Document:

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                                                                   EXHIBIT 10.29

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

                                  MP3.com, Inc.
                               4790 Eastgate Mall
                               San Diego, CA 92121

                                  July 26, 2000

Virgin Holdings, Inc.
c/o EMI Recorded Music
1750 North Vine Street
Los Angeles, CA 90028

Gentlepersons:

        This agreement (this "Agreement") sets forth the terms and conditions of
the agreement between Virgin Holdings, Inc. ("Virgin" and, together with the
Label Affiliates (as defined below), the "Company") and MP3.com, Inc. (together
with its Affiliates, "MP3") with respect the matters set forth herein.

1.      DEFINITIONS:

        (a)    [...***...]

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        (b)    "Affiliate" has the meaning assigned to that term under Rule 501
               of the Securities Act of 1933, as amended, and the rules and
               regulations promulgated thereunder [...***...].

        (c)    "Artist" means a recording artist whose performance is embodied
               in the Company Recordings.

        (d)    "Beam-it System" [...***...]

        (e)    "Company Album" [...***...]

        (f)    "Company Master" [...***...]

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        (g)    "Company Recordings" [...***...]

        (h)    "Company Shelf" [...***...]

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        (i)    "Download" or "Downloading" [...***...]

        (j)    "Enforcement Technology" [...***...]

        (k)    [...***...]

        (l)    "Instant Listening System" [...***...]

        (m)    "Internet" means the publicly available network of computer
               networks using the Transmission Control Protocol/Internet
               Protocol (TCP/IP) (including subsequent extensions or
               modifications thereof) commonly referred to as the Internet and
               also known as the "World Wide Web," from which digital data
               (e.g., text, information, graphics, audio, video or a combination
               thereof) may be transmitted from a distant location from or to
               electronic devices (e.g., computers (mainframe, desktop, laptop,
               handheld, etc.), set-top boxes, cable modems, handheld devices,
               cell phones, televisions, etc.) capable of transmitting or
               receiving digital data or digital

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                information, irrespective of whether a fee is charged or a
                subscription or membership is required in order to access such
                network. [...***...]

        (n)    "Label Affiliates" [...***...]

        (o)    "Locker" [...***...]

        (p)    "Locker Owner" means an individual Person who shall have
               established a particular Locker.

        (q)    "MP3 Website" [...***...]

        (r)    "MyMP3" [...***...]

        (s)    "Own," "Owned" or "Ownership" [...***...]

        (t)    "Password" means a password either (i) provided to a Locker Owner
               by MP3 or (ii) chosen by the Locker Owner and accepted by MP3 so
               that

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                MP3 is able to identify the Locker Owner. Each Password will be
                unique to the individual Locker Owner.

        (u)    "Person" means any individual, corporation, partnership or other
               legal entity.

        (v)    "Record" means any and all forms of reproductions of audio
               recordings (e.g., albums, singles, etc.), now or hereafter
               invented, manufactured or distributed primarily for non-public
               use, including, without limitation, home use, school use, juke
               box use, or use in means of transportation including both
               physical and digitized reproductions; provided, that the
               applicable Recording embodied in a Record shall in all events
               have been commercially released in the form of a physical
               phonorecord for sale to consumers.

        (w)    "Recording" means a sound recording embodied in a Record.

        (x)    "Record Labels" [...***...]

        (y)    "Record Payments" [...***...]

        (z)    "Stream" [...***...]

        (aa)   "Territory" [...***...]

        (ab)   "Title List(s)" [...***...]

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2.      LICENSE:

        (a)    Upon the terms and subject to the conditions, restrictions and
               limitations set forth herein, and solely to the extent of the
               Company's rights with respect thereto, the Company hereby grants
               to MP3 a non-exclusive, non-transferable license, without the
               right to sublicense, solely during the Term (as defined below)
               and within the Territory:

               (i)     To encode the Company Recordings in a secure Streaming
                       format using technologies selected by MP3 (which, if
                       modified or changed from the technologies used by MP3 on
                       the date hereof, shall be subject to the approval of the
                       Company, such approval not to be unreasonably withheld)
                       reasonably necessary to create a database of Recordings
                       which Locker Owners can access only in accordance with
                       the methods described in Sections 2(b)-(d) below and
                       otherwise on the terms and subject to the conditions of
                       this Agreement, to Stream such encoded Company
                       Recordings from the MP3 Servers (as defined below) to
                       Locker Owners via the Internet and to make copies of
                       such Company Recordings solely to the extent necessary
                       to exercise its rights under this Section 2(a)(i);
                       provided, that all such copies shall reside only on the
                       network servers, mirror sites, caching servers,
                       workstations or equivalent devices under the direct
                       control of MP3 dedicated to MyMP3 (the "MP3 Servers");

               (ii)    To encode and display on the MP3 Website solely for
                       informational purposes as part of the MyMP3 service
                       (i.e., not made available for copying or other
                       reproduction by Locker Owners), cover artwork associated
                       with the Company Recordings (except for any Company
                       Recordings that are soundtrack albums, unless the
                       Company has the unrestricted right to authorize such
                       use); provided, that no cover artwork shall be encoded
                       by MP3 at a quality in excess of seventy-two (72) dots
                       per inch; and provided further, that all copies of such
                       cover artwork shall reside only on the MP3 Servers;

               (iii)   To use on the MP3 Website the names and tradenames of
                       the Company (only as such names and tradenames appear on
                       the Company Recordings), the titles of the Company
                       Recordings and the names of the Artists whose
                       performances are embodied in the Company Recordings (or
                       a producer or other performer who is credited by the
                       Company with such Company Recording), in all cases
                       solely to identify the Company Recordings on the MyMP3
                       service (and not in connection with any promotion,
                       marketing

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                       and/or advertising of MyMP3, MP3, the MP3 Website or for
                       any other purpose whatsoever without Virgin's prior
                       written approval); and

               (iv)    In each instance where Virgin has consented in writing
                       to such use (in all cases prior to the time of such
                       use), to use on the MP3 Website the likenesses (other
                       than cover artwork, which is covered by Section
                       2(a)(iii) above) of the Artists whose performances are
                       embodied in the Company Recordings (and any producer or
                       other performer associated with such Company Recording,
                       to the extent the Company has the right to authorize
                       such use) solely as part of the MyMP3 service (and not
                       in connection with any promotion, marketing and/or
                       advertising of MyMP3, MP3, the MP3 Website or for any
                       other purpose whatsoever).

        (b)    The Company Recordings may be added to or inserted in an
               individual Locker:

               (i)     At the direction of a Locker Owner using the Instant
                       Listening System (or any Equivalent System (as defined
                       below) established by MP3);

               (ii)    At the direction of a Locker Owner using the Beam-it
                       System (or any Equivalent System established by MP3);

               (iii)   [...***...]

               (iv)    [...***...]

               [...***...]

        (c)    [...***...]

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        (d)    [...***...]

3.      LIMITATIONS:

        (a)    The rights granted by Virgin hereunder are limited to the
               non-exclusive use of the Company Recordings in the manner
               expressly described in Section 2. Any and all other rights in
               connection with the Company Recordings are specifically reserved
               by the Company. MP3 shall not sublicense, assign or convey to any
               Person, or pledge, mortgage or encumber any rights under this
               Agreement.

        (b)    [...***...]

        (c)    [...***...]

        (d)    [...***...]

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        (e)    [...***...]

4.      TERM AND TERRITORY:

        (a)    The term (the "Term") of this Agreement shall commence upon
               execution hereof and shall continue [...***...]

        (b)    [...***...]

        (c)    [...***...]

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5.      CONSIDERATION: In consideration of this Agreement, MP3 shall pay to the
        Company the following:

        (a)    Upon execution of this Agreement, [...***...]

        (b)    [...***...]

        (c)    [...***...]

        (d)    [...***...]

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6.      COMPANY SHELF AND USAGE DATA:

        (a)    [...***...]

        (b)    [...***...]

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        (c)    [...***...]

7.      ACCOUNTINGS:

        (a)    MP3 shall maintain full, true and accurate accounts with respect
               to the Royalty Fees and the Per Master Fees and shall compute the
               sums due to the Company under Sections 5(b) and (c) as of each
               March 31, June 30, September 30 and December 31 after the date
               hereof. Within thirty (30) days after each calendar quarterly
               period, MP3 will send the Company a statement relating to such
               quarter that includes [...***...] (the "Quarterly Statement"),
               together with payment of all sums due to the Company. MP3 shall
               send such Quarterly Statements to the Company regardless of
               whether any amounts are due to the Company. Quarterly Statements
               shall be delivered in a computer readable format specified by
               Virgin in its reasonable, good faith business discretion.

        (b)    MP3 will maintain (for at least 5 years after the end of the
               Term) books and records with respect to sums payable to the
               Company hereunder. The Company may, at its own expense no more
               than once per calendar year, examine and copy those books and
               records, as provided in this paragraph. In the event that the
               calculation of such sums is determined by a computer-based
               system, the Company shall be permitted to examine the machine
               sensible data utilized by such system and the related
               documentation describing such system. The Company may make those
               examinations only during MP3's usual business hours, and at the
               place where it keeps the books and records. Such books and
               records shall be kept at the MP3 office in San Diego, California,
               unless otherwise notified. The Company will be required to notify
               MP3 at least ten (10) days before the date of planned
               examination. If any audit reveals any statement hereunder to be
               in error by more than ten percent (10%), in addition to payment
               of the deficiency, the reasonable costs and expenses of such
               inspection shall be borne by MP3.

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8.      REPRESENTATIONS, WARRANTIES AND AGREEMENTS.

        (a)    In addition to the other representations, warranties, agreements
               and obligations of MP3 herein:

               (i)    [...***...]

               (ii)   [...***...]

               (iii)  [...***...]

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               (iv)   [...***...]

               (v)    [...***...]

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               (vi)   [...***...]

               (vii)  [...***...]

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               (viii) [...***...]

               (ix)   [...***...]

        (b)    The Company shall be solely responsible for any Record Payments
               that may be due in connection with the use of the Company
               Recordings contemplated hereunder.

        (c)    Each party to this Agreement represents and warrants to the other
               that (i) such party has the right, power and authority to enter
               into and fully perform this Agreement and (ii) the execution of
               this Agreement by such party and its performance of the
               obligations hereunder do not and will not violate any agreement
               by which such party is bound.

9.      OWNED PROPERTY: MP3 hereby acknowledges that all sound recording
copyrights or equivalent state law rights in and to the Company Recordings, and
all copyrights in and to the cover artwork, names and tradenames described in
Sections 2(a)(ii) and (iii) (the "Owned Property"), as between the Company and
MP3, are the sole property of the Company. MP3 shall not contest, or assist
others in contesting, the Company's rights or interests in the Owned Property or
the validity of such ownership. MP3 shall include on the MP3 Website, its
products and all other material produced and distributed publicly by MP3 in
accordance with this Agreement, such copyright, trademark and other notices as
the Company may from time to time reasonably require.

10.     TERMINATION:

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        (a)    Either party may terminate this Agreement upon a material breach
               of any of the representations, warranties, agreements or
               obligations made by the parties in Sections 2(a), 4(b), 5(b),
               5(c), 8(a)(ii), 8(a)(vii) and (viii) of this Agreement, which
               breach is not cured within thirty (30) days from date of written
               notice by the non-breaching party of any such breach.

        (b)    The Company may terminate this Agreement: (i) if MP3 is dissolved
               or liquidated, or becomes bankrupt or otherwise insolvent; (ii)
               if MP3 fails to fully comply with Sections 3, 5(a) and 8(a)(iv)
               hereof; or (iii) at any time after the sale by MP3 of fifty
               percent (50%) or more of its assets, whether by stock sale,
               merger, share exchange, asset sale, consolidation or otherwise to
               any company engaging in, or which has been sued by the Company
               for engaging in, music piracy.

        (c)    Upon the occurrence of any of the events described in Section
               10(b) or the failure of MP3 to cure a material breach within the
               cure period as provided in Section 10(a), in addition to such
               other rights and remedies which the Company may have at law or
               otherwise under this Agreement, the Company shall have the right
               to terminate this Agreement and all rights granted hereunder
               shall forthwith revert to the Company. Notwithstanding any such
               termination, this Section 10 and Sections 13 and 14 shall remain
               in full force and effect.

        (d)    [...***...]

11.     INDEMNITY:

        (a)    Each party hereby agrees to hold harmless, defend and indemnify
               the other party (and its Affiliates, directors, officers,
               employees and agents) from any and all damages, liabilities,
               costs, losses and expenses (including reasonable attorneys' fees)
               ("Losses") arising out of or connected with any claim, demand,
               liability or action brought or claimed by a third party
               (collectively referred to as a "Claim") to the extent such Claim
               is based upon a breach of any of the warranties, representations,
               covenants or obligations of the indemnifying party in this
               Agreement or the gross negligence or wilfull misconduct of such
               party.

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        (b)    In claiming any indemnification hereunder, the indemnfied party
               shall promptly provide the indemnifying party with written notice
               of any Claim which the indemnified party believe it is entitled
               to be indemnified pursuant to this Section 11. The indemnifying
               party agrees to reimburse the indemnified party, on demand, for
               any payment made by the indemnified party at any time with
               respect to any Losses to which the foregoing indemnity applies.
               The indemnified party may, at its own expense, assist in the
               defense and all negotiations relating to a settlement of any such
               Claim. Any settlement intended to bind the indemnified party may
               not be entered into without the indemnfied party's prior written
               consent, which shall not be unreasonably withheld or delayed.

12.     NOTICES: All notices hereunder shall be given in writing and shall be
effective when served by personal delivery or upon receipt when sent by
certified mail, return receipt requested, postage prepaid; when sent by
overnight courier service; when sent by facsimile transmission with hard copy
confirmation sent by certified mail; or when sent by e-mail with telephonic
confirmation, in each case to the party at the addresses set forth below (or at
such other addresses hereafter designated by the parties):

               If to MP3:

               MP3.com, Inc.
               4790 Eastgate Mall
               San Diego, CA  92121
               Attention:  Robin Richards
               Facsimile:  (858) 623-7003
               e-mail:  robin@mp3.com

               with a copy to:

               Ziffren, Brittenham, Branca & Fischer LLP
               1801 Century Park West
               Los Angeles, CA  90067-6405
               Attention:  Gary Stiffelman, Esq.
               Facsimile:  (310) 553-7068
               e-mail:  garys@zbbf.com

               If to the Company:

               Virgin Holdings, Inc.
               c/o EMI Recorded Music, New Media Group
               1750 N. Vine Street
               YV Building
               Hollywood, California 90028
               Attention:  Robyn L. Glaser
               Facsimile:  (323) 769-4421
               e-mail:  robyn.glaser@emicap.com

                                       19

<PAGE>   20
               with a copy to:

               EMI Recorded Music, North America
               1290 Avenue of the Americas, 38th Floor
               New York, New York 10104
               Attention:  Alasdair J. McMullan
               Facsimile:  212-492-5095
               e-mail:  alasdair.mcmullan@emicap.com

or to such other persons or at such other address hereafter designated by the
parties.

13.     CONFIDENTIALITY. The terms and conditions of this Agreement are in all
        respects confidential, and neither party shall disclose them, directly
        or indirectly, to any other person (except to the extent such disclosure
        is required by law [...***...]), other than such party's
        legal and financial advisors who shall agree to be bound by this
        confidentiality agreement. Neither party shall, directly or indirectly,
        by any means, disclose, or participate in or contribute to any public
        discussion, notice or other publicity concerning, the terms and
        conditions of this Agreement. Notwithstanding the foregoing, the parties
        agree that a mutually approved press release with respect to this
        Agreement shall be issued within a reasonable period after execution
        hereof in accordance with Section 14(i) below.

14.     MISCELLANEOUS:

        (a)    This Agreement sets forth the entire understanding of the parties
               hereto relating to the subject matter hereof and supersedes all
               prior and contemporaneous agreements and understandings, whether
               oral or written. This Agreement may be amended, modified,
               superseded, canceled, renewed or extended, and the terms hereof
               may be waived, only by a written instrument signed by the parties
               hereto or, in the case of a waiver, by the party waiving
               compliance. All remedies, rights, undertakings and obligations
               contained in this agreement shall be cumulative and none of them
               shall be in limitation of any other remedy, right, undertaking or
               obligation of either party.

        (b)    The Company may transfer or assign, in whole or in part, this
               Agreement (or its rights, interests or obligations hereunder) to
               any of its Affiliates or upon a change of ownership of the
               Company. MP3 shall not assign its rights hereunder in whole or in
               part to any person or entity without the prior written approval
               of Virgin. Any such purported assignment shall be null and void.
               Subject to the foregoing, this Agreement shall be binding upon
               and inure to the benefit of the parties, their permitted assigns
               and their respective successors and legal representatives.

                                              *CONFIDENTIAL TREATMENT REQUESTED
                                       20

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        (d)    This Agreement shall be governed by the laws of the State of New
               York applicable to contracts entered into and performed entirely
               within the State of New York, 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
               claim arising out of or relating to this Agreement or the
               transactions contemplated hereby shall be instituted in the
               United States District Court of the Southern District of New York
               or, if federal jurisdiction is unavailable, in any state court
               located in New York County, State of New York, and each party
               agrees not to assert, by way of motion, as a defense or
               otherwise, in any such claim, that it is not subject personally
               to the jurisdiction of such Court, that the claim is brought in
               an inconvenient forum, that the venue of the claim is improper or
               that this Agreement of the subject matter hereof may not be
               enforced in any such Court.

        (e)    Except as is specifically provided herein, nothing in this
               Agreement is intended to confer on any person not a party hereto
               any rights or remedies under this Agreement.

        (g)    A waiver by either party of any provision of this agreement in
               any instance shall not be deemed to waive it for the future.

        (i)    Other than as required by law, regulation or stock exchange
               requirements, and without the consent of the other party, the
               parties hereto shall not, and shall cause their respective
               Affiliates not to, disclose the existence of this Agreement or
               issue or cause the publication of any press release or other
               announcement with respect to the transactions contemplated by
               this Agreement. If any press release or other announcement is
               made in accordance with the foregoing sentence, the content of
               such release or other announcement must be mutually agreed by the
               parties hereto.

        (j)    Should any part of this Agreement judicially be declared to be
               invalid, unenforceable, or void, the parties agree that the part
               or parts of this Agreement so held to be invalid, unenforceable,
               or void shall be reformed by the entity having jurisdiction
               thereover without further action by the parties hereto and only
               to the extent necessary to make such part or parts valid and
               enforceable.

        (k)    Each party is acting as an independent contractor and not as an
               agent, partner, or joint venturer with the other party for any
               purpose. Except as provided in this Agreement, neither party
               shall have any right, power, or authority to act or to create any
               obligation, express or implied, on behalf of the other.

        (l)    The Section headings in this Agreement are used for convenience
               only and will not affect the interpretation of any provision.

                                       21

<PAGE>   22
        (m)    This Agreement may be executed in one or more counterparts, each
               of which shall be deemed an original, and all of which, when
               taken together, shall constitute one and the same instrument.

                                       22

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        Please indicate your acceptance of the above terms by signing in the
space indicated below.

                                  Very truly yours,

                                  MP3.COM, INC.

                                  By:  /S/ Robin Richards
                                      -------------------------------
                                      Name:
                                      Title: Pres

AGREED AND ACCEPTED:

VIRGIN HOLDINGS, INC.

By:  /S/ Signature Illegible
   -------------------------------
   Name:  Name Illegible
   Title: Vice President

                                       23

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                                    EXHIBIT A

                                   [...***...]

                                              * CONFIDENTIAL TREATMENT REQUESTED

                                       24

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                                    EXHIBIT B

                                   [...***...]

                                  See Attached

                                              * CONFIDENTIAL TREATMENT REQUESTED

                                       34<PAGE>   1
                                                                   EXHIBIT 10.30

                                            ***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 AND MUTUAL RELEASE

        This Settlement Agreement and Mutual Release (together with the exhibits
and schedules attached hereto, the "Settlement Agreement") is entered into
effective as of August 17, 2000 by and between MP3.COM, INC. ("MP3" herein), on
the one hand, and Sony Music Entertainment Inc. ("Company"), on the other hand,
both of which are sometimes collectively referred to as the "Parties" and each
of which is sometimes individually referred to as a "Party" and is made with
reference to the following:

1.      RECITALS:

        a)      Company is a Plaintiff and MP3 is the defendant in the following
                litigation (the "Litigation"): 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).

        b)      Each of the Parties to this Settlement Agreement desire 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 and to dismiss with prejudice the
                Litigation.

        c)      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 (f)
                below, and the execution by counsel for the Parties hereto and
                delivery of a copy to MP3 for filing of the Dismissal With
                Prejudice of the Litigation as described hereinbelow MP3 will
                pay Company the sum of [...***...] plus [...***...].

                                              * CONFIDENTIAL TREATMENT REQUESTED

                                       1
<PAGE>   2
               Bank Address: [...***...]

               Bank Contact: [...***...]

        b)     [...***...]

               i)     [...***...]

               ii)    [...***...]

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

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

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

                                              * CONFIDENTIAL TREATMENT REQUESTED

                                       2

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                      d) EMI Records Group - [...***...].

               iii)   [...***...]

        c)     For no additional consideration, Company also hereby agrees that
               the master recordings and phonorecord copyrights, excluding the
               musical compositions or literary or dramatic works embodied
               therein, previously copied by MP3 which are owned or controlled
               by Company shall be deemed to have been copied with Company's
               consent.

        d)     [...***...]

        e)     It specifically is understood that the term "Company" shall
               include any corporation or other entity controlling, or
               controlled by, or under common control therewith, [...***...]

        f)     Concurrently herewith, Company and MP3 are entering into a
               License Agreement in the form annexed hereto as Exhibit A (the
               "License Agreement").

                                              * CONFIDENTIAL TREATMENT REQUESTED

                                       3

<PAGE>   4
3.      RELEASES

        a)      Company Release. Company, on behalf of itself and its heirs,
                agents, employees, representatives, partners, owners, related
                entities, officers, parents, shareholders, directors,
                subsidiaries, affiliates, attorneys, transferees, predecessors,
                successors, and assigns does hereby irrevocably release, acquit
                and forever discharge MP3 and each of its respective heirs,
                agents, employees, representatives, partners, owners, related
                entities, officers, parents, shareholders, directors,
                subsidiaries, parents, subsidiaries, divisions, affiliates,
                officers, directors, shareholders, investors, family members,
                attorneys, transferees, predecessors, successors, and assigns,
                jointly and severally in their representative capacities (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 "Company 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, relating to, arising from, or concerning the
                MyMP3 Service or the Litigation (hereinafter "Company Released
                Claims").

        b)      MP3 Release. MP3, on behalf of itself and its heirs, agents,
                employees, representatives, partners, owners, related entities,
                officers, parents, shareholders, directors, subsidiaries,
                affiliates, attorneys, transferees, predecessors, successors,
                and assigns does hereby irrevocably release, acquit and forever
                discharge Company and each of its respective heirs, agents,
                employees, representatives, partners, owners, related entities,
                officers, parents, shareholders, directors, subsidiaries,
                affiliates, attorneys, transferees, predecessors, successors,
                and assigns, jointly and severally in their representative
                capacities (the "Company 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 "MP3 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 Service or the Litigation
                (hereinafter "MP3 Released Claims").

        c)      Statutory Waiver. With respect to the Company Released Claims
                and the MP3 Released Claims (collectively, the "Released
                Claims"), all rights under

                                       4

<PAGE>   5
                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, heirs
                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 sum described
                in 2(a) above, shall execute, file and deliver to MP3 a
                Dismissal With Prejudice of the Litigation, in the form annexed
                hereto as Exhibit B.

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 ordered to be addressed and served on or delivered to
                the other Party at the address set forth below. Any Party may
                change his/his/its address by notifying the other Parties of
                their change of address(es) in writing.

               i)     The addresses for MP3 are as follows:

                      MP3.com, Inc.
                      4790 Eastgate Mall
                      San Diego, CA 92121
                      Attn: General counsel and VP Legal

                      With simultaneous copies to:

                      Gary Stiffelman, Esq.
                      Ziffren, Brittenham, Branca & Fischer LLP

                                       5
<PAGE>   6
                      1801 Century Park West
                      Los Angeles, California 90067

               ii)    The address for Company is as follows:

                      Sony Music Entertainment Inc.
                      550 Madison Avenue
                      New York, NY 10022-3211
                      Attn: Senior Vice President and General Counsel

                      With simultaneous copies to:

                      Sony Music Entertainment Inc.
                      550 Madison Avenue
                      New York, NY 10022-3211
                      Attn: Senior Vice-President, Business Affairs &
                      Administration

5.      MISCELLANEOUS PROVISIONS

        a)      In order to carry out the terms and conditions of this
                Settlement Agreement, the Parties agree to promptly execute upon
                reasonable request any and all documents and instruments
                consistent herewith necessary to effectuate the terms of this
                Settlement Agreement.

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

        c)      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 Southern
                District New York, 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.

        d)      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

                                       6
<PAGE>   7
                shall be deemed a breach of this Settlement Agreement.

        e)      No breach of any 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.

        f)      This Settlement Agreement shall be binding upon and inure to the
                benefit of the Parties hereto and his/his/its respective heirs,
                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 which now or
                ever 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.

        g)      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 herein agrees to indemnify
                and hold harmless the other Party from any said claims being
                made.

        h)      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, 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.

        i)      Each of the Parties hereto represent and declare that in
                executing this Settlement Agreement, they rely solely upon their
                own judgment, belief and knowledge, and on the advice and
                recommendations of their own independently selected legal
                counsel, concerning the nature, extent and duration of their
                rights and claims and that they have not been influenced to any
                extent whatsoever in executing the same by any representations
                or statements covering any matters made by any of the Parties
                hereto or by any person representing them or any of them. The
                Parties acknowledge that

                                       7
<PAGE>   8
                neither any Party hereto nor any of their representatives have
                made any promise, representation or warranty whatsoever, written
                or oral to any other party, as any inducement to enter into this
                Settlement Agreement, except as expressly set forth in this
                Settlement Agreement or in the License Agreement.

        j)      The Parties hereto or responsible officer or representative
                thereof, 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.

        k)      This Settlement Agreement may be executed in counterparts and
                when each Party has signed and delivered at least one such
                counterpart to each of the other Parties, 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.

        l)      Each party hereto warrants and represents 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.

        m)      Company, MP3 and each of their respective affiliates agree that
                they shall, and they shall instruct in writing their respective
                attorneys, accountants and other professional advisors
                (collectively, "Advisors") to, hold in confidence and not
                communicate, transmit, publish, disseminate or otherwise
                disclose any of the terms and conditions of this Agreement or
                any fact, matter, event or surrounding circumstance leading to
                or relating to the negotiation thereof to which such Party was
                privy or of which they were otherwise made aware (e.g., by being
                copied on correspondence or by being advised of such fact,
                matter, event or circumstance by another party to the
                negotiation) (collectively, "Confidential Information");
                provided, however, that nothing in this subparagraph (m) shall
                prohibit disclosure of such Confidential Information: (a) by
                Company, MP3 or any Affiliate to its respective financial
                officers, management, bankers or others as may be reasonably
                necessary in the operation of its respective business or by
                Company to any of its Affiliates; (b) by Company, MP3 or any
                Affiliate to its respective

                                       8
<PAGE>   9
                Advisors to the extent that such disclosure is in the opinion of
                such Advisors required to enable such Advisors fully to
                represent the person or entity concerned (or by any of Company's
                Affiliates or licensees to their respective attorneys,
                accountants and other professional advisors); (c) in connection
                with any legal or governmental proceeding; or (d) to any
                judicial, governmental or regulatory body. [...***...]

        n)      Company and MP3 and each of their respective affiliates agree
                that the disclosure of the existence of this agreement or any of
                the transactions contemplated in this Agreement, including,
                without limitation, any Confidential Information, in the context
                of any formal public communication to a third party of any kind,
                including, for the avoidance of doubt and without limitation, in
                the context of a formal press announcement or press conference,
                shall be subject to MP3's and Company's mutual approval.
                Attached hereto as Exhibit C to this Agreement is a formal press
                announcement which is deemed mutually approved by both MP3 and
                Sony (the "Agreed Statement").

                                              * CONFIDENTIAL TREATMENT REQUESTED

                                        9

<PAGE>   10
        IN WITNESS WHEREOF, the Parties hereto have executed this Settlement
Agreement on the date(s) written beside his/his/its name, respectively.

                                          Sony Music Entertainment Inc.

Dated:                                    By: /s/ Ron Wilcox
       ---------------------------            ----------------------------------
                                          Its: Senior Vice President Business
                                               Affairs and Administration

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

                                          By: /s/ Robin Richards
                                              ----------------------------------
                                          Its: President

APPROVED AND ACCEPTED INSOFAR AS THE UNDERSIGNED IS CONCERNED:

                                          Sony/ATV Music Publishing LLC

                                          By: /s/ Signature Illegible
                                              ----------------------------------
                                          Its: Executive Vice President

                                       10
<PAGE>   11
                                    EXHIBIT A
                                LICENSE AGREEMENT

                                       11
<PAGE>   12
                                            ***TEXT OMITTED AND FILED SEPARATELY
                                                CONFIDENTIAL TREATMENT REQUESTED
                                         UNDER 17 C.F.R.  SECTIONS 200.80(B)(4),
                                                            200.83 AND 240.24B-2

                                  MP3.com, Inc.
                               4790 Eastgate Mall
                               San Diego, CA 92121

                                 August __, 2000

Sony Music, a Group of Sony Music Entertainment Inc.
550 Madison Avenue
New York, NY 10022-3211

Gentlepersons:

        This letter, when and if fully executed, will set forth the terms of the
license agreement between Sony Music, a Group of Sony Music Entertainment Inc.
("Sony" or "Company") and MP3.com, Inc. ("MP3", "us" or "we"), with respect to
Sony licensing certain rights to MP3 on the following terms:

1.      DEFINITIONS:

        a)     [...***...]

               i)     [...***...]

               ii)    [...***...]

               iii)   [...***...]

                                              * CONFIDENTIAL TREATMENT REQUESTED

                                        1

<PAGE>   13
               iv)    [...***...]

               v)     [...***...]

               vi)    [...***...]

               vii)   [...***...]

                                              * CONFIDENTIAL TREATMENT REQUESTED

                                        2

<PAGE>   14
        b)      "Affiliate": Any corporation or other person or entity
                controlling, or controlled by, or under common control with a
                party or Person, as the case may be, and any joint ventures in
                which any of the foregoing participate.

        c)      "Artist": A recording artist, record producer, or other third
                party entitled to a royalty or other participation in revenues
                derived from the exploitation of Company Recordings ("Record
                Revenue Participation"). [...***...]

        d)     "Beam It":    [...***...]

                                              * CONFIDENTIAL TREATMENT REQUESTED

                                        3

<PAGE>   15
        e)      "Company Album": [...***...]

        f)      "Company Master": [...***...]

        g)      "Company Recordings": [...***...]

               i)     [...***...]

                                              * CONFIDENTIAL TREATMENT REQUESTED

                                        4
<PAGE>   16
               ii)    [...***...]

               iii)   [...***...]

                                              * CONFIDENTIAL TREATMENT REQUESTED

                                        5
<PAGE>   17
        h)      "Company Shelf" [...***...]

                                              * CONFIDENTIAL TREATMENT REQUESTED

                                        6

<PAGE>   18
        i)      "Composition" - [...***...]

        j)      "Download" or Downloading" - [...***...]

        k)      "Electronic Digital Copy" - [...***...]

        l)      [...***...]

        m)      "Home Page" - the individual Web Page of a Web Site intended by
                the Person maintaining the Web Site concerned to be the first
                Web Page viewed by new end-users the first time they access such
                Web Site.

        n)      "Instant Listen": [...***...]

                                              * CONFIDENTIAL TREATMENT REQUESTED

                                        7

<PAGE>   19
        o)      "Internet": A medium consisting of wired or wireless electronic
                or electromagnetic networks (including without limitation, fiber
                optic, microwave, twisted-pair copper wires, coaxial cable,
                satellite, wireless transmission, cellular networks, and
                combinations thereof) and collections thereof now or hereafter
                existing, wherever, located, for the transmission from a distant
                location of digital data (e.g., text, information, graphics,
                audio, video, or combination of the foregoing), through the use
                of any protocols or standards now known or hereafter devised
                (including without limitation, Transmission Control
                Protocol/Internet Protocol ["TCP/IP"] and subsequent extensions
                or modifications thereof) from or to electronic devices (e.g.,
                computers [mainframe, desktop, laptop, handheld, etc.], set-top
                boxes, cable modems, handheld devices, cell phones, televisions,
                etc.) capable of transmitting or receiving digital data or
                digital information, irrespective of whether such networks are
                open or proprietary, public or private, or whether a fee is
                charged or a subscription or membership is required in order to
                access such networks. "Internet" also includes without
                limitation the computer network comprising inter-connected
                networks commonly referred to as the "Internet" and the "World
                Wide Web." [...***...]

        p)      "Link" - an embedded icon, object, graphic or text within a Web
                Page that consists of a hypertext pointer to the URL of another
                Web Page.

        q)      "Locker": [...***...]

                                              * CONFIDENTIAL TREATMENT REQUESTED

                                        8
<PAGE>   20
        r)      "Locker Owner": an individual end-user who:

                i)      has registered for and has been assigned by MP3 a unique
                        "account" for access to MyMP3 (a "User Account");

                ii)     has had a unique password approved by MP3 in respect of
                        each User Account, which must be correctly entered prior
                        to the commencement of any session during which such
                        end-user is permitted to access MyMP3 (i.e., Persons
                        that do not have such a unique password cannot access
                        MyMP3.

        s)      "Mechanical Royalties" - [...***...]

        t)      "MP3 Site" - [...***...]

        u)      "MyMP3": [...***...]

        v)      "Person": any natural person, legal entity, or other organized
                group of persons or entities. (All pronouns, whether personal or
                impersonal, which refer to Persons include natural persons and
                other Persons.)

        w)      A "Phonograph Record" is a Record as embodied by the
                manufacturer and/or distributor in a physical, audio-only Record
                configuration (e.g., vinyl LP's, cassettes and compact discs).

        x)      "Record": Any and all forms of reproductions, transmissions or
                communications of audio Recordings (e.g., Albums, singles,
                etc.), now or hereafter known, manufactured, distributed,
                transmitted or communicated primarily for home use, school use,
                juke box use, or use in means of transportation.

                                              * CONFIDENTIAL TREATMENT REQUESTED

                                        9
<PAGE>   21
        y)      "Record Labels" [...***...]

        z)      "Recording": every recording of sound, not coupled with a visual
                image, by any method and on any substance or material, or in any
                other form or format, whether now or hereafter known, which is
                used or useful in the recording, production and/or manufacture
                of Records.

        aa)     "Company Site" - [...***...]

        bb)     (A) "Stream" - [...***...]

        cc)     "Title List(s)": [...***...]

        dd)     "Web Page" - a document that is either (a) written in HTML
                (i.e., Hypertext Markup Language), or another industry standard
                mark-up language, that is made available for viewing by end
                users at a single URL or domain name via the World Wide Web
                portion of the Internet by server software using HTTP (i.e.,
                Hypertext Transfer Protocol) to effectuate data transmission (or
                server software using any other generally accepted protocols
                utilized to effectuate data transmissions via the World Wide Web
                portion of the Internet); or (b) written in any computer
                programming language other than HTML, that is intended to be
                accessible, directly or indirectly, simultaneously to end users
                throughout the world via a computer or any other electronic
                device on any public data network that uses Transmission Control
                Protocol/Internet Protocol (i.e., TCP/IP) or Wireless
                Application Protocol (i.e., WAP) to effectuate data transmission
                (or any other generally accepted protocols utilized to
                effectuate data transmissions via public data networks). For
                purposes of the preceding sentence, only, the requirement that
                end users pay a subscription fee or other charge in
                consideration of accessing a data network

                                              * CONFIDENTIAL TREATMENT REQUESTED

                                       10
<PAGE>   22
                shall not, by that reason alone, mean that such data network is
                not a public data network.

        ee)     "Web Site" - a collection of Web Pages with a common theme or
                subject matter which are (a) organized hierarchically, (b)
                owned, managed and operated by the same Person or at the
                direction of such Person, and (c) interconnected via Links..

2.      LICENSE:

        a)      Subject to the terms and conditions of this agreement, Company
                hereby licenses to MP3 during the Term the non-exclusive,
                non-sublicensable right:

                i)      To reproduce one or a reasonable number of copies of the
                        Company Recordings, solely to the extent necessary to
                        enable the digital audio transmission of the Company
                        Recordings in accordance with the terms and conditions
                        prescribed elsewhere in this Agreement; and

                ii)     To make digital audio transmissions of the Company
                        Recordings solely by means of Streaming in accordance
                        with paragraph 12 and the Exhibits hereto, from MP3's
                        servers, to Locker Owners solely as part of MyMP3.

                iii)    To use the names and tradenames of Company (as and
                        solely to the extent that same appear on Company
                        Recordings), the titles of Company Albums and Company
                        Masters, the names of any Artists or other Persons
                        rendering services or granting rights to Company with
                        respect to Company Recordings, and any front Company
                        Album cover artwork utilized by Company and its
                        Affiliates in the United States, in connection with
                        Company Recordings solely for informational purposes to
                        identify Company Recordings in Lockers as part of MyMP3,
                        e.g., on Title Lists and on display during Streaming.
                        MP3 shall have the right to use such front album cover
                        art only to the extent that Company can license such
                        rights. Except as provided above, MP3 shall not have the
                        right to use any of said materials, without Company's
                        approval, which it can withhold in its absolute
                        discretion. [...***...]

                                              * CONFIDENTIAL TREATMENT REQUESTED

                                        11

<PAGE>   23
                iv)     [...***...]

        b)      Company Recordings can be added to or inserted in an individual
                Locker solely:

                i)      Via MP3's "Instant Listen" system, or

                ii)     Via MP3's "Beam-it" system, or

                iii)    [...***...]

                iv)     [...***...]

        c)      [...***...]

                                              * CONFIDENTIAL TREATMENT REQUESTED

                                       12

<PAGE>   24
        d)      [...***...]

        e)      [...***...]

        f)      It is agreed that no rights whatsoever to Compositions or other
                dramatic, literary or other works other than sound recordings
                that are embodied in Company Recordings are being conveyed
                herein and that MP3 separately shall secure any rights required
                in connection with the use of same in connection with MyMP3.

        g)      [...***...]

        h)      The license granted in this Section 2 is limited to the use of
                the Company Recordings and the materials described in 2(a)(iii)
                above solely in the manner set forth in this Agreement. Any and
                all other rights in connection with the Company Recordings and
                the materials described in 2(a)(iii) above are specifically
                reserved by Company. Nothing herein shall be construed as
                permitting MP3 to otherwise exploit the Company Recordings and
                the

                                              * CONFIDENTIAL TREATMENT REQUESTED

                                        13

<PAGE>   25
                materials described in 2(a)(iii) above, and/or engage in the
                sale or distribution of any Electronic Digital Copies of any
                Company Recordings.

        i)      [...***...]

        j)      Except as expressly provided herein or permitted under
                applicable law: (a) neither MP3 nor any Person deriving rights
                from MP3 shall have any right to edit, modify or otherwise alter
                any of the Company Recordings; and (b) neither MP3 nor any
                Person deriving rights from MP3 will include the Company
                Recordings in computer files other than computer files created
                for use exclusively MyMP3 in accordance with this Agreement.

3.      EXCLUSIVITY: The rights granted to MP3 hereunder shall be non-exclusive.

4.      TERM AND TERRITORY:

        a)      The territory shall be [...***...]

                i)      [...***...]

                ii)     [...***...]

                iii)    Notwithstanding subparagraphs (i) and (ii) above:

                                              * CONFIDENTIAL TREATMENT REQUESTED

                                       14

<PAGE>   26
                a)      [...***...]

                b)      [...***...]

                                              * CONFIDENTIAL TREATMENT REQUESTED

                                       15

<PAGE>   27
        b)      The term of this license (the "Term") shall commence forthwith
                and shall continue until [...***...]

5.      CONSIDERATION:In consideration of this license, Company shall receive
        the following:

        a)      [...***...]

                                              * CONFIDENTIAL TREATMENT REQUESTED

                                        16

<PAGE>   28
        b)     [...***...]

        c)     [...***...]

        d)     [...***...]

        e)     [...***...]

        f)     [...***...]

                                              * CONFIDENTIAL TREATMENT REQUESTED

                                        17

<PAGE>   29
        g)     [...***...]

                                              * CONFIDENTIAL TREATMENT REQUESTED

                                        18

<PAGE>   30
        h)      [...***...]

6.      ACCOUNTINGS:

        a)      MP3 will compute the sums due Company under paragraphs 5(a),
                5(b) and 5(d) as of each March 31, June 30, September 30 and
                December 31 after the date hereof. Within sixty-(60) days after
                each calendar quarterly period, MP3 will send Company a
                statement covering sums due hereunder and shall concurrently pay
                Company all sums shown due thereunder.

        b)      MP3 will maintain (for at least 5 years after the end of the
                Term) books and records with respect to sums payable to Company
                hereunder. Company may, at its own expense no more than once per
                calendar year, examine and copy those books and records, as
                provided in this paragraph. Company may make such an examination
                for a particular statement within three and one-half (3-1/2)
                years after the date when MP3 sends Company the statement
                concerned. Company shall only have the right to institute suit
                with respect to a particular statement within three years after
                the close of the Term hereof. As an alternative, Company shall
                have the right to conduct a single audit of MP3, otherwise as
                set forth herein, at any time within eighteen (18) months after
                the end of the Term. Company may make those examinations only
                during MP3's usual business hours, and at the place where it
                keeps the books and records. Such books and records shall be
                kept at the MP3 office in San Diego, California, unless
                otherwise notified. Company will be required to notify MP3 at
                least ten (10) days before the date of planned examination. In
                the event that an audit proves (as a result of a mutually
                approved settlement or a

                                              * CONFIDENTIAL TREATMENT REQUESTED

                                       19

<PAGE>   31
                binding judgment) an underpayment to Company of greater than
                [...***...] of sums properly due for the audited period, MP3
                shall reimburse Company for its reasonable audit costs.

        c)      The statements referred to paragraph 7(a) above shall provide
                Company information, sorted by both artist and title, setting
                forth [...***...] MP3 will work in good faith with Company to
                develop formats for MP3's accounting statements, including
                computer-sensible formats, which will assist Company in
                accounting to Artists with respect to the exploitation by MP3 of
                Company Recordings and incorporating the information directly
                into Company's accounting systems.

        d)      If Company does not receive any accounting statement as and when
                required hereunder for more than three accounting periods in any
                one (1) year period, then with respect to the next accounting
                period(s), MP3 shall submit License Fee payments that are
                [...***...] than the quarterly payments due for the preceding
                quarter, and payments shall continue at that increased rate,
                until Company receives the late accounting statement. If the
                amount paid pursuant to this subparagraph is more than the
                amount actually due, the overpayment shall be credited against
                future license fees due to Company under this agreement.

7.      WARRANTIES; AUTHORITY TO CONTRACT:

        a)      MP3 warrants and represents that:

               i)     [...***...]

               ii)    [...***...]

               iii)   [...***...]

                                              * CONFIDENTIAL TREATMENT REQUESTED

                                        20

<PAGE>   32
                iv)     [...***...]

                v)      [...***...]

                vi)     [...***...]

                vii)    [...***...]

                viii)   [...***...]

                ix)     [...***...]

                x)      [...***...]

                                              * CONFIDENTIAL TREATMENT REQUESTED

                                       21
<PAGE>   33
                xi)     [...***...]

                xii)    [...***...]

        b)      Company represents and warrants:

                i)      [...***...]

                ii)     [...***...]

                iii)    [...***...]

                iv)     [...***...]

                v)      [...***...]

        c)      Either Party may terminate the Term of this Agreement upon a
                material breach of any of the material agreements made by the
                other Party hereto, including without limitation a failure to
                account for more than three (3) consecutive accounting periods
                in any year, which breach is not cured within thirty (30) days
                from date of detailed written notice by the non-breaching Party
                of any such breach.

        d)      [...***...]

8.      INDEMNITY:

                                              * CONFIDENTIAL TREATMENT REQUESTED

                                       22
<PAGE>   34
        a)      MP3 shall at all times indemnify and hold harmless Company and
                its Affiliates from and against any and all claims, losses,
                damages, liabilities, costs and expenses, including, without
                limitation, legal expenses and reasonable counsel fees arising
                out of any breach or alleged breach by MP3 or any MP3 Affiliate
                of any of warranty, representation, covenant or obligation by
                MP3 or any MP3 Affiliate hereunder (individual and collectively,
                "MP3 Claims"). In the event of any MP3 Claim: (i) Company shall
                notify MP3 of the MP3 Claim concerned promptly following the
                date that Company or any Company Affiliate becomes aware of it;
                (ii) MP3 shall defend against the MP3 Claim concerned (at MP3's
                own expense) through legal counsel selected by MP3 with
                Company's consent, which consent Company shall not unreasonably
                withhold; and (iii) each Party shall reasonably cooperate with
                the other in the defense of the MP3 Claim concerned. MP3 shall
                be solely responsible for the amount of any settlement approved
                by MP3 or judgment for such MP3 Claim and all legal expenses and
                counsel fees incurred by MP3 in connection therewith, subject to
                section 8(b) below.

        b)      In the event that MP3 or any MP3 Affiliate is failing for any
                reason to defend against the MP3 Claim concerned, Company shall
                have the right to assume the defense and settlement of the MP3
                Claim concerned through legal counsel selected by Company, but
                MP3 shall be solely responsible at all times for the amount of
                any settlement or judgment for such MP3 Claim, as well as all
                reasonable legal expenses and reasonable counsel fees incurred
                by Company in connection therewith. Any settlement of an MP3
                Claim shall be subject to MP3's consent, which consent MP3 shall
                not unreasonably withhold. Notwithstanding the foregoing, in the
                event that MP3 defends against the MP3 Claim concerned (at MP3's
                own expense) through legal counsel selected by MP3 in accordance
                with and subject to clause (ii) of section 8(a) above, Company
                shall have the right at all times to actively participate in the
                defense thereof, and to employ legal counsel selected by Company
                at Company's own expense [separate from the counsel employed by
                MP3], it being understood that MP3 shall have the right at all
                times, in MP3's sole discretion, to maintain control of the
                conduct of the defense.

        c)      Company shall at all times indemnify and hold harmless MP3 and
                its Affiliates from and against any and all claims, losses,
                damages, liabilities, costs and expenses, including, without
                limitation, legal expenses and reasonable counsel fees arising
                out of any breach or alleged breach by Company of any warranty,
                representation, covenant or obligation by Company hereunder
                (individually and collectively, "Company Claims"). In the event
                of any Company Claim: (i) MP3 shall notify Company of the
                Company Claim concerned promptly following the date that MP3
                becomes aware of it; (ii) Company shall defend against the
                Company Claim concerned (at Company's own expense) through legal
                counsel selected by Company

                                       23
<PAGE>   35
                with MP3's consent, which consent MP3 shall not unreasonably
                withhold; and (iii) each Party shall reasonably cooperate with
                the other in the defense of the Company Claim concerned. Company
                shall be solely responsible for the amount of any settlement or
                judgment for such Company Claim and all legal expenses and
                counsel fees incurred by Company in connection therewith,
                subject to section 8(d) below.

        d)      In the event that Company or any Company Affiliate is failing
                for any reason to defend against the Company Claim concerned,
                MP3 shall have the right to assume the defense and settlement of
                the Company Claim concerned through legal counsel selected by
                MP3, but Company shall be solely responsible at all times for
                the amount of any settlement or judgment for such Company Claim,
                as well as all reasonable legal expenses and reasonable counsel
                fees incurred by MP3 in connection therewith. Any settlement of
                a Company Claim shall be subject to Company's consent, which
                consent Company shall not unreasonably withhold. Notwithstanding
                the foregoing, in the event that Company defends against the
                Company Claim concerned (at Company's own expense) through legal
                counsel selected by Company in accordance with and subject to
                clause (ii) of section 8(c) above, MP3 shall have the right at
                all times to actively participate in the defense thereof, and to
                employ legal counsel selected by MP3 at MP3's own expense
                [separate from the counsel employed by Company], it being
                understood that Company shall have the right at all times, in
                Company's sole discretion, to maintain control of the conduct of
                the defense.

9. INJUNCTIVE RELIEF: MP3 acknowledges that the rights licensed by Company
hereunder have a special, unique and extraordinary character which gives them a
peculiar value, and that, in the event of a material breach of any material
term, condition, representation, warranty, covenant or agreement contained in
this agreement, Sony may be caused irreparable injury, which cannot be
adequately compensated in monetary damages. Accordingly, in the event of any
such breach, actual or threatened, Company shall have, in addition to any other
legal remedies, the right to seek injunctive or other equitable relief. (The
preceding sentence shall not be construed to preclude MP3 from opposing any
application for such relief based upon contest of other facts alleged by Company
in support of the application.).

10. NOTICES: All notices to be given hereunder shall be in writing and shall be
sent by courier or other personal delivery or by registered or certified mail to
the applicable address set forth on page 1 hereof or at such other address as
shall be designated in writing from time to time by the party receiving notice.
Company shall send a copy of each such notice to MP3 to Ziffren, Brittenham,
Branca & Fischer, LLP., 1801 Century Park West, Los Angeles, California 90067,
Attn: Gary Stiffelman, Esq. MP3 shall send a copy of each notice to Company to
its Senior Vice President of Business Affairs and Administration and its Senior
Vice President and General Counsel. Except as otherwise provided herein, such
notices shall be deemed

                                       24
<PAGE>   36
given when personally delivered or mailed, except that notices of change of
address shall be effective only after the actual receipt thereof.

11.     MISCELLANEOUS:

        a)      This Agreement sets forth the entire understanding of the
                parties hereto relating to the subject matter hereof and
                supersedes all prior and contemporaneous agreements and
                understandings, whether oral or written. This Agreement may be
                amended, modified, superseded, canceled, renewed or extended,
                and the terms hereof may be waived, only by a written instrument
                signed by the parties hereto or, in the case of a waiver, by the
                party waiving compliance.

        b)      Company may assign its rights under this agreement in whole or
                in part to any subsidiary, affiliated or controlling
                corporation, to any Person owning or acquiring a substantial
                portion of the stock or assets of Company, or to any partnership
                or other venture in which Company participates, and such rights
                may be similarly assigned by any assignee. No such assignment
                shall relieve Company of any of its obligations hereunder.
                Company may also assign its rights to any of its Licensees if
                advisable in Company's sole discretion to implement the license
                granted. MP3 shall not have the right to assign this agreement
                or any of its rights hereunder other than to a Person owning or
                acquiring a substantial portion of its stock or assets without
                Company's prior written consent; provided no such assignment
                shall relieve MP3 of any of its obligations hereunder. Any
                purported assignment by MP3 in violation of this paragraph shall
                be void.

        c)      This Agreement shall be governed and construed in accordance
                with the laws of the State of New York applicable to agreements
                made and to be performed entirely within such State. The New
                York courts (State and Federal), only, will have jurisdiction of
                any controversies regarding this agreement; any action or other
                proceeding which involves such a controversy will be brought in
                those courts and not elsewhere. Except as is specifically
                provided herein, nothing in this Agreement is intended to confer
                on any person not a party hereto any rights or remedies under
                this Agreement.

        d)      Neither party shall be deemed to be in breach of any of its
                obligations hereunder unless and until the other party shall
                have given specific written notice describing in reasonable
                detail the breach and the allegedly breaching party shall have
                failed to cure that breach within a reasonable time after its
                receipt of that written notice.

        e)     This agreement may not be modified except by an instrument in
               writing executed by each party hereto. The invalidity or
               unenforceability of any provision hereof shall not affect the
               validity or enforceability of any other provision hereof.

                                       25
<PAGE>   37
        f)      MP3 acknowledges that Company shall have the right to license or
                establish businesses similar to MyMP3.

        g)      In entering into this agreement, and in providing services
                pursuant hereto, MP3 and Company have and shall have the status
                of independent contractors and nothing herein contained shall
                contemplate or constitute MP3 or Company as each other's agents
                or employees.

        h)      A waiver by either party of any provision of this agreement in
                any instance shall not be deemed to waive it for the future.

        i)      All remedies, rights, undertakings, and obligations contained in
                this agreement shall be cumulative and none of them shall be in
                limitation of any other remedy, right, undertaking or obligation
                of either party. No exercise of any of a Party's options or
                remedies under this Agreement will limit a Party's right to
                recover damages by reason of any default by the other Party, a
                Party's right to exercise any of its other options or remedies
                under this Agreement, or any of any Party's other rights or
                remedies. The captions of the Articles in this agreement are
                included for convenience only and will not affect the
                interpretation of any provision.

        j)      MP3 will bear and pay any and all taxes, duties and customs of
                any kind, however designated, levied or based in any way
                anywhere in the Territory upon the performance of this agreement
                or the sale or resale of any products or services by MP3 and its
                Affiliates, including, for the avoidance of doubt and without
                limitation, all sales, use, excise, purchase, value added or
                similar taxes but excluding income or similar taxes on sums
                payable to Company, which income or similar taxes, for the
                avoidance of doubt, Company shall bear. If any claim is made
                against Company for such taxes, MP3 will promptly remit to
                Company such sums together with any penalties and interest
                assessed immediately, unconditionally and without offset.

12.     [...***...]

        a)    [...***...]

                                              * CONFIDENTIAL TREATMENT REQUESTED

                                       26

<PAGE>   38
        b)      [...***...]

                                              * CONFIDENTIAL TREATMENT REQUESTED

                                       27
<PAGE>   39
        c)      [...***...]

13.     CONFIDENTIALITY; PRESS RELEASE:

        a)      Company, MP3 and each of their respective Affiliates agree that
                they shall, and they shall instruct in writing their respective
                attorneys, accountants and other professional advisors
                (collectively, "Advisors") to, hold in confidence and not
                communicate, transmit, publish, disseminate or otherwise
                disclose any of the terms and conditions of this Agreement or
                any fact, matter, event or surrounding circumstance leading to
                or relating to the negotiation thereof to which such Party was
                privy or of which they were otherwise made aware (e.g., by being
                copied on correspondence or by being advised of such fact,
                matter, event or circumstance by another party to the
                negotiation) (collectively, "Confidential Information");
                provided, however, that nothing in this paragraph 13 shall
                prohibit disclosure of such Confidential Information: (a) by
                Company, MP3 or any Affiliate to its respective financial
                officers, management, bankers or others as may be reasonably
                necessary in the

                                              * CONFIDENTIAL TREATMENT REQUESTED

                                       28
<PAGE>   40
                operation of its respective business or by Company to any of its
                Affiliates; (b) by Company, MP3 or any Affiliate to its
                respective Advisors to the extent that such disclosure is in the
                opinion of such Advisors required to enable such Advisors fully
                to represent the Person concerned (or by any of Company's
                Affiliates or licensees to their respective attorneys,
                accountants and other professional advisors); (c) in connection
                with any legal or governmental proceeding; or (d) to any
                judicial, governmental or regulatory body. [...***...]

        b)      Company, MP3 and each of MP3's Affiliates agree that the
                disclosure of the existence of this agreement or any of the
                transactions contemplated in this Agreement, including, without
                limitation, any Confidential Information, in the context of any
                formal public communication to a third party of any kind,
                including, for the avoidance of doubt and without limitation, in
                the context of a formal press announcement or press conference,
                shall be subject to MP3's and Company's mutual approval.
                Attached hereto as Exhibit C to this Agreement is a formal press
                announcement which is deemed mutually approved by both MP3 and
                Sony (the "Agreed Statement").

        Please indicate your acceptance of the above terms by signing in the
space indicated below.

                                            Very truly yours,

                                            MP3.COM, INC.

                                            By: /s/ Robin Richards
                                                --------------------------------

AGREED AND ACCEPTED:

Sony Music, A Group of Sony Music Entertainment Inc.

By: /s/ Ron Wilcox
    --------------------------------
Senior Vice President Business Affairs and Administration

                                              * CONFIDENTIAL TREATMENT REQUESTED

                                       29

<PAGE>   41
                                    EXHIBIT A

                                   [...***...]

                                              * CONFIDENTIAL TREATMENT REQUESTED

                                       A-1

<PAGE>   42
                                    EXHIBIT B
                                   [...***...]

                                              * CONFIDENTIAL TREATMENT REQUESTED

                                      A-11
<PAGE>   43
                                    EXHIBIT C
                           Exemplar of MyMP3 Web Page

                    [GRAPHIC DEPICTING A MY.MP3.COM WEB PAGE]

<PAGE>   44
                                    EXHIBIT B
                                   STIPULATION

UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK

UMG RECORDINGS, INC., SONY MUSIC
ENTERTAINMENT INC., WARNER BROS. RECORDS          Case No.: 00 Civ. 0472 (JSR)
INC., ARISTA RECORDS INC., ATLANTIC
RECORDING CORPORATION, BMG MUSIC d/b/a THE
RCA RECORDS LABEL, CAPITOL RECORDS, INC.,         Stipulation and Order
ELEKTRA ENTERTAINMENT GROUP, INC.,                of Discontinuance
INTERSCOPE RECORDS, and SIRE RECORDS GROUP        With Prejudice
INC.,

                  Plaintiffs,
        v.

MP3.COM, INC.,

                  Defendant.

IT IS HEREBY STIPULATED AND AGREED, by and among the undersigned counsel for
Plaintiff Sony Music Entertainment Inc. (the "Settling Plaintiff") and Defendant
MP3.com, Inc. that, pursuant to said parties' settlement agreement, the
Complaint in the above-captioned action is hereby dismissed with prejudice
pursuant to Fed.R.Civ.P. Rule 41 as to the claims of the Settling Plaintiff.

Dated:  August 15, 2000

                                               ARNOLD & PORTER

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

<PAGE>   45
                                             Counsel for Plaintiff
                                             Sony Music Entertainment Inc.

                                             COOLEY GODWARD LLP

                                          By: /s/ Michael B. Carlinsky
                                              --------------------------------
                                             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
                                             Michael B. Carlinsky (MC-6594)
                                             666 Fifth Avenue
                                             Suite 1100
                                             San Diego, CA  92121
                                             (212) 506-5000

                                             Counsel for Defendant
                                             MP3.com, Inc.

SO ORDERED.

--------------------------------
Hon. Jed Rakoff
U.S.D.J.

<PAGE>   46
                             EXHIBIT C (PAGE 1 OF 3)

                                                                     FOR MP3.COM
                                                                   GREG WILFAHRT
                                                                  (858) 623-7280
                                                                      pr@mp3.com

                                                   FOR SONY MUSIC ENTERTAINMENT:
                                                                 LAURIE JAKOBSEN
                                                                  (212) 833-5047
                                                   laurie_jakobsen@sonymusic.com

     MP3.COM AND SONY MUSIC ENTERTAINMENT SETTLE COPYRIGHT INFRINGEMENT SUIT

     SONY MUSIC ENTERTAINMENT GRANTS MP3.COM LICENSE FOR MY.MP3.COM SERVICE

SAN DIEGO and NEW YORK, Aug. XX, 2000 -- MP3.com, Inc. (Nasdaq: MPPP) and Sony
Music Entertainment (SME) announced today that they have settled the copyright
infringement suit brought by Sony Music Entertainment in connection with
MP3.com's My.MP3.com system. In addition to a payment by MP3.com for past acts,
the companies announced that MP3.com has entered into a non-exclusive, North
American license with SME for use of SME-controlled recordings with the
My.MP3.com system, including the "Beam-It(TM)" and "Instant Listening(TM)"
software services. These services are designed to require, among other things,
users to verify the CDs they own in order to access that music in their
My.MP3.com Music Manager (i.e. personal digital locker).

"It is clear that Sony Music Entertainment understands and embraces the Internet
and values responsible technologies that excite consumers and reward content
owners," said Michael Robertson, chairman and chief executive officer of
MP3.com. "MP3.com respects the rights of copyright holders, and now, with this
settlement and license, we can offer consumers an avenue to access music online
from CDs they have purchased."

"Sony Music Entertainment strongly enforces its copyrights. This settlement
affirms and upholds the right of copyright owners to be paid for the use of
their works on the Internet," said Al Smith, Senior Vice President, Sony Music
Entertainment. "Sony Music has always understood that changes in technology
create new ways for consumers to experience entertainment. This licensing
agreement with MP3.com is one of a number of initiatives that we have underway
to enhance music fans' experience in an environment that protects intellectual
property rights."

About MP3.com

<PAGE>   47
                             Exhibit C (page 2 of 3)

MP3.com, Inc. has created what it believes is a unique and robust technology
infrastructure for the storage, management, promotion and delivery of digital
music. As the Internet's premier Music Service Provider (MSP), the company is
dedicated to providing consumers with anytime, anywhere access to their music
using any web-enabled device. The company's web site hosts what it believes is
the largest collection of digital music available on the Internet, with more
than 562,000 songs and audio files from over 87,000 digital artists and record
labels. Dedicated to growing the digital music space, the company's products and
services include on-demand Subscription Music Channels, an innovative Retail
Music Program, a Syndicated Radio Division and others. Additionally, through the
company's MSP initiative, MP3.com is partnering with a variety of
forward-looking technology companies to expand its digital music strategy.
MP3.com common stock is traded on the Nasdaq National Market under the ticker
symbol MPPP. The company is based in San Diego, California. For more information
on MP3.com, visit www.mp3.com.

About Sony Music Entertainment

Sony Music Entertainment (SME), a leading global producer, manufacturer, and
marketer of recorded music and video, has a presence in 60 countries. In 1994,
the company created the New Technology and Business Development division, which
operates companies, directs investments and provides incubation facilities for
early stage digital media companies from three principal locations in San
Francisco, New York and Los Angeles. The group's holdings include over 30
companies in the digital media infrastructure, technology, wireless, service and
digital content areas, reflecting SME's strategy for the broadband era. These
companies include AllStarCharity.com, AudioBase, C4, Digital On-Demand, Emazing,
Exactis/ 24/7 Media, Gig.com, Indimi (the parent company of AdTools and
InfoBeat), i3 Mobile, lastminute.com, Launch Media, Listen.com, MongoMusic,
NetGen, Palm, Inc, Quintus, Reciprocal, Redband Broadcasting, Spinner.com, T-10,
Urbanworld and Yupi.com.

Statements in this press release that are not strictly historical are
forward-looking statements within the meaning of section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such
statements include references to activities expected to occur in connection with
MP3.com's settlement and license arrangement with Sony Music Entertainment.
These statements involve a high degree of risk and uncertainty, are only
predictions, and actual events or results may differ materially from those
projected in such forward-looking statements. Factors that could cause or
contribute to differences include risks related to: implementation of MP3.com's
license arrangement with Sony Music Entertainment; MP3.com's current litigation
proceedings, including without limitation the inability to reach settlement with
all parties to such litigation proceedings; MP3.com's new and uncertain business
model; acceptance of MP3.com's products and services; MP3.com's limited
operating history, and MP3.com's rapid growth, as well as other risks detailed
from time-to-time in MP3.com's reports to the Securities and Exchange
Commission, including its report on

<PAGE>   48
                             Exhibit C (page 2 of 3)

Form 10-K for the year ended December 31, 1999 and its most recent report on
Form 10-Q.

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