LLC,

Los Angeles Superior Court, Case No. BC285692 ( Nov. 20, 2002).

the JCOR Records Complaint is attached hereto as Exhibit 33.

198.

A true and correct copy of

Pursuant to this strategy, once the independent labels ran out of money and could

no longer pay artists they had spent years and untold resources developing into commercially

viable prospects, Iovine and Interscope would aggressively pursue and sign these artists away

from their smaller partners.

10

11

199.

Following this pattern and practice, Defendants here defrauded Plaintiffs of

hundreds of millions of dollars. This lawsuit follows.

12

FIRST CAUSE OF ACTION

13

Fraud and Deceit

14

15

16

17

By Plaintiff Monster Against Defendants Beats, Dre, Iovine, and Wachter)

200.

Plaintiff Monster hereby realleges and incorporates herein by reference each and

every allegation in the paragraphs above as though fully set forth herein.
201.

Beats, Dre, Iovine, and Wachter represented to Monster that HTC was entering

18

into a bona fide strategic partnership and investment in Beats, whereby HTC acquired a 51 %

19

membership interest in Beats. In a September 9. 2011 letter, Beats, Dre, Iovine, and Wachter

20

told Monster that the HTC transaction triggered the " Change of Control" Provision in the
I'

21

Amended License Agreement and divested Monster of its license and business relationship with

22

Beats: "[ T] he transaction

23

Monster, LLC" such that Beats will "provide notice to Monster no later than January 7, 2012 to

24

terminate the License Agreement in

25

202.

with

HTC

will result In a ` Change of

connection with

Control' ...

the Change

of

between Beats and

Control." See Exhibit 24.

In or about June 30, 2012 at Monster' s offices in San Mateo County, Wachter,

26

Wood, and Costello, acting as representatives of Beats, reiterated to representatives of Monster

27

that the HTC transaction would result in a " Change of Control" and coerced Monster to agree to

28

a transition plan that required Monster to hand over its international production and logistics

LAW OFFICES

COTCI RIT, PI111E

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COMPLAINT

50

connections and, critically, hand over its domestic retailers and international distributors and
2

retailers, all at Monster' s expense.

203.

These representations were false. Indeed, in a May 27, 2014 conversation in

Cambridge, Massachusetts, with Harvard Business School Professor and HTC Corporation

Board Member David Yoffie, Monster' s David Tognotti and Leo Lin learned that Beats

orchestrated the HTC deal with one purpose: eliminate Monster. In an off-the- cuff remark,

Yoffie

utilizing HTC in a sham transaction to trigger the ` Change of Control' provision to get out of the

relationship with Monster."

10

stated words

204.

to the

effect: "

Iovine, Dre, and Wachter took advantage of Lee and Monster,

Beats, Dre, Iovine, and Wachter knew these representations were false when they

11

made them and intended that Monster rely on the representations. Specifically, Beats, Dre,

12

Iovine, and Wachter knew that the HTC transaction was a sham and did not trigger the " Change

13

of Control" Provision in the Amended License Agreement and did not divest Monster of its

14

license and business relationship with Beats.

15

205.

On May 28, 2014, at the Code Conference in Rancho Palos Verdes, CA, belying

16

the September 2013 statements of Wachter and Wood, Iovine and Apple Senior Vice President

17

Eddy Cue stated that the Apple -Beats deal was several years in the making.

18

206.

Monster reasonably relied on the representations of Beats, Dre, Iovine, and

19

Wachter. Indeed, on June 30, 2012, Monster and Beats executed a series of agreements

20

memorializing the terms of a transition and separation. In signing these agreements, Monster

21

relied on the veracity of the HTC " Change of Control."

22

207.

By triggering the Change of Control Provision in the Amended License

23

Agreement that divested Monster of its license and business relationship with Beats, Monster lost

24

millions. Monster' s reliance on the truth of the representations by Beats, Dre, Iovine, and

25

Wachter was a substantial factor in causing its harm.

26

27

208.

The conduct of Beats, Dre, Iovine, and Wachter was a substantial factor in

causing Monster to suffer damages, including, but not limited to, out-of-pocket losses, lost

28
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COMPLAINT

51

interest, and fees and expenses, all in an amount to be determined according to proof at time of
I trial.

209

The wrongful acts of Beats, Dre, Iovine, and Wachter, and each of them, were

done maliciously, oppressively, and with intent to defraud, and Monster is therefore entitled to

punitive and exemplary damages in an amount to be ascertained according to proof

WHEREFORE, Monster prays for relief as set forth below.

SECOND CAUSE OF ACTION

Fraud and Deceit

By Plaintiff Lee Against Defendants Beats and Wachter)

210.

10

11

Plaintiff Lee hereby realleges and incorporates herein by reference each and every

allegation in the paragraphs above as though fully set forth herein.

211.

12

In September 2013, Lee learned that Defendants Beats, Iovine, and Wachter

Carlyle to buyout HTC' s remaining 25% interest in Beats. On September 13, 2013, as

13

enlisted

14

part of this acquisition, Wachter called Lee to advise him of his supposed obligations as a 1. 25%

15

shareholder. Wachter informed Lee that, pursuant to the promissory note from Lee to HTC

16

under the " Change of Control" deal, Lee would have to immediately pay HTC $3 to $ 5 million

17

to

18

made it

retain

212.

19

20

his 1. 25% in Beats. That statement was false and Wachter knew it was false when he

In truth and as Wachter knew, any payment by Lee under the promissory note was

much closer to $3 million, not $ 5 million.

213.

21

Alternatively,

Wachter feigning

altruism offered

to cause Beats to purchase

22

Lee' s remaining shares for approximately $5. 5 million. Weighing these two options, Lee asked

23

Wachter

24

Beats,

25

liquidity

26

Wachter knew it was false when he made it.

27

28
LAW OFFICES

Corcru:rr,Prriu:
M(:QuKri-rY, LLP

whether

when

do

event

214.

Beats had any

you

think I

in the

liquidity

can cash

next year or

events on

out9"

the horizon "

Unflinching,

two; nothing is

On September 30, 2013, Lee

on

asked

Wachter

the horizon "

Paul, if I retain my interest in

responded: "

There will be no

That statement was false and

Luke Wood Beats' President whether

Beats had any liquidity events on the horizon Echoing Wachter, Wood responded in a similar
COMPLAINT

52

fashion that no liquidity event was going to occur. That statement was false and Wood knew it

was false when he made it.

215.

Wachter and Wood, on behalf of Beats, made the above statements to Lee

intending that he rely

216

on

them

and

immediately

sell

his remaining 1. 25% interest in Beats.

Lee reasonably relied on the above statements as evidenced by the fact that he

sought out two directors and officers of Beats to determine whether any deal was on the horizon

and received the same answer from each executive. Further, as a Member of Beats, Lee was

entitled to rely on the truth and completeness of statements made to him by individuals who were

directors and officers of Beats. Based on these representations, Lee sold his remaining 1. 25%

10

interest in Beats for approximately $5. 5 million.

217.

11

In May 2014, less than eight months later, Lee learned through media reports that

12

Apple was acquiring Beats for a reported $3. 2 billion, Apple' s largest acquisition as of that date.

13

Lee'

14

his

15

over $100 million.

16

218.

1. 25% interest in Beats would have been worth in excess of $30 million. Had Lee retained

original

interest in Beats, his total stake in the Beats -Apple deal would have been worth

5%

On May 28, 2014, belying the September 2013 statements by Wachter and Wood,

17

Apple Senior Vice President Eddy Cue and Iovine said the Apple -Beats deal was a decade in the

18

making. On information and belief, the deal work, including extensive due diligence by Apple,

19

was

20

President, respectively knew

21

to execution. Accordingly, Lee' s reliance on the representations of Beats, by Wachter and

22

Wood, was a substantial factor in causing his harm.

23

underway in September 2013

219.

and

Wachter

and

Wood a Beats Board Member and Beats

and actively participated in the Apple -Beats deal, from inception

The conduct of Beats and Wachter was a substantial factor in causing Lee to

24

suffer damages, including, but not limited to, out-of-pocket losses, lost interest, and fees and

25

expenses, all in an amount to be determined according to proof at time of trial.

26

220.

The wrongful acts of Beats and Wachter, and each of them, were done

27

maliciously, oppressively, and with intent to defraud, and Lee is therefore entitled to punitive

28

and exemplary damages in an amount to be ascertained according to proof.

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COMPLAINT

53

WHEREFORE, Lee prays for relief as set forth below.

THIRD CAUSE OF ACTION

Aiding and Abetting Fraud and Deceit

By Plaintiff Monster Against HTC)

221.

Plaintiff Monster hereby realleges and incorporates herein by reference each and

every allegation in the paragraphs above as though fully set forth herein.
222.

HTC knew that Beats, Dre, Iovine, and Wachter perpetrated a fraud against

Monster. Specifically, HTC knew the HTC -Beats deal was a sham transaction executed solely to

divest Monster of its business relationship with Beats. Indeed, in a May 2014 conversation with

10

Monster' s David Tognotti and Leo Lin, Harvard Business School Professor and HTC

11

Corporation Board Member David Yoffie

12

and Monster utilizing HTC in a sham transaction to trigger the `Change of Control' provision to

13

get out of the relationship with Monster."

14

223.

admitted: "

Iovine, Dre, and Wachter defrauded Lee

HTC gave substantial assistance and encouragement to Beats, Dre, Iovine, and

15

Wachter in perpetrating the fraud. In fact, during the time frame of September 2011 to June

16

2012, at Monster' s offices in Brisbane, CA, in negotiations to effect the transition and separation

17

of Monster and Beats, HTC employee Matthew Costello pressed Monster to agree to a transition

18

plan that required Monster to hand over its international production and logistics connections

19

and, critically, hand over its domestic retailers and international retailers and distributors, all at

20

Monster' s expense.

21

224.

HTC' s conduct was a substantial factor in causing harm to Monster. Indeed, HTC

22

was instrumental in negotiating and finalizing the transition agreements that memorialized the

23

separation of Monster and Beats, causing Monster to sustain millions in damages.

24

225.

The conduct of HTC was a substantial factor in causing Monster to suffer

25

damages, including, but not limited to, out-of-pocket losses, lost interest, and fees and expenses,

26

all in an amount to be determined according to proof at time of trial.

27

28

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- TT,
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COMPLAINT

54

226.

The wrongful acts of HTC were done maliciously, oppressively, and with intent to

defraud, and Monster is therefore entitled to punitive and exemplary damages in an amount to be

ascertained according to proof.

WHEREFORE, Monster prays for relief as set forth below

FOURTH CAUSE OF ACTION

Breach of Duty of Trust and Confidence

By Plaintiff Monster Against Defendants Beats, Dre, Iovine, and Wachter)

227.

every allegation in the paragraphs above as though fully set forth herein.

10

11

12

13

Plaintiff Monster hereby realleges and incorporates herein by reference each and

228.

Outside

As the Court

of `technical,

legal

stated

in Shum

relationships,'

Intel

Corp (

Fed. Cir. 2010) 633 F.3d 1067, 1077:

certain factual circumstances surrounding a

confidential relationship' may give rise to a fiduciary relationship, with attendant fiduciary
duties. A confidential relationship may arise when one party reposes trust and confidence in

14

another who is aware of that fact. In order for that confidential relationship to also qualify as a
15

fiduciary relationship, four additional requirements must be met. First, one party must be
16

vulnerable. Second, that vulnerability must result in the empowerment of the stronger party by
17

the weaker. Third, that empowerment must have been solicited or accepted by the stronger
18

party. Fourth, the empowerment must prevent the weaker party from effectively protecting
19

itself."
20

229.

Here, trusting Defendants' business integrity completely, Lee and Monster

21
committed over

60%

percent of their resources to making Monster' s " Beats By Dr. Dre" product

22

23

24

25

26

27

line a success, putting both Lee and Monster in a position of vulnerability vis-a-vis Beats. Beats

was thereby put in a position of power. Defendants not only solicited Monster' s expense of
resources, they intentionally put Monster in a position where Monster took on the bulk of the
financial risk and was therefore exposed to Defendants' nefarious plan to abscond with the value

created by the Monster -Beats partnership.

28
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COTCHE'IT, PME
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55

230.

The parties' arrangements provided Defendants with the potential for

opportunism. In performing their responsibilities under the parties' various agreements,

Defendants knowingly undertook the duty of loyalty to act on behalf of and for the benefit of

Plaintiffs, and each of them, in light of the circumstances, purposes, and terms of the parties'

agreements. This duty of loyalty required Defendants, and each of them, to act primarily for the
benefit of Monster, where Defendants were to subordinate their interests to those of Monster.

The duty of loyalty also required Defendants, and each of them, to exercise discretion on behalf

of Monster concerning the headphones and related technology. Loyalty means that Defendants,
9

and each of them, were required to exercise reasonable care, skill, and caution in administering
10

business affairs concerning the " Beats By Dr. Dre" headphones and related technology.
11

231.

In failing to properly exercise reasonable care, skill, and caution in administering

12

business affairs concerning the headphones and related technology, Defendants, and each of
13

them, breached the duty of loyalty owed to Monster and thereby breached their duty of trust and
14
confidence.

15

232.

By virtue of their respective roles, as described above, Defendants set out to

16

17

18

create and did in fact create a special relationship of trust and confidence, and thereby owed
Monster a duty of trust and confidence.
233.

19

Defendants, and each of them, breached their duties of trust and confidence by,

20

among other things, failing to represent and protect the interests of Monster concerning the

21

headphones and related technology.

22

234.

Monster' s reliance on Defendants was so substantial as to give rise to equitable

235

Defendants' conduct was a substantial factor in causing Monster to suffer millions

23

24

25

of dollars of damages including, but not limited to, out-of-pocket losses, lost interest, and fees

26

and expenses, all in an amount to be determined according to proof at time of trial.

27

28
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236.

The acts of Defendants, and each of them, were done maliciously, oppressively,

and with the intent to defraud. Therefore, Monster is entitled to punitive and exemplary
COMPLAINT

56

damages, pursuant to Section 3294 of the California Civil Code, in an amount to be shown

according to proof at the time of trial.

WHEREFORE, Monster prays for relief as set forth below.

FIFTH CAUSE OF ACTION

Aiding and Abetting Breach of Duty of Trust and Confidence

10

By Plaintiff Monster Against All Defendants)

237.

Plaintiff Monster hereby realleges and incorporates herein by reference each and

every allegation in the paragraphs above as though fully set forth herein.
238.

One or more of Defendants had a duty of trust and confidence to Monster. To

induce Monster to enter into the arrangements concerning the headphones and other technology,

11

Defendants, directly and by and through authorized agents, made material misrepresentations to
12

Monster. Said misrepresentations included, but were not limited to, claims by Defendants that
13

they knowingly undertook the duty of loyalty to act on behalf of and for the benefit of Monster,
14

in light of the circumstances, purposes, and terms of the parties' agreements. This duty of
15

loyalty required one or more Defendants to act primarily for the benefit of Monster, where
16

Defendants were to subordinate their interests to those of Monster. The duty of loyalty also
17

required one or more Defendants to exercise discretion on behalf of Monster concerning the
18

headphones and related technology

19

239.

Defendants, and each of them, intended that Monster rely on the representations

20

21

of Defendants that they knowingly undertook the duty of loyalty to act on behalf of and for the
benefit of Monster, in light of the circumstances, purposes, and terms of the parties' agreements

22

23

Monster did in fact rely on Defendants' representations by entering into the various

24

arrangements concerning the headphones and related technology This reliance was justified and

25

reasonable in that, among other things, Monster on the one hand, and Beats, Dre, Iovine, and

26

Wachter, on the other hand, entered into a business relationship identical to a partnership and

27

reposed complete trust in each other

28
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COMPLAINT

57

240.

Defendants aided and abetted, encouraged, and rendered substantial assistance in

accomplishing the wrongful conduct of these breaches and other wrongdoing complained of

herein. In taking action, as particularized herein, to aid and abet and substantially assist the

commission of these wrongful acts and other wrongdoings complained of, Defendants and other

unnamed parties acted with an awareness of his/her/its primary wrongdoing and realized that
his/her/ its conduct would substantially assist the accomplishment of the wrongful conduct,

wrongful goals, and wrongdoing.

8

241.

Monster' reliance on Defendants was so substantial as to give rise to equitable

9
concerns.

10

242.

As a result of Defendants' substantial assistance in aiding and abetting in the

11

breaches of trust and confidence, Monster has suffered millions of dollars in damages, including,
12

but not limited to, out-of-pocket losses, lost interest, and lost profits, all in an amount to be
13

determined according to proof at time of trial.

14

243.

The acts of Defendants, and each of them, were done maliciously, oppressively,

15

and with the intent to defraud. Therefore, Monster is entitled to punitive and exemplary
16

damages, pursuant to Section 3294 of the California Civil Code, in an amount to be shown
17

18

according to proof at the time of trial.

WHEREFORE, Monster prays for relief as set forth below.

19

SIXTH CAUSE OF ACTION

20

Breach of Fiduciary Duty

21

By Plaintiff Lee Against Defendants Beats, Iovine, Dre, and Wachter)

22

244.
23

24

25

26

27

28

LAW OFFICES
COTCHETT, PITRE
MCCAIM IY, LLP

Plaintiff Lee hereby realleges and incorporates herein by reference each and every

allegation in the paragraphs above as though fully set forth herein.

245.

Defendants Iovine, Dre, and Wachter were corporate officers and/ or members of

Beats, with all of the fiduciary duties attendant thereto to Beats shareholders, including Lee.
246.

interests to

Defendants Beats, Iovine, Dre, and Wachter knowingly acted against Lee' s

eliminate

COMPLAINT

Lee'

5%

interest in Beats. By September 2012, on the heels of the HTC

58

Change

of

Control" transaction

and sudden

25%

buyback by Beats, Lee was concerned that he

was being kept in the dark by Beats, Iovine, Dre, Wachter, and Wood about material aspects of

the business. As a direct result, fearful that he did not have the required transparency vis-a-vis

his investment in Beats, Lee

retained

this 1. 25%

reduced

his interest

in

Beats from 5% to approximately 1. 25%.

Lee

interest so that he could profit from his hard work to create the " Beats By Dr.

Dre" products in any future acquisition or other liquidity event.

247.

8
enlisted

In September 2013, Lee learned that Beats, Iovine, Dre, Wachter, and Wood had

Carlyle to buyout HTC' s remaining 25%

interest in Beats. HTC sold its remaining

shares in Beats back to Beats for $265 million.

10

248.

On September 13, 2013, as part of the Carlyle acquisition, Wachter called Lee to

11
advise

him

of his obligations as a

1. 25% shareholder. Wachter informed Lee that, pursuant to a

12

promissory note from Lee to HTC as part of the " Change of Control" deal, Lee would have to
13

immediately

pay HTC $3 to $ 5

million

to

retain

his 125% in Beats. In truth and as Wachter

14

knew, any payment by Lee under the promissory note was much closer to $3 million, not $5
15

Wachter feigning

million.

altruism offered

Lee an alternative: Lee could cause Beats to

16

purchase Lee' s remaining shares for gains of approximately $5. 5 million. Weighing these two
17
options,

Lee

asked

Wachter

whether

Beats had any

18
retain

19
20

21

22

23

24

25
26

my interest in Beats,

when

do

you

think I

liquidity events

can cash out?"

on

the horizon: " Paul, if I

Unflinching, Wachter responded:

There will be no liquidity event in the next year or two; nothing is on the horizon."
249.

On September 30, 2013, Lee

asked

Wood Beats' President whether Beats had

Iany liquidity events on the horizon. Echoing Wachter, Wood gave a similar response, that there
will be no liquidity event in the near future.
250.

Based

on

these

representations,

Lee

sold

his remaining 1. 25% interest in Beats

back to Beats for approximately $5. 5 million.

251.

In May 2014, less than eight months later, Lee learned that Apple was acquiring

Beats for

28

in Beats would have been worth in excess of $30 million. Had Lee retained his original 5%

LAW OFFICES
COTCl-IETT, PITRE

MCCAICI'HY, LLP

a reported $ 3

COMPLAINT

billion, Apple'

largest

that date. Lee'

27

acquisition as of

1. 25% interest

59

interest in Beats, his total stake in the Beats -Apple deal would have been worth over $100

million.

252.

Apple Senior Vice President Eddy Cue and Iovine stated the Apple -Beats deal was a decade in

the making. On information and belief, the deal negotiations, including extensive due diligence
by

Apple,

7
and

On Map 28, 2014, belying the September 2013 statements by Wachter and Wood,

was

underway in September 2013

Beats President, respectively knew

and

Wachter

and

Wood a Beats Board Member

and actively participated in the Apple -Beats deal, from

inception to execution.

253.

Beats, through Iovine, Dre, Wachter, and Wood, made these misrepresentations to

10

Lee to substantially increase their personal profits. Lee did not give his informed consent to this
11

misrepresentation and was harmed as a direct result. Beats, Iovine, and Wachter were a
12

substantial factor in causing Lee' s harm.

13

WHEREFORE, Lee prays for relief as set forth below.

14

SEVENTH CAUSE OF ACTION

15

Aiding and Abetting Breach of Fiduciary Duty

16

By Plaintiff Lee Against All Defendants)

17

254

Plaintiff Lee hereby realleges and incorporates herein by reference each and every

18

allegation in the paragraphs above as though fully set forth herein.

19

255.
20

21

Defendants, and each of them, knew that breaches of fiduciary duty were being

committed by Beats, Iovine, Dre, and Wachter against Lee.

256.

Defendants, and each of them, gave substantial assistance and encouragement to

22

23

24

25

Beats, Iovine, Dre, and Wachter in perpetrating breaches of fiduciary duty against Lee.
257.

Defendants' conduct was a substantial factor in causing harm to Lee.

WHEREFORE, Lee prays for relief as set forth below

26

27

28
LAW OFFICES
CurcI-ioyr, PTrlu;

MCCARTI-IY, LLP

COMPLAINT

60

EIGHTH CAUSE OF ACTION

Unfair Competition

By Plaintiff Monster Against All Defendants)

10

258.

Plaintiff Monster hereby realleges and incorporates herein by reference each and

every allegation in the paragraphs above as though fully set forth herein.
259.

By their wrongful conduct, as set forth above, Defendants, and each of them,

engaged in unfair and/ or fraudulent acts in violation of section 17200 et seq of the California
Business and Professions Code
260.

Defendants' practices are unfair and/ or fraudulent business practices for the

reasons set forth below, without limitation:

11

Defrauding Monster utilizing HTC in a sham " Change of Control" transaction to

12

freeze out Monster;

13

Recruiting away high-level Monster employees to steal Monster trade secrets;

14

Making significant misrepresentations during the negotiations surrounding the HTC

15

Change of Control" transition, including, but not limited to, that HTC could not lend
16

money to Beats;
17

Unfairly and falsely taking credit for the creation and success of the " Beats By Dr.
18
19

20

Dre" product line, including: allegedly creating the idea for premium headphones and
allegedly performing the engineering of the " Beats By Dr. Dre" product line. In
interviews with publications like the Wall Street Journal and on NBC News with

21

22

Special Anchor, Maria Shriver, and in speeches before consumer electronics groups,

23

Beats, through Iovine, Dre, Wachter, and Wood are improperly claiming that they

24

developed not only the " Beats By Dr. Dre" headphones, but also the supply, dealer,

25

and retail relationships necessary to make the product line a success;

26

Unfairly and falsely covering up the role of Lee and Monster in successfully

27

spearheading all of the designing, engineering, manufacturing, producing, marketing,

28

and

LAW OFFICES
Comm-mrr, PITRI

MCCAirn-iY, LLP

COMPLAINT

distributing

of "Beats

By

Dr Dre"

products.

Originally, " Beats By Dr. Dre" was

61

essentially a marketing label for a line of Monster headphones. Defendants set about

to re- create the history of the " Beats By Dr. Dre" brand without giving appropriate

credit to Lee or Monster, all the while using Monster' s funds to support their

marketing effort. Defendants built the Beats name on Monster' s back, and then

attempted to re -write history by erasing Lee and Monster' s names from the product' s

history;

Unfairly and falsely attempting to create the false public view that Beats, not Lee and

Monster, was responsible for designing, engineering, manufacturing, production,

9

marketing, and distributing the " Beats By Dr. Dre" product line. In public statements
10

and interviews, even on the American Idol TV show, Iovine, Dre, Wachter, and
11

Wood assert that the entire success of the product line was due to Beats, giving no
12

credit to Lee or Monster; and

13

Unfairly attacking Monster in meetings with Monsters' sales representative and

14

dealers. Beats told Monster' s distributors and retailers to drop Monster headphones
15

as a product line, forcing them to choose between Beats and Monster. These sales
16

representative and dealers were the same distributors and retailers that Monster had
17

introduced to Beats. A

senior

Beats

executive announced: "

18

We are going to take

Monster down!"
19

261.

As a result, Monster is entitled to injunctive relief to prevent these misstatements

20

21

22

from continuing to occur.

WHEREFORE, Monster prays for relief as set forth below
i

NINTH CAUSE OF ACTION

23

Violations

24

27

262.

Plaintiff Lee hereby realleges and incorporates herein by reference each and every

allegation in the paragraphs above as though fully set forth herein.

0

28
LAW OFFICES
C

irl-lorr, P1,11tL:
MCCAIM-1Y, LLP

California Corporations Code 25400 and 25500

By Plaintiff Lee Against Defendants Beats, Iovine, and Wachter)

25

26

of

COMPLAINT

62

263.

By virtue of the conduct herein alleged, Defendants, directly or Indirectly made,

for the purpose of inducing the sale of Units, statements which were, at the time and in light of

the circumstances under which they were made, false or misleading with respect to material

facts, and which omitted to state material facts necessary in order to make the statements made,

in light of the circumstances under which they were made, not misleading, and such Defendants
knew or had reasonable ground to believe such statements were so false or misleading.
264.

As a direct and proximate result of the foregoing conduct, Lee has sustained

damage and pray for the relief hereinafter specified.

9

WHEREFORE, Lee prays for relief as set forth below.

10

TENTH CAUSE OF ACTION

11

Violations

of

California Corporations Code 25401 and 25501

12

By Plaintiff Lee Against Defendants Beats, Iovine, and Wachter)

13

265.

Plaintiff Lee hereby realleges and incorporates herein by reference each and every

14

allegation in the paragraphs above as though fully set forth herein.

15

266.

By virtue of the conduct herein alleged, Defendants offered to buy and bought

16

securities in this state by means of written communications which Included untrue statements of
17

material facts and omitted to state material facts necessary in order to make the statements made,
18

19

in light of the circumstances under which they were made, not misleading.
267.

20

As a direct and proximate result of the foregoing conduct, Lee has sustained

damage and prays for the relief hereinafter specified.

21

WHEREFORE, Lee prays for relief as set forth below.

22

ELEVENTH CAUSE OF ACTION

23

Violations
24

268.

27

California Corporations Code 25504. 1

By Plaintiff Lee Against Defendants Beats, Iovine, and Wachter)

25

26

of

Plaintiff Lee hereby realleges and incorporates herein by reference each and every

allegation in the paragraphs above as though fully set forth herein.

28

LAW OFFICES
CarcHorr, Pr raF.
MCCARn-rY, LLP

COMPLAINT

63

269.

By virtue of the conduct herein alleged, Defendants, and each of them, materially

assisted

with the intent to deceive or defraud Lee.

the

270

violations of

California Corporations Code 25401 and 25501 hereinabove alleged

As a direct and proximate result of the foregoing conduct, Lee has sustained

damage and pray for the relief hereinafter specified

WHEREFORE, Lee prays for relief as set forth below.

10

11

PRAYER FOR RELIEF

Plaintiffs, and each of them, pray for relief as follows:

1.

For general damages in an amount according to proof;

2.

For special damages in an amount according to proof;

3.

For exemplary and punitive damages against Beats, HTC, and the Individual

12

13

14

Defendants;
4.

For injunctive relief; and

5.

For such other and further relief as the Court may deem just and proper

15

16

Dated: January 6, 2015

COT CHETT PITRE & McCARTHY, LLP

17
18

By:

19

Attorneys for

20

21

DEMAND FOR JURY TRIAL

22

Plaintiffs, and each of them, hereby demand a trial by jury of all issues so triable.
23

24

LLP

Dated. January 6, 2014

25

UA

26

27

Attorneys for

28
LAW OFFICES

COTCI-IETT, PITIM
MCCARTHY, LLP

COMPLAINT

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MONSTER CABLE PRODUCTS, INC

DATE:

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Effective date of
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September 13, 2011

Title
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1st Publication:

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455 Valley Drive, Brisbane, CA, 94005, United States

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Monterey, CA 93942 United States

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From:
Sent:
To: '
Cc: '
Subject:

Noel Lee

Saturday, April 17, 2010 8 40 AM

Daddy'
Jimmy lovine'

Diddybeats has superior low level listening

I wanted to bring to your attention that DiddyBeats has a features that no other headphone has that you can speak
about
That's the ability to play at low levels -with extreme clarity, We built Diddybeats to a curve that follows how the

EAR HEARS at low levels Hence you can have it at a relaxing low level, and hear every detail (we call it' resolving low

level detail') with great clarity This is especially evident with acoustic instruments, percussion, strings etc There is also a
lot

of

low level detail

in

the bass

Its

not dust about " woof' its about punch and impact in

to any other headphone on the market

bass

Try it and see compared

I' d like to go over other technical and musical features of your headphone when we do the release together

Monsterously,
Noel
The Head Monster
Mobile, 415 508- 0000
Contact

Assistant to the Head Monster

Jessica Shea
ishea(cDmonstercable corn

415) 430 - 7729

Http 11www

monstercable com

From.

JI < J I@umusic com>

Sent:
To:
Subject-

Wednesday, January 20, 2010 4 00 PM

Denise Morales, Kevin Lee, Susan Paley, Noel Lee
Re Apple meeting- quick update from Today' s meeting

Great
Original Message -----

From Denise Morales < dmorales , monstercable com>

To Kevin Lee < lclee , monstercable com>, JI, susan paley < susan
Sent Wed Jan 20 15 57 43 2010

beatsbydre

coin>,

Noel Lee < nlee , monstercable com>

Subject Apple meeting- quick update from Today's meeting

1

Apple LOVES the Beat Box - i -pod dock

The buyer said,

This

could replace the

Bose SoundDock

in all stores" "

SoundDock is old

and tired"

He also said, " thus could be your number one selling sku at apple"
By next week we will receive unit projections from him
They want to be at $ 349 ( not $299)

Once the sound is approved by our teams, he would like a demo right away
4'2- Apple ALSO LOVE' S THE SOLO H.D' S

WANT TO DO ALL COLORS ON - LINE AND AT

RETAIL WANT TO HAVE PRODUCT RED BY END OF FEB

113- They will launch the White Tours exclusively for first 60 days They
believe sales will be mcuemental to current tour sales They are very
excited about the presence of Tours in Book of Eli

There's lots of other updates, these are highlights

Trinity is the sales/ marketing coordinator for Apple and will follow up with
all of us and Apple on these projects
DENISE

17

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Certificate of Registration
This Certificate issued under the seal of the Copyught

STATgS

CIO

Office in accordance with title 17, United States Code,

attests that registration has been made foi the work
identified below The information on this certificate has

y
o,

Registration Number

been made a pai t of the Copyi ight Office records

VA 1- 802- 896

3
IV.

1870

20-'

aJl

rri`.

Effective date of
registration:

Register of Copyrights, United States of America

September 13, 2011

Title
Title of Work: Yao Ming Solos

Completion/ Publication
Year
Date

of

of

Completion:

1st Publication:

2011

July 31, 2011

Nation of 1st Publication: United States

Author
Author:

Author Created:

Work

made

for hire:

Citizen

of:

Monster Cable Products, Inc

Photograph( s)

Yes
United States

Domiciled in:

United States

Copyright claimant
Copyright Claimant:

Monster Cable Products, Inc.

455 Valley Drive, Brisbane, CA, 94005, United States

Rights and Permissions

Organization Name:
Address:

321 Law, Inc.

P.O Box 911

Monterey, CA 93942 United States

Certification
Name:
Date:
Applicant' s

Tracking Number:

Correspondence:

Matthew Powelson
September 13, 2011

MON.C. 073 US

Yes

Page 1

of

Certificate of Registration
This Certificate issued under the seal of the Copyright

STATgs

coma
A

Office in accordance with title 17, United States Code,

attests that registration has been made for the work

identified below. The information on this certificate has

ry

been made a pai t of the Copyi fight Office i ecords

Registration Number

VA 1- 802- 896

bas

6~
1870

Effective date of
aA GPti. '

WWiJ`

registration:

Register of Copyrights, United States of America

September 13, 2011

Title
Title of Work: Yao Ming Solos

Completion/ Publication
Year

Date

of

of

Completion:

1st Publication:

2011

July 31, 2011

Nation of 1st Publication: United States

Author
Author:

Author Created:

Monster Cable Products, Inc

Photograph( s)

Work

made

for hire:

Citizen

of:

Yes
United States

Domiciled in:

United States

Copyright claimant
Copyright Claimant:

Monster Cable Products, Inc.

455 Valley Drive, Brisbane, CA, 94005, United States

Rights and Permissions
Organization Name:

321 Law, Inc

Address:

P.O. Box 911

Monterey, CA 93942 United States

Certification
Name:
Date:

Applicant' s Tracking Number:

Correspondence:

Matthew Powelson
September 13, 2011

MON.C. 073. US

Yes

Page 1

of

Certificate of Registration
This Certificate issued under the seal of the Copyright

STATZ
C

Office in accordance with title 17, United States Code,

o4

1 ?

attests that registration has been made for the work

identified below The information on this certificate has

been made a pat t of the Copyr fight Office recoi ds.

S`

z_

Registration Number

VA 1- 802- 895
Effective date of
registration:

Register of Copyrights, United States of America

September 13, 2011

Title
Title of Work: Yao Mmg Studios

Completion/ Publication
Year
Date

of

of

Completion:

1st Publication:

2011

July

31, 2011

Nation of 1st Publication: United States

Author
Author:

Author Created:

Work

made

for hire:

Citizen

of:

Monster Cable Products, Inc

Photograph( s)

Yes
United States

Domiciled in:

United States

Copyright claimant
Copyright Claimant:

Monster Cable Products, Inc.

455 Valley Drive, Brisbane, CA, 94005, United States

Rights and Permissions
Organization Name:

321 Law, Inc

Address:

P.O. Box 911

Monterey, CA 93942 United States

Certification

Applicant' s

Name:

Matthew Powelson

Date:

September 13, 2011

Tracking Number:

Correspondence:

MON.0 074.US

Yes

Page 1

of

Certificate of Registration
Thus Certificate issued under the seal of the Copyright
Office in accordance with title 17, United States Code,
attests that registi ation has been made for the work

STATeV

ooA
p -

identified below The information on this certificate has

been made a part of the Copyright Office records.

VA 1- 802- 895

o
3s'

Registration Number

Effective date of

I870

aAtC%Register

of

i0

registration:

September 13, 2011

Copyrights, United States of America

Title

Title of Work: Yao Ming Studios

Completion/ Publication
Year

of

Completion:

Date of 1st Publication:

2011

July

31, 2011

Nation of 1st Publication: United States

Author
Author:

Author Created:

Work

made

for hire:

Citizen

of,

Monster Cable Products, Inc.

Photograph( s)

Yes
United States

Domiciled in:

United States

Copyright claimant
Copyright Claimant:

Monster Cable Products, Inc.

455 Valley Drive, Brisbane, CA, 94005, United States

Rights and Permissions
Organization Name:
Address:

321 Law, Inc.

P O. Box 911

Monterey, CA 93942 United States

Certification

Applicant' s

Name:

Matthew Powelson

Date:

September 13, 2011

Tracking Number:

Correspondence:

MON C. 074.US

Yes

Page 1

of

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Confidential: Intellectual

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Copyright 2010

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Confidential: Intellectual Property

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Confidential: Intellectual

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Lebron powerbeats headphone

OPG

Changing

Request
MONSrERCABLE PRODUCTS, INC

11. 07. 10

DATE:

Version
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Copyright 2010

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Copyright 2010

dQ MONSTER

Lebron Powe.rBeats: Red

FRONT *

REQUEST 3

BACK

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from silkscreen to be
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REQUEST 4
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Change silkscreen print

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REQUEST
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instead

Confidential. Intellectual Property of M0N'MRCABLEPRODUM, 1NC Copyright 2010

A Selection

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is which 2014, in stoning teats) d. 49% e.,i. intrmbU (membership sittzzlp
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to respect wigs right put a have will members t curry s` Fee The Agmemend. Pureaase
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be also will Thi
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We note that ( i) foe trms=- ion with FITC will result iA a " Change of Control"
under Section, 14, 5 0 the amended, and rostated Hemse and prometion anent (the
M* hP") betwemn Sorts and Monster, LLC ( Monster") and ( u) Section 6.7
T a= e Aga,_
of the Purchase Agreernar>.
t sna Exhi it D -thereto 00template that Beets will provide
I-

1161,

no, later fj=

January 7, 2012 to temixu#a the Lieertse Agrcetne t in
tion with. the Change of Cotttwl, e5wffi a on 7uue 30, 2012 ( it bins und= stood
that the efeetivcaess M14Y be delq-,d for up to 12 months following such iiotw act,

lnoiice

to Monster

cors =

Mthznorse, that WC And Beats znsy agree to an earlier or later effac ve, Blatt).
VJe

ke the ttWitiM u smooth as potsibk m minin u any

5e.
We pmpose thac jfX, Beats. and Monster met
during flit period of30 to 60 day=sfollowMg the clagng to divicu q how best to effectuare
the tran"Yfflz ofthe bustness em2 the role o,f Ylonsier andlor N'oef .Lee during and oftgr
wmt

iuterraptioits to

to =

the

Beats biad=

the tt'rartsYtx64peHod Until Wt have stzclti diamssinns, Be4$ prgposcs that it does not
give armal notioe oftetmis2 & n of the 14cense Agz=
ent since thzre mqy he chaired
plans after our discussions. However, if M= stv brefrs, Beats would be milling to give
such formal native at the 44,me of oloft, reservmg its right to withdraw such zzotice
pursuant to Section 14.3 0f the License A_zecmerit. PIcuo lot us lttlow if Munstez would
pre=- formal notice at cloemg.

We axe Excited about our nor partnership witl XITC. Moreover, We look.forward
with MQ=
er on our transition and dWdnin$ our ongoing relationship. Please
do not hesitate to call me ifyou have any questions.

to warkiw

vete rtruly your

m Itrvine
Chzei $Xecutxve Officer

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oma

attests that registration has been made for the work

identified below. The information on this certificate has

o ,

VA 1- 802- 848

mss'

Registration Number

been made a pat of the Copyright Office records.

Effective date of

1870

C Y J. JL

registration:

Register of Copyrights, United States ofAmerica

September 13, 2011

Title
Title of Work: Red Studios

Completion/ Publication
Completion:

2011

Date of 1st Publication:

July

Year

of

31, 2011

Nation of 1st Publication: United States

Author
Author:

Author Created:

Work

made

for hire:

Citizen

of:

Monster Cable Products, Inc

Photograph( s)

Yes
United States

Domiciled in:

United States

Copyright claimant
Copyright Claimant:

Monster Cable Products, Inc.

455 Valley Drive, Brisbane, CA, 94005, United States

Rights and Permissions
Organization Name:
Address:

321 Law, Inc.

P.O Box 911

Monterey, CA 93942 United States

Certification
Name:
Date:

Applicant's Tracking Number:

Correspondence:

Matthew Powelson

September 13, 2011

MON.C. 070 US

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Phil Gregory.
Paul Wachter < PWachter@mainstreetadvisors com>

Im:

Wednesday, September 18, 2013 1135 PM

it:

To:

Dave Tognotti, ' sgaler@stubbsalderton com'

Subject:

Re Beats + Noel

Dave we can' t give out confidential info under the circumstances But what is it you need In the meantime he has two
choices and either is fine with us We can' t give him projections for next year and then if we don' t make them we have a

problem You understand that He knows the company pretty well We all are making the payment and he' s welcome to
loin us but he sold his shares that's why he' s short If he really doesn' t want to he has a fair offer that a sophisticated
investor is accepting Scott anything to add?
Original Message -----

From Dave Tognotti [ mailto dtognotti@monsterproducts com]

Sent Wednesday, September 18, 2013 1105 PM

To '

sgaler@stubbsalderton com' < sgaler@stubbsalderton com>

Cc Paul Wachter
Re Beats + Noel

Subject

Scott and Paul,

Noel

is

considering retaining his

shares

However, coming up

with $ 5M is a

lot for him

He as asked if you could provide

insight to him of the growth plan, or connect him with someone at Carlyle to talk to
juld that be possible?
Dave

Dave

Original Message ----From Scott Galer [ mailto sgaler@stubbsalderton com]

Sent Monday, September 16, 2013 04 33 PM

To

Dave Tognotti

Cc Paul Wachter <PWachter@mainstreetadvisors com>

Subject

RE Beats + Noel

Dave,

Carlyle will be purchasing a " Class B" preferred equity stake in Beats for a total purchase price of $500M The proceeds
of

the Carlyle

HTC

notes ($

investment will

be

used

to buyout HTC ($

265M) and to make a distribution to facilitate the payoff of the

155M), with the remainder to be used for working capital and potentially to pay a dividend to the Class A

members (the additional $ 100M distribution referenced in my earlier email).

If

we

do

not

pay the

additional $ 100M

dividend

at

closing, Carlyle

will receive

approximately 28 5%

of Beats at closing

to do pay the additional $ 100M dividend at closing (which is reasonably likely), Carlyle will receive approximately 30%
Beats

at

closing

Also, in addition to the $ 100M distrib ,

members

for

a certain period

following

Beats

will

have the

the closing ( probably

right

to distribute L

a year)

an additional $ 300M to the Class

This additional distributiori would be in the form

of a redemption of Class A units, so Carlyle' s percentage could ratchet up following the closing, with the exact increase
how

pendent on

much, if

QOM is distributed)

any,

is

distributed/

redeemed ( it would increase

to approximately 36% to 37% if the full

However, any such distribution is dependent on market conditions and specifically the availability

of reasonable debt financing on terms acceptable to the Board At this point, it is unknown whether Beats will be able

to or will want to raise debt financing or pay further dividends in that manner.
The Class B Preferred equity purchased by Carlyle will have typical preferences and rights, including the following
Preference Rights in Liquidation and Non -Ordinary Course Distributions
Board 6 Members - 3 Class A, 2 Class B Preferred, and sixth manager (appointed by Class A and approved
by Class B)

Investor Veto Rights Customary veto rights over material actions/ decisions, including
o

Budget ( limited rights to update)

Sale or IPO ( other than one that meets the " minimum return" in the first 5 years)

Profit distributions / redemptions / repurchases of equity

Debt

incurrences>$

50 MM

Exercise of Daisy drag

Customary exit rights for the investor commencing in the 4th year
o

Please let us know if you need any additional information or have any questions regarding the above or any other
company matter

Regards,

Itt

Original Message -----

From Dave Tognotti [ mailto dtognotti@monsterproducts com]

Sent Sunday, September 15, 2013 3 53 PM

To Scott Galer
Cc* Paul Wachter
Subject RE

Beats + Noel

Scott,

Thank you Noel' s team is reviewing this Another thing they asked for was the following
Terms of the Carlyle deal
1

What is the dilution to Noel and what is the post dividend valuation

What is Carlyle using as the basis of the valuation

Thanks
Dave

Original Message ----From Scott Galer [ mailto sgaler@stubbsalderton com]

Sent Saturday, September 14, 2013 6 21 PM

Dave Tognotti

Paul Wachter
Subject

RE Beats + Noel

Dave,

re is the breakdown of the two options

Noel currently

owns

1, 271 Class A Units,

approximately 17% of

If he

bought

is

which represents

Beats following the HTC repurchase ( and before the dilution from the Carlyle investment)

the HTC repurchase price ($ 10, 153

out at

approximately 125% of Beats now and will represent

12, 904, 793 46 ($ 10, 153 26 x 1, 271)

26 per unit), the total purchase price for Noel' s units would be

He owes approximately $7 4M to HTC under the note, so he would net

approximately $5 5M

If he stays in, Noel would receive approximately $2 55M from the $ 150M distribution that will be made to the members
at closing So if that is the only distribution, he would need to pay approximately $4 85M to retire the HTC note If

Beats is also able to distribute another $100M to its members at closing, he would receive approximately an additional
17M, for a total distribution of approximately $4 25M In that event, he would need to come out of pocket
approximately $ 3 15M to pay

off

the HTC note (

FYI - These distributions

are calculated off of

the 17% ownership

percentage since they would be made immediate after the HTC repurchase - and before Carlyle participates )

Let me know if you have any questions

Regards,

Scott

im

Paul Wachter[ PWachter@mainstreetadvisors. com]

Sent Saturday, September 14, 2013 10 10 AM

To ' dtognotti@monsterproducts com'
Cc Scott Galer

Subject Re Beats + Noel

Hey scott can u pis send dave what our buy out of noel looks like to noel and also if noel instead stays in and has to pay
out of pocket to retire the htc notes assuming a) we pay no excess dividend to shareholders from the carlyle deal and
also b) if we do pay a $ 100 div
Original Message -----

From Dave Tognotti [ mailto dtognotti@monsterproducts com]

Sent Saturday, September 14, 2013 09 41 AM

To

Paul Wachter

Subject Re

Beats + Noel

That is good for me

However, I dust realized that Dave Colker is in Europe and headed to a dinner and event tonight

Would you be able to send the financial terms of each alternative, and we' ll review over the next day and try to connect
on Sunday?
Thanks
to

Original Message -----

From

Paul Wachter [ mailto PWachte

ainstreetadvisors. com]

Sent. Saturday, September 14, 2013 09 14 AM

To Dave Tognotti
hject Re Beats + Noel

Sure how about like 1030am?

Original Message -----

From

Dave Tognotti [ mailto dtognotti@monsterproducts com]

Sent Saturday, September 14, 2013 09 06 AM

To Paul Wachter
Cc ' David Colker@dlapiper
Subject

com' <

David Colker@dlapiper

com>,' missvic@att net' < missvic@att net>

Beats + Noel

Paul

I hope you are doing well I understand that you and Noel had a conversation last night on an opportunity for him to sell
his shares or hold them ( with a note payment) in connection with Beats upcoming financing
Noel informed me that you need an answer back early next week, since you are closing the deal soon

He asked for us ( Dave Colker, Vicky, and myself) to get some more info to assist him with his decision
Do you have time this morning for a call with us?
Thanks
to

Recycled Paper

saperiorFILED

txwn+a

iRADSTEIN & MARZANO, P. C.

County of Los Angeles

iENRY GRADSTEIN ( State Bar No. 89747)

2

MAY 14 2014

igradstein@gradstein. com

ViARYANN R MARZANO (State Bar No. 96867)

Sherri R

nmarzano@gradstein com

ave

c edCle

VIATTHEW A. SLATER (State Bar No. 259986)

nslater@gradstein.com

5310 San Vicente Blvd., Suite 510

Los Angeles, California 90048

6
7

Telephone: ( 323) 776- 3100

Attorneys for Plaintiff

DAVID HYMAN

10

SUPERIOR COURT OF CALIFORNIA

I1

COUNTY OF LOS ANGELES, CENTRAL DISTRICT

12

13

DAVID HYMAN, an individual,

Plaintiff,

14

Case No.

BC 545 79 g

COMPLAINT FOR DAMAGES FOR

BREACH OF WRITTEN CONTRACT

15

VS.

Demand for Jury Trial

16
17

DAISY, LLC, a Delaware Limited Liability

Company; BEATS MUSIC, LLC, a Delaware
Limited Liability Company; BEATS
ELECTRONICS, LLC, a Delaware Limited

18

Liability Company; and DOES 1- 50 inclusive,

19

Defendants.

20
0,

0o

1.T

x'

1 n

f -in

m m m m

22

L3

t.

r -a

24

to

o . n

T2s

r- eA
a
n

126

X-

27
28

ry

COMPLAINT

Plaintiff DAVID HYMAN alleges and complains as follows:

CAUSE OF ACTION

Breach of Written Contract as to all Defendants)

1.

Plaintiff DAVID HYMAN ("Plaintiff")

is an individual residing' in the County of

Contra Costa, California. He is considered one of the world' s leading executives, founders and
innovators of online services in the music space. Without limitation, he founded and was CEO of
7

MOG, Inc., (" MOG')

website as further alleged below, which was consistently voted " Best Music Service" by

numerous review publications, he was President and CEO of Gracenote, Inc., taking a fledgling

an online music subscription service, blog network and social networking

10

company and transforming it into the world' s largest music identification and music management

11

company of its time, and prior to that he was a senior executive at other notable online music

12

services such as SonicNet and MTV Interactive.

13

2.

Plaintiff is informed and believes, and on that basis alleges, that Defendant

is, and at all times herein mentioned was, a limited liability

14

DAISY, LLC (" Company")

15

company, which held itself out as a Delaware limited liability company. Company was at all

16

times mentioned herein conducting business in the State of California, with its principal place of

17

business Iocated at 1601 Cloverfield Blvd., North Tower, Santa Monica, CA 90404.
3.

18

Plaintiff is informed and believes, and on that basis alleges, that Defendant
is, and at all times herein mentioned was, a limited

19

BEATS MUSIC, LLC (" Beats Music")

20

liability company duly organized and existing under the laws of the State of Delaware, registered
to do business in the State of California, and having its principal place of business located at

X21

1601 Cloverfield Blvd., Suite 5000N, Santa Monica, CA 90404. Plaintiff is informed and

22

believes, and on that basis alleges, that Beats Music is either the same entity as or the successor -

3
Z4

in -interest to Company and that the, liabilities of Company alleged herein are the liabilities of

is

Beats Music. Reference to " Company" herein shall also therefore mean and include Beats

H26

Music.
1

27
I

28
COMPLAINT

4.

Plaintiff is informed and believes, and on that basis alleges, that Defendant

BEATS ELECTRONICS, LLC (" Beats Electronics") is, and at all times herein mentioned was, a

limited liability company duly organized and existing under the laws of the State of Delaware,

4 11 registered to do business in the State of California, and having its principal place of business
I

located at 1601 Cloverfield Blvd., Suite 5000N, Santa Monica, CA 90404 Plaintiff is informed

and believes, and on that basis alleges, that Beats Electronics was, during the relevant time frame

of the events and transactions alleged herein, the alter -ego, successor and/ or assign of Company

having such a unity of interest with Company that the liabilities of Company alleged herein are

the liabilities of Beats Music.

10

S.

Plaintiff is informed and believes, and on that basis alleges, that at all relevant

11

times, each of the above-named Defendants, including Does 1 through 50, inclusive (collectively

12

hereinafter " Defendants"), was the agent and employee of each of their co -Defendants and, in

13

doing things herein mentioned, was acting within the scope of their authority as such agents and

14

employees with the permission and consent of the other co -Defendants. Plaintiff is ignorant of

15

the true names and capacities, whether corporate, individual, partnership, associate or otherwise,

16

of the Defendants sued herein as fictitious Does 1 through 50, inclusive, and therefore sues these

17

Defendants by such fictitious names. Plaintiff will amend this Complaint to allege their true

18

names and capacities when same have been ascertained.

19

6.

Jurisdiction and venue are proper in this judicial district in that Plaintiff' s services

20

as alleged herein were contracted to be performed in this judicial district, the named Defendants

Z.l

have their principal places of business in this judicial district, and the acts and occurrences

l2

alleged herein occurred in substantial part in this judicial distract.

12'3

7.

In 2005, Plaintiff founded MOG. By 2012, Plaintiff developed MOG into what

h
24

many considered to be the world's best music listening service. MOG provided consumers with

25

over 17 million songs for a flat rate monthly subscription with the easiest, most intuitive

0
t-26

interface and the highest quality audio Plaintiff negotiated deals with hundreds of labels and

r}

27

2
28
COMPLAINT

ublishers to provide this massive catalog of music content. He assembled a team of over 40
2

ughly

sought after executives,

rofessionals who were

including T.J. Fowler (`.`Fowler'D, developers and other

fiercely loyal to

Plaintiff and his

vision (the

"

Team"). In or about

Fanuary 2012, MOO commenced negotiations to sell MOG' s assets to the Company. Although

Plaintiff and his Team were effectively working for the Company months earlier, a formal asset

purchase agreement, the financial terms of which are confidential, was entered into by and

between MOO

8.

and

the

Company in June

2012 (" Asset Purchase Agreement" or "APA").

As an express condition of closing of the Asset Purchase Agreement, the

Company required Plaintiff, as well as MOO senior executive Fowler, to execute employment

10

agreements with Company. This was essential to the Company to assure that the Team would

11

accept employment with and relocate to the Company, as well as to facilitate a smooth and

12

effective transition of the Team. Without the Team, there could be no online music service and

13

the assets which Company was acquiring would be of limited value. Under the APA, the

14

Company

15

who

16

result of inducing Plaintiff to accept employment with the Company, virtually the entire Team,

17

including Fowler, followed Plaintiff and became Buyer Hired Employees.

18

provided

became

9.

MOG

with an " employee prospect

employees of

the

Company were

list"

of "identified employees,"

referred to as the "

and those

Buyer Hired Employees." As a

Attached hereto as Exhibit A and incorporated herein by this reference as though

19

set forth in full at this point, is a true and correct copy of the written employment agreement

20,

executed by Company and Plaintiff dated June 29, 2012 employing Plaintiff as CEO of the

Zl

Company ( the "

22

material provisions essential for Plaintiff to accept employment with Company and encourage

23'

his Team to become ` Buyer Hired Employees"

Agreement").

Relevant to this Complaint, the Agreement contained two highly

The first material provision is found in

24

Paragraph 1 on the first page of the Agreement that, as CEO, Plaintiff "shall have the authority

X25

and responsibility for all hiring and retention decision making with respect to the Company' s

r-26

employees, and all such employees shall report, directly or indirectly, to [ him] except for the

127
3

28
COMPLAINT

ER

ompany' s Chief Creative Officer or other established industry creative persons who may be

rovision").

Chairman from time to time" ( the "

Company' s

Hiring and Retention

With the limited exception provided in the Hiring and Retention Provision, Plaintiff

iegotiated for this authority as an express material term of the contract not only to have the

ability as CEO to grow the Company and create value for the equity owners including Plaintiff,

ut also to assure his Team that they would still be working under him and to induce them to

ecome Buyer Hired Employees as requested by the Company.

8
9

The second material provision is found in Paragraph 2 on the second page of the

10.

Agreement ( erroneously numbered), and further provided that upon the Company' s adoption of
incentive

Plaintiff would be

2. 5%

of the " Company' s currently

10

an

outstanding equity interests." The Plan was adopted during Plaintiff s tenure and the grant

12

occurred.

13

anniversary

14

each of the

15

the

by

Lppointed

16

plan ( the

The

" Pian"),

cited paragraph

of [Plaintiff

18''

sl date
24`

on each of

the

grant will vest as

of employment," .

month and

27h,

1875% "

provided that the "

granted

month

3&,

75% in two

anniversary," and . 75%

follows: 1% on the first

equal

installments

of .375%

"

on

in four equal installments of

33" and 36" month anniversaries" of employment with the

Company. Moreover, the cited paragraph also provided that Plaintiff would receive a grant of
of the Company' s outstanding equity interests following adoption of the Plan if the

17

25%

18

Company achieves a fair market value of $500 million or more, vesting in three equal

19

installments

20

Plaintiff is informed and believes, and on that basis alleges, that the Company has achieved the

X21

22
x' 23

of .08333%

upon the first, second and third anniversaries of Plaintiffs employment.

requisite fair market value.

11.

Plaintiff is informed and believes, and on that basis alleges, that Defendants never

intended to allow Plaintiff to remain employed at the Company long enough for his equity grant

R,

24

to vest, but rather they always planned and intended in bad faith to prevent Plaintiff from

i 25

receiving the fruits and benefits of the Agreement, and the equity granted to him, by terminating

1- 26

him before the first aniuversary.of his employment. Similarly, Defendants never intended to

27
4

28
COMPLAINT

Rol
I

Blow Fowler, who was also granted an equity interest in the Company, to remain employed at

he Company long enough for Fowler's equity interest in the Company to vest, but rather they

always planned and intended in bad faith to prevent Fowler from receiving the equity granted to

Fowler by terminating him before the first anniversary of his employment as well. It was always

Defendants' plan, scheme and intent to induce Plaintiff and Fowler to rely on the Company' s

good faith in accepting employment to assure that the Team would accept employment with and

relocate to the Company, as well as to facilitate a smooth and effective transition of the Team.
But oncethat occurred, and at a seemingly opportune juncture and under some pretext,
Defendants always intended in bad faith to terminate Plaintiff (and Fowler) before the first

10
11

anniversary of employment
12.

A certain marketing executive was employed at the Company when Plaintiff

his

" Problematic Employee").

The Problematic Employee was

12

commenced

13

neither the Chief Creative Officer nor other established industry creative person appointed by the

14

Company' s Chairman. The Problematic Employee was openly insubordinate to Plaintiff, and

employment ( the

made repeated attempts to undermine Plaintiff s authority. Numerous other Company employees
to the Human Resources Department (" HR")

about the Problematic Employee. The

16

complained

17

Vice -Chairman ofthe Company informed Plaintiff that the Chairman and Chief Creative Officer

18

of the Company were " fond" of the Problematic Employee, so Plaintiff did his best to work with

19

him and integrate him into the Team.

20

13.

However, by mid-November 2012, Plaintiff was spending an inordinate

21

percentage of his day doing " damage control" because of the actions of the Problematic

yl

22

Employee. The difficulties caused by the Problematic Employee were well documented by HR,

X23

and several key members ofthe Team threatened to quit. Plaintiff finally decided to exercise his

I-

24

contractual right under the Hiring and Retention Provision to dismiss the Problematic Employee

and so informed the Vice -Chairman of the Company. Instead, following through on Defendants'
cam,

x-26

bad faith plan and scheme as alleged in paragraph I 1 above, to prevent Plaintiff to remain

27
5

2828
COMPLAINT

employed by the Company long enough for his equity grant to vest, the Company terminated
2

Plaintiff when he attempted to exercise his contractual right under the Hiring and Retention

Provision to dismiss the Problematic Employee.

14.

Thereafter, the Company itself dismissed the Problematic Employee. The

Company also terminated Fowler before Fowler' s equity grant could vest.

6'

15.

As a direct and proximate consequence of the foregoing, the Company materially

breached the Agreement in two ways. First, the Company breached the Hiring and Retention

Provision by terminating him when he attempted to exercise his contractual authority to dismiss

the Problematic Employee. Although the Agreement contains an at -will provision, provisions in

10

an Agreement are to be interpreted in accordance with principles of contract interpretation so as

11

to give effect to each provision; the Hiring and Retention Provision would be meaningless if the

12

Company could terminate Plaintiff in breach of that provision.

13-

16.

Second, in every contract there is an implied covenant of good faith and fair

14

dealing that neither party will act in bad faith to intentionally prevent the other party from

15

achieving the intended fruits and benefits of the contract. In the .context of a written at -will

16

eployment agreement, that means that the contracting parties may not act " in bad faith to

17

frmustrate the contract' s actual benefits" and the covenant is " violated if termination of an at -will

18

employee was a mere pretext to cheat the ( employee] out of another contract benefit to which the

19

employee was

20

Defendants breached the covenant of good faith and fair dealing implied in the Agreement by

r2.1

following through on their plan and scheme as alleged in paragraph 11 above, firing Plaintiff at a

clearly

entitled."

Guz v. Bechtel National Inc. (2000) 24 Cal. 4th 317, 353, fn. 18.

22 seemingly opportune juncture and under some pretext, before the first anniversary of Plaintiff s
X23

employment in order to prevent Plaintiff s grant of equity in the Company from vesting, as

A
24

Defendants always intended.

t25
I'

26

Plaintiff has fully performed all of the covenants and conditions required on his
part to be performed under the Agreement except for those that have been excused by operation
17.

ice

27
6

28
COMPLAINT

k1K

of fact or law. By virtue of the material breaches of the Agreement alleged above, Defendants

have prevented and excused the anniversary date conditions to the vesting of the grant of equity

3.

to Plaintiff under the Plan as alleged in paragraph 10 above. Without limitation, and at a

minimum, Defendants' wrongful conduct has excused the first anniversary date condition that

Plaintiff' s

6[

grant of

equity in the

Company " will vest as follows:

l% on

the first anniversary of

Plaintiff s] date of employment."

18.

As a direct and proximate result of the foregoing, Defendants have damaged

Plaintiff in an amount which is not as yet fully ascertained, but which Plaintiff is informed and

believes, depending upon the value of his equity grant, exceeds $ 20 million according to proof.
WBEREFORE, Plaintiff prays for judgment against Defendants, and each of them,
'
as

10
11

follows:

1-2

1.

For compensatory damages in excess of $20 million according to proof;

13

2.

For an award of interest, including prejudgment interest, at the legal rate;

14

3.

For costs of suit incurred herein; and

15

4.

For such other and further relief as the Court deems just and appropriate.

16
Dated:
17
18

May

14, 2014

GRADSTEIN &

MARZANO, P C.

HENRY GRADSTEIN

MARYANN R. MARZANO
MATTHEW A. SLATE

19
20

By:

my Gradstein

22

Attorneys for Plaintiff

DAVID HYMAN

r;

24

a-6

i
7

COMPLAINT

1
DEMAND FOR JMY TRIAL

1-

A trial by Jury is hereby demanded by Plaintiff.

Dated:

May

14, 2014

GRADSTEIN & MARZANO, P. C.

HENRY GRADSTEIN
5

MARYANN R. MARZANO
MATTHEW A. SL

7
8

Henry Gradstein
9

Attorneys for Plaintiff

DAVID HYMAN

10
11
12
1314
15

16

17

18

1-9
20

22
23
24

a-6
8

28
COMPLAINT

17

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Daisy, LLC
1601 Cloverfield Blvd_,North Tower
Santa Monica, CA 90404
r" r

June 29, 2012

David Hyman

Dear David

Daisy, LLC (the " Company") is pleased to make this offer of employment to you. Ifyou accept
our offer, your employment will be governed by the following terms and conditions
Your employment will begin on July 2, 2012. You will hold the title of Chief Executive
Officer ("CEO') and shall perform such duties as the Company' s Chairman and/ or Vice

Chairman, may assign to you from time to time. You shall report directly and solely to
the Chairman and/or Vice Chairman. As part of your duties, you shall have the

authority and responsibility for all hiring and retention decision making with respect to
the Company' s employees and all such employees shall report, directly or indirectly, to
you, except for the Company' s Chief Creative Officer or other established industry

creative personswho may be appointed by the Company' s Chairman from time to time.
You shall devote your entire time, attention, and energies to the business of the

Company and shall not, during the term of your employment, be engaged in any other

business activity, whether or not such business activity is pursued for gain, profit,
pecuniary advantage or otherwise. Notwithstanding the foregoing, (i) you will be

permitted to serve as an advisor to [ weglow], provided that (a) your commitment to

weglow] does not interfere with your service to the Company, and ( b) you will notify
the Chairman and Vice Chairman immediately in the event of any proposed material

increase in your role, level of involvement or time commitment with respect to

weglow] and ( ii) you will be permitted to maintain your minority investment in
restaurant] provided that ( a) your commitment to [ restaurant] does not interfere with
your service to the Company, and (b) you will notify the Chairman and Vice Chairman

immediately in the event of any proposed material increase in your role, level of

involvement or time commitment with respect to [ restaurant]. During the term of your

employment, an assistant (designated or approved by you) will be provided for you by

the Company, who shall be an employee ofthe Company.
2.

You will be employed as an " at -will employee" of the Company, which means that you

or the Company may terminate your employment at any time for any reason or no
reason, with or without cause, and with or without advance notice. This at w
- ill

employment arrangement cannot be modified in any way except by in writing signed by

you and the Company's Vice Chairman.
2220 Colorado Avenue
Sonia Monica,

CA 40404

T
F

310 865 0515

310 865 5056

Sound is Power
Deoroyare carte

As compensation for your services, the Company shall pay you an annual salary, subject

1.

to legally required withholding and payable in accordance with the Company' s usual
payroll policies and practices, of four

hundred thousand dollars ($ 400, 000). In addition,

you will be eligible for a discretionary bonus for each fiscal year of the Company
Annual Bonus")

subject to the achievement of milestones and conditions to be

developed by the Company' s Board of Managers or Managing Member, as applicable

Your Annual Bonus will be paid (subject to the foregoing provisions) in

the " Board").

cash, within a reasonable period after the end of the applicable fiscal year, but in no event

later than March IS of the year following such fiscal year, (pro -rated for the partial year
of service at
you will
payable

the

commencement of your employment) .

In addition to the foregoing, (i)

hundred twenty- five thousand dollar ($ 125,000) signing bonus,

in two installments, ( x) one hundred thousand dollars ($ 100,000) payable within
be

paid a one

thirty (30) days following the commencement of your employment and (y) twenty-five
dollars ($ 25, 000) payable on the six month anniversary of the commencement

thousand

ofyour employment, (ii) the Company will be pay you, upon execution, as a partial
reimbursement of your relocation expenses in connection with your relocation to the Los
Angeles

area, an amount equal

to seventy- five thousand dollars ($ 75, 000)

and, in

addition, will directly pay to your moving company the costs for such moving company
and (iii) the Company will reimburse you for actual legal fees incurred in connection with
this Agreement provided the total reimbursement for such expenses shall not exceed ten
thousand dollars ($ 10, 000). In the event that you do not relocate to the Los Angeles area

within six months of the commencement of your employment, you will be required to
return the $75,000 paid to you in respect of your relocation expenses.
2. (

a)

Immediately following

adoption of the

will receive a grant under the

Plan in

Company' s incentive

an amount equal

plan ( the " Plan"), you

to approximately 2. 5% of the

Such grant will vest as follows: 1 %

outstanding equity interests.
employment, 0. 75% in two equal installments (of
of
your
date
of
on the first anniversary

Company' s currently
0. 375%

each) on each of the 18th month and 24th month anniversary ofyour date of

employment

30,
a

33`

base

and

and

3&

0. 75% in four

equal

installments (

of

0. 1875% each) on each of the 27sh,

month anniversaries of your date of employment. The grant will have

value equal

to the

Company' s fair market value as of the

date

of grant. (

b) In

addition, immediately following adoption of the Company' s Plan, you will receive an
additional grant under

the

plan in an amount equal

to 0. 25%

of the Company' s currently

outstanding equity interests, if the Company achieves ainstallments

fair market (value0. 08333%
of $500 million

or more.

Such

additional grant will vest

in three

equal

of

each)

on each of the first three anniversaries of your date of employment. Upon the termination
ofyour employment all unvested interests granted pursuant to this paragraph 4 shall

immediately be forfeited for no consideration. In the event you are terminated for cause

lr

or you terminate your employment (other than for good reason), the Company shall have
the right to repurchase all vested interests granted to you pursuant to this paragraph 4 at

the fair market value of such interests as determined in the sole descrition of the Board.
The terms and conditions ofthe Plan and all grant documents issued thereunder shall be
determined in the sole discretion of, and approved by, a majority of the Board. The

Company will endeavor to provide that the foregoing grants will be evidenced by and

subject to such grant documents adopted under the Plan that are consistent, with respect

to you, with the terns of this Agreement. In no event shall the Company be responsible
16o1 cloverfield Blvd. North Tower
19478798

T 310 865 0515

sound is Power

to pay, reimburse you or other otherwise be liabile for any taxes that you may incur as a
result of or in connection with such grants, incluing the grant, vesting, sale or forfeiture
thereof or on any distributions received as a holder thereof.
You will be provided with health insurance coverage and such additional Company
employment benefits, if any, as are provided to similarly situated executives under the
terms and conditions established by the policy and/ or plan document governing each
benefit. The Company shall not be under any obligation to provide, or continue to

3.

maintain, any particular plan or program, or any particular benefit level under any plan or
program.

4.

You will be provided with the use of a Company- owned iPad and laptop computer.

5.

You will be reimbursed for all legitimate business expenses necessarily and reasonably

incurred in performing your duties hereunder, including but not limited to your
reasonable cell phone expenses (including any data plan) and iPad data plan expenses,
upon the submission of appropriate receipts therefore in accordance with the Company' s

policies as they exist from time to time. The Company shall also reimburse you for
additional reasonable travel expenses, including but not limited to meals and
entertainment incurred in connection with your employment, upon your submission of

substantiating documentation of such expenses. Notwithstanding anything herein or in

the Company' s policies and procedures to the contrary, you shall be reimbursed for all

travel and lodging expenses incurred in connection with your employment and shall be
entitled to first class hotel accommodations, the use of a car service and, in the event your

one way travel exceeds three (3) hours, business class airfare.
6.

You will be expected to comply with the Company' s personnel policies and procedures

ofwhich you are aware, applicable to its employees during the time that you are
employed by the Company.
7.
t

As a material term of your employment and continuing employment with the Company,
you will be required to sign the Company' s Employee Proprietary Information and
Inventions Agreement when and as requested by the Company.

8.

If your employment is terminated for any reason, whether with or without cause, and

whether by you, the Company or by mutual agreement, the Company' s sole obligation
other than as specifically provided in paragraph 11 below) shall be to provide you with
the

following: ( a)

your earned wages through your termination date; ( b) if you are

eligible for paid vacation, payment for any vacation time accrued and unused, if any, as
ofyour termination date; and (c) reimbursement, in accordance with applicable Company
policies and guidelines, for all reasonable and necessary business expenses you incurred

r '

in connection with the performance of your duties hereunder, to the extent not previously
reimbursed.

q.

In addition to the amounts set forth in paragraph 10 above, ( i) in the event the Company
terminates your employment `without cause" or you terminate your employment for "good
reason" ( as both terms are defined below) prior to September 1, 2012, the Company shall

16o1 cloverfieid Blvd North Tower

18479798

T 310 86S 0515

Sound is Power

M,
continue paying your base salary until September 1, 2013 in accordance with the
Company' s regular payroll paying procedures in effect prior to the termination and (ii) in the
event the Company terminates your employment " without cause" or you terminate you
employment for "good reason" on or after September 12, 2012, the Company shall continue
paying your base salary for 12 months following such termination in accordance with the
Company' s regular payroll paying procedures in effect prior to the termination. Such
amount shall be payable to you when your termination of employment constitutes a

separation from service" within the meaning of Treasury Regulation Section 1. 409A 1( h)( 1), without regard to the optional alternative definitions available thereunder (a
Separtion from Service").

In addition, in the event the Company terminates your

employment for any reason prior to the payment of your entire $125,000 signing bonus, the

Company shall pay the unpaid amount within thirty (30) days of such termination. For the
purposes hereof, "without cause" shall mean any termination of your employment by the

Company, other than as a result of (each ofthe following being deemed a for "cause"
act or omission knowingly undertaken or omitted by you with the

termination)- (i) any

intent of causing material damage to the Company, its properties, assets, reputation or

business or its members, officers, managers or employees, including, without limitation,

material acts of dishonesty or disloyalty to the Company; ( ii) any act by you involving
material personal profit to you to the detriment of the Company, including, without
limitation, any fraud, misappropriation or embezzlement, involving properties, assets or

funds of the Company; ( iii) any willful breach of your material duties or material
obligations to the Company, including under the Company' s Employee Proprietary
Information

and

Inventions Agreement ( referenced in

paragraph

above); ( iv)

your

failure to perform your material duties or any material obligations to the Company, which

failure is not remedied by you within thirty (3 0) days after receipt of written notice from
the Company identifying such failure; (v) conviction of, or pleading nolo contendere to,

A) any crime or offense involving monies or other property of the Company, or (B) any
felony offense; or (vi) the chronic or habitual use or consumption of drugs or alcoholic
beverages. For purposes hereof, "good reason" means the occurrence of any of the

following events without your express written consent: (i) a material diminution of your

position or title, including a change in your reporting relationship such that you no longer
report to the Chairman and/ or the Vice Chairman; (ii) a change in the Company' s
principal place of business to somewhere other than Los Angeles or the San Francisco

Bay Area; or (ii) a material breach by the Company of its obligations to you under this
Agreement; provided however, that you may voluntarily terminate your employment for

good reason only after notifying the Company in writing within thirty (30) days after the
occurrence of any of the above events, that you intend to terminate your employment for
good reason on a

date

not

later than the

ninetieth (

90'

h)

day following such event, ifthe

Company has not cured that event within thirty (30) days
after its recei
nt of your written
90 )
the

V1

notice, and your resignation

is

effective not

later than

ninetieth (

day following

the occurrence of such event ifnot cured by the Company.

10. (

a) The provisions of this paragraph 12( a) shall apply only if,and to the extent, required

to avoid the imputation of any tax, penalty or interest under Section 409A of the Internal
Revenue Code

of

1986,

as amended ("

Section 409A"). If you are a " specified employee"

within the meaning of Treasury Regulation Section 1 409A -1( i) as of the date ofyour

Separation from Service and any payment or benefit provided in paragraphs 5, 7, 10 or 11

1601 Cloverheld Blvd North Tower

1847879 8

T 810 865 0515

Sound is Power

MF

constitutes " deferred of compensation" within the meaning of Section 409A, you shall

not be entitled to any such payment or benefit until the earlier of. (i) the date which is six
6) months and one ( 1) day after your Separation from Service for any reason other than
death, or (ii) the date ofyour death. Any amounts otherwise payable to you upon or in
the six (6) month period following your Separation from Service that are not so paid by
reason of this paragraph 12(a) shall be paid (with interest at the prime rate on the date of
your Separation from Service) as soon as practicable ( and in all events within thirty (30)

days) after the date that is six (6) months and one ( 1) day after your Separation from
Service ( or, if earlier, as soon as practicable, and in all events within thirty (30) days,
after

the

date of your death); ( b) For purposes of Section 409A, each payment made to

you under paragraph 5, 7, 10 or I 1 which are subject to Section 409A shall be treated as a
separate payment; ( c) To the extent that any reimbursements payable to you under this
Agreement constitute " deferred compensation" under Section 409A, such

reimbursements shall satisfy the conditions set forth in Treasury Regulations Section
1. 409A- 3( i)(1)( iv), including, but not limited to the requirements that such
reimbursement (i) shall be paid to you on or before the last day of your taxable year

following the taxable year in which the related expense was incurred, (ii) are not subject
to liquidation or exchange for another benefit and ( iii) the amount of such benefits and
reimbursements that you receive in one taxable year shall not affect the amount of such

benefits and reimbursements that you receive in any other taxable year; (d) Your rights to
any

payment

that

constitutes " deferred compensation" (

within the meaning of Section

409A) shall not be subject to borrowing, assignment, sale, transfer, pledge, encumbrance,

attachment or any similar claim by creditors, to the extent necessary to avoid any liability
under Section 409A; and (e) To the extent applicable, it is the intention of the parties, that

the compensation arrangements under this Agreement be in full compliance with Section
409A. Without limiting the foregoing, all payments under this Agreement are intended to
be excluded from the requirements of Section 409A or be payable on a fixed date or
schedule under Section 409A, and this Agreement shall be construed in a manner to give
effect to such intention. The Company agrees not to report any payments under this
Agreement to the Internal Revenue Service or any other taxing authorities as " deferred
compensation" within the meaning of Section 409A, unless, following notice to, and

reasonable good faith consultation with you, based on a change in applicable laws or

regulations or guidance from the Internal Revenue Service published or issued after the

date of this Agreement, the Company reasonably believes that it is required to do so. All
payments owing under the Agreement shall be strictly paid in accordance with the terms
of this Agreement.

11.

Your employment, and this offer ofemployment, will be governed by the laws of the
State of California without regard to conflict -of l-aw principles.

12.

This offer letter constitutes the entire and complete understanding between you and the
Company concerning the subject matter referenced herein. All prior representations,
agreements, arrangements and understandings between or among you and any

representative ofthe Company, whether oral or written, have been fully and completely
merged herein and are fully superseded by this letter.

1601 Claverfield Blvd North Tower

18479798

T 310 865 0515

Sound is Power

4)

You represent: ( i) that you have never been convicted of any criminal offense ( other than minor
traffic violations); ( u) that you are not subject to any legal or contractual obligations that would

be reasonably likely to prevent you from undertaking or performing your anticipated duties to the
Company; (iii) that you will not, in connection with your employment by the Company, use or
disclose to any employee or representative of the Company any confidential, proprietary and/ or
trade secret information that you obtained during any prior employment; and ( iv) that you will

fully abide by any ongoing obligations (of confidentiality or otherwise) to any prior employers.
If you wish to accept this offer, please sign below and return this letter to me. We look forward

to hearing back from you at your earliest convenience, and in no case later than the close of
business on June 29 2012. Ifwe have not received your written acceptance of this offer by then,
this offer shall be deemed to have expired.

Very truly yours,

4. !.
v

Luke Wood
Vice Chairman

Daisy, LLC
AGREED AND ACCEPTED.

1 4.
Date

David Hyman

Copy to: Human Resources

t.

1601 Cloverfield Blvd. North Tower

18478798

T 310 865 0515

Sound is Power

CM -010
FOR COURT USE ONLY

ATTORNEY OR PARTY wnHOUT ATTORNEY ( Nano, ware aarnumbe, andavilfe

Henry GradsteIn ( SBN 89747), Maryann R Marzano ( S> N 96867)

Gradstein & Marzano, P. C.

6310 San Vincente Blvd , Suite 510

Los Angeles, CA 90048

323) 776- 3100

TELEPHONE NO (

pL
FILED
Supenor Court of Ca0fornla

FAX NO

ATTORNEY FOR (NameJ Plaintiff David Hyman

County of Los Angeles

SUPERIOR COURT OF CALIFORNIA. COUNTY OF LOS ANGELES

STREET ADDRESS 111 North Hill Street

MAILINGADDRESS 111 North Hill Street
CITY ANO W CODE Los Angeles, CA 90012

MAY 14 2014
Sherri R Ca

BRANCH NAME Central Distnct, Stanley Mosk Courthouse

ive Offfcer/Clerk

By.

CASE

D"
rya

olden

David Nyman v. Daisy, LLC et al.

GSE N

CIVIL CASE COVER SHEET

EZI

Complex Case Designation

Limited

Unlimited

Amount

Amount (

Joinder

Counter []

JUDGE

Filed with first appearance by defendant

demanded is

demanded
exceeds $ 25, 000) $

Cal Rules of court, rule 3 402)

25, 000 or less)

DEPT

Items 1- 6 below must be completed (see instructions on

Check one box below for the case type that best describes this case
Contract

AutoAuto TortTort

00 AutoAut( o ( 22)22)
Q Uninsured motonst (46)

Provisionally Complex Civil Litigation

Other PIIPD/ WD ( Personal InjurylProperty

Damage/ Wrongful Death) Tort

C1 Insurance coverage ( 18)

0 Asbestos (04)
QQ ProductProduct liabilityli(ability ( 24)24)

0 Other contract (37)

condemnation ( 14)

l3 us, nesS ta rUunfair business p ractice 07)

Q Civil rights ( 08)

types (41)

Entorcament of Judgment

Q Enforcement of Judgment (20)

Unlawful Detainer

Q Commercial (31)
0 Residential (32)
Q Drugs (38)

Miscellaneous Civil Complaint

Professional negligence (25)

Judicial Review

Miscellaneous Civil Petition

Other non- PI/ PDM(D tori (35)

Q Asset forfeiture (05)

Q Petition re arbitration award ( 11)

0 Other petibon ( not specified above) (43)

Defamation ( 13)

Q Fraud ( 16)

0 Intellectual property ( 1g)

loyment

Other rudicial review

factors requiring exceptional judicial management Large

a (

number of

Extensive
issues

Remedies

i4

Number of causes

This

If there

motion practice

amount of

sought ( check all

6.

separately

raising difficult

documentary

that apply)

any known

is not

or novel

d 0 Large number of witnesses

Coordination with related actions pending in one or more courts

In other counties, states, or countries, or in a federal court

resolve

evidence

monetary

Substantial postjudgment judicial supervision

b=

nonmonetary,

declaratory

or Injunctive relief

c =

punitive

of action ( speedy}

is

case =

are

represented parties

that will be time- consuming to

Substantial

Partnership and corporate governance ( 21)

complex under rule 3 400 of the California Rules of Court If the case is complex, mark the

Is not

Is

case

RICO (27)

Q Other complaint (not specified above) (42)

Writ of mandate (02)

Wrongful termination (36)

Q Other employment (15}

r;

above listed provisionally complex case

0 Wrongful eviction (33)

0 Other real property (26)

Hon- PUPDIWD ( Other) Tort

Securities litigation ( 28)

D EnvironmentaUroxic tort (30)

Q Insurance coverage claims ansing from the

Q Eminent domaintinverse

Q Other PI/ POJWD ( 23)

This

Construction defect (10)

Q Mass tort (40)

Real Property

Medical malpractice ( 45)

Antitrustfrrade regulation ( 03)

Rule 3 740 collections (OR)

0 Other collections (09)

Cal, Rules of Court, rules 3. 400- 3 403)

Breach of contracthNarranty (06)

a Gass action suit

related cases,

file

and serve a notice of related case (

You

ma

a form CM 015

Date May 14, 2014

Henry Gradstein

PnRTY)

SIGNATURE OF PARTY OR ATTORNEY

TYPE OR PRINT NAM-) (

NOTICE

a Plaintiff must file this cover sheet with the first paper filed in the action or proceeding (except small claims cases or cases filed
under the Probate Code, Family Code, or Welfare and Institutions Code) ( Cal Rules of Court, rule 3 220 ) Failure to file may result
in sanctions

a File this cover sheet in addition to any cover sheet required by local court rule

a If this case is complex under rule 3 400 et seq of the California Rules of Court, you must serve a copy of this Cover sheet on all
other parties to the action or proceeding

fD -

Unless this

Is a collections case under rule

Form Adm,ted ror Mandatory the

l orearifomla
Julfioai Co=
CM 010 rRov July 120071

3 740

or a Complex case,

this

cover sheet well

CIVIL CASE COVER SHEET

be

used

for

statistical purposes

Cil Rules of Court

onllx

3AIxi-

e.

of 2

3 403, 3 740

3. 10
dsrUlo
C81 Standards
of Jud Bat Admmlet2LOR did. 3.
10
www

qurbnro m gov

M
CRO -010
INSTRUCTiONS ON HOW TO COMPLETE THE COVER SHEET

To Plaintiffs and Others Piling First Papers if you are filing a first paper ( for example, a complaint) in a civil case, you must
Complete and file, along with your first paper, the Civil Case Cover Sheet contained on page 1 This information will be used to compile
stati4tics about the types and numbers of cases filed You must complete items 1 through 6 on the sheeL In item 1, you must check

one box for the case type that best describes the case if the case fits both a general and a more specific type of case listed In item 1,
check the more specific one If the case has multiple causes of action, check the box that best indicates the pnmary cause of action

To assist you in completing the sheet, examples of the cases that belong under each case type in item 1 are provided below A cover
sheet -must be filed only with your Initial paper Failure to file a cover sheet with the first paper filed in a civil case may subject a party,
its counsel, or both to sanctions under rules 2 30 and 3 220 of the California Rules of Court
To Parties in Rule 3.740 Collections Cases. A "collections case" under rule 3 740 Is defined as an action for recovery of money
owed in a sum stated to be certain that Is not more than $ 25,000, exclusive of interest and attorney' s fees, arising from a transaction in

which property, services, or money was acquired on credit A collections case does not include an action seeking the following ( 1) tort
damages, ( 2) punitive damages, ( 3) recovery of real property, ( 4) recovery of personal property, or ( 5) a prejudgment writ of
attachment The identification of a case as a rule 3 740 collections case on this fond means that it will be exempt from the general
time -for -service requirements and case management rules, unless a defendant files a responsive pleading A rule 3 740 collections
case will be subject to the requirements for service and obtaining a judgment in rule 3 740

To Parties in Complex Cases. In complex cases only, parties must also use the Civil Case Cover Sheet to designate whether the
case is complex. If a plaintiff believes the case is complex under rule 3 400 of the California Rules of Court, this must be indicated by

completing the appropriate boxes in items 1 and 2 If a plaintiff designates a case as complex, the cover sheet must be served with the
complaint on all parties to the action. A defendant may file and serve no later than the time of its first appearance a joinder in the

plaintiffs designation, a counter -designation that the case is not complex, or, if the plaintiff has made no designation, a designation that
the

case is complex.

Auto (22) - Personal Injury/Property

DamageMlrongful Death

Urunsured Molonst (46) (if the

case involves an uninsured

motorist claim subject to

arbitration, check this item

instead of Auto)

Other Pl1PDIWD ( Personal Injury/

Property Damage/Wrongful Death)
Tort

Asbestos Property Damage

Asbestos Personal Injury/
Wrongful Death

Product Liability (not asbestos or

toxir/environmenfal) (24)
Medical Malpractice (45)
Medical MalpracticaPhysicians & Surgeons

Other Professional Health Care

Malpractice

Other Pi/ PD/ WD ( 23)

Premises Liability ( e 9, slip

and fall)

Intentional Bodily Injury/ PD/WD

e g , assault, vandalism)
Intentional Infliction of
Emotional Distress

Negligent Infliction of
Emotional Distress

Other PIIPD/ WD

Non- PUPDIIND ( other) Tort

Business Tort/ Unfair Business
Practice ( 07)

t1

Civil Rights (e 9, discrimination,

false arrest) ( not civil
harassment) (08)

Defamation ( e, g , slander, libel)

13)
Fraud ( 16)

Intellectual Property 09)

Professional Negligence ( 25)
Legal Malpractice

Other Professional Malpractice

iT (
f

Provisionally Complex Civil Litigation (Cal

Breach of ContractfWarranty ( 05)

Breach of Rental/ Lease

Contract ( not unlawful detainer

or wrongful eviction)

ContracUWarranty Breach -Seller

Plaintiff (not fraud or negligence)

Negligent Breach of Contract/

Warranty
Other Breach of ContractlWarranty

Collections (e g , money owed, open

book accounts) ( 09)

Asbestos (04)

i`

CASE TYPES AND EXAMPLES

Contract

Auto Tort

not medical or legal)

Other Non- PIIPDNW Tort (35)

Collection Case -Seller Plaintiff

Other Promissory Note/Collections

Case

Insurance Coverage (not provisionally

complex) ( 18)
Auto Subrogation

Other Coverage
Other Contract (37)
Contractual Fraud
Other Contract Dispute

Real Property
Eminent Domainflnverse
Condemnation ( 14)

Wrongful Eviction (33)

Other Real Property (e g , quiet title) (26)

Writ of Possession of Real Property
Mortgage Foreclosure

Wrongful Termination ( 38)

Other Employment ( 15)

Claims Involving Mass Tort (40)

Securities Litigation ( 28)

Environmentairroxic Tort ( 30)

Insurance Coverage Claims

lensing from provisionally complex

case type listed above) (4 1)

Enforcement of Judgment

Enforcement of Judgment ( 20)

Abstract of Judgment ( Out of

County)
Confession of Judgment (nondomestic relations)

Sister State Judgment

Administrative Agency Award

not unpaid taxes)

PetitionlCertification of Entry of
Judgment on Unpaid Taxes
Other Enforcement of Judgment
Case
Miscellaneous Civil Complaint

RICO ( 27)

Other Complaint (not specified

above) (42)

Declaratory Rerwf Only

injunctive Relief Only (non harassment)

Quiet Title

Mechanics Lien

Other Real Property (not eminent

domain, landlordRenant or

Other Commercial Complaint

Case ( non- forUnon-complex)
Other Civil Complaint

foreclosure)

Unlawful Detainer
Commercial ( 31)
Residential ( 32)

Drugs ( 38) Qf the case involves illegal

drugs, check this Item, otherwise,

report as Commercial or Resfdenhap
Judicial Review

Asset Forfeiture (05)

Petition Re Arbitration Award (11)
Writ of Mandate ( 02)

non- toWhon- complex)

Miscellaneous Civil Petition

Partnership and Corporate

Governance ( 21)
Other Petition ( not specified

above) (43)
Civil Harassment
Workplace violence
Elder/Dependent Adult
Abuse

Writ- Administratroe Mandamus

Election Contest

Writ -Mandamus on Limited Court

Petition for Name Change

Petition for Relief From Late

Case Matter
Writ -Other Limited Court Case
Review

EtnpioyMont

Rules of Court Rules 3 400- 3 403)

Antitrustrrrade Regulation ( 03)
Construction Defect (10)

Claim

Other Civil Petition

Other Judicial Review (39)

Review of Health Officer Order
Notice of Appeal -Labor
Commissioner Appeals
Page 2 of 2

CM- 0101Rev July 1,

20071

CIVIL CASE COVER SHEET

k_'
CASE NUMBER

SHORT TITLE

Hyman

v.

Daisy,

LLC,

B5
U

at al.

VV

CIVIL CASE COVER SHEET ADDENDUM AND

STATEMENT OF LOCATION

CERTIFICATE OF GROUNDS FOR ASSIGNMENT TO COURTHOUSE LOCATION)

This form is required pursuant to Local Rule 2.0 in all new civil case filings in the Los Angeles Superior Court.

Item 1 Check the types of hearing and fill in the estimated length of hearing expected for this case
JURY TRIAL?

YES

CLASS ACTION?

YES

LIMITED

CASE1

OYES

TIME ESTIMATED FOR TRIAL 7- 10

HOURSI

DAYS

Item IL Indicate the correct district and courthouse location (4 steps If you checked "Limited Case", skip to Item III, Pg 4)

Step 1: After first completing the Civil Case Cover Sheet form, find the main Civil Case Cover Sheet heading for your
case In the left margin below, and, to the right In Column A, the Civil Case Cover Sheet case type you selected.

Step 2: Check one Superior Court type of action in Column B below which best describes the nature of this case.
Step 3; to Column C, circle the reason for the court location choice that applies to the type of action you have
checked For any exception to the court location, see Local Rule 2 0.
Applicable Reasons for Choosing Courthouse Location (see Column C below)
V Class
2
3
4
5

actions must

Maybe filed In

Location
Location
Location

be filed in the

central ( other

Stanley

county, or

Mosk Courthouse, central district

bodily injury/ property damage)

no

where cause of action arose

when:

bodily Injury, death

or

5 Location of property.or permanently garaged vehicle

Location where petitioner resides

8 Location wherein defendant/respondent functions wholly

g Location where one or mon: of the parties reside

damage occurred
defendant resides

10 Location of Labor Commissioner Ottioe

where performance required or

Step 4: FII in the Information requested on page 4 in Item 111, complete Item IV Sign the declaration
A

CivA Case Cover Sheet

Category No

Type of Acton
Check only ane)

Applicable Reasons -

Auto ( 22)

A7100 Motor Vehicle - Personal Injury/ Property Damage/Wrongful Death

See Step 3 Above

1, 2, 4

0 r

FnmsZ

Motorist (46)

Asbestos (04)

Product Liability (24)

A71i0 Personal Injury/Property Damage/Wrongful Death Uninsured Motonst 1, 2, 4

A6070 Asbestos Property Damage

A7221 Asbestos - Personal Injuryl4Vrongful Death

A7260 Product Liability ( not asbestos or tomcfenvironmental)

1,

O A7210 Medical Malpractice - Physicians & Surgeons

Medical Malpractice (45)

Other

Personal Injury

Property Damage
Wrongful Death
23)

LACIV 109 ( Rev. 03111)

LASCApproved 03. 04

2. 3. 4. 8.

1, 4

A7240 Other Professional Health Care Malpractice

4.

A7250 Premises Liability (e 9, slip and fall)

1,

1,

f7 A7230 Intentional Bodily Injury/ Property DamagefWrongful Death ( e g ,

dsm eta)
assault, vandalism,

1, 3

A7270 Intentional infliction of Emotional Distress

1.

A7220 Other Personal Injury/Property DamageWrongful Death

CIVIL CASE COVER SHEET ADDENDUM

AND STATEMENT OF LOCATION

Local Rule 2 0
Page 1

of4

TORT T{ TLE

CASE NUMBER

Hyman v. Daisy, LLC, et al.

A

BB

CC

Civil Case Cover Sheet

TypeType ofof ActionAction

ApplicableApplicable ReasonsReasons
-

CategoryCategory NoNo

Check only one)

SeeSee StepStep 33 AboveAbove

BusinessBusiness TortTort
( ( 07)07)

A6029A6029 OtherOther Commercial/Commercial/ BusinessBusiness TortTort

( ( notnot fraudlbreachfraudlbreach ofof contract)contract)

1, 3

Civil Rights (08)

A6005A6005 CivilCivil Rights/Rights/ Discrimination Discrimination

1, 2, 3

Defamation ( 13)

A6010 Defamation ( slanderflibel)

1 , 2., 3

A6013 Fraud ( no contract)

1 , 2, 3

A6017 Legal Malpractice

1. 2 , 3

A6050 Other Professional Malpractice ( not medical or legal)

1.

rL1_
Q, $

CL m
In

c rn
a

cnC03ai

a cn

Fraud ( 16)

Professional Negligence ( 25)

c E
o

2. 3

ra

Z t3

Other (35)

Wrongful Termination (36)

A5025

Other Non -Personal

Injury/ Property

Damage tort -

72-

A6037 Wrongful Termination

1 , 2 , 3.

13A6024 Other Employment Complaint Case

1 , 2, 3

Other Employment (15)

A6109

10

Labor Commissioner Appeals

A6004 Breach of Rental/ Lease Contract (not unlawful detainer or wrongful

1-

Breach of Contract/ Warranty

I.

not insurance)

2, 5

eviction)

A6008 Contract/Warranty Breach -Seller Plaintiff (no fraudlnegligence)

06)

A6019 Negligent Breach of Contract/Warranty (no fraud)

0 A6028 Other Breach of Contract/ Warranty (not fraud or negligence)

2, 5
1 , 2, 5

5
55,

2., 5 , 6

A6002 Collections Case -Seller Plaintiff

Collections (09)

2. 5

II A6012 Other Promissory NotelColledions Case

Insurance Coverage ( I B)

Other Contract (37)

A6015 Insurance Coverage (not complex)

1., 2, 5, B

A6009

Contractual Fraud

1 , 2, 3. 6

A6031

Tortlous Interference

1,

A6027 Other Contract Dispute( nol breacWinsurancelfraud/ negligence)

Eminent Domainlinverse
Condemnation ( 14)

Wrongful Eviction ( 33)

Other Real Property (26)

Unlawful Detainer -Commercial

31)

Unlawful Detamer-Residential
32)
Unlawful Detainer-

t3

A7300

Eminent Domain/ Condemnation

Number of parcels

2. 3. 5

1 , 2 , 3., 8

A6023 wrongful Eviction Case

2, 6

Awl a

2, 6

Mortgage Foreclosure

A6032 Quiet Title

2, 6

A6060 Other Real Property (not eminent domain, landlorditenant, foreclosure)

2, 6

A6021 unlawful Detainer -Commercial ( not drugs or wrongful eviction)

2, 15

A6020 Unlawful Detainer -Residential ( not drugs or wrongful eviction)

2, 6

A6020FUnlawful Detainer -Post -Foreclosure

2. 6

A6022 Unlawful Detainer -Drugs

2, 15

Post -Foreclosure (34)

Unlawful Detainer -Drugs (38)

LACIV 109 ( Rev 03/ 11)

tASC Approved 03- 04

CIVIL CASE COVER SHEET ADDENDUM

AND STATEMENT OF LOCATION

Local Rule 2 0
Page 2

of

CASE NUMBER

TTITLE.

Hyman v Daisy, LLC, et al.

A
Civil Case Cover Sheet

13
Type of Action

Applicable Reasons -

Category No

Check only one)

See Step 3 Above

A6108 Asset Forfeiture Case

2, 6

A6115 Petition to Compel/ ConfirmlVacate Arbitration

7-. 1

A6151 Writ - Administrative Mandamus

2, a

A6152 Writ - Mandamus on Limited Court Case Matter

A6153 Writ - Other Limited Court Case Review

2.

A6150 Other Writ Mudiciai Review

2. 8

A6003 Antitrust/ trade Regulation

1., 2 , 8

A6007 Construction Defect

1.. 2 , 3

A6006 Claims Involving Mass Tort

1.,

2, 8

Secunties Litigation (28)

A6035 Securities Litigation Case

1,

2 , 8.

Toxic Tort
Environmental ( 30)

A6035 Toxic Tort/Environmental

1,

2, 3, 8

A6014 Insurance Coverage/ Subrogation (complex case only)

1., 2 , 5., 8

A6141 Sister State Judgment

2, 9

A6i60 Abstract of Judgment

2, 13

Asset Forfeiture ( 05)

Petition re Arbitration ( 11)

Writ of Mandate ( 02)

Other Judicial Review (39)

Antitrust/Trade Regulation ( 03)

Construction Defect (10)

Claims Involving Mass Tort

40)

Insurance Coverage Claims

from Complex Case ( 41)

0
Enforcement

of Judgment (20)

RICO (27)

Other Complaints

Not Specified Above) (42)

Partnership Corporation
Governance (21)

A6107 Confession of Judgment (non-domestic relations)

2. 9

A6140 Administrative Agency Award ( not unpaid taxes)

2, 8

A6114 Petition/ Certificate for Entry of Judgment on Unpaid Tax

2. 8

A6112 Other Enforcement of Judgment Case

2. 8

A6033 Racketeering ( RICO) Case

1. 2, 8

A5030 Declaratory Relief Only

1 , 2 , 8

A8040 Injunctive Relief Only ( not domestic(narassment)

2, 8

A6011 Other Commercial Complaint Case (non-tort/non-complex)

1,

A6000 Other Civil Complaint (non-tort/non-oomplex)

1,

2, 6

A6113 Partnership and Corporate Govemance Case

2. 8

A6121

2. 3, 9

Civil Harassment

0 A6123 Workplace Harassment

43)

8.

2. 1319.

A6124 Elder/Dependent Adult Abuse Case

2, 3. 9

A6190 Election Contest

A6110 Petition for Change of Name

2, 7

A6170 Petition for Relief from Late Claim Law

2, 3 , 4 , 8

A6100 Other Civil Petition

2 , 9.

Other Petitions

Not Specified Above)

9.

LACIV

109 ( Rev 03/ 11)

LASC Approved 03- 04

CIVIL CASE COVER SHEET ADDENDUM

AND STATEMENT OF LOCATION

Local Rule 2 0
Page 3

of

CASE NUMBER

SHORTTITLE

Hyman v Daisy, LLC, et al.

Item Ill. Statement of Location- Enter the address of the accident, party' s residence or place of business, performance, or other

circumstance Indicated In Item 11 , Step 3 on Page 1, as, the proper reason for filing in the court location you selected.
ADDRESS

REASON. Check the

appropriate

boxes for the

numbers shown

1601 Cloverfield Blvd

under Column C for the type of action that you have selected for
this case,

5. 06. 07 08

31. B2, 03. 04

cny

STATE.

Santa Monica

CA

10

09.

ZIPCODE

90404

Item IV. Declarabon ofAssignment I declare under penalty of penury under the laws of the State of California that the foregoing is true
and correct and

that the

Central

entitled matter is
above -

District

of

properly filed for

the Superior Court

of

assignment

California, County

of

to the

Stanley Mosk

courthouse In the

Los Angeles (Code Civ Proc.,

392 et seq , and Local

Rule 2 0, subds ( b), (c) and (d))

Dated May 14, 2014

RE OF AAT

1NG PARTY)

4z

PLEASE HAVE THE FOLLOWING ITEMS COMPLETED ARID READY TO BE FILED IN ORDER TO PROPERLY
COMMENCE YOUR NEW COURT CASE:
1.

Original Complaint or Petition.

If filing a Complaint, a completed Summons fort for Issuance by the Clerk

Civil Case Cover Sheet, Judicial Council form CM -010

4.

Civil Case Cover Sheet Addendum and Statement of Location form, LAC IV 109, LASC Approved 03-04 (Rev
03111).

5.

Payment in full of the filing fee, unless fees have been waived

6.

A signed order appointing the Guardian ad Utem, Judicial Council form CIV -010, if the plaintiff or petitioner is a
minor under 18 years of age will be required by Court in order to issue a summons.
of documents
mustbeserved

along

with

the

to be

ns

and

the Clerk Copies

nt, oro her
plaint,

initiating pleading n the case

addendum

h'

w,

LACIV 109 ( Rev 03111)

LASC Approved 03- 04

CIVIL CASE COVER SHEET ADDENDUM

AND STATEMENT OF LOCATION

Loral Rule 2 0
Page 4

of

2
3
4

GIRARDI

FILED

KE E SE
THOMAS V. GIRARDI, SBN 36603
tggirardi

Superior Court of California

County of Los Angeles

gIrardikeese, com

MAY 16 2014

B. LIPPSMITH, SBN 221984

8ppsmith
RISTO

Irardikeese. com

Sherri6y R, Carter, Ex cuttve Officer/Clerk

R T. AUMAIS, SBN 249901

caumais aa, ggirardikeese. cozn

Myrna Beltran

1126 Wilshire Boulevard

Deputy

Los Angeles, California 90017

Telephone- ( 213) 977- 0211 / Facsimile: ( 213) 481- 1554

6
7

Attorneys for Defendants and Cross -Claimants JIBE AUDIO, LLC and STEVEN LAMAR

SUPERIOR COURT OF THE STATE OF CALIFORNIA

COUNTY OF LOS ANGELES

10

HINRICHS & ASSOCIATES- and

PENTAGRAM DESIGN,

Case No. BC533089

INCA.

11

JIBE AUDIO, LLC.AND STEVEN

LAMAR' S CROSS- COMPLAINT

Plaintiffs,

12

FOR:

13

14
15
16

1
2

BEATS ELECTRONICS, LLC; ANDRE

YOUNG P/ K/A DR. DRE, an individual,
JIMMY IOVINE, an individual, STEVEN

3)

BAD FAITH DENIAL OF

4)

CONTRACT BREACH OI?FIDUCIARY

DUTIES;

5)

INTENTIONAL INTERERENCE

and DOES 1 through 30, inclusive

Defendants.
JIBE ;

WITH CONTRACTUAL

an ,

RELATIONS;

an individual,

6)

19

BREACH OF CONTRACT;

BREACH OF THE COVENANT

OF GOOD FAITH AND FAIR
DEALING;

LAMAR, an individual; JIBE AUDIO, LLC;

17
18

By Fax

Cross -claimants,

NEGLIGENT INTERFERENCE
WITH CONTRACTUAL
RELATIONS;

20

7)

r"
A

INTENTIONAL

INTEREFERENCE WITH A

21

PENTAGRAM DESIGN, INC .-HINRICHS

PROSPECTIVE ECONOMIC

22

ASSOCIATES; JIMMY IODINE, an

individual, ANDRE YOUNG P/ K/A DR

ADVANTAGE;

23

DRE, an Individual; BEATS

24

ELECTRONICS LLC; AMMUNITION,

LLC; ROBERT bRUNNER, an individual;

8)

NEGLIGENT INTERFERENCE
WITH A PROSPECTIVE

ECONOMIC ADVANTAGE,
DECLARATORY RELIEF; AND
10) ACCOUNTING

9)

and DOES 31 through 50, Inclusive

25

Cross- defendants.

26

AND DEMAND FOR JURY TRIAL

27

Hort. Malcolm H. Mackey, Dept. 55

28

Action Filed: January 13, 2014

Trial Date: Not set

I
JIBE AUDIO, LLC p

STEVEN LAMAR

AND DEMAND FOR JURY TRIAL

1
2

CROSS-COMPLAINT

Defendants and cross -claimants JIBE AUDIO, LLC and STEVEN LAMAR hereby

cross -complain against plaintiff and cross- defendant PENTAGRAM DESIGN, INC.,

plaintiff and cross-

JIMMY IOVINE, defendant and cross- defendant ANDRE YOUNG P/ K/A DR. DRE,

defendant and cross- defendant BEATS ELECTRONICS, LLC, cross- defendant

AMMUNITION, LLC, cross- defendant ROBERT BRUNNER and cross- defendants DOES

31 through 50, inclusive, and on information and belief allege as follows:

defendant PIINRICHS & ASSOCIATES, defendant and cross- defendant

9
10

11
12

13

Jibe Audio, LLC (" Jibe") is a Delaware limited_

liability company with its principal place of business in California.

2.

Defendant

and cross- complainant

Steven Lamar (" Lamar"), the founder of

individual and resident of the State of California.

3.

Plaintiff and

cross- defendant

Pentagram Design, Inc. (" Pentagram") is a New

17

York corporation and, on information and belief, the successor in interest to Pentagram

18

Design Inc., formerly a California corporation.

21
22
23

24
25

26

27
28

and cross -claimant

15

20

Cw

Defendant

Jibe, the founder of the Beats headphones, its design and corporate identity, is an

19

ry..

1.

14

16

r
J,

PARTIES

4.

Plaintiff and

cross-

defendant Hinrichs & Associates, d/ b/ a/ Studio Hinrichs

Hinrichs & Associates") is a California corporation.

5

Defendant

and cross- defendant

James "

Jimmy"

Iovine (" Iovine") is an

individual and resident of the State of California.

6.

Defendant

and cross-

defendant Andre

Young p/ k/a Dr. Dre (" Dre") is an

individual and resident of the State of California.

7.

Defendant

and cross- defendant

Beats Electronics, LLC (" Beats Electronics")

is a California limited liability company.

8.

Cross- defendant Ammunition, LLC (" Ammunition") is a California limited

liability company.

3
JIBE AUDIO, LLC AND STEVEN LAMAR' S CROSS- COMPLAINT AND DEMAND FOR JURY TRIAL

Cross- defendant Robert Brunner (" Brunner") is an individual and resident of

9.

the State of California. Brunner was a partner and agent of Pentagram, then later became a

partner and agent of Ammunition.

Defendants and cross -claimants Jibe and Lamar are unaware of the true

10.

identity, nature and capacity of each of the cross- defendants designated herein as Does 31

through 50, inclusive, and therefore sue said Doe defendants by such fictitious names. Jibe

and Lamar are informed and believe and thereon allege that each of the cross- defendants

designated as a Doe has participated in some way in the wrongful acts and omissions

alleged below, has in some manner a stake in the outcome of the issues raised in this cross-

10

complaint, and is liable to Jibe and Lamar for damages and other relief to which they are

11

entitled. Upon learning the true identity, nature and capacity of the Doe cross- defendants,

12

Jibe and Lamar will seek leave of this Court, as necessary, to amend this cross- complaint

13

to allege their true names and capacities.

14

Cross -Defendants Pentagram, Hinrichs & Associates, lovine, Dre, Beats

1. 1.

15

Electronics, Ammunition, Brunner and Does 31- 50, inclusive, are referred to collectively

16

herein as " Gross -Defendants "

17

Each of the cross- defendants concerned herein was the agent, joint venturer

12.

18

and/ or employee of each of the and/ or any of the remaining cross- defendants, and in doing

19

the things hereinafter alleged, each was acting in the course and scope of said agency,

20

employment or joint venture with advance knowledge of, acquiescence in or subsequent

21

ratification of the acts of each and every and/ or any of the other remaining cross-

22

defendants.

23

it

25

13.

In

or about

January

2006, Lamar, then President

of

SLS International (" SLS"),

26

discussed Lamar' s concept for celebrity musical artist -endorsed headphones with Iovine,

27

Chairman

c.
R,

FACTUAL BACKGROUND

24

of Interscope

Geffen A&M Records (" Interscope").

28

3
JIBE AUDIO, LLC AND STEVEN LAMAR' S CROSS- COMPLAINT AND DEMAND FOR JURY TRIAL

14.

Lamar' s concept envisioned a partnership between technology that would

provide a superior audio experience and an iconic product design and brand identity

promoted by a well-known and respected musical artist. Iovine proposed that Dre be the

celebrity musical artist to endorse the headphones.

15.

Lamar then engaged Pentagram to assist in developing the design and

corporate identity for a line of headphones to be marketed and sold under the name "Beats

by Dr. Dre" (" Beats

worked on Lamar' s account for the Beats Headphones products. Lamar and Pentagram

developed design and branding concepts including trademarks, logos, packaging, and

Headphones").

At the time, Brunner was a partner at Pentagram who

10

headphone product designs. In or about February 2Q06, Lamar and Pentagram presented

11

their initial design and branding concepts to Iovine, Dre, and others at Interscope.
J

12

The Beats Headphones business model developed by Lamar included at least

13

three different versions of headphones: noise canceling, non -noise canceling, and wireless

14

headphone models. The focus for the first Beats Headphones product would be a noise

15

canceling version, which later became known as the Beats " Studio" headphone. Although

16

there were initially only three different versions of Beats Headphones, these versions were

17

to serve and eventually did serve as prototypes for a much wider range of additional Beats

18

Headphones products that came in a variety of sizes, shapes, and colors and/ or with a

19

variety of features, all of which were based on the iconic product design and brand identity

20

in the original Beats Headphones prototypes.

21

16.

17.

In or about March 2006, Lamar identified a manufacturing partner in China,

22

Innovation Sound

23

Innovation and Pentagram to engineer and manufacture the Beats -Headphones prototypes.

24

18.

Technology

Co., Ltd. (" Innovation"), and worked closely with

Over the next several months, Lamar, Jibe, and Pentagram continued to

25

develop and refine the distinctive Beats design and iconic brand identity of Beats

26

Headphones embodied in the original prototypes.

27
28

19

From April. 2006 to July 2006, Lamar worked from an office in the Pentagram

offices improving the Beats business model, and collaborated side by side with Pentagram

2
JIBE AUDIO, LLC AND STEVEN LAMAR'S CROSS- COMPLAINT AND DEMAND FOR JURY TRIAL

designers to refine the design and brand identity of Beats Headphones. Lamar, Jibe, and

Pentagram worked to perfect the foundational designs, corporate identity and packaging

that would carry through the entire line of Beats headphone products.

4
5

20

Apple")

In May 2006, Iovme introduced Lamar to Jerry McDougal at Apple Inc.

and Lamar presented the first three of many anticipated versions of Beats

the noise canceling, non -noise canceling, and wireless Beats Headphones.

The proposal was to sell Beats Headphones in Apple stores. McDougal was so interested

in the Beats Headphones that he introduced Lamar to Don Inmon of Apple who was

responsible for product placement in stores. Inmon worked with Lamar and others to

1' 0

ensure the packaging sized for Beats Headphones was compatible for Apple retail stores.

11

21.

In or about June 2006, Lamar and Pentagram began working on the design for

12

the non -noise canceling Beats Headphones ( now marketed and sold as the " Sold' model of

13

headphones).

14

22.

Iovine also asked Lamar to present the Beats Headphones product concepts

15

and

16

Following numerous presentations by Lamar to executives and sales personnel at Monster

17

in or around July 2006, Monster agreed to be the distribution partner for the Beats

18

Headphones. At that time, the parties contemplated that Iovine and Dre would receive a

1.9

20% royalty ( while maintaining ownership

20

on the gross sales of Beats Headphones, less some percentage withheld for marketing and

21

promotion expenses. The parties further contemplated that Lamar/Jibe would receive a 5%

22

royalty based on the gross sales of Beats Headphones, less some percentage withheld for

23

marketing and promotion expenses, and an equity interest in the brand for the origination

24

of and contributions to the business model, product concepts, brand identity, and iconic

25

designs.

26

business

23

plan to a potential

distribution

partner,

of the

Monster, LLC (" Monster").

brand

name "

Beats

by Dr. Dre") based

On July 28 2006, Dre and Iovine filed a lawsuit against Pentagram, Lamar,

27

Jibe, and SLS in the Superior Court for the County of Los Angeles, Iovine et al. v. SLS

28

International, Inc.,

et al,

Case No. SC 090575 ( the " 2006 Action"), alleging a purported

JIBE AUDIO, LLC AND STEVEN LAMAR' S CROSS- COMPLAINT AND DEMAND FOR JURY TRIAL

breach of an oral contract concerning the manufacture, marketing, and distribution of the

Beats line of headphones.

24

they entered into three agreements:

a.

The Settlement and Mutual Release Agreement by and among Iovme, Dre,

Pentagram, SLS, Jibe, and Lamar dated on or about April 24, 2007 ( the " Global

Settlement Agreement");

b.

The Royalty Agreement by and among Iovine, Dre, and Pentagram dated on or
about

10

C.

April 24, 2007 ( the " Royalty Agreement");

and

The Settlement and Mutual Release Agreement by and among Pentagram, Jibe,

11

and Lamar dated on or about April 24, 2007 (the " Pentagram -Lamar Settlement

12

Agreement").

13

A true and correct copy of the Settlement Agreement is attached hereto as Exhibit A and is

14

incorporated herein by reference as though fully set. forth herein, a true. and correct copy of

15

the Royalty Agreement is attached hereto as Exhibit B and is incorporated herein by

16

reference as though fully set forth herein, and a true and correct copy of the Pentagram -

17

Lamar Settlement is attached hereto as Exhibit C and is incorporated herein by reference as

18

though fully set forth herein.

19

25.

On information and belief, Iovine and Dre contend that they have assigned all

20

of their rights and obligations under the Global Settlement Agreement, and Royalty

21

Agreement to Beats Electronics. Iovine, Dre, and Beats Electronics are collectively

22

referred to herein as the " Beats Defendants "

23

The parties to the 2006 Action reached a global settlement pursuant to which

26.

Pentagram contends it has assigned all of its rights and obligations under the

24

Global Settlement Agreement, Royalty Agreement, and Pentagram -Lamar Settlement

25

Agreement to Hinrichs & Associates

26

27.

On information and belief, Brunner left Pentagram in 2007 to form

27

Ammunition, where he is currently a partner Brunner and Ammunition continued to work

28

on Beats Headphones products that were all fundamentally based on the original Beats

r
6

11

JIBE AUDIO, LLC. AND STEVEN LAMAR' S CROSS- COMPLAINT AND DEMAND FOR JURY TRIAL

0
1

I I Headphones prototypes that Lamar developed. Brunner and/ or Ammunition received

monetary compensation and/ or other consideration from the Beats Defendants for the Beats

Headphones products.

28.

In or about July 2008, Beats Electronics released the model of Beats

Headphones marketed and sold as the Studio headphone. On information and belief, Beats

Electronics released in subsequent years additional models of Beats Headphones, including

headphones

Studio Wireless headphones, all of which were based on the original Beats Headphones

prototypes

10

marketed and sold as

the Solo, Pro, Wireless, Mixr, "remastered" Studio, and

that Lamar developed (" Covered Headphones")

As part of the global settlement of the 2006 Action, pursuant to the Global

29

11

Settlement Agreement, and Royalty Agreement, Iovine and Dre agreed to pay Pentagram a

12

four

13

Covered Headphones manufactured, marketed, and/ or sold by entities other than Monster,

14

subject

15

percent ( 4%)

royalty on all Covered Headphones sold by Monster as well as all

to specified reductions identified in the

Royalty Agreement. ("Main Royalty").

Headphone" as it is defined in the Royalty Agreement means " a headphone that only

16

embodies the Headphones Design depicted in Schedule I [to the Royalty Agreement] and

17

any minor or cosmetic modifications in the design specifically identified on Schedule I

18

19

thereto]."

based

20

The Royalty .Agreement further provides that royalty payments would be made

on sales of "headphones or other products. [

30.

emphasis added]"

As part of the global settlement of the 2006 Action, pursuant to the

21

Pentagram -Lamar Settlement Agreement, Pentagram agreed to pay to Jibe one- half of the

22

Main

23

is further defined in Exhibit C of the Jibe Pentagram Settlement Agreement to mean

Royalty

24

certain audio

25

Beats'

iy

payments received

from Iovine

headphones (` Headphones')

and related

trademarks (` Marks')."

and

Dre (" Royalty Share") "

Headphones"

featuring a stylized `b' logo and the trademark

These headphones are included in the Covered

26

Headphones.

r-

Itr

28

rn

JIBE AUDIO, LLC AND STEVEN LAMAR' S CROSS- COMPLAINT AND DEMAND FOR JURY TRIAL

31.

In addition, the PentagramLamar Settlement Agreement provides that

Pentagram shall not waive or impair (through inadvertence or otherwise) Lamar and/ or

Jibe' s rights to receive Main Royalty payments from Iovine and Dre.

Each of the Covered Headphones embodies the Headphones Design in

32

Schedule I to the Royalty Agreement and any minor or cosmetic modifications in the

design specifically identified on Schedule I thereto. As a result, Lamar and Jibe are entitled

to royalties to be paid under the Royalty Agreement on sales revenues of the Covered

Headphones.

33.

To date and although Lamar and Jibe are entitled to royalty payments for all

10

of the Covered Headphones, Jibe has received Royalty Share payments only for sales of

11

the Studio model of Beats Headphones Jibe has not received any royalty payments for the

12

sale of any other model of Covered Headphones, including the Solo, Pro, Wireless, Mixr,

13

remastered" Studio, or Studio Wireless models.

14

34.

The Pentagram -Lamar Settlement Agreement created fiduciary duties owed

15

by Pentagram ( including its agents such as Brunner and its successors -in -interest such as

16

Hinrichs & Associates) to Jibe and Lamar. The duties that Pentagram and, its agents owed

17

to Jibe and Lamar included, but were not limited to, the duty of loyalty, the duty of

18

disclosure, and the duty of care with respect to their business dealings and interactions with

19

Iovine, Dre, and Beats Electronics.

20

35.

At every stage of the relationship between Jibe and Lamar, on the one hand,
Hinrichs & Associates,

hand, Brunner both when he was

21

and

22

a partner at

23

the role of the point person who made decisions concerning their rights and interests in the

24

Settlement Agreement, Royalty Agreement, and the Pentagram -Lamar Settlement

25

Agreement, but never advised Jibe and Lamar of those decisions until after they had been

26

made and acted upon by the parties.

27
28

Pentagram

36.

and

Pentagram

and

then

when

on

the

other

he later became

a partner at

Ammunition assumed

On information and belief, while simultaneously advising Jibe and Lamar that

their royalty rights in the Settlement Agreement, Royalty Agreement, and the Pentagram -

8
JIBE AUDIO, LLC AND STEVEN LAMAR' S CROSS- COMPLAINT AND

DEMAND FOR JURY TRIAL

is
1

Lamar Settlement Agreement were limited and although Brunner himself had a financial

interest in the royalty stream in the Settlement Agreement, Royalty Agreement, and the

Pentagram -Lamar Settlement Agreement that aligned with Jibe and Lamar' s financial

interests, Brunner surreptitiously negotiated a separate agreement with Iovine, Dre, and/ or

Beats Electronics for monetary compensation monetary compensation and/ or other

consideration from the Beats Defendants for the Covered Headphones. In other words,

without Jibe and Lamar' s knowledge, Brunner and/ or Ammunition effectively cut Jibe and

Lamar out of the royalty stream on the Covered Headphones for their own benefit and to

the detriment of Jibe and Lamar

10

37.

As a result of Brunner' s representations and concealment, Jibe and Lamar

11

were unaware until at least as late as December 2013 that Brunner had effectively cut Jibe

12

and Lamar out of the royalty stream on the Covered Headphones to which they were

13

entitled.

14

38.

On information

and

belief, Pentagram

and

Hinrichs & Associates have

15

received Main Royalty payments only for sales of the Studio model of Beats Headphones,

16

However, Brunner and/ or Ammunition have received monetary compensation and/ or other

17

consideration from the Beats Defendants for the Covered Headphones.

18

39

Jibe and Lamar are informed and believe that the Beats Defendants contend

19

they do

20

Headphones other than the Studio.

21
22

not owe

40.

Pentagram

or

Hinrichs &

Associates royalties on any model of Beats

On or about January 9, 2014, Jibe and Lamar made a demand on Pentagram to

enforce its right under the Royalty Agreement to receive the Main Royalty payments from

23, Iovme and Dre.

24

41.

On

or about

January

13, 2014, Pentagram

and

Hinrichs & Associates filed this

25

action, requesting a judicial declaration of the parties' rights and obligations under the

26

Global Settlement Agreement, Royalty Agreement, and Pentagram -Lamar Settlement

27

Agreement.

28

J
JIBE AUDIO, LLC AND

STEVEN LAMAR' S CROSS- COMPLAINT AND DEMAND FOR JURY TRIAL

1
2

42.

Pentagram contends that it owes no obligation to Jibe and Lamar under the

Pentagram -Lamar Settlement Agreement.

Hinrichs & Associates contends that it owes no obligation to Jibe and Lamar

43.

under the Pentagram -Lamar Settlement Agreement to audit ox, otherwise monitor the

royalty

determine whether those payments are sufficient under the Royalty Agreement, or to take

legal

payments to be insufficient.

payments

Hinrichs & Associates receives from the Beats Defendants, or to

action against

the Beats Defendants if Hinrichs &

Associates determines the royalty

9
10

11

FIRST CAUSE OF ACTION

BREACH OF CONTRACT

By

Jibe

and

Lamar

12

13
14
15

against

Pentagram, Hinrichs & Associates, Iovine, Dre, Beats

Electronics, and Does 31- 40)

44

Jibe and Lamar re -allege and incorporate herein by reference each and every

foregoing paragraph as if they were fully set forth herein,

45

Iovine, Dre, Pentagram, SLS, Jibe, and Lamar entered into the Global

16

Settlement Agreement. Jibe and Lamar were known intended third parry beneficiaries of

1.7

the Global Settlement Agreement. On information

18

successor -m -interest to some or all of Pentagram' s obligations and interests in the Global

19

Settlement Agreement. On information and belief, Beats Electronics is a successor -in -

20.

interest to some or all of Iovine and Dre' s obligations and interests in the Global

21

Settlement Agreement

22

46.

and

belief, Hinrichs & Associates is a

Iovine, Dre, and Pentagram entered into the Royalty Agreement. Jibe and

23

Lamar were known intended third party beneficiaries of the Royalty Agreement On

24

information

25

Pentagram' s obligations and interests in the Royalty Agreement. On information and

26

belief, Beats Electronics is a successor -in -interest to some or all of Iovine and Dre' s

27

obligations and interests in the Royalty Agreement.

and

belief, Hinrichs & Associates is a successor -in -interest to some or all of

28

io
JIBE AUDIO, LLC AND STEVEN LAMAR' S CROSS- COMPLAINT AND DEMAND FOR JURY TRIAL

Pentagram, Jibe, and Lamar entered into the Pentagram -Lamar Settlement

47.

Agreement. On information

some or all of Pentagram' s obligations and interests in the Pentagram -Lamar Settlement

Agreement.

48.

and

belief, Hinrichs & Associates is a successor -in -interest to

Jibe and Lamar did all. or substantially all of the significant things, if any, that

the Global Settlement Agreement, the Royalty Agreement, and Pentagram -Lamar

Settlement Agreement required them to do.

8
9
10

49.

Pentagram, Hinrichs & Associates, Iovine, Dre, and Beats Electronics have all

breached and continue to breach the Global Settlement Agreement, the Royalty
Agreement, and the Pentagram -Lamar Settlement Agreement.

11

50.

As

direct

and proximate result of Pentagram,

Hinrichs & Associates, Iovine,

12

Dre, and Beats Electronics' breaches of the Global Settlement Agreement, Royalty

13

Agreement, and Pentagram -Lamar Settlement Agreement, Jibe and Lamar were damaged

14

in an amount to be determined at trial..

15

16

SECOND CAUSE OF ACTION

BREACH OF THE IMPLIED COVENANT OF

17

GOOD FAITH AND FAIR DEALING

18

By Jibe

and

Lamar

19

Pentagram, Hinrichs & Associates, Iovine, Dre, Beats

Electronics, and Does 31- 40)

20
21

against

51.

Jibe and Lamar re -allege and incorporate herein by reference each and every

foregoing paragraph as if they were fully set forth herein.

22

52.

Iovine, Dre, Pentagram, SLS, Jibe, and Lamar entered into the Global

23

Settlement Agreement. Jibe and Lamar were known intended third party beneficiaries of

24

the

25

successor -in -interest to some or all of Pentagram' s obligations and interests In the Global

26.

Settlement Agreement. On information and belief, Beats Electronics is a successor. in

- -

27

interest to some or all of Iovine and DW s obligations and interests in the Global

28

Settlement Agreement.

Global Settlement Agreement. On information

and

belief, Hinrichs & Associates is a

I1
JIBE AUDIO, LLC AND STEVEN LAMAR' S CROSS- COMPLAINT AND DEMAND FOR JURY TRIAL

53.

Iovine, Dre, and Pentagram entered into the Royalty Agreement. Jibe and

Lamar were known intended third party beneficiaries of the Royalty Agreement. On

information

Pentagram' s obligations and interests in the Royalty Agreement. On information and

belief, Beats Electronics is a successor -in -interest to some or all of Iovine and Dre' s

obligations and interests in the Royalty Agreement.

54.

and

belief, Hinrichs & Associates is a successor -in -interest to some or all of

Pentagram, Jibe, and Lamar entered into the Pentagram -Lamar Settlement
belief, Hinrichs & Associates is a successor -in -interest to

Agreement. On information

some or all of Pentagram' s obligations and interests in the Pentagram -Lamar Settlement

10

11

and

Agreement

55:

Jibe and Lamar did all or substantially all of the significant things, if any,,that

12

the Global Settlement Agreement, the Royalty Agreement, and Pentagram -Lamar

13

Settlement Agreement required them to do.

14

56.

Pentagram, Hinrichs &. Associates, Iovine, Dre, and Beats Electronics have all

15

breached and continue to breach the Global Settlement Agreement, the Royalty

16

Agreement, and the Pentagram -Lamar Settlement Agreement. '

IWA

57.

As

direct

and proximate result of Pentagram,

Hinrichs & Associates, Iovine,

18

Dre, and Beats Electronics' breaches of the Global Settlement Agreement, Royalty

19

Agreement and Pentagram -Lamar Settlement Agreement, Jibe and Lamar were damaged

20

and continue to be damaged in an amount to be determined at trial.

21

58.

Pentagram, Hinrichs & Associates, Iovine, Dre, and Beats Electronics' owe

22

Jibe and Lamar the duties to act in good faith and deal fairly with Jibe and Lamar under the

23

Global Settlement Agreement, Royalty Agreement, and Pentagram -Lamar Settlement

24

Agreement. Instead of acting in good faith and dealing fairly with Jibe and Lamar,

25

Pentagram, Hinrichs & Associates, Iovine, Dre, and Beats Electronics acted and continue

26

to act in bad faith as is alleged herein.

L..

27

28

59.

As

direct

and proximate result of Pentagram,

Hinrichs & Associates, Iovine,

Dre, and Beats Electronics' breaches of the implied covenant to act in good faith and deal

12
JIBE AUDIO, LLC AND STEVEN LAMAR' S CROSS- COMPLAINT AND DEMAND FOR JURY TRIAL

fRirly, Jibe and Lamar were damaged and continue to be damaged in an amount to be

determined at trial.

3,

60.

Pentagram, Hinrichs & Associates, Iovine, Dre, and Beats Electronics'

411

misconduct described herein was despicable and done with a conscious disregard of Jibe

and Lamar' s rights, constituting malice, fraud, oppression, and/ or intent to injure Jibe and

Lamar and warranting punitive damages.

71
8'

THIRD CAUSE OF ACTIONBAD FAITH DENIAL OF CONTRACT

By Jibe

and

Lamar

against

10

ill
12
13

Pentagram, Hinrichs & Associates, Iovine, Dre, Beats

Electronics, and Does 31- 40)

61.

Jibe and Lamar re -allege and incorporate herein by reference each and every

foregoing paragraph as if they were fully set forth herein.

62.

Iovine, Dre, Pentagram, SLS, Jibe, and Lamar entered into the Global

14

Settlement Agreement. Jibe and Lamar were known intended third party beneficiaries of

15

the Global Settlement Agreement. On information and belief, Hinrichs & Associates is a

16

successor -in -interest to some or all of Pentagram' s obligations and interests in the Global

17

Settlement Agreement. On information and belief, Beats Electronics is a successor -in -

18

interest to some or all of Iovine and Dre' s obligations and interests in the Global

19

Settlement Agreement

20

63.

Iovine, Dre, and Pentagram entered into the Royalty Agreement. Jibe and

21

Lamar were known intended third party beneficiaries of the Royalty Agreement. On

22

information and

23

Pentagram' s obligations and interests in the Royalty Agreement. On information and

24

belief, Beats Electronics is a successor -in -interest to some or all of Iovine and Dre' s

25

obligations and interests in the Royalty Agreement.

26

27

64.

belief, Hinrichs & Associates is a successor -in -interest to some or all of

Pentagram, Jibe and Lamar entered into the Pentagram -Lamar Settlement

Agreement. On information

and

belief, Hinrichs & Associates is a successor -in -interest to

28

13
JIBE AUDIO, LLC AND STEVEN LAMAR' S CROSS- COMPLAINT AND DEMAND FOR JURY TRIAL

some' or all of Pentagram' s obligations and interests in the Pentagram -Lamar Settlement

Agreement.

65.

the Global Settlement Agreement, the Royalty Agreement, and Pentagram -Lamar

Settlement Agreement required them to do.

66.

Pentagram, Hinrichs & Associates, Iovine, Dre, and Beats Electronics have all

breached and continue to breach the Global Settlement Agreement, the Royalty

Agreement, and the Pentagram -Lamar Settlement Agreement.

67.

As

direct

and proximate result of

Pentagram, Hinrichs & Associates, Iovine,

10

Dre, and Beats Electronics' breaches of the Global Settlement Agreement, Royalty

11

Agreement, and Pentagram -Lamar Settlement Agreement, Jibe and Lamar were damaged

12

and continue to be damaged in an amount to be determined at trial.

13

68.

Pentagram, Hinrichs & Associates, Iovine, Dre and Beats Electronics have all

14

in bad faith and without probable cause denied and continue to deny the existence of their

15

contractual obligations to Jibe and Lamar that are alleged herein.

16

17p

Jibe and Lamar did all or substantially all of the significant things, if any, that

18

69.

As

direct

and proximate result of Pentagram,

Hinrichs & Associates, Iovine,

Tare and Beats Electronics bad faith denial of their contractual obligations, Jibe and Lamar
were damaged and continue to be damaged in an amount to be determined at trial.

19

70,

Pentagram, Hinrichs & Associates, Iovine, Dre and Beats Electronics

20

misconduct described herein was despicable and done with a conscious disregard of Jibe

21

and Lamar' s rights, constituting malice, fraud, oppression, and/ or intent to injure Jibe and

22

Lamar and warranting punitive damages.

23
24
25

FOURTH CAUSE OF ACTION

BREACH OF FIDUCIARY DUTIES

By

Jibe

and

Lamar

against

Pentagram, Hinrichs & Associates, Brunner, and Does

26

27
28

31- 40)

71.

Jibe and Lamar re -allege and incorporate herein by reference each and every

foregoing paragraph as if they were fully set forth herein.

4:

14

JIBE AUDIO, LLC AND STEVEN LAMAR' S CROSS- COMPLAINT AND DEMAND FOR JURY TRIAL

72.

Pentagram, Jibe, and Lamar entered into the Pentagram -Lamar Settlement

Agreement. On information

some or all of Pentagram' s obligations and interests in the Pentagram -Lamar Settlement

Agreement. At every stage ofthe relationship between Jibe and Lamar, on. the one, hand,

and

a partner at

the role of the

- point person who made decisions concerning their rights and interests in the

Settlement Agreement, Royalty Agreement and the Pentagram -Lamar Settlement

Agreement, but never advised Jibe and Lamar of those decisions until after they had been

10
11
12

Pentagram

and

and

belief, Hinrichs & Associates is .a successor -in -interest to

Hinrichs & Associates,

Pentagram

and

then

when

on

the

other

he later became

hand, Brunner both when he was

a partner at

Ammunition assumed

made and acted upon by the parties.

73.

Pursuant to the Pentagram -Lamar Settlement Agreement, Pentagram, Hinrichs

Associates, and Brunner owed fiduciary duties to Jibe and Lamar in their interactions,

13

dealings and accountings with Iovine, Dre and Beats Electronics under the Global

14

S ettlement Agreement and Royalty Agreement.

15

74.

Jibe and Lamar did all or substantially all of the significant things, if any, that

16.

the Global Settlement Agreement, the Royalty Agreement, and Pentagram -Lamar

17

Settlement Agreement required them to do,

18'

19

20

75

Pentagram, Hinrichs & Associates, and Brunner breached and continue to

breach their fiduciary duties owed to Jibe and Lamar.

76.

As

direct

and proximate result of Pentagram,

Hinrichs & Associates, and

21

Brunner' s breaches of their fiduciary duties, Jibe and Lamar were damaged and continue to

22

be damaged in an amount to be determined at trial.

23

77.

Pentagram, Hinrichs & Associates, and Brunner' s misconduct described

24

herein was despicable and done with a conscious disregard of Jibe and Lamar' s rights,

25

constituting malice, fraud, oppression, and/ or intent to injure Jibe and Lamar and

26

warranting punitive damages

27
28

15
JIBE AUDIO, LLC AND STEVEN LAMAR' S CROSS- COMPLAINT AND DEMAND FOR JURY TRIAL

FIFTH CAUSE OF ACTION

INTENTIONAL INTERFERENCE WITH

CONTRACTUAL RELATIONS

By Jibe and Lamar against Brunner, Ammunition, and Does 41- 50)

4
5

78.

Jibe and Lamar re -allege and incorporate herein by reference each and every

foregoing paragraph as if they were fully set forth herein.

79.

Iovine, Dre, Pentagram, SLS, Jibe, and Lamar entered into the Global

Settlement Agreement. Jibe and Lamar were known intended third parry beneficiaries of

the Global Settlement

successor -in -interest to some or all of Pentagram' s, obligations and interests in the Global

Agreement. On information

and

belief, Hinrichs & Associates is a

10

Settlement Agreement. On information and belief, Beats Electronics is a successor -in -

11

interest to some or all of Iovine and Dre' s obligations and interests in the Global

12

Settlement Agreement.

13

80.

Iovine, Dre, and Pentagram entered into the Royalty Agreement. Jibe and

14

Lamar were known intended third party beneficiaries of the Royalty Agreement, On

15

information

16

Pentagram' s obligations and interests in the Royalty Agreement. On information and

17

belief, Beats Electronics is a successor -in -interest to some or all of lovine and Dre' s

18

obligations and interests in the Royalty Agreement.

19.

81.

and

belief, Hinrichs & Associates is a successor -in -interest to some or all of

Pentagram, Jibe and Lamar entered into the Pentagram -Lamar Settlement

20' Agreement. On information

and

belief, Hinrichs & Associates is a successor -in -interest to

21

some or all of Pentagram' s obligations and interests in the Pentagram -Lamar Settlement

22

Agreement.

23

82.

Jibe and Lamar did all or substantially all of the significant things, if any, that

24

the Global Settlement Agreement, the Royalty Agreement, and Pentagram -Lamar

25

Settlement Agreement required them to do.

26

83.

On information and belief, Brunner and Ammunition had knowledge of the

27

Global Settlement Agreement, the Royalty Agreement, and Pentagram -Lamar Settlement

28

Agreement, as well as Jibe and Lamar' s rights and interests under those agreements..

16

JIBE AUDIO, LLC AND STEVEN LAMAR' S CROSS- COMPLAINT AND DEMAND FOR JURY TRIAL

1'

84.

2'

and continue to

Electronics to breach the Global Settlement Agreement, the Royalty Agreement, and

Pentagram -Lamar Settlement Agreement; ( 2)

5'

Pentagram, Hinrichs & Associates, Iovine, Dre, and Beats Electronics' breach of the

Global Settlement Agreement, the Royalty Agreement, and Pentagram -Lamar Settlement

71

Agreement and/ or (3) intentionally interfered and continue to intentionally interfere with

On information

and

belief, Brunner

and

Ammunition: ( 1)

wrongfully induced

induce Pentagram, Hinrichs & Associates, Iovine, Dre, and Beats

wrongfully assisted and continue to assist in

8I Jibe and Lamar' s rights and interests in the Global Settlement Agreement, the Royalty
9'
10

Agreement, and Pentagram -Lamar Settlement Agreement without any justification.

85.

Pentagram, Hinrichs & Associates, Iovine, Dre, and Beats Electronics have all

breached and continue to breach the Global Settlement Agreement, the Royalty
Agreement, and the Pentagram -Lamar Settlement Agreement.
13

86.

As a direct and proximate result of Brunner and Ammunitions' intentional

14

interference with the contractual relations described herein, Jibe and Lamar were damaged

15

and continue to be damaged in an amount to be determined at trial

16

87.

Brunner and Ammunition' s misconduct described herein was despicable and

17

done with a conscious disregard of Jibe and Lamar' s rights, constituting malice, fraud,

18

oppression, and/ or intent to injure Jibe and Lamar and warranting punitive damages.

19
20

SIXTH CAUSE OF ACTIONNEGLIGENT INTERFERENCE WITH

21

CONTRACTUAL RELATIONS

22

By Jibe and Lamar against Brunner, Ammunition, and Does 41- 50)

23
24

25

88.

Jibe and Lamar re -allege and incorporate herein by reference each and every

foregoing paragraph as if they were fully set forth herein.

89.

Iovine, Dre, Pentagram, SLS, Jibe, and Lamar entered into the Global

26

Settlement Agreement. Jibe and Lamar were known intended third party beneficiaries of

27

the Global Settlement Agreement. On information

28

successor -in -interest to some or all of Pentagram' s obligations and interests in the Global

and

belief, Hinrichs & Associates Is a

17

nBE AUDIO, LLC AND STEVEN LAMAR' S CROSS- COMPLAINT AND DEMAND FOR JURY TRIAL

Settlement Agreement. On information and belief, Beats Electronics is a successor -in -

interest to some or all of Iovine and Dre' s obligations and interests in the Global

Settlement Agreement,

90.

Iovine, Dre, and Pentagram entered into the Royalty Agreement. Jibe and

Lamar were known intended third party beneficiaries of the Royalty Agreement. On

information

7'

Pentagram' s obligations and interests in the Royalty Agreement. On information and

belief, Beats Electronics is a successor -in -interest to some or all of Iovine and Dre' s

obligations and interests in the Royalty Agreement.

10

91.

and

belief, Hinrichs & Associates is a successor -in -interest to some or all of

Pentagram, Jibe, and Lamar entered into the Pentagram -Lamar Settlement

Agreement. On information

and

belief, Hinrichs & Associates is a successor -in -interest to

some or all of Pentagram' s obligations and interests in the Pentagram -Lamar Settlement
13

Agreement.

14

92,

15

the Global Settlement Agreement, the Royalty Agreement, and Pentagram -Lamar

16

Settlement Agreement required them to do

17

tr

Jibe and Lamar did all or substantially all of the significant things, if any, that

93.

Ori information and belief, Brunner and Ammunition knew or should have

18

known of the Global Settlement Agreement, the Royalty Agreement, and Pentagram -

19

Lamar Settlement Agreement, as well as Jibe and Lamar' s rights and interests under those

20

agreements.

21

94.

22

known that Jibe

23

Iovine, Dre, and Beats Electronics would be disrupted if they failed to act with reasonable

24

care.

25

95.

On information and belief, Brunner and Ammunition knew or should have

and

Lamar' s

contractual relations with

Pentagram, Hinrichs & Associates,

On information and belief, Brunner and Ammunition engaged in wrongful

ry

26

conduct

because they: (

1) wrongfully induced and continue to-induce Pentagram, Hinrichs

27

Associates, Iovine, Dre and Beats Electronics to breach the Global Settlement

28

Agreement, the Royalty Agreement and Pentagram -Lamar Settlement Agreement;

r
Is

JIBE AUDIO, LLC AND STEVEN LAMAR' S CROSS- COMPLAINT AND DEMAND FOR FJRY TRIAL

2) wrongfully

assisted anal continue

to assist in Pentagram, Hinrichs & Associates, Xovine,

Dre, and Beats Electronics' breach of the Global Settlement Agreement, the Royalty

Agreement, and Pentagram -Lamar Settlement Agreement; and/ or (3) intentionally

interfered and continue to intentionally interfere with Jibe and Lamar' s rights and interests

in the Global Settlement Agreement, the Royalty Agreement, and Pentagram -Lamar

Settlement Agreement without any justification,

7
8
9

96.

Jibe and Lamar' s contractual relationship with Pentagram, Hinrichs &

Associates, Iovine, Dre, and Beats Electronics has been and continues to be disrupted,
97.

As a direct and proximate result of Brunner and Ammunitionse negligent

10

interference with Jibe and Lamar' s contractual relations, Jibe and Lamar were damaged

11

and continue to be damaged in an amount to be determined at trial,

12

98.

Brunner and Ammunition' s misconduct described herein was despicable and

13

done with a conscious disregard of Jibe and Lamar' s rights, constituting malice, fraud,

14

oppression, and/ or intent to injure Jibe and Lamar and warranting punitive damages.

15

16

SEVENTH CAUSE OF ACTION

INTENTIONAL INTERFERENCE WITH A

17

PROSPECTIVE ECONOMIC ADVANTAGE

18

By Jibe and Lamar against Brunner, Ammunition., and Does 41- 50)

19
20

21

99.

Jibe and Lamar re -allege and incorporate herein by reference..each and every

foregoing paragraph as if they were fully set forth herein.

100.

Jibe and Lamar were in an economic relationship with Pentagram, Hinrichs &

22

Associates, Iovine,' Dre, and Beats Electronics that would have resulted in a future

23

economic benefit to Jibe and Lamar.

24

101.

On information and belief, Brunner and Ammunition knew about Jibe and

25

Lamar' s

2.6

Beats Electronics that would have resulted in a future economic benefit to-Jibe and Lamar,

economic

relationship

with

Pentagram, Hinrichs & Associates, Iovine, Dre, and

27
28

19

JIBE AUDIO, LLC AND STEVEN LAMAR' S CROSS- COMPLAINT AND DEMAND FOR JURY TRIAL

E
1

102.

On information and belief, Brunner and Ammunition knew that Jibe and

Lamar' s

Beats Electronics would be disrupted if they interfered with that economic relationship.

economic

103

relationship

with

Pentagram, Hinrichs & Associates, Iovine, Dre, and

On information and belief, Brunner and Ammunition intentionally interfered

with

Iovine, Dre

induce

Global Settlement Agreement, the Royalty Agreement, and Pentagram -Lamar Settlement

Agreement; (2) wrongfully assisted and continue to assist in Pentagram, Hinrichs &

Jibe

and

Lamar'

and

s economic

relationship

with

Beats Electronics because they (

Pentagram, Hinrichs & Associates,

1) wrongfully induced and continue to

Pentagram, Hinrichs & Associates, Iovine, Dre, and Beats Electronics to breach the

10

Associates, Iovine, Dre, and Beats Electronics' breach of the Global Settlement

11

Agreement, the Royalty Agreement, and Pentagram -Lamar Settlement Agreement, and/ or

12

3) intentionally interfered and continue to intentionally interfere with Jibe and Lamar' s

13

rights and interests in the Global Settlement Agreement, the Royalty Agreement, and

14.

Pentagram -Lamar Settlement Agreement without any justification

15,
16

17
18

104.

Jibe and Lamar' s economic relationship with Pentagram, Hinrichs &

Associates, Iovine, Dre, and Beats Electronics has been and continues to be disrupted
105.

As a direct and proximate result of Brunner and Ammunitions' intentional

interference with Jibe and Lamar' s economic relationship, Jibe and Lamar were damaged
and continue to be damaged in an amount to be determined at trial.

20

Brunner and Ammunition' s misconduct described herein was despicable and

106

21

done with a conscious disregard of Jibe and Lamar' s rights, constituting malice, fraud,

22

oppression, and/ or intent to inure Jibe and Lamar and warranting punitive damages.

23

24

EIGHTH CAUSE OF ACTION

NEGLIGENT INTERFERENCE WITH A

25

PROSPECTIVE ECONOMIC ADVANTAGE

26

By Jibe and Lamar against Brunner, Ammunition, and Does 41- 50)

27

28

107.

Jibe and Lamar re -allege and incorporate herein by reference each and every

foregoing paragraph as if they were fully set forth herein

20
JIBE AUDIO, LLC AND STEVEN LAMAR' S CROSS- COMPLAINT AND DEMAND FOR JURY TRIAL

108.

Jibe and Lamar were in an economic relationship with Pentagram, Hinrichs &

Associates, Iovine, Dre, and Beats Electronics that would have resulted in a future

economic benefit to Jibe and Lamar.

109.

On information and belief, Brunner and Ammunition knew or should have

known about Jibe and Lamar' s economic relationship with Pentagram, Hinrichs &

Associates, Iovine, Dre ,and Beats Electronics that would have resulted in a future

economic benefit to Jibe and Lamar.

110.

On information and belief, Brunner and Ammunition knew or should have

known that Jibe and Lamar' s economic relationship with Pentagram, Hinrichs &

10

Associates, Iovine, Dre, and Beats, Electronics would be disrupted if they failed to act with

11

reasonable care.

12
13

14
15

111.

On information and belief, Brunner and Ammunition failed to acfwith

reasonable care.

112.
conduct

On information and belief, Brunner and Ammunition engaged in wrongful

because they: (

1) wrongfully induced and continue to induce Pentagram, Hinrichs

16

Associates, Iovine, Dre, and Beats Electronics to breach the Global Settlement

17

Agreement, the Royalty Agreement, and Pentagram -Lamar Settlement Agreement;

18

2) wrongfully

assisted and continue

to

assist

in Pentagram, .Hinrichs & Associates, Iovine,

19

Dre, and Beats Electronics' breach of the Global Settlement Agreement, the Royalty

20

Agreement, and Pentagram -Lamar Settlement Agreement; and/ or (3) intentionally

21'

interfered and continue to intentionally interfere with Jibe and Lamar' s rights and interests

22

in the Global Settlement Agreement, the Royalty Agreement, and Pentagram -Lamar

23

Settlement Agreement without any justification.

24
25
26

113.

Jibe and Lamar' s economic relationship with Pentagram, Hinrichs &

Associates, Iovine, Dre, and Beats Electronics has been and continues to be disrupted.
114.

Asa direct and proximate result of Brunner and Ammunitions' negligent

27

interference with Jibe and Lamar' s economic relationship, Jibe and Lamar were damaged

28

and continue to be damaged in an amount to be determined at trial.

21

JIBE AUDIO, LLC AND STEVEN LAMAR' S CROSS- COMPLAINT AND DEMAND FOR JURY TRIAL

0
1

115.

Brunner and Ammunition' s misconduct described herein was despicable and

done with a conscious disregard of Jibe and Lamar' s rights, constituting malice, fraud,

oppression, and/ or intent to injure Jibe and Lamar and warranting punitive damages,

4
5

NINTH CAUSE OF ACTION

DECLARATORY RELIEF

By Jibe

and

Lamar

against

8
9

Electronics, and Does 31- 40)

116.

Jibe and Lamar re -allege and incorporate herein by reference each and every

foregoing paragraph as if they were fully set forth herein.

10

117.

This matter is properly the subject of declaratory relief.

11

118.

There are actual controversies involving justiciable questions relating to rights

12

or obligations of the parties herein, including, but not limited, to the following

13

controversies:

14

a.

Jibe and Lamar contend that the Beats Defendants owe Pentagram .and/ or

15

Hinrichs & Associates

16

in the Royalty Agreement, On information and belief the Beats Defendants

17

deny that they owe such a royalty;

18

b.

Jibe

and

Lamar

four

contend. that

percent (4%)

Pentagram

royalty on the Covered Headphones

and/ or

Hinrichs & Associates owe Jibe

19

and Lamar one-half of royalty payments for the Covered Headphones. On

2.0

information

21

owe such payments,

22

h;

Pentagram, Hinrichs & Associates, Iovine, Dre, Beats

C.

Jibe

and

and

Lamar

belief, Pentagram

contend

and

Hinrichs &

Associates deny that they

that Pentagram and Hinrichs & Associates are obligated

23

not to waive or impair (through inadvertence or otherwise) the right to receive

24

Main Royalty payments for sales of all Covered Headphones On information

25

and

26

obligations;

27
28

d.

Jibe

belief, Pentagram

and

Lamar

and

contend

Hinrichs &

Associates deny that they owe such

that Pentagram and Hinrichs & Associates are obligated

but have failed to audit and monitor whether Pentagram and Hinrichs &

V_
41.

22
JIBE AUDIO, LLC AND STEVEN LAMAR' S

AND DEMAND FOR JURY TRIAL

Associates have received all Main Royalty payments for all Covered

Headphones, and are obligated but have failed to take reasonable steps to assure

such payments, to which Jibe and Lamar are entitled to one- half. On

information and

owe such obligations and deny that Jibe and Lamar are entitled to such

payments,

belief, Pentagram

and

Hinrichs &

Associates deny that they

Jibe and Lamar contend that to the extent Jibe and Lamar do not receive from

the Beats Defendants through this action all their one- half share of all Main

Royalty payments owed by the Beats Defendants, Pentagram and Hinrichs &

10

Associates are liable to Jibe and Lamar for the difference, which Jibe and Lamar

11

should recover

12

impaired the right to receive such Main Royalty payments. On information and

13

belief, Pentagram

14

obligations and deny that Jibe and Lamar are entitled to such payments;

15

119.

from Pentagram

and

and

Hinrichs &

Hinrichs &

Associates for their having

Associates deny that they owe such

A continuing and justiciable controversy exists among Jibe, Lamar,

16

Pentagram, Hinrichs &

17

and responsibilities under the Global Settlement Agreement, the Royalty Agreement and

18

Pentagram -Lamar Settlement Agreement

19

120.

Associates, and the Beats Defendants regarding the parties' rights

Accordingly, a declaratory judgment is both necessary and proper at this time.

20

21
22

TENTH CAUSE OF ACTION

ACCOUNTING

By

Jibe

and

Lamar

against

23

Pentagram, Hinrichs & Associates, Iovine, Dre, Beats

Electronics, and Does 31- 40)

24

121.

The relationship between Jibe and Lamar, as royalty participants and known

25

intended third party beneficiaries dependent on payment of the correct amounts of royalties

26

being

27

Defendants

paid

by

the Beats Defendants to

who owe a

royalty

stream

Pentagram

and

Hinrichs & Associates, the Beats

to Pentagram and Hinrichs & Associates, and

28

23
JIBE AUDIO, LLC AND STEVEN LAMAR' S CROSS- COMPLAINT AND DEMAND FOR JURY TRIAL

Pentagram

2'

to Jibe its royalty share, is one that requires an accounting in equity.

3
4'

and

122`

Hinrichs &

Associates as the parties responsible for monitoring and paying

An amount is due to Jibe and Lamar that they do not know and that they

cannot ascertain without an accounting.

123.

The facts from which. the royalty amounts owed may properly be calculated

are within the knowledge of the Beats Defendants and the facts from which the royalty

amounts paid to date may be ascertained are within the knowledge of the Beats Defendants

and

Hinrichs & Associates.

124.

An accounting is necessary in order to determine the royalty amounts owed.

10

11

PRAYER FOR RELIEF

12

WHEREFORE, Cross -claimants Jibe and Lamar pray for judgment as follows:

13

For general damages in an .amount to be proven at trial;

14

2.

For special damages in an amount to be proven at trial;

15

3.

For injunctive relief;

16

4.

For declaratory relief;

17

5.

For an accounting;

18

For a constructive trust;

19

7.

For costs of suit incurred herein;

20

8.

For attorneys' fees;

21

9.

For punitive damages;

22

10.

For prejudgment interest; and

23

11.

For such other and further relief as the Court may deem just and proper.

24
25

Dated;

May

16, 2014

GIRARDI I KEESE

26

27
n

By:
V. GIRARDI

28

GRAHAM B. LIPPSMITH

r
24

JIBE AUDIO, LLC AND STEVEN LAMAR' S CROSS- COMPLAINT AND DEMAND FOR JURY TRIAL

1
2

4
5
1

6
7
8
9
10

11
12
13

14
15
16
17

18
19
20

21
22

23
24

25
t^

26

27
28
hT

I-)

I
1
2
3

DEMAND FOR JURY TRIAL

Defendants and Cross -Claimants Steven Lamar and Jibe Audio, LLC hereby
demand a jury trial on all causes of action in their Cross -Complaint.

4
5

7
89

10

Dated:

May

16, 2014

GIRARDI I aKEESE

By:

rN Mg S-7
- GIRARDI
GRAHAM B. LIPPSMITH
CHRISTOPHER T. AUMAIS

Attorneys for Defendants and Cross Claimants Jibe Audio, LLC and Steven Lamar

11
12

13

14
15
16
17
18

19
20

21
22
23
1-;

24
25
F

26
27
28

r'
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2626

JIBEJIBE AUDIO,AUDIO, LLCLLC ANDAND STEVENSTEVEN LAMAR'LAMAR' SS CROSS-CROSS- COMPLAINTCOMPLAINT ANDAND DEMANDDEMAND FORFOR JURYJURY TRIALTRIAL
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Supplemental Royalty paymots. For purposes of clarity, payment of the Base Royalty
will not be credited tdward amounts due under the Supplemental Royalty and vice versa.

d) All royalties payable to Pentagram under this Royalty Agreement ( other than the

Minimum Royalty..)shall be calculated, reduced, determined acrd pard in the same manner
and at the same time as the royalty payable to Jinialy and Dre under the Merchandising
Agreement. The royalty rate paid to Pentagram on sales other than Normal Dealer Sales
will be reduced by the same percentage that the royalty rate paidto Jimmy and Dre under

the :Merchandising Agrgement oa sales other than Normal Dealer Sales are reduced from
the royalty rate paid t-o Jimmy and Dre on Normal Dealer Sales.
e)

If Jimmy and Dre manufacture, market, or sell the Headphones through another source
than Monster, Pentagram will be entitled to payment on the same terms as set forth
above, in which case the term " Merchandising Agreement" shall mean the agreement

between Jimmy, Dre, and the other source for the manufacture, marketing and sale of the
Headphones, Jimmy and Dre will provide Pentagram with a copy of the Merchandising
Agreement redacted to reflect only the royalty and accounting provisiolis applicable to

the calculation and timing of royalty payments to Pentagram under this Agreement.
f)

The terms and conditions under which,royalties are paid to Pentdgram under this Royalty
Agreement shall remain as set .forth Herein, notwithstanding any future amendments to

Cie Merchandising Agreement that may be executed by Jimmy/Dre and Monster,

including that Pentgram' s royalty hereunder will continue to be paid in the full stated
percentages in cash, regardless of any amendments to the Mercbandismg Agreement.
2)

Ileadphoijo Design. Subject to Royalty. The only headphones or other prgducts that are
subject to the Base I, oyalty and the Supplemental.Royalty are the Hgadphones,

3)

Payment of Royalties.

The 'Base .Royalty and the Supplemental Royalty 'will be paid -to

Pentagram on or before the thirtieth day following the end of each calendar quarter, along

with a suinmary in reasonable detail of the basis of the calculation of royalties during such
period.

4)

Defaults, Overdue royalty payments and reports will be deemed delinquent and therefore a
material breach of this Royalty Agreement by Jimmy and Dre if not received by Pentagram
within ten. (10) days of written notice from Pentagram to Jimmy and Dre.

5)

Audit Rights. Jimmy, Dre, and their Affiliates, agents and distributors will make available
to Pentagram' s independent auditor on a, confidential basis at all reasonable times on
reasonable advance notice no more than onde per year, all books and records -relevant to

calculation and verification of the Base Royalty and the Supplemental Royalty.
i -t=

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6) General Provisions.
a)

Notices. Notices sent to the following addresses will be deemed received by the other
Party (

1823 709182272. 1

a)

three ( 3)

days after boing mailed postage prepaid, certified return receipt

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SCHBDULBI

Reference to. Headphones Design Patent Application

1828 109/ 822721

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0 ,
PROOF OF SERVICE

STATE OF CALIFORNIA, COUNTY OF LOS ANGELES

lain employed in the County of Los Angeles, State of California. I am over the age of 18 and not

a party to the within action; my business address is 1126 Wilshire Boulevard, Los Angeles, California
90017- 1904,

On May 16, 2014, I served the foregoing document described as, JIBE AUDIO, LLC AND
STEVEN LAMAR'S CROSS- COMPLAINT AND DEMAND FOR JURY TRIAL on all interested

parties in this action as set forth on the attached service list in the following manner:
SEE ATTACHED SERVICE LIST

BY MAIL: I am familiar with. this firm' s practice of collection and processing correspondence
for mailing. Under that practice it would be deposited with U.S, postal service on that same day
with postage thereon fully prepaid at Los Angeles, California in the ordinary course of business. I

am aware that on motion of the party, service is presumed invalid if postal cancellation date or
postage meter date is more than one day after date of deposit for mailing in affidavit.
BY FACSIMILE: In addition to service by mail as set forth above, a copy of said document( s)
was also delivered by facsimile transmission to the addressee( s) pursuant to Code of Civil

Procedure 1013( e).

BY OVERNIGHT MAIL: I caused said document( s) to be picked up by an overnight delivery

service company for delivery to the addressee( s) on the next.business day.

14

15

BY PERSONAL, SERVICE: By causing personal delivery of the document listed .above to the
person at the address set forth on the attached service list.

16

BY ELECTRONIC SERVICE: I caused the above document to be sent to the listed

addressee( s) in the attached service list via email.

17

18

STATE

I declare under penalty of perjury under the laws of the State of California that the

19

above is true and correct.

20

FEDERAL
I declare that I am employed in the office of the member of the bar of this court at
whose direction the service was made.

21

Executed on May 16, 2014, at Los Angeles, California.

231

Lo ____ LAURA E

2,
28

PROOF OF SERVICE

SERVICE LIST

1
2
3
Daniel A. Saunders

4 Brianna L Abrams
5

6
7

BTNGHAM MCCUTCHEN LLP

The Water Garden, Ste. 2050 North

1601 Cloverfield Blvd

Santa Monica, CA 90404- 4082

Daniel.saunders@bingham. com

8 Brianna abrams@bmgham. com

9 Attorneysfor Defendants .beats Electronics, LLC, Andre Young and Jimmy lovene
10
J Morrow Otis

11 G. Scott Emblidge
12 MOSCONE EMBLIDGE

SLATER & OTIS LLP

220 Montgomery St., Ste. 2100

13 San Francisco, CA 94104

14 jmo@mosconelaw.com
emblidge@mosconelaw. com

15
16

Scott P. Cooper
PROSKAUER ROSE LLP

17 2049 Century Park East, Ste. 3200

Los Angeles, CA 90067
18

scooper@proskauer.com

19
20
21
22

23

24
25
26
27
28

r
k^

PROOF OF SERVICE

1
2

3
4

J. MORROW OTIS, State Bar No. 0393I1

G. SCOTT EMBLIDGE, State Bar No. 121613
MOSCONE EMBLIDGE SATER & OTIS LLP

FILE
Superior Court of California

County of Los Angeles

220 Montgomery Street, Suite 2100

San Francisco, CA 94104
Telephone: (
Facsimile. (

JAN 13 2014

415) 362- 3599

415) 362- 2006

Sherri R Carter, Ex cutive Officer/Clerk

Deputy

By

Attorneys for Plaintiffs Hinrichs & Associates

Myrna Beltran

and Pentagram Design, Inc

6
7

SUPERIOR COURT FOR THE STATE OF CALIFORNIA

COUNTY OF LOS ANGELES

10

HINRICHS & ASSOCIATES; and

PENTAGRAM DESIGN, INC.

11

9
6 C 5/3 3 0 8

Case No.

Plaintiffs,

12

f,

BY fAX
COMPLAINT FOR DECLARATORY
RELIEF ( CCP 1060)

VS.

13

BEATS ELECTRONICS, LLC, ANDRE

14

JIMMY IOVINE, an individual; STEVEN

LAMAR, an individual; JIBE AUDIO, LLC;
and DOES 1 through 30, inclusive

YOUNG P/K/A DR. DRE, an individual;

15

16

Defendants.

17

18

HINRICHS & ASSOCIATES and PENTAGRAM DESIGN, INC. allege as follows:

I.

19
20

21

1.

X24

Plaintiff Hinrichs & Associates, d/ b/ a Studio Hinrichs (" Hinrichs") is a California

corporation licensed to do business in the State of California.

22

1- 23

INTRODUCTION

2
the

Plaintiff Pentagram Design, Inc. (" Pentagram") is a New York corporation and is

successor in

interest to Pentagram Design, Inc.,

formerly

m
mi3>
n -<. -+

California Corporation

ca

C0

m -+ -' -

2Ssz^..

3.

625

Plaintiffs

are informed and

believe that

at all material

times herein al%e`

dT

Id

Pentagram California

727
27 ..- State

of

was a

validly formed California

corporation

licensed to do business in the

mx

n '

vx

m..

x,.

26

rz-t,- o

Pentagram California").

rn
X' -{

rA

0,

ca

California.
CA
CA

i--

28

4:11

10

COMPLAINT FOR DECLARATORY RELIEF

abu 1VV .

Z7 _.
0 rn O

0000

No

Plaintiffs are informed and believe that at all material times herein alleged,

Defendant Beats Electronics, LLC (" Beats, LLC")

authorized to conduct business in the State of California.

Defendant Andre

6.

Plaintiffs are informed and believe that at all material times herein alleged,

Young, p/ k/a Dr. Dre (" Dre") is a resident of the State of California.

Plaintiffs are informed and believe that at all material times herein alleged,

Defendant Jimmy lovine (" Iovine") is a resident of the State of California.

7.
1,

is a limited liability company that is duly

Plaintiffs are informed and believe that at all material times herein alleged,

Defendant Steven Lamar (" Lamar") is a resident of the State of California

8.

10

Plaintiffs are informed and believe that at all material times herein alleged,

11

Defendant Jibe Audio, LLC (" Jibe")

12

conduct business in the State of California.

13

9.

is a limited liability company that is duly authorized to

Plaintiffs are unaware of the true identity, nature and capacity of each of the

14

Defendants designated herein as Doe. Plaintiffs are informed and believe and thereon allege that

15

each of the Defendants designated as a Doe has in some manner a stake in the outcome of the

16

issues raised in this complaint. Upon learning the true identity, nature and capacity ofthe Doe

17

Defendants, Plaintiffs will amend this complaint to allege their true names and capacities.

18

10.

Venue is

proper

in this Court

pursuant

to Code

of

Civil Procedure 395( a) as the

19

contracts at issue here were entered into in Los Angeles County, the contracts expressly state that

20

Los Angeles shall be the exclusive venue for all disputes under the contracts, and the principal

21

conduct alleged in this complaint occurred at least in part in Los Angeles County.

22

II

FACTUAL BACKGROUND

C-)
2;3

24
1

25

26
Q

J7

11.

SLS")

Pentagram California, Iovine, Dre, Lamar, Jibe, and SLS International, Inc.

designed certain audio headphones, which headphones were later successfully

manufactured, marketed, and sold to the public.

12.

In 2006, Dre and Iovine, as plaintiffs, filed a lawsuit against Pentagram

Califomia, Lamar, Jibe, and SLS International, Inc. as defendants, in the Superior Court for the

28 County of Los Angeles. The lawsuit, Iovine et al v. SLS International, Inc. et al, Case No. SC

13k

COMPLAINT FOR DECLARATORY RELIEF

Case No.:

090575 ( the " Iovine Lawsuit"),

other tlungs, the right, title and ownership ofproperty rights, including intellectual property

rights, associated with the aforementioned audio headphones.

13.

which ultimately included counter claims, concerned, among

The parties to the Iovine Lawsuit reached la global settlement of that dispute

Global Settlement")

pursuant to which the parties entered into certain agreements, including: a

Settlement and Mutual Release Agreement by and among Iovine, Dre, Pentagram California,

SLS, Jibe,

Settlement and Mutual Release Agreement by and among Pentagram California, Jibe and Lamar

dated

and

Lamar dated

on or about

on or about

April 24, 2007 ( the " Settlement Agreement");

April 24, 2007 ( the " Pentagram -Lamar Settlement Agreement");

and a Royalty

10

Agreement by and among Iovine, Dre and Pentagram California dated on or about April 24,

11

2007 ( the " Royalty Agreement").

12

attached hereto as Exhibit A and is incorporated herein by reference as though fully set forth, a

13

true and correct copy of the Pentagram -Lamar Settlement Agreement is attached hereto as

14

Exhibit B and is incorporated herein by reference as though frilly set forth, and a true and correct

15

copy ofthe Royalty Agreement is attached hereto as Exhibit C and is incorporated herein by

16

reference as though fully set forth.

17

14.

A true and correct copy of the Settlement Agreement is

As part of the Global Settlement, and as further described in the Settlement

18

Agreement and the Royalty Agreement, Iovine and Dre agreed to pay Pentagram California

19

royalties

20

for the

15.

sales of "Headphones,"

as that term is defined in the Royalty Agreement.

As part of the Global Settlement, and as further described in the Pentagram -

21

Lamar Settlement Agreement, to compensate Jibe and Lamar for any contributions Jibe and

22

Lamar made to the design of the Headphones, as that term is defined in the Pentagram -Lamar

23

Settlement Agreement, Pentagram California agreed to distnbute to Jibe a portion of the royalty

X24

payments received by Pentagram California from Iovine and Dre.

16.

X26

w l

On or about September 10, 2009, Pentagram California, Iovine, and Dre agreed to

assign Iovine and Dre' s rights and duties under the Royalty Agreement to Beats Electronics,

f 7

LLC. (

28

Defendants.")

Iovine, Dre, and Beats Electronics, LLC are hereinafter referred to as the " Beats

I=

COMPLAINT FOR DECLARATORY RELIEF

Case No -

W7
1

17.

On or about September 10, 2009, Pentagram California, Iovine and Dre agreed to

assign Pentagram California' s rights and duties under the Royalty Agreement to Plaintiff

Hinrichs & Associates.

18.

On or about September 10, 2009, Pentagram California, Jibe, and Lamar agreed to

assign Pentagram California' s rights and duties under the Pentagram -Lamar Settlement

Agreement to

19.

plaintiff Hinrichs

& Associates.

Thereafter, all royalty payments under Royalty Agreement were sent by Beats

Electronics, LLC to Hinrichs & Associates, rather than to Pentagram California or Pentagram

Design, Inc.

10

20.

In

addition,

Hinrichs & Associates not Pentagram California or Pentagram

11

Design Inc. thereafter made all distributions to Lamar and Jibe under the Pentagram -Lamar

12

Settlement Agreement.

13
14

15

21.

On or about October 1, 2009, Pentagram California merged into Plaintiff

Pentagram Design, Inc., a New York corporation.

22.

On or about January 9, 2014, counsel for Lamar sent a letter to Pentagram Design,

16

Inc., making a number of assertions. For example, Lamar' s counsel claimed that the Beats

17

Defendants are failing to pay sufficient royalties under the Royalty Agreement for all sales of

18

Headphones as that term is defined in the Royalty Agreement. This claim is based on an

19

assertion that the Beats Defendants' royalty payments have been based only on the sales of one

20

version of the Headphones, but should have included sales of later, substantially similar, versions

21

of the Headphones.
23.

H23

In addition, Lamar' s counsel claimed that Pentagram has an obligation to Lamar

and Jibe arising under the Pentagram -Lamar Settlement Agreement to audit or otherwise monitor

24

the royalty payments made by the Beats Defendants under the Royalty Agreement, determine

25

whether those payments are sufficient under the Royalty Agreement, and take legal action

26

I 27

against the Beats Defendants if Pentagram determines the payments to be insufficient.

24.

Lamar' s counsel demanded that Pentagram " take appropriate action" to " pursue"

r4

Lamar' s and Jibe' s alleged royalty rights. If Pentagram fails to do so by January 30, 2014,
COMPLAINT FOR DECLARATORY RELIEF

Case No :

OW
1

Lama>;'s counsel threatened that Lamar and Jibe " will be forced to hold Pentagram financially

responsible for (Lamar' s and Jibe' s] losses, and will be required to take action against Pentagram

to compensate Jibe

the January 9 letter is attached hereto as Exhibit D and is incorporated herein by reference as

though fully set forth.

for Pentagram' s failure to

enforce

those

rights."

FIRST CAUSE OF ACTION

Declaratory Relief

Plaintiffs v. All Defendants)

25.

paragraph.

10

26.

A true and correct copy of

Plaintiffs re -allege and incorporate herein by reference each and every foregoing,

Plaintiffs are informed and believe that Lamar and Jibe contend that the Beats

11

Defendants are failing to pay Plaintiffs royalties under the Royalty Agreement for all sales of

12

Headphones as that term is defined in the Royalty Agreement.

13

27

Plaintiffs are informed and believe that the Beats Defendants contend that they

14

are, and have been, paying Plaintiffs all royalties under the Royalty Agreement for all sales of

15

Headphones as that term is defined in the Royalty Agreement.

16

28.

Accordingly, a declaratory judgment is both necessary and proper at this time in

17

order to determine the respective rights and liabilities of the parties regarding whether the Beats

18

Defendants have paid, and are continuing to pay, all royalties to Plaintiffs under the Royalty

19

Agreement for all sales of Headphones as that term is defined in the Royalty Agreement.

20

29

A continuing and justiciable controversy exists among (a) Plaintiffs, (b) Lamar

21

and Jibe, and ( c) the Beats Defendants, regarding the parties' rights and responsibilities

22

concerning royalty payments due to Plaintiffs under the Royalty Agreement for all sales of

x- 23

Headphones as that term is defined in the Royalty Agreement

SECOND CAUSE OF ACTION
Declaratory Relief
Plaintiffs v Lamar and Jibe)

25
30.

Plaintiffs re -allege and incorporate herein by reference each and every foregoing

paragraph ' ,

31.

Plaintiffs are informed and believe that Lamar and Jibe contend that Plaintiffs

COMPLAINT FOR DECLARATORY RELIEF

Case No -

4F
I

have an obligation to Lamar and Jibe under the Pentagram -Lamar Settlement Agreement or

another contract to audit or otherwise monitor the royalty payments Plaintiffs receive from the

Beats Defendants under the Royalty Agreement, determine whether those payments are

sufficient under the Royalty Agreement, and take legal action against the Beats Defendants if

Plaintiffs determine the payments to be insufficient.

32.

Plaintiffs, on the other hand, contend that (a) Pentagram has no obligations under

7''

the Pentagram -Lamar Settlement Agreement and Royalty Agreement because it validly assigned

8,

all of its rights and responsibilities under the Pentagram -Lamar Settlement Agreement and

Royalty Agreement to Hinrichs; (b) Hinrichs' obligations to Lamar and Jibe under the

10

Pentagram -Lamar Settlement Agreement are to pay to Lamar and Jibe their royalty share " as,

11

when, if and only to the extent that" Hinrichs actually receives royalty payments from the Beats

12

Defendants; and ( c) Hinrichs does not have an obligation to Lamar and Jibe under the

13

Pentagram -Lamar Settlement Agreement or any other valid contract to audit or otherwise

14

monitor the royalty payments Hinrichs receives from the Beats Defendants, determine whether

15

those payments are sufficient under the Royalty Agreement, or take legal action against the Beats

16

Defendants if Hinrichs determines the payments to be insufficient.

17

33.

Accordingly, a declaratory judgment is both necessary and proper at this time in

18

order to determine the respective rights and liabilities of the parties regarding ( a) whether

19

Pentagram has any obligations under the Pentagram -Lamar Settlement Agreement; and

20

b) whether Hinrichs has an obligation to Lamar and Jibe under the Pentagram -Lamar Settlement

21

Agreement or any other contract to audit or otherwise monitor the royalty payments Hinrichs

22

receives from the Beats Defendants under the Royalty Agreement, determine whether those

1- 23

payments are sufficient under the Royalty Agreement, or take legal action against the Beats

24

Defendants if Hinrichs determines the payments to be insufficient.

r25

34.

A continuing and justiciable controversy exists among Plaintiffs, on the one hand,

26

and Lamar and Jibe, on the other hand, regarding the parties' rights and responsibilities under the

IN

Pentagram -Lamar Settlement Agreement.

28
9

COMPLAINT FOR DECLARATORY RELIEF

Case No -

III.

PRAYER

2i

WHEREFORE, Plaintiffs pray for Judgment against Defendants as set forth below.

1)

For a declaration of the respective rights and liabilities of the parties regarding

whether the Beats Defendants have paid, and are continuing to pay, all royalties to

Plaintiffs under the Royalty Agreement for all sales of Headphones as that term is

defined in the Royalty Agreement.

2)

7
8

For a declaration that a.

Pentagram has no obligations to Lamar and Jibe under the Pentagram -Lamar
Settlement Agreement;

9
b

10

Hinrichs has no obligation to Lamar and Jibe under the Pentagram -Lamar

11

Settlement Agreement to audit or otherwise monitor the royalty payments

12

Hinrichs receives from the Beats Defendants, or to determine whether those

13

payments are sufficient under the Royalty Agreement, or to take legal action

14

against the Beats Defendants if Hinrichs determines the royalty payments to

15

be insufficient.

16

3)

For costs of suit incurred herein;

17

4)

For attorneys' fees; and

18

5)

For such other and further relief as the Court may deem just and proper.

19

20

Dated

January

13, 2014

Respectfully Submitted,

21

MOSCONE EMBLIDGE SATE

OTIS LLP

22

w
3

By:

24

G. Scott Em li ge

25

Attorneys for Plaintiffs HINRICHS &

ASSOCIATES and PENTAGRAM

26

DESIGN, INC.

h27

28

COMPLAINT FOR DECLARATORY RELIEF

Case No

Exhibit A

SETTLEMENT AND MUTUAL RELEASE AGREEMENT

This Settlement
1- 4

and

Mutual Release Agreement (" Agreement")

is entered into as of April

2007 (`' Effective Date') by and

among Pentagram Design, Inc. (" Pentagram")
Jibe Audio, LLC (" Jibe") and Steven Lamar (" Lamar") (

and

collectively, "Parties").

Recitals

A. The Parties have entered (or will enter) into a Settlement and Mutual Release
Agreement in the form attached hereto as Exhibit A (" Global Settlement")
about the date hereof with
Jimmy Iovine (" Jimmy"),
Dre"),

and

on,or

Andre Young p/k/a Dr. Dre

SLS International Inc. (" SLS").

Jimmy and Are are referred to

herein as " Plaintiffs."

B. The Parties, Plaintiffs, and SLS have been parties to a lawsuit, including

counterclaims,
concerning, among other things, right, title and ownership in and
all copyright, patent

to

and

audio

Beats"

C, As
4%

trademark

headphones (" Headphones")

and related

part of the

rights ("

IP Rights") associated with certain

featuring a stylized "b" logo and the trademark

trademarks (" Marks").

Global Settlement,

Jimmy and Dre have agreed to pay Pentagram a

royalty on the sale of Headphones using the design features developed by

Pentagram, as further detailed in Ex. A of the Global Settlement, Terms and

Conditions Paragraphs 1( b), I( d), 1(

e), and

1(

0 ("Main Royalty").

D. Pentagram
has provided various design services and cost advances ( collectively
Project Advances")
to Jibe, Lamar, and/ or SLS, the repayment for which they

are jointly and severally responsible.

E. The Parties desire to resolve among themselves their respective right, title and

interest in and to the Headphones and the Marks and to agree to a division of the

Main
Royalty and repayment ofthe Project Advances directly and/or by way of
offset to royalties payable hereunder.
Terms and Conditions
1)

Payment to Jibe. To compensate for any contributions that Jibe and Lamar may
have made to the design ofthe Headphones, Pentagram will pay to Jibe one-half of
the Main Royalty
payments actually received by Pentagram from Jimmy/Dre
Share").
Royalty

The Main Royalty does not include the Minimum Royalty or the

Supplemental Royalty as defined in Exhibit A to the Global Settlement The Royalty

Share will be paid to Jibe as, when, if and only to the extent that Main Royalty
Payments are actually received by Pentagram. Without prior written consent by Jibe,

Pentagram shall not waive or impair (through inadvertence or otherwise) any right to
receive Main Royalty payments from Jimmy/Dre, or to receive them in a timely

manner. The Royalty Share will be offset by any outstanding Project Advances.
SFl\ 36324212

i
a.

To the extent Main Royalty payments are received by Pentagram, the Royalty
Share will be paid to Jibe on or before the fifteenth day following the end of each
calendar quarter, along with a summary in reasonable detail of the basis of the
calculation of royalties during such period.

b.

Overdue Royalty Share and reports will be deemed delinquent and therefore a

material breach of this Agreement by Pentagram if not received by Jibe within ten
10) days of written notice from Jibe to Pentagram.
c.

2)

Pentagram and its Affiliates and agents will make available to Jibe on a
confidential basis at all reasonable times on reasonable advance notice no more
than once per year, all books and records relevant to, calculation and verification
of the Royalty Share.

Indemnification by Jibe. Jibe hereby agrees to indemnify, defend, and hold

harmless Pentagram from any claim or cause of action by SIS for which Pentagram

is responsible concerning royalties, profits, or proceeds from exploitation, and any '
other claim of any kind or nature whatsoever that SLS may now have, may have had,
or may have in the future with respect to any IP Rights to the Headphones and Marks.
3)

Project Advances. The Project Advances total One Hundred Fifty -Eight Thousand
Four Hundred

Forty

and

57/ 00 Dollars ($ 158,440.57) and are itemized in Exhibit 13 to

this Agreement. The Prpject Advances that have not been offset against the Royalty
Share will continue to be owing and payable even ifPentagram receives no Main
Royalty from Jimmy/Dre.
4)

Release of Claims of IP Right's. In consideration for Pentagram' s agreement to pay

the Royalty Share to Jibe, Jibe and Lamar hereby release, waive and forever

discharge all other claims of royalties, profits or proceeds from exploitation, and any
other claim of any kind or nature whatsoever against Pentagram, its officers,
shareholders or affiliates (
collectively, " Released Parties") that Jibe may

directors,

now have, may have had or may have in the future with respect to any IP Rights in
the

5)

Headphones

and

Marks (" Claims") that are the subject of the Global Settlement.

Dismissal of Action. Within three ( 3) business days of execution in full of this

Agreement, Pentagram will dismiss with prejudice its Cross -Complaint in the action
and all causes of action therein, as against Jibe and Lamar. Counsel for Pentagram

will execute a Request for Dismissal to the above effect in the form attached hereto as
Exhibit C concurrently with execution of this Agreement and will provide the
executed Request for Dismissal to counsel for Jibe and Lamar, who will file it with
x

the Court upon execution in full of this Agreement. Each Party will bear its own

costs and attorneys' fees' in the action. The Parties will cooperate in executing any
documents and in taking any other action as may be reasonably necessary or required
by the Court to effectuate the dismissals.

6)

Mutual General Releases. Pentagram, Jibe,

and

Lamar (" Releasors"), on behalf of

itself and each of its Affiliates, hereby absolutely, fully and forever waives, releases
and

discharges

each other

Releasor

and

their Affiliates (" Released Parties'),

from any

and all Claims relating to the Headphones, the Marks,.or.any_Assigned_Rights.m4he

Marks and the Headphones, ( excluding only Claims for breach of this Agreement),
whether in law or in equity, and whether known or unknown, suspected or

unsuspected, which the Releasors may now have or at any time may have had or

which at any time hereafter have or claim to have against any ofthe Released Parties
prior to the Effective Date, including, but not limited to, any claims or cross-claims
that are or could have been asserted iri the Action.

7)

Waiver of Civil Code Section 1542. In connectionwith the foregoing releases and
otherwise, each party expressly waives all rights it may have under Section 1542 of

the California Civil Code, and any statute of similar purpose. Section 1542 reads 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 ifknown by

him must have materially affected his settlement with the debtor."

Notwithstanding the provisions of Section 1542 or any statute of similar purpose, and
for the purpose of implementing a full and complete release and discharge of the
Released Parties, the parties expressly acknowledge that this Agreement is intended

to include and does include in its effect, without limitation, all Claims which they do

not know or suspect to exist in favor of either of them against the other and that this
Agreement contemplates the extinguishment of any such Claims.
8)

Representations and Warranties Each Party represents and warrants to the other
Parties that it has all requisite rights, power, and authority to enter into this
Agreement. Each Party represents and warrants to the other Parties that it has not
assigned or transferred, and that it will not in the future assign or transfer, either ..

voluntarily or involuntarily, any claim, cause of action, or right based on, arising out
of, or in connection with this Agreement whether potential, known or unknown,

foreseen or unforeseen that is being released pursuant hereto.

9)

Indemnity. Each Party hereby agrees to indemnify, defend and hold harmless the
other Party and its Affiliates from and against any and all Claims arising from breach

ofthe indemnifying Party' s representations and warranties hereunder. Notice of any

claim for indemnification hereunder must be delivered to the indemnifying Party

within three ( 3) years from the Effective Date. The indemnified Party (or Party
whose Affiliate is indemnified) agrees to give the indemnifying Party prompt notice

of any Claim covered by this Indemnity, together with copies of any correspondence,

pleadings or other documents or information received by the indemnified Party (or

NI

IGS
raj

Party whose Affiliate is indemnified) with respect to the Claim.

10) Effect of Settlement Agreement. This Agreement is entered into solely for the
purpose of compromising and settling certain matters in dispute. It does not

constitute, nor shall it be construed to constitute, an admission by any of the Parties

hereto of the truth or validity of any claims asserted by the Parties.
11) General Provisions.
a)

Notices. Notices sent to the following addresses will be deemed received by the
other party (a) three ( 3) days after being mailed postage prepaid, certified return
receipt requested; ( b) upon personal delivery if sent by messenger; or (c) 24 hours after delivery to a reputable overnight courier service.
Pentagram Design, Inc.'

387 Tehama Street

San Francisco, CA 94103
Steven Lamar

1877 Centro West

Tiburon, CA 94920
Jibe Audio, LLC

1877 Centro West

Tiburon, CA 94920

b)

Interation. This Agreement and the Royalty Agreement set forth the entire
understanding and agreement of the parties with regard to the subject matter of
this Agreement, and supersede all prior and contemporaneous agreements and

understandings, both oral and written. Notwithstanding any language in the

Global Settlement ( or any executed version thereof), including without limitation
any language in the " Release of Ownership Claims by Jibe, SLS, and Lamar,"
Mutual General Releases," and " Integration" clauses contained therem, the

Parties expressly do not waive, release, or discharge each other from any Claims
for breach of this Agreement.
c)

Amendment. This Agreement may only be modified or amended by atten

agreement signed by all parties.

d)

Assignment. No party may assign its rights or delegate its duties under this
Agreement

without

the

other parties' prior written consent, except

in

the

case of

transfer of this Agreement by merger of a party or by change in ownership of the

controlling interests in a party or by sale of substantially all of a party' s assets.
Subject to the foregoing, this Agreement is binding on the parties and their
successors and assigns.

e)

Choice of Law, Jurisdiction and Venue. California law, without regard to

conflicts of law principles, will govern the interpretation and enforcement of this

Agreement. The state or Federal courts sitting in San Francisco, Califorru will
V

i x

4i
4

have exclusive jurisdiction over any dispute relating to this Agreement and the

parties hereby consent to exclusive jurisdiction and venue in such courts.

f)

Drafting and Interpretation. The parties acknowledge and agree that they have

participated equally in the negotiation and preparation of this Agreement, each

relying on the advice of its independent legal counsel, and the provisions of

California Civil Code Section 1654 will not be applicable to this Agreement. As

used

in this Agreement,

the terms "

hereof; "` herein," " hereunder" and words of

similar meaning refer to this Agreement as a whole and not to any particular
subdivision hereof. The section and paragraph headings in this Agreement are for
ease of reference and will not bear upon interpretation.
g)

Severability, If any provision of this Agreement is deemed invalid or

unenforceable, such provision will be deemed modified to the extent necessary to
cure such invalidity or unenforceability. If such modification is not possible
without

creating

a conflict

with another material provision of this Agreement, the

invalid or unenforceable provision will be deemed severed from this Agreement

and the remaining provisions hereof will continue in full force and effect.
h)

Attorneys' Fees. The prevailing party in any dispute relating to this Agreement

will be entitled to recover its attorneys' fees and costs from the non -prevailing

patty as part of the same proceeding.

i)

Execution. This Agreement may be executed in counterparts, each of which is

deemed an original and which together constitute one and the same contract.
Signatures transmitted by fax or pdf will be deemed originals.

IN WITNESS WHEREOF, the parties have executed this Agreement as ofthe Effective

Date by their signatures below.

Pentagram Design, Inc.

By:
Its.

4-

Jibe Audio, LLC

By:
Its.

Steve Lamar

Al

YX- 16- 2007

15: 40

have exclusivejurisdiction Pvcr at y dispute relating to this Agreement and the '
Parties hereby consent to eatclubivejurisdiction and venao in such courts.

f) I rafiin and tcmretation, no parties aclmowledge and "Sten thatthey have

Participated eqVally is the negotiation a; d preparation ofthis Agreement, each
relyIng on the advice ofits independent legal counsel, and the proviaionaof

California
Code Section
1654will not be applicablo to1lds Agreement, Ad
in thisCivil
Agreement,'
thb teniis " hereof,"'

used

ereia," "

hereuizder^ and words of

sir#iilarmeaning nor to this Agreement ns a whole and not to anyparticuiar

subdivision hereof, 71:0 section and paragraph headings in t-his Agreement aret for

ease ofreforoneo and will not bear upon interpretation,

g) Severe' 1i ,

Tfanyprovisian ofthis'Agroemont is dgmed invalid or

uaenfbrceable;
such provision
W91be deemed modified to the extent noeessary to
invalidity
unenforceability. IfauchaiedlAcation is
le
withoutoibnonforceable
cleating a conflictprovision
with atiotharuldcrialProvision
of'mis-Agroement,
the
invalid
bedeomed
cure mmh

or

notpw*

will

severed

fiorh this Agroembnt,

and the remainiagprovisions hereofwill contiaue in full force and effect.

hj Attomevs' bees: Tho prevailing parts' in any dispute rePesiag to this Agree'ntent

will be entitled to recbverits uttarneyc' fensand costs from the non -prevailing

Party as part ofthe same Proceeding.

i)

Agreerpenttnay be executed 114 counterparts, each ofwhich is

Signatures transmitted by fax or pdfwilt be doomed originals,' ;
Sinal and which togethor constitute one and the same contract.

1N WITNESS WHSRSOF, thapardes h$vc executed this Agteemont as oftheEffective

Date by their signatures below.

Pentagram Design, Ino,
By,
Its

JibAudio, L ,

Steve

v
0

Attachments: Exhibit AGlobal Settlement

Exhibit B Itemization of Project Advances
Exhibit C Request for Dismissal

4p

110

EXHIBIT A

SETTLEMENT AND MUTUAL RELEASE AGREEMENT

u
This Settlement and Mutual Release Agreement ("
Agreement' l is entered into as of April
2007 (` affective Date' s by and among Jimmy Iovine (" Jimmy"),
Andre young p/ k/a Dr. Dre
Dre'), Pentagram Design, Inc. (" Pentagram'
s, SLS International, Inc. (" SLS'), Jibe Audio,
LLC (" Jibe"), and Steve Lamar (" Lamar') (
collectively, " Parties' l. Dre and Jimmy are

sometimes collectively referred to herein as `Plaintiffs" and Pentagram, SLS, Jibe and Lamar are
sometimes collectively referred to herein as ` Defendants."
Recitals

A. Jimmy and Dre as plaintiffs filed an action in the Superior Court for the County of Los
Angeles, California (Iovine et at v SLS International, Inc. et al, Case No. SC 0905 15)
Action") against Pentagram, SLS, Jibe and Lamar as defendants.

B. The Action includes various causes of action, including breach of contract, unjust
enrichment relief
and unfair competition, and seeks monetary damages and declaratory and

injunctive

against

the

defendants.

Pentagram filed a cross- complaint for

declaratory reliefin the Action against Jimmy, Dre, Jibe, Lamar and SLS.

C. Pentagram, Lamar, SLS, Jibe, Jimmy and/ or Dre designed certain headphones as depicted
on Schedule 1 to the Royalty Agreement attached as Exhibit A to this Settlement

Agreement (" Headphones Design')

to be marketed and sold under certain
trademarks including, but not limited to, ` Beats
by Dr. Dre" (" Marks").

names and

D. The claims and cross-claims in the Action relate directly or indirectly to the Parties'

respective rights, including intellectual property rights, if any, in and to the Headphones
Design and the Marks.

E. The Parties desire to reach a full and final compromise and settlement of the claims and

counterclaims in the Action and to resolve the' Parties' respective rights, including

intellectual property rights, in the Headphones Design and Marks.

Terms and Conditions
1)

Assignment of Rights in Headphones Design and Marks.

Lamar, individually and collectively (" Assignors'),

Pentagram, SLS, Jibe and

hereby assign all of their right, title and

interest, including without limitation all copyright, trademark, patent and trade secret rights,

in

and

and

to the Headphones Design

Dre

as

joint

owners ("

and

the Marks, ( collectively, "Assigned Rights',

Assignees").

to Jimmy

Assignors agree promptly to execute and deliver any

and all documents and instruments, necessary or appropriate to support the Assignees'
ownership of the Headphones Design and/ or Marks, including but not limited to, cancellation
sem

of registration of any rights of Assignors in the Headphones Design and Marks, at Assignees'
Assignment').
Within seven business day's of execution of this Agreement,

expense ("

Defendants
shall deliver to Jimmy and Dre digital files of all assets and materials pertaining
to the Headphones Design,
including

1828 109182272. 1

all

logos, drawings, designs,

and

photographs.

The

parties agree that the Headphones Design does not encompass any non -aesthetic and non.
visual audio technology features developed by SLS.
2)

Indemnification by Pentagram. Pentagram hereby agrees to indemnify, defend and hold

harmless

the

Assignees

and

their

officers,

directors,

partners,

shareholders,

parents,

subsidiaries, agents, representatives, heirs, legatees, devisees, assigns, and each of them
collectively, " Affiliates")

from and against any and all claims, demands, suits, actions,
judgments, damages, costs and expenses ( including reasonable attorneys' fees and litigation
expenses) (" Claims") incurred by the Assignees as the result of Pentagram' s infringement of
any third party' s copyright, trademark, patent, and/ or trade secret rights, in connection with
any of the aesthetic design features of the Headphones Design. Pentagram Will have sole

direction and control over the defense and settlement of all such Claims using counsel of its
choosing.

Affiliates of Assignees include, but are not limited to, Aftermath, Interscope,
and their Affiliates.
Notice of ariy claim for indemnification hereunder

Universal Music

must be delivered to Pentagram within three (3) years from the Effective Date, Pending the
determination of any claim, demand or action, Plaintiffs may, at their election, withhold

payment of any monies otherwise payable to Pentagram under the Royalty Agreement ( as

defined below) in an amount which does not exceed Pentagram' s potential liability to

Plaintiffs pursuant to this paragraph; provided, however, that if Pentagram delivers an

indemnity or surety bond, in a form and with a company acceptable to Plaintiffs, which shall
cover the amount of such claim, demand or action and Plaintiff' s estimated attorneys' fees

and legal costs in connection therewith, then Plaintiffs will not withhold payment of monies
otherwise payable to Pentagram hereunder. Plaintiffs will liquidate any amounts withheld
pursuant to this paragraph if within twelve ( 12) months no lawsuit has been commenced and
active settlemed discussions are not then taking place.
3)

Royalty

Agreement

between

Dre,

Jimmy

and

Pentagram.

In consideration of

Pentagram' s assignment of all of its Assigned Rights in the Headphones Design and the
Marks to Assignees, Dre and Jimmy will enter into a royalty agreement with Pentagram
Royalty Agreement") to be effective and executed concurrently with the execution of this
Agreement, in the form set forth as Exhibit A to this Agreement.

4) No Payment Obligations for Jimmy or Dre. Jimmy and Dre shall have no obligation to
pay any monies or other consideration to Pentagram, Jibe, SLS, or Lamar in connection with
the Headphones Design or Marks, or otherwise, except for the payment obligations to
Pentagram set forth in the Royalty Agreement. Any monies or other consideration to be paid

to Jibe, SLS, or Lamar, if any, shall be paid by Pentagram alone, and Pentagram shall fully

indemnify Jimmy and Dre in connection therewith. Pentagram, Jibe, SLS, and Lamar shall,

jointly and severally, be solely responsible for any payments due to any third parties ( other
than Assignee Affiliates), if any, with respect to the Assigned Rights granted to Jimmy and
Dre hereunder.

5)

Release of Ownership Claims by Jibe, SLS and Lamar. Jibe, SLS and Lamar, on behalf
of themselves and each of their respective Affiliates, hereby release, waive and forever

discharge all claims ofroyalties, profits or proceeds from exploitation, and any other claim of

any kind or nature whatsoever that Jibe, SLS and Lamar, respectively, may now have, may
1928 109/ 82272 1

Ii

have had or play have in the future with respect to any Assigned Rights in the Headphones

Design and Marks. Except for the payment obligations set forth in the Royalty Agreement,
Pelztagram;- on behalf o- f itself -and -each ofits-respectiveAffiliates,' herebyielea"ses,-waives

and forever discharges all claims of royalties, profits or proceeds from exploitation, and any

other claim of any kind or nature whatsoever that Pentagram may now have, may have had or
may have in the future with respect to any Assigned Rights in the Headphones Design and

Marks.

6) Dismissal of Action. Within three (3) business days of execution in full of this Agreement,
a) Plaintiffs will dismiss with prejudice their Complaint in the Action and all causes of
action therein, as against all Defendants; and ( b) Pentagram will dismiss with prejudice its
Cross -Complaint in the _Action and all causes of action therein, as against all cross
defendants. Counsel for each of the Parties will execute a Request for Dismissal to the above
effect in the form attached hereto as Exhibit B concurrently with execution of this Agreement
and will provide the executed Request for Dismissal to counsel for Plaintiffs, who will file it

with the Court upon execution in full of this Agreement. Each Party will bear its own costs
and attorneys' fees in the Action. The Parties will cooperate in executing any documents and
in taking any other action as may be reasonably necessary or required by the Court to
effectuate the dismissals.

7)

Mutual General Releases. Each

Plaintiff

and

Each Defendant (" Releasor"), on behalf of

itself and each of its Affiliates, hereby absolutely, fully and forever waives, releases and
discharges

each other

Plaintiff and Defendant

and

their Affiliates (" Released Parties"), from

any and all Claims relating to the Headphones Design, the Marks, or any Assigned Rights in
the Marks and the Headphonds Design, (excluding only Claims for breach of this Agreement
or the Royalty Agreement), whether in law or in equity, and whether known or unknown,
suspected or unsuspected, which the Releasor may now have or at any time may have had or
which at any time hereafter have or claim to have against any of the Released Parties prior to
the Effective Date, including; but not limited to, any claims or cross-claims that are or could

have been asserted in the Action.

8)

Waiver

of

Ciyff Code Section 1542.

In connection with the foregoing releases and

otherwise, each Party expressly waives all nghts it may have under Section 1542 of the
California Civil Code, and any statute of sumlar purpose. Section 1542 reads as follows:
A general release does not extend to claims which the creditor does not know or suspect

to exist in lus favor at the time of executing the release, which if known by him must

have materially affected his settlement with the debtor."

Notwithstanding the provisions of Sectio41542 or any statute of similar purpose, and for the
purpose of implementing a full and complete release and discharge of the Released Parties,

l`

the Parties expressly acknowledge that this Agreement is intended to include and does
include in its effect, without limitation, all Claims which they do not know or suspect to exist
in favor of either of them against the other and that this Agreement contemplates the
extinguishment of any such Claims.

W.

1828 109182272. 1

9)

Representations
and Warranties. Each Party represents and warrants to the other Parties
that it
has

all requisite rights, power, and

authority to

enter

into this Agreement.

The

Defendants, individually and collectively, represent and warrant to the Plaintiffs that they
have not sold, assigned, transferred, or encumbered any right, title and/or interest, including

without hmltation any copyright, trademark, patent and trade secret rights, that any of the
Defendants has or ever had in wd/or to the Headphones Design and the Marks, and that they
have obtained any andtoallthe
requisite
consents and approvals from any and all necessary third
Assigned Rights
parties

with

respect

granted

to

Jimmy

and

Dre herein.

The

Defendants, individually and collectively, represent and warrant to the Plaintiffs that the
Defendants have not knowingly infringed any third party copyright, trademark, patent and/ or
trade secret rights in developing the Headphones Design and/ or with respect to the Marks.

Pentagram further represents and warrants to the Plaintiffs that it has not infringed,

knowingly or otherwise, any third party' s copyright, trademark, patent and/ or trade secret

rights in connection with developing any of the aesthetic design features of the Headphones
Design. Each Party represents and warrants to the other Parties that it has not assigned or

transferred, and that it will not in the future assign or transfer, either voluntarily or

involuntarily, any claim, cause of action, or right based on, arising out of; or in connection
with this Agreement whether potential, known or unknown, foreseen or unforeseen that is

being released pursuant hereto.

10)

Indemnity. Each Party hereby agrees to indemnify, defend and hold harmless the other

Party and its Affiliates from and against any and all Claims arising from breach of the
indemnifying Party' s

representations and warranties

hereunder.

Notice of any claim for

indemnification hereunder must be delivered to the indemnifying Party within three (3) years

from the Effective Date. The indemnified Party ( or Party whose Affiliate is indemnified)

agrees to give the indemnifying party prompt notice of any Claim covered by this Indemnity,

together with copies of any correspondence, pleadings or other documents or information

received by the indemnified Party ( or Party whose Affiliate is indemnified) with respect to
the Claim.
Notwithstanding the foregoing, Jibe, SLS, and Lamar shall have no right of

indemnity or other claim against Dre or Jimmy with regard to any failure by Dre or Jimmy to

comply with the payments contemplated in the Royalty Agreement.

11) Effect of Settlement Agreement. This Agreement is entered into solely for the purpose of
compromising and settling certain matters in dispute. It does not constitute, nor shall it be

construed to constitute, an admission by any of the Parties hereto ofthe truth or validity of
any claims asserted by the Parties.

12) General Provisions.

a)

Notices. All notices required or desired to be given hereunder to any Party shall be sent
to the respective addressee at the addresses as set forth herein, or such other address as
each Party may respectively hereafter designate by written notice to the other Parties,

1-,

Notices sent to the following addresses will be deemed received by the other Party (a)
three ( 3) days ager being mailed postage prepaid, certified return receipt requested; ( b)

upon personal delivery if sent by messenger, or (c) 24hours after delivery to a reputable

overnight courier service.

1828. 109182272. 1

Jimmy lovine
c/o Interscope Records, A Division ofUMG Recordings, Inc
O -Colorado -Avenue--- - - -

Santa Monica, CA 90404

Attention: Head of Business and Legal Affairs

with a copy (which shall not constitute notice) to:
Stubbs Alderton & Markiles, LLP

15260 Ventara. Blvd,, 20' Mr.

Sherman Oaks, CA 91403

Attention: Robert M. Jason, Esq,

Andre Young p/1 d- a Dr. Dre
c/ o King, Holmes, Paterno &

Berliner LLP

1900 Avenue of the Stars, Floor 25

Los Angeles, CA 90067

Attention: Peter T Memo, Esq.

Pentagram Design, Inc.
387 Tehama Street

San:Francisco, CA 94103
SLS International, Inc.
1650 West Jackson Street

Ozark, MO 65721
Jibe Audio, LLC

1877 Centro West

Tiburon, CA 94920
Steve Lamar

1877 Centro West

t'

Tiburon, CA 94920
b) Integration

This Agreement and the Royalty Agreement set forth the entire
understanding and agreement of the Parties with regard to the subject matter of this
Agreement,

and

supersede

all

prior

and

contemporaneous

agreements

and

understandings, both oral and written.

c)

Amendment. This Agreement may only be modified or amended by a written agreement

signed by all Parties.

d) Assignment.

Jimmy and Dre shall have the right to assign and/ or delegate their

respective rights and obligations hereunder, in whole or in part, to any person or business

1828 109/ 822721

entity. Jimmy and Dre shall remain obligated to Pentagram for the payment of all amounts

due to Pentagram under the Royalty Agreement, regardless of any assignment of any of
Jimmy' s

and/ or

Dre' s

rights

hereunder. Pentagram, Jibe, SIS,

and

Lamar

shall

not, and

have no power to, assign, delegate, or otherwise transfer any right or obligation under this
Agreement without the other Parties' prior written consent, except in the case of transfer of

this Agreement by merger of a Party or by change in ownership of the controlling interests in

a Party or by sale of
substantially all of a Party' s assets. Subject to the foregoing, this
Agreement is binding upon and shall inure to the benefit of the Parties and their licensees,
representatives, transferees, affiliates, divisions, entities, related entities, subsidiaries, parent
corporations, successors, and assigns.

e)

Choice

Law: Jurisdiction

and Venue. California law, without regard to conflicts of

law principles, will govern the interpretation and enforcement of this Agreement. The
state or Federal courts sitting in Los Angeles, California will have exclusive jurisdiction
of

over any dispute relating to this Agreement and the Parties hereby consent to exclusive
jurisdiction and venue in such courts.
f)

Drafting

and

Interpretation.

The Parties acknowledge and agree that they have

participated equally in the negotiation and preparation of this Agreement, each relying on
the advice of its.mdependent legal counsel, and the provisions of California Civil Code
Section 1654

will not

be

apphcable

terms " hereof," " herein," "

to this Agreement.

As used in flus Agreement, the

hereundee' and words of similar meaning refer to this

Agreement as a whole and not to any particular subdivision hereof. The section and
paragraph headings in this Agreement are for ease of reference and will not bear upon
interpretation.

g)

Severability.

If any provision of this Agreement is deemed invalid or unenforceable,

such provision will be deemed modified to the extent necessary to cure such invalidity or
unenforceability. If such modification is not possible without creating a conflict with
another material provision of this Agreement, the invalid or unenforceable ,provision will

be deemed severed from this Agreement and the remaining provisions hereof will
continue in full force and effect.

h) Attorneys' Fees. The prevailing Party or Parties in any dispute relating to this Agreement

will be entitled to recover its or their attorneys' fees and costs from the non -prevailing
Party or Parties adverse to it or them as part of the same proceeding.
i)

Execution. This Agreement may be executed in counterparts, each of which is deemed

an

original

and

which

together

constitute

one

and

the

same

contract.

Signatures

transmitted by fax or pdfwill be deemed originals. Each Party represents and warrants to
the other Parties that the person signing the Agreement is fully authorized to do so on
behalf of that Party.

1 1
Y

1828 109182272. 1

IN WITNESS WIOF, the Parties have executed this Agreement as ofthe Effective Date by

their signatures be ow.

vine

Andre Young p/k/a Dr. bre

Pentagram Design, Inc.

By:
Its:

Jibe Audio, LLC

By:
Its:

SLS International, Inc.

By:
Its:

Steve Lamar

k, a
182BA09182272, 1

r,,

IN
WMQSS WHEREOF, the Partlea have executed this Agreement as of the Effective Date by
their signatures below.

Jimmy Iovme

Andre Young p/ k/a,

Pentagram Design, Tho.

By:
Its:

Jibe Audio, LLC

By:
Its:

SLS Intemational, Inc.

Y=
Its:

Steve Lamar

1828.109182272. 1

bre

IN
WITNESS WHEREOF, the Parties have executed this Agreement as of the Effectiye_Azte by
theirsignatures below. - ' "Jimmy Iovine

Andre Young p/k/a Dr. Dre

Pentagram Design, Inc.

By.
Its:

Abe Audio, LLC

By:
Its:

SLS Intemational; Inc.

By-

yIts.

Its.

Steve Lamar

t r

1828109182272 1

IN WITNESS WHMOF, the Parties have executed this Agreement as of the Bffeotive Date by
their signatures below.

Jimmy Iovine

Andre Young pAda Dr. Dre

Pontagram.Design, Inc,

By:
Its:

Jibe Audio, LLC

By.
Its;

SLS Iateraatl= 4 Inc.

py:
Its:

stave Lama

kti ,

1878, 109192272. 1

p,

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SLS

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Interaiol,

Jibe

Ila:I s: 33y-

Audio

Pentagrm

LLC

Design,

Ino,

Andre

7unmylovit

Young
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4P

Royalty Agreement
This

Royalty Agreement (` Royalty Agreement") is

Effective Date' l by and between
Jimmy Iovine ("
Dre"), and Pentagram Design, Inc. ("

entered

into

as

of

April '

ZH

2007

Jimmy'% Andre Young p/k/a Dr. Dre ;

Pentagram's ( collectively, the "Parties').

Recitals

A. This Royalty Agreement is entered into pursuant to that certain. Settlement and Mutual
Release Agreement (" Agreement")

entered into by the Parties as of the Effective Date.

Capitalized terms not defined in this Royalty Agreement will have the meanings given in

the Agreement.

B. Pentagram provided services to Jimmy and Dre in the design of the aesthetic features of
the Headphones Design and

in

designing the Marks (" Services").

C. Jimmy and Dre intend to enter into an agreement with Monster Cable for the
manufacture,

marketing

and sale of

Headphones (

as

defined below) ("

Agreement').

Merchandising

D. In consideration of Pentagram' s assignment to Jimmy and Dre of Pentagram' s Assigned

Rights acquired in the course ofproviding the Services, Jimmy and Dre will pay a royalty

to Pentagram on revenue generated by sales ofHeadphones. _

Terms and Conditions
1)

Royalty

Payments to Pentagram.

royalty payments:
a)

Jimmy and Dre will pay to Pentagram the following

One Hundred Eight Thousand Dollars ($ 108, 000) (" Minimum

Royalty") on the execution

of this Royalty Agreement.

b)

Four

percent (

41/

6)

of

the Base Price (` Base

Royalty") of every Headphone sold by

Monster and its Affiliates through dealer/distributor sales channels, as reduced by returns

and discounts and other reductions pursuant to the terms of the Merchandising

Agreement (" Nor mal Dealer Sales').

The term' Base Price" means the royalty base price

applicable to the royalty payable to Jimmy and Dre under the Merchandising Agreement.
The term " Headphone" means a headphone that only embodies the Headphones Design
depicted m Schedule I hereto, and any minor or cosmetic modifications in the design
specifically identified on Schedule I hereto.
c)

An

additional one percent (

1%)

of

the Base Price (" Supplemental

Royalty")

of every

Headphone sold by Monster and its Affiliates, through Normal Dealer Sales, until

Pentagram

1828 109192272. 1

shall

have

received

One Hundred

Forty

Thousand Dollars ($ 140,000) in

ir

Supplemental Royalty payments. For purposes of clarity, payment of the Base Royalty
will not be credited toward amounts due under the Supplemental Royalty and vice versa.

d) All royalties payable to Pentagram under this Royalty Agreement ( other than the
Minimum Royalty) shall be calculated, reduced, determined and paid in the same manner

and at the same time as the royalty payable to Jimmy and Dre under the Merchandising

Agreement. The royalty rate paid to Pentagram on sales other than Normal Dealer Sales

will be reduced by the same percentage that the royalty rate paid to Jimmy and Dre under
the Merchandising Agreement on sales other than Normal Dealer Sales are reduced from
the royalty rate paid to Jimmy and Dre on Normal Dealfr Sales.

e) If Jimmy and Dre manufacture, market, or sell the Headphones through another source
than Monster, Pentagram will be entitled to payment on the same terms as set forth
above, in which case the tern " Merchandising Agreement" shall mean -the agreement

between Jimmy, Dre, and the other source for the manufacture, marketing and sale of the
Headphones. Jimmy and Dre will provide Pentagram with a copy of the Merchandising
Agreement redacted to reflect only the royalty and accounting provisions applicable to
the calculation and timing of royalty payments to Pentagram under this Agreement.
f)

The terms and conditions under which royalties are paid to Pentagram under this Royalty
Agreement shall remain as set forth herein, notwithstanding any future amendments to
the Merchandising Agreement that may be executed by Jimmy/Dre and Monster,
including that Pentagram' s royalty hereunder will continue to be paid in the full stated

percentages in cash, regardless of any amendments to the Merchandising Agreement.

y

2)

Headphones Design Subject to Royalty. The only headphones or other products that are
subject to the Base Royalty and the Supplemental Royalty are the Headphones.

3)

Payment

of

Royalties.

The Base Royalty and the Supplemental Royalty will be paid to

Pentagram on or before the thirtieth day following the end of each calendar quarter, along
with a summary in reasonable detail of the basis of the calculation of royalties during such
period.

4)

Defaults. Overdue royalty payments and reports will be deemed delinquent and therefore a

material breach of this Royalty Agreement by Jimmy and Dre if not received by Pentagram
within ten ( 10) days ofwritten notice from Pentagram to Jimmy and Dre.'
5)
r?

Audit Rights. Jimmy, Dre, and their Affiliates, agents and distributors will make available
to Pentagram' s independent auditor on a confidential basis at all reasonable times on
reasonable advance notice no more than once per year, all books and records relevant to ,

calculation and verification of the Base Royalty and the Supplemental Royalty.

M1

6)

General Provisions,
a)

Notices, Notices sent to the following addresses will be deemed received by the other
Party ( a) three ( 3) days after being mailed postage prepaid, certified return receipt

18281091822721

r
requested; ( b) upon personal delivery if sent by messenger; or (c) 24 -hours after delivery
to a reputable overnight courier service.

Jimmy Iovmc
c/ o Interscope Records, A Division of UMG Recordings, Inc.
2220 Colorado Avenue
Santa Monica, CA 90404

Attention: Head of Business and Legal Affairs

with a copy (which shall not constitute notice) to:

Stubbs Alderton & Markiles, LLP

15260 Ventura Blvd., 20" Mr.

Sherman Oaks, CA 91403 -- Attention:

Robert M. Jason, Esq.

Andre Young p/ls/ a Dr. Dre

c/ o

King, Holmes, Patera & Berliner LLP

1900 Avenue of the Stars, Floor 25

Los Angeles, CA 90067 Attention:

Peter T. Patera, Esq.

Pentagram Design, Inc.

387 Tehama Street
San Francisco, CA 94103

b) Integration.

This Royalty Agreement and the Agreement set forth the entire

understanding and agreement of the Parties with regard to the subject matter of this

Royalty Agreement, and supersede all prior and contemporaneous agreements and
understandings (not including the Agreement), both oral and written. .
c)

Amendment. This Royalty Agreement may only be modified or amended by a written

agreement signed by all Parties.

d) Assi

ent.

No party may assign its rights or delegate its duties under this Royalty

Agreement without the other Parties' prior written consent, except in the case of transfer

of this Royalty Agreement by merger of a Party or by change in ownership of the

controlling interests in a Party or by sale of substantially all of a Party' s assets. Subject
to the foregoing, this Royalty Agreement is binding on the Parties and their successors
and assigns.
Notwithstanding the foregoing, Jimmy and Dre may instruct Monster or
another party to make the payments due under this Royalty Agreement directly to
Pentagram on behalf of Jimmy and Dre.
e)

Joint and Several Obligations. The obligations of Jimmy and Dre hereunder shall be joint
and several.

f) Choice

of

Law: Jurisdiction

and

Venue.

California law, without regard to conflicts of

law principles, will govern the interpretation and enforcement of this Royalty Agreement.

82272 1
1828. 109%

The state or Federal courts sitting in Los Angeles, California will have exclusive

Msdiction over any dispute relating to this Royalty Agreement and the Parties hereby
consent to exclusive jurisdiction and venue in such courts:

g)

Drafting and Intepretation. The Parties acknowledge and agree that they have
participated equally in the negotiation and preparation of this Royalty Agreement, each

relying on the advice of its independent legal counsel, and the provisions of California
Civil Code Section 1654 will not be applicable to this Royalty Agreement. As used in
this Royalty Agreement, the terms " hereof," " herein," " hereunder" and words of similar
meaning refer to this Royalty Agreement as 4 Whole qnd not to any particular subdivision

hereof. The section and paragraph headings in thus Royalty Agreement are for ease of
reference and'will not bear upon interpretation,
h)

Severability If any provision of this Royalty, Agreement is deemed invalid or

unenforceable, such provision will be deemed modified to the extent: necessary to cure

such invalidity or unenforceability. If such modification is not possible without creating

a conflict with another material provision of this Royalty Agieement, the invalid or

unenforceable provision will be deemed severed from this Royalty Agreement and the
remaining provisions hereof will continue in full force and effect.
i)

Attorneys' Fees. The prevailing Party or Parties in any -dispute relating to this Royalty

Agreement will be entitled to recover its or their attorneys' fees and costs from the non -

prevailing Partyor Parties adverse to it or them as part of the same proceeding.

j) . Execution _ This Royalty Agreement may be. executed_in counterparts, each -of which -is-

deemed an original and which together constitute one and the same contract. Signatures
transmitted by fax or pdf will be deemed originals.

IN WITNESS WHEREOF, the Parties have executed this Royalty Agreement as of the Effective
Date by their signatures below.
Pentagram Design, Inc.

By:
Its:

In

t- E

Vj

tre:,

Jimmy Iovine

ry ,

1-'

Andre Young p/k/a Dr. Dre

1828 109182272. 1

The state or Federal courts sitting in Los Angeles, California will have exclusive

jurisdiction
over any'dispute relating to this Royalty Agreement and the Parties hereby
consent to exclusive jurisdiction and Venue in such courts.
rafdng
g) D_

and

Interpretation,

The Parties acknowledge and- agreb that they have

participated equally in the negotiation and preparation of this Royalty Agreement, each
relying on t$e advice of its' independent legal counsel, and the provisions of California
Civil Cade Section 1654 will not be applicable to this
Royalty Agreement.
Royalty Agreement, the terms " hereat;" " herein," "

this

As used in

hereunder" and words of similar

meaning refer to this Royalty Agreement as a whole and not to any particular subdivision
hereof: The section and paragraph headings in this Royalty Agreement are for ease of
reference and will not bear upon interpretation.
h) Severability.

If any provision of this Royalty Agreement is deemed invalid or

unenforceable, such provision will be deemed modified to the extent necessary to cure

such invalidity or unenforceability. If such modification is not possible Without creating

a conflict with another material provision of this Royalty Agreement, the invalid or

urlenforceable provision will be deemed severed from this Royalty Agreement and the

remaining provisions hereofwill continue in full force and effect.

i)

Attorneys' Fees. The prevailing Party or Parties in any dispute relating to this Ro3wty

Agreement will be entitled to recover its or their attorneys' fees and costs from the non prevailing Party or Parties adverse to it or them as part ofthe same proceeding.
Execution,
j) _

This

Royalty Agreement maybe

Qecuteci

covunterparts,_eabh of which is -

deemed an original and which together constitute one and the same contract. Signatures

transmitted by fax or pdf will be deemed originals.

IN VVTZNESS WHEREOF, the Parties have executed this Royalty Agreement as ofthe Effective
Date by their signatures below.
PentagramDesign, Inc,

BY
Its

Andre Young p/ lda Dr. Dro

r

1828. 1OMM272, 1

The state or Federal courts sitting in Los Angeles, Caftm_is will hav_q exclusive

ju'risdictiorioverany dispute zelatingttothisRoyaltyAgreement and the Parties hereby

consent to exclusive jurisdiction and venue in such courts.

g) Drafting

and.

Interpretation.

The Parties acknowledge and agree that they have

participated equally tri the negotiation and preparation of this Royalty Agreement, each

relying on the advice of its independent legal counsel, and the provisions of California
Civil Code Section

this

1654

will not

be

applicable

to this

Royalty Agreement, As used in

Royalty Agreement, the terms " hereof," " herein," " hereunder" and words of similar

meaning refer to this Royalty Agreement as a whole and not to any particular subdivision

hereof. The section and paragraph headings iu this Royalty Agreement are for: ease of
reference aad will not bear upon interpretation.

h) Severability

If any provision of this Royalty Agreement is deemed invalid or

unenforceable, such provision will be deemed modified to the extent necessary to cure
such invalidity or unenforceability. If such modification is not possible without creating
a conflict with another material provision of this Royalty Agreement, the invalid or

unenforceable provision will be deemed severed from this Royalty Agreement -and the
remaining provisions hereof will continue in full force and effect.
i)

Attorneys' Fees. The prevailing Party or Parties in any dispute relating to this Royalty

Agreement will be entitled to recover its or their attorgeys' fees and costs from the non

prevailing Party or Parties adverse to it or them as part of the same proceeding.

J)

Execution. This

Royalty Agreement

may

executed in counterparts; each of which is

deemed an original and which together constitute one and the same contract. Signatures
transmitted by fax or pdfwill be deemed originals.

IN WITNESS VIDMOF, the Parties have executed this Royalty Agreement as of the Effective
Date by their signatures below.
Pentagram Design, Ino.

By:
Its:

Jimmy 10vine

04 U

Andre

oung p

1828.I0918227Z.1

I9.0

a Dr. Dre

SCHEDULEI

Reference to Headphones Design Patent Application

1828. 109182272 1

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BDRWYNER, aL IO

of

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Start.

hTMMwrVxft1P

M90189, Los
Avenue 1900
BQLmras, Rnis,
Miller, Seth

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Exhibit B

Itemization of Project Advances

Steve Lamar Cost Detail

Sound Machine
Design fees:
Art Production expenses-

Alignment PD consulting:
Phil Baker consulting.
Travel expenses:

Overnight couners:

Model making:
Model supplies:

65, 931. 25
45.04

12, 916. 50 ;
698. 76

7, 627.99
19. 00
14, 492. 50
55. 98

Color copies:

13400

Telephone:

372, 11

Meals:

168.30

I
Sound Machine Total,

102,459 43

Q Line Surround Sound TV

Design Fees,

Art Production expenses:

14, 906. 25

j
I

468. 00

Travel expenses:
Overnight couners.

1, 241. 40

Model making:

8, 707.50

12, 13

Model supplies:

80. 99

Color copies:

47. 00

Q Line TV Total

26, 001 68

JIBE Identity/Packaging
Design Fees:

11 950.00

JIBE Start-up costs

Fees.

Phil Baker consulting:

7/25/ 06 Payment to Steve/ Gwyn

15,000. 00 ;

Art Production expenses (print):

651. 00

Computer services/ expenses:

854. 37

Total

Tr

112.50

11950. 00

158440 57

JIBE Start-up Cost Total

18,56787

4p

EXHIBIT C

t
ATTORNEY OR PARTY WRHOUTATTORNEY (Name

and

civ -7 70

Address),

TELEPHONE NO-

Suzan

Canli ( SBN 1170B5)

OTIS CANLI & IRIKI, LLP
625 Market Street, 4th Floor
San Francisco, CA 94105

Pentagram Desicin,

ATTORNEY FOR ( NamoY

FOR COURT USE ONLY

415. 362. 4442

Inc.

Insertname of court and name oljudidel district end brant court, if airy,

Superior Court of the State of California

County

of

Los Angeles West District

PLAINTIFF) PETITIONER.
Andre

Iovine,

Jimmy

individual; and

an

an individual
DEFENDANT/ RESPONDENT: SLS International,

Young,

Inc.,

et

al.

REQUEST FOR DISMISSAL

CASENUMBER

Personal Injury, Property Damage, or Wrongful Death

SC090515

Q Other

Motor Vehicle

Family Law
Eminent Domain

FX7 Other (specify): DeclaratorRelief

T

A conformed copy will not be returned by the clerk unless a method of return is provided with the document. -

a.. , ,

with
b. ( 1)

caao u, auu

a uuo a1. uU, 1 GS IWIVWb:

2) [

prejudice (

Without prejudice

2) Q Petition

Complaint (

3)

Cross- complaint filed

by ( name):

on ( date):

4)

Cross- complaint filed by ( name):

on ( date):

5)

6)

Entire action of all parties and all causes of action

27

Other (specify):* Cross

complaint

Lamar and Jibe

Date: April_,
2007
Suzan

Canli ( SBN

TYPE OR PRINT NAME OF

Audio,

LLC;

filed

by

Inc.

against Steven

117085) ,
ATTORNEY =

SIGNATURE)
PARTY WITHOUTATTORNEY)

Attorney or party without attomey for. Pentagram

Design,

w Aismissal requested la of spewfied parties only of specified causes of

1

Pentagram Design,

each party to bear their own costs.

action only, or of specified cross- complaints

only, so state
the parties, causes of action; or cross-complaints to be dismissed,

and

Inc.

0 Piaintlif/Petltioner
DXCross - complainant --

identify

Defendant/Respondent

2. TO THE CLERK: Consent to the above dismissal Is hereby glven *

Date: April ,
2007
uzan

Canli ( SBN

1170851

TYPE OR PRINT NAME OF F-X

I ATTORNEY O PARTY wITHOurATTOnNEY)
If a cross-complelnt-or Response (Family Law) seeking affirmative refef-is on
file, the attorney for cross-complainant ( respondenQ must sign this consent
consent If required by Code of Civil Procedure section 581( Q or 17

SIGNATURE)

Attorney or party withdut attorney for.

Design,

Plaintiff/Petltioner
X

3: ]

Dismissal entered as requested on ( date) Dismissal

5.,=

Dismissal not entered as requested for the following reasons (Specify)-

date):
I

Q Defendant/Respondent

Cross - complainant

41"

entered on (

Pentagram

Inc.

as to only ( name):

a. Attorney or party without attorney notified on (date):

b. Attorney or party without attorney not notified. Filing party failed to provide
Q a copy to conform
Q means to return conformed popy
D'atb:

Clerk, by _

MI
wp

mr manumaq use

Judldal CounrJl or California

CIV 110
- [ROY. January 1, 201171

REQUEST FOR DISMISSAL

i;
Deputy
1f Civil Procedure, 581 at seq , f
Col. Rules of Court, rule 3 139

ri

4-

I-

4p

Exhibit B

ct

4 ,, -2

SETTLEMENT AND MUTUAL RELEASE AGREEMENT

This Settlement

and

Mutual Release Agreement (" Agreement") is entered into as of April

2007 (" Effective Date")

Dre"), Pentagram Design, Inc. (" Pentagram"), SLS International, Inc. ("
SLS"), Jibe Audio,
LLC (" Jibe'), and Steve Lamar (" Lamar'
D ( collectively, " Parties").

by and among Jimmy Iovine ('Jimmy"),Andre Young p/k/a Dr. Dre

Dre and Jimmy are

sometimes collectively referred to herein as ` Plaintiffs" and Pentagram, SLS, Jibe and Lamar are
sometimes collectively referred to herein as " Defendants."
Recitals

A. Jimmy and Dre as plaintiffs filed an action in the Superior Court for the County of Los
Angeles, California ( Iovine et al v. SLS International, Inc. et al, Case No. SC 090515)
Action")

against Pentagram, SLS, Jibe and Lamar as defendants.

B. The Action includes various causes of action, including breach of contract, unjust
enrichment and unfair competition, and seeks monetary damages and declaratory and

injunctive

relief

against

the

defendants.

Pentagram filed a cross- complaint for

declaratory relief in the Action against Jimmy, Dre, Jibe, Lamar and SLS.

C. Pentagram, Lamar, SLS, Jibe, Jimmy and/ or Dre designed certain headphones as depicted
on Schedule 1 to the Royalty Agreement attached as Exhibit A to this Settlement
Agreement (" Headphones Design")
to be marketed and sold under certain
trademarks including, but not limited to, ` Beats
by Dr Dre" (' Marks").

names and

D. The claims and cross-claims in the Action relate directly or indirectly to the Parties'

respective rights, including intellectual property rights, if any, in and to the Headphones

Design and the Marks.

E.

The Parties desire to reach a full and final compromise and settlement of the claims and

counterclaims in the Action and to resolve the Parties' respective rights, including

intellectual property rights, in the Headphones Design and Marks.

Terms and Conditions
1)

Assignment

Lamar,

of

Rights in Headphones Design

individually

and

and

collectively (" Assignors"),

Marks.

Pentagram, SLS, Jibe and

hereby assign all -of their right, title and

interest, including without limitation all copyright, trademark, patent and trade secret rights,

in

and

and

to the Headphones Design

Dre

as

joint

owners ("

and

the Marks, ( collectively, " Assigned Rights"),

Assignees").

to Jimmy

Assignors agree promptly to execute and deliver any

and all documents and instruments, necessary or appropriate to support the Assignees'
ownership of the Headphones Design and/ or Marks, including but not limited to, cancellation
of registration of any rights of Assignors in the Headphones Design and Marks, at Assignees'
Assignment").
Within seven business days of execution of this Agreement,

expense ("

Defendants
shall deliver to Jimmy and Dre digital files of all assets and materials pertaining
to the Headphones Design,
including

1828109\ 82272. 1

all

logos, drawings, designs,

and photographs.

The

4P

partes agree that the- Headphones Design does not encompass any non -aesthetic and non -

visual audio technology features developed by SLS.

2)

Indemnification

by

Pentagram.

Pentagram hereby agrees to indemnify, defend and hold

harmless --the - Assigneesand- their --officers,-' directors, partners,

shi&eH'IU

parents,

subsidiaries, agents, representatives, heirs, legatees, devisees, assigns, and each of them
collectively, " Affiliates")

from and against any and all claims, demands, suits, actions,
judgments, damages, costs and expenses ( including reasonable attorneys' fees and litigation
expenses) (" Claims")
incurred by the Assignees as the result of Pentagram' s infringement of
any third party' s copyright, trademark, patent, and/ or trade secret rights, in connection with
any

of

the

aesthetic

design features

of

the Headphones Design.

Pentagram will have sole

direction and control over the defense and settlement of all such Claims using counsel of its
choosing.

Affiliates of Assignees include, but are not limited to, Aftermath, Interscope,
and their Affiliates.
Notice of any claim for indemnification hereunder

Universal Music

must be delivered to Pentagram within three ( 3) years from the Effective Date. Pending the
determination of any claim, demand or action, Plaintiffs may, at their election, withhold
payment of any monies otherwise payable to Pentagram under the Royalty Agreement ( as

defined below) in an amount which does not exceed Pentagram' s potential liability to
Plaintiffs pursuant to this paragraph; provided, however, that if Pentagram delivers an
mde=
lty or surety bond, in a form and with a company acceptable to Plaintiffs, which shall

cover the amount of such claim, demand or action and Plaintiff's estimated attorneys' fees

and legal costs in connection therewith, then Plaintiffs will not withhold payment of monies
otherwise payable

to Pentagram

hereunder. Plaintiffs will liquidate any amounts withheld

pursuant to. this paragraph if within twelve ( 12) months no lawsuit has been commenced and
active settlement discussions are not then taking place.
3)

Royalty

Agreement

between

Dre,

Jimmy

and

Pentagram.

In consideration

of

Pentagram' s assignment of all of its Assigned Rights in the Headphones Design and the

Marks to Assignees, Dre and Jimmy will enter into a royalty agreement with Pentagram
Royalty Agreement")

to be effective and executed concurrently with the execution of this

Agreement, in the form set forth as Exhibit A to this Agreement

4)

No Payment Obligations for

Jimmy or Dre. Jimmy and Dre shall have no obligation to

pay any monies or other consideration to Pentagram, Jibe, SLS, or Lamar in coinfection with
the Headphones Design or Marks, or otherwise, except for the payment obligations to

Pentagram set forth in the Royalty Agreement. Any monies or other consideration to be paid

to Jibe, SLS, or Lamar, if any, shall be paid by Pentagram alone, and Pentagram shall fully

indemnify Jimmy and Dre in connection therewith. Pentagram, Jibe, SLS, and Lamar shall,

jointly and severally, be solely responsible for any payments due to any third parties ( other
than Assignee Affiliates), if any, with respect to the Assigned Rights granted to Jimmy and

1,

Dre hereunder.

5)

Release of Ownership Claims by Jibe, SLS and Lamar. Jibe, SLS and Lamar, on behalf
of themselves and each of their respective Affiliates, hereby release, waive and forever

discharge all claims of royalties, profits or proceeds from exploitation, and any other claim of

any land or nature whatsoever that Jibe, SLS and Lamar, respectively, may now have, may
i

1 828 109\ 82272 1

have had or may have in the future with respect to any Assigned Rights in the Headphones

Design and Marks. Except for the payment obligations set forth in the Royalty Agreement,
Pentagram, on behalf of itself and each of its respective Affiliates, hereby releases, waives
and forever discharges all claims of royalties, profits or proceeds from exploitation, and any
other claim of'anykind of nature wthatsoevei`that Pentagram may,nowE ve; mayha'vehid`or
may have in the future with respect to any Assigned Rights in the Headphones Design and

Marks.
6)

Dismissal of Action. Within three ( 3) business days of execution in full of this Agreement,
a) Plaintiffs will dismiss with prejudice their Complaint in the Action and all causes of
action therein, as against all Defendants; and ( b) Pentagram will dismiss with prejudice its

Cross -Complaint in the Action and all causes of action therein, as against all cross
defendants. Counsel for each of the Parties will execute a Request for Dismissal to the above

effect in the form attached hereto as Exhibit 13 concurrently with execution of this Agreement
and will provide the executed Request for Dismissal to counsel for Plaintiffs, who will file it

with the Court upon execution in full of this Agreement. Each Party will bear its own costs

and attorneys' fees in the Action. The Parties will cooperate in executing any documents and
in taking any other action as may be reasonably necessary or required by the Court to
effectuate the dismissals

7)

Mutual General Releases.

Each Plaintiff. and Each Defendant (" Releasor"),' on behalf of

itself and each of its Affiliates, hereby absolutely, fully and forever waives, releases and
discharges

each other

Plaintiff

and

Defendant

and

their Affiliates (" Released Parties"), from

any and all Claims relating to the Headphones Design, the Marks, or any Assigned Rights in
the Marks and the Headphones Design, (excluding only Claims for breach of this Agreement
or the Royalty Agreement), whether in law or in equity, and whether known or unknown,
suspected or unsuspected, which the Releasor may now have or at any time may have had or,
which at any time hereafter have or claim to have against any of the Released Parties prior to
the Effective Date, including, but not limited to, any claims or cross- claims that are or could
have been asserted in the Action.
8)

Waiver

of

Civil Code Section 1542.

In connection with the foregoing releases and

otherwise, each Party expressly waives all rights it may have under Section 1542 of the
California Civil Code, and any statute of similar purpose. Section 1542 reads 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."

Notwithstanding the provisions of Section 1542 or any statute of similar purpose, and for the
purpose of implementing a full and complete release and discharge of the Released Parties,
the Parties expressly acknowledge that this Agreement is intended to include and does
include in its effect, without limitation, all Clanns which they do not know or suspect to exist

in favor of either of them against the other and that this Agreement contemplates the
extinguishment of any such Claims.
YQ

L'

1 828 109/ 82272 1

9)

Representations
that it has

all

Warranties

and

requisite rights,

Each Party represents and warrants to the other Parties

power,

and

authority to

enter

into this Agreement.

The

Defendants, individually and collectively, represent and warrant to the Plaintiffs that they
have not sold, assigned, transferred, or encumbered any right, title and/ or interest, including
without limitation -ariy copyngfft ' trademarl , patent and trade secretrights, that any of the
Defendants has or ever had in and/ or to the Headphones Design and the Marks, and that they
have obtained any and all requisite consents and approvals from any and all necessary thud
with

to the Assigned Rights

to Jimmy and Dre herein.

The
Defendants, individually and collectively, represent and warrant to the Plaintiffs that the
Defendants have not knowingly infringed any third party copyright, trademark, patent and/ or
trade secret rights in developing the Headphones Design and/ or with respect to the Marks.
Pentagram further represents and warrants to the Plaintiffs that it has not infringed,
knowingly or otherwise, any third party' s copyright, trademark, patent and/ or trade secret
rights in connection with developing any of the aesthetic design features of the Headphones
parties

Design.

respect

granted

Each Party represents and warrants to the other Parties that it has not assigned or

transferred, and that it will not in the future assign or transfer, either voluntarily or
involuntarily, any claim, cause of action, or right based on, arising out of, or in connection
with this Agreement whether potential, known or unknown, foreseen or unforeseen that is
being released pursuant hereto.
10)

Indemnity. Each Party hereby agrees to indemnify, defend and hold harmless the other

Party and its Affiliates frgm and against any and all Claims arising from breach of the
Party' s

representations and warranties

hereunder.

Notice of any claim for

indemnification hereunder must be delivered to the indemnifying Party within three ( 3) years
from the Effective Date. The indemnified Party ( or Party whose Affiliate is indemnified)
agrees to give the indemnifying Party prompt notice of any Claim covered by this Indemnity,
indemnifying

together with copies of any correspondence, pleadings or other documents or information

received by the indemnified Party ( or Party whose Affiliate is indemnified) with respect to
the Claim

Notwithstanding the foregoing, Jibe, SLS, and Lamar shall have no nght of
indemnity or other claim against Dre or Jimmy with regard to any failure by Dre or Jimmy to
comply with the payments contemplated in the Royalty Agreement.

11) Effect of Settlement Agreement. This Agreement is entered into solely for the purpose of
compromising and settling certain matters in dispute. It does not constitute, nor shall it be

construed to constitute, an admission by any of the Parties hereto of the truth or validity of
any claims asserted by the Parties.
12) General Provisions.
a)

Notices. All notices required or desired to be given hereunder to any Party shall be sent
to the respective addressee at the addresses as set forth herein, or such other address as

each Party may respectively hereafter designate by written notice to the other Parties

Notices sent to the following addresses will be deemed received by the other Party ( a)
three ( 3) days

after

being

mailed postage prepaid, certified return receipt requested; (

b)

upon personal delivery if sent by messenger; or (c) 24 -hours after delivery to a reputable
overnight couner service.

1828 109182272 1

i
Jimmy Iovine
c/ o Interscope Records, A Division of UMG Recordings, Inc.
2220 Colorado Avenue
Santa Monica, CA 90404

Attention: Head of Business and Legal Affairs

with a copy (which shall not constitute notice) to:
Stubbs Alderton & Markiles, LLP

15260 Ventura Blvd., 20`h Mr.

Sherman Oaks, CA 91403

Attention: Robert M. Jason, Esq.

Andre Young p/ k/a Dr. Dre
c/ o

King, Holmes,

Paterno & Berliner LLP

1900 Avenue of the Stars, Floor 25

Los Angeles, CA 90067

Attention: Peter T. Patemo, Esq

Pentagram Design, Inc.
387 Tehama Street
San Francisco, CA 94103

SLS International, Inc.

1650 West Jackson Street

Ozark, MO 65721
Jibe Audio, LLC

1877 Centro West

Tiburon, CA 94920
Steve Lamar

1877 Centro West

Tiburon, CA 94920
b)

Integration.

This Agreement and the Royalty Agreement set forth the entire

understanding and agreement of the Parties with regard to the subject matter of ,this
Agreement,

and

supersede

all

prior

and

contemporaneous

agreements

and

understandings, both oral and written.

w
c)

Amendment. This Agreement may only be modified or amended by a written agreement

signed by all Parties.

d)

Assignment,

Jimmy and Dre shall have the right to assign and/ or delegate their
respective rights and obligations hereunder, in whole or in part, to any person or business

1 828 109/ 82272 1

entity. Jimmy and Dre shall remain obligated to Pentagram for the payment of all amounts

due to Pentagram under the Royalty Agreement, regardless of any assignment of any of
Jimmy' s

Dre' s

and/ or

rights

hereunder. Pentagram, Jibe, SLS,

and

Lamar

shall

not, and

have no power to, assign, delegate, or otherwise transfer any right or obligation under this
Agreeittent-witliout- aother-Partieg"' prior written consent, except iii the case of transfer' of

this Agreement by merger of a Party or by change in ownership of the controlhng interests in

a Party or by sale of substantially all of a Party' s assets.
Subject to the foregoing, this
Agreement is binding upon and shall inure: to the .,benefit of the Parties and their licensees,
representatives, transferees, affiliates, divisions, entities, related entities, subsidiaries, parent
corporations, successors, and assigns.

e)

Choice

law

of

Law, Jurisdiction

and

principles, will govern the

Venue. California law, without regard to conflicts of

interpretation

and enforcement of

this Agreement.

The

state or Federal courts sitting in Los Angeles, California will have exclusive jurisdiction

over any dispute relating to this Agreement and the Parties hereby consent to exclusive
jurisdiction and venue in such courts.

fl - Drafting

and

Interpretation.

The Parties acknowledge and agree that they have

participated equally in the negotiation and preparation of this Agreement, each relying on
the advice of its independent legal counsel, and the provisions of California Civil Code
Section 1654

will not

be

applicable, to

terms " hereof," " herein," "

Agreement

as a whole and

this Agreement. As used in this Agreement, the

hereunder" and words of similar meaning refer to this
not to any particular subdivision hereof. The section and

paragraph headings in this Agreement are for ease of reference and will not bear upon
interpretation.
g)

SeverabiIrty.

If any provision of this Agreement is deemed invalid or unenforceable,

such provision will be deemed modified to the extent necessary to cure such invalidity or
unenforceability

If such modification is not possible without creating a conflict with

another material provision of this Agreement, the invalid or unenforceable provision will

be deemed severed from this Agreement and the remaining provisions hereof will
continue in full force and effect.
h)

Attorneys' Fees. The prevailing Party or Parties in any dispute relating to this Agreement
will be entitled to recover its or their attorneys' fees and costs from the non -prevailing
Party or Parties adverse to it or them as part of the same proceeding.

i)

Execution
an

original

This Agreement may be executed in counterparts, each of which is deemed

and

which

together constitute

one

and

the

same

contract

Signatures

transmitted by fax or pdf will be deemed originals. Each Party represents and warrants to
the other Parties that the person signing the Agreement is fully authorized to do so on
behalf of that Party.

1628 10% B2272 1

r
IN
WITNESS WHEREOF, the Parties have executed this Agreement as ofthe Effective Date by
their signatures below.

Andre Young p/Wa Dr. Dye

Pentagram Design, Inc.

By:
Its:

Jibe Audio, LLC

By:
Its: '

SLS International, Inc.

By:
Its: --

Steve Lamar

N)

1828. 1091822721

IN
WITNESS WEERHOF, the Parties have executed this Agreement as of the Effective Date by
their signatures below.
Jimmy Iovine
I

Andre Young p/k(a fir. Dre

Pentagram Design, Inc.

By:
Its:
Jibe Audio, LLC

By:
Its:

StS International, Inc.

By:
Its:

Steve Lamar

IB' 8. 1091822721

4.,:,

IN
WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date by
their signatures below.

Jimmy Iovine

Andre

Young p/k/ a Dr. Dre

Pentagram Design, Inc.

By.
Its:
Jibe Audio, LLC

yItsBy-

its

SLS International, Inc.

By.
Its:

Steve Lamar

1A

1828, 1091822721

4,
1,

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date by
their signatures below,. _

Jtmrny Iovine

Andre Young p/k/a Dr. Dre

Pentagram Design, Inc,

By:
Its:
Jibe Audio, LLC

By:
Its:

SLS Intemational, Inc.

By.
Its:

Stove Lamar

1828, L09182272. 1

IN
WITNESS WHEREOF, the Patties leve executed this Agreement as ofthe Effective Date by
their signatures below.

Timmy iovino

Andre Young p/ k/a Dr. Dre

Pentagram Design, Inc.

Dy.
Iis

Jibe Audio, LLC

3y:
Its:

SLS International, Inc,

p'YIts;

Sieve Lamar

4.
M1

113

18231090272. 1

Royalty Agreement
Tlus'

Royalty Agreement (" Royalty Agreement") is entered into as of April ,

2007
by and between Jimmy Iovine (" Jimmy"), Andre Young p/k/a Dr. Dre

Effective Date")

Dre"),

and

Pentagram Design, Inc. (` Pentagram") (

collectively, the " Parties").
Recitals

A. This Royalty Agreement is entered into pursuant to that certain Settlement and Mutual
Release Agreement (" Agreement")

entered into by the Parties as of the Effective Date.

Capitalized terms not defined in this Royalty Agreement will have the meanings given in

the Agreement.

B. Pentagram provided services to Jimmy and Dre in the design of the aesthetic features of
the

Headphones Design

and

in designing the Marks (" Services").

C Jimmy and Dre intend to enter into an agreement with Monster Cable for the
manufacture,

marketing

and sale

of

Headphones (

as

defined below) ("

Agreement'.

Merchandising

D. In consideration of Pentagram' s assignment to Jimmy and Dre of Pentagram' s Assigned

Rights acquired in the course ofproviding the Services, Jimmy and Dre will pay a royalty
to Pentagram on revenue generated by sales of Headphones.
Terms and Conditions
1)

Royalty Payments

to

Pentagram.

royalty payments:
a)

Jimmy and Dre will pay to Pentagram the following

One Hundred Eight Thousand Dollars ($ 108, 000) (" Minimum

Royalty")

on the execution

of this Royalty Agreement.

b) Four

percent (

4%)

of

the Base Pnce (` Base

Royalty") of every Headphone sold by

Monster and its Affiliates through dealer/distributor sales channels, as reduced by returns
and
discounts and other reductions pursuant to the terms of the Merchandising
Agreement (" Normal Dealer Sales'.

The term " Base Price" means the royalty base price
applicable to the royalty payable to Jimmy and Dre under the Merchandising Agreement.
The term " Headphone" means a headphone that only embodies the Headphones Design
depicted in Schedule I hereto, and any minor or cosmetic modifications in (.the design

M1

specifically identified on Schedule I hereto.

4-1

c)

An

additional one percent (

1%)

of

the Base Price ("

Supplemental RoyalVI) of every

Headphone sold by Monster and its Affiliates, through Normal Dealer Sales, until

Pentagram

1828 109/ 82272 1

shall

have

received

One Hundred

Forty Thousand Dollars ($ 140, 000) in

4P

Supplemental Royalty payments. For purposes of clarity, payment of the Base Royalty

will not be credited toward amounts due under the Supplemental Royalty and vice versa.
d)

All royalties payable to Pentagram under this Royalty Agreement ( other than the
Minnnum Royalty) shall be calculated, reduced, determined and paid iii the same manner
and at the same time as the royalty payable to Jimmy and Dre under the Merchandising

Agreement. The royalty rate paid to Pentagram on sales other than Normal Dealer Sales

will be reduced by the same percentage that the royalty rate paid to Jimmy and Dre under

the Merchandising Agreement,on sales other than Normal Dealer Sales are reduced from
the royalty rate paid to Jimmy and Dre on Normal Dealer Sales.
e)

If Jimmy and Dre manufacture, market, or sell the Headphones through another source
than Monster, Pentagram will be entitled to payment on the same terms as set forth

above, in which case the term " Merchandising Agreement" shall mean the agreement
between Jimmy, Dre, and the other source for the manufacture, marketing and sale of the

Headphones. Jimmy and Dre will provide Pentagram with a copy of the Merchandising
Agreement redacted to reflect only the royalty and accounting provisions applicable to

the calculation and timing of royalty payments to Pentagram under this Agreement.
f)

The terms and conditions under which royalties are paid to Pentagram under this Royalty

Agreement shall remain as set forth herein, notwithstanding any future amendments to
the Merchandising Agreement that may be executed by Jimmy/Dre and Monster,
including that Pentagram' s royalty hereunder will continue to be paid in the full stated

percentages in cash, regardless of any amendments to the Merchandising Agreement.

2)

Headphones Design Subject to

Royalty. The only headphones or other products that are

subject to the Base Royalty and the Supplemental Royalty are the Headphones.
3)

Payment

of

Royalties.

The Base Royalty and the Supplemental Royalty will be paid to

Pentagram on or before the thirtieth day following the end of each calendar quarter, along

with a summary in reasonable detail of the basis of the calculation of royalties during such

period.

4)

Defaults.

Overdue royalty payments and reports will be deemed delinquent and therefore a

material breach of this Royalty Agreement by Jimmy and Dre if not received by Pentagram

within ten ( 10) days of written notice from Pentagram to Jimmy and Dre. 5)

Audit Rights. Jimmy, Dre, and their Affiliates, agents and distributors will make available
to Pentagram' s independent auditor on a confidential basis at all reasonable times on
reasonable advance notice no more than once per year, all books and records relevant to

calculation and verification of the Base Royalty and the Supplemental Royalty.

h..

6)

h.

General Provisions
a)

Notices.

Party (

1828 109182272. 1

a)

Notices
sent to the following addresses will be deemed received by the other
three ( 3)
days after being mailed postage prepaid, certified return receipt

requested; ( b) upon personal delivery if sent by messenger; or (c) 24-hours' after delivery
to a reputable overnight courier service.

Jimmy Iovine
y

d/ o Inteisdbpd-Redbrds, A Division ofUMG Recordings, Inc,

2220 Colorado Avenue

Santa Monica, CA 90404

Attention: Head of Business and Legal Affairs

with a copy (which shall not constitute notice) to:
Stubbs Alderton & Markiles, LLP

15260 Ventura Blvd., 20th Flr.

Sherman Oaks, CA 91403 --

Attention. Robert M. Jason, Esq.

Andre Young p/ k/a Dr. Dre

c/ o King, Holmes, Paterno &

Berliner LLP
1900 Avenue of the Stars, Floor 25

Los Angeles, CA 90067 --

Attention: Peter T. Paterno, Esq.

Pentagram Design, Inc.

387 Tehama Street

San Francisco, CA 94103

b)

Inte

ration

This Royalty Agreement and the Agreement set forth the entire

understanding and agreement of the Parties with regard to the subject matter of this

Royalty Agreement, and supersede all prior and contemporaneous agreements and
understandings (not including the Agreement), both oral and written.
c)

Amendment.

This Royalty Agreement may only be modified or amended by a written

agreement signed by all Parties.

d)

Assignment.

No party may assign its rights or delegate its duties under this Royalty

Agreement without the other Parties' prior written consent, except iri the case of transfer

of this Royalty Agreement by merger of a Party or by change in ownership of the

controlling interests in a Party or by sale of substantially all of a Party' s assets. Subject
to the foregoing, this Royalty Agreement is binding on the Parties and their successors
and assigns.
Notwithstanding the foregoing, Jimmy and Dre may instruct Monster or
another party to make the payments due under this Royalty Agreement directly to

Pentagram on behalf of Jimmy and Dre.

e)

Joint and Several Obligations. The obligations of Jimmy and Dre hereunder shall be joint
and several.

1,a

f) Choice

of

Law: Jurisdiction

and

Venue.

California law, without regard to conflicts of

law principles, will govern the interpretation and enforcement of this Royalty Agreement.

4:4

1828 109/ 82272 1

GP

The state or Federal courts sitting in Los Angeles, California will have exclusive

jurisdiction over any dispute relating to this Royalty Agreement and the Parties hereby
consent to exclusive junsdiction and venue,in such courts

g)

Drafting

and

Interpretation.

The Parties acknowledge and agree that they have

participated equally in the negotiation and preparation of this Royalty Agreement, each
relying on the advice of its independent legal counsel, and the provisions of Cal}foinia

Civil Code Section 1654

this Royalty Agreement,

will not

be

the terms "

applicable

to this

hereof," " herein," "

Royalty Agreement. As used in

hereunder" and words of similir

meaning refer to this Royalty Agreement as a whole and not to any particular subdivision

hereof. The section and paragraph headings in this Royalty Agreement are for ease of

reference and will not bear upon interpretation.

h) Severability.

If any provision of this Royalty Agreement is deemed invalid or

unenforceable, such provision will be deemed modified to the extent necessary to cure

such invalidity or unenforceability. If such modification isnot possible wiihout creating

a conflict with another material provision of this Royalty Agreement, the invalid or

unenforceable provision will be deemed severed from this Royalty Agreement and the

remaining provisions hereof will continue in full force and effect.

i)

Attorneys' Fees. The prevailing party or Parties in any dispute relating to this Royalty

Agreement will be entitled to recover its or their attorneys' fees and costs from the non -

prevailing Party or Parties adverse to it or them as part of the same proceeding

j)

Execution. This Royalty Agreement may be executed in counterparts, each of which is

deemed an original and which together constitute one and the same contract. Signatures

transmitted by fax or pdf will be deemed originals

IN WITNESS WHEREOF, the Parties have executed this Royalty Agreement as of the Effective

Date by their signatures below.

Pentagram Design, Inc.

By Zta
Its:

7'

t i- U qT - cam

Jimmy Iovme

I^^

Andre Young p/k/ a Dr. Dre

1828 109/ 822721

4P

The state or Federal courts sitting in Los ,Angeles, California will have exclusive

jurisdiction
over any dispute relating to this Royalty Agreement and the Parties hereby
consent to exclusive jurisdiction and venue in such courts.
g)

Drafting

and

Interpretation.

The Parties acknowledge and agree that they have

participated equally in the negotiation and preparation of this Royalty Agreement, each
relying on the advice of its independent legal counsel, and the provisions of California
Civil Code Section 1654 will not be applicable to this
Royalty Agreement.
Royalty Agieement, the terms " hereof:," " herein," "

this

As used in

hereunder" and words of similar

meaning refer to this Royalty Agreement as a whole and not to any particular subdivision

hereof.' The section and paragraph headings in this Royalty Agreement are for ease of

reference and will not bear upon interpretation.

h) Severability.

If any provision of this Royalty Agreement is deemed invalid or

unenforceable, such provision will be deemed modified to the extent necessary to cure

such invalidity or unenforceability. If such modification is not possible without creating

a conflict with another material provision of this Royalty Agreement, the invalid or

unenforceable provision will be deemed severed from this Royalty Agreement and the

remaining provisions hereofwill continue in full force and effect.

i)

Attorneys' Fees. The prevailing Party or Parties in any dispute relating to this Royalty

Agreement will be entitled to recover its or their attorneys' fees and costs from the non prevailing Party or Parties adverse to it or them as part ofthe same proceeding.
j)

Execution. This Royalty Agreement may be executed in counterparts, each of which is

deemed an original and which together constitute one and the same contract. Signatures

transmitted by fax or pdf will be deemed originals.

IN WITNESS WHEREOF, the Parties have executed this Royalty Agreement as ofthe Effective

Date by their signatures below.

Pentagram Design, Inc.

By:
Its:

AndreAndre YoungYoung p/p/ IdaIda Dr.Dr. DreDre

NJNJ

1828. 109182272. 11

The state or Federal courts sitting in Los Angeles, California will have exclusive

jurisdiction over any dispute relating to this Royalty Agreement and the Parties hereby
consent to exclusive jurisdiction and venue in such courts.

g) Drafting

Interpretation.

The Parties acknowledge and agree that they have

participated equally in the negotiation and preparation of this Royalty Agreement, each
and

relying on the advice of its independent legal counsel, and the provisions of California
Civil Code Section 1654 will not be applicable to this Royalty Agreement, As used in
this Royalty Agreement, the terms " hereof," " herein," " hereunder" and words of similar

meaning refer to this Royalty Agreement as a whole and not to any particular subdivision

hereof. The section and paragraph headings in this Royalty Agreement are for ease of
reference and will not bear upon interpretation.
h) Severability.

If any provision of this Royalty Agreement is deemed invalid or

unenforceable, such provision will be deemed modified to the extent necessary to cure
such invalidity or unenforceability. If such modification is not possible without creating
a conflict with another material provision of this Royalty Agreement, the invalid or

unenforceable provision will be deemed severed from this Royalty Agreement and the
remaining provisions hereof will continue in full force and effect,
i)

Attorneys' Fees. The prevailing Party or Parties in any dispute relating to this Royalty
Agreement will be entitled to recover its or their attorneys' fees and costs from the non -

prevailing Party or Parties adverse to it or them as part of the same proceeding.

j) Execution. This Royalty Agreement may be executed in counterparts, each of which is
deemed an original and which together constitute one and the same contract. Signatures
transmitted by fax or pdfwill be deemed originals.

IN WITNESS WHEREOF, the Parties have executed this Royalty Agreement as of the Effective
Date by their signatures below.
Pentagram Design, Inc.

By:
Its:

Jimmy lovine

uA
t,.

Andre

oung p

1828, 109182272. 1

a Dr. Dre

4F
SCHEDULEI

Reference to Headphones Design Patent Application

fI^

18281091822721

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Royalty Agreement
This

Royalty Agreement (` Royalty Agreement') is

entered

into

as

of

April _Zy

Effective Date")
Dre'),

and

2007

by and between Jimmy Iovine C Jimmy' s, Andre young p/k/a Dr. Dre
Pentagram Design, Inc. (" Pentagram') (
collectively, the Tarties').

Recitals

A. This Royalty Agreement is entered into pursuant to that certain Settlement and Mutual
Release Agreement (" Agreement')

entered into by the Parties as of the Effective Datb.

Capitalized terms not defined in this Royalty Agreement will,have the meanings given in
the Agreement.
B. Pentagram provided services to Jimmy and Dre in the design of the aesthetic features of
the

Headphones Design

and

in

designing the Marks (" Services'),

C. manufacture,
Jimmy and Dre intend to enter into an agreement with Monster Cable for the
marketing

and sale of

Headphones (

as

defined below) ("

Agreement'), .

Merchandising

D. In consideration of Pentagram' s assignment to Jimmy and Dre of Pentagram' s Assigned

Rights acquired in the course ofproviding the Services, Jimmy and Dre will pay a royalty

to Pentagram on revenue generated by s-ales ofHeadphones.

Terms and Conditions
1)

Royalty

Payments to Pentagram.

royalty payments:
a)

Jimmy and Dre will pay to Pentagram the following

One Hundred Eight Thousand Dollars ($ 108, 000) (" Minimum

Royalty") on the execution

of this Royalty Agreement.

b)

Four

percent (

4%)

of

the Base Price (" Base

Royalty") of every Headphone sold by

Monster and its Affiliates through dealer/distributor sales channels, as reduced by returns

and discounts and other reductions pursuant to the terms of the Merchandising

Agreement (" Normal Dealer Sales'),

The term' Base Price" means the royalty base price

applicable to the royalty payable to Jimmy and Dre under the Merchandising Agreement.
The tern "Headphoae" means a headphone that only embodies the Headphones Design
depicted in Schedule I hereto, and any minor or cosmetic modifications in the design
specifically identified on Schedule I hereto,
c)

i=

An

additional one percent (

11/
o)

of

the Base Price ("

Supplemental Royalty"} of every

Headphone sold by Monster and its Affiliates, through Normal Dealer Sales, until

Pentagram

shall

have

received

One Hundred

Forty

Thousand Dollars ($ 140, 000) in

4
l

1828. 109N 22721

nn

r
Supplemental Royalty payments. For purposes of clarity, payment of the Base Royalty

will not be credited toward amounts due,under the Supplemental Royalty and vice versa.

d) All royalties payable to Pentagram under this Royalty Ag>;eement ( othei than the
Minimum Royalty) shall be calculated, reduced, determined and paid in the same manner

and,at the same time as the royalty payable to Jimmy and Dre under the Merchandising

Agreement. The royalty rate paid to Pentagram on sales other than Normal Dealer Sales

will be reduced by the same peicentage that the royalty rate paid to Jimmy and Dre under
the Merchandising Agreement on sales other than Normal Dealer Sales are reduced from
the royalty rate paid to Jimmy and Dre on Normal Dealer Sales.

e) If Jimmy and Dre manufacture, market, or sell the Headphones through another source
than Monster, Pentagram will be entitled to payment on the same terms as set forth
above, in which case the term " Merchandising Agreement" shall mean the agreement

between Jimmy, Die, and the other source for the manufacture, marketing and sale of the

Headphones. Jimmy and Dre will provide Pentagram with a copy of the Merchandising
Agreement redacted to reflect only the royalty and accounting provisions applicable to
the calculation and timing ofroyalty payments to Pentagram under this Agreement.

f)

The terms and conditions under which royalties are paid to Pentagram under this Royalty

Agreement shall remain as set forth herein, notwithstanding any future amendments to
the Merchandising Agreement that may be executed by Jimmy/Dre and Monster,
including that Pentagram' s royalty hereunder will continue to be paid in the full stated

percentages in cash, regardless of any amendments to the Merchandising Agreement,

2)

Headphones Design Subject to Royalty. The only headphones or other products that are

subject to the Base Royalty and the Supplemental Royalty are the Headphones.
3)

Payment

of

Royalties.

The Base Royalty and the Supplemental Royalty will be paid to

Pentagram on or before the thirtieth day following the end of each calendar quarter, along

with a summary in reasonable detail of the basis of the calculation of royalties during such

period.

4)

Defaults. Overdue royalty payments and reports will be, deemed delinquent and therefore a

material breach of this Royalty Agreement by Jimmy and Dre ifnot received by Pentagram
within ten ( 10) days ofwritten notice from Pentagram to Jimmy and Dre.'

5)

Audit Rights, Jimmy, Dre, and their Affiliates, agents and distributors will make available
to Pentagram' s independent auditor on a confidential basis at all reasonable times an
reasonable advance notice no more than once per year, all books and records relevant to

calculation and verification of the Base Royalty and the Supplemental Royalty.
6)
t,

General Provisions.
a)

Notices. Notices sent to the following addresses will be deemed received by the other

Party ( a) three ( 3) days after being mailed postage prepaid, certified return receipt
1828. 109184272. 1
r.

requested; ( b) upon personal delivery if sent by messenger; or (c) 24 -hours after delivery

to a reputable overnight courier service.

Jimmy Iovine

c/ o Interscope Records, A Division ofUMQ Recordings, Inc.

2220 Colorado Avenue
Santa Monica, CA 90404

Attention: Head of Business and Legal Affairs

with a copy (which shall not constitute notice) to:
Stubbs Alderton & Markiles, LLP

15260 Ventura Blvd., 20" Mr.

Sherman Oaks, CA 91403 --

Attention: Robert M. Jason, Esq.

Andre Young ptIr/a Dr. Dre

King, Holmes, Patemo & Berliner LLP
1900 Avenue of the Stars, Floor 25
c/ o

Los Angeles, CA 90067

Attention: Peter T. Patemo, Esq.

Pentagram Design, Inc.

387 Tehama Street

San Francisco, CA 94103

b) Integration.

Thio Royalty Agreement and the Agreement set forth the entire

understanding and agreement of the Parties with regard to the subject matter of this

Royalty Agreement, and supersede all prior and contemporaneous agreements and
understandings (not including the Agreement), both oral and written;
c)

Amendment. This Royalty Agreement may only be modified or amended by a written

agreement signed by all Parties.

d) Assi

ent.

No party may assign its rights or delegate its duties under this Royalty
of this Royalty Agreement by merger of a Party or by change in ownership of the
Agreement without the other Parties' prior written consent, except in the case of transfer

controlling interests in a Party or by sale of substantially all of a Party' s assets. Subject

to the foregoing, this Royalty Agreement is binding,on the Parties and their successors
Notwithstanding the foregoing, Jimmy and Dre may instruct Monster or
and assigns.

another party to make the payments due under this Royalty Agreement directly to

Pentagram on behalf of Jimmy and Dre.

e)

Joint and Several Obligations. The obligations of Jimmy and Dre hereunder shall bejoint
and several.

fl Choice of Law: Jurisdiction ad -Venue. California law, without regard to conflicts of

law principles, will govern the interpretation and enforcement ofthis Royalty Agreement.

IN)

0
1828. 109182272. 1

ICN

The state or Federal courts sitting in Los Angeles, California will have exclusive

jurisdiction
over any dispute relating to this Royalty Agreement and the Parties hereby.
consent to exclusive jurisdiction and venue in such courts.
Drafting

g)

and

Interpretation,

The Parties acknowledge and agree that they have

participated equally in the negotiation and preparation of this Royalty Agreement, each
relying
on the advice of its independent legal counsel, and the provisions of California
Civil Code
Section, 1654

this

Royalty Agreement,

will not

be

the terms "

applicable

to this

hereof," " herein," "

Royalty Agreement, As used in

hereunder" and words of similar

meaning refer to this Royalty Agreement as 4 whole and not to any particular subdivision

hereof, The section and paragraph headings in this Royalty Agreement are for ea4e of
reference andwill not beer upon interpretation. h) Say
ortift,

If any provision of this Royalty. Agreement is deemed invalid or

unenforceable, such provision will be deemed modifted to the extent" necessary to cure

such invalidity or unenforceability. If such modification is not possible without creating

a conflict with another material provision of this Royalty Agreement, the invalid or

unenforceable provision will be deemed severed from this Royalty Agreement and the

remaining provisions hereof will continue in full force' and effecti)

Attome s' Fees. The prevailing Party or Parties in any dispute relating to this Royalty

Agreement will be entitled to recover its or their attorneys' fees and costs from the non -

prevailingParty or Parties adverse to it or them as part ofthe same proceeding.

j) _

Execution.. This Royalty Agreement.way be executtd.in counterparts, each.of which is

deemed an original and which together constitute one and the same contract. Signatures

transmitted by fax or pdf will be deemed originals.

IN WITNESS WHEREOF, the Parties have executed this Royalty Agreement as ofthe Effective

Date by their signatures below.

Pentagram Design, Inc.

By:
Its:

r11-:2

Jimmy Iovine

M~

Andre Young p/k%a Dr. Dre

1828. 109182272 1

The state or Federal courts sitting in Los Angeles, California will We exclusive

jurisdiction
over any' dispute relating to this Royalty Agreement and the Parties hereby
consent to exclusive jurisdiction and venue in such courts.
g) Diaftiria and

Intretatiori,

The Parties aclmowledge and agreb that they have

participated equally in the negotiation and preparation of this Royalty Agreement, each
relying
on the advice of its independent legal counsel, and the provisior(s of California
Civil Code Section 1654 will not be
applicable to this

this

Royalty Agreement,

the terms ` hereof"

Royalty Agreement. Asused in

" herein," " hereunder' and words of similar

meaning refer to this Royalty Agreement as a whole and not to any particular subdivision

hereof:
The section and paragraph headings in this Royalty Agreement are for ease of
reference and will not bear upon interpretation,
h) Severability.

If any provision of this Royalty Agreement is deemed invalid or

unenforceable, such provision will be deemed modified to the extent necessary to cure

such invalidity or unenforceability. Itsuch modification is not possible Without creating

a conflict with another material provision of this Royalty Agreement, the invalid or
urienforceable provision will be deemed severed from' this Royalty Agreement and the
remaining provisions hereofwill continue in full force and effect.

i)

Attorneys' Fees. The prevailing Party or Parties in arty dispute, relating to this Royalty

Agreement will be entitled to recover its or their attorneys' fees and costs from the non prevailing Party or Parties adverse to it or them as part ofthe same proceeding,
Execution, This Royalty_Agreement maybe piepci W in oo_unterpArta,_cach of which is.

deemed an original and which together constitute one and the same contract. Signatures

transmitted by fax or pdf will bs deemed originals.

IN VA NESS WDMEOF, the Parties have executed this Royalty Agreement as ofthe Effective

Date by their signatures below.

Pentagram Design, Inc.

By;
Its:

t~

7474
F=F=

AndreAndre YoungYoung pAdapAda Dr.Dr. DreDre

1828. 1 09182 27 2, 1

0.

The state or Federal oourt8 sitting in Los Angeles, California will have exclusive

jurisdiction
over anyjurisdiction
dispute relating
to thiiss RoyaltyAgreement
and the Parties hereby
consent to exclusive
and venue
such courts.
g) Drafting

and

Interpretation.

The Parties acIcnowledge and agree that they have

participated equally in the negotiation and preparation of this Royalty Agreement, each
relying on the advice of ita independent legal counsel, and the provisions of California
CivilRoyalty
Code Suction
1654 will not be applicable to this Royalty Agreement As used in
US
Agreement, the terms " hereof," "
herein," "

hereunder" and words of similar

meaning refer to tins Royalty Agreement as a whole and not to any particular subdivision

hereof. The section and paragraph headings in this Royalty Agreement are for ease of

reference and will not bear upon interpretation.

h)

everab' ' .

If aay provision of this Royalty Agreement is deemed invalid or

unenforceable, such provision will be doomed modified to the extent necessary to Cure
such invalidity or unenforceability. IfSuch modification is not possible without creating
a conflict with another material provision of this Royalty Agreement, the invalid or

unenforceable provision will be deemed severed from this Royalty Agreement -and the

remaining provisions hereofwill continue in full force and effect

i)

Attorneys' Fees. The prevailing Party or Parties in MY dispute relating to this Royalty

Agreemc-M will be entitled to recover its or their attorneys' fees and costs from the nonprevailing Party or Parties adverse to it orthem as part ofthe same proceeding.
Ex_ecution. This Royalty Agreement maybe executed i; counterparts; each ofwhich is
deemed an original and which together constitute one and the same contract. Signatures
transmitted by fax or pdfwill be deemed originals.

IN WITNESS WIIl~REOF, the Parties have executed this Royalty Agreement as ofthe Effective

Date by their signatures below.

Pentagram Design, Inc.

By:
Its..

Jimmy Iovine

0.U

r-

AndreYo-ung p
rl,

1828. 104}82272,1

e-

a Dr. Dre

SCHEDULE I

Reference to Headphones Design Patent Application

FYI}

1828 109182272. 1

rI

4 FIG.

OLI

8,

91:
1

t-

11

Ct
I
et

4
e

Ea
1

Ma

Proskauer

Proekeuer Rose LLP 2049 Century Park East, 32nd Floor Loa Angeles. CA 00087. 3208

Scott P. Cooper
Member of the Firm
d 310.284. 5569

f 310.557.2193
scooper@proskauer.com
www. proskauer com

January 9, 2014

VIA FEDERAL EXPRESS

Mr. Michael Gericke

Pentagram Design, Inc.

204 Fifth Avenue
New York, NY 10010

Dear Mr Gericke:
As

is entitled to one- half of the royalty

name, among others, " Beats by Dr. Dre"
for headphones
pursuant to the April 24, 2007 Settlement and Mutual Release Agreement entered into

you are aware, our client

payments

Beats"),

Jibe Audio, LLC (" Jibe")

marketed and sold under

the

Lamar"),

the
by and between Pentagram Design, Inc. (" Pentagram"), Jibe and Steven Lamar ("
April 24, 2007 Settlement and Mutual Release Agreement entered into by and among Pentagram,
Jibe, Lamar, Jimmy Iovine (" Iovine") and Andre Young p/ k/ a Dr. Dre (" Dre"), and the April 24,

2007 Royalty Agreement entered into by and between Pentagram, lovine and Dre. We
understand that Jibe has been receiving royalty payments related to the Beats Studio headphones
since at least the fourth quarter of 2008. We further understand that these royalty payments have
not included royalties for the subsequently introduced Solo headphones, Wireless headphones or
the

so- called " remastered"

Studio (" New Studio") headphones. The Solo, Wireless. and New

Studio headphones are, however, subject to the royalty obligation under the Royalty Agreement

and the subsequent assignments of royalties by Pentagram, including the assignment to Jibe.
A significant amount of money is at stake in this issue. Even a conservative estimate of royalties
owed for sales of the Solo and Wireless headphones to -date, and for estimated sales of the Solo,
Wireless and New Studio headphones over the next three years, exceeds $ 60 million.
We understand the rights and obligations to enforce receipt of royalties from Iovine and Dre

under the Royalty Agreement are currently held by Pentagram. Under the Royalty Agreement,
r.

no party may assign its rights or delegate its duties without the other parties' prior written
consent, subject to certain limited circumstances not applicable here. To the best of our

knowledge, written consent for any purported assignment of Pentagram' s rights and obligations

Hx

7729141530- 001 current/40591533v1

Beijing I Bow Ratan I Boston I Chlwgo I Hong Kong I London I Los Angeles I Now Orleans I NOW York I Nawark t Pads i s90 Paulo

I waswnglon, Oc

Proskauer}
Mr. Michael Gericke

January 9, 2014
Page 2

was not obtained from Iovine and Dre, and thus no valid assignment by Pentagram to Hinrichs &
Associates, or to any other entity or individual, could have occurred.'

Pentagram maintains the rights and obligations under the Royalty Agreement, and pursuant to
the Settlement Agreement with Jibe and Lamar, it shall do nothing to waive or impair Jibe' s right
to payment of the royalties owed by Iovine and Dre. Pentagram is obligated to enforce the rights
to receive royalties on the Solo, Wireless and New Studio headphones. While the failure to pay

all ioyalties owed under the agreements is a continuing wrong, we understand that die first
royalty payment on the Solo headphones would have been due following their release in the
fourth quarter of 2009. Pentagiam should take action to enforce the rights of the royalty
participants within four years of its receipt of the first royalty report that should have included
royalties on the Solo headphones to avoid any arguable bar by the applicable statute of

limitations. For example, if Pentagram received the royalty report for Q4 2009 on January 30,
2010, it would be obligated to act on or before January 30, 2014. On behalf of Jibe, we hereby
demand that Pentagram take appropriate action either by timely filing a legal action against
Beats/ Iovine and Dre or, at a minimum, by entering into a tolling agreement between Pentagram
and Beats/Iovine and Dre. Please let us know promptly the date on which Pentagram received the
Q4 2009 royalty report, and whether Pentagram will pursue the royalty participants' rights as
described above. If it will not, Jibe will be forced to hold Pentagram financially responsible for
its losses, and will be required to take action against Pentagram to compensate Jibe for

Pentagram' s f,42g a to enforce those rights.

Very

r=

To the extent there was a merger of Pentagram CA into Pentagram NY in June 2009, any assignment of
Pentagram CA' s rights could be assigned only to Pentagram NY. We are not aware of any other merger,
change in ownership, or sale of assets by which a further assignment would be valid We are unaware of
any other information demonstrating that the " Confirmation of Assignment of Royalties" signed by
Michael Gei icke for Pentagram

and

valid assignment.

7729141530- 001

currentl40591533v1

Kit Hinrichs for Hinrichs & Associates reflects the confirmation of a

ATTORNEY OR PARTY WITHOUT ATTORNEY (Name StallWnumper, and address

FOR COURT USE ONLY

J Morrow Otis ( SBN 0393 11) G. Scott Emblidge ( SEN )121613)

Moscone Emblidge Sater & Otis

220 Montgomery Street, Suite 2100

FILE

San Francisco, CA 94104

FAXNo (
415) 362- 3599
415 362- 2006
ATTORNEY FOR (Name) Plaintiffs Hinrichs & Associates, eta .
UPERIOR COURT OF CALIFORNIA, COUNTY OF Los Angeles
STREETADDRESS 111 North Hill Street
TELEPHONE NO (

of

is

ofAngees

JAN 13 20A4
rri R Carter, Ex utive OificerlClerk

MAILING ADDRESS

CITY AND ZIP CODE. Los Angeles CA 90012

BRANCH NAME Stanley Mosk Courthouse

Deputy

By

Myrna Beltran

CASE NAME

Hituichs & Associates v Beats Electronics, et at.

CIVIL CASE COVER SHEET

Unlimited

Limited

Amount (

Amount

demanded

demanded is

exceeds $ 25, 000)

CASE NUr,

Complex Case Designation

Filed

25, 000 or less) (

D Joinder

Counter
with

first

appearance

Cal Rules

of

Court,

p
v

JUDGE

by defendant

rule

11 3 O

3 402)

DEPT

Items 1- 6 below must be completed (see instructions on page 2)

1

Check one box below for the case type that best describes this case*
Auto Tort

Contract

0 Auto (22)
0 Uninsured motorist (46)

0 Breach of contract/warranty (06)

0 Rule 3 740 collections (09)
0 Other collections ( 09)
0 Insurance coverage ( 18)
0 Other contract (37)

Other PI/ PD/ WD ( Personal Injury/Property

Damage/ Wrongful Death) Tort

Asbestos ( 04)

0 Product liability

Provisionally Complex Civil Litigatifff ' -

24)

Antitrust/ Trade regulation ( 03)

Q Construction defect (10)

0 Mass tort (40)
0 Securities litigation ( 28)

Q Environmentalfroxic tort (30)

0 Insurance coverage claims arising from the

Real Property

0 Medical malpractice ( 45)

0 Olhdr Pi1PD1WD ( 23)

0 Eminent domain/ Inverse

condemnation ( 14)

above listed provisionally complex case

types ( 41)

Wrongful eviction ( 33)

Nan- PI/ PDIWD ( Other) Tort

Other real property ( 26)

0 Business tortfunfair business practice ( 07)
Unlawful
Detainer
0 Civil rights (08)
0 Commercial (31)
0 Defamation ( 13)

Enforcement of Judgment

0 Enforcement ofjudgment (20)

Miscellaneous Civil Complaint

0 RICO (27)
0 Other complaint (not specified above) (42)

Residential ( 32)

Fraud ( 16)

0 Drugs (38)

Intellectual property ( 19)

0 Professional negligence (25)

Judicial Review

Miscellaneous Civil Petition

Asset forfeiture (05)

Other non- PI/ PD/ WD tort (35)

0 Petition re arbitration award ( 11)

Employment
Wrongful termination ( 36)

L -_J Writ of mandate (02)

Other

n Other Judicial review

employment

0 5)

Cal. Rules of Court, rules 3 400- 3. 403)

Partnership and corporate governance (21)

Other petition ( not specified above) ( 43)

complex under rule 3.400 of the California Rules of Court If the case is complex, mark the
Ll(J is not
U is
factors requiring exceptional judicial management.

This

case

0
0

Large

issues

number of

amount of

sought ( check all

timber

4 [- t -

represented parties

motion practice

Substantial

separately

raising difficult or novel

that will be time- consuming to resolve

Extensive

documentary

that apply)

of causes of action ( specify).

a.

5"" This case

any known related cases, file

is

is

not

monetary

Two ( 2) -

i3.,,, If there

are

evidence

d Q Large number of witnesses

e

Coordination with related actions pending in one or more courts

in other counties, states, or countries, or in a federal court

f.

Substantial postjudgment judicial supervision

b. 0 nonmonetery,

declaratory

or injunctive relief

c. =

punitive

Declaratory Relief

a class action suit and serve a notice of related case (

ra us

form C

Date January 13, 2014

G. Scott Emblidge
IYV r rVG

L/

v Plaintiff must file this cover sheet with the first paper filed in the action or proceeding (except small claims cases or cases filed
r*- lunder the Probate Code,
Family Code, or Welfare and Institutions Code), ( Cal. Rules of Court, rule 3 220.) Failure to file may result
Wsanctions.

ile this cover sheet in addition to any cover sheet required by local court rule.

1, ' if this case is complex under rule 3.400 et seq of the California Rules of Court, you must serve a copy of this cover sheet on all
other parties to the action or proceeding.
Unless this is a collections case under rule 3,740 or a complex case, this cover sheet will be used for statistical purposes on
Form Adopted for Mandatory Use
Judicial Council of California

CM -010 f Rev

July i, 20071

CIVIL CASE COVER SHEET

Lie

Cel. Rules or Court, rules 230. 3.2.20. 3400. 3403, 3740;

Cel Standards of Judicial Administration, std 3 10
www coudinro ce gov

CM -010

INSTRUCTIONS ON HOW TO COMPLETE THE COVER SHEET To Plaintiffs and Others Filing First Papers. if you are filing a first paper ( for example, a complaint) in a civil case, you must
complete and file, along with your first paper, the Civil Case Cover Sheet contained on page 1 This information will be used to compile
statistics about the types and numbers of cases filed. You must complete items 1 through 6 on the sheet In item 1, you must check
one box for the case type that best describes the case if the case fits both a general and a more specific type of case listed in item 1,

check the more specific one. If the case has multiple causes of action, check the box that best indicates the primary cause of action.
To assist you in completing the sheet, examples of the cases that belong under each case type in item 1 are provided below A cover

sheet must be filed only with your Initial paper. Failure to file a cover sheet with the first paper filed in a civil case may subject a party,
Its counsel, or both to sanctions under rules 2 30 and $. 220 of the California Rules of Court.

To Parties in Rule 3.740 Collections Cases. A " collections case" under rule 3 740 is defined as an action for recovery of money
owed in a sum stated to be certain that is not more than $ 25,000, exclusive of interest and attorney' s fees, arising from a transaction in
which property, services, or money was acquired on credit A collections case does not include an action seeking the following, ( 1) tort
damages, ( 2) punitive damages, ( 3) recovery of real property, ( 4) recovery of personal property, or ( 5) a prejudgment writ of
attachment

The identification of a case as a rule 3 740 collections case on this form means that it will be exempt from the general

time -for -service requirements and case management rules, unless a defendant files a responsive pleading. A rule 3. 740 collections
case will be subject to the requirements for service and obtaining a judgment in rule 3. 740.
To Parties in Complex Cases. In complex cases only, parties must also use the Civil Case Cover Sheet to designate whether the

case is complex If a plaintiff believes the case is complex under rule 3 400 of the California Rules of Court, this must be indicated by
completing the appropriate boxes in items 1 and 2 If a plaintiff designates a case as complex, the cover sheet must be served with the
complaint on all parties to the action A defendant may file and serve no later than the time of its first appearance a joinder in the
plaintiffs designation, a counter -designation that the case Is not complex, or, If the plaintiff has made no designation, a designation that
the

case is complex

Auto Tort

CASE TYPES AND EXAMPLES

Contract

Auto (22) - Personal Injury/Property

DamagelWrongful Death
Uninsured Motorist (46) ( if the

Provisionally Complex Civil Litigation (Cal

Breach of Contract/ Warranty (06)

Breach of Rental/ Lease
Contract ( not unlawful detainer
or wrongful eviction)

case involves an uninsured

motonst claim subject to

ContracVvVarranty Breach - Seller

arbitration, check this item

instead of Auto)

Plaintiff (not fraud or negligence)

Negligent Breach of Contract/

Other PI/ PD/WD ( Personal Injury/

Property DamagelWrongful Death)

Tort

Asbestos ( 04)

Asbestos Property Damage

Asbestos Personal Injury/
Wrongful Death

Product Liability (not asbestos or

toxiclenvironmental) (24)
Medical Malpractice ( 45)

Medical Malpractice Physicians & Surgeons

Other Professional Health Care
Malpractice

Other PI/ PDM/D ( 23)

Premises Liability ( e g , slip

End fall)

Collections ( e g , money owed, open

book accounts) ( 09)
Collection Case -Seller Plaintiff

Other Promissory Note/ Collections

Practice ( 07)

Civil Rights ( e g , discrimination,

false arrest) (not civil
harassment) (OB)

Defamation ( e g , slander, libel)

13)

Fraud ( 16)

r intellectual Property ( 19)

Professional Negligence ( 25)
Legal Malpractice
Other Professional Malpractice

1'*) (

not medical orlegal)

Other Non- PI/ PDlWD Tort (35)

Employment

i, Wrongful Termination ( 36)

Other Employment ( 15)

CM 010 (Rev

July

1,

20071

Insurance Coverage Claims

arising from provisionally complex

case type listed above) ( 41)
Enforcement of Judgment
Enforcement of Judgment ( 20)
Abstract of Judgment ( Out of

County)

Auto Subrogation

Administrative Agency Award

Other Coverage
Other Contract (37)
Contractual Fraud
Other Contract Dispute

Real Property
Eminent Domain/ Inverse
Condemnation ( 14)

Other Real Property ( e g , quiet title) ( 26)

Writ of Possession of Real Property

Business Tort/ Unfair Business

Securities Litigation ( 28)

Environmental/ Toxic Tort (30)

complex) ( 18)

Insurance Coverage ( not provisionally

Wrongful Eviction ( 33)

Non- PIIPDMD ( Other) Tort

Claims Involving Mass Tort (40)

Confession of Judgment (nondomestic relations)

Sister State Judgment

Case

e g , assault, vandalism)
Intentional Infliction of
Negligent Infliction of
Emotional Distress
Other PI/ PDiWD

Other Breach of ContractMfarranty

Intentional Bodily InjuryIPDMID

Emotional Distress

i.

Warranty

Rules of Court Rules 3 400- 3 403)

Antitrust/ Trade Regulation ( 03)
Construction Defect ( 10)

Mortgage Foreclosure

Quiet Title

Other Real Property (not eminent

domain, land/ordltenant, or
foreclosure)
Unlawful Detainer
Commercial ( 31)
Residential ( 32)

Drugs (38) ( if the case involves illegal

drugs, check this Item, otherwise,

report as Commercial or Residential)
Judicial Review
Asset Forfeiture ( 05)
Petition Re Arbitration Award ( 11)

Writ of Mandate ( 02)

Writ -Administrative Mandamus
Writ -Mandamus on Limited Court
Case Matter Wnt- Other Limited Court Case
Review
Other Judicial Review (39)
Review of Health Officer Order
Notice of Aooeal- Labor

CIViL CASE COVER SHEET

not unpaid taxes)

PetittontCertification of Entry of
Judgment on Unpaid Taxes
Other Enforcement of Judgment
Case
Miscellaneous Civil Complaint
RICO ( 27)

Other Complaint ( not specified

above) (42)

Declaratory Relief Only

Injunctive Relief Only (non harassment)

Mechanics Lien
Other Commercial Complaint

Case ( non- torYnon- complex)

Other Civil Complaint
non- tort/non- complex)
Miscellaneous Civil Petition

Partnership and Corporate

Governance ( 21)
Other Petition ( not specified
above) ( 43)

Civil Harassment
Workplace Violence

Elder/Dependent Adult
Abuse
Election Contest
Petition for Name Change
Petition for Relief From Late
Claim
Other Civil Petition

SHDRiTT11E

Y FAX

CASE NUMBER

MORRIS ' V . : HERAZJX , _

09

CIVIL' CASE COVER SHEET i4DDENDUM AND

STATElVIENT,OF; LOCATION _';,' ,

CERTIFICATE; OEGROUNDS FORIASSIGPIMENT TO COUFtTWOUSE LOCATION) '
etr, ra :`

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tip 1:;' After first' cgrj plating the,Civil Case Cover,S

at,form; find, the maln, Civil Case Cover' Sheet heading for your

case.in;the left margin 'beI6W and,1to' the;ilght in Column A;; the Civil Case,Cove Sheet case type you selected,
t_ -

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checked,.,,For anylaxceptyonto)the;court,locatlori;!see' L'ocal Rule2.l).'

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where performance required or defendant resides

Location of propsrty or permanently garaged vehicle

where cause of action arose.. ; , _ `

Location wh: re pedtloner resides

8. Location wh rein defendant/respondent functions wholly

9. Location where one or more of the parties reside

10 Location of Labor Commissioner Office

Location

Step 4: Fill In the information requested onpage 4 in Item IIi, complete Item IV, Sign the declaration.
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A6910A6910 DefamationDefamation
(
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( ( nono wnlract)wnlract)

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(
( 25)25)

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1,1,

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11, ,

22 3,3,

16017 ' Legal Malpractice

1 , 2.. 3.

A6050A6050 OtherOther Professional Professional MalpracticeMalpractice

(
( notnot medicalmedical oror legal)legal)

1., 2 , 3,

A6026 Other Non -Personal Injury/Property Damage tort

2.,3.

A6037, Wrongful Termination

1,

z-z-

Wrongful Termination (36)

Other Employment (15)

lE
y

A6 024 Other Employment Complaint Case

1 . 2.. 3.

A6109LaborCommissionerAppeals

10

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Breach of' ContracU Warranty

Breach of Rental/LeaseContract (not unlawful detainer or wrongful

2 , 5 .

1_

2. 5

16008 ConliacNWarranty Breach _Seiler,Plaintiff (no fraud/negligence),'

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a

not insur"' , ..

C]jA6019- Negligent Breach of ContractlWarranty"(no fraud): Y +

A 6098 Other Breach of Contract/Warranty (not fraud or negligence)

A6002 Collections Case Seller Plaintiff

2, 5, 6

16012 Other Promissory Note/Collections Case

2. 5

n A6015 insurance Coverage ( not complex)

1, 2 , 5 , 8

C] A6009 Contractual Fraud

1 , 2 , 3 , 5.

Other Contract ( 37)

A6031 Torbous Interference

Eminent Domain/ inverse

Condemnation ( 14)

C] A6027 Other Contract Dispute( not breachAnsurance/fraud/negligence)

1 , 2., 3 , 8

C1

A7300 Eminent Domain/ Condemnation

Number of parcels

r --T 16023 Wrongful Eviction Case > ,

Wrongful Eviction ( 33)

1 ' 2., 5

1, 2, 5

Collections ( 09)

Insurance Coverage (18)

2, 3

2. 6

o.

Other Real Property (26)

Jal

A6018 Mortgage Foreclosure

2 6

A6032 Quiet Title _ _

2 , 6, _

A60BOOtherRealProperty( noteminentdomaln, landlord/tenant, forectosure

2 , 6.

Unlawful detainer
Q A6021 Unlawful Detalner-Commercial (not drugs or wrongful eviction)
31) -Commercial
Unlawful Detalner-Residential

E A6020 Unlawful Detainer -Residential ( not drugs or wrongful eviction)

32)

Unlawful DetalnerRast-Foreclosure ( 34)

Unlawful Detainer -Drugs (38)

LACIVM9 (Rev;03111)

ql

c -

0Yp;

2, 6

A6020F Unlawful DetalnerPost-Foreclosure

6,

16022 Unlawful Detainer -Drugs

g,

C`

vkr

2. 6

L'A.S,..

CIVIL

S:,:
qEiQDDFNGDUM
Ha
T:Al
ANDS,TATEMENT`;"
1:,; , ;,:,
OF; LOC=,

Lam.:=

hlv',
1'''

z " ":
r; '',

Local' Ruie' 20

o
r;:,_<,'.:

f1-

Pae2 of;4

SHORTTriE

MORRIS

V.

BERAUX

yi{'.

CA ENUMBER

5,

44f'. ta

9,

r {

t}

a1 "

B
h'

yrt

hs

L.

5*

wf

_):

OMNI.
7

L] A6108 Asset, Forfeiture Case

Asset Forfeiture ( 05) '

Petition re Arbitratlon ( 11)

A6115 Petition to Compel/ConfirmNacate Arbitration

Writ of Mandate ( 02)

i 7l

y;

Q1`

w.

2. 6

2., 5
2 8

A6152 Writ - Mandamus on Limped Court Case Matter

A6153 Writ - Other Limited Court Case Review

2
2, 8

c0
Anbtrustffrads Regulation ( 03)

A6003 Antitrust/ Trade Regulation

1, 2 , 8

A6007 Construction Defect

1,

2, 3

A6006 Claims Involving Mass Tort

1,

2, 8

ar

Construction Defect ( 10)

Claims Involving Mass Tort

E::]

0'

Secuntles Litigation ( 28)

tom A6035 Securities Litigation Case

1 , 2 , 8,

cc

Toxic Tort
Environmental ( 30)

Insurance Coverage Claims

from Cornpiex Case ( 41)

Enforcement
of Judgment (20)

A6036 Toxic Tort/ Environmental

1 , 2 , 3 , 8.

A6014 Insurance Coveraga/ Subrogation ( complex case only)

1 , 2 , 5., 8

A6141 Sister State Judgment

2, 9

J A6160 Abstract of Judgment

2, 13

n A6107 Confession of Judgment ( non-domestic relations)

2, 9

A6140 Administrative Agency Award ( not unpaid taxes)

2. 8

A6114 Petltlon/ Certificate for Entry of Judgment on Unpaid Tax

2, 8

n A61112 Other Enforcement of Judgment Case

RICO (27)

A6033 Racketeering ( RICO) Case

0 A6030 Declaratory Rellef Only

Other Complaints
Not Spedfled Above) (42)

A6040 Injunctive Rellef Only (not domestic/harassment)

0 A6011 Other Commercial Complaint Case (non-tort/non- complex)

2 , 8., 9,

1,

2, 8

1, 2 , 8
2., B.
1,

2, 8

A6000 Olhar Clvll Compialnt (non; tort/ non- complex)

Partnership
CorporationA6aa3- P-artnershlpand Corporate-Govemance-Case -Govemance (21)

Other Petitions
Not Specified Above)
43) ,

I_]

2- 8.

A6121 Civil Harassment

2. 3. 9

A6123 Workplace Harassment

2, 3. 9.

A6124 Elder/Dependent Adult Abuse Case

2, 3, 9

A6190 Election Contest

2,

A6110 Petition for Change of Name

2, 7

A6170 Petltlon for Relief from Late Claim Law

2, 3. 4, 8

A6100 Other Civil Petition

2, 9

LACIV- 109( Rev 03( 11) LASCApproved 03- 04

CIVIL, CASE COVER SHEET ADDEN[

AND STATEMENT OF, LOCATION

Local Rule 2 0
Page 3

d^p..,'

bTwf.t<.

. y, ri..
trCt9141'i..`
C

vh',

A6151 Wilt - Administrative Mandamus

C] A6150 Other Writ /Judicial Review

Other Judicial Review (39)

1
L"\

of

SHORTTITLE

MORRIS V.

BERAUX

CASENUMBER

Item III. Statement of Location: Enter the address of the accident, party's residence or place of business, performance, or other

circumstance Indicated in Item It., Step 3 on Page 1, as the proper reason for filing in the court location you selected.
ADDREss'

REASON; Check the appropriate boxes for the numbers shown

under Column C for the type of action that you have selected for

214

E.

120th Street

this case.

01. 1x] 2. O3.04:C-- 15.

6. 07.1: 18. E--19. M10.

CITY.,

LOS

STATE,

1c;

ANGELES

ZIP CODE.,

190061

Item IV. Declaration ofAssignment I declare under penalty of perjury under the laws of the State of Caldomla that the foregoing is true
and correct and

that the

above -entitled matter

District

of

is property filed for

assignment

the Superior Court of Callfomla,

County

of

to the STANLEY

MOSK

courthouse . n the

Los Angeles [ Code Civ. Proc., 392 at seq., and Local

Rule 2.0, subds. ( b), ( c) and ( d)):

Dated:

1\ 1

a,-,

SIGNATURE OF ATTORNEY/FILING PARTY)

PLEASE HAVE THE -FOLLOWING ITEMS COMPLETED AND READY TO BE FILED IN ORDER TO PROPERLY
COMMENCE

YOURINEW! COURT

CASE:',`-,,

ry

I. .- Original Complaint or Petition.'

2.;

If filing a Complalnt, a completed Summons form for Issuance by the Clerk

Civil Case Cover Sheet, Judicial Council form CM -010

Civil Case Cover Sheet Addendum and Statement of Location form, LACIV 109, LASC Approved 03-04 ( Rev
03/ 11)

5.

Payment in full of the filing fee, unless fees have been waived.

6.

A signed order appointing the Guardian ad l.Item, Judicial Council form CIV -010, if the plaintiff or petitioner is a

minor under 18 years of age will be required by Court in order to Issue a summons.
7.

Additional copies of documents to be conformed by the Clerk, Copies of the cover sheet and this addendum

must be served along with the summons and complaint, or other Initiating pleading In the case

r-

WIACIV 109 (Rev. I

rM LA6C'Approved 0

tin :. . ; `

C-' ,

ule

2: 0 ?

PIPER RUDNICK LLP

MICHAEL EIDEL ( SBN 11970 1)

JEFFREY A. ROSENFELD ( SBN 136696)
NANCY T. NGUYEN ( SBN 215869)

1999 Avenue of the Stars, Third Floor

Los Angeles, Califomia 90067- 6022

Telephone. ( 310) 595- 3000
Facsimile: ( 310) 595- 3300

FILED
Los ANGEL

SUPERIOR COURT

20 z
JOHN A. CLARKE,

IVE OFFMPaCLERK

BY

STEPHANIE SIANEZ, DEPUTY

Attorneys for Plaintiff JCOR RECORDS, LLC

Case

JUDGE

calp t_,

Fri;

IN THE SUPERIOR COURT OF THE STATE OF CALIFORNIA

l0

FOR THE COUNT' OF LOS ANGELES

11

C2S5692

12 $
JCOR RECORDS, LLC,

Case No.

13

Plaintiff,
1. 1

COMPLAINT FOR BREACH OF CONTR:i.CT,

BREACH OF FIDUCIARY DUTY,

CONSTRUCTIVE FRAUD, INDUCING

V.

15
16

iNTERSCOPE RECORDS, JIMMY

IOVINE, an individual, and DOES 1

17

through I00,

BREACH OF CONTRACT AND FIDUCIARY

DUTIES. BREACH OF IMPLIED COVENANT
OF GOOD FAITH AND FAIR DEALING,
INTERFERENCE WITH CONTRACTUAL
RELATIONS, INTERFERENCE' 4'VITH

BUSINESS RELATIONS, INTERFERENCE

Defendants.

I8
19

WITH PROSPECTIVE BUSINESS

ADVANTAGE, UNFAIR COMPETITION, AND
ACCOUNTING

20 [

JURY TRIAL DEMANDED]

21
22

Plaintiff XOR Records. LLC (" JCOR") alleges as folloN%s:

23
24

FACTS COMMON TO EACH CAUSE OF ACTION '

1

Beleaguered by massive, publicly -disclosed financial losses;, the defendant' reeorii

35

company. along with its pmicipal executive, embarked on a scheme to extract themselves from

26

their business arrangement with plaintiffby demolishing plaintifrs business and stealing his

27

clients. Defendants concocted flimsy, bad faith excuses and false accountings to withhold

23

1 monies to which plaintiff JCOR was and is contractually entitled, knowingly frustrating JCOR' s
LCIS 41 42W

1
COMPLAINT

ability to pay for and operate its business, al l with the tortious objective of inducing recording

artists and others to sever their contractual relationships with JCOR and contract with defendant

Interscope instead. Defendants thereby sought to usurp for their own benefit JCOR' s valuable

business relationships and opportunities. This wrongful scheine has alreadv induced the breach

of a record supplier' s contract with ICOR Defendants accomplished their goal of destroying

ICOR through

mullions of dollars rightfully due to it

the simple. yet

egregiously

urilawibl expedient of
wrongfully

%itliholding

Plaintiff is a Delaware limited liability company conducting business in Los

Angeles County and elsewhere, and qualified to do business in the State of Calit'ornia Plaintiff

iii

is in the business of contracting with recording artists and financiitig, manufacturing, promoting

11

and exploiting their records

12

3.

Defendant Interscope Records (" Interscope-)

contracts with recording artists and

13

finances, manufactures and exploits throughout the world records supplied by such artists and by

14

others. The principal place ofbusiness of Interscope is in Los Angeles County. Vagrant

15

Records, Inc (" Vagrant")

16

elsewhere of contracting with recording artists and financing and promoting their records.

17
15
19

4.

is a corporation conducting a business in Los .Angeles County and

Plaintiff is informed and believes, and oil that basis alleges, that Defendant Jiruihy

Toy ine is a resident of the County of Los Angeles, and is a principal of Defendant Interscope.
5.

The true names and capacities of defendants named herein as Does I through 104

20

are unknown to plaintiff, Nt ho therefore sues said defendants by such fictitious names Plaintiff

21

will ask: leave of thus Court to amend this complaint to show their true names and capacities

22

when the same has been ascertained. Plaintiff is infonned and believes, and, on that ground,

i3

alleges that Does 1 through 100 were responsible in some inaiiiher for the misconduct alleged

24

hereinbelow and are liable to plaintilYtheiefor, and that, in all of the conduct alleged

25

hereinbelow, Does I through 100 acted as the duty authorized agents of the Interscope

26

defendants

27

29

6.

On or about October 1S, 200U, plaintiff and Interscope entered into a written

contract ( the

LOS 4 i 421x53

ti

" Distribution Contract")

under which plaints ff turned of er to Interscope for

2
COMPLAINT

distribution the valuable records made by plaintiff s recording artists, and Interscope agreed to

distribute those records and divide the proceeds of such distribution with plaintiff. Tine

Distribution Contract also required Inteiscope to make specified advances of money to plaintiff

when a certain nu niber o units are shipped

was made, that timely receipt of monies due under the Distribution Contract was critical to the

successful operation of plaintiff" s business and that, if such payments were withheld from

plaint] tl when earned and due, plaintiffs business could be seriously damaged. A copy of the

Distribution Contract is attached heieto as Exhibit " A" and herein incorporated by reference.

9
10

11

Defendants knew, when the Distribution Contract

Plaintiff has perf'ornied all conditions, covenants, and promises required ofit to be

performed under the Distribution Contract.

S.

As of the summer, 2001, plaintiff had a contractual relationship with Vagrant

12

Records pursuant to which plaintiff agreed to purchase Vagrant' s recording agreements pursuant

13

to certain terms and conditions. Plaintiff and Vagrant subsequently amended their contract and

14

entered into a new written contract making their obligations conditional upon a court ruling or

15

settlement that

16

previously been

I7

acquire specified equity in Vagrant and to distribute Vagrant' s records in the United States on

18

specified terms and permitted plaintiff to seek an ownership distribution arrangement for such

19

records. Plaintiff has done everything required of it tinder the Vagrant Contract and is in no

20

manner or respect in breach thereof.

21

9.

Vagrant

was

associated

free

of

This

its

obligations to "

agreement (

TVT,"

an entity with which Vagrant had

the " Vagrant Contract")

called for plainti ff to

During December, 2001, plaintiffbccainc entitled to an advance under the

22

Distribution Contract of S2 million from Interscope At that time, defendants well knew that this

23

payment was essential to the operation of plaintiffs business, and that plaintiffs business would

2#

15

be severely damaged, if not destroyed, if that distribution was not made when due.
10.

Defendants delibei-ately withheld that $2 million advance from plaintiff pursuant

26

to what apparently is, unfortunately, a oft -used modus operandi. To withhold essential funds and

til

thereby emaciate a record producer' s business, so that the producer' s recording artists will have

28

no choice but to jump ship directly to defendants' label or labels. Defendants thus enjoyed the

1
LOSA1' 42Q53 %-i

3
COMPLAINT

benefits of plaintiffs success for a time and then, when they saw they could get the f'niits of
plaintiff' s labors without the middle -man, embarked on a scheme to remove plaintiff from the

picture. Defendants supplemented the financial starvation of plaintiff with carefully planned

inducements to plaintiff s recording artists and others to sever their contractual relationships with

plaintiff and to contract with Interscope instead. For example, defendants offered substantial

payments to Vagrant to sever its relationship with plaintiffand to contract instead with

defendants, while withholding the essential funds from plaintiff. In effect, defendants used

plaintiffs money to induce Vagrant to breach its contract and sever its ties with plainti fiand to

contract with defendants instead.

10

FIRST CAUSE OF ACTION

I 1(

Breach

12

11.

13

of

Contract Against Interscope and DOES 1 through 100)

Plaintiff incorporates by reference paragraphs 1 through 100 heremabove as

though fully set forth heroin.

14

12.

15

Interscope' s acts alleged hereinabove constitute a willful and material breach of

the Distribution Contract.

16

13.

Interscope' s wrongful conduct has directly and proximately caused actual damage

17

and consequential damages which were fully anticipated at the time the contract was entered

18

into.

19

14.

20

As a direct and proximate result of Interscope' s bi each, plaintiff has suffered and

will su ffer substantial monetary harm, in a sum not as yet known, but which plaintiff is Informed

and believes and, on that ground, alleges will exceed the suns of Thirty Million Dollars

2' ($

30,000,000.00)

23

SECOND CAUSE OF ACTION

24 (

25

Breach

15.

Fiduciary Duty Against All Defendants)

Plaintiff incorporates by reference paragraphs 1 through 10 hereinabove as though

fully set forth herein.

16.

28

of

The relationship between plaintiff and Interscope, pursuant to which plaintiff

turned over its valuable property to said defendants to distribute and otherwise exploit, and to
LOSA 142953 %1

4
COM PLA UVT

1
2

divide the proceeds of such distribution and exploitation with plaintiff, created fiduciary duties to
plaintiff on the part of Interscope and its principals.
17.

Defendants' wrongful and coercive scheme alleged hereinabove, including the

failure to account properly and the deliberate withholding from plaintiff of a $ 2 million advance,
5

in order to deprive plaintiff of finds and to lure away recording artists and Vagrant, constituted a

willful breach of defendants' fiduciary duties.

S
9

10 ($
11

12

18

As a direct and proximate result of defendants' misconduct, plaintiff has suffered

and will suffer substantial monetary harm in a sum not yet fully known, but which plaintiff is

informed and believes and, on that ground, alleges will exceed the sum of Thirty Million Dollars
30,000,000. 00).
19.

Defendants' breach of its fiduciary duty owed to plaintiff was committed with

malice, oppressively, and fraudulently, in that it was designed to " starve plaintiff out" In order to

13

steal front plaintiffits valuable contract nghts and opportunities, appropriating the monetary

14

benefit thereof, while destroying plaintiffs business.

15

THIRD CAUSE OF ACTION

16 (
17
18

19
20
21

Constructive Fraud Against All Defendants)

2U.

Plaintiff incorporates by reference paragraphs 1 through 10 and 16 through 1 S

hereinabove as though fully set forth herein.

21.

Defendants' misconduct constitutes constructive fraud with the meaning of Civil

Code Section 1573.

22.

As a direct and proximate result of defendants' misconduct, plaintiff has suffered

22

and will suffer substantial monetary harni in a sum not yet fully knowii, but which plaintiff is

23

informed and believes and, oil that ground, alleges will exceed the sum of Thirty Million Dollars

24 ($
25

30,000, 000. 00).

23.

Defendants' wrongful conduct as herein alleged was committed with malice,

26

oppressively, and fraudulently, in that it was designed to " starve plaintiff out" in order to steal

27

from plaintiff its valuable contract nglits and opportunities, appropnating the monetary benefit

18

thereof, white destroying plaintiff s business

LOS 4 142 M

5
C ONIPLAINT

I
2(
3

4
5

FOURTH CAUSE OF ACTION

Inducing Breach
24.

of

Vagrant Contract

Against Interscope, Iovine, and DOES 1 through 100.)

Plaintiff incorporates by reference paragraphs 1 through 23 hei einabove as though

fully set forth herein.

25.

Vagrant's breach and repudiation of the Vagrant Contract was induced and

brought about by the defendants tt ith full knowledge of the Vagrant Contract and with no

legitimate pnvilege to so act

26.

As a direct and proximate result of said defendants' nusconduct, plaintiff has

suffered and will suffer substantial monetary harm to a stem not yet fully known, but which

10

plaintiff is informed and believes and, on that ground, alleges will exceed the sum ofThirty

11

Million Dollars ($ 30,000, 000 00).

12

27

Defendants' wrongful conduct as herein alleged was committed witli malice,

13

oppressively, and fraudulently, in that it was designed to " starve plaintiff out" in order to steal

14

from plaintiff its valuable contract rights grid opportunities, appropnating the monetary benefit

15

thereof, while destroying plaintiff s business Plaintiffis therefore entitled to an award of

16

punitive or exemplary damages in order to punish defendants and deter them, and/or each of

17

them, from such further wrongful conduct

18

f9 (

FIFTH CAUSE OF ACTION

Breach Of Implied Covenant Of Good Faith And Fair
Dealing Against Interscope and DOES

l through 100)
20
21
22

Z3

28.

Plaintiff incorporates by reference paragraphs 1 through 10 and 14 through 27

hereinabove as though fully set forth herein.

29.

Iriiplied into every contract is a covenant that each party will act in good faith and

24

deal fairly with one another, and thereby do nothing in bad faith, which deprives the other party

25

or parties of the benefits of the contract.

26
7

30.

In doing the acts alleged Herein, defendants breach the implied covenant of good

faith and fair dealing.

zs
LOSA 1 43$ 53 %1

G
COMPLAINT

31.

As a direct and pio\ rmate result of said defendants' breach ofthe implied

covenant of good faith and fair dealing, plaintiff has suffered and will suffer substantial

monetary hams in a suns not yet fully known, but which plaintiff is informed and believes and,

on

that ground, alleges will etceed the sum

of

Thirty Million Dollars ($ 30, 000, 000. 00).

SIXTH CAUSE OF ACTION

6(

interference With Contractual Relations Against All Defendants)

32.

Plaintiff incorporates by reference paragraphs 1 through 14 hereinabove as though

fully set forth herein.

33.

10

Contractual relationships existed between plaintiff, on the one hand, and Vagrant,

plaintiffs recording artists, and its vendors, on the other hand.

11

34.

12

At all relevant times herein, defendants had knowledge of plaintiffs

aforementioned contractual relationships.

13

35

In doing the acts hereinabove alleged, defendants intentionally interfered with

14

plaintifts contractual relationships Defendants' interference. and wrongful acts in furtherance

16

thereof, were unprivileged and witliootjustiiication. Defendants' misconduct was and is

16

particularly egregious because, by virtue of defendants' intentional interference with plaintiffs

17

contractual relalionslup, a relationship of confidence in which one party was dependent on the

IS

other, was destroyed.

19

36

20

Defendants' wrongful or unlawful conduct prommately caused the injunes

alleged herein.

21

37.

As a proximate result of defendants' interference, plaintiff ]las sul'1'ered and will

22

suffer substantial monetary Harm in a sum not yet fully known, but which plaintiff is informed

23

and believes and, on that ground, alleges will e%ceed the sum of Thirty Million Dollars

24 ($
25

30,000, 000. 00).

38.

Defendants acted with malice by acting intentionally and without cause to

26

interfere wrongfully with plaintiffs contractual relationships with knowledge that it had no right

to do so Plaintiff is therefore entitled to an award of punitive or e\ emplary damages in order to

28

punish defendants and deter them, and/ or each ofthem. frorn such further wrongful conduct.
tasni 42553

vi

7
COMPLAINT

Ll

0,

SEVENTH CAUSE' OF ACTION

2(

interference WithBusiness Relations Against All Defendants)

3
4
5

30.

Plaintiff incorporates by i eference paragraphs I through 10 hereinabo a as thou; h

fully set forth herein.

40.

Business relationslups existed between plaintiff; on the one hand, and Vagrant,

plaintiff' s recording artists, and its vendors, on the other hand. These business relationships

were eOdenced by actual and identifiable understandings that in all probability', tiould have

either continued or been completed, as the case may be, ifdefendants had not interfered.

9
10
11

41.

At all relevant times herein, defendants had knowledge of plaintiffs aforesaid

business relationships
42.

In doing the acts hereinabove alleged, defendants intentionally interfered with

12

plaintiff business relationships Defendants' interference, and wrongful acts in furtherance

13

thereof, were unprivileged and withoutjustification. Defendants' misconduct was and is

14

particularly egregious because it involves the destruction of a relationship in which one party

15

was dependent on the other, and thus where a relation of confidence existed between plaintiff

16

and defendants.

17
IS
19

43.

Defendants' wrongful or unlawful conduct protinlately caused the injuries

alleged herein.
44..

As a proximate result of defendants' interference, plaintiffhas suffered and will

20

suf% r substantial monetary harm in a sum not yet fully known, but which plaintiff is ittfomied

31

and believes and, on that ground, alleges will exceed the sum of Thirty Million Dollars

22 ($
23

30,000, 000.01)).
45.

Defendants acted with malice by acting intentionally and without cause to

24

interfere wrongfully with plaintiffs business relationships with knowledge that it had no right to

25

do so Plaintiff is therefore entitled to an award of punitive or exemplary dainages in order to

26

punish defendants and deter them, and/ or each of then/, from such further wrongful conduct.

37

28
i

LOSAJ 42853

vi

g
f'Oh1PLAiPJ' i'

EIGHTH CAUSE OF ACTION

2(

Interference With Prospective Business Advantage

Against All Defendants)

46

Plaintiff incorporates by reference palagTaphs 1 through 10 hereinabove as though

fully set forth herein.

47.

Prospective business relationships existed between plaintiff, on the one hand, and

Vagrant. plaintiffs. recording artists, its vendors, and others, on the other hand. These

prospective business relationships were evidenced by actual and identifiable understandings that

in all probability would have resulted in a business advantage and/or profit if defendants had not

interfered.

I()

48.

1 I

prospective business relationships

12

13
14
15
16

17
18
19
20

At all relevant times herein, defendants had knowledge of plaintiffs aforesaid

49

In doing the acts hereinabove alleged, defendants intentionally interfered with

plaintiffs prospective business relationships. Defendants' interference, and wrongful acts in

furtherance theieof, were unprivileged and without justification. Defendants' misconduct was
and is particularly egregious because it involves the destruction of a relationship in which one
party was dependent on the other, and thus where a relation of confidence existed between
plaintiff and defendants.
50

Defendants' wrongful or unlawful conduct proximately caused the injuries

alleged herein.
51.

As a proximate result ofdefendants' interference, plaintiff has suffered and will

21

suffer substantial monetary harm in a sum not _yet fully known, but which plaintiff is infonned

22

and believes and, on that ground, alleges will exceed the sum of Thirty Million Dollars

23 (
24

30.000, 000 00)

52.

Defendants acted with malice by acting intentionally and without cause to

25

interfere wrongfully with plaintiffs prospective business relationships with knowledge that it

26

had no right to do so. Plaintiff is therefore entitled to an award of punitive or exemplary damages

38

in order to punish defendants and deter them, and/or each of theni, from such further wrongful
conduct.

LOSAI3?S5J

9
CONIPL 41NT

NINTH CAUSE OF ACTION

2(

Unfair Connpetition Against All Defendants)

3
4

53.

fully set forth het ei n

Plaintiff incorporates by reference paragraphs l through 52 hereinabove as though

54
and

thus "

51

Defendants' conduct alleged hereinabove constituted an " unfair business practice"

unfair

competition" as

delated in Business

and

Professions Code

17200 et seq

By reason of their misconduct, defendants will be unjustly enriched through

contracting with plaintiffs recording artists and with Vagrant in a substantial suns as yet

unknown to plaintiff but which plaintiff is informed and believes and, on that ground alleges will

10

11
I2

exceed the sum of Thirty Million Dollars.

56.

Defendants' misconduct was not committed out of any sincere or proper motive.
but was malicious and oppressive in that it was designed to " starve plaintiff out" in order to steal

13

from plaintiff its valuable contractual rights and opportunities, appropriating the monetary

14

benefit thereof, while destroying plaintiffs business.

15

TENTH CAUSE OF ACTION

16 (

For

17
13

57

an

Accounting Against Interscope)

Plaintiff incorporates by reference paragraphs 1 through 52 hereinabove as though

fully set forth herein

19

58.

By virtue of the relationship established between plaintiff JCOR and defendant

20

Interscope, defendant is obligated to provide, and plaintiff is entitled to receive, an account of

21

monies due to plaintiff on a periodic basis

22

59

Based upon defendants' conduct as hereinabove alleged, and improper accounting

23

statements rendered to date, plaintiff is informed and believes, and based thereon alleges, that

24

Interscope has failed to account properly and continues to fail to account properly to plaintiff:

25
26
7

60

The full extent of montes awed to plaintiff cannot be determined without a

complete accounting oflnterscope' s books and records. Plaintiff therefore seeks an order that
said accounting be provided by Interscope.

1s

Lc IW

42, m

vi

10
COMPLAINT

3
4

5
6

WHEREFORE, plaintiff prays judgment as follows.

1

For damages in the suns of Thirty Million Dollars,

For restitution of al I sums received by or held for defendants in respect of the

records of recording artists now under contract to plaintiff or to Vagrant,

3.

For imposition of an actual or constnictivz trust on all such receipts for the benefit

of pIaintitl;

4.

For an accounting of Interscope' s books and records;

5.

For punitiLe damages in an amount that, given defendants' massive wealth and

10
11
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13

income, will be Sufficient to punish defendants, deter further such conduct and set an example
for others;
6.

For prejudgment interest at the highest iaw Ful rate on all monetary awards other

than punitive damages, and

7

For such other and further relief as the Court deems just and proper.

14
15

Dated: November 20, 2002

Respectfully submitted,

16

PIPER RUDNICK LLP

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18

gY'

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Nancy T. Nguyen

Attomey For Plaintiff JCOR RECORDS, LLC

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LOS,A 142SS3 %l

1i
COMPLAINT

DEMAND FOR JURY TRIAL

Jury trial is demanded by Plaintiff

Dated: November 2O, 2002

Respectfully submitted,
PIPER RUDNICK LLP

By
Nancy

guyen

Attorney for Plaintiff JCOR RECORDS, LLC

t

17

2(
21
2-

24
25
26
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28
Y

LOSA l 42S53 -0 [?

COMPLAINT

DISTRIBUTION AND LICENSING AGREEMENT

An Agreement

made

this 18th

day of October 2000 between Interscope Records, a

division
of UMG Recordings,
Inc, of 2220 Colorado Avenue, Santa Monica, CA 90404
hereinafter
to
referred

as "

Interscope")

and

JCOR Records L. L.C.

41 Floor, New York, NY 14013 ( hereinafter referred to as " you").

of 211 Center Street

DISTRIBUTION TERM
The term

of this

Agreement ( hereinafter

referred

to

as the ' Term")

will commence on the

date first above written and will continue for a period of thIme ( 3) years subject to any
extensions or renewals and the rights of sell-off pursuant to paragraph 7. 05. hereof.
2.

COMMITMENT
2. 01

You

shall

not

release

hereunder

more

than eight ( 8)

LPs in any one

calendar quarter or more than a total of twenty five ( 25) LPs in a calendar year of the

Term wdhout INTERSCOPE' s prior written approval.

The first LP
hereunder shall be an LP by the artist " Eightball and MJG".
Such

to be released

LP is currently

scheduled for release on November 21, 2000, subject to delivery by you to INTERSCOPE

in good time ( being a period of time as shall be advised by INTERSCOPE to you) of the
parts, artwork and all other materials reasonably necessary to undertake such release on
that date.

2. 02

You will deliver to INTERSCOFE fOr distribution hereunder no fewer than

six ( 6) newly recorded and previously unreleased LPs in each year of the Term ( the
Product Commitment!).

If as of the date thirty ( 30) days prior to the and of any year of
the Term you have failed to deliver the Product Commrtment the running of Term of this
agreement will be suspended until delivery of the ' Product Commitment,
expiration of the Term will be extended for the:length of such suspension_

3.

and

the

INTERSCOPeS RIGHTS
3. 01.

During the Term INTERSCOPE will have the exclusive right ( except as

hereinafter provided) in the Territory to distribute any and all Records embodying Master
Recordings that are owned or controlled, in whole or in part, directly or indirectly by ( a)
you or the Principal and/or (b) any corporation or other entity owned or controlled by you

or the Principal; and/or ( c) any person, corporation or other entity owning or controlling
any of the foregoing or controlling a financial interest In all or a substantial part of the
recording rights, of the foregoing.
JcorP&O. final

10/ 18/ 00

00- 194

ri

3. 05.

INTERSCOPE

will

have the

right to

distribute,

publicize,

advertise and

exploit Records and to cause or permit others to do so.

3 06.

INTERSCOPE will have the right to perform Records hereunder publicly

and to permit the public performances thereof in any medium and by any means

whatsoever, whether now or hereafter known.

3. 07.

INTERSCOPE will have the right to use and publish and to permit others to

use and publish your, each artist's and producer's likeness, name, voice, sound effects

and biographical material, or any reproduction or simulation thereof, in connection with

INTERSCOPE's sale, advertisement, distribution and exploitation of Records hereunder.
3. 08.
above)

INTERSCOPE will have the exclusive right, (subject to paragraph 3. 03

obligation ( subject

and

to

paragraph

8. 09

hereof) to use your applicable

trademark or logo ( as more 'specificaliy set forth) during the Term hereunder ( and after
the Term to the extent INTERSCOPE has the right to continue to distribute Records
hereunder as provided below) at no additional cost to iNTERSCOPE and in accordance
with the terms and conditions of the trademark license agreement attached hereto as
Exhibit " 13"

and incorporated by reference, and you will indemnify INTERSCOPE with

respect thereto.

Your submission of any material which includes your trademark and/or

logo will be deemed to be instructions to INTERSCOPE for INTERSCOPE to use such
trademark and/or logo, as submitted.

4.

PAYMENTSIACCOUNTiNGS
4.01.

With

respect

to

Records

distributed

hereunder

to

INTERSCOPE' s

customers and subject to paragraphs 4. 04 and 4.05 following, I

a
n-

and will rairue.neE.a>#,

Gross_ QP;; iPr price_ a

( s hereinafter defined) of QqGb
costs. (the amount remaining after deduction of all said costs and applicable- taxes is
referred to as " Net Proceeds"):

INTERSCOPE's distribution fee of eighteen percent

a) -

18%)

of the Gross Dealer Price invoiced hereunder during each billing month

hereinafter referred to

as

the " Distribution Pee"), which is inclusive of a charge for

overhead, freight, bad debts, and cash discounts. Notwithstanding the foregoing,
the Distribution Fee in any year of the Terri shall prospectively de-escalate by .5%
17%) in respect of Net Proceeds

to seventeen

percent (

hereunder

that year of the Terrn i-

and

shall

in

further de- escalate prospectively by . 5% to

respect of Net Proceeds

Term in
Jcor?&D. P_ nal

OC - 1 ? 4

excess of

fifteen

credited to your account

Dl

e+cs -

sixteen

percent (

16%)

in

credited to your account hereunder in that year of the

million

dollars ($ 15, 000, 000) .

10/ 18/ 00

b)

To

the

that

extent

during the Term

you

require

INTERSCOPE's promotion staff to work LPs and any Singles therefrom delivered
hereunder
the Distribution Feeon shall be twenty two point four percent ( 22.4%)
the aforementioned
de -escalations (

with

21. 4%)

twenty

and

Singles .

four

point

percent (

i. e,

to twenty one point four percent

20. 4%) respectively) on those LPs and

Any approved third party costs actually incurred by INTERSCOPE in

connection
with the promotion of records hereunder shall be an additional cost to
be deducted
by INTERSCOPE

from Net Proceeds.

To the extent that Net

Proceeds due to be accounted to you in the monm in which the promotion costs
are incurred are not sufficient to reimburse such costs the unrecovered portion of
such costs shall be paid by you to INTERSCOPE within ten ( 10) business days
INTERSCOPE' s

after

demand

written

therefor.

You

hereby request and

INTERSCOPE agrees that INTERSCOPE' s promotion department shall work the

mum and Singles by the artist Eightball and MJG for the life of the same.
c)

Credits to INTERSCOPE' s customers0 for actual returns made during

billing

each

month.+

artmpated and

a,

ii

fMti ` ..

yAinste

rr,,..

then against the

oldest unused

reserves.

tQae

Sales$..

If the amount of actual

returns and/or credits exceed the amount of reserves held by INTERSCOPE ( as

set forth below) then, without limiting its other rights, iNTERSCOPE will deduct the
from

unrecovered portion

your

Net Proceeds hereunder. If your Net Proceeds are

insufficient to pay the unrecovered amount, such amount will be paid by you within

ten ( 10) business days following INTERSCOPE' s written demand therefor

d)

INTERSCOPE will withhold a reasonable percentage of the amount

invoiced hereunderwith respect to LPs and Singles and
Records

other
rP3Gn

a _

as

reserve

f. _

MPce -

against

anticipated

returns

and/ or

The

credits.

ase- a-shgii hp ri

3UStf#eSS

At^

ra }

t `

e
dar

figures. In the case of the

taking of reserves
hereunder any reserve taken on any accounting shall -cot
i
o"
tftcat: fi

exree '

n"

tosar.

that a
r,
irfrig.
The

Gid

n+h

to

tF,

nv+
pnt..

tae illat

reasQraala

ilSr.p

d''

ai

dr

nt_rPri) t[` pr+

b'3"in"

e"
r

e craiee vf

hV art ial
ra

mamter a ief

akile

ae

besiaess'

dfe

vik

3e

tro

5oundscan.
acc.our

In. any
ueA.t_aay.,.raserye_ taken shall be_.jigllidated
tingr,folio>
Ar t g
eild
f-he ccoi r tmg
r tt- in
f la ttaa

taken

business

fifth
r

ser r

vas

Notwithstanding the foregoing and in INTERSCOPE's reasonable

judgment,

one

hundred

and

eighty ( 184) days prior to the

natural

expiration or the termination of the term hereunder, INTERSCOPE will have the

right to withhold reserves in an amount sufficient in INTERSCOPE's reasonable

business judgment to cover anticipated retums or credits after the term hereof.
Such post -Term reserves shall be liquidated in a manner as shall be determined
final $
cc -! 94

ZfJlltli

nVii(

iEi:_

by INTERSCOPE in its reasonable business judgement unless you procure that

the party exercising post Term distribution rights in respect of Records distributed
hereunder shall accept post -Term returns in respect of Records distributed
hereunder during the Term. Where such new distributor notifies retail that it will

accept post Term returns of Records distributed hereunder during the Term then
Interscope

shall

not

take,

or shall

immediately liquidate , if already

taken,

any

reserves in respect of post Term returns.

Any and all manufacturing charges and costs ( at the rates charged
to INTERSCOPE by its manufacturer) for any Records pressed hereunder which
e)

have not been paid for by you.

f)

Any and all amounts due INTERSCOPE hereunder or otherwise at

the time of payment to you of all sums under this paragraph.

Any and ail applicable taxes imposed an INTERSCOPE with respect

g)
to the manufacture, distribution and sale of Records hereunder ( e.g. sales tax,
VAT, etc.).

h)
Any other fees actually charged to INTERSCOPE by its distributor,
including, without limitation, any charges for retums handling, free goads handling
or excess inventory charges.

In the event that INTERSCOPE licenses to third parties any of your Masters
hereunder (or portions thereof),(which shall only be done with your prior approval) in lieu
of the Distribution Pee set forth hereinabove, INTERSCOPE will be entitled to retain for its
own account fifteen percent ( 15%)) of the Net Receipts received by INTERSCOPE from
4. 02.

license. The balance will be credited tD your account. INTERSCOPE shall

attempt to procure licenses to third parties of Masters distributed hereunder through the

each such

partylies procuring such licenses on behalf of INTERSCOPE's own catalogue, who is, at
the date hereof, Universal Music Enterprises.
4. 03.

in the event that INTERSCOPIr sells your Records hereunder as cutouts,

distress or scrap, in lieu of the Distribution Fee set forth hereinabove, INTERSCOPE will
deduct twenty-five p'ercerit ( 25%) of the gross amount received from customers with

respect to such sales. The balance will be credited to your account.

4. 04.

In respect of sales and exploitations of Masters in Canada in lieu of the net

amount invoiced, INTERSCOPE shall credit to Net Proceeds a royalty ('The Royalty").
The Royalty on an Album shall be twenty four (24%) percent, and on a Single fourteen
percent ( 14%), calculated on 100% of sales net of returns and credits calculated on the
Grass Dealer Price less a deduction of twenty fire percent ( 25%) on all forms of
exploitation on account of packaging ( but twenty percent ( 20%) in the case of cassette
format).

In addition the Royalty shaft be calculated in the same manner subject to the

JcorP&D. flnal
00- 194

10/ 18/ 00

same

deductions

reductions,

and

mitigations,

including

format and price category

reductions,
free goods and reserve
policies, as the royalty payable to INTERSCOPE by
its licensees in
Records licensed
respect

hereunder.

of

Where INTERSCOPE' S

licensees account to INTERSCOPE in respect of Records licensed hereunder otherwise

than

the basis

on

percent (75%)

of a royalty, Interscopeshall credit to Net Proceeds seventy five

of Interscope's net receipts in respect thereof.

4. 05.

Monies eamed by you with respect to the exploitation of your Records in

Canada, will be credited to Net Proceeds only after receipt by or credit to INTERSCOPE
of United States currency ( less the cost of conversion) at the same rate of exchange as
INTERSCOPE

is

paid

after

deducting any

and all

foreign taxes.

Such credit to Net

Proceeds shall be made within sixty (60) days of Interscope's receipt of such monies or
credit from its licensees. In respect of explortation of Records licensed hereunder in
Canada INTERSCOPE shall be entitled to retain for its own, account the difference
between its receipts from its licensees and the monies to be credited to Net Proceeds
pursuant hereto.
4. 06.

All statements and other accounts rendered by INTERSCOPE will be

lainding upon you and not subject to any objections by you for any reason whatsoever,
unless such specific objection is made in writing, stating the basis thereof and delivered to
iNTERSCOPE

within

three ( 3)

years from the date such statement is rendered.

INTERSCOPE may at any time elect to utilize a different method of accounting so long as
such method does not alter the net monies due you. You shall not be entitled to audit the
books of INTERSCOPE's Canadian licensee.
4.07.

You acknowledge that INTERSCOPE and its licensees may invoice free

goods in accordance with their standard policies.

4, 08.

You will have the right upon giving INTERSCOPE thirty ( 30) days pnor

written notice, by independent certified public accountants experienced in the books and
records and methods of accounting utilized in the recording industry, to audit
INTERSCOPE' s books and records insofar as they relate to this Agreement, at

INTERSCOPE's regular place of business and during INTERSCOPE' s regular working

hours. Any such audit will be conducted no later than three ( 3) years after the date such
statement is rendered to you and such audit will be conducted in a manner that will not

interfere with the normal operation of,INTERSCOPE's business. You may make such an
examination

for a

particular statement

only

once.

You will not audit INTERSCOPE' s

books and records more than once during any calendar year of the term hereof. Any suit
commenced on such audit must be instituted within eighteen ( 18) months after said three
3) year period. You agree to discuss in good farth the preliminary results of any audit

undertaken with a view to clarifying any issues contained therein.

4. 08.

forth

as

3corP
00- 194

You will concurrently herewith execute a security agreement in the form set
attached hereto and by this reference incorporated herein.
You

Exhibit " A."

D. Eina1

10/ 18/ 00

hereby grant
to and in favor of hereinafter
INTERSCOPE, and INTERSCOPE will retain a security
in, the Collateral (

interest

as

defined)

to secure the recoupment by or

repayment to INTERSCOPE of any and all amounts otherwise

due INTERSCOPE. The

security interest herein granted to and retained by INTERSCOPE will attach to the

Collateral immediately You agree to execute all documents required by law to perfect or
modify ( if necessary) the security interest granted herein.

The Collateral will mean and

include, without limiting the foregoing and as is more completely described in the security

agreement, the following:

The Masters contained on your Records distributed hereunder

including all physical manifestations thereof) now owned or hereafter acquired,
and all of your license and contract rights relating to such Masters.
a)

IF (

b) -

The "

sound recordings' ( as

defined in 17 USC 101) contained in

the Masters including, but not limited to, the copyrights therein and thereto.
c)

Any denvates or duplicates of the Masters now owned or hereafter

acquired.

d)

All proceeds of the foregoing, including, but not limited to, any

property you may receive by sale, assignment, license or disposition of the

Masters.
e)

Any and all monies payable to you or which become payable to you

hereunder.

f)

Your inventory, now owned or hereafter acquired, in INTERSCOPE's

possession.

In this regard, INTERSCOPE will have all of the rights and remedies of a secured creditor
under

the Uniform Commercial Code

of

the

applicable

jurisdiction.

You will not, without

INTERSCOPE's written approval, grant a security interest in the Collateral which would
be superior or prior to the security interest of INTERSCOPE.
5.

ADVANCES
5. 01

INTERSCOPE hereby agrees to pay you the sum of four million dollars

4,000,000) upon execution hereof by the parties hereto.

Upon the shipment in the United States of five hundred thousand LP units
net of reserves taken in accordance with the provisions of this Agreement and actual
5. 02

returns ( if any) hereunder INTERSCOPE shall promptly pay you an additional sum of
three

million

dollars ($ 3, 000,000).

Jcor?&D. final
00- 194

10/ 16/ 00

10

5. 03
pay

you the

Duringsums
the firsttwo
twomillion
(2) years
of the Term only INTERSCOPE shall promptly
dollars ($

further

of

2, 000, 000) upon shipment In the United

States every five hundred thousand LP units net of reserves taken in accordance with the

provisions of this Agreement and actual returns ( if any) hereunder in excess of the five

hundred thousand units

referred to

in paragraph 5. 02

above.

By way of example if/

shipments net of reserves taken in accordance with the provisions of this Agreement and

returns during the first two years of the term total three million and one units you shall
receive the payments under paragraphs 5. 01 and 5.02 hereof
5. 04

All payments to you under this Article 5 shall be advances recoupable and

deductible from Net Proceeds to be accounted to you hereunder. Such payments made
to you shall be recovered from Net Proceeds before any payment of Net Proceeds is

made to you.
In thecevent that your Net Proceeds account hereunder shows a negative
balance, i. e. the total of the foregoing payments, as well as other charges, costs and
expenses

authorized hereunder debited to your account exceed credits of whatever

nature to your account then, at the end of the Term you shall repay the negatrve balance

to INTERSCOPE

within

ten ( 10)

business days of INTERSCOPE' s written demand ,

therefor.
6.

YOUR OBLIGATIONS
6. 01.

You will be solely responsible for and will accept and process any and all
returns of your Records heretofore commercially released by you or a third party and

distributed by you or a third party ( other than INTERSCOPE' S licensees outside of the
Untied States) including without limitation, returns from independent distributors, retailers,
racks or otherwise. The preceding sentence is of the essence of this agreement. Without
limiting the foregoing, if INTERSCOPE elects, in its sole discretion, to accept and process
such returns on your behalf, then, without limiting its other rights and remedies,

INTERSCOPE will have the right to deduct any costs incurred therefor against any and all
monies

due

hereunder.

You warrant and represent that than neither you nor any
Principal or any other entity owned or controlled by you or either Principal has any
agreemerit (written or oral) or has made any promise or is in any way obligated to anyone
you

including independgnt distributors) other than INTERSCOPE with

respect to the

distribution of Records in the Territory and that no agreement or promise, whether oral or
written, will in any way impact upon or interfere with or impair this agreement or

INTERSCOPE's rights herein, or give anyone other than INTERSCOPE the right to buy
Records from you or any of the above.
6 02. In
INTERSCOPE,

INTERSCOPE,

respect of Records to be distributed in the United States you will supply

material

to

and
specifications
the
schedule
designated by
for insertion in INTERSCOPE' s sales publication( s), if any, Such

pursuant

material will be printed by MTERSCOPE, at INTERSCOPE's sole cost and expense.

Jcor?&D. final
nn_

ct

10/ 18/ 00

6. 03.

In respect of Records to be distributed in the United States you will use

INTERSCOPE' s

prassina

facilities

hereunder.

Attached hereto is a schedule of

INTERSCOPE' s current costs of manufacture as are charged to it by its manufacturer as

at the date hereof. If you desire INTERSCOPE to utilize special marketing aids. such as

stickers, T- shirts, or otherwise in connection with your Records distributed hereunder,

then INTERSCOPE, in its sole discretion, may elect to do so, provided that you will bear
all the costs attendant thereto.

6 04.

In respect of Records to be distributed in the United States promptly after

INTERSCOPE' s request, you will, at your sole expense, remove from INTERSCOPE' s

warehouse, or order the destruction of, the stock of any "surplus" Records ( as defined
below).

You will be deemed to have ordered the destruction of surplus stock within

twenty-one (21) days after the data of INTERSCOPE's request to remove such " surplus"
Records,

unless

INTERSCOPE

receives

from

you within

said

twenty- one (

21)

days,

written instructions for the immediate delivery of such stock to a public, warehouse or
other non- INTERSCOPE location at your expense.
6. 05.

In respect of Records to be distributed in the United States prior to the

commercial release by INTERSCOPE of any of your Records hereunder, you wiH cause
the catalogue numbers contained on your Records to conform to INTERSCOPE's
catalogue numbers, and you will be responsible for all costs in connection therewith.

Moreover, you will cause the containers of your Records to conform to INTERSCOPE' s
bar coding requirements at your sole cost and expense. In respect of Records to be
exploited by iNTERSCOPE's licensees outside of the Untied States INTERSCOPE's
licensees shall apply their own catalogue numbers to Records to be distributed
hereunder.

6 06.

Neither you nor INTERSCOPE will not issue or cause the issuance of any

press releases announcing this agreement without your and INTERSCOPE's pnor-written
approval.

6.07.

You will be,fully responsible for the following obligations and will directly pay
to the applicable party all costs incurred in connection therewith:
Royaities and other payments to the artist, producers and any other
third party royalty participant which may become due and payable with respect to
Records distributed by INTERSCOPE hereunder.
a)

b)

All recording and production costs incurred with respect to the

Records distributed hereunder and any and all applicable union or guild payments
including so-called " per -record" or trust fund payments.

i
Jco= P& O.`

ina1

10/ 18/ 00

Any and all sales, use or other taxes levied on any of the sums

c)

payable

to you

hereunder which

iNTERSCOPE from your accountings.

have not been previously deducted by

d)

in respect of Records to be distributed in the United States any and

all costs incurred with respect to the manufacture and pressing of Records

distributed hereunder, including, but not limited to, costs incurred with respect to
discs, tapes, and tape boxes.

In respect of Records to be distributed in the United States any and

e)

all costs incurred with respect to the manufacture of record jackets for Records

distributed hereunder, including, but not limited to, costs incurred with respect to
album artwork, sleeves, color separations, liners and inserts.
f)

in respect of Records to be distributed in the United States all costs

incurred with ' respect to the hiring and maintenance of a promotion and
advertising staff utilized to promote, market and advertise Records distributed
hereunder, and ail expenses attendant thereto, including, without limitation, all
costs of marketing records and producing videos. Notwithstanding the foregoing
where it is agreed between the parties that INTERSCOPE shall undertake
promotion in respect of an LP or Single and INTERSCOPE is remunerated
therefor

pursuant

to

the

provisions

of

subparagraph

4. 01 (

b)

hereof

then

INTERSCOPE shall be responsible for its in house costs of providing the same.
In such circumstances you shall continue to be responsible for iNTERSCOPE' s

out of pocket expenses and any mutually approved third party fees and expenses
attendant thereto, including, without limitation, all costs of producing videos.
in respect of Records to be distributed in the United States all

g)
mechanical

royalties

payable

to

publishers

with

respect

to

the

musical

compositions embodied on Records distributed hereunder, as further set forth in

Article 8, below.
6. 08. At all times during the Term hereof, you will maintain in full force and effect
an " Errors and Omissions" Insurance policy in the amount of at feast One Million Dollars

1, 000,000.00)

per ' occurrence

and

Three

Million

Dollars ($ 3,000, 000.00)

in

the

aggregate with INTERSCOPE as a named insured, in connection with Records released

hereunder, and related material used in connection therewith. Proof of succi policy will be
delivered to iNTERSCOPE priorto the commencement of this agreement.

Notwithstanding anything to the contrary contained herein, INTERSCOPE

may, at its sole discretion, pay on your behalf any of the costs or expenses referred to in
6. 09.

paragraph

6. 07, above.

If INTERSCOPE pays any such costs, which it will be under no

obligation to do, such amounts will be a direct debt from you to INTERSCOPE, which

among its other remedies, INTERSCOPE may deduct from any monies payable to you
JcorP&D. final
00- 134

10

10/ 18/ 00

hereunder.

Pnor to making any such payment an your behalf in the case of

subparagraphs 6. 07 ( a), (

b) and (g) above, INTERSCOPE shall provide you with a written

notice to you at your address first above written informing you of the proposed payee, the
amount of the payment and the reason for the same. Within five ( 5) business days of

INTERSCOPE's notice you shall either, discharge the payment to the party named in the
notice and inform INTERSCOPE
of the payment, or inform INTERSCOPE why that party
to payment.
is

legally

not entitled

Such notice from you shall be writing marked for the

INTERSCOPE' s Head of Legal and Business Affairs._.,

Failure by
to INTERSCOPE' s notice within the specified timeframe shall

attention of
respond

you to
entitle

INTERSCOPE to make the payment as aforesaid.

6. 10.

It is the essence of this agreement that, at all times during the term hereof,

you will maintain a full-time staff of not less than ten ( 10) dmployess ( excluding clerical,

i. e., secretary, file clerks, etc) to work exclusively for your Record operations. In the event

any person leaves your staff and as a result your full time staff is reduced to below ten
10)

people, such person will

be replaced

within

ninety ( 90) days. In the event you fall to

comply with this paragraph, INTERSCOPE will have the right, without limiting its other
rights and remedies, to terminate this agreement upon written notice to you, in which case
the provisions of Article 7 will apply.

TERMINATION
7. 01.

Upon the expiration or termination of this Agreement and notwithstanding

anything to the contrary contained herein, INTERSCOPE will also have the right to secure
payment from you of any outstanding obligation or indebtedness, including, without
limitation, manufacturing and pressing charges, if applicable, and will have, without

limitation, each and every one of the following remedies:

a)

INTERSCOPE will have the right to recall all of your Records then

out in the field.

b)

INTERSCOPE may look to your Net Proceeds and/or payments

under Article 5 payable but not yet paid or any other monies payable to you to
recover any unsatisfied obligations;
c)

indebtedness
d)
subsequent

iNTERSCOPE may require

upon ten ( 10) business days"

you

to

pay

iNTERSCOPE

said

written notice.

INTERSCOPE will have the nght to sell your inventory ( and

returns)

at whichever price INTERSCOPE in its sole discretion

determines.
e)
Jcor?&D. Final

00-'_ 94

Intentionally deleted
11

10/ 18/ 00

f)

If your account in unrecovped at the time of expiration or termination

of this Agreement INTERSCOPE will have the right, without limiting its other rights
or remedies, at its sole discretion, to continue to manufacture and distribute your
Records which had previously been distributed under this Agreement, until such
time as you have paid INTERSCOPE the full amount of your indebtedness or in
the

alternative, until INTERSCOPE has recouped the full amount of such

indebtedness out of your Net Proceeds.

7. 02.

Upon the termination or expiration of this agreement for whatever reason,

INTERSCOPE will, at your option and expense but subject to payment of all outstanding
debts to INTERSCOPE hereunder,

and subject to subparagraph

7.01.( f), above, deliver

to you at your sole expense all stock of your Records and related materials then on hand
and subsequent returns).

If within thirty (30) days after the data of such termination you

have not given INTERSCOPE delivery instructions for such stock and related material,

you will be deemed to have authorized INTERSCOPE to destroy such stock and related
material on your behalf and at your expense or to sell such Records as cutouts or scrap.
7. 03.

In respect of Records to be distributed in the United States after the

expiration and/ or termination of this Agreement for whatever reason, you will be solely

responsible for any and ail returns of your Records from retailers, racks, one -stops or
otherwise and you will indemnify and hold INTERSCOPE harmless with respect thereto.
if, in 1NTERSCOPE' s sole discretion, iNTERSCOPE elects to accept returns of your

Records after the termination or expiration of the term hereunder, and said returns
exceed the reserves then

held

by

INTERSCOPE ( as

set

forth

above),

INTERSCOPE will

deduct the unrecovered portion from any and all monies otherwise due and owing you

hereunder, or in the alternative, you will pay such sums within ten ( 6) days following
INTERSCOPE's written demand therefor.
7. 04.

Notwithstanding anything -.to the contrary contained herein, in the event of

the termination or the expiration of the term of this agreement for any reason whatsoever,

the security agreement ( including the security interest thereunder) will continue in full
force and effect untii all obligations owing theFeunder are satisfied.
7. 05,

At the end of the term, INTERSCOPE will have a period of six ( 6) months

in which to fulfill any orders for your Records that were placed during the term and to sell

off its existing inventory of Records hereunder ( herein referred to as " Sell -Off Period")
pursuant to the same terms and conditions contained herein.
a)

Upon the expiration of the Sell -Off Period, but subject to payment of

all outstanding debts to INTERSCOPE hereunder and subject to your full

compliance with all-of your material obligations, you will have a period of thirty (30)

days following such expiration to order INTERSCOPE either to destroy all

Records, parts, labels, inventory and other materials then in its possession, or to
JcozP&d. Eiral
nn_+ 4c

12

10/ 18/ 00

deliver tohand
you, (at your sole expense, all INTERSCOPE's inventory of your Records

then

on

and subsequent returns),

limitation,
marked

parts,

labels,

accordingly

etc.).

to

and related materials ( including, without

All such Records will have the comers cut and be

ensure

that

no

such

Records

are

returned

to

INTERSCOPE. INTERSCOPE hereby agrees to discuss with you at the relevant

time a less intrusive means of marking stock as non returnable. If, within thirty (30)
days after the date of such termination. you have not given INTERSCOPE delivery
instruction for such stocks, INTERSCOPE will have the nght to;

r (

1)

destroy such stock on your behalf at your expense;

ii)

continue to sell off same;

iii)

sell such Records at cutout prices or. other puce designed by

iNTERSCOPE and/ or;

iv)

charge you the cost of warehousing such Records until you

accept delivery of same.

8.

REPRESENTATIONS AND WARRANTIES

You warrant and represent:
8. 01.

You are not and will not be under any disability, restriction or prohibition in

respect of your rights to execute this agreement and perform your obligations hereunder
or to grant to INTERSCOPE the rights granted herein.
8. 02.

In respect of Records to be distributed in the United States you will pay

timely all royalties to the copyright ownprs in respect of the compositions embodied on
your Records and you will hold INTERSCOPE harmless from the obligation to pay said
royalties. At INTERSCOPE' s request, you agree to furnish INTERSCOPE with: copies of

the mechanical licenses for all such compositions or with letters from the publishers

concerned certifying that appropriate licenses have been orwill.be issued.

8. 03.

You wit! make all payments which may be required based on the sale of
your Records to any applicable union or guild agreement ( including but not limited to, the
American Federation of Musicians and the American Federation of Television and Radio
Artists),

to a trustee, agent or fund under any successor agreement, and all similar
charges. or payments, and you will hold INTERSCOPE free and harmless from any
obligations to pay such sums.
8. 04.

INTERSCOPE will not be required to make any payments of any nature

including, without limitation, royalties to the artists or producers) for, or in connection with,
Jcor?&D. fsnal

00- 194

13

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the acquisition, exercise or exploitation of any and all rights granted to INTERSCOPE
hereunder, except as specifically provided to the contrary herein.
8. 05.
recorded

on

You have and will have the right to mechanically record the selections
the

Records

hereunder.

None

of

the

Masters

hereunder,

nor the

performances embodied thereon, nor any other Materials, as hereinafter defined, nor any

authorized use thereof by INTERSCOPE or its grantees, licensees or assigns, will violate
or

infringe

upon

the

rights of

any third party, " Materials"

as

used herein means:

all

Compositions; each name or sobriquet used by you or Artist, individually or as a group;

and all other musical, dramatic, artistic and literary materials, ideas and other intellectual
properties

furnished

or

selected

by

the Artist or any individual producer and

contained in or used in connection with any Recordings made hereunder or the
packaging, sale, distribution, advertising, publicizing or other exploitation thereof.
8. 06.

you,

Ali recording costs and expenses incurred with respect to the making or

acquiring of such phonograph records have been and will be fully, completely and timely
paid by you, and iNTERSCOPE will be held free and harmless from the obligation to pay
any such costs and expenses.
8. 07.

You have not sold, assigned, transferred, leased, conveyed or granted a

security interest in, or otherwise disposed of, and will not sell, assign, transfer, lease,

convey or grant a security interest in and to the Records covered by this Agreement, or
any of them, adverse to or derogatory of the rights granted to INTERSCOPE herein and

you have not authorized and will not authorize any other person to distribute and sell you
Records in the Territory in contravention of iNTERSCOPE' s exclusive rights hereunder
8. 08.

You will not enter into any agreement with any person or entity for the
distribution or exploitation of any master recordings embodying any performances
contained on the Records hereunder.
8. 09. You are the owner of any trademark or logo appearing on your Records and
to be used by INTERSCOPE and no other person has any interest therein. You warrant
and represent that no use of the logo by INTERSCOPE or its licensees for any purpose
will violate any law or infringe any rights of others; and INTERSCOPE will not be required
to make any payments in connection with its use. You hereby indemnify INTERSCOPE
and any licensee of INTERSCOPE against all claims, damages, liabilities, and expenses
including reasonable counsel fees and legal expenses) arising out of any breach of your
representations and warranties herein which are reduced to a final adverse judgement by

a court of competent jurisdiction or is settled with your consent ( not to be unreasonably

delayed). Without prejudice to INTERSCOPE ' s right to manage any claim

withheld or

against it as it sees fit you shall have a right to participate in the defense of any claim
made against you at your cost. Further, INTERSCOPE may refrain from printing your
logo at any time when its use might violate any law or the rights of any other person, in
INTERSCOPE' s sole good faith judgment.
1

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14

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8. 10.

Each artist whose performances are contained on Records hereunder is,

and during the term hereof will remain or will promptly become and remain, a member in
good

standing

of any applicable

union

and/ or guild

to the extent that you

or

INTERSCOPE may require such membership.

8. 11

INTERSCOPE's exercise of any of the nghts granted to INTERSCOPE

hereunder wiil not violate any law or the rights of any person, and you agree to indemnify
and hold INTERSCOPE free and harmless from any claim brought against INTERSCOPE
in connection with INTERSCOPE's exercise of any of its right hereunder.
8. 12.

9.

You are a duly formed and existing DelawareCorporation.

MISCELLANEOUS
9. 01.

You will at all times indemnify and hold INTERSCOPE harmless from and
against any and all claims, damages, liabilities, costs and expenses, including legal
expenses and reasonable attorney fees, arising out of any breach or alleged breach by
you of any representation, warranty or agreement made by you herein which is reduced

to a final non appealed judgement or is settled ( such settlement being with your approval
not to be unreasonably withheld or delayed where the monies to be paid under this

indemnity are in excess of seven thousand five hundred dollars ($ 7, 500)). To the extent
that INTERSCOPE is not reimbursed by retaining for its own account monies payable to
you hereunder but not yet paid you will reimburse INTERSCOPE on demand for any
payment made at any time after the date hereof with respect to any liability or claim in

which INTERSCOPE (or its licensees) are entitled to be indemnified. You may participate
in the defense of any such claim through counsel of your selection at your own expense,
provided INTERSCOPE will have the right at all times, in its sole discretion, to retain or
resume control of the action thereof.

INTERSCOPE will have the right to withhold from

any payments due an amount reasonably related to the potenbaTliabiiify of'such claim
providediftaf IN TERSCUPE s
e ahy Sum MMM In CMMWon with a claim if
no proceedings amfiled and served within twelve ( T2) m
on-Ifs of the allegations being
made and

in INTERSCOPE' s

reasonable business

judgatllen thaM is

no pl

ubpat;

of

being fled and served. If after the release of any such retention
proceedings are filed and served the INTERSCOPE' s foregoing rights of retention shall
apply anew. INTERSCOPE shall not make a retention as previously provided where you

such proceedings

provide iNTERSCOPE with a surety bond in an amount, in such terms and from a party
reasonably acceptable to INTERSCOPE in its reasonable. business judgement.
9. 02. All notices required to be given to iNTERSCOPE will be sent to
INTERSCOPE at its address first mentioned herein or such other address as Interscope

may notify to you in writing from time, to time, and all royalties, royalty statements and
payments and any and all notices to you will be sent to you at your address first
JcorP&D. final
00- 194

is,

10/ 18/ 00

mentioned

herein,

or such other address as each party respectively may hereafter

designate by notice in writing to the other. All notices sent under this agreement will be in

writing and, except for royalty statements, will be sent by personal delivery, registered or
certified mail ( retum receipt requested) or telegraph ( prepaid) and the day of mailing ( or
transmission in the case of telegraphs) of any such notice will be deemed the date of the
giving thereof ( except notices of change of address, the date of which will be the date of
receipt

by

the

receiving

INTERSCOPE to the

party)

attention of

All notices to INTERSCOPE will be served upon

the Head

of

Business

and

Legal Affairs.

As a courtesy

to you INTERSCOPE shall serve copies of any notices to you to Eric Greenspan, Esq at
Myman, Abell, Fineman, Greenspan and Light, 11777 San Vincente Blvd, Suite 880, Los

Angeles, dA 90049 and to Steve Moir

Blvd, Suite 325, Encino, CA 91436

at

Moir Marie Entertainment L. L. 0 , 16101 Ventura

that inadvertent failure to send such

courtesy notices shall not be a breach of this Agreement. '
9. 03,

provided

INTERSCOPE will not be deemed in default hereunder if iNTERSCOPE's

obligations hereunder are delayed or become impossible or impractical by reason of any

act of God, war, fire, earthquake, strike, sickness, accident, civil commotion, epidemic, act
of government or governmental instrumentality ( whether federal, state, local or foreign),

failure of technical facifities, failure or delay of transportation facilities, shortage of raw

materials, or any other cause of a similar or different nature beyond 1NTERSCOPE's

control (hereinafter called a "force majeure contingency").

Upon the happening of any force majeure contingency

INTERSCOPE may, in addition to any other rights or remedies it may have
a)

hereunder

or

otherwise,

elect by notice to you to suspend the term of this

Agreement for the duration of said force majeure contingency, In the event of any
such suspension, specific dates, period and time requirements referred to herein
will be postponed or extended accordingly Interscope shall continue to account to

you during such force majeure contingency unless such force majeure contingency
affects Interscope' s ability to account.
b)

In the event that the force majeure event lasts for more than six ( 6)

months you shall have the right to terminate the Term by way of written notice to
INTERSCOPE.

In such circumstances the terms of this Agreement. which are

expressed to survive the and of the Term shall continue to apply.

9 04.

iNTERSCOPE may assign its rights hereunder in whole or in part to any

company under common control with it or to any company acquiring all or substantially all
of its share andlor assets..
9. 05.

In the event of your dissolution or the liquidation of your assets, or the filing

of a petition in bankruptcy or Insolvency or for an arrangement or reorganization, by, for or

against you, or in the event of the appointment of a receiver or a trustee for all or a portion

of your property, or in the event that you will make an assignment for/ the benefit of
Jca= P& D. final

00- 194

16

10/ 18/ 00

creditors, commit any act for, or in, bankruptcy or become insolvent, or in the event you
will fail to fulfill any of your material obligations under this Agreement for any other reason
subject to the foregoing notice -and -cure provisions) or in the event any payment to you
by iNTERSCOPE under this Agreement becomes subject, in any manner, to anticipation,
alienation, sale, transfer, assignment ( except as permitted pursuant to this agreement),

levy, pledge, encumbrance or charge, or to attachment, garnishment or other legal

process, or you materially change the scope and nature of your record operations, then at

any time after the occurrence of any such event, in addition to any other remedies which
may be available, INTERSCOPE will have the right to terminate the term of this
Agreement

to you.

The foregoing notice provision dues not apply to

any voluntary dissolution or liquidation of your assets.

upon written notice

9. 06. In entering into this Agreement you and iNTERSCOPE each have and will
have the status of an independent contractor and nothing herein will contemplate or

constitute you as INTERSCOPITs agent or employee or INTERSCOPE as your agent or

employee.

9. 47. INTERSCOPE will undertake to consult with you with respect to the initial
release date of each Record distnbuted under this Agreement.

In respect of Records to be distributed in 4ia United States you and

9. 08.

INTERSCOPE
production

will

mutually , agree with you

each

of

release (

Albums

or

the quantity with respect to the initial

singles)

of

your

Records

hereunder.

INTERSCOPE may manufacture quantities of Records necessary to fulfill anticipated and

actual customer orders.

9. 09.

This Agreement contains the entire understanding of the parties hereto

relating to the subject matter hereof and cannot be changed or terminated except by an
instrument signed

by

an officer of

INTERSCOPE

and

an officer of your

company.

waiver by either party of any term or condition for the future, or of any subsequent breach
thereof will not be deemed a waiver thereof in whole or in part.

All remedies, rights,

undertakings, obligations and agreements contained in this Agreement will be cumulative

and none of them will be in limitation of any other remedy, right, undertaking, obligation or
agreement of either party.,

9. 14.

This Agreement has been entered into in the State of California, and the

validity, interpretation and legal effect of this Agreement will be governed by the law's of
the State of California applicable to contracts entered into and performed entirety within

the State of California with respect to the determination of any claim, dispute or

disagreement which may arise out of the interpretation, performance or breach of this
Agreement. Any process in any action or proceeding commenced in the courts of the
State of California or elsewhere ansing out of any such claim, dispute or disagreement,
may, among other methods, be served upon you or INTERSCOPE by delivering or

mailing the same, via registered or certified mail, addressed to you at the address first
Jcor?&D. final

00- 194

17

10/ 18/ 00

above written or such other address as you or INTERSCOPE may designate pursuant to
paragraph.
Any such delivery or mail service will be deemed to have the same force

this

and effect as personal service within the State of California or the jurisdiction in which
such action or proceeding may be commenced.
9. 11,

it is understood that the active participation of the Principal in your business

and the Principal's active participation in the performance of your obligations
hereunder, are a vital part of this agreement.
In the event of the death or incapacity of
affairs.

the Principal and/or in the event the Principal will cease for whatever reason to be actively

engaged in your management in a controlling capacity or will cease to perform his or her

obligations hereunder, INTERSCOPE will have the right, wdhout liability of any kind to

you whatsoever, by giving you written notice thereof to terminate this agreement in the
event INTERSCOPE so terminates this agreement, it will continue to have all of its nghts,
as rf the agreement were terminated or expired in accordance with any of the other
provisions hereof.
9. 12.

will: (

3)

It is expressly understood that throughout the term of this agreement, you

1) be actively involved in the Record business; (2) maintain a full staff of employees;

be responsible for all functions of a major record company, other than that of

distributor"
promotion

Records,

of

functions (

INTERSCOPE' s

including,
save

promotion

to

without

the

limitation,

extent

department

that

all so- called "

you

and

shall render services);

ASR" , marketing and

Interscope agree that

and in respect of Records

to be distnbuted in the United States (4) market, promote ( save to the extent that you and
INTERSCOPE agree that iNTERSCOPE's promotion department shall render services)

and advertise any Record released by INTERSCOPE hereunder to the same extent as
INTERSCOPE

would

market,

promote

and

advertise

Records

released

on

the

INTERSCOPE Records, Inc., label. In the event you fail to comply with any aspect of this
paragraph 9. 12, INTERSCOPE will have the right, without limiting its other rights, by
giving you wnttan notice thereof, to terminate this agreement. In the event INTERSCOPE
so terminates this agreement, it will continue to have all of its rights, as if the agreement

were terminated or expired in accordance with any of the other provisions hereof.
9. 13.

You recognize that the sale and distribution of Records is speculative and

agree that the judgment of INTERSCOPE with respect to matters affecting the sale,
distnbution and explortatlon of such Records will be binding upon you. Nothing contained
in this agreement will obligate INTERSCOPE to make, sell, license or distribute your
Records, except as specified herein.
9. 14.

You will not be entitled to recover damages or to terminate the term of this

agreement by reason of any breach by INTERSCOPE of its material obligations

hereunder, unless INTERSCOPE has failed to remedy such breach within a reasonable
time following receipt of your notice therefor.

JcorP& D. finai
00- 194

18

10/ 18/ 00

9. 15.
This agreement will not become
hereto. Any and all riders, exhibits or schedules
document will constitute this agreement.

10.

effective until executed by all parties

annexed hereto together with this basic

DEFINITIONS
10. 01. " Master," "

Master Recording" or "Recording" means any recording of sound,

whether or not coupled with a visual image. by any method and/or any substance or

material, whether now or hereafter known, which is intended for use in the recording,
production and/ or manufacture of Phonograph Records.
10. 02. The
association

or

word "

any

includes any

person"

other

group

organized

individual,

of

persons

corporation,

or

legal

partnership,

successors

or

representatives of the foregoing.

10. 03. The word " single Record" or "Single" means a Record containing not more
than three (3) Sides.
10. 04. " The

Territory" shall mean the United States and Canada

10. 05. " EIectronic

Transmission"

means any transmission to the consumer,

whether sound alone, sound coupled with an image, or sound coupled with data, in any
form, analog or digital, now known or later developed ( including, but not limited to, direct
broadcast

satellite,

point -to -multipoint

satellite, multipoint distribution

service,

point-to-

point distribution service, cable system, telephone system, and broadcast station) where
a direct or indirect charge is made to receive the transmission.
10. 06. " Record" or "Phonograph Record" means all forms of reproduction, now or

hereafter known, whether manufactured and/ or distributed primarily for personal use,

home use, school use, juke box use or use in means of transportation, including but not
limited to

sound -alone

Recordings,

audiovisual

Recordings, interactive media (

g., CD-

ROM), or Electronic Transmission. ,

10. 07. The

words " Gross

iNTERSCOPE' s wholesale price

to

Dealer

Price"

in

the

its customers of a specific

United
Record.

States

means

Outside of the

United States "Gross Dealer Price" means the INTERSCOPE's licensee's published price
to dealer or other price basis used in INTERSCOPE's licensees accountings to
INTERSCOPE in

respect

of

Records

exploited

hereunder.

In respect of Electronic

Transmissions or other form of exploitation where there is no wholesale or published

price to dealers the Gross Dealer Price shall mean INTERSCOPE's net receipts in
respect of that exploitation.
c

JcorP&D. final

00- 194

19

10/ 13/ 00

10. 08. The term " surplus" as used in paragraph 4 means more than a three ( 3)

month supply of records in a particular configuration.

10 09. "LP"

Album"

means a sufficient number of Masters embodying

performances of the Artist, sufficient to comprise one ( 1) or more 12 -inch, 33- 1/ 3, longor "

playing Phonograph Record album, or the equivalent, of not less than thirty-eight ( 38)
minutes of playing time.
10. 10., "Side"

means a Recording of sufficient playing time to constitute one side of

a 45 rpm record, but not less than three ( 3) minutes of continuous sound embodying
performances by Artist.
States"

10. 11. " United

the

means

States-

United

of

America,

its

territories,

possessions and military exchanges.

10. 12. " Mechanical

Royalties" means royalties payable to any Person for the right '

to reproduce and distribute copynghted musical compositions on Phonograph Records.

10. 13. The terms " net

receipts," " net sums,"

or " net amount received" and similar'

terms will mean amounts received by INTERSCOPE in connection with the subject matter
thereof which are solely attributable to the Masters hereunder, less any costs or expenses
which

iNTERSCOPE

is

required

to pay

or

credit

to third

parties ( such

as, without

limitation, production costs, mechanical royalties, AF of M and other union or guild

payments).

10. 14. " Principal" means Jay Faires.

11.

MANUFACTURING

11. 01. INTERSCOPE will have the right, (but not the obligation in the case of the

United States only), to manufacture Records distributed hereunder during the term of this
Agreement,

subject

11. 02 -The

to the terms

and conditi

masters (" Masters")

s set forth in this paragraph.

from which iNTERSCOPE will manufacture

phonograph records will be delivered to INTERSCOPE by you at places designated, by

INTERSCOPE.

Each Master will be in the form of a two -track stereo tape, fully edited,

mixed, equalized and leadered, or other comparable format in a form suitable for the
manufacture of phonograph records and tapes. All configurations of record product to be
manufactured

hereunder

will

be fully

sequenced

by

you.

Lacquer masters and tape

running masters will be made by you and the actual cost thereof will be paid by you:

INTERSCOPE will have the right to reject any master which is technically deficient, in that
it does not most INTERSCOPE' s ' then current prevailing standards for audio and

engineering quality, or which INTERSCOPE reasonably deems to be offensive ( applying

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20

10/ 18/ 00

similar standards as INTERSCOPE applies to other recordings being released by it at the

time)

to reasonable standards of public morals or which may infringe on the rights of

others.

If INTERSCOPE so rejects any Master, you, at your own cost, will supply to

INTERSCOPE

substitute

Master

which

does

not

embody

such

defect.

If,

in

INTERSCOPE' s best business judgment, it determines that the initial sequencing of

Masters is not technically suitable for the manufacture of any configuration of records,

then you will have the first opportunity to perform the resequencing in order to meet
INTERSCOPE' s deadlines.

You will also deliver with each Master full and accurate

copyright and label information including any and all approvals, consents and necessary
sideartist clearances.

11. 03 You will supply to INTERSCOPE, at your sole cast and expense, film from
the camera-ready artwork to be used by INTERSCOPE for the inserts for each Record
manufactured hereunder.

11. 04 INTERSCOPE will have the right to use the same label backdrop which will
be used for all Records manufactured hereunder. Your logo and trademark appearing on
the label backdrop will remain your sole property.
11. 05 In respect of Records to be distributed in the United States INTERSCOPE

will charge you per Record manufactured by INTERSCOPE in accordance wrth its then.
current rate card charges for similar quantities of records.

11. 06. You will be responsible for and pay all manufacturing costs as described
above prior to the manufacture of Records hereunder. In respect of Records to be

distnt uted in the United States if INTERSCOPE so elects, INTERSCOPE may invoice
you

for

Records

manufactured

hereunder

as

such

Records

are

completed,

and

INTERSCOPE will deduct such invoice changes within thirty ( 30) days from the date of
If your Net Proceeds are
invoice from your Net Proceeds earned by you hereunder.
insufficient to pay said manufacturing costs. then INTERSCOPE will send you wntten

notice and you will pay INTERSCOPE said sum within ten ( 10) business days following
INTERSCOPE' s written demand therefor.

11. 07 After the completion of the manufacture of each Record hereunder, you will

bear the risk of any lass to or in connection with such Record.

11. 08 In respect of Records to be distributed in the United States you agree that
INTERSCOPE will not be obligated to accept Record returns, except for Records having
pressing defects which have been returned by INTERSCOPes customers. However,
INTERSCOPE' s reasonable decision will be final as to whether or not a Record has a
pressing defect. If a Record is found by INTERSCOPE to be defective, INTERSCOPE
debit your account for the return thereof. In the event of loss or damage to you

will

resulting from such pressing defects, the sole and exclusive liability of INTERSCOPE will
JcorPED. final
00- 194

21

10/ 16/ 00

be to replace any defective Record, and INTERSCOPE will not ue liable for any damages
including without limitation, consequential damages) resulting therefrom.
11. 09 You acknowledge that the transactions to be completed hereunder are not
sales, or otherwise subject to sales or use

taxes. Moreover, if such taxes are determined

to be applicable, you agree to be responsible for the total amount of any such taxes and
will hold INTERSCOPE harmless therefrom.

AGREED AND ACCEPTED:

By:
Interscope Records, a division of UMG Recordhngs, Inc.

An authorized signatory

Y'

ror and 0 behalf of JCOR Records L.L. C.

An authahied signatory
Federal Tax 1D No.

13
0

JcorP&D. final

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22

10/ 18/ 00

EXHIBIT "A"
SECURITY AGREEMENT

1NTERSCOPE RECORDS,

a division of UMG Recordings Inc. ( hereinafter referred to as

Secured Party`% whose principal place of business is at 2220 Colorado Avenue, Santa
Monica CA 90404 and J -COR Records L. L. C. ( hereinafter referred to as " Debtor") whose

principal place of business is at 211 Center St. 41 floor New York, New York10013 on this
18th day of October 2000, hereby agree:

1.

Grant of Security Interest.

Debtor has heretofore incurred certain monetary obligations to Secured Party to

accordance with certain terms and conditions contained in the Distribution Agreement,
attached hereto and incorporated herein by reference. The parties anticipate that from
time to time Secured Party will distribute on behaff of Debtor goods described as follows:
Certain phonograph records, pre- recorded tapes, sound and/ or videodiscs, in

whatever format by whatever means whether now or hereafter known on J -COR or any
parent and/or subsidiary of the same, as more specifically set forth In the Distnbution
Agreement.

In order to induce Secured Party to manufacture, sell, distribute and commercially

exploit such goods.' to finance the manufacture of such goods, and/ or market and

promote such goods Debtor hereby grants to Secured Party a security interest in the
collateral described below.

This agreement is a master security agreement and is not a contract to require the
sale, consignment, or provision of goods and will not be deemed a promise that any
goods will be sole or provides! to Debtor.
2.

Collateral.

The collateral in which a security interest is granted consists of

a)

Ail goods described in Section 1 above which are now in Debtor's

possession or in which Debtor has rights,

b)

All goods described in Section 1 above hereafter acquired by debtor,

Jcor?&D. final

10/ 18/ 04

00- 194

c)

All other goods, equipment, inventory, accounts, contract rights, general

intangibles, fixtures

and all

property ( other than realty but

including fixtures),

in which a

security interest may adhere, at any time acquired by Debtor from Secured Party;
d)
a), (

All cash and non- cash proceeds of the items described in subparagraphs

b), or (c) of this section;

e)

Collateral described in paragraph 4. 09 of the Distribution Agreement

between Secured

Party and Debtor dated October

incorporated herein by reference.

16m

2000, attached hereto and

The parties intend, to create a security interest in all goods heretofore sold by
Secured Party to Debtor and to the maximum extent possible, to have the security
interest be a purchase money security interest in all goods hereafter sold by Secured
Party to Debtor. With respect to all goods which may be classes as inventory, the
secunty interest will be a separate security interest arising and attaching in each article of
goods when the Debtor obtains possession or rights in such article, and the grant of the

security interest renews upon each subsequent occasion when the Debtor obtains
possession or rights in artides of goods.

3.

Obligations Secured.

The Collateral is security for the payment in full of

a)
The failure to pay for goods consigned by Secured Party to Debtor, upon
such payment becoming due or the failure to retum such consigned goods on Secured
Party' s request,

b)

All existing obligations of Debtor to Secured Party arising out of the

purchase, by Debtor, or other acquisition by Debtor, of goods or other personality from

Secured Party;
c)

Alf obligations of Debtor to Secured Parry arising hereafter on account of

consignment, purchases, or other acquisition, of goods or other personal property by

7

Debtor from Secured Party;

d)

All other obligations owed by Debtor to Secured Party, whether now

existing or hereafter arising; and

costs and expenses, including reasonable attorney's fees, expended by Secured Party to
enforce or foreclose the security agreement or in any way incurred by Secured Party with
respect to its security interests.

JcorPM Einal
00- 194

2,

10/ 18/ 00

4.

Renresentations, snd Warranties.

Debtor hereby makes the following continuing representations and warranties;

That no liens or security interests have arisen or been granted, except as
specifically disclosed in writing to Secured Party heretofore; and that Debtor has not
a)

made or suffered, and will not make or suffer, any transfer, pledge, hypothecation or other

transactions ( except for sales of goods or licenses in the ordinary course of business)

which will defeat or diminish the value of priority of the security interest granted

hereunder, and that Debtor will not remove the collateral without written consent of
Secured Party;
b)

That the Debtor

will,, at

Debtor`s

expense, '

Forever warrant and defend

Secured Party's interest in the Collateral from all claims and demands of all other
persons;

c)

That Debtor will at all times keep said property free of all taxes, liens and

encumbrances, and will pay or cause to be paid all rents due on premises where the

propprty not in the possession of Secured Party is or may be held. Debtor agrees that In
the event that it fails to have such sums paid, Secured Party may do so for Debtor, and
any payments so advanced or made will be an additional obligation of the Debtor secured
hereunder,
d)

That Debtor will keep the collateral in good order and repair and will not
waste or destroy the collateral or any part thereof; Debtor will not use the collateral in
violation of any statute or ordinance;
6)

That Debtor's principal place of business is located at the address set forth

in the beginning of this Agreement and will be maintained at that address until Segued

Party is otherwise notified In writing of any change; that Debtor is also conducting
business at the addresses set forth in Schedule A attached hereto; Debtor will notify

Secured Party in writing of any new locations where Debtor's business will be conducted
prior to the acquisition of such new place of business and of any change in the location of

any other place where Debtor' s business is conducted prior to making such change; and
f)

That Debtor will maintain books and records pertaining to the collateral in

such detail, form and scope as to provide reasonable information for Secured Party to
ascertain the value, extent and status of the collateral and to protect Secured Party' s
herein. Secured Party will have the right to inspect the collateral and
Debtor's books at any reasonable time or times during the continuance of this Agreement
upon ten ( 10) business days prior written notice from Secured Party to Debtor.
interests secured

JcorP60. final
00- 194

1Of18/ 00

Debtor represents that it is currently solvent and the net saleable value of its
assets exceeds the amount of all outstanding liabilities including unliquidated and
g)

contingent Liabilities.
5.

Rights and Duties.

a)

At its option, Secured Party may discharge taxes, liens, security interests,

encumbrances or cure any breach of warranties made hereinabove and Debtor agrees to

reimburse Secured Party on demand for any payment, or any expense incurred by
Secured Party pursuant to the foregoing authorization and any payment so advanced will
be an additional obligation of Debtor secured hereunder. The right of Secured Party to
make such payments is purely voluntary and any instance where Secured party chooses
not to exercise the authorization herein will not be a failure of Secured Party to discharge
any duty arising out of this Agreement.
b)

Upon Secured Party's demand, Debtor will deliver to Secured Party aU non-

cash proceeds received by debtor. with endorsements and assignments as may be

necessary, to transfer the title thereto to Secured Party, no later than the business day
following their receipt and will deposrt not later than this business day following their
receipt and will deposit not later than the business day following their receipt all cash
proceeds, with endorsements where necessary, in a bank account designated for that
purpose by and under the sole control of Secured Party. Debtor agrees that it will not
commingle and such proceeds with other funds or property, but will hold them separate
and apart therefrom and upon an express trust for Secured Party until such delivery or
deposit.

At the request of Secured Party, Debtor agrees to join with Secured Party in
executing one or more Financing Statements as well as other instruments or documents
c)

pursuant to or required by the Uniform Commercial Code or any vanatlon enacted in the

state( s) where Collateral is located, in a form reasonably satisfactory to the Secured Party
and customarily filed for transactions of this type. Debtor further agrees to pay the cost of
filing the same in any public suffice deemed advisable to Secured Party.

JcorP&D. final
00- 194

10/ 16/ 00

6.

Defaul.

A default will occur if Debtor fails to perform any monetary obligation secured
hereunder, or make timely payment of any indebtedness secured hereunder, or in the
due performance of or compliance with any of the material terms, conditions or provisions

hereof or of the Distribution Agreement, or there is created or attempted by Debtor to be

created either voluntarily or involuntarily a lien, charge or encumbrance on the collateral

equal or superiors to the security interest of Secured Party, or if a proceeding in

bankruptcy, assignment for benefit of creditors, insolvency, receivership or reorganization
is instituted by or against Debtor or Debtoes property not properly and timely discharged
in accordance with paragraph 9.05 of the Distribution Agreement, or if the business of
Debtor is otherwise liquidated, or if said collateral or any part thereof is in danger of loss,
misuse, seizure or confiscation.

7.

Remedies on Q fault.

Upon default, or if Secured Party reasonably deems itself insecure, Secured Party
have

by law. In the event of default under the

Qistribution Agreement of this Security Agreement. the Secured Parry's rights will include,
but are not limited to, the following:

will

a)

ail rights and remedies available

The right to declare that all indebtedness owed by Debtor to Secured Party

is due and payable at once;

The right to have immediate possession, with legal process, of any or all
For this purpose and in furtherance hereof, Debtor will, if Secured Party so
requests, assemble said property and make it available to Secured Party at a reasonably
b)

collateral.

convenient place designated by Secured Party, and Secured Party is hereby authorized
by Debtor to enter upon the premises wherever said property may be and remove the
same, subject to one ( 1) day prior written notice.
c)

The right to purchase collateral at any public sale.

d)

The right to require Debtor to do all things and execute all instruments

necessary or desirable to ratify or otherwise accomplish an absolute assignment of

i

Secured Party is authorized ( without limiting the

general nature of the authority conferred) to pay, purchase, contest and compromise any

Debtoes interest In the

collateral.

encumbrances, charge or lien that, in its judgment, appears to be prior or superior to

Secured Party's interest and in exercising any powers and authority, pay necessary
expenses, employ counsel, or pay reasonable fees.

The vanous remedies available to Secured Party in the event of default will be
cumulative and' the exercise or non -exercise of one right or remedy by Secured Parry will
not preclude the Secured Party from time to time exercising additional rights or remedies.
JcorP&D. final

00- 194

10/ 18/ 00

8.

Non -waiver.

Any failure by Secured Party to enforce a provision hereof or to exercise any right
will not be deemed a waiver.
9.

Insurance.

Debtor agrees to carry and maintain for full value with extended coverage at all
times with respect to all collateral not in the possession of Secured Party against risks of
fire, theft and other risks as Secured Party may require and to provide endorsements

upon such policies of insurance providing that the loss, if any, will be payable to Secured
Party

and

Debtor as their interest may appear.

If Debtor fails to provide such insurance

or to pay the premium thereon, Secured Party may do so and any amount so advanced
or paid will

be

an additional obligation of

Debtor

secured

hereunder.

Secured Party Is

hereby appointed Oebtoes attorney-in- fact to endorse any draft or check which may be
payable to Debtor in order to collect any proceeds of such insurance to the extent of

Debtor's financial default; any amounts so collected to be applied by Secured Party to any
amount then owing by Debtor to Secured Party.
10.

At Secured Party's sole discretion any payments rightfully received from or on

behalf of Debtor ( whether by foreclosure of any security interest or otherwise) may be
applied to any debt to which Secured Party chooses to apply such payment.

Attomeyg Fees -and, Costj.

11.

Debtor agrees to pay, and this agreement will secure, all costs and reasonable

attorney's fees reasonably incurred by Secured Party or on its behalf in connection with
any reasonable exercise of its rights or remedies hereunder, including any third party
litigation in which Secured Party or Debtor may be a party or in which any question of
Secured Party's or Debtoes rights or obligations, or the priority of Its security interest, may
arise.

12.

Severability.

if any cause, provision, covenant or condition in this Agreement will be determined

to be void or unenforceable or in any way contrary to applicable law, such determination
will

have

no affect upon

any

other clause, covenant or con&

JIon of this Agreement and to

this extent only, the provisions of this Agreement will be severable.

JcorPED. final

00- 194

10/ 18/ 00

13.

Notic2s,

Any written notice desired or required to be given by Secured Party to Debtor will
be given by delivery to Debtor by mail addressed to Debtor at Debtor's principal address
specified

on

page

hereof; and with respect to notices to Secured

Party, by mail
addressed to Secured Party at 2220 Colorado Avenue, Santa Monica CA 90404, marked

for

attention of

Head

a substrtute address

of

Business &

by

Legal Affairs. ' Secured Party or Debtor may designate

wntten notice

to the

other.

A notice given by mail as herein

provided will be deemed received on the date mailed.

14.

EntirAAgMgment.

This Agreement includes the entire understanding of the parties with respect to the
r

subject matter hereof and all prior and concurrent oral agreements, and all prior written
agreements, with respect to such subject matter, have been merged herein.
No

representations or warmntles have been made other than those expressly provided for
herein. This Agreement may not be modified, except by a written instrument signed by
the partes.
15.

Headings,

The headings of the paragraphs and subparagraphs hereof are for convenience

only, and they will not be of any effect in construing the contents of the respective
paragraphs or sub -paragraphs.

Effective as of this Ie day of October 2000

iNTERSCOPE RECORDS, a division of UMG Recordings, Inc.

By:
LA'. 1..
J -Cor Recon-

Scor?&D. final
00- 190

10/ 18/ 00

EXHIBIT " B"

TRADEMARK LICENSE AGREEMENT

This trademark license
18

day

of

agreement ( the " Agreement") is made and entered into as of this

October 2000 between J -COR Records L. L. G.(" Licensor") and INTERSCOPE

RECORDS,

division of UMG Recordings, Inc. (" Licensee"), with reference to the

following:
A.

Licensor Is the owner of the service marks and the logo attached hereto
which it has adopted and used and which are well known for entertainment
Said service marks, when referred to in relation to their use in connection with

the " Logo")

services.

phonograph records are hereinafter referred to as the "Trademarks".

B.

Licensor and Licensee are concurrently herewith entering into a Distribution

Agreement attached hereto and incorporated herein by reference, ( the " Distribution
Agreement') pursuant to which Licensor has granted Licensee the right to distribute for

sale to the public phonograph records bearing Licensoes Trademarks.

C.

Licensor desires to grant to Licensee the right to use the Trademarks

throughout the Territory of the universe, for the term and on the conditions hereinafter set
forth in connection with Licensee's manufacture and sale of records pursuant to the
Distribution Agreement

NOW, THEREFORE, in consideration of the foregoing and the covenants and conditions
hereinafter set forth. Licensor and Licensee hereby agree as follows:
1.

Licensor grants to Licensee, for the term of the Distribution Agreement. the

non-exclusive and royalty -free right, subject to the provisions of the next paragraph, to
use the Trademarks throughout the Territory for phonograph records ( the " Goods')
distributed in accordance with the provisions of the Distribution Agreement.
2.

Licensee will provide Licensor with a sample of the Goods and Licensor will

have the opportunity to approve such sample as to style and quality; such approved
sample will thereafter serve as the Quality Control Sample. If applicable, Licensee will

use the Trademarks only so long as the Goods are made in accordance with
specifications, standards and quality approved by Licensor and which conform to quality
standards embodied in the Quality Control Sample approved by Licensor. From time to
time upon Licensor's written request. Licensee will furnish Licensor with samples of the

Goods and will permit inspection by Licensor or its duly authorized representative to
observe the manufacture of the Goods for the purpose of verifying that the Goods are
being made as provided in the preceding sentence.

JcorP&D. iinal
00- 194

10/ lE/ 00

3.

Licenses recognizes Licensor's title to the Trademarks and will not at any
time do or suffer to be done any act or thing which will in any way impair the rights of

Licensor in and to the Trademarks. It is understood that Licensee will not acquire and will
not claim any title to the Trademarks adverse to Licensor by virtue of the license granted

to Licensee, or through Licensee's use of the Trademarks, it being the intention of the

parties that all use of the Trademarks by Licenses will at all times inure to the benefit of
Licensor.
4.

If applicable, Licensee agrees to display the Trademarks on the Goods

and/or on labels affixed to the Goods, as well as on the packaging, advertising and
promotional materials for the Goods, In a mariner approved by Licensor and Licensee
also agrees that it will cause to appear on all material on or in connection with which the

Trademarks are used such legends, markings and notices, as Licensor may request in
order to give

any

appropriate notice of

Licensor' s trademark

rights.

Licensee agrees that

it will use no markings, legends or notices with respect to the Trademarks without first
obtaining Licensoes approval.
6.

Licensee

In the event that Licensee leams of any infringements of the Trademarks,

wili

promptly notify Licensor

of

the same.

Licensor reserves the right to deride

whether legal proceedings will be instituted, by whom and how the same are to be
handled, and in whose name and same will be brought.
6.

hereafter

The term of this Agreement will commence on [

l October 2040 period
to as the ' Term'). After the expiration of the Tenn, Licensee will have

referred

the right, in accordance with applicable terns of the Distribution Agreement, to continue
to sell, distribute and otherwise dispose of the Goods manufactured prior to the expiration
of the Term, and to advertise and promote in connection therewith.
7.

Licensee will not sublicense or assign any of its rights under this Agreement

without the prior written consent of Llcensor,

8.

This Agreement will be binding upon the successors and assigns of both

parties. .

JcorP&D. final
00- 194

10/ 18/ 00

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the

date first set forth above,

Licensor.

By.
An Autfhod;
J -Cor Rem

d signatory for
L. L. C.

i
r

Licensee.

An Authorized signatory for

Interscope Records, a division of
UMG Recordings, Inc.

JcorP&D. final

00- 196

10

LO/ 18/ 00

ATTORNnORPARTYWITHOUT ATTORNE) ( Name state b3rnumtrer, a1dadaressi

Nancy T. Nguyen ( SEN 215869)
Nancy Nguyen ( SEN
15669)

FOR COURT USE ONLY

PIPER RUDNICK LLP

1999
Los

Avenue

the

Stars,
Angeles,
California
TELEPHONE NO
310. 595. 3000

AVORNEYFOR

of

Plaintiff

Fourth

FA. no

310. 595. 3300

JCOR

E' D
d

s SUPERIOR COURT

S AN

90067

Records
INSERT NAME OF COURT. JUDICIAL DISTRICT, AND BRANCH COURT IF ANY
tNamrl

bJ

1L

Floor

2 0 2002

LLC

Los Angeles Superior Court

XEC

HN A, C

Central District

ISE OFF)CER/CLERK

f
CASENAME.

JCOR

Records,

LLC

Interscope Records, et

v.

DEPUTY

al.

Complex Case Designation

CIViL CASE COVER SHEET

Counter =
Limited [

Unlimited

CASE NUMBED

Joinder

Filed with first appearance by defendant

ASSIGNED,&

Cal. Rules of Court, rule 1811)

C 2S5U UN

Please Complete all five (5) items below

I. Check one box below for the case type that best describes this case Auto Tort

C Auto (22)
Other PI/ PDMD (Personal Injury/Property

Damage/ Wrongful Death) Tort

Other employment ( 15)

n Other judicial review (39)

F_X I Breach of contract/warranty (06)

0 Collections

0 Asbestos (04)

Writ of mandate ( 02)

Contract

e g

Provisionally Complex Civil Litigation

Cal. Rules

money owed

open boo), accounts) ( 09)

Product liability ( 24)

Insurance coverage ( 18)

Medical malpractice (45)

Construction defect ( 10)

Other contract (37)

Claims involving mass tort (40)

0 Other Pl/ PD/WD (23)

Real Property

Non- PI/ PD/WD ( Other) Tort

Q Securities litigation (28)'

Eminent domain/ Inverse

Toxic torl/ Environmental ( 30)

condemnation ( 14)
O Business tortfunfair business practice (07)
Q Civil rights ( e g, discrimination,
0 Wrongful eviction ( 33)
false arrest) ( 08)
n Other real property (e.g. quiet

Defamation ( e g, slander, libel) (13)

Intellectual property (19)

RICO (27)

0 Drugs ( 38)

Other complaint (not specified above) ( dam)

Judicial Review

Employment

0 Asset forfeiture (05)

termination ( 36)

Miscellaneous Civil Petition

IsX[IsX[- IsIs notnot

complexcomplex underunder rulerule 18001800 ofof thethe CaliforniaCalifornia RulesRules ofof CourtCourt IfIf casecase isis complex,complex, markmark thethe factorsfactors

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Partnership and corporate governance ( 21)

Other petition (not spectried above) ( 43)

Petition re arbitration award ( 11)

11

casecase
= =

Miscellaneous Civil Complaint

Residential ( 32)

0 Other non-PI/ PD/WD tort (35)

b.b.

Enforcement of judgment ( e g, sister state,

foreign, out -of c- ounty abstracts) (20)

n Commercial ( al)

malpractice) (25)

ThisThis

Enforcement of Judgment

Unlawful Detainer

U Professional negligence ( e g, legal

Q Wrongful

insurance coverage claims arising from the

above listed provisionally complex case

types (41)

title) ( 26)

C . I Fraud ( 16)

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= =

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DateDate NovemberNovember

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CASE NUMBER

JCOR Records,

LLC

Interscope Records,

v.

et

a1.

CIVIL CASE COVER SHEET ADDENDUM AND STATEMENT OF LOCATION

CERTIFICATE OF GROUNDS FOR ASSIGNMENT TO COURTHOUSE LOCATI(

This form is required in all new civil case filings in the Los Angeles Superior Gotalt
I Check the types of hearing and fill to the estimated length of hearing expected for this case,
JURY TRIAL?

U YES

CLASS ACTION?

II Select the correct district

DYES

and courthouse

LIMITED CASE?

location ( 4

DYES TIME ESTIMATED FOR TRIAL 15

HOURSQDAYS
If you checked " Limited Case", skip to No 111, Pg 4)

steps

1 After first completing the Civil Case Cover Sheet Form, find the main civil case cover sheet heading for your

case in the left margin below, and, to the right in Column 1, the Civil Case Cover Sheet case type you selected

2 Check one Superior Court type of action in Column 2 below which best describes the nature of this case.
3 In Column 3, circle the reason for the court location choice that applies to the type of action you have checked
Applicable Reasons for Choosing Courthouse Location (See Column 3 below)

Actions must be riled in the County Courthouse. Central District 6, Location

Location where
of property
or permanently
21 Class
Maybe
petitioner
resides garaged vehicle
Locationfiled in Central(Other county, or no Bodily Inj/ Prop Damage) 7
3
4

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Location where one or more of the parties reside

10 Location of Labor Commissioner Office

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Civil Case Cover

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Type of Action

Sheat Category No.

Applicable Reasons -

Check only one)

l'0-

Ya00

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See Step 3 Above

A7100 Motor Vehicle - Personal injury/Properly Dam./Wrongful Death

Auto ( 221.

Is this

Asbestos ( 04)

Product Liability (24)

an uninsured motonst case?

Yes

A6070

Asbestos Property Damage

A7221

Asbestosis- Personallnjury/WrongfulDeath

A7260 Product Liability not asbestos or toxiclerivironmental)

Medical Malpractice
45)

Other PI/PD/WD ( 23)

1.

2, 4

No

1.

2. 3, 4_ 8

A7210 Medical Malpractice - Physicians & Surgeons

1 , 2, 4 '

A7240 Other Professional Health Care Malpractice

1,

2, 4

A7250 Premises Liability (e g., slip and fall)

1,

2, 4

A7230 Intentional Bodily Injury/ PD1WD ( e g assault, vandalism, etc)

1,

2, 4

A7270 Intentional Infliction of Emotional Distress

1,

2. 3

A7271 Negligent Infliction of Emotional Distress

2., 3

A7220 Other Personal Injury/Property DamJwrungfut Death

A6029

Other Commercial/ Business Tort (not fraud/ breach of contract)

1 , 2. 3.

A6005

Civil Rights/Discrimination

1, 2

A6010

Defamation ( slanderAibel)

1,

2. 3

1,

2. 3

business Tort ( 07)

Civet Rights ( OB)

3

betamatlon ( 18)
Fraud ( is)

0 A6013 Fraud ( no contract)

Intellectual Property

A60t6 IntellectualProperly

19)

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CIVCIV 108108 04-04- 0202

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ADDENDUMADDENDUM ANDAND STATEMENTSTATEMENT OFOF LOCATIONLOCATION

!_
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Page 1 of
of 4

SHORT nTLE

JCQR

CAM NUMBER

Records,

LLC

v.

Interscope

Records,

et

al.

1-

2-

3.

Civil Case Cover

Type of Action

Applicable Reasons -

Sheet Category No.

Prof Negligence (25)

Wrongful(

Check only one)

A6017

See Step 3 Above

Legal Malpractice

1.

2. 3

A6050 Other Professional Malpractice ( not medical or legal)

1.

2. 3

A6037

Wrongful Termination

1, 2 , 3

A5024

Other Employment Complaint Case

1 , 2 3,

A6109

Labor Commissioner Appeals

minabon

5)
Other Employment
15)

Breach of Contract

Warranty
06)
not insurance)

Collections
09)

Insurance Coverage
1 B)

Other Contract
37)

10

A6004

Breach of Rental/ Lease Contract (not UD or wrongful eviction)

2, 5

A6D08

Contract/ Warranty Breach - Seller Plarnlrff(no fraud/ negligence)

2, 5

A6019 Negligent Breach of ContracUWarranty ( no fraud)

1.

A6028

Other Breach of Contracf/Warranty ( not fraud or negligence.)

1, 2 , 5

A6002

Collections Case -Seller Plaintiff

2.

A6012

Other Promissory Note/ Collections Case

2, 5

A6015

Insurance Coverage ( not complex)

5. 6

1, 2

L y A6009 Contractural Fraud

4.3

5 , 8.

103, 5

A6031

Tortious Interference

A6027

Other Contract Dispute(not breachlinsurancelfraud/ negligence)

A7300

Eminent Doma in/ Condemnation Number of

A6023

Wrongful Eviction Case

2, 13

A6018

Mortgage Foreclosure

2, 6

A6032

QuietTllie

1 , 2 , 3., 5
1.

2, 3. 8

Emnt Dom/ Inv Cond

14)

parcels

Wrongful Eviction
33)

Other Real Property

26)

A6060 Other Real Property( not em domain landlord/ tenant, foreclosure)

Unlawful DefamerCommercial ( 31)

A6021

2, 6
2. 6

Unlawful Detalner- Commerclal not drugs

9 or wrongful
9 ) eviction

2. 6

A6020 Unlawful Detainer -Residential ( not drugs or wrongful eviction)

2. 6

A6022

Unlawful Detalner- Drugs

2, 5

A6108

Asset Forfeiture Case

2, 6

A6115

Petition to Compel/ Confirm Arbitration

2, 5

Unlawful Detainer-

UResldential ( 32)
ljnfawful Detainer -

Drugs ( 3(3)

Asset Forfeiture ( 051

Petition re Arbitration
Award ( 11)

CIVIL CASE COVER SHEET ADDENDUM AND STATEMENT OF LOCATION HSC Rule 2 0
CIV 109 04- 02

Page 2

of

SHORT TITLE

CASC NUMBER

JCOR Records,

LLC

v.

Interscope Records,

Civil Case Cover

et

al

Type of Action

Sheet Category No,

Applicable Reasons

Check only one)

Writ of Mandate
02)

See Step 3 Above

A6151

Wnt- Administrative Mandamus

2, 8

A6152

W nt - Mandamus on Limited Court Case Matter

A6153

Writ - Other Limited Court Case Review

A6150

Other Writ /Judicial Review

2- g

A6003

AntitrusbTrade Regulation

1, 2 , 8

0th Jud Review ( 39)

Anlitrust/ Trade Reg

rn

03)

Xm

Construction Defect

A6007

t0)

Construction defect

1.

o.

Claims Involving Mass

Tort (40)

aA6006 Claims Involving Mass Tort

2. 3

1 , 2. 8

Securities LIIIg ( 28)

A6036

00

Securities Litigation Case

1,

2, B

Tox Tort/ Envronm

0

30)

A6036 Toxic Tort/Environmental

1 , 2 3 , 8

A6014 Insurance CoveragerSubrogation ( complex case only)

a -

Ins Covrage Clms

from Complex Case

5, 8

41)

A6141
Enforcement

of Judgment
20)

Sister State Judgment

2. 9

A6160 Abstract of Judgment'

2. 6

A6107 Confession of Judgment (non-domestic relations)

A6140 AdminislrativeAgencyAward ( not unpaid taxes)

A6114 Petilion/Certificate for Entry or Judgment on Unpaid Tax

A6112 Other Enforcement of Judgment Case

2, 13

2, 8
2. 8, 9

RICO ( 27)

A6033 Racketeering ( RICO) Case

Other Complaints
Nat Specified Above)

Govemance( 21)

43)

2. 8

A6030 Declaratory Relief Only

1,

2. 8

A6011

Other Commercial Complaint Case ( non-torUnon- complex)

1,

2, 8

A6000 Other Civil Complaint (non- lort/non- complex)

1,

2. 8

A6113 Partnership and Corporate Governance Case

A6121

2. 3

Civil Harassment

A6123 Workplace Harassment

Other Petitions
Nat Specified Above)

2. B

harat
A6040 Injunctive Relief Only (not domestiGssmen)

42)

Partnership/ Corp

A6124

EJder/DependentAdult Abuse Case

A6190

Election Contest

ABI 10

Petition for Change of Name

A6170 Petition for Relief from Late Claim Law

A6100 Other Civil Petition

2,

3, 9

2, 3. 9

2
2, 7
2, 3. 4. 8.
2

LAVILLAVIL LASELASE DOVERDOVER SHEETSHEET ADDENDUMADDENDUM ANDAND STATEMENTSTATEMENT OFOF LOCATIONLOCATION LASCLASC RuleRule 2020

CIVCIV 109109 04-04- 0202

143*143*

40AA40AA YEMAWrorMSTMYEMAWrorMSTM

Page 3 of
of 4

circumstance

indicated in No II..

Item

on

Pane In-:tha

nrnnor
r

REASON CHECK THE NUMBER UNDER ITEM - 3- WHICH APPLIES IN THIS CASE

Di X"32

04 05

6. 1J7

CITY

CA

nn
..

2720

8.09 131

STATE

Santa Monica

ran

fr

fd. nn

4,.........

, r,

rl.

a.. ui t iu VatlVl I

V V . JCICt1LCU

i ADDRESS
Colorado Avenue

ZIP CODE.

90404

1V. Cerhficate/Declaration of Assignment The undersigned hereby certifies and declares that the above entitled matter is

properly filed for assignment to the Superior

Los Angeles Superior Court under Section 392 at
seq., Code

of

courthouse in the Central

District of the
Civil Procedure and Rule 2( b), ( c) and ( d) of this court for

the
reason checked above.
I declare under penalty of penury under the laws of the State of California that the foregoing
is true and correct
this
and

declaration

was executed on

November

20,

2002at,

Los

fCaier

Angeles ___ California

tatyl ----

al.
SIG ATUR O A

Nancy

T.

URNt: Y/ FILIN6 Ar t'tj

Nguyen

New Civil Case Filing Instructions

This addendum form is required so that the court can assign your case to the correct courthouse location in the

proper district for filing and hearing It satisfies the requirement for a certificate as to reasons for authorizing filing in

the courthouse location, as set forth in Los Angeles Superior Court Local Rule 2 0. it must be completed and
submitted to the courtalong with the Civil Case Cover Sheet and the original Complaint or Petition in ALL civil cases

filed in any district (including the Central District) of the Los Angeles County Superior Court Copies of the cover
sheet and this addendum must be served along with the summons and complaint, or other initiatino oleadino in the
case. - -

PLEASE HAVE THE FOLLOWING DOCUMENTS COMPLETED AND READY TO BE FILED IN ORDER TO
PROPERLY COMMENCE YOUR NEW COURT CASE.
1. Original Complaint or Petition

2 IfForms
filing aCounter)
Complaint, a completed Summons form for issuance by the Clerk (Summons forms available at the

3 Civil
Case Cover Sheet form required by California Rule of Court 982 2(b)( 1), completely filled out (Cover Sheet
forms available at the Forms Counter)
4. This " Addendum to Civil Case Cover Sheet --form [ Superior Court Form Number 982 2( b)( 1) A, revised 7/ 99],
completely filled out (Item 11 does not apply in limited civil cases) and submitted with the Civil Case Cover Sheet

5 Payment in full of the filing fee ( unless filing on behalf of state or local government or no fee is due for the type
of case being filed) or an Order of the Court waiving payment of filing fees in forma paupens ( fee waiver
application forms available at the Filing Window)

6 In case of a plaintiff or petitioner who is a minor under 18 years of age, an Order of the Court appointing an adult
as a guardian ad [item to act on behalf of the minor (Guardian ad Litem Application and Order forms available at
the Forms Counter)

7. Additional copies of documents presented for endorsement by the Clerk and return to you.

With the exception of unlimited civil cases concerning propertydamage, bodily injury orwrongful death occurring in

this County, Labor Commissioner Appeals, and those types of actions required to be filed in the Central District by
Loral Court Rule 2(b), all unlimited jurisdiction civil actions may be optionally filed either in the Central District or in
whichever other court location the rule would allow them to be filed When a party elects to file an unitmited jurisdiction
civAaction in Central District that would also be eligible for filing in one or more of the other court locations, this form
must still be submitted with location and assignment information completed.

CiVIL CASE COVER SHEET ADDENDUM AND STATEMENT OF LOCATION LASC Rule 2 o

CIV 109 04- 02

8rarkaD.

M- EmnbatFomuTH

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