-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NUUYjz1zXMO/QoV6f6qZXQu2UyNIUfGppnO9BX5a0cNCGbTevPDdELJ74rRcWL6f ooTkb52j4vC519k89205yg== /in/edgar/work/20000919/0000940180-00-001098/0000940180-00-001098.txt : 20000923 0000940180-00-001098.hdr.sgml : 20000923 ACCESSION NUMBER: 0000940180-00-001098 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20000919 GROUP MEMBERS: NEW TECHNOLOGY HOLDINGS INC. GROUP MEMBERS: SONY CORPORATION OF AMERICA GROUP MEMBERS: SONY MUSIC ENTERTAINMENT INC SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: EUNIVERSE INC CENTRAL INDEX KEY: 0001088244 STANDARD INDUSTRIAL CLASSIFICATION: [5735 ] IRS NUMBER: 061556248 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-57811 FILM NUMBER: 724827 BUSINESS ADDRESS: STREET 1: 101 NORTH PLAINS INDUSTRIAL ROAD CITY: WALLINGFORD STATE: CT ZIP: 06492 BUSINESS PHONE: 2032941648 MAIL ADDRESS: STREET 1: 101 NORTH PLAINS INDUSTRIAL ROAD CITY: WALLINGFORD STATE: CT ZIP: 06492 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: SONY MUSIC ENTERTAINMENT INC CENTRAL INDEX KEY: 0001085808 STANDARD INDUSTRIAL CLASSIFICATION: [ ] IRS NUMBER: 133431958 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 550 MADISON AVENUE CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2128337907 MAIL ADDRESS: STREET 1: 550 MADISON AVENUE CITY: NEW YORK STATE: NY ZIP: 10022 SC 13D 1 0001.txt SCHEDULE 13D SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D (Rule 13d-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13D-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13D-2(a) eUniverse, Inc. - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, par value $0.001 per share - -------------------------------------------------------------------------------- (Title of Class of Securities) 298 412 10 7 ------------------- (CUSIP Number) Thomas C. Tyrrell General Counsel Sony Music Entertainment Inc. 550 Madison Avenue New York, New York 10022 (212) 833-8000 with a copy to: Morton A. Pierce, Esq. Dewey Ballantine LLP 1301 Avenue of the Americas New York, New York 10019-6092 (212) 259-8000 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) September 6, 2000 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box [_]. Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent. The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). SCHEDULE 13D - ------------------------------- ------------------------------ CUSIP No. 298 412 10 7 Page 2 of 16 Pages ----------------- - ------------------------------- ------------------------------ - ------------------------------------------------------------------------------ 1 NAME OF REPORTING PERSON: Sony Music Entertainment Inc. S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: - ------------------------------------------------------------------------------ 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [_] (b) [_] - ------------------------------------------------------------------------------ 3 SEC USE ONLY - ------------------------------------------------------------------------------ 4 SOURCE OF FUNDS* OO - ------------------------------------------------------------------------------ 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [_] - ------------------------------------------------------------------------------ 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - ------------------------------------------------------------------------------ 7 SOLE VOTING POWER NUMBER OF 0 SHARES ----------------------------------------------------------- 8 SHARED VOTING POWER BENEFICIALLY OWNED BY 2,051,260 ----------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING 0 PERSON ----------------------------------------------------------- 10 SHARED DISPOSITIVE POWER WITH 2,051,260 - ------------------------------------------------------------------------------ 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,051,260 - ------------------------------------------------------------------------------ 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* Not Applicable [_] - ------------------------------------------------------------------------------ 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 10.7% - ------------------------------------------------------------------------------ 14 TYPE OF REPORTING PERSON* CO - ------------------------------------------------------------------------------ *SEE INSTRUCTIONS BEFORE FILLING OUT! SCHEDULE 13D - ------------------------------- ------------------------------ CUSIP No. 298 412 10 7 Page 3 of 16 Pages ----------------- - ------------------------------- ------------------------------ - ------------------------------------------------------------------------------ 1 NAMES OF REPORTING PERSON: Sony Corporation of America S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: - ------------------------------------------------------------------------------ 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [_] (b) [_] - ------------------------------------------------------------------------------ 3 SEC USE ONLY - ------------------------------------------------------------------------------ 4 SOURCE OF FUNDS* OO - ------------------------------------------------------------------------------ 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [_] - ------------------------------------------------------------------------------ 6 CITIZENSHIP OR PLACE OF ORGANIZATION New York - ------------------------------------------------------------------------------ 7 SOLE VOTING POWER NUMBER OF 0 SHARES ----------------------------------------------------------- 8 SHARED VOTING POWER BENEFICIALLY OWNED BY 2,051,260 ----------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING 0 PERSON ----------------------------------------------------------- 10 SHARED DISPOSITIVE POWER WITH 2,051,260 - ------------------------------------------------------------------------------ 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,051,260 - ------------------------------------------------------------------------------ 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* Not Applicable [_] - ------------------------------------------------------------------------------ 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 10.7% - ------------------------------------------------------------------------------ 14 TYPE OF REPORTING PERSON* CO - ------------------------------------------------------------------------------ *SEE INSTRUCTIONS BEFORE FILLING OUT! SCHEDULE 13D - ---------------------------------- ------------------------------ CUSIP No. 298 412 10 7 Page 4 of 16 Pages ----------------- ------------------------------ - ---------------------------------- - ------------------------------------------------------------------------------ 1 NAME OF REPORTING PERSON: New Technology Holdings Inc. S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: - ------------------------------------------------------------------------------ 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [_] (b) [_] - ------------------------------------------------------------------------------ 3 SEC USE ONLY - ------------------------------------------------------------------------------ 4 SOURCE OF FUNDS* WC - ------------------------------------------------------------------------------ 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [_] - ------------------------------------------------------------------------------ 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - ------------------------------------------------------------------------------ 7 SOLE VOTING POWER NUMBER OF 0 SHARES ----------------------------------------------------------- 8 SHARED VOTING POWER BENEFICIALLY OWNED BY 2,051,260 ----------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING 0 PERSON ----------------------------------------------------------- 10 SHARED DISPOSITIVE POWER WITH 2,051,260 - ------------------------------------------------------------------------------ 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,051,260 - ------------------------------------------------------------------------------ 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* Not Applicable [_] - ------------------------------------------------------------------------------ 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 10.7% - ------------------------------------------------------------------------------ 14 TYPE OF REPORTING PERSON* CO - ------------------------------------------------------------------------------ *SEE INSTRUCTIONS BEFORE FILLING OUT! Item 1. Security and Issuer This Statement relates to the common stock, par value $0.001 per share (the "eUniverse Common Stock"), of eUniverse, Inc., a Nevada Corporation ("eUniverse"). The address of the principal executive offices of eUniverse is 101 North Plains Industrial Road, Wallingford, Connecticut 06492. Item 2. Identity and Background. This statement is filed jointly by Sony Music Entertainment Inc., a Delaware corporation ("Sony Music"), Sony Corporation of America, a New York corporation ("SCA") and New Technology Holdings Inc., a Delaware corporation ("New Technology") (collectively, the "Reporting Persons"). SCA has its principal executive offices at 550 Madison Avenue, New York, New York 10022. The principal business of SCA is the manufacture and sale, through its subsidiaries, of audio, video, communications and information technology products for the consumer and professional markets, and the music, motion picture, television and online entertainment businesses. Sony Music, an indirect wholly owned subsidiary of SCA, has its principal executive offices at 550 Madison Avenue, New York, New York 10022. The principal business of Sony Music is the development, production, manufacture, and distribution of recorded music, in all commercial formats and musical genres worldwide. New Technology, an indirect wholly owned subsidiary of SCA, has its principal executive offices at 550 Madison Avenue, New York, New York 10022. The principal business of New Technology is investment in and incubation of digital media technology companies. Sony Music and SCA are deemed the beneficial owners of 2,051,260 shares of eUniverse Common Stock through New Technology. In addition, Sony Corporation, a Japanese corporation and the ultimate parent of SCA, Sony Music and New Technology, is deemed the beneficial owner of such shares. Sony Corporation has ADRs which trade on the New York Stock Exchange. The name, business address, present principal occupation or employment, name, principal business and address of any corporation or other organization in which such employment is conducted and the citizenship of each director and executive officer of each of the Reporting Persons is set forth in Schedule A, B or C as the case may be, and Schedules A, B and C are incorporated herein by reference. None of the Reporting Persons nor, to the best knowledge of the Reporting Persons, any person listed in Schedule A, B or C, as appropriate, has been convicted during the last five years in a criminal proceeding (excluding traffic violations or 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 or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. Page 5 of 16 Item 3. Source and Amount of Funds or Other Consideration. On September 6, 2000, New Technology entered into a secured note and warrant purchase agreement (the "Secured Note and Warrant Purchase Agreement" and attached hereto as Exhibit 1) with eUniverse. Pursuant to the Secured Note and Warrant Purchase Agreement, New Technology purchased from eUniverse, and eUniverse sold to New Technology, a secured note in the aggregate principal amount of $3,155,670 (the "Note" and attached hereto as Exhibit 2), which Note is collateralized by certain assets of eUniverse pursuant to a security agreement by and between eUniverse and New Technology (the "Security Agreement" and attached hereto as Exhibit 3). In further consideration of the purchase by New Technology of the Note, eUniverse issued to New Technology a warrant to purchase 1,101,260 shares of eUniverse Common Stock (the "Warrant" and attached hereto as Exhibit 4). As more fully described in the Warrant, New Technology may purchase 701,260 shares of eUniverse Common Stock at $4.50 per share, purchase an additional 200,000 shares of eUniverse Common Stock at $5.00 per share and purchase an additional 200,000 shares of eUniverse Common Stock at $6.00 per share. The Warrant is exercisable by New Technology at any time prior to September 6, 2004. On January 26, 2000, eUniverse entered into a stock option agreement (the "Stock Option Agreement") with Charles Beilman. Pursuant to the Stock Option Agreement, eUniverse has the right to purchase from Mr. Beilman up to 2,325,000 shares of eUniverse Common Stock at various exercise prices. As more fully described in the Secured Note and Warrant Purchase Agreement, New Technology may, subject to certain restrictions, deliver one or more notices (an "Option Notice") to eUniverse, which Option Notice or Option Notices shall obligate eUniverse to exercise its right to purchase up to an aggregate of 650,000 shares of eUniverse Common Stock from Mr. Beilman under the Stock Option Agreement. As more fully described in the Secured Note and Warrant Purchase Agreement, under certain circumstances, New Technology may loan eUniverse the funds necessary to consummate the purchase of shares of eUniverse Common Stock pursuant to an Option Notice. Any such loan shall be evidenced by a secured promissory note substantially similar to the Note and secured by the Security Agreement. Within ten business days following its receipt of an Option Notice, eUniverse shall issue to New Technology a warrant (an "Option Warrant") for such number of shares of eUniverse Common Stock equal to the number of shares of eUniverse Common Stock set forth in the Option Notice. An Option Warrant is exercisable by New Technology at various prices determined by the date of exercise as more fully described in the Secured Note and Warrant Purchase Agreement. As more fully described in the Secured Note and Warrant Purchase Agreement, under certain circumstances, New Technology may purchase up to 650,000 shares of eUniverse Common Stock directly from Mr. Beilman (such number of shares purchased directly from Mr. Beilman shall reduce the number of shares of eUniverse Common Stock with respect to which New Technology may deliver an Option Notice). On each of June 30, 2000 and July 26, 2000, eUniverse entered into two separate option to purchase agreements (the "Option to Purchase Agreements") with VideoGame Partners, LLC ("VP LLC"). Pursuant to the Option to Purchase Agreements, Page 6 of 16 VP LLC has the right to purchase from eUniverse 750,000 shares of eUniverse Common Stock at $1.675 per share. As more fully described in the Secured Note and Warrant Purchase Agreement, one business day after VP LLC's right to purchase the shares of eUniverse Common Stock expires, eUniverse shall deliver notice to New Technology to such effect (the "VP Notice"). To the extent VP LLC has not exercised its option to purchase a number of shares of eUniverse Common Stock (the "VP Option Shares"), New Technology shall have the right to purchase the VP Option Shares, at an exercise price of $1.675 per share, up to a maximum of 300,000 shares. New Technology may exercise its option to purchase the VP Option Shares (i) within 15 days of its receipt of the VP Notice and (ii) in the event the VP Notice is delivered at any time prior to October 31, 2000, the later of (A) such date that is 15 business days after receipt by New Technology of the VP Notice or (B) October 31, 2000. New Technology used working capital for the loan evidenced by the Note. It is presently anticipated that, if the Warrant or Option Warrant is exercised, or the VP Option Shares are purchased, the funds required would be provided from general corporate funds of the Reporting Persons. The description of the terms of the Secured Note and Warrant Purchase Agreement, the Note and the Security Agreement and the Warrant set forth in this Statement are qualified in their entirety by reference to the terms of the Secured Note and Warrant Purchase Agreement, the Note, the Security Agreement and the Warrant attached as Exhibits 1, 2, 3 and 4, respectively. Item 4. Purpose of the Transaction. In connection with the transactions described in Item 3 above, New Technology and eUniverse entered into a letter of intent, dated August 22, 2000, as amended (the "Letter of Intent" and attached hereto as Exhibit 5). Pursuant to the Letter of Intent, the parties agreed that commencing on August 22, 2000 and ending September 20, 2000 (the "Non-Solicitation Period"), eUniverse will not and will not authorize any officer, director or affiliate or any other person on its behalf to, directly or indirectly, solicit, initiate, entertain or encourage (including by way of furnishing information), any offer or proposal from any party concerning a broader strategic relationship (a "Third Party Proposal"); provided, however, that nothing in the Letter of Intent shall preclude the board of directors of eUniverse, pursuant to its fiduciary duties under applicable law, from entering into, or causing its officers from entering into negotiations with or furnishing information to a third party which has initiated contact with it, from passing on to its shareholders information regarding a Third Party Proposal or from otherwise fulfilling such fiduciary duties. eUniverse agrees to promptly notify New Technology in writing of any such Third Party Proposal. Furthermore, the parties agree that within 45 days after the expiration of the Non-Solicitation Period (unless mutually extended by the parties), the parties will commence good-faith negotiations with respect to entering into a broader strategic relationship (such agreement(s) to be on reasonable financial terms consistent with similar agreements between New Technology and other parties); provided, however, that eUniverse is not restricted in soliciting, initiating, entertaining or encouraging a Third Party Proposal during such 45-day period as long as such Third Party Proposal is made by a venture capital firm, financial institution or other similar type of institutional financial investor entity and is not (i) strategic in nature, and (ii) an equity financing for the benefit of eUniverse or its shareholders in an amount equal to or greater than $5,000,000; provided, further, that eUniverse shall provide New Technology with three days' prior written notice to eUniverse's response to such Third Party Proposal to afford New Technology the opportunity to match such Third Party Proposal. Any such broader strategic relationship would be subject, among other things, to the satisfactory completion of a due diligence investigation, to the negotiation and execution of definitive agreements, the approval of the boards of directors of both companies, and receipt of all necessary stockholder and regulatory approvals. There can be no assurance that any definitive agreements will be reached, as to the form of any transaction or that any transaction will be consummated. In addition and subject to the foregoing, in connection with the Secured Note and Warrant Purchase Agreement described in Item 3, New Technology acquired the Warrant and other rights described in Item 3 hereof for the purpose of investment and has no definitive plan with respect to the exercise of the Warrant, in whole or in part, or to give an Option Notice, or to exercise any rights with respect to the VP Option Shares. The Reporting Persons are in the process of, and intend to continue, an ongoing review of their investment in eUniverse. The Reporting Persons may, subject to applicable law, in the future take such actions with respect to their investment in eUniverse as they deem appropriate, including without limitation: (i) exercising the Warrant in whole or in part; (ii) continuing previously held discussions, or discussing or negotiating with eUniverse with respect to a business combination or other strategic relationship or the acquisition or disposition of warrants or shares of eUniverse Common Stock; (iii) holding shares of eUniverse Common Stock as a passive investor or as an active investor (whether or not as a member of a "group" with other beneficial owners of shares of eUniverse Common Stock or otherwise); (iv) acquiring beneficial ownership of additional shares of eUniverse Common Stock in the open market, in privately negotiated transactions or otherwise; (v) disposing of all or a part of their holdings of eUniverse Common Stock; (vi) taking other actions which could involve one or more of the types of transactions or have one or more of the results previously described in this Item 4; or (vii) changing any or all of their intentions with respect to the matters reported in this Item 4. Page 7 of 16 Item 5. Interest in Securities of the Issuer. As a result of the transactions described in Items 3 and 4 above, each of the Reporting Persons is the beneficial owner of up to 2,051,260 shares of eUniverse Common Stock or 10.7% of the issued and outstanding shares of eUniverse Common Stock, comprised of the following: (i) up to 1,101,260 shares of eUniverse Common Stock issuable to New Technology upon exercise of the Warrant, (ii) up to 650,000 shares of eUniverse Common Stock issuable to New Technology upon exercise of an Option Warrant and/or purchased directly from Mr. Beilman by New Technology and (iii) up to 300,000 shares of eUniverse Common Stock issuable to New Technology upon exercise of its option to purchase the VP Option Shares. Upon the exercise of the Warrant in full and the exercise of other rights described in Item 3 hereof in full, each of the Reporting Persons will share the power to vote, and the power to dispose of, 2,051,260 shares of eUniverse Common Stock. Except as described herein, none of the Reporting Persons, nor, to the best knowledge of the Reporting Persons, any person listed in Schedules A, B or C, as appropriate, beneficially owns, or has acquired or disposed of, any shares of eUniverse Common Stock during the past 60 days. Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer. Except as described in Items 3, 4 and 5 above, neither the Reporting Persons nor, to the best knowledge of the Reporting Persons, any of their respective directors or executive officers has any contract, arrangements, understandings or relationships (legal or otherwise) among the persons named in Item 2 and between such persons and any person with respect to any securities of eUniverse, including, but not limited to, transfer or voting of any securities, finder's fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, division of profits or loss, or the giving or withholding of proxies. Page 8 of 16 Item 7. Material to be filed as Exhibits. EXHIBIT NO. DESCRIPTION - ---------- ----------- 1 Secured Note and Warrant Purchase Agreement, dated as of September 6, 2000, by and between eUniverse and New Technology. 2 Secured Promissory Note, dated as of September 6, 2000, by and between eUniverse and New Technology. 3 Security Agreement, dated as of September 6, 2000, by and between eUniverse and New Technology. 4 Warrant, dated as of September 6, 2000, by and between eUniverse and New Technology. 5 Letter of Intent, dated as of August 22, 2000, by and between eUniverse and New Technology; Amendment No. 1 to Letter of Intent, dated as of August 28, 2000; Amendment No. 2 to Letter of Intent, dated as of September 1, 2000. Page 9 of 16 After reasonable inquiry and to the best knowledge and belief of the undersigned, the undersigned certifies that the information set forth in this statement is true, complete and correct. Date: September 18, 2000 SONY CORPORATION OF AMERICA By: /s/ Steven E. Kober ----------------------- Name: Steven E. Kober Title: Senior Vice President and Controller SONY MUSIC ENTERTAINMENT INC. By: /s/ Thomas C. Tyrrell ------------------------- Name: Thomas C. Tyrrell Title: Senior Vice President and General Counsel NEW TECHNOLOGY HOLDINGS INC. By: /s/ Mark Eisenberg ------------------------- Name: Mark Eisenberg Title: Vice President and General Counsel Page 10 of 16 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION - ---------- ----------- 1 Secured Note and Warrant Purchase Agreement, dated as of September 6, 2000, by and between eUniverse and New Technology. 2 Secured Promissory Note, dated as of September 6, 2000, by and between eUniverse and New Technology. 3 Security Agreement, dated as of September 6, 2000, by and between eUniverse and New Technology. 4 Warrant, dated as of September 6, 2000, by and between eUniverse and New Technology. 5 Letter of Intent, dated as of August 22, 2000, by and between eUniverse and New Technology; Amendment No. 1 to Letter of Intent, dated as of August 28, 2000; Amendment No. 2 to Letter of Intent, dated as of September 1, 2000. Page 11 of 16 SCHEDULE A EXECUTIVE OFFICERS AND DIRECTORS OF SONY CORPORATION OF AMERICA Set forth below is the name, business address, principal occupation or employment and citizenship of each director and executive officer of Sony Corporation of America. Unless otherwise indicated, each person listed below is a citizen of the United States.
Name Office Principal Occupation or ---- ------ Employment and Address ------------------------ Nobuyuki Idei* Director Chairman of the Board and Representative Director; Chief Executive Officer Sony Corporation** Norio Ohga* Director Chairman of the Board; Director Sony Corporation** Tsunao Hashimoto* Director Chairman Sony Life Insurance Co., Ltd. 1-1 Minami Aoyama 1-Chome, Minato-ku Tokyo 107-8585 Japan Tamotsu Iba* Director Vice Chairman and Director Sony Corporation** Howard Stringer***** Chairman of the Board and Chairman of the Board and Chief Chief Executive Officer; Executive Officer; President President Sony Corporation of America*** Teruo Masaki* Director Corporate Senior Executive Vice President; Director Sony Corporation** Peter G. Peterson Director Chairman The Blackstone Group 345 Park Avenue New York, NY 10154 H. Paul Burak Director Partner Rosenman & Colin LLP 575 Madison Avenue New York, NY 10022 Teruhisa Tokunaka* Director Executive Deputy President and Chief Financial Officer; Representative Director Sony Corporation** Page 12 of 16
Name Office Principal Occupation or ---- ------ Employment and Address ------------------------ Yang Hun Lee**** Executive Vice President Executive Vice President Sony Corporation of America** Steven E. Kober Senior Vice President and Senior Vice President and Controller Controller Sony Corporation of America*** Kenneth L. Nees Senior Vice President and Senior Vice President and Secretary Secretary Sony Corporation of America*** J. Michael Suffredini Senior Vice President and Senior Vice President and Treasurer Treasurer Sony Corporation of America*** Karen Halby Vice President Vice President Sony Corporation of America*** Craig R. Torrie Assistant Treasurer Assistant Treasurer Sony Corporation of America*** Stephanie H. Roth Vice President Vice President Sony Corporation of America***
* Citizen of Japan. ** The business address of Sony Corporation is 6-7-35 Kitashinagawa, Shinagawa-ku, Tokyo 141-0001 Japan. *** The business address of Sony Corporation of America is 550 Madison Avenue, New York, New York 10022. **** Citizen of Republic of Korea. ***** Citizen of the United Kingdom. Page 13 of 16 SCHEDULE B EXECUTIVE OFFICERS AND DIRECTORS OF SONY MUSIC ENTERTAINMENT INC. Set forth below is the name, business address, principal occupation or employment and citizenship of each director and executive officer of Sony Music Entertainment Inc. Unless otherwise indicated, each person listed below is a citizen of the United States.
Name Office Principal Occupation or ---- ------ Employment and Address ---------------------- Howard Stringer***** Director Chairman of the Board and Chief Executive Officer; President Sony Corporation of America*** Norio Ohga* Director Chairman of the Board; Director Sony Corporation** Nobuyuki Idei* Director Chairman and Representative Director; Chief Executive Officer Sony Corporation** Kunitake Ando* Director President; Chief Operating Officer; Representative Director Sony Corporation** Tsunao Hashimoto* Director Chairman Sony Life Insurance Co., Ltd. 1-1 Minami Aoyama 1-Chome, Minato-ku Tokyo 107-8585 Japan Tamotsu Iba* Director Vice Chairman and Director Sony Corporation** Thomas D. Mottola Chairman of the Board and Chief Chairman of the Board and Chief Executive Executive Officer; Officer; President President Sony Music Entertainment Inc.**** Frank Stanton Director Retired Peter G. Peterson Director Chairman The Blackstone Group 345 Park Avenue New York, NY 10154 H. Paul Burak Director Partner Rosenman & Colin LLP 575 Madison Avenue New York, NY 10022 Teruo Masaki* Director Corporate Senior Executive Vice President; Director Sony Corporation** Teruhisa Tokunaka* Director Executive Deputy President and Chief Financial Officer; Representative Director Sony Corporation** Mel Ilberman Vice Chairman Vice Chairman Sony Music Entertainment Inc.**** Robert M. Bowlin Executive Vice President Executive Vice President Sony Music Entertainment Inc.**** Michele Anthony Executive Vice President Executive Vice President Sony Music Entertainment Inc.**** Yoshiuki Isomura* Executive Vice President Executive Vice President Sony Music Entertainment Inc.**** Kevin M. Kelleher Executive Vice President; Executive Vice President; Chief Financial Officer Chief Financial Officer Sony Music Entertainment Inc.**** Thomas C. Tyrrell Senior Vice President; Senior Vice President; General Counsel; Secretary General Counsel; Secretary Sony Music Entertainment Inc.**** Frank Calamita Senior Vice President, Senior Vice President, Administration and Personnel Administration and Personnel Sony Music Entertainment Inc.**** Wilbert H. Howey Senior Vice President; Senior Vice President; Chief Information Officer Chief Information Officer Sony Music Entertainment Inc.**** Thomas J. Connolly Senior Vice President; Senior Vice President; Controller Controller Sony Music Entertainment Inc.****
Page 14 of 16
Name Office Principal Occupation or ---- ------ Employment and Address ---------------------- Michael Schwerdtman Vice President, Finance Vice President, Finance Sony Music Entertainment Inc.**** J. Michael Suffredini Vice President and Treasurer Vice President and Treasurer Sony Music Entertainment Inc.****
* Citizen of Japan. ** The business address of Sony Corporation is 6-7-35 Kitashinagawa, Shinagawa-ku, Tokyo 141-0001 Japan. *** The business address of Sony Corporation of America is 550 Madison Avenue, New York, New York 10022. **** The business address of Sony Music Entertainment Inc. is 550 Madison Avenue, New York, New York 10022. ***** Citizen of the United Kingdom. Page 15 of 16 SCHEDULE C EXECUTIVE OFFICERS AND DIRECTORS OF NEW TECHNOLOGY HOLDINGS, INC. Set forth below is the name, business address, principal occupation or employment and citizenship of each director and executive officer of New Technology Holdings, Inc. Unless otherwise indicated, each person listed below is a citizen of the United States.
Name Office Principal Occupation or ---- ------ Employment and Address ---------------------- Fred Ehrlich President; Director President; Director New Technology Holdings Inc.* Mark Wachen Vice President Vice President New Technology Holdings Inc.* Ron C. Wilcox Vice President Vice President New Technology Holdings Inc.* Mark Eisenberg Vice President Vice President New Technology Holdings Inc.* Kevin M. Kelleher Treasurer; Director Executive Vice President Chief Financial Officer Sony Music Entertainment Inc.** Thomas J. Connolly Assistant Treasurer Senior Vice President; Controller Sony Music Entertainment Inc.** Thomas C. Tyrrell Secretary Senior Vice President; General Counsel; Secretary Sony Music Entertainment Inc.** Ann C. Sweeney Assistant Secretary Assistant Secretary New Technology Holdings Inc.* Mel Ilberman Director Vice Chairman Sony Music Entertainment Inc.** Robert M. Bowlin Director Executive Vice President Sony Music Entertainment Inc.**
* The business address of New Technology Holdings Inc. is 550 Madison Avenue, New York, New York 10022. ** The business address of Sony Music Entertainment Inc. is 550 Madison Avenue, New York, New York 10022. Page 16 of 16 EX-99.1 2 0002.txt SECURED NOTE & WARRANT PURCHASE AGMT EXHIBIT 1 EXECUTION COPY -------------- EUNIVERSE, Inc. SECURED NOTE AND WARRANT PURCHASE AGREEMENT ------------------------------------------- This Secured Note and Warrant Purchase Agreement (the "Agreement") is made --------- this 6th day of September, 2000 (the "Effective Date") by and between eUniverse, -------------- Inc., a Nevada corporation (the "Company"), and New Technology Holdings Inc., a ------- Delaware corporation (the "Purchaser"), a subsidiary of Sony Music Entertainment --------- Inc. RECITALS -------- WHEREAS, on the terms and subject to the conditions of this Agreement, the Company desires to issue and sell, and the Purchaser desires to purchase from the Company, a secured note in the aggregate principal amount of $3,155,670, in the form attached hereto as Exhibit A (the "Note"); --------- ---- WHEREAS, in further consideration of the purchase by the Purchaser of the Note, the Company desires to issue to the Purchaser a warrant to purchase 1,101,260 shares of the Company's common stock, par value $0.001 per share (the "Common Stock"), in the form attached hereto as Exhibit B (the "Warrant"); and ------------ --------- ------- WHEREAS, the Notes, the Warrants, the Purchaser Option Shares issued to the Purchaser hereunder (each as hereinafter defined), and the Common Stock issuable upon exercise of the Warrants are collectively referred to herein as the "Securities." ---------- AGREEMENT --------- In consideration of the mutual promises contained herein and other good and valuable consideration, receipt of which is hereby acknowledged, the parties to this Agreement agree as follows: 1. Purchase and Sale of Note and Warrant. ------------------------------------- (a) Sale and Issuance of Note and Warrant. ------------------------------------- (i) At the Initial Closing (as hereinafter defined), on the terms and subject to the conditions of this Agreement, the Purchaser agrees to purchase from the Company, and the Company agrees to issue and sell to the Purchaser, the Note. (ii) At the Initial Closing (as hereinafter defined), in further consideration of the purchase by the Purchaser of the Note, on the terms and subject to the conditions of this Agreement, the Company agrees to issue to the Purchaser the Warrant. (b) Additional Sale of Notes and Warrants. Pursuant to Section 8(m) ------------------------------------- of this Agreement, the Purchaser may make an Option Loan (as hereinafter defined) to the Company and be issued additional warrants relating thereto (a "Subsequent Closing"). At such a ------------------- Subsequent Closing, the Company shall issue an Option Note, if applicable, and the Option Warrant (as hereinafter defined). In the event that that an Option Note and/or the Option Warrant are issued by the Company to the Purchaser, this Agreement shall govern the parties hereto relating to such issuances. The Loan and any Option Loan, if any is issued, are collectively referred to herein as the "Loans;" the Warrant and the Option Warrant are collectively referred to ----- herein as the "Warrants"; and the Note and any Option Note are collectively -------- referred to herein as the "Notes." ----- (c) Closings; Deliveries; Second Funding. ------------------------------------ (i) The sale and purchase of the Note to be purchased by the Purchaser and the issuance of the Warrant by the Company (the "Initial Closing" --------------- and together with a Subsequent Closing, the "Closings" and each a "Closing") -------- ------- shall occur at the offices of Rosenman & Colin LLP, 575 Madison Avenue, New York, New York 10022, at 10:00 a.m. (New York City time), on September 6, 2000 or on such other business day thereafter as may be agreed upon by the Company and the Purchaser but in any event not later than September 8, 2000. Any Subsequent Closing shall be at such location, and at such time as the Purchaser and the Company shall agree. At the Initial Closing, the Company will deliver to the Purchaser (i) the Warrant, and (ii) the Note to be purchased by the Purchaser each dated the date of the Closing, and each registered in the name of the Purchaser, in exchange for delivery by the Purchaser to the Company or its order of immediately available funds in the amount of $2,155,670. At a Subsequent Closing relating to an Option Loan described in Section 8(m), if applicable, the Company will deliver to the Purchaser (i) the Option Warrant, and (ii) the Option Note which may be purchased by the Purchaser each dated the date of such Subsequent Closing, and each registered in the name of the Purchaser. The Company acknowledges that in accordance with Section 8(m), at a Subsequent Closing, the Company may be required to deliver the Option Warrant to the Purchaser notwithstanding the Purchaser may not have made an Option Loan. (ii) The Company and the Purchaser agree that, unless an Event of Default (as hereinafter defined) shall have accrued on or prior to such date, the Purchaser shall advance to the Company $1,000,000, of which $500,000 will be deemed delivered to the Company in connection with that certain Subscriber Acquisition Agreement between the parties hereto, dated August 21, 2000 (the "Second Funding Amount") on October 1, 2000 or such earlier date as the parties --------------------- may agree (the "Second Funding Date"). In accepting the Second Funding Amount, ------------------- the Company shall have deemed to represent that no Event of Default shall have occurred on or prior to the Second Funding Date. The Purchaser shall endorse the Grid attached to the Note to reflect the Second Funding Amount on the Second Funding Date. 2. Security Interest. The indebtedness represented by the Notes ----------------- shall be secured and shall be entitled to the benefit of a security agreement, in the form attached hereto as Exhibit C (the "Security Agreement"), pursuant to --------- ------------------ which the Purchaser shall be granted a first priority security interest in substantially all of the assets of the Company. 3. Registration Rights. The Company and the Purchaser agree that the ------------------- Purchaser shall be granted registration rights with respect to the shares of Common Stock underlying the Warrant, on the terms set forth in Annex A to ------- Exhibit B. - --------- -2- 4. Conditions to Closing(s). The Purchaser's obligation to purchase ------------------------ and pay for the Notes to be sold to it at the Initial Closing and any Subsequent Closing is subject to the fulfillment to the Purchaser's satisfaction, prior to or at such Closing, of the following conditions: (a) Representations and Warranties. The representations and ------------------------------ warranties of the Company in this Agreement shall be correct when made and at the time of such Closing. (b) Performance; No Default. The Company shall have performed and ----------------------- complied with all agreements and conditions contained in this Agreement required to be performed or complied with by it prior to or at such Closing and after giving effect to the issue and sale of the Notes to be issued at such Closing (and the application of the proceeds thereof as set forth in Section 8(a) in the case of the Note). No Default or Event of Default (each as hereinafter defined) shall have occurred and be continuing. (c) Compliance Certificates. The Company shall have delivered to the ----------------------- Purchaser an officer's certificate, dated the date of such Closing, certifying that the conditions specified in Section 4(a) and Section 4(b) have been fulfilled. The Company shall have delivered to the Purchaser a certificate certifying as to the resolutions attached thereto and other corporate proceedings relating to the authorization, execution and delivery of the Securities and this Agreement. (d) Opinion of Counsel The Purchaser shall have received an opinion ------------------ in form and substance satisfactory to the Purchaser, dated the date of such Closing, from legal counsel for the Company. (e) Purchase Permitted by Applicable Law, etc. On the date of such ------------------------------------------ Closing, the Purchaser's purchase of the Notes to be issued at such Closing, as applicable, and the Company's issuance of the Warrants to be issued at such Closing shall (i) be permitted by the laws and regulations of each jurisdiction to which the Company is subject and (ii) not violate any applicable law or regulation. (f) Changes in Corporate Structure. The Company shall not have been a ------------------------------ party to any merger or consolidation and shall not have succeeded to all or any substantial part of the liabilities of any other entity, at any time following the date of the Company Financial Statements (as hereinafter defined); provided, however, that the Company may change its jurisdiction of incorporation from Nevada to Delaware. (g) Proceedings and Documents All corporate and other proceedings in ------------------------- connection with the transactions shall be satisfactory to the Purchaser and its legal counsel, and the Purchaser and its legal counsel shall have received all such counterpart originals or certified copies of such documents as the Purchaser or its legal counsel may reasonably request. (h) Subscriber Acquisition Agreement. The Company shall have -------------------------------- delivered to the Purchaser the amended and restated Subscriber Acquisition Agreement, in substantially the form attached hereto as Exhibit D, duly executed --------- by the Company. -3- (i) Advertising Agreement. The Company shall have delivered to the --------------------- Purchaser the Advertising Agreement, in substantially the form attached hereto as Exhibit E, duly executed by the Company. --------- 5. Representations and Warranties of the Company. The Company hereby --------------------------------------------- represents and warrants to the Purchaser that as of the date hereof and as of the date of each Subsequent Closing, as applicable: (a) Organization, Good Standing and Qualification. The Company is a --------------------------------------------- corporation duly organized, validly existing and in good standing under the laws of the State of Nevada. It has all requisite right, power and authority to (i) own or lease and operate its properties and assets, (ii) conduct its business as presently conducted, and (iii) engage in and consummate the transactions contemplated hereby, except as set forth on Schedule 5(a). The Company is duly qualified or otherwise authorized as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification or authorization is required by applicable law except for those jurisdictions in which failure to do so would not have a material adverse effect on the results of operations, condition (financial or otherwise), business, assets or liabilities of the Company, taken as a whole. (b) Authorization. All corporate action on the part of the Company, ------------- its officers, directors and stockholders necessary for the authorization, execution and delivery of this Agreement and the authorization, sale, issuance and delivery of the Securities, and the performance of all obligations of the Company hereunder and thereunder has been taken. The Agreement, the Notes, and the Warrants, when executed and delivered by the Company, shall constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their terms except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and other laws of general application affecting enforcement of creditors' rights generally, as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies. (c) No Conflict with Other Instruments. The execution, delivery and ---------------------------------- performance of this Agreement and the issuance, sale and delivery of the Securities will not result in any violation of, be in conflict with, or constitute a default under, with or without the passage of time or the giving of notice: (i) any provision of the Company's Certificate of Incorporation (the "Certificate") or the Company's by-laws; (ii) any provision of any judgment, ----------- decree or order to which the Company is a party or by which it is bound; (iii) any material contract, obligation or commitment to which the Company is a party or by which it is bound or other contract, obligation or commitment to which the Company is a party or by which it is bound and which would reasonably be expected to have a material adverse effect on the results of operations, condition (financial or otherwise), business, assets or liabilities Company, taken as a whole, or impair the Company's performance of this Agreement or the issuance, sale and delivery of the Securities; or (iv) any statute, rule or governmental regulation applicable to the Company. (d) Valid Issuance. The Securities when issued, sold and delivered in -------------- compliance with the terms and for the consideration expressed in this Agreement will be duly authorized and validly issued, fully-paid and nonassessable. The shares of Common Stock -4- underlying the Warrants have been duly and validly reserved. The Securities when issued, sold and delivered in compliance with the terms of this Agreement will be free and clear of any mortgage, lien, pledge, charge, security interest or other encumbrance (each, a "Lien" and collectively, "Liens") other than any ---- ---- Liens created by or imposed thereon by the Purchaser; provided, however, that the Securities will be subject to restrictions on transfer under state and/or federal securities laws. The Securities are not (and will not, when issued be) subject to any preemptive rights or rights of first refusal under any agreement to which the Company is a party or under any other agreement known to the Company. (e) Securities Law Compliance. Subject to the accuracy of the ------------------------- representations and warranties of the Purchaser set forth in Section 6, the offer, issue, and sale of the Securities is (and will be, when issued) exempt from the registration requirements of Section 5 of the Securities Act of 1933, as amended (the "Act") and the qualification requirements, if any, of applicable --- state securities laws. (f) Organization and Ownership of Shares of Subsidiaries. ---------------------------------------------------- (i) Schedule 5(f) hereto is (except as noted therein) a complete and correct list of the Company's Subsidiaries (as hereinafter defined), showing, as to each Subsidiary, the correct name thereof, the jurisdiction of its organization, and the percentage of shares of each class of its capital stock or similar equity interests outstanding owned by the Company and each other Subsidiary. (ii) All of the outstanding shares of capital stock or similar equity interests of each Subsidiary shown in Schedule 5(f) as being owned by the Company and its Subsidiaries have been validly issued, are fully paid and nonassessable and are owned by the Company or another Subsidiary free and clean of any Lien (except as otherwise disclosed in Schedule 5(f)). (iii) Each Subsidiary identified in Schedule 5(f) is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and is duly qualified or otherwise authorized as a foreign corporation or other legal entity to transact business and each Subsidiary is in good standing in each jurisdiction in which such qualification or authorization is required by applicable law or in which the failure so to qualify or be authorized could have a material adverse effect on the results of operations, condition (financial or otherwise), business, assets or liabilities of the Company, taken as a whole. (iv) For purposes of this Agreement, "Subsidiary" means any ---------- corporation, association or other business entity in which the Company or one or more of its Subsidiaries owns sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence of contingencies, to elect a majority of the directors (or persons performing similar functions) of such entity, and any partnership or joint venture if more than a 50% interest in the profits or capital thereof is owned by the Company or one or more of its Subsidiaries (unless such partnership can and does ordinarily take major business actions without the prior approval of the Company or one or more of its Subsidiaries). -5- (g) Financial Statements. -------------------- (i) Attached hereto as Schedule 5(g) are the following financial statements of the Company (collectively, the "Company Financial Statements"): ---------------------------- (A) the unaudited balance sheet of the Company as at June 30, 2000 (the "Unaudited Interim Balance Sheet"), and the related unaudited statements of ------------------------------- income, cash flow and stockholders' equity for the three-month period then ended (the "Unaudited Interim Financial Statements"); and (B) the audited balance -------------------------------------- sheet of the Company as at March 31, 2000 (the "Audited Year-End Balance ------------------------ Sheet"), and the related audited statements of income, cash flow and - ----- stockholders' equity for the year then ended, certified by Merdinger, Fruchter, Corso & Rosen, P.C. (ii) The Company Financial Statements (A) are in accordance with the books and records of the Company, (B) fairly present the financial condition of the Company as at the respective dates indicated and the results of operations of the Company for the respective periods indicated, and (C) have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), except, in the case of the Unaudited Interim Financial Statements, for ---- changes resulting from normal year-end audit adjustments, which adjustments shall not individually or in the aggregate be material. (h) Absence of Undisclosed Liabilities. Except as set forth on ---------------------------------- Schedule 5(h) hereto, at March 31, 2000, with respect to the Audited Year-End Balance Sheet, and at June 30, 2000, with respect to the Unaudited Interim Balance Sheet, respectively, (i) the Company had no liability or obligation of any nature (whether known or unknown, matured or unmatured, fixed or contingent, secured or unsecured, accrued, absolute or otherwise) required to be set forth on the Audited Year-End Balance Sheet or the Unaudited Interim Balance Sheet, respectively, in order for the Audited Year-End Balance Sheet and the Unaudited Interim Balance Sheet, respectively, to fairly present the financial condition of the Company at the respective dates thereof in accordance with GAAP, which was not provided for or disclosed thereon, and (ii) all liability reserves established by the Company and set forth thereon were adequate under GAAP for all such liabilities or obligations at the respective dates thereof. There were no material loss contingencies (as such term is used in Statement of Financial Accounting Standards No. 5) which were not adequately provided for on the Audited Year-End Balance Sheet and the Unaudited Interim Balance Sheet, respectively, as required thereby. (i) Absence of Changes. Since June 30, 2000, the Company has operated ------------------ in the ordinary course, and except as set forth on Schedule 5(i) hereto, no event, circumstance or condition has occurred that has caused a material adverse effect on the results of operations, condition (financial or otherwise), business, assets or liabilities of the Company, taken as a whole. (j) Governmental Authorizations, Etc. No consent, approval or --------------------------------- authorization of, or registration, filing or declaration with, any court or any federal, state, municipal or local government or any political subdivision, governmental department, board, agency or instrumentality thereof, and any administrative or regulatory agency (each, a "Governmental Authority") is ---------------------- required in connection with the execution, delivery or performance by the Company of this Agreement or the issuance, sale and delivery of the Securities. -6- (k) Litigation. Except as set forth on Schedule 5(k) hereto, there is ---------- no litigation, action, complaint, claim or suit, judicial or administrative action, audit, proceeding or governmental investigation pending or, to the knowledge of the Company, threatened, against the Company or its Subsidiaries or any of their respective properties. Neither the Company nor any Subsidiary is in default in any material respect under any judgment, order or decree of a Governmental Authority. There is no judgment, order, decree, injunction, stipulation or settlement against the Company or any Subsidiary that is reasonably likely to prevent, enjoin or materially alter or delay any of the transactions contemplated by this Agreement or that would reasonably be likely to cause a material adverse effect on the results of operations, condition (financial or otherwise), business, assets or liabilities of the Company, taken as a whole. (l) Taxes. The Company and its Subsidiaries have filed all income tax ----- returns that are required to have been filed in any jurisdiction, and have paid all taxes shown to be due and payable on such returns and all other taxes and assessments payable by them, to the extent such taxes and assessments have become due and payable and before they have become delinquent, except for any taxes and assessments (x) the amount of which is not individually or in the aggregate material or (y) the amount, applicability or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which the Company or a Subsidiary, as the case may be, has established adequate reserves in accordance with GAAP. (m) Title to Property; Leases. Except as set forth on Schedule 5(m) ------------------------- hereto, the Company and its Subsidiaries have good and sufficient title to their respective properties and assets, including the properties and assets reflected in the most recent audited balance sheet referred to in Section 5(g) or purported to have been acquired by the Company or any Subsidiary after said date (except as sold or otherwise disposed of in the ordinary course of business), in each case free and clear of Liens, except for those defaults in title and Liens which do not and will not materially detract from the value of the property subject thereto or interfere with the use of the property subject thereto or materially impair the respective operations of the Company and any Subsidiary involving such property. All leases of the Company and its Subsidiaries are valid and subsisting and are in full force and effect in all material respects. (n) Licenses, Permits, Etc. The Company and its Subsidiaries own or ----------------------- possess all licenses, permits, franchises, authorizations, patents, copyrights, service marks, trademarks and trade names, or rights thereto, that are material, without known conflict with the rights of others, except for those conflicts that, individually or in the aggregate, would not have a material adverse effect on the results of operations, condition (financial or otherwise), business, assets or liabilities of the Company, taken as a whole. (o) Employee Benefit Plans. Except as set forth on Schedule 5(o) ---------------------- hereto: (i) neither the Company nor any Subsidiary has employee benefit plans (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974 ("ERISA")); (ii) the Company and each Subsidiary does not now, or has it ----- ever, maintained, established, sponsored, participated in, or contributed to, any pension plan within the meaning of Section 3(2) of ERISA which is subject to Title IV of ERISA or Section 412 of the Internal Revenue Code of 1986, as amended; and (iii) at no time has the Company or any Subsidiary contributed to or been requested to contribute to any multiemployer plan as defined in Section 3(37) of ERISA. -7- (p) Existing Indebtedness. Except as described therein, Schedule 5(p) --------------------- hereto sets forth a complete and correct list of all outstanding Indebtedness (as hereinafter defined) of the Company and its Subsidiaries as of July 31, 2000, since which date there has been no material change in the amounts, interest rates, sinking funds, installment payments or maturities of the Indebtedness of the Company or its Subsidiaries. Neither the Company nor any Subsidiary is in default and no waiver of default is currently in effect, in the payment of any principal or interest on any Indebtedness of the Company or such Subsidiary and no event or condition exists with respect to any Indebtedness of the Company or any Subsidiary that would permit (or that with notice or the lapse of time, or both, would permit) one or more persons to cause such Indebtedness to become due and payable before its stated maturity or before its regularly scheduled dates of payment. For purposes of this Agreement, "Indebtedness" with respect to the Company means, at any time, without ------------ duplication, (i) its liabilities for borrowed money and its redemption obligations in respect of mandatorily redeemable preferred stock; (ii) its liabilities for the deferred purchase price of property acquired by the Company (excluding accounts payable arising in the ordinary course of business but including all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such property); (iii) all liabilities appearing on its balance sheet in accordance with GAAP in respect of capital leases; (iv) all liabilities for borrowed money secured by any Lien with respect to any property owned by the Company (whether or not it has assumed or otherwise become liable for such liabilities); (v) all its liabilities in respect of letters of credit or instruments serving a similar function issued or accepted for its account by banks and other financial institutions (whether or not representing obligations for borrowed money); and (vi) any guaranty of the Company with respect to liabilities of a type described in any of subclauses (i) through (v) hereof. (q) Status under Certain Statutes. Neither the Company nor any ----------------------------- Subsidiary is subject to regulation under the Investment Company Act of 1940, as amended, the Public Utility Holding Company Act of 1935, as amended, the Interstate Commerce Act, as amended, or the Federal Power Act, as amended. 6. Representations and Warranties of the Purchaser. The Purchaser ----------------------------------------------- hereby represents and warrants to the Company that: (a) Purchase Entirely for Own Account. The Securities to be acquired --------------------------------- by the Purchaser will be acquired for investment for the Purchaser's own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and the Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the same. The Purchaser has not been formed for the specific purpose of acquiring any of the Securities. (b) Knowledge. The Purchaser is aware of the Company's business --------- affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. (c) Restricted Securities. The Purchaser understands that the --------------------- Securities have not been registered under the Act, by reason of a specific exemption from the registration provisions of the Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Purchaser's representations as expressed herein. The -8- Purchaser understands that the Securities are "restricted securities" under applicable U.S. federal and state securities laws and that, pursuant to these laws, the Purchaser must hold the Securities indefinitely unless they are registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available. The Purchaser further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Securities, and on requirements relating to the Company which are outside of the Purchaser's control, and which the Company is under no obligation and may not be able to satisfy. (d) Legends. The Purchaser understands that the Securities, and any ------- securities issued in respect thereof or exchange therefor, may bear one or all of the following legends: (i) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED." (ii) Any legend required by the Blue Sky laws of any state to the extent such laws are applicable to the shares represented by the certificate so legended. (e) Accredited Investor. The Purchaser is an "accredited investor" as ------------------- defined in Rule 501(a) of Regulation D promulgated under the Act. 7. Financial Statements and Information. The Company shall deliver ------------------------------------ to the Purchaser so long as the Purchaser holds any of the Securities: (a) Quarterly Statements. Within 60 days after the end of each -------------------- quarterly fiscal period in each fiscal year of the Company (other than the last quarterly fiscal period of each such fiscal year), duplicate copies of, (i) a consolidated balance sheet of the Company and its Subsidiaries as at the end of such quarter, and (ii) consolidated statements of income, changes in shareholders' equity and cash flows of the Company and its Subsidiaries, for such quarter and (in the case of the second and third quarters) for the portion of the fiscal year ending with such quarter, setting forth in each case in comparative form the figures for the corresponding periods in the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP applicable to quarterly financial statements generally, and certified by a senior financial officer of the Company as fairly presenting, in all material respects, the financial position of the companies being reported on and their results of operations and cash flows, subject to changes resulting from year-end adjustments, provided that delivery within the time period specified above of copies of the Company's Quarterly Report on Form 10-Q prepared in compliance with the requirements therefor and filed with the Securities and Exchange Commission shall be deemed to satisfy the requirements of this Section 7(a). -9- (b) Annual Statements. Within 105 days after the end of the fiscal ----------------- year of the Company, duplicate copies of, (i) a consolidated balance sheet of the Company and its Subsidiaries as at the end of such year, and (ii) consolidated statements of income, changes in shareholders' equity and cash flows of the Company and its Subsidiaries, for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP, and accompanied by an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall state that such financial statements present fairly, in all material respects, the financial position of the companies being reported on and their results of operations and cash flows and have been prepared in conformity with GAAP, and that the examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards, and that such audit provides a reasonable basis for such opinion in the circumstances, provided that delivery within the time period specified above of copies of the Company's Annual Report on Form 10-K for such fiscal year (together with the Company's annual report to shareholders, if any, prepared pursuant to Rule 14a-3 under the Security Exchange Act of 1934, as amended) prepared in accordance with the requirements therefor and filed with the Securities and Exchange Commission shall be deemed to satisfy the requirements of this Section 7(b). (c) SEC and Other Reports. Promptly upon their becoming available, --------------------- one copy of (i) each financial statement, report, notice or proxy statement sent by the Company or any Subsidiary to public securities holders generally, and (ii) each regular and periodic report, each registration statement that shall have become effective (without exhibits except as expressly requested by the Purchaser), and each final prospectus and all amendments thereto filed by the Company or any Subsidiary with the Securities and Exchange Commission. (d) Notice of Default or Event of Default. Promptly, and in any event ------------------------------------- within five days after a senior financial officer of the Company becoming aware of the existence of any event or condition the occurrence or existence of which would, with the lapse of time or the giving of notice, or both, become an Event of Default (as hereinafter defined) (a "Default") or Event of Default, a written ------- notice specifying the nature and period of existence thereof and what action the Company is taking or proposes to take with respect thereto. The Company has notified the Purchaser of its default under that certain $1,022,444.44 Promissory Note from the Company to SFX, Inc., dated July 26, 2000 in accordance with this subparagraph (d). (e) Requested Information. With reasonable promptness, such other --------------------- date and information relating to the operations, condition (financial or otherwise), business, assets or liabilities of the Company, or any of its Subsidiaries or relating to the ability of the Company to perform its obligations hereunder and under the Notes as from time to time may be reasonably requested by the Purchaser. 8. Additional Agreements of the Parties. ------------------------------------ (a) Use of Proceeds. Subject to Sections 8(m) and 8(n), the Company --------------- shall use the net cash proceeds from the sale of the Notes for working capital purposes, except that a portion of the net cash proceeds from the sale of the Note, simultaneously with the Initial Closing, shall be applied to the repayment of all amounts then outstanding with respect to notes -10- issued by the Company in favor of third parties which notes are required to be repaid in the event of a financing. (b) Visits and Inspections. The Company agrees to permit, or, in the ---------------------- case of properties, books, records or persons not within its immediate control, promptly take such actions as are reasonably practicable in order to permit, representatives (whether or not officers or employees) of the Purchaser, from time to time upon reasonable advance notice to the chief executive officer of the Company, as often as may be reasonably requested, to (i) visit and inspect any properties of the Company and its Subsidiaries, (ii) inspect and make extracts from the books and records of the Company and its Subsidiaries, including management letters prepared by its independent certified public accountants, and (iii) discuss with any person, including the principal officers and the independent certified public accountants of the Company, the results of operations, condition (financial or otherwise), business, assets or liabilities of the Company. All such information received shall be held by the Purchaser and its representatives subject to the confidentiality requirements of Section 8(c). (c) Confidentiality of Information. The Purchaser agrees to hold and ------------------------------ to cause its representatives and affiliates to hold all information received from or concerning the Company in connection with the transactions contemplated by this Agreement, including information described under Section 8(b), in confidence, and not to use or disclose any of such information to any such third party, except to the extent such information may be made publicly available by the Company. (d) Reservation of Stock and Fully Paid Shares. If at any time the ------------------------------------------ number of authorized but unissued shares of the Company's Common Stock shall not be sufficient to effect the exercise of the Warrants, then the Company will take such corporate action as may, in the opinion of its legal counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares of the Company's Common Stock as shall be sufficient for such purposes. (e) No Impairment. The Company will not, by amendment of its ------------- Certificate or By-laws, or through reorganization, consolidation, merger, dissolution, issuance or sale of securities, sale of assets or any other voluntary action, willfully avoid or seek to avoid the observance or performance of any of the terms of this Agreement, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Purchaser under this Agreement against wrongful impairment. (f) Compliance with Law. The Company will and will cause each of its ------------------- Subsidiaries to comply with all laws, ordinances or governmental rules or regulations to which each of them is subject and will obtain and maintain in effect all licenses, certificates, permits, franchises and other governmental authorizations necessary to the ownership of their respective properties or to the conduct of their respective businesses, in each case to the extent necessary to ensure that non-compliance with such laws, ordinances or governmental rules or regulations or failures to obtain or maintain in effect such licenses, certificates, permits, franchises and other governmental authorizations would not reasonably be expected, individually or in the aggregate, -11- to have a materially adverse effect on the business, operation, affairs, financial condition, properties or assets of the Company. (g) Insurance. The Company will and will cause each of its --------- Subsidiaries to maintain, with financial sound and reputable insurers, insurance with respect to their respective properties and businesses against such casualties and contingencies, of such types, on such terms and in such amounts (including deductibles, co-insurance and self-insurance, if adequate reserves are maintained with respect thereto) as is customary in the case of entities of established reputations engaged in the same or a similar business and similarly situated. (h) Maintenance of Properties. The Company will and will cause each ------------------------- of its Subsidiaries to maintain and keep, or cause to be maintained and kept, their respective properties in good repair, working order and condition (other than ordinary wear and tear), so that the business carried on in connection therewith may be properly conducted at all times, provided that this Section shall not prevent the Company or any Subsidiary from discontinuing the operation and maintenance of any of its properties if such discontinuance is desirable in the conduct of its business and the Company has concluded that such discontinuance would not, individually or in the aggregate, have a materially adverse effect on the results of operations, condition (financial or otherwise), business, assets or liabilities of the Company. (i) Payment of Taxes. The Company will and will cause each of its ---------------- Subsidiaries to file all income tax or similar tax returns required to be filed in any jurisdiction and to pay and discharge all taxes shown to be due and payable on such returns and all other taxes, assessments, governmental charges, or levies payable by any of them, to the extent such taxes and assessments have become due and payable and before they have become delinquent, provided that neither the Company nor any Subsidiary need pay any such tax or assessment if (i) the amount, applicability or validity thereof is contested by the Company or such Subsidiary on a timely basis in good faith and in appropriate proceedings, and the Company or a Subsidiary has established adequate reserves therefor in accordance with GAAP on the books of the Company or such Subsidiary or (ii) the nonpayment of all such taxes and assessments in the aggregate would not reasonably be expected to have a materially adverse effect on the results of operations, condition (financial or otherwise), business, assets or liabilities of the Company. (j) Corporation Existence. The Company will at all times preserve and --------------------- keep in full force and effect its corporation existence. The Company will at all times preserve and keep in full force and effect the corporate existence of each of its Subsidiaries (unless merged into the Company or a Subsidiary) and all rights and franchises of the Company and its Subsidiaries unless, in the good faith judgment of the Company, the termination of or failure to preserve and keep in full force and effect such corporate existence, right or franchise would not, individually or in the aggregate, have a materially adverse effect on the results of operations, condition (financial or otherwise), business, assets or liabilities of the Company. (k) Transactions with Affiliates. The Company will not and will not ---------------------------- permit any Subsidiary to enter into directly or indirectly any material transaction or material group of related transactions (including without limitation the purchase, lease, sale or exchange of properties of any kind or rendering of any services) with any affiliate (other than the Company or another Subsidiary), except pursuant to the reasonable requirements of the Company's or such -12- Subsidiary's business and upon fair and reasonable terms no less favorable to the Company or such Subsidiary than would be obtainable in a comparable arm's-length transaction with a person not an affiliate of the Company. (l) Merger, Consolidation, etc. Except for its reincorporation into --------------------------- Delaware, the Company shall not consolidate with or merge with any other corporation or convey, transfer or lease substantially all of its assets in a single transaction or series of transactions to any person unless (i) the successor formed by such consolidation or the survivor of such merger or the person that acquires by conveyance, transfer or lease substantially all of the assets of the Company as an entirety, as the case may be, shall be a solvent corporation organized and existing under the laws of the U.S. or any state thereof (including the District of Columbia), and, if the Company is not such a corporation, such corporation shall have executed and delivered to the Purchaser its assumption of the due and punctual performance and observance of each covenant and condition of this Agreement, the Notes and the Warrants; and (ii) immediately after giving effect to such transaction, no Default or Event of Default (as hereinafter defined) or Event of Default shall have occurred and be continuing. No such conveyance, transfer or lease of substantially all of the assets of the Company shall have the effect of releasing the Company or any successor corporation that shall theretofore have become such in the manner prescribed in this Section 8(l) from its liability under this Agreement, the Notes or the Warrants. (m) Additional Right to Purchase 650,000 Shares of Common Stock. ----------------------------------------------------------- (i) Pursuant to the terms set forth in that certain Stock Option Agreement, dated as of January 26, 2000, as amended through the date hereof, between the Company and Charles Beilman ("Beilman") (the "Option Agreement"), ------- ---------------- the Company has the right to purchase from Beilman up to 2,325,000 shares (the "Beilman Shares") of Common Stock at an exercise price of (i) $1.675 per share -------------- if all or any portion of such shares are purchased by the Company on or before September 1, 2000 or (ii) $1.85 per share if all or any portion of such shares are purchased by the Company after September 1, 2000 and prior to October 31, 2000. The Company agrees that, any time prior to October 14, 2000, the Purchaser may deliver one or more notices (each, an "Option Notice") to the ------------- Company directing the Company, whereupon the Company shall be obligated, to exercise its right to purchase up to an aggregate of 650,000 of the Beilman Shares under the Option Agreement in accordance with Section 8(m)(iii) below. (ii) Notwithstanding the foregoing, promptly following the Initial Closing, the Company agrees to negotiate in good faith with Beilman and to use its best efforts in such negotiation to amend the Option Agreement (the "Amended ------- Option Agreement") so that (i) the Company shall have the right to purchase from - ---------------- Beilman the Beilman Shares on or before October 31, 2001, or (ii) the Purchaser shall have the right to purchase directly from Beilman up to 650,000 of the Beilman Shares (or such lesser number of shares in the event the Purchaser has directed the Company to purchase a portion of the Beilman Shares in accordance with Section 8(m)(i) above) on or before October 31, 2001. The Company agrees that, from and after the date the Company and Beilman amend the Option Agreement, the Purchaser shall have the right, at any time prior to October 14, 2001 or such date that is 15 days prior to the expiration date of the Amended Option Agreement, to deliver an Option Notice to the Company directing the Company, whereupon the Company shall be obligated, to exercise its right to purchase up to -13- 650,000 of the Beilman Shares under the Amended Option Agreement in accordance with Section 8(m)(iii) below. (iii) Each Option Notice will set forth the number of such Beilman Shares (the "Purchase Shares") the Company shall be obligated to --------------- purchase in accordance with the terms of the Option Agreement or the Amended Option Agreement, as the case may be. Within two business days of delivery of an Option Notice, the Company hereby agrees to purchase, in accordance with the terms of the Option Agreement or the Amended Option Agreement, as the case may be, the Purchase Shares. In connection therewith, if the Company so requests, the Purchaser agrees to lend to the Company an amount equal to the purchase price for the Purchase Shares (an "Option Loan"), which amount shall be used by ----------- the Company for the sole purpose of purchasing the Purchase Shares from Beilman. The parties acknowledge that the Purchaser will not make an Option Loan to the Company if the Amended Option Agreement provides that the Purchaser may purchase directly from Beilman up to 650,000 of the Beilman Shares. (iv) An Option Loan and the Company's obligation to repay an Option Loan shall be evidenced by a secured promissory note (each, an "Option ------ Note"), which Option Note shall be substantially identical in form and substance - ---- to the Note, except that (x) the Option Note shall not bear interest and (y) the outstanding principal under the Option Note shall be payable on demand; provided, however, that unless and until there occurs an Event of Default hereunder, the Purchaser shall not have the right to demand payment under an Option Note prior to the one-year anniversary of the date of issuance of such Option Note. The parties hereto agree that the security interest granted to the Purchaser under an Option Note shall be pari passu with other security interests granted to the Purchaser by the Company. (v) In further consideration of the Loan and regardless of whether the Purchaser makes an Option Loan to the Company, as long as the Purchaser has delivered to the Company an Option Notice in accordance with this Section 8(m), the Company agrees (within ten business days following its receipt of the Option Notice) to issue to the Purchaser a warrant to purchase such number of shares of Common Stock equal to the number of Purchase Shares set forth in the Option Notice. Subject to this subsection (v), such warrant shall be substantially identical in form and substance to the Warrant (the "Option ------ Warrant"), except that Section 6(c) of the Option Warrant shall provide standard - ------- weighted average anti-dilution protection for the exercise price and number of shares of Common Stock underlying the Option Warrant only and not for "full ratchet" anti-dilution protection for the exercise price and the number of shares of Common Stock underlying the Option Warrant. If the Option Warrant is issued in connection with the Purchaser delivering an Option Notice pursuant to Section 8(m)(i), the Option Warrant shall be exercisable (A) at any time or from time to time after the date of the Option Warrant and up to and including 5:00 p.m. (New York City time) on the date that is two years following the date of issuance of the Option Warrant (the "First Option Warrant Expiration Date") and ------------------------------------ (B) as follows: for a purchase price of (i) $1.85 per share for any shares purchased pursuant to the exercise thereof between the date of issuance of the Option Warrant and February 1, 2001, (ii) $2.25 per share for any shares purchased pursuant to the exercise thereof between February 2, 2001 and May 1, 2001, (iii) $2.50 per share for any shares purchased pursuant to the exercise thereof between May 2, 2001 and August 1, 2001, or (iv) $2.75 per share for any shares purchased pursuant to the exercise thereof between August 2, 2001 and the First Option Warrant -14- Expiration Date. If the Option Warrant is issued in connection with the Purchaser delivering an Option Notice pursuant to Section 8(m)(ii), the Option Warrant shall be exercisable (A) within 30 business days following the issuance of the Option Warrant (the "Second Option Warrant Expiration Date") and (B) for ------------------------------------- a purchase price not greater than the following: (i) $1.85 per share purchased pursuant to the exercise thereof between the date of issuance of such Option Warrant and February 1, 2002, (ii) $2.25 per share purchased pursuant to the exercise thereof between February 2, 2002 and May 1, 2002, (iii) $2.50 per share purchased pursuant to the exercise thereof between May 2, 2002 and August 1, 2002, or (iv) $2.75 per share purchased pursuant to the exercise thereof between August 2, 2002 and the Second Option Warrant Expiration Date. The Purchaser shall be granted registration rights with respect to the shares of Common Stock underlying the Option Warrant, in substantially the form set forth in Exhibit F --------- hereto. (n) Additional Right to Purchase up to 300,000 Shares of Common Stock. ----------------------------------------------------------------- Pursuant to the terms set forth in (i) that certain Option to Purchase Agreement between the Company and VideoGame Partners, LLC ("VP LLC"), made as of June 30, ------ 2000, as amended through the date hereof, and (ii) that certain Option to Purchase Agreement between the Company and VP LLC, made as of July 26, 2000, as amended through the date hereof (collectively, the "VP Agreements"), VP LLC has ------------- the right to purchase from the Company 750,000 shares of Common Stock (the "VP -- Shares") at an exercise price of $1.675 per share. In connection therewith, the - ------ Company and the Purchaser agree that, one business day after VP LLC's right to purchase the VP Shares expires pursuant to the VP Agreements, the Company shall deliver written notice to the Purchaser (the "VP Notice") to such effect, which --------- notice shall also set forth the number of VP Shares not purchased by VP LLC (the "VP Option Shares") under the VP Agreements. So long as VP LLC has not ---------------- purchased all of the VP Shares, the Purchaser may, within 15 business days of receiving the VP Notice deliver a notice to the Company that it wishes to purchase from the Company, and the Company shall be obligated to issue within five business days therefrom, a number of shares of Common Stock equal to the VP Option Shares (the "Purchaser Option Shares"); provided, however, that such ----------------------- number shall not be greater than 300,000. The exercise price for the Purchaser Option Shares shall be $1.675 per share. Notwithstanding the foregoing, the parties agree that if the Company delivers the VP Notice to the Purchaser at any time prior to October 31, 2000, the Purchaser shall have the right to exercise its option granted hereunder by (i) such date that is 15 business days after receipt by the Purchaser of the VP Notice or (ii) October 31, 2000, whichever is later. The parties further agree that the Purchaser's right to purchase the Purchaser Option Shares is in addition to the right described in Section 8(m) above. The Purchaser shall be granted registration rights with respect to the Purchaser Option Shares issued hereunder, in the form set forth in Exhibit F --------- hereto. 9. Events of Default. An "Event of Default" shall exist if any of the ----------------- following conditions or events shall occur and be continuing: (a) Failure to Pay. The Company's failure to pay any of the Principal -------------- Amount (as defined in each Note) due under the Notes on the date the same becomes due and payable, or any accrued interest or other amounts due under the Notes after the same becomes due and payable; or (b) Representations and Warranties. Any representation and warranty ------------------------------ made in writing by or on behalf of the Company or by any officer of the Company in this -15- Agreement or in any writing furnished in connection with the transactions contemplated hereby proves to have been false or incorrect in any material respect on the date as of which made; or (c) Default in Performance. The Company defaults in the performance ---------------------- of or compliance with any term contained herein and such default is not remedied within 30 days after the earlier of (i) an officer of the Company obtaining actual knowledge of such default, and (ii) the Company receiving written notice of such default from the Purchaser (any such written notice to be identified as a "notice of default"); or (d) Other Defaults. The Company or any Subsidiary is in default (as -------------- principal or as guarantor or other surety) in the payment of any principal of or premium or make-whole amount or interest on any Indebtedness that is outstanding in any aggregate principal amount of at least $100,000 beyond any period of grace provided with respect thereto, or (ii) the Company or any Subsidiary is in default in the performance of or compliance with any term of any evidence of any Indebtedness in an aggregate outstanding principal amount of at least $100,000 or of any mortgage, indenture or other agreement relating thereto or any other condition exists, and as a consequence of such default or condition such Indebtedness has become, or has been declared due and payable before its stated maturity or before its regularly scheduled dates of payment; or (e) Inability to Pay Debts. The Company or any Subsidiary (i) is ---------------------- generally not paying, or admits in writing its inability to pay, its debts as they become due, (ii) files, or consents by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv) consents to the appointment of a custodian, receiver, trustee or other similar officer with similar powers with respect to it or with respect to any substantial part of its property, (v) is adjudicated as insolvent or to be liquidated, or (vi) takes corporation action for the purpose of any of the foregoing; or (f) Defaults under Security Agreement. Any Event of Default under the --------------------------------- Security Agreement. 10. Remedies on Default, Etc. ------------------------- (a) Acceleration. ------------ (i) If an Event of Default with respect to the Company described in Section 9(e) has occurred, the Notes shall automatically become due and payable. (ii) If any other Event of Default has occurred and is continuing, the Purchaser may at any time at its option, by notice to the Company, declare the Notes then outstanding to be immediately due and payable. (iii) If any Event of Default described in Section 9(a) has occurred and is continuing, the Purchaser may at any time, at its option, by notice to the Company, declare the Notes immediately due and payable. -16- Upon the Notes becoming due and payable under this Section 10(a), whether automatically or by declaration, the Notes will forthwith mature and the entire unpaid principal amount of the Notes plus all accrued and unpaid interest thereon shall all be immediately due and payable, in each and every case without presentment, demand, protest or further notice, all of which are hereby waived. Effective upon an Event of Default that is not cured, the interest rate on the Notes shall increase by the lesser of the rate per annum equal to the rate reported in the Wall Street Journal as the prime rate for major banks plus 4% or the maximum penalty as shall be permitted by applicable law (the "Default ------- Rate"). Notwithstanding the foregoing, the Purchaser may, at its option, in the case of Section 9(a) and for so long as an Event of Default is continuing accept the delivery by the Company of additional subscriber names at no charge to the Purchaser whatsoever toward repayment of the outstanding principal amount under the Notes and accrued interest thereon. In such event, the Purchaser shall apply $0.35 for each subscriber name delivered to the Purchaser for no charge toward the outstanding principal amount under the Notes and accrued interest thereon. During an Event of Default, such deductions and corresponding reductions to collection expenses, the outstanding principal amount under the Notes and accrued interest thereon in the manner described in Section 4 of each Note shall be computed at the end of each [calendar month]. Such payments may be endorsed by the Purchaser on the Grid attached to the applicable Note. The Purchaser, in its sole discretion, may determine to discontinue the foregoing arrangement on the date that is five days after delivery to the Company of a written notice to that effect. Notwithstanding such reductions described above, interest shall continue to accrue at the Default Rate on the principal amount outstanding during an Event of Default. (b) Other Remedies. If any Default or Event of Default has occurred -------------- and is continuing, and irrespective of whether the Notes have become or have been declared immediately due and payable under Section 10(a), the Purchaser may proceed to protect and enforce its rights by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein, in the Notes or in the Warrants, or for an injunction against a violation of any of the terms hereof or thereof, or in aid of the exercise of any power granted hereby or thereby or by law or otherwise. (c) No Waiver or Election of Remedies, Expenses, Etc. No course of ------------------------------------------------ dealing and no delay on the part of the Purchaser in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice the Purchaser's rights, powers and remedies. No right, power or remedy conferred by this Agreement, the Notes or the Security Agreement upon the Purchaser shall be exclusive of any other right, power or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise. Without limiting the obligations of the Company under Section 11(a), the Company will pay to the Purchaser on demand such further amount as shall be sufficient to cover all costs and expenses of the Purchaser incurred in any enforcement or collection under this Section, including, without limitation, reasonable attorneys' fees, expenses and disbursements. 11. Miscellaneous. ------------- (a) Transaction Expenses. Whether or not the transactions -------------------- contemplated hereby are consummated, the Company will pay all costs and expenses (including reasonable attorneys' fees) incurred by the Purchaser in connection with the transactions and in connection -17- with any amendments, waivers or consents under or in respect of this Agreement, the Notes or the Warrants (whether or not such amendment, waiver or consent becomes effective). The obligations of the Company under this Section will survive the payment or transfer of the Notes or the Warrants, the enforcement, amendment or waiver of any provision of this Agreement, the Notes or the Warrants, and the termination of this Agreement. (b) Survival of Representations and Warranties; Entire Agreement. All ------------------------------------------------------------ representations and warranties contained herein shall survive the execution and delivery of this Agreement, the Notes and the Warrants, the purchase or transfer by the Purchaser of the Notes or the Warrants or portions thereof or interest therein and the payment of the Notes, and may be relied upon by any subsequent holder of any Note and any Warrant, regardless of any investigation made at any time by or on behalf of the Purchaser or any such holder. All statements contained in any certificate or other instrument delivered by or on behalf of the Company pursuant to this Agreement shall be deemed representations and warranties of the Company under this Agreement. Subject to the preceding sentence, this Agreement, the Notes and the Warrants embody the entire agreement and understanding between the Purchaser and the Company and supersede all prior agreements and understandings relating to the subject matter hereof. (c) Successors and Assigns. The terms and conditions of this ---------------------- Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. Notwithstanding the foregoing, the Purchaser may assign its rights under this Agreement in whole or in part to any of its affiliates or the affiliates of Sony Music Entertainment Inc., and such rights may be similarly assigned by such assignee. No such assignment shall relieve the Purchaser of any of its obligations hereunder. The Company shall not have the right to assign this Agreement without the Purchaser's written consent. (d) Governing Law. This Agreement and all acts and transactions ------------- pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of New York, without giving effect to principles of conflicts of law. (e) Counterparts. This Agreement may be executed in two or more ------------ counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument. (f) Titles and Subtitles. The titles and subtitles used in this -------------------- Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. Except as otherwise stated, all section and schedule references refer to Sections and Schedules in this Agreement. (g) Notices. Any notice required or permitted by this Agreement shall ------- be in writing and shall be deemed sufficient upon receipt, when delivered personally or by courier, overnight delivery service or confirmed facsimile, or 48 hours after being deposited in the U.S. -18- mail as certified or registered mail with postage prepaid, if such notice is addressed to the party to be notified at such party's address or facsimile number as set forth on the signature page hereto or as subsequently modified by written notice. (h) Finder's Fee. Each party represents that it neither is nor will ------------ be obligated for any finder's fee or commission in connection with this transaction. The Purchaser agrees to indemnify and to hold harmless the Company from any liability for any commission or compensation in the nature of a finder's fee (and the costs and expenses of defending against such liability or asserted liability) for which the Purchaser or any of its officers, employees, or representatives is responsible. The Company agrees to indemnify and hold harmless the Purchaser from any liability for any commission or compensation in the nature of a finder's fee (and the costs and expenses of defending against such liability or asserted liability) for which the Company or any of its officers, employees or representatives is responsible. (i) Amendments and Waivers. Any term of this Agreement may be amended ---------------------- or waived only with the written consent of the Company and the Purchaser. Any amendment or waiver effected in accordance with this Section shall be binding upon the Purchaser and each transferee of the Securities, each future holder of all such Securities, and the Company. (j) Severability. If one or more provisions of this Agreement are ------------ held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith, in order to maintain the economic position enjoyed by each party as close as possible to that under the provision rendered unenforceable. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of the Agreement shall be enforceable in accordance with its terms. (k) Payments Due on NonBusiness Days Anything in this Agreement or -------------------------------- the Notes to contrary notwithstanding, any payment of principal or interest on the Notes that is due on a date other than a business day shall be made on the next succeeding business day without including the additional days elapsed in the computation of the interest payable on such next succeeding business day. [SIGNATURE PAGE FOLLOWS] -19- The parties have executed this Secured Note and Warrant Purchase Agreement as of the date first written above. COMPANY: EUNIVERSE, INC. By: /s/ Brad Greenspan ------------------------------- Brad Greenspan Address: 101 North Plains Industrial Road Wallingford, Connecticut 06492 Facsimile No.: 203-265-7798 PURCHASER: NEW TECHNOLOGY HOLDINGS INC. By: /s/ Mark Eisenberg ------------------------------- Mark Eisenberg Address: 550 Madison Avenue New York, New York 10022 Facsimile No.: 212-833-7462 [SIGNATURE PAGE TO SECURED NOTE AND WARRANT PURCHASE AGREEMENT] EX-99.2 3 0003.txt SECURED PROMISSORY NOTE, DTD 9/6/2000 EXHIBIT 2 THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), NOR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS AND HAS BEEN TAKEN FOR INVESTMENT PURPOSES ONLY. IT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO SUCH SECURITIES UNDER THE ACT AND QUALIFICATION UNDER APPLICABLE STATE LAW WITHOUT AN OPINION OF COUNSEL SATISFACTORY TO BORROWER THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED. SECURED PROMISSORY NOTE $3,155,670 September 6, 2000 New York, New York For Value Received, eUniverse, Inc., a Nevada corporation ("Borrower"), hereby unconditionally promises to pay on demand to the order of New Technology Holdings Inc. ("Lender"), in lawful money of the United States of America and in immediately available funds, the aggregate principal sum of up to $3,155,670 or, if less, the aggregate principal amount of the borrowings outstanding (the "Principal Amount") together with accrued and unpaid interest thereon, in the manner set forth herein. Borrower further agrees to pay interest on the Principal Amount at the rate per annum equal to the rate reported in the Wall Street Journal as the prime rate for major banks plus 2% on the outstanding Principal Amount. Interest shall be calculated from and including the date of this Note to but not including the date such Principal Amount has been repaid in full. Interest shall be calculated on the basis of a 365-day or 366-day year, as the case may be, for the actual number of days elapsed and shall be paid together with the outstanding Principal Amount, as provided in Section 1 of this Note. All borrowings evidenced by this Note and all payments (including those described in Sections 1(b)) and prepayments of the principal hereof and interest hereon and the respective date thereof shall be endorsed by the holder hereof on the grid schedule attached hereto and made a part hereof, or on a continuation thereof which shall be attached hereto and made a part hereof (the "Grid"); provided, however, that the failure of the holder hereof to make such a notation or any error in such a notation shall not affect the obligations of Borrower under this Note. 1. Repayment. (a) The outstanding Principal Amount and all interest accrued thereon shall be payable on demand; provided, however, that unless there has been an Event of Default (as defined in the Secured Note and Warrant Purchase Agreement described below), Lender agrees not to make demand prior to the six-month anniversary from the date hereof and provided, further, that Lender shall provide Borrower with ten days' advance written notice of such demand (the "Demand Notice"). (b) Reference is hereby made to that certain amended and restated Subscriber Acquisition Agreement between Borrower and Lender dated of even date herewith (the "Subscriber Agreement"). Lender shall have the right, but not the obligation, to deduct from all amounts owed to Borrower under the Subscriber Agreement the amount of $0.35 per subscriber delivered to Lender, and apply such $0.35 per subscriber to the outstanding principal amount or interest under this Note. In the event that Lender makes deductions with respect to amounts owed to Borrower for the delivery of subscriber names pursuant to the Subscriber Agreement as described above, Lender shall set forth in the Demand Notice the aggregate amount of such deductions, and the aggregate amount of such corresponding deductions from all amounts owed to Lender pursuant hereto as computed in the manner described above. (c) Borrower may at any time and from time to time prepay the Principal Amount, in whole or in part, without premium or penalty. 2. Security Agreement. This Note is entitled to the benefit of that certain Security Agreement, dated of even date herewith, between Lender and Borrower (the "Security Agreement"), pursuant to which Lender is granted a first priority security interest in the Collateral (as such term is defined in the Security Agreement). This Note shall be subject to the terms and conditions set forth in such Security Agreement. 3. Note and Warrant Purchase Agreement. This Note is one of the Notes issued pursuant to a separate Note and Warrant Purchase Agreement, dated of even date herewith, between Lender and Borrower (the "Note and Warrant Purchase Agreement") and is entitled to the benefits thereof. This Note shall be subject to the terms and conditions set forth in such Note and Warrant Purchase Agreement. 4. Place of Payment; Application of Payments. All amounts payable hereunder shall be payable to Lender in United States dollars at such bank account as shall be designated by Lender in the Demand Notice in immediately available funds. Payment on this Note shall be applied first to any expenses of collection, then to accrued interest, and thereafter to the outstanding principal balance hereof. 5. Default. Subject to the terms of the Note and Warrant Purchase Agreement, upon the occurrence of an Event of Default (as defined in the Note and Warrant Purchase Agreement) the unpaid Principal Amount, all unpaid accrued interest thereon and all other amounts owing hereunder may, at the option of Lender, become immediately due and payable to Lender with the effect provided in each of the Note and Warrant Purchase Agreement and the Security Agreement. 6. Waiver. Except as otherwise provided herein, Borrower waives presentment and written demand for payment, notice of dishonor, protest and notice of protest of this Note, and shall pay all costs of collection when incurred, including, without limitation, reasonable attorneys' fees, 2 costs and other expenses. BORROWER WAIVES ITS RIGHTS TO A JURY TRIAL IN CONNECTION WITH ANY CLAIMS ARISING UNDER THIS NOTE TO THE FULLEST EXTENT PERMITTED BY LAW. The right to plead any and all statutes of limitations as a defense to any demands hereunder is hereby waived to the fullest extent permitted by law. 7. Expenses; Attorney's Fees; Collection Costs. Borrower agrees that it will pay the reasonable costs and expenses of the parties (including legal and accounting fees) in connection with this Note. Without limiting the foregoing, if there has been an Event of Default by Borrower hereunder, Lender shall be entitled to receive and Borrower agrees to pay all costs of enforcement and collection incurred by Lender, including, without limitation, reasonable attorney's fees relating thereto. 8. Successors and Assigns; Assignment. The provisions of this Note shall inure to the benefit of and be binding on any successor to Borrower and shall extend to any holder hereof. Borrower may assign this Note to any of its affiliates or the affiliates of Sony Music Entertainment Inc., and such rights may be similarly assigned by such assignee. 9. Further Assurances. Borrower shall, at any time and from time to time, upon the written request of Lender, execute and deliver to Lender such further documents and instruments (including, without limitation, financing statements in connection with Lender's security interest granted hereby) and do such other acts and things as Lender may reasonably request in order to effectuate fully the purpose and intent of this Note. 3 THIS NOTE HAS BEEN EXECUTED AND DELIVERED IN THE CITY OF NEW YORK,STATE OF NEW YORK, UNITED STATES OF AMERICA. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, EXCLUDING CONFLICT OF LAWS PRINCIPLES THAT WOULD CAUSE THE APPLICATION OF LAWS OF ANY OTHER JURISDICTION. BORROWER EUNIVERSE, INC. By: /s/ Brad Greenspan --------------------------------- Name: Brad Greenspan Title: President and Chief Executive Officer [SIGNATURE PAGE TO SECURED PROMISSORY NOTE] EX-99.3 4 0004.txt SECURITY AGREEMENT DTD 9/6/2000 EXHIBIT 3 SECURITY AGREEMENT DEBTOR: Name: eUniverse, Inc. 101 North Plains Industrial Road Wallingford, CT 06492 SECURED PARTY: Name: New Technology Holdings Inc. Address: 550 Madison Avenue New York, NY 10022 1. Debtor, in consideration of the agreement of Secured Party to make one or more loans to Debtor pursuant to that certain Note and Warrant Purchase Agreement, of even date herewith, between Debtor and Secured Party (the "Purchase Agreement"), and for other good and sufficient consideration, hereby ------------------ grants to Secured Party a first priority security interest in all of Debtor's right, title and interest in and to the following property (except as set forth herein), including without limitation any and all additions, accessions and substitutions thereto or therefor (hereinafter called the "Collateral"): ---------- (a) all tangible personal property, machinery, electrical and electronic components, equipment, fixtures, furniture, office machinery, vehicles, trailers, implements and other tangible personal property of every kind and description, all goods of like kind or type hereafter acquired in substitution or replacement thereof, all additions and accessions thereto and all rents, proceeds and products on or of any of the foregoing, including, without limitation, the rights to insurance proceeds covering the foregoing; (b) all inventory, including without limitation, all merchandise, raw materials, components, parts, supplies, unfinished goods, work-in-progress, finished products intended for sale, lease or other disposition, and packing and shipping materials of every kind, nature and description, wherever any of the same may be located; (c) all deposits, cash, cash equivalents and all drafts, checks, certificates of deposit, notes, bills of exchange and other writings which evidence a right to the payment of money; (d) all insurance policies on which Debtor is named as an insured or additional insured or loss payee and all proceeds which may be derived therefrom; (e) all "accounts" (as that term is defined in the Uniform Commercial Code as in effect from time to time in the State of New York, the "Uniform Commercial Code") and/or other rights to payment; (f) all "general intangibles" (as that term is defined in the Uniform Commercial Code); (g) all leasehold interests and other rights and interests of Debtor respecting the use or ownership of or title to any real property, including the interests, easements, licenses, all other rights and interests of any kind; (h) all Debtor's books and records and all computer software programs relating to the Collateral, wherever located; and (i) all products, proceeds and income of any of the foregoing and all substitutions and replacement of, and additions and accessions to, any of the foregoing. to secure payment of the unpaid principal amount of and interest on the Notes (as defined in the Purchase Agreement) and all other obligations and liabilities of Debtor to Secured Party, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, the Purchase Agreement or this Security Agreement and any other document executed and delivered in connection therewith or herewith and each other obligation and liability, whether direct or indirect, absolute or contingent, due or to become due, or now or hereafter existing, of the Debtor to Secured Party, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including, without limitation, all fees and disbursements of counsel to Secured Party) or otherwise. Specifically excluded from the Collateral are goods covered by any purchase money security interest. 2. Debtor expressly represents, warrants and covenants: (a) That except for the first priority security interest granted hereby and the permitted liens listed on Schedule A hereto, Debtor is the owner of the ---------- Collateral free from any adverse lien, security interest or encumbrances; and that Debtor will defend the Collateral against all claims and demands of all persons at anytime claiming the same or any interest therein. (b) That Debtor has the full power and authority to enter into this Security Agreement, that this Security Agreement has been duly authorized, executed, and delivered by the Debtor and Debtor's obligations under this Security Agreement are legal, valid, binding, absolute and unconditional. (c) That Debtor's location is as stated above and the Collateral will be kept at that location or at the locations of Debtor's subsidiaries. (d) That Debtor will promptly notify Secured Party of any change in the location of the Collateral. (e) That Debtor will pay all taxes and assessments of every nature which may be levied or assessed against the Collateral. (f) That Debtor will not permit or allow any adverse lien, security interest or encumbrance whatsoever upon the Collateral and will not permit the same to be attached or replevined. (g) That Debtor has used, and will continue to use for the duration of this Security Agreement, consistent standards of quality in its provision of services sold under Debtor's service marks. Debtor shall use its best efforts to do any and all acts required by Secured Party to ensure Debtor's compliance with this subparagraph. (h) That the Collateral is in good condition, and that Secured Party may examine and inspect the Collateral at any time, wherever located. Without limiting the generality of the foregoing, Debtor hereby grants to Secured Party and its employees and agents the right to visit Debtor's offices from which services are provided under any of Debtor's service marks, and to inspect the quality control relating thereto at reasonable times during regular business hours. (i) That Debtor will not do any act, or omit to do any act, whereby Debtor's service marks or any registration or application appurtenant thereto, may become abandoned, invalidated, unenforceable, avoided, avoidable, or will otherwise diminish in value, and shall notify Secured Party immediately if it knows of any reason or has reason to know of any ground under which this result may occur. Debtor shall take appropriate action at its expense to halt the infringement of Debtor's service marks and shall properly exercise its duty to control the nature and quality of the goods offered by any licensees in connection therewith. (j) That Debtor will not use the Collateral in violation of any applicable statutes, regulations or ordinances or rights to any third parties. (k) That Debtor will keep the Collateral at all times insured against risks of loss or damage by fire, theft and such other casualties as Secured Party may reasonably require, all in such amounts, under such forms of policies, upon such terms, for such periods, and written by such companies or underwriters as Secured Party may approve, losses in all cases to be payable to Secured Party and Debtor as their interest may appear. Secured Party may act as attorney for Debtor in making, adjusting and settling claims under or canceling such insurance and endorsing Debtor's name on any drafts drawn by insurers of the Collateral. (l) At any time and from time to time, upon the request of Secured Party, Debtor will promptly and duly execute and deliver any and all such further instruments and documents and take such further action as Secured Party may reasonably deem desirable in obtaining the full benefits of this Security Agreement, including, without limitation, the filing of any financing or continuation statement under the Uniform Commercial Code with respect to the liens and security interests granted hereby. Debtor hereby authorizes Secured Party to file any such financing or continuation statement without the signature of Debtor to the extent permitted by applicable law. (m) That Debtor hereby indemnifies and holds Secured Party, its officers, directors, employees and shareholders, harmless from and against any claim, suit, loss, damage or expense (including reasonable attorneys' fees) arising out of this Security Agreement, the Purchase Agreement, or Debtor's operation of its business from the use of the Collateral. (n) That Debtor hereby irrevocably appoints Secured Party, and its successors and assigns, Debtor's true and lawful attorney, with full power (in the name of Debtor or otherwise), after the occurrence and during the continuance of an Event of Default (defined in Section 4 below), to ask, require, demand, receive, compound and give acquittance for any and all moneys, claims and other amounts due and to become due at any time under, or arising out of, the Collateral; to endorse any checks or other instruments or orders in connection therewith; to enforce all Secured Party's rights hereunder, to enter into all agreements or instruments required to carry out the terms hereof which are required to be performed by Debtor; to execute such other assignments and mortgages of the Collateral as Secured Party may deem to be necessary or advisable. Such power of attorney shall be deemed a power coupled with an interest and, therefore, irrevocable. 3. Until an Event of Default, Debtor may have possession of the Collateral and use it in any lawful manner, and upon an Event of Default, Secured Party shall have the immediate right to the possession of the Collateral. 4. Debtor shall be in default under this Security Agreement upon the happening of any of the following events or conditions (each an "Event of Default"): (a) default in the payment or performance of any obligation, covenant or liability contained or referred to herein or in any note evidencing the same; (b) the making or furnishing of any warranty, representation or statement to Secured Party by or on behalf of Debtor which proves to have been false in any material respect when made or furnished; (c) loss, theft, damage, destruction, sale or encumbrance to or of any of the Collateral, or the making of any levy seizure or attachment thereof or thereon and, if capable of being remedied, such default shall continue unremedied for a period of 30 days; (d) dissolution, termination of existence, insolvency, business failure, appointment of a receiver of any part of the property of, assignment for the benefit of creditors by, or the commencement of any proceeding under any bankruptcy or insolvency laws of, by or against Debtor or any guarantor or surety for Debtor. and Debtor shall give Secured Party immediate notice of the occurrence of any matter referred to in clause (d) of this paragraph. 5. Upon such default and at any time thereafter, Secured Party may declare all obligations secured hereby immediately due and payable and shall have the remedies of a secured party under Article 9 of the Uniform Commercial Code. Secured Party may require Debtor to assemble the Collateral and deliver or make it available to Secured Party at a place to be designated by Secured Party which is reasonably convenient to both parties. Expenses of taking, holding, preparing for sale, or selling the Collateral or the like shall include Secured Party's reasonable attorney's fees and legal expenses. 6. No waiver by Secured Party of any Event of Default shall operate as a waiver of any other Event of Default or of the same Event of Default on a future occasion. The taking of this Security Agreement shall not waive or impair any other security said Secured Party may have or hereafter acquire for the payment of the above indebtedness, nor shall the taking of any such additional security waive or impair this Security Agreement; but said Secured Party may, resort to any security it may have in the order it may deem proper, and notwithstanding any collateral security, Secured Party shall retain its rights of set-off against Debtor. 7. Secured Party's rights hereunder shall be senior to the rights of any other person except as listed on Schedule A hereto. ---------- 8. All rights of Secured Party hereunder shall inure to the benefit of its successors and assigns; and all promises and duties of Debtor shall bind his heirs, executors or administrators or his or its successors or assigns. If there be more than one Debtor, their liabilities hereunder shall be joint and several. 9. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, EXCLUDING CONFLICT OF LAWS PRINCIPLES THAT WOULD CAUSE THE APPLICATION OF LAWS OF ANY OTHER JURISDICTION. 10. This Security Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. [signature page follows] Dated this 6th day of September, 2000. Debtor: Secured Party: eUniverse, Inc. New Technology Holdings Inc. By: /s/ Brad Greenspan By: /s/ Mark Eisenberg -------------------- --------------------- Name: Brad Greenspan Name: Mark Eisenberg Title: President and Title: Vice President Chief Executive Officer [SIGNATURE PAGE TO SECURITY AGREEMENT] EX-99.4 5 0005.txt WARRANT, DTD 9/6/2000 EXHIBIT 4 THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS. EUNIVERSE, INC. Warrant for the Purchase of up to 1,101,260 Shares of Common Stock, par value $.001 per Share No. W-__________ THIS CERTIFIES that, for value received, NEW TECHNOLOGY HOLDINGS INC., 550 Madison Avenue, New York, New York 10022 (the "Holder"), is entitled to subscribe for and purchase from EUNIVERSE, INC., a Nevada corporation (the "Company"), upon the terms and subject to the conditions set forth herein, at any time or from time to time after the date hereof and up to and including 5:00 P.M. on September 6, 2004, New York time (the "Exercise Period"), up to a maximum of 1,101,260 shares (as adjusted pursuant to the terms hereof, the "Warrant Shares") of the Company's common stock, par value $.001 per share (the "Common Stock"). This Warrant shall be exercisable to purchase the Warrant Shares at the following exercise prices: $4.50 per share for the first 701,260 Warrant Shares to be purchased pursuant to the exercise hereof, $5.00 per share for the next 200,000 Warrant Shares to be purchased after the Holder has purchased 701,260 Warrant Shares hereunder, and $6.00 per share for the next 200,000 Warrant Shares to be purchased after the Holder has purchased 901,260 Warrant Shares hereunder (each, an "Exercise Price"). As used herein the term "this Warrant" shall mean and include this Warrant and any Warrant or Warrants hereafter issued as a consequence of the exercise or transfer of this Warrant in whole or in part. The number of shares of Common Stock issuable upon exercise of this Warrant and each Exercise Price may be adjusted from time to time as hereinafter set forth. 1. This Warrant may be exercised during the Exercise Period, as to the whole or any lesser number of whole Warrant Shares, by the surrender of this Warrant (with the form of election attached hereto duly executed) to the Company at its office at 101 North Plains Industrial Road, Wallingford, Connecticut 06492, or at such other place as is designated in writing by the Company, together with (a) a certified or bank cashier's check payable to the order of the Company in an amount equal to the applicable Exercise Price multiplied by the number of Warrant Shares for which this Warrant is being exercised (the "Aggregate Exercise Price") and (b) the acceptance by the Holder of a number of Warrant Shares equal to the number of Warrant Shares being purchased upon such exercise. 2. Upon each exercise of the Holder's rights to purchase Warrant Shares, the Holder shall be deemed to be the holder of record of the Warrant Shares issuable upon such exercise, notwithstanding that the transfer books of the Company shall then be closed or certificates representing such Warrant Shares shall not then have been actually delivered to the Holder. As soon as practicable after each such exercise of this Warrant, the Company shall issue and deliver to the Holder a certificate or certificates for the Warrant Shares issuable upon such exercise, registered in the name of the Holder or its designee. If this Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the right of the Holder to purchase the balance of the Warrant Shares (or portions thereof) subject to purchase hereunder. 3. Any Warrants issued upon the transfer or exercise in part of this Warrant shall be numbered and shall be registered in a warrant register (the "Warrant Register") as they are issued. The Company shall be entitled to treat the registered holder of any Warrant on the Warrant Register as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such Warrant on the part of any other person, and shall not be liable for any registration or transfer of Warrants which are registered or to be registered in the name of a fiduciary or the nominee of a fiduciary unless made with the actual knowledge that a fiduciary or nominee is committing a breach of trust in requesting such registration or transfer, or with the knowledge of such facts that its participation therein amounts to bad faith. This Warrant shall be transferable only on the books of the Company upon delivery thereof duly endorsed by the Holder or by his or its duly authorized attorney or representative, or accompanied by proper evidence of succession, assignment, or authority to transfer. In all cases of transfer by an attorney, executor, administrator, guardian, or other legal representative, duly authenticated evidence of his or its authority shall be produced. Upon any registration of transfer, the Company shall deliver a new Warrant or Warrants to the person entitled thereto. This Warrant may be exchanged, at the option of the Holder thereof, for another Warrant, or other Warrants of different denominations, of like tenor and representing in the aggregate the right to purchase a like number of Warrant Shares (or portions thereof), upon surrender to the Company or its duly authorized agent. 4. The Company shall at all times reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose of providing for the exercise of the rights to purchase all Warrant Shares granted pursuant to the Warrants, such number of shares of Common Stock as shall, from time to time, be sufficient therefor. The Company covenants that all shares of Common Stock issuable upon exercise of this Warrant, upon receipt by the Company of the full Exercise Price therefor, shall be validly issued, fully paid, nonassessable, and free of preemptive rights of third parties. 5. (a) In case the Company shall at any time after the date this Warrant was first issued (i) declare a dividend on the outstanding shares of Common Stock payable in shares of its Common Stock, (ii) subdivide the outstanding shares of Common Stock, (iii) combine the outstanding shares of Common Stock into a smaller number of shares, or (iv) issue any shares of its capital stock by reclassification of the shares of Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation), then, in each case, the applicable Exercise Price, and the number of Warrant Shares issuable upon exercise of this Warrant, in effect at the time of the record date for 2 such dividend or of the effective date of such subdivision, combination, or reclassification, shall be proportionately adjusted so that the Holder after such time shall be entitled to receive the aggregate number and kind of shares which, if such Warrant had been exercised immediately prior to such time, it would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination, or reclassification. Such adjustment shall be made successively whenever any event listed above shall occur. (b) Whenever there shall be an adjustment as provided in this Section 5, the Company shall promptly cause written notice thereof to be sent by registered mail, postage prepaid, to the Holder, at its address as it shall appear in the Warrant Register, which notice shall be accompanied by an officer's certificate setting forth the number of Warrant Shares purchasable upon the exercise of this Warrant and the Exercise Price(s) after such adjustment and setting forth a brief statement of the facts requiring such adjustment and the computation thereof, which officer's certificate shall be conclusive evidence of the correctness of any such adjustment absent manifest error. (c) The Company shall not be required to issue fractions of shares of Common Stock or other capital stock of the Company upon the exercise of this Warrant. 6. (a) In case of any consolidation with or merger of the Company with or into another corporation (other than a merger or consolidation in which the Company is the surviving or continuing corporation), or in case of any sale, lease, or conveyance to another corporation of the property and assets of any nature of the Company as an entirety or substantially as an entirety, such successor, leasing, or purchasing corporation, as the case may be, shall (i) execute with the Holder an agreement providing that the Holder shall have the right thereafter to receive upon exercise of this Warrant solely the kind and amount of shares of stock and other securities, property, cash, or any combination thereof receivable upon such consolidation, merger, sale, lease, or conveyance by a holder of the number of shares of Common Stock for which this Warrant might have been exercised immediately prior to such consolidation, merger, sale, lease, or conveyance and (ii) make effective provision in its certificate of incorporation or otherwise, if necessary, to effect such agreement. Such agreement shall provide for adjustments which shall be as nearly equivalent as practicable to the adjustments in Section 5. (b) In case of any reclassification or change of the shares of Common Stock issuable upon exercise of this Warrant (other than a change in par value or from no par value to a specified par value, or as a result of a subdivision or combination, but including any change in the shares into two or more classes or series of shares), or in case of any consolidation or merger of another corporation into the Company in which the Company is the continuing corporation and in which there is a reclassification or change (including a change to the right to receive cash or other property) of the shares of Common Stock (other than a change in par value, or from no par value to a specified par value, or as a result of a subdivision or combination, but including any change in the shares into two or more classes or series of shares), the Holder shall have the right thereafter to receive upon exercise of this Warrant solely the kind and amount of shares of stock and other securities, property, cash, or any combination thereof receivable upon such reclassification, change, consolidation, or merger by a holder of the number of shares of 3 Common Stock for which this Warrant might have been exercised immediately prior to such reclassification, change, consolidation, or merger. Thereafter, appropriate provision shall be made for adjustments which shall be as nearly equivalent as practicable to the adjustments in Section 5. (c) In case of any sale (publicly or privately) by the Company of (i) shares of its Common Stock, (ii) securities convertible into shares of its Common Stock, or (iii) options or warrants to purchase shares of its Common Stock or securities convertible into shares of its Common Stock ("Additional Shares of Common Stock") at a sale, conversion or exercise price per share as determined by the Board of Directors of the Company (the "Issue Price"), as the case may be, less than any Exercise Price then in effect, each Exercise Price which is greater than the Issue Price (A) if such sale of Additional Shares of Common Stock is prior to the six-month anniversary of the date hereof, shall be reset to the Issue Price and the number of shares purchasable pursuant to that portion of this Warrant shall be increased pro rata to the percentage reduction in such Exercise Price, and (B) if such sale of Additional Shares of Common Stock is after the six-month anniversary of the date hereof, shall be adjusted to a price determined by multiplying the applicable Exercise Price by a fraction (i) the numerator of which shall be the sum of (x) the number of shares of Common Stock outstanding (on a fully-diluted basis) immediately prior to such issue or sale of Additional Shares of Common Stock plus (y) the quotient obtained by dividing the Aggregate Consideration Received (as hereinafter defined) by the Company for the total number of Additional Shares of Common Stock so issued or sold (or deemed so issued or sold) by the applicable Exercise Price in effect immediately prior to such issue or sale; and (ii) the denominator of which shall be the sum of (A) the number of shares of Common Stock outstanding (on a fully-diluted basis) immediately prior to such issue or sale plus (B) the number of Additional Shares of Common Stock so issued or sold (or deemed so issued and sold). (d) Section 6(c) shall not apply to (i) any shares issued upon exercise or conversion of any currently outstanding options, warrants or convertible securities or (ii) shares of any Common Stock options or warrants issuable pursuant to the Company's Stock Option Plan as currently in effect or any underlying Common Stock issued on the exercise thereof. (e) The Issue Price shall be calculated taking into account the amount paid for the issuance of such Common Stock, option or warrant or convertible security and the amount, if any, payable upon the exercise or conversion thereof. (f) The "Aggregate Consideration Received" by the Company for any issue or sale (or deemed issue or sale) of securities shall (A) to the extent it consists of cash, be computed at the gross amount of cash received by the Company before deduction of any reasonable or customary underwriting or similar commissions, compensation or concessions paid or allowed by the Company in connection with such issue or sale and without deduction of any expenses payable by the Company; (B) to the extent it consists of property other than cash, be computed at the fair value of that property determined in good faith by the Company's board of directors; and (C) if Additional Shares of Common Stock, convertible securities or rights or options to purchase either Additional Shares of Common Stock or convertible securities are issued or sold together 4 with other stock or securities or other assets of the Company for a consideration that covers both, be computed as the portion of the consideration so received that may be reasonably determined in good faith by the Company's board of directors to be allocable to such Additional Shares of Common Stock, convertible securities or rights or options. (g) The above provisions of this Section 6 shall similarly apply to successive reclassifications and changes of shares of Common Stock and to successive consolidations, mergers, sales, leases, or conveyances. 7. In case at any time the Company shall propose: (a) to pay any dividend or make any distribution on shares of Common Stock in shares of Common Stock or make any other distribution to all holders of Common Stock; or (b) to effect any reclassification or change of outstanding shares of Common Stock, or any consolidation, merger, sale, lease, or conveyance of property, described in Section 6; or (c) to effect any liquidation, dissolution, or winding-up of the Company, except for the reincorporation of the Company into Delaware; (d) effect any sale of its Common Stock or securities convertible into Shares of its Common Stock; or (e) to take any other action which would cause an adjustment to any Exercise Price; then, and in any one or more of such cases, the Company shall give written notice thereof, by registered mail, postage prepaid, to the Holder at the Holder's address as it shall appear in the Warrant Register, mailed at least 15 days prior to (i) the date as of which the holders of record of shares of Common Stock to be entitled to receive any such dividend or distribution is to be determined, (ii) the date on which any such reclassification, change of outstanding shares of Common Stock, consolidation, merger, sale, lease, conveyance of property, liquidation, dissolution, or winding-up is expected to become effective, and the date as of which it is expected that holders of record of shares of Common Stock shall be entitled to exchange their shares for securities or other property, if any, deliverable upon such reclassification, change of outstanding shares, consolidation, merger, sale, lease, conveyance of property, liquidation, dissolution, or winding up, (iii) the date on which any such sale is expected to be consummated, or (iv) the date of such action which would require an adjustment to any Exercise Price. 8. The issuance of any shares of Common Stock or other securities upon the exercise of this Warrant, and the delivery of certificates or other instruments representing such shares or other securities, shall be made without charge to the Holder for any tax or other charge in respect of such issuance. The Company shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of any certificate in a 5 name other than that of the Holder and the Company shall not be required to issue or deliver any such certificate unless and until the person or persons requesting the issue thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. 9. The registration rights of the Holder (including the Holder's successors) with respect to this Warrant and the Warrant Shares will be as set forth in Annex A hereto. 10. The certificate or certificates evidencing such Warrant Shares shall bear a legend in substantially the following form: "THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS." 11. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction, or mutilation of any Warrant (and upon surrender of any Warrant if mutilated), and upon reimbursement of the Company's reasonable incidental expenses, the Company shall execute and deliver to the Holder thereof a new Warrant of like date, tenor, and denomination. 12. The Holder of any Warrant shall not have, solely on account of such status, any rights of a stockholder of the Company, either at law or in equity, or to any notice of meetings of stockholders or of any other proceedings of the Company, except as provided in this Warrant. 13. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (i) upon personal delivery to the party to be notified; (ii) five business days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (iii) one business day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the Company at 101 North Plains Industrial Road, Wallingford, Connecticut 06492; Fax: 203-265-7798, Attention: Brad Greenspan; and to the Holder c/o Sony Music Entertainment Inc., 550 Madison Avenue, New York, New York 10022, Fax: 212-833-7844, Attention: Senior Vice President-Business Affairs and Administration, and Senior Vice President, General Manager - New Technology and Business Development or at such other address as the Company or the Holder may designate by ten days' advance written notice to the other parties hereto. 14. The rights and obligations of the Company, of the holder of this Warrant and holder of shares of Common Stock issued upon exercise of this Warrant, referred to in Section 9, shall survive the exercise of this Warrant. 15. This Warrant shall be binding upon the Company and its successors and assigns and shall inure to the benefit of the Holder and its successors and assigns. The Holder 6 may assign the Holder's rights under this Warrant, in whole or in part, to any of its affiliates or the affiliates of Sony Music Entertainment, Inc., and such rights may be similarly assigned by such assignee. The provisions of this Agreement, together with Annex A attached hereto, are subject to the terms of existing registration rights obligations of the Company as of the date hereof (as set forth on Annex B hereto) 16. This Warrant shall be construed in accordance with the laws of the State of New York applicable to contracts made and performed within such State, without regard to principles of conflicts of law. 7 IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its Chief Executive Officer under its corporate seal and attested by its Secretary on the day and year first written below. Dated: September 6, 2000 EUNIVERSE, INC. By: /s/ Brad Greenspan -------------------- Name: Brad Greenspan Title: President and Chief Executive Officer [Seal] ATTEST: /s/ William Wagner - ------------------ Secretary [Signature Page for Warrant] 8 ANNEX A ------- REGISTRATION RIGHTS ------------------- A. Registration. (a) After six months from the date of the Warrant to ------------ which this Annex A is attached, if the Company shall receive a written request from the Holder that the Company prepare and file with the Securities and Exchange Commission (the "Commission") a registration statement under the Securities Act of 1933, as amended (the "Securities Act") covering the registration of Warrant Shares (the "Subject Stock") having an aggregate offering price to the public of not less than $1,000,000, then the Company shall, subject to the limitations of this Annex A, (A) prepare and file such registration statement, (B) use its best efforts to cause the registration statement to be declared effective as soon as possible after the filing thereof, but in any event prior to the earlier of (i) 60 days from the date of the request by the Holder and (ii) the date which is within five days of the date on which the Commission informs the Company that the Commission will not review the registration statement or that the Company may request the acceleration of the effectiveness of the registration statement, and (C) to keep such registration statement continuously effective under the Securities Act until such date as is the earlier of (x) the date when all Subject Stock covered by such registration statement has been sold or (y) the date on which the Subject Stock may be sold without any restriction pursuant to Rule 144(k) promulgated by the Commission pursuant to the Securities Act, as such rule may be amended from time to time, as determined by the counsel to the Company pursuant to a written opinion letter, addressed to the Company's transfer agent to such effect (the "Effectiveness Period"). (b) If the Holder intends to distribute the Subject Stock covered by its request by means of an underwriting, it shall so advise the Company as a part of its request made pursuant to this paragraph. In such event, the right of the Holder to include its shares of Subject Stock in such registration shall be conditioned upon the Holder's participation in such underwriting and the inclusion of such Holder's Subject Stock in the underwriting to the extent provided herein. The Holder shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected by the Holder (which underwriter or underwriters shall be reasonably acceptable to the Company). (c) The Company shall not be required to effect a registration pursuant to this Paragraph A after the Company has effected four registrations pursuant to this paragraph, and such registrations have been declared effective. B. Registration Procedure. In connection with the Company's registration ---------------------- obligations hereunder, the Company shall: (a) Prepare and file with the Commission a registration statement with respect to such Subject Stock in accordance with the method or methods of distribution thereof as 9 specified by the Holder (except if otherwise directed by the Holder), and cause the registration statement to become effective and remain effective as provided herein; provided, however, that not less than five business -------- ------- days prior to the filing of such registration statement or any related prospectus or any amendment or supplement thereto (including any document that would be incorporated therein by reference), the Company shall (i) furnish to the Holder and its legal counsel, copies of all such documents proposed to be filed, which documents (other than those incorporated by reference) will be subject to the review of such Holder and such legal counsel, and (ii) at the request of the Holder cause its officers and directors, counsel and independent certified public accountants to respond to such inquiries as shall be necessary, in the reasonable opinion of counsel to the Holder, to conduct a reasonable investigation within the meaning of the Securities Act. The Company shall not file the registration statement or any such prospectus or any amendments or supplements thereto to which the Holder or its legal counsel shall reasonably object in writing within three business days of their receipt thereof. (b) Prepare and file with the Commission such amendments, including post- effective amendments, to the registration statement as may be necessary to keep the registration statement continuously effective as to the applicable Subject Stock for the Effectiveness Period and prepare and file with the Commission such additional registration statements in order to register for resale under the Securities Act all of the Subject Stock; (ii) cause the related prospectus to be amended or supplemented by any required prospectus supplement, and as so supplemented or amended to be filed pursuant to Rule 424 (or any similar provisions then in force) promulgated under the Securities Act; (iii) respond as promptly as possible to any comments received from the Commission with respect to the registration statement or any amendment thereto and as promptly as possible provide the Holder true and complete copies of all correspondence from and to the Commission relating to the registration statement; and (iv) comply in all material respects with the provisions of the Securities Act and the Securities Exchange Act of 1934, as amended (the "Exchange Act") with respect to the disposition of all shares of Subject Stock covered by the registration statement during the applicable period in accordance with the intended methods of disposition by the Holder thereof set forth in the registration statement as so amended or in such prospectus as so supplemented. (c) Notify the Holder and its legal counsel as promptly as possible (and, in the case of (i)(A) below, not less than five business days prior to such filing) and (if requested by any such person) confirm such notice in writing no later than one business day following the day: (i)(A) when a prospectus or any prospectus supplement or post-effective amendment to the registration statement is proposed to be filed; (B) when the Commission notifies the Company whether there will be a "review" of such registration statement and whenever the Commission comments in writing on such registration statement; and (C) with respect to the registration statement or any post-effective amendment, when the same has become effective; (ii) of any request by the Commission or any other federal or state governmental authority for amendments or supplements to the registration statement or prospectus or for additional information; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the registration statement covering any or all of the Subject Stock or the initiation of any action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened (each, a "Proceeding") for that purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Subject Stock for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose; and (v) of the occurrence of any event that makes any statement made in the registration statement or prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to the registration statement, prospectus or other documents so that, in the case of the registration statement or the prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (d) The Company shall promptly furnish to the Holder's legal counsel, without charge, (i) any correspondence from the Commission or the Commission's staff to the Company or its representatives relating to any registration statement and (ii) promptly after the same is prepared and filed with the Commission, a copy of any written response to the correspondence received from the Commission. (e) Use its best efforts to avoid the issuance of, or, if issued, obtain the withdrawal of, (i) any order suspending the effectiveness of the registration statement or (ii) any suspension of the qualification (or exemption from qualification) of any of the Subject Stock for sale in any jurisdiction, at the earliest practicable moment. (f) If requested by the Holder, (i) promptly incorporate in a prospectus supplement or post-effective amendment to the registration statement such information as the Company reasonably agrees should be included therein and (ii) make all required filings of such prospectus supplement or such post- effective amendment as soon as practicable after the Company has received notification of the matters to be incorporated in such prospectus supplement or post-effective amendment. (g) Furnish to the Holder and its legal counsel, without charge, at least one conformed copy of each registration statement and each amendment thereto, including financial statements and schedules, all documents incorporated or deemed to be incorporated therein by reference, and all exhibits to the extent requested by such person (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission. (h) Promptly deliver to the Holder and its legal counsel, without charge, as many copies of the registration statement, prospectus or prospectuses (including each form of prospectus) and each amendment or supplement thereto as such persons may reasonably request; and the Company hereby consents to the use of such prospectus and each amendment or supplement thereto by the Holder in connection with the offering and sale of the Subject Stock covered by such prospectus and any amendment or supplement thereto. (i) Prior to any public offering of the Subject Stock, use its best efforts to register or qualify or cooperate with the Holder and its legal counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Subject Stock for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as the Holder requests in writing, to keep each such registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Subject Stock covered by a registration statement; provided, however, that the -------- ------- Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action that would subject it to general service of process in any such jurisdiction where it is not then so subject or subject the Company to any material tax in any such jurisdiction where it is not then so subject. (j) Cooperate with the Holder to facilitate the timely preparation and delivery of certificates representing Subject Stock to be sold pursuant to a registration statement, which certificates shall be free of all restrictive legends, and to enable such Subject Stock to be in such denominations and registered in such names as the Holder may request at least two business days prior to any sale of Subject Stock. (k) Upon the occurrence of any event contemplated by Paragraph B(c)(vi), as promptly as possible, prepare a supplement or amendment, including a post- effective amendment, to the registration statement or a supplement to the related prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither the registration statement nor such prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (l) Use its best efforts to cause all Subject Stock relating to such registration statement to be listed on NASDAQ and any other securities exchange, quotation system or market, if any, on which similar securities issued by the Company are then listed. (m) Comply in all material respects with all applicable rules and regulations of the Commission and make generally available to its security holders earning statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 not later than 45 days after the end of any 12- month period (or 90 days after the end of any 12-month period if such period is a fiscal year) commencing on the first day of the first fiscal quarter of the Company after the effective date of the registration statement, which statement shall conform to the requirements of Rule 158. (n) Within two business days after the registration statement which includes the Subject Stock is ordered effective by the Commission, the Company shall deliver, and shall cause legal counsel for the Company to deliver, to the transfer agent for such Subject Stock (with copies to the Holder) confirmation that the registration statement has been declared effective by the Commission in the form attached hereto as Schedule 1. ---------- C. Registration Expenses. All fees and expenses incident to the performance of --------------------- or compliance with this Annex A by the Company shall be borne by the Company whether or not the registration statement is filed or becomes effective and whether or not any Subject Stock is sold pursuant to the registration statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation, the following: (i) all registration and filing fees (including, without limitation, fees and expenses (A) with respect to filings required to be made with NASDAQ and each other securities exchange or market on which Subject Stock are required hereunder to be listed, (B) with respect to filings required to be made with the Commission and (C) in compliance with state securities or Blue Sky laws (including, without limitation, fees and disbursements of counsel for the Holder in connection with Blue Sky qualifications of the Subject Stock and determination of the eligibility of the Subject Stock for investment under the laws of such jurisdictions as the Holder may designate)), (ii) printing expenses (including, without limitation, expenses of printing certificates for Subject Stock and of printing prospectuses if the printing of prospectuses is requested by the Holder), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company and the legal counsel for the Holder, (v) Securities Act liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of all other persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement, including, without limitation, the Company's independent public accountants (including the expenses of any comfort letters or costs associated with the delivery by independent public accountants of a comfort letter or comfort letters); it being understood that the Company shall not be responsible for any discounts and commissions payable with respect to the sale of any Subject Stock. In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Annex A (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit, the fees and expenses incurred in connection with the listing of the Subject Stock on any securities exchange as required hereunder. D. Piggy-Back Registrations. If at any time after the date hereof when there ------------------------ is not an effective registration statement covering the Warrant Shares, the Company shall determine to prepare and file with the Commission a registration statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or its then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with stock option or other employee benefit plans, the Company shall send to the Holder written notice of such determination and, if within 30 days after receipt of such notice, the Holder shall so request in writing (which request shall specify the shares of Subject Stock intended to be disposed of by the Holder), the Company will cause the registration under the Securities Act of all Subject Stock which the Company has been so requested to register by the holder, to the extent requisite to permit the disposition of the Subject Stock so to be registered, provided that if at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register or to delay registration of such securities, the Company may, at its election, give written notice of such determination to such holder and, thereupon, (i) in the case of a determination not to register, shall be relieved of its obligation to register any Subject Stock in connection with such registration (but not from its obligation to pay expenses in accordance with this Annex A), and (ii) in the case of a determination to delay registering, shall be permitted to delay registering any Subject Stock being registered pursuant to this paragraph for the same period as the delay in registering such other securities. The Company shall include in such registration statement all or any part of such Subject Stock the Holder requests to be registered; provided, however, that the Company shall not be -------- ------- required to register any Subject Stock pursuant to this paragraph that are eligible for sale pursuant to Rule 144(k) of the Securities Act. In the case of an underwritten public offering, if the managing underwriter(s) should reasonably object in writing to the inclusion of the Subject Stock in such registration statement, then if the Company after consultation with the managing underwriter should reasonably determine that the inclusion of such Subject Stock would materially adversely affect the offering contemplated in such registration statement, and, based on such determination, recommends inclusion in such registration statement of fewer or none of the shares of Subject Stock of the Holder, then, as applicable (x) the number of shares of Subject Stock included in such registration statement shall be reduced, or (y) none of the shares of Subject Stock of the Holder shall be included in such registration statement. E. Company Indemnification. In the case of any offering registered pursuant to ----------------------- this Annex A, the Company agrees to indemnify and hold harmless the Holder and each controlling person of the Holder within the meaning of Section 15 of the Securities Act, and the directors and officers of the Holder, against any and all losses, claims, damages or liabilities to which they or any of them may become subject under the Securities Act or any other statute or common law or otherwise, and to reimburse them, from time to time upon request, for any legal or other expenses reasonably incurred by them in connection with investigating any claims and defending any actions, insofar as any such losses, claims, damages, liabilities or actions shall arise out of or shall be based upon any untrue statement or alleged untrue statement contained in the registration statement relating to the sale of such Subject Stock in any preliminary prospectus or in any prospectus or in any supplement or amendment to any of the foregoing of a material fact, or the omission or alleged omission to state therein a material fact required to be stated or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, -------- ------- that the indemnification agreement contained in this paragraph shall not apply to such losses, claims, damages, liabilities or actions which shall arise from (i) the sale of Subject Stock if such losses, claims, damages, liabilities or actions shall arise out of or shall be based upon any such untrue statement or alleged untrue statement, or any such omission or alleged omission, if such statement or omission shall have been made in reliance upon and in conformity with information furnished in writing to the Company by the Holder specifically for use in connection with the preparation of the registration statement or any preliminary prospectus or prospectus contained in the registration statement or any amendment thereof or supplement thereto; or (ii) any actual or alleged untrue statement of a material fact or any actual or alleged omission of a material fact required to be stated in any preliminary prospectus if the Holder sells securities to a person to whom there was not sent or given, at or prior to the written confirmation of such sale, a copy of the final prospectus or of the final prospectus as then amended or supplemented, whichever is most recent, if the Company had previously furnished copies thereof to the Holder or its representatives and such final prospectus, as then amended or supplemented, corrected any such misstatement or omission; or (iii) the use of any preliminary, final or summary prospectus by or on behalf of the Holder after the Company has notified the Holder that such prospectus contains an untrue statement of a material fact or omits to state a material fact required to be stated therein, in light of the circumstances under which they were made, not misleading; or (iv) the use of any final prospectus, as amended or supplemented, by or on behalf of the Holder after such time as the obligation of the Company under this Annex A to keep the related registration statement effective has expired; or (v) any violation of any federal or state securities laws, rules or regulations committed by the Holder (other than any violation that arises out of or is based upon the circumstances described above and as to which the Holder would otherwise be entitled to indemnification hereunder). F. Holder Indemnification. In connection with any registration statement in ---------------------- which the Holder is participating, the Holder will indemnify, to the extent permitted by law, the Company, controlling persons of the Company under Section 15 of the Securities Act and its directors and officers against any and all losses, claims, damages, liabilities and expenses resulting, and to reimburse them, from time to time upon request, for any legal or other expenses reasonably incurred by them in connection with investigating any claims and defending any actions, solely by reason of (i) any untrue statement of a material fact or any omission of a material fact necessary to make the statements therein not misleading, in the registration statement or any prospectus or preliminary prospectus or any amendment or supplement thereto, but only to the extent that such untrue statement is contained in, or such omission is omitted from, information so furnished to the Company by the Holder in writing; or (ii) the use of any prospectus by or on behalf of the Holder (x) after the Company has notified the Holder that such prospectus contains an untrue statement of a material fact or omits to state a material fact required to be stated therein, in light of the circumstances under which they were made, not misleading or (y) after such time as the obligation of the Company to keep the related registration statement effective and current has expired; or (iii) the failure to send or deliver to a party to whom the Holder sells the securities, at or prior to the written confirmation of sale, a copy of the final prospectus or of the final prospectus as then amended or supplemented, whichever is most recent, if the Company had previously furnished copies thereof to the Holder or its representatives; or (iv) any violation of the Holder of any federal or state securities law or rule or regulation thereunder (other than any violation that arises out of or is based upon the circumstances described above and as to which the Holder is entitled to indemnification hereunder); provided, however, that the Holder -------- ------- shall not be liable in the aggregate for any amounts exceeding the product of the sale price minus the exercise price per share of Subject Stock of the Holder sold in such registered offering and the number of shares of Subject Stock sold pursuant to such registration statement or prospectus by the Holder. G. Indemnification Procedure. (a) Each party indemnified under Paragraph E ------------------------- or F of this Annex A shall, promptly after receipt of notice of the commencement of any action against such indemnified party in respect of which indemnity may be sought hereunder, notify the indemnifying party in writing of the commencement thereof. The omission of any indemnified party to so notify an indemnifying party of any such action shall not relieve the indemnifying party from any liability in respect of such action which it may have to such indemnified party on account of the indemnity agreement contained in Paragraph E or F of this Annex A, unless the indemnifying party was prejudiced by such omission, and in no event shall relieve the indemnifying party from any other liability which it may have to such indemnified party. In case any such action shall be brought against any indemnified party and it shall notify an indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it may desire to assume the defense thereof through counsel satisfactory to the indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under Paragraph E or F of this Annex A for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof, other than reasonable costs of investigation (unless such indemnified party reasonably objects to such assumption on the grounds that there may be defenses available to it which are different from or in addition to such indemnifying party in which event the indemnified party shall be reimbursed by the indemnifying party for the expenses incurred in connection with retaining one separate legal counsel). (b) Nothing in Paragraph E or F of this Annex A shall prevent the indemnified party from retaining counsel of its own choosing, at its own expense, to defend or cooperate in the defense or investigation of any claim in respect of which indemnification is available hereunder. No indemnifying party will consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. (c) If recovery is not available under the foregoing indemnification provisions, for any reason other than as specified therein, the parties entitled to indemnification by the terms thereof shall be entitled to contribution for any and all loses, claims, damages, or liabilities, joint or several, and expenses to which they may become subject, in such proportion as is appropriate to reflect the relative fault of the parties entitled to indemnification, on the one hand, and the indemnifying parties, on the other, in connection with the matter out of which such losses, claims, damages, liabilities or expenses arise or result from. In determining the amount of contribution to which the respective parties are entitled, there shall be considered the parties' relative knowledge and access to information concerning the matter with respect to which the action was asserted, the opportunity to correct and prevent any statement or omission, and any other equitable considerations appropriate under the circumstances. The Company and the Holder agree that it would not be equitable if the amount of such contribution were determined by pro rata or per capita allocations. Notwithstanding the provisions of this paragraph the Holder shall not be required to contribute any amount in excess of the amount by which the net proceeds received by such Holder from the sale of its Warrant or underlying shares of Common Stock exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. H. Notwithstanding the foregoing, the Holder shall furnish to the Company such information regarding the Holder, its intended method of distribution of the securities and such other information as the Company may from time to time reasonably request for purposes of preparation of any registration statement pursuant to this Annex A and to maintain the effectiveness of such registration statement. (i) At least five business days prior to any disposition of the Subject Stock (other than pursuant to an underwritten offering) by the Holder, the Holder will orally advise the Company (and promptly confirm such advise in writing) of the dates on which such disposition is expected to commence and terminate, the number of shares of Subject Stock expected to be sold, the method of disposition and such other information as the Company may reasonably request in order to supplement the prospectus contained in the registration statement in accordance with the rules and regulations of the Commission. Promptly after receiving such advise, the Company will, if necessary, (x) prepare a supplement to the prospectus based upon such advice and file the same with the Commission pursuant to Rule 424(b) under the Securities Act and (y), if necessary, qualify the Subject Stock to be sold under the securities or blue sky laws of such jurisdiction in the United States as the Holder shall reasonably request (subject to the proviso of Paragraph B(i) of this Annex A). (ii) The Holder agrees that, upon receipt of any notice from the Company of any event of the kind described in Paragraph B(c)(v) of this Annex A, the Holder will forthwith discontinue disposition of the securities pursuant to such registration statement until receipt of copies of the supplemented or amended prospectus contemplated by Paragraph D, and, if so directed by the Company, will deliver to the Company all copies of the prospectus covering the Subject Stock in its possession at the time of receipt of such notice. (iii) The Holder shall, at any time it is engaged in a distribution of the Subject Stock, comply with Regulation M (or any successor provisions then in force) promulgated under the Exchange Act, and (x) will not engage in any stabilization activity in connection with the securities of the Company in contravention of such rules, (y) will distribute the securities solely in the manner described in the registration statement and (z) will not bid for or purchase any securities of the Company or attempt to induce any person to purchase any securities of the Company other than as permitted under the Exchange Act. (iv) The Holder shall provide such information and materials, execute all such documents and take all such other actions as the Company shall reasonably request in order to permit the Company to comply with all applicable requirements of law and to effect the registration of the Holder's securities. (v) If securities of the Company are registered for sale pursuant to Rule 415 under the Securities Act, the Holder shall cease any distribution of such shares under the registration statement twice a year, for up to 90 days each, upon the request of the Company if: (x) such distribution would require the public disclosure of material non-public information concerning any transaction or negotiations involving the Company or any of its affiliates that, in the good faith judgment of the Company's Board of Directors (or the executive thereof), would materially interfere with such transaction or negotiations, (y) such distribution would otherwise require premature disclosure of information that, in the good faith judgment of the Company's Board of Directors, would adversely affect or otherwise be detrimental to the Company or (z) the Company proposes to file a registration statement under the Securities Act for the offering and sale of securities for its own account in an underwritten offering and the managing underwriter therefor shall advise the Company in writing (with a copy to the Holder) that in its opinion the continued distribution of the securities would adversely affect the success of the offering of the securities proposed to be registered for the account of the Company. The Company shall promptly notify the Holder at such time as (i) such transactions or negotiations have been otherwise publicly disclosed or terminated, (ii) such non-public information has been publicly disclosed or counsel to the Company has determined that such disclosure is not required due to subsequent events or (iii) the completion of such underwritten offering. (vi) The Company shall be entitled to postpone once a year, for a reasonable period of time not to exceed 90 days, the filing of a registration statement otherwise required to be prepared and filed by it pursuant to Paragraph A of this Annex A if, at the time it receives the written demand, (x) such registration would require the public disclosure of material non-public information concerning any transaction or negotiations involving the Company or any affiliate that, in the opinion of counsel to the Company, is not yet required to be publicly disclosed and the Company's Board of Directors, in good faith, determines that such disclosure would materially interfere with such transaction or negotiations, (y) such registration would, in the good faith judgment of the Company, otherwise require premature disclosure of information which would adversely affect or otherwise be detrimental to the Company, or (z) the Company has filed or is in the process of preparing for filing a registration statement under the Securities Act for the offering and sale of securities for its own account in an underwritten offering and the managing underwriter therefor shall advise the Company in writing (with a copy to the Holder) that in its opinion the filing or effectuation of a registration statement pursuant to this Annex A would adversely affect the success of the offering of the securities proposed to be registered or offered for the account of the Company. I. Rule 144 Disclosure. With a view to making available the benefits of ------------------- certain rules and regulations of the SEC that may at any time permit the sale of the Subject Stock to the public without registration, the Company agrees to: (i) make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act; (ii) use it best efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and (iii) so long as the Holder owns the Warrant and shares of Common Stock, to furnish to the Holder forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of said Rule 144, and of the Securities Act and the Exchange Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents of the Company as the Holder may reasonably request in availing itself of any rule or regulation of the SEC allowing the Holder to sell any such securities without registration. J. Assignment of Registration Rights. The rights of the Holder hereunder, --------------------------------- including the right to have the Company register for resale Subject Stock in accordance with the terms of this Annex A, shall be automatically assignable by the Holder to any of the Holder's affiliates or the affiliates of Sony Music Entertainment Inc., of all or a portion of the Warrant or the Subject Stock if: (i) the Holder agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the Company within a reasonable time after such assignment, (ii) the Company is, within a reasonable time after such transfer or assignment, furnished with written notice of (a) the name and address of such transferee or assignee, and (b) the securities with respect to which such registration rights are being transferred or assigned, (iii) following such transfer or assignment the further disposition of such securities by the transferee or assignees is restricted under the Securities Act and applicable state securities laws and (iv) at or before the time the Company receives the written notice contemplated by clause (ii) of this paragraph, the transferee or assignee agrees in writing with the Company to be bound by all of the provisions of this Annex A. In addition, such other Holders shall have the right to assign their rights hereunder to any other person. The rights to assignment shall apply to the Holders (and to subsequent) successors and assigns. EX-99.5 6 0006.txt LETTER OF INTENT EXHIBIT 5 New Technology Holdings Inc. 550 Madison Avenue New York, New York 10022 August 22, 2000 eUniverse, Inc. 101 North Plains Industrial Road Wallingford, Connecticut 06492 Attn: Brad Greenspan Gentlemen: This letter ("Letter of Intent") will confirm the intentions of New Technology Holdings Inc., a subsidiary of Sony Music Entertainment Inc. ("NTH"), and eUniverse, Inc. ("EUNI"), with respect to, among other things, a secured loan from NTH to EUNI in the amount of $3,155,670, and the completion of such other agreements as are set forth in this Letter of Intent (the "Transactions"). It is understood that the terms of this Letter of Intent set forth the binding obligations of NTH and EUNI with respect to the matters described herein; provided, however, that in the event the Transactions are not consummated on or before August 28, 2000, any obligations under this Letter of Intent will terminate, unless otherwise agreed by the parties. Notwithstanding any other provision of this Letter of Intent, EUNI acknowledges that NTH shall have no obligations to consummate the Transactions or any element thereof if, in completing its financial, legal, technical and corporate "due diligence" investigations of EUNI and its operations, it shall not have received reports satisfactory to NTH from accountants, legal advisors, technical advisors and corporate staff of NTH with respect thereto. 1. Closing The closing of the Transactions (the "Closing") will take place at ------- such date (the "Closing Date") and in such place as the parties mutually determine (except that the Closing Date will not be more than thirty (30) days after the date hereof without NTH's approval). 2. Loan ---- (a) Upon the terms and subject to the conditions of this Letter of Intent and the definitive agreements relating thereto, NTH agrees to make loans to EUNI in the aggregate amount of $3,155,670 (the "Loans"), of which $2,155,670 will be payable to EUNI on the Closing Date and of which $1,000,000 will be payable to EUNI on October 1, 2000 (the "Second Funding Date"). The Loans and EUNI's obligation to repay the Loans with interest shall be evidenced by a secured promissory note (the "Note"). (b) Unless an Event of Default (as defined below) is continuing, the Loans shall bear interest on the outstanding principal amount thereof at a rate per annum equal to the rate reported in the Wall Street Journal as the prime rate for major banks ("Prime") plus 2%. During an Event of Default, each Loan and, to the maximum extent permitted by applicable law, each other amount due and payable under the Note shall bear interest at a rate per annum equal to Prime plus 4% (the "Default Rate"). (c) The Note shall be entitled to the benefit of a security agreement between NTH and EUNI (the "Security Agreement"), pursuant to which NTH shall be granted a first priority security interest in substantially all of the assets (including intangible assets and intellectual property rights) of EUNI. The Note shall be subject to the terms and conditions of the Security Agreement. (d) The outstanding principal amount and interest accrued on the Note shall be payable on demand; provided, however, that unless there has been an Event of Default, NTH agrees not to make such a demand prior to the six-month anniversary of the Closing Date; provided, further, that NTH provides EUNI with ten days' prior written notice of such demand. (e) Pursuant to the terms to be set forth in the amended and restated Subscriber Acquisition Agreement between NTH and EUNI (the "New Subscriber Acquisition Agreement"), which is more fully described below, NTH will agree to pay to EUNI $1.00 per subscriber name EUNI delivers to NTH for its Infobeat and Emazing services in accordance with the New Subscriber Acquisition Agreement. In that connection, during the term of the Note, NTH will have the right, but not the obligation, to deduct from all amounts owed to EUNI under the New Subscriber Acquisition Agreement the amount of $0.35 per subscriber delivered to NTH, and apply such $0.35 per subscriber to the outstanding principal amount or interest under the Note. NTH will also have the right to deduct from all amounts owed to EUNI under the New Subscriber Acquisition Agreement an additional $0.20 per subscriber delivered to NTH as consideration for marketing and consulting services provided to EUNI (as more fully described below). (f) The following events shall each be an "Event of Default" under the Note: (i) bankruptcy or insolvency of EUNI; (ii) EUNI's failure to pay the outstanding principal amount and accrued interest thereon due under the Note on the date the same becomes due and payable, or its failure to pay such other amounts due under the Note after the same becomes due and payable; (iii) breach of any covenant or agreement contained in the Note or any other definitive agreement; (iv) a default of the obligations of EUNI with respect to any other indebtedness or other contractual obligation of EUNI which has or may have a material adverse effect on the results of operations, condition (financial or otherwise), business, assets or liabilities of EUNI, taken as a whole and (v) any event of default under the Security Agreement. Effective upon an Event of Default, the interest rate on the Note will increase by the Default Rate. Notwithstanding the foregoing, NTH may, at its option, in the case of subsection (ii) above and for so long as an Event of Default is continuing, accept the delivery by EUNI of additional subscriber names at no charge to NTH whatsoever toward repayment of the outstanding principal amount and accrued interest thereon. In such event, NTH will deduct $0.35 per subscriber name delivered to NTH from the outstanding principal amount or accrued interest thereon. 2 NTH, in its sole discretion, may determine to discontinue the foregoing arrangement on the date that is five days after delivery to EUNI of a written notice to that effect. (g) EUNI agrees that the net cash proceeds loaned to it pursuant to the Note are to be used for working capital purposes, except that a portion of the net cash proceeds, simultaneously with the consummation of the Transactions, shall be applied to the repayment of all amounts then outstanding with respect to notes issued by EUNI in favor of third parties which notes are required to be repaid in the event of a financing. 3. Warrants to Purchase Common Stock --------------------------------- A. Warrant to Purchase 400,000 shares of Common Stock (a) NTH shall be entitled to subscribe for and purchase 400,000 shares of common stock, par value $.001 per share (the "Common Stock"), of EUNI, upon the terms and subject to the conditions of a warrant in favor of NTH by EUNI, dated the Closing Date (the "A Warrant"). Of the A Warrant, 200,000 shares shall be purchasable at an exercise price of $5.00 per share and an additional 200,000 shares shall be purchasable at an exercise price of $6.00 per share. All of such shares of Common Stock shall be purchasable by NTH at any time or from time to time after the Closing Date and up to and including 5:00 p.m. (local time) on the fourth anniversary of the Closing Date. (b) The A Warrant will provide (i) "full ratchet" anti-dilution protection for the exercise price and the number of shares of Common Stock underlying the A Warrant in connection with mergers, reorganizations, consolidations, stock splits, stock dividends, combinations, recapitalizations, reclassifications, certain distributions of cash, securities or property, and sales of stock for a price below the exercise price of the A Warrant or other similar events (each a "Dilution Event") that occur at any time prior to the six month anniversary of the Closing Date, and (ii) "weighted average" anti-dilution protection in connection with any Dilution Event that occurs after the six month anniversary of the Closing Date. B. Warrant to Purchase 701,260 shares of Common Stock (a) NTH will be entitled to subscribe for and purchase 701,260 shares of Common Stock, upon the terms and subject to the conditions of a warrant in favor of NTH by EUNI, dated the Closing Date (the "B Warrant"). All of such shares of Common Stock underlying the B Warrant shall be purchasable by NTH at $4.50 per share at any time or from time to time after the Closing Date and up to and including 5:00 p.m. (local time) on the fourth anniversary of the Closing Date. (b) The B Warrant will provide (i) "full ratchet" anti-dilution protection for the exercise price and the number of shares of Common Stock underlying the B Warrant in connection with a Dilution Event that occurs at any time prior to the six month anniversary of the Closing Date, and (ii) "weighted average" anti- dilution protection in 3 connection with any Dilution Event that occurs after the six month anniversary of the Closing Date. NTH and EUNI agree that NTH shall be granted registration rights with respect to the shares of Common Stock underlying the A Warrant and the B Warrant (the "Registrable Securities"). Upon notice from NTH, which notice NTH agrees will not be delivered prior to the six-month anniversary of the Closing Date, EUNI shall be required to file a registration statement under the Securities Act of 1933 (the "Act") covering the registration of the Registrable Securities having an aggregate offering price to the public of not less than $1,000,000. EUNI will not be required to effect more than four such registrations of Registrable Securities. In addition, EUNI shall be required to provide notice to NTH prior to the filing of any registration statement under the Act for purposes of a public offering of securities of EUNI so that NTH may include in any such registration statement all or any part of the Registrable Securities held by it on a basis which shall be no less than pari passu with any other holder of registration rights. 4. Additional Rights to Purchase Common Stock ------------------------------------------ A. Right to Purchase 650,000 shares of Common Stock (a) Pursuant to the terms set forth in that certain Stock Option Agreement, dated as of January 26, 2000, as amended through the date hereof, between EUNI and Charles Beilman ("Beilman") (the "Option Agreement"), EUNI has the right to purchase from Beilman up to 2,325,000 shares (the "Beilman Shares") of Common Stock at an exercise price of (i) $1.675 per share if all or any portion of such shares are purchased by EUNI on or before September 1, 2000 and (ii) $1.85 per share if the balance or any portion of such shares are purchased by EUNI thereafter and prior to November 1, 2000. At any time prior to October 29, 2000, NTH may deliver a notice (the "Option Notice") to EUNI of its requirement that EUNI exercise its right to purchase up to 650,000 of the Beilman Shares under the Option Agreement. The Option Notice will set forth how many of such Beilman Shares (the "Purchase Shares") EUNI must purchase pursuant to the terms of the Option Agreement. Within two business days of delivery of the Option Notice, EUNI hereby agrees to purchase, in accordance with the terms of the Option Agreement, the Purchase Shares. In connection therewith, if EUNI so requests, NTH agrees to lend to EUNI an amount equal to the purchase price for the Purchase Shares (the "Option Loan"), which amount shall be used by EUNI for the sole purpose of purchasing the Purchase Shares from Beilman. (b) The Option Loan and EUNI's obligation to repay the Option Loan with interest shall be evidenced by a secured promissory note (the "Option Note") in form and substance substantially similar to the Note described above. (c) The outstanding principal amount and interest accrued on the Option Note shall be payable on demand; provided, however, that unless there has been an Event of Default, NTH agrees not to make such a demand prior to the six-month anniversary of the 4 issuance of the Option Note. However, upon NTH's notice to EUNI that it intends to exercise the Option Warrant (described below), NTH may, in its sole discretion, pay the NTH Exercise Price (as defined below) (i) in cash or (ii) by forgiving the outstanding principal amount of the Option Loan in the event the Option Loan is outstanding on the date thereof. In the latter case, EUNI shall be obligated to pay to NTH interest accrued thereon through the date of such exercise. (d) In consideration of the Option Loan, EUNI shall issue to NTH a warrant (the "Option Warrant") to purchase up to 650,000 shares of Common Stock at an exercise price of $1.675 (if the Option Warrant is exercised on or before September 1, 2000) or $1.85 per share (if the Option Warrant is exercised after September 1, 2000) (the "NTH Exercise Price"), which shall be exercisable by NTH at any time or from time to time after the issuance of the Option Warrant and up to and including 5:00 p.m. (local time) on the second anniversary of the issuance of the Option Warrant. (e) The Option Warrant will provide customary price protection and standard weighted average anti-dilution protection for the shares of Common Stock underlying the Option Warrant and for the exercise price in connection with mergers, reorganizations, consolidations, stock splits, stock dividends, combinations, recapitalizations, reclassifications, certain distributions of cash, securities or property and sales of stock for a price below the exercise price of the Option Warrant or other similar events. (f) NTH and EUNI agree that NTH shall be granted registration rights with respect to the shares of Common Stock underlying the Option Warrant, which rights shall be no less favorable than the registration rights that EUNI has granted or agreed to grant to VP LLC (as defined below), in substantially the form attached hereto as Schedule 1. B. Right to Purchase shares of Common Stock not Purchased by VP LLC (a) Pursuant to the terms set forth in (i) that certain Option to Purchase Agreement between EUNI and VideoGame Partners, LLC ("VP LLC"), made as of June 30, 2000 and (ii) that certain Option to Purchase Agreement between EUNI and VP LLC, made as of July 26, 2000 (collectively, the "VP Agreements"), VP LLC has the right to purchase certain shares of Common Stock (the "VP Shares") at an exercise price of $1.675 per share on or before August 31, 2000. In connection therewith, NTH and EUNI agree that if any of the VP Shares are not purchased by VP LLC pursuant to the VP Agreements prior to August 31, 2000 (the "Balance Shares"), EUNI will, if NTH delivers a notice to EUNI (the "VP Notice"), exercise its right under the Option Agreement to purchase from Beilman 300,000 Beilman Shares, or, if there are less than 300,000 Balance Shares, such lesser number of Beilman Shares (the "VP Option Shares"), in accordance with the terms of the Option Agreement. If EUNI so requests, NTH agrees to lend to EUNI an amount equal to the purchase price for the VP Option Shares (the "VP Loan"), which amount shall be used by EUNI for the sole purpose of purchasing the VP Option Shares. 5 (b) The VP Loan and EUNI's obligation to repay the VP Loan with interest shall be evidenced by a secured promissory note (the "VP Note") in form and substance substantially similar to the Note described above. (c) The outstanding principal amount and interest accrued on the VP Note shall be payable on demand; provided, however, that unless there has been an Event of Default, NTH agrees not to make such a demand prior to the six-month anniversary of the issuance of the VP Note. However, upon NTH's notice to EUNI that it intends to exercise the VP Warrant (described below), NTH may, in its sole discretion, pay the NTH Exercise Price (as defined below) (i) in cash or (ii) by forgiving the outstanding principal amount of the VP Loan in the event the VP Loan is outstanding on the date thereof. In the latter case, EUNI shall be obligated to pay to NTH interest accrued through the date of such exercise. (d) In consideration of the VP Loan, EUNI shall issue to NTH a warrant (the "VP Warrant") to purchase that number of shares equal to the VP Option Shares at an exercise price of $1.675 per share (the "NTH Exercise Price"), which shall be exercisable by NTH at any time or from time to time after the issuance of the VP Warrant and up to and including 5:00 p.m. (local time) on the second anniversary of the issuance of the VP Warrant. (e) The VP Warrant will provide customary price protection and standard weighted average anti-dilution protection for the shares of Common Stock underlying the VP Warrant and for the exercise price in connection with mergers, reorganizations, consolidations, stock splits, stock dividends, combinations, recapitalizations, reclassifications, certain distributions of cash, securities or property and sales of stock for a price below the exercise price of the VP Warrant or other similar events. (f) NTH and EUNI agree that NTH shall be granted registration rights with respect to the shares of Common Stock underlying the VP Warrant, which rights shall be no less favorable than the registration rights that EUNI has granted or agreed to grant to VP LLC, in substantially the form attached hereto as Schedule 1. 5. Subscriber Acquisition Agreement -------------------------------- In further consideration of the Loans provided by NTH, EUNI agrees to enter into the New Subscriber Acquisition Agreement, which agreement will supercede and preempt the Subscriber Acquisition Agreement between NTH and EUNI, dated as of August 16, 2000. The term of the New Subscriber Acquisition Agreement shall be five years, however, NTH shall have the right to terminate the New Subscriber Acquisition Agreement upon ten days' advance written notice to EUNI. The New Subscriber Acquisition Agreement shall provide that NTH will pay to EUNI $1.00 per subscriber name (the "Subscriber Fee") EUNI delivers to NTH for its Infobeat and Emazing services in accordance with the Subscriber Acquisition Agreement. During the term of the Note, NTH will have the right, but not the obligation, to deduct from the Subscriber Fee and any other amounts owed to EUNI under the New Subscriber Acquisition Agreement the 6 amount of $0.35 per subscriber delivered to NTH, and to apply such $0.35 per subscriber to payment of the outstanding principal amount or interest under the Note. In addition, NTH and EUNI agree that NTH will deduct from the Subscriber Fee and any other amounts owed to EUNI under the New Subscriber Acquisition Agreement the amount of $0.20 per subscriber delivered to NTH in exchange for EUNI receiving marketing and consulting services from NTH, the receipt of which is hereby acknowledged. 6. Advertising Agreement --------------------- In further consideration of the Loans provided by NTH, EUNI agrees to provide NTH and any of its affiliates or the affiliates of Sony Music Entertainment Inc., with advertising space (the "Advertising") on its website, "euniverse.com," or any other web site operated and managed by EUNI (the "Web Sites") at no additional charge. The Advertising shall consist of not less than 40 million "buttons" and 20 million "banners," each per month, for a period commencing on the Closing Date and ending six months thereafter. NTH and such affiliates shall have the right to resell the Advertising so long as such transactions are not granted to third parties at a rate which is more favorable than similar sales made by EUNI. 7. Conditions The intentions of the parties, and their obligations to complete ---------- the Transactions, are conditioned upon the satisfaction of the following additional terms prior to Closing: (a) The parties shall have negotiated, executed, and delivered such definitive agreements as they mutually deem necessary to carry out the terms of this Letter of Intent and effectuate the Transactions, such documents to be in form and substance satisfactory to both parties and containing customary representations, warranties, covenants and indemnities by the parties (subject to the specific provisions of this Letter of Intent). (b) NTH shall have completed a financial, legal, technical, and corporate "due diligence" investigation of EUNI and its operations, and shall have received (or, in its sole discretion, shall have waived in writing the receipt of) reports satisfactory to NTH from its accountants, legal advisers, technical advisors and its corporate staff with respect thereto. In this regard, EUNI will afford NTH and its representatives during normal business hours full and free access to EUNI's books and records, as well as all technical documents and systems, so that NTH may have full opportunity to make such review, examination, and audit as it deems necessary. (c) The parties shall have obtained any required government or third party approvals to the Transactions or any of them. (d) THE DEFINITIVE AGREEMENTS IMPLEMENTING THIS LETTER OF INTENT ARE EXPRESSLY SUBJECT TO THE WRITTEN APPROVAL OF THE SENIOR MANAGEMENT OF NTH AND SONY MUSIC ENTERTAINMENT INC. AND OF THEIR RESPECTIVE BOARDS OF DIRECTORS. 7 8. Representations and Warranties ------------------------------ (a) NTH hereby represents and warrants that it has the right and power to enter into and fully perform under this Letter of Intent; NTH shall at all times indemnify and hold harmless EUNI from and against any claims, dangers, or liabilities (including reasonable costs and expenses) arising out of any breach of the representations and warranties specified in this paragraph 8(a). (b) EUNI hereby represents and warrants that (i) it has the right and power to enter into and fully perform under this Letter of Intent; and (ii) it will not, prior to the expiration of the Non-Solicitation Period (as defined below), sell, assign, or otherwise grant, to any person or entity any right or interest which would adversely affect the rights granted to NTH hereunder (including without limitation the disposition, impairment of the value, or encumbrance of any of the assets of EUNI) without the prior written approval of NTH. EUNI shall at all times indemnify and hold harmless NTH from and against any claims, dangers, or liabilities (including reasonable costs and expenses) arising out of any breach of the representations and warranties specified in this paragraph 8(b). 9. Non-Solicitation. The parties agree that commencing on the date hereof and ---------------- ending two weeks after the Closing Date (the "Non-Solicitation Period"), EUNI will not and will not authorize any officer, director or affiliate or any other person on its behalf to, directly or indirectly, solicit, initiate, entertain or encourage (including by way of furnishing information), any offer or proposal from any party concerning a broader strategic relationship (a "Third Party Proposal"); provided, however, that nothing in this paragraph 9 shall preclude the board of directors of EUNI, pursuant to its fiduciary duties under applicable law, from entering into, or causing its officers from entering into negotiations with or furnishing information to a third party which has initiated contact with it, from passing on to its shareholders information regarding a Third Party Proposal or from otherwise fulfilling such fiduciary duties. EUNI agrees to promptly notify NTH in writing of any such Third Party Proposal. Furthermore, the parties agree that within 45 days after the expiration of the Non-Solicitation Period (unless mutually extended by the parties), the parties will commence good-faith negotiations with respect to entering into a broader strategic relationship (such agreement(s) to be on reasonable financial terms consistent with similar agreements between NTH and other parties); provided, however, that EUNI is not restricted in soliciting, initiating, entertaining or encouraging a Third Party Proposal during such 45-day period as long as such Third Party Proposal is made by a venture capital firm, financial institution or other similar type of institutional financial investor entity and is not (i) strategic in nature, and (ii) an equity financing for the benefit of EUNI or its shareholders in an amount equal to or greater than $5,000,000; provided, further, that EUNI shall provide NTH with three days' prior written notice to EUNI's response to such Third Party Proposal to afford NTH the opportunity to match such Third Party Proposal. 8 10. Publicity; Confidentiality All publicity relating to the Transactions -------------------------- shall be subject to the mutual approval of the parties and, except as otherwise may be required by applicable law, no public announcement or disclosure of the terms or existence of this Letter of Intent or the Transactions shall be made by either party (or any of its affiliates or representatives) without the prior written consent of the other. To the extent either party is required by applicable law to disclose publicly or to make any public announcement of the terms or existence of this Letter of Intent or the Transactions, such party shall, to the extent possible within the applicable time constraints, give the other party reasonable, actual prior notice of such disclosure and use best efforts to agree with the other party on the form of such disclosure. 11. Fees and Expenses EUNI agrees that it will pay the costs and expenses of ----------------- the parties (including legal and accounting fees) in connection with this Letter of Intent and the Transactions. Neither party has incurred and neither party will incur any liability for finder's, brokerage, agent's, advisory or similar fees or commissions in connection with the Transactions. 12. Miscellaneous ------------- (a) The parties agree that, promptly after EUNI countersigns this Letter of Intent, NTH will instruct its counsel to prepare the first draft of proposed definitive written agreements for the Transactions, which EUNI acknowledges will contain the terms described herein, and such representations and warranties, and other terms as are customary for transactions of this type. (b) All notices under this Letter of Intent shall be in writing and shall be given by courier or other personal delivery or by registered or certified mail at the appropriate address first listed above or at a substitute address designated by notice by the party concerned. Each notice to NTH shall be addressed for the attention of its President, a copy of each notice to NTH shall be sent simultaneously to both the Sony Music Entertainment Inc. Senior Vice President, Business Affairs & Administration, and the Sony Music Entertainment Inc. Law Department for the attention of Sony's Senior Vice President and General Counsel. Notices shall be deemed given when mailed or, if personally delivered, when so delivered, except that a notice of change of address shall be effective only from the date of its receipt. (c) This Letter of Intent contains the entire understanding of the parties relating to its subject matter. No change or termination of this Letter of Intent shall be binding upon either party unless it is made by an instrument signed by an authorized officer of such party. A waiver by either party of any provision of this Letter of Intent in any instance shall not be deemed a waiver of such provision, or any other provision hereof, as to any future instance or occurrence. All remedies, rights, undertakings, and obligations contained in this Letter of Intent shall be cumulative and none of them shall be in limitation of any other remedy, right, undertaking, or obligation of either party. The captions of the paragraphs in this Letter of Intent are included for convenience only and shall not affect the interpretation of any provision. 9 (d) NTH may assign NTH's rights under this Letter of Intent or any definitive agreement in whole or in part to any of its affiliates or the affiliates of Sony Music Entertainment Inc., and such rights may be similarly assigned by such assignee. No such assignment shall relieve NTH of any of NTH's obligations hereunder. EUNI shall not have the right to assign this Letter of Intent or any definitive agreement without NTH's prior written consent. Any purported assignment by either party in violation of this subparagraph 12(d) shall be void. (e) If any part of this Letter of Intent, or the application thereof to any party, shall be adjudged by a court of competent jurisdiction to be invalid, such judgment shall not affect the remainder of this Letter of Intent, which shall continue in full force and effect, or the application of this Letter of Intent to the remaining parties. (f) The provisions of this Letter of Intent are not for the benefit of any other person other than the parties hereto, and no third party shall obtain any rights under this Letter of Intent or by reason of this Letter of Intent. (g) THIS LETTER OF INTENT HAS BEEN ENTERED INTO IN THE STATE OF NEW YORK, AND THE VALIDITY, INTERPRETATION AND LEGAL EFFECT OF THIS LETTER OF INTENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS ENTERED INTO AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO ANY CONFLICT OF LAW PRINCIPLES UNDER NEW YORK LAW). (h) This Letter of Intent may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute on instrument. If this Letter of Intent accurately reflects your intentions, please so confirm by signing and returning the enclosed copies of this Letter of Intent. Very truly yours, NEW TECHNOLOGY HOLDINGS INC., a subsidiary of Sony Music Entertainment Inc. By: /s/ Mark Eisenberg __________________________ ACCEPTED AND AGREED: EUNIVERSE, INC By: /s/ Brad Greenspan ___________________________ 10 New Technology Holdings Inc. 550 Madison Avenue New York, New York 10022 August 28, 2000 eUniverse, Inc. 101 North Plains Industrial Road Wallingford, Connecticut 06492 Gentlemen: Reference is made to the letter dated August 22, 2000 between New Technology Holdings Inc. ("NTH"), a subsidiary of Sony Music Entertainment Inc., and eUniverse, Inc. (the "Letter"). NTH hereby agrees that the reference made to August 28, 2000 in the first paragraph of the Letter shall be amended to September 1, 2000, so that, the binding obligations of NTH and eUniverse shall terminate on such later date, unless otherwise agreed to by the parties. All other terms of the Letter will remain in full force and effect. Very truly yours, NEW TECHNOLOGY HOLDINGS INC. By: /s/ Mark Eisenberg __________________ Accepted and Agreed: EUNIVERSE, INC. By: /s/ Brad Greenspan __________________ New Technology Holdings Inc. 550 Madison Avenue New York, New York 10022 September 1, 2000 eUniverse, Inc. 101 North Plains Industrial Road Wallingford, Connecticut 06492 Gentlemen: Reference is made to the letter dated August 22, 2000 between New Technology Holdings Inc. ("NTH"), a subsidiary of Sony Music Entertainment Inc., and eUniverse, Inc., as amended on August 28, 2000 (the "Letter"). NTH hereby agrees that the reference made to September 1, 2000 in the first paragraph of the Letter shall be amended to September 6, 2000, so that, the binding obligations of NTH and eUniverse shall terminate on such later date, unless otherwise agreed to by the parties. All other terms of the Letter will remain in full force and effect. Very truly yours, NEW TECHNOLOGY HOLDINGS INC. By: /s/ Mark Eisenberg __________________ Accepted and Agreed: EUNIVERSE, INC. By: /s/ Brad Greenspan __________________ -----END PRIVACY-ENHANCED MESSAGE-----