
<PAGE>

[LOGO]
                          EMusic.com Inc.
                          1991 Broadway, 2nd Floor
                          Redwood City, California 94063
                          Phone: (650) 216-0200
                          Fax: (650) 556-1610
                          Web: http://www.emusic.com

                                                                 April 20, 2001
To EMusic Stockholders:

   We are pleased to inform you that on April 6, 2001, EMusic.com entered into
a merger agreement with Universal Music Group, Inc. ("Universal") pursuant to
which Universal's wholly-owned subsidiary has today commenced a cash tender
offer to purchase all of the outstanding EMusic shares for $0.57 per share in
cash.

   The tender offer is conditioned on the minimum tender of a majority of
EMusic's shares (on a fully diluted basis) as well as other conditions
described in the offering materials enclosed with this letter. Those materials
also describe Universal's commitment to complete its acquisition of EMusic,
once the tender offer is successfully consummated, through a merger in which
all EMusic's shares not purchased in the tender offer will be converted into
the same net price as is paid in the tender offer.

   Current and former directors and executive officers of EMusic have
individually agreed to tender their EMusic shares. These shares, in total,
represent approximately 17% of the outstanding shares of EMusic.

   Your Board of Directors has unanimously determined that the terms of
Universal's tender offer and the related merger are fair to, and in the best
interests of, EMusic's stockholders and unanimously recommends that you accept
the Universal offer by tendering all of your EMusic shares before the offer
expires on May 17, 2001.

   Enclosed with this letter is a Schedule 14D-9 containing the EMusic Board's
recommendation and explaining the reasons behind it, as well as the background
to the transaction and other important information. Included as Annex B to our
Schedule 14D-9 is the written opinion, dated April 6, 2001, of Allen & Company
Incorporated, EMusic's financial advisor, to the effect that, as of that date
and based on and subject to the matters stated in such opinion, the $0.57 per
share cash consideration to be received by EMusic's stockholders was fair,
from a financial point of view, to EMusic's stockholders.

   Also enclosed with this letter are Universal's Offer to Purchase, a Letter
of Transmittal and other related documents. These documents set forth the
terms and conditions of Universal's tender offer.

   Please give all of the enclosed tender offer materials, which are being
filed today with the Securities and Exchange Commission, your careful
consideration.

           Sincerely,


           /s/ Gene Hoffman
           Gene Hoffman, Jr.                     /s/ Robert Kohn
           President and Chief Executive Officer Robert H. Kohn
                                                 Chairman
<PAGE>

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                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

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

                                SCHEDULE 14D-9
         Solicitation/Recommendation Statement under Section 14(d)(4)
                    of the Securities Exchange Act of 1934

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

                                EMUSIC.COM INC.
                           (Name of Subject Company)

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

                                EMUSIC.COM INC.
                      (Names of Persons Filing Statement)

                    COMMON STOCK, PAR VALUE $.001 PER SHARE
                        (Title of Class of Securities)

                                   292476108
                     (CUSIP Number of Class of Securities)

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

                               Gene Hoffman, Jr.
                     President and Chief Executive Officer
                                EMusic.com Inc.
                           1991 Broadway, 2nd Floor
                        Redwood City, California 94063
                                (650) 216-0200
     (Name, address, and telephone numbers of person authorized to receive
     notices and communications on behalf of the persons filing statement)

                                With copies to:

                              Henry Lesser, Esq.
                               Andrew Zeif, Esq.
                       Gray Cary Ware & Freidenrich, LLP
                              400 Hamilton Avenue
                  Palo Alto, California 94301 (650) 833-2000

[_]Check the box if filing relates solely to preliminary communications made
   before the commencement of a tender offer.

-------------------------------------------------------------------------------
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<PAGE>

Item 1. Subject Company Information.

   The name of the subject company is EMusic.com Inc., a Delaware corporation
("EMusic" or the "Company"). The address of the principal executive office of
EMusic is 1991 Broadway, 2nd Floor, Redwood City, California 94063, and its
telephone number is (650) 216-0200.

   The title of the class of equity securities to which this
Solicitation/Recommendation Statement on Schedule 14D-9 (this "Statement")
relates is the Company's common stock, par value $.001 per share (the
"Shares"). As of April 6, 2001 there were 43,202,110 Shares issued and
outstanding.

Item 2. Identity and Background of Filing Person.

   The filing person of this Statement is the subject company, EMusic. The
business address and telephone number of EMusic are as set forth in Item 1
above.

   This Statement relates to the tender offer (the "Offer") by Universal
Acquisition Corp., a Delaware corporation ("Purchaser") and a wholly-owned
subsidiary of Universal Music Group, Inc., a California corporation
("Universal"), to purchase all outstanding Shares at a purchase price of $0.57
per Share, net to the seller in cash, without interest thereon (the "Offer
Price"). The Offer is being made on the terms and subject to the conditions
set forth in the Offer to Purchase, dated April 20, 2001 (the "Offer to
Purchase"), and in the related Letter of Transmittal (the "Letter of
Transmittal"). Copies of the Offer to Purchase and the Letter of Transmittal
are filed as Exhibit (a)(1) and (a)(2) herewith, respectively, and are
incorporated herein by reference in their entirety. The Offer is described in
a Tender Offer Statement on Schedule TO, dated April 20, 2001 (the "Schedule
TO"), which was filed with the Securities and Exchange Commission (the "SEC")
on April 20, 2001.

   The Offer is being made pursuant to an Agreement and Plan of Merger dated
as of April 6, 2001 (the "Merger Agreement") by and among Universal, Purchaser
and EMusic. The Merger Agreement provides that, among other things, as soon as
practicable following consummation of the Offer and satisfaction or waiver of
the conditions set forth in the Merger Agreement, Purchaser will merge with
and into EMusic (the "Merger") with EMusic continuing as the surviving
corporation (the "Surviving Corporation"). At the effective time of the Merger
(the "Effective Time"), each outstanding Share (other than Shares held in the
treasury of EMusic or owned by any subsidiary of EMusic or by Universal, or by
Purchaser or any other wholly-owned subsidiary of Universal, or by
stockholders who properly exercise their appraisal rights under Delaware law)
will be converted into the right to receive the merger consideration, without
interest, which will be the same as the Offer Price. The Merger Agreement was
filed with the SEC on April 10, 2001 as an exhibit to the Company's Current
Report on Form 8-K and is incorporated herein by reference in its entirety.

   Concurrently with the execution of the Merger Agreement and as a condition
to Purchaser's and Universal's willingness to enter into the Merger Agreement,
Universal and the Purchaser entered into a Stockholders Agreement (the
"Stockholders Agreement") with each of certain of the current directors and
current and former executive officers of the Company (each a "Signatory
Stockholder") under which each Signatory Stockholder has, among other things,
subject to the conditions set forth therein, agreed to tender all of such
Signatory Stockholder's Shares in the Offer, granted Universal an option to
purchase all of the Shares owned by such Signatory Stockholder (to the extent
they are not so tendered) at the Offer Price (such option being conditioned on
Purchaser having accepted for payment, under the Offer, all Shares properly
tendered and not withdrawn thereunder) and agreed to vote all Shares
beneficially owned by such Stockholder in favor of the Merger and the Merger
Agreement and against any competitive takeover proposal. The form of
Stockholders Agreement was filed with the SEC on April 10, 2001 as an exhibit
to the Company's Current Report on Form 8-K and is incorporated herein by
reference in its entirety.

   The Schedule TO states that the principal executive offices of the
Purchaser are located at 2220 Colorado Avenue, Santa Monica, California 90404.

                                       1
<PAGE>

Item 3. Past Contacts, Transactions, Negotiations and Agreements.

   In considering the recommendation of the Company's Board of Directors (the
"Board") with respect to the Offer and the fairness of the consideration to be
received in the Offer and the Merger, stockholders should be aware that
certain officers and directors of the Company have interests in the Offer and
the Merger which are described below and which may present them with certain
potential conflicts of interest. The Board was aware of these actual and
potential conflicts of interest and considered them along with the other
matters described below in Item 4, "The Solicitation of Recommendation --
Background and Reasons for the Recommendation."

Allocation of Consideration among Executive Officers and Directors

   The table below sets forth information for each director and executive
officer of the Company who will be entitled to receive cash payments in
connection with the Offer or the Merger with respect to such individual's
Shares or options to purchase Shares. Under the Merger Agreement, upon
consummation of the Offer, each option holder who has executed an option cash-
out agreement in the form approved by Universal and EMusic (an "Option Cash-
Out Agreement") will be entitled to receive an amount in cash equal to the
excess (if any) of the Offer Price over the exercise price thereof times the
number of options held. Except as set forth in the table below, no director or
executive officer of the Company is entitled to receive any cash compensation
in connection with the Offer or the Merger for Shares owned or options to
purchase Shares held.

<TABLE>
<CAPTION>
                                        Number of   Dollar Amount
                                       In-The-Money      for       Total Cash
          Name             Shares         Options    Options(1)   Consideration
          ----            ---------    ------------ ------------- -------------
<S>                       <C>          <C>          <C>           <C>
Executive Officers:
Gene Hoffman, Jr......... 3,089,000            0             0     $1,760,730
 President and Chief
  Executive Officer
 and Director

Chris Henger.............     1,000      200,000      $ 20,000     $   20,570
 Vice President and
  General Manager of
 RollingStone.com

Emily Rupp...............     1,000      200,000      $ 20,000     $   20,570
 Vice President and Chief
  Financial
 Officer

Steve Grady .............     2,700      554,000      $211,160     $  212,699
 Senior Vice President of
  Marketing

Brett Thomas ............   566,100      200,000      $ 20,000     $  342,677
 Senior Vice President,
  Technology

Directors:
Robert H. Kohn .......... 2,908,000            0             0     $1,657,845
 Chairman of the Board

Tor Braham...............    11,600            0             0     $    6,612

Ralph Peer...............   218,900(2)         0             0     $  124,773

Ed Rosenblatt............         0            0             0     $        0

Howard Tullman...........    47,703            0             0     $   27,190
</TABLE>
--------
(1) Amount represents Offer Price less exercise price. Under the Merger
    Agreement, EMusic will offer to each optionee, including the individuals
    listed in the table, the opportunity under an Option Cash-Out Agreement to
    receive, upon consummation of the Offer, in surrender of each individual's
    in-the-money options (i.e., options, the exercise price of which is less
    than the Offer Price), whether or not then vested, a cash payment equal to
    the excess of the Offer Price over the exercise price. The individuals
    listed in the table have advised EMusic that they intend to accept this
    offer. All out-of-the money options, if not theretofore exercised, will
    terminate in accordance with their terms upon consummation of the Offer,
    if Universal acquires thereunder a majority of the outstanding Shares, but
    in no event later than the Effective Time.

                                       2
<PAGE>

(2) Includes 208,900 Shares held by peermusic III, Ltd. Mr. Peer disclaims
    beneficial ownership of those Shares except to the extent of his pecuniary
    interest therein.

Employment Agreements and Severance Arrangements with Executive Officers and
Directors

   No discussions have occurred as of the date hereof between Universal and
the Company's executive officers regarding continued employment with the
Company or Universal following the consummation of the Offer, except that Gene
Hoffman, the Company's President and Chief Executive Officer, has had a
preliminary and general discussion with Universal concerning his role in
helping to integrate the Company with Universal and whether he might have an
interest in a future role with the Company or Universal. No agreement or
understanding between Universal and Mr. Hoffman has been reached as of the
date hereof as to whether or not he would have any role and, if so, its nature
and terms. Additional discussions may occur in the future with Mr. Hoffman and
other executive officers of the Company.

   Consummation of the Offer and the Merger will have the effects summarized
below on the compensation, incentive plans, agreements and arrangements in
which executive officers and directors of the Company are participating.

   The Company has entered into employment agreements with certain of its
executive officers. Each of these agreements is described below and is filed
as an exhibit hereto and is incorporated by reference herein. If Purchaser
does not waive the condition of the Offer that a majority of the Shares (on a
fully-diluted basis) are tendered and accepted for payment (the "Minimum
Condition") and the Offer is consummated, such consummation will result in an
acquisition of the Company under these agreements. If Purchaser waives the
Minimum Condition and consummates the Offer, the Merger will result in such an
acquisition. Each of these employment agreements provides for acceleration of
options or termination of repurchase rights with respect to Shares held by the
employee following an acquisition of the Company. Additional information with
respect to the treatment of options in the Merger Agreement is contained above
under "Allocation of Consideration among Executive Officers and Directors."

   Gene Hoffman, Jr., President and Chief Executive Officer: Under agreements
with Mr. Hoffman dated February 1998 and March 1999, upon on any acquisition
of EMusic or if his employment is terminated other than for cause the
repurchase right in favor of EMusic which applies to 743,400 Shares held by
Mr. Hoffman will terminate. In addition, Mr. Hoffman is entitled to severance
equal to his base salary payable over a twelve month period (totaling
$150,000) in the event his employment is terminated other than for cause.

   Robert H. Kohn, Chairman: Under agreements with Mr. Kohn dated February
1998 and March 1999, upon any acquisition of EMusic the repurchase right in
favor of EMusic which applies to 863,676 Shares held by Mr. Kohn will
terminate.

   Steve Grady, Senior Vice President, Marketing: Under an agreement with Mr.
Grady effective January 2001, upon any acquisition of EMusic the 264,451
unvested stock options held by him will become vested in full. 187,507 of
these options are in the money. In addition, Mr. Grady is entitled to six
months severance (totaling $70,000) in the event his employment is terminated
other than for cause.

   Brett Thomas, Senior Vice President, Technology: Under an agreement with
Mr. Thomas effective January 2001, upon any acquisition of EMusic the 453,927
unvested stock options held by him will become vested in full. 187,507 of
these options are in the money. In addition, Mr. Thomas is entitled to six
months severance (totaling $71,500) in the event his employment is terminated
other than for cause.

   Emily Rupp, Vice President and Chief Financial Officer: Under an agreement
with Ms. Rupp effective January 2001, upon any acquisition of EMusic the
263,237 unvested stock options held by her will become vested in full. 187,507
of these options are in the money. In addition, Ms. Rupp is entitled to six
months severance (totaling $70,000) in the event her employment is terminated
other than for cause (12 months (totaling $140,000) in the event such
termination occurs within 12 months of an acquisition).

                                       3
<PAGE>

   Chris Henger, Vice President and General Manager of RollingStone.com: Under
an agreement with Mr. Henger effective January 2001, upon any acquisition of
EMusic the 325,529 unvested stock options held by him will become vested in
full. 187,507 of these options are in the money. In addition, Mr. Henger is
entitled to six months severance (totaling $70,000) in the event his
employment is terminated other than for cause (9 months severance (totaling
$105,000) in the event such termination occurs within 12 months of an
acquisition).

   In addition, each of Messrs. Henger, Grady and Thomas and Ms. Rupp is
entitled to a bonus of $50,000 in the event of an acquisition of the Company
less any amount they earn from payments on Company options. Accordingly, each
of Messrs. Henger and Thomas and Ms. Rupp will receive an additional $30,000
following consummation of the Offer (if it results in an acquisition of the
Company) or the Merger.

Stock Option Plans

   The Company's directors and executive officers have been granted options
under the Company's stock option plans. Under such plans, in the event of a
"change in control" of EMusic the acquiring or successor corporation may
assume or substitute the outstanding options granted under the Company's stock
option plan and, if it does not do so, any then-unexercised options terminate.
Under the Merger Agreement, upon consummation of the Offer each option holder
who has executed an Option Cash-Out Agreement will be entitled to receive an
amount of cash equal to the excess (if any) of the Offer Price over the
exercise price thereof times the number of options held. Options held by
option holders who do not execute an Option Cash-Out Agreement, as well as
out-of-the money options, will terminate in accordance with their terms upon
consummation of the Offer, if Universal acquires thereunder a majority of the
outstanding Shares, but in no event later than the Effective Time to the
extent not theretofore exercised. See "Allocation of Consideration among
Executive Officers and Directors" above.

Indemnification; Directors and Officers' Insurance

   The Merger Agreement provides that the Surviving Corporation shall assume
all rights to indemnification and exculpation from liabilities for acts or
omissions occurring at or prior to the Effective Time existing in favor of the
current or former directors or officers of the Company as provided in the
Company's charter, bylaws or in separate agreements between the Company and
individual officers and directors, and such rights shall continue in full
force and effect in accordance with their respective terms and shall not be
amended, repealed or modified so as to materially and adversely effect any
indemnified party.

   The Merger Agreement provides that Universal and the Surviving Corporation
shall maintain in effect, for not less than six years after the Effective
Time, directors' and officers' liability insurance policies equivalent in all
material respects to those maintained by or on behalf of the Company and its
subsidiaries on the date of the Merger Agreement (and having coverage and
containing terms and conditions which in the aggregate are not less
advantageous to the persons currently covered by such policies as insureds)
with respect to claims arising from any actual or alleged wrongful act or
omission occurring prior to the Effective Time for which a claim has not been
made against any officer or director of the Company or subsidiary prior to the
Effective Time; provided, however, that if the aggregate annual premiums of
such insurance at any time during such period exceed 150% of the annual
premiums paid by the Company for such insurance coverage on the date of the
Merger Agreement, the Surviving Corporation will be obligated to obtain the
maximum coverage that will then be available at an annual premium equal to
150% of such rate.

   Except as described or referred to in this Item 3, there exists on the date
hereof no material agreement, arrangement or understanding and no actual or
potential conflict of interest between EMusic or its affiliates and either (i)
EMusic, its executive officers, directors or affiliates or (ii) Universal or
the Purchaser or any of their respective executive officers, directors or
affiliates. For a complete description of the stock ownership of EMusic's
executive officers and directors, please see the section entitled "Security
Ownership of Certain Beneficial Owners and Management" in Annex A attached
hereto.

                                       4
<PAGE>

Item 4. The Solicitation or Recommendation.

Recommendation of the Board

  At a special meeting held on April 6, 2001, the Board by unanimous vote of
     all directors:

  . approved the Merger Agreement and the transactions contemplated thereby,
    including the Offer and the Merger;

  . determined that the Merger is advisable and that the terms of the Offer
    and the Merger are fair to, and in the best interests of, the Company's
    stockholders; and

  . recommended that the Company's stockholders accept the Offer and tender
    their Shares thereunder to the Purchaser.

   The Board's recommendation is based in part on the oral opinion (which was
subsequently confirmed in writing) delivered by Allen & Company Incorporated
("Allen") to the Board on April 6, 2001, to the effect that, as of such date,
and based on and subject to the matters described in the opinion, the price
per share of $0.57 to be received pursuant to the Offer and the Merger by
Company stockholders was fair, from a financial point of view, to such
stockholders on the date thereof. The full text of Allen's written opinion,
which sets forth the assumptions made, the procedures followed, the matters
considered and the limitations on the review undertaken by Allen, is set forth
in Annex B to this Statement.

Background of the Recommendation

 Overview of the Company's History through March 2001

   The Company began operations in January 1998 under the name GoodNoise
Corporation.

   In May 1998, the Company entered into a reverse merger with Atlantis
Ventures and, as a result of such transaction, the Shares began trading on the
Over-the-Counter Bulletin Board.

   In June 1998, the Company began selling recordings over the Internet.

   In March 1999, the Company raised approximately $31 million, net of
issuance costs, from a private placement of equity securities.

   In June 1999, the Company changed its name to EMusic.com Inc. and the
Shares began trading on the Nasdaq Stock Market ("Nasdaq").

   In September 1999, the Company completed a public offering of 5,270,000
Shares at $16 per Share. In October 1999, the Company issued an additional
300,000 Shares in connection with the exercise by the underwriters of their
over-allotment option.

   In December 1999, the Company completed an acquisition of Group K, Inc.,
the owner and operator of Cductive.com.

   For the quarter ended December 31, 1999, the Company reported total
revenues of $423,000. For the quarter, the closing price for the Shares ranged
from $17.88 to $9.40.

   In February 2000, the Company completed the acquisition of Tunes.com, the
owner and operator of RollingStone.com under license from RollingStone LLC,
the owner of RollingStone magazine. In the quarter ended March 31, 2000, the
Company's total revenues were $2.1 million and the closing price for the
Shares ranged from $10.88 to $5.19.

   In June 2000, the Company announced that it was undertaking significant
cost-reduction actions, including a reduction of its employee headcount of
approximately 20 percent, reductions in marketing spending and other

                                       5
<PAGE>

operational savings. For the quarter ended June 30, 2000, the Company reported
revenues of $3.8 million, reflecting its first full quarter of results
following the acquisition of Tunes.com. During the quarter, the closing price
for the Shares ranged from $6.50 to $1.94.

   For the quarter ended December 31, 2000, the Company reported revenues of
$4.7 million, including $1.7 million of music revenues and advertising
revenues of $3.0 million. Music revenues benefited from a previously announced
$3.1 million agreement with Hewlett-Packard Company. Advertising revenues were
flat as compared to the prior quarter. During the quarter, the closing price
for the Shares ranged from $1.56 to $0.25.

   In January 2001, the Company announced a further corporate restructuring in
response to the challenges continuing to confront it. The lack of resolution
of the recording industry's litigation challenging Napster's practice of
facilitating the free downloading of recorded music over the Internet was
continuing to adversely impact the Company's ability to rapidly grow its paid
subscription program. In addition, as a result of the continued erosion of the
online advertisement market, the Company could not expect to grow its
advertising revenues as previously expected. This was particularly a concern
given that advertising revenues continued to constitute a majority of the
Company's revenues. Finally, given market conditions, it was unlikely that the
Company could raise additional financing on favorable terms or at all. The
restructuring included a staff reduction of approximately 36%, a further
significant reduction in sales and marketing expenses and changes in senior
management. The Company also recorded a charge of approximately $173 million
for the quarter ended December 31, 2000 that primarily included non-cash
impairment charges related to goodwill, intangibles and music content-related
assets.

   For the quarter ended March 31, 2001, the Company reported revenues for the
quarter of approximately $4.3 million. Music revenues, again benefiting from
the agreement with Hewlett-Packard Company, were approximately $2.2 million,
up from $1.7 million in the quarter ended December 31, 2000. Advertising
revenues declined to approximately $2.0 million, down from $3.0 million for
the quarter ended December 31, 2000. Consistent with industry-wide trends, the
decline in advertising revenues was well below even the lowered forecasts
assumed at the end of the December quarter. This decline was particularly
significant given its impact on the cash needed by the Company to continue
funding operations as well as the timeframe within which the Company could
expect its RollingStone.com operations to become cash flow positive. During
the quarter, the closing price for the Shares ranged from $0.72 to $0.22.

 Discussions with Potential Acquirors

   Since launching the first commercial recorded music digital download
business in June 1998, the Company has regularly engaged in discussions with
other companies involved in the music and entertainment business as well as
companies with significant Internet related activities. Such discussions have
often involved a wide range of relationships, from licensing or investment
transactions to a potential acquisition of the Company.

   From April 2000, although the Company continued to seek investments from
strategic partners, based upon responses from potential partners the Company's
discussions with potentially interested parties increasingly focused on a
potential acquisition transaction. During the period from April 2000 through
March 2001, the Company engaged in high-level discussions with 16 companies
(additional to Universal, the discussions with which are summarized below),
including discussions that resulted in separate exploratory meetings with nine
companies and additional discussions that involved other information exchanges
with four companies and exploratory approaches to three companies that did not
result in discussions. These companies included major media or entertainment
companies and other major companies with significant online interactive
operations, including other companies principally focused on the online music
business.

   In early August 2000, in connection with discussions with one potential
acquiror, the Company engaged Allen as a financial advisor to assist in those
discussions. Allen participated in many of the other discussions which
followed.

                                       6
<PAGE>

   None of the 16 companies referred to above made a formal proposal to
acquire the Company. Two of them made preliminary proposals to acquire the
Company's RollingStone.com operations (one for $5 million and the other for
$6.5 million); each was offered the opportunity to increase its offer but
declined to do so. Another informally expressed interest in purchasing
EMusic's content library for what it described as an unspecified price that
would have to be low. Another indicated that it had no immediate intention of
making an acquisition offer but might at a future time consider offering to
acquire the Company in exchange for its own publicly-traded shares.

 Discussions with Universal

   In April 2000, Robert H. Kohn, Chairman of the Board of Directors of the
Company, Gene Hoffman, Jr., President and Chief Executive Officer of the
Company, and James Chapman, then Executive Vice President, Corporate
Development of the Company, met with Edgar Bronfman, Jr., the President and
Chief Executive Officer of Universal's then ultimate parent, The Seagram
Company Ltd. ("Seagram"), to discuss the two companies' businesses and the
general terms under which a strategic acquisition or equity investment by
Universal could be made.

   On May 5, 2000, Universal and the Company entered into a mutual
confidentiality letter agreement.

   During the period from April through August 2000, representatives of the
Company had numerous discussions and exchanged various documents with
representatives of Universal and its affiliates, including FarmClub.com and
eLabs. After review and in light of circumstances surrounding the pending
business combination among Seagram, Vivendi S.A. and Canal Plus S.A.,
strategic discussions ceased.

   In October 2000, in response to a telephone conversation between Mr. Kohn
and Mr. Bronfman in which Mr. Bronfman expressed interest in discussing a
possible investment in, or acquisition of, the Company, Allen wrote to Mr.
Bronfman in order to initiate such discussions. Subsequent to the letter,
Allen and Universal worked to organize a meeting and, in preparation for it,
Allen provided Universal certain materials regarding the Company.

   In November 2000, representatives of the Company and Allen met with
representatives of Universal to update each other on the respective businesses
and to discuss the ongoing process of seeking a strategic partner. During the
meeting, Company representatives presented an overview of the Company's
corporate structure and business operations.

   Over the course of the next three months, numerous discussions between the
parties continued about potential business opportunities between the two
companies.

   On January 14, 2001 Mr. Kohn and Mr. Bronfman exchanged emails regarding a
potential partnership between the two companies. Also in January 2001, various
members of Company management met with various representatives of Universal
and its affiliates and Universal's legal counsel to discuss the business
model, historical financial performance, future direction and operations of
the Company's EMusic.com and RollingStone.com operations.

   Over the course of the next six weeks, representatives of the Company and
Allen held numerous conversations with representatives of Universal and its
affiliates to discuss the terms and timing of a possible strategic acquisition
of the Company by Universal.

   In March 2001, Universal's legal counsel reviewed the results of their due
diligence investigation with members of Universal's senior management.
Universal's legal counsel then recommended a structure for a proposed
transaction to acquire the Company and the meeting participants discussed the
possible economic terms for an acquisition proposal.

                                       7
<PAGE>

   During the course of a conversation in March 2001 between a representative
of Universal and Ed Rosenblatt, a member of the Board, the Universal
representative informed Mr. Rosenblatt that Universal had indicated to Allen a
potential interest in acquiring the Company. Mr. Rosenblatt, prior to his
retirement in 1999, had served as Chairman of Geffen Records, a part of the
Universal Music Group that he had helped found, and, in connection with his
retirement, had entered into a consulting agreement under which, in
consideration of a consulting fee of $500,000 per year, he had agreed that for
a five-year period ending in January 2004 he would provide to the Universal
Music Group such consulting services as it requested. No substantive
discussions regarding Universal's interest in the Company took place on this
occasion, no further discussions on that subject took place between Universal
and Mr. Rosenblatt prior to the execution of the Merger Agreement on
April 6, 2001, and, other than through his participation in meetings of the
Board at which Universal's interest was discussed and his vote as a director
in favor of approval of the Merger Agreement and the recommendation of the
Offer and the Merger, Mr. Rosenblatt played no role in the negotiations.
Because Mr. Rosenblatt owns no outstanding Shares or in-the-money options, he
believed it was not necessary for him to execute a Stockholders Agreement and
he does not anticipate receiving any payments in the Offer or the Merger.

   On March 9, 2001, Universal provided Allen with a verbal indication of its
interest in acquiring the Company for a total price (including options and
warrants) of $25 million, which would have represented a purchase price of
approximately $0.55 per outstanding Share. Universal informed Allen that this
proposal assumed that the Company's transaction expenses would not exceed $1
million and that the Company would have on hand at least $8.5 million in cash
at closing.

   On March 9 and 10, 2001, the Company's directors had various discussions
regarding the Universal proposal and the range of possible responses. Based
upon such discussions, Allen was directed to make a $30 million
counterproposal to Universal, which would have represented a purchase price of
approximately $0.66 per outstanding Share.

   On March 14, 2001, Universal submitted a preliminary letter of intent to
the Company wherein, subject to several conditions, Universal proposed to
acquire all of the fully diluted outstanding Shares pursuant to a definitive
agreement to be negotiated during an exclusivity period between the parties at
an aggregate price of $27.5 million, which would have represented a purchase
price of approximately $0.60 per outstanding Share.

   On March 16, 2001, representatives of Universal and its outside legal
counsel and representatives of the Company and its outside legal discussed the
terms of the proposed letter of intent. This discussion focused on the
Company's anticipated transaction expenses, which the Company estimated at up
to $2 million rather than up to the $1 million maximum contemplated by the
proposed letter of intent, and the requirement regarding the minimum cash
level for the Company at closing.

   On March 18, 2001, the Board met to discuss the proposed letter of intent.
Among other matters, the Board reviewed the Company's financing and
acquisition alternatives and the results and status of discussions regarding
other potential strategic transactions. After discussion, the Board authorized
management to execute the letter of intent on behalf of the Company provided
the total purchase price proposed by Universal was consistent with the range
previously discussed between the parties.

   On March 19, 2001, Universal and the Company entered into a revised non-
binding letter of intent relating to a proposed acquisition. The letter of
intent contemplated a total price (including options and warrants) of
$27 million, which would have represented a purchase price per outstanding
Share of approximately $0.59. The total price was subject to, among other
matters, further due diligence by Universal and satisfactory resolution of the
minimum cash condition that Universal was requiring. The letter of intent also
provided for a period of exclusive negotiation ending on April 8, 2001.

   Thereafter, representatives of the two companies negotiated the terms of a
definitive merger agreement and discussed the unresolved issues. The
discussions focused, in part, on Universal's insistence on conditioning the
transaction on the Company having a minimum amount of cash at closing and the
level of cash that the Company

                                       8
<PAGE>

believed would be an appropriate minimum without subjecting the transaction to
an unacceptable risk of non-consummation. Based on Universal's understanding
of the Company's cash projections, at one point in the discussions Universal
proposed a total purchase price of $25 million, which Universal viewed as
representing a purchase price of $0.55 per Share. The discussions ultimately
resulted in the parties agreeing, subject to approval of the Board, that, in
consideration for Universal agreeing to a reduced minimum level of required
cash at the end of May and June as a basis for Universal declining to close
(i.e., $3.5 million at May 31 and $2 million at June 30) and in response to
other issues raised as a result of Universal's further due diligence review of
the Company, the price per Share would be $0.57. The discussions also focussed
on the circumstances under which the Board would be able to consider and
respond to a competing acquisition proposal and the size of the fee the
Company would have to pay if its Board decided to terminate the transaction in
order to accept, or to modify or withdraw its recommendation on the basis of,
a superior offer.

   On March 29, 2000, the Board received a presentation from the Company's
management and legal counsel regarding the status of negotiations and the
Board discussed the open issues under the draft Merger Agreement and the
responses thereto that would be acceptable to the Board.

   On April 4, 2001, the Board received an update from management and the
Company's legal counsel on the status of the negotiations and authorized
management to continue with, and seek to finalize, the negotiations on the
basis of a per Share price of $0.57.

   On April 4, 2001, the Company became aware of a just published report that
the Company was in negotiations to be acquired by Universal. Accordingly, with
Universal's concurrence, on the morning of April 5, 2001, the Company
requested Nasdaq to halt trading in the Shares pending an announcement.
Shortly thereafter on the same day, the Company issued a press release
announcing that it had signed a non-binding letter of intent with an unnamed
major publicly-held media company that contemplated the Company being acquired
for $0.57 per Share in cash and that the letter of intent provided for an
exclusive negotiation period. The press release, which has been filed with the
Securities and Exchange Commission as an exhibit to this Statement, also
reported on the initiation of Nasdaq proceedings to delist the Shares and on
the Company's preliminary financial results for the quarter ended March 31,
2001.

   On April 5, 2001, senior management of Universal received authorization to
finalize a definitive merger agreement substantially on the basis of the terms
that had previously been negotiated and that were reflected in the latest
draft of the Merger Agreement, with such changes as management considered
appropriate.

   On April 6, 2001, the Board met with its advisors to review the draft
Merger Agreement and to discuss the terms of the Offer and the Merger, as
contemplated by the draft Merger Agreement, as well as the draft Stockholders
Agreement. Additional changes to the draft Merger Agreement that had resulted
from further negotiations were also discussed. It was reported that Universal
had approved the draft Merger Agreement. Allen then reviewed its financial
analysis of the $0.57 Offer Price and delivered its oral fairness opinion
(later confirmed in writing) to the effect that, as of such date and subject
to the qualifications, assumptions and limitations stated in the opinion, the
Offer Price was fair to the Company's stockholders from a financial point of
view.

   In the course of its April 6, 2001 deliberations, the Board was advised
that the previous day, following the Company's public announcement of the
letter of intent, Mr. Hoffman had received an unsolicited telephone call from
the chief executive officer of one of the companies that had previously been
approached as a potential acquiror of the Company. This company, which had
previously indicated that it had no immediate intention of making an
acquisition offer but might at a future time consider offering to acquire the
Company in exchange for its own publicly-traded shares, had indicated in this
latest call that it might be interested in making an acquisition offer in the
range of $0.60 to $0.70 per Share in its stock. The Board was also informed
that the chief executive officer of this company had been informed, in
response to his unsolicited call, that the Company was not in a position to
discuss the matter because of the publicly-announced exclusive negotiation
provisions of the letter of intent.

                                       9
<PAGE>

   After discussion, the Board directed that Company representatives
immediately contact Universal's representatives, while the Board recessed, to
advise them of this unsolicited contact and to inquire as to Universal's
position in relation to the exclusive negotiation provisions of the letter of
intent. Shortly after receiving this inquiry, Universal's representatives
informed the Company's representatives that Universal would terminate
discussions with the Company if the Board decided to pursue the other
company's possible interest and to defer approval and immediate execution of
the Merger Agreement.

   The Board then reconvened and considered Universal's response. The Board
noted that there was cause for substantial uncertainty as to whether or not
the other company would in fact make any specific acquisition offer; that the
other company, which had previously declined to pursue a possible acquisition
of the Company, had conducted no due diligence whereas Universal had completed
substantial due diligence; that the other company was not pre-approved by
RollingStone LLC as a potential owner of EMusic whereas Universal was, which
meant that a transaction with the other company would be subject to
significantly more risk of delay and non-consummation; that a transaction
involving an acquiror's stock, rather than cash, would likely take several
months to complete in light of Securities and Exchange Commission registration
requirements, during which delay the Company's cash would continue to deplete
in the absence of committed bridge financing; that, given current market
conditions, the value of many stock transactions had been declining sharply
between announcement and completion; and that Universal had indicated it would
withdraw its offer if the other company's interest was pursued and the Board
deferred approval and immediate execution of the Merger Agreement.

   In light of these considerations and the factors described under "Reasons
for the Recommendation," the Board unanimously resolved to approve the Merger
Agreement and the transactions contemplated thereby and to recommend the Offer
and the Merger.

   On April 6, 2001, the Merger Agreement was finalized and executed.

   On April 9, 2001, prior to the opening of trading on Nasdaq, the execution
of the Merger Agreement was announced in a joint press release of the Company
and Universal.

Reasons for the Recommendation

   In deciding to approve the Merger Agreement and recommend the Offer, the
Board considered the factors listed below, as well as the information set
forth under "Background of the Recommendation" above. The following discussion
of the factors considered by the Board is not intended to be exhaustive but
summarizes all material factors considered. The Board did not assign any
relative or specific weights to the following factors nor did it specifically
characterize any factor as positive or negative, except as described below. In
addition, individual members of the Board may have given differing weights to
differing factors and may have viewed certain factors more positively or
negatively than others. Throughout its deliberations, the Board received the
advice of its financial advisors and legal counsel.

   The Company's Deteriorating Financial Condition. The Board considered the
financial condition and prospects of the Company. This consideration included
the fact that the Company had incurred substantial operating losses since
inception and was projecting that it would continue to incur substantial
operating losses for each quarter in 2001, notwithstanding the reductions in
expenses resulting from the Company's prior restructurings. Among other
things, the Board noted that in the absence of further expense reduction
actions and/or other improvements in the Company's working capital position,
the Company's management was projecting that the Company would run out of cash
to fund its operating deficit during the fourth calendar quarter of 2001. The
Board noted that the on-line advertising market appeared to be continuing to
decline unabated at an even faster rate than previously anticipated, which was
having a very severe negative impact on the Company's cash requirements. The
Board also noted that the Company could not expect material increases in music
revenues in the near term as the court actions to date had not yet resulted in
ending the free online availability of music through Napster. The Board also
noted that, although several major recording companies had recently announced
strategic alliances to promote on-line access to their content, based upon the
prior and current announcements by

                                      10
<PAGE>

such companies it was highly unlikely that such programs would result in
significant revenues in the near term. Similarly, because of the limited
nature of such programs, there was no immediate prospect that enhanced general
interest in downloadable music would result in a significant increase in the
Company's subscription or advertising revenue in the near term. These
considerations were in addition to the detailed financial information that had
been regularly furnished to the members of the Board by the Company's senior
management and the general familiarity of the members of the Board with the
affairs of the Company.

   Absence of Better Alternatives. The Board reviewed with management and its
financial advisors the contacts that had been made with potential acquirors
during the preceding approximately 12 months. The Board noted that, although a
total of 17 substantial companies with potential strategic interest in an
acquisition of the Company had been contacted, only Universal had made an
offer to acquire the entire equity interest in the Company (see "Background of
the Recommendation" above). The Board concluded that, in the context of the
Board's goal of maximizing stockholder value, selling only portions of the
Company's assets, as two of the other companies had proposed, was not a
realistic alternative to Universal's acquisition of the entire Company. The
Board also concluded that the liquidation of the Company was not an acceptable
alternative because it would take a substantial number of months to complete
and would not, on any realistic basis, realize aggregate net proceeds per
Share equal to or greater that $0.57.

   The Board concluded that, in the absence of a transaction that afforded the
stockholders the opportunity to sell or exchange their shares for cash at the
Offer Price, and taking into account the risk that no other proposal for the
acquisition of the Shares would be forthcoming in the foreseeable future, the
Company's stockholders were confronted with two disadvantageous alternatives,
namely:

  . retaining their Shares and subjecting themselves to the significant risk
    that their Shares might decline in value, and might conceivably be
    rendered virtually worthless in the event that the Company continued to
    use more cash than it generated; or

  . selling their Shares into a market which, in the absence of the pendency
    of the acquisition proposal, and having regard to the Company's
    substantial continuing and projected operating losses and the
    uncertainties that the market was likely to perceive in the extent and
    timing of the positive effects of the recent enhanced interest in the
    online music business, might price the Shares at a level below the level
    at which the Shares were then trading and the price might conceivably
    fall to substantially below that level if the Company continued to report
    losses and deplete its cash reserves.

   The Board also took into consideration the fact that Nasdaq has initiated
proceedings to delist the Shares on the ground of the Company's failure to
meet the Nasdaq minimum $1.00 per Share trading price requirement for
continued listing on its National Market System. The Board concluded that
there was no assurance that the Company would succeed in demonstrating to
Nasdaq that it would return to compliance with those requirements.

   The Board also noted that approximately 100 public and private companies
the businesses of which were directly linked to the Internet had closed their
doors since October 2000 and that, in the absence of an acquiror or committed
substantial funding, there was a serious possibility that the Company might
follow suit, resulting in the elimination of equity value. The Board noted
that the market value of several other public companies, the businesses of
which principally involve online distribution of music or music related
information, was substantially below the cash value of such companies whereas,
in contrast, the Offer Price represented a substantial premium over the
Company's current cash value.

   The Board determined that a transaction with Universal at the Offer Price
of $0.57 and on the other terms set forth in the Merger Agreement was a
preferable alternative that subjected the Company's stockholders to
substantially less risk than would be created by rejecting the proposed Offer
and Merger and discontinuing negotiations with Universal.

   Fairness of the Offer Price. The Board took into account the oral opinion
of Allen that, as of the date on which the Board agreed to make its
recommendation, the Offer Price proposed in the Offer and the Merger was

                                      11
<PAGE>

fair, from a financial point of view, to the Company's stockholders. Allen
subsequently confirmed this opinion in writing. The full text of Allen's
written opinion dated April 6, 2001 which sets forth the assumptions made,
matters considered and limitations on the review undertaken by Allen is
attached hereto as Annex B and is incorporated by reference. Allen's opinion
is directed only to the fairness, from a financial point of view, of the $0.57
per Share cash consideration to be received in the Offer and the Merger by
holders of Shares (other than Universal and its affiliates) and is not
intended to constitute and does not constitute a recommendation as to whether
any stockholder should tender Shares in the Offer or as to any other matters
relating to the Offer or the Merger. Holders of Shares are urged to read such
opinion carefully in its entirety.

   The Board noted that it was unlikely that the market price of the Shares
would attain the $0.57 per Share level of the Offer Price unless and until the
Company began to generate operating profits, which the Company had yet to do
and the attainment of which was therefore subject to substantial uncertainty.

   On the basis of this information and Allen's oral opinion, and taking into
account the fact that the Offer Price represented a premium of approximately
160% over the closing price of the Shares on Nasdaq on the day preceding the
Company's April 5, 2001 press release announcing the letter of intent,
approximately 89% over the 30-day average trading price and approximately 31%
over the 90-day average trading price, the Board concluded that the Offer
Price was fair under all of the relevant circumstances, including the
Company's deteriorating financial condition, the negotiated scope of the
prohibition on responding to third-party bidders, the lack of preferable
alternatives and the likelihood of consummation.

   Scope of Prohibition on Responding to Third-Party Bidders. The Board took
into consideration the Merger Agreement provisions that would permit the
Company to provide information in response to, and negotiate, any unsolicited
bona fide third party offer to acquire the Company provided the Board
determined, after consultation with its advisors, that the offer was
reasonably likely to result in a higher fully-financed all-cash transaction
and that Universal was given notice of such offer and an opportunity to keep
the Merger Agreement in effect by matching it. The Board also considered the
Merger Agreement provisions that would obligate the Company to pay a
termination fee of $1 million plus Universal's documented expenses of up to
$200,000 if either EMusic terminated the Merger Agreement to accept a superior
third party cash offer or Universal terminated the Merger Agreement by reason
of the Board modifying or withdrawing its recommendation of the Offer on the
basis of a superior offer.

   The Board concluded that these provisions, while protecting Universal's
rights under the Merger Agreement, would not represent a material impediment
to any serious potential bidder, particularly since the amount of cash
necessary to finance a higher bid would likely be readily available to the
kinds of companies that had been approached and that would be considered the
most likely potential strategic acquirors of EMusic.

   Likelihood of Consummation. The Board took into consideration the totality
of the terms of the Merger Agreement and concluded that they were such as to
maximize the likelihood of the consummation of the Offer and the Merger.

   Among other things, the Board took note of the following:

  . The fact that Universal was willing to effect the transaction through the
    first-step Offer, to be commenced within ten business days and closed as
    early as twenty business days thereafter, under the terms of which it was
    willing to accept all validly tendered Shares provided the Minimum
    Condition was satisfied, followed by the second-step Merger at the same
    price. As a result of this two-step structure, there was a reasonable
    possibility that the Company's stockholders could sell their Shares to
    Universal at the Offer Price earlier than if the transaction were
    effected as a one-step merger.

  . The fact that directors, executive officers and former executive officers
    beneficial owning an aggregate of 17% of the outstanding Shares were
    willing, as individual stockholders, to support the transaction, and
    increase the likelihood that the Minimum Condition would be satisfied, by
    committing to Universal, under their Stockholders Agreements, to tender
    their Shares into the Offer.

                                      12
<PAGE>

  . The fact that the minimum cash condition to Universal's obligation to
    consummate the Offer had been negotiated to a level that was somewhat
    lower than the Company's expectations through June 25, 2001 (the outside
    date after which either party could terminate the Merger Agreement if the
    Offer had not by then been consummated).

  . The fact that the other conditions to Universal's obligations to
    consummate the Offer were customary and, in the assessment of the Board,
    not unduly onerous.

  . The fact that Universal was willing, pursuant to the Merger, to pay the
    Offer Price for all Shares not purchased pursuant to the Offer and that,
    if the Offer were consummated, there would be no conditions to
    Universal's obligation to consummate the Merger other than the absence of
    a legal prohibition provided the Company had not, prior to the closing of
    the Offer, breached the Merger Agreement in a manner reasonably likely to
    have a material adverse effect on the Company.

  . The fact that, to the extent that any of the Company's stockholders chose
    not to tender their Shares into the Offer or accept the Offer Price
    pursuant to the Merger but, rather, exercised statutory appraisal rights
    under Delaware law, such exercise would not impair Universal's obligation
    to consummate the Merger, provided the Offer was consummated.
    Accordingly, those of the Company stockholders who believed that the
    exercise of statutory appraisal rights would yield them a greater per
    Share amount than the Offer Price would be free to pursue such exercise
    without adversely affecting the ability of the other Company stockholders
    to receive the Offer Price for their Shares.

  . The fact that the Merger Agreement expressly precluded Universal from
    being able to terminate the Merger Agreement solely because the Company's
    business or financial condition was adversely affected by the
    announcement or pendency of the transaction or the Company's operations
    or operating results sustained an adverse change consistent with the
    adverse change sustained during the preceding 12 months.

   The Board also took into consideration the fact that Universal was willing
to agree that all of the rights of the Company under the Merger Agreement,
including, without limitation, rights of waiver, enforcement and termination
(except termination to accept a superior acquisition proposal), would be
delegated exclusively to a committee composed of at least two of the Company's
current independent directors and would be exercisable only with the consent,
or at the express direction, of those independent directors. In the view of
the Board, this provision was significant in ensuring that the fact that
Universal's stock ownership in the Company and its control of the Board would
not preclude the Company from taking such action as might be appropriate to
seek to ensure that Universal's obligations under the Merger Agreement were
satisfied and the Company's rights thereunder were enforced. Also see "Board
Committee Created by Merger Agreement" in Item 8 below.

Intent to Tender

   To the best of the knowledge of EMusic, after making reasonable inquiry,
each of EMusic's executive officers, directors and affiliates currently
intends to tender pursuant to the Offer all Shares held of record or
beneficially owned by such stockholder as of the date hereof.

Item 5. Person/Assets, Retained, Employed, Compensated or Used.

   Pursuant to a letter agreement dated August 28, 2000, as amended, the
Company has retained Allen as its exclusive financial advisor in connection
with an acquisition by, or change-in-control transaction with, Universal.
Pursuant to the terms of Allen's engagement, the Company has agreed to pay
Allen for its financial advisory services in connection with the Offer and the
Merger an aggregate fee equal to a percentage of the total consideration
payable in the transaction. Based on the Offer Price, the aggregate fee
payable to Allen upon completion of the transaction will be $1.5 million. The
Company has also agreed to reimburse Allen for reasonable out-of-pocket
expenses, including reasonable fees and expenses of its legal counsel,
incurred in connection with its services, up to a maximum of $50,000 (or
higher if approved by the Company) and to

                                      13
<PAGE>

indemnify Allen and its officers, agents, employees, affiliates and
controlling persons against certain costs, expenses and liabilities arising
out of Allen's engagement. In the ordinary course of business, Allen and its
affiliates may actively trade the debt and equity securities of the Company
and of Universal and its affiliates for their and their affiliates' own
accounts and for the accounts of customers and, accordingly, may at any time
hold long or short positions in such securities.

   Neither the Company nor any person acting on its behalf has employed,
retained or compensated, or currently intends to employ, retain or compensate,
any person to make solicitations or recommendations to the stockholders of the
Company on its behalf with respect to the Offer or the Merger.

Item 6. Interest in Securities of the Subject Company.

   No transactions in Shares during the past 60 days have been effected by
EMusic or, to the best of EMusic's knowledge, by any executive officer,
director, affiliate or subsidiary of EMusic.

Item 7. Purposes of the Transaction and Plans or Proposal.

   Except as described or referred to in this Statement, no negotiation is
being undertaken or engaged in by EMusic which relates to or would result in
(i) a tender offer or other acquisition of the Shares by EMusic, any of its
subsidiaries or any other person, (ii) an extraordinary transaction, such as a
merger, reorganization, or liquidation involving EMusic or any of its
subsidiaries, (iii) a purchase, sale or transfer of a material amount of
assets by EMusic or any of its subsidiaries or (iv) any material change in the
present dividend rate or policy, or indebtedness or capitalization of EMusic.
Reference is also made to the information set forth under Section 7 "Effect of
the Offer on Market for the Shares, Stock Market Quotation, and Exchange Act
Registration" and Section 12 "Purpose of the Offer and the Merger; Plans for
the Company after the Offer and the Merger; Stockholder Approval and Appraisal
Rights" in the Offer to Purchase.

   Except as described or referred to in this Statement, there are no
transactions, resolutions of the EMusic Board, agreements in principle, or
signed contracts entered into in response to the Offer that would relate to
one or more of the matters referred to in the preceding paragraph.

Item 8. Additional Information.

 Nasdaq Delisting

   Nasdaq has scheduled a hearing on May 18, 2001 for EMusic's appeal against
the delisting of the Shares from Nasdaq. If the Shares are delisted and the
market price for the Shares remains below $1.00, the Shares may be deemed a
penny stock, which would subject the Shares to rules which impose additional
sales practices rules on broker-dealers who sell the Company's securities. As
a result of the additional obligations, some brokers may not effect
transactions in penny stocks, which could adversely affect the liquidity of
the Shares.

 Delaware General Corporation Law

   As a Delaware corporation, the Company is subject to Section 203 ("Section
203") of the Delaware General Corporation Law (the "DGCL"). In general,
Section 203 would prevent an "interested stockholder" (generally defined as a
person beneficially owning 15% or more of a corporation's voting stock) from
engaging in a "business combination" (as defined in Section 203) with a
Delaware corporation for three years following the date such person become an
interested stockholder unless: (1) before such person became an interested
stockholder, the board of directors of the corporation approved the
transaction in which the interested stockholder became an interested
stockholder or approved the business combination, (2) on consummation of the
transaction which resulted in the interested stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (excluding, for purposes of determining the number of outstanding
shares, stock held by directors who are also officers and

                                      14
<PAGE>

by employee stock plans that do not allow plan participants to determine
confidentially whether to tender shares), or (3) following the transaction in
which such person became an interested stockholder, the business combination
is (x) approved by the board of directors of the corporation and (y)
authorized at a meeting of stockholders by the affirmative vote of the holders
of a least 66 2/3% of the outstanding voting stock of the corporation not
owned by the interested stockholder. In accordance with the provisions of
Section 203, the Board has approved the Merger Agreement and the Stockholders
Agreement, as described in Item 4 above, and, therefore, the restrictions of
Section 203 are inapplicable to the Merger and the transactions contemplated
under the Merger Agreement.

   Under the DGCL, if Purchaser acquires, pursuant to the Offer or otherwise,
at least 90% of the outstanding Shares, Purchaser will be able to effect the
Merger after consummation of the Offer without the approval of the Company's
stockholders. However, if Purchaser does not acquire at least 90% of the
Shares pursuant to the Offer or otherwise and a vote of the Company's
stockholders is required under the DGCL, a significantly longer period of time
will be required to effect the Merger. However, pursuant to the Merger
Agreement, the Company has granted Universal and Purchaser an option to
purchase up to that number of newly issued Shares equal to the number of
Shares that, when added to the number of Shares owned by Purchaser, Universal
and their affiliates immediately following consummation of the Offer,
constitutes one share more than 90% of the Shares then outstanding on a fully
diluted basis, for a consideration per share equal to the Offer Price. This
option may be exercised only if, after the Offer, Universal and Purchaser
beneficially own at least 80% of the Shares outstanding.

 Regulatory Filings

   Under the Hart-Scott-Rodino Antitrust Improvements Act ("HSR Act"), and the
rules that have been promulgated thereunder by the Federal Trade Commission
("FTC"), certain acquisition transactions may not be consummated unless
certain information has been furnished to the Antitrust Division of the United
States Department of Justice (the "Antitrust Division") and the FTC and
certain waiting period requirements have been satisfied. Neither the
acquisition of Shares by Purchaser pursuant to the Offer nor the Merger, nor
any of the other transactions contemplated by the Merger Agreement and the
Stockholders Agreement, is subject to such requirements.

   The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the acquisition of Shares by
Purchaser pursuant to the Offer and the Merger. At any time before or after
the consummation of any such transactions, the Antitrust Division or the FTC
could, notwithstanding the inapplicability of the HSR Act thereto, take such
action under the antitrust laws as it deems necessary or desirable in the
public interest, including seeking to enjoin the purchase of Shares pursuant
to the Offer and the Merger or seeking divestiture of Shares so acquired or
divestiture of substantial assets of Parent or the Company or any of their
respective subsidiaries. State attorneys general may also bring legal actions
under the antitrust laws, and private parties may bring such actions under
certain circumstances.

   While the Company does not believe that the acquisition of Shares by
Purchaser will violate the antitrust laws, there can be no assurance that a
challenge to the Offer and/or the Merger on antitrust grounds will not be made
or, if such a challenge is made, what the result will be.

 Board Committee Created by Merger Agreement

   As indicated under "Reasons for the Recommendation" in Item 4 above, the
Merger Agreement provides for a committee of independent directors of the
Company to be given delegated authority over the administration of the Merger
Agreement between the appointment of Universal's delegates to the Board
following the consummation of the Offer and the closing of the Merger.

   The Board has designated Tor Braham and Ralph Peer, II as the prospective
members of this committee and they have consented to such designation. For
information about these individuals, see Item 3 above and Annex A to this
Statement.

                                      15
<PAGE>

                                    Exhibits

<TABLE>
 <C>     <S>
 (a)(1)  Offer to Purchase dated April 20, 2001 (incorporated by reference to
         Exhibit (a)(1) to the Schedule TO filed by Purchaser and Parent with
         respect to the Offer on April 20, 2001 ("Schedule TO"))
 (a)(2)  Form of Letter of Transmittal (incorporated by reference to Exhibit
         (a)(2) to Schedule TO)
 (a)(3)  Information Statement Pursuant to Section 14(f) of the Securities
         Exchange Act of 1934 and Rule 14f-1 thereunder (incorporated by
         reference and attached hereto as Annex A)
 (a)(4)  Opinion of Allen & Company Incorporated dated April 6, 2001
         (incorporated by reference and attached hereto as Annex B)
 (a)(5)  Press Release, dated April 18, 2001, announcing Emusic's third quarter
         financial results.*
 (a)(6)  Press Release, dated April 9, 2001, regarding the proposed transaction
         between Universal Music Group, Inc. and EMusic.com Inc.*
 (a)(7)  Press Release, dated April 5, 2001, regarding letter of intent
         contemplating the transaction provided for in the Merger Agreement.*
 (e)(1)  Agreement and Plan of Merger among Universal Music Group, Inc.,
         Universal Acquisition Corp. and EMusic.com Inc. dated as of April 6,
         2001 (incorporated by reference to Exhibit 2.1 to the Current Report
         on Form 8-K filed by the Company on April 10, 2001)*
 (e)(2)  Form of Stockholders' Agreement, dated as of April 6, 2001, by and
         among Universal Music Group, Inc. and certain stockholders of
         EMusic.com Inc. (incorporated by reference to Exhibit 2.2 to the
         Current Report on Form 8-K filed by the Company on April 10, 2001)*
 (e)(3)  Offer Letter dated February 1, 1998 between the Company and Gene
         Hoffman, Jr.
 (e)(4)  Offer Letter dated February 1, 1998 between the Company and Robert H.
         Kohn
 (e)(5)  Form of Stockholders' Agreement dated March 23, 1999 by and among the
         Company, Gene Hoffman, Jr., Robert H. Kohn and the Purchasers of
         Series B Preferred Stock
 (e)(6)  Amended Offer Letter dated January 11, 2000 between the Company and
         Steve Grady
 (e)(7)  Amended Offer Letter dated January 11, 2000 between the Company and
         Emily Rupp
 (e)(8)  Amended Offer Letter dated January 11, 2000 between the Company and
         Brent Thomas
 (e)(9)  Amended Offer Letter dated January 11, 2000 between the Company and
         Chris Henger
 (e)(10) Form of Indemnification Agreement between the Company and each of its
         officers and directors (incorporated by reference to Exhibit 10.1(a)
         to the Annual Report on Form 10-K for the fiscal year ended June 30,
         1999 filed by the Company with the SEC on September 30, 1999)
</TABLE>
--------
* Previously filed on Schedule 14D-9 as a preliminary communication

                                       16
<PAGE>

                                   SIGNATURE

   After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and
correct.

                                          EMUSIC.COM INC.

                                                   /s/ Gene Hoffman, Jr.
                                          By: _________________________________
                                                     Gene Hoffman, Jr.
                                               President and Chief Executive
                                                          Officer


                                      17
<PAGE>

                                                                        ANNEX A

                           EMUSIC.COM INC.
                           1991 Broadway, 2nd Floor
                           Redwood City, California 94063
                           Phone: (650) 216-0200
                           Fax: (650) 556-1610
                           Web: http://www.emusic.com

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

                INFORMATION STATEMENT PURSUANT TO SECTION 14(f)
            OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND
                             RULE 14f-1 THEREUNDER

   This Information Statement is being mailed on or about April 20, 2001, as
part of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") to holders of shares of common stock, $0.001 par value per
share (the "Shares"), of EMusic.com Inc., a Delaware corporation ("EMusic" or
the "Company"). Capitalized terms used herein and not otherwise defined herein
shall have the meanings set forth in the Schedule 14D-9, which (including the
Exhibits thereto) is incorporated by reference herein. This Information
Statement is being provided in connection with the possible appointment of
persons designated by Universal Acquisition Corp., a Delaware corporation
("Purchaser"), a wholly-owned subsidiary of Universal Music Group, Inc., a
California corporation ("Universal"), to at least a majority of the seats on
the Board of Directors of the Company (the "Board"). Such designation is to be
made pursuant to Section 1.3 of the Agreement and Plan of Merger, dated as of
April 6, 2001 (the "Merger Agreement"), among Universal, Purchaser and the
Company.

   This Information Statement is required by Section 14(f) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1
thereunder. YOU ARE URGED TO READ THIS INFORMATION STATEMENT CAREFULLY. YOU
ARE NOT, HOWEVER, REQUIRED TO TAKE ANY ACTION.

   Pursuant to the Merger Agreement, on April 20, 2001, Purchaser commenced a
cash tender offer to acquire all of the issued and outstanding Shares (the
"Offer"). The Offer is scheduled to expire at midnight, New York City time, on
May 17, 2001, unless the Offer is extended. Following the successful
completion of the Offer, upon approval by a stockholder vote, if required, and
subject to certain other conditions, Purchaser will be merged with and into
the Company (the "Merger") and the Company shall become a wholly-owned
subsidiary of Universal.

   The information contained in this Information Statement concerning
Universal and Purchaser has been furnished to the Company by Universal, and
the Company assumes no responsibility for the accuracy or completeness of such
information.

                   GENERAL INFORMATION REGARDING THE COMPANY

General

   The Shares are the only class of securities outstanding having the right to
vote for the election of the Company's directors. Each Share entitles its
record holder to one vote. As of April 6, 2001, there were 43,202,110 Shares
issued and outstanding.

The Company's Board of Directors

   If Purchaser purchases Shares pursuant to the Offer, the Merger Agreement
provides that Purchaser will be entitled to designate such number of
directors, rounded up to the next whole number, on the Board as will give
Purchaser, subject to compliance with Section 14(f) of the Exchange Act,
representation on the Board equal to that number of directors which equals the
product of the total number of directors on the Board (giving effect to the
directors elected or appointed pursuant to this paragraph and including
current directors serving as officers of the Company) multiplied by the
percentage that the aggregate number of Shares beneficially owned by
Universal, Purchaser or any of their respective affiliates, bears to the total
number of Shares then issued and outstanding. If,

                                      A-1
<PAGE>

and at such times as, requested by Purchaser, the Company will use its best
efforts to cause each committee of the Board and the board of directors of
each subsidiary of the Company to include persons designated by Purchaser
constituting the same percentage of each such committee and the board of each
subsidiary of the Company as Purchaser's designees are of the Board. The
Company shall, on request of Purchaser, promptly increase the size of the
Board as is necessary to enable Purchaser's designees to be elected to the
Board and shall cause the Purchaser's designees to be so elected.
Notwithstanding the foregoing, if Purchaser's designees are appointed or
elected to the Board, until the Effective Time at least two of the members of
the Board will be directors who were directors on the date of the Merger
Agreement and neither officers of the Company nor designees, stockholders,
affiliates or associates of Universal ("Independent Directors"), provided,
that if less than two Independent Directors remain, the remaining Independent
Director (if any) or, if no Independent Directors remain, the other directors
shall designate persons to fill the vacancies who shall be neither officers of
the Company or designees, shareholders, affiliates or associates of Universal.
Notwithstanding the foregoing, after the time that Purchaser's designees
constitute at least a majority of the Board and until the Effective Time, the
Board shall delegate to a committee comprised solely of the Independent
Directors the sole responsibility for (i) the amendment or termination of the
Merger Agreement on behalf of the Company (but excluding a termination
pursuant to Section 7.1(c)(ii) of the Merger Agreement), (ii) the waiver of
any of the Company's rights or remedies under the Merger Agreement, (iii) the
extension of time for the performance of any of the obligations of Universal
or the Purchaser under the Merger Agreement, and (iv) the assertion or
enforcement of the Company's rights under the Merger Agreement to object to
(a) a failure to consummate the Merger for a failure of the condition set
forth in 6.2 of the Merger Agreement or (b) a termination of the Merger
Agreement under Section 7.1(d)(iii). See under "Additional Information--Board
Committee Created by Merger Agreement" in Item 8 of the Schedule 14D-9 for the
identity of the prospective Independent Directors.

   As of the date of this Information Statement, Purchaser has not determined
who will be Purchaser's designees (the "Universal Designees"). However, the
Universal Designees will be selected from among the persons listed in Schedule
I attached hereto, which has been furnished, together with the following
information related thereto, by Universal and Purchaser. Schedule I also
includes certain information with respect to each such person. Each of the
persons listed in Schedule I has consented to serve as a director of the
Company if appointed or elected. None of such persons currently is a director
of, or holds any positions with, the Company. Universal and Purchaser have
advised the Company that, to their knowledge, none of the persons listed on
Schedule I or any of their affiliates beneficially owns any equity securities
or rights to acquire any such securities of the Company, nor has any such
person been involved in any transaction with the Company or any of its
directors, executive officers or affiliates that is required to be disclosed
pursuant to the rules and regulations of the Securities and Exchange
Commission (the "SEC") other than with respect to transactions between
Universal, Purchaser and the Company that have been described in the Schedule
TO or this Information Statement.

   Universal has advised the Company that, to the knowledge of Universal and
Purchaser, none of the persons listed on Schedule I is an adverse party to the
Company in any material legal proceedings or has a material interest in any
such proceedings. Universal has also advised the Company that, to the
knowledge of Universal and Purchaser, none of the persons listed in Schedule I
has during the last five years been convicted in a criminal proceeding
(excluding traffic violations and similar misdemeanors) or was a party to a
civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was, or is, subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or finding any
violation of such laws or is involved in any other legal proceeding which is
required to be disclosed under Item 401(f) of Regulation S-K promulgated by
the SEC.

   It is expected that the Universal Designees may assume office at any time
following the purchase by Purchaser of Shares pursuant to the Offer. Assuming
the Minimum Condition has been satisfied and Purchaser has purchased under the
Offer a majority of the outstanding Shares, which purchase cannot be earlier
than midnight, New York City time, on May 17, 2001, upon taking office, the
Universal Designees will thereafter constitute at least a majority of the
Board.

                                      A-2
<PAGE>

                       DIRECTORS AND EXECUTIVE OFFICERS

   The Company's executive officers and directors and their ages and positions
are as follows:

<TABLE>
<CAPTION>
Name                 Age                       Position(s)
----                 ---                       ----------
<S>                  <C> <C>
Gene Hoffman, Jr....  25 President and Chief Executive Officer
Steve Grady.........  35 Senior Vice President, Marketing
Brett A. Thomas.....  30 Senior Vice President, Technology
Chris Henger........  33 Vice President and General Manager of RollingStone.com
Emily Rupp..........  31 Vice President, Chief Financial Officer
Robert H. Kohn......  44 Chairman
Tor Braham..........  43 Director
Ralph Peer II.......  56 Director
Ed Rosenblatt.......  66 Director
Howard Tullman......  56 Director
</TABLE>

   Gene Hoffman, Jr., a co-founder of EMusic, has been President, Chief
Executive Officer and a director since January 1998. From November 1996 to
December 1997, Mr. Hoffman was Director of Business Development and Director
of Interactive Marketing of Pretty Good Privacy. From October 1995 to November
1996, he was founder, director and Executive Vice President of PrivNet, Inc.,
an Internet privacy software company. From August 1993 to October 1995, Mr.
Hoffman was a student at the University of North Carolina, Chapel Hill.

   Steve Grady joined EMusic in June 1998 as Vice President, Corporate
Communications and was promoted to Vice President, Marketing in January 1999
and to Senior Vice President, Marketing in October 2000. From July 1997 to May
1998, Mr. Grady was Director, Corporate Communications for Borland, where he
was responsible for public relations and investor relations. From July 1996 to
July 1997, he was Director, Marketing Communications for Infoseek Corporation.
From 1992 to June 1995, he served as Director, Corporate Communications for
Borland. Prior to Borland, Mr. Grady served in a variety of corporate
communications and marketing positions with Ashton-Tate, TeraData, and Lotus
Development. Mr. Grady received a Masters degree in Communications Studies
from Emerson College and a Bachelor of Arts degree in Public Communications
from Ashland University.

   Brett A. Thomas joined EMusic in April 1998 as Vice President, Technology
and was appointed Senior Vice President, Technology in May 2000. From November
1996 to January 1998, Mr. Thomas was Principal Engineer for Pretty Good
Privacy, where he was responsible for the design and implementation of PGP 4.5
and 5.0 for Win32, PGP for Unix and its key server software. Previously, Mr.
Thomas was a senior engineer for NCR. Prior to NCR, he wrote automated
document processing programs for MCI, internal management software for an
insurance company, and inventory control systems under contract to IBM. Since
1994, Mr. Thomas has been involved in the Linux software community,
maintaining websites operating on Linux platform and making several
modifications to the source code of the core of the Linux operating system.

   Chris Henger joined EMusic as Vice President and General Manager of
RollingStone.com in February 2000. He served as the Director of Business
Development for Tunes.com from April of 1997 until February 2000. From August
1990 to April 1997, Mr. Henger served primarily as a consultant and systems
analyst for CCC Information Services, a publicly traded company providing
software and services to the insurance claims industry. Mr. Henger holds a
B.A. from Indiana University and an M.B.A. from DePaul University.

   Emily Rupp has been Vice President and Chief Financial Officer since
January 2001. Ms. Rupp had been Corporate Controller from March 2000 through
January 2001. From June 1999 to February 2000 Ms. Rupp was Vice President,
Finance and Controller of Tunes.com Inc. and was Controller from September
1998 through June 1999. Prior to joining Tunes.com, Ms. Rupp was an audit
manager with PricewaterhouseCoopers LLP, where she spent seven years in the
Assurance and Business Advisory Services group. She holds a B.S. in Business
from Miami University and is a C.P.A.

                                      A-3
<PAGE>

Board of Directors

   The members of the Board are divided into three classes: Class I, whose
term will expire at the annual meeting of stockholders to be held in 2002;
Class II, whose term was to expire at the annual meeting of stockholders to be
held in 2000; and Class III, whose term will expire at the annual meeting of
stockholders to be held in 2001. The Class I directors are Robert H. Kohn and
Tor Braham, the Class II directors are Gene Hoffman, Jr. and Howard Tullman,
and the Class III directors are Ralph Peer, II and Ed Rosenblatt. At each
annual meeting of stockholders, the successors to directors whose term expires
will be elected to serve a term of three years. This classification of
directors may have the effect of delaying or preventing changes in control of
the Company. The Board currently consists of six members. The Company's bylaws
provide that the authorized number of directors may be changed by resolution
of the Board.

   Executive officers are elected by the Board annually. There are no family
relationships among any of the Company's directors, officers or key
executives.

 Class II Directors whose terms were to expire at the 2000 Annual Meeting of
 Shareholders, which meeting has not yet been held:

   Gene Hoffman, Jr. (see above for biography)

   Howard A. Tullman became a director in February, 2000. Mr. Tullman served
as Chairman of Tunes.com Inc. since February 1999 and as Chief Executive
Officer and a director since June 1997. Mr. Tullman also serves as a director
of UBID, Inc. and serves as the Chairman of the board of directors of The
Cobalt Group, Inc. From June 1993 to January 1998, Mr. Tullman served as Chief
Executive Officer of Imagination Pilots, Inc., a developer and producer of
interactive CD games and educational software. From 1990 to May 1993, Mr.
Tullman served as Chief Executive Officer of Eager Enterprises, Inc., a
venture capital firm concentrating in investments in the information and
computer industries. Mr. Tullman holds a B.A. and J.D. from Northwestern
University.

 Class III directors whose terms expire at the 2001 Annual Meeting of
 Stockholders:

   Ralph Peer, II became a director in June 1998. Mr. Peer is Chairman and
Chief Executive Officer of peermusic, a global network of music publishing and
production companies. In addition, Mr. Peer is Vice President and Director of
the National Music Publishers' Association (U.S.A.) and the Harry Fox Agency.
He is a lifetime director and past president of the Country Music Association
and a publisher/director of ASCAP. Mr. Peer is also a director of Fox Agency
International (Singapore) and a consultant to the board of the Mechanical
Copyright Protection Society, U.K. He is a past president and a current
director of the International Confederation of Music Publishers and in 1997
was elected "President d' Honneur" of the Confederation.

   Ed Rosenblatt became a director in 1999. From 1994 until his retirement in
1999, Mr. Rosenblatt served as Chairman of Geffen Records. Mr. Rosenblatt
helped found Geffen Records in 1980, and served as its President and Chief
Operating Officer until 1994. Prior to Geffen Records, Mr. Rosenblatt served
as Senior Vice President of sales and promotion for Warner Brothers Records.
Mr. Rosenblatt received a degree in Applied Arts from Brooklyn College. Mr.
Rosenblatt, in connection with his retirement, entered into a five-year
consulting agreement with Universal.

 Class I directors whose terms expire at the 2002 Annual Meeting of
 Stockholders:

   Robert H. Kohn, a co-founder of EMusic, has been Chairman of the Board
since January 1998. From October 1996 to December 1997, Mr. Kohn was Vice
President, Business Development and General Counsel of Pretty Good Privacy,
Inc., a developer and marketer of Internet encryption and security software.
From March 1987 to September 1996, he was Senior Vice President of Corporate
Affairs, Secretary and General Counsel of Borland International, Inc., a
software company. Mr. Kohn also served as chief legal counsel for Ashton-Tate
Corporation. Prior to Ashton-Tate, he was an attorney at the Beverly Hills law
offices of Rudin & Richman, an

                                      A-4
<PAGE>

entertainment law firm whose clients included Frank Sinatra, Liza Minelli,
Cher and Warner Brothers Music. He was also Associate Editor of the
Entertainment Law Reporter, for which he continues to serve as a member of the
Advisory Board. A member of the California Bar Association, Mr. Kohn co-
authored Kohn On Music Licensing, a treatise on music industry law for
lawyers, music publishers and songwriters. He graduated from Loyola Law
School, Los Angeles and received a Bachelor of Arts degree in Business
Administration from California State University at Northridge. Mr. Kohn is
also a member of the Board of Directors of GlobalNet International, Inc., a
telecommunications company and Borland International and serves as Chairman
and CEO of Laugh.com Inc. Mr. Kohn is also an adjunct professor of law at
Monterey College of Law, where he teaches corporate law.

   Tor Braham, a Director since May 1999, has been a Managing Director at
Credit Suisse First Boston since March 2000. Mr. Braham was Managing Director
and Head of the Technology Mergers & Acquisitions Department for Warburg
Dillon Read from December 1997 until March 2000. Prior to joining Warburg,
Dillon Read, Mr. Braham was a partner at the law firm of Wilson Sonsini
Goodrich & Rosati. Mr. Braham received a Bachelor of Science degree in English
from Columbia University and a J.D. from the New York University School of
Law.

Board Meetings

   During the fiscal year ended June 30, 2000, the board held eleven meetings
and took action by unanimous written consent once. No director serving on the
Board in fiscal year 2000 attended fewer than 75% of such meetings of the
Board and the committees on which he serves except for Mr. Braham who attended
six of the eleven meetings.

Board Committees

   The Board has an Audit Committee and a Compensation Committee. The
Compensation Committee currently consists of Messrs. Braham, Peer and
Rosenblatt. The Compensation Committee reviews and recommends to the Board the
compensation and benefits of the Company's executive officers, establishes and
reviews general policies relating to the Company's compensation and benefits,
and administers the Company's stock plans. During fiscal 2000, the
Compensation Committee held six meetings and took action once by written
consent.

                           REPORT OF AUDIT COMMITTEE

   The Audit Committee currently consists of Messrs. Braham, Peer and
Rosenblatt. The Audit Committee operates under a written charter adopted by
the Board (the "Audit Committee Charter," attached hereto as Exhibit A).
During the fiscal year ended June 30, 2000, the Audit Committee held two
formal meetings. As the Company's current fiscal year will not end until June
30, 2001, the annual audit has not commenced and, therefore, the Audit
Committee has neither reviewed nor discussed the fiscal 2001 audited financial
statements with management and has not recommended to the Board that the
audited financial statements be included in the Company's Annual Report. The
Audit Committee has not yet discussed with the independent auditors the
matters required to be discussed by Statement on Auditing Standards 61.
Additionally, the Audit Committee has not received the written disclosures and
the letter from the independent accounts required by Independence Standards
Board Standard No. 1 and has not discussed with the independent accountants
their independence. The members of the Audit Committee are independent as
independence is defined in Rule 4200(a)(14) of the National Association of
Securities Dealers' listing standards.

                                          AUDIT COMMITTEE
                                          Tor Braham, Ralph Peer, II and Ed
                                           Rosenblatt

                                      A-5
<PAGE>

Director Compensation

   Directors do not receive cash compensation for their services as directors
or members of committees of the Board, but are reimbursed for reasonable
expenses incurred in attending meetings of the Board. In April 2000, the Board
granted each of Messrs. Braham, Rosenblatt and Peer fully-vested, nonqualified
stock options to purchase 30,000 Shares at an exercise price of $2.31 per
Share. These options are not being assumed by Purchaser pursuant to the Merger
Agreement. Accordingly, they will terminate by no later than the Effective
Time to the extent theretofore unexercised.

Compensation Committee Interlocks and Insider Participation

   None of the Company's executive officers has served as a member of a
compensation committee or board of any other entity which has an executive
officer serving as a member of the Board.

                            EXECUTIVE COMPENSATION

Compensation of Executive Officers

   The following table presents information for the fiscal years ended June
30, 2000 and 1999 and for the period from January 8, 1998 (inception) to June
30, 1998 regarding the compensation paid to the Company's Chief Executive
Officer and each of its four highest-paid executive officers whole total
salary and bonus exceeded $100,000 for the fiscal year ended June 30, 2000.

                          SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                            Long-Term
                                   Annual Compensation     Compensation
                               --------------------------- ------------
                                                            Securities
                                              Other Annual  Underlying    All Other
                          Year  Salary  Bonus Compensation   Options    Consideration
                          ---- -------- ----- ------------ ------------ -------------
<S>                       <C>  <C>      <C>   <C>          <C>          <C>
Gene Hoffman, Jr........  2000 $129,000  --       --         $    --         --
President and Chief
 Executive Officer        1999 $ 85,000  --       --         $250,000        --
                          1998 $ 28,000  --       --         $    --         --

Robert H. Kohn(1).......  2000 $129,000  --       --         $    --         --
Chairman                  1999 $ 85,000  --       --         $250,000        --
                          1998 $ 23,000  --       --         $    --         --

Joseph H. Howell(1).....  2000 $124,000  --       --         $ 90,000        --
Executive Vice President
 and Chief                1999 $ 98,000  --       --         $ 50,000
 Financial Officer        1998 $    --   --       --         $590,000        --

Peter M. Astiz(2).......  2000 $123,000  --       --         $230,000        --
Acting Chief Operating    1999 $    --   --       --         $100,000        --
 Officer, Executive Vice
 President, Secretary &
 General Counsel

James R. Chapman(3).....  2000 $123,000  --       --         $275,000        --
Executive Vice President  1999 $ 18,000  --       --         $400,000        --
 Corporate Strategy
</TABLE>
--------
(1) Mr. Kohn and Mr. Howell ceased to be officers and full-time employees of
    the Company as of January 2001. Mr. Kohn continues to serve as Chairman of
    the Board.

(2) Mr. Astiz ceased to be acting Chief Operating Officer as of January 2001.
    At that time, he agreed to continue to serve transitionally as Executive
    Vice President and General Counsel on an interim basis.

(3) Mr. Chapman ceased to be a full-time employee of the Company as of March
    2001.

                                      A-6
<PAGE>

Option Grants During Fiscal 2000

   The following table provides the specified information concerning grants of
options to purchase Shares made during the fiscal year ended June 30, 2000, to
the persons named in the Summary Compensation Table above. Except as otherwise
noted, these options vest over a four year period from the date of grant, with
25% vesting after one year and the remaining vesting 1/48th per month over the
remaining three years.

<TABLE>
<CAPTION>
                                                                                          Potential
                                                                                     Realizable Value at
                                                                                       Assumed Annual
                                                                                         Stock Price
                                              % of Total Options Exercise             Appreciation for
                         Number of Securities     Granted to      Price                Option Terms(2)
                              Underlying         Employees in      Per    Expiration -------------------
                           Options Granted      Fiscal 2000(1)    Share      Date       5%        10%
                         -------------------- ------------------ -------- ---------- -------- ----------
<S>                      <C>                  <C>                <C>      <C>        <C>      <C>
Joseph H. Howell........        40,000               0.5%         $2.31    4/20/10   $ 58,000 $  147,000
                                50,000               0.7%         $9.88    1/12/10   $311,000 $  787,000
Peter M. Astiz..........       180,000               2.4%         $2.31    4/20/10   $261,000 $  663,000
                                50,000               0.7%         $9.88    1/12/10   $311,000 $  788,000
James R. Chapman........       200,000               2.6%         $2.31    4/20/10   $291,000 $  736,000
                                75,000               1.0%         $9.88    1/12/10   $466,000 $1,181,000
</TABLE>
--------
(1) Based on an aggregate of 7,615,000 Shares subject to options granted in
    fiscal 2000.

(2) Potential realizable values are net of exercise price but before taxes
    associated with exercise. Amounts represent hypothetical gains that could
    be achieved for the options if exercised at the end of the option term
    assuming that the fair market value of the Shares appreciates at 5% and
    10% over the option term based on the per Share market price at the time
    of grant, and that the option is exercised and sold on the last day of its
    option term for the appreciated stock price. The assumed 5% and 10% rates
    of stock price appreciation are provided in accordance with rules of the
    SEC and do not represent the Company's estimate or projection of the
    future stock price of the Shares.

Option Exercises in 2000 and Year-End Value

   The following table provides the specified information concerning exercises
of options to purchase Shares in the fiscal year ended June 30, 2000, and
unexercised options held as of June 30, 2000, by the persons named in the
Summary Compensation Table above.

   Aggregate Option Exercises In Last Fiscal Year And Fiscal Year-End Values

<TABLE>
<CAPTION>
                                                                     Value of
                                                                 Unexercised In-
                                         Number of Securities       the-Money
                     Shares             Underlying Unexercised      Options at
                    Acquired   Value     Options at 6/30/2000     6/30/2000 ($)
                       on     Realized  ------------------------ ----------------
       Name         Exercise    ($)       Vested     Unvested    Vested  Unvested
       ----         -------- ---------- ----------- ------------ ------- --------
<S>                 <C>      <C>        <C>         <C>          <C>     <C>
Gene Hoffman,
 Jr...............      --          --       62,500     187,500      --       --
Robert H. Kohn....      --          --       62,500     187,500      --       --
Joseph H. Howell..  383,000  $2,487,000      47,283     299,717  $78,000 $474,000
Peter M. Astiz....      --          --       36,668     293,332      --  $ 11,000
James R. Chapman..      --          --      163,898     511,102      --  $ 12,000
</TABLE>

   The Company has not awarded stock appreciation rights to any of its
employees and it does not have any multi-year incentive plans.

Certain Relationships and Related Transactions

   In July 2000, the Company provided a short-term loan of $250,000 to Gene
Hoffman, Jr., the Company's President and Chief Executive Officer. The loan
bore interest at market rates and was secured by a deed of trust and pledge of
shares. The loan was repaid in August 2000.

   In August 2000, the Company provided a short-term loan of $198,000 to Brett
Thomas, the Company's Senior Vice President, Technology. The loan was entered
at 10% per annum and is payable on the earlier of (i) August 30, 2001, (ii)
any Liquidity Event (as defined in the note) or (iii) thirty (30) days after
the date of any

                                      A-7
<PAGE>

termination of Mr. Thomas' employment with the Company, excluding any
termination of his employment by the Company other than for cause. The
purchase of Mr. Thomas' shares as a result of the Offer or the Merger will
constitute a Liquidity Event under the note.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

   Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
a registered class of the Company's equity securities, to file with the SEC
initial reports of ownership and reports of changes in ownership of Shares and
other equity securities of the Company. Officers, directors, and greater than
ten-percent stockholders are required to furnish the Company with copies of
all Section 16(a) forms they file.

   To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the last fiscal year, all Section 16(a) filing
requirements applicable to its officers, directors and greater than ten
percent beneficial owners were complied with by such persons.

                     REPORT OF THE COMPENSATION COMMITTEE
                           ON EXECUTIVE COMPENSATION

   The Compensation Committee of the Board of Directors is comprised of
Messrs. Braham, Peer and Rosenblatt. Each of these individuals is a non-
employee member of our Board of Directors. The Compensation Committee is
responsible for approving all compensation recommended by the President for
our executive officers and also approves all compensation for the President
and Chief Executive Officer of EMusic. The goal of the EMusic compensation
policy is to attract, retain and reward executive officers who contribute to
our success and to motivate these executives to achieve our business
objectives. We use salary, stock option grants and bonus compensation to meet
these goals.

   Compensation Policies. To date, we have been operating as a development
stage business and salaries have been set at substantial discounts to
prevailing market rates. EMusic salaries reflect typical salaries for similar
positions in comparable companies in EMusic's industry and geographic area.
Salaries are generally set to reflect the applicable range for each position
and are adjusted for historical and expected contributions of each officer to
EMusic. Salaries are reviewed annually based on individual past performance
and financial results of EMusic. Adjustments are made, if appropriate, to
maintain competitiveness within the industry.

   Compensation Components. The Compensation Committee strongly believes that
executive compensation should be based in significant part on EMusic's
performance and uses stock option grants and bonus compensation to accomplish
this goal. We believe that equity ownership by executive officers provides
incentives to build stockholder value and aligns the interests of executive
officers with those of the stockholders. The size of an initial option grant
to an executive officer is generally determined with reference to comparable
companies in EMusic's industry and geographical area, the responsibilities and
expected future contributions of the executive officer, as well as recruitment
and retention considerations. Additional option grants to an executive officer
are generally based on EMusic's and the individual's performance. In fiscal
2000, the Compensation Committee approved stock option grants to three
executive officers. See "Option Grants During Fiscal 2000."

   Chief Executive Officer Compensation. The Compensation Committee annually
reviews the performance and compensation of Gene Hoffman, Jr., the President
and Chief Executive officer of EMusic. During fiscal 2000, Mr. Hoffman's
compensation consisted of salary. To date, Mr. Hoffman's cash compensation has
been significantly lower as compared with comparable companies within the
Company's industry and geographic area. During fiscal 2000, Mr. Hoffman's
compensation consisted of a base salary of $129,000. Mr. Hoffman did not
receive an option grant in fiscal 2000.

                                          COMPENSATION COMMITTEE
                                          Tor Braham, Ralph Peer, II and Ed
                                           Rosenblatt

                                      A-8
<PAGE>

                            STOCK PERFORMANCE GRAPH

   Set forth below is a line graph comparing the annual percentage change in
the cumulative total return on the Shares with the cumulative total returns of
the Nasdaq Composite Index and the AMEX Internet Index for the period
commencing on June 30, 1998 and ending June 30, 2000.

                           [STOCK PERFORMANCE GRAPH]

   Comparison of Cumulative Total Return from June 30, 1998 through June 30,
2000(1)

<TABLE>
<CAPTION>
                                                                 June    June
                                                       June 30,   30,     30,
                                                         1998    1999    2000
                                                       -------- ------- -------
   <S>                                                 <C>      <C>     <C>
   Emusic.com Inc.....................................   $100   $284.48 $ 32.75
   Nasdaq Composite Index.............................   $100   $141.77 $209.32
   AMEX Internet Index................................   $100   $244.36 $387.78
</TABLE>
--------
(1) The Stock Performance Graph assumes $100 was invested on June 30, 1998 at
    the closing sales price of the Shares and each index. No cash dividends
    have been declared on the Shares. Stockholder returns over the indicated
    period should not be considered indicative of future stockholder returns.

                                      A-9
<PAGE>

        SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

   The following table sets forth the ownership of the Shares as of March 31,
2001, including optioned shares, by:

  . each person or entity who is known by the Company to beneficially own
    more than 5% of our outstanding common stock;

  . each of the Company's directors and the executive officers named in the
    Summary Compensation Table; and

  .all current executive officers and directors as a group.

   Unless otherwise indicated, the address for each of the named individuals
is c/o EMusic.com Inc., 1991 Broadway, 2nd Floor, Redwood City, California
94063. Except as otherwise indicated, and subject to applicable community
property laws, the persons named in the table have sole voting and investment
power with respect to all Shares held by them.

   Applicable percentage ownership in the table is based on Shares outstanding
as of March 31, 2001. Beneficial ownership is determined in accordance with
the rules of the SEC. Shares stock subject to options that are presently
exercisable or exercisable within sixty (60) days of March 31, 2001, are
deemed outstanding for the purpose of computing the percentage ownership of
the person or entity holding such options, but are not treated as outstanding
for the purpose of computing the percentage ownership of any other person or
entity.

<TABLE>
<CAPTION>
                                                          Number of
                                                           Shares
                   Beneficial Owner(1)                      Owned   Percent(2)
                   -------------------                    --------- ----------
<S>                                                       <C>       <C>
5% Stockholder
Citiventure 96 Partnership, L.P.......................... 3,333,400    7.72%
 c/o Invesco Private Capital
 1166 Avenue of the Americas, Suite 2700
 New York, NY 10036(3)
Directors and Named Executive Officers
Gene Hoffman, Jr.(4)..................................... 3,208,791    7.41%
Robert H. Kohn(5)........................................ 3,028,291    6.99%
Joseph Howell(6).........................................   510,833    1.18%
Peter Astiz(7)...........................................   349,083       *
James Chapman(8).........................................   475,148    1.09%
Tor Braham(9)............................................    76,600       *
Ralph Peer(10)...........................................   348,900       *
Ed Rosenblatt(11)........................................   130,000       *
Howard Tullman(12).......................................   445,464    1.02%
All directors and current executive officers as a group
 10 persons(13).......................................... 8,527,463    19.0%
</TABLE>
--------
  *  Less than 1%

 (1) A person is deemed to be the beneficial owner of securities that can be
     acquired by such person within 60 days upon the exercise of options.
     Calculations of percentages of beneficial ownership assume the exercise
     by only the respective named shareholders of all options for the purchase
     of Shares held by such shareholder, which are exercisable within 60 days
     of March 31, 2001.

 (2) Percentage of beneficial ownership excludes Share issuable upon the
     exercise of outstanding stock options and warrants except for Shares
     issuable upon the exercise of options and warrants exercisable within the
     next 60 days.

 (3) The information set forth in this footnote regarding shares beneficially
     owned by Citiventure is based on Amendment No. 1 to a Schedule 13D dated
     November 17, 1999 filed by Citiventure reflecting beneficial

                                     A-10
<PAGE>

    ownership as of March 24, 1999. Represents Shares owned by Invesco-related
    partnerships as follows: 58,300 Shares owned by Chancellor Private Capital
    Offshore Partners I, C.V.; 624,000 Shares owned by Chancellor Private
    Capital Offshore Partners II, L.P.; 379,000 Shares owned by Chancellor
    Private Capital III, L.P.; 1,627,100 Shares owned by Citiventure 96
    Partnership, L.P.; and 645,000 Shares owned by Drake & Co. for the account
    of Citiventure Private Participations II.

 (4) Includes 119,791 Shares issuable upon exercise of outstanding options.

 (5) Includes 119,791 Shares issuable upon exercise of outstanding options.

 (6) Includes 207,833 Shares issuable upon exercise of outstanding options.
     See footnote (1) to the Summary Compensation Table above.

 (7) Includes 122,083 Shares issuable upon exercise of outstanding options.
     See footnote (2) to the Summary Compensation Table above.

 (8) Includes 356,948 Shares issuable upon exercise of outstanding options.
     See footnote (3) to the Summary Compensation Table above.

 (9) Includes 65,000 Shares issuable upon exercise of outstanding options.

(10) Includes 130,000 Shares issuable upon exercise of outstanding options.
     Includes 208,900 Shares held by peermusic III, Ltd. Mr. Peer disclaims
     beneficial ownership of the shares held by peermusic III, Ltd. except to
     the extent of his pecuniary interest therein.

(11) Represents Shares issuable upon exercise of outstanding options.

(12) Includes 397,761 Shares issuable upon exercise of outstanding options.

(13) Includes 1,680,960 Shares issuable for exercise of outstanding options.
     See footnotes (1), (2) and (3) to the Summary Compensation Table above.

Merger Agreement

   On April, 2001, the Company entered into the Merger Agreement, pursuant to
which: (i) Purchaser is making the Offer; and (ii) following the successful
completion of the Offer, upon approval by a stockholder vote, if required, and
subject to certain other conditions, Purchaser will be merged with and into
the Company, with the Company continuing as the surviving corporation and a
wholly owned subsidiary of Universal.

Stockholders Agreement with Certain Officers, Directors and other Stockholders

   Concurrently with the execution of the Merger Agreement and as a condition
to Purchaser's and Universal's willingness to enter into the Merger Agreement,
Universal and the Purchaser entered into a Stockholders Agreement (the
"Stockholders Agreement") with each Signatory Stockholder under which each
Signatory Stockholder has, among other things, subject to the conditions set
forth therein, agreed to tender all of such Signatory Stockholder's Shares in
the Offer, granted Universal an option to purchase all of the Shares owned by
such Signatory Stockholder (to the extent they are not so tendered) at the
Offer Price (such option being conditioned on Purchaser having accepted for
payment, under the Offer, all Shares properly tendered and not withdrawn
thereunder) and agreed to vote all Shares beneficially owned by such
Stockholder in favor of the Merger and the Merger Agreement and against any
competitive takeover proposal. The form of Stockholders Agreement was filed
with the SEC on April 10, 2001 as an exhibit to the Company's Current Report
on Form 8-K and is incorporated herein by reference in its entirety. The
following table identifies each Signatory Stockholder and the number of his
Shares covered by his or her Stockholder Agreement:

                                     A-11
<PAGE>

<TABLE>
<CAPTION>
                                                                      Number of
                         Signatory Stockholder                         Shares
                         ---------------------                        ---------
   <S>                                                                <C>
   Peter Astiz.......................................................   227,000
   Tor Braham........................................................    11,600
   James R. Chapman..................................................   118,200
   Steve Grady.......................................................     2,700
   Christopher G. Henger.............................................     1,000
   Eugene E. Hoffman, Jr............................................. 3,089,000
   Joseph H. Howell..................................................   303,000
   Robert H. Kohn.................................................... 2,908,500
   Ralph Peer II.....................................................   218,900
   Emily J. Rupp.....................................................     1,000
   Brett A. Thomas...................................................   566,100
   Howard A. Tullman.................................................    47,703
</TABLE>

Allocation of Consideration among Executive Officers and Directors

   The table below sets forth information for each director and executive
officer of the Company who will be entitled to receive cash payments in
connection with the Offer or the Merger with respect to such individual's
Shares or options to purchase Shares. Under the Merger Agreement, upon
consummation of the Offer, each option holder who executes an Option Cash-Out
Agreement will be entitled to receive an amount in cash equal to the excess
(if any) of the Offer Price over the exercise price thereof times the number
of options held. Except as set forth in the table below, no director or
executive officer is entitled to receive any cash compensation in connection
with the Offer or the Merger for Shares owned or options to purchase Shares
held.

<TABLE>
<CAPTION>
                                        Number of   Dollar Amount
                                       In-The-Money      for       Total Cash
          Name             Shares        Options     Options(1)   Consideration
          ----            ---------    ------------ ------------- -------------
<S>                       <C>          <C>          <C>           <C>
Executive Officers:
Gene Hoffman, Jr......... 3,089,000            0             0     $1,760,730
 President and Chief
  Executive Officer and
  Director
Chris Henger.............     1,000      200,000      $ 20,000     $   20,570
 Vice President and
 General Manager of
  RollingStone.com
Emily Rupp...............     1,000      200,000      $ 20,000     $   20,570
 Vice President and Chief
  Financial Officer
Steve Grady .............     2,700      554,000      $211,160     $  212,699
 Senior Vice President of
  Marketing
Brett Thomas ............   566,100      200,000      $ 20,000     $  342,677
 Senior Vice President,
  Technology
Directors:
Robert H. Kohn .......... 2,908,000            0             0     $1,657,845
 Chairman of the Board
Tor Braham...............    11,600            0             0     $    6,612
Ralph Peer...............   218,900(2)         0             0     $  124,773
Ed Rosenblatt............         0            0             0     $        0
Howard Tullman...........    47,703            0             0     $   27,190
</TABLE>
--------
(1) Amount represents Offer Price less exercise price. Under the Merger
    Agreement, EMusic will offer to each optionee, including the individuals
    listed in the table, the opportunity under an Option Cash-Out Agreement

                                     A-12
<PAGE>

   to receive, upon consummation of the Offer, in surrender of each
   individual's in-the-money options (i.e., options, the exercise price of
   which is less than the Offer Price), whether or not then vested, a cash
   payment equal to the excess of the Offer Price over the exercise price. The
   individuals listed in the table have advised EMusic that they intend to
   accept this offer. All out-of-the money options, if not theretofore
   exercised, will terminate in accordance with their terms upon the
   consummation of the Offer, if Universal acquires thereunder a majority of
   the outstanding Shares, but no event later than the Effective Time.

(2) Includes 208,900 Shares held by peermusic III, Ltd. Mr. Peer disclaims
    beneficial ownership of those Shares except to the extent of his pecuniary
    interest therein.

Employment Agreements and Severance Arrangements with Executive Officers and
Directors

   No discussions have occurred as of the date hereof between Universal and
the Company's executive officers regarding continued employment with the
Company or Universal following the consummation of the Offer, except that Gene
Hoffman, the Company's President and Chief Executive Officer, has had a
preliminary and general discussion with Universal concerning his role in
helping to integrate the Company with Universal and whether he might have an
interest in a future role with the Company or Universal. No agreement or
understanding between Universal and Mr. Hoffman has been reached as of the
date hereof as to whether or not he would have any role and, if so, its nature
and terms. Additional discussions may occur in the future with Mr. Hoffman and
other executive officers of the Company.

   Consummation of the Offer and the Merger will have the effects summarized
below on the compensation, incentive plans, agreements and arrangements in
which executive officers and directors of the Company are participating.

   The Company has entered into employment agreements with certain of its
executive officers. Each of these agreements is described below and is filed
as an exhibit hereto and is incorporated by reference herein. If the Purchaser
does not waive the Minimum Condition and the Offer is consummated, such
consummation will result in an acquisition of the Company under these
agreements. If Purchaser waives the Minimum Condition and consummates the
Offer, the Merger will result in such an acquisition. Each of these employment
agreements provides for acceleration of options or termination of repurchase
rights with respect to Shares held by the employee following an acquisition of
the Company. Additional information with respect to the treatment of options
in the Merger Agreement is contained above under "Allocation of Consideration
among Executive Officers and Directors."

   Gene Hoffman, Jr., President and Chief Executive Officer: Under agreements
with Mr. Hoffman dated February 1998 and March 1999, upon any acquisition of
EMusic or if his employment is terminated other than for cause the repurchase
right in favor of EMusic which applies to 743,400 Shares held by Mr. Hoffman
will terminate. In addition, Mr. Hoffman is entitled to severance equal to his
base salary payable over a twelve month period (totaling $150,000) in the
event his employment is terminated other than for cause.

   Robert H. Kohn, Chairman: Under agreements with Mr. Kohn dated February
1998 and March 1999, upon any acquisition of EMusic the repurchase right in
favor of EMusic which applies to 863,676 Shares held by Mr. Kohn will
terminate.

   Steve Grady, Senior Vice President, Marketing: Under an agreement with Mr.
Grady effective January 2001, upon any acquisition of EMusic the 264,451
unvested stock options held by him will become vested in full. 187,507 of
these options are in the money. In addition, Mr. Grady is entitled to six
months severance (totaling $70,000) in the event his employment is terminated
other than for cause.

   Brett Thomas, Senior Vice President, Technology: Under an agreement with
Mr. Thomas effective January 2001, upon any acquisition of EMusic the 453,927
unvested stock options held by him will become vested in full. 187,507 of
these options are in the money. In addition, Mr. Thomas is entitled to six
months severance (totaling $71,500) in the event his employment is terminated
other than for cause.

                                     A-13
<PAGE>

   Emily Rupp, Vice President and Chief Financial Officer: Under an agreement
with Ms. Rupp effective January 2001, upon any acquisition of EMusic the
263,237 unvested stock options held by her will become vested in full. 187,507
of these options are in the money. In addition, Ms. Rupp is entitled to six
months severance (totaling $70,000) in the event her employment is terminated
other than for cause (12 months (totaling $140,000) in the event such
termination occurs within 12 months of an acquisition).

   Chris Henger, Vice President and General Manager of RollingStone.com: Under
an agreement with Mr. Henger effective January 2001, upon any acquisition of
EMusic the 325,529 unvested stock options held by him will become vested in
full. 187,507 of these options are in the money. In addition, Mr. Henger is
entitled to six months severance (totaling $70,000) in the event his
employment is terminated other than for cause (9 months severance (totaling
$105,000) in the event such termination occurs within 12 months of an
acquisition).

   In addition, each of Messrs. Henger, Grady and Thomas and Ms. Rupp is
entitled to a bonus of $50,000 in the event of an acquisition of the Company
less any amount they earn from payments on Company options. Accordingly, each
of Messrs. Henger and Thomas and Ms. Rupp will receive an additional $30,000
following consummation of the Offer (if it results in an acquisition of the
Company) or the Merger.

Stock Option Plans

   The Company's directors and executive officers have been granted options
under the Company's stock option plans. Under such plans, in the event of a
"change in control" of EMusic the acquiring or successor corporation may
assume or substitute the outstanding options granted under the Company's stock
option plan and, if it does not do so, any then-unexercised options terminate.
Under the Merger Agreement, upon consummation of the Offer each option holder
who has executed an Option Cash-Out Agreement will be entitled to receive an
amount of cash equal to the excess (if any) of the Offer Price over the
exercise price thereof times the number of options held. Options held by
option holders who do not execute an Option Cash-Out Agreement, as well as
out-of-the-money options, will terminate in accordance with their terms upon
consummation of the Offer, if Universal acquires thereunder a majority of the
outstanding Shares, but in no event later than the Effective Time to the
extent not theretofore exercised. See "Allocation of Consideration among
Executive Officers and Directors" above.


                                     A-14
<PAGE>

                                                                      EXHIBIT A

                                EMUSIC.COM INC.

                     CHARTER OF THE AUDIT COMMITTEE OF THE

                              BOARD OF DIRECTORS

I. STATEMENT OF POLICY

   This Charter specifies the scope of the responsibilities of the Audit
Committee of the Board of Directors of EMusic.com Inc. (the "Company"), and
how the Committee carries out those responsibilities, including the structure,
processes, and membership requirements. The primary function of the Committee
is to assist the Board of Directors in fulfilling its financial oversight
responsibilities by reviewing and reporting to the Board upon (i) the
financial reports and other financial information provided by the Company to
any governmental body or to the public, (ii) the Company's systems of internal
and external controls regarding finance, accounting, legal compliance and
ethics that management and the Board have established and (iii) the Company's
auditing, accounting and financial reporting processes in general. Consistent
with this function, the Committee should encourage continuous improvement of,
and should foster adherence to, the Company's financial policies, procedures
and practices at all levels. The Committee's primary duties and
responsibilities are to:

  . Serve as an independent and objective party to monitor the Company's
    financial reporting process and internal control systems.

  . Review and appraise the audit efforts and independence of the Company's
    auditors.

  . Provide an open avenue of communication among the independent auditors,
    financial and senior management, and the Board.

   The Committee will primarily fulfill these responsibilities, and others as
may be prescribed by the Board from time to time, by carrying out the
activities enumerated in Section IV of this Charter.

II. ORGANIZATION AND MEMBERSHIP REQUIREMENTS

   The Committee shall be comprised of three or more directors as determined
by the Board, each of whom shall be independent directors, and free from any
relationship that, in the opinion of the Board, would interfere with the
exercise of his or her independent judgment as a member of the Committee. A
member of the Committee shall be considered independent if, among other
things, such Director:

  . is not an employee of the Company or its affiliates and has not been
    employed by the Company or its affiliates within the past three years;

  . is not a member of the immediate family of an executive officer of the
    Company or its affiliates who currently serves in that role or did so
    during the past three years;

  . has not accepted more than $60,000 in compensation from the Company
    during the previous fiscal year (excluding compensation and the related
    benefits for Board service, retirement plan benefits or non-discretionary
    compensation);

  . has not been a partner, controlling shareholder or an executive officer
    of any for-profit business to which the Company made, or from which it
    received, payments (other than those which arise solely from investments
    in the Company's securities) that exceed 5% of the Company's consolidated
    gross revenues for that year, or $200,000, whichever is more, in any of
    the past three years; and

  . is not an executive of another entity on whose Compensation Committee any
    of the Company's current executives serves.

   All members of the Committee must be able to read and understand
fundamental financial statements, including a balance sheet, income statement,
and cash flow statement. In addition, at least one member must

                                     A-15
<PAGE>

have past employment experience in finance or accounting, professional
certification in accounting, or other comparable experience or background
resulting in the individual's financial sophistication, including being or
having been a chief executive, chief financial, or other senior officer with
financial oversight responsibilities.

   The members of the Committee shall be elected by the Board and shall serve
until their successors shall be duly elected and qualified. Unless a chairman
is elected by the full Board, the members of the Committee may designate a
chairman by majority vote of the full Committee membership.

III. MEETINGS

   The Committee shall meet at least annually with management and the
independent auditors in separate executive sessions to discuss any matters
that the Committee or each of these groups believe should be discussed
privately. In addition, the Committee should meet with the independent
auditors and management on a quarterly basis to review the Company's financial
statements consistent with Section IV.A.5. below.

IV. PROCESSES

   To fulfill its responsibilities and duties the Committee shall:

     A. Documents/Reports to Review

       1. Review and reassess the Charter's adequacy periodically, as
    conditions dictate.

       2. Review the organization's annual audited financial statements and
    any reports or other financial information submitted to any
    governmental body, or the public, including any certification, report,
    opinion, or review rendered by the independent auditors.

       3. Review the regular Management Letter to management prepared by
    the independent auditors and management's response.

       4. Review related party transactions for potential conflicts of
    interests.

       5. Review the interim financial statements with financial management
    and the independent auditors prior to the filing of the Company's Form
    10-Ks and Form 10-Qs. These meetings should include a discussion of the
    independent auditors, judgment of the quality of the Company's
    accounting and any uncorrected misstatements as a result of the
    auditors quarterly review.

       6. Maintain written minutes of its meetings, which minutes will be
    filed with the minutes of the meetings of the Board. The Committee will
    also record its summaries of recommendations to the Board in written
    form that will be incorporated as part of the minutes of the Board
    meeting at which those recommendations are presented.

     B. Independent Auditors

       1. Recommend to the Board the selection of the independent auditors,
    considering independence and effectiveness.

       2. Obtain from the independent auditors a formal written statement
    delineating all relationships between the auditor and the Company, and
    discussing with the auditor any disclosed relationships or services
    that may impact auditor objectivity and independence (consistent with
    Independence Standards Board Standard No. 1).

       3. Take, or recommend that the Board take, appropriate action to
    oversee the independence of the outside auditor.

       4. Review the performance of the independent auditors and approve
    any proposed discharge of the independent auditors when circumstances
    warrant.

                                     A-16
<PAGE>

       5. Periodically consult with the independent auditors out of the
    presence of management about internal controls and the fullness and
    accuracy of the Company's financial statements.

     C. Financial Reporting Processes

       1. In consultation with the independent auditors, review the
    integrity of the Company's financial reporting processes, both internal
    and external.

       2. Consider the independent auditors' judgments about the quality and
    appropriateness of the Company's accounting principles as applied in its
    financial reporting.

       3. Consider and approve, if appropriate, changes to the Company's
    auditing and accounting principles and practices as suggested by the
    independent auditors or management.

     D. Process Improvement

       1. Review with management and the independent auditors any
    significant judgments made in management's preparation of the financial
    statements and the view of each as to appropriateness of such judgments.

       2. Review with management and the independent auditors any
    significant difficulties encountered during the course of the audit,
    including any restrictions on the scope of work or access to required
    information.

       3. Review any significant disagreement among management and the
    independent auditors in connection with the preparation of the financial
    statements.

       4. Review with the independent auditors and management the extent to
    which changes or improvements in financial or accounting practices, as
    approved by the Committee, have been implemented.

       5. Provide oversight and review the Company's asset management
    policies, including an annual review of the Company's investment
    policies and performance for cash and short-term investments.

     E. Ethical and Legal Compliance

       1. Review whether management has set an appropriate corporate "tone"
    for quality financial reporting, sound business practices and ethical
    behavior.

       2. Review whether management has the proper review system in place to
    ensure that the Company's financial statements, reports and other
    financial information disseminated to governmental organizations and the
    public satisfy legal requirements.

       3. Review management's monitoring of compliance with the Foreign
    Corrupt Practices Act.

       4. Review, with the Company's counsel, legal compliance matters
    including corporate securities trading policies.

       5. Review, with the Company's counsel, any legal matter that could
    have a significant impact on the Company's financial statements.

       6. Perform any other activities consistent with this Charter, the
    Company's Bylaws and governing law, as the Committee or the Board deems
    necessary or appropriate.

       7. If necessary, initiate special investigations, and if appropriate,
    hire special counsel or experts to assist the Committee.

                                     A-17
<PAGE>

                                  SCHEDULE I

   As of the date of this Information Statement, Universal has not determined
who will be the Universal Designees. However, the Universal Designees will be
selected from the following list of directors and officers of Universal or its
affiliates. The information contained herein concerning Universal and its
directors and executive officers and those of its affiliates has been
furnished by Universal and Purchaser. The Company assumes no responsibility
for the accuracy or completeness of such information.

   The name, present principal occupation or employment and five-year
employment history of each of the persons is set forth below. To the knowledge
of Universal and Purchaser, none of the persons listed below owns any Shares
or has engaged in transactions with respect to Shares during the past 60 days.
To the knowledge of Universal and Purchaser, during the last five years none
of the persons listed below has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) nor was such person a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction, and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or finding any
violation of such laws. None of the persons listed below (i) is currently a
director of, or holds any position with, the Company, (ii) has a familial
relationship with any director or executive officers of the Company, or (iii)
based on information provided to the Company by Universal (which is to the
best of Universal's knowledge), beneficially owns any securities (or any to
acquire securities) of the Company. The Company has been advised by Universal
that, to the knowledge of Universal and Purchaser, none of the potential
Universal Designees listed below have been involved in any transactions with
the Company or any of its directors, officers or affiliates which are required
to be disclosed pursuant to the rules and regulations of the SEC, except as
may be disclosed herein.

                             UNIVERSAL'S DESIGNEES

   The following table sets forth the name, present principal occupation or
employment and material occupations, positions, offices or employments for the
past five years of each of the potential Universal Designees. Unless otherwise
indicated, the current business address of each person is 2220 Colorado
Avenue, Santa Monica, California 90404. Unless otherwise indicated, each such
person is a citizen of the United States and each occupation set forth
opposite an individual's name refers to employment with Universal.

   Designees include:

<TABLE>
<CAPTION>
                                       Present Principal Occupation or
                                       Employment;
                                       Material Positions Held During the Past
 Name and Business Address         Age Five Years
 --------------------------------- --- ----------------------------------------
 <C>                               <C> <S>
 Doug P. Morris...................  62 Director, Chairman and Chief Executive
                                       Officer from 1996 to the
  1755 Broadway, 6th Floor             present. Director, Chairman and CEO of
                                       MCA Records, Inc., 100
  New York, New York 10019             Universal City Plaza, Universal City,
                                       California 91608, from 1996 to 1999.

 Zachary I. Horowitz..............  47 Director, President and Chief Operating
                                       Officer from 1999 to the present.
                                       Director and President from 1996 to
                                       1999. Officer of MCA Records, Inc., 100
                                       Universal City Plaza, Universal City,
                                       California 91608, from 1983 to 1999.

 Vincent Grimond..................  45 Senior Executive Vice President from
                                       2000 to the present. Senior
  100 Universal City Plaza             Executive Vice President, Operations and
                                       Finance of Universal
  Universal City, California 91608     Studios, Inc., 100 Universal City Plaza,
                                       Universal City, California 91608, from
                                       2000 to the present. Chairman and CEO of
                                       STUDIOCANAL, 85-89 Quai Andre Citroen,
                                       75015 Paris la Defense, France, from
                                       April 2000 to December 2000. Managing
                                       Director of Canal+, 85-89 Quai Andre
                                       Citroen, 75015 Paris la Defense, France,
                                       from February 1996 to April 2000. Mr.
                                       Grimond is a citizen of France.
</TABLE>

                                     A-18
<PAGE>

<TABLE>
<CAPTION>
                                       Present Principal Occupation or
                                       Employment;
                                       Material Positions Held During the Past
 Name and Business Address         Age Five Years
 --------------------------------- --- ----------------------------------------

 <C>                               <C> <S>
 Norman Epstein...................  50 Executive Vice President from 1996 to
                                       the present. Officer of MCA Records,
                                       Inc., 100 Universal City Plaza,
                                       Universal City, California 91608, from
                                       1990 to 1999.

 Marinus N. Henny.................  50 Executive Vice President and Chief
                                       Financial Officer from 2000 to
  1755 Broadway, 4th Floor             the present. Executive Vice President
                                       and Chief Financial Officer of
  New York, New York 10019             Sony Corporation of America, 55 Madison
                                       Avenue, New York, New York 10022, from
                                       1996 to 2000. Officer of Sony
                                       Corporation of America from 1988 to
                                       1996.

 Lawrence Kenswil.................  50 Executive Vice President from 1996 to
                                       the present. President of Universal
                                       Music Group eLabs, 2220 Colorado Avenue,
                                       Santa Monica, California 90404, from
                                       1999 to the present. Officer of MCA
                                       Records, Inc., 100 Universal City Plaza,
                                       Universal City, California 91608, from
                                       1989 to 1999.

 Daniel C. McGill.................  57 Executive Vice President from 1996 to
                                       the present. Officer of MCA Records,
                                       Inc., 100 Universal City Plaza,
                                       Universal City, California 91608, from
                                       1978 to 1999.

 Michael Ostroff..................  46 Executive Vice President, Business and
                                       Legal Affairs, from 1999 to the present.
                                       Officer from 1996 to 1999. Officer of
                                       MCA Records, Inc., 100 Universal City
                                       Plaza, Universal City, California 91608,
                                       from 1992 to 1999.

 Karen Randall....................  47 Executive Vice President from 2000 to
                                       the present. Director of
  100 Universal City Plaza             Universal Studios, Inc., 100 Universal
                                       City Plaza, Universal City,
  Universal City, California 91608     California 96108, from 1998 to the
                                       present. Executive Vice President and
                                       General Counsel of Universal Studios,
                                       Inc. from 2000 to the present. Officer
                                       of Universal Studios, Inc. and Parent
                                       from 1996 to the present.

 Jonathan Smilansky...............  49 Executive Vice President, Global Human
                                       Resources, from 1996 to
  1755 Broadway, 4th Floor             the present. Senior Vice President,
                                       Global Human Resources &
  New York, New York 10019             Service Quality, Forte-Meridien Hotels &
                                       Resorts, 166 High Holburn, London WC1V
                                       6TT, United Kingdom, from 1995 to 1996.
                                       Mr. Smilansky is a citizen of the United
                                       Kingdom.
</TABLE>

                                      A-19
<PAGE>

                                                                         ANNEX B
Allen & Company
       INCORPORATED

                        711 FIFTH AVENUE . NEW YORK, N.Y. 10022 . (212) 832-8000

                                 April 6, 2001

The Board of Directors
EMusic.com, Inc.
1991 Broadway
Redwood City, California 94063

Members of the Board of Directors:

   We hereby confirm our oral opinion presentation as to the fairness, from a
financial point of view, of the Consideration (as defined below) to be paid
pursuant to the Proposed Transaction (as defined below) to the stockholders of
EMusic.com, Inc. ("EMusic" or the "Company") that we presented to the Board of
Directors of the Company (the "Board") at its meeting on the date hereof.

   We understand that Universal Music Group, Inc. (the "Parent"), Universal
Acquisition Corp. (the "Purchaser") and the Company have entered into an
Agreement and Plan of Merger, dated as of April 6, 2001 (the "Agreement"),
pursuant to which (i) the Parent will cause the Purchaser to commence a tender
offer (the "Offer") for all the outstanding shares of the Company's common
stock, par value $0.001 per share (the "Shares"), for $0.57 per share, net to
the seller in cash (the "Consideration"), and (ii) the Purchaser will be merged
with and into the Company in a merger, pursuant to which stockholders not
tendering in the Offer and not exercising their appraisal rights will receive
the Consideration (the "Merger") and pursuant to which the Company shall be the
successor or surviving corporation. The Offer and the Merger, taken together,
are referred to as the "Proposed Transaction." The terms of the Proposed
Transaction are set forth in more detail in the Agreement.

   We have been requested by the Board to render our opinion (the "Opinion")
with respect to the fairness, from a financial point of view, to the Company's
stockholders of the Consideration to be paid pursuant to the Proposed
Transaction. We have not been requested to opine as to, and our Opinion does
not in any manner address, the Company's underlying business decision to enter
into the Agreement or to proceed with or effect the Proposed Transaction.

   We, as part of our investment banking business, are regularly engaged in the
valuation of businesses and their securities in connection with tender offers,
mergers and acquisitions, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements and valuations for estate,
corporate and other purposes. We will receive a fee in connection with services
provided in rendering our Opinion pursuant to our engagement agreement with the
Company.

   In connection with delivering our Opinion, we have reviewed and analyzed:
(1) the draft Agreement and the specific terms of the Proposed Transaction; (2)
publicly available information concerning the Company that we believe to be
relevant to our analysis, including the Company's annual report on Form 10-K
for the fiscal year ended June 30, 2000, and the Company's quarterly reports on
Form 10-Q for the quarters ended September 30 and December 31, 2000; (3)
financial and operating information with respect to the business, operations
and prospects of the Company furnished to us by the Company; and (4) publicly
available information regarding the structure of and outlook for the online
music industry. In addition, we have had discussions with the management of the
Company concerning its business, operations, assets, financial condition and
prospects and have undertaken such other studies, analyses and investigations
as we deemed appropriate.

   We have assumed and relied upon the accuracy and completeness of the
financial and other information used by us in arriving at our Opinion without
independent verification, and have further relied upon the

                                      B-1
<PAGE>

assurances of management of EMusic that they are not aware of any facts that
would make such information inaccurate or misleading. In arriving at our
Opinion, we neither performed nor obtained any evaluations or appraisals of
the assets or liabilities of EMusic. In addition to our review and analyses of
the specific information set forth above, our opinion herein reflects and
gives effect to our assessment of general economic, monetary, market and
industry conditions existing as of the date hereof as they may affect the
business and prospects of EMusic.

   Our Opinion rendered herein does not constitute a recommendation of the
Proposed Transaction over any other alternative transaction which may be
available to EMusic. The Opinion contained herein relates to the fairness from
a financial point of view of the Consideration to be paid pursuant to the
Proposed Transaction to the stockholders of EMusic and does not address any
other aspect of the Proposed Transaction or any related transaction and does
not constitute a recommendation to any stockholder of EMusic as to whether to
accept the Consideration in connection with the Proposed Transaction. It is
understood that this letter is for the information of the Board and may not be
used for any other purpose without our prior written consent, except that this
letter may be included in its entirety in any filing made by EMusic with the
Securities and Exchange Commission with respect to the Proposed Transaction

   Based on the foregoing and subject to the qualifications stated herein, we
are of the Opinion that, as of the date hereof, the Consideration to be paid
pursuant to the Proposed Transaction is fair to the stockholders of the
Company from a financial point of view.

                                          Very truly yours,

                                          Allen & Company Incorporated

                                                  /s/ Stanley S. Shuman
                                          By: _________________________________
                                                     Stanley S. Shuman
                                                 Executive Vice President &
                                                     Managing Director


                                                          Allen & Company
                                                           INCORPORATED

                                      B-2
