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________________________________________________________________________________
EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
by and between
STAN LEE MEDIA, INC.
and
SELLERS OF CONAN PROPERTIES, INC
August 31, 2000
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TABLE OF CONTENTS
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STOCK PURCHASE AGREEMENT......................................................... 2
ARTICLE I........................................................................ 2
The Sale......................................................................... 2
1.1. Purchase and Sale of Stock................................................ 2
1.2. Consideration............................................................. 2
1.3. Delivery of Consideration................................................. 3
1.4. Certain Definitions And Provisions....................................... 3
1.5. Accrued Income............................................................ 4
1.6. Historical References..................................................... 5
1.7. Fractional Shares......................................................... 6
1.8. Restricted Shares......................................................... 6
1.9. Repurchase of Shares...................................................... 6
1.10. Contingent Liability...................................................... 6
1.11. NonRecourse............................................................... 6
ARTICLE II The Closing And Transfer Of Stock................................. 7
2.1. The Closing............................................................... 7
2.2. Deliveries at the Closing................................................. 7
ARTICLE III Representations And Warranties Of Sellers......................... 8
3.1. Due Organization.......................................................... 8
3.2. Capitalization; Ownership of Company...................................... 9
3.3. Authorization of Transaction.............................................. 9
3.4 Consents and Approvals; No Violations....................................... 10
3.4. Financial Statements...................................................... 10
3.5. Assets.................................................................... 10
3.7. Events Subsequent to Most Recent Financial Statement Date................. 10
3.8. Tax Matters............................................................... 10
3.9. Legal Compliance.......................................................... 11
3.10. Intellectual Property..................................................... 11
3.11. Contracts................................................................. 12
3.12. Legal Proceedings......................................................... 12
3.13. No Employees or Employee Plans............................................ 12
3.14. Acquisition of Stock for Investment....................................... 13
3.15. Investor Status........................................................... 13
3.16. Reliance on Exemptions.................................................... 13
3.17. Legend.................................................................... 13
3.18. Brokers' Fees............................................................. 14
3.19. Disclaimer................................................................ 14
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ARTICLE IV Representations And Warranties Of Buyer........................... 14
4.1. Organization of Buyer..................................................... 14
4.2. Authorization of Transaction.............................................. 14
4.3. Consents and Approvals; No Violations..................................... 14
4.4. Reliance Upon Disclosure Documents........................................ 15
4.5. Acquisition of Stock for Investment....................................... 15
4.6. Buyer's Business Investigation............................................ 15
4.7. Brokers' Fees............................................................. 15
ARTICLE V Covenants Of Sellers.............................................. 15
5.1. Interim Conduct of Business............................................... 15
5.2 PERMITTED ACTION.......................................................... 16
5.3. Access.................................................................... 16
5.4. Consummation.............................................................. 16
5.5. Termination of Consulting Agreements...................................... 16
ARTICLE VI COVENANTS OF BUYER................................................ 16
6.1. Consummation.............................................................. 16
6.2 Security Agreement........................................................ 17
6.3 Registration Rights Agreement............................................. 17
6.4 Records and Documents..................................................... 17
ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER...................... 17
7.1. Accuracy of Warranties and Performance of Covenants....................... 18
7.2. No Pending Action......................................................... 18
ARTICLE VIII Conditions Precedent To Obligations Of Sellers.................... 18
8.1. Accuracy of Warranties and Performance of Covenants....................... 18
8.2. No Pending Action......................................................... 18
ARTICLE IX Survival And Indemnification...................................... 19
9.1. Survival.................................................................. 19
9.2. Indemnification........................................................... 19
9.3. General Provisions Relating to Indemnification............................ 19
ARTICLE X TERMINATION....................................................... 20
10.1. Termination or Abandonment................................................ 20
10.2. Effect of Termination..................................................... 21
ARTICLE XI Tax Allocation.................................................... 21
ARTICLE XII GENERAL PROVISIONS................................................ 21
12.1. Amendments and Waiver..................................................... 21
12.2. Notices................................................................... 21
12.3. Expenses.................................................................. 22
12.4. Counterparts.............................................................. 22
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12.5. Successors and Assigns; Beneficiaries.............................. 22
12.6. Entire Agreement................................................... 22
12.7. Announcements...................................................... 22
12.8. Partial Invalidity................................................. 23
12.9. Governing Law...................................................... 23
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT made this 31st day of August, 2000 (the
"Agreement"), by and among Stan Lee Media, Inc. a Colorado corporation (the
"Buyer"), those entities listed in Schedule A hereto (the "Sellers"), and Conan
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Sales Co. LLC, a Delaware limited liability company ("CSC'). Buyer, Sellers and
---
CSC are sometimes referred to collectively herein as "Parties."
W I T N E S S E T H:
Whereas, Sellers collectively own or have rights in all of the issued
and outstanding shares of Conan Properties, Inc. (the "Company"), a New York
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corporation engaged, among other things, in owning and licensing certain
intellectual property relating to "Conan", "Conan the Barbarian" or variations
thereon all originally created by author Robert E. Howard (hereinafter "Conan");
and
Whereas, Buyer desires to acquire the Company through the purchase of
all of the Company's issued and outstanding shares, consisting of 100 shares of
the Company's no par common stock (collectively, the "Company's Stock"), from
---------------
Sellers and Sellers desire to sell the Company's Stock to Buyer, all upon the
terms and subject to the conditions set forth herein; and
Whereas, Sellers have formed CSC in order to collect certain portions
of the Consideration to be paid by Buyer.
Now, Therefore, Seller and Buyer hereby covenant, warrant, represent,
and agree as follows:
ARTICLE I
The Sale
1.1. Purchase and Sale of Stock. Subject to the terms and
conditions set forth in this Agreement, at the Closing (as hereinafter defined),
Sellers will sell, convey, assign, transfer and deliver to Buyer, and Buyer will
purchase, acquire and accept from Sellers, the Company's Stock for the
consideration set forth in (S)1.2 below.
1.2. Consideration. The consideration for the Company's Stock (the
"Consideration") which Buyer hereby agrees to pay Sellers and/or CSC as provided
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below shall be:
(a) At the Closing, The "Initial Shares" (as defined in and calculated
pursuant to (S)1.4(a)); and
(b) At the Closing, "Warrants" (as defined in and calculated pursuant
to (S)1.4(b)) to purchase a total of 20,000 shares of the Buyer's no par common
stock ("Buyer's Stock"); and
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(c) On the "Measurement Dates", either the "Shortfall Amount" (in
cash) or the "Guarantee Shares" and "Additional Guarantee Shares" (as such terms
are defined in and calculated pursuant to (S)1.4(c) below) if any; and
(d) On the Measurement Date, the "Contingent Payment" (as defined in
and calculated pursuant to (S)1.4(d)) if any; and
1.3. Delivery of Consideration.
(a) At the Closing, the Buyer shall issue to CSC the total number of
Initial Shares to be issued;
(b) At the Closing, the Buyer shall issue to CSC a "Warrant" (as
defined in (S)1.2(b) to purchase 20,000 shares of the Buyer's common stock no
par value ("Buyer's Stock");
(c) On the Measurement Date, Buyer shall either pay CSC the Shortfall
Amount in cash or issue at least 50% (or such greater percentage as Buyer shall
elect) of the Guarantee Shares to CSC; and if Buyer issues less than 100% of the
Guarantee Shares on the Measurement Date, then on the "Second Measurement Date"
Buyer shall issue the "Additional Guarantee Shares" to CSC (as all such terms
are defined in (S)1.4(c)); and
(d) On the Measurement Date, Buyer shall pay CSC the Contingent
Payment, if any.
1.4. Certain Definitions and Provisions With respect to the foregoing
items of the Consideration:
(a) "Initial Shares" shall mean that number of shares of Buyers Stock
--------------
calculated by dividing $4,300,000 by the "Market Price". The "Market Price"
------------
shall mean the average price per share of Buyer's Stock, during the thirty (30)
consecutive trading days ending August 31, 2000 (in the case of Initial Shares
and the Warrants, and in the case of the Guarantee Shares, and the additional
Guarantee Shares before the respective Measurement Dates), based on the closing
price or, in case no sale takes place on any such day, the average of the
closing bid and asked prices on such day as reported on the nasdaq Stock Market,
or if the Company's Stock is not then listed on The Nasdaq Stock Market, the OTC
Bulletin Board or any comparable system or, if the Buyer's Stock is not reported
on, The Nasdaq Stock Market, the OTC Bulletin Board or a comparable system, the
average of the closing bid and asked prices as furnished by two members of the
National Association of Securities Dealers, Inc. selected by Buyer, and
reasonably acceptable to Sellers for that purpose.
(b) "Warrants" shall mean warrants to purchase that number of the
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Buyer's Stock as provided in (S)1.3(b) at the Market Price as defined in
(S)1.4(a) pursuant to the terms and conditions of a Warrant Agreement in the
form annexed hereto as SCHEDULE 1.4(B).
(c) "Measurement Dates" shall mean the "Measurement Date" and the
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"Second Measurement Date". The "Measurement Date" shall mean that date which is
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18 months following the Closing Date. The "Second Measurement Date" shall mean
-----------------------
the second anniversary of the Closing Date. If at the Measurement Date, the per
share Market Price of the Buyer's Stock is equal to or in excess of the Market
Price at the Closing, then Buyer will not be
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obligated to issue any Guaranteed Shares or any Additional Guaranteed Shares.
If, however, the Market Price at the Measurement Date is less than the Market
Price at the Closing Date (such differential being referred to as the "Price
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Shortfall") then the "Guaranteed Shares" shall be that number of shares equal to
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the product of (i) the Price Shortfall multiplied by (ii) the "Unsold Shares"
(the Price Shortfall multiplied by the Unsold Shares is referred to as the
"Shortfall Amount") divided by (iii) the Market Price on the Measurement Date;
----------------
where the "Unsold Shares" means the total number of Initial Shares which remain
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unsold by CSC on the Measurement Date. If the Buyer issues to CSC 100% of the
Guaranteed Shares on the Measurement Date, then Buyer will not be required to
issue any Additional Guaranteed Shares. If, however, the Buyer issues less than
100% of the Guaranteed Shares on the Measurement date, then the "Additional
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Guaranteed Shares" shall mean that number equal to the product of: (i) the
-----------------
number of Guaranteed Shares which are not issued to CSC at the Measurement Date;
multiplied by (ii) the Market Price at the Measurement Date; and (iii) divided
by the Market Price on the Second Measurement Date.
(d) If, on the Measurement Date, the "Trading Volume" equals or
exceeds 100,000 shares (the "Target Volume") then Buyer shall not be required to
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pay any Contingent Payment; where "Trading Volume" means the thirty-day average
--------------
daily trading volume of the Buyer's Shares. If, however the Trading Volume is
less than the Target Volume, then the "Contingent Payment" that Buyer shall pay
------------------
to CSC on the Measurement Date shall equal the product of (i) $900,000
multiplied by (ii) a fraction, the numerator of which is the difference between
the Trading Volume and the Target Volume, and the denominator is the Target
Volume.
1.5. Accrued Income. At the Closing, the Company will assign to CSC
the right to collect as "Accrued Income" as defined in (S)1.5(a) below pursuant
to an assignment in the form of SCHEDULE 1.5.
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(a) "Accrued Income" shall mean all (i) royalties due to the Company
--------------
from any source which is "accrued" but unpaid as of the Closing Date ("Accrued
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Royalties"); (ii) to the extent not collected by the Company as of the Closing,
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the advances set forth in SCHEDULE 1.5(a) ("Accrued Advances"); and (iii) any
----------------
sums collected with respect to any causes of action which have accrued as of the
Closing Dates ("Accrued Causes"). For the purposes of this Agreement,
--------------
(i) a payment is accrued if it is earned by the Company in
accordance with the agreements giving rise to such royalties or other
payment, but payment of such amount has not yet been made, and accrual
of such payment would be permitted under generally accepted accounting
principles, provided that for third parties which make payments to the
Company and supply reports based on a monthly, quarterly or other
reporting period which does not break-down or permit the practicable
calculation of transactions on a daily basis, with respect to any
payment for a reporting period starting before and ending after the
Closing Date, CSC and the Company will allocate such payment based on
the number of days during the reporting period which were prior to the
Closing Date and the number of days which were from the Closing Date
through the end of the reporting period. Payments for periods which
end prior to the Closing Date will be allocated entirely to CSC and
payments for periods starting on and after the
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Closing Date will be allocated to the Company and need not be
deposited in the separate account provided in (S)1.5(b);
(ii) a Cause of Action shall be deemed accrued as of the Closing
Date if the Company had any payments accrued but not received in
connection with the cause of action as of the Closing Date or if the
defendant in such cause of action had as of the Closing Date violated
any right of the Company giving rise to a claim for compensation. CSC
shall not be entitled to make any claim or bring any cause of action
---
against any party with which the Company has ongoing business
activities at the Closing, except as provided in SCHEDULE 1.5(a)(ii).
-------------------
If an Accrued Cause of Action will potentially result in revenues with
respect to periods both before and after the Closing Date, then Buyer
and CSC will negotiate in good faith whether to jointly prosecute the
cause of action and allocate the expenses thereof provided that the
Company will be entitled to make the ultimate determination whether a
claim should be made or a litigation commenced, except for those
claims referred to in SCHEDULE 1.5(a)(ii). If Buyer determines, after
the Closing, to make any claim or commence any litigation against any
third party with respect to an Accrued Cause of Action, Buyer shall
report to CSC the progress and costs of such claim CSC and pay to CSC
amounts recovered for periods prior to the Closing, net of the pro-
rata costs of such collection. CSC shall at its own expense and in
its own name, be entitled to make a claim or file suit with respect to
any Accrued Claim against a party with which the Company does not have
ongoing business activities at the Closing.
(b) The Company will prior to the Closing open a separate bank account in a
bank in New York, which requires the signature of a representative of the
Company and a representative of CSC for all transactions. All payments from any
third party that may in part be for Accrued Income, shall be deposited into this
separate account. The Company and CSC shall allocate such amount between Accrued
Income and other amounts and jointly sign checks to disburse such funds. Until
such remittance, all funds that constitute Accrued Income shall be held by the
Company in trust for CSC and shall not be deemed the property of the Company.
(c) In the event that the Company receives any Accrued Income, until it
deposits such amount into the joint account provided in (S)1.5(b), the Company
shall hold such amounts in trust for CSC and promptly remit such funds to such
account.
(d) CSC shall be responsible to pay any commissions due to any sales agent
or other party with respect to, and out of, Accrued Income. CSC shall also be
responsible to pay all filing and maintenance fees accrued up to the Closing
Date with respect to the Assigned IP (as defined in the Security Agreement) as
provided in (S)6.2.
1.6. Historical References. At the Closing the Company will license
Sellers (or companies that they control) who have an ownership interest in
Robert E. Howard works, the right to make historical references of the nature of
"from the creators of Conan the Barbarian" but such parties shall have no right
to show any visual representation of Conan the Barbarian.
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1.7. Fractional Shares. Buyer shall not issue any fractional shares as
part of the Initial Shares or the Guarantee Shares, or Additional Guarantee
Shares and if any calculation of Initial Shares or Guarantee Shares or
Additional Guarantee Shares would result in fractional shares, Buyer shall pay
an amount of cash in lieu of such fractional share based on the Market Price at
the Closing Date or the appropriate Measurement Date.
1.8. Restricted Shares. All shares of Buyer's Stock issued to Sellers or
CSC hereunder will be restricted securities as such term is defined in paragraph
(a)(3) of Rule 144 of the Securities Act of 1933, as amended. However, as
provided in (S)6.2 below, Seller agrees to register such shares in certain
circumstance
1.9. Repurchase of Shares. If the Trading Volume on the date that is 90
days following the Measurement Date (the "Buyback Date") is less than 50,000
shares, then, to the extent requested by CSC, the Buyer shall be required to
purchase any Unsold Shares (excluding the Guaranteed Shares) at the Market Price
on the Closing of this Agreement. Upon CSC receiving such amount, it will
deliver to Buyer the Guaranteed Shares for no additional Payment. Such
repurchase shall occur within 30 days following the request of CSC. CSC shall be
entitled to request the repurchase with respect to all or a portion of the
Unsold Shares. With respect to any shares so repurchased: (a) Buyer will not be
required to deliver any Additional Guaranteed Shares; and (b) Buyer will be
entitled to a credit for the portion of the Contingent Payment allocable to the
Unsold Shares.
1.10. Contingent Buyback Liability. In addition to the foregoing
Consideration, the Buyer shall pay CSC $2,000,000 on the Buyback Date (the
"Contingent Buyback Liability"). Notwithstanding the foregoing, the Contingent
Liability shall not be due and payable by the Company if either (a) the Trading
Volume on the Buyback Date equals or exceeds 50,000 shares; or (b) if Buyer
complies with the payment obligation provided in (S)1.9.
1.11. NonRecourse Subject to the exception provided in this Section, CSC
shall not enforce the liability and obligations of Buyer under (S)1.9 and
(S)1.10 (the "Non-Recourse Obligations") by any action or proceeding wherein a
money judgment shall be sought against Buyer, except that CSC may exercise any
remedies as a secured creditor against the Collateral (as defined in the
Security Agreement provided in (S) 2.2(b)(iv) below (the "Security Agreement")
and take any appropriate action or proceeding to enable CSC to enforce and
realize upon its interests under the Security Agreement; provided however, that,
except as specifically provided herein, any judgment in any action or proceeding
naming the Buyer shall be enforceable against Buyer with respect to the Non-
Recourse Obligations only to the extent of Buyer's interest in the Collateral
and in any other collateral given to CSC, and CSC by accepting this agreement,
agrees that it shall not sue for, seek or demand any deficiency judgment against
Buyer, with respect to the Non-Recourse Obligations in any action or proceeding
under or by reason of or under or in connection with the Non-Recourse
Obligations. Nothing contained in this (S)1.11 shall be construed (i) as
preventing CSC from naming Buyer in any action, case or proceeding brought by
CSC to enforce obligations other than the Non-Recourse Obligations, or to
enforce and to realize upon the security and Collateral provided under the
Security Agreement so long as no judgment, order, decree or other relief in the
nature of a personal or deficiency judgment or otherwise establishing any
personal obligation shall be asked for, taken, entered or enforced against Buyer
in any such action, case or proceeding with respect to any Non-Recourse
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Obligation; (ii) as modifying, qualifying or affecting any manner whatsoever the
lien and security interests created by the Security Agreement or the enforcement
thereof by CSC; (iii) as modifying, qualifying or affecting in any manner
whatsoever the undertakings, obligations and liabilities of Buyer, other than
the Non-Recourse Obligations or of any other person under any agreement now or
hereafter executed; (iv) as constituting a prohibition against CSC commencing
any other appropriate action or proceeding in order for CSC to fully realize the
security granted by the Security Agreement or to exercise its rights and/or
remedies against, or with respect to, the Collateral or any other collateral
given by Buyer to CSC or (v) as constituting a waiver of the right of CSC to
enforce the liability and obligation of Buyer, by money judgment or otherwise,
to the extent of any loss, damage, cost, expense, liability, claim, action,
judgment, court cost or other obligation incurred by CSC (including without
limitation, Professional Fees), arising out of or in connection with the failure
of Buyer to comply with its covenants under the Security Agreement, including
without limitations those under (S) 4 thereof, it being hereby expressly agreed
that Borrower shall be liable and obligated to CSC for such amounts and such
amounts shall be payable by Buyer to CSC immediately upon demand.
Notwithstanding anything to the contrary in this Agreement, CSC shall not be
deemed to have waived any right which CSC may have under (S) 506(a), 506(b),
1111(b) or any other provisions of the U.S. Bankruptcy Code to file a claim for
the full amount of the Obligation evidenced by this Agreement or to require that
all Collateral shall continue to secure all of the Obligations owing to CSC in
accordance with this Agreement and the Security Agreement, and the Non-Recourse
Obligations shall be fully recourse to Buyer in the event of Buyer filing for
protection under any Article of the U.S. Bankruptcy Code (or joining in any case
filed by any other party to similar effect) or in the event of the filing of a
case, proceeding or other action by any other person under any Article of the
U.S. Bankruptcy Code against Buyer which is not dismissed within sixty (60) days
of filing.
ARTICLE II
The Closing And Transfer Of Stock
2.1. The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Share & Blejec LLP,
counsel to the Seller, 317 Madison Avenue, New York, New York 10017, commencing
at 10:00 a.m., local time, on the fifth business date following the date first
set forth above, or such other date as mutually agreed by the parties (the
"Closing Date").
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2.2. Deliveries at the Closing.
(a) Deliveries by Sellers. At the Closing, Sellers will execute,
acknowledge (if appropriate), and deliver to Buyer:
(i) Certificates for the Company's Stock with duly executed stock
powers to effect the transfer of ownership of the Stock to Buyer;
(ii) Certificates of good standing from the state of New York.
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(iii) A copy of all charter documents of the Company certified by the
Secretary of State of New York as of a recent date;
(iv) Certificate of the Secretary of the Company certifying copies of
the By-laws, minute book and stock record book of the Company as of the
Closing Date;
(v) The officer's certificate specified in (S)7.1;
(vi) Resignations of all directors and officers; and
(x) All other documents, instruments and writings required to be
delivered by Seller at or prior to the Closing Date pursuant to this
Agreement.
(b) Deliveries by Buyer. At the Closing, Buyer will execute,
-------------------
acknowledge (if appropriate), and deliver to Seller:
(i) Certificates for the Initial Shares;
(ii) The Warrant Agreements;
(iii) The officer's certificate specified in (S)8.1;
(iv) An executed Security Agreement in the form attached hereto as
Schedule 6.2
(v) An executed Registration Rights Agreement in the form attached
hereto as Schedule 6.3, and;
(vi) All other reasonable and material documents, instruments and
writings required to be delivered by Buyer at or prior to the Closing Date
pursuant to this Agreement.
(c) Deliveries by Company. At the Closing, the Company will execute and
---------------------
deliver to CSC the assignment required in (S)1.5.
ARTICLE III
Representations And Warranties Of Sellers
Sellers, jointly and severally hereby represent and warrant to Buyer as of
the date hereof as set forth below:
3.1. Due Organization. The Company is a corporation validly existing and
in corporate good standing under the laws of the State of New York, and has all
requisite power and authority, corporate and governmental, to own, lease and
operate its properties and assets and to carry on the Business as now conducted.
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(a) The Company is duly qualified or licensed to do business as a foreign
corporation and is in good standing in all jurisdictions in which the ownership,
leasing or operation of its assets or the conduct of the Business requires such
qualification.
(b) CSC is validly existing and in good standing under the laws of the
State of Delaware and has all requisite authority and power to conduct those
activities as contemplated by this Agreement, and to perform its obligations as
set forth in this Agreement.
(c) The Company has no subsidiaries nor does it own the equity securities
of any other entity.
3.2. Capitalization; Ownership of Company. (a) The aggregate authorized
capital stock of the Company consists of 200 shares of No par value common
stock, of which a total of 100 shares are issued and outstanding. All
outstanding shares of the Company's Stock were issued in compliance with
applicable federal and state laws.
(b) All of the outstanding shares of the Company's Stock are duly
authorized, validly issued, fully paid and nonassessable, with no preemptive
rights of third parties attaching thereto. There are no outstanding options,
rights, warrants, preemptive rights, conversion rights or other agreements or
commitments to which the Company is a party or subject providing for the
issuance of additional capital stock or any other securities of the Company or
for any other adjustment, purchase or transfer affecting the ownership interests
in the Company.
(c) The Sellers collectively own (beneficially and of record) and have
good title to 100% the Company's Stock, and have the right, power and capacity
to sell, assign and transfer the Stock to the Buyer without the consent of any
other person, free and clear of all liens or encumbrances. Sellers have not
entered into any contract, agreement or arrangement with respect to the
disposition or voting of the Company's Stock. Upon completion of the
transactions contemplated hereby, Buyer will have good title to the Company's
Stock, free and clear of all liens or encumbrances, except those created by or
on behalf of Buyer and such shares shall represent 100% of the issued and
outstanding equity securities of the Company. The Company has no bonds or other
debt instruments outstanding.
3.3. Authorization of Transaction. CSC has full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder and thereunder. Jack Webb Baum, as Executor of the Estate of Alla Ray
Morris represents and warrants that he has the right to execute this Agreement
on behalf of such Estate and that such estate owns 50 shares of the Company's
Stock, free and clear of all liens and encumbrances. Lyman Sprague de Camp and
Gerard Beekman de Camp represent and warrant that they are the duly authorized
trustees of the Voting Trust Agreement ("de Camp Trust") between themselves and
as such are authorized to execute this Agreement on behalf of such Trust and
that the de Camp Trust owns 50 shares of the Company's Stock, free and clear of
all liens and encumbrances. All acts and proceedings required to be taken by
Sellers to authorize the execution, delivery and performance of this Agreement
and all transactions contemplated thereby have been duly and properly taken.
This Agreement has been, duly executed and delivered by Sellers and CSC.
Assuming due authorization, execution and delivery by Buyer, this Agreement
constitutes the lawful, valid and legally binding obligation of Sellers, and CSC
in accordance with its terms, except as limited by
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applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights and remedies.
3.4 Consents and Approvals; No Violations. No filing with, and no permit,
authorization, consent or approval of, any public body or authority, domestic or
foreign, is necessary for the consummation by Sellers and CSC of the
transactions contemplated by this Agreement. Neither the execution and delivery
of this Agreement by Sellers and CSC, nor the consummation by Sellers and CSC of
the transactions contemplated hereby, nor compliance by Sellers and CSC with any
of the provisions hereof will (a) conflict with or result in any breach of any
provision of the certificate of incorporation of the Company or CSC, (b) result
in a violation or breach of, or constitute (with or without due notice or lapse
of time or both) a default under, or give rise to any right of termination,
cancellation or acceleration under any of the terms, conditions or provisions
of, any indenture, license, contract, agreement or other instrument or
obligation to which the Company or Sellers or CSC is a party or by which any of
them or any of their properties or assets may be bound, or (c) violate any
order, writ, injunction, decree, statute, treaty, rule or regulation applicable
to the Company or Sellers or CSC or any of their properties or assets.
3.4. Financial Statements. The unaudited Balance Sheet and Statement of
Profit and Loss for the years ended December 31, 1997, 1998 and 1999 of the
Company (the "Annual Statements"), together with the Company's unaudited
Quarterly Statement for the quarter[s] ended April 30, 2000, and June 30, 2000
(the "Most Recent Financial Statement Date") have been delivered or made
available to Buyer. The Sellers and CSC believe that these statements fairly
present the financial condition, assets, liabilities, of the Company as of such
dates. To the Sellers' and CSC's knowledge, there are no liabilities, not shown
or adequately reserved against in such Annual Statements and Quarterly
Statements.
3.5. Assets. The Company has no tangible assets having conducted its
business from the homes or offices of its employees or agents. The Company's
assets consist solely of receivables and intellectual property relating to Conan
and some (but not all) of the characters featured in some of the Conan books,
movies, television productions and/or other works ("Conan Works"). The Company
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has good and marketable title to, or a valid leasehold interest in, the
properties and assets reflected on its most recent financial statements referred
to in (S)3.4 thereof, free and clear of any and all liens, encumbrances,
licenses or other adverse interests, except for liens or encumbrances for
current Taxes (as defined in (S)3.8) not yet due and payable or limitations
agreed to in contracts listed in Schedule (S)3.11.
3.7. Events Subsequent to Most Recent Financial Statement Date. Except as
provided in Schedule (S)3.7, since the Most Recent Financial Statement Date, the
Business has been operated in the ordinary course and there has not been any
material change in the assets, liabilities, properties, business, financial
condition, operations or results of operations of the Business. None of the
events set forth in (S)5.1 hereof, other than the events permitted thereunder,
have occurred since the Most Recent Financial Statement Date.
3.8. Tax Matters. The Company has filed all tax returns and forms that it
was required to file, and paid all Taxes shown thereon as owing. To the
knowledge of the Sellers, all such tax returns were completed and filed in
accordance with applicable law in all material
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respects. Neither Sellers nor the Company have waived any statute of limitations
in respect of taxes payable by the Company or agreed to any extension of time
with respect to a tax assessment or deficiency. Neither Sellers nor the Company
is subject to or threatened with any action, suit, proceeding, investigation,
audit or claim with respect to the payment of any tax by the Company. As used
herein, "Tax" or "Taxes" means any federal, state, local, or foreign income,
gross receipts, franchise, estimated, alternative minimum, add-on minimum,
sales, use, transfer, registration, value added, excise, natural resources,
severance, stamp, occupation, premium, profit, customs, duties, real property,
personal property, capital stock, intangibles, social security, employment,
unemployment, disability, payroll, license, employee, or other tax, withholding
tax, or levy, of any kind whatsoever, including any interest, penalties, or
additions to tax in respect of the foregoing.
3.9. Legal Compliance. The Company is in compliance with all applicable
laws (including rules, regulations, codes, plans, injunctions, licensing
requirements, judgments, orders, decrees, rulings, and charges thereunder) of
federal, state, local, and foreign governments (and all agencies thereof), and
with its Articles of Incorporation and By-Laws.
3.10. Intellectual Property. The Company's Intellectual Property, and major
asset is its ownership of certain trademarks and copyrights and secondary
meanings relating to "Conan" and certain characters portrayed in Conan Works
(the "Intellectual Property"). Attached as SCHEDULE 3.10 is a list of all
trademarks and copyrights filed by the Company. Except as set forth in Schedule
3.10 or in the Contracts listed in Schedule 3.11, with respect to all
trademarks, copyrights, registrations and licenses of the Company comprising the
Intellectual Property, (a) the Company is the owner or has the right to use the
Intellectual Property in the manner in which it is currently being used, (b) no
action, suit or proceeding is pending against the Company or, to Sellers'
knowledge, threatened with respect to the Intellectual Property, (c) to the
knowledge of Sellers, the Intellectual Property does not infringe upon the
rights of others and is not subject to any outstanding claim, order, decree or
judgment, and (d) there are no royalty, commission or similar arrangements, and
no licenses, sublicenses or agreements, pertaining to any of the Intellectual
Property. Except as provided in Schedule 3.10, the Sellers' make no
representations as to whether some of its trademarks and/or copyrights have
expired or are invalid in certain countries, and it is acknowledged by the
Parties that US trademarks and/or copyrights are not necessarily honored in
certain jurisdictions. Buyer acknowledges that as indicated in the contracts
listed in Schedule 3.11 many of the Company's contracts grant licenses to third
parties for certain uses which limit the Company's rights to make certain use of
its Intellectual Property during the term of such agreements, which might be
lengthy or indefinite. Further, under some of these license agreements the
Company has received substantial advance payments which it has distributed to
its shareholders and others, and no further royalties will be paid until sales
exceed the amount on which the advance is based. An example is a license granted
to Hasbro granting it the perpetual exclusive right to market Conan Merchandise.
Under the Hasbro agreement, the Company received an advance of $2 million only
approximately $400,000 of which has been offset by sales. As a result no
royalties will be payable to the Company by Hasbro until $1.6 million of
royalties of Conan Merchandise has been offset by sales. Certain Robert E.
Howard characters that may have been portrayed in Conan Works are not owned by
Conan Properties. Among such characters are: "Red Sonja", "Kull", "Soloman
Kane", "Bran Mak Morn", "Essau Kairn", "Cormac Mac Art", "Turlogh
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O'Brien", and "Thulsa Doom", and other Robert E. Howard characters appearing in
other Robert E Howard works as well as third party characters appearing in
licensees' stories, such as a Spiderman appearance in a Conan comic from the
licensee Marvel
3.11. Contracts. SCHEDULE 3.11 lists the following contracts and other
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agreements to which, to the knowledge of Sellers or CSC, the Company is a party:
(a) any agreement licensing to any party any rights to use any of the
Company's Intellectual Property to the extent that any such rights remain in
effect;
(b) any agreement to pay any third party any commissions;
(c) all insurance policies covering the Company;
(d) any agreement (or group of related agreements) for the lease of
personal property to or from any Person providing for lease payments in excess
of $10,000 per annum;
(e) any agreement (or group of related agreements) under which the Company
has created, incurred, assumed, or guaranteed any indebtedness for borrowed
money;
(f) any agreement imposing non-competition obligations on the Company;
(g) any agreement for the employment of any individual; and
(h) any agreement not made in the ordinary course of business, other than
this Agreement and the agreements contemplated hereby.
To the knowledge of Sellers and CSC, except as described in Schedule 3.11, each
of such contracts or agreements, (i) is a legal, valid and binding obligation of
the Company and (ii) no party is in breach or default thereunder and no event
has occurred which, with notice or lapse of time, would constitute a breach or
default of any such contract. Sellers and CSC represent and warrant that
Schedule 3.11 includes all agreements relating to or restricting movie rights,
television rights, video game rights or internet rights and that there are no
disputes relating to such rights except as set forth in the contracts listed in
Schedule 3.11.
3.12. Legal Proceedings. (i) the Company is not engaged in or a party to,
or threatened with, any claim, action, suit or other legal or administrative
proceeding involving the Company or its assets, (ii) Sellers have no knowledge
of any investigation threatened by any governmental or regulatory authority with
respect to the Company or its assets, and (iii) the Company is not subject to
any judgment, order, writ, injunction, stipulation or decree of any court or any
governmental agency.
3.13. No Employees or Employee Plans. The Company has no employees except
that Sandy Bronsther, Raymond Schacht, Barbara Baum and Jocelyn Darling have
provided the Company services via consulting agreements and the Company has no
employee pension benefit plans ("Pension Benefit Plans"), as defined in (S)3(2)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
under other employee welfare benefit plans ("Welfare Benefit Plans"), as defined
in (S)3(l) of ERISA, or under any multiemployer plan as
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defined in (S)3(37) of ERISA, nor does it have any liability with respect to any
such plan. The Company has no liability to make any contributions under the
terms of any Pension Benefit Plans. The Company is not responsible for or liable
in connection with any Welfare Benefit Plans, under which any material claims
for benefits are in dispute, or for the compliance as to any such Plan with any
applicable requirements, if any, of ERISA and the Code, including, but not
limited to, the requirements of the Consolidated Omnibus Budget Reconciliation
Act of 1985 ("COBRA") to provide health care continuation coverage ((S)4980B(f)
of the Code).
3.14. Acquisition of Stock for Investment. CSC is are acquiring the Buyer's
Stock on behalf of the Sellers for investment and not with a view toward any
distribution thereof, and will dispose of such Stock only in compliance with the
Securities Act of 1933 as amended (the "33 Act") and any applicable state
securities laws. Notwithstanding the foregoing, it is understood that CSC will
be holding Buyer's Stock for the benefit of the Sellers who will be the
beneficial holders thereof and for a small number of other entities who have an
interest in the Company which will not continue as a result of this Agreement,
or to satisfy amounts owed to such entities by the Company, and that CSC will
transfer record ownership of such shares to such persons in private placements
during the two years following the Closing.
3.15. Investor Status. Each of the Sellers has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of an investment made pursuant to this Agreement. Each of
the Sellers is aware that it may be required to bear the economic risk of an
investment made pursuant to this Agreement for an indefinite period of time, and
is able to bear such risk for an indefinite period.
3.16. Reliance on Exemptions. Each of the Sellers and CSC understands the
Buyer's Stock is being offered and sold to it in reliance on specific exemptions
from the registration requirements of the applicable United States federal and
state securities laws and that the Buyer is relying upon the truth and accuracy
of, and the Sellers' compliance with, the representations, warranties,
acknowledgments, understandings, agreements and covenants of the Sellers set
forth herein in order to determine the availability of such exemptions and the
eligibility of the Sellers to acquire the Buyer's Stock
3.17. Legend. The Sellers and CSC understand that until the Common Stock,
the Warrants, and the shares of Common Stock issuable upon exercise of the
Warrants (if any) (the "Registrable Securities"), have been registered under the
33 Act and that the stock certificates representing the Registrable Securities
will bear a restrictive legend (the "Legend") in substantially the following
form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE
SECURITIES LAWS (COLLECTIVELY, THE "LAWS"). THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED IN THE ABSENCE OF EITHER (I) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE LAWS, OR (II) AN OPINION OF COUNSEL
PROVIDED TO THE ISSUER IN FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE
TO THE ISSUER TO THE EFFECT THAT REGISTRATION IS NOT
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REQUIRED UNDER THE LAWS DUE TO AN AVAILABLE EXCEPTION TO OR EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE LAWS.
3.18. Brokers' Fees. Upon the completion of this Agreement, neither the
Sellers nor the Company has any liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which the Buyer or the Company will be
liable.
3.19. Disclaimer. Sellers make no representation or warranty with regard to
any statements, oral or written, with respect to the Stock, the Business or the
Company except as expressly set forth in this Agreement.
ARTICLE IV
Representations And Warranties Of Buyer
Buyer represents and warrants to Sellers and CSC as follows:
4.1. Organization of Buyer. Buyer is a corporation validly existing and in
good standing under the laws of the State of Colorado.
4.2. Authorization of Transaction. Buyer has full corporate power and
authority to execute and deliver this Agreement, the Security Agreement and the
Registration Rights Agreement and the Warrants and the Initial Shares, the
Guarantee Shares and the Additional Guarantee Shares and to perform its
obligations hereunder and thereunder. All acts and proceedings required to be
taken by Buyer to authorize the execution, delivery and performance of this
Agreement and all transactions contemplated thereby have been duly and properly
taken. This Agreement has been, and the other documents contemplated to be
executed and delivered by Buyer at Closing will be, duly executed and delivered
by Buyer. Assuming due authorization, execution and delivery by Sellers, this
Agreement, the Security Agreement and the Registration Rights Agreement
constitute the lawful, valid and legally binding obligations of Buyer,
enforceable, in all cases, in accordance with their terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights and remedies.
4.3. Consents and Approvals; No Violations. No filing with, and no permit,
authorization, consent or approval of, any public body or authority, domestic or
foreign, is necessary for the consummation by Buyer of the transactions
contemplated by this Agreement. Neither the execution and delivery of this
Agreement by Buyer nor the consummation by Buyer of the transactions
contemplated hereby nor compliance by Buyer with any of the provisions hereof
will (a) conflict with or result in any breach of any provision of the
certificate of incorporation of Buyer, (b) result in a violation or breach of,
or constitute (with or without due notice or lapse of time or both) a default
under, or give rise to any right of termination, cancellation or acceleration
under any of the terms, conditions or provisions of, any indenture, license,
contract, agreement or other instrument or obligation to which the Buyer is a
party or by which Buyer or any of its properties or assets may be bound, or (c)
violate any order, writ, injunction, decree, statute, treaty, rule or regulation
applicable to the Buyer or any of its properties or assets.
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4.4. Reliance Upon Disclosure Documents. Sellers and CSC, in agreeing to
take Buyer's Stock as part of the Consideration shall be entitled to rely upon
the Buyer's various forms 10-KSB's and 10-QSB's, proxy statements and annual
reports to shareholders. Such documents are true and correct as of their
respective dates, do not contain any misstatements as to material facts, and do
not omit to disclose any information necessary to make any statements made, in
the context in which made, not misleading.
4.5. Acquisition of Stock for Investment. Buyer is acquiring the Stock for
investment and not with a view toward any distribution thereof, and will dispose
of such Stock only in compliance with the 33 Act and any applicable state
securities laws.
4.6. Buyer's Business Investigation. Buyer has been permitted by Sellers to
conduct such investigation of the Company as it has deemed necessary in order to
make an informed decision concerning the transactions contemplated hereby. Buyer
has reviewed all of the documents, records, reports and other materials
identified in the Schedules hereto and is familiar with the content thereof.
Buyer acknowledges that it has been given access to all such information. For
the purpose of conducting these investigations, Buyer has employed the services
of its own agents, representatives, experts and consultants. To Buyer's
knowledge, all materials and information requested by Buyer have been provided
to Buyer to Buyer's satisfaction. Sellers, for the convenience of Buyer, have
provided Buyer a brief description of certain of the contracts listed in (S)3.14
to Buyer, provided that it is agreed and acknowledged that: (i) such description
is from the personal memory of one of the Sellers and has not been verified and
Sellers disclaim any obligation to verify such description; (ii) such
description is not represented by the Sellers or CSC to be accurate; and (iii)
such description is qualified in its entirety by the actual agreement which
Buyer has had the opportunity to review.
4.7. Brokers' Fees. Buyer has no liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which the Seller will be liable.
ARTICLE V
Covenants Of Sellers
5.1. Interim Conduct of Business. Without limiting the generality of the
foregoing and except as otherwise provided in this Agreement or the transactions
contemplated hereby, the Sellers will not cause the Company prior to the Closing
Date, without the prior consent of Buyer, to do any of the following:
(a) sell, lease, transfer, license, or assign any of its assets, tangible
or intangible, to any third party, other than in the ordinary course of
business.
(b) impose any Lien upon any of its assets, tangible or intangible, or any
security interest;
(c) change or authorize a change in the Certificate of Incorporation or
bylaws of the Company;
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(d) issue, sell or otherwise dispose of any of its capital stock, or grant
any options, warrants, or other rights to purchase or acquire (including
upon conversion, exchange, or exercise) any of its capital stock;
(e) guarantee any third-party indebtedness;
(f) incur borrowings from third parties, without Buyer's prior approval;
(g) enter into or amend any agreement or transaction other than as
permitted herein;
(h) merge or consolidate with any other person or entity or acquire a
material amount of assets of any other person or entity; or
(i) agree or commit to do any of the foregoing.
5.2 Permitted Action. Notwithstanding the provisions of (S)5.1, between
the date hereof and the Closing Date,Sellers will be entitled to cause the
Company to declare, set aside, or pay any cash dividend or make any cash
distributions with respect to its capital stock to the extent of any amounts
collected, after the Company has first paid or provided for all creditors.
5.3. Access. From the date hereof through the Closing Date, Sellers shall
give Buyer and its representatives access, during normal business hours and
under reasonable circumstances, to all properties, records and appropriate
personnel, including officers and independent public auditors, of the Company
and shall furnish Buyer with all financial and other information in its
possession relating to the Company as Buyer may reasonably request.
5.4. Consummation Subject to the terms and conditions provided herein,
Sellers agree to use all reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement in accordance with its terms;
except that this covenant shall not require Sellers to make any payment or incur
any economic burden not provided for herein.
5.5. Termination of Consulting Agreements Sellers shall cause the
consulting agreements listed in (S)3.13 to be terminated effective as of the
Closing and be responsible for any liability to any person or Company for any
such termination. CSC and Sellers will provide Buyer at the Closing with such
evidence of having complied with this (S)5.5 as Buyer may reasonably request.
ARTICLE VI
COVENANTS OF BUYER
6.1. Consummation. Subject to the terms and conditions provided herein,
Buyer agrees to use all reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement in accordance
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with its terms; except that this covenant shall not require Buyer to make any
payment or incur any economic burden not provided for herein.
6.2 Security Agreement. Buyer will enter into and will cause the
Company to enter into a security agreement in the form attached hereto as
SCHEDULE 6.2 pursuant to which Buyer will cause the Company to assign CSC the
Conan Trademarks and copyrights and will grant CSC a security interest in all
contracts of the Company granting licenses to third parties to use any of the
Company's Intellectual Property and all proceeds thereof including royalties and
advances received by the Company as security for the payment by buyer of its
obligations under (S)(S)1.2(c) and (d). In connection with the Security
Agreement, (a) Buyer will not permit the Company to enter into any licensing
agreement that does not provide for fair consideration to the Company under
terms consistent with normal practices in the industry; (b) will cause all
assets of the Company to remain in the Company and not commingle the Company's
assets with those of Buyer; (c) Buyer will advise CSC of all material licenses
and agreements entered into and payments received thereunder; (d) with respect
to existing contracts, Buyer agrees that upon the Company failing to comply with
its obligation hereunder CSC is authorized to notify third parties thereto to
make all future royalty and other payments relating to any Conan Work to CSC
rather than the Company or Buyer; and (e) with respect to any contract entered
into by the Company or with respect to any of its intellectual property after
the Closing and before the Buyer has fulfilled all its obligations under
(S)(S)1.2(c) and (d) Buyer shall cause to be included in each such contract a
provision notifying the other parties to such contract of CSC's security
interest and direct such parties to make all payments to CSC upon receipt of
notification from CSC or the Company to do so.
6.3 Registration Rights Agreement. Buyer will enter into the
Registration Rights Agreement with Sellers and CSC attached hereto as SCHEDULE
6.3 pursuant to which it will confirm that Buyer will (a) within 9 months
following the closing register the Initial Shares and any Guarantee Shares under
the "33 Act"; and (b) grant Sellers and CSC "Piggyback Rights" to have their
Initial Shares and Guarantee Shares included in certain registration statements.
6.4 Records and Documents. Following the Closing Date, Buyer shall
grant to Sellers and their respective representatives, at Sellers' reasonable
request, reasonable access to and the right to make copies at Sellers' expense
of those records and documents covering any period prior to the Closing related
to the Business as may be reasonably necessary for litigation, preparation of
financial statements, tax returns and audits or other business purposes. In
connection with the Security Interest referred to in (S)6.2 above, Buyer will
grant CSC access to all records and documents covering any assets and income
covered by the security interest granted to CSC. If Buyer elects to dispose of
such records, Buyer shall first give CSC sixty (60) days' written notice, during
which period CSC shall have the right to take such records without further
consideration
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
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The obligation of Buyer to consummate the transactions contemplated by this
Agreement is subject to delivery of the items specified in (S)2.2(a) and
fulfillment prior to or at the Closing of the following conditions (unless
waived in writing in the sole discretion of Buyer):
7.1. Accuracy of Warranties and Performance of Covenants. The
representations and warranties of Sellers and CSC contained herein shall be
accurate in all material respects as if made on and as of the Closing Date,
except for changes occurring in the ordinary course of the Business or as
permitted herein. Sellers shall, in all material respects, have performed all
obligations and complied with each and all of the covenants and agreements
required to be performed or complied with on or prior to the Closing. A
Certificate of the Chief Executive Officer or Chief Financial Officer of the
Company shall be delivered to the effect that, to the knowledge of such
certifying officer, the representations and warranties are true and correct and
that the covenants have been fully complied with.
7.2. No Pending Action. No order of any court, administrative agency or
other governmental authority shall be pending which prohibits the carrying out
of this Agreement or any of the significant transactions contemplated hereby or
declares unlawful the transactions contemplated hereby.
7.3 Security Agreement. CSC shall have signed a Security Agreement in the
form attached hereto as Schedule 6.2.
7.4 Registration Agreement. Sellers and CSC shall have signed a
Registration Rights Agreement in the form attached hereto as Schedule 6.3.
ARTICLE VIII
Conditions Precedent To Obligations Of Sellers
The obligation of Sellers to consummate the transactions contemplated by
this Agreement is subject to delivery of the items specified in (S)2.2(b) and
fulfillment prior to or at the Closing of the following conditions (unless
waived in writing in the sole discretion of Seller):
8.1. Accuracy of Warranties and Performance of Covenants. The
representations and warranties of Buyer contained herein shall be accurate in
all material respects as if made on and as of the Closing Date. Buyer shall
have, in all material respects, performed all obligations and complied with each
and all of the covenants and agreements required to be performed or complied
with on or prior to the Closing. A Certificate of the Chief Executive Officer or
Chief Financial Officer of the Buyer shall be delivered to the effect that to
the knowledge of such certifying officer, the representations and warranties are
true and correct and that the covenants have been fully complied with.
8.2. No Pending Action. No order of any court, administrative agency or
other governmental authority shall be pending which prohibits the carrying out
of this Agreement or any of the significant transactions contemplated hereby or
declares unlawful the transactions contemplated hereby.
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8.3 Security Agreement. Buyers and the company shall have signed and
delivered the Security Agreement in the form annexed hereto as Schedule 6.2
8.4 Registration Rights Agreement. Buyer shall have signed and delivered
the Registration Rights Agreement form annexed hereto as Schedule 6.3
8.5 Assignment. The Company shall have signed and delivered the
Assignment required in (S)1.5
ARTICLE IX
Survival And Indemnification
9.1. Survival. Unless otherwise specified herein, all covenants and
agreements contained herein or in any agreement or document delivered pursuant
hereto, shall survive the Closing until fully performed. All representations and
warranties contained herein or in any agreement or other document delivered
pursuant hereto shall survive the Closing for a period of six months from the
date hereof, after which they shall be of no further force or effect; provided,
however, that all representations and warranties set forth in (S)3.2, (S)3.3 and
(S)4.2 shall survive until the expiration of the applicable statute of
limitations. Notwithstanding the foregoing, any claim for indemnification that
is asserted by written notice as provided in (S)9.3 within the applicable
survival period shall survive until resolved pursuant to a final nonappealable
judicial determination or otherwise.
9.2. Indemnification. Subject to the provisions of (S)9.3, Sellers shall
indemnify and hold harmless Buyer, and Buyer shall indemnify and hold harmless
Sellers and CSC from and against any and all loss, damage, cost or expense
(including reasonable attorneys' fees and expenses) caused by any
misrepresentation, breach of warranty or failure to fulfill any covenant or
agreement contained herein or in any agreement or other document delivered
pursuant to the terms hereof. All such indemnification shall be made by delivery
of shares of Buyer's Stock at the Market Price at the Closing Date.
9.3. General Provisions Relating to Indemnification. (a) Neither Sellers
nor CSC nor Buyer shall be required to make any restitution, in the form of
Buyer's Stock pursuant to this Article IX, unless and to the extent that the
aggregate amount of all claims by Buyer or by Sellers and CSC, taken as a whole
pursuant to this Article IX shall exceed $50,000 (the "Threshold Amount").
(b) Neither Buyer, nor Sellers and CSC taken as a whole shall be entitled
to collect greater than a total of the lesser of (i) shares of Buyer's Stock
with a Market Price at the time of claim equal to $500,000 or (ii) 50,000 shares
of Buyer's Stock as indemnification under this Agreement ("Maximum Claim"). If
Buyer has claims which exceed the Maximum Claim they shall be entitled to
rescind this Agreement and return all consideration including any agreements
entered into following the Closing, provided however, that Buyer must provide
Sellers and CSC with written notice of such election within 30 days of learning
of any claim or matter giving rise to such claim and must not have taken any
action which prejudices Sellers' and CSC's rights to resolve such claim.
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(c) The party entitled to indemnification shall take all reasonable steps
to mitigate all indemnifiable liabilities and damages upon and after becoming
aware of any event which could reasonably be expected to give rise to any
liabilities and damages that are indemnifiable hereunder. The party seeking
indemnification shall give written notice to the indemnifying party of the facts
and circumstances giving rise to any claim for indemnification as soon as
reasonably possible but in any event within thirty (30) days after it obtains
knowledge of the basis for a claim for indemnification hereunder.
(d) Buyer shall not be entitled to any indemnification because of the
existence of a contract not disclosed by Sellers pursuant to (S)3.12 merely
because such agreement grants a third party exclusivity as to a particular use
of the Company's Intellectual Property for a royalty rate based on Buyer's claim
that it could negotiate a more favorable license, provided that such undisclosed
contract does not limit the Company's rights to grant movie rights, television
rights or rights to use and license the Intellectual Property on the internet.
(e) With respect to each third-party claim subject to this Article IX (a
"Third Party Claim"), the party seeking indemnification (the "Indemnified
Party") must give prompt notice to the indemnifying party (the "Indemnifying
Party") of the Third Party Claim. The Indemnifying Party may, at its sole cost
and expense, upon notice to the Indemnified Party within thirty (30) days after
the Indemnifying Party receives notice of the Third Party Claim, assume the
defense of the Third Party Claim, with counsel of its choice without prejudice
to the right of the Indemnifying Party to contest its obligation to indemnify
the Indemnified Party in respect to the claims asserted therein. The
Indemnifying Party shall not consent to a settlement of, or the entry of any
judgment arising from, any Third Party Claim, unless the Indemnified Party
consents thereto, which consent shall not be unreasonably withheld. The
Indemnifying Party shall provide the Indemnified Party with ten (10) days' prior
notice before it consents to a settlement of, or the entry of a judgment arising
from, any Third Party Claim. The Indemnified Party shall be entitled to
participate in the defense of any Third Party Claim with its own counsel and at
its own expense. In no event shall the Indemnified Party consent (without the
consent of the Indemnifying Party) to a settlement of, or the entry of any
judgment arising from, any Third Party Claim. The parties shall cooperate in the
defense of any Third Party Claim and the relevant records of each party shall be
made available on a timely basis.
(f) After the Closing, the indemnification rights provided hereunder
shall be the exclusive remedy of Sellers and Buyer with respect to any dispute
arising out of or related to this Agreement.
ARTICLE X
TERMINATION
10.1. Termination or Abandonment. Notwithstanding anything contained in
this Agreement to the contrary, this Agreement may be terminated and abandoned
at any time prior to the Closing:
(a) by the mutual written consent of Sellers and Buyer;
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(b) by Sellers or Buyer, if any court of competent jurisdiction or
governmental body, authority or agency having jurisdiction shall have issued an
order, decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement and such
order, decree, ruling or other action shall have become final and nonappealable;
10.2. Effect of Termination. If any party terminates this Agreement
pursuant to (S) 10.1 above, all obligations of the parties hereunder shall
--------
terminate without any liability of any party to any other party (except for any
liability of any party then in breach); provided, however, that the provisions
of this (S) 10.2 shall survive termination of this Agreement.
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ARTICLE XI
Tax Allocation
11.1. Taxes. The Company has filed as a Subchapter S corporation under
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the internal revenue code, and it's shareholders pay income taxes on the
Company's net income. The Sellers' will be responsible for such tax liability up
through the date prior to the closing date and Buyer (or the Company if Buyer
terminates such election) shall be responsible for income taxes on the Company's
net income from and after the Closing Date.
ARTICLE XII
GENERAL PROVISIONS
12.1. Amendments and Waiver. No amendment, waiver or consent with respect
to any provision of this Agreement shall, in any event, be effective unless the
same shall be in writing and signed by the parties hereto, and then such
amendment, waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
12.2. Notices. All notices, demands, requests, consents, approvals and
other communications (any of the foregoing, a "Notice") required, permitted, or
desired to be given hereunder shall be in writing sent by telefax (with answer
back acknowledged and a copy by hand or by reputable overnight courier within
one (1) business day thereafter or by registered or certified mail, postage
prepaid, return receipt requested, or delivered by hand or reputable overnight
courier addressed to the party to be so notified at its address hereinafter set
forth, or to such other address as such party may hereafter specify in
accordance with the provisions of this (S)12.2. Any such Notice shall be deemed
to have been received three (3) days after the date such Notice is mailed or on
the date of sending by telefax or delivery by hand if sent or delivered during
business hours on a business day (otherwise on the next business day) or the
next day if sent by an overnight commercial courier addressed to the parties as
follows:
(a) If to Sellers or CSC:
c/o Arthur Lieberman, Esq.
Lieberman & Nowak
Empire State Building
350 Fifth Avenue
Suite 7412
New York, NY 10118
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With copies to:
Share & Blejec LLP Dr. Jack Baum Lyman decamp
317 Madison Avenue 126 Hurst Creek Drive 2801 Woods Lane
Suite 1421 Austin TX 78734 Garland, TX 75044
New York, NY 10017
Telecopy No.: 212-378-1299
Attn: Paul Share, Esq.
(b) If to Buyer:
Stan Lee Media, Inc.
15821 Ventura Boulevard, Suite 675
Sherman Oaks, CA 91435
Telecopy No. 818-461-1760
Attn: General Counsel
Any party may change its address or add or change parties for receiving notice
by written notice given to the others named above.
12.3. Expenses. Except as otherwise expressly provided herein, each party
to this Agreement shall pay its own costs and expenses in connection with the
transactions contemplated hereby, except that (i) the Buyer and (ii) the Sellers
and CSC shall each pay 50% of the legal costs of drafting this Agreement.
12.4. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
12.5. Successors and Assigns; Beneficiaries. This Agreement shall bind and
inure to the benefit of the parties named herein and their respective permitted
successors and assigns. No party may assign any rights, benefits, duties or
obligations under this Agreement without the prior written consent of the other
party. No third party shall be entitled to enforce any provision hereof and no
third party is intended to benefit from this Agreement.
12.6. Entire Agreement. This Agreement and the documents referred to
herein contain the entire agreement and understanding among the parties with
respect to the transactions contemplated hereby and supersede all other
agreements, understandings and undertakings among the parties on the subject
matter hereof.
12.7. Announcements. No announcement of the specific terms of this
Agreement shall be made by any party without the written approval of the other
party (which approval shall not be unreasonably withheld), except for regulatory
filings and disclosures made based upon advice of counsel. Each party shall
promptly advise the other of any such contemplated announcements.
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12.8. Partial Invalidity. In the event that any provision of this
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, such holding shall not invalidate or render unenforceable any
other provision hereof.
12.9. Governing Law. This Agreement shall be interpreted in accordance
with the substantive laws of the State of New York applicable to contracts made
and to be performed wholly within said State.
In Witness Whereof, the Parties hereto have executed this Agreement as of
the date first above written.
STAN LEE MEDIA, INC. ("BUYER"). ALLA RAY MORRIS TRUST (a "Seller")
By:__________________________ By:__________________________
Its: Jack Webb Baum, Executor
VOTING TRUST (a "Seller") CONAN SALES CO. LLC ("CSC")
By:__________________________ and By____________________________
Lyman deCamp, Manager
_____________________________
Lyman Sprague de Camp and Gerard Beekman By:___________________________
de Camp as Co-Trustees Arthur Lieberman, Manager
By:__________________________
Jack Baum, Manager
______________________________
Arthur Lieberman (a "Seller")
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SCHEDULES
SCHEDULE A List of Sellers and Addresses
SCHEDULE 1.4(a) Form Of Warrant Agreement
SCHEDULE 1.5 Form of Assignment of Accrued Advances
SCHEDULE 1.5(a) List of Accrued Advances
SCHEDULE 1.5(a)(ii) List Accrued Causes of Action
SCHEDULE 3.7 Events Subsequent to the Most Recent Financial Statement
Date
SCHEDULE 3.10 List of All Copyrights and Trademarks Filed
SCHEDULE 3.11 List of Contracts
SCHEDULE 6.2 Form of Security Agreement
SCHEDULE 6.3 Form of Registration Rights Agreement
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