-----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, LT5JUV4+IVH/DRCgVh4S2nKziy+Vv+EVTgIEQ+Mla0VGETOCLOCnPmKWwsOU7okJ f8QgGg6fJepq3X7y01riEw== 0000950172-01-501174.txt : 20020411 0000950172-01-501174.hdr.sgml : 20020411 ACCESSION NUMBER: 0000950172-01-501174 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20011119 GROUP MEMBERS: 550 DIGITAL MEDIA VENTURES INC. GROUP MEMBERS: SONY CORPORATION OF AMERICA SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: EUNIVERSE INC CENTRAL INDEX KEY: 0001088244 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL- COMPUTER & PRERECORDED TAPE STORES [5735] IRS NUMBER: 061556248 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-57811 FILM NUMBER: 1795714 BUSINESS ADDRESS: STREET 1: 6300 WILSHIRE BLVD SUITE 1700 CITY: LOS ANGELES STATE: CA ZIP: 90048 BUSINESS PHONE: 2032941648 MAIL ADDRESS: STREET 1: 6300 WILSHIRE BLVD SUITE 1700 CITY: LOS ANGELES STATE: CA ZIP: 90048 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/A 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/A 1 s562360.txt SC 13D - AMENDMENT NO. 2 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) (Amendment No. 2) eUniverse, Inc. --------------------------------------------------------------------------- (Name of Issuer) Common Stock, par value 0.001 per share -------------------------------------------------------------------------- (Title of Class and Securities) 298 412 10 7 ------------------------------------------------------------------------- (CUSIP Number) Thomas C. Tyrell General Counsel Sony Music Entertainment Inc. 550 Madison Avenue New York, New York 10022 (212) 833-8000 with a copy to: David J. Goldschmidt, Esq. Skadden, Arps, Slate, Meagher & Flom LLP 4 Times Square New York, NY 10036 (212) 735-3000 ------------------------------------------------------------------ (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) October 25, 2001 ----------------------------------------------------------- (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 that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or d-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. (continued on following page) (Page 1 of 8 Pages SCHEDULE 13D CUSIP No. 298 412 10 7 Page 2 of 8 Pages - ----------------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only) Sony Music Entertainment Inc. - ----------------------------------------------------------------------------- 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 ------------------------------------------------ BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 5,289,231 (1) EACH ------------------------------------------------ REPORTING 9. SOLE DISPOSITIVE POWER PERSON 0 WITH ------------------------------------------------ 10. SHARED DISPOSITIVE POWER 5,289,231 - ----------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 5,289,231 - ----------------------------------------------------------------------------- 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 21.2% (2) - ----------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON CO - ----------------------------------------------------------------------------- (1) 550 Digital Media Ventures Inc. ("550 DMV") holds these shares and is an indirect wholly-owned subsidiary of Sony Music Entertainment Inc. ("Sony Music"). Accordingly, Sony Music has beneficial ownership of the shares. (2) Based on 24,964,792 shares outstanding: (1) 3,366,154 shares issued to 550 DMV as described herein; (2) 19,675,561 shares outstanding as of September 30, 2001 as reported in eUniverse, Inc.'s Quarterly Report on Form 10-Q filed with the SEC on November 14, 2001, for the quarterly period ended September 30, 2001; and (3) an additional 1,923,077 shares (assuming conversion today of the Series B Preferred Stock (described herein)) for purposes of Rule 13d-3(d) of the Exchange Act of 1934, as amended. SCHEDULE 13D CUSIP No. 298 412 10 7 Page 3 of 8 Pages - ----------------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only) Sony Corporation of America - ----------------------------------------------------------------------------- 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 ---------------------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 5,289,231 (1) EACH ---------------------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON 0 WITH ---------------------------------------------------- 10. SHARED DISPOSITIVE POWER 5,289,231 - ----------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 5,289,231 - ----------------------------------------------------------------------------- 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 21.2% (2) - ----------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON CO - ----------------------------------------------------------------------------- (1) 550 Digital Media Ventures Inc. holds these shares and is an indirect subsidiary of Sony Music Entertainment Inc. ("Sony Music"). Sony Music is an indirect wholly-owned subsidiary of Sony Corporation of America ("SCA"). Accordingly, SCA has beneficial ownership of these shares. (2) Based on 24,964,792 shares outstanding: (1) 3,366,154 shares issued to 550 DMV as described herein; (2) 19,675,561 shares outstanding as of September 30, 2001 as reported in eUniverse, Inc.'s Quarterly Report on Form 10-Q filed with the SEC on November 14, 2001, for the quarterly period ended September 30, 2001; and (3) an additional 1,923,077 shares (assuming conversion today of the Series B Preferred Stock (described herein)) for purposes of Rule 13d-3(d) of the Exchange Act of 1934, as amended. SCHEDULE 13D CUSIP No. 298 412 10 7 Page 4 of 8 Pages - ----------------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (entities only) 550 Digital Media Ventures Inc. - ----------------------------------------------------------------------------- 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 ----------------------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 5,289,231 EACH ----------------------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON 0 WITH ----------------------------------------------------- 10. SHARED DISPOSITIVE POWER 5,289,231 - ----------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 5,289,231 - ----------------------------------------------------------------------------- 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 21.2% (1) - ----------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON CO - ----------------------------------------------------------------------------- (1) Based on 24,964,792 shares outstanding: (1) 3,366,154 shares issued to 550 DMV as described herein; (2) 19,675,561 shares outstanding as of September 30, 2001 as reported in eUniverse, Inc.'s Quarterly Report on Form 10-Q filed with the SEC on November 14, 2001, for the quarterly period ended September 30, 2001; and (3) an additional 1,923,077 shares (assuming conversion today of the Series B Preferred Stock (described herein)) for purposes of Rule 13d-3(d) of the Exchange Act of 1934, as amended. Page 5 of 8 Pages This Amendment No. 2 amends and supplements the statement on Schedule 13D, as amended (the "Schedule 13D") originally filed with the SEC on September 19, 2001 and amended on August 10, 2001 by Sony Corporation of America, a Delaware corporation, Sony Music Entertainment, Inc., a New York corporation, and 550 Digital Media Ventures Inc. ("550 DMV"), a Delaware corporation, relating to the common stock, par value $0.001 per share (the "eUniverse Common Stock"), of eUniverse, Inc., a Nevada Corporation ("eUniverse"). Capitalized terms not otherwise defined herein shall have the meanings set forth in the Schedule 13D. Item 3. Source and Amount of Funds or Other Consideration. Item 3 is hereby amended and supplemented by incorporating herein the information set forth under Item 4 of this Amendment No. 2. Item 4. Purpose of Transaction. Item 4 is hereby amended and supplemented by adding the following thereto: On July 13, 2001, 550 DMV, and eUniverse entered into (i) the Share Purchase Agreement together with Indimi Inc., Indimi, L.L.C. and Sony Music Entertainment Inc., and (ii) the Stock Purchase Agreement with 550 DMV. On October 25, 2001, pursuant to the Share Purchase Agreement, eUniverse purchased Indimi, L.L.C., which is substantially made up of InfoBeat, a personalized news and entertainment email service from 550 DMV for by delivering 3,058,461 shares of eUniverse Common Stock to 550 DMV. On October 25, 2001, pursuant to the Stock Purchase Agreement, 550 DMV (i) made a $5,000,000 equity investment (the "Preferred Purchase Price") in eUniverse in the form of Series B Convertible Preferred Stock, par value $0.10 per share (the "Series B Preferred Stock"), convertible into 1,923,077 shares of eUniverse Common Stock, (ii) gained a seat on the Board of Directors of eUniverse, and (iii) tendered existing warrants (described in the Schedule 13D) for 307,692 shares of eUniverse Common Stock. On August 6, 2001, pursuant to Section 13.17 of the Stock Purchase Agreement, eUniverse borrowed $2,500,000 from 550 DMV pursuant to the terms of the Promissory Note. On October 25, 2001 eUniverse repaid the Promissory Note by giving 550 DMV a $2,500,000 credit towards the Preferred Purchase Price. In order to issue the Series B Preferred Stock, eUniverse filed a Certificate of Designation (the "Certificate of Designation") with the Secretary of State of the State of Nevada on October 19, 2001 which is incorporated by reference herein and attached as Exhibit 99.1 hereto. Pursuant to the Certificate of Designation, each share of Series B Preferred Stock is convertible, at the option of the holder at any time after the issuance of such share, into such number of shares of eUniverse Common Stock as is determined by dividing $2.60 by the Conversion Price (as defined in the Certificate of Designation) in effect on the date such share certificates are surrendered for conversion. The initial Conversion price is $2.60, subject to standard anti-dilution provisions. Assuming conversion on the date hereof, the Reporting Persons would receive 1,923,077 shares of eUniverse Common Stock. Accordingly, the Reporting Persons, through their ownership of 1,923,077 shares of Series B Preferred Stock, have acquired, and for the purpose of Rule 13d-3(3) promulgated under the Exchange Act of 1934, as amended (the "Exchange Act"), beneficially own 1,923,077 shares of eUniverse Common Stock, representing approximately 7.85% of the outstanding shares of the eUniverse. Pursuant to the terms of the Stock Purchase Agreement, on October 25, 2001, 550 DMV tendered that certain Secured Promissory Note in the aggregate principal amount of $3,155,670 (the "Original Note") to eUniverse. In exchange for the Original Note, eUniverse issued an Amended and Restated Convertible Secured Promissory Note dated October 24, 2001 to 550 DMV (the "Convertible Note") and entered into that certain Loan Extension Agreement, dated October 24, 2001, with 550 DMV (collectively the "Loan Documentation"), which are attached as Exhibit 99.2 hereto and incorporated herein by reference. The Convertible Note is entitled to the benefit of that certain Security Agreement dated as of September 6, 2000 (the "Security Agreement"), between 550 DMV and eUniverse, pursuant to which 550 DMV is granted a first priority security interest in the Collateral (as such term is defined in the Security Agreement). The Convertible Note is convertible into the Series B Preferred Stock at the option of eUniverse after March 31, 2001, or , if earlier, upon and Event of Default or Change of Control (as such terms are defined in the Loan Documentation). The eUniverse Common Stock issuable upon conversion of the Series B Preferred Stock have not been included in the Reporting Persons' "beneficial ownership" calculation as per Rule 13d-3(d)(1) promulgated under the Exchange Act. Page 6 of 8 Pages In order to facilitate the consummation of the transactions contemplated by the Share Purchase Agreement and the Stock Purchase Agreement and in consideration thereof, 550 DMV entered into Voting Agreements (the "Voting Agreements"), dated as of July 20, 2001, with certain stockholders of eUniverse named therein (collectively, the "Stockholders") whereby the Stockholders granted 550 DMV an irrevocable proxy to vote 9,737,000 shares of eUniverse Common Stock beneficially owned by them in favor of the approval of the transactions contemplated in the Purchase Agreements. 550 DMV did not pay additional consideration to any Stockholder in connection with the execution and delivery of the Voting Agreements. On October 18, 2001, the shares were voted in favor of the transactions contemplated by Share Purchase Agreement and Stock Purchase Agreement. The Voting Agreements have terminated pursuant to their terms. References to, and descriptions of, the Certificate of Designation, and the Loan Documentation set forth above in this Item 4 are qualified in their entirety by reference to the copies of the Certificate of Designation and the Loan Documentation attached hereto as Exhibits 99.1 and 99.2 respectively, and are incorporated in this Item 4 in their entirety where such references and descriptions appear. Item 5. Interest in Securities of the Issuer. Item 5 is hereby amended and supplemented by incorporating herein the information set forth under Item 4 of this Amendment No. 2. Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer. Item 6 is hereby amended and supplemented by incorporating herein the information set forth under Items 4 and 5 and the information set forth below. The Company and 550 DMV have entered into a Registration Rights Agreement (the "Registration Rights Agreement"), attached hereto as Exhibit 99.3 and incorporated herein by reference, which grants the 550 DMV certain rights with respect to registration under the Securities Act of 1933, as amended (the "Act"). Under the terms of the Registration Rights Agreement, beginning two and one half (2 1/2) years from the date of the Registration Rights Agreement (April 24, 2004), the holders of a majority of Registrable Common Stock may request registration under the Act of the then outstanding Registrable Common Stock. Registrable Common Stock is defined as (i) the Series B Preferred Stock and the shares of eUniverse Common stock issued or issuable upon conversion of or otherwise pursuant to the Series B Preferred Stock, (ii) any securities of the Company issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange by the Company generally for, or in replacement by the Company generally of, the Series B Preferred Stock or the eUniverse Common Stock issued upon conversion of the Series B Preferred Stock, or (iii) any securities issued in exchange for Registrable Securities in any merger or reorganization of the Company. The Registration Rights Agreement also grants "piggy-back" rights to 550 DMV to participate in certain registration statements filed by the Company in the event that a registration statement as described in the preceding paragraph is not effective. References to, and descriptions of, the Registration Rights Agreement set forth above in this Item 5 are qualified in their entirety by reference to the copy of the Registration Rights Agreement attached hereto as Exhibits 99.3, and incorporated in this Item 5 in its entirety where such references and descriptions appear. Page 7 or 8 Pages Item 7. Material to be Filed as Exhibits. 99.1 Certificate of Designation of Series B Preferred Convertible Preferred Stock of eUniverse, Inc. filed with the Nevada Secretary of State on October 19, 2001. 99.2 Loan Extension Agreement by and between eUniverse, Inc. and 550 Digital Media Ventures Inc., dated October 24, 2001 (the "Agreement") and the Amended and Restated Secured Promissory Note, dated October 24, 2001 (attached as an exhibit to the Agreement) made in connection therewith by eUniverse, Inc. to 550 Digital Media Ventures Inc. 99.3 Registration Rights Agreement, dated October 24, 2001, between eUniverse, Inc. and 550 Digital Media Ventures Inc. Page 8 of 8 Pages 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: November 16, 2001 SONY CORPORATION OF AMERICA By: /s/ Kenneth L. Nees ----------------------------------- Name: Kenneth L. Nees Title: Senior Vice President & Secretary SONY MUSIC ENTERTAINMENT INC. By: /s/ Thomas Tyrrell ----------------------------------- Name: Thomas Tyrrell Title: Executive Vice President & General Counsel 550 DIGITAL MEDIA VENTURES INC. By: /s/ Mark Eisenberg ----------------------------------- Name: Mark Eisenberg Title: Senior Vice President and General Counsel Exhibit Index EXHIBIT DESCRIPTION 99.1 Certificate of Designation of Series B Preferred Convertible Preferred Stock of eUniverse, Inc. filed with the Nevada Secretary of State on October 19, 2001. 99.2 Loan Extension Agreement by and between eUniverse, Inc. and 550 Digital Media Ventures Inc., dated October 24, 2001 (the "Agreement") and the Amended and Restated Secured Promissory Note, dated October 24, 2001 (attached as an exhibit to the Agreement) made in connection therewith by eUniverse, Inc. to 550 Digital Media Ventures Inc. 99.3 Registration Rights Agreement, dated October 24, 2001, between eUniverse, Inc. and 550 Digital Media Ventures Inc. EX-99 3 s557027.txt EXHIBIT 99.1 Exhibit 99.1 CERTIFICATE OF DESIGNATION OF SERIES B CONVERTIBLE PREFERRED STOCK OF eUNIVERSE, INC. (Pursuant to Sections 78.035, 78.195, 78.196 of the Nevada Revised Statutes) eUniverse, Inc., a Nevada corporation (the "Company"), hereby certifies that the following resolution was adopted by the Board of Directors of the Company: RESOLVED, that pursuant to the authority expressly granted to and vested in the Board of Directors of the Company (the "Board of Directors") by the provisions of the Articles of Incorporation of the Company (the "Articles of Incorporation"), there is hereby created, out of the 40,000,000 shares of preferred stock, par value $.10 per share, of the Company authorized in Article Fourth of the Articles of Incorporation (the "Preferred Stock"), a series of the Preferred Stock consisting of 4,098,335 shares, which series shall have the following powers, designations, preferences and relative, participating, optional or other rights, and the following qualifications, limitations and restrictions (in addition to any powers, designations, preferences and relative, participating, optional or other rights, and any qualifications, limitations and restrictions, set forth in the Articles of Incorporation which are applicable to the Preferred Stock): Section 1. Designation of Amount. The shares of Preferred Stock created hereby shall be designated the "Series B Convertible Preferred Stock" (the "Series B Preferred Stock") and the authorized number of shares constituting such series shall be 4,098,335. The Series B Preferred Stock shall rank senior to the Series A 6% Convertible Preferred Stock as to dividends, distributions or as to distributions of assets upon liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary. Section 2. Dividends. (a) The holders of the then outstanding shares of Series B Preferred Stock will be entitled to receive, when, as and if declared by the Board of Directors out of funds of the Company legally available therefor, non-cumulative cash dividends, accruing on a daily basis from the Original Issuance Date (as hereinafter defined) through and including the date on which such dividends are paid at the annual rate of 8% (the "Applicable Rate") of the Liquidation Preference (as hereinafter defined) per share of the Series B Preferred Stock. The term "Original Issuance Date" means October 23, 2001. The cash dividends provided for in this Section 2(a) are hereinafter referred to as "Base Dividends." (b) In addition to Base Dividends, in the event any dividends are declared or paid or any other distribution is made on or with respect to the common stock, par value $.001 per share ("Common Stock"), the holders of the Series B Preferred Stock as of the record date established by the Board of Directors for such dividend or distribution on the Common Stock shall be entitled to receive as additional dividends (the "Additional Dividends") an amount (whether in the form of cash, securities or other property) equal to the amount (and in the form) of the dividends or distribution that such holder would have received had the Series B Preferred Stock been converted into Common Stock as of the date immediately prior to the record date of such dividend or distribution on the Common Stock, such Additional Dividends to be payable on the same payment date as the payment date for the dividend on the Common Stock established by the Board of Directors (the "Additional Dividend Payment Date"); provided, however, that if the Company declares and pays a dividend or makes a distribution on the Common Stock consisting in whole or in part of Common Stock, then no such dividend or distribution shall be payable in respect of the Series B Preferred Stock on account of the portion of such dividend or distribution on the Common Stock payable in Common Stock and in lieu thereof the anti-dilution adjustment in Section 5(e) below shall apply. The record date for any such Additional Dividends shall be the record date for the applicable dividend or distribution on the Common Stock, and any such Additional Dividends shall be payable to the individual, entity or group (a "Person") in whose name the Series B Preferred Stock is registered at the close of business on the applicable record date. (c) No dividend shall be paid or declared on any share of Common Stock (other than dividends payable in Common Stock for which an adjustment is made pursuant to Section 5(e)(iv) hereof), unless a dividend, payable in the same consideration and manner, is simultaneously paid or declared, as the case may be, on each share of Series B Preferred Stock in an amount determined as set forth in paragraph (b) above. For purposes hereof, the term "dividends" shall include any pro rata distribution by the Company, out of funds of the Company legally available therefor, of cash, property, securities (including, but not limited to, rights, warrants or options) or other property or assets to the holders of the Common Stock, whether or not paid out of capital, surplus or earnings. (d) Prior to declaring any dividend or making any distribution on or with respect to shares of Common Stock, the Company shall take all prior corporate action necessary to authorize the issuance of any securities payable as a dividend in respect of the Series B Preferred Stock. Section 3. Liquidation Preference. In the event of a liquidation, dissolution or winding up of the Company, whether voluntary or involuntary (a "Liquidation"), the holders of the Series B Preferred Stock then outstanding shall be entitled to receive out of the available assets of the Company, whether such assets are stated capital or surplus of any nature, an amount on such date equal to $2.60 per share of Series B Preferred Stock plus the amount of any accrued and unpaid Base Dividends as of such date, calculated pursuant to Section 2 and any declared but unpaid Additional Dividends as of such date (collectively, the "Liquidation Preference"). Such payment shall be made before any payment shall be made or any assets distributed to the holders of any class or series of the Common Stock, the holders of the Series A 6% Convertible Preferred Stock or any other class or series of the Company's capital stock ranking junior as to liquidation rights to the Series B Preferred Stock. After the Liquidation Preference has been paid in full pursuant to this Section 3, the holders of the Series A 6% Convertible Preferred Stock shall be entitled to receive their liquidation preference as set forth in the First Amendment to the Certificate of Designation of the Series A 6% Convertible Preferred Stock. Following payment, first, to the holders of the Series B Preferred Stock of the full preferential amounts described in the first sentence of this Section 3 and, second, to the holders of the Series A 6% Convertible Preferred Stock of the full preferential amounts described in the First Amendment to the Certificate of Designation of the Series A 6% Convertible Preferred Stock, the remaining assets (if any) of the Company available for distribution to stockholders of the Company shall be distributed, subject to the rights of the holders of shares of any other series of Preferred Stock ranking prior to the Common Stock as to distributions upon Liquidation, pro rata among (i) the holders of the then outstanding shares of Series B Preferred Stock (as if the Series B Preferred Stock had been converted into Common Stock as of the date immediately prior to the date fixed for determination of stockholders entitled to receive such distribution) and (ii) the holders of the Common Stock and any other shares of capital stock of the Company ranking on a parity with the Common Stock as to distributions upon Liquidation. If upon any Liquidation the assets available for payment of the Liquidation Preference are insufficient to permit the payment to the holders of the Series B Preferred Stock of the full preferential amounts described in this paragraph, then all the remaining available assets shall be distributed among the holders of the then outstanding Series B Preferred Stock pro rata according to the number of then outstanding shares of Series B Preferred Stock held by each holder thereof. A Corporate Transaction (as hereinafter defined), shall at the election of the holders of a majority of the Series B Preferred Stock outstanding at the time constitute a Liquidation for purposes of this Section 3, other than an Excluded Corporate Transaction. Section 4. Voting Rights. (a) Except as otherwise provided by applicable law and in addition to any voting rights provided by law, the holders of outstanding shares of the Series B Preferred Stock: (i) shall be entitled to vote together with the holders of the Common Stock as a single class on all matters submitted for a vote of holders of Common Stock; (ii) shall have such other voting rights as are specified in the Articles of Incorporation or as otherwise provided by Nevada law; and (iii) shall be entitled to receive notice of any stockholders' meeting in accordance with the Articles of Incorporation and By-laws of the Company. For purposes of the voting rights set forth in this Section 4(a), each share of Series B Preferred Stock shall entitle the holder thereof to cast one vote for each whole vote that such holder would be entitled to cast had such holder converted its Series B Preferred Stock into shares of Common Stock as of the date immediately prior to the record date for determining the stockholders of the Company eligible to vote on any such matter. (b) The holders of Series B Preferred Stock shall have the exclusive right, voting separately as a single class, to elect the following number of members of the Board of Directors: one (1) member in the event the Board of Directors consists of one (1) to five (5) members; two (2) members in the event the Board of Directors consists of six (6) to eight (8) members; and three (3) members in the event the Board of Directors consists of nine (9) to eleven (11) members (each such member elected by the Series B Preferred Stockholders, a "Preferred Stock Director"). Except as permitted by Section 4(c) below in no event shall the total number of members of the Board of Directors exceed eleven (11). In any such election the holders of Series B Preferred Stock shall be entitled to cast one vote per share of Series B Preferred Stock held of record on the record date for the determination of the holders of Series B Preferred Stock entitled to vote on such election. The initial Preferred Stock Director(s) shall be Thomas Gewecke, and he is elected to serve until his successors are duly elected; and thereafter the Preferred Stock Directors shall be elected at the same time as other members of the Board of Directors. A Preferred Stock Director may only be removed by the written consent or affirmative vote of at least a majority of the Series B Preferred Stock. If for any reason a Preferred Stock Director shall resign or otherwise be removed from the Board of Directors, then his or her replacement shall be a person elected by the holders of the Series B Preferred Stock, in accordance with the voting procedures set forth in this Section 4(b). The Preferred Stock Directors shall be appointed by the Board of Directors to serve on each committee of the Board of Directors at least in the same proportions that the number of Preferred Stock Directors bears to the total number of directors then comprising the entire Board of Directors. (c) So long as any shares of Series B Preferred Stock remain outstanding, the Company shall not, without the written consent or affirmative vote of the holders of at least two-thirds of the outstanding shares of Series B Preferred Stock, (i) amend, alter, waive or repeal, whether by merger, consolidation, combination, reclassification or otherwise, the Articles of Incorporation, including this Certificate of Designation, or By-laws of the Company or any provisions thereof (including the adoption of a new provision thereof), (ii) create, authorize or issue any class, series or shares of Preferred Stock or any other class of capital stock ranking either as to payment of dividends, distributions or as to distributions of assets upon Liquidation (x) prior to the Series B Preferred Stock, or (y) on a parity with the Series B Preferred Stock or (iii) increase the size of the Board or Directors beyond eleven (11) members. The vote of the holders of at least two- thirds of the outstanding shares of Series B Preferred Stock, voting separately as one class, shall be necessary to adopt any alteration, amendment or repeal of any provision of this Resolution, in addition to any other vote of stockholders required by law. (d) So long as 550 Digital Media Ventures Inc. or any of its affiliates owns at least 1,442,308 shares of Series B Preferred Stock or Common Stock (as appropriately adjusted for any stock split, combination, reorganization, reclassification, stock dividend, stock distribution or similar event), the Company shall not, without the written consent or affirmative vote of at least two-thirds of the Board of Directors (i) enter into an agreement to, or consummate, a Corporate Transaction, (ii) enter into transactions which result in or require the Company to issue shares of its capital stock in excess of 5% (in any one transaction) or 12.5% (in the aggregate, in a series of transactions commencing on or after the Original Issuance Date) of the Company's issued and outstanding shares of capital stock, (iii) enter into transactions which result in or require the Company to pay (whether in cash, stock or a combination thereof) in excess of 5% (in any one transaction) or 12.5% (in the aggregate, in a series of transactions commencing on or after the Original Issuance Date) of the Company's then-current market capitalization, (iv) increase or decrease the number of authorized shares of capital stock, (v) directly or indirectly declare or pay any dividend or make any other distribution in respect thereof, or directly or indirectly purchase, redeem, repurchase or otherwise acquire any shares of capital stock of the Company or any subsidiary, whether in cash or property or in obligations of the Company or any subsidiary, other than repurchases pursuant to an employee's employment or incentive agreement and upon an employee's termination and at a price not to exceed such employee's cost, (vi) increase or decrease the size of the Company's Board of Directors; provided that in no event shall the total number of members of the Board of Directors exceed (11). Section 5. Conversion Rights. (a) General. Subject to and upon compliance with the provisions of this Section 5, the holders of the shares of Series B Preferred Stock shall be entitled, at their option, at any time to convert all or any such shares of Series B Preferred Stock into a number of fully paid and non-assessable shares (calculated as to each conversion to the nearest 1/100,000th of a share) of Common Stock. The number of shares of Common Stock to which a holder of Series B Preferred Stock shall be entitled upon conversion shall be determined by dividing (x) the Liquidation Preference of such Series B Preferred Stock as of the Conversion Date (as hereinafter defined) by (y) the Conversion Price in effect at the close of business on the Conversion Date (determined as provided in this Section 5). (b) Automatic Conversion. Each share of Series B Preferred Stock shall automatically convert, immediately upon the earlier of (1) the written consent of holders of more than 50% of issued and outstanding Series B Preferred Stock, and (2) the Company Election (each, an "Automatic Conversion Date") into fully paid and non-assessable shares of Common Stock. The number of shares of Common Stock (calculated as to each conversion to the nearest 1/100,000th of a share) to which a holder of Series B Preferred Stock shall be entitled upon such automatic conversion shall be determined by dividing (x) the Liquidation Preference of such Series B Preferred Stock as of the Automatic Conversion Date by (y) the Conversion Price in effect at the close of business on the Business Day immediately preceding such closing date. Such conversion shall occur automatically and without any further action by the holders of such shares and whether or not the certificates representing such shares are surrendered to the Company or its transfer agent. Upon the occurrence of such automatic conversion of the Series B Preferred Stock, the holders of Series B Preferred Stock shall surrender the certificates representing such shares at the office of the Company or any transfer agent for the Series B Preferred Stock. Thereupon, there shall be issued and delivered to such holder promptly at such office and in its name as shown on such surrendered certificate or certificates, a certificate or certificates for the number of shares of Common Stock into which the shares of Series B Preferred Stock surrendered were convertible on the date on which such automatic conversion occurred. (c) Conversion Price. The conversion price (the "Conversion Price") shall initially be $2.60, subject to adjustment from time to time in accordance with Section 5(e). (d) Fractions of Shares. Unless the holder of shares of Series B Preferred Stock being converted specifies otherwise, the Company shall issue fractional shares of Common Stock (carried out to seven decimal places) upon conversion of shares of Series B Preferred Stock. If more than one share of Series B Preferred Stock shall be surrendered for conversion at one time by the same holder, the number of full shares of Common Stock to be issued shall be computed on the basis of the aggregate number of shares of Series B Preferred Stock so surrendered. Instead of any fractional shares of Common Stock which would otherwise be issuable upon conversion of any shares of Series B Preferred Stock, the Company shall pay a cash adjustment in respect of such fractional share in an amount equal to the product of such fraction multiplied by the Fair Market Value (as hereinafter defined) of one share of Common Stock on the Conversion Date. (e) Adjustments to Conversion Price. The Conversion Price shall be subject to adjustment from time to time as follows: (i) Upon Issuance of Common Stock. If the Company shall, at any time or from time to time after the Original Issuance Date, issue any shares of Common Stock (other than an issuance of Common Stock as a dividend or in a split of or subdivision in respect of which the adjustment provided for in Section 5(e)(iv) applies), options to purchase or rights to subscribe for Common Stock, securities by their terms convertible into or exchangeable for Common Stock, or options to purchase or rights to subscribe for such convertible or exchangeable securities (other than Excluded Stock (as defined below)) without consideration or for consideration per share less than the Conversion Price in effect immediately prior to such issuance, then such Conversion Price shall forthwith be lowered to a price equal to the price obtained by multiplying: (A) the Conversion Price in effect immediately prior to the issuance of such Common Stock, options, rights or securities by (B) a fraction o which (x) the denominator shall be the number of shares of Common Stock outstanding on a fully-diluted basis immediately after such issuance and (y) the numerator shall be the sum of (i) the number of shares of Common Stock outstanding on a fully-diluted basis immediately prior to such issuance and (ii) the number of additional shares of Common Stock which the aggregate consideration for the number of shares of Common Stock so offered would purchase at the Conversion Price. For purposes of this Section 5(e), "fully diluted basis" shall be determined in accordance with the treasury stock method of computing fully diluted earnings per share in accordance with GAAP. (ii) Upon Acquisition of Common Stock. If the Company or any subsidiary shall, at any time or from time to time after the Original Issuance Date, directly or indirectly, redeem, purchase or otherwise acquire any shares of Common Stock, options to purchase or rights to subscribe for Common Stock, securities by their terms convertible into or exchangeable for Common Stock (other than shares of Series B Preferred Stock that are redeemed according to their terms), or options to purchase or rights to subscribe for such convertible or exchangeable securities, for a consideration per share greater than the Fair Market Value (plus, in the case of such options, rights, or securities, the additional consideration required to be paid to the Company upon exercise, conversion or exchange) per share of Common Stock immediately prior to such event, then the Conversion Price shall forthwith be lowered to a price equal to the price obtained by multiplying: (A) the Conversion Price in effect immediately prior to such event by (B) a fraction o which (x) the denominator shall be the Fair Market Value per share of Common Stock immediately prior to such event and (y) the numerator shall be the result of dividing: a) (1) the product of (A) the number of shares of Common Stock outstanding on a fully-diluted basis and (B) the Fair Market Value per share of Common Stock, in each case immediately prior to such event, minus (2) the aggregate consideration paid by the Company in such event (plus, in the case of such options, rights, or convertible or exchangeable securities, the aggregate additional consideration to be paid by the Company upon exercise, conversion or exchange), by b) the number of shares of Common Stock outstanding on a fully-diluted basis immediately after such event. (iii) For the purposes of any adjustment of a Conversion Price pursuant to paragraphs (1) of this Section 5(e), the following provisions shall be applicable: (1) In the case of the issuance of Common Stock for cash in a public offering or private placement, the consideration shall be deemed to be the amount of cash paid therefor before deducting therefrom any discounts, commissions or placement fees payable by the Company to any underwriter or placement agent in connection with the issuance and sale thereof. (2) In the case of the issuance of Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the Fair Market Value thereof. (3) In the case of the issuance of options to purchase or rights to subscribe for Common Stock, securities by their terms convertible into or exchangeable for Common Stock, or options to purchase or rights to subscribe for such convertible or exchangeable securities (except for options to acquire Excluded Stock): (A) the aggregate maximum number of shares of Common Stock deliverable upon exercise of such options to purchase or rights to subscribe for Common Stock shall be deemed to have been issued at the time such options or rights were issued and for a consideration equal to the consideration (determined in the manner provided in subparagraphs (i) and (ii) above), if any, received by the Company upon the issuance of such options or rights plus the minimum purchase price provided in such options or rights for the Common Stock covered thereby; (B) the aggregat maximum number of shares of Common Stock deliverable upon conversion of or in exchange for any such convertible or exchangeable securities or upon the exercise of options to purchase or rights to subscribe for such convertible or exchangeable securities and subsequent conversion or exchange thereof shall be deemed to have been issued at the time such securities, options, or rights were issued and for a consideration equal to the consideration received by the Company for any such securities and related options or rights (excluding any cash received on account of accrued interest or accrued dividends), plus the additional consideration, if any, to be received by the Company upon the conversion or exchange of such securities or the exercise of any related options or rights (the consideration in each case to be determined in the manner provided in paragraphs (i) and (ii) above); (C) on any change in the number of shares or exercise price of Common Stock deliverable upon exercise of any such options or rights or conversions of or exchanges for such securities, other than a change resulting from the anti-dilution provisions thereof, the applicable Conversion Price shall forthwith be readjusted to such Conversion Price as would have been obtained had the adjustment made upon the issuance of such options, rights or securities not converted prior to such change or options or rights related to such securities not converted prior to such change been made upon the basis of such change; and (D) no further adjustment of the Conversion Price adjusted upon the issuance of any such options, rights, convertible securities or exchangeable securities shall be made as a result of the actual issuance of Common Stock on the exercise of any such rights or options or any conversion or exchange of any such securities. (iv) Upon Stock Dividends, Subdivisions or Splits. If, at any time after the Original Issuance Date, the number of shares of Common Stock outstanding is increased by a stock dividend payable in shares of Common Stock or by a subdivision or split-up of shares of Common Stock, then, following the record date for the determination of holders of Common Stock entitled to receive such stock dividend, or to be affected by such subdivision or split-up, the Conversion Price shall be appropriately decreased so that the number of shares of Common Stock issuable on conversion of Series B Preferred Stock shall be increased in proportion to such increase in outstanding shares. (v) Upon Combinations. If, at any time after the Original Issuance Date, the number of shares of Common Stock outstanding is decreased by a combination of the outstanding shares of Common Stock into a smaller number of shares of Common Stock, then, following the record date to determine shares affected by such combination, the Conversion Price shall be appropriately increased so that the number of shares of Common Stock issuable on conversion of each share of Series B Preferred Stock shall be decreased in proportion to such decrease in outstanding shares. (vi) Upon Reclassifications, Reorganizations, Consolidations or Mergers. In the event of any capital reorganization of the Company, any reclassification of the stock of the Company (other than a change in par value or from par value to no par value or from no par value to par value or as a result of a stock dividend or subdivision, split- up or combination of shares), or any consolidation or merger of the Company with or into another corporation (where the Company is not the surviving corporation or where there is a change in or distribution with respect to the Common Stock), each share of Series B Preferred Stock shall after such reorganization, reclassification, consolidation, or merger be convertible into the kind and number of shares of stock or other securities or property of the Company or of the successor corporation resulting from such consolidation or surviving such merger, if any, to which the holder of the number of shares of Common Stock deliverable (immediately prior to the time of such reorganization, reclassification, consolidation or merger) upon conversion of such Series B Preferred Stock would have been entitled upon such reorganization, reclassification, consolidation or merger. The provisions of this clause shall similarly apply to successive reorganizations, reclassifications, consolidations, or mergers. The Company shall not effect any such reorganization, reclassification, consolidation or merger unless, prior to the consummation thereof, the successor corporation (if other than the Company) resulting from such reorganization, reclassification, consolidation, shall assume, by written instrument, the obligation to deliver to the holders of the Series B Preferred Stock such shares of stock, securities or assets, which, in accordance with the foregoing provisions, such holders shall be entitled to receive upon such conversion. (vii) Deferral in Certain Circumstances. In any case in which the provisions of this Section 5(e) shall require that an adjustment shall become effective immediately after a record date of an event, the Company may defer until the occurrence of such event: (1) issuing to the holder of any Series B Preferred Stock converted after such record date and before the occurrence of such event the shares of capital stock issuable upon such conversion by reason of the adjustment required by such event and issuing to such holder only the shares of capital stock issuable upon such conversion before giving effect to such adjustments, and (2) paying to such holder any amount in cash in lieu of fractional share of capital stock pursuant to Section 5(d) above; provided, however, that the Company shall deliver to such holder an appropriate instrument or due bills evidencing such holder's right to receive such additional shares and such cash. (viii) Other Anti-Dilution Provisions. If the Company has issued or issues any securities on or after the Original Issuance Date containing provisions protecting the holder or holders thereof against dilution in any manner more favorable to such holder or holders thereof than those set forth in this Section 5, such provisions (or any more favorable portion thereof) shall be deemed to be incorporated herein as if fully set forth herein and, to the extent inconsistent with any provision herein, shall be deemed to be substituted therefor. (ix) Appraisal Procedure. In any case in which the provisions of this Section 5(e) shall necessitate that the Appraisal Procedure be utilized for purposes of determining an adjustment to the Conversion Price, the Company may defer until the completion of the Appraisal Procedure and the determination of the adjustment: (1) issuing to the holder of any share of Series B Preferred Stock converted after the date of the event that requires the adjustment and before completion of the Appraisal Procedure and the determination of the adjustment, the shares of capital stock issuable upon such conversion by reason of the adjustment required by such event and issuing to such holder only the shares of capital stock issuable upon such conversion before giving effect to such adjustment and (2) paying to such holder any amount in cash in lieu of a fractional share of capital stock pursuant to Section 5(d) above ; provided, however, that the Company shall deliver to such holder an appropriate instrument or due bills evidencing such holder's right to receive such additional shares and such cash. (x) Exceptions. Section 5(e) shall not apply to (i) any issuance of Common Stock upon any grant or exercise of any warrants or options awarded to employees or directors of the Company pursuant to an employee stock option plan or stock incentive plan approved by the Board of Directors, (ii) any issuance of Common Stock upon conversion of the Preferred Stock, (iii) upon approval by the Preferred Stockholder, (x) any issuance of Common Stock or any grant of any warrants or options to purchase Common Stock as payment for services or compensation or (y) in connection with an asset or stock acquisition (collectively, the "Excluded Stock"). (f) Exercise of Conversion Privilege. (i) Except in the case of an automatic conversion pursuant to Section 5(b), in order to convert shares of Series B Preferred Stock, a holder must (A) surrender the certificate or certificates evidencing such holder's shares of Series B Preferred Stock to be converted, duly endorsed in a form satisfactory to the Company, at the office of the Company and (B) notify the Company at such office that such holder elects to convert Series B Preferred Stock and the number of shares such holder wishes to convert. Such notice referred to in clause (B) above shall be delivered substantially in the following form: "NOTICE TO EXERCISE CONVERSION RIGHT The undersigned, being a holder of the Series B Convertible Preferred Stock of eUniverse, Inc. (the "Convertible Preferred Stock"), irrevocably exercises the right to convert ____________ outstanding shares of Convertible Preferred Stock on ___________, ____, into shares of Common Stock of eUniverse, Inc. In accordance with the terms of the shares of Convertible Preferred Stock, and directs that the shares issuable and deliverable upon the conversion be issued and delivered in the denominations indicated below to the registered holder hereof unless a different name has been indicated below. Dated: [At least one Business Day prior to the date fixed for conversion] Fill in for registration of shares of Common Stock if to be issued other than to the registered holder: Name Address Please print name and (Signature) address, including postal code number Denominations: _________" (ii) Series B Preferred Stock shall be deemed to have been converted immediately prior to the close of business on the day (the "Conversion Date") of surrender of such shares of Series B Preferred Stock for conversion in accordance with the foregoing provisions (or, in the case of an automatic conversion pursuant to Section 5(b), the Automatic Conversion Date, and at such time the rights of the holders of such shares of Series B Preferred Stock as holder shall cease, and the Person or Persons entitled to receive the Common Stock issuable upon conversion shall be treated for all purposes as the record holder or holders of such Common Stock as and after such time. As promptly as practicable on or after the Conversion Date, the Company shall issue and shall deliver at any office or agency of the Company maintained for the surrender of Series B Preferred Stock a certificate or certificates for the number of full shares of Common Stock issuable upon conversion, together with payment in lieu of any fraction of a share, as provided in Section 5(d). (iii) In the case of any certificate evidencing shares of Series B Preferred Stock which is converted in part only, upon such conversion the Company shall execute and deliver a new certificate representing an aggregate number of shares of Series B Preferred Stock equal to the unconverted portion of such certificate. (g) Notice of Adjustment of Conversion Price. Whenever the Conversion Price is adjusted as herein provided: (i) the Company shall compute the adjusted Conversion Price in accordance with Section 5(e) and shall prepare a certificate signed by the Treasurer or Chief Financial Officer of the Company setting forth the adjusted Conversion Price and showing in reasonable detail the facts upon which such adjustment is based, and such certificate shall forthwith be filed at each office or agency maintained for such purpose or conversion of shares of Series B Preferred Stock; and (ii) a notice stating that the Conversion Price has been adjusted and setting forth the adjusted Conversion Price shall forthwith be prepared by the Company, and as soon as practicable after it is prepared, such notice shall be mailed by the Company at its expense to all holders at their last addresses as they shall appear in the stock register. (h) Notice of Certain Corporate Action. In case: (i) the Company shall take an action or an event shall occur, that would require a Conversion Price adjustment pursuant to Section 5(e); or (ii) the Company shall grant to the holders of its Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class; or (iii) of any reclassification of the Common Stock (other than a subdivision or combination of the outstanding shares of Common Stock), or of any consolidation, merger or share exchange to which the Company is a party and for which approval of any stockholders of the Company is required, or of the sale or transfer of all or substantially all of the assets of the Company; or (iv) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; or (v) the Company or any subsidiary shall commence a tender offer for all or a portion of the outstanding shares of Common Stock (or shall amend any such tender offer to change the maximum number of shares being sought or the amount or type of consideration being offered therefor); then the Company shall cause to be filed at each office or agency maintained for such purpose, and shall cause to be mailed to all holders at their last addresses as they shall appear in the stock register, at least 30 days prior to the applicable record, effective or expiration date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution or granting of rights or warrants, or, if a record is not to be taken, the date as of which the holders of Common Stock of record who will be entitled to such dividend, distribution, rights or warrants are to be determined, (y) the date on which such reclassification, consolidation, merger, share exchange, sale, transfer, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, share exchange, sale, transfer, dissolution, liquidation or winding up, or (z) the date on which such tender offer commenced, the date on which such tender offer is scheduled to expire unless extended, the consideration offered and the other material terms thereof (or the material terms of the amendment thereto). Such notice shall also set forth such facts with respect thereto as shall be reasonably necessary to indicate the effect of such action on the Conversion Price and the number, kind or class of shares or other securities or property which shall be deliverable or purchasable upon the occurrence of such action or deliverable upon conversion of the Series B Preferred Stock. Neither the failure to give any such notice nor any defect therein shall affect the legality or validity of any action described in clauses (i) through (v) of this Section 5(h). (i) Company to Reserve Common Stock. The Company shall at all times reserve and keep available, free from preemptive rights, out of the authorized but unissued Common Stock or out of the Common Stock held in treasury, for the purpose of effecting the conversion of Series B Preferred Stock, the full number of shares of Common Stock then issuable upon the conversion of all outstanding shares of Series B Preferred Stock. Before taking any action that would cause an adjustment reducing the Conversion Price below the then par value (if any) of the shares of Common Stock deliverable upon conversion of the Series B Preferred Stock or that would cause the number of shares of Common Stock deliverable upon conversion of the Series B Preferred Stock to exceed (when taken together with all other outstanding shares of Common Stock) the number of shares of Common Stock that the Company is authorized to issue, the Company will take any corporate action that, in the opinion of its counsel, is necessary in order that the Company may validly and legally issue the full number of fully paid and non-assessable shares of Common Stock issuable upon conversion at such adjusted conversion price. (j) Taxes on Conversions. The Company will pay any and all original issuance, transfer, stamp and other similar taxes that may be payable in respect of the issue or delivery of shares of Common Stock on conversion of Series B Preferred Stock pursuant hereto. 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 shares of Common Stock in a name other than that of the holder of the share(s) of Series B Preferred Stock to be converted, and no such issue or delivery shall be made unless and until the Person requesting such issue has paid to the Company the amount of any such tax, or has established to the reasonable satisfaction of the Company that such tax has been or will be paid. (k) Cancellation of Converted Series B Preferred Stock. All Series B Preferred Stock delivered for conversion shall be delivered to the Company to be canceled. (l) Certain Definitions. The following terms shall have the following respective meanings herein: "Appraisal Procedure" if applicable, means the following procedure to determine the fair market value, as to any security, for purposes of the definition of "Fair Market Value" or the fair market value, as to any other property (in either case, the "Valuation Amount"). The Valuation Amount shall be determined in good faith jointly by the Board of Directors and the holders of more than 50% of the issued and outstanding shares of Series B Preferred Stock (the "Majority Holder"); provided, however, that if such parties are not able to agree on the Valuation Amount within a reasonable period of time (not to exceed twenty (20) days), the Valuation Amount shall be determined by an investment banking firm of national recognition, which firm shall be reasonably acceptable to the Board of Directors and the Majority Holder. If the Board of Directors and the Majority Holder are unable to agree upon an acceptable investment banking firm within ten (10) days after the date either party proposed that one be selected, the investment banking firm will be selected by an arbitrator located in New York City, New York, selected by the American Arbitration Association (or if such organization ceases to exist, the arbitrator shall be chosen by a court of competent jurisdiction). The arbitrator shall select the investment banking firm (within ten (10) days of his appointment) from a list, jointly prepared by the Board of Directors and the Majority Holder, of not more than six investment banking firms of national standing in the United States, of which no more than three may be named by the Board of Directors and no more than three may be named by the Majority Holder. The arbitrator may consider, within the ten- day period allotted, arguments from the parties regarding which investment banking firm to choose, but the selection by the arbitrator shall be made in its sole discretion from the list of six. The Board of Directors and the Majority Holder shall submit their respective valuations and other relevant data to the investment banking firm, and the investment banking firm shall, within thirty days of its appointment, make its own determination of the Valuation Amount. The final Valuation Amount for purposes hereof shall be the average of the two Valuation Amounts closest together, as determined by the investment banking firm, from among the Valuation Amounts submitted by the Company and the Majority Holder and the Valuation Amount calculated by the investment banking firm. The determination of the final Valuation Amount by such investment-banking firm shall be final and binding upon the parties. The Company shall pay the fees and expenses of the investment banking firm and arbitrator (if any) used to determine the Valuation Amount. If required by any such investment banking firm or arbitrator, the Company shall execute a retainer and engagement letter containing reasonable terms and conditions, including, without limitation, customary provisions concerning the rights of indemnification and contribution by the Company in favor of such investment banking firm or arbitrator and its officers, directors, partners, employees, agents and affiliates. "Business Day" means a day other than a Saturday, Sunday or day on which banking institutions in New York are authorized or required to remain closed. "Company Election" means the election by the Company to exercise its right to convert the Series B Preferred Stock into Common Stock within 60 days of the public filing by the Company on Form 10-K or 10-Q, as applicable, evidencing the Company's achievement of four (4) consecutive quarters (commencing after the Original Issuance Date) of individual quarterly Operating Profits equal to or greater than $750,000 in each of the four (4) consecutive quarters. "Corporate Transaction" means a reorganization, merger, change of control or consolidation of the Company or sale or other disposition of all or substantially all of the assets of the Company. "Excluded Corporate Transaction" means a Corporate Transaction pursuant to which the individuals or entities who are the beneficial owners, respectively, of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Corporate Transaction will beneficially own, directly or indirectly, more than 50% of, respectively, the outstanding shares of common stock, and the combined voting power of the outstanding securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from, or the transferee Person, in such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns 100% of the Outstanding Company Common Stock or all or substantially all of the Company's assets either directly or indirectly) in substantially the same proportions relative to each other as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be. "Fair Market Value" means, as to any security, the Twenty Day Average of the average closing prices of such security's sales on all domestic securities exchanges on which such security may at the time be listed, or, if there have been no sales on any such exchange on any day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or, if on any day such security is not so listed, the average of the representative bid and asked prices quoted in the NASDAQ National Market System as of 4:00 P.M., New York City time, on such day, or, if on any day such security is not quoted in the NASDAQ National Market System, the average of the highest bid and lowest asked prices on such day in the domestic over-the-counter market as reported by the National Quotation Bureau, Incorporated, or any similar or successor organization (and in each such case excluding any trades that are not bona fide, arm's length transactions). If at any time such security is not listed on any domestic securities exchange or quoted in the NASDAQ National Market System or the domestic over-the-counter market, the "Fair Market Value" of such security shall be the fair market value thereof as determined in accordance with the Appraisal Procedure, using any appropriate valuation method, assuming an arms-length sale to an independent party. In determining the Fair Market Value of any class or series of Common Stock, a sale of all of the issued and outstanding Common Stock will be assumed, without giving regard to the lack of liquidity of such stock due to any restrictions (contractual or otherwise) applicable thereto or any discount for minority interests and assuming the conversion or exchange of all securities then outstanding that are convertible into or exchangeable for Common Stock and the exercise of all rights and warrants then outstanding and exercisable to purchase shares of such stock or securities convertible into or exchangeable for shares of such stock; provided, however that such assumption will not include those securities, rights and warrants convertible into Common Stock where the conversion, exchange or exercise price per share is greater than the Fair Market Value; provided, further, however, that Fair Market Value shall be determined with regard to the relative priority of each class or series of Common Stock (if more than one class or series exists). "Fair Market Value" means with respect to property other than securities, the "fair market value" determined in accordance with the Appraisal Procedure. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board, which are in effect from time to time. "Operating Profits" means earnings before interest, taxes and purchase price amortization, adjusted to exclude non-recurring items, equity earnings/losses and minority interests. "Outstanding Company Common Stock" means the then outstanding shares of Common Stock. "Outstanding Company Voting Securities" means the combined voting power of the then outstanding securities of the Company entitled to vote generally in the election of directors. "Twenty Day Average" means, with respect to any prices and in connection with the calculation of Fair Market Value, the average of such prices over the twenty Business Days ending on the Business Day immediately prior to the day as of which "Fair Market Value" is being determined. "Voting Stock" shall mean shares of Common Stock, Preferred Stock and any other class of securities of the Company having the power to elect directors to the Board of Directors and any other general voting power (and shall include any shares of Voting Stock issuable upon exercise, exchange or conversion of securities exercisable or exchangeable for or convertible into shares of Voting Stock). Each share of Common Stock shall count as one share of Voting Stock, each share of Preferred Stock shall count as a number of shares of Voting Stock equal to the number of shares of Common Stock into which such share of Preferred Stock is then convertible and each share of any other class of securities of the Company constituting Voting Stock shall count as a number of shares of Voting Stock equal to the number of shares of Common Stock into which such share of Voting Stock is then convertible, exchangeable or exercisable, as the case may be. "Voting Stock Equivalents" means any right, warrant, option or security of the Company which is exercisable or exchangeable for or convertible into, or represents the right to otherwise acquire, directly or indirectly, Voting Stock, whether at the time of issuance or upon the passage of time or the occurrence of some future event. Each Voting Stock Equivalent shall count as a number of shares of Voting Stock equal to the number of shares of Common Stock into which such Voting Stock Equivalent is then convertible, exchangeable or exercisable. Section 6. Dividend Received Deduction. For federal income tax purposes, the Company shall report distributions on the Series B Preferred Stock as dividends, to the extent of the Company's current and accumulated earnings and profits (as determined for federal income tax purposes). Section 7. Preemptive Rights. In case the Company proposes at any time to issue or sell any Voting Stock, options, rights or warrants to purchase Voting Stock or Voting Stock Equivalents or any other securities (whether debt or equity) of the Company, other than Excluded Stock (collectively, the "Company Offered Securities"), the Company shall, no later than twenty-five (25) days prior to the consummation of such transaction (a "Preemptive Rights Transaction"), give notice in writing (the "Preemptive Rights Offer Notice") to each holder of Series B Preferred Stock of such Preemptive Rights Transaction. The Preemptive Rights Offer Notice shall describe the proposed Preemptive Rights Transaction, identify the proposed purchaser, and contain an offer (the "Preemptive Rights Offer") to sell to each holder of Series B Preferred Stock, at the same price and for the same consideration to be paid by the proposed purchaser (provided, that, in the event any of such consideration is non-cash consideration, at the election of such holder of Series B Preferred Stock to whom the Preemptive Rights Offer is made, such holder of Series B Preferred Stock may pay cash equal to the value of such non-cash consideration), all or any part of such holder of Series B Preferred Stock's pro rata portion of the Company Offered Securities (which shall be a fraction of the Company Offered Securities determined by dividing the number of shares of outstanding Voting Stock owned by such holder of Series B Preferred Stock by the sum of (i) the number of shares of outstanding Voting Stock owned by such holder of Series B Preferred Stock and (ii) the number of outstanding shares of Voting Stock not held by such holder of Series B Preferred Stock). If any holder of Series B Preferred Stock to whom a Preemptive Rights Offer is made fails to accept (a "Non-Responding Holder") in writing the Preemptive Rights Offer by the tenth (10th) day after the Company's delivery of the Preemptive Rights Offer Notice, such Non-Responding Holders shall have no further rights with respect to the proposed Preemptive Rights Transaction. [Execution Page Follows] IN WITNESS WHEREOF, the Company has caused this Certificate of Designation to be signed by Brad Greenspan, its Chairman & CEO, this 19th day of October, 2001. eUNIVERSE, INC. By: /s/ Brad D. Greenspan -------------------------- Name: Brad D. Greenspan Title: Chairman and Chief Executive Officer EX-99 4 s521148.txt EXHIBIT 99.2 Exhibit 99.2 October 24, 2001 Brad Greenspan CEO eUniverse, Inc. 6300 Wilshire Boulevard Los Angeles, CA 90048 Re: Amendment of Secured Promissory Note Ladies and Gentlemen: Reference is made to that certain Secured Note and Warrant Purchase Agreement (the "Note Purchase Agreement"), dated September 6, 2000 by and between eUniverse, Inc. (the "Company") and 550 Digital Media Ventures Inc. (f.k.a. New Technology Holdings Inc.) ("550 DMV"), pursuant to which the Company issued to 550DMV that certain Secured Promissory Note in the aggregate principal amount of $3,155,670 (the "Original Note"). The Original Note, by its terms, could not be called for repayment before March 6, 2001. In connection with an Amendment to Subscriber Acquisition Agreement, dated February 14, 2001, among 550DMV, Indimi, Inc., Emazing, Inc., and the Company, 550DMV exchanged the Original Note for an amended promissory note (the "Amended Note") identical in all respects to the Original Note, except that the Amended Note may not be called for repayment before December 31, 2001. Simultaneously with the execution of this letter agreement, the Company and 550DMV shall enter into agreements pursuant to which the Company will purchase from 550DMV all of the membership interests in Indimi LLC (the "Indimi Acquisition") and 550DMV will purchase from the Company (the "550DMV Placement") $5,000,000 of the Company's Series B Preferred Stock, par value $.10 per share (the "Series B Preferred Stock"). The Indimi Acquisition and the 550DMV Placement shall be collectively referred to herein as the "Transactions". In connection with the consummation of the Transactions, the Company and 550DMV desire, among other things, to further extend the date upon which the Amended Note may be called for repayment, enter into a $2,500,000 Senior Secured Convertible Promissory Note (the "$2,500,000 Note") and to specifically provide that the existing Security Agreement dated as of September 6, 2000 collateralizes the $2,500,000 Note. In consideration of certain promises contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, 550DMV and the Company hereby agree that simultaneously with the execution of this letter agreement, 550DMV will exchange the Amended Note for an Amended and Restated Convertible Secured Promissory Note (the "Extended Note") identical in all respects to the Amended Note, except for the following: (a) the Extended Note may not be called for repayment before March 31, 2003 (the "Extended Demand Date"); provided that, repayment shall be accelerated upon a Change of Control (as defined below) of the Company or upon an Event of Default (as defined in the Note Purchase Agreement); (b) the Company shall have the option, exercisable within 30 days following the Extended Demand Date, to convert the outstanding principal and interest of the Extended Note to shares of Series B Preferred Stock, at the 20 day trailing average closing price of the Company's common stock for the 20 day trading period immediately prior to such conversion; provided that, if the Company previously converted the Series B Preferred Stock held by 550DMV into Common Stock in accordance with its terms, then the outstanding principal and interest shall then be converted into Common Stock, at the above described price per share otherwise applicable to the Series B Preferred Stock. "Change of Control" means the occurrence of any of the following events: (i) a sale of all or substantially all of the assets of the Company in one transaction or a series of transactions; (ii) the merger or consolidation of the Company with or into another person under circumstances in which the holders of the voting stock of the Company immediately prior to such merger or consolidation, do not own a majority of the voting stock of the Company or the surviving corporation immediately after such merger or consolidation; (iii) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), after the date of the Extended Note, becomes the "beneficial owner" (as defined in Rules 13-d-3 and 13d-5 under the Exchange Act), directly or indirectly, of voting stock of the Company entitled to cast more than 30% of the votes entitled to be cast by the holders of the outstanding voting stock of the Company. A copy of the Extended Note is attached hereto as Exhibit A. The parties hereto confirm that the obligations owed by the Company to 550DMV pursuant to the Extended Note and the $2,500,000 Note are of the nature and type contemplated by the phrase "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." To the extent necessary, the Security Agreement is hereby amended to provide that the Collateral secures all obligations of the Company to 550DMV whether arising under the Note Purchase Agreement, the Extended Note, the $2,500,000 Note or otherwise. This letter agreement shall be interpreted and construed in accordance with the laws of New York , including, without limitation, Section 5-1401 of the New York General Obligations Law (without regard to any conflicts of law provision that would require the application of the law of any other jurisdiction). This letter agreement shall not be modified or amended except by written instrument executed by the parties hereto. [SIGNATURE PAGE TO FOLLOW] If this letter agreement meets with your approval, please sign and return both originals to me to show your agreement and intent to be legally bound by its terms. We will sign and return one original to you. Sincerely yours, 550 DIGITAL MEDIA VENTURES INC. By: /s/ Mark Eisenberg ----------------------------- Name: Mark Eisenberg Title: Senior Vice President and General Counsel Agreed and Accepted this 24th day of October, 2001: EUNIVERSE, INC. By: /s/ Brad D. Greenspan ----------------------- Name: Brad D. Greenspan Title: CEO EXHIBIT A EXTENDED NOTE 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. AMENDED AND RESTATED CONVERTIBLE SECURED PROMISSORY NOTE $3,155,670 October 24, 2001 New York, New York THIS AMENDED CONVERTIBLE SECURED PROMISSORY NOTE (the "Note") is hereby issued by eUniverse, Inc., a Nevada corporation ("Borrower") to 550 Digital Media Ventures Inc. (f.k.a. New Technology Holdings Inc.) ("Lender"). This Note amends and restates in its entirety that certain amended Secured Promissory Note, which replaced the original Secured Promissory Note issued on September 6, 2000. FOR VALUE RECEIVED, Borrower hereby unconditionally promises to pay on demand to the order of 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. This Note is the Extended Note referred to in that certain Letter Agreement by and between the Borrower and the Lender dated October 23, 2001 (as the same may from time to time be amended or supplemented). 1. Repayment. (a) The outstanding Principal Amount and all interest accrued thereon shall be payable on demand, unless Lender has received a written notice from Borrower within 30 days of its delivery of a Demand Notice of Borrower's intent to convert pursuant to Section 7 below; provided, however, that unless there has been an Event of Default (as defined in the Secured Note and Warrant Purchase Agreement described below) or a Change of Control (as defined below), Lender agrees not to make demand prior to March 31, 2003 and provided, further, that Lender shall provide Borrower with 30 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, and as may be amended from time to time thereafter (the "Subscriber Agreement"). Lender shall have the right, but not the obligation, to deduct certain amounts, as described in the Subscriber Agreement, from all amounts owed to Borrower under the Subscriber Agreement, and apply such deducted amounts to the outstanding principal amount or interest due 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 as of September 6, 2000, 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 as of September 6, 2000, 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. Change of Control. As used herein, the term "Change of Control" means the occurrence of any of the following events: (i) a sale of all or substantially all of the assets of the Borrower in one transaction or a series of transactions; (ii) the merger or consolidation of Borrower with or into another person under circumstances in which the holders of the voting stock of Borrower immediately prior to such merger or consolidation, do not own a majority of the voting stock of Borrower or the surviving corporation immediately after such merger or consolidation; (iii) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), after the date of this Note, becomes the "beneficial owner" (as defined in Rules 13-d-3 and 13d-5 under the Exchange Act), directly or indirectly, of voting stock of Borrower entitled to cast more than 30% of the votes entitled to be cast by the holders of the outstanding voting stock of Borrower. 7. Conversion. (a) Mechanics of Conversion. Within 60 days following receipt of a Demand Notice, Borrower may at its option elect to automatically convert the outstanding Principal Amount and unpaid accrued interest thereon as of such date into shares of the Borrower's Series B Preferred Stock, $.10 par value per share (the "Series B Preferred Stock"), in accordance with this Section 7. The Borrower shall give at least 15 days prior notice to Lender of the date on which such automatic conversion is to be effectuated (such date, the "Conversion Date"). The number of shares of Series B Preferred Stock (calculated to the nearest 1/100,000th of a share) to which Lender shall be entitled upon such automatic conversion shall be determined by dividing (x) the outstanding Principal Amount and unpaid accrued interest thereon as of the Conversion Date by (y) the average Closing Price (as defined below) for the twenty trading days immediately prior to the Conversion Date. "Closing Price" means, the price with respect to the shares of the Borrower's Common Stock on any day, (i) the last reported sales price, or in the case no such reported sale takes place on such day, the average of the reported closing bid and asked prices, in either case on any national securities exchange on which the shares of Common Stock are listed or admitted to trading, or (ii) if the shares of Common Stock are not listed on any national securities exchange, the average of the closing bid and asked prices in the over-the-counter market as furnished by any NYSE member firm selected from time to time by Borrower for that purpose, or (iii) if such prices in the over-the-counter market are not available, the fair market value of such shares. On the Conversion Date, the outstanding Principal Amount and unpaid accrued interest thereon shall be converted automatically into the Series B Preferred Stock without further action by the Lender and whether or not this Note has been surrendered to Borrower or its transfer agent, and Lender shall be deemed to be the shareholder of record as of the Conversion Date with respect to the Series B Preferred Stock. Within fourteen (14) days subsequent to the Conversion Date Lender shall surrender this Note to Borrower or its transfer agent, duly marked cancelled and, in exchange therefor, Lender shall receive from Borrower share certificates evidencing the Series B Preferred Stock in the name or names in which Lender wishes such certificate or certificates for the Series B Preferred Stock to be issued. If within fourteen (14) days of the Conversion Date, Lender is unable to deliver this Note, Lender shall notify Borrower or its transfer agent that such Note has been lost, stolen or destroyed and shall deliver to Borrower an acknowledgement that the obligations evidenced by this Note, shall have been upon the Conversion Date be deemed fully satisfied, and, if requested by Borrower, Lender shall execute an agreement reasonably satisfactory to Borrower to indemnify Borrower from any loss incurred by it in connection with inability of Lender to deliver such Note. (b) Issue Taxes. Borrower shall pay any and all stamp, issue and other taxes that may be payable in respect of the issuance or delivery of the Series B Preferred Stock. (c) In the event that the Company exercises the option to convert this Note pursuant to Section 7(a) after all Series B Preferred Stock held by 550 DMV has been converted into the Company's common stock, par value $.001 per share (the "Common Stock"), than the outstanding principal and interest of this Note may be converted by the Company into Common Stock at the price per share otherwise applicable to the Series B Preferred Stock. (d) Reservation of Stock Issuable Upon Conversion. Upon any automatic conversion pursuant to Section 7(a) above, Borrower will take all corporate action as may be necessary to increase its authorized but unissued shares of Series B Preferred Stock or Common Stock, as the case may be, to such number of shares as shall be sufficient to effect the conversion of this Note under Section 7(a) above, including, without limitation, obtaining the requisite stockholder approval of any necessary amendment to Borrower's certificate of incorporation. (e) Fractional Shares. No fractional shares shall be issued upon the conversion of this Note into the Series B Preferred Stock or Common Stock, as the case may be. If the conversion would result in the issuance of a fraction of a share of the Series B Preferred Stock or Common Stock, as the case may be, Borrower shall, in lieu of issuing any fractional share, pay Lender who is otherwise entitled to such fraction a sum in cash equal to the fair market value of such fraction on the Conversion Date, with respect to the Series B Preferred Stock, or Common Stock, as the case may be, (in each case as determined in good faith by the Board of Directors of Borrower and agreed to by Lender). (f) Registration Rights. If the outstanding Principal Amount of and unpaid accrued interest thereon has been converted pursuant to Section 7(a) hereof into Series B Preferred Stock or Common Stock, as the case may be, Borrower shall grant to Lender the same registration rights and other minority shareholder rights granted to other holders of Series B Preferred Stock. If the outstanding Principal Amount and unpaid accrued interest thereon has been converted pursuant to Section 7(a) in to Series B Preferred Stock or Common Stock, as the case may be, Borrower shall ensure that Lender shall receive registration rights and other minority shareholder rights whenever such rights are granted by Borrower to other holders of its securities (such holders, "Other Shareholders"), and the terms of such rights granted to Lender shall, in each case, be equal (including, without limitation, any holding periods) to the terms governing the grant of such registration rights and minority shareholder rights to such Other Shareholders. 8. 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, 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. 9. 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. 10. 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. 11. 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 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, INCLUDING, WITHOUT LIMITATION, SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW (WITHOUT REGARD TO ANY CONFLICTS OF LAW PROVISION THAT WOULD REQUIRE THE APPLICATION OF THE LAW OF ANY OTHER JURISDICTION). BORROWER EUNIVERSE, INC. By: /s/ Brad D. Greenspan ------------------------- Name: Brad D. Greenspan Title: Chairman and Chief Executive Officer [SIGNATURE PAGE TO SECURED PROMISSORY NOTE] EX-99 5 s349819.txt EXHIBIT 99.3 Exhibit 99.3 - ------------------------------------------------------------------------------ REGISTRATION RIGHTS AGREEMENT by and between EUNIVERSE, INC. and 550 DIGITAL MEDIA VENTURES INC. ------------------- Dated as of October 24, 2001 - ------------------------------------------------------------------------------ TABLE OF CONTENTS 1. Certain Definitions..................................................3 2. Demand Registrations.................................................4 (a) Right to Request Registration....................................4 (b) Number of Demand Registrations...................................5 (c) Priority on Demand Registrations.................................5 (d) Restrictions on Demand Registrations.............................5 (e) Selection of Underwriters........................................6 (f) Other Registration Rights........................................6 (g) Effective Period of Demand Registrations.........................6 3. Piggyback Registrations..............................................7 (a) Right to Piggyback...............................................7 (b) Priority on Primary Registrations................................7 (c) Priority on Secondary Registrations..............................7 (d) Selection of Underwriters........................................8 (e) Other Registrations..............................................8 4. S-3 Registrations....................................................8 5. Holdback Agreements..................................................8 6. Registration Procedures..............................................9 7. Registration Expenses...............................................12 8. Indemnification.....................................................13 9. Participation in Underwritten Registrations.........................15 10. Rule 144............................................................15 11. Miscellaneous.......................................................15 (a) Notices.........................................................15 (b) No Waivers......................................................16 (c) Successors and Assigns..........................................16 (d) Governing Law...................................................16 (e) Jurisdiction....................................................16 (f) Waiver of Jury Trial............................................17 (g) Counterparts; Effectiveness.....................................17 (h) Entire Agreement................................................17 (i) Captions........................................................17 (j) Severability....................................................17 (k) Amendments......................................................17 (l) Equitable Relief................................................18 (m) Costs and Expenses. ...........................................18 REGISTRATION RIGHTS AGREEMENT dated as of October 24, 2001, between eUniverse, Inc., a Nevada corporation (the "Company"), and 550 Digital Media Ventures Inc., a Delaware corporation (the "Stockholder"). In consideration of the mutual covenants and agreements herein contained and other good and valid consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree as follows: 1. Certain Definitions. In addition to the terms defined elsewhere in this Agreement, the following terms shall have the following meanings: "Affiliate" of any Person means any other Person which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with such Person. The term "control" (including the terms "controlled by" and "under common control with") as used with respect to any Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "Agreement" means this Registration Rights Agreement, including all amendments, modifications and supplements and any exhibits or schedules to any of the foregoing, and shall refer to this Registration Rights Agreement as the same may be in effect at the time such reference becomes operative. "Business Day" means any day on which commercial banks are open for business in New York, New York. "Common Stock" means common stock, par value $.001 per share, of the Company. "Conversion Shares" means any of (x) the shares of Common Stock owned by the Stockholder, (y) the shares of Common Stock issued or issuable upon conversion of the Series B Preferred Stock or (z) any securities issued or issuable with respect to the Common Stock or Series B Preferred Stock by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Holder" means any holder of record of Registrable Common Stock (as defined below) and any transferees of such Registrable Common Stock from such Holders (or in the case of a Holder of Series B Preferred Stock, the transferees of such Holder). For purposes of this Agreement, the Company may deem and treat the registered holder of Registrable Common Stock as the Holder and absolute owner thereof, and the Company shall not be affected by any notice to the contrary. "Person" means an individual, partnership, corporation, trust, limited liability company, or unincorporated organization, or a government or agency or political subdivision thereof. "Prospectus" means the prospectus or prospectuses included in any Registration Statement, as amended or supplemented by any prospectus supplement with respect to the terms of the offering of any portion of the Registrable Common Stock covered by such Registration Statement and by all other amendments and supplements to the prospectus, including post-effective amendments and all material incorporated by reference in such prospectus or prospectuses. "Purchase Agreement" means the stock purchase agreement, dated as of July 13, 2001, between the Company and the Stockholder. "Registrable Common Stock" means the Conversion Shares. All references herein to a "Holder" or "Holder of Registrable Common Stock" shall include the holder or holders of Series B Preferred Stock to the extent of the Conversion Shares then underlying such Series B Preferred Stock. For purposes of determining the number of shares of Registrable Common Stock held by a Holder and the number of shares of Registrable Common Stock outstanding, for purposes of this Agreement (including the definition of "Holder") but not for any other purpose, any holder of record of Series B Preferred Stock shall be deemed to be a Holder of the number of Conversion Shares issuable upon conversion of such Series B Preferred Stock and all such Conversion Shares shall be deemed to be outstanding shares of Registrable Common Stock. "Registration Statement" means any registration statement of the Company which covers any of the Registrable Common Stock pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such Registration Statement, including post-effective amendments, all exhibits and all materials incorporated by reference in such Registration Statement. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Series B Preferred Stock" means the Series B Convertible Preferred Stock, par value $0.10 per share, of the Company held by the Stockholder. "underwritten registration or underwritten offering" means a registration in which securities of the Company are sold to underwriters for reoffering to the public. 2. Demand Registrations. (a) Right to Request Registration. Beginning two and one-half (2 1/2) years after the date of this Agreement, any Holder or Holders who together hold a majority of the then outstanding Registrable Common Stock ("Initiating Holders") may request registration under the Securities Act of all or part of the Registrable Common Stock ("Demand Registration"). Within 10 days after receipt of any such request for Demand Registration, the Company shall give written notice of such request to all other Holders of Registrable Common Stock and shall, subject to the provisions of Section 2(d) hereof, include in such registration all such Registrable Common Stock with respect to which the Company has received written requests for inclusion therein within 15 days after the receipt of the Company's notice. (b) Number of Demand Registrations. Subject to the provisions of Section 2(a), the Initiating Holders of Registrable Common Stock shall be entitled to request an aggregate of five (5) Demand Registrations. A registration shall not count as one of the permitted Demand Registrations (i) until it has become effective, (ii) if the Initiating Holder requesting such registration is not able to register and sell at least 50% of the Registrable Common Stock requested by such Initiating Holder to be included in such registration or (iii) in the case of a Demand Registration that would be the last permitted Demand Registration requested hereunder, if the Initiating Holder requesting such registration is not able to register and sell all of the Registrable Common Stock requested to be included by such Initiating Holder in such registration. (c) Priority on Demand Registrations. Except as provided in Section 2(g), the Company shall not include in any Demand Registration any securities which are not Registrable Common Stock without the written consent of the Holders of a majority of the shares of Registrable Common Stock to be included in such registration, or, if such Demand Registration is an underwritten offering, without the written consent of the managing underwriters. If the managing underwriters of the requested Demand Registration advise the Company in writing that in their opinion the number of shares of Registrable Common Stock proposed to be included in any such registration exceeds the number of securities which can be sold in such offering and/or that the number of shares of Registrable Common Stock proposed to be included in any such registration would adversely affect the price per share of the Company's equity securities to be sold in such offering, the Company shall include in such registration only the number of shares of Registrable Common Stock which in the opinion of such managing underwriters can be sold. If the number of shares which can be sold is less than the number of shares of Registrable Common Stock proposed to be registered, the amount of Registrable Common Stock to be so sold shall be allocated pro rata among the Holders of Registrable Common Stock desiring to participate in such registration on the basis of the amount of such Registrable Common Stock initially proposed to be registered by such other Holders. If the number of shares which can be sold exceeds the number of shares of Registrable Common Stock proposed to be sold, such excess shall be allocated pro rata among the other holders of securities, if any, desiring to participate in such registration based on the amount of such securities initially requested to be registered by such holders or as such holders may otherwise agree. (d) Restrictions on Demand Registrations. The Company shall not be obligated to effect any Demand Registration within six months after the effective date of a previous Demand Registration, a previous S-3 Registration (as hereinafter defined) or a previous registration under which the Initiating Holders had piggyback rights pursuant to Section 3 hereof wherein the Initiating Holders were permitted to register, and sold, at least 50% of the shares of Registrable Common Stock requested to be included therein. The Company may (i) postpone for up to ninety (90) days the filing or the effectiveness of a Registration Statement for a Demand Registration if, based on the good faith judgment of the Company's board of directors, such postponement or withdrawal is necessary in order to avoid premature disclosure of a matter the board has determined would not be in the best interest of the Company to be disclosed at such time or (ii) postpone the filing of a Demand Registration in the event the Company shall be required to prepare audited financial statements as of a date other than its fiscal year end (unless the stockholders requesting such registration agree to pay the expenses of such an audit); provided, however, that in no event shall the Company withdraw a Registration Statement under clause (i) above after such Registration Statement has been declared effective; and provided, further, however, that in any of the events described in clause (i) or (ii) above, the Initiating Holders requesting such Demand Registration shall be entitled to withdraw such request and, if such request is withdrawn, such Demand Registration shall not count as one of the permitted Demand Registrations. The Company shall provide written notice to the Initiating Holders requesting such Demand Registration of (x) any postponement or withdrawal of the filing or effectiveness of a Registration Statement pursuant to this Section 2(d), (y) the Company's decision to file or seek effectiveness of such Registration Statement following such withdrawal or postponement and (z) the effectiveness of such Registration Statement. The Company may defer the filing of a particular Registration Statement pursuant to this Section 2(d) only once every 12 months. (e) Selection of Underwriters. If any of the Registrable Common Stock covered by a Demand Registration or an S-3 Registration pursuant to Section 4 hereof is to be sold in an underwritten offering, the Initiating Holders shall have the right to select the managing underwriter(s) to administer the offering subject to the approval of the Company, which will not be unreasonably withheld. (f) Other Registration Rights. The Company shall not grant to any Person the right, other than as set forth herein and except to employees of the Company with respect to registrations on Form S-8 (or any successor forms thereto), to request the Company to register any securities of the Company except such rights as are not more favorable than or inconsistent with the rights granted to the Holders herein. The stock transfer restriction imposed on the shares of the Company's Capital Stock held by Brad Greenspan (the "Greenspan Restrictions") are not more favorable than or inconsistent with the stock transfer restrictions contained in this Agreement. In the event the Company grants rights which are more favorable or relaxes the Greenspan Restrictions, the Company will make such provisions available to the Holders and will enter into any amendments necessary to confer such rights on the Holders. (g) Effective Period of Demand Registrations. After any Demand Registration filed pursuant to this Agreement has become effective, the Company shall use its best efforts to keep such Demand Registration effective for a period equal to 180 days from the date on which the SEC declares such Demand Registration effective (or if such Demand Registration is not effective during any period within such 180 days, such 180-day period shall be extended by the number of days during such period when such Demand Registration is not effective), or such shorter period which shall terminate when all of the Registrable Common Stock covered by such Demand Registration has been sold pursuant to such Demand Registration. If the Company shall withdraw any Demand Registration pursuant to subsection (d) of this Section 2 (a "Withdrawn Demand Registration"), the Initiating Holders of the Registrable Common Stock remaining unsold and originally covered by such Withdrawn Demand Registration shall be entitled to a replacement Demand Registration which (subject to the provisions of this Section 2) the Company shall use its best efforts to keep effective for a period commencing on the effective date of such Demand Registration and ending on the earlier to occur of the date (i) which is 180 days from the effective date of such Demand Registration and (ii) on which all of the Registrable Common Stock covered by such Demand Registration has been sold. Such additional Demand Registration otherwise shall be subject to all of the provisions of this Agreement. 3. Piggyback Registrations. (a) Right to Piggyback. Whenever the Company proposes to register any of its common equity securities under the Securities Act (other than a registration statement on Form S-8 or on Form S-4 or any similar successor forms thereto), whether for its own account or for the account of one or more stockholders of the Company, and the registration form to be used may be used for any registration of Registrable Common Stock (a "Piggyback Registration"), the Company shall give prompt written notice (in any event within 10 business days after its receipt of notice of any exercise of other demand registration rights) to all Holders of its intention to effect such a registration and, subject to Sections 3(b) and 3(c), shall include in such registration all Registrable Common Stock with respect to which the Company has received written requests for inclusion therein within 15 days after the receipt of the Company's notice. The Company may postpone or withdraw the filing or the effectiveness of a Piggyback Registration at any time in its sole discretion. (b) Priority on Primary Registrations. If a Piggyback Registration is an underwritten primary registration on behalf of the Company, and the managing underwriters advise the Company in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold in such offering and/or that the number of shares of Registrable Common Stock proposed to be included in any such registration would adversely affect the price per share of the Company's equity securities to be sold in such offering, the Company shall include in such registration (i) first, the securities the Company proposes to sell, and (ii) second, the Registrable Common Stock requested to be included therein by the Holders and other securities requested to be included in such registration pro rata among all the holders of such securities on the basis of the number of shares requested to be registered by such holders or as such holders may otherwise agree. (c) Priority on Secondary Registrations. If a Piggyback Registration is an underwritten secondary registration on behalf of a holder of the Company's securities other than Registrable Common Stock, and the managing underwriters advise the Company in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold in such offering and/or that the number of shares of Registrable Common Stock proposed to be included in any such registration would adversely affect the price per share of the Company's equity securities to be sold in such offering, the Company shall include in such registration (i) first, the securities the Company proposes to sell, and (ii) second the Registrable Common Stock requested to be included therein by the Holders and other securities requested to be included in such registration pro rata among all the holders of such securities on the basis of the number of shares requested to be registered by such holders or as such holders may otherwise agree. (d) Selection of Underwriters. If any Piggyback Registration is an underwritten primary offering, the Company shall have the right to select the managing underwriter or underwriters to administer any such offering. (e) Other Registrations. If the Company has previously filed a Registration Statement with respect to Registrable Common Stock pursuant to Sections 2 or 4 hereof or pursuant to this Section 3, and if such previous registration has not been withdrawn or abandoned, the Company shall not be obligated to cause to become effective any other registration of any of its securities under the Securities Act, whether on its own behalf or at the request of any holder or holders of such securities, until a period of at least three months has elapsed from the effective date of such previous registration. 4. S-3 Registrations. If at any time that the Company is eligible to use Form S-3 or any successor thereto, any Holder or Holders requests that the Company file a Registration Statement on Form S-3 or any successor thereto for a public offering of all or any portion of the Registrable Common Stock held by such Holders, then the Company shall use its best efforts to register under the Securities Act on Form S-3 (an "S-3 Registration") or any successor thereto, for public sale in accordance with the method of disposition specified in such notice, the number of shares of Registrable Common Stock specified in such notice; provided, however, that the Company shall have no obligation to register such shares of Registrable Common Stock pursuant to this Section if (based on the current market prices) the number of shares of Registrable Common Stock specified in such notice would not yield gross proceeds to the selling stockholders of at least $1,000,000. Whenever the Company is required by this Section 4 to use its best efforts to effect the registration of Registrable Common Stock, each of the procedures and requirements of Section 2 (including but not limited to the requirement that the Company notify all Holders from whom notice has not been received and provide them with the opportunity to participate in the offering) shall apply to such registration. There is no limitation on the number of registrations pursuant to this Section 4 that the Company is obligated to effect. 5. Holdback Agreements. (a) The Company agrees not to effect any sale or distribution of any of its equity securities during the 10 days prior to and during the 180 days beginning on the effective date of any underwritten Demand Registration or any underwritten Piggyback Registration or any underwritten S-3 Registration (except as part of such underwritten registration or pursuant to registrations on Form S-8 or S-4 or any successor forms thereto) unless the underwriters managing the offering otherwise agree to a shorter period. (b) The Holders agree not to effect any sale or distribution of any equity securities of the Company during the eighteen (18) month period following the date of this Agreement; provided, that such restriction shall not apply to (i) transactions related to Common Stock acquired in open market transactions after the date of this Agreement, (ii) sales or distributions conducted pursuant to Section 3 of this Agreement, or (iii) transfers to Affiliates, or other private transactions which do not require registration under the Securities Act, provided that the transferee pursuant to this Section 5(b)(iii) agrees in writing to be subject to the terms hereof to the same extent as if the transferee were a Holder hereunder. 6. Registration Procedures. Whenever the Holders request that any Registrable Common Stock be registered pursuant to this Agreement, the Company shall use its best efforts to effect the registration and the sale of such Registrable Common Stock in accordance with the intended methods of disposition thereof, and pursuant thereto the Company shall as expeditiously as possible: (a) prepare and file with the SEC a Registration Statement with respect to such Registrable Common Stock and use its best efforts to cause such Registration Statement to become effective as soon as practicable thereafter; and before filing a Registration Statement or Prospectus or any amendments or supplements thereto, furnish to the Holders of Registrable Common Stock covered by such Registration Statement and the underwriter or underwriters, if any, copies of all such documents proposed to be filed, including documents incorporated by reference in the Prospectus and, if requested by such Holders, the exhibits incorporated by reference, and such Holders shall have the opportunity to object to any information pertaining to such Holders that is contained therein and the Company will make the corrections reasonably requested by such Holders with respect to such information prior to filing any Registration Statement or amendment thereto or any Prospectus or any supplement thereto; (b) prepare and file with the SEC such amendments and supplements to such Registration Statement and the Prospectus used in connection therewith as may be necessary to keep such Registration Statement effective for a period of not less than 180 days, in the case of a Demand Registration or an S-3 Registration, or such shorter period as is necessary to complete the distribution of the securities covered by such Registration Statement and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement during such period in accordance with the intended methods of disposition by the sellers thereof set forth in such Registration Statement; (c) furnish to each seller of Registrable Common Stock such number of copies of such Registration Statement, each amendment and supplement thereto, the Prospectus included in such Registration Statement (including each preliminary Prospectus) and such other documents as such seller may reasonably request in order to facilitate the disposition of the Registrable Common Stock owned by such seller; (d) use its best efforts to register or qualify such Registrable Common Stock under such other securities or blue sky laws of such jurisdictions as any seller reasonably requests and do any and all other acts and things which may be reasonably necessary or advisable to enable such seller to consummate the disposition in such jurisdictions of the Registrable Common Stock owned by such seller (provided, that the Company will not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this subparagraph (d), (ii) subject itself to taxation in any such jurisdiction or (iii) consent to general service of process in any such jurisdiction); (e) notify each seller of such Registrable Common Stock, at any time when a Prospectus relating thereto is required to be delivered under the Securities Act, of the occurrence of any event as a result of which the Prospectus included in such Registration Statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading, and, at the request of any such seller, the Company shall prepare a supplement or amendment to such Prospectus so that, as thereafter delivered to the purchasers of such Registrable Common Stock, such Prospectus shall not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading; (f) in the case of an underwritten offering, enter into such customary agreements (including underwriting agreements in customary form) and take all such other actions as the Holders of a majority of number of shares of the Registrable Common Stock being sold or the underwriters, if any, reasonably request in order to expedite or facilitate the disposition of such Registrable Common Stock (including, without limitation, making members of senior management of the Company available to participate in, and cause them to cooperate with the underwriters in connection with, "road-show" and other customary marketing activities (including one-on-one meetings with prospective purchasers of the Registrable Common Stock)) and cause to be delivered to the underwriters and the sellers, if any, opinions of counsel to the Company in customary form, covering such matters as are customarily covered by opinions for an underwritten public offering as the underwriters may request and addressed to the underwriters and the sellers; (g) make available, for inspection by any seller of Registrable Common Stock, any underwriter participating in any disposition pursuant to such Registration Statement, and any attorney, accountant or other agent retained by any such seller or underwriter, all financial and other records, pertinent corporate documents and properties of the Company, and cause the Company's officers, directors, employees and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such Registration Statement; (h) use its best efforts to cause all such Registrable Common Stock to be listed on each securities exchange on which securities of the same class issued by the Company are then listed or, if no such similar securities are then listed, on Nasdaq or a national securities exchange selected by the Company; (i) provide a transfer agent and registrar for all such Registrable Common Stock not later than the effective date of such Registration Statement; (j) if requested, cause to be delivered, immediately prior to the effectiveness of the Registration Statement (and, in the case of an underwritten offering, at the time of delivery of any Registrable Common Stock sold pursuant thereto), letters from the Company's independent certified public accountants addressed to each selling Holder (unless such selling Holder does not provide to such accountants the appropriate representation letter required by rules governing the accounting profession) and each underwriter, if any, stating that such accountants are independent public accountants within the meaning of the Securities Act and the applicable rules and regulations adopted by the SEC thereunder, and otherwise in customary form and covering such financial and accounting matters as are customarily covered by letters of the independent certified public accountants delivered in connection with primary or secondary underwritten public offerings, as the case may be; (k) make generally available to its stockholders a consolidated earnings statement (which need not be audited) for the 12 months beginning after the effective date of a Registration Statement as soon as reasonably practicable after the end of such period, which earnings statement shall satisfy the requirements of an earning statement under Section 11(a) of the Securities Act; (l) promptly notify each seller of Registrable Common Stock and the underwriter or underwriters, if any: (i) when the Registration Statement, any pre-effective amendment, the Prospectus or any Prospectus supplement or post-effective amendment to the Registration Statement has been filed and, with respect to the Registration Statement or any post-effective amendment, when the same has become effective; (ii) of any written request by the SEC for amendments or supplements to the Registration Statement or Prospectus; (iii) of the notification to the Company by the SEC of its initiation of any proceeding with respect to the issuance by the SEC of any stop order suspending the effectiveness of the Registration Statement; and (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of any Registrable Common Stock for sale under the applicable securities or blue sky laws of any jurisdiction. At all times after the Company has filed a registration statement with the SEC pursuant to the requirements of either the Securities Act or the Exchange Act, the Company shall file all reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder, and take such further action as any Holders may reasonably request, all to the extent required to enable such Holders to be eligible to sell Registrable Common Stock pursuant to Rule 144 (or any similar rule then in effect). The Company may require each seller of Registrable Common Stock as to which any registration is being effected to furnish to the Company any other information regarding such seller and the distribution of such securities as the Company may from time to time reasonably request in writing. Each seller of Registrable Common Stock agrees by having its stock treated as Registrable Common Stock hereunder that, upon notice of the happening of any event as a result of which the Prospectus included in such Registration Statement contains an untrue statement of a material fact or omits any material fact necessary to make the statements therein not misleading (a "Suspension Notice"), such seller will forthwith discontinue disposition of Registrable Common Stock until such seller is advised in writing by the Company that the use of the Prospectus may be resumed and is furnished with a supplemented or amended Prospectus as contemplated by Section 6(e) hereof, and, if so directed by the Company, such seller will deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such seller's possession, of the Prospectus covering such Registrable Common Stock current at the time of receipt of such notice; provided, however, that such postponement of sales of Registrable Common Stock by the Holders shall not exceed ninety (90) days in the aggregate in any one year. If the Company shall give any notice to suspend the disposition of Registrable Common Stock pursuant to a Prospectus, the Company shall extend the period of time during which the Company is required to maintain the Registration Statement effective pursuant to this Agreement by the number of days during the period from and including the date of the giving of such notice to and including the date such seller either is advised by the Company that the use of the Prospectus may be resumed or receives the copies of the supplemented or amended Prospectus contemplated by Section 6(e). In any event, the Company shall not be entitled to deliver more than three (3) Suspension Notices in any one year. 7. Registration Expenses. All expenses incident to the Company's performance of or compliance with this Agreement, including, without limitation, all registration and filing fees, fees and expenses of compliance with securities or blue sky laws, listing application fees, printing expenses, transfer agent's and registrar's fees, cost of distributing Prospectuses in preliminary and final form as well as any supplements thereto, and fees and disbursements of counsel for the Company and all independent certified public accountants and other Persons retained by the Company (all such expenses being herein called "Registration Expenses") (but not including any underwriting discounts or commissions attributable to the sale of Registrable Common Stock or fees and expenses of counsel representing the Holders of Registrable Common Stock), shall be borne by the Company. In addition, the Company shall pay its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit or quarterly review, the expense of any liability insurance and the expenses and fees for listing the securities to be registered on each securities exchange on which they are to be listed. 8. Indemnification. (a) The Company agrees to indemnify, to the fullest extent permitted by law, each Holder, its officers, directors and affiliates and each Person who controls such Holder (within the meaning of the Securities Act) against all losses, claims, damages, liabilities and expenses arising out of or based upon any untrue or alleged untrue statement of material fact contained in any Registration Statement, Prospectus or preliminary Prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading or any violation or alleged violation by the Company of the Securities Act, the Exchange Act or applicable "blue sky" laws, except insofar as the same are made in reliance and in conformity with information relating to such Holder furnished in writing to the Company by such Holder expressly for use therein or caused by such Holder's failure to deliver to such Holder's immediate purchaser a copy of the Registration Statement or Prospectus or any amendments or supplements thereto (if the same was required by applicable law to be so delivered) after the Company has furnished such Holder with a sufficient number of copies of the same. In connection with an underwritten offering, the Company shall indemnify such underwriters, their officers and directors and each Person who controls such underwriters (within the meaning of the Securities Act) to the same extent as provided above with respect to the indemnification of the Holders. (b) In connection with any Registration Statement in which a Holder of Registrable Common Stock is participating, each such Holder shall furnish to the Company in writing such information and affidavits as the Company reasonably requests for use in connection with any such Registration Statement or Prospectus and, to the extent permitted by law, shall indemnify the Company, its directors and officers and each Person who controls the Company (within the meaning of the Securities Act) against any losses, claims, damages, liabilities and expenses arising out of or based upon any untrue or alleged untrue statement of material fact contained in the Registration Statement, Prospectus or preliminary Prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that such untrue statement or omission is made in reliance on and in conformity with information or affidavit so furnished in writing by such Holder expressly for use in the Registration Statement; provided, however, that the obligation to indemnify shall be several, not joint and several, among such Holders and the liability of each such Holder shall be in proportion to and limited to the net amount received by such Holder from the sale of Registrable Common Stock pursuant to such Registration Statement. (c) Any Person entitled to indemnification hereunder shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such defense is assumed, the indemnifying party shall not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent will not be unreasonably withheld). An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim shall not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party there may be one or more legal or equitable defenses available to such indemnified party which are in addition to or may conflict with those available to another indemnified party with respect to such claim. Failure to give prompt written notice shall not release the indemnifying party from its obligations hereunder. (d) The indemnification provided for under this Agreement shall remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director or controlling Person of such indemnified party and shall survive the transfer of securities. (e) If the indemnification provided for in or pursuant to this Section 8 is due in accordance with the terms hereof, but is held by a court to be unavailable or unenforceable in respect of any losses, claims, damages, liabilities or expenses referred to herein, then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified person as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions which result in such losses, claims, damages, liabilities or expenses as well as any other relevant equitable considerations. The relative fault of the indemnifying party on the one hand and of the indemnified person on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party, and by such party's relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. In no event shall the liability of any selling Holder be greater in amount than the amount of net proceeds received by such Holder upon such sale or the amount for which such indemnifying party would have been obligated to pay by way of indemnification if the indemnification provided for under Section 8(a) or 8(b) hereof had been available under the circumstances. 9. Participation in Underwritten Registrations. No Person may participate in any registration hereunder which is underwritten unless such Person (a) agrees to sell such Person's securities on the basis provided in any underwriting arrangements approved by the Person or Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements. 10. Rule 144. The Company covenants that it will file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder, and it will take such further action as any Holder may reasonably request to make available adequate current public information with respect to the Company meeting the current public information requirements of Rule 144(c) under the Securities Act, to the extent required to enable such Holder to sell Registrable Common Stock without registration under the Securities Act within the limitation of the exemptions provided by (i) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (ii) any similar rule or regulation hereafter adopted by the SEC. Upon the request of any Holder, the Company will deliver to such Holder a written statement as to whether it has complied with such information and requirements. 11. Miscellaneous. (a) Notices. All notices, requests and other communications to any party hereunder shall be in writing (including facsimile or similar writing) and shall be given, If to the Company: eUniverse, Inc. 6300 Wilshire Blvd., Suite 1700 Los Angeles, CA 90048 Facsimile No.: (323) 658-9089 Attn: President with a copy to: Martin, Lucas & Chioffi, LLP 1177 Summer Street Stamford, CT 06905 Attention: Christopher Martin, Esq. Facsimile No.: (203) 324-8646 If to the Stockholder: 550 Digital Media Ventures Inc. c/o Sony Music Entertainment, Inc. 550 Madison Avenue New York, NY 10022 Attention: Senior Vice President and General Counsel of 550 Digital Media Ventures, Inc; and Senior Vice President and General Counsel - Sony Music Facsimile No.: (212) 833-7844 If to a transferee Holder, to the address of such Holder set forth in the transfer documentation provided to the Company; in each case with copies to: Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, New York 10036-6522 Attention: David J. Goldschmidt, Esq. Facsimile No.: (212) 735-2000 or such other address or facsimile number as such party (or transferee) may hereafter specify for the purpose of providing notice to the other parties. Each such notice, request or other communication shall be effective (a) if given by facsimile, when such facsimile is transmitted to the facsimile number specified in this Section and the appropriate facsimile confirmation is received or (b) if given by any other means, when delivered at the address specified in this Section. (b) No Waivers. No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. (c) Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, it being understood that subsequent Holders of the Registrable Common Stock are intended third party beneficiaries hereof. (d) Governing Law. This Agreement shall be construed in accordance with and governed by the law of the State of New York, without regard to principles of conflicts of law. (e) Jurisdiction. Any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby may be brought in any federal or state court located in the State of California, and each of the parties hereby consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 10(a) shall be deemed effective service of process on such party. (f) Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. (g) Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. (h) Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter of this Agreement and supersedes all prior agreements and understandings, both oral and written, between the parties with respect to the transactions contemplated herein. No provision of this Agreement or any other agreement contemplated hereby is intended to confer on any Person other than the parties hereto any rights or remedies. (i) Captions. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. (j) Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible. (k) Amendments. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given without the prior written consent of the holders of a majority of the Conversion Shares (as constituted on the date hereof); provided, however, that the consent or agreement of the Company shall be required with regard to any termination, amendment, modification or supplement of, or waivers or consents to departures from, the terms hereof, which affect the Company's obligations hereunder. (l) Equitable Relief. The parties hereto agree that legal remedies may be inadequate to enforce the provisions of this Agreement and that equitable relief, including specific performance and injunctive relief, may be used to enforce the provisions of this Agreement. (m) Costs and Expenses. Except as otherwise expressly provided for herein, each party to this Agreement shall bear its own costs and expenses, including but not limited to attorneys' fees and expenses, in connection with the closing of the transactions contemplated hereby. [Execution Page Follows] WITNESS WHEREOF, this Registration Rights Agreement has been duly executed by each of the parties hereto as of the date first written above. 550 DIGITAL MEDIA VENTURES INC. By: /s/ Mark Eisenberg --------------------------------------- Name: Mark Eisenberg Title: Senior Vice President and General Counsel EUNIVERSE, INC. By: /s/ Brad D. Greenspan --------------------------------------- Name: Brad D. Greenspan Title: Chairman and Chief Executive Officer -----END PRIVACY-ENHANCED MESSAGE-----