Document:

Certificate of Designation - Series C-1

 Exhibit 4.2 
  
 CERTIFICATE OF DESIGNATION 
 OF

 SERIES C-1 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 commencing 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 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 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-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. 
  
 (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-1 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-1 Preferred Stock then 

  

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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). 
  

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 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 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 

  

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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). 
  

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 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 

  

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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-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

  

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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 

  

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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-1 Preferred Stock shall be increased in
proportion to such increase in outstanding shares. 
  

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 (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-1 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-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. 
  
 (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-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 

  

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	 	(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-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 
  
 (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-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”). 
  

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 (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:
	  	 	 

  

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	 	(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. 
  
 (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 

  

 -13- 

 
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. 
  

 -14- 

 (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 

  

 -15- 

 
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 

  

 -16- 

 
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

  

 -17- 

 
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-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. 
  
 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-1 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-1 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 

  

 -18- 

 
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 (10th) day after the Company‘s delivery of the Preemptive Rights Offer Notice, such Non-Responding
Holders shall have no further rights with respect to the proposed Preemptive Rights Transaction. 
  
 IN WITNESS WHEREOF, this Certificate of Designation is executed on behalf of the Company by its duly authorized officer this 31st day of October, 2003.

  

	eUNIVERSE, INC.
		
	By:	 	/s/    CHRISTOPHER S. LIPP        
	 	

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

  

 -19-<PAGE>

                                                                   Exhibit 10.32

                            BAXTER INTERNATIONAL INC.
                NON-EMPLOYEE DIRECTOR DEFERRED COMPENSATION PLAN

                            (Effective July 1, 2003)

<PAGE>

                            BAXTER INTERNATIONAL INC.
                NON-EMPLOYEE DIRECTOR DEFERRED COMPENSATION PLAN

                            (Effective July 1, 2003)

                                    ARTICLE I

                           PURPOSE AND EFFECTIVE DATE

     1.1  Purpose. The Baxter International Inc. Non-Employee Director Deferred
Compensation Plan (the "Plan") has been adopted by Baxter International Inc.
("Baxter"). The Plan is intended to help Baxter attract and retain the services
of qualified individuals to serve as non-employee members of its Board of
Directors by offering them the opportunity to defer payment of compensation
through an unfunded deferred compensation arrangement.

     1.2  Effective Date. The effective date of this Plan is July 1, 2003.

                                   ARTICLE II

                                   DEFINITIONS

     2.1  Account. The bookkeeping account established to record a Participant's
interest in the Plan as provided in Article IV.

     2.2  Administrator. The person or entity appointed to administer the Plan
as provided in Article VII.

     2.3  Baxter. Baxter International Inc., a Delaware corporation, and any
other company that succeeds to the obligations of Baxter under this Plan
pursuant to Section 9.8.

     2.4  Beneficiary. A Participant's Beneficiary, as defined in Article VI, is
the Beneficiary designated to receive the Participant's Account, if any, from
the Plan, upon the death of the Participant.

     2.5  Board. The Board of Directors of Baxter.

     2.6 Compensation. All cash compensation payable by Baxter to a Participant
for his/her services as a member of the Board, including without limitation any
annual retainer, fees for attending meetings of the Board or any committee
thereof, fees for acting as chairperson of any Board or committee meeting, and
any other fees as may become payable to a Non-Employee Director.

     2.7  Compensation Committee. The Compensation Committee of the Board.

     2.8  Deferral. The Deferral is the amount of the Participant's Compensation
which the Participant elected to defer and contribute to the Plan which, but for
such election, would have otherwise been paid to him/her.

<PAGE>

     2.9  Deferral Election. The election which a Participant must make, in
accordance with the rules and procedures as may be established by the
Administrator, in order to defer a portion of his or her Compensation into the
Plan.

     2.10 Distribution Election. The election which a Participant must make, in
accordance with the rules and procedures as may be established by the
Administrator to:

          (a) Select the manner in which the Participant's Account will be
              distributed upon Termination; and/or

          (b) Request a scheduled in-service distribution of all or a portion of
              his or her Account.

To be effective, a Distribution Election must be filed within the time
prescribed by the Administrator.

     2.11 Non-Employee Director. Any member of the Board who is not an employee
of Baxter or its subsidiaries and who receives Compensation for his services as
a member of the Board.

     2.12 Participant. A Participant is any Non-Employee Director or former
Non-Employee Director who has an Account balance in the Plan.

     2.13 Plan Year. The Plan Year is the calendar year. The first Plan Year
shall be the six month period commencing July 1, 2003, and ending December 31,
2003.

     2.14 Termination. For purposes of the Plan, Termination means a Participant
ceasing to be a member of the Board for any reason, including resignation,
removal, death or failure to be re-elected. A Participant who ceases to be a
Non-Employee Director, but is still a member of the Board, shall not have
incurred a Termination.

     2.15 Unforeseeable Emergency/Hardship. A severe financial hardship
resulting from a sudden or unexpected illness or accident of the Participant or
one of his or her dependents, loss of the Participant's property due to casualty
or similar extraordinary and unforeseeable circumstances arising as a result of
one or more recent events beyond the control of the Participant, as determined
by the Administrator in accordance with the standards established by regulations
issued under (S)457 of the Internal Revenue Code or other applicable law.

                                   ARTICLE III

                     ELIGIBILITY FOR COMPENSATION DEFERRALS

     3.1  Compensation Deferral Elections. Any Non-Employee Director may elect
to defer all or a portion of his or her Compensation in accordance with
applicable rules and procedures established by the Administrator.

                                        2

<PAGE>

     3.2  Timing of and Changes in Deferral Election. A Non-Employee Director
may make a Deferral Election for each Plan Year during the annual enrollment
period established by the Administrator prior to the beginning of the Plan Year,
and such Deferral Election shall apply to all Compensation payable to such
Non-Employee Director during the Plan Year.

          (a) New Non-Employee Director. A person who is elected as a
              Non-Employee Director during a Plan Year may make a Deferral
              Election within a reasonable enrollment period established by the
              Administrator as soon as administratively feasible prior to the
              beginning of a calendar quarter commencing after the Non-Employee
              Director's election, and such election shall apply to all
              Compensation received in such quarter and the remainder of the
              Plan Year.

          (b) Initial Enrollment Period. Notwithstanding the above, Deferral
              Elections made during the Plan's initial enrollment period prior
              to the July 1, 2003 effective date for the Plan (or by a
              Non-Employee Director elected following the initial enrollment
              period and before the first annual enrollment period thereafter)
              shall be effective for all Compensation payable through December
              31, 2004, unless properly revoked in accordance with Section
              3.2(c) below.

          (c) Revocation. A Participant who has a Deferral Election in effect
              may not change such election during the Plan Year, but may revoke
              such election in accordance with procedures established by the
              Administrator. Such revocation shall apply to all Compensation
              earned by the Participant beginning with the first calendar
              quarter after the Deferral Election is revoked, and,
              notwithstanding the first sentence of this Section 3.2, such
              Participant shall not be eligible to make a new Deferral Election
              until the first Plan Year beginning at least twelve months after
              the Deferral Election is revoked.

                                   ARTICLE IV

                              CREDITING OF ACCOUNTS

     4.1  Crediting of Accounts. All amounts deferred by a Participant under the
Plan shall be credited to his/her Account in the Plan. Each Participant's
Account shall be credited or charged with its share of investment earnings or
losses determined in accordance with Section 4.2, and shall be charged with all
distributions made to the Participant or his/her Beneficiary. Accounts shall be
maintained for bookkeeping purposes only, and shall not require the segregation
of funds or establishment of a separate fund.

     4.2  Earnings. Each Participant's Account shall be adjusted upward or
downward, on a weekly (or as otherwise determined by the Administrator) basis to
reflect the investment return that would have been realized had such amounts
been invested in one or more investments

                                        3

<PAGE>

selected by the Participant from among the assumed investment alternatives
designated by the Administrator for use under the Plan. Until otherwise
determined by the Administrator in its sole discretion, the investment
alternatives shall be the same as those available under the Baxter International
Inc. and Subsidiaries Deferred Compensation Plan, except for the Baxter Common
Stock Fund, and Accounts for which no election is made shall be invested in the
Stable Income Fund. Prior to the first day of each calendar quarter (or at such
other intervals as may be determined by the Administrator), Participants may
change the assumed investment alternatives in which their Account will be deemed
invested for such quarter. Participant elections of assumed investment
alternatives shall be made at the time and in the form determined by the
Administrator, and shall be subject to such other restrictions and limitations
as the Administrator shall determine.

     4.3  Vesting. Subject to Sections 9.1 and 9.2, a Participant is always 100%
vested in his or her Account in the Plan at all times.

                                    ARTICLE V

                            DISTRIBUTION OF BENEFITS

     5.1  Distribution of Benefits. Subject to Section 5.2, distribution of a
Participant's Account, if any, will commence as soon as administratively
feasible in accordance with this Article V and the Participant's Distribution
Election.

     5.2  Distribution.

          A. Upon Termination. A Participant's Account will be paid after the
Participant's Termination, in accordance with such Participant's Distribution
Election. If multiple Distribution Election forms are on file with Baxter, the
Distribution Election form that was properly completed and submitted latest in
time will be honored. Such Distribution Election shall apply to the
Participant's entire Deferred Compensation Account balance at his or her
Termination. A Participant may change the form of payment designated on his or
her Distribution Election form from time to time in accordance with procedures
established by the Administrator; provided that if the Participant incurs a
Termination within 12 months after changing the form of payment designated the
change shall be disregarded and his/her Account shall be distributed in
accordance with the form of payment designated prior to the change.

          B. In-Service. A Participant may also elect to receive a distribution
of all or a portion of his or her Account during a future Plan Year, by filing a
Distribution Election form with the Administrator, specifying the dollar amount
of the distribution, provided that such form is filed at least 24 months prior
to the date distribution is to commence and may not be revoked within 12 months
of the distribution date. If the balance in the Participant's Deferred
Compensation Account on the specified distribution date is less than the dollar
amount requested, the entire balance of the Deferred Compensation Account shall
be distributed. If the Participant has a Termination prior to the specific date
requested on a Distribution Election form for an in-service distribution, the
in-service Distribution Election shall be ignored and the Participant's
Distribution Election with respect to Termination shall be followed.

                                        4

<PAGE>

          C. Forms. The forms of distribution are:

             (a) a lump sum payment, or

             (b) annual installments of at least 2 years, but not to exceed 15
                 years.

Annual installments will commence in accordance with the Participant's
Distribution Election, and each installment shall be equal to the remaining
balance in the Participant's Account immediately prior to such payment divided
by the number of installments remaining to be paid. Lump sum payments will be
made in accordance with the Participant's Distribution Election. If a
Participant does not timely elect a form of distribution, the Participant's
election will default to a lump sum payment in the first quarter of the Plan
Year following the Participant's Termination.

Notwithstanding the above, a Participant whose Account totals less than $50,000
as of the last day of the Plan Year in which he or she incurs a Termination will
receive lump sum payment of his or her Account in the first quarter of the Plan
Year following the Participant's Termination.

The Administrator has the right to postpone the payment of any Account for up to
one year from the date on which the credits would otherwise be paid.

     5.3  Effect of Payment. Payment to the person, trust or other entity
reasonably and in good faith determined by the Administrator to be the
Participant's Beneficiary will completely discharge any obligations Baxter or
any of its subsidiaries may have under the Plan. If a Plan benefit is payable to
a minor or a person declared to be incompetent or to a person the Administrator
in good faith believes to be incompetent or incapable of handling the
disposition of property, the Administrator may direct payment of such Plan
benefit to the guardian, legal representative or person having the care and
custody of such minor and such decision by the Administrator is binding on all
parties. The Administrator may initiate whatever action it deems appropriate to
ensure that benefits are properly paid to an appropriate guardian.

The Administrator may require proof of incompetence, minority, incapacity or
guardianship as it may deem appropriate prior to distribution of the Plan
benefit. Such distribution will completely discharge the Administrator, Baxter
and its subsidiaries from all liability with respect to such benefit.

     5.4  Taxation of Plan Benefits. It is intended that each Participant will
be taxed on amounts credited to him or her under the Plan at the time such
amounts are received, and the provisions of the Plan will be interpreted
consistent with that intention.

     5.5  Distribution Due to Unforeseeable Emergency/Hardship. Upon written
request of a Participant and the showing of Unforeseeable Emergency, the
Administrator may authorize distribution of all or a portion of the
Participant's Accounts, and or the acceleration of any installment payments
being made from the Plan, but only to the extent reasonably necessary to relieve
the Unforeseeable Emergency. In any event, payment may not be made to the extent
such Unforeseeable Emergency is or may be satisfied through reimbursement by
insurance or otherwise, including, but not limited to, liquidation of the
Participant's assets, to the extent that such liquidation would not in and of
itself cause severe financial hardship. In addition, such

                                        5

<PAGE>

Participant is precluded from enrolling in the Plan for the entire Plan Year
beginning January 1 after the request is approved.

                                   ARTICLE VI

                             BENEFICIARY DESIGNATION

     6.1  Beneficiary Designation. Each Participant has the right to designate
one or more persons, trusts or, with the Administrator's approval, other entity
as the Participant's Beneficiary, primary as well as secondary, to whom benefits
under this Plan will be paid in the event of the Participant's death prior to
complete distribution to the Participant of the benefits due under the Plan.
Each Beneficiary designation will be in a written form prescribed by the
Administrator and will be effective only when filed with the Administrator
during the Participant's lifetime.

     6.2  Amendments to Beneficiary Designation. Any Beneficiary designation may
be changed by a Participant without the consent of any Beneficiary by the filing
of a new Beneficiary designation with the Administrator. Filing a Beneficiary
designation as to any benefits available under the Plan revokes all prior
Beneficiary designations effective as of the date such Beneficiary designation
is received by the Administrator. If a Participant's Account is community
property, any Beneficiary designation will be valid or effective only as
permitted under applicable law.

     6.3  No Beneficiary Designation. In the absence of an effective Beneficiary
designation, or if all Beneficiaries predecease the Participant, the
Participant's estate will be the Beneficiary. If a Beneficiary dies after the
Participant and before payment of benefits under this Plan has been completed,
and no secondary Beneficiary has been designated to receive such Beneficiary's
share, the remaining benefits will be payable to the Beneficiary's estate.

                                   ARTICLE VII

                                 ADMINISTRATION

     7.1  Administration. The Plan is administered by the Administrative
Committee, which shall be the Administrator for all purposes of the Plan and
shall be appointed by the Board or Compensation Committee. Notwithstanding the
foregoing, all authority to administer the Plan, including the authority to
adopt and implement all rules and procedures for the administration of the Plan
and authority to amend the Plan, may also be exercised by the Corporate
Secretary of Baxter, and all references to the Administrator herein shall, as
appropriate, be construed to also refer to such person.

     7.2  Administrator Powers. The Administrator has such powers as may be
necessary to discharge its duties hereunder, including, but not by way of
limitation, the power, right and duty to construe, interpret and enforce the
Plan provisions and to determine all questions arising under the Plan including,
but not by way of limitation, questions of Plan participation, eligibility for
Plan benefits and the rights of Non-Employee Directors, Participants,
Beneficiaries and other persons to benefits under the Plan and to determine the
amount, manner and time of payment of

                                        6

<PAGE>

any benefits hereunder, and to adopt procedures, rules, regulations and forms to
be utilized in the efficient administration of the Plan which may alter any
procedural provision of the Plan without the necessity of an amendment. The
Administrator is empowered to employ agents (who may also be employees of
Baxter) and to delegate to them any of the administrative duties imposed upon
the Administrator or Baxter.

     7.3  Finality of Decisions. Any ruling, regulation, procedure or decision
of the Administrator will be conclusive and binding upon all persons affected by
it. There will be no appeal from any ruling by the Administrator that is within
its authority.

     7.4  Indemnity. To the extent permitted by applicable law and to the extent
that they are not indemnified or saved harmless under any liability insurance
contracts, any present or former employees, officers, or directors of Baxter, or
its subsidiaries or affiliates, if any, will be indemnified and saved harmless
by Baxter from and against any and all liabilities or allegations of liability
to which they may be subjected by reason of any act done or omitted to be done
in good faith in the administration of the Plan, including all expenses
reasonably incurred in their defense in the event that Baxter fails to provide
such defense after having been requested in writing to do so.

                                  ARTICLE VIII

                        AMENDMENT AND TERMINATION OF PLAN

     8.1  Amendment. The Board, the Compensation Committee or the Administrator
may amend the Plan at any time, except that no amendment will decrease the
Accounts of Participants and Beneficiaries at the time of the amendment.

     8.2  Right to Terminate. The Board or the Compensation Committee may at any
time terminate the Plan.

     8.3  Payment at Termination. If the Plan is terminated, payment of each
affected Participant's Account to the Participant or Beneficiary for whom they
are held will commence within 60 days of such termination in the form determined
under Article V.

                                   ARTICLE IX

                                  MISCELLANEOUS

     9.1  Unfunded Plan. This Plan is intended to be an unfunded deferred
compensation plan. All credited amounts are unfunded, general obligations of
Baxter. This Plan is not intended to create an investment contract.

     9.2  Unsecured General Creditor. In the event of Baxter's insolvency,
Participants and their Beneficiaries, heirs, successors and assigns will have no
legal or equitable rights, interest or claims in any property or assets of
Baxter or any of its subsidiaries, nor will they be beneficiaries of, or have
any rights, claims or interests in any life insurance policies, annuity
contracts or the proceeds therefrom owned or which may be acquired by Baxter
(the "Policies") greater than

                                        7

<PAGE>

those of any other unsecured general creditors. In that event, any and all of
Baxter's assets and Policies will be, and remain, the general, unpledged,
unrestricted assets of Baxter. Baxter's obligation under the Plan will be merely
that of an unfunded and unsecured promise of Baxter to pay money in the future.

     9.3  Nonassignability. Neither a Participant nor any other person will have
any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or
otherwise encumber, transfer, hypothecate or convey in advance of actual receipt
the amounts, if any, payable hereunder, or any part thereof, which are, and all
rights to which are, expressly declared to be nonassignable and nontransferable.
No part of the amounts payable will, prior to actual payment, be subject to
seizure or sequestration for the payment of any debts, judgments, alimony or
separate maintenance owed by a Participant or any other person, nor be
transferable by operation of law in the event of a Participant's or any other
person's bankruptcy or insolvency. Nothing contained herein will preclude Baxter
from offsetting any amount owed to it by a Participant against payments to such
Participant or his or her Beneficiary.

     9.4  Protective Provisions. A Participant will cooperate with Baxter by
furnishing any and all information requested by Baxter, in order to facilitate
the payment of benefits hereunder.

     9.5  Governing Law. The provisions of this Plan will be construed and
interpreted according to the laws of the State of Illinois, without regard to
any conflicts of law provisions.

     9.6  Severability. In the event any provision of the Plan is held invalid
or illegal for any reason, any illegality or invalidity will not affect the
remaining parts of the Plan, but the Plan will be construed and enforced as if
the illegal or invalid provision had never been inserted, and Baxter will have
the privilege and opportunity to correct and remedy such questions of illegality
or invalidity by amendment as provided in the Plan, including, but not by way of
limitation, the opportunity to construe and enforce the Plan as if such illegal
and invalid provision had never been inserted herein.

     9.7  Notice. Any notice or filing required or permitted to be given to
Baxter or the Administrator under the Plan will be sufficient if in writing and
hand delivered, or sent by registered or certified mail or by overnight courier
to Baxter's Corporate Secretary and, if mailed, will be addressed to the
principal executive offices of Baxter. Notice to a Participant or Beneficiary
may be hand delivered or mailed to the Participant or Beneficiary at his or her
most recent address as listed in the records of Baxter. Notices will be deemed
given as of the date of delivery or the day after mailing or, if delivery is
made by certified or registered mail, as of the date shown on the receipt for
registration or certification. Any person entitled to notice hereunder may waive
such notice.

     9.8  Successors. The provisions of this Plan will bind and inure to the
benefit of Baxter, the Participants and Beneficiaries, and their respective
successors, heirs and assigns. The term successors as used herein will include
any corporate or other business entity, which, whether by merger, consolidation,
purchase or otherwise acquires all or substantially all of the business and
assets of Baxter, and successors of any such corporation or other business
entity.

                                        8

<PAGE>

     9.9  Participant Litigation. In any action or proceeding regarding the
Plan, Non-Employee Directors, Participants, Beneficiaries or any other persons
having or claiming to have an interest in this Plan will not be necessary
parties and will not be entitled to any notice or process. Any final judgment
which is not appealed or appealable and may be entered in any such action or
proceeding will be binding and conclusive on all persons having or claiming to
have any interest in this Plan. To the extent permitted by law, if a legal
action is begun against Baxter, the Administrator, or any member of the Board by
or on behalf of any person and such action results adversely to such person or
if a legal action arises because of conflicting claims to a Participant's or
other person's benefits, the costs to such person of defending the action will
be charged to the amounts, if any, which were involved in the action or were
payable to the Participant or other person concerned. To the extent permitted by
applicable law, acceptance of participation in this Plan will constitute a
release of Baxter, the Administrator, the Board and the Compensation Committee,
and their respective agents from any and all liability and obligation not
involving willful misconduct or gross neglect.

                                        9

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