<PAGE>   1
                                                                   EXHIBIT 10.28
                                            ***TEXT OMITTED AND FILED SEPARATELY
                                                CONFIDENTIAL TREATMENT REQUESTED
                                          UNDER 17 C.F.R. SECTIONS 200.80(B)(4),
                                                            200.83 AND 240.24B-2


                                     SETTLEMENT AGREEMENT

        This Settlement Agreement and Mutual Release (hereinafter "Settlement
Agreement") is entered into effective as of July 26, 2000 by and between
MP3.COM, INC. ("MP3" herein) on the one hand, and Capitol Records, Inc.
("Capitol") and all of its affiliated and related entities (collectively with
Capitol, "Company") on the other hand, both of which are sometimes collectively
referred to as the "Parties" and is made with reference to the following:

1.      RECITALS:

        a)      Capitol is a Plaintiff and MP3 is the defendant in the following
                litigation (the "Litigation") pending in the United States
                District Court for the Southern District of New York captioned
                UMG RECORDINGS, INC., SONY MUSIC ENTERTAINMENT INC., WARNER
                BROS. RECORDS INC., ARISTA RECORDS INC., ATLANTIC RECORDING
                CORPORATION, BMG MUSIC D/B/A THE RCA RECORDS LABEL, CAPITOL
                RECORDS, INC., ELEKTRA ENTERTAINMENT GROUP, INC., INTERSCOPE
                RECORDS, AND SIRE RECORDS GROUP INC., Plaintiffs, vs. MP3.COM,
                INC., Defendant, Case No. 00 Civ. 0472 (JSR). Each of the
                Parties to this Settlement Agreement desires to permanently
                settle and resolve any and all claims, disputes, issues or
                matters that exist between them as of the date of this
                Settlement Agreement as to the MyMP3.com service as set forth
                below and to dismiss with prejudice the Litigation.

        b)      NOW, THEREFORE, in consideration of the mutual promises,
                covenants and agreements set forth herein, and subject to the
                terms and conditions set forth below, the Parties desire to, and
                hereby do, resolve their differences and agree as follows:

2.      SETTLEMENT TERMS:

        a)      In consideration hereof, concurrently with the execution hereof
                and of the License Agreement referred to in subparagraph (e) of
                this Section 2 below, and the execution and filing of the
                Dismissal With Prejudice of the Litigation as described
                hereinbelow, MP3 will pay Company's Virgin Holdings, Inc.
                affiliate an amount equal to[...***...] the "EMI Amount"),
                [...***...] by wire transfer of immediately available funds to
                an account designated by Company.

        b)      If MP3 or an affiliate enters into or has heretofore entered
                into a settlement



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                                       1.
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                agreement with any of the original plaintiffs to the Litigation,
                which settlement agreement obligates MP3 or an affiliate to pay
                such plaintiff or its affiliate (collectively, a "Plaintiff" or
                the "Plaintiffs") a "Settlement Amount" (defined below) greater
                than the applicable amount set forth in the schedule in
                subparagraph 2(b)(ii) below, then MP3 shall pay to Company an
                additional settlement payment (the "Additional Payment(s)") as
                set forth below:

                i)      The "Settlement Amount" is defined as sums paid by MP3
                        or an affiliate to a Plaintiff in settlement of the
                        Litigation, exclusive only of (i) similar "Additional
                        Payments" required to be paid to any such Plaintiff,
                        (ii) sums paid to a Plaintiff in the form of a damage
                        award in the Litigation or any other litigation, (iii)
                        legal fees and (iv) any recoupable sums, per stream
                        royalties or revenue shares paid by MP3 in connection
                        with any exploitation after the date hereof of sound
                        recordings or musical compositions pursuant to a license
                        or other agreement, but inclusive, without limitation,
                        of (x) any non-recoupable amounts paid to a Plaintiff
                        (other than per stream royalties or revenue shares as
                        described above in (iv) of this subparagraph 2(b)(i))
                        paid pursuant to any license or any other agreement
                        entered into concurrently or substantially concurrently
                        with such settlement agreement with a Plaintiff
                        (including any and all agreements entered into or
                        substantially negotiated within six [6] months of entry
                        into the settlement agreement with a Plaintiff), and (y)
                        any payments to a Plaintiff with respect to past uses of
                        musical compositions. In the event that an Additional
                        Payment is due as a result of a license or other
                        agreement pursuant to which MP3 is granted additional
                        material rights by a Plaintiff (other than rights
                        previously granted by Company to MP3), then in
                        consideration of Company's receipt of such Additional
                        Payment (should it elect to receive said Additional
                        Payment), Company shall grant to MP3 the same such
                        rights, insofar as Company is concerned, as were granted
                        by such Plaintiff. If such Plaintiff grants additional
                        material rights to MP3 as aforesaid, but shall not have
                        granted to MP3 substantially all of the rights that
                        Company shall have granted to MP3, then the parties
                        shall assess whether or not the rights granted to MP3 by
                        Company are in their totality comparable to the rights
                        granted to MP3 by such Plaintiff and whether or not
                        Company would be obligated to grant additional rights to
                        MP3 in order to receive the Additional Payment. If the
                        parties are unable to agree, such a determination may be
                        submitted to non-binding mediation, and if a party
                        thereafter elects, then to binding, expedited
                        arbitration in each event by written notice from one
                        party to the other. If it is




                                       2.
<PAGE>   3


                        determined that additional rights are required to be
                        granted to MP3 in order for Company to be entitled to
                        the Additional Payment, Company shall have the right to
                        elect not to grant such rights and, in such event, not
                        to take such Additional Payment.

                ii)     The Additional Payment shall be defined as the amount in
                        excess of the EMI Amount determined after multiplying
                        the EMI Amount by a fraction (the "Fraction"), the
                        denominator of which is the applicable amount described
                        in the following schedule and the numerator of which is
                        the Settlement Amount actually paid to the applicable
                        Plaintiff

                        a)      BMG Entertainment, - [...***...]

                        b)      Warner Music Group, Inc. - [...***...]

                        c)      UMG Recordings, Inc. - [...***...] and

                        d)      Sony Music Entertainment, Inc. - [...***...]

                iii)    Such Additional Payment shall be calculated and made
                        promptly after MP3 has executed any applicable
                        agreements with any of said Plaintiffs. MP3 is obligated
                        to advise Company promptly of any applicable agreement.
                        The total Additional Payment(s) shall be based on the
                        Settlement Amount which effectively yields the single
                        largest Fraction, if any, with respect to any of the
                        four Plaintiffs. Thus, if any one such agreement with a
                        Plaintiff results in a certain Fraction requiring an
                        Additional Payment, then any subsequent agreement with
                        another Plaintiff will only result in a further
                        Additional Payment to the extent the Fraction applicable
                        to such subsequent agreement is greater than the
                        Fraction resulting from such prior agreement.

                iv)     An "Other Release" is defined as an agreement or
                        agreements (or any amendment to or modification of any
                        agreement) that MP3 or an affiliate of MP3 enters into
                        (or has entered into) with a Plaintiff pursuant to which
                        claims as to the use by MP3 of musical compositions in
                        connection with the MyMP3.com service are released or
                        compromised including by reason of a license or grant of
                        rights. An agreement with either Sony Music
                        Entertainment, Inc. or UMG Recordings, Inc. or their
                        respective affiliates pursuant to which claims as to the
                        use by




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                                       3.
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                           MP3 of musical compositions in connection with
                           the MyMP3.com service are released or
                           compromised shall only be an Other Release as
                           aforesaid if pursuant to such agreement or any
                           other agreement entered into concurrently or
                           substantially concurrently with such agreement
                           with Sony Music Entertainment, Inc. or UMG
                           Recordings, Inc. or their respective affiliates
                           [...***...] or more of the sums scheduled in
                           2(b)(ii)(c) or (d) are paid or payable to such
                           Plaintiff as the applicable Settlement Amount
                           (prior to reduction by reason of setoffs arising
                           from claims of MP3 or any affiliate of MP3).
                           Notwithstanding anything to the contrary
                           contained in this Agreement, if an Other Release
                           is, in any respect, other than in respect of the
                           amount of any monies paid or the dollar amount
                           thresholds which determine whether or not an
                           Additional Payment may be payable, more
                           favorable to such Plaintiff in respect of the
                           disposition of claims than the release granted
                           in this Settlement Agreement (including, without
                           limitation, in the event an Other Release only
                           settles claims with respect to past uses of
                           musical compositions (x) embodied only in sound
                           recordings owned or controlled by any entity
                           affiliated with such Plaintiff or (y) embodied
                           only on records manufactured and/or distributed
                           by any entity affiliated with such Plaintiff)
                           (hereinafter the "More Favorable Terms") then,
                           without in any way affecting Company's right to
                           retain or receive payment in full of the EMI
                           Amount and any other amounts theretofore paid to
                           Company by MP3 or thereafter payable, unless
                           Company otherwise specifically elects in
                           writing, the release given hereunder shall be
                           deemed to be changed so as to exactly conform in
                           such respects to the More Favorable Terms of the
                           Other Release other than the payment amount or
                           the dollar amount thresholds which determine
                           whether or not an Additional Payment may be
                           payable. In the event that as a result of any
                           such conforming changes in this release, certain
                           claims are no longer released or compromised by
                           Company, then Company will be deemed to have
                           reserved its rights and remedies with respect to
                           such claims. MP3 agrees that it shall
                           immediately notify Company in writing as to the
                           terms of any agreements, amendments,
                           modifications, changes or dispositions to which
                           this Section 2(b)(iv) applies or relates, and
                           shall simultaneously provide Company with a full
                           and complete copy of such Other Release.



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                                       4.
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                        v)      MP3 acknowledges that the provisions of this
                                subparagraph 2(b) are of the essence of this
                                Agreement.

                       vi)      In no event will the provisions of this
                                subparagraph 2(b) operate to reduce the EMI
                                Amount or require the repayment of any portion
                                thereof to MP3.

                c)      Reference is made to all musical compositions owned or
                        controlled by Company's music publishing affiliates,
                        including without limitation, EMI Music Publishing, as
                        of the date hereof (the "Compositions"). Company and MP3
                        agree that the release herein covers only claims that
                        Company could have asserted in respect of MP3's
                        unlicensed use prior to the date hereof for or in
                        connection with MP3's My.MP3 service of the Compositions
                        to the extent of Company or its affiliates' ownership or
                        control thereof as of the date hereof (including, by way
                        solely of example, the reproduction thereof). Company
                        and MP3 agree that the release herein does not cover any
                        additional use of the Compositions which takes place
                        after the date of this Settlement Agreement by any means
                        now known or hereafter invented (including without
                        limitation any exploitations of Compositions already
                        copied into MP3's database or any use by MP3 of any
                        other musical compositions). The parties agree that this
                        release does not extend to uses of the Compositions to
                        the extent same were authorized pursuant to licenses
                        between MP3 and any performing rights societies
                        ("Licensed Performances").

                d)      Capitol represents that it is the parent company to all
                        of EMI Group plc's U.S. record and music publishing
                        businesses. It specifically is understood that the term
                        "Company" shall include any corporation or other entity
                        currently controlling, or controlled by, or under common
                        control with Company, including, without limitation,
                        Company's affiliates and divisions in the music
                        publishing and the recorded music businesses.
                        Notwithstanding the foregoing, and for the avoidance of
                        doubt, "Company" does not include labels or music
                        publishers owned, distributed or controlled by Time
                        Warner, Inc. or any of its affiliates. If the Warner EMI
                        Music joint venture is consummated, any labels or music
                        publishers which may be controlled by Company or Warner
                        EMI Music subsequent to its formation but which were not
                        controlled by Company prior to its formation shall not
                        be considered related entities or affiliates of Company
                        for purposes of this Agreement; however, this agreement
                        shall remain binding with respect to any rights
                        presently held by Company that are transferred to such
                        label or music publisher subsequent to such formation.

                e)      Concurrently herewith, Company and MP3 are entering into
                        a License Agreement with respect to, inter alia, the
                        licensing to MP3 of the right to




                                       5.
<PAGE>   6






                stream master recordings controlled by Company via the MyMP3
                service(the "License Agreement").

3.      RELEASES

        a)      Company Release. Company, on behalf of itself and its agents,
                employees, representatives, partners, owners, officers, parents,
                shareholders, directors, subsidiaries, affiliates, attorneys,
                transferees, predecessors, successors, and assigns, solely to
                the extent it can legally bind such entities, does hereby
                irrevocably release, acquit and forever discharge MP3 and each
                of its agents, employees, representatives, partners, owners,
                related entities, officers, parents, shareholders, directors,
                subsidiaries, affiliates, attorneys, transferees, predecessors,
                successors, and assigns, jointly and severally (the "MP3
                Releasees"), of and from any and all debts, suits, claims,
                actions, causes of action, controversies, demands, rights,
                damages, losses, expenses, costs, attorneys' fees, compensation,
                liabilities and obligations whatsoever (hereinafter referred to
                collectively as "Claims"), suspected or unsuspected, known or
                unknown, foreseen or unforeseen, arising at any time up to and
                including the date of this Settlement Agreement, which Company
                may now have or at any time heretofore may have had, or which at
                any time hereafter may have or claim to have against the MP3
                Releasees, solely to the extent they relate to, arise from, or
                concern the MyMP3.com service up to the date hereof, the
                Litigation or the subject matter thereof and with respect to the
                Compositions and sound recordings included in the MyMP3.com
                service as of the date hereof (hereinafter "Company's Released
                Claims"). Nothing contained in the Release is intended to
                release any claims for any activity of MP3 occurring after the
                date of this agreement nor for any Licensed Performances.

        b)      MP3 Release. MP3, on behalf of itself and its agents, employees,
                representatives, partners, owners, related entities, officers,
                parents, shareholders, directors, subsidiaries, affiliates,
                attorneys, transferees, predecessors, successors, and assigns,
                solely to the extent it can legally bind such entities, does
                hereby irrevocably release, acquit and forever discharge Company
                and each of its agents, employees, representatives, partners,
                owners, related entities, officers, parents, shareholders,
                directors, divisions, subsidiaries, affiliates, attorneys,
                transferees, predecessors, successors, and assigns, jointly and
                severally (the "Company Releasees"), of and from any and all
                Claims, suspected or unsuspected, known or unknown, foreseen or
                unforeseen, arising at any time up to and including the date of
                this Settlement Agreement, which MP3 may now have or at any time
                heretofore may have had, or which at any time hereafter may have
                or claim to have against the Company Releasees, relating to,
                arising from, or concerning the MyMP3




                                       6.
<PAGE>   7


                service, the Litigation or the subject matter thereof and any
                counter claims which MP3 could have asserted in connection with
                the Litigation (hereinafter "MP3's Released Claims").

        c)      Statutory Waiver. Company's Released Claims and MP3's Released
                Claims are collectively defined as the "Released Claims". With
                respect to the Released Claims, all rights under California
                Civil Code Section 1542 (and any other law of similar effect),
                are hereby expressly waived by the Parties, and each of them,
                notwithstanding any provision to the contrary. Section 1542
                provides as follows:

                      "A general release does not extend to claims which the
                             creditor does not know or suspect to exist in his
                             favor at the time of executing the Release, which
                             if known by him must have materially affected his
                             settlement with the debtor."

        d)      The Parties, and each of them, and their representatives, and
                assigns expressly waive and release any right or benefit which
                they have or may have under Section 1542 of the Civil Code of
                the State of California, to the fullest extent that they may
                waive all such rights and benefits pertaining to the matters
                released herein. It is the intention of the Parties, and each of
                them, through this Settlement Agreement, and with the advice of
                counsel, to fully, finally and forever settle and release all
                such matters, and all claims relative thereto, in furtherance of
                such intention.

        e)      Dismissal With Prejudice. Company, concurrently with the
                execution and delivery hereof and payment of the EMI Amount and
                the Advance payable under the License Agreement shall execute
                and deliver to MP3 a Dismissal With Prejudice of the Litigation,
                which MP3 shall file, in the form annexed hereto as Exhibit A.

4.      NOTICES

        a)      Any notice, demand, request, consent, approval, or communication
                that either Party desires or is required to give to the other
                Party is to be addressed and served on or delivered to the other
                Party at the address set forth below. Any Party may change its
                address by notifying the other Party of its change of address in
                writing.

                i)    The addresses for MP3 are as follows:

                      MP3.com, Inc.




                                       7.
<PAGE>   8


                      4790 Eastgate Mall
                      San Diego, CA 92121
                      Attn: General counsel and VP Legal

                      With simultaneous copies to:

                      Gary Stiffelman, Esq.
                      Ziffren, Brittenham, Branca & Fischer
                      1801 Century Park West
                      Los Angeles 90067

               ii)    The address for Company is as follows:

                      EMI Recorded Music - North America
                      1290 Avenue of the Americas
                      New York, NY 10104
                      Attn:  Alasdair McMullan, Vice President Legal Affairs

                      With simultaneous copy to:

                      EMI Recorded Music, New Media
                      1750 North Vine Street
                      YV Building
                      Los Angeles, CA 90028
                      Attn:  Robyn Glaser, Vice President, Business
                             and Legal Affairs

5.      MISCELLANEOUS PROVISIONS

        a)      By entering into this Settlement Agreement, no Party admits or
                acknowledges that they committed any wrongdoing on their part.

        b)      This Settlement Agreement and any controversy which might arise
                therefrom shall in all respects be interpreted, enforced and
                governed by the laws of the State of New York applicable to
                agreements made and to be fully performed therein. All parties
                consent to the sole and exclusive personal jurisdiction and
                venue in the United States District Court for the SDNY, or if
                federal jurisdiction is unavailable, in the Supreme Court of the
                State of New York located in New York County, and agree that all
                disputes or litigation regarding this Settlement Agreement shall
                be submitted to and determined by said court, which shall have
                sole and exclusive jurisdiction. Subsequent changes in New York
                law or federal law through legislation or judicial
                interpretation that creates or finds additional or different
                rights and obligations




                                       8.
<PAGE>   9


                of the Parties shall not affect this Settlement Agreement.

        c)      This Settlement Agreement, together with the License Agreement,
                is the entire agreement between the Parties with respect to the
                Released Claims or subject matter of this Settlement Agreement
                and supersedes all prior and contemporaneous oral and written
                agreements and discussions pertaining to the Released Claims or
                subject matter of this Settlement Agreement. This Settlement
                Agreement may be amended only by a written agreement executed by
                each of the Parties hereto. No breach of the License Agreement
                may or shall be deemed a breach of this Settlement Agreement
                other than failure to pay the advance due thereunder.

        d)      No breach of any provision, representation or warranty
                ("Provision") hereof can be waived unless in writing signed by
                the party to be charged with such a waiver. Waiver of any one
                breach of any Provision hereof shall not be deemed to be a
                waiver of any other breach of the same or any other Provision
                hereof.

        e)      This Settlement Agreement shall be binding upon and inure to the
                benefit of the Parties hereto and its respective agents,
                employees, representatives, partners, parents, subsidiaries,
                divisions, affiliates, officers, related entities, licensees,
                directors, shareholders, investors, attorneys, transferors,
                transferees, predecessors, successors, trustees in bankruptcy,
                and assigns and each and every entity or person which now or
                during the pendency of the Litigation was a division, parent,
                successor, predecessor, division, affiliate, officer, director,
                shareholder, investor, employee, attorney, transferor,
                transferee, or subsidiary for each Party and its respective
                legal successors and assigns, to the extent each party can bind
                such parties.

        f)      The Parties represent and warrant that each of them have not
                assigned all or any portion of any claim pertaining to the
                Released Claims to any person or entity. In the event any claims
                are made by any third persons or entities based upon any
                purported assignment or any such liens or claims are asserted in
                connection with the Released Claims or proceeds of the
                Settlement Agreement, then the Party who has breached his
                representation or warranty contained in this Section 5(f) agrees
                to indemnify and hold harmless the other Party from any said
                claims being made.

        g)      In the event that any covenant, condition or other provision
                herein contained is held to be invalid, void or illegal by any
                court of competent jurisdiction, the same shall be deemed
                severable from the remainder of this Settlement Agreement and
                shall in no way affect, impair or invalidate any other covenant,
                condition or other provision herein contained. If such
                condition,




                                       9.
<PAGE>   10


                covenant or other provisions shall be deemed invalid due to its
                scope or breadth, such covenant, condition or other provision
                shall be deemed valid to the extent of the scope or breadth
                permitted by law.

        h)      Each of the Parties hereto represent and declare that in
                executing this Settlement Agreement, it has relied solely upon
                its own judgment, belief and knowledge, and on the advice and
                recommendations of its own independently selected counsel,
                concerning the nature, extent and duration of its rights and
                claims and that it has not been influenced to any extent
                whatsoever in executing the same by any representations or
                statements covering any matters made by the other Party hereto
                or by any person representing it.

        i)      The Parties hereto and each of them, further represent and
                warrant that they have carefully read this Settlement Agreement
                and know and understand the contents hereof, and that they
                signed this Settlement Agreement freely and voluntarily and have
                had the benefit of the advice of legal counsel before executing
                this Settlement Agreement. Each of the representatives executing
                this Settlement Agreement on behalf of their respective
                corporations or partnerships is empowered to do so and thereby
                binds his respective corporation or partnership. The Parties
                hereto acknowledge and agree that this Settlement Agreement
                shall be deemed to have been drafted jointly by the Parties
                hereto. Ambiguities shall not be construed against the interest
                of either party by reason of it having drafted all or any part
                of this Settlement Agreement.

        j)      This Settlement Agreement may be executed in counterparts and
                when each Party has signed and delivered at least one such
                counterpart to the other Party, each counterpart shall be deemed
                an original, and all counterparts taken together shall
                constitute one and the same agreement, which shall be binding
                and effective as to all Parties. This Settlement Agreement may
                be executed via facsimile signatures, which shall have the same
                force and effect as if they were original signatures to be
                followed by executed originals.

        k)      Each party hereto represents and warrants that it has all
                necessary right, title, and authority to enter into this
                Settlement Agreement, to grant the rights and interests herein
                granted, and to perform all of its obligations under this
                Settlement Agreement.

        l)      The provisions and existence of this Settlement Agreement (a)
                may not be cited by any party hereto as an admission of any
                issue of fact or law; and (b) shall not be disclosed to any
                third party or entity, except (i) as required by law or
                regulation or to enforce the terms hereof, (ii) to the parties
                respective professional advisors and executives on a "need to
                know" basis, provided that




                                      10.
<PAGE>   11


                such parties agree to be bound by these confidentiality
                provisions, and (iii) to the Internal Revenue Service, or any
                state or municipal taxing authority or other regulatory body
                having jurisdiction. The parties may also disclose these terms
                as required in connection with stock exchange, shareholder,
                internal, governmental or regulatory requirements, or external
                audit or similar disclosure requirements. The amount paid under
                this Settlement Agreement may also be disclosed to the
                Plaintiffs for purposes of compliance with provisions similar to
                2(b) above. It is understood and agreed that if the foregoing
                provision is breached by any party hereto, the non-breaching
                party may be entitled to injunctive or other equitable relief to
                prevent such a breach. Any non-breaching party seeking such
                injunctive relief will not be obligated to secure any bond or
                give any security in connection with the application for such
                relief. The right to seek injunctive relief under this paragraph
                shall be in addition to all other rights, remedies and forms of
                relief which may be available. In furtherance of the foregoing,
                any and all press releases relating to the subject matter hereof
                shall not be released until the timing and contents of such
                press release has been approved in writing by Company's Vice
                President, Legal Affairs; provided, the parties agree that a
                press release with respect to this Settlement Agreement shall be
                mutually agreed and issued within a reasonable period after
                execution hereof, and in any event within any time frame
                required by law or regulation.

        IN WITNESS WHEREOF, the Parties hereto have executed this Settlement
Agreement on the date(s) written beside its name, respectively.

                                 Capitol Records, Inc.


Dated: 26 July 2000              By: /s/ [SIGNATURE ILLEGIBLE]
      ----------------              ------------------------------
                                 Its:  Secretary
                                     -----------------------------


Dated:                           MP3.com, Inc.
      ----------------

                                 By:
                                    ------------------------------
                                 Its:
                                     -----------------------------




                                      11.
<PAGE>   12

        IN WITNESS WHEREOF, the Parties hereto have executed this Settlement
Agreement on the date(s) written beside its name, respectively.

                                 Capitol Records, Inc.


Dated:                           By:
      ----------------              ------------------------------
                                 Its:
                                     -----------------------------


Dated: 26 July 2000              MP3.com, Inc.
      ----------------

                                 By: /s/ PAUL OUYANG
                                    ------------------------------
                                 Its: EVP & CFO
                                     -----------------------------



                                       12
<PAGE>   13

                          UNITED STATES DISTRICT COURT
                     FOR THE SOUTHERN DISTRICT OF NEW YORK


-------------------------------------
UMG RECORDINGS, INC.,
SONY MUSIC ENTERTAINMENT INC.,
CAPITOL RECORDS, INC.,
and INTERSCOPE RECORDS,

                         Plaintiffs,

          v.                                      Case No.: 00 CIV. 0472
                                                  (JSR)
MP3.COM, INC.,

                         Defendant.

-------------------------------------


                   STIPULATION OF DISMISSAL WITH PREJUDICE OF
                        PLAINTIFF CAPITOL RECORDS, INC.

     Plaintiff Capitol Records, Inc. and defendant MP3.com, Inc. hereby
stipulate that all claims of plaintiff Capitol Records, Inc. herein are
dismissed with prejudice, pursuant to rule 41 of the Federal Rules of Civil
Procedure. Plaintiff Capitol Records, Inc. and defendant MP3.com, Inc. shall
bear their own costs and expenses, including attorneys' fees.

Dated: New York, New York
       July 28, 2000


                                        ARNOLD & PORTER

                                        By:  /s/ ROBERT A. GOODMAN
                                           -----------------------------
                                             Robert A. Goodman
                                             399 Park Avenue
                                             New York, NY 10022
                                             (212) 715-1000

<PAGE>   14
                                        -and-

                                            Hadrian R. Katz
                                            555 Twelfth Street, N.W.
                                            Washington, D.C. 20004
                                            (202) 942-5000

                                            Counsel for Plaintiffs
                                            Capitol Records, Inc.


                                        COOLEY GODWARD LLP


                                        By: /s/ MICHAEL G. RHODES
                                            -------------------------------
                                            Michael G. Rhodes (MR-0426)
                                            4365 Executive Drive
                                            Suite 1100
                                            San Diego, CA 92121-2128
                                            Tel: (858) 550-6000
                                            Fax: (858) 453-3555

                                        -and-


                                        ORRICK, HERRINGTON & SUTCLIFFE LLP


                                        By: /s/ JEFFREY A. CONCIATORI
                                            -------------------------------
                                            Jeffrey A. Conciatori (JC-6858)
                                            666 Fifth Avenue
                                            Suite 1100
                                            San Diego, CA 92121
                                            (858) 550-6000

                                             Counsel for Defendant
                                             MP3.com, Inc.


So ordered:


/s/ [Signature Illegible]
-------------------------------
United States District Judge
7-28-00