0001104659-03-024588.txt : 20031104 0001104659-03-024588.hdr.sgml : 20031104 20031104141153 ACCESSION NUMBER: 0001104659-03-024588 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 20031104 GROUP MEMBERS: ALAN E. SALZMAN GROUP MEMBERS: VANTAGEPOINT VENTURE ASSOCIATES IV, L.L.C. GROUP MEMBERS: VANTAGEPOINT VENTURE PARTNERS IV (Q), L.P. GROUP MEMBERS: VANTAGEPOINT VENTURE PARTNERS IV PRINCIPALS FUND, L.P. GROUP MEMBERS: VANTAGEPOINT VENTURE PARTNERS IV, L.P. GROUP MEMBERS: VP ALPHA HOLDINGS IV, LLC 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: 03975637 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: MARVER JAMES D CENTRAL INDEX KEY: 0001098347 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 1001 BAYHILL DR STREET 2: STE 100 CITY: SAN BRUNO STATE: CA ZIP: 94066 BUSINESS PHONE: 6508663100 MAIL ADDRESS: STREET 1: 1001 BAYHILL DR STREET 2: STE 100 CITY: SAN BRUNO STATE: CA ZIP: 94066 SC 13D/A 1 a03-4712_1sc13da.htm SC 13D/A

SEC 1746
(11-02)

Potential persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.

	UNITED STATES	OMB APPROVAL
	SECURITIES AND EXCHANGE COMMISSION	OMB Number: 3235-0145
	Washington, D.C. 20549	Expires: December 31, 2005
	SCHEDULE 13D	Estimated average burden hours per response. . 11

Under the Securities Exchange Act of 1934
(Amendment No. 1 )*

eUniverse, Inc.

(Name of Issuer)

Common Stock, par value $0.001 per share

(Title of Class of Securities)

298 412 10 7

(CUSIP Number)

Dora Mao
Orrick, Herrington & Sutcliffe LLP
400 Sansome Street
San Francisco, CA 94111
(415) 392-1122

(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)

October 31, 2003

(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 §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. [ ]

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent.

^* The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

CUSIP No. 298 412 10 7

	1.	Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only). VP ALPHA HOLDINGS IV, LLC

	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			[ ]
		(b)			[ ]

	3.	SEC Use Only

	4.	Source of Funds (See Instructions) WC, OO

	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) [ ]

	6.	Citizenship or Place of Organization Delaware

Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power 0

			8.	Shared Voting Power 10,133,333

			9.	Sole Dispositive Power 0

			10.	Shared Dispositive Power 10,133,333

	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 10,133,333

	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [ ]

	13.	Percent of Class Represented by Amount in Row (11) 30.1%**

	14.	Type of Reporting Person (See Instructions) OO

**Based on 33,645,572 shares of Common Stock outstanding, including: (i) 1,295,455 shares to be issued to VP Alpha Holdings IV, LLC (“VP Alpha LLC”) upon conversion of the Series B Convertible Preferred Stock issuable upon full exercise of the option described herein, (ii) 454,545 shares to be issued to VP Alpha LLC upon full conversion of the Series B Convertible Preferred Stock issued to VP Alpha LLC pursuant to the partial exercise of the option described herein, and (iii) 5,333,333 shares to be issued to VantagePoint Venture Partners IV (Q), L.P., VantagePoint Venture Partners IV, L.P. and VantagePoint Venture Partners IV Principals Fund, L.P. upon full conversion of the Series C Convertible Preferred Stock purchased pursuant to the Series C Preferred Stock Purchase Agreement described herein. There are 26,562,239 shares of Common Stock outstanding as of October 31, 2003, as represented by eUniverse, Inc. in the Series C Preferred Stock Purchase Agreement described herein.

	1.	Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only). VANTAGEPOINT VENTURE ASSOCIATES IV, L.L.C.

	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			[ ]
		(b)			[ ]

	3.	SEC Use Only

	4.	Source of Funds (See Instructions) AF

	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) [ ]

	6.	Citizenship or Place of Organization Delaware

Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power 0

			8.	Shared Voting Power 10,133,333

			9.	Sole Dispositive Power 0

			10.	Shared Dispositive Power 10,133,333

	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 10,133,333

	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [ ]

	13.	Percent of Class Represented by Amount in Row (11) 30.1%**

	14.	Type of Reporting Person (See Instructions) OO

	1.	Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only). VANTAGEPOINT VENTURE PARTNERS IV (Q), L.P.

	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			[ ]
		(b)			[ ]

	3.	SEC Use Only

	4.	Source of Funds (See Instructions) WC, OO

	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) [ ]

	6.	Citizenship or Place of Organization Delaware

Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power 0

			8.	Shared Voting Power 10,133,333

			9.	Sole Dispositive Power 0

			10.	Shared Dispositive Power 10,133,333

	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 10,133,333

	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [ ]

	13.	Percent of Class Represented by Amount in Row (11) 30.1%**

	14.	Type of Reporting Person (See Instructions) OO

	1.	Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only). VANTAGEPOINT VENTURE PARTNERS IV, L.P.

	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			[ ]
		(b)			[ ]

	3.	SEC Use Only

	4.	Source of Funds (See Instructions) WC, OO

	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) [ ]

	6.	Citizenship or Place of Organization Delaware

Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power 0

			8.	Shared Voting Power 10,133,333

			9.	Sole Dispositive Power 0

			10.	Shared Dispositive Power 10,133,333

	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 10,133,333

	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [ ]

	13.	Percent of Class Represented by Amount in Row (11) 30.1%**

	14.	Type of Reporting Person (See Instructions) OO

	1.	Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only). VANTAGEPOINT VENTURE PARTNERS IV PRINCIPALS FUND, L.P.

	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			[ ]
		(b)			[ ]

	3.	SEC Use Only

	4.	Source of Funds (See Instructions) WC, OO

	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) [ ]

	6.	Citizenship or Place of Organization Delaware

Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power 0

			8.	Shared Voting Power 10,133,333

			9.	Sole Dispositive Power 0

			10.	Shared Dispositive Power 10,133,333

	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 10,133,333

	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [ ]

	13.	Percent of Class Represented by Amount in Row (11) 30.1%**

	14.	Type of Reporting Person (See Instructions) OO

	1.	Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only). JAMES D. MARVER

	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			[ ]
		(b)			[ ]

	3.	SEC Use Only

	4.	Source of Funds (See Instructions) AF

	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) [ ]

	6.	Citizenship or Place of Organization United States

Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power 0

			8.	Shared Voting Power 10,133,333

			9.	Sole Dispositive Power 0

			10.	Shared Dispositive Power 10,133,333

	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 10,133,333

	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [ ]

	13.	Percent of Class Represented by Amount in Row (11) 30.1%**

	14.	Type of Reporting Person (See Instructions) IN

	1.	Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only). ALAN E. SALZMAN

	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			[ ]
		(b)			[ ]

	3.	SEC Use Only

	4.	Source of Funds (See Instructions) AF

	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) [ ]

	6.	Citizenship or Place of Organization Canada

Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power 0

			8.	Shared Voting Power 10,133,333

			9.	Sole Dispositive Power 0

			10.	Shared Dispositive Power 10,133,333

	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 10,133,333

	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [ ]

	13.	Percent of Class Represented by Amount in Row (11) 30.1%**

	14.	Type of Reporting Person (See Instructions) IN

This Amendment No. 1 amends and supplements the statement on Schedule 13D originally filed with the Securities and Exchange Commission (the “SEC”) on July 25, 2003 (the “Original Statement”) by (1) VP Alpha Holdings IV, L.L.C. (“VP Alpha LLC”), (2) VantagePoint Venture Associates IV, L.L.C. (“VP Associates LLC”), (3) James D. Marver and (4) Alan E. Salzman, relating to an option to purchase shares of common stock, par value $0.001 per share (the “Common Stock”), and shares of Series B Convertible Preferred Stock (the “Series B”), par value $0.10 per share, of eUniverse, Inc., a Delaware corporation (the “Company”). The Original Statement, as amended hereby, is referred to herein as the “Amended Statement.”

Item 1.	Security and Issuer
This Amended Statement relates to (i) an option (the “Option”), granted to VP Alpha LLC pursuant to an Option Agreement, dated as of July 15, 2003 (the “Option Agreement”), between the Company, 550 Digital Media Ventures, Inc. (“550 DMV”) and VP Alpha LLC, that may be exercised within the next 60 days to purchase shares of the Company’s Common Stock and Series B held by 550 DMV and (ii) shares of Series C Convertible Preferred Stock (the “Series C”), par value $0.10 per share, of the Company issued pursuant to the Series C Purchase Agreement described in Item 4 below. The principal executive offices of the Company are located at 6060 Center Drive, Suite 300, Los Angeles, California 90045.
Item 2.	Identity and Background
Item 2 of the Original Statement is hereby amended and restated as follows:
(a), (b), (c) and (f).
This Amended Statement is filed by (1) VP Alpha LLC, (2) VP Associates LLC, (3) VantagePoint Venture Partners IV (Q), L.P. (“VP (Q) LP”), (4) VantagePoint Venture Partners IV, L.P. (“VP Partners LP”), (5) VantagePoint Venture Partners IV Principals Fund, L.P. (“VP Fund LP”), (6) James D. Marver and (7) Alan E. Salzman. Messrs. Marver and Salzman, together with VP Alpha LLC, VP Associates LLC, VP (Q) LP, VP Partners LP and VP Fund LP, are hereinafter referred to as the “Reporting Persons.” VP (Q) LP, VP Partners LP and VP Fund LP are collectively referred to herein as the “Funds.”
VP Alpha LLC is a Delaware limited liability company with VP Associates LLC as its managing member. VP (Q) LP, VP Partners LP and VP Fund LP are each a Delaware limited partnership with VP Associates LLC as its general partner. James D. Marver and Alan E. Salzman are managing members of VP Associates LLC, which is a Delaware limited liability company. The principal business of the Reporting Persons is to provide venture capital financing and active assistance to information, internet and technology companies. The address of each of the Reporting Persons is 1001 Bayhill Drive, Suite 300, San Bruno, California 94066. Mr. Marver is a U.S. citizen and Mr. Salzman is a Canadian citizen with residency status in the United States.
(d) and (c).
During the last five years, none of the Reporting Persons has been (i) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.
Item 3.	Source and Amount of Funds or Other Consideration
Item 3 of the Original Statement is hereby amended and supplemented by adding the following thereto:
The consideration paid for the purchase of the Series C shares by the Funds was $8,000,000 in cash. The consideration for the Series C shares that has been paid was funded by the available cash of the Funds and/or their affiliates.
The consideration to be paid for the purchase of the Series B shares from 550 DMV for exercise of the Option with respect to 454,545 Series B shares is $500,00 in cash. The consideration to be paid for the purchase of the Series B shares will be paid by available cash of VP Alpha LLC and/or its affiliates.

Item 4.	Purpose of Transaction
Item 4 of the Original Statement is hereby amended and supplemented by adding the following thereto:
On October 31, 2003, the Funds purchased an aggregate of 5,333,333 shares of Series C, at $1.50 per share, pursuant to the Series C Preferred Stock Purchase Agreement, dated as of October 31, 2003 (the “Series C Purchase Agreement”), between the Funds and the Company. The 5,333,333 shares of Series C are currently convertible into an aggregate of 5,333,333 shares of Common Stock. The total consideration paid by the Funds for the shares of Series C was $8,000,000 in cash.
Pursuant to the Company’s Certificate of Designation of the Series C Convertible Preferred Stock (the “Series C Designation”): (a) the shares of Series C provide for an 8% cumulative dividend payable in additional shares of Series C for a period of 12 months from the Original Issuance Date (as defined in the Series C Designation); (b) the initial conversion price will be $1.50 for shares of Series C; (c) the Funds, as the sole holder of the Series C, will have the exclusive right to elect two members of the Company’s Board of Directors (so long as at least 51% of the originally issued Series C remains outstanding); and (d) so long as at least 51% of the originally issued Series C remains outstanding, the affirmative vote of the holders of at least two-thirds of the Series C is required (i) for any changes in the Certificate of Incorporation or Bylaws of the Company, (ii) to 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, distribution or as to distributions of assets upon liquidation, prior to or on a parity with the Series C, or (iii) to increase the size of the Board of Directors beyond nine members. In addition, so long as VP (Q) LP, together with any of its affiliates, owns at least 2,666,667 shares of Series C or Common Stock (as appropriately adjusted for any stock split, combination, reorganization, reclassification, stock dividend, stock distribution or similar event), the Company will not, without the affirmative consent or vote of at least two-thirds of the Board of Directors, (i) enter into an agreement for or consummate a Corporate Transaction (as defined in the Series C Designation), (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) of the Company’s then-current market capitalization, (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 purchase, redeem, repurchase or otherwise acquire any shares of capital stock of the Company or any subsidiary, other than as specified in the Series C Designation, or (vi) increase or decrease the size of the Company’s Board of Directors.
In accordance with the right of the holders of Series C shares to elect two members of the Company’s Board of Directors pursuant to the Series C Designation, David Carlick and Andrew T. Sheehan, managing directors of VantagePoint Management, Inc., have been appointed as members of the Company’s Board of Directors. Section 7.8(c) of the Series C Purchase Agreement provides that the directors on the Board of Directors of the Company who are designated by the holders of Series C shares shall generally be accorded no less favorable treatment than any other Board member.
Pursuant to the Series C Purchase Agreement, the Funds and the Company have also agreed that (i) the existing Certificate of Designation of the Series A Convertible Preferred Stock will be amended to delete Section 12(c)(v) thereof and (ii) the Line of Credit concept previously discussed between the parties be eliminated and not a part of any agreement or undertaking by the Funds or their affiliates.
In connection with the issuance of the Series C shares, the Company and the Funds entered into a Registration Rights Agreement, dated as of October 31, 2003 (the “Registration Rights Agreement”), pursuant to which the Company, upon the request of the Funds (no earlier than 180 days after the date of the Registration Rights Agreement), will be required to file a registration statement registering all or any portion of the shares of the Company’s Common Stock into which the Series C shares and Series C-1 shares (as defined in Item 6 below) are convertible and any other shares of the Company’s Common Stock owned by the Funds. The Registration Rights Agreement also provides the Funds with piggyback registration rights with respect to certain underwritten offerings initiated by the Company.
In connection with the transactions described herein, the Funds and the Company entered into a Management Rights Agreement, dated as of October 31, 2003 (the “Management Rights Agreement”), pursuant to which the Funds, as a result of their purchase of Series C shares, have certain rights to consult with the management of the Company, obtain information about the Company and attend, through a representative, meetings of the Company’s Board of Directors.

Concurrently with the Fund’s execution of the Series C Stock Purchase Agreement, 550 DMV, the Funds and the Company entered into the 550 DMV Consent and Waiver Agreement, dated October 31, 2003 (the “550 DMV Consent”). Under the 550 DMV Consent, VP Alpha LLC has partially exercised the Option, and within five days of the closing of the purchase by the Funds of Series C shares under the Series C Purchase Agreement, will pay $500,000 for the purchase of 454,545 Series B shares held by 550 DMV. Pursuant to the 550 DMV Consent (a) 550 DMV released any potential claims it may have had against the Company, except as related to the DMV Note (as defined in the 550 DMV Consent) and certain rights to online advertising impressions, if any, (b) the Option Agreement was amended to (i) extend the Termination Date (as defined in the Option Agreement) from January 16, 2004 until April 16, 2004 and (ii) allow any partial exercise of the Option by the holder thereof, (c) 550 DMV consented to the terms of the Series C Purchase Agreement and all related transactions contemplated thereunder (including those described in Item 6 below), and (d) the Company agreed to expeditiously provide to 550 DMV a replacement note for the DMV Note with an outstanding principal thereon equal to $2,403,528, reflecting the conversion of all accrued and unpaid interest on the DMV Note to principal.
Concurrently with, and as a condition to, the Funds’ execution of the Series C Purchase Agreement, 550 DMV entered into a Voting Agreement, dated as of October 31, 2003 (the “Voting Agreement”). Under the Voting Agreement, 550 DMV agreed that, at any meeting of the stockholders of the Company, or in connection with any action proposed to be taken by the stockholders of the Company, it will vote in favor of the approval of the transactions contemplated by the Series C Purchase Agreement (and its exhibits), including the transactions described in Item 6 below. 550 DMV has also granted an irrevocable proxy to VP (Q) LP with respect to the shares 550 DMV is entitled to vote in connection therewith . During the term of the Voting Agreement, 550 DMV has agreed not to sell, assign, transfer, pledge or otherwise dispose of any of the shares subject to the Voting Agreement. The Voting Agreement terminates on the first to occur of (i) the closing of all transactions contemplated under the Series C Purchase Agreement, including, but not limited to, the transactions described in Item 6 below; (ii) the termination of such transactions; or (iii) the completion of a stockholder vote in connection with all such transactions. 550 DMV beneficially owns an aggregate of 3,366,154 shares of Common Stock, representing approximately 12.7% of the issued and outstanding shares of Common Stock as of October 31, 2003, as represented by the Company in the Series C Purchase Agreement. 550 DMV also beneficially owns 1,468,532 shares of Series B, representing approximately 76.4% of the issued and outstanding shares of Series B as of October 31, 2003, as represented by the Company in the Series C Purchase Agreement.
All references to the Series C Purchase Agreement, the Series C Designation, the Registration Rights Agreement, the Management Rights Agreement, the Voting Agreement, the 550 DMV Consent, and the other documents and transactions described herein, including the Series C-1 Designation, the Series C Warrant and the New Note (as such terms are defined in Item 6 below), are qualified in their entirety by the full text of such agreements, which are filed as exhibits to this amendment.
Item 5.	Interest in Securities of the Issuer
Item 5 of the Original Statement is hereby amended and supplemented as follows:
(a) and (b).
As a result of the Option described in Items 3 and 4 of the Original Statement, including the partial exercise of the Option as described in Item 4 above, and the purchase of Series C shares described in Items 3 and 4 above, each of the Reporting Persons is the beneficial owner of, and shares the power to vote, and the power to dispose of, (i) 1,750,000, or approximately 91%, of the issued and outstanding shares of Series B, (ii) 5,333,333 or 100% of the issued and outstanding shares of Series C and (iii) 10,133,333 shares, or approximately 30.1%, of the issued and outstanding shares of the Company’s Common Stock (assuming full exercise of the Option and full conversion of the Series B and Series C shares beneficially owned by the Reporting Persons (as described below) to Common Stock).
The shares of the Company’s Common Stock beneficially owned by the Reporting Persons is comprised of the following: (i) up to 3,050,000 shares of Company Common Stock purchasable by VP Alpha LLC upon exercise of the Option, (ii) 454,545 shares of Series B obtained from 550 DMV as a result of the partial exercise of the Option, (iii) up to an estimated 1,295,455 shares of Company Common Stock issuable to VP Alpha LLC upon conversion of the up to 1,295,455 shares of Series B to be purchased by VP Alpha LLC upon the further exercise of the Option (subject to increase pursuant to the terms of the Series B Designation) and (iv) 5,333,333 shares to be issued to the Funds upon full conversion of the Series C shares purchased pursuant to the Series C Purchase Agreement. There are 26,562,239 shares of the Company’s Common Stock outstanding as of October 31, 2003, as represented by the Company in the Series C Purchase Agreement described in Item 4 above.
(c)

None of the Reporting Persons has effected any transactions in the class of securities reported on the Amended Statement during the past 60 days, other than as set forth in the Amended Statement.
(d) and (e).
Not applicable.
Item 6.	Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer
Pursuant to the Series C Purchase Agreement, the Funds and the Company have agreed that, contingent upon the satisfaction of certain conditions on or before January 31, 2004, including approval by the stockholders of the Company, a senior secured loan of up to $4 million (the “Senior Loan”) will be made to the Company by the Funds or an affiliate thereof (or by a third party lender with a guarantee provided by the Funds or an affiliate thereof). In connection with the funding of the Senior Loan, the Company will issue warrant(s) to the Funds to purchase additional shares of Series C (each, a “Series C Warrant”). Under the Series C Warrant(s), the Funds will be permitted to purchase up to 1,000,000 shares of Series C (up to 250,000 shares for each $1,000,000 advanced to the Company under the Senior Loan) at any time and from time to time within five years from the date of issuance at an exercise price of $2.00 per share.
Concurrently with, and as a condition to, the Funds’ execution of the Series C Purchase Agreement, VP Alpha LLC and the Company have also agreed to amend and restate the Secured Promissory Note issued by the Company to VP Alpha LLC pursuant to the Note Purchase Agreement. The amended and restated Secured Promissory Note, dated October 31, 2003 (the “New Note”) provides VP Alpha LLC with the option to convert, at any time, all or a portion of the outstanding principal amount (currently $2,500,000) and unpaid accrued interest thereon as of such date into shares of the Company’s Series C-1 Convertible Preferred Stock (the “Series C-1”) at a conversion price of $2.00 per share (as adjusted in the event of any stock split, stock dividend, recapitalization and the like). The conversion provision of the New Note is contingent upon approval by the stockholders of the Company. If this provision is not approved by the stockholders by January 31, 2004, it becomes due and payable ten days after such failure. If no stockholder vote is held by January 31, 2004, the New Note becomes due and payable on January 31, 2004.
Pursuant to the Company’s Certificate of Designation of the Series C-1 Convertible Preferred Stock (the “Series C-1 Designation”), the Series C-1 shares are identical in all respects to the Series C, except that each of the initial purchase price, the Liquidation Preference and the Conversion Price (as such terms are defined in the Series C-1 Designation) is $2.00 (as adjusted in the event of any stock split, stock dividend, recapitalization and the like).
Except as described in the Amended Statement, none of the Reporting Persons has any contract, arrangement, understanding or relationship with any other person with respect to any securities of the Company, including, but not limited to, transfer or voting of any of the securities, finder’s fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, division of profits or loss, or the giving or withholding of proxies.
Item 7.	Material to Be Filed as Exhibits
9. Agreement of Joint Filing, dated as of November 3, 2003.
10. Series C Preferred Stock Purchase Agreement, dated as of October 31, 2003, between eUniverse, Inc., VantagePoint Venture Partners IV (Q), L.P., VantagePoint Venture Partners IV, L.P. and VantagePoint Venture Partners IV Principals Fund, L.P.
11. Registration Rights Agreement, dated as of October 31, 2003, between eUniverse, Inc., VantagePoint Venture Partners IV (Q), L.P., VantagePoint Venture Partners IV, L.P. and VantagePoint Venture Partners IV Principals Fund, L.P.
12. Certificate of Designation of Series C Convertible Preferred Stock.
13. 550 DMV Consent and Waiver Agreement, dated as of October 31, 2003, between eUniverse, Inc., 550 Digital Media Ventures, Inc., VantagePoint Venture Partners IV (Q), L.P., VantagePoint Venture Partners IV, L.P., and VantagePoint Venture Partners IV Principals Fund, L.P.
14. Voting Agreement, dated as of October 31, 2003, between eUniverse, Inc., VantagePoint Venture Partners IV (Q), L.P., VantagePoint Venture Partners IV, L.P., VantagePoint Venture Partners IV Principals Fund, L.P. and the stockholder(s) of eUniverse, Inc. named therein.

15. Management Rights Agreement, dated as of October 31, 2003, between eUniverse, Inc. VantagePoint Venture Partners IV (Q), L.P., VantagePoint Venture Partners IV, L.P. and VantagePoint Venture Partners IV Principals Fund, L.P.

16. Form of Warrant to Purchase Series C Preferred Stock.

17. Amended and Restated Promissory Note, dated as of October 31, 2003, between eUniverse, Inc. and VP Alpha Holdings IV, L.L.C.

18. Certificate of Designation of Series C-1 Convertible Preferred Stock.

SIGNATURES

After reasonable inquiry and to the best of his or its knowledge and belief, each of the undersigned hereby certifies that the information set forth in this statement is true, complete and correct.

Dated: November 3, 2003

VP ALPHA HOLDINGS IV, L.L.C.
		VANTAGEPOINT VENTURE PARTNERS IV, L.P.
By: VantagePoint Venture Associates IV, L.L.C.		By: VantagePoint Venture Associates IV, L.L.C.
its Managing Member		Its General Partner

By:	/s/ Alan E. Salzman
Name: Alan E. Salzman,		By:	/s/ Alan E. Salzman
Managing Member		Name: Alan E. Salzman,
		Managing Member

VANTAGEPOINT VENTURE ASSOCIATES IV, L.L.C.		VANTAGEPOINT VENTURE PARTNERS IV PRINCIPALS FUND, L.P.
By:	/s/ Alan E. Salzman	By: VantagePoint Venture Associates IV, L.L.C.
Name: Alan E. Salzman,		Its General Partner
Managing Member
		By:	/s/ Alan E. Salzman
		Name: Alan E. Salzman,
VANTAGEPOINT VENTURE PARTNERS IV (Q), L.P.		Managing Member
By: VantagePoint Venture Associates IV, L.L.C.,
Its General Partner		/s/ James D. Marver
		James D. Marver
By:	/s/ Alan E. Salzman
Name: Alan E. Salzman,		/s/ Alan E. Salzman
Managing Member		Alan E. Salzman

INDEX TO EXHIBITS

9.		Agreement of Joint Filing, dated as of October 31, 2003.

10.		Series C Preferred Purchase Agreement, dated as of October 31, 2003, between eUniverse, Inc., VantagePoint Venture Partners IV (Q), L.P., VantagePoint Venture Partners IV, L.P. and VantagePoint Venture Partners IV Principals Fund, L.P.

11.		Registration Rights Agreement, dated as of October 31, 2003, between eUniverse, Inc., VantagePoint Venture Partners IV (Q), L.P., VantagePoint Venture Partners IV, L.P. and VantagePoint Venture Partners IV Principals Fund, L.P.

12.		Certificate of Designation of Series C Convertible Preferred Stock.

13.		550 DMV Consent and Waiver Agreement, dated as of October 31, 2003, between eUniverse, Inc., 550 Digital Media Ventures, Inc., VantagePoint Venture Partners IV (Q), L.P., VantagePoint Venture Partners IV, L.P., and VantagePoint Venture Partners IV Principals Fund, L.P.

14.		Voting Agreement, dated as of October 31, 2003, between eUniverse, Inc., VantagePoint Venture Partners IV (Q), L.P., VantagePoint Venture Partners IV, L.P., VantagePoint Venture Partners IV Principals Fund, L.P. and the stockholder(s) of eUniverse, Inc. named therein.

15.		Management Rights Agreement, dated as of October 31, 2003, between eUniverse, Inc. VantagePoint Venture Partners IV (Q), L.P., VantagePoint Venture Partners IV, L.P. and VantagePoint Venture Partners IV Principals Fund, L.P.

16.		Form of Warrant to Purchase Series C Preferred Stock.

17.		Amended and Restated Promissory Note, dated as of October 31, 2003, between eUniverse, Inc. and VP Alpha Holdings IV, L.L.C.

18.		Certificate of Designation of Series C-1 Convertible Preferred Stock.

EXHIBIT 9

JOINT FILING AGREEMENT

In accordance with Rule 13d-1(k) under the Securities Exchange Act of 1934, as amended, the persons named below agree to the joint filing on behalf of each of them of the Amendment No .1 to Schedule 13D to which this Agreement is an exhibit (and any further amendment filed by them) with respect to the shares of Common Stock, par value $0.001 per share, of eUniverse, Inc.

This agreement may be executed simultaneously in any number of counterparts, all of which together shall constitute one and the same instrument.

Dated: November 3, 2003

VP ALPHA HOLDINGS IV, L.L.C.		VANTAGEPOINT VENTURE PARTNERS IV, L.P.
By: VantagePoint Venture Associates IV, L.L.C.		By: VantagePoint Venture Associates IV, L.L.C.
its Managing Member		Its General Partner

By:	/s/ Alan E. Salzman	By:		/s/ Alan E. Salzman
Name: Alan E. Salzman,		Name: Alan E. Salzman,
Managing Member		Managing Member

VANTAGEPOINT VENTURE ASSOCIATES IV, L.L.C.		VANTAGEPOINT VENTURE PARTNERS IV PRINCIPALS FUND, L.P.
		By: VantagePoint Venture Associates IV, L.L.C.
By:	/s/ Alan E. Salzman	Its General Partner
Name: Alan E. Salzman,
Managing Member		By:	/s/ Alan E. Salzman
		Name: Alan E. Salzman,
VANTAGEPOINT VENTURE PARTNERS IV (Q), L.P.		Managing Member
By: VantagePoint Venture Associates IV, L.L.C.,
Its General Partner		/s/ James D. Marver
		James D. Marver
By:	/s/ Alan E. Salzman
Name: Alan E. Salzman,		/s/ Alan E. Salzman
Managing Member		Alan E. Salzman

EX-10 3 a03-4712_1ex10.htm EX-10

Exhibit 10

Execution Version

SERIES C PREFERRED
STOCK PURCHASE AGREEMENT

This SERIES C PREFERRED STOCK PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of the date written on the signature line hereof (the “Purchase Date”) by and between eUniverse, Inc., a Delaware corporation (the “Company”), and the purchasers listed on the Schedule of Purchasers attached hereto (the “Purchasers”). Certain terms used and not otherwise defined in the text of this Agreement are defined in Section 12 of this Agreement.

W I T N E S S E T H

WHEREAS, the Company desires to issue and to sell to the Purchasers, and the Purchasers desire to purchase from the Company, the Series C Preferred Shares (as hereinafter defined), all in accordance with the terms and provisions of this Agreement; and

NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties and covenants herein contained, the parties hereto hereby agree as follows:

1. Authorization of Securities. The Company has authorized the issuance and sale of shares of its Series C Convertible Preferred Stock, par value $.10 per share (the “Series C Preferred Shares”), which will be convertible into shares of the Company’s common stock, par value $.001 per share (the “Common Stock”). The Series C Preferred Shares will have the rights, preferences and privileges set forth in the form of Certificate of Designations, Powers, Preferences and Rights substantially in the form attached hereto as Exhibit A (the “Certificate of Designation”). The shares of Common Stock into which the Series C Preferred Shares are convertible are sometimes referred to herein as the “Conversion Shares” and the Series C Preferred Shares delivered pursuant to this Agreement and the Conversion Shares are sometimes referred to herein collectively as the “Securities”.

2. Sale and Purchase of the Securities.

2.1 Upon the terms and subject to the conditions herein contained, the Company agrees to sell to the Purchasers, and the Purchasers agree to purchase from the Company, at the Closing (as hereinafter defined), such number of Series C Preferred Shares as equals $8,000,000 (the “Purchase Price”) divided by $1.50 per share (as adjusted for a stock split, reverse split, stock dividend, merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event).

2.2 No Series C Preferred Shares may be issued other than as contemplated by this Agreement, except as agreed in writing between the Company and a majority-in-interest of the Series C Preferred Shares.

3. Closing. The closing of the sale to, and purchase by, the Purchasers of the Series C Preferred Shares to be delivered pursuant to this Agreement (the “Closing”) shall occur at the offices of Orrick, Herrington & Sutcliffe LLP, 400 Sansome Street, San Francisco, California 94111, as soon as practicable after the satisfaction or waiver of all of the conditions set forth in Section 6 hereof or at such other time and place as the Company and the Purchasers may agree (the “Closing Date”), provided that if the Closing Date does not occur by December 31, 2003

either party may terminate this Agreement so long as such party is not in breach of this Agreement. At the Closing, the Company shall deliver to the Purchasers one or more certificates evidencing the Series C Preferred Shares to be delivered pursuant to this Agreement (in such denomination as shall be specified in writing by each Purchaser at least three days in advance of the Closing), each of which shall be registered in the Purchaser’s name or its designee, against delivery to the Company of the Purchase Price payable by wire transfer of immediately available funds to an account that the Company will designate in writing to the Purchasers at least two business days prior to the Closing Date.

4. Representations and Warranties of the Purchasers, Register of Securities, Restrictions on Transfer. Each Purchaser represents and warrants to the Company as follows:

4.1 Organization. The Purchaser is validly existing and in good standing under the laws of its state of organization, and has all requisite power and authority to enter into this Agreement and consummate the transactions contemplated hereby.

4.2 Validity. The execution, delivery and performance of this Agreement, and the other documents and instruments referred to herein, in each case to which the Purchaser is a party, and the consummation of the transactions contemplated hereby, have been duly authorized by all necessary action on the part of the Purchaser. This Agreement has been duly executed and delivered by the Purchaser and constitutes a valid and binding obligation of the Purchaser enforceable against it in accordance with its terms.

4.3 Brokers. There is no broker, investment banker, financial advisor, finder or other Person which has been retained by or is authorized to act on behalf of the Purchaser who might be entitled to any fee or commission for which the Company will be liable in connection with the execution of this Agreement and the consummation of the transactions contemplated hereby.

4.4 Investment Representations and Warranties. The Purchaser understands that the Securities have not been, and will not upon issuance be, registered under the Securities Act of 1933, as amended (the “Securities Act”), by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Purchaser’s representations as expressed herein and that the certificates evidencing the Securities shall bear a legend to that effect, unless prior to conversion of any Series C Preferred Shares, the Common Stock issuable upon conversion thereof shall have been so registered. The Purchaser understands that the Securities are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, the Purchaser must hold the Securities indefinitely unless they are registered with the Securities and Exchange Commission (the “SEC”) and qualified by state authorities, or an exemption from such registration and qualification requirements is available. The Purchaser further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Securities, and on requirements relating to the Company which are outside of the Purchaser’s control, and which the Company may not be able to satisfy.

4.5 Acquisition for Own Account. The Securities to be acquired by the Purchaser will be acquired for investment for the Purchaser’s own account (or for the account of Purchaser’s

affiliated venture funds) not as a nominee or agent, and not with a view to the resale or distribution of any part thereof in any manner that would cause issuance of the Securities hereunder to fail to be exempt from the registration requirements of the Securities Act, and the Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the same in any manner that would cause issuance of the Securities hereunder to fail to be exempt from the registration requirements of the Securities Act. The Purchaser has not been formed for the specific purpose of acquiring any of the Securities.

4.6 Ability to Protect Its Own Interests and Bear Economic Risks. The Purchaser represents that by reason of the business and financial experience of its management, the Purchaser has the capacity to protect its own interests in connection with the transactions contemplated by this Agreement. The Purchaser further represents that the Purchaser is able to bear the economic risk of an investment in the Securities, and has an adequate income independent of any income produced from an investment in the Securities and has sufficient net worth to sustain a loss of all of its investment in the Securities without economic hardship if such a loss should occur. The Purchaser is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities assuming the truth, accuracy and completeness of the information provided by the Company, its officers, directors, attorneys and agents. Without limiting the foregoing, the Purchaser is aware that the Company has restated its financial statements for the second and third quarter of the fiscal year ended March 31, 2003 (“Fiscal 2003”), issued an earnings warning for the fourth quarter of fiscal 2003, has been delisted from the Nasdaq SmallCap Market, is the subject of an informal inquiry with the Nasdaq and an informal inquiry from the SEC and is named as a defendant in several pending class action and shareholder derivative lawsuits. However, nothing contained in this Section 4.6 shall be deemed to in any way qualify any of the representations and warranties of the Company contained in Section 5.

4.7 Accredited Investor. The Purchaser represents that it is an “accredited investor” as that term is defined in Regulation D promulgated under the Securities Act.

4.8 Access to Information. The Purchaser has had adequate opportunity to ask questions of, and receive answers from, the Company’s officers, employees, agents, accountants, and representatives concerning the Company’s business, operations, financial condition, assets, liabilities, and all other matters relevant to its investment in the Securities.

5. Representations and Warranties by the Company. The Company represents and warrants to the Purchasers as follows:

5.1 Capitalization. (a) The authorized capital stock of the Company immediately prior to the Closing will consist of 250,000,000 shares of Common Stock, par value $.001 per share, and 40,000,000 shares of preferred stock (“Preferred Stock”), par value $.10 per share. Immediately prior to the Closing, ten million (10,000,000) shares of the Preferred Stock will be designated as Series A 6% Convertible Preferred Stock (the “Series A”), 4,098,335 shares of preferred stock will be designated Series B Preferred Stock (“Series B”), 20,000,000 shares of preferred stock will be designated Series C Preferred Shares and 2,000,000 shares of Preferred Stock will be designated Series C-1 Preferred Shares (the “Series C-1 Preferred Shares”). There are

outstanding 26,562,239 shares of Common Stock, 300,500 shares of Series A, 1,923,077 shares of Series B, no Series C Preferred Shares and no Series C-1 Preferred Shares, and the Company has no other shares of capital stock authorized, issued or outstanding.

(b) Except as set forth on Schedule 5.1, (i) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into or exercisable or exchangeable for, any shares of capital stock of the Company, or arrangements by which the Company is or may become bound to issue additional shares of capital stock, nor are any such issuances or arrangements contemplated other than pursuant to Existing Stock Option Plans, (ii) there are no agreements or arrangements under which the Company is obligated to register the sale of any of its securities under the Securities Act (except as provided hereunder or in the Registration Rights Agreement), (iii) the Company has no obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any of its equity securities or any interests therein or to pay any dividend or make any distribution in respect thereof and (iv) except as set forth on Schedule 5.1 the Company has not reserved any shares of capital stock for issuance pursuant to any stock option plan or similar arrangement. The capitalization of the Company as of the date hereof, including, without limitation, the authorized capital stock, the number of shares issued and outstanding, the number of shares issuable and reserved for issuance pursuant to the Company’s stock option plans, the number of shares issuable and reserved for issuance pursuant to securities (other than the Series C Preferred Shares) exercisable for, or convertible into or exchangeable for any shares of capital stock and the number of shares to be reserved for issuance upon conversion of the Series C Preferred Shares is set forth in Section 5.1(a) above and on Schedule 5.1 of the disclosure schedule delivered by the Company to the Purchasers in connection herewith. Schedule 5.1 also lists any stockholders that, to the Company’s knowledge, beneficially own five percent (5%) or more of the Common Stock, determined in accordance with Rule 13d-3 under the Exchange Act. Except as set forth on Schedule 5.1 there are no securities or instruments containing antidilution or similar provisions that will be triggered by the issuance of the Securities in accordance with the terms of this Agreement or the issuance of the Conversion Shares in accordance with the Certificate of Designation.

(c) The Company has furnished to the Purchasers true and correct copies of the Company’s Certificate of Incorporation (the “Certificate of Incorporation”) as in effect on the date hereof, and the Company’s by-laws (the “By-laws”) as in effect on the date hereof.

5.2 Due Issuance and Authorization of Capital Stock. All of the outstanding shares of capital stock of the Company have been duly authorized, validly issued and are fully paid and nonassessable. Except as set forth on Schedule 5.2, no shares of capital stock of the Company are subject to (a) preemptive rights or any other similar rights of the stockholders of the Company or (b) any lien, claim, judgment, charge, mortgage, security interest, pledge, escrow equity, restriction or transfer or other encumbrance (collectively, “Encumbrances”) imposed by the Company or any agreement to which the Company or its officers or directors are a party and the sale and delivery of the Securities to the Purchasers pursuant to the terms hereof and the issuance of the Conversion Shares to the Purchasers upon conversion of the Series C Preferred Shares and Series C-1 Preferred Shares will vest in the Purchasers legal and valid title to such Securities, free and clear of all Encumbrances other than those that may arise solely by virtue of the action of the Purchasers or under applicable securities laws. At the Closing, the Securities will be duly

authorized, validly issued, fully paid and nonassessable and a sufficient number of shares of Common Stock have been reserved for issuance upon conversion of the Series C Preferred Shares and Series C-1 Preferred Shares. Except as set forth on Schedule 5.2 none of the Securities are subject to (a) preemptive rights or any other similar rights of the stockholders of the Company or (b) immediately prior to the Closing, Encumbrances.

5.3 Organization. The Company was incorporated in the State of Delaware. The Company (a) is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, (b) is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where the nature of the property owned or leased by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to be so qualified would not have a “Material Adverse Effect” on the Company, (c) has its principal place of business and chief executive office at 6060 Central Drive, Suite 300, Los Angeles, CA 90045 and (d) has all requisite corporate power and authority to own or lease and operate its assets and carry on its business as presently being conducted. For purposes of this Agreement, “Material Adverse Effect” shall mean any material adverse effect on (i) the Securities, (ii) the ability of the Company or the Purchasers to perform their respective obligations under this Agreement, the Certificate of Designation, Amended and Restated Promissory Note, the Warrants, the Voting Agreement, or the Registration Rights Agreement (collectively, the “Transaction Documents”), or (iii) the results of operations, financial condition, properties, assets, liabilities, business, prospects or operations of the Company and any of its Subsidiaries, taken as a whole (in any case, a “Material Adverse Effect”).

5.4 Subsidiaries. Except as set forth on Schedule 5.4, the Company has no subsidiaries and has no equity interest in any corporation, partnership, joint venture, limited liability company or other Person.

5.5 Consents. Neither the execution, delivery or performance of this Agreement or any other Transaction Document by the Company, nor the consummation by it of the obligations and transactions contemplated hereby or thereby (including, without limitation, the issuance, the reservation for issuance and the delivery of the Securities) requires any consent, license or approval of, authorization by, exemption from, filing or registration with, or notice to any Governmental Entity or authority or any other Person, other than (a) the filings under applicable securities laws required to comply with the Company’s registration obligations under the Registration Rights Agreement (b) the filing of the Certificate of Designation with the Secretary of State of Delaware and (c) consents listed on Schedule 5.5.

5.6 Financial Statements. The Company has delivered or caused to be delivered to the Purchasers audited consolidated balance sheets dated as of March 31, 2001, March 31, 2002, and March 31, 2003 and audited consolidated statements of income and retained earnings and cash flows of the Company and any Subsidiaries, as applicable, for the years ended March 31, 2001, March 31, 2002, and March 31, 2003 (the financial statements for the fiscal year ended March 31, 2003 are hereinafter referred to as the “2003 Financial Statements”) together with an unqualified opinion thereon from the Company’s independent accountants, except as set forth in Schedule 5.6 (collectively, the “Audited Financial Statements”). Attached hereto as Schedule 5.6 are an unaudited consolidated balance sheet of the Company and the Subsidiaries, as applicable, as of June 30, 2003, and unaudited consolidated statements of income of the Company and any

Subsidiaries, as applicable, for the three months ended June 30, 2003 (the “June 2003 Financial Statements”). Except as set forth on Schedule 5.6, the 2003 Financial Statements were prepared in conformity with generally accepted accounting principles (“GAAP”) applied on a consistent basis (except as may be indicated in the notes thereto) and present fairly, in all material respects, the financial position and the results of operations of the Company and the Subsidiaries, as applicable, as of the dates, and for the periods, referred to therein. Except as set forth on Schedule 5.6, the June 2003 Financial Statements were prepared in conformity with GAAP applied on a consistent basis (except for the lack of footnote disclosure and normal, customary year-end audit adjustments) and present fairly, in all material respects, the financial position and the results of operations of the Company and the Subsidiaries, as applicable, as of the dates, and for the periods, referred to therein.

5.7 Title to Property and Assets. Neither the Company nor any Subsidiary, as the case may be, owns any real property. Except as set forth on Schedule 5.7, each of the Company and the Subsidiaries owns its personal property and assets free and clear of all Encumbrances, except liens that arise in the ordinary course of business which do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and its Subsidiaries, Encumbrances in favor of equipment lessors and purchase money security interests. Except as set forth on Schedule 5.7 with respect to any real property, the Company is not in material violation of any of its leases. All machinery, equipment, furniture, fixtures and other personal property and all plants, buildings, structures and other facilities, including, without limitation, office space used by the Company and the Subsidiaries in the conduct of its business, is in good operating condition and fit for operation in the ordinary course of business (subject to normal wear and tear) except for any defects which will not materially interfere with the conduct of normal operations of the Company and the Subsidiaries. The Company has made available for review by the Purchasers true and complete copies of any leases related to the real property used by the Company and the Subsidiaries in the conduct of their business (the “Real Property”).

5.8 SEC Documents. Except as set forth in Schedule 5.8, since January 1, 2003, the Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Exchange Act (all of the foregoing filed prior to the date hereof and after January 1, 2003, and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein, being hereinafter referred to herein as the “SEC Documents”). The Company has delivered to the Purchasers true and complete copies of the SEC Documents, except the exhibits and schedules thereto and the documents incorporated therein. Except as set forth in Schedule 5.8, as of their respective dates, the SEC Documents complied with the requirements of the Exchange Act or the Securities Act, as the case may be, and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Except as set forth in Schedule 5.8, as of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC applicable with respect thereto. Except as set forth in Schedule 5.8, such financial statements

have been prepared in accordance with GAAP applied on a consistent basis during the periods involved (except (a) as may be otherwise indicated in such financial statements or the notes thereto, or (b) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements) and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to immaterial year-end audit adjustments).

5.9 Authorization; Enforcement. The Company has all requisite corporate power and has taken all necessary corporate action required for the due authorization, execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby (including, without limitation, the issuance of the Securities). The execution, delivery and performance by the Company of each of the Transaction Documents, the execution and filing of the Certificate of Designation, and the consummation by the Company of the transactions contemplated hereby and thereby, have been duly authorized by all necessary corporate action on the part of the Company. Immediately prior to the Closing, the Company will have filed the Certificate of Designation and taken all actions as may be necessary or advisable to provide the Purchasers with the rights contemplated by the Transaction Documents. This Agreement and each other Transaction Document have been duly and validly executed and delivered by the Company and constitute the valid and binding obligation of the Company, enforceable against the Company in accordance with their respective terms.

5.10 Issuance of Shares. The Securities have been duly authorized and a sufficient number of shares of authorized but unissued Common Stock have been reserved for issuance upon conversion of the Series C Preferred Shares and the Series C-1 Preferred Shares as currently constituted, and upon such issuance or conversion in accordance with the terms of this Agreement or the Certificate of Designation (as applicable), all such Securities will be duly authorized, validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and Encumbrances, and will not be subject to preemptive rights or other similar rights of stockholders of the Company and will not impose personal liability upon the holder thereof.

5.11 No Conflicts. The execution, delivery and performance of this Agreement and each other Transaction Document, the execution and filing of the Certificate of Designation, and the consummation of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance, as applicable, of the Securities) will not (a) result in a violation of the Certificate of Incorporation or By-laws of the Company, (b) conflict with or result in the breach of the terms, conditions or provisions of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give rise to any right of termination, acceleration or cancellation under, any material agreement, lease, mortgage, license, indenture, instrument or other contract to which the Company or any Subsidiary is a party, (c) result in a violation of any law, rule, regulation, order, judgment or decree (including, without limitation, U.S. federal and state securities laws and regulations) applicable to the Company or any Subsidiary or by which any property or asset of the Company or any Subsidiary is bound or affected, that would reasonably be expected to result in liability to the Company in excess of $100,000, or (d) result in the creation of any Encumbrance upon any of their assets other than those imposed pursuant to this Agreement or the exhibits hereto. Neither the Company nor any Subsidiary is in violation of its certificate of incorporation,

certificate of formation, articles of organization, limited liability company agreement, partnership agreement or by-laws (as applicable in each case), and except as set forth on Schedule 5.11 neither the Company nor any Subsidiary is in default (and no event has occurred which, with notice or lapse of time or both, would cause the Company or any Subsidiary to be in default) under, nor has there occurred any event giving others (with notice or lapse of time or both) any rights of termination, amendment, acceleration or cancellation of, any material agreement, indenture or instrument to which the Company or any Subsidiary is a party. The business of the Company and its Subsidiaries are not being conducted in violation of any law, ordinance or regulation of any Governmental Entity, except for violations that, either singly or in the aggregate, would not have a Material Adverse Effect.

5.12 Intellectual Property. (a) “Intellectual Property” means (i) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereon, and all patents, patent applications and patent disclosures, together with all reissuances, continuations, continuations-in-part, revisions, extensions and reexaminations thereof, (ii) all trademarks, service marks, trade dress, logos, trade names, Internet domain names and corporate names, together with all translations, adaptations, derivations and combinations thereof and including all goodwill associated therewith, and all applications, registrations and renewals in connection therewith (collectively, “Trademarks”), (iii) all copyrightable works, all copyrights and all applications, registrations and renewals in connection therewith, and all content and information contained on any website (iv) all trade secrets and confidential business information (including, without limitation, ideas, research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information and business and marketing plans and proposals), (v) all computer software (including, without limitation, data and related documentation) and source codes, (vi) all other proprietary rights, (vii) all copies and tangible embodiments of the foregoing (in whatever form or medium) and (viii) all licenses or agreements in connection with the foregoing. “Company Intellectual Property” means all Intellectual Property which is used in connection with the business of, or as presently contemplated to be conducted by, the Company or any Subsidiary, and which the Company or any Subsidiary owns or has rights in and to pursuant to a License Agreement (as defined below), the absence of which would have a Material Adverse Effect.

(b) Except as set forth on Schedule 5.12(a), with respect to each material item of Company Intellectual Property:

(i) the Company and the Subsidiaries possess all right, title and interest in and to the item (if owned), free and clear of any Encumbrance, license or other restriction, and the Company or its Subsidiaries has taken or caused to be taken reasonable and prudent steps to protect its rights in and to, and the validity and enforceability of, the item and no trade secret of the Company or any Subsidiary has been disclosed or authorized to be disclosed to any third party other than pursuant to a written nondisclosure agreement that adequately protects the Company’s and the applicable Subsidiary’s proprietary interests in and to such trade secrets;

(ii) the item (if owned) is not subject to any outstanding injunction, judgment, order, decree, ruling or charge;

(iii) no action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand is pending or, to the knowledge of the Company, is threatened which challenges the legality, validity, enforceability, use or ownership of the item (if owned);

(iv) the Company has never agreed to indemnify any Person for or against any interference, infringement, misappropriation or other conflict with respect to the item;

(v) each license, sublicense, agreement or permission covering the item (“License Agreements”) is legal, valid, binding, enforceable and in full force and effect;

(vi) neither the Company nor any Subsidiary has licensed or sublicensed its rights in any Company Intellectual Property, or received or been granted any such rights, other than pursuant to the License Agreements; and

(vii) to the knowledge of the Company or any subsidiary thereof no party (other than the Company) to any License Agreement is in breach or default, and no event has occurred which, with notice or lapse of time, would constitute a breach or default or permit termination, modification or acceleration thereunder, except for any such breach, default or event which would not have a Material Adverse Effect.

Schedule 5.12(b) sets forth a list of all material Company Intellectual Property and identifies which is owned, licensed, leased or otherwise used, as the case may be. All Company or Subsidiary registered patents, and all registered and unregistered copyrights, trademarks, and service marks are valid and subsisting and in full force and effect and are not subject to any taxes or other fees except for annual filing and maintenance fees. Neither the Company nor any Subsidiary is aware of (a) any notice, claim or assertion that any item of Company Intellectual Property is or potentially may be invalid or (b) any facts which would cause a reasonable person to conclude that any item of Company Intellectual Property is or potentially may be invalid. Neither the Company nor any Subsidiary is currently or has interfered with, infringed upon, misappropriated or otherwise come into conflict with any Intellectual Property rights of third parties in any manner which could reasonably be expected to result in a Material Adverse Effect, and there is no pending or, to the best of knowledge of the Company, threatened claim or litigation against the Company or any Subsidiary contesting the right to use Intellectual Property rights, asserting the misuse of any thereof, or asserting the infringement or other violation of any Intellectual Property rights of a third party where such infringement or violation could reasonably be expected to result in a Material Adverse Effect. Except as set forth on Schedule 5.12, all Trademarks have been in continuous use by the Company or Subsidiaries, and the Trademarks listed on Schedule 5.12(b) for which the Company or any Subsidiary has obtained or applied for a registration have been continuously used in the form appearing in, and in connection with the goods and services listed in, their respective registration certificates. To the knowledge of the Company and its Subsidiaries, there has been no material prior use of such Trademarks by any third party which would confer upon said third party superior rights in such Trademarks. The Company and its Subsidiaries have adequately policed the material Trademarks against third party infringement so as to maintain the validity of such Trademarks.

(c) Other than as set forth on Schedule 5.12(c), which Schedule sets forth a list of all material Company Intellectual Property so effected, there are no outstanding options, licenses,

or agreements of any kind relating to Company Intellectual Property owned by the Company, nor is the Company or any Subsidiary bound by or a party to any options, licenses, or agreements of any kind with respect to Company Intellectual Property owned by the Company. To the best of knowledge of the Company and any Subsidiary, no third party has interfered with, infringed upon, misappropriated or otherwise come into conflict with the material Intellectual Property rights of the Company or any Subsidiary.

(d) To the best of knowledge of the Company, none of the key employees, contractors or agents of the Company or any Subsidiary are obligated under any contract (including, without limitation, licenses, covenants, or commitments of any nature) or other agreement, or subject to any judgment, decree, or order of any court or administrative agency, that would interfere with the use of his or her reasonable diligence to promote the interests of the Company or any Subsidiary or that would conflict with the Company’s or the Subsidiary’s businesses as presently conducted or contemplated to be conducted. Neither the execution, delivery or performance of this Agreement, nor the carrying on of the Company’s or the Subsidiaries’ businesses by the employees, contractors or agents of the Company or the Subsidiaries, nor the conduct of the Company’s and the Subsidiaries’ businesses as presently conducted or contemplated to be conducted, will conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any contract, covenant, or instrument under which any such key employee, contractors or agents is obligated, and which conflict, breach or default would reasonably be expected to have a Material Adverse Effect.

(e) The Company has entered into written agreements with all key employees, contractors or agents of the Company and each Subsidiary with provisions seeking to protect the confidentiality of all Company Intellectual Property and to ensure full and unencumbered ownership by the Company or a Subsidiary of all Company Intellectual Property including, without limitation, appropriate “work for hire” language. The Company, without an independent investigation, is not aware of any violation by any such employees, contractors or agents of such agreements. All proprietary Company Intellectual Property was either developed: (i) by employees of the Company or any Subsidiary within the scope of their employment; or (ii) by independent contractors who have assigned all of their rights to the Company or any Subsidiary pursuant to written agreement.

(f) No stockholder, member, director, officer, employee, contractors or agents of the Company or any Subsidiary has any interest in any of the Company Intellectual Property, other than by virtue of their stock ownership of the Company.

(g) The consummation of the transactions contemplated hereby will not result in the loss or impairment of the Company’s or any Subsidiary’s rights to own, use, or to bring any action for the infringement of, any of the Company Intellectual Property, nor will such consummation require the consent of any third party in respect of any Company Intellectual Property.

(h) Except as set forth in Schedule 5.12(h), neither the Company nor any Subsidiary:

(i) has granted to any third party any exclusive rights of any kind (including, without limitation, exclusivity with regard to categories of advertisers on any World Wide Web site, territorial exclusivity or exclusivity with respect to particular versions, implementations or translations of any of the Company Intellectual Property), nor has the Company or any Subsidiary granted any third party any right to market any of the Company Intellectual Property under any private label or “OEM” arrangements;

(ii) has any outstanding sales or advertising contract, commitment or proposal (including, without limitation, insertion orders, slotting agreements or other agreements under which the Company or any Subsidiary has allowed third parties to advertise on or otherwise be included in a World Wide Web site) that the Company currently expects to result in any loss in excess of $50,000 to the Company upon completion or performance thereof; or

(iii) has any material oral contracts or arrangements for the sale of advertising or any other product or service.

5.13 Foreign Corrupt Practices Act. Neither the Company nor any Subsidiary, director, officer, agent, employee or other Person acting on behalf of the Company or any Subsidiary has, in the course of his, her or its actions for, or on behalf of, the Company or any Subsidiary, offered or made, directly or indirectly through any other Person, any payments of anything of value (in the form of a contribution, gift, entertainment or other expense), to (a) any Person employed by, or acting in an official capacity on behalf of, any governmental agency, department or instrumentality, or (b) any foreign or domestic government official, political party or official of such party, or any candidate for political office or employee thereof. Neither the Company, any Subsidiary, nor any director, officer, agent, employee or other Person acting on behalf of the Company or any Subsidiary has violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff, influence payment, kickback or unlawful payment to any foreign or domestic government or political party official, employee, appointee or candidate.

5.14 Material Contracts. Each Material Contract of the Company and any of its Subsidiaries is listed on Schedule 5.14 hereof . Each such contract is the legal, valid and binding obligation of the Company, enforceable against the Company and/or such Subsidiary, as the case may be, in accordance with its terms. Except as set forth on Schedule 5.14 there has not occurred any breach, violation or default by the Company or any other action by the Company that, with the lapse of time, the giving of notice or the election of any Person, or any combination thereof, would constitute a breach, violation or default by the Company or its Subsidiary, as the case may be, under any such contract or, to the knowledge of the Company or its Subsidiary, as the case may be, by any other Person to any such contract. Except as set forth on Schedule 5.14 neither the Company nor any Subsidiary has been notified that any party to any Material Contract intends to cancel, terminate, not renew or exercise an option under any Material Contract, whether in connection with the transactions contemplated hereby or otherwise.

5.15 Right of First Refusal; Voting and Registration Rights. To the best of the Company’s knowledge and except as set forth on Schedule 5.15, no party has any right of first refusal, right of first offer, right of co-sale, preemptive right or other similar right regarding the Company’s securities. Except as set forth on Schedule 5.15 or in the Certificate of Designation,

there are no provisions of the Certificate of Incorporation or the By-laws of the Company or any of its Subsidiaries, no agreements to which the Company or any of its Subsidiaries is a party and no agreements by which the Company, any of its Subsidiaries or the Securities are bound, which (a) may affect or restrict the voting rights of each Purchaser with respect to the Securities in its capacity as a stockholder of the Company, (b) restrict the ability of each Purchaser, or any successor thereto or assignee or transferee thereof, to transfer the Securities, (c) would adversely affect the Company’s right or ability to consummate the transactions contemplated by this Agreement or comply with the terms of the Transaction Documents and the transactions contemplated hereby or thereby, (d) require the vote of more than a majority of the Company’s issued and outstanding Common Stock, voting together as a single class, to take or prevent any corporate action, other than those matters requiring a class vote under Delaware law, or (e) entitle any party to nominate or elect any director of the Company or require any of the Company’s stockholders to vote for any such nominee or other Person as a director of the Company in each case, except as provided for in or contemplated by this Agreement.

5.16 Form S-3 Eligibility. [Reserved]

5.17 Previous Issuances. All shares of capital stock and other securities issued by the Company prior to the Closing Date have been issued in transactions registered under the Securities Act or exempt from the registration requirements under the Securities Act and all applicable state securities or “blue sky” laws, and in compliance with all applicable corporate laws. The Company has not offered any of its capital stock, or any other securities, for sale to, or solicited any offers to buy any of the foregoing from the Company, or otherwise approached or negotiated with any other Person in respect thereof, in such a manner as to require registration under the Securities Act (except where such a registration has been filed). No holder of any of the Company’s capital stock has any rescission or pre-emptive rights.

5.18 No Integrated Offering. Neither the Company, nor any of its Affiliates or any other Person acting on the Company’s behalf, has directly or indirectly engaged in any form of general solicitation or general advertising with respect to the Securities nor have any of such Persons made any offers or sales of any security or solicited any offers to buy any security under circumstances that would require registration of the Securities under the Securities Act or cause this offering of Securities to be integrated with any prior offering of securities of the Company for purposes of the Securities Act or any applicable stockholder approval provisions, including, without limitation, NASD Rule 4460(i) or any similar rule.

5.19 Absence of Certain Developments. Except as set forth on Schedule 5.19 since March 31, 2003, neither the Company nor its Subsidiaries have suffered any change or development which has had a Material Adverse Effect. Except as set forth on Schedule 5.19, since March 31, 2003, the Company and its Subsidiaries have conducted their business in the ordinary and usual course consistent with past practices and have not (a) sold, leased, transferred or otherwise disposed of any of the assets (other than dispositions in the ordinary course of business consistent with past practices), (b) terminated or amended in any material respect any Material Contract or lease to which the Company or any of its Subsidiaries is a party or to which it is bound or to which its properties are subject, (c) suffered any loss, damage or destruction, whether or not covered by insurance, which has had a Material Adverse Effect, (d) made any change in the accounting methods or practices it follows, whether for general financial or tax

purposes, (e) incurred any liabilities (other than in the ordinary course of business or contractual liabilities) which, individually or in the aggregate, have had a Material Adverse Effect, (f) incurred, created or suffered to exist any Encumbrances (other than non-material Encumbrances) on its assets, (g) increased the compensation payable or to become payable to any of its officers or employees or increased any bonus, severance, accrued vacation, insurance, pension or other employee benefit plan, payment or arrangement made by the Company or any of its Subsidiaries for or with any such officers or employees out of the ordinary course of business, (h) suffered any labor dispute, strike, or other work stoppage, (i) made or obligated itself to make any capital expenditures in excess of $200,000 individually, (j) entered into any contract or other agreement requiring the Company or a Subsidiary to make payments in excess of $200,000 individually, other than in the ordinary course of business consistent with past practices, (k) paid any dividends, whether in cash or property, on account of, or repurchased any of, the Common Stock, or (l) entered into any agreement to do any of the foregoing.

5.20 No Undisclosed Material Liabilities. Schedule 5.20 sets forth an accurate list of (a) all liabilities of the Company and its Subsidiaries in excess of $50,000 individually that are not reflected on the June 2003 Financial Statements of those entities that became Subsidiaries of the Company after the date of the June 2003 Financial Statements, or in the SEC Documents (other than trade payables in the ordinary course of business), and (b) all loan agreements, indemnity or guaranty agreements, bonds, mortgages, liens, pledges or other security agreements to which the Company or any Subsidiary is a party relating to indebtedness in an amount in excess of $100,000. Except as set forth on Schedule 5.20, since the date of the June 2003 Financial Statements, neither the Company nor any Subsidiary has incurred any liabilities of any kind, character and description, whether accrued, absolute, secured or unsecured, contingent or otherwise other than (i) liabilities incurred in the ordinary course of business subsequent to the date of the June 2003 Financial Statements and (ii) obligations under contracts and commitments incurred in the ordinary course of business and not required under generally accepted accounting principles to be reflected in the June 2003 Financial Statements.

5.21 Litigation. Except as set forth on Schedule 5.21, as of the date hereof, there is no claim, action, proceeding, lawsuit, inquiry, arbitration or investigation before or by any court, public board, arbitrator, governmental body, agency or official, self-regulatory organization or body including, without limitation, the SEC or the National Association of Securities Dealers Automated Quotation System, pending or, to the knowledge of the Company or any Subsidiary, threatened against or affecting the Company, any Subsidiary, or their respective properties or their respective directors or officers in their capacities as such. The Company has not received any written notice of information that could reasonably be expected to give rise to a claim or proceeding which would reasonably be expected to have a Material Adverse Effect or could prevent or materially delay the consummation of the transactions contemplated hereby. Neither the Company nor any Subsidiary is subject to any outstanding order, ruling, judgment or decree that would reasonably be expected to have a Material Adverse Effect or could prevent or materially delay the consummation of the transactions contemplated hereby.

5.22 Compliance with Laws. Neither the Company nor any Subsidiary has received notification from any Governmental Entity (a) asserting a violation of any law, statute, ordinance or regulation or the terms of any judgments, orders, decrees, injunctions or writs applicable to the conduct of its business which, if true, could reasonably be expected to have a Material Adverse

Effect, (b) threatening to revoke any material license, franchise, permit or government authorization, or (c) materially restricting or limiting its operations as currently conducted or proposed to be conducted.

5.23 Taxes. The Company and each Subsidiary have made or filed all federal and all state, local and foreign income tax returns required to be filed with respect to the Company and each Subsidiary in a timely manner (taking into account all extensions of due dates), other than any immaterial filings. Without limiting the applicability of Section 5.20 hereof, the Company and each Subsidiary have paid all taxes and other governmental assessments and charges shown or determined to be due on such reports, returns and declarations, except those being contested in good faith and for which adequate reserves have been made, and has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply and ending prior to the date hereof. Except as set forth in Schedule 5.23, there are no unpaid taxes claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim. Neither the Company or any Subsidiary has executed a waiver with respect to any statute of limitations relating to the assessment or collection of any federal, state or local tax. Except as set forth on Schedule 5.23, none of the Company’s or any Subsidiary’s tax returns has been or is being audited by any taxing authority.

5.24 Employee Relations. (a) All bonus, deferred compensation, pension, retirement, profit-sharing, thrift, savings, employee stock ownership, stock bonus, stock purchase, restricted stock and Existing Stock Option Plan, employment or severance contracts, health and medical insurance plans, life insurance and disability insurance plans, other material employee benefit plans, contracts or arrangements which cover employees or former employees of the Company or the Subsidiaries including, but not limited to, “employee benefit plans” within the meaning of Section 3(3) of ERISA (the “Employee Benefit Plans”), are listed on Schedule 5.24. No Employee Benefit Plans are or were collectively bargained for or have terms requiring assumption or any guarantee by the Purchasers.

(b) There have been no violations of ERISA or the Code that could reasonably be expected to have a Material Adverse Effect relating to any Employee Benefit Plan. The Company has timely filed all documents, notes and reports (including IRS Form 5500) for each such Employee Benefit Plan with all applicable governmental authorities and has timely furnished all required documents to the participants or beneficiaries of each such Employee Benefit Plans.

(c) The Company and its Subsidiaries have entered into individualized written employment agreements with the officers and key employees of the Company and its Subsidiaries listed on Schedule 5.24, true and complete copies of which have been delivered to Purchasers. To the knowledge of the Company, no employee of or consultant to the Company or any Subsidiary is in violation of any term of any employment contract or any other contract or agreement relating to the relationship of any such employee or consultant with the Company or any Subsidiary the violation of which could reasonably be expected to result in a loss to the Company in excess of $5,000. The Company and each Subsidiary have operated and administered all plans, programs and arrangements providing compensation and benefits to employees in accordance with their terms and with all applicable laws. To the Company’s

knowledge, no key employee has any plans to terminate his or her employment with the Company or any Subsidiary, nor does the Company or any Subsidiary have any present intention to terminate the employment of any key employee.

(d) The Company and its Subsidiaries are not delinquent in payments to any of their employees for any wages, salaries, commissions, bonuses or other direct compensation for any services performed through the date hereof or amounts required to be reimbursed to them prior to the date hereof. The Company and its Subsidiaries are in compliance with all applicable federal, state and local laws, rules and regulations respecting employment, employment practices, labor, terms and conditions of employment and wages and hours, except for either immaterial instances of noncompliance or instances of noncompliance of which the Company is unaware which may be reasonably cured without the incurrence by the Company or the Subsidiary of any material cost or liability. Neither the Company nor any Subsidiary is bound by or subject to (and none of its assets or properties is bound by or subject to) any written or oral, express or implied, commitment or arrangement with any labor union, and, to the knowledge of the Company, no labor union has requested or has sought to represent any of the employees, representatives or agents of the Company or any Subsidiary. There is no labor strike, dispute, slowdown or stoppage actually pending or, to the knowledge of the Company, threatened against or involving the Company or any Subsidiary. There are no suits, actions, disputes, claims (other than routine claims for benefits), investigations or audits pending or, to the knowledge of the Company, threatened in connection with any Employee Benefit Plan that would reasonably be expected to have a Material Adverse Effect.

(e) No director or officer or other employee of the Company or any Subsidiary will become entitled to any retirement, severance or similar benefit or enhanced or accelerated benefit (including any acceleration of vesting or lapse of repurchase rights or obligations with respect to any Employee Benefit Plan) solely as a result of the transactions contemplated in this Agreement; and (ii) no payment made or to be made to any current or former employee of director of the Company or any of its Affiliates by reason of the transactions contemplated hereby (whether alone or in connection with any other event, including, but not limited to, a termination of employment) will constitute an “excess parachute payment” within the meaning of Section 280G of the Code.

5.25 Acknowledgment Regarding Securities. The Company acknowledges that its obligation to issue Conversion Shares upon conversion of the Series C Preferred Shares, in accordance with the terms of this Agreement and the Certificate of Designation, is absolute and unconditional, regardless of the dilution that such issuance may have on the ownership interests of other stockholders of the Company. Taking the foregoing into account, the Company’s Board of Directors has determined in its good faith business judgment that the issuance of the Securities hereunder and the consummation of the other transactions contemplated hereby are (a) in the best interests of the Company and its stockholders and (b) do not breach (with or without the passage of time or the giving of notice) any obligations of the Company or any Subsidiary the result of which would have a Material Adverse Effect. The Company’s Board of Directors has approved the terms of this Agreement and the Certificate of Designation and the transactions contemplated hereby and thereby. Schedule 5.25 sets forth any adjustments, Encumbrances or rights that would be triggered by the issuance of the Securities pursuant to agreements between the Company or

any Subsidiary and any lender or holder of an equity interest or other securities of the Company or any Subsidiary.

5.26 Brokers. There is no broker, investment banker, financial advisor, finder or other Person which has been retained by or is authorized to act on behalf of the Company who might be entitled to any fee or commission for which the Company will be liable in connection with the execution of this Agreement and the consummation of the transactions contemplated hereby.

5.27 Environmental Matters. (a)(i) No written notice, notification, demand, request for information, citation, summons, complaint or order has been received by, and no investigation, action, claim, suit, proceeding or review is pending or, to the knowledge of the Company, threatened by any Person against, the Company or any Subsidiary, and no penalty has been assessed against the Company or any Subsidiary, in each case, with respect to any matters relating to or arising out of any Environmental Law; (ii) the Company and its Subsidiaries are in compliance with all Environmental Laws except for failures to comply that would generate a liability of less than $100,000 in the aggregate; and (iii) to the knowledge of the Company there are no liabilities of or relating to the Company or any Subsidiary relating to or arising out of any Environmental Law that would reasonably be expected to result in a liability of more than $100,000 in the aggregate.

(b) For purposes of this Agreement, the term “Environmental Laws” means federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, codes, injunctions, permits and governmental agreements relating to human health and the environment and applicable to the Company, including, but not limited to, Hazardous Materials; and the term “Hazardous Material” means all substances or materials regulated as hazardous, toxic, explosive, dangerous, flammable or radioactive under any Environmental Law including, but not limited to: (i) petroleum, asbestos, or polychlorinated biphenyls and (ii) in the United States, all substances defined as Hazardous Substances, Oils, Pollutants or Contaminants in the National Oil and Hazardous Substances Pollution Contingency Plan.

5.28 Related-Party Transactions. Except as set forth on Schedule 5.28 hereto, no employee, officer, director, stockholder or Affiliate of the Company or any of its Subsidiaries or member of his or her immediate family is currently indebted to the Company or any of its Subsidiaries, nor is the Company or any of its Subsidiaries indebted (or committed to make loans or extend or guarantee credit) to any of such individuals. Except as set forth on Schedule 5.28 hereto, as of the date hereof none of such Persons has any direct or indirect ownership interest in any firm or corporation with which the Company (other than Affiliates) has a business relationship, or any firm or corporation that competes with the Company except that employees, officers, or directors of the Company and members of their immediate families may own stock in an amount not to exceed 1% of the outstanding capital stock of publicly traded companies that may compete with the Company. As of the date hereof, except as set forth on Schedule 5.28 hereto no employee, director, officer or stockholder of the Company and no member of the immediate family of any employee, officer, director or stockholder of the Company is directly or indirectly interested in any Material Contract with the Company.

5.29 Insurance. The Company and each Subsidiary has in force fire, casualty, product liability and other insurance policies, with extended coverage, sufficient in amount to allow it to replace any of its material properties or assets which might be damaged or destroyed or sufficient to cover liabilities to which the Company or any Subsidiary may reasonably become subject. The Company has a directors’ and officers’ liability insurance policy that, together with an excess liability policy, is in full force and effect in the amount of no less than $10 million. Schedule 5.29 sets forth a list of all insurance policies currently in effect that insure the business, operations, assets, directors, officers or employees of the Company and the Subsidiaries, the name of the carrier and the terms and amount of coverage. No default or event has occurred that could give rise to a default under any such policy.

5.30 Acknowledgment Regarding the Purchasers’ Purchase of the Securities. The Company acknowledges and agrees that each Purchaser is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement or the transactions contemplated hereby, and the relationship between the Company and each Purchaser is “arms length” and that, except for the representations and warranties of the Purchasers under this Agreement, any statement made by the Purchasers or any of its representatives or agents in connection with this Agreement and the transactions contemplated hereby is not advice or a recommendation and is merely incidental to the Purchasers’ purchase of Securities and has not been relied upon by the Company, its officers or directors in any way. The Company further represents to the Purchasers that the Company’s decision to enter into this Agreement has been based solely on an independent evaluation by the Company and its representatives.

5.31 Disclosure. No representation or warranty by the Company contained in this Agreement, and no representation, warranty or statement by the Company contained in any certificate or schedule furnished or to be furnished at the Closing to the Purchasers pursuant to this Agreement, contains any untrue statement by the Company of a material fact or omits to state any material fact necessary to make any statement herein or therein not misleading.

All information relating to or concerning the Company and the Subsidiaries set forth in this Agreement, including, without limitation, in the Schedules hereto, or provided to the Purchasers and otherwise in connection with the transactions contemplated hereby is true and correct in all material respects and the Company has not omitted to state any material fact necessary in order to make the statements made herein or therein, in light of the circumstances under which they were made, not misleading.

5.32 Corporate Records. Copies of the Certificate of Incorporation of the Company, certified by the Secretary of State of the State of Delaware, and of the By-laws of the Company, certified by the Secretary of the Company, delivered pursuant to Section 6.1 to the Purchasers at the Closing are true and complete copies of such instruments as amended to the date of this Agreement. Such Certificate of Incorporation and By-laws are in full force and effect. The Company is not in violation of any provision of its Certificate of Incorporation or By-laws. The corporate records of the Company are correct and complete in all material respects.

5.33 Board Resolutions. The Board of Directors of the Company has passed resolutions attached as Schedule 5.33 hereto (the “Board Resolutions”) recommending to its stockholders the transactions contemplated by this Agreement.

6. Conditions of Parties’ Obligations.

6.1 Conditions of the Purchasers’ Obligations. The obligations of each Purchaser under Section 2 hereof are subject to the fulfillment prior to or on the Closing Date of all of the following conditions, any of which may be waived in whole or in part by the Purchasers.

(a) Covenants; Representations and Warranties. (i) The Company shall have performed in all material respects its obligations hereunder required to be performed by it at or prior to the Closing Date, and shall have obtained all consents and approvals required for the consummation of the transactions contemplated hereby, and (ii) the representations and warranties of the Company contained in this Agreement and in any certificate or other writing delivered by the Company pursuant hereto shall be true and correct (without giving effect to any limitation as to “materiality” or “Material Adverse Effect” set forth therein) at and as of the Closing Date as if made at and as of the Closing Date, except where the failure of such representations and warranties to be true and correct (without giving effect to any limitation as to “materiality” or “Material Adverse Effect” set forth therein) would not, individually or in the aggregate, have a Material Adverse Effect;

(b) Laws; Injunctions. There shall not be any statute, rule, regulation, injunction, order or decree, enacted, enforced, promulgated, entered, issued or deemed applicable to this Agreement or the transactions contemplated hereby (or in the case of any statute, rule or regulation, awaiting signature or reasonably expected to become law), by any court, government or governmental authority or agency or legislative body, domestic, foreign or supranational, that would, or would reasonably be expected to, have a Material Adverse Effect at or after the Closing Date.

(c) Certificate of Designation. The Certificate of Designation shall have been filed with the Secretary of State of the State of Delaware, and the Purchasers shall have received confirmation satisfactory to it that such filing has occurred.

(d) Series C-1 Certificate of Designation. The Certificate of Designation with respect to the Series C-1 Preferred Stock in the form of Exhibit B shall have been filed with the Secretary of State of the State of Delaware, and the Purchasers shall have received confirmation satisfactory to it that such filing has occurred.

(e) Series A Certificate of Designation. An amendment to the Certificate of Designation with respect to the Series A Preferred Stock of the Company shall have been prepared for filing with the Secretary of State of the State of Delaware deleting Section 12 thereof, in the form acceptable to Purchasers. The Purchasers shall have received confirmation satisfactory to it that (1) the holders of Series A Preferred Stock have waived any past or current application of Section 12 of the Series A Certificate of Designation and (2) the requisite consents from holders of the Series A Preferred Stock of the Company have been obtained approving such amendment.

(f) Qualification Under State Securities Laws. All registrations, qualifications, permits and approvals required under applicable state securities laws shall have been obtained

for the lawful execution, delivery and performance of this Agreement and each other Transaction Document, including, without limitation, the offer and sale of the Securities.

(g) Certificate of Officer. The Company shall have delivered to the Purchasers a certificate dated the Closing Date, executed by its principal executive officer, certifying the satisfaction of the conditions specified in paragraphs (a) and (b) of this Section 6.1.

(h) Registration Rights Agreement. The Purchasers and the Company shall have executed and delivered the Registration Rights Agreement in the form of Exhibit C hereto.

(i) Voting Agreement. The Company shall have delivered to Purchasers the Voting Agreement attached as Exhibit D hereto duly executed by the Company and the signatories thereto.

(j) Director Indemnification Agreement. The Company shall have executed and delivered an Indemnification Agreement in the form of Exhibit F hereto for each director representative of the Purchasers.

(k) Supporting Documents. The Purchasers shall have received the following:

(i) A favorable opinion (the “Company Opinion”) from Fulbright & Jaworski L.L.P., counsel to the Company, dated the Closing Date, in the form of Exhibit H hereto.

(ii) Copies of resolutions of the Board of Directors of the Company, certified by the Secretary or other authorized officer of the Company, authorizing and approving the filing of the Certificate of Designation, the execution, delivery and performance of the Transaction Documents and all other documents and instruments to be delivered pursuant hereto and thereto;

(iii) A certificate of incumbency executed by the Secretary of the Company (A) certifying the names, titles and signatures of the officers authorized to execute the Transaction Documents to be executed by the Company and (B) further certifying that the Certificate of Incorporation and By-laws of the Company delivered to the Purchasers at the time of the execution of this Agreement have been validly adopted and have not been amended or modified, except to the extent provided in the Certificate of Designation; and

(iv) Such additional supporting documentation and other information with respect to the transactions contemplated by this Agreement as the Purchasers or their counsel, Orrick, Herrington & Sutcliffe LLP, may reasonably request.

(l) Composition of Board of Directors. On the Closing Date, the Company’s Board of Directors shall be composed of Brett C. Brewer, Lawrence R. Moreau, Brad Greenspan, Bradley Ward, Jeff Edell, Daniel Mosher, and two individuals elected by the Holders of a majority of the Series C Preferred Shares.

(m) Consents and Waivers. The Company shall have obtained all consents or waivers necessary to execute and perform its obligations under this Agreement and the other

Transaction Documents, to issue the Series C Preferred Shares to be delivered pursuant to this Agreement and the Conversion Shares, and to carry out the transactions contemplated hereby and thereby. All corporate and other action and governmental filings necessary to effectuate the terms of this Agreement, the other Transaction Documents, the Series C Preferred Shares, the Conversion Shares, and other agreements and instruments executed and delivered by the Company in connection herewith shall have been made or taken.

(n) No Material Adverse Change. There shall have been no material adverse change in the business, properties, assets, prospects or condition (financial or otherwise) of the Company from and after the date of this Agreement.

(o) Financial Statements. The Purchasers shall have received an unqualified reliance letter of Moss Adams LLP with respect to the Company’s consolidated financial statements as of and for the years ended March 31, 2003.

(p) Expenses. The Company shall have reimbursed Purchasers for their transaction expenses by wire transfer in accordance with Section 14.10.

(q) Trading Price. The trading price of the Company’s Common Stock prior to the Closing Date shall be acceptable to Purchasers in their sole discretion.

(r) Litigation. The Company’s outstanding litigation shall have been resolved or progress towards resolution shall have been made in a manner acceptable to the Purchasers in their sole discretion.

6.2 Conditions of the Company’s Obligations. The obligations of the Company under Section 2 hereof are subject to the fulfillment prior to or on the Closing Date of all of the following conditions, any of which may be waived in whole or in part by the Company.

(a) Covenants; Representations and Warranties. (i) The Purchasers shall have performed in all material respects their obligations hereunder required to be performed by it at or prior to the Closing Date, and shall have obtained all consents and approvals required for the consummation of the transactions contemplated hereby, and (ii) the representations and warranties of the Purchasers contained in this Agreement and in any certificate or other writing delivered by the Purchasers pursuant hereto shall be true and correct (without giving effect to any limitation as to “materiality” set forth therein) at and as of the Closing Date as if made at and as of the Closing Date, except where the failure of such representations and warranties to be true and correct (without giving effect to any limitation as to “materiality” set forth therein) would not, individually or in the aggregate, have a material adverse effect on the Purchasers.

(c) Registration Rights Agreement. The Purchasers and the Company shall have executed and delivered the Registration Rights Agreement.

6.3 Conditions of Each Party’s Obligations. The respective obligations of each party to consummate the transactions contemplated hereunder are subject to the parties being reasonably satisfied as to the absence of (a) litigation challenging or seeking damages in connection with the transactions contemplated by this Agreement and (b) any provision of any applicable law or regulation, or any judgment, injunction, order or decree prohibiting or enjoining the transactions contemplated by this Agreement or by the Transaction Documents.

7. Covenants of the Company. The Company agrees that the Company (and each of its Subsidiaries unless the context otherwise requires) will do the following:

7.1 Maintain Corporate Rights and Facilities. From the date hereof through the Closing, and thereafter for so long as the Purchasers own 50% or more of the Series C Preferred Shares issued hereunder (or the equivalent thereof in Common Stock if such Series C Preferred Shares are converted) maintain and preserve its corporate existence and all rights, franchises, licenses, trademarks, service marks, trade names, copyrights and other authority reasonably deemed adequate by the Company for the conduct of its business; maintain its properties, equipment and facilities in good order and repair; and conduct its business in an orderly manner without voluntary interruption.

7.2 Maintain Insurance. From the date hereof through the Closing, and thereafter for so long as the Purchasers own 50% or more of the Series C Preferred Shares issued hereunder (or the equivalent thereof in Common Stock if such Series C Preferred Shares are converted) maintain in full force and effect a policy or policies of insurance issued by insurers of recognized responsibility, insuring it and its properties and business against such losses and risks, and in such amounts, as are customary in the case of corporations of established reputation engaged in the same or a similar business.

7.3 Information Rights. (a) Access to Records. From the date hereof through the Closing, and thereafter for so long as the Purchasers own 50% or more of the Series C Preferred Shares issued hereunder (or the equivalent thereof in Common Stock if such Series C Preferred Shares are converted) the Company shall, and shall cause each Subsidiary to, afford to the Purchasers, the Affiliates of the Purchasers and each of their respective officers, employees, advisors, counsel and other authorized representatives (collectively with the Affiliates of the Purchasers, the “Representatives”), during normal business hours, reasonable access, upon reasonable advance notice, to all of the books, records and properties of the Company and its Subsidiaries and all officers and employees of the Company and such Subsidiaries. The Purchasers shall keep confidential information obtained by it in connection with any such inspection, except that the Purchasers shall be permitted to disclose the information relating to the Company’s business (i) to such of its representatives as need to know such information relating to the Company’s business for the sole purpose of evaluating the business of the Company, provided such Persons are informed of the confidential nature of the information relating to the Company’s business and the restrictions imposed hereby; (ii) to the extent required by law, rule or regulation or legal process; (iii) to the extent such information relating to the Company’s or any of its Subsidiaries’ business is or becomes publicly available other than as a

result of a breach of this Section 7.3(a); or (iv) to the extent the Company shall have consented to such disclosure. If the Purchasers desire to obtain any information pursuant to this Section 7 that contains material non-public information, Purchasers agree to sign a reasonable form of Confidentiality Agreement and become subject to the SEC insider trading policies of the Company.

(b) Financial Reports. From the date hereof through the Closing, and thereafter for so long as the Purchasers own 50% or more of the Series C Preferred Shares issued hereunder (or the equivalent thereof in Common Stock if such Series C Preferred Shares are converted), the Company shall furnish to the Purchasers the following:

(i) Quarterly Reports. As soon as available, but not later than the date of filing of the Company’s Form 10-Q with the SEC beginning with the report for the quarter ended June 30, 2003, (A) a consolidated balance sheet of the Company as of the end of such period and consolidated statements of income, cash flows and changes in stockholders’ equity for such quarterly accounting period and for the period commencing at the end of the previous fiscal year and ending with the end of such period, setting forth in each case in comparative form the corresponding figures for the corresponding period of the preceding fiscal year, and including comparisons to the budget or business plan, all prepared in accordance with generally accepted accounting principles consistently applied, subject to normal year-end adjustments and the absence of footnote disclosure, and (B) a report or presentation by management of the Company of the operating and financial highlights of the Company and its Subsidiaries for such period, which shall include (x) a comparison between operating and financial results and budget and (y) an analysis of the operations of the Company and its Subsidiaries for such period.

(ii) Annual Audit. Beginning with the fiscal year ended March 31, 2003, as soon as available, but not later than 120 days after the end of each fiscal year of the Company, audited consolidated financial statements of the Company, which shall include statements of income, cash flows and changes in stockholders’ equity for such fiscal year and a balance sheet as of the last day thereof, each prepared in accordance with GAAP, and accompanied by the report of nationally- recognized independent certified public accountants selected by the Company’s Board of Directors (the “Accountants”). The Company and its Subsidiaries shall maintain a system of accounting sufficient to enable its Accountants to render the report referred to in this Section 7.3(b)(iii).

(iii) Miscellaneous. Promptly upon becoming available, each of the following:

(A) copies of all financial statements, reports, press releases, notices, proxy statements and other documents sent by the Company or its Subsidiaries to its stockholders generally or released to the public and copies of all regular and periodic reports, if any, filed by the Company or its Subsidiaries with the SEC, any securities exchange or the NASD;

(B) notification in writing of the existence of any default under any material agreement or instrument to which the Company or any of its Subsidiaries is a party or by which any of their assets are bound;

(C) upon specific request, copies of all reports prepared for or delivered to the management of the Company or its Subsidiaries by its accountants; and

(D) upon specific request, any other routinely collected financial or other information available to management of the Company or its Subsidiaries (including, without limitation, routinely collected statistical data).

7.4 Notice of Litigation, Disputes and Adverse Changes; Other Information. (a) From the date hereof through the Closing, and thereafter for so long as the Purchasers own 50% or more of the Series C Preferred Shares issued hereunder (or the equivalent thereof in Common Stock if such Series C Preferred Shares are converted) promptly notify the Purchasers of (i) each legal action, suit, arbitration or other administrative or governmental investigation or proceeding (whether federal, state, local or foreign) instituted or, to the Company’s knowledge, threatened against the Company (or of any occurrence or dispute which involves a reasonable likelihood of any such action, suit, arbitration, investigation or proceeding being instituted) reasonably likely to result in liability to the Company in excess of $100,000, or (ii) any other occurrence or change of circumstance relating to the Company which, in either such case, could reasonably be expected to materially and adversely affect the Company’s condition (financial or otherwise), properties, assets, liabilities, business, prospects or operations (except for any changes that are the effect or result of economic factors generally affecting the economy as a whole).

(b) From the date hereof through the Closing, and thereafter for so long as the Purchasers own 50% or more of the Series C Preferred Shares issued hereunder (or the equivalent thereof in Common Stock if such Series C Preferred Shares are converted) promptly provide the Purchasers with such other information relating to the Company as reasonably requested by the Purchasers on an item by item basis.

7.5 Internal Accounting Controls. From the date hereof through the Closing, and thereafter for so long as the Purchasers own 50% or more of the Series C Preferred Shares issued hereunder (or the equivalent thereof in Common Stock if such Series C Preferred Shares are converted) maintain a system of internal accounting controls administered in accordance with Section 13(b)(2) of the Exchange Act. The internal accounting controls shall be sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

7.6 Conduct of Business. From the date hereof through the Closing, and thereafter for so long as the Purchasers own 50% or more of the Series C Preferred Shares issued hereunder (or the equivalent thereof in Common Stock if such Series C Preferred Shares are converted) conduct its business in accordance with all applicable provisions of federal, state, local and foreign law, including without limitation, those pertaining to intellectual and proprietary property rights.

7.7 Compliance with Certificate of Incorporation and By-laws. From the date hereof through the Closing, and thereafter for so long as the Purchasers own 50% or more of the Series C Preferred Shares issued hereunder (or the equivalent thereof in Common Stock if such Series C Preferred Shares are converted) perform and observe all of its obligations to the holders of all of its securities set forth in the Company’s Certificate of Incorporation and By-laws.

7.8 Directors. (a) From the date hereof through the Closing, and thereafter reimburse all directors of the Company for their reasonable out-of-pocket expenses in connection with attending meetings of the Company’s Board of Directors and all committees thereof and all reasonable out-of-pocket expenses otherwise incurred in fulfilling their duties as directors. The Company, the Company’s Certificate of Incorporation, or the Company’s By-Laws if no provisions in the Certificate of Incorporation relate to directors’ liability or indemnification, shall at all times (i) eliminate the liabilities of directors to the maximum extent permitted by the law, and (ii) require the indemnification of all of the Company’s directors against liability for actions and omissions to act in their capacity as directors of the Company to the maximum extent that such individuals may lawfully be so indemnified by the Company.

(b) From the date hereof through the Closing, and thereafter for so long as the Purchasers own 50% or more of the Series C Preferred Shares issued hereunder (or the equivalent thereof in Common Stock if such Series C Preferred Shares are converted) maintain in full force and effect a directors and officers liability insurance policy issued by an insurer or insurers of recognized responsibility, insuring its directors and officers against such losses and risks, and in such amounts, as are customary in the case of corporations of established reputation in the same or similar business in the amount of at least $5 million primary coverage and $5 million excess coverage. From the date hereof through the Closing, and thereafter for so long as the Purchaser owns 50% or more of the Series C Preferred Shares issued hereunder (or the equivalent thereof in Common Stock if such Series C Preferred Shares are converted) at least one of the members of the Board of Directors appointed by the Purchaser pursuant to the Certificate of Designation shall be appointed by the Board of Directors to serve on each committee of the Board of Directors, unless applicable law, stock exchange rules or the particular charter of a committee would prevent the representative of the Purchaser from serving on a particular committee.

(c) The directors on the Board of Directors of the Company who are designated by the Series C Preferred Shares shall be accorded no less favorable treatment than any other Board member with respect to all matters, including without limitation, expense reimbursement, stock options or grants, benefits, and access to Company information and management (except for compensation paid to directors for extra responsibilities undertaken).

7.9 Use of Proceeds. The Company will use the proceeds from the sale of the Series C Preferred Shares for the purposes summarized on Schedule 7.9 hereto.

7.10 Reservation of Common Stock. The Company shall reserve and keep available out of its authorized but unissued Common Stock the number of shares required for issuance upon the conversion of all of the Series C Preferred Shares (including any additional shares which may become so issuable by reason of the operation of anti-dilution provisions of the Certificate of Designation).

7.11 Non-Disclosure and Non-Competition Agreement. The Company shall aggressively enforce and protect, to the fullest extent permitted by the applicable law, the Company’s rights with respect to all non-disclosure and non-competition agreements it has with third parties, including, without limitation, employees, where such enforcement is in the best interests of the Company and its stockholders as determined in good faith by the Company.

7.12 Advice of Changes; Filings. From the date hereof through the Closing, and thereafter for so long as the Purchaser owns 50% or more of the Series C Preferred Shares issued hereunder (or the equivalent thereof in Common Stock if such Series C Preferred Shares are converted) the Company shall confer with the Purchaser on a regular and frequent basis as reasonably requested by the Purchaser, orally and, if requested by the Purchaser, in writing, with regard to any change that has had a Material Adverse Effect. From the date hereof through the Closing, and thereafter for so long as the Purchaser owns 50% or more of the Series C Preferred Shares issued hereunder (or the equivalent thereof in Common Stock if such Series C Preferred Shares are converted) the Company shall promptly provide to the Purchasers (or their counsel) copies of all filings made by the Company or any Affiliate with any Governmental Entity in connection with this Agreement and the transactions contemplated hereby.

7.13 Special Stockholders Meeting.

(a) To the extent stockholder approval of any of the transactions contemplated by this Agreement including, without limitation, the approval of the matters contemplated by Section 11 hereof and the filing of the amended Series A Certificate of Designation contemplated by Section 6.1(e), is required by applicable law or otherwise appropriate to be obtained, as soon as practicable after the date hereof, the Company shall prepare and file with the SEC one or more proxy or information statements in connection with the transactions contemplated by this Agreement and the other Transaction Documents (each such proxy statement or information, together with any amendments or supplements thereto, in each case in the form mailed to the Company stockholders, being a “Proxy Statement”). Each Proxy Statement shall not, at the date such Proxy Statement is first mailed to the Company’s stockholders, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. All documents that the Company will file with the SEC in connection with the transactions contemplated herein will comply as to form and substance in all material respects with the applicable requirements of the Exchange Act and the rules and regulations thereunder. The Company shall promptly after the date hereof take all action necessary in accordance with the General Corporation Law of Delaware and the Certificate of Incorporation and By-laws to convene a stockholders meeting to vote on the issuance of the Securities to the Purchaser as promptly as practicable after the date hereof. The Company shall use its best efforts to solicit from stockholders of the Company proxies in favor of the aggregate transactions to be voted on at the stockholders meeting. The Company shall provide to the Purchaser drafts of any materials to be filed with the SEC or mailed to the Company’s stockholders and, prior to submitting or filing such materials with the SEC, shall accept reasonable comments from the Purchaser and its Representatives.

(b) The Company shall ensure that each Proxy Statement contains all material disclosures and is in compliance with all applicable laws, rules, and regulations, and that the

solicitation of the Stockholder Approval is made in compliance with all applicable laws, rules, and regulations.

7.14 Line of Credit. The Line of Credit concept previously discussed by the parties in that certain Term Sheet #2 dated as of July 1, 2003 (the “Term Sheet #2”) is specifically eliminated and negated and not a part of any agreement or undertaking by the Purchasers or their affiliates.

7.15 NASDAQ Listing. The Company shall use its reasonable best efforts to cause its common stock to be listed for trading on NASDAQ as soon as practicable. Any decision to appeal from an adverse ruling shall be made by the Board of Directors of the Company.

8. Negative Covenants of the Company.

8.1 No Solicitation. (a) From the date hereof through the Closing Date, the Company shall and shall cause each Subsidiary and its Subsidiaries’ officers and directors to, and each of the foregoing shall cause their respective agents, representatives, advisors or subsidiaries, to cease any discussions or negotiations with any parties (other than the Purchaser) that may be ongoing with respect to (A) any acquisition or purchase of assets of the Company and its Subsidiaries other than in the ordinary course of business consistent with past practice, (B) the purchase of any equity security of the Company or any Subsidiary (including a self tender offer) or any security that is convertible, exchangeable or exercisable for any such equity security, (C) any merger, consolidation, business combination, sale of substantially all assets, recapitalization, Liquidation, or similar transaction involving the Company or any Subsidiary (other than a Permitted Acquisition), or (D) any other transaction the consummation of which would, or could reasonably be expected to, impede, interfere with, prevent or materially delay the transactions contemplated by this Agreement or which would, or could reasonably be expected to, materially dilute the benefits to the Purchasers of the transactions contemplated hereby (each of the foregoing items set forth in (A) through (D), an “Alternative Transaction”). From the date hereof through the Closing Date, the Company shall not, shall cause each Affiliate not to and shall not authorize or permit any of its or any such Person’s officers, directors or employees or any investment banker, financial advisor, attorney, accountant or other representative representing any such Person to, directly or indirectly, (i) solicit, initiate or encourage (including by way of furnishing information), or take any other action to facilitate, any inquiries or the making of any proposal that may lead to an Alternative Transaction or (ii) participate in any discussions or negotiations with any third party regarding any proposed Alternative Transaction.

(b) From the date hereof through the Closing Date, neither the Board of Directors of the Company nor any committee thereof shall (i) withdraw or modify the approval or recommendation by such Board of Directors or such committee of this Agreement, the Transaction Documents or any of the transactions contemplated hereby or thereby, (ii) approve or recommend any Alternative Transaction or (iii) cause or permit the Company or any Affiliate to enter to any letter of intent, agreement in principle or other agreement with respect to an Alternative Transaction.

(c) In addition to the obligations of the Company set forth in paragraphs (a) and (b) of this Section 8.1, the Company shall promptly advise each Purchaser orally and in writing

of any request for information or of any proposal or any inquiry regarding any Alternative Transaction, the material terms and conditions of such request, proposal or inquiry and the identity of the Person making such request, proposal or inquiry. The Company will keep each Purchaser fully informed of the status and details (including amendments or proposed amendments) of any such request, proposal or inquiry.

9. Restrictive Legend. Each Purchaser understands that the Securities and any securities issued in exchange therefor may bear one or all of the following legends:

(i) “THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF IN VIOLATION OF THE SECURITIES ACT OF 1933.

(ii) Any legend required by the Blue Sky laws of any state to the extent such laws are applicable to the shares represented by the certificate so legended.

10. Registration, Transfer and Substitution of Certificates for Shares.

10.1 Stock Register; Ownership of Securities. The Company will keep at its principal office a register in which the Company will provide for the registration of transfers of the Securities. The Company may treat the Person in whose name any of the Securities are registered on such register as the owner thereof and the Company shall not be affected by any notice to the contrary. All references in this Agreement to a “holder” of any Securities shall mean the Person in whose name such Securities are at the time registered on such register.

10.2 Replacement of Certificates. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of any certificate representing Securities, and, in the case of any such loss, theft or destruction, upon delivery of indemnity reasonably satisfactory to the Company in form and amount or, in the case of any such mutilation, upon surrender of such certificate for cancellation at the office of the Company maintained pursuant to Section 10.1 hereof, the Company at its expense will execute and deliver, in lieu thereof, a new certificate representing Securities of like tenor.

11. Loans.

11.1 Amendment to Existing Secured Note. Effective as of the Closing Date, the parties agree to amend and restate the terms of the Secured Promissory Note as specified in Exhibit E.

11.2 New Loan.

(a) Provided that the conditions described in this Section 11.2 are satisfied by January 31, 2004, the parties agree that a $4 million dollar senior secured loan (or such lesser amount as agreed to by the parties consistent with Section 11.2(a)(ii)) shall be made by the Purchasers or an affiliate of the Purchasers (or at Purchasers sole discretion, by a bank or other lender, with a guarantee provided by the Purchasers or an affiliate of Purchasers) and the loan

will be accepted by the Company (the “Senior Secured Loan”) by February 28, 2004. The terms of the Senior Secured Loan shall be as follows:

(i) The Senior Secured Loan shall be secured by a first priority lien on all of the assets of the Company.

(ii) The proceeds from the Senior Secured Loan may only be used for the transactions described in Schedule 11.2 hereof.

(iii) The interest on the Senior Secured Loan shall be payable at an interest equal to the prime rate, as published from time to time by the Federal Reserve Bank in Statistical Release H.15., as it may change from time to time, and interest shall be payable quarterly by the first day of each calendar quarter.

(iv) The principal shall be due and payable one year after the closing of the funding of the Senior Secured Loan.

(v) If the Purchasers are not the lender, the Company shall have provided to the Purchasers an unconditional agreement to reimburse the Purchasers for any payments made by the Purchasers pursuant to the guarantee. Such reimbursement obligation shall be secured by a lien on all the assets of the Company, subordinated only to the lien of the lender of the Senior Secured Loan.

(vi) The Company will sign all documents and take all actions requested by the lender in order to complete the funding of the Senior Secured Loan.

(b) At the time of the funding of the Senior Secured Loan, the Company shall issue to Purchasers five-year Warrants in the form of Exhibit G, exercisable for shares of Series C Preferred Stock at $2 per share (as appropriately adjusted for any stock splits, stock dividends, recapitalizations and the like), exercisable into an aggregate amount of 250,000 shares of Series C Preferred Stock for each one million dollars advanced to the Company under the Senior Secured Loan.

(c) The right of the Company to receive proceeds from the Senior Secured Loan are subject to the following contingencies for the benefit of the Purchasers (which may be waived by the Purchasers in their sole discretion):

(i) The stockholders of the Company shall have approved the Senior Secured Loan and the issuance of the Warrants to the Purchasers by January 31, 2003.

(ii) 550 Digital Media Ventures, Inc. (“550 DMV”) shall have agreed to subordinate indebtedness owed by the Company to 550 DMV pursuant to a subordination agreement in a form approved by the lender of the Senior Secured Loan (if the lender is a third party commercial lender) and if the Senior Secured Loan is made by Purchasers, 550 DMV shall have agreed to a pari passu form of agreement for its security interest vis-à-vis the Purchasers’ security interest.

(iii) The Company shall have provided to the Purchasers final forms of documents relating to each of the transactions proposed to be financed by loan proceeds and such documents (the “Deal Documents”) and the transactions reflected in the Deal Documents shall be acceptable to the Purchasers in their reasonable discretion.

(iv) The representations and warranties specified in this Agreement shall be true and correct, as if made on the closing date of the Senior Secured Loan, and the conditions to closing specified in this Agreement shall be satisfied, even if they were previously waived by the Purchasers.

(v) The Company shall have delivered such other opinions and satisfied such other customary closing conditions as the lender shall require.

12. Definitions. Unless the context otherwise requires, the terms defined in this Section 12 shall have the meanings specified for all purposes of this Agreement.

Except as otherwise expressly provided, all accounting terms used in this Agreement, whether or not defined in this Section 12, shall be construed in accordance with United States generally accepted accounting principles. If and so long as the Company has one or more Subsidiaries, such accounting terms shall be determined on a consolidated basis for the Company and each of its Subsidiaries, and the financial statements and other financial information to be furnished by the Company pursuant to this Agreement shall be consolidated and presented with consolidating financial statements of the Company and each of its Subsidiaries.

“Affiliate” and “Associate” have the respective meanings assigned to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act.

“Agreement” means this Agreement.

“Alternative Transaction” has the meaning assigned to it in Section 8.1 hereof.

“Amended and Restated Promissory Note” means the amended and restated promissory note in the form of Exhibit E.

“Certificate of Designation” has the meaning assigned to it in Section 1 hereof.

“Closing” has the meaning assigned to it in Section 3 hereof.

“Closing Date” has the meaning assigned to it in Section 3 hereof.

“Code” means the Internal Revenue Code of 1986, as amended.

“Common Stock” has the meaning assigned to it in Section 1 hereof.

“Company Intellectual Property” shall have the meaning assigned to it in Section 5.12 hereof.

“Conversion Shares” means the shares of Common Stock issuable upon conversion of the Series C Preferred Shares.

“Employee Benefit Plans” has the meaning assigned to it in Section 5.24 hereof.

“Encumbrances” has the meaning assigned to it in Section 5.2 hereof.

“Environmental Law” has the meaning assigned to it in Section 5.27 hereof.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Existing Stock Option Plans” means the eUniverse, Inc. 1999 Stock Awards Plan.

“GAAP” means U.S. generally accepted accounting principles consistently applied.

“Governmental Entity” means any national, federal, state, municipal, local, territorial, foreign or other government or any department, commission, board, bureau, agency, regulatory authority or instrumentality thereof, or any court, judicial, administrative or arbitral body or public or private tribunal.

“Hazardous Material” has the meaning assigned to it in Section 5.27 hereof.

“Intellectual Property” has the meaning assigned to it in Section 5.12 hereof.

“Liquidation” means any voluntary or involuntary liquidation, dissolution, or winding up of the affairs of the Company.

“Material Adverse Effect” has the meaning assigned to it in Section 5.3 hereof.

“Material Contract” means any contract, the absence of which would have a Material Adverse Effect.

“Permitted Acquisition” means any acquisition by the Company or any Subsidiary of (i) any business or assets with a purchase price of $350,000 or less (including all assumed debt, all cash payments, and the fair market value of all securities or other property issued as consideration) or (ii) any business or assets for which the consent or approval of the Purchasers has been given.

“Person” means and includes all natural persons, corporations, business trusts, associations, companies, partnerships, joint ventures, limited liability companies and other entities and governments and agencies and political subdivisions.

“Purchase Price” has the meaning assigned it in Section 2 hereof.

“Purchasers” has the meaning assigned it in the introductory paragraph of this Agreement, and for purposes of Article 7 or as otherwise determined by Purchasers, shall include members, partners, and Affiliates of the Purchasers.

“Real Property” shall have the meaning assigned to it in Section 5.7 hereof.

“Registration Rights Agreement” means the Registration Rights Agreement substantially in the form attached hereto as Exhibit C.

“SEC” means the Securities and Exchange Commission.

“SEC Documents” has the meaning assigned to it in Section 5.8 hereof.

“Secured Promissory Note” means that certain Secured Promissory Note dated July 15, 2003 from the Company payable to the order of VP Alpha Holdings IV, L.L.C., in the amount of $2.5 million.

“Securities” has the meaning assigned to it in Section 1 hereof.

“Securities Act” or “Act” means the Securities Act of 1933, as amended.

“Series C Preferred Shares” has the meaning assigned to it in Section 1 hereof.

“Subsidiary” means any corporation, association trust, limited liability company, partnership, joint venture or other business association or entity (i) at least 50% of the outstanding voting securities of which are at the time owned or controlled directly or indirectly by the Company or (ii) with respect to which the Company possesses, directly or indirectly, the power to direct or cause the direction of the affairs or management of such Person.

“Transaction Documents” has the meaning assigned to it in Section 5.3 hereof.

“Warrant” means the 5 year warrant issuable to the Purchasers in the form of Exhibit G.

13. Enforcement.

13.1 Remedies. If any representation or warranty made by or on behalf of any party hereto, in this Agreement or in any certificate, report, or other instrument delivered under or pursuant to any term hereof shall be untrue or misleading as of the date of this Agreement or as of the Closing Date or as of the date it was made, furnished or delivered, or any covenant made by a party hereto shall be breached by such party, the other party or parties may proceed to protect and enforce its rights under the arbitration provision of Section 14.11, whether for the specific performance of any term contained in this Agreement, the Certificate of Designation or any other Transaction Document or for an injunction against the breach of any such term or in aid of the exercise of any power granted in this Agreement, any other Transaction Document or the Certificate of Designation, or to enforce any other legal or equitable right of such party, or to take any one or more of such actions.

13.2 Cumulative Remedies. None of the rights, powers or remedies conferred upon the Purchasers on the one hand, or the Company, on the other hand, shall be mutually exclusive, and each such right, power, or remedy shall be cumulative and in addition to every other right, power, or remedy, whether conferred hereby or by the Transaction Documents or now or hereafter available at law, in equity, by statute or otherwise.

14. Miscellaneous.

14.1 Waivers and Amendments. Upon the approval of the Company and the written consent of the Purchasers (a) the obligations of the Company and the rights of the Purchasers under this Agreement may be waived (either generally or in a particular instance, either retroactively or prospectively and either for a specified period of time or indefinitely), and (b) the Company may enter into a supplementary agreement for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement, or of any supplemental agreement or modifying in any manner the rights and obligations hereunder or thereunder of the Purchasers and the Company.

The foregoing notwithstanding, no such waiver or supplemental agreement shall affect any of the rights of any holder of a Security created by the Certificate of Designation without compliance with all applicable provisions of the Certificate of Designation.

Neither this Agreement, nor any provision hereof, may be changed, waived, discharged or terminated orally or by course of dealing, but only by a statement in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought, except to the extent provided in this Section 14.1.

14.2 Notices. All notices, requests, consents and other communications required or permitted hereunder shall be in writing and shall be hand delivered or mailed postage prepaid by registered or certified mail or transmitted by facsimile transmission (with immediate telephonic confirmation thereafter),

(a) If to the Purchasers:

VantagePoint Venture Partners

1001 Bayhill Drive, Suite 300

San Bruno, CA 94066

Attention: General Counsel

Facsimile No.: (650) 869-6344

with a copy to:

Orrick, Herrington & Sutcliffe LLP

400 Sansome Street

San Francisco, CA 94111

Attention: Dora Mao, Esq.

Facsimile No.: (415) 773-5759

or (b) If to the Company:

eUniverse, Inc.

6060 Center Drive, Suite 300

Los Angeles, CA 90045

Facsimile No.: 310-215-2757

Attn: President

with a copy to:

Fulbright & Jaworski L.L.P.

865 South Figueroa St.

Los Angeles, CA 90017

Attention: Keith Biancamano, Esq.

Facsimile No.: (213) 680-4518

or at such other address as the Company or the Purchasers may specify by written notice to the others, and each such notice, request, consent and other communication shall for all purposes of the Agreement be treated as being effective or having been given when delivered if delivered personally, upon receipt of facsimile confirmation if transmitted by facsimile, or, if sent by mail, at the earlier of its receipt or 72 hours after the same has been deposited in a regularly maintained receptacle for the deposit of United States mail, addressed and postage prepaid as aforesaid.

14.3 Termination of Agreement. This Agreement may be terminated prior to the Closing as follows:

(a) by mutual consent of the Purchaser and the Company;

(b) at the election of either party, if the Closing has not been consummated as of December 31, 2003; provided that the right to terminate this Agreement under this Section 13.3(b) shall not be available to either party whose material misrepresentations, material breach of warranty or failure to fulfill any material obligation under this Agreement has been the cause of, or resulted in, the failure of the Closing to occur on or before such date;

(c) at the election of the Purchasers, if the Company has materially breached any representation, warranty, covenant or agreement contained in this Agreement;

(d) at the election of the Company, if the Purchasers has materially breached any representation, warranty, covenant or agreement contained in this Agreement.

14.4 Indemnification. The Company agrees to protect, indemnify, defend and hold harmless each Purchaser and all of its members, Affiliates, partners, and their respective directors, members, attorneys (including, without limitation, those retained in connection with the transactions contemplated by the Transaction Documents), representatives, officers, and employees (collectively, the “Indemnitees”) from and against any and all liabilities, losses, damages or expenses (including in respect of or for attorney’s fees and other expenses) of any kind or nature and from any suits, claims or demands, causes of action, proceedings, (payable by the Company monthly in advance of being incurred if the Company is not immediately assuming satisfactory defense of the matter, in the amounts reasonably estimated by the Indemnitee to be incurred) arising on account of, relating to, in connection with, or as a result of (i) any breach of a representation or warranty of the Company contained herein, (ii) any breach of any covenant, agreement or obligation of the Company contained in any of the Transaction Documents, (iii) any use by the Company of any proceeds of the Securities, and (iv) any violation by the

Company, its Subsidiaries or their respective officers, directors and employees of the Securities Act, the Exchange Act, or any other applicable rule, regulation or law arising on account of, relating to, in connection with, or as a result of the Transaction Documents and/or the transactions contemplated therein, except to the extent such liability is finally judicially determined to directly arise from the willful misconduct or gross negligence of any such Indemnitee. Upon receiving knowledge of any suit, claim or demand asserted by a third party that Indemnitee believes is covered by this indemnity, Indemnitee shall give the Company notice of the matter and an opportunity to defend it, at the Company’s sole cost and expense, with legal counsel reasonably satisfactory to Indemnitee. Any failure or delay of Indemnitee to notify the Company of any such suit, claim or demand shall not relieve the Company of its obligations under this Section 14.4 but shall reduce such obligations to the extent of any increase in those obligations caused solely by any such failure or delay which is unreasonable. The obligations of the Company under this Section 14.4 shall survive the payment and performance of the Company’s obligations under the Transaction Documents.

14.5 Survival of Representations and Warranties, etc. All representations and warranties made in, pursuant to or in connection with this Agreement shall survive the Closing Date for a period of three (3) years, notwithstanding any investigation at any time made by or on behalf of the Purchasers, and the sale and purchase of the Securities and payment therefor; and all statements contained in any certificate or schedule delivered or to be delivered to the Purchasers by or on behalf of the Company at the Closing pursuant to this Agreement or in connection with or contemplation of the transactions herein contemplated shall constitute representations and warranties by the Company hereunder.

14.6 No Implied 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.

14.7 Successors and Assigns. All the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective parties hereto, the successors and assigns of the Purchasers and the successors of the Company, whether so expressed or not. None of the parties hereto may assign any of its rights or obligations hereunder without the prior written consent of the other parties hereto; provided, however, each Purchaser may assign all or a portion of its rights hereunder to its members, partners, and Affiliates without consent of the Company.

14.8 Headings. The headings of the Sections and paragraphs of this Agreement have been inserted for convenience of reference only and do not constitute a part of this Agreement.

14.9 Governing Law. The internal laws, and not the laws of conflicts of California shall govern the enforceability and validity of this Agreement, the construction of its terms and the interpretation of the rights and duties of the parties.

14.10 Transaction Expenses. The Company shall pay to counsel to the Purchasers at the Closing by wire transfer, Purchasers’ attorneys’ fees and due diligence expenses incurred in

connection with this transaction. Whether or not the transactions contemplated hereby are consummated, the Company will pay all out-of-pocket legal, accounting and due diligence fees and expenses incurred by Purchasers in connection with the transactions contemplated hereby.

14.11 Dispute Resolution. In the event of any dispute arising out of or relating to this Agreement, then such dispute shall be resolved solely and exclusively by confidential binding arbitration with the San Francisco branch of JAMS (“JAMS”) to be governed by JAMS’ Commercial Rules of Arbitration (the “JAMS Rules”) and heard before one arbitrator. The parties shall attempt to mutually select the arbitrator. In the event they are unable to mutually agree, the arbitrator shall be selected by the procedures prescribed by the JAMS Rules. Each party shall bear its own attorneys’ fees, expert witness fees, and costs incurred in connection with any arbitration.

14.12 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, AND AGREE TO THE ARBITRATION PROVISION CONTAINED IN SECTION 14.11.

14.13 Counterparts; Effectiveness. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, with the same effect as if all parties had signed the same document. All such counterparts shall be deemed an original, shall be construed together and shall constitute one and the same instrument. This Agreement shall become effective when each party hereto shall have received counterparts hereof signed by all of the other parties hereto.

14.14 Entire Agreement. This Agreement and the other Transaction Documents contain the entire agreement among the parties hereto with respect to the subject matter hereof and such Agreement supersedes and replaces all other prior agreements, written or oral, among the parties hereto with respect to the subject matter hereof.

14.15 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.

14.16 Efforts. The Company and the Purchasers shall each cooperate with the other and use (and shall cause their respective Subsidiaries to use) their respective commercially reasonable best efforts to promptly (i) take or cause to be taken all necessary actions, and do or cause to be done all things, necessary, proper or advisable under this Agreement and applicable

laws to consummate and make effective all the transactions contemplated by this Agreement as soon as practicable, including, without limitation, preparing and filing promptly and fully all documentation to effect all necessary filings, notices, petitions, statements, registrations, submissions of information, applications and other documents and (ii) obtain all approvals required to be obtained from any third party necessary, proper or advisable to the transactions contemplated by this Agreement.

14.17 Construction. All provisions of this Agreement have been negotiated at arms length, each party having legal counsel, and this Agreement shall not be construed for or against any party by reason of the authorship or alleged authorship of any provision hereof. The language in this Agreement shall be construed as to its fair meaning and not strictly for or against any party.

14.18 Publicity. The Company hereby covenants and agrees not to disclose the transactions contemplated hereby or by the Transaction Documents without the consent of the Purchasers, except for disclosures required under applicable securities laws.

[Execution Page Follows]

IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase Agreement to be duly executed as of the day and year first above below.

Dated:	October 31, 2003

		eUniverse, Inc.


		By:	/s/ Brett Brewer
		Name:			Brett Brewer
		Title:		President


		VantagePoint Venture Partners IV (Q), L.P.
		By: VantagePoint Venture Associates IV,
		L.L.C.,
		Its General Partner


		By:	/s/ Alan E. Salzman
		Name:			Alan E. Salzman
		Title:		Managing Member


		VantagePoint Venture Partners IV, L.P.
		By: VantagePoint Venture Associates IV,
		L.L.C.
		Its General Partner


		By:	/s/ Alan E. Salzman
		Name:			Alan E. Salzman
		Title:		Managing Member

		VantagePoint Venture Partners IV Principals
		Fund, L.P.
		By: VantagePoint Venture Associates IV,
		L.L.C.
		Its General Partner


		By:	/s/ Alan E. Salzman
		Name:			Alan E. Salzman
		Title:		Managing Member

[Signature Page to Series C Preferred Stock Purchase Agreement]

EXHIBITS

Schedule of Purchasers

Exhibit A: Form of Series C Certificate of Designation

Exhibit B: Form of Series C-1 Certificate of Designation

Exhibit C: Form of Registration Rights Agreement

Exhibit D: Voting Agreement

Exhibit E: Amended and Restated Promissory Note

Exhibit F: Form of Indemnification Agreement

Exhibit G: Form of Warrant

Exhibit H: Form of Company Legal Opinion

Disclosure Schedule

SCHEDULE OF PURCHASERS

Purchaser	Aggregate Purchase Price		Number of Shares
VantagePoint Venture Partners IV (Q), L.P.	$	7,247,199.50	4,831,466
VantagePoint Venture Partners IV, L.P.	$	726,400.50	484,267
VantagePoint Venture Partners IV Principals Fund, L.P.	$	26,400.00	17,600

Exhibit A

Form of Series C Certificate of Designation

Exhibit B

Form of Series C-1 Certificate of Designation

Exhibit C

Form of Registration Rights Agreement

Exhibit D

Voting Agreement

Exhibit E

Amended and Restated Promissory Note

Exhibit F

Form of Indemnification Agreement

Exhibit G

Form of Warrant

Exhibit H

Form of Company Legal Opinion

EX-11 4 a03-4712_1ex11.htm EX-11

Exhibit 11

Final Version

REGISTRATION RIGHTS AGREEMENT

EUNIVERSE, INC.

REGISTRATION RIGHTS AGREEMENT dated as of the date written below, between eUniverse, Inc., a Delaware corporation (the “Company”), and the undersigned stockholders (the “Stockholders”).

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 C Preferred Stock or Series C-1 Preferred Stock or (z) any securities issued or issuable with respect to the Common Stock or Series C Preferred Stock or Series C-1 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 C Preferred Stock or Series C-1 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 Series C Preferred Stock Purchase Agreement, dated the date hereof, between the Company and the Stockholders.

“Registrable Common Stock” means the Conversion Shares and any other shares of Common Stock obtained in the future by the Stockholder or its affiliates, partners or members. All references herein to a “Holder” or “Holder of Registrable Common Stock” shall include the holder or holders of Series C Preferred Stock or Series C-1 Preferred Stock to the extent of the Conversion Shares then underlying such Series C Preferred Stock or Series C-1 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 C Preferred Stock or Series C-1 Preferred Stock shall be deemed to be a Holder of the number of Conversion Shares issuable upon conversion of such Series C Preferred Stock or Series C-1 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 C Preferred Stock” means the Series C Convertible Preferred Stock, par value $0.10 per share, of the Company held by any Holder.

“Series C-1 Preferred Stock” means the Series C-1 Convertible Preferred Stock, par value $0.10 per share, of the Company that may be held by a Holder.

“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 180 days after the date hereof, 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 two (2) 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.

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.

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) (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, defend, protect and hold harmless 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.

6060 Center Drive, Suite 300

Los Angeles, CA 90045

Facsimile No.: 310-215-2757

Attn: President

with a copy to:

Fullbright & Jaworski

865 South Figueroa Street

Los Angeles, CA 90017

Attention: Keith Biancamano, Esq.

Facsimile No.: 213-680-4518

If to the Stockholders:

VantagePoint Venture Partners

1001 Bayhill Drive, Suite 300

San Bruno, CA 94066

Attention: General Counsel

Facsimile No.: (650) 869-6344

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:

Orrick, Herrington & Sutcliffe LLP

One Sansome Street

San Francisco, CA 94111

Attention: Dora Mao, Esq.

Facsimile No.: (415) 773-5759

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 California, without regard to principles of conflicts of law.

(e) Dispute Resolution. In the event of any dispute arising out of or relating to this Agreement, then such dispute shall be resolved solely and exclusively by confidential binding arbitration with the San Francisco branch of JAMS (“JAMS”) to be governed by JAMS’ Commercial Rules of Arbitration (the “JAMS Rules”) and heard before one arbitrator. The parties shall attempt to mutually select the arbitrator. In the event they are unable to mutually agree, the arbitrator shall be selected by the procedures prescribed by the JAMS Rules. Each

party shall bear its own attorneys’ fees, expert witness fees, and costs incurred in connection with any arbitration.

(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. Legal fees and expenses incurred in connection with this transaction shall be paid as provided in Section 14.10 of the Purchase Agreement.

(n) Construction. All provisions of this Agreement have been negotiated at arms length, each party having legal counsel, and this Agreement shall not be construed for or against any party by reason of the authorship or alleged authorship of any provision hereof. The language in this Agreement shall be construed as to its fair meaning and not strictly for or against any party.

[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 below.

Date:	October 31, 2003	eUniverse, Inc

		By:	/s/ Brett Brewer
		Name:			Brett Brewer
		Title:		President

		VantagePoint Venture Partners IV (Q), L.P.
		By: VantagePoint Venture Associates IV, L.L.C.,
		Its General Partner
		By:	/s/ Alan E. Salzman
		Name:			Alan E. Salzman
		Title:		Managing Member

		and

		VantagePoint Venture Partners IV, L.P.
		By: VantagePoint Venture Associates IV, L.L.C.
		Its General Partner
		By:	/s/ Alan E. Salzman
		Name:			Alan E. Salzman
		Title:		Managing Member

		and

		VantagePoint Venture Partners IV Principals Fund,
		L.P.
		By: VantagePoint Venture Associates IV, L.L.C.
		Its General Partner
		By:	/s/ Alan E. Salzman
		Name:			Alan E. Salzman
		Title:		Managing Member

[Signature Page to Registration Rights Agreement]

EX-12 5 a03-4712_1ex12.htm EX-12

Exhibit 12

FINAL VERSION

CERTIFICATE OF DESIGNATION
OF
SERIES C CONVERTIBLE PREFERRED STOCK
OF
eUNIVERSE, INC.

eUniverse, Inc., a Delaware corporation (the “Company”), hereby certifies that the following resolution was adopted by the Board of Directors of the Company, as required by Section 151 of the Delaware General Corporation Law pursuant to a meeting of the Board of Directors on October 27, 2003:

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 Certificate of Incorporation of the Company (the “Certificate 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 Certificate of Incorporation (the “Preferred Stock”), a series of the Preferred Stock consisting of 20,000,000 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 Certificate 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 C Convertible Preferred Stock” (the “Series C Preferred Stock”) and the authorized number of shares constituting such series shall be 20,000,000. The Series C Preferred Stock shall rank pari passu with the Series C-1 Preferred Stock (the “Series C-1 Preferred Stock” and along with the Series C Preferred Stock, the “Combined Series C Preferred Stock”), senior to the Series A 6% Convertible Preferred Stock (the “Series A Preferred Stock”) and senior to the Series B Convertible Preferred Stock (the “Series B 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 C Preferred Stock will be entitled to receive cumulative stock 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 C Preferred Stock. The stock dividends to be issued hereunder shall be issued on the last day of each calendar quarter, in the form of Series C Preferred Stock. By way of example, a holder of 100,000 shares of Series C Preferred Stock shall be entitled to receive 2,000 shares of Series C Preferred Stock as its quarterly stock dividend. The term “Original Issuance Date” means October 31, 2003. The stock dividends provided for in this

Section 2(a) are hereinafter referred to as “Base Dividends.” The Base Dividends shall be eliminated and of no further effect as of twelve (12) months after the Original Issuance Date.

(b) In addition to Base Dividends (if still in effect), 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 C 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 C 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 C 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 C 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 C 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 C 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 C 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 $1.50 per share of Series C 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 at the same time any payment shall be made or any assets distributed to the holders of Series C-1 Preferred Stock and 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 B Preferred Stock, the holders of the Series A Preferred Stock or any other class or series of the Company’s capital stock ranking junior as to liquidation rights to the Series C Preferred Stock. After the Liquidation Preference has been paid in full pursuant to this Section, the holders of the Series B Preferred Stock shall be entitled to receive their liquidation preference as set forth in the Certificate of Designation of Series B Preferred Stock. After the liquidation preference of the Series B Preferred Stock has been paid in full, 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 Preferred Stock. Following payment, first, to the holders of the Combined Series C Preferred Stock of the full preferential amounts described in the first sentence of this Section 3 (and with respect to holders the holders of Series C-1 Preferred Stock, their preferential amount) and, second, to the holders of Series B Preferred Stock of their preferential amount and, third, to the holders of the Series A Preferred Stock of their full preferential amounts, 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 Combined Series C Preferred Stock (as if the Combined Series C 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), (ii) 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), (iii) the holders of the then outstanding shares of Series A Preferred Stock (as if the Series A 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 (iv) the holders of the then outstanding shares of 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 Combined Series C Preferred Stock of the full preferential amounts described in this paragraph, then all the remaining available assets shall be distributed ratably among the holders of the then outstanding Combined Series C Preferred Stock in proportion to the preferential amount each such holder is otherwise entitled to receive. A Corporate Transaction (as hereinafter defined), shall at the election of the holders of a majority of the Combined Series C Preferred Stock outstanding at the time constitute a Liquidation for purposes of this Section 3, other than an Excluded Corporate Transaction (as hereinafter defined).

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 Combined Series C 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 Certificate of Incorporation or as otherwise provided by Delaware law; and

(iii) shall be entitled to receive notice of any stockholders’ meeting in accordance with the Certificate of Incorporation and By-laws of the Company.

For purposes of the voting rights set forth in this Section 4(a), each share of Combined Series C 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 Combined Series C 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) So long as at least 51% of the originally issued Series C Preferred Stock remains outstanding, the holders of Combined Series C Preferred Stock shall have the exclusive right, voting separately as a single class, to elect two (2) members of the Board of Directors (each such member elected by the Combined Series C Preferred Stockholders, a “Series C 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 nine (9). In any such election the holders of Combined Series C Preferred Stock shall be entitled to cast one vote per share of Combined Series C Preferred Stock held of record on the record date for the determination of the holders of Combined Series C Preferred Stock entitled to vote on such election. The initial Series C Preferred Stock Directors shall be as designated by written notice to the Company from a majority-in-interest of the holders of the Combined Series C Preferred Stock and they are elected to serve until their successors are duly elected; and thereafter the Series C Preferred Stock Directors shall be elected at the same time as other members of the Board of Directors. A Series C Preferred Stock Director may only be removed by the written consent or affirmative vote of at least a majority of the Combined Series C Preferred Stock. If for any reason a Series C 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 Combined Series C Preferred Stock, in accordance with the voting procedures set forth in this Section 4(b).

(c) So long as at least 51% of the originally issued Series C Preferred Stock remains 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 Combined Series C

Preferred Stock, (i) amend, alter, waive or repeal, whether by merger, consolidation, combination, reclassification or otherwise, the Certificate 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) or (ii) increase the size of the Board of Directors beyond nine (9) members. The vote of the holders of at least two-thirds of the outstanding shares of Combined Series C 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 at least 51% of the originally issued Series C Preferred Stock remains 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 C Preferred Stock 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 C Preferred Stock or (y) on a parity with the Series C Preferred Stock. The vote of the holders of at least two-thirds of the outstanding shares of Series C 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.

(e) So long as VantagePoint Venture Partners IV (Q), L.P. together with any of its affiliates owns at least 2,666,667 shares of Series C 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 nine (9).

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 C Preferred Stock shall be entitled, at their

option, at any time to convert all or any such shares of Series C 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 C Preferred Stock shall be entitled upon conversion shall be determined by dividing (x) the Liquidation Preference of such Series C 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 C Preferred Stock shall automatically convert, immediately upon the written consent of holders of more than 50% of issued and outstanding Series C Preferred Stock (the “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 C Preferred Stock shall be entitled upon such automatic conversion shall be determined by dividing (x) the Liquidation Preference of such Series C 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 C Preferred Stock, the holders of Series C Preferred Stock shall surrender the certificates representing such shares at the office of the Company or any transfer agent for the Series C 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 C 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 $1.50, subject to adjustment from time to time in accordance with Section 5(e).

(d) Fractions of Shares. Unless the holder of shares of Series C 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 C Preferred Stock. If more than one share of Series C 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 C Preferred Stock so surrendered. Instead of any fractional shares of Common Stock which would otherwise be issuable upon conversion of any shares of Series C 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 of 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 C 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 of 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 aggregate 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 C 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 C 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 C 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 C 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 C 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 C 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 C 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 holders of a majority of the outstanding Series C Preferred Stock, (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 C Preferred Stock, a holder must (A) surrender the certificate or certificates

evidencing such holder’s shares of Series C 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 C 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 C Convertible Preferred Stock of eUniverse, Inc. (the “Convertible Preferred Stock”), irrevocably exercises the right to convert outstanding shares of Series C 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 address, including postal code number		(Signature)

Denominations:

(ii) Series C 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 C 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 C 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 C 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 C 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 C 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 C 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 C 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 C Preferred Stock, the full number of shares of Common Stock then issuable upon the conversion of all outstanding shares of Series C 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 C Preferred Stock or that would cause the number of shares of Common Stock deliverable upon conversion of the Series C 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.

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 C Preferred Stock. All Series C 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 C 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 San Francisco, California, selected by the San Francisco branch of JAMS (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.

“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.

“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 C 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 C 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 C 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 C Preferred Stock to whom the Preemptive Rights Offer is made, such holder of Series C Preferred Stock may pay cash equal to the value of such non-cash consideration), all or any part of such holder of Series C 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 C Preferred Stock by the sum of (i) the number of shares of outstanding Voting Stock owned by such holder of Series C

Preferred Stock and (ii) the number of outstanding shares of Voting Stock not held by such holder of Series C Preferred Stock). If any holder of Series C 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 (10^th) 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.

IN WITNESS WHEREOF, this Certificate of Designation is executed on behalf of the Company by its duly authorized officer this day of , 2003.

		eUNIVERSE, INC.

		By:
			Christopher S. Lipp
			Secretary, Senior Vice President and General Counsel

EX-13 6 a03-4712_1ex13.htm EX-13

Exhibit 13

550 DMV

CONSENT AND WAIVER AGREEMENT

THIS CONSENT AND WAIVER AGREEMENT (this “Agreement”) is made and entered into by and among between 550 Digital Media Ventures, Inc. (together with its predecessor in interest, “550 DMV”), the investors listed on the signature pages below (collectively, “VPVP”), and eUniverse, Inc. (the “Company”).

RECITALS

A. 550 DMV is the owner of 3,366,154 shares of Common Stock of the Company and 1,923,077 shares of Series B Preferred Stock of the Company (which constitutes all of the outstanding Series B Preferred Stock of the Company) and a holder of that certain Second Amended and Restated Convertible Secured Promissory Note dated as of March 28, 2003, executed by the Company and payable to the order of 550 DMV in the principal amount of $1,789,764 (the “DMV Note”).

B. Concurrently herewith, VPVP and the Company are entering into that certain Series C Preferred Stock Purchase Agreement, pursuant to which VPVP will purchase 5,333,333 shares of Series C Preferred Stock (the “Series C Preferred Stock”) from the Company (the “Stock Purchase Agreement”). The rights, preferences and privileges associated with the Series C Preferred Stock are specified on the Certificate of Designation attached as an exhibit to the Stock Purchase Agreement.

C. Concurrently herewith, VPVP and the Company have agreed to amend and restate that certain secured promissory note dated July 15, 2003 in the principal amount of $2,500,000 (as amended and restated, the “Secured Note”) to, among other changes, provide that such Secured Note shall be convertible into shares of Series C-1 Preferred Stock of the Company (the “Series C-1 Preferred Stock”). The rights, preferences and privileges associated with the Series C-1 Preferred Stock are specified on the Certificate of Designation attached as an exhibit to the Stock Purchase Agreement.

D. Under the terms of the Stock Purchase Agreement, following the required stockholder approvals and the satisfaction of certain other conditions, (i) VPVP or its affiliate will either provide to the Company a senior secured loan in the amount of up to $4,000,000 (the “New Secured Loan”) or guarantee the New Secured Loan provided by a third party and (ii) VPVP will receive warrants to purchase up to 1,000,000 shares of Series C Preferred Stock for an exercise price of $2.00 per share (the “Warrants”).

E. The execution and delivery of this Agreement is a condition precedent to the obligations of VPVP under the Stock Purchase Agreement.

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants of the parties contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. Consent of 550 DMV. 550 DMV hereby consents to VPVP’s purchase of Series C Preferred Stock pursuant to the Stock Purchase Agreement, all transactions and the execution of any additional documents contemplated thereunder, the changes to the Secured Note and the issuance of the Warrants to VPVP. 550 DMV hereby waives any and all terms, covenants or provisions contained in the Certificate of Designation of Series B Convertible Preferred Stock (the “Series B Certificate”) of the Company (including the preemptive rights contained in Section 7 thereof), in warrants issued to 550 DMV, and in any other agreements between the Company and 550 DMV or any of its affiliates (collectively, the “550 DMV Documents”) solely as necessary to permit the completion of VPVP’s financing and the other transactions contemplated by the Stock Purchase Agreement, the Secured Note and the Warrants without resulting in a default or a deemed Change of Control (as defined in the 550 DMV Documents) under the 550 DMV Documents, the Series B Certificate or any other agreements between 550 DMV or any of its affiliates and the Company. 550 DMV hereby agrees that the Warrants, the shares of Series C Preferred Stock to be issued to VPVP pursuant to the Stock Purchase Agreement between VPVP and the Company, any shares of preferred stock issued upon exercise of the Warrants, any shares of Series C-1 Preferred Stock issued upon conversion of the Secured Note and any shares of common stock issuable upon conversion of any such shares of preferred stock shall not constitute (x) the issuance of additional Common Stock under Section 5 of the Series B Certificate, (y) Additional Shares of Common Stock under Section 6(c) of that certain warrant convertible into the Company common stock held by 550 DMV or (z) otherwise be deemed to trigger the anti-dilution provisions of any security of the Company held by 550 DMV or any affiliate thereof or any agreement between any of them and the Company. 550 DMV hereby irrevocably covenants to vote all of its shares in the Company in favor of the transactions set forth in Schedule 1.

2. Agreement to Subordinate 550 DMV Obligations. 550 DMV agrees to subordinate its rights under the DMV Note to the New Secured Loan upon such terms as a commercial lender thereunder shall require, and to execute such subordination and related documents as such lender shall request; provided, however, if the lender is VPVP, then VPVP’s security interest shall be pari passu with 550 DMV’s security interest under the DMV Note.

3. Release of Certain Claims.

3.1 550 DMV hereby releases and forever discharges eUniverse, Inc., and each of its past, present, and future directors, officers, employees, agents, attorneys, representatives, principals, partners, shareholders, joint venturers, lenders, sureties, experts, consultants, parent corporations, sister corporations, subsidiaries, affiliated entities, predecessors, successors, and assigns (hereinafter, all such related persons and entities are collectively referred to as the “eUniverse Related Persons”) from any and all liabilities, claims, causes of action, suits, debts, liens, rights, duties, obligations, agreements, promises, warranties, representations, damages, losses, costs (including costs of suit and attorney’s fees and expenses), or demands, of whatever nature, character, type, or description, whether known or unknown, existing or potential, or suspected or unsuspected (collectively “Claims”), which 550 DMV has or asserts, or may hereafter have or assert, against eUniverse or any of the eUniverse Related Persons based on any act or omission of the Company or any eUniverse Related Persons occurring at any time prior to the date of this Agreement and arising in connection with, or related to, the 550 DMV Documents, any agreements with eUniverse or the eUniverse Related Persons, and/or 550

DMV’s status as a shareholder of the Company, including, but not limited to, any Claims based on the breach of any representation, warranty or covenant contained in the 550 DMV Documents or based on federal or state securities laws in connection with the Company’s recent restatement of financial results for its fiscal year 2003 and the matters and allegations at issue in the purported class and derivative stockholder actions pending against the Company in the State and Federal Courts located in Los Angeles (the foregoing matters released in this Section shall collectively be referred to as “550 DMV Released Claims”).

3.2 550 DMV hereby waives and relinquishes any rights, defenses, or benefits it may have under section 1542 of the Civil Code which provides as follows:

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

3.3 550 DMV represents and warrants that it has not assigned or transferred, nor purported to assign or transfer, to any other person or entity any of their rights or interests in any of the 550 DMV Released Claims, and 550 DMV agrees to indemnify and hold harmless the Company, and each of the eUniverse Related Persons from any liability, claims, causes of action, obligations, demands, damages, costs, attorney’s fees, or expenses incurred by them as a result of any person or entity asserting any assignment or transfer of any rights or interests in any of 550 DMV Released Claims.

3.4 The release set forth in this Section 3 is not intended to, and shall not, terminate or vitiate or have any effect on the DMV Note or any rights of DMV thereunder or under DMV’s security documents securing the obligations under the DMV Note or the rights that DMV may have to certain online advertising impressions.

4. Option.

4.1 Option Exercise. Within 5 business days after closing of the purchase by VPVP of the Series C Preferred Stock under the Stock Purchase Agreement, VPVP shall partially exercise its option under the Option Agreement to purchase 454,545 shares of the Series B Preferred Stock held by 550 DMV for an aggregate purchase price of $500,000.

4.2 Amendment of Option Agreement. The Option Agreement is hereby amended to provide that

(a) the “Termination Date” (as defined in the Option Agreement) shall be deemed to be April 16, 2004 instead of January 16, 2004.

(b) Section 14 of the Option Agreement is amended to provide that the Option may be partially exercised by the holder of the Option.

5. DMV Note. The Company shall expeditiously provide to DMV a replacement note to the DMV Note, with such replacement showing the principal to be $1,789,764 plus the outstanding interest of $613,764, with all such interest being converted to principal, with the result being that the total outstanding principal shall equal $2,403,528.

6. Miscellaneous Provisions.

6.1 Binding Effect. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors, and assigns. Each party shall notify its respective transferees or assignees that this Agreement is in effect. Each party shall notify the other in writing of any such assignment or transfer.

6.2 Waiver. Failure of any party at any time to require performance of any provision of this Agreement shall not limit such party’s right to enforce such provision, nor shall any waiver of any breach of any provision of this Agreement constitute a waiver of any succeeding breach of such provision or a waiver of such provision itself. Each party hereby agrees that this Agreement satisfies all notice requirements under any of the 550 DMV documents with respect to the transactions described herein.

6.3 Amendment. This Agreement may not be modified or amended except by the written agreement of the parties. No attempted waiver of any provision of this Agreement shall be binding unless in writing and signed by the party to be bound.

6.4 Severability. If any term or provision of this Agreement or the application thereof to any person or circumstance shall to any extent be held invalid or unenforceable, the remainder of this Agreement and the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable shall not be affected thereby, and each term or provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.

6.5 Integration. This Agreement contains the entire agreement and understanding of the parties with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements among them with respect to such matters.

6.6 Notices. Notices under this Agreement shall be in writing and shall be effective when actually delivered, by facsimile or by personal delivery, or three (3) days after being deposited in the United States Mails, certified, return receipt requested, directed to the other party at the address set forth below, or to such other address as the party may indicate by written notice:

If to the Company: eUniverse, Inc.
6060 Center Drive, Suite 300
Los Angeles, California 9045
Attention: General Counsel
Facsimile: (310) 258-2758

If to VPVP: Vantage Point Venture Partners
1001 Bayhill, Suite 300
San Bruno, CA 94066
Attention: General Counsel
Facsimile: (650)869-6078

If to 550 DMV: Sony Music Entertainment Inc.
550 Madison Avenue
New York, New York 10022
Attention: Executive Vice President, Business Affairs
Facsimile: (212) 833-7844

And

Sony Music Entertainment Inc.
550 Madison Avenue
New York, New York 10022
Attention: General Counsel and Senior Vice President
Facsimile: (212) 833-4533

6.7 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the state of California without reference to conflict of laws principles.

6.8 Construction and Interpretation. The headings or titles of the sections of this Agreement are intended for ease of reference only and shall have no effect whatsoever on the construction or interpretation of any provision of this Agreement. All provisions of this Agreement have been negotiated at arms length, each party having legal counsel, and this Agreement shall not be construed for or against any party by reason of the authorship or alleged authorship of any provision hereof, notwithstanding that each party may have signed a separate signature page. The language in this Agreement shall be construed as to its fair meaning and not strictly for or against any party.

6.9 Counterparts. This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one and the same instrument, notwithstanding that one or more parties may have signed a separate signature page.

6.10 No Third Party Beneficiaries. This Agreement and the terms and provisions hereof are solely for the benefit of the parties hereto and their respective successors and permitted assigns and shall not in any way benefit any other person.

6.11 Dispute Resolution. In the event of any dispute arising out of or relating to this Agreement, then such dispute shall be resolved solely and exclusively by confidential binding arbitration with the San Francisco branch of JAMS (“JAMS”) to be governed by JAMS’ Commercial Rules of Arbitration (the “JAMS Rules”) and heard before one arbitrator. The parties shall attempt to mutually select the arbitrator. In the event they are unable to mutually agree, the arbitrator shall be selected by the procedures prescribed by the JAMS Rules. Each

party shall bear its own attorneys’ fees, expert witness fees, and costs incurred in connection with any arbitration.

6.12 Waiver of Jury Trial.

[Remainder of page intentionally left blank; signature page follows]

IN WITNESS WHEREOF, the parties have executed this Consent and Waiver Agreement as of the date first above written.

550 DMV:		550 Digital Media Ventures, Inc.
		a Delaware corporation


		By:	/s/ Mark Eisenberg
		Name:			Mark Eisenberg
		Title:		Senior Vice President and General Counsel


THE COMPANY:		eUniverse, Inc., a Delaware corporation
		By:	/s/ Brett Brewer


		Name:			Brett Brewer
		Title:		President

VPVP:		VantagePoint Venture Partners IV(Q), L.P.
		By: VantagePoint Venture Associates IV, L.L.C.,
		Its General Partner


		By:	/s/ Alan E. Salzman
		Name:			Alan E. Salzman
		Title:		Managing Member


		VantagePoint Venture Partners IV, L.P.
		By: VantagePoint Venture Associates IV, L.L.C.,
		Its General Partner


Date:	October 31, 2003	By:	/s/ Alan E. Salzman
		Name:			Alan E. Salzman
		Title:		Managing Member

		VantagePoint Venture Partners IV Principals
		Fund, L.P.
		By: VantagePoint Venture Associates IV, L.L.C.,
		Its General Partner


		By:	/s/ Alan E. Salzman
		Name:			Alan E. Salzman
		Title:		Managing Member

[SIGNATURE PAGE TO CONSENT AND WAIVER AGREEMENT]

Schedule 1

Summary of Transactions

1. The offer, sale and issuance of $8 million of Series C Convertible Preferred Stock of the Company, pursuant to the Stock Purchase Agreement and the exhibits and schedules thereto.

2. The amendment and restatement of the $2.5 million note from the Company to VP Alpha Holdings IV, L.L.C. (“VP Alpha”).

3. The potential loan of up to $4 million to the Company and issuance of up to 1 million Warrants in connection therewith, as described in the Stock Purchase Agreement.

4. The various rights granted to VPVP under the Stock Purchase Agreement and its exhibits, including but not limited to Board seats, registration rights, and various other information and other rights set forth therein.

5. The rights of VP Alpha under the Option Agreement dated July 15, 2003 by and between 550 DMV, the Company and VP Alpha.

EX-14 7 a03-4712_1ex14.htm EX-14

Exhibit 14

Execution Version

VOTING AGREEMENT

THIS VOTING AGREEMENT, dated as of the date written below (the “Agreement”), is by and among various investors listed on the signature pages below (collectively, “VPVP”), eUniverse, Inc., a Delaware corporation (the “Company”), and the stockholders of the Company listed on the signature pages hereto (each, a “Stockholder” and collectively, the “Stockholders”).

RECITALS:

1. The Company and VPVP propose to enter into a certain Series C Preferred Stock Purchase Agreement, dated as of even date herewith (the “Purchase Agreement”), providing for an investment by VPVP in the Company by means of the purchase of shares of the Company’s Series C Preferred Stock, par value $.01 (the “Preferred Stock”).

2. In connection with an additional loan transaction, the Company proposes to issue to VPVP a warrant or warrants to purchase up to1,000,000 shares of the Company’s Preferred Stock (the “Warrant”) for an exercise price of $2.00 per share (subject to appropriate adjustments).

3. The Stockholders own the shares of stock of the Company identified on Annex I hereto (the “Shares”).

4. In order to induce VPVP to enter into the Purchase Agreement and in consideration of the substantial investment to be made and expenses incurred and to be incurred by VPVP in connection therewith, the Stockholders have agreed to enter into and perform this Agreement.

AGREEMENT:

For good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

1. Agreement to Vote Shares.

(a) Each of the Stockholders agrees that such Stockholder shall vote, or cause to be voted, those Shares set forth on Annex I hereto and owned or held of record by such Stockholder and such Stockholder’s Affiliates over which the undersigned exercises effective control, in person or by proxy, at every meeting of the stockholders of the Company at which such matters are considered and at every adjournment thereof and in connection with every proposal to take action by written consent with respect thereto, to approve the transactions contemplated in the Purchase

Agreement and the Warrant and against any other transaction the consummation of which would, or could reasonably be expected to, impede, interfere with, prevent or materially delay the transactions contemplated by the Purchase Agreement, or which would, or could reasonably be expected to dilute the benefits of the purchasers under the Purchase Agreement.

(b) Irrevocable Proxy. Each Stockholder hereby irrevocably constitutes and appoints VantagePoint Venture Partners IV(Q), L.P. and/or its designee as his or her attorney-in-fact and proxy pursuant to the provisions of Section 212 of the Delaware General Corporation Law, with full power of substitution, to vote and otherwise act (by written consent or otherwise) with respect to the Shares which such Stockholder is entitled to vote at any meeting of the stockholders of the Company (whether annual or special and whether or not an adjourned or postponed meeting) or consent in lieu of any such meeting or otherwise, on, an only on, the matters described in Section 1 and to duly execute and deliver any and all consents, instruments, or other agreements or documents in order to take any and all such actions in connection with or in furtherance of the obligations of such Stockholder set forth in this Agreement, and the transactions contemplated therein. Each Stockholder intends that the proxy granted hereby shall be coupled with an interest pursuant to this Agreement and that such proxy, therefore, shall be irrevocable so long as this Section 1(b) remains in effect pursuant to the terms of this Agreement.

2. No Voting Trusts. Each Stockholder agrees that such Stockholder shall not, nor shall such Stockholder permit any affiliate over which the undersigned exercises effective control, to deposit any Shares in a voting trust or subject the Shares to any agreement, arrangement or understanding with respect to the voting of the Shares inconsistent with this Agreement.

3. Limitation on Sales. During the term of this Agreement, each Stockholder agrees not to sell, assign, transfer, pledge, encumber, hypothecate, rehypothecate or otherwise dispose of any of the Shares.

4. Stop Order Instructions; Legend.

(a) Each Stockholder agrees and understands that stop transfer instructions will be given to the Company’s transfer agent with respect to the Shares and that the Company may place on any certificate representing shares issued to such Stockholder a legend stating in substance:

TRANSFERS, VOTING AND OTHER MATTERS IN RESPECT OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A VOTING AGREEMENT DATED AS OF [ , 2003] BY AND AMONG THE COMPANY AND CERTAIN PARTIES NAMED THEREIN, A COPY OF WHICH AGREEMENT IS ON FILE

AT THE PRINCIPAL OFFICE OF THE COMPANY AND MAY BE OBTAINED WITHOUT CHARGE UPON WRITTEN REQUEST TO THE COMPANY.

(b) It is understood and agreed that the legend set forth above shall be removed by delivery of substitute certificates without such legend upon termination of this Agreement.

5. Representations and Warranties of Stockholders. Each Stockholder represents and warrants to and agrees with VPVP and the Company as follows as of the date hereof:

(a) Capacity. Such Stockholder has all requisite capacity and authority to enter into and perform his or her obligations under this Agreement.

(b) Binding Agreement. This Agreement constitutes the valid and legally binding obligation of such Stockholder, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

(c) Non-Contravention. The execution and delivery of this Agreement by such Stockholder does not, and the performance by such Stockholder of such Stockholder’s obligations hereunder and the consummation by such Stockholder of the transactions contemplated hereby will not, violate or conflict with, or constitute a default under, any agreement, instrument, contract or other obligation or any order, arbitration award, judgment or decree to which such Stockholder is a party or by which such Stockholder is bound, or any statute, rule or regulation to which such Stockholder is subject or, in the event that such Stockholder is a corporation, partnership, trust or other entity, any charter, bylaw or other organizational document of such Stockholder.

(d) Ownership of Shares. Annex I hereto correctly sets forth, as of the date of this Agreement, the number of Shares owned beneficially and of record by such Stockholder that are the subject of this Agreement. Such Stockholder has good title to all of the Shares indicated as owned by such Stockholder in the capacity set forth on Annex I as of the date hereof, and has the right to vote such Shares in the manner provided herein.

6. Specific Performance and Remedies. The parties hereto declare that it is impossible to measure in money the damages which would accrue to a party by reason of failure to perform any of the obligations hereunder. Therefore, if any party shall institute any action or proceeding to enforce the provisions hereof, any party against whom such action or proceeding is brought hereby waives any claim or defense therein that the other party has an adequate remedy at law.

7. Term of Agreement; Termination. The term of this Agreement shall commence on the date hereof and such term and this Agreement shall terminate the first to occur of (1) the closing of the transactions contemplated under the Purchase Agreement and the Warrant; (2) the termination of the transactions contemplated under the Purchase Agreement; or (3) the completion of a stockholder vote in connection with the transactions contemplated by the Purchase Agreement.

8. Entire Agreement; Amendment. This Agreement constitutes the entire agreement among the parties pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the parties pertaining to the subject matter hereof. This Agreement may be amended by an instrument in writing signed on behalf of VPVP, the Company and the Stockholder(s) affected by such amendment. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided.

9. Notices. Any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient upon receipt, when delivered personally or by courier, overnight delivery service or confirmed facsimile, or three business days after being deposited in the U.S. mail as certified or registered mail with postage prepaid, if such notice is addressed to the party to be notified at such party’s address or facsimile number as set forth below or as subsequently modified by written notice.

If to the Company addressed to:

eUniverse, Inc.

6060 Center Drive, Suite 300

Los Angeles, California 90045

Attention: General Counsel

by Facsimile: 310-215-2757

with a copy to:

Fulbright & Jaworski, L.L.P.

865 South Figueroa St.

Los Angeles, CA 90017

Attention: Keith Biancamano, Esq.

Facsimile: (213) 680-4518

If to VPVP addressed to:

VantagePoint Venture Partners

1001 Bayhill Drive, Suite 300

San Bruno, CA 94066

Attention: General Counsel

Facsimile: (650) 869-6344

with a copy to:

Orrick, Herrington & Sutcliffe LLP

400 Sansome Street

San Francisco, CA 94111-3143

Attention: Dora Mao

Facsimile: (415) 773-5759

If to any Stockholder, to such Stockholder at the address indicated on the signature pages hereto.

10. Miscellaneous.

(a) Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith, in order to maintain the economic position enjoyed by each party as close as possible to that under the provision rendered unenforceable. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of the Agreement shall be enforceable in accordance with its terms.

(b) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

(c) Headings. The titles, captions or headings of the Sections herein are for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.

(d) Choice of Law. THIS AGREEMENT SHALL BE CONSTRUED, INTERPRETED AND THE RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PROVISIONS THEREOF.

(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.

(f) WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.

(g) Arbitration. In the event of any dispute arising out of or relating to this Agreement, then such dispute shall be resolved solely and exclusively by confidential binding arbitration with the San Francisco branch of JAMS (“JAMS”) to be governed by JAMS’ Commercial Rules of Arbitration (the “JAMS Rules”) and heard before one arbitrator. The parties shall attempt to mutually select the arbitrator. In the event they are unable to mutually agree, the arbitrator shall be selected by the procedures prescribed by the JAMS Rules. Each party shall bear its own attorneys’ fees, expert witness fees, and costs incurred in connection with any arbitration.

(h) Successors and Assigns. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. Neither the Company nor any Stockholder shall have the right to assign this Agreement without the written consent of VPVP.

(i) Construction. All provisions of this Agreement have been negotiated at arms length and this Agreement shall not be construed for or against any party by reason of the authorship or alleged authorship of any provision hereof, notwithstanding that each party may have signed a separate signature page. The language in this Agreement shall be construed as to its fair meaning and not strictly for or against any party.

[signatures on next page]

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Voting Agreement as of the date first written above.

Date:	October 31, 2003	eUniverse, Inc.

		By:	/s/ Brett Brewer
		Name:			Brett Brewer
		Title:		President



		[Additional Stockholders, if any]


		VantagePoint Venture Partners IV (Q), L.P.
		By: VantagePoint Venture Associates IV, L.L.C.,
		Its General Partner

		By:	/s/ Alan E. Salzman
		Name:			Alan E. Salzman
		Title: Managing Member


		VantagePoint Venture Partners IV, L.P.
		By: VantagePoint Venture Associates IV, L.L.C.,
		Its General Partner

		By:	/s/ Alan E. Salzman
		Name:			Alan E. Salzman
		Title: Managing Member

[Signature Page to Voting Agreement]


		VantagePoint Venture Partners IV Principals Fund, L.P.
		By: VantagePoint Venture Associates IV, L.L.C.,
		Its General Partner

		By:	/s/ Alan E. Salzman
		Name:			Alan E. Salzman
		Title: Managing Member

550 Digital Media Ventures, Inc.
a Delaware corporation

By:	/s/ Mark Eisenberg
Name:			Mark Eisenberg
Title:		Senior Vice President and General Counsel

[Signature Page to Voting Agreement]

ANNEX I

550 Digital Media Ventures, Inc.		3,366,154 shares of Common Stock

		1,923,077 shares of Series B Preferred Stock

EX-15 8 a03-4712_1ex15.htm EX-15

Exhibit 15

MANAGEMENT RIGHTS AGREEMENT

This MANAGEMENT RIGHTS AGREEMENT (this “Agreement”) is entered into as of October 31, 2003 by and among eUniverse, Inc., a Delaware corporation (the “Company”), and VantagePoint Venture Partners IV(Q), L.P., VantagePoint Venture Partners IV, L.P. and VantagePoint Venture Partners IV Principals Fund, L.P. (each a “Fund” and together the “Funds” and together with the Company, the “Parties”).

RECITALS

WHEREAS, each Fund is seeking to satisfy certain requirements to qualify, or to maintain its qualification, as a “venture capital operating company” within the meaning of Department of Labor Regulation Section 2510.3-101(d) (the “Regulation”); and

WHEREAS, the Regulation generally requires that a venture capital operating company have direct contractual rights to substantially participate in, or substantially influence the conduct of, the management of its portfolio companies; and

WHEREAS, each Fund additionally is seeking to establish, or to maintain, such rights for purposes of Section 22062 of the California Financial Code and Rule 260.204.9 of the California Code of Regulations (the “California Rules”); and

WHEREAS, in order to induce each Fund to invest in the Company, the Company has agreed to provide such rights to the Funds.

NOW, THEREFORE, the Parties, intending to be legally bound, hereby agree as follows.

1. Grant of Management Rights. From and after each Fund’s purchase of shares of Series C Preferred Stock or Series C-1 Preferred Stock of the Company (the “Securities”), each Fund shall have the following contractual management rights. Such rights shall be in addition to, and nothing in this Agreement shall be deemed to limit, any other rights that the Fund may hold as a holder of the Securities or otherwise.

a. The Fund shall be entitled to consult with and advise management of the Company on significant business issues, including without limitation management’s proposed quarterly and annual operating plans. Upon request by the Fund, management of the Company shall meet with authorized representatives of the Fund, at a mutually agreeable time and place, within thirty days after the end of each calendar quarter for such consultation and advice and to review progress in achieving such plans.

b. The Fund shall be entitled to examine the books and records of the Company, inspect its facilities, and receive other information at reasonable times and intervals concerning the general status of the Company’s financial condition and operations.

c. For any period during which an authorized representative of the Fund is not a member of the Company’s Board of Directors or if otherwise requested by a Fund, the Company shall invite the Fund’s authorized representative to attend all meetings of the Board and in connection therewith shall provide to such representative copies of all notices, minutes, consents, and

other materials that it provides to its directors. Such representative may participate in discussions of matters brought before the Board, but shall in all other respects be a nonvoting observer.

2. Limitation on Management Rights. The Company shall not be required under this Agreement to provide access to attorney/client privileged communications or other information of an extremely sensitive nature the disclosure of which to the Fund would be materially detrimental to the Company. The Company acknowledges and agrees that the preceding sentence is not intended to prevent the Fund from obtaining information necessary for the Fund to substantially participate in, or substantially influence the conduct of, management of the Company within the meaning of the Regulation or the California Rules.

3. Termination of Management Rights. The management rights granted in paragraph 1, above, shall terminate upon the earlier of: (i) any transaction (including, without limitation, a merger, acquisition or reorganization of the Company) pursuant to which a Fund exchanges 100 percent of the Securities for cash and/or securities that are, have become, or will within 12 months become freely tradable on a United States domestic, national securities exchange; (ii) distribution by the Fund to its constituent partners of 100 percent of the Securities; or (iii) any other transaction pursuant to which the Fund disposes of 100 percent of the Securities exclusively for cash and/or other consideration that does not include debt or equity securities or instruments.

4. Confidentiality. Except as otherwise required by applicable law, each Fund and any authorized representative acting on behalf of the Fund pursuant to this Agreement shall maintain the confidentiality of all proprietary Company information acquired pursuant to this Agreement and shall not disclose or use such information other than for a Company purpose or with the Company’s consent. Notwithstanding the foregoing, or any other provision in this Agreement or any other agreement between each Fund and the Company, the Company understands and agrees that each Fund and its representatives are in the business of evaluating technologies and the potential development plans of a large number of companies. In the course of its business, each Fund is provided access to a variety of, and a steady stream of information regarding, many companies’ business plans, ideas and projections. Accordingly, the Company acknowledges that each Fund, its representatives and its affiliates may have in the past or may in the future hold discussions with, evaluate an investment in or develop an investment relationship with one or more companies who could be deemed to be competitive with the Company. Therefore, the use of confidential information in evaluating, making or managing such investments or investment relationships shall not be deemed to be a violation of this Agreement or any other agreement between each Fund and the Company.

5. Restructuring. Subject to paragraph 3, above, if the Company engages in a restructuring or similar transaction, any resulting entity or entities shall be subject to this Agreement in the same manner as the Company.

6. Parallel Funds. The Parties acknowledge that one or more investment vehicles may currently or subsequently exist for the principal purpose of investing in parallel with each Fund (each a “Parallel Fund”). Solely with respect to those Parallel Funds that both (i) hold debt or equity securities or instruments issued by the Company, and (ii) control, are controlled by, or are under common control with the Fund, each Parallel Fund shall (automatically and without the need for further action) be entitled to the same rights as the Fund in the same manner as if such Parallel Fund and the Company had directly entered into an agreement identical to this Agreement. The Parallel Funds are intended third party beneficiaries of this paragraph 6.

7. Counterparts. This Agreement may be executed in any number of counterparts and, when so executed, all of such counterparts shall constitute a single instrument binding upon all Parties notwithstanding the fact that all Parties are not signatory to the original or to the same counterpart.

[Remainder of this page intentionally left blank; signature page follows.]

IN WITNESS WHEREOF the Parties have executed this Management Rights Agreement as of the date first above written.

EUNIVERSE, INC.,

a Delaware corporation

By:

/s/ Brett Brewer
Name: Brett Brewer
Title: President


VantagePoint Venture Partners IV (Q), L.P.
By: VantagePoint Venture Associates IV, L.L.C.,
Its General Partner
By:	/s/ Alan E. Salzman
Name:		Alan E. Salzman
Title: Managing Member

and

VantagePoint Venture Partners IV, L.P.
By: VantagePoint Venture Associates IV, L.L.C.
Its General Partner
By:	/s/ Alan E. Salzman
Name:		Alan E. Salzman
Title: Managing Member


and

VantagePoint Venture Partners IV Principals Fund, L.P.
By: VantagePoint Venture Associates IV, L.L.C.
Its General Partner
By:	/s/ Alan E. Salzman
Name:		Alan E. Salzman
Title: Managing Member

[Signature Page to Management Rights Agreement]

EX-16 9 a03-4712_1ex16.htm EX-16

Exhibit 16

THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 8 OF THIS WARRANT.

eUniverse, Inc.

WARRANT TO PURCHASE SHARES
OF SERIES C PREFERRED STOCK

THIS CERTIFIES THAT, for value received, VP Alpha Holdings IV, L.L.C., a Delaware corporation, and its assignees are entitled to subscribe for and purchase 1,000,000 shares of the fully paid and nonassessable Series C Preferred Stock (as adjusted pursuant to Section 5 hereof, the “Shares”) of eUniverse, Inc., a Delaware corporation (the “Company”), at the Warrant Price as set forth in Section 2 below, subject to the provisions and upon the terms and conditions hereinafter set forth. As used herein, (a) the term “Series Preferred” shall mean the Company’s authorized Series C Preferred Stock, and any stock into or for which such Series C Preferred Stock may hereafter be converted or exchanged, and (b) the term “Date of Grant” shall mean the Date of Grant listed on the signature page hereof.

1. Term. The purchase right represented by this Warrant is exercisable, in whole or in part, at any time and from time to time from the Date of Grant through 5 p.m., Pacific standard time, five (5) years from the Date of Grant.

2. Warrant Price. The price at which this Warrant may be exercised shall be $2.00 per share of Series C Preferred Stock. Such price and such other price as shall result, from time to time, from the adjustments specified in Section 5 hereof is herein referred to as the “Warrant Price”.

3. Method of Exercise; Payment; Issuance of New Warrant. Subject to Section 1 hereof, the purchase right represented by this Warrant may be exercised by the holder hereof, in whole or in part and from time to time, at the election of the holder hereof, by (a) the surrender of this Warrant (with the notice of exercise substantially in the form attached hereto as Exhibit A duly completed and executed) at the principal office of the Company and by the payment to the Company, by certified or bank check, by wire transfer to an account designated by the Company (a “Wire Transfer”), or by the cancellation by the holder hereof of indebtedness or other obligations of the Company to such holder of an amount equal to the then applicable Warrant Price multiplied by the number of Shares then being purchased, or (b) exercise of the right provided for in Section 11.3 hereof. The person or persons in whose name(s) any certificate(s) representing shares of Series Preferred shall be issuable upon exercise of this Warrant shall be deemed to have become the holder(s) of record of, and shall be treated for all purposes as the record holder(s) of, the shares represented thereby (and such shares shall be deemed to have been issued) immediately prior to the close of business on the date or dates upon which this Warrant is exercised. In the event of any exercise of the rights represented by this Warrant, certificates for the shares of stock so purchased shall be delivered to the holder hereof by the Company at the Company’s expense as soon as possible and in any event within thirty (30) days after such exercise and, unless this Warrant has been fully exercised or expired, a new Warrant representing the portion of the Shares, if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the holder hereof as soon as possible and in any event within such thirty-day period.

4. Stock Fully Paid; Reservation of Shares. All Shares that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance pursuant to the terms and conditions herein, be duly authorized, validly issued, fully paid and nonassessable, and free from all taxes, liens, encumbrances, preemptive rights and charges. During the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized, and reserved for the purpose of the issue upon exercise of the purchase rights evidenced by this Warrant, a sufficient number of shares of its Series Preferred to provide for the exercise of the rights represented by this Warrant and a sufficient number of shares of its Common Stock to provide for the conversion of the Series Preferred into Common Stock, and from time to time, will take all steps necessary to amend its Certificate of Incorporation to provide sufficient reserves of shares of Series Preferred issuable upon exercise of the Warrant (and shares of its Common Stock for issuance on conversion of such Series Preferred).

5. Adjustment of Warrant Price and Number of Shares. The number and kind of securities purchasable upon the exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time upon the occurrence of certain events, as follows:

(a) Conversion of Series Preferred. Should all of the Company’s Series Preferred be, or if outstanding would be, at any time prior to the expiration of this Warrant or any portion thereof, converted into shares of the Company’s Common Stock in accordance with the Company’s Certificate of Incorporation, then the Company shall duly execute and deliver to the holder of this Warrant a new Warrant (in form and substance satisfactory to the holder of this Warrant), so that the holder of this Warrant shall have the right to receive that number of shares of the Company’s Common Stock equal to the number shares of the Common Stock that would have been received if this Warrant had been exercised in full and the Series Preferred received thereupon had bee simultaneously converted immediately prior to such event, and the Warrant Price shall immediately be adjusted to equal the quotient obtained by dividing (i) the aggregate Warrant Price of the maximum number of shares of Series Preferred for which this Warrant was exercisable immediately prior to such conversion, by (ii) the number of shares of Common Stock for which this Warrant is exercisable immediately after such conversion. Such new Warrant shall be immediately exercisable and shall provide for adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 5 and shall provide for anti-dilution protection that shall be as nearly equivalent as may

be practicable to the anti-dilution provision applicable to the Series Preferred on the Date of Grant. For purposes of the foregoing, the “Certificate of Incorporation” shall mean the Certificate of Incorporation of the Company as amended and/or restated and effective immediately prior to the conversion of all of the Company’s Series Preferred. At the time of any such conversion of all of the Company’s Series Preferred, references herein to Series Preferred shall be deemed to refer to the Company’s Common Stock to the extent necessary to give appropriate meaning to the provisions hereof.

(b) Reclassification or Merger. In case of any reclassification or change of securities of the class issuable upon exercise of this Warrant (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 subdivision or combination), or in case of any merger of the Company with or into another corporation (other than a merger with another corporation in which the Company is the acquiring and the surviving corporation and which does not result in any reclassification or change of outstanding securities issuable upon exercise of this Warrant), or in case of any sale of all or substantially all of the assets of the Company, the Company, or such successor or purchasing corporation, as the case may be, shall duly execute and deliver to the holder of this Warrant a new Warrant (in form and substance satisfactory to the holder of this Warrant), so that the holder of this Warrant shall have the right to receive, at a total purchase price not to exceed that payable upon the exercise of the unexercised portion of this Warrant, and in lieu of the shares of Series Preferred theretofore issuable upon exercise of this Warrant, the kind and amount of shares of stock, other securities, money and property receivable upon such reclassification, change or merger that a holder of the shares deliverable upon exercise of this Warrant would have been entitled to receive in such reclassification, change or merger if this Warrant had been exercised immediately before such reclassification, change or merger, all subject to further adjustment as provided in this Section 5. Such new Warrant shall provide for adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 5 and, in the case of a new Warrant issuable after the amendment of the terms of the anti-dilution protection of the Series Preferred, shall provide for anti-dilution protection that shall be as nearly equivalent as may be practicable to the anti-dilution provisions applicable to the Series Preferred on the Date of Grant. The provisions of this subparagraph (a) shall similarly apply to successive reclassifications, changes, mergers and transfers.

(c) Subdivision or Combination of Shares. If the Company at any time while this Warrant, or any portion thereof, remains outstanding and unexpired shall split, subdivide or combine the securities as to which purchase rights under this Warrant exist, into a different number of securities of the same class, the Warrant Price shall be proportionately decreased in the case of a split or subdivision or increased in the case of a combination, effective at the close of business on the date the subdivision or combination becomes effective.

(d) Stock Dividends and Other Distributions. If the Company at any time while this Warrant is outstanding and unexpired shall (i) pay a dividend with respect to Series Preferred payable in Series Preferred, or (ii) make any other distribution with respect to Series Preferred (except any distribution specifically provided for in Sections 5(b) and 5(c)), of Series Preferred, then the Warrant Price shall be adjusted, from and after the date of determination of shareholders entitled to receive such dividend or distribution, to that price determined by multiplying the Warrant Price in effect immediately prior to such date of determination by a fraction (i) the numerator of which shall be the total number of shares of Series Preferred outstanding immediately prior to such dividend or distribution, and (ii) the denominator of which shall be the total number of shares of Series Preferred outstanding immediately after such dividend or distribution.

(e) Adjustment of Number of Shares. Upon each adjustment in the Warrant Price, the number of Shares of Series Preferred purchasable hereunder shall be adjusted, to the nearest whole share, to the product obtained by multiplying the number of Shares purchasable immediately prior to such adjustment in the Warrant Price by a fraction, the numerator of which shall be the Warrant Price immediately prior to such adjustment and the denominator of which shall be the Warrant Price immediately thereafter.

(f) Anti-dilution Rights. The other antidilution rights applicable to the Shares of Series Preferred purchasable hereunder are set forth in the Company’s Certificate of Incorporation, as amended through the Date of Grant, a true and complete copy of which has been supplied to the holder of this Warrant (the “Charter”). The Company shall promptly provide the holder hereof with any restatement, amendment, modification or waiver of the Charter promptly after the same has been made.

6. Notice of Adjustments. Whenever the Warrant Price or the number of Shares purchasable hereunder shall be adjusted pursuant to Section 5 hereof, the Company shall make a certificate signed by its chief financial officer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the Warrant Price and the number of Shares purchasable hereunder after giving effect to such adjustment, and shall cause copies of such certificate to be mailed (without regard to Section 14 hereof, by first class mail, postage prepaid) to the holder of this Warrant. In addition, whenever the conversion price or conversion ratio of the Series Preferred shall be adjusted, the Company shall make a certificate signed by its chief financial officer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the conversion price or ratio of the Series Preferred after giving effect to such adjustment, and shall cause copies of such certificate to be mailed (without regard to Section 14 hereof, by first class mail, postage prepaid) to the holder of this Warrant.

7. Fractional Shares. No fractional shares of Series Preferred will be issued in connection with any exercise hereunder, but in lieu of such fractional shares the Company shall make a cash payment therefor based on the fair market value of the Series Preferred on the date of exercise as reasonably determined in good faith by the Company’s Board of Directors.

8. Compliance with Act; Disposition of Warrant or Shares of Series Preferred.

(a) Compliance with Act. The holder of this Warrant, by acceptance hereof, agrees that this Warrant, and the shares of Series Preferred to be issued upon exercise hereof and any Common Stock issued upon conversion thereof are being acquired for investment and that such holder will not offer, sell or otherwise dispose of this Warrant, or any shares of Series

Preferred to be issued upon exercise hereof or any Common Stock issued upon conversion thereof except under circumstances which will not result in a violation of the Act or any applicable state securities laws. Upon exercise of this Warrant, unless the Shares being acquired are registered under the Act and any applicable state securities laws or an exemption from such registration is available, the holder hereof shall confirm in writing that the shares of Series Preferred so purchased (and any shares of Common Stock issued upon conversion thereof) are being acquired for investment and not with a view toward distribution or resale in violation of the Act and shall confirm such other matters related thereto as may be reasonably requested by the Company. This Warrant and all shares of Series Preferred issued upon exercise of this Warrant and all shares of Common Stock issued upon conversion thereof (unless registered under the Act and any applicable state securities laws) shall be stamped or imprinted with a legend in substantially the following form:

“THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 8 OF THE WARRANT UNDER WHICH THESE SECURITIES WERE ISSUED, DIRECTLY OR INDIRECTLY.”

Said legend shall be removed by the Company, upon the request of a holder, at such time as the restrictions on the transfer of the applicable security shall have terminated. In addition, in connection with the issuance of this Warrant, the holder specifically represents to the Company by acceptance of this Warrant as follows:

(1) The holder is acquiring this Warrant for its own account for investment purposes only and not with a view to, or for the resale in connection with, any “distribution” thereof in violation of the Act. The holder is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Act.

(2) The holder understands that this Warrant has not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the holder’s investment intent as expressed herein.

(3) The holder further understands that this Warrant must be held indefinitely unless subsequently registered under the Act and qualified under any applicable state securities laws, or unless exemptions from registration and qualification are otherwise available. The holder is aware of the provisions of Rule 144, promulgated under the Act.

(b) Disposition of Warrant or Shares. With respect to any offer, sale or other disposition of this Warrant or any shares of Series Preferred acquired pursuant to the exercise of this Warrant prior to registration of such Warrant or shares, the holder hereof agrees to give written notice to the Company prior thereto, describing briefly the manner thereof, together with a written opinion of such holder’s counsel, or other evidence, if reasonably requested by the Company, to the effect that such offer, sale or other disposition may be effected without registration or qualification (under the Act as then in effect or any federal or state securities law then in effect) of this Warrant or such shares of Series Preferred or Common Stock and indicating whether or not under the Act certificates for this Warrant or such shares of Series Preferred to be sold or otherwise disposed of require any restrictive legend as to applicable restrictions on transferability in order to ensure compliance with such law. Promptly upon receiving such written notice and reasonably satisfactory opinion or other evidence, if so requested, the Company, as promptly as practicable but no later than fifteen (15) days after receipt of the written notice, shall notify such holder that such holder may sell or otherwise dispose of this Warrant or such shares of Series Preferred or Common Stock, all in accordance with the terms of the notice delivered to the Company. If a determination has been made pursuant to this Section 8(b) that the opinion of counsel for the holder or other evidence is not reasonably satisfactory to the Company, the Company shall so notify the holder promptly with details thereof after such determination has been made. Notwithstanding the foregoing, this Warrant or such shares of Series Preferred or Common Stock may, as to such federal laws, be offered, sold or otherwise disposed of in accordance with Rule 144 or 144A under the Act, provided that the Company shall have been furnished with such information as the Company may reasonably request to provide a reasonable assurance that the provisions of Rule 144 or 144A have been satisfied. Each certificate representing this Warrant or the shares of Series Preferred thus transferred (except a transfer pursuant to Rule 144 or 144A) shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with such laws, unless in the aforesaid opinion of counsel for the holder, such legend is not required in order to ensure compliance with such laws. The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions.

(c) Applicability of Restrictions. Neither any restrictions of any legend described in this Warrant nor the requirements of Section 8(b) above shall apply to any transfer or grant of a security interest in, this Warrant (or the Series Preferred or Common Stock obtainable upon exercise thereof) or any part hereof (i) to a partner of the holder if the holder is a partnership, (ii) to a partnership of which the holder is a partner, or (iii) to any affiliate of the holder if the holder is a corporation; provided, however, in any such transfer, if applicable, the transferee shall on the Company’s request agree in writing to be bound by the terms of this Warrant as if an original signatory hereto.

9. Rights as Shareholders; Information. No holder of this Warrant, as such, shall be entitled to vote or receive dividends or be deemed the holder of Series Preferred or any other securities of the Company which may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the holder of this Warrant, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until this Warrant shall have been exercised and the Shares purchasable upon the exercise hereof shall have become deliverable, as provided herein. Notwithstanding the foregoing, the Company will transmit to the holder of this Warrant such information, documents and reports as are generally distributed to the holders of any class or series of the securities of the

Company concurrently with the distribution thereof to the shareholders.

10. Registration Rights. The Company grants registration rights to the holder of this Warrant for any Common Stock of the Company obtained upon conversion of the Series Preferred, comparable to the registration rights granted to the investors in that certain Registration Rights Agreement dated as of , (the “Registration Rights Agreement”).

11. Additional Rights.

11.1 Secondary Sales. The Company agrees that it will not interfere with the holder of this Warrant in obtaining liquidity if opportunities to make secondary sales of the Company’s securities become available.

11.2 Mergers. The Company shall provide the holder of this Warrant with at least thirty (30) days’ notice of the terms and conditions of any of the following potential transactions: (i) the sale, lease, exchange, conveyance or other disposition of all or substantially all of the Company’s property or business, or (ii) its merger into or consolidation with any other corporation (other than a wholly-owned subsidiary of the Company), or any transaction (including a merger or other reorganization) or series of related transactions, in which more than 50% of the voting power of the Company is disposed of. The Company will cooperate with the holder in arranging the sale of this Warrant in connection with any such transaction.

11.3 Right to Convert Warrant into Stock: Net Issuance.

(a) Right to Convert. In addition to and without limiting the rights of the holder under the terms of this Warrant, the holder shall have the right to convert this Warrant or any portion thereof (the “Conversion Right”) into shares of Series Preferred (or Common Stock if the Series Preferred has been automatically converted into Common Stock) as provided in this Section 11.3 at any time or from time to time during the term of this Warrant. Upon exercise of the Conversion Right with respect to a particular number of shares subject to this Warrant (the “Converted Warrant Shares”), the Company shall deliver to the holder (without payment by the holder of any exercise price or any cash or other consideration) (X) that number of shares of fully paid and nonassessable Series Preferred (or Common Stock if the Series Preferred has been automatically converted into Common Stock) equal to the quotient obtained by dividing the value of this Warrant (or the specified portion hereof) on the Conversion Date (as defined in subsection (b) hereof), which value shall be determined by subtracting (A) the aggregate Warrant Price of the Converted Warrant Shares immediately prior to the exercise of the Conversion Right from (B) the aggregate fair market value of the Converted Warrant Shares issuable upon exercise of this Warrant (or the specified portion hereof) on the Conversion Date (as herein defined) by (Y) the fair market value of one share of Series Preferred (or Common Stock if the Series Preferred has been automatically converted into Common Stock) on the Conversion Date (as herein defined).

Expressed as a formula, such conversion (assuming the Series Preferred has been automatically converted into Common Stock) shall be computed as follows:

X =	B - A
	Y

Where:	X	=	the number of shares of Common Stock that may be issued to holder

	Y	=	the fair market value (FMV) of one share of Common Stock

	A	=	the aggregate Warrant Price (i.e., Converted Warrant Shares x Warrant Price)

	B	=	the aggregate FMV (i.e., FMV x Converted Warrant Shares)

No fractional shares shall be issuable upon exercise of the Conversion Right, and, if the number of shares to be issued determined in accordance with the foregoing formula is other than a whole number, the Company shall pay to the holder an amount in cash equal to the fair market value of the resulting fractional share on the Conversion Date (as hereinafter defined). For purposes of Section 10 of this Warrant, shares issued pursuant to the Conversion Right shall be treated as if they were issued upon the exercise of this Warrant.

(b) Method of Exercise. The Conversion Right may be exercised by the holder by the surrender of this Warrant at the principal office of the Company together with a written statement specifying that the holder thereby intends to exercise the Conversion Right and indicating the number of shares subject to this Warrant which are being surrendered (referred to in Section 11.3(a) hereof as the Converted Warrant Shares) in exercise of the Conversion Right. Such conversion shall be effective upon receipt by the Company of this Warrant together with the aforesaid written statement, or on such later date as is specified therein (the “Conversion Date”), and, at the election of the holder hereof, may be made contingent upon the closing of the sale of the Company’s Common Stock to the public in a public offering pursuant to a Registration Statement under the Act (a “Public Offering”). Certificates for the shares issuable upon exercise of the Conversion Right and, if applicable, a new warrant evidencing the balance of the shares remaining subject to this Warrant, shall be issued as of the Conversion Date and shall be delivered to the holder within thirty (30) days following the Conversion Date. Any conversion from Series Preferred to Common Stock shall be in the ratio of one (1) share of Common Stock for each share of Series Preferred (as adjusted herein and in the Charter). On the Date of Grant, each share of the Series Preferred represented by this Warrant is convertible into one (1) share of Common Stock.

(c) Determination of Fair Market Value. For purposes of this Section 11.3, “fair market value” of a share of Series Preferred (or Common Stock if the Series Preferred has been automatically converted into Common Stock) as of a particular date (the “Determination Date”) shall mean:

(i) If the Conversion Right is exercised in connection with and contingent upon the closing of the sale and issuance of shares of Common Stock of the Company in a firmly underwritten public offering, pursuant to an effective registration statement under the Securities Act of 1933, as amended, (“Public Offering”), and if the Company’s Registration Statement relating to such Public Offering (“Registration Statement”) has been declared effective by the SEC, then the initial “Price to Public” specified in the final prospectus with respect to such offering.

(ii) If the Conversion Right is not exercised in connection with and contingent upon a Public Offering, then as follows:

(A) If traded on a securities exchange, the fair market value of the Common Stock shall be deemed to be the average of the closing prices of the Common Stock on such exchange over the 30-day period ending five business days prior to the Determination Date, and the fair market value of the Series Preferred shall be deemed to be such fair market value of the Common Stock multiplied by the number of shares of Common Stock into which each share of Series Preferred is then convertible;

(B) If traded over-the-counter, the fair market value of the Common Stock shall be deemed to be the average of the closing bid prices of the Common Stock over the 30-day period ending five business days prior to the Determination Date, and the fair market value of the Series Preferred shall be deemed to be such fair market value of the Common Stock multiplied by the number of shares of Common Stock into which each share of Series Preferred is then convertible; and

(C) If there is no public market for the Common Stock, then fair market value shall be determined by mutual agreement of the holder of this Warrant and the Company.

12. Representations and Warranties. The Company represents and warrants to the holder of this Warrant that:

(a) Loan Agreement. The representations and warranties of the Company contained in that certain [Senior Secured Bridge Note Purchase Agreement (the “Note Purchase Agreement”) between the Company and the initial holder hereof, dated as of , 2003] [Credit Agreement dated , 2003 by and between the Company and [Bank], are true, complete and correct.

(b) Corporate Power. The Company has all requisite legal and corporate power to execute and deliver this Warrant and any other agreement contemplated hereby, to sell and issue the Warrant, to sell and issue the Shares upon exercise of the Warrant upon the terms of the Warrant, to sell and issue the shares of Common Stock issuable upon conversion of the Shares (the “Conversion Shares”) and to carry out and perform its obligations under the terms of this Agreement and any other agreement contemplated hereby or thereby. (The Shares and the Conversion Shares are collectively referred to hereinafter as the “Underlying Stock.”)

(c) Authorization. All corporate action on the part of the Company, its directors and stockholders necessary for the authorization, sale and issuance of the Warrant, the Warrant Shares and the Conversion Shares, and the performance of the Company’s obligations hereunder, contemplated hereby and the reservation of the Underlying Stock has been taken. This Agreement and the Warrant and the other transactions contemplated hereby are valid and binding obligations of the Company, enforceable in accordance with their respective terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors.

(d) Rights. The rights, preferences, privileges and restrictions granted to or imposed upon the Shares and the holders thereof are as set forth in the Company’s Certificate of Incorporation, a true and complete copy of which has been provided to the holder of this Warrant.

(e) No Inconsistency. The execution and delivery of this Warrant is not, and the issuance of the Shares upon exercise of the Warrant in accordance with the terms hereof, and the issuance of the Conversion Shares upon conversion of the Shares, will not be, inconsistent with the Certificate of Incorporation or the Company’s Bylaws, do not and will not contravene any law, governmental rule or regulation, judgment or order applicable to the Company, and do not and will not conflict with or contravene any provision of, or constitute a default under, any indenture, mortgage, contract or other instrument of which the Company is a party or by which it is bound or require the consent or approval of, the giving of notice to, the registration or filing with or the taking of any action in respect of or by, any Federal, state or local government authority or agency or other person, except for the filing of notices pursuant to federal and state securities laws, which filings will be effected by the time required thereby and, except for defaults, conflicts, or contraventions, or where the failure to obtain any such consent or approval, or to register, file, or take any action, would not have a Material Adverse Effect (as defined in the Note Purchase Agreement).

(f) No Suits. Except as set forth in Schedule to the [Credit Agreement] [Note Purchase Agreement], there are no actions, suits, audits, investigations or proceedings pending or, to the knowledge of the Company, threatened against the Company in any court or before any governmental commission, board or authority which, if adversely determined, would reasonably be expected to have a Material Adverse Effect (as defined in the Note Purchase Agreement) or a material adverse effect on the ability of the Company to perform its obligations under this Warrant.

13. Modification and Waiver. This Warrant and any provision hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of the same is sought.

14. Notices. Any notice, request, communication or other document required or permitted to be given or delivered to the holder hereof or the Company shall be delivered, or shall be sent by certified or registered mail, postage prepaid, to each such holder at its address as shown on the books of the Company or to the Company at the address indicated therefor on the signature page of this Warrant.

15. Binding Effect on Successors. This Warrant shall be binding upon any corporation succeeding the Company by merger, consolidation or acquisition of all or substantially all of the Company’s assets, and all of the obligations of the Company relating to the Series Preferred issuable upon the exercise or conversion of this Warrant shall survive the exercise, conversion and termination of this Warrant.

16. Lost Warrants or Stock Certificates. The Company covenants to the holder hereof that, upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant or any stock certificate and, in the case of any such loss, theft or destruction, upon receipt of an indemnity reasonably satisfactory to the Company, or in the case of any such mutilation upon surrender and cancellation of such Warrant or stock certificate, the Company

will make and deliver a new Warrant or stock certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant or stock certificate.

17. Descriptive Headings. The descriptive headings of the several paragraphs of this Warrant are inserted for convenience only and do not constitute a part of this Warrant.

18. Governing Law. This Warrant shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the State of California without regard to the conflicts of law principle.

19. Survival of Representations, Warranties and Agreements. All representations and warranties of the Company and the holder hereof contained herein shall survive the Date of Grant and the exercise or conversion of this Warrant (or any part hereof). All agreements of the Company and the holder hereof contained herein shall survive indefinitely until, by their respective terms, they are no longer operative.

20. Remedies. In case any one or more of the covenants and agreements contained in this Warrant shall have been breached, the holders hereof (in the case of a breach by the Company), or the Company (in the case of a breach by a holder), may proceed to protect and enforce their or its rights either by suit in equity and/or by action at law, including, but not limited to, an action for damages as a result of any such breach and/or an action for specific performance of any such covenant or agreement contained in this Warrant.

21. No Impairment of Rights. The Company will not, by amendment of its Charter or through any other means, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against impairment.

22. Severability. The invalidity or unenforceability of any provision of this Warrant in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction, or affect any other provision of this Warrant, which shall remain in full force and effect.

23. Dispute Resolution. In the event of any dispute arising out of or relating to this Warrant, then such dispute shall be resolved solely and exclusively by confidential binding arbitration with the San Francisco branch of JAMS (“JAMS”) to be governed by JAMS’ Commercial Rules of Arbitration (the “JAMS Rules”) and heard before one arbitrator. The parties shall attempt to mutually select the arbitrator. In the event they are unable to mutually agree, the arbitrator shall be selected by the procedures prescribed by the JAMS Rules. Each party shall bear its own attorneys’ fees, expert witness fees, and costs incurred in connection with any arbitration.

23. Construction. This Agreement has been negotiated and drafted by both parties with counsel and its language shall be construed as to its fair meaning and not strictly for or against any party.

24. Entire Agreement; Modification. This Warrant constitutes the entire agreement between the parties pertaining to the subject matter contained in it and supersedes all prior and contemporaneous agreements, representations, and undertakings of the parties, whether oral or written, with respect to such subject matter.

eUniverse, Inc.


By

Title

Address:

Date of Grant: ,

EXHIBIT A
NOTICE OF EXERCISE

To: eUniverse, Inc

1. The undersigned hereby:

o elects to purchase shares of Series C Preferred Stock of eUniverse, Inc. pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price of such shares in full, or

o elects to exercise its net issuance rights pursuant to Section 11.3 of the attached Warrant with respect to ____ Shares of Series C Preferred Stock.

2. Please issue a certificate or certificates representing said shares in the name of the undersigned or in such other name or names as are specified below:


		(Name)



		(Address)

3. The undersigned represents that the aforesaid shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares, all except as in compliance with applicable securities laws.


(Signature)

(Date)

EX-17 10 a03-4712_1ex17.htm EX-17

Exhibit 17

FINAL VERSION

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

$2,500,000

Los Angeles, California

This Amended and Restated Convertible Secured Promissory Note (the “Note”) is hereby issued by eUniverse, Inc., a Delaware corporation (“Borrower”), to VP Alpha Holdings IV, L.L.C. (“Lender”). This Note amends and restates in its entirety that certain Secured Promissory Note dated July 15, 2003 previously delivered by Borrower to Lender.

For Value Received, Borrower hereby unconditionally promises to pay to the order of Lender, in lawful money of the United States of America and in immediately available funds, the principal sum of Two Million Five Hundred Thousand Dollars ($2,500,000) (the “Principal Amount”). Simple interest shall accrue from the date hereof on the unpaid principal amount of this Note at a rate equal to eight percent (8%) per annum. 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 as provided in Section 1 of this Note.

1. Repayment.

(a) This Note will mature and the Principal Amount shall become due upon the first to occur of the following (the “Maturity Date”): (i) the maturity date of that certain Second Amended and Restated Convertible Secured Promissory Note, dated as of March 28, 2003 of Borrower in favor of 550 Digital Media Ventures, Inc. (“550 DMV”), a wholly owned subsidiary of Sony Corporation of America, (ii) one year from the date hereof or (iii) if the stockholders of the Borrower fail to provide the approvals necessary to effect the conversion provisions of this Note at a stockholders’ meeting or in connection with a written consent solicitation (either such event, a “Stockholder Vote”) prior to January 31, 2004, ten (10) calendar days following the date of such failure or, if no such Stockholder Vote is held prior to such date, January 31, 2004. Interest only shall be payable prior to the Maturity Date and shall be paid quarterly, with the first

payment due on September 30, 2003. Notwithstanding the foregoing, the entire unpaid principal sum of this Note, together with accrued and unpaid interest hereon may become due and payable upon the occurrence of an Event of Default as more fully described in the Note Purchase Agreement.

(b) All payments shall be made in lawful money of the United States of America at such place as Lender may from time to time designate in writing to Borrower. All payments shall be credited first to the expenses of collection (if any, and only if an Event of Default has occurred and is continuing), then to accrued interest then due and payable and the remainder applied to principal. Borrower may prepay the Principal Amount, in whole or in part, without premium or penalty, upon not less than ten (10) days prior written notice to Lender. Lender may, following receipt of such notice, elect to convert this Note in accordance with Section 18 hereof prior to the date specified for prepayment in such notice.

2. Security Agreement. This Note is entitled to the benefit of that certain Security Agreement, dated of even date herewith, between Lender and Borrower (the “Security Agreement”), pursuant to which Lender is granted a first priority security interest in the Collateral (as such term is defined in the Security Agreement), pari passu with the security interest of 550 DMV securing the 550 DMV Loan. This Note shall be subject to the terms and conditions set forth in such Security Agreement.

3. Note Purchase Agreement. This Note was initially issued pursuant to a separate Secured Note Purchase Agreement, dated July 15, 2003, between Lender and Borrower (the “Note Purchase Agreement”) and is entitled to the benefits thereof. This Note shall be subject to the terms and conditions set forth in such Note Purchase Agreement, together with the terms of this Note.

4. Intercreditor Agreement. This Note is subject to the terms and provisions of an Intercreditor Agreement, dated of even date herewith, between Lender, Borrower and 550 DMV (the “Intercreditor Agreement”).

5. Default. Subject to the terms of the Note Purchase Agreement, the Security Agreement and the Intercreditor Agreement, upon the occurrence of an Event of Default (as defined in the Note 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 effects provided in each of the Note Purchase Agreement, the Intercreditor Agreement and the Security Agreement.

6. Waiver. Except as otherwise provided herein, Borrower waives presentment and written demand for payment, notice of dishonor, protest and notice of protest of this Note, and shall pay all costs of collection when incurred, including, without limitation, reasonable attorneys’ fees, costs and other expenses. BORROWER WAIVES ITS RIGHTS TO A JURY TRIAL IN CONNECTION WITH ANY CLAIMS ARISING UNDER THIS NOTE TO THE FULLEST EXTENT PERMITTED BY LAW. The right to plead any and all statutes of limitations as a defense to any demands hereunder is hereby waived to the fullest extent permitted by law.

7. 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. Lender may assign this Note to any of its affiliates. Subject to the preceding sentence, this Note may be transferred only upon surrender of the original Note for registration of transfer, duly endorsed, or accompanied by a duly executed written instrument of transfer in form satisfactory to Borrower. Thereupon, a new note for the same principal amount and interest will be issued to, and registered in the name of, the transferee. Interest and principal are payable only to the registered holder of this Note.

8. Shareholders, Officers and Directors Not Liable. In the absence of fraud, no shareholder, officer or director of Borrower shall be liable for any amounts due or payable pursuant to this Note.

9. Further Assurances. Borrower shall, at any time and from time to time, upon the written request of Lender, execute and deliver to Lender such further documents and instruments (including, without limitation, financing statements in connection with Lender’s security interest granted hereby) and do such other acts and things as Lender may reasonably request in order to effectuate fully the purpose and intent of this Note.

10. Subordination. Lender hereby agrees that the first priority security interest granted to it pursuant to the terms of the Security Agreement shall be subordinate to a revolving, working capital line of credit obtained by the Company from a bona fide commercial lender for the primary purpose of covering day-to-day operational expenses incurred by the Company in the ordinary course of business, in an amount that does not exceed One Million Five Hundred Thousand Dollars ($1,500,000). Lender agrees to execute such agreements and other documents as may be reasonably necessary to effectuate the subordination provided above.

11. Governing Law. This Note and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of law.

12. Notices. Any notice required or permitted to be given hereunder shall be given in the manner set forth in the Note Purchase Agreement.

13. Amendments and Waivers. Any term of this Note may be amended only with the written consent of the Company and Lender. Any amendment or waiver effected in accordance with this Section 13 shall be binding upon Borrower, Lender and each transferee of any Note.

14. Expenses; Attorney’s Fees; Collection Costs. If there has been an Event of Default (as defined in the Note Purchase Agreement), Lender shall be entitled to receive and Borrower agrees to pay all costs of enforcement and collection incurred by Lender in connection with such Event of Default, including, without limitation, attorney’s fees relating thereto.

15. Loss of Note. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Note or any Note exchanged for it, and indemnity satisfactory to the Company (in case of loss, theft or destruction) or surrender and cancellation of such Note (in the case of mutilation), the Company will make and deliver in lieu of such Note a new Note of like tenor.

16. Maximum Interest. In no event shall the amount of interest (and any other sums or amounts that are deemed to constitute interest under applicable legal requirements) due or payable in connection with the Note exceed the maximum rate of interest designated by applicable legal requirements (the “Maximum Amount”), and in the event such excess payment is inadvertently paid by Borrower or inadvertently received by Lender, then such excess sum shall be credited as a payment of principal on the Note, and if in excess of the outstanding principal amount of the Note, shall be immediately returned to Borrower upon such determination. It is the express intent hereof that Borrower not pay and Lender not receive, directly or indirectly, interest in excess of the Maximum Amount.

17. Construction and Interpretation. The headings or titles of the sections of this Note are intended for ease of reference only and shall have no effect whatsoever on the construction or interpretation of any provision of this Note. All provisions of this Note have been negotiated at arms length, each party having legal counsel, and this Note shall not be construed for or against

any party by reason of the authorship or alleged authorship of any provision hereof. The language in this Note shall be construed as to its fair meaning and not strictly for or against any party.

18. Conversion. Lender may at its option elect to convert all or a portion of the outstanding Principal Amount and unpaid accrued interest thereon as of such date into shares of the Borrower’s Series C-1 Preferred Stock, par value $.10 per share (the “Series C-1 Preferred Stock”), in accordance with this Section 18 at any time after the date that any requisite stockholder approval for the issuance of Series C-1 Preferred Stock is obtained, subject to Section 1(a)(iii) of this Note. The Lender shall notify Borrower in writing of the date on which such conversion is to be effectuated (such date, the “Conversion Date”). The number of shares of Series C-1 Preferred Stock (calculated to the nearest whole share) to which Lender shall be entitled upon such conversion shall be determined by dividing the outstanding Principal Amount and unpaid accrued interest thereon to be converted by the Conversion Price of the Series C-1 Preferred Stock, determined in accordance with the Certificate of Designation of Series C-1 Convertible Preferred Stock. On the Conversion Date, Lender shall surrender this Note to Borrower or its transfer agent, and Lender shall receive from Borrower share certificates evidencing the Series C-1 Preferred Stock in the name or names in which Lender wishes such certificate or certificates for the Series C-1 Preferred Stock to be issued and, if the entire Principal Amount is not converted, a replacement note in the amount of the unconverted Principal Amount. If 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 all or part of the obligations evidenced by this Note shall have been upon the Conversion Date deemed satisfied. If the entire principal balance is not converted, Lender shall receive a replacement note in the amount of the unconverted principal amount. 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.

THIS NOTE HAS BEEN EXECUTED AND DELIVERED IN THE CITY OF LOS ANGELES, STATE OF CALIFORNIA, UNITED STATES OF AMERICA. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA, EXCLUDING CONFLICT OF LAWS PRINCIPLES THAT WOULD CAUSE THE APPLICATION OF LAWS OF ANY OTHER JURISDICTION.

BORROWER		Date:	October 31, 2003

EUNIVERSE, INC.

By:	/s/ Brett Brewer

Name: Brett Brewer
Title: President

[SIGNATURE PAGE TO AMENDED AND RESTATED SECURED CONVERTIBLE PROMISSORY NOTE]

EX-18 11 a03-4712_1ex18.htm EX-18

Exhibit 18

FINAL VERSION

CERTIFICATE OF DESIGNATION
OF
SERIES C-1 CONVERTIBLE PREFERRED STOCK
OF
eUNIVERSE, INC.

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 Certificate of Incorporation of the Company (the “Certificate 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 Certificate of Incorporation (the “Preferred Stock”), a series of the Preferred Stock consisting of 2,000,000 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 Certificate 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 C-1 Convertible Preferred Stock” (the “Series C-1 Preferred Stock”) and the authorized number of shares constituting such series shall be 2,000,000. The Series C-1 Preferred Stock shall rank pari passu with the Series C Preferred Stock (the “Series C Preferred Stock” and along with the Series C-1 Preferred Stock, the “Combined Series C Preferred Stock”), senior to the Series A 6% Convertible Preferred Stock (the “Series A Preferred Stock”) and senior to the Series B Convertible Preferred Stock (the “Series B 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 C-1 Preferred Stock will be entitled to receive cumulative stock 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 C-1 Preferred Stock. The stock dividends to be issued hereunder shall be issued on the last day of each calendar quarter, in the form of Series C-1 Preferred Stock. By way of example, a holder of 100,000 shares of Series C-1 Preferred Stock shall be entitled to receive 2,000 shares of Series C-1 Preferred Stock as its quarterly stock dividend. The term “Original Issuance Date” means , 2003. The stock dividends

provided for in this Section 2(a) are hereinafter referred to as “Base Dividends.” The Base Dividends shall be eliminated and of no further effect as of twelve (12) months after the Original Issuance Date.

(b) In addition to Base Dividends (if still in effect), 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 C-1 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 C-1 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 C 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 C-1 Preferred Stock is registered at the close of business on the applicable record date.

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 C-1 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 $2.00 per share of Series C-1 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 at the same time any payment shall be made or any assets distributed to the holders of Series C Preferred Stock and 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 B Preferred Stock, the holders of the Series A Preferred Stock or any other class or series of the Company’s capital stock ranking junior as to liquidation rights to the Series C-1 Preferred Stock. After the Liquidation Preference has been paid in full pursuant to this Section, the holders of the Series B Preferred Stock shall be entitled to receive their liquidation preference as set forth in the Certificate of Designation of Series B Preferred Stock. After the liquidation preference of the Series B Preferred Stock has been paid in full, 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 Preferred Stock. Following payment, first, to the holders of the Combined Series C-1 Preferred Stock of the full preferential amounts described in the first sentence of this Section 3 (and with respect to holders the holders of Series C Preferred Stock, their preferential amount) and, second, to the holders of Series B Preferred Stock of their preferential amount and, third, to the holders of the Series A Preferred Stock of their full preferential amounts, 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 Combined Series C Preferred Stock (as if the Combined Series C 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), (ii) 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), (iii) the holders of the then outstanding shares of Series A Preferred Stock (as if the Series A 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 (iv) the holders of the then outstanding shares of 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 Combined Series C Preferred Stock of the full preferential amounts described in this paragraph, then all the remaining available assets shall be distributed ratably among the holders of the then outstanding Combined Series C Preferred Stock in proportion to the preferential amount each such holder is otherwise entitled to receive. A Corporate Transaction (as hereinafter defined), shall at the election of the holders of a majority of the Combined Series C Preferred Stock outstanding at the time constitute a Liquidation for purposes of this Section 3, other than an Excluded Corporate Transaction (as hereinafter defined).

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 Combined Series C 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 Certificate of Incorporation or as otherwise provided by Delaware law; and

(iii) shall be entitled to receive notice of any stockholders’ meeting in accordance with the Certificate of Incorporation and By-laws of the Company.

(b) So long as at least 51% of the originally issued shares of Series C Preferred Stock remains outstanding, the holders of Combined Series C Preferred Stock shall have the exclusive right, voting separately as a single class, to elect two (2) members of the Board of Directors (each such member elected by the Combined Series C Preferred Stockholders, a “Series C 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 nine (9). In any such election the holders of Combined Series C Preferred Stock shall be entitled to cast one vote per share of Combined Series C Preferred Stock held of record on the record date for the determination of the holders of Combined Series C Preferred Stock entitled to vote on such election. The initial Series C Preferred Stock Directors shall be as designated by written notice to the Company from a majority-in-interest of the holders of the Combined Series C Preferred Stock and they are elected to serve until their successors are duly elected; and thereafter the Series C Preferred Stock Directors shall be elected at the same time as other members of the Board of Directors. A Series C Preferred Stock Director may only be removed by the written consent or affirmative vote of at least a majority of the Combined Series C Preferred Stock. If for any reason a Series C 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 Combined Series C Preferred Stock, in accordance with the voting procedures set forth in this Section 4(b).

(c) So long as at least 51% of the originally issued shares of Series C Preferred Stock remains 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

Combined Series C Preferred Stock, (i) amend, alter, waive or repeal, whether by merger, consolidation, combination, reclassification or otherwise, the Certificate 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) or (ii) increase the size of the Board of Directors beyond nine (9) members. The vote of the holders of at least two-thirds of the outstanding shares of Combined Series C 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 at least 51% of the originally issued Series C Preferred Stock remains 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 C-1 Preferred Stock 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 C-1 Preferred Stock or (y) on a parity with the Series C-1 Preferred Stock. The vote of the holders of at least two-thirds of the outstanding shares of Series C-1 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.

(e) So long as VantagePoint Venture Partners IV (Q), L.P. together with any of its affiliates owns at least 2,666,667 shares of Combined Series C 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 nine (9).

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 C-1 Preferred Stock shall be entitled, at their option, at any time to convert all or any such shares of Series C-1 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 C-1 Preferred Stock shall be entitled upon conversion shall be determined by dividing (x) the Liquidation Preference of such Series C-1 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 C-1 Preferred Stock shall automatically convert, immediately upon the written consent of holders of more than 50% of issued and outstanding Series C-1 Preferred Stock (the “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 C-1 Preferred Stock shall be entitled upon such automatic conversion shall be determined by dividing (x) the Liquidation Preference of such Series C-1 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 C-1 Preferred Stock, the holders of Series C-1 Preferred Stock shall surrender the certificates representing such shares at the office of the Company or any transfer agent for the Series C-1 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 C-1 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 $2.00, subject to adjustment from time to time in accordance with Section 5(e).

(d) Fractions of Shares. Unless the holder of shares of Series C-1 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 C-1 Preferred Stock. If more than one share of Series C-1 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 C-1 Preferred Stock so surrendered. Instead of any fractional shares of Common Stock which would otherwise be issuable upon conversion of any shares of Series C-1 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:

(A) the Conversion Price in effect immediately prior to the issuance of such Common Stock, options, rights or securities by

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 C-1 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 of 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:

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:

(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.

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;

(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 C-1 Preferred Stock shall be increased in proportion to such increase 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 C-1 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 C-1 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 C-1 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.

(1) issuing to the holder of any Series C-1 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

(1) issuing to the holder of any share of Series C-1 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

(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 holders of a majority of the outstanding Series C-1 Preferred Stock, (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 C-1 Preferred Stock, a holder must (A) surrender the certificate or certificates evidencing such holder’s shares of Series C-1 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 C-1 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 C-1 Convertible Preferred Stock of eUniverse, Inc. (the “Convertible Preferred Stock”), irrevocably exercises the right to convert outstanding shares of Series C-1 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 address, including postal code number		(Signature)

Denominations:

(ii) Series C-1 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 C-1 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 C-1 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 C-1 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 C-1 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 C-1 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 C-1 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.

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 C-1 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 C-1 Preferred Stock, the full number of shares of Common Stock then issuable upon the conversion of all outstanding shares of Series C-1 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 C-1 Preferred Stock or that would cause the number of shares of Common Stock deliverable upon conversion of the Series C-1 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 C-1 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 C-1 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 C-1 Preferred Stock. All Series C-1 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 C-1 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 San Francisco, California, selected by the San Francisco branch of JAMS (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.

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.

“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.

Section 6. Dividend Received Deduction.

For federal income tax purposes, the Company shall report distributions on the Series C-1 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.

Series C-1 Preferred Stock to whom the Preemptive Rights Offer is made, such holder of Series C-1 Preferred Stock may pay cash equal to the value of such non-cash consideration), all or any part of such holder of Series C-1 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 C-1 Preferred Stock by the sum of (i) the number of shares of outstanding Voting Stock owned by such holder of Series C-1 Preferred Stock and (ii) the number of outstanding shares of Voting Stock not held by such holder of Series C-1 Preferred Stock). If any holder of Series C-1 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 (10^th) 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.

IN WITNESS WHEREOF, this Certificate of Designation is executed on behalf of the Company by its duly authorized officer this day of , 2003.

		eUNIVERSE, INC.

		By:
			Christopher S. Lipp
			Secretary, Senior Vice President and General Counsel

Under the Securities Exchange Act of 1934 (Amendment No. 1 )*

3. Release of Certain Claims.

3.2 550 DMV hereby waives and relinquishes any rights, defenses, or benefits it may have under section 1542 of the Civil Code which provides as follows:

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

4. Option.

6. Miscellaneous Provisions.

NOW, THEREFORE, the Parties, intending to be legally bound, hereby agree as follows.

b. The Fund shall be entitled to examine the books and records of the Company, inspect its facilities, and receive other information at reasonable times and intervals concerning the general status of the Company’s financial condition and operations.

other materials that it provides to its directors. Such representative may participate in discussions of matters brought before the Board, but shall in all other respects be a nonvoting observer.

5. Restructuring. Subject to paragraph 3, above, if the Company engages in a restructuring or similar transaction, any resulting entity or entities shall be subject to this Agreement in the same manner as the Company.

7. Counterparts. This Agreement may be executed in any number of counterparts and, when so executed, all of such counterparts shall constitute a single instrument binding upon all Parties notwithstanding the fact that all Parties are not signatory to the original or to the same counterpart.

Under the Securities Exchange Act of 1934
(Amendment No. 1 )*