Exhibit 10.44

Not for Circulation

Confidential & Proprietary

 

Term Sheet #1—Sony

 

This term sheet is among eUniverse, Inc. (“Company”), 550 Digital Media
Ventures, Inc., a wholly owned subsidiary of Sony Corporation of America
(“Sony”), and VP Alpha Holdings IV, L.L.C. (“VPVP”).

 

Loan:

Bridge loan to the Company from VPVP in the amount of $2.0 million (the “Loan”).
The principal of the Loan to be due and payable on the earlier of (a) the
closing of the PIPE transaction referenced below, in which case the outstanding
principal and interest under the Loan shall be applied toward the purchase price
in the PIPE transaction, (b) the maturity date of the Company’s existing loan
with an affiliate of Sony, (c) two years from the date of the Loan, or (d) the
closing of any debt or equity financing by the Company in excess of $2.5
million. $500,000 additional to Sony to purchase $500,000 of its existing
promissory note with the Company. Bridge loan is to be secured by a first
priority lien on the assets of the Company on a parsi passu basis with the
Company’s existing loan from Sony, will be payable interest only at 8% per annum
payable quarterly. Form of Loan Agreement to be acceptable to VPVP in its sole
discretion and acceptable to the Company in good faith.

 

Option:

Sony to grant VPVP an exclusive option to purchase 4.8 million shares held by
Sony, consisting of a pro rata number of Common and Preferred shares held by
Sony (the “Option”). The Option shall be for 180 days, exercisable at a price
equal to $1.10 per share. In the event that VPVP sells or distributes the Option
shares at a price in excess of $3 per share, then Sony shall receive a
contingent payment equal to 40% of the amount in excess of $3 per share, subject
to a maximum additional payment to Sony of $1.10 per share. The contingent
payment shall be in the form of cash if the shares are sold, or in the event of
a distribution to VPVP’s limited partners, in the form of Company shares for
Sony to sell or hold as it determines. The form of the Option shall contain
customary representations, warranties and other terms acceptable to VPVP. Sony
will agree to vote in favor of the consummation of the PIPE transaction and
related transactions set forth below, as approved by the Board of Directors of
the Company. Sony will also waive its anti-dilution rights with respect to the
Series B shares if the PIPE transactions is completed. The Company consents to
the Option and the transaction contemplated thereunder.

 

PIPE Transaction:

The Company and VPVP plan to enter into a separate term sheet for possible
additional investment by VPVP, the terms of which are still being negotiated. In
order to qualify as the “PIPE” transaction, the additional investment must be no
less than $5million (with possibly greater amounts) and the purchase price per
share must be equal to or greater than $1.00

 

Capitalization:

The Company represents and warrants that its outstanding capitalization consists
of the following:

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Security

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   Number of Shares on an As
Converted to Common Basis

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Common1

   25,866,812

Series A Preferred

   400,000

Series B Preferred3

   1,923,077

Warrants

   700,000

Vested Options

   3,673,277

Unvested Options

   1,966,239

Ungranted Options

   2,601,301     

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Total

   37,130,706

 

Definitive Agreements:

The Company and Sony will act in good faith to negotiate, complete and enter
into a definitive Option Agreement, Loan Agreement, and related closing
documents reflecting the terms and conditions hereof as soon as reasonably
possible, with a goal of executing the Loan Agreement, Option, and related
closing documents within 10 days hereof.

 

Closing and Closing Conditions:

The closing of the Loan Agreement and the other transactions contemplated hereby
will be conditioned upon a variety of items for the benefit of VPVP (which may
be waived by VPVP in its sole discretion only in a writing signed by VPVP),
including but not limited to the following:

 

  (a)   The parties shall have negotiated the definitive agreements on terms
acceptable to VPVP in its sole discretion.

 

  (b)   All representations and warranties of the Company in the definitive
agreements shall be true at the signing dates and as of the closing dates.

 

  (c)   The Company shall have performed all of its pre-closing covenants
contained in the definitive agreements.

 

  (d)   VPVP shall have completed its business and legal due diligence and
approved the same in its sole discretion.

 

  (e)   There shall have been no material adverse change or effect that,
individually or when taken together with all other changes or effects, is or
could be likely to be materially adverse to the business assets, financial
condition, operations, capitalization, or prospects of the Company and its
subsidiaries.

 

 

The closing of the Loan Agreement shall be subject to applicable customary
conditions for the benefit of the Company, but in no event more extensive than
the conditions contained in the Company’s loan documents with Sony.

 

Representations and Warranties:

The Company will make representations and warranties in the definitive
agreements customary in transactions of this kind including, without
limitations, representations regarding due formation, qualification and good
standing, organization documents and by-laws, company power

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1 Sony owns 3,366,154 shares of Common Stock and 1,923,077 shares of Series B
Preferred Stock. Except for such shares, Sony holds no options, warrants, or
rights to acquire any securities of the Company.

3 See footnote 1, above.

 

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subsidiaries, capitalization, authorization, due issuance, financial statements
subsequent developments, no encumbrances, obligations, use of proceeds, assets,
litigation, proprietary information, patents, contracts, and commitments. The
Company’s representations concerning financial statements, ownership of its
intellectual property, compliance with laws and non-infringement of third party
intellectual property rights, shall not be qualified by any “knowledge”
qualifier.

 

Due Diligence Period to Invest and Right to Invest:

The Company recognizes that VPVP has and will expand considerable resources and
time in negotiating definitive agreements with respect to the transactions
contemplated herein. Accordingly, following execution of this Term Sheet, the
Company and its shareholders, officers, directors and agents and Sony shall
negotiate in good faith with VPVP for a period of 10 days (the “Due Diligence
Period”), with respect to transactions contemplated hereby. Such negotiations
shall reflect the terms set forth in this Term Sheet.The Company recognizes that
VPVP has and will expand considerable resources and time in negotiating
definitive agreements with respect to the transactions contemplated herein.
Accordingly, following execution of this Term Sheet, the Company and its
shareholders, officers, directors and agents and Sony shall negotiate in good
faith with VPVP for a period of 10 days (the “Due Diligence Period”), with
respect to transactions contemplated hereby. Such negotiations shall reflect the
terms set forth in this Term Sheet.

 

 

For valuable consideration, receipt of which is hereby acknowledged, the Company
and Sony agree that VPVP shall have the right to complete its due diligence
during the Due Diligence Period and to make a loan to the Company and obtain the
Option on the terms outlined herein. Once VPVP has notified the Company that it
has satisfactorily completed its due diligence and wishes to complete the Loan
(which notice, if to be given, must occur within 10 calendar days following
execution of this Term Sheet), the Company and Sony agree to cooperate
reasonably and in good faith to complete such transaction as expeditiously as
practicable thereafter.

 

Indemnification:

The Company shall indemnify, defend and hold harmless VPVP and its affiliates,
agents, employees, officers, directors and partners (collectively, the
“Indemnitees”) from and against any investigations, proceedings, claims,
lawsuits or actions, and for any expenses, losses, damages, attorneys’ fees and
costs (payable in advance for the amounts expected to be incurred), and
liabilities (joint or several), to which the Indemnitees may become subject
under the Securities Act of 1933, the Securities Exchange Act of 1934, or any
other applicable rule, regulation or law, arising out of or in any way related
to this Term Sheet, the definitive agreements, and/or an investment in or loan
to the Company.

 

Expenses and Professional Fees:

The Company shall pay to VPVP at the closing of the Loan Agreement VPVP’s
attorneys’ fees and due diligence expenses, in connection with this transaction.
If for any reason the transactions contemplated by this Term Sheet do not close,
the Company shall immediately reimburse VPVP’s out-of-pocket legal, accounting
and due diligence expenses.

 

Confidentiality:

The terms and existence of this Term Sheet are confidential to VPVP and may not
be disclosed by the Company or Sony except as may be approved by VPVP.

 

Miscellaneous:

The footnote contains various applicable miscellaneous provisions.*

 

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* This Term Sheet constitutes and contains the entire agreement and
understanding between parties with respect to the subject matter hereof and
supersedes any prior or contemporaneous oral or written agreements or

 

 

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****

 

Except as set forth in “Due Diligence Period and Right to Invest”,
“Confidentiality”, “Indemnification”, and “Miscellaneous” above, the provisions
of this Term Sheet are non-binding on each party.

 

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understandings. Each party acknowledges and agrees that they have not made any
representations, warranties or agreements of any kind regarding the subject
matter hereof, except as expressly set forth herein. This Term Sheet may not be
modified or amended, except by an instrument is writing signed by duly
authorized officers of both of the parties hereto. The parties, agree that any
dispute arising out of the connection with this Term Sheet will be resolved
solely by confidential binding arbitration in San Francisco, California
according to the commercial arbitration rules of _AMS. Each party shall bear its
own attorney’s fees, expert witness fees, and costs in connection with such
arbitration. This Term Sheet has been negotiated and drafted by each party, with
counsel from each party reviewing the document. The language in this Agreement
shall be construed as to its fair meaning and not strictly for or against any
party. This Term Sheet, and any dispute arising hereunder, shall be governed by
California law, without giving effect to any choice of law or conflict of law
provision or rule that would cause the application of the laws of any
jurisdiction other than California. If any provision of this Term Sheet is
determined to be invalid in whole or in part of any reason, such unenforceable
or invalid provision shall not affect the legality, enforceability or validity
of the rest of this Term Sheet. If any provision is stricken in accordance with
the previous sentence, then the stricken provisions shall be replaced with a
legal, enforceable and valid provision that is as similar in tenor to the
stricken provision as is legally possible. The provisions of this Term Sheet are
intended solely for the benefit of the Company, VPVP, and Sony and no provision
hereof may be enforced by any creditor, shareholder, officer, director, or agent
of, or any other party affiliated with the Company, VPVP or Sony. The Company
and Sony shall use its reasonable best efforts to perform such further acts and
things as VPVP may reasonably request in order to carry out the intent and
accomplish the purposes of the binding provisions of this Term Sheet.

 

 

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If the terms and conditions described above are acceptable to you, please so
indicate by your signature below. This proposal shall remain outstanding until
4:00 pm, San Francisco time, on June 26, 2003, unless previously revoked by us.

 

VP ALPHA HOLDINGS IV, L.L.C

By:

 

VANTAGEPOINT VENTURE ASSOCIATES IV, L.L.C.

   

Its

  Managing Member        

By:

 

ALAN E. SALZMAN        

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Name:

  Alan E. Salzman        

Title:

  Managing Member

Agreed and Accepted:

   

eUNIVERSE INC.

   

By:

 

BRAD GREENSPAN        

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        Brad Greenspan,CEO

550 DIGITAL MEDIA VENTURES, INC.

   

By:

 

/s/    TOM CONNOLLY        

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Title:

 

Sr. V.P. & Chief Financial Officer

 

Date:                                     

 

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