Exhibit 99.2
October 24, 2001
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
CEO
eUniverse, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Re: Amendment of Secured Promissory Note
Ladies and Gentlemen:
Reference is made to that certain Secured Note and Warrant Purchase Agreement
(the "Note Purchase Agreement"), dated September 6, 2000 by and between
eUniverse, Inc. (the "Company") and 550 Digital Media Ventures Inc. (f.k.a.
New Technology Holdings Inc.) ("550 DMV"), pursuant to which the Company issued
to 550DMV that certain Secured Promissory Note in the aggregate principal
amount of $3,155,670 (the "Original Note"). The Original Note, by its terms,
could not be called for repayment before March 6, 2001. In connection with an
Amendment to Subscriber Acquisition Agreement, dated February 14, 2001, among
550DMV, Indimi, Inc., Emazing, Inc., and the Company, 550DMV exchanged the
Original Note for an amended promissory note (the "Amended Note") identical in
all respects to the Original Note, except that the Amended Note may not be
called for repayment before December 31, 2001.
Simultaneously with the execution of this letter agreement, the Company and
550DMV shall enter into agreements pursuant to which the Company will purchase
from 550DMV all of the membership interests in Indimi LLC (the "Indimi
Acquisition") and 550DMV will purchase from the Company (the "550DMV
Placement") $5,000,000 of the Company's Series B Preferred Stock, par value
$.10 per share (the "Series B Preferred Stock"). The Indimi Acquisition and
the 550DMV Placement shall be collectively referred to herein as the
"Transactions". In connection with the consummation of the Transactions, the
Company and 550DMV desire, among other things, to further extend the date upon
which the Amended Note may be called for repayment, enter into a $2,500,000
Senior Secured Convertible Promissory Note (the "$2,500,000 Note") and to
specifically provide that the existing Security Agreement dated as of
September 6, 2000 collateralizes the $2,500,000 Note. In consideration of
certain promises contained herein and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, 550DMV and the
Company hereby agree that simultaneously with the execution of this letter
agreement, 550DMV will exchange the Amended Note for an Amended and Restated
Convertible Secured Promissory Note (the "Extended Note") identical in all
respects to the Amended Note, except for the following:
(a) the Extended Note may not be called for repayment before
March 31, 2003 (the "Extended Demand Date"); provided that,
repayment shall be accelerated upon a Change of Control (as
defined below) of the Company or upon an Event of Default
(as defined in the Note Purchase Agreement);
(b) the Company shall have the option, exercisable within 30
days following the Extended Demand Date, to convert the
outstanding principal and interest of the Extended Note to
shares of Series B Preferred Stock, at the 20 day trailing
average closing price of the Company's common stock for the
20 day trading period immediately prior to such conversion;
provided that, if the Company previously converted the
Series B Preferred Stock held by 550DMV into Common Stock in
accordance with its terms, then the outstanding principal
and interest shall then be converted into Common Stock, at
the above described price per share otherwise applicable to
the Series B Preferred Stock.
"Change of Control" means the occurrence of any of the following events:
(i) a sale of all or substantially all of the assets of the
Company in one transaction or a series of transactions;
(ii) the merger or consolidation of the Company with or into
another person under circumstances in which the holders of
the voting stock of the Company immediately prior to such
merger or consolidation, do not own a majority of the voting
stock of the Company or the surviving corporation
immediately after such merger or consolidation;
(iii) any "person" or "group" (as such terms are used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), after the date of the
Extended Note, becomes the "beneficial owner" (as defined in
Rules 13-d-3 and 13d-5 under the Exchange Act), directly or
indirectly, of voting stock of the Company entitled to cast
more than 30% of the votes entitled to be cast by the
holders of the outstanding voting stock of the Company.
A copy of the Extended Note is attached hereto as Exhibit A.
The parties hereto confirm that the obligations owed by the Company to 550DMV
pursuant to the Extended Note and the $2,500,000 Note are of the nature and
type contemplated by the phrase "and each other obligation and liability,
whether direct or indirect, absolute or contingent, due or to become due, or
now or hereafter existing, of the Debtor to Secured Party, whether on account
of principal, interest, reimbursement obligations, fees, indemnities, costs,
expenses, (including, without limitation, all fees and disbursements of
counsel to Secured Party) or otherwise." To the extent necessary, the Security
Agreement is hereby amended to provide that the Collateral secures all
obligations of the Company to 550DMV whether arising under the Note Purchase
Agreement, the Extended Note, the $2,500,000 Note or otherwise.
This letter agreement shall be interpreted and construed in accordance with
the laws of New York , including, without limitation, Section 5-1401 of the
New York General Obligations Law (without regard to any conflicts of law
provision that would require the application of the law of any other
jurisdiction). This letter agreement shall not be modified or amended except
by written instrument executed by the parties hereto.
[SIGNATURE PAGE TO FOLLOW]
If this letter agreement meets with your approval, please sign and return both
originals to me to show your agreement and intent to be legally bound by its
terms. We will sign and return one original to you.
Sincerely yours,
550 DIGITAL MEDIA VENTURES INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Senior Vice President
and General Counsel
Agreed and Accepted this 24th day of October, 2001:
EUNIVERSE, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: CEO
EXHIBIT A
EXTENDED NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), NOR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS AND HAS BEEN
TAKEN FOR INVESTMENT PURPOSES ONLY. IT MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
AS TO SUCH SECURITIES UNDER THE ACT AND QUALIFICATION UNDER APPLICABLE STATE
LAW WITHOUT AN OPINION OF COUNSEL SATISFACTORY TO BORROWER THAT SUCH
REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
AMENDED AND RESTATED CONVERTIBLE SECURED PROMISSORY NOTE
$3,155,670 October 24, ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
THIS AMENDED CONVERTIBLE SECURED PROMISSORY NOTE (the "Note") is
hereby issued by eUniverse, Inc., a Nevada corporation ("Borrower") to 550
Digital Media Ventures Inc. (f.k.a. New Technology Holdings Inc.) ("Lender").
This Note amends and restates in its entirety that certain amended Secured
Promissory Note, which replaced the original Secured Promissory Note issued on
September 6, 2000.
FOR VALUE RECEIVED, Borrower hereby unconditionally promises to pay
on demand to the order of Lender in lawful money of the United States of
America and in immediately available funds, the aggregate principal sum of up
to $3,155,670 or, if less, the aggregate principal amount of the borrowings
outstanding (the "Principal Amount") together with accrued and unpaid interest
thereon, in the manner set forth herein. Borrower further agrees to pay
interest on the Principal Amount at the rate per annum equal to the rate
reported in the Wall Street Journal as the prime rate for major banks plus 2%
on the outstanding Principal Amount. Interest shall be calculated from and
including the date of this Note to but not including the date such Principal
Amount has been repaid in full. Interest shall be calculated on the basis of a
365-day or 366-day year, as the case may be, for the actual number of days
elapsed and shall be paid together with the outstanding Principal Amount, as
provided in Section 1 of this Note.
All borrowings evidenced by this Note and all payments (including
those described in Sections 1(b)) and prepayments of the principal hereof and
interest hereon and the respective date thereof shall be endorsed by the
holder hereof on the grid schedule attached hereto and made a part hereof, or
on a continuation thereof which shall be attached hereto and made a part
hereof (the "Grid"); provided, however, that the failure of the holder hereof
to make such a notation or any error in such a notation shall not affect the
obligations of Borrower under this Note.
This Note is the Extended Note referred to in that certain Letter
Agreement by and between the Borrower and the Lender dated October 23, 2001
(as the same may from time to time be amended or supplemented).
1. Repayment.
(a) The outstanding Principal Amount and all interest
accrued thereon shall be payable on demand, unless Lender has received a
written notice from Borrower within 30 days of its delivery of a Demand Notice
of Borrower's intent to convert pursuant to Section 7 below; provided,
however, that unless there has been an Event of Default (as defined in the
Secured Note and Warrant Purchase Agreement described below) or a Change of
Control (as defined below), Lender agrees not to make demand prior to March
31, 2003 and provided, further, that Lender shall provide Borrower with 30
days' advance written notice of such demand (the "Demand Notice").
(b) Reference is hereby made to that certain amended and
restated Subscriber Acquisition Agreement between Borrower and Lender dated of
even date herewith, and as may be amended from time to time thereafter (the
"Subscriber Agreement"). Lender shall have the right, but not the obligation,
to deduct certain amounts, as described in the Subscriber Agreement, from all
amounts owed to Borrower under the Subscriber Agreement, and apply such
deducted amounts to the outstanding principal amount or interest due under
this Note. In the event that Lender makes deductions with respect to amounts
owed to Borrower for the delivery of subscriber names pursuant to the
Subscriber Agreement as described above, Lender shall set forth in the Demand
Notice the aggregate amount of such deductions, and the aggregate amount of
such corresponding deductions from all amounts owed to Lender pursuant hereto
as computed in the manner described above.
(c) Borrower may at any time and from time to time prepay
the Principal Amount, in whole or in part, without premium or penalty.
2. Security Agreement. This Note is entitled to the benefit of that certain
Security Agreement, dated as of September 6, 2000, between Lender and Borrower
(the "Security Agreement"), pursuant to which Lender is granted a first
priority security interest in the Collateral (as such term is defined in the
Security Agreement). This Note shall be subject to the terms and conditions
set forth in such Security Agreement.
3. Note and Warrant Purchase Agreement. This Note is one of the Notes issued
pursuant to a separate Note and Warrant Purchase Agreement, dated as of
September 6, 2000, between Lender and Borrower (the "Note and Warrant Purchase
Agreement") and is entitled to the benefits thereof. This Note shall be
subject to the terms and conditions set forth in such Note and Warrant
Purchase Agreement.
4. Place of Payment; Application of Payments. All amounts payable hereunder
shall be payable to Lender in United States dollars at such bank account as
shall be designated by Lender in the Demand Notice in immediately available
funds. Payment on this Note shall be applied first to any expenses of
collection, then to accrued interest, and thereafter to the outstanding
principal balance hereof.
5. Default. Subject to the terms of the Note and Warrant Purchase Agreement,
upon the occurrence of an Event of Default (as defined in the Note and Warrant
Purchase Agreement) the unpaid Principal Amount, all unpaid accrued interest
thereon and all other amounts owing hereunder may, at the option of Lender,
become immediately due and payable to Lender with the effect provided in each
of the Note and Warrant Purchase Agreement and the Security Agreement.
6. Change of Control. As used herein, the term "Change of Control" means the
occurrence of any of the following events:
(i) a sale of all or substantially all of the assets of
the Borrower in one transaction or a series of transactions;
(ii) the merger or consolidation of Borrower with or into another
person under circumstances in which the holders of the
voting stock of Borrower immediately prior to such merger or
consolidation, do not own a majority of the voting stock of
Borrower or the surviving corporation immediately after such
merger or consolidation;
(iii) any "person" or "group" (as such terms are used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), after the date of this Note,
becomes the "beneficial owner" (as defined in Rules 13-d-3
and 13d-5 under the Exchange Act), directly or indirectly,
of voting stock of Borrower entitled to cast more than 30%
of the votes entitled to be cast by the holders of the
outstanding voting stock of Borrower.
7. Conversion.
(a) Mechanics of Conversion. Within 60 days following receipt of a
Demand Notice, Borrower may at its option elect to automatically convert the
outstanding Principal Amount and unpaid accrued interest thereon as of such
date into shares of the Borrower's Series B Preferred Stock, $.10 par value
per share (the "Series B Preferred Stock"), in accordance with this Section 7.
The Borrower shall give at least 15 days prior notice to Lender of the date on
which such automatic conversion is to be effectuated (such date, the
"Conversion Date"). The number of shares of Series B Preferred Stock
(calculated to the nearest 1/100,000th of a share) to which Lender shall be
entitled upon such automatic conversion shall be determined by dividing (x)
the outstanding Principal Amount and unpaid accrued interest thereon as of the
Conversion Date by (y) the average Closing Price (as defined below) for the
twenty trading days immediately prior to the Conversion Date. "Closing Price"
means, the price with respect to the shares of the Borrower's Common Stock on
any day, (i) the last reported sales price, or in the case no such reported
sale takes place on such day, the average of the reported closing bid and
asked prices, in either case on any national securities exchange on which the
shares of Common Stock are listed or admitted to trading, or (ii) if the
shares of Common Stock are not listed on any national securities exchange, the
average of the closing bid and asked prices in the over-the-counter market as
furnished by any NYSE member firm selected from time to time by Borrower for
that purpose, or (iii) if such prices in the over-the-counter market are not
available, the fair market value of such shares. On the Conversion Date, the
outstanding Principal Amount and unpaid accrued interest thereon shall be
converted automatically into the Series B Preferred Stock without further
action by the Lender and whether or not this Note has been surrendered to
Borrower or its transfer agent, and Lender shall be deemed to be the
shareholder of record as of the Conversion Date with respect to the Series B
Preferred Stock. Within fourteen (14) days subsequent to the Conversion Date
Lender shall surrender this Note to Borrower or its transfer agent, duly
marked cancelled and, in exchange therefor, Lender shall receive from Borrower
share certificates evidencing the Series B Preferred Stock in the name or
names in which Lender wishes such certificate or certificates for the Series B
Preferred Stock to be issued. If within fourteen (14) days of the Conversion
Date, Lender is unable to deliver this Note, Lender shall notify Borrower or
its transfer agent that such Note has been lost, stolen or destroyed and shall
deliver to Borrower an acknowledgement that the obligations evidenced by this
Note, shall have been upon the Conversion Date be deemed fully satisfied, and,
if requested by Borrower, Lender shall execute an agreement reasonably
satisfactory to Borrower to indemnify Borrower from any loss incurred by it in
connection with inability of Lender to deliver such Note.
(b) Issue Taxes. Borrower shall pay any and all stamp, issue and
other taxes that may be payable in respect of the issuance or delivery of the
Series B Preferred Stock.
(c) In the event that the Company exercises the option to convert
this Note pursuant to Section 7(a) after all Series B Preferred Stock held by
550 DMV has been converted into the Company's common stock, par value $.001
per share (the "Common Stock"), than the outstanding principal and interest of
this Note may be converted by the Company into Common Stock at the price per
share otherwise applicable to the Series B Preferred Stock.
(d) Reservation of Stock Issuable Upon Conversion. Upon any automatic
conversion pursuant to Section 7(a) above, Borrower will take all corporate
action as may be necessary to increase its authorized but unissued shares of
Series B Preferred Stock or Common Stock, as the case may be, to such number
of shares as shall be sufficient to effect the conversion of this Note under
Section 7(a) above, including, without limitation, obtaining the requisite
stockholder approval of any necessary amendment to Borrower's certificate of
incorporation.
(e) Fractional Shares. No fractional shares shall be issued upon the
conversion of this Note into the Series B Preferred Stock or Common Stock, as
the case may be. If the conversion would result in the issuance of a fraction
of a share of the Series B Preferred Stock or Common Stock, as the case may
be, Borrower shall, in lieu of issuing any fractional share, pay Lender who is
otherwise entitled to such fraction a sum in cash equal to the fair market
value of such fraction on the Conversion Date, with respect to the Series B
Preferred Stock, or Common Stock, as the case may be, (in each case as
determined in good faith by the Board of Directors of Borrower and agreed to
by Lender).
(f) Registration Rights. If the outstanding Principal Amount of and
unpaid accrued interest thereon has been converted pursuant to Section 7(a)
hereof into Series B Preferred Stock or Common Stock, as the case may be,
Borrower shall grant to Lender the same registration rights and other minority
shareholder rights granted to other holders of Series B Preferred Stock. If
the outstanding Principal Amount and unpaid accrued interest thereon has been
converted pursuant to Section 7(a) in to Series B Preferred Stock or Common
Stock, as the case may be, Borrower shall ensure that Lender shall receive
registration rights and other minority shareholder rights whenever such rights
are granted by Borrower to other holders of its securities (such holders,
"Other Shareholders"), and the terms of such rights granted to Lender shall,
in each case, be equal (including, without limitation, any holding periods) to
the terms governing the grant of such registration rights and minority
shareholder rights to such Other Shareholders.
8. Waiver. Except as otherwise provided herein, Borrower waives presentment
and written demand for payment, notice of dishonor, protest and notice of
protest of this Note, and shall pay all costs of collection when incurred,
including, without limitation, reasonable attorneys' fees, costs and other
expenses. BORROWER WAIVES ITS RIGHTS TO A JURY TRIAL IN CONNECTION WITH ANY
CLAIMS ARISING UNDER THIS NOTE TO THE FULLEST EXTENT PERMITTED BY LAW. The
right to plead any and all statutes of limitations as a defense to any demands
hereunder is hereby waived to the fullest extent permitted by law.
9. Expenses; Attorney's Fees; Collection Costs. Borrower agrees that it will
pay the reasonable costs and expenses of the parties (including legal and
accounting fees) in connection with this )Note. Without limiting the
foregoing, if there has been an Event of Default by Borrower hereunder, Lender
shall be entitled to receive and Borrower agrees to pay all costs of
enforcement and collection incurred by Lender, including, without limitation,
reasonable attorney's fees relating thereto.
10. Successors and Assigns; Assignment. The provisions of this Note shall
inure to the benefit of and be binding on any successor to Borrower and shall
extend to any holder hereof. Borrower may assign this Note to any of its
affiliates or the affiliates of Sony Music Entertainment Inc., and such rights
may be similarly assigned by such assignee.
11. Further Assurances. Borrower shall, at any time and from time to time,
upon the written request of Lender, execute and deliver to Lender such further
documents and instruments (including, without limitation, financing statements
in connection with Lender's security interest granted hereby) and do such
other acts and things as Lender may reasonably request in order to effectuate
fully the purpose and intent of this Note
THIS NOTE HAS BEEN EXECUTED AND DELIVERED IN ▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ OF AMERICA. THIS NOTE SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
INCLUDING, WITHOUT LIMITATION, SECTION 5-1401 OF THE NEW YORK GENERAL
OBLIGATIONS LAW (WITHOUT REGARD TO ANY CONFLICTS OF LAW PROVISION THAT WOULD
REQUIRE THE APPLICATION OF THE LAW OF ANY OTHER JURISDICTION).
BORROWER
EUNIVERSE, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chairman and Chief Executive
Officer
[SIGNATURE PAGE TO SECURED PROMISSORY NOTE]
