According to the Company’s FORM 10-Q for the quarterly period ended June 30, 2006, in March 2005, a proposed settlement among plaintiffs, issuer defendants, issuer officers and directors named as defendants, and issuers’ insurance companies, was approved by the Court. This proposed settlement provides, among other matters, that: issuer defendants and related individual defendants will be released from the litigation without any liability other than certain expenses incurred to date in connection with the litigation; issuer defendants’ insurers will guarantee $1.0 billion in recoveries by plaintiff class members; issuer defendants will assign certain claims against underwriter defendants to the plaintiff class members; and issuer defendants will have the opportunity to recover certain litigation-related expenses if plaintiffs recover more than $5.0 billion from underwriter defendants. The Company’s board of directors approved the final settlement terms in March 2005. A fairness hearing for final approval of the settlement terms was held on April 24, 2006, and a decision from the court is pending.

As summarized by the same SEC filing, between January 11 and December 6, 2001, class action complaints were filed in the United States District Court for the Southern District of New York. These actions were filed against 310 issuers (including Loudeye), 55 underwriters and numerous individuals including certain of Loudeye’s former officers and directors. The various complaints were filed purportedly on behalf of a class of persons who purchased Loudeye’s common stock during the time period between March 15 and December 6, 2000. The complaints allege violations of the Securities Act of 1933 and the Securities Exchange Act of 1934, primarily based on allegations that Loudeye’s underwriters received undisclosed compensation in connection with our initial public offering and that the underwriters entered into undisclosed arrangements with some investors that were designed to distort and/or inflate the market price for Loudeye’s common stock in the aftermarket. These actions were consolidated for pre-trial purposes. No specific amount of damages has been claimed. Loudeye and the individual defendants have demanded to be indemnified by underwriter defendants pursuant to the underwriting agreement entered into at the time of the initial public offering. Presently all claims against the former officers have been withdrawn without prejudice. The Court suggested that the parties select six test cases to determine class-action eligibility. Loudeye is not a party to any of the test cases.

The complaint alleges that the Prospectus was false and misleading because it failed to disclose (i) the Underwriter Defendants' agreement with certain investors to provide them with significant amounts of restricted Loudeye shares in the IPO in exchange for exorbitant and undisclosed commissions; and (ii) the agreement between the Underwriter Defendants and certain of its customers whereby the Underwriter Defendants would allocate shares in the IPO to those customers in exchange for the customers' agreement to purchase Loudeye shares in the after-market at pre-determined prices.