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The agreement between Sony BMG and the attorneys general of Los Angeles County and the state of California settles a lawsuit charging that the company secretly embedded digital rights management software on CDs that potentially opened the door to hackers.

The lawsuit alleges that Sony did not properly disclose information about the software aimed at limiting the number of copies consumers could make of their music.

Tom Papageorge, a head deputy district attorney for Los Angeles County, said Texas filed a similar agreement with the courts on Tuesday and he predicted the

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Federal Trade Commission and other U.S. states would do the same over the next year.

He estimated Sony BMG sold about 12.6 million CDs with the software nationwide between January 2005 and November 2005 and about 930,000 in California. Sony stopped using the software when officials brought the problem to the record company's attention, Papageorge said.

'To their credit, they did stop the practice as soon as we brought it to their attention,' he said. 'The FTC and a group of other states are looking at this as well and will file similar agreements.'

Sony BMG, a joint venture of Sony and Germany's Bertelsmann AG, said in a statement it was pleased to have reached agreements with officials in California and Texas.

As part of the settlement that still must be signed by a judge Sony BMG will provide refunds of up to $175 to California consumers who can provide a description and documentation of damage to their computers from the software, officials said.

The record company will also pay $750,000 in penalties and fees to settle the case that accused Sony BMG of using false advertising, unfair competition and unlawful computer intrusion.