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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to __________________
Commission file number 0-28530
STAN LEE MEDIA, INC.
(Name of small business issuer in its charter)
COLORADO 84-1341980
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
15821 VENTURA BOULEVARD, SUITE 675, ENCINO, CALIFORNIA, 91436
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (818) 461-1757
Securities registered under Section 12(b) of the Exchange Act:
NONE
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK, NO PAR VALUE
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports) and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
----- -----
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
The issuer's revenues for its most recent fiscal year were $30,605.
The aggregate market value of the voting and non-voting common equity
held by non-affiliates, based upon the average bid and asked prices of the
issuer's common stock on March 6, 2000 was $88,404,941. Shares of common stock
held by each officer and director and by each person who owns 5% or more of the
outstanding common stock have been excluded in that such persons may be deemed
to be affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.
The number of shares outstanding of the issuer's common stock, as of
March 6, 2000, was 11,856,362.
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STAN LEE MEDIA, INC.
FORM 10-KSB
TABLE OF CONTENTS
<TABLE>
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ITEM NO. PAGE
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PART I
ITEM 1. DESCRIPTION OF BUSINESS 1
ITEM 2. DESCRIPTION OF PROPERTY 11
ITEM 3. LEGAL PROCEEDINGS 11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 11
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 12
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 15
ITEM 7. FINANCIAL STATEMENTS 18
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 18
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT 19
ITEM 10. EXECUTIVE COMPENSATION 25
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 31
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 32
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K 33
</TABLE>
FORWARD LOOKING STATEMENTS
When used in this Form 10-KSB or future filings by the Company with the
Securities and Exchange Commission, in the Company's press releases or other
public or shareholder communications, or in oral statements made with the
approval of an authorized executive officer, the words or phrases "would be",
"will be", "will allow", "intends to", "will likely result", "are expected to",
"will continue", "is anticipated", "estimate", "project", or similar expressions
are intended to identify "forward looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. The Company wishes to caution
readers not to place undue reliance on any such forward-looking statements,
which speak only as of the date made, and to advise readers that these
statements involve known and unknown risks, uncertainties and other factors that
may cause our actual results, levels of activity, performance or achievements to
be materially different from those anticipated. Such factors include the
availability of sufficient financing to implement the Company's plan of
operation, acceptance in the marketplace of the Company's new characters and
story franchises and distribution via the Internet, ability to generate revenues
through Internet distribution, increased levels of competition, new products and
technological
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changes, and regulatory factors. The Company does not undertake, and
specifically disclaims any obligation, to update any forward-looking statements
to reflect occurrences or unanticipated events or circumstances after the date
of such statements.
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STAN LEE MEDIA, INC.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
OUR BUSINESS
We are an Internet-based, global branded content creation, production
and marketing company founded by comic book icon Stan Lee to conceive, create,
co-create and produce marketable characters and story franchises for
entertainment, merchandising and promotional exploitation worldwide. Built on
Stan Lee's signature style, our "hub" website, stanlee.net, will be a leading
online entertainment destination targeting a global community of 6 to 20 year
olds. Our website also is designed to attract the three generations of fans in
100 countries and 27 languages assembled by Stan Lee during his 60-year career
as founder and creative head of Marvel Comics and co-creator of the Spider-Man,
X-Men, and The Incredible Hulk franchises. Through our no cost, percentage of
gross relationships entered into with a leading e-commerce retail comic book
company, NPO Online (NextPlanetOver.com), a leading online storefront,
WhatsHotNow.com, our digital production studio strategic partner, IBM, and our
entertainment community hosting company, Warner/Acme City, we have achieved the
requisites of content, commerce and community defining a robust Internet
company. Our relationship with Macromedia, Inc., pursuant to which it invested
$5 million in our company, and our distribution relationship with Macromedia's
subsidiary, shockwave.com (the largest online animation portal for original
content), offers the aggregation and delivery of 11 million registered
shockwave.com subscribers to our original, high concept episodic animation and
to our "sticky content" stanlee.net website. We will demonstrate that the
Internet is now a viable, independent entertainment medium with the delivery of
a uniquely compelling entertainment experience for a global audience of more
than 230,000,000 Flash enabled Internet users with 28.8Kbs or faster modems.
Flash is the industry standard for high-impact, vector-based websites that
deliver motion, sound, interactivity and graphics.
Our strategy of co-creating Super Hero franchises as brand extensions of
globally recognized leaders in niche markets along with harnessing offline
strategic publishing/media partners worldwide will diversify our product and
audience demographics and provide continued visibility and support for building
the Stan Lee brand and community. By executing this strategy, we intend to
significantly mitigate the traditional huge resource commitments made by
Internet companies to build their brand and generate traffic. For example, we
have entered into an agreement with The Backstreet Boys, the most popular boys
music group in the world, having generated more than $1 billion in sales during
the last four years, to produce and co-own, under Stan Lee's direction, a Super
Hero franchise based on their personae having Internet-based Super Hero
alter-egos. This co-owned franchise, The Backstreet Project, extends our reach
over the Internet to the international young female audience which has
historically been uninvolved with the Super Hero genre. In addition to providing
our company with a licensing franchise based on fantasy animated Super Hero
extensions of popular musicians, this relationship provides us with access to
the sought after youth market and a dedicated international fan base of girls
and women aged 8 to 25. We also have entered into an agreement with Viacom
Productions to reinvent and produce Internet-based animated webisodes reviving
Viacom's world famous Mighty Mouse franchise, while retaining an equity interest
in the exploitation of the Stan Lee revised character. Through licensed
distribution with Macromedia's shockwave.com animation portal, our content will
be exposed to a global audience of millions of registered users who will be
encouraged to visit the stanlee.net hub site for community chat, games and
related "sticky" experiences. Using this model, we plan to leverage on the
audiences of our distribution partners to deliver a dedicated global audience to
stanlee.net expeditiously. Our site also will
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feature content generated by our users, thereby creating a platform for users to
interact and tools that allow our members to personalize their user experience.
We have designed stanlee.net to facilitate communication among our users, to
empower them to express their opinions, creativity and ideas as a community, and
to shop online. We believe that we will be able to grow our business in a rapid
and cost efficient manner based on global demographics and the desire for users
to actively participate in creating user-generated content.
CORPORATE HISTORY AND REORGANIZATION
Stan Lee Entertainment, Inc. ("Entertainment") was incorporated in the
State of Delaware on October 13, 1998. Stan Lee Media, Inc. ("SLM Delaware") was
originally incorporated in the State of Delaware on January 14, 1999.
Entertainment was merged with SLM Delaware on April 14, 1999 with SLM Delaware
being the surviving corporation. Effective July 23, 1999, the surviving Delaware
corporation engaged in a share exchange with Boulder Capital Opportunities,
Inc., a public company, incorporated in the State of Colorado, which previously
had no operating history. This share exchange was accounted for as a reverse
acquisition in which SLM Delaware is considered our predecessor because it had
operations at the time of the share exchange. The new name of our company after
the share exchange is Stan Lee Media, Inc. ("SLM" or the "Company").
INDUSTRY BACKGROUND
Growth of the Internet, E-Commerce and Online Advertising. The Internet
has emerged as a significant global communications medium, enabling millions of
people to share information, communicate and conduct business electronically.
Both the number of Internet users and the amount of time they spend online are
growing. This growth is the result of a number of factors, including: increase
in the number of computers in the home, schools and workplace; improvements in
computer network infrastructure; more convenient, faster and less expensive
Internet access; advances in computer and modem technology; an increase in
public awareness of the benefits of using the Internet; and the development of
easy-to-use interfaces. The rapid adoption of the Internet represents a
significant opportunity for businesses to market and sell products and services
online and for advertisers and businesses to capitalize on the Internet's
interactive nature by marketing their products to highly targeted audiences. The
success of Internet advertising can be attributed to the following factors:
Internet advertising offers advertisers a flexible way to target their messages
and measure their results; Internet advertisers can tailor their messages to
specific groups of consumers; Internet advertisers can change advertising
content frequently in response to market factors, current events and consumer
feedback; and advertisers can more accurately track the effectiveness of their
advertising messages based on the rate at which consumers directly respond to
their advertisements through "click-throughs" that their advertisements receive.
Growth of Targeted Online Content and Community Sites. As the Internet
has grown, users and advertisers have started seeking more targeted and
compelling content, information, expression and interaction. Just as cable
television channels, such as MTV and ESPN, have become more popular by
aggregating content targeted towards a specific audience, online content and
community sites that provide a demographically targeted environment have
emerged. Like the major television networks that provide programming across many
demographic segments, the major online portals typically provide a broad range
of content and services without a specific demographic focus. Targeted online
communities provide users with the ability to access relevant content and to
interact directly with other people with similar interests. Registered users, or
members, are often eligible for additional services from a site, such as
customization options or access to premium content. As a site learns more about
its members as they register and spend more time online, it can tailor its
features to meet the needs and preferences of
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its users and members. This information also provides advertisers and merchants
with more focused demographic and psychographic information that can be used to
maximize direct marketing opportunities.
Children and Teens are Becoming an Increasingly Important Audience to
Online Advertisers and Merchants. Significant advertising opportunities exist on
a child and teen-focused website. Children and teens are more difficult than
adults to reach with targeted advertising because they generally do not
subscribe to magazines in large numbers, and they tend to watch less television
and lead more active lifestyles than adults. While children and teens are
flooded with literally thousands of broad-based marketing messages every day
from other traditional sources, such as billboard and radio advertising, we
believe they are largely unreceptive to advertising messages that are not
personally relevant. We believe that marketing products and services to children
and teens online through a site with contextual information focused on them is
more effective than using traditional marketing methods.
The United States Census Bureau projects that the number of individuals
between the ages of 10 and 24 will grow to 63.1 million in 2010. This growth
rate is estimated to outpace growth of the general population by nearly 10%. In
addition, children, but teenagers especially, possess substantial disposable
income. eMarketer, a market research firm, estimates that over $109 billion is
spent annually by teenagers in the United States alone.
Teenagers are often early adopters of new technologies and are
significantly involved with the Internet. According to eMarketer, about 57% of
13 to 17 year olds use the Internet regularly, as compared to about 36% of 18-34
year olds, 31% of 35-54 year olds and 17% of individuals over the age of 55.
eMarketer also estimates that the number of 13 to 17 year olds who regularly
access the Internet will rise to 12.4 million by 2000 from 9.1 million in 1998,
an increase of over 36%. eMarketer estimates that 13 to 17 year olds currently
spend an average of 8.5 hours online per week as compared to 6.7 hours for
individuals over the age of 18. This creates a significant opportunity to both
sell products and advertise to children and teens online. eMarketer also
estimates that online commerce sales to 13 to 17 year olds will increase to $1.4
billion in 2002 from $161 million in 1999.
UNIQUE COMPANY ASSETS
Our primary assets consist of all the intellectual property currently
owned by our founder Stan Lee, including ownership in perpetuity to Stan's name,
likeness, brand and signature slogans, "Stan Lee Presents," "Excelsior!" and
"Stan's Soap Box," along with rights to all intellectual property that will
hereafter be created by Stan Lee. Known to millions as the man whose Super
Heroes propelled Marvel Comics to its preeminent position in the comic book
industry, Stan Lee's co-creations include Spider-Man, The Incredible Hulk,
X-Men, The Fantastic Four, Iron Man, Daredevil, Silver Surfer and Dr. Strange.
Now, in the 21st Century, Stan Lee is broadening his horizons once more, this
time, into cyberspace. His Marvel creations have inspired thousands of Super
Hero fan sites throughout the web, representing millions of web page references.
Now his fans and admirers may meet the newest cutting-edge Stan Lee characters
in The 7th Portal, which has been launched on shockwave.com and will later be
featured on our stanlee.net website. In addition, Stan's fans can visit
stanlee.net to read a regularly updated Stanzine with games, goofs and features
from Stan and his staff.
We believe our competitive advantages include the following: (1) Stan
Lee having a proven historic ability to create internationally popular, engaging
content; (2) a talented, experienced creative and production team assembled from
leading Internet and entertainment companies, including Disney, 20th Century Fox
and NBC Interactive; and (3) goodwill with global media and creative
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leaders around the world desirous of supporting and collaborating with
pop-culture icon Stan Lee. These attributes will provide exponential resource
strength and growth through association of the "best of breed" strategic
partners providing financial, production, marketing and distribution
capabilities utilizing all venues of media and product dissemination. Stan Lee
now personifies the genre at large, and we believe our company has the ability
and resources to consolidate his brand recognition in more than 100 countries
around the world to firmly establish a lifestyle brand for "tweens" between ages
6 to 20 in addition to the three generation of fans already assembled.
After the exclusive lifetime contract with founder Stan Lee, our
greatest assets are the creative power represented by our assembled team for
original Internet content creation, production, research and development and
marketing. This team integrates experience in online publishing and technical
innovations and community building for a global youth audience with seasoned
comic book writers and artists, digital artists and technicians, and senior
producers all under the direction of award winning television writers and
animation storyboard supervisors. This team currently is producing seven
original Stan Lee Super Hero franchises while it prepares for production of
additional co-owned global branded content which will harness the audiences of
other recognized brands not currently being produced on the Internet. Under Stan
Lee's active stewardship, this team will focus on institutionalizing Stan Lee's
signature style and developing a global lifestyle brand.
THE STANLEE.NET SOLUTION
stanlee.net is positioned as a branded content gateway targeting
children and teens on the Internet to join with the three generations of fans
assembled by Stan Lee during his 60-year career as founder and creative head of
Marvel Comics and co-creator of the Spider-Man, X-Men and The Incredible Hulk
franchises. We provide a site where children and teens can congregate in an
environment that caters to their interests and promotes their participation and
recognition. We plan to generate online revenues from advertising and
sponsorship sales and e-commerce transactions, and offline revenues by
exploiting such online branded content in television animation, features,
location-based entertainment, theme park attractions, comic book publishing,
merchandising and licensing.
Visitors will congregate at stanlee.net because we empower our members
and provide a dynamic, interactive and fun Internet environment. In addition to
viewing webisodes and playing games on our site, our members will create their
own content for our site using personalized animation tools we create and
provide for them. We enable our members to continually contribute "user created"
content, and which may extend itself to news reports, music and movie reviews,
product reviews and survey questions and answers. Through our member program, we
will gather a significant amount of data concerning the preferences and dislikes
of our members, which should allow our site to be continually relevant to them.
This data can be used to target content as well as advertising information
toward particular members, while maintaining the confidentiality of our members
(stanlee.net does not give out information about members without a member's
consent). We believe our registered member base creates member loyalty and leads
to repeat site visits, referrals and higher quality member-generated content.
THE STANLEE.NET STRATEGY
Our objective is to be the leading Internet destination for content,
community and commerce relating to the Super Hero and comic book genre. We
intend to develop consumer loyalty, attract new users/members, and promote
commerce by implementing the following strategies:
Continue to Build Brand Awareness. Stan Lee is a leader and a visionary
in the world of Super Hero characters. Millions of young people have transited
adolescence to adulthood using his almost mythic - but also very human -
characters as role models and moral compasses. His influence goes beyond
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that of mere comics - before "community" became a buzz word associated with the
Internet, Lee's creations were a common touchstone in the lives of boys all over
the world. Though separated by geography and language barriers, Lee's fans are
bound together by their affinity for his powerful storytelling style and
creative genius in making the Super Heroes come to life. We believe that
continuing to build brand awareness for our site is critical to attracting and
expanding our global member base and customer loyalty. Our strategy is to
enhance the recognition of the Stan Lee brand through traditional and Internet
advertising, and nontraditional events. We will continue to use traditional
advertising, which may include print, television and radio, not only to continue
to reach more advertising customers but also to publicize our brand to potential
users. With respect to non-traditional events, we will continue to promote our
brand at events such as The Backstreet Boys concerts and other venues where
children and teens gather. We also have initiated a campaign through advertising
supported insert entertainment (via our majority-owned subsidiary Eat-Time
Media, Inc.), including without limitation, the placement of card strips,
promotional material and collectible items into suitable prepackaged pastry
products and other snack foods throughout the country, which will cross-promote
our brand.
Continue to Build Premier Content and Community. We will initially focus
on creating new proprietary Super Hero characters along with related content
developed specifically for the Internet with subsequent distribution through
traditional merchandising and licensing. Leveraging the global medium of the
Internet to brand new Super Heroes and Super Villains, we intend to subsequently
partner with leading companies to extend these brands off-line -- through
location based entertainment, 3-D animated features, television, film, comics
and merchandise. This process will be applied to other niche audiences as well.
The Company's initial project is Stan Lee's first team of Super Heroes
for the 21st century -- The 7th Portal - the first global team ever created
consisting of 14 original Super Heroes and Super Villains, which launched on
February 29, 2000. Because of the technological advances offered by the
Internet, the bonds between Super Hero enthusiasts and Super Hero characters
will become even stronger. The term "connectivity" will have new meaning:
stanlee.net will be their central meeting place - an online home where they can
immediately interact with each other, and with Stan Lee himself. The Internet
has revolutionized the way that The 7th Portal characters were introduced and
presented - as fully realized animated figures with a comic book edge. In
addition to The 7th Portal, we currently are producing six other original Stan
Lee Super Hero franchises and producing additional co-owned global branded
content which will harness the audiences of other recognized brands not
currently being produced on the Internet, including The Backstreet Project and
Mighty Mouse.
We will continue to develop our content and community product offerings
to drive children and teen traffic to our website. We are always looking for
innovative and exciting interactive tools and new technologies to enhance our
users' experience. For example, we have entered into agreements with Cyberworld
International Corporation to enable our members to create their own 3-D
environments, which can be populated with characters and objects, including the
intelligent agent morphing software we have licensed from Haptek, Inc. Further,
we are developing and integrating our own online music content strategy into
these environments.
Develop and Grow Multiple Revenue Streams:
Content Syndication. We intend to license elements of our original
content to third-parties for exploitation in publishing, television and feature
motion picture productions, which opportunities will include licensing and
merchandising fees. In December 1999, we and Stan Lee were engaged by DC Comics
to reinvent DC's principal Super Heroes through the publishing of 12 issues of
approximately 48 story pages each tentatively entitled "The Staniverse" or "If
Stan Lee Had Created the DC Universe," to enrich the DC Comic book characters
such as Superman, Batman and Wonder Woman with the
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sensibilities and style of Stan Lee. Also, in November 1999, Simon & Schuster,
Inc. entered into an agreement with Stan Lee to publish a Stan Lee official
biography entitled Stan Lee: Master of Imagination. We are pursuing publishing,
television and feature productions to further broaden the reach of our branded
content creations.
Advertising Sales. In addition to the traditional online banner ads and
sponsorships, we have initiated a campaign through advertising supported insert
entertainment (via our majority-owned subsidiary, Eat-Time Media, Inc.),
including without limitation, the placement of card strips, promotional material
and collectible items into suitable prepackaged pastry products and other snack
foods throughout the country, which will cross-promote our branded content.
E-Commerce Offerings. We have established strategic alliances with
leading companies engaging in Internet e-commerce (NextPlanetOver.com and
WhatsHotNow.com). We intend to continue to make e-commerce an integrated and
valuable part of our website. The Stan store, operated by WhatsHotNow.com,
currently offers over 100 products, and we intend to significantly increase the
number of products we offer over the next year. In addition, we plan to
integrate global shopping opportunities into the store for our users outside of
the United States who seek access to American products.
Location-Based Entertainment. We intend to license elements of our
original content to third parties for exploitation as theme-park rides and
simulation rides, and as wait-time entertainment at movie theaters and shopping
malls. We have entered into a working relationship with Iwerks to further this
initiative.
Utilize Technology to Improve the Experience. We have implemented a wide
range of secure, scalable services and systems for the stanleemedia.com
corporate and stanlee.net "hub" websites. These services and systems include:
website management, advanced searching tools, transaction processing, community
message boards, payment services and a variety of marketing applications. We
have developed proprietary technologies to augment those that we have licensed
from vendors, such as Macromedia, Microsoft and IBM. Our software platform and
architecture are integrated with relational database servers. The employment of
multiple web servers, application servers and database servers, allows our
systems to be resilient and redundant. Our systems utilize communication
infrastructure from multiple providers and provide 24 hour monitoring and
engineering support.
Wireless and Telecommunications Applications. We intend to develop the
ability to access many of the features and functionality found on stanlee.net by
as many electronic means as possible, including wireless phones, personal
digital assistants and pagers.
Develop a Co-Branded Debit Card. We are planning to develop, with a
strategic partner, the stanlee card, a co-branded financial resource for
children and teens that will not only provide them with a non-credit based means
of conducting transactions at the Stan store but will also allow them to make
purchases throughout the Internet.
Expand our International Presence. We plan to launch localized versions
of our website in strategic locations throughout the world. The Super Heroes of
The 7th Portal are situated in the following countries outside the United
States: Japan, India, Germany, Brazil and South Africa. Accordingly, we have
entered into a relationship in Japan and are pursuing the establishment of
strategic partnerships with local operators who will contribute assets,
operating infrastructure and capital to build, maintain, market and promote our
Company's global branded content in their local market, and who will host and
webcast local language versions of Super Hero series produced by us,
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repurpose such webisodes for exploitation in the local language, and jointly
develop original Super Hero and comic character properties. We intend to
leverage our domestic production facility to maintain economies of scale as we
focus on additional countries.
ADVERTISING SALES
We intend to derive substantial revenues from advertising sales. We
intend to offer advertisers the following advertising options:
Banner advertisements. An advertiser may purchase banners, which are
graphical advertisements with the advertiser's logo, for placement throughout
our site or in a specific area within our site.
Integrated content sponsorships. Advertisers may also sponsor a specific
area or feature of our site.
Pop-up advertisements. Advertisers may choose to have an advertising
window "pop-up" following certain actions by members on stanlee.net.
Section sponsorships. Advertisers may also pay to own a premiere
position within a particular section or sections of stanlee.net.
A rotating "viewer window." Our front page contains a rotating viewer
window that displays advertisements and promotes new content on the site.
Because this window is constantly changing and is always visible to members, it
provides our advertisers with an excellent way to catch the attention of our
members.
HTML-based and text-based advertisements in targeted email. We intend to
send targeted HTML-based emails every week. We provide advertisers the
opportunity to place a graphic advertisement within these emails. In addition,
we intend to send text-based targeted emails every week. Advertisers can choose
to include a textual advertisement in these messages. Because of our ability to
target these emails, the advertisements tend to be more relevant to the
recipient.
Opt-in registration boxes. When new members register, they will have the
opportunity to "opt-in" or request information about products or services from
certain advertisers. These advertisers will pay a fee for each new member that
opts-in for information about their products or services during registration.
E-COMMERCE AND THE STAN STORE
In March 1999, we entered into an agreement with NextPlanetOver.com to
provide fulfillment and distribution in connection with online sales of retail
comic books. NextPlanetOver.com manages all fulfillment and distribution
requirements, including product ordering and return processing, thereby
resulting in our having little, if any, inventory. In August 1999, we entered
into an agreement with WhatsHotNow.com to design and host the Stan store, which
houses one of the largest collections of comic genre-focused product offerings
on the Internet. In creating the Stan store, we have utilized our relationships
with our members by asking them, through surveys, polls and other interactive
tools which products they would like to buy through our website. The Stan store
contains over 100 products. WhatsHotNow manages all fulfillment and distribution
requirements, including product ordering and return processing. This results in
our having little, if any, inventory. Our customers are given a
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number of shipping options, all of which are handled by standard shipping
franchises such as UPS and Federal Express. We also intend to generate
e-commerce revenues by charging transaction fees to retailers and e-commerce
companies that wish to use our site to promote their products and services as
well as to purchase premium positioning on our site.
CUSTOMER CARE
Users who are unfamiliar with our site can click on the "help" button on
stanlee.net. This feature describes all of our stanlee.net features and services
and explains to the user how to use them. In addition, our members can post
messages on our help boards and our staff will respond. Finally, users can also
send emails to support, and our staff generally responds within one day.
COMPETITION
The market for Internet traffic, registered users and Internet
advertising is new and rapidly evolving, and competition is intense. With no
substantial barriers to entry, we expect that competition will continue to
intensify. We believe that the primary competitive factors in creating community
on the Internet and attracting advertisers are: user receptiveness to branded
content; functionality; brand recognition; user affinity and loyalty; the
ability to target a specific demographic; variety of value-added services;
ease-of-use; quality of service; reliability and critical mass; and the overall
cost-effectiveness of the advertising medium. We compete with sites, and sites
with areas, that are primarily focused on targeting teens online. These sites
include MTV Online and the Yahoo! Teen Chat area. We also compete with retailers
that have moved to the Web such as Delia's. We will likely also face online
competition in the future from: search engine providers; content sites;
commercial online services; sites maintained by Internet service providers;
traditional media companies such as MTV, Disney and NBC, many of which have
recently made significant acquisitions or investments in Internet companies; and
other entities that will attempt to establish communities on the Internet by
developing their own or purchasing one of our competitors. We also compete with
traditional forms of media, such as newspapers, magazines, radio and television,
for advertisers and advertising revenues.
TECHNOLOGY AND SYSTEMS
We rely almost exclusively on a variety of third-party products for our
hardware and software. We operate our network to ensure maximum uptime, to
obtain, preserve and analyze customer data, and to enhance our members'
experience. Our goal is to maintain the technological infrastructure required to
handle heavy traffic, e-commerce and complex graphics on our site. We currently
house our servers at Exodus Communications in California. Exodus maintains an
environmentally controlled data center with multiple communication lines and
uninterrupted power. We believe that our infrastructure conforms to the latest
industry standards. We are also in the process of installing additional servers.
If a server fails, we believe that we have enough back-up servers to ensure that
our service interruption would be minimized. Our infrastructure is scalable in
that as additional capacity is needed, additional servers can be easily added.
We are also planning to expand our server system to multiple data centers. We
also run weekly full backups of all of our servers, as well as daily incremental
backups of these same machines. These tape backups are stored off of the
premises.
TRADEMARKS AND INTELLECTUAL PROPERTY
We use the following trademarks for which applications in the United
States Patent and Trademark Office are pending: our logo, "Stanzine," "Stan Lee
Presents," "The 7th Portal," and "Excelsior," as well as the marks for the
various heroes and villains of The 7th Portal. We also have
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trademark and domain name applications pending in other countries. Any claims or
confusion related to such marks, or our failure to obtain trademark
registration, might materially adversely affect our business.
We rely on a combination of copyright, trademark and trade secret laws
and our contractual obligations with employees and third parties to protect our
proprietary rights. Protection of our intellectual property is limited. Despite
our efforts to protect our proprietary rights, it may be possible for a third
party to copy or obtain and use our intellectual property without our
authorization. In addition, other parties may breach confidentiality agreements
or other protective contracts we have entered into, and we may not be able to
enforce our rights in the event of these breaches.
We have entered into confidentiality and invention assignment agreements
with our employees and consultants, and nondisclosure agreements with our
vendors and strategic partners to limit access to and disclosure of our
proprietary information. We cannot be certain that these contractual
arrangements or the other steps taken by us to protect our intellectual property
will prevent misappropriation of our technology. We have licensed in the past,
and expect that we will license in the future, some of our proprietary rights,
such as trademarks or copyrighted material, to third parties. While we attempt
to ensure that the quality of the stanlee products and brand is maintained by
these licensees, we cannot assure that these licensees will not take actions
that might hurt the value of our proprietary rights and reputation.
GOVERNMENT REGULATION
We are subject to various laws and governmental regulations relating to
our business. Although there are currently few laws or regulations directly
applicable to online services or the Internet, the increasing popularity and use
of the Internet might cause additional laws and regulations to be adopted. These
laws and regulations currently cover or may cover in the future issues including
the following:
Internet Privacy. The Children's Online Privacy Protection Act of 1998,
which was enacted by the United States Congress on October 21, 1998 and for
which the Federal Trade Commission issued its final regulations on October 20,
1999, regulates the collection, use, and/or disclosure of personal information
obtained from children under the age of 13. Under the provisions of this Act,
which becomes effective on April 21, 2000, websites catering to children will be
required to: provide notice on their website and to parents of children under
the age of 13 with notice of what information is being collected, how the site
uses the information, and the website's practices regarding disclosures of
information; obtain verifiable parental consent for the collection, use and/or
disclosure of their children's information, and allow parents to terminate their
consent at any time; provide parents an opportunity to review the information
collected from their children; and refrain from conditioning a child's
participation in a game on the child revealing more information than reasonably
necessary to participate. If we discover that a member about whom we have
collected information has misrepresented his or her age and is in fact under age
13, or that a child under 13 has disclosed personal information on our bulletin
boards or in any other public forum on our site, we will have to either (1)
remove that person as a member, or (2) comply with the Federal Trade Commission
regulations under the Act. It is important to our members that we protect their
privacy. We use password protection and member IDs to ensure anonymity among our
members. In addition, we do not sell or distribute information about the
identities, preferences or page views of individual members without their
permission. We do disclose certain information to third parties, with our
members' permission, in connection with product promotions and special programs
in which members elect to participate. Market research data that we may sell to
third parties consists of trend information about various segments of our
members; for example, what certain types of users like to do in their spare time
or which of two products our members prefer. While we believe that we
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currently adequately provide for our members' privacy, our current programs may
not conform to legislation or regulations adopted in the future by the Federal
Trade Commission or other governmental entities. In addition, if unauthorized
persons were able to penetrate our security and gain access to, or otherwise
misappropriate, our members' personal information, we could be subject to
liability. Such liability could include claims for misuses of personal
information, such as for unauthorized marketing purposes or unauthorized use of
credit cards. These claims could result in litigation which could require us to
expend significant financial resources and divert management's attention from
operations.
The European Union adopted a Directive which became effective in October
1998 that imposes restrictions on the collection and use of personal data. Under
the Directive, European Union citizens are guaranteed the right of access to
their data, the right to know where the data originated, the right to have
inaccurate data corrected, the right to recourse in the event of unlawful
processing of information and the right to withhold permission to use their data
for direct marketing. The Directive could affect U.S. companies that collect
information over the Internet from individuals in European Union member
countries and may impose restrictions that are more stringent than current
Internet privacy standards in the United States or our own privacy policies. The
Directive does not, however, define what standards of privacy are adequate. As a
result, the Directive might adversely affect the activities of entities,
including us, that engage in data collection from members in European Union
member countries.
Internet Taxation. A number of legislative proposals have been made by
federal, state, local and foreign governments that would impose additional taxes
on the sale of goods and services over the Internet, and some states have taken
measures to tax Internet-related activities. Although in October 1998 Congress
placed a three-year moratorium on state and local taxes on Internet access or on
discriminatory taxes on electronic commerce, existing state or local laws were
excluded from this moratorium. Further, once this moratorium is lifted, some
type of federal or state taxes may be imposed upon Internet commerce. Such
legislation or other attempts at regulating commerce over the Internet may cause
sales at the Stan Store to decrease which might adversely affect advertising
revenues as well since Internet sales generally may decline.
Domain Names. Our domain names are our Internet "addresses." Domain
names have been the subject of significant trademark litigation in the United
States. We have applied for registration of certain domain names in the United
States and foreign countries. Third parties might bring claims for infringement
against us for the use of these domain names. Moreover, because domain names
derive value from the individual's ability to remember such names, it is
possible that our domain names could lose their value if, for example, members
begin to rely on mechanisms other than domain names to access online resources.
The current system for registering, allocating and managing domain names has
been the subject of litigation and of proposed regulatory reform. Our domain
names might lose their value, and we might have to obtain entirely new domain
names in addition to or instead of our current domain names if such litigation
or reform efforts result in a restructuring of the current system.
Jurisdiction. Due to the global reach of the Internet, it is possible
that the governments of other states and foreign countries might attempt to
regulate our activities or prosecute us for violations of their laws. This could
seriously affect our business. In addition, because our products and services
are available over the Internet anywhere in the world, multiple jurisdictions
may claim that we are required to qualify to do business as a foreign
corporation in each of those jurisdictions. Our failure to qualify as a foreign
corporation in a jurisdiction where we are required to do so could subject us to
taxes and penalties for the failure to qualify. It is possible that state and
foreign governments might also attempt to regulate our transmissions of content
on our Websites or prosecute us for violations of their laws. State or foreign
governments might allege or charge us with violations of local laws, we might
unintentionally violate these laws, and these laws might be modified, or new
laws might be enacted, in
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the future.
EMPLOYEES
As of March 1, 2000, we employed a total of 85 full-time employees, 56
of whom were in content creation and product development; 6 in technology; 12 in
sales, marketing, business development and e-commerce; 1 in market research; and
11 in finance and administration. In addition, about 18 persons provide services
to us pursuant to consulting and/or freelance agreements. To support our
anticipated future growth, we expect to hire additional employees, particularly
in the areas of content creation and product development. None of our employees
is represented by unions, and we believe our relations with our employees are
good.
ITEM 2. DESCRIPTION OF PROPERTY
Our principal executive offices are located in Encino, California, where
we sublease approximately 7,000 square feet that expires in April 2002. In
November 1999, we entered into two separate leases expiring in October 2004 for
an additional approximate 7,000 and 6,500 feet of ground floor space,
respectively, in the same building for our studio production facilities, and a
sublease expiring in April 2000 for an additional approximate 3,500 feet of
office space for our technology infrastructure requirements. We have initiated
negotiations to extend the sublease and anticipate that it will be extended for
an additional period as desired by the Company, but no assurance can be made
that such extension will be granted. As we expand, we anticipate that additional
space will be available on commercially reasonable terms, but no assurance can
be made in this regard. We intend to rent additional space in the same building
in which our principal executive offices are situated, aggregating an additional
approximate 18,000 square feet pursuant to two separate leases, and that terms
of these leases will vary as to duration and rent escalation provisions tied to
either increases in the landlord's operating expenses or fluctuations in the
consumer price index in the relevant geographical area.
ITEM 3. LEGAL PROCEEDINGS
We are not currently involved in any material legal proceedings, nor, to
our knowledge, are any threatened.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There have been no matters submitted to a vote of security holders
during the quarter ended December 31, 1999.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock is traded on the over-the-counter bulletin board under
the symbol "SLEE." The following table sets forth the range of reported closing
bid prices of Stan Lee Media, Inc.'s common stock during the periods indicated.
Such prices reflect prices between dealers in securities and do not include any
retail markup, markdown or commission and may not necessarily represent actual
transactions. The information set forth below was obtained from America Online.
<TABLE>
<CAPTION>
Fiscal Year Ended December 31, 1999 High Low
<S> <C> <C>
Three Months Ended -
September 30, 1999 $ 9.00 $2.50
December 31, 1999 $ 7.50 $4.06
For the period January 1, 2000 through March 6, 2000 $30.00 $5.88
</TABLE>
As of February 25, 2000, we had 438 shareholders of record of Stan Lee
Media, Inc.'s common stock, excluding shares held in street name by brokerage
firms and other nominees who hold shares for multiple investors, and one
shareholder of record of Stan Lee Media, Inc.'s Series A Preferred Stock.
Holders of common stock are entitled to receive dividends if, as and
when declared by the Board of Directors out of funds legally available therefor,
subject to the dividend and liquidation rights of any preferred stock that may
be issued and outstanding. We have never declared or paid any dividends on our
common stock. We intend to retain any future earnings for use in the operation
and expansion of our business. Consequently, we do not anticipate paying any
cash dividends on our common stock to our shareholders for the foreseeable
future.
The holders of Series A Preferred Stock are not entitled to dividends
unless dividends are paid on the common stock, in which case the Series A
Preferred Stock will receive dividends at the same rate payable on the common
stock on the basis of the number of shares of common stock into which the Series
A Preferred Stock is convertible. The holders of Series A Preferred Stock vote
together with the holders of common stock, on the basis of the number of shares
of common stock into which the Series A Preferred Stock is convertible, on all
matters presented to the stockholders to vote. The Series A Preferred Stock will
vote separately as a class on matters which affect its rights and preferences.
RECENT SALES OF UNREGISTERED SECURITIES
Sales of Common Stock Prior to January 1, 2000. Between January 1, 1999
and June 30, 1999, 400,000 shares of common stock were issued for services
before any stock was issued for cash. Each issuance was valued at $0.001 per
share at that time.
Effective July 23, 1999, SLM Delaware engaged in a share exchange with
Boulder Capital Opportunities, Inc. ("Boulder"), a public company, incorporated
in the State of Colorado, which previously had no operating history. This share
exchange was accounted for as a reverse acquisition in which SLM Delaware is
considered our predecessor because it had operations at the time of the share
exchange. In this share exchange, the shareholders of SLM Delaware received
8,500,000 shares of
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common stock of Boulder in exchange for all of the issued and outstanding shares
of common stock of SLM Delaware. The number of shares of common stock
outstanding after this transaction was 11,025,000.
On July 23, 1999, the Company issued 60,000 shares of common
stock at $2.50 per share, the fair value on the date of issuance, to employees
for services rendered. The fair value of these shares, $150,000, was charged to
operations during 1999. On December 9, 1999, 50,000 of these shares were
cancelled in conjunction with the termination of an employee and the
corresponding $125,000 fair value originally expensed at the date of the grant
was reversed upon cancellation. As settlement of amounts due under the
terminated employment contract, the Company issued 7,000 shares of
common stock. The fair value of these shares, $38,500, was charged to
operations.
On July 30, 1999, 37,500 shares of common stock were issued at
$4.00 per share as part of a private placement, resulting in gross proceeds of
$150,000.
Through July 1999, a total of $738,100 in cash was received for
subscription stock. The subscription stock consisted of 246,029 shares of common
stock that were issued on July 23, 1999 in consideration for $3.00 per share. In
addition, the subscription stock investors were granted warrants to purchase
another 246,029 shares at an exercise price of $5.00 per share.
During August 1999, 62,500 shares of common stock were issued at
$4.00 per share in private placements, resulting in gross proceeds of $250,000.
On October 12, 1999, the Company issued 10,000 shares of common
stock in connection with a bridge loan from VMR Luxembourg S.A. The fair value
of these shares, $61,800, was recorded as debt offering costs at December 31,
1999 and is being amortized into interest expense over the six-month term of the
loan. As of December 31, 1999, $30,900 has been amortized to interest expense.
On November 8, 1999, the Company issued 25,000 shares of common
stock at $7.19 per share in exchange for rights to use software developed by
Cyberworld International Corporation, a third party. The fair value of these
shares, $179,675, on the date of issuance was recorded as a licensing right
asset.
On November 8, 1999, the Company issued 10,000 shares of common
stock at $7.19 per share to VMR Luxembourg S.A. for services rendered relating
to the Company's listing on the Frankfurt stock exchange. The fair value of
these shares, $71,870, was charged to operations during 1999.
Series A Preferred Stock Issuance. On November 3, 1999, the Company
entered into an agreement with Macromedia, Inc. ("Macromedia") to issue 714,286
shares of the Company preferred stock at $7.00 per preferred share for a total
of $5,000,002 in cash. The Company entered into a five-year distribution
agreement with Macromedia to distribute flash-animated episodes of series
produced by the Company. During the first year of the term, the Company must
make 10 submissions of series at an average rate of at least one submission
every two months. Macromedia will reimburse the Company for production costs
plus profit and overhead in addition to a license fee after delivery of the last
episode in each accepted series. The Company is required to pay $178,000 of the
advertising costs to launch the first series.
Stock Option Issuances. From July 23, 1999 through October 5, 1999, the
Company entered
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into stock option agreements with certain executives, employees, consultants and
directors to purchase 2,435,000 common shares at $2.50 to $5.50 per share, the
fair market values at the date of grant. Of said amount, options to purchase
1,110,000 common shares have a term of five years, and are subject to various
vesting periods ranging up to two years. Options to purchase the remaining
1,325,000 common shares were issued to consultants, have a term of 10 years and
are fully vested at December 31, 1999. The fair value of these options,
$3,258,979, was charged to operations during 1999.
1999 Stock Incentive Plan. The company adopted the 1999 Stock Incentive
Plan (the "1999 Plan"), effective on October 11, 1999. Each director, officer,
employee or consultant of the Company or any of its subsidiaries is eligible to
be considered for the grant of awards under the 1999 Plan. The maximum number of
shares of Common Stock that may be issued pursuant to awards granted under the
1999 Plan is 3,000,000 pursuant to an amendment by the board of directors in
March 2000 to increase the total number of shares reserved for issuance
thereunder. Any shares of Common Stock subject to an award which for any reason
expires or terminates unexercised are again available for issuance under the
1999 Plan. Options granted generally have a term of five years and usually vest
over two years beginning on the anniversary date of the grant.
Under the 1999 Plan, the Company issued 355,000 options to officers and
employees during 1999. In addition, under the 1999 Plan, the Company issued
202,500 options to consultants. The fair value of these options, $611,425, was
charged to operations during 1999.
Warrant Issuances. On September 15, 1999, the Company issued warrants to
purchase 5,000 common shares in conjunction with debt financing. The warrants
have a $5.00 per share exercise price and a term of three years. Since the note
was repaid by December 31, 1999, the fair value of these warrants, $7,486, was
charged to interest expense during the year.
On September 21, 1999, the Company issued warrants to purchase
5,000 common shares in conjunction with debt financing. The warrants have a
$5.00 per share exercise price and a term of three years. Since the note was
repaid by December 31, 1999, the fair value of these warrants, $7,486, was
charged to interest expense during the year.
On October 12, 1999, the Company issued warrants to purchase
25,000 shares of common stock in connection with a bridge loan from VMR
Luxembourg S.A. The warrants have a $6.18 per share exercise price and a term of
three years. The fair value of these warrants, $35,572, was recorded as debt
offering costs at December 31, 1999 and is being amortized into interest expense
over the six-month term of the loan. As of December 31, 1999, $17,756 remained
capitalized in deferred offering costs.
On November 1, 1999, the Company issued warrants to purchase
2,500 common shares in conjunction with debt financing. The warrants have a
$6.00 per share exercise price and a term of three years. Since the note was
repaid by December 31, 1999, the fair value of these warrants, $3,351, was
charged to interest expense during the year.
Sales of Common Stock Post December 31, 1999. On February 1, 2000, the
Company sold, in a private placement, 200,000 shares of common stock at $8.00
per share for a total purchase price of $1,600,000, and issued five-year
warrants to purchase an additional 100,000 shares of common stock at an exercise
price of $10.00 per share.
On February 4, 2000, the Company sold, in a private placement,
200,000 shares of common stock at $11.00 per share for a total purchase price of
$2,200,000, and issued five-year warrants to purchase an additional 100,000
shares of common stock at an exercise price of $11.00 per
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share.
Under the terms of these two separate February 2000 private
placements, the Company is required to file a registration statement registering
such securities for sale to the general public within 180 days following their
respective closings, and to have such registration statement be ordered
effective by the Securities and Exchange Commission within 225 days following
their respective closings. Failure to comply with such registration requirements
will result in the Company being subjected to certain penalty provisions,
including the issuance and delivery of additional warrants in an amount equal to
3% of the number of shares issued in each offering. Finder's fees totaling
$150,000 were paid in conjunction with these financings and five-year warrants
to purchase 5,000 shares of common stock at an exercise price of $10.00 per
share were granted.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This discussion contains forward-looking information that involves risks
and uncertainties. Our actual results could differ materially from those
anticipated by this forward-looking information. This discussion should be read
in conjunction with our financial statements and the related notes thereto set
forth elsewhere in this Report.
Our predecessor company conducted only organizational activities.
Accordingly, there were no material operations for the comparable periods for
the prior year, and therefore, there is no discussion of comparable historical
periods.
As of December 31, 1999, our company was considered to be a development
stage company as it had not recognized revenue from planned principal
operations.
PLAN OF OPERATIONS
Our plan of operations for the next 12 months is to carry out our
business plan as described in this Annual Report; namely, to create premier
branded content focused on the Super Hero genre, and develop and grow multiple
revenue streams through entertainment, merchandising (e.g., toys, video games
and apparel licenses) and promotional exploitation initially via the Internet,
and thereafter, by harnessing our offline strategic publishing/media partners
worldwide.
We launched our initial franchise, The 7th Portal, on Macromedia's
shockwave.com animation portal, thereby exposing our content to a global
audience of millions of registered users who will be encouraged to visit the
stanlee.net website. By contracting with best of breed online content
distribution partners, we intend to build the Stan Lee brand and community
without incurring traditional huge resource commitments to generate traffic that
Internet companies historically incur in order to aggregate eyeballs. In this
regard, we have entered into an agreement with The Backstreet Boys to produce
and co-own a Super Hero franchise based on their personae having Internet-based
Super Hero alter-egos, thereby extending our reach over the Internet to a
dedicated international fan base of girls and women aged 8 to 25. In February
2000, we commenced selling The Backstreet Project comic book in furtherance of
this strategic partnership over the Internet and at the venue locations for The
Backstreet Boys current concert tour. We also have entered into an agreement
with Viacom Productions to reinvent and produce Internet-based animated
webisodes reviving Viacom's world famous Mighty Mouse franchise. Our site also
will feature content generated by our users, thereby creating a platform for
users to interact and tools that allow our members to personalize their user
experience.
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We plan to launch localized versions of our website in strategic
locations throughout the world. The Super Heroes of The 7th Portal are situated
in the following countries outside the United States: Japan, India, Germany,
Brazil and South Africa. Accordingly, we have entered into a relationship in
Japan and are pursuing the establishment of strategic partnerships with local
operators who will contribute assets, operating infrastructure and capital to
build, maintain, market and promote our Company's global branded content in
their local market, and who will host and webcast local language versions of
Super Hero series produced by us, repurpose such webisodes for exploitation in
the local language, and jointly develop original Super Hero and comic character
properties. We intend to leverage our domestic production facility to maintain
economies of scale as we focus on additional countries.
We intend to license elements of our original content to third-parties
for exploitation in publishing, television and feature motion picture
productions, which opportunities will include licensing and merchandising fees.
In December 1999, we and Stan Lee were engaged by DC Comics to reinvent DC's
principal Super Heroes through the publishing of 12 issues of approximately 48
story pages each tentatively entitled "The Staniverse" or "If Stan Lee Had
Created the DC Universe," to enrich the DC Comic book characters such as
Superman, Batman and Wonder Woman with the sensibilities and style of Stan Lee.
Also, in November 1999, Simon & Schuster, Inc. entered into an agreement with
Stan Lee to publish a Stan Lee official biography entitled Stan Lee: Master of
Imagination. We are pursuing publishing, television and feature productions to
further broaden the reach of our branded content creations.
In addition to the traditional online banner ads and sponsorships, we
have initiated a campaign through advertising supported insert entertainment
(via our majority-owned subsidiary, Eat-Time Media, Inc.), including without
limitation, the placement of card strips, promotional material and collectible
items into suitable prepackaged pastry products and other snack foods throughout
the country, which will cross-promote our branded content.
We also have established strategic alliances with leading companies
engaging in Internet e-commerce (NPO Online (NextPlanetOver.com) and
WhatsHotNow.com). We intend to continue to make e-commerce an integrated and
valuable part of our website. The Stan store, operated by WhatsHotNow.com,
currently offers over 100 products, and we intend to significantly increase the
number of products we offer over the next year. In addition, we plan to
integrate global shopping opportunities into the store for our users outside of
the United States who seek access to American products.
We have entered into a working relationship with Iwerks to license
elements of our original branded content for exploitation as simulation rides
and as wait-time entertainment at movie theaters and shopping malls. We also
have initiated a campaign to license elements of our branded content for
exploitation as theme-park attractions.
We intend to develop the ability to access many of the features and
functionality found on stanlee.net by as many electronic means as possible,
including wireless phones, personal digital assistants and pagers. We are
planning to develop, with a strategic partner, the stanlee card, a co-branded
financial resource for children and teens that will not only provide them with a
non-credit based means of conducting transactions at the Stan store but will
also allow them to make purchases throughout the Internet.
Since our formation in October 1998, we have incurred substantial
operating expenses to produce our branded content, establish our Internet
infrastructure, and expand our operations to include
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more than 100 employees and consultants. Operating expenses for the year ended
December 31, 1999 and for the period from October 13, 1998 (date of inception)
to December 31, 1999 were $7,877,830 and $7,910,180, respectively. Operating
expenses have increased as we engaged additional personnel and incurred other
expenses in producing original characters and content for delivery on the
Internet and other media pursuant to existing and anticipated contractual
arrangements. We expect to incur operating losses at least through 2000.
LIQUIDITY AND CAPITAL RESOURCES
Our primary sources of liquidity and capital resources have been private
placements of common stock and borrowings from related and non-related parties.
We refer you to Note 7 to the Financial Statements (Shareholders' Equity) and
Note 9 to the Financial Statements (Subsequent Events) for further descriptions
of these activities. We will require additional capital financing to continue
the development of our business plan consistent with anticipated growth in
operations, infrastructure and personnel. We anticipate that the cash on hand
coupled with the cash to be raised from additional private placements and public
offerings, assuming they will be successful, will be sufficient to satisfy our
operating expenses and capital until such time as revenues are sufficient to
meet operating requirements.
INCOME TAXES
Net operating losses generated a deferred tax asset of
approximately $1,000,000 at December 31, 1999. The deferred tax asset has not
been recognized since management is unable to determine whether it is more
likely than not that it will be realized. Accordingly, a 100% valuation
allowance has been provided.
ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "According for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 requires companies to
recognize all derivative contracts as either assets or liabilities in the
balance sheet and to measure them at fair value. If certain conditions are met,
a derivative may be specifically designated as a hedge, the objective of which
is to match the timing of gain or loss recognition on the hedging derivative
with the recognition of (i) the changes in the fair value of the hedged asset or
liability that are attributable to the hedge risk or (ii) the earnings effect of
the hedged forecasted transaction for a derivative not designated as a hedging
instrument, the gain or loss is recognized in income in the period of change.
SFAS 133 is effective for all fiscal quarters of fiscal years beginning after
June 15, 1999. Historically, the Company has not entered into derivative
contracts either to hedge existing risks or for speculative purposes.
Accordingly, the Company does not expect adoption of the new standard on January
1, 2000 to affect its financial statements.
In June 1998, the Accounting Standards Executive Committee of the AICPA
issued SOP 98-5, Reporting on the Costs of Start-up Activities. SOP 98-5
requires all start-up and organizational costs to be expensed as incurred. It
also requires all remaining historically capitalized amounts of these costs
existing at the date of adoption to be expensed and reported as the cumulative
effect of a change in accounting principles. SOP 98-5 is effective for all
fiscal years beginning after December 31, 1998. The adoption of SOP 98-5 on
January 1, 1999 had no effect on the financial statements.
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ITEM 7. FINANCIAL STATEMENTS
The consolidated financial statements are listed at the "Index to
Financial Statements" elsewhere in this Report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Effective August 16, 1999, we engaged BDO Seidman, LLP as the
registrant's independent public accountants, subsequent to the July 1999
reorganization transaction with our predecessor and concurrent with the
resignation of the registrant's previously engaged independent accountant. The
engagement of BDO Seidman, LLP was approved by our board of directors. The
financial statements for the past two years contained no adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles. There were no accounting or auditing
disagreements between the Company, the registrant's previously engaged
independent accountant, and BDO Seidman, LLP. Prior to its engagement by the
registrant, BDO Seidman, LLP represented each of Stan Lee Entertainment, Inc.
and Stan Lee Media, Inc. (SLM Delaware).
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
Our Board of Directors consists of only one class. All of the directors
will serve until the next annual meeting of shareholders and until their
successors are elected and qualified, or until their earlier death, retirement,
resignation or removal. There are no family relationships among directors and
executive officers. We also have provided a brief description of the business
experience of each director and executive officer during the past five years and
an indication of directorships held by each director in other companies subject
to the reporting requirements under the Federal securities laws.
Our predecessor company conducted only organizational activities and,
accordingly, no information is included for the period prior to July 23, 1999.
Effective July 24, 1999, the number of directors of the company was increased to
five. Effective December 10, 1999, the number of directors of the company was
increased to seven.
DIRECTORS AND EXECUTIVE OFFICERS
The following tables set forth certain information regarding the
directors, executive officers and certain key employees of Stan Lee Media, Inc.:
DIRECTORS:
<TABLE>
<CAPTION>
Name Age Date Director Service Commenced
---- --- -------------------------------
<S> <C> <C>
Stan Lee(1) 77 July 23, 1999
Devendra Mishra 55 July 23, 1999
Gill Champion(2) 56 July 23, 1999
Nelson S. Thall(2) 41 January 1, 2000
Robert K. Burgess 42 January 1, 2000
Arthur E. Schramm, Jr.(2) 58 March 1, 2000
</TABLE>
----------
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
EXECUTIVE OFFICERS:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Stan Lee 77 Chairman and Chief Creative Officer
Devendra Mishra 55 President, Chief Executive Officer
and Director
Gill Champion 56 Chief Operating Officer and Director
Stephen M. Gordon 49 Executive Vice President - Operations
and Secretary
Robert M. Schultz 56 Vice President, Finance
</TABLE>
19
<PAGE> 23
CERTAIN KEY STAN LEE TEAM MEMBERS
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Bryce Zabel 45 President, Linear Content and Television Production
Jon Corfino 41 President, Theme Park and Location Based Attractions
Stephen L. Brain 45 Executive Vice President, Production
Jamie Wilkinson 27 Executive Vice President, Internet Strategy
Stephen A. Segal 45 Chief Technology Officer
</TABLE>
BIOGRAPHIES OF DIRECTORS, EXECUTIVE OFFICERS
AND CERTAIN KEY STAN LEE TEAM MEMBERS:
Stan Lee is the Founder of the Company and has served as its Chairman of
the Board of Directors and Chief Creative Officer since inception. Known to
millions as the man whose Super Heroes propelled Marvel to its preeminent
position in the comic book industry, Stan Lee's co-creations include Spider-Man,
The Incredible Hulk, X-Men, The Fantastic Four, Iron Man, Daredevil, Silver
Surfer and Dr. Strange. Now the Chairman Emeritus of Marvel Media and a member
of the Editorial Board of Marvel Comics, Lee first became publisher of Marvel
Comics in 1972. In 1977, he introduced Spider-Man as a syndicated newspaper
strip which became the most successful of all syndicated adventure strips and
now appears in more than 500 newspapers worldwide -- making it the
longest-running of all Super Hero strips.
Devendra Mishra has served as the Company's President, Chief Executive
Officer since January 1999, and as a Director since July 1999. Prior thereto,
Mr. Mishra was a consultant to the worldwide entertainment, distribution and
multimedia industries and served multiple Fortune 500 companies as a senior
executive for 20 years. From 1994 to 1996, Mr. Mishra was President and Chief
Executive Officer of Multifoods, a billion dollar, independently-owned,
specialty distribution subsidiary of VSA, Inc., after having served as the
President of Worldwide New Media, Distribution Services and New Ventures at
Technicolor, Inc. He launched Technicolor Entertainment Services, a
state-of-the-art, physical distribution business to supply movie prints to
theaters in the United States. He also engineered and put into production an
"Optical Media Manufacturing Facility." From 1986 to 1992, Mishra held senior
management positions at LIVE Entertainment -- a diversified supplier, wholesaler
and retailer of home video, music and personal computer software -- and
eventually served as its President and Chief Operating Officer. During his
tenure at LIVE Entertainment, revenues grew from $32 million to over $600
million. At LIVE Entertainment, Mishra operationally launched the Teenage Mutant
Ninja Turtles home video and demonstrated his retail management capability by
rapidly growing Strawberries Records and Tapes in the Northeast. During this
time, Mishra also served as the Managing Director of VCL-Carolco, a leading home
video company in Germany that he helped acquire in 1989. Prior to 1986, Mishra
was Vice President of the $900 million worldwide manufacturing and distribution
operations of RCA-Ariola Records. Mishra holds a Master's degree in business
administration from Butler University, a Master's degree in operations research
from Purdue University and a Bachelor of Science degree in mechanical
engineering from the Indian Institute of Technology.
Gill Champion has served as the Company's Vice President, Chief
Operating Officer since March 1999, and as a Director since July 1999. Mr.
Champion brings 20 years of executive experience in global entertainment,
marketing, retail and licensing industries to his role at the Company. Prior to
joining the Company, he was Chief Financial Officer and Vice President of Mirage
Holdings, Inc., a company that went public in 1998. There, he originated the
concept, design and application for Virtual Mart and Showroom, an apparel, home
furnishings and accessories Internet site, and orchestrated Mirage Holding
Inc.'s
20
<PAGE> 24
acquisition of NetSol International, a fully integrated IT company in Southeast
Asia. Concurrently, Mr. Champion worked as a production executive on the motion
picture Jinnah. From 1990 to 1997, Mr. Champion was Chief Executive Officer of
American CinemaStores, Inc., a private company that went public in 1994, trading
on the NASDAQ SmallCap Market. He was elected Chairman in 1994 and opened 42
mini-stores in shopping malls and over a hundred kiosks in entertainment venues
with licensed-related apparel and merchandise. Establishing the American Cinema
Industries licensing division, he created original apparel designs and marketing
strategies for the official lines of Baywatch, the CBS cartoon Hyperman, the
film Miracle on 34th Street and the initial Forrest Gump apparel license. On a
global scale, he was responsible for both domestic and international sales
strategies and distribution, for licensed entertainment products. From 1985 to
1989, Mr. Champion was Vice President of Real Treasures, Inc., in Dallas, TX, a
company that licensed technology pivotal in the production process of television
commercials and movie production. From 1981 to 1984, Mr. Champion was Vice
President of Gaylord Broadcasting in charge of New Projects and oversaw 15
episodes of Faerie Tale Theatre in association with Shelly Duval and Showtime,
as well as feature films and television, some made for Spanish TV. At Producer
Circle Co. he was Vice President of Production from 1976 to 1981, which
Company's Broadway shows included Norman Conquest, Sweeney Todd, On the
Twentieth Century, Crimes of the Heart and the original Broadway production of
Chicago. Additional film credits include Boys from Brazil, starring Laurence
Olivier and Gregory Peck; The Shining, directed by Stanley Kubrick and starring
Jack Nicholson; and Fort Apache, the Bronx, starring Paul Newman.
Nelson S. Thall, has been a Director of the Company since January 2000.
Mr. Thall is the Director of Research for the Centre for Media Sciences of
Toronto and a leading authority on the science of communication/media theory and
process analysis, and served as President of the Marshall McLuhan Center on
Global Communications from 1990-1995. In 1998, Mr. Thall was elected to the
Board of Directors of Torstar Corp., the largest newspaper-publishing group in
Canada and owner of the Harlequin Romance publishing franchise. Mr. Thall has
consulted to government, federal tribunals, commissions and business
organizations, appeared regularly on the CBC Television Network as a media
scientist, and has been published widely.
Robert K. Burgess has been a Director of the Company since January 2000.
Mr. Burgess has been Chief Executive Officer and a director of Macromedia, Inc.
since November 1996 and has served as Chairman of the Board of Macromedia, Inc.
since July 1998. Prior to joining Macromedia, Mr. Burgess was Senior Vice
President of Silicon Graphics, Inc., responsible for the Silicon Interactive
Strategic Business Unit. Prior to this position, he was President of
Alias/Wavefront, a wholly-owned independent software subsidiary of Silicon
Graphics, created from the 1995 merger of Alias Research, Inc. and Wavefront
Technologies, Inc. From 1992 to 1995, he was President, CEO, COO and Director of
Alias Research. Prior to joining Alias Research, Mr. Burgess held a number of
senior management positions at Silicon Graphics, including Vice President of
Marketing, Applications and Business Development (1991), Vice President of
Applications (1990) and President of Silicon Graphics Canada, Inc. (1984-1990).
Mr. Burgess earned a Bachelors Degree in Commerce from McMaster University. Mr.
Burgess is also a director of Paraform Technologies, Inc.
Arthur E. Schramm, Jr. has been a Director of the Company since March
2000. Mr. Schramm has 25 years experience in the shopping center industry,
advising in a legal and financial capacity, and acting as a financial adviser
and a senior negotiator for Westfield America, Inc. (NYSE: WEA) which is one of
the largest publicly traded shopping center REITs, in conjunction with
acquisitions, financing and equity raisings. In addition, Mr. Schramm has served
on a variety of corporate boards, including directorships with Fujita Investors
of California, a private REIT, and Interim Trustee for three regional service
trusts for Apartment Investment and Management Company, a publicly traded REIT.
He is also a
21
<PAGE> 25
Trustee of the Southern California Chapter of the National Multiple Sclerosis
Society and has for the past four years been a co-chair of the MS Dinner of
Champions. Mr. Schramm earned his Juris Doctor/Bachelor of Laws Degree from the
University of Pennsylvania, a Masters of Business Administration Degree from the
University of California, Berkeley, and a Bachelors Degree with Honors from
Lehigh University.
Stephen M. Gordon has served as the Company's Executive Vice President,
Operations since inception, and was appointed Secretary in December 1999. Mr.
Gordon has 27 years of experience in corporate management and finance. In 1972,
he co-formed Gordon & Associates, Inc., a market maker of precious metals,
coins, bars and other related materials. He became President and CEO in 1981 and
sold the company in 1986. He then became a consultant to American Coin Company,
where he innovated a marketing strategy and dealer network to distribute the
U.S. Mint's new American Eagle Gold Coin series. From 1988 to 1992, he was a
financial workout consultant to various small-to-medium sized companies. In
1992, he was one of the founders of Gourmet Group Ltd., a nationwide network of
sales representatives, who distributed Hershey's sports line of chocolates and
Le Cordon Bleu, a French gift line of gourmet food products. He later founded
Trumpets Gourmet Teas. Mr. Gordon attended California State University at
Northridge as a business and marketing major.
Robert M. Schultz joined the Company as Vice President, Finance in July
1999. Before joining the Company and for the prior period beginning January 1,
1997, Mr. Schultz was Managing Director of Goldmark Advisers, Inc., an
investment banking and corporate development firm located in Los Angeles,
California. Prior to Goldmark, from 1995 through 1996, he was Vice President -
Corporate Finance and Managing Director of the Capital Markets Division of J.B.
Oxford & Co., a registered broker-dealer with national and international
offices. From 1993 to 1995, Schultz was the Chief Financial Officer at Portfolio
Capital Corporation, a financial services company specializing in the health
care industry. From 1983 to 1993 he was the Treasurer at Monex Corporation, a
holding company with subsidiaries and affiliates involved in the wholesale and
retail sales of commodities. Schultz's experience prior to 1983 includes his
acting as Vice President and Treasurer of Gateway Sporting Goods Company, an
AMEX-listed company, and Director of Taxation for National Patent Development
Corporation, a multinational AMEX listed Company. Mr. Schultz is a CPA who began
his career at KPMG Peat Marwick and is a graduate of Pace University.
CERTAIN KEY STAN LEE TEAM MEMBERS:
Bryce Zabel joined the Company in November 1999 as President, Linear
Content and Television Production. Mr. Zabel has helped launch a dozen one hour
TV drama series, often as the Executive Producer or Showrunner. He has received
the Writers Guild "created by" or "developed for television by" credit on five
prime-time network or syndication series including NBC's Dark Skies and Fox's
M.A.N.T.I.S. His writing and producing credits include popular series from L.A.
Law to Life Goes On. Mr. Zabel has carved out a niche in the world of science
fiction and established a specialty in turning comic book properties into
television series, most notably as a supervising producer on the first season of
Lois & Clark: The New Adventures of Superman and as Executive Producer of last
season's The Crow: Stairway to Heaven. In the world of new media, Mr. Zabel has
consulted on the creation of websites for both SONY and Polygram, and developed
a video game for DreamWorks. He also wrote the feature film, Mortal Kombat:
Annihilation for New Line Cinema. Immediately before joining our company, Mr.
Zabel worked as the Co-Executive Producer of the Steven Spielberg mini-series
Taken for the Sci-Fi Channel. Over the years, Zabel has been nominated by the
WGA, the Mystery Writers of America, the Environmental Media Association and the
Emmy
22
<PAGE> 26
awards. He currently has been re-elected as a Governor of the Academy of
Television Arts and Sciences. He is a member of the Writers Guild, the Directors
Guild and AFTRA.
Jon Corfino joined the Company in February 2000 as President, Theme Park
and Location Based Attractions. Previously, Mr. Corfino served in various
executive capacities with Iwerks Entertainment Inc., most recently as Senior
Vice President of Film and Executive in Charge of Production since March 1998,
and prior thereto, as Vice President of Attractions, Vice President of Owned and
Operated Operations, Director of Studio Operations and Production Manager. Over
the past seven years, he supervised the production and/or acquisition at Iwerks
of over 30 Specialty films, i.e. Simulation, Attraction and Large Format films.
Mr. Corfino previously worked at MCA in various capacities, and assisted in the
development and hosting of presentations to potential sponsors and investors in
the Universal Florida and Japan theme park projects. As a Project Manager in the
Planning and Development group at Universal, Mr. Corfino was directly involved
in the creative development and construction of a variety of projects and
attractions, including "The Star Trek Adventure", "Back to the Future" The Ride,
Studio Center expansion, "ET the Extraterrestrial", and the "Special Effects
Stages".
Stephen L. Brain joined the Company in January 2000 as Executive Vice
President, Production. Prior thereto, from 1996 to 1999, Mr. Brain served as
President and Chief Executive Officer of Arizona Studios and White Tiger
Productions and achieved recognition in the Arizona film and business community
for his efforts to attract film production to the state. During the 1994 to 1996
period, Mr. Brain was recruited to serve as Senior Vice President and General
Manager of 20th Century Fox's new feature animation division, where he managed a
budget of $100 million, hired more than 320 employees, and helped develop Fox
Animation Studios into one of the most modern animation studios in the world,
revolutionizing the process of animation through the use of computers. During
the 1991 to 1994 period, Mr. Brain worked for Silver Pictures at Warner Bros. in
several management capacities including Executive Vice President, responsible
for daily management of the company and completely reorganized the
administration of the company. During the 1983 to 1990 period, Mr. Brain was
hired by Stephen J. Cannell Productions, ultimately serving as Vice President of
Studio Operations responsible for all real estate and facilities as the company
grew from several hundred to several thousand employees. As the company expanded
internationally, Mr. Brain was given the responsibility for the development of
North Shore Studios in Vancouver, B.C. From 1981 to 1983, Mr. Brain was an
executive of Financial News Network, responsible for network operations and
facilities nationwide. He began his professional career in June 1977 as an
assistant to television producer Glen Larson at Universal Studios. Mr. Brain
currently serves on the Board of the Arizona Biltmore Children's Charity and the
Governor's Film and Television Advisory Board. He previously served on the Board
of the Phoenix Chamber of Commerce. Mr. Brain also serves on the Board of
Directors of Xomba.com, an Internet portal company.
Jamie Wilkinson joined the Company in June 1999 as Executive Vice
President, Internet Strategy. For the prior three-year period, Mr. Wilkinson had
been innovating website production at Disney Online, where he was responsible
for research and development of Squeak applications and for new content areas,
which included Stories and Studio Blast. As Associate Producer/Director of New
Technology, Wilkinson managed the 15 member Disney Blast Story group, including
research and development, overall
23
<PAGE> 27
design, financial control, and all other production responsibilities. He also
handled the corporate license acquisition of Cartoon Maker software and produced
multi-user interactive content, as well as SQUEAK OS development with Alan Kay.
Prior thereto, at NBC Interactive in New York Wilkinson was the graphic designer
who designed, developed and maintained an internal graphics network for
NBC/Microsoft. He was responsible for the development and initial launch of NBC
on Microsoft Network, NBC.com, TNBC.com, MSNBC.com, SUPERBOWL.com, Olympics.com,
NBA.com and Live Playoff Broadcast. He also worked with the Broadcast Group to
develop telefusion content. Mr. Wilkinson's freelance credits include
photography and computer imaging for Franklin Spier Inc., Comedy Central and
Grey Advertising.
Stephen A. Segal joined the Company in February 2000 as Chief Technology
Officer. Mr. Segal brings to Stan Lee Media over 20 years of information
technology experience, including extensive Internet and Intranet development and
implementation for companies such as Seagate Technology and the IBM Corporation.
Mr. Segal's Web consulting projects have included technical support services for
the bmwusa.com and nikonusa.com websites, and development of a database driven
retail product catalog system, an online site guest book and a sales lead
tracking system with data gathering capabilities. Intranet projects have
included work for Sprint and Northern States Power Company, and include the
development of systems for online approval routing and support, employee
recognition and registration, and online product ordering. Mr. Segal's
experience in systems programming, database administration skills and
implementation of software such as Oracle and SQL Server will assist in
developing the Company's databases, interfaces and retail and community sites.
His experience with dynamic HTML, JavaScript, Cold Fusion and Active Server
Pages will facilitate online user experiences. Mr. Segal also served as a
Technical Instructor and Systems Engineer for the IBM Corporation for six years.
Mr. Segal received a Master in Business Administration in Management Information
Systems from the University of Minnesota and a Bachelor of Arts Degree in
Economics and Accounting from the University of California, Los Angeles, and has
MCSE (Microsoft Certified Systems Engineer) and MCT (Microsoft Certified
Trainer) certifications from the Microsoft Corporation.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
To our knowledge, during and for Stan Lee Media, Inc.'s year ended December 31,
1999, there were no directors or officers or more than 10% shareholders of the
Company who failed to timely file a Form 3, Form 4 or Form 5, other than the
individuals set forth below. All of the filings have been made as of the date of
this Annual Report.
(a) Stan Lee failed to timely file a Form 4 in which one transaction
was reported.
(b) Gill Champion failed to timely file a Form 4 in which two
transactions were reported.
(c) Stephen M. Gordon failed to timely file a Form 4 in which two
transactions were reported.
(d) Robert M. Schultz failed to timely file a Form 3 in which two
transactions were reported.
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<PAGE> 28
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth information for 1999 with regard to
compensation paid to our chief executive officer and the executive officers or
key employees whose total salary and bonus exceeded $100,000. None of our
officers was compensated in 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
OTHER ANNUAL SECURITIES ALL OTHER
COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($) OPTIONS(#) ($)(1)
--------------------------- ---- --------- -------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Stan Lee .................... 1999 $247,500(1) $25,000 -- -- --
Chairman and
Chief Creative Officer
Devendra Mishra.............. 1999 48,500(2) -- -- -- --
President and
Chief Executive Officer
Stephen M. Gordon(3)......... 1999 108,999 25,000 -- 150,000 --
Secretary and
Executive Vice President
Operations
</TABLE>
(1) $235,000 of Mr. Stan Lee's wages were paid to his corporation, S.L.
Productions.
(2) $48,500 of Mr. Devendra Mishra's wages were paid to his corporation,
MND Resources.
(3) Mr. Stephen M. Gordon was elected Secretary of the Company on
December 1, 1999.
The following table sets forth further information regarding individual
grants of stock options during fiscal 1999 to each of the named executive
officers. In accordance with the rules of the Securities and Exchange
Commission, the table sets forth the hypothetical gains or "option spreads" that
would exist for the options at the end of their respective five-year terms based
on assumed annualized rates of compound stock price appreciation of 5% and 10%
from the dates the options were granted to the end of the respective option
terms. Actual gains, if any, on option exercises are dependent on the future
performance of the Company's Common Stock and overall market conditions. There
can be no assurance that the potential realizable values shown in this table
will be achieved. The table also shows all options that were granted with
exercise prices equal to fair market value on the dates of grant.
OPTION GRANTS IN FISCAL 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------------- POTENTIAL REALIZABLE
PERCENT OF VALUE
NUMBER OF TOTAL AT ASSUMED ANNUAL RATES
SECURITIES OPTIONS PER SHARE OF STOCK PRICE
UNDERLYING GRANTED PER SHARE MARKET APPRECIATION FOR OPTION
OPTIONS TO EXERCISE PRICE ON TERM(2)
GRANTED EMPLOYEES IN PRICE GRANT DATE EXPIRATION -----------------------
NAME (#)(1) FISCAL 1999 ($/SH)(1) ($/SH) DATE 5%($) 10%($)
- ---- ---------- ------------ --------- ---------- ---------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Stan Lee................. -- -- -- -- -- -- --
Devendra Mishra.......... -- -- -- -- -- -- --
Stephen M. Gordon ....... 100,000 6.8 2.5000 2.5000 7/22/2004 749,815 946,175
Stephen M. Gordon........ 50,000 3.4 5.8750 5.8750 12/30/2004 374,908 392,760
</TABLE>
- -------------
25
<PAGE> 29
(1) Stock options are generally awarded with an exercise price equal to
the fair market value of the Company's Common Stock on the date of grant.
Options granted to new employees generally become exercisable, so long as the
employee continues to provide services to the Company, as to 50% of the shares
at the end of the first year and as to 50% at the end of the second year.
Options expire five years from the date of grant or at the time of the
optionee's termination of employment.
(2) The 5% and 10% assumed rates of annual compound stock price
appreciation are prescribed by rules of the SEC and do not represent the
Company's estimate or projection of future Common Stock prices.
There were no exercises of stock options by any of the named executive
officers in 1999. The following table sets forth certain information concerning
the exercise of stock options during fiscal 1999 by each of the Named Executive
Officers and the number and value at December 31, 1999 of unexercised options
held by said individuals.
AGGREGATED OPTION EXERCISES IN FISCAL 1999
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY OPTIONS
SHARES VALUE UNEXERCISED OPTIONS AT AT FISCAL YEAR-END(2)($)
ACQUIRED ON REALIZED FISCAL YEAR-END(#)
NAME EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stan Lee................. 0 $ 0 0 0 $ 0 $ 0
Devendra Mishra.......... 0 $ 0 0 0 $ 0 $ 0
Stephen M. Gordon........ 0 $ 0 0 150,000 $ 0 $506,250
</TABLE>
- --------------------------
(1) "Value Realized" represents the fair market value of the shares
underlying the option on the date of exercise less the aggregate exercise price.
(2) These values, unlike the amounts set forth in the column entitled
"Value Realized," have not been, and may never be, realized, and are based on
the positive spread between the respective exercise prices of outstanding stock
options and the closing price of the Company's Common Stock on December 31, 1999
($5.875 per share).
BOARD OF DIRECTORS:
From the Company's inception through December 31, 1999, there have been
no meetings of the Company's board of directors. Other actions in 1999 were
conducted by means of unanimous written consents on 11 separate instances. The
Company held a meeting on March 1, 2000, at which all directors eligible to
attend did so attend.
Non-employee directors receive options to purchase 7,500 shares of the
Company's common stock as of January 10 of each year of service, and are
reimbursed for travel costs and other out-of-pocket expenses incurred in
attending board of directors and committee meetings. Directors do not receive
compensation for attending meetings of the board of directors.
Effective June 25, 1999, the authorized number of directors on the
Company's board of directors was fixed at four. Effective July 23, 1999,
concurrent with the closing of the reverse merger transaction, the Company's
board of directors was comprised of Stan Lee, Devendra Mishra, Gill Champion
and Andrea L. Freitag. Effective July 24, 1999, the Company's bylaws were
amended by unanimous written consent of the board of directors to provide that
the number of directors of the corporation shall be fixed from time to time by
the board, within a range of not less than three nor more than seven, and fixed
the number of directors at five. There then existed one vacancy on the
Company's board of directors. The vacancy on the Company's board of directors
was filled by the election of Stanley A. Weston by unanimous written consent of
the board of directors effective October 15, 1999. Effective December 1, 1999,
Ms. Freitag resigned as a director and as the Company's Secretary, and Mr.
Mishra resigned from the Company's board of directors to accommodate the
election of Robert K. Burgess and Nelson S. Thall to the board, and the
appointment of Stephen M. Gordon as the Company's Secretary. Effective December
7, 1999, Mr. Weston resigned from the Company's board of directors for personal
reasons. Effective December 10, 1999, the vacancy on the Company's board of
directors was filled by the election of Devendra Mishra by unanimous written
consent of the board of directors effective immediately, and the Company's
bylaws were amended to provide that the number of directors of the corporation
shall be fixed from time to time by the board, within a range of not less than
three nor more than seven, and fixed the number of directors at seven, in part
to respond to changes to the Nasdaq independent director and audit committee
requirements. There then existed two vacancies on the Company's board of
directors. At a meeting of the board of directors held on March 1, 2000, Arthur
E. Schramm, Jr. was elected to fill a vacancy on the board. As of the date of
this Annual Report, there exists one vacancy on the Company's board of
directors.
Andrea L. Freitag was the Secretary and a Director of the Company and
its predecessor, Stan Lee Entertainment, Inc. since October 18, 1998 until her
resignation effective December 1, 1999. Prior thereto, Ms. Freitag was the
founder and President of TLS Media Inc., a multimedia publishing and
distribution company, and President of Global Language Solutions Inc., a
language acquisition and training company. Ms. Freitag is the spouse of Peter
F. Paul, a Co-Founder of the Company, and a general partner of P.F.P. Family
Holdings, L.P., the holder of 2,700,000 shares of the Company's common stock.
Paraversal, Inc. provides the services to the Company of Peter F. Paul pursuant
to a consulting agreement.
Stanley A. Weston entered into a consulting relationship to provide
licensing and merchandising services to the Company, and entered into an
agreement providing for the issuance of options to purchase 27,500 shares of the
Company's common stock as of October 5, 1999, vesting to occur as follows:
options to purchase 17,500 shares of the company's common stock as of April 1,
2000 and options to purchase all of said 27,500 shares of the company's common
stock as of April 1, 2001. Mr. Weston was elected to serve as a director of the
company, effective as of October 15, 1999,
26
<PAGE> 30
and resigned from the company's board of directors for personal reasons on
December 7, 1999.
Arthur E. Schramm, Jr. entered into a consulting agreement with the
Company providing for the issuance of options to purchase 20,000 shares of the
company's common stock, vesting to occur as follows: 8,000 shares of the
Company's common stock as of January 10, 2000, and the issuance of options to
purchase an additional 1,000 shares monthly of the Company's common stock
commencing as of January 31, 2000, pending continued provision of services under
said consulting agreement. Mr. Schramm was elected to serve as a director of the
company, effective immediately, at the company's March 1, 2000 board of
directors meeting.
As of March 1, 2000, options to acquire 175,000 shares of common stock
held in the aggregate by such directors are outstanding, and 29,500 of such
options are vested or will be vested within the next 60 days.
During the period from July 23, 1999 to October 13, 1999, the Board of
Directors administered the Stan Lee Media, Inc. stock option plans. Effective
October 13, 1999, the committees of the Board of Directors were established or
restructured. As of March 1, 2000, the Company currently has three committees:
the Executive Committee, the Compensation Committee and the Audit Committee.
Messrs. Lee, Mishra and Champion are the members of the Executive
Committee. The Executive Committee has full authority to exercise all the powers
of the board of directors to the fullest extent permitted by Colorado law.
Actions of the Executive Committee are taken by a majority vote.
Mr. Stan Lee is the sole member of the Compensation Committee. The
Compensation Committee administers, reviews and approves, subject to the board
of directors, Stan Lee Media, Inc.'s stock option plans, and makes
recommendations to the board of directors regarding compensation, including
payment of salaries, bonuses and incentive compensation and other benefit
programs, including those relating to Stan Lee Media's senior management.
Messrs. Champion, Thall and Schramm are the members of the Audit
Committee. The Audit Committee interacts with Stan Lee Media, Inc.'s Chief
Financial Officer and outside auditors concerning Stan Lee Media, Inc.'s
independent public accountants and the establishment and oversight of such
systems of internal accounting and auditing control as it deems appropriate.
The board of directors does not have a nominating committee. However,
the board of directors will consider nomination recommendations from
shareholders, which should be addressed to Stan Lee Media, Inc.`s secretary at
its principal executive offices.
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<PAGE> 31
EMPLOYMENT AND SERVICES AGREEMENTS:
The Company entered into a lifetime employment agreement with Stan Lee
in 1998 in consideration for the assignment and transfer of all of Mr. Lee's
right, title and interest in and to any and all ideas, names, titles,
characters, symbols, logos, designs, likenesses, visual representations,
artwork, stories, plots, scripts, episodes, literary property, and the
conceptual universe related thereto, including his name and likeness. Mr. Lee's
services for and on behalf of the Company shall be exclusive with the exception
of those services provided under a lifetime agreement with Marvel Enterprises,
Inc., which shall require no more than an average of 10-15 hours per week on its
behalf. The employment agreement provides for base salary compensation of
$250,000 annually, a discretionary bonus as determined by the company's board of
directors, stock options equal to the highest number of options offered to
company executives, reimbursement of certain business expenses, including
without limitation, business-related travel and entertainment expenses, and a
term life insurance policy in the minimum principal sum of $2 million.
The Company entered into a five-year employment agreement with Stephen
M. Gordon, its Executive Vice President - Operations, commencing as of November
1, 1999, subject to annual successive one-year renewals thereafter unless either
party notifies the other party of its election not to so renew not less than 90
days prior to the expiration of the initial term or the then current renewal
term, as the case may be. Mr. Gordon receives base compensation of $135,000 for
the period ending May 31, 2000, increasing to $150,000 for the period June 1,
2000 through May 31, 2001, and thereafter, annual base compensation in an amount
not less than $175,000. Mr. Gordon also is entitled to receive an annual bonus
determined by the board of directors in its discretion. All options granted to
Mr. Gordon will vest upon a change in control of Stan Lee Media, Inc. In
addition, if Mr. Gordon is terminated other than for cause, during the first
three years of his employment agreement, Mr. Gordon will receive 200% of his
base compensation as a severance payment; if termination other than cause occurs
during the fourth year of his employment agreement, Mr. Gordon will receive 250%
of his base compensation as a severance payment; and if termination occurs in
the fifth year of his employment agreement or thereafter, Mr. Gordon will
receive 299% of his base compensation as a severance payment.
The Company entered into a seven-year agreement with Paraversal, Inc. to
provide the Company with strategic business development services, including
structuring of corporate partnering relationships and strategic alliances. The
agreement may be renewed for two additional three-year terms by the parties. The
agreement provides for the Company to pay Paraversal monthly compensation of
$16,500 for the period commencing October 1, 1999. Coincident with the receipt
by the Company of equity financing in an amount not less than $5,000,000, the
monthly compensation paid by the Company to Paraversal will increase to $20,000,
and upon receipt of an additional equity infusion of $5,000,000, such monthly
compensation will increase to $25,000. Currently, the Company pays Paraversal
$20,000 monthly. Under the agreement, Paraversal is entitled to an annual bonus
in accordance with the terms and provisions mutually agreed upon with the
Company, will receive options to purchase 200,000 shares of the Company's common
stock at a price equal to 110% of the closing bid price at each date of issue.
On October 5, 1999, Paraversal was granted options to purchase 500,000 shares of
the Company's common stock at $5.50, which options vested on October 8, 1999.
The agreement further provides that if Paraversal is terminated for any reason
other than for cause or for death and disability, Paraversal will be entitled to
a lump sum payment of $1,000,000.
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<PAGE> 32
STOCK OPTIONS AND WARRANTS
From July 23, 1999 through October 5, 1999, the Company entered into
stock option agreements with certain executives, employees, directors and
consultants to purchase 2,435,000 common shares at $2.50 to $5.50 per share. Of
said amount, options to purchase 1,110,000 common shares have a term of five
years, and are subject to various vesting periods ranging up to two years.
Options to purchase the remaining 1,325,000 common shares were issued to
consultants, have a term of 10 years and are fully vested at December 31, 1999.
The board of directors determined the terms and conditions of all the stock
options granted pursuant to written compensatory agreements for the period
from July 23, 1999 to October 5, 1999, including the number of shares subject
to the option, exercise price, term, transferability and exercisability.
Payment of the exercise price may be made by any of the following alternative
payment procedures: (a) cash; (b) check; (c) cancellation of indebtedness; (d)
other shares that (x) in the case of shares acquired upon exercise of an
option, have been owned by the optionee for more than six months on the date of
surrender or such other period as may be required to avoid a charge to the
corporation's earnings, and (y) have a fair market value on the date of
surrender equal to the aggregate exercise price of the shares as to which such
option shall be exercised; or (e) authorization for the corporation to retain
from the total number of shares as to which the option is exercised that number
of shares having a fair market value on the date of exercise equal to the
exercise price for the total number of shares as to which the option is
exercised.
No option may be transferred by the optionee other than by will or the
laws of descent or distribution; provided, however, that the board of directors
may in its discretion provide for the transferability of the options. Each
option may be exercised during the lifetime of the optionee only by such
optionee or permitted transferee. Options granted pursuant to the written
compensatory agreements generally must be exercised within 3 months after the
termination of the optionee's status as an employee of the Company, or within
12 months if such termination is due to the death or disability of the
optionee, but in no event later than the expiration of the option's term.
Options granted pursuant to the written compensatory agreements generally vest
over a two-year period at a rate of one-half of the total number of shares
subject to the option twelve months after the date of grant, with the remaining
shares vesting in equal installments at the end of the two years. In the event
of our merger with or into another corporation, the successor corporation is
obligated to assume each option.
The Company also has issued three-year warrants to acquire 246,029
shares of Common Stock at an exercise price of $5.00 per share to investors in
certain of the Company's private placement transactions.
On September 15, 1999, the Company issued warrants to purchase 5,000
common shares in conjunction with debt financing. The warrants have a $5.00 per
share exercise price and a term of three years. On September 21, 1999, the
Company issued warrants to purchase 5,000 common shares in conjunction with debt
financing. The warrants have a $5.00 per share exercise price and a term of
three years. On October 12, 1999, the Company issued warrants to purchase 25,000
shares of common stock in connection with a bridge loan from VMR Luxembourg S.A.
On November 1, 1999, the Company issued warrants to purchase 2,500 common shares
in conjunction with debt financing. The warrants have a $6.00 per share exercise
price and a term of three years.
STOCK PLANS
1999 Incentive Stock Plan. Our 1999 stock plan provides for the grant of
incentive stock options to employees and nonstatutory stock options and stock
purchase rights to employees, directors and consultants to acquire shares of
common stock. The purposes of the 1999 stock plan are to attract and retain the
best available personnel, to provide additional incentives to our employees and
consultants and to promote the success of our business. Our board of directors
originally adopted the 1999 stock plan in October 1999. The 1999 stock plan was
amended by the board of directors in March 2000 to increase the total number of
shares of common stock reserved for issuance to 3,000,000 shares and to
incorporate certain other changes. Unless terminated earlier by the board of
directors, the 1999 stock plan will terminate in October 2009. All grants under
the 1999 stock plan are subject to the approval of our shareholders.
Under the Company's 1999 stock plan, the Company issued 355,000 options
to officers and employees during 1999, and 202,500 options to consultants. As of
March 1, 2000, options to purchase 3,766,000 shares of common stock were
outstanding at a weighted average exercise price of $4.60 per share. Of said
amount, options to purchase 1,331,000 shares of common stock had been issued
under our 1999 stock plan and were outstanding at a weighted average price of
$6.50 per share. The remaining options, 2,435,000, had been issued pursuant to
written compensatory agreements prior to the adoption of our 1999 stock plan and
were outstanding at a weighted average price of $3.47 per share. No shares had
been issued upon exercise of outstanding options, and 1,669,000 shares remained
available for future grant under the 1999 stock plan.
The 1999 stock plan may be administered by the board of directors, a
committee appointed by the board of directors or a combination of the board of
directors and a committee, as determined by the board of directors. The
administrator determines the terms of options granted under the 1999 stock plan,
including the number of shares subject to the option, exercise price, term and
exercisability. In no
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<PAGE> 33
event, however, may an individual receive option grants for more than 500,000
shares of common stock under the 1999 stock plan in any fiscal year. Incentive
stock options granted under the 1999 stock plan must have an exercise price of
at least 100% of the fair market value of the common stock on the date of grant
and at least 110% of such fair market value in the case of an optionee who holds
more than 10% of the total voting power of all classes of our stock.
Nonstatutory stock options granted under the 1999 stock plan will have an
exercise price as determined by the administrator. Payment of the exercise price
may be made in cash or such other consideration as determined by the
administrator.
The administrator determines the term of options, which may not exceed
10 years or 5 years in the case of an incentive stock option granted to a holder
of more than 10% of the total voting power of all classes of our stock. No
option may be transferred by the optionee other than by will or the laws of
descent or distribution, provided, however, that the administrator may in its
discretion provide for the transferability of nonstatutory stock options granted
under the 1999 stock plan if the common stock is listed or approved for listing
on a national securities exchange or designated as a national market system
security by the National Association of Securities Dealers, Inc. Each option may
be exercised during the lifetime of the optionee only by such optionee or
permitted transferee. The administrator determines when options become
exercisable. Options granted under the 1999 stock plan generally must be
exercised within 3 months after the termination of the optionee's status as an
employee, director or consultant of the Company, or within 12 months if such
termination is due to the death or disability of the optionee, but in no event
later than the expiration of the option's term. Options granted under the 1999
stock plan generally vest over a two-year period at a rate of one- half of the
total number of shares subject to the option twelve months after the date of
grant, with the remaining shares vesting in equal installments at the end of the
two years.
In the event of our merger with or into another corporation, the
successor corporation may assume each option and outstanding stock purchase
right or may substitute an equivalent option or stock purchase right. However,
if the successor corporation does not agree to this assumption or substitution,
the option or stock purchase right will terminate. The board of directors has
the authority to amend or terminate the 1999 stock plan provided that no action
that impairs the rights of any holder of an outstanding option may be taken
without the holder's consent. In addition, we will obtain requisite stockholder
approval for any action requiring stockholder approval under the applicable law.
In addition to stock options, the administrator may issue stock
purchase rights under the 1999 stock plan to employees, directors and
consultants. The administrator determines the number of shares, price, terms,
conditions and restrictions related to a grant of stock purchase rights and the
purchase price of a stock purchase right granted under the 1999 stock plan. The
administrator also determines the period during which the stock purchase right
is held open, but in no case shall such period exceed 30 days. Unless the
administrator determines otherwise, the recipient of a stock purchase right must
execute a restricted stock purchase agreement granting an option to repurchase
the unvested shares at cost upon termination of such recipient's relationship
with us.
1999 Stock Compensation Plan. Our 1999 Stock Compensation Plan
(the "Compensation Plan") was adopted on October 11, 1999, and was instituted
for the purpose of compensating non-employee directors by granting them shares
of the company's common stock in lieu of annual director's fees. A total of
150,000 were reserved for issuance pursuant to the Compensation Plan. By its
terms, the Compensation Plan may be terminated or amended by the board of
directors or the shareholders. No shares of the company's common stock were
issued under the Compensation Plan, and the Compensation Plan was terminated by
the board of directors as of December 10, 1999.
30
<PAGE> 34
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of March 1, 2000 by (i) each person
known by the Company to be the beneficial owner of more than five percent of its
Common Stock; (ii) each director; and (iii) all directors and executive officers
as a group. Beneficial ownership is determined in accordance with the rules of
the Securities and Exchange Commission and includes voting or investment power
with respect to the securities. Shares of common stock that may be acquired by
an individual or group within 60 days of March 1, 2000, pursuant to the exercise
of options or warrants are deemed to be outstanding for the purpose of computing
the percentage ownership of such individual or group, but are not deemed to be
outstanding for the purpose of computing the percentage ownership of any other
person shown in the table. Percentage of ownership is based on 11,856,362 shares
of common stock outstanding, which does not assume the conversion of all
outstanding shares of preferred stock into common stock.
Except as indicated in the footnotes to this table, we believe that the
shareholders named in this table have sole voting and investment power with
respect to all shares of common stock shown to be beneficially owned by them
based on information provided to us by such shareholders. Unless otherwise
indicated, the address for each director and executive officer listed is: c/o
Stan Lee Media, Inc., 15821 Ventura Boulevard, Suite 675, Encino, California,
91436.
<TABLE>
<CAPTION>
Name of Shareholder Number of Shares Percent of Common Stock
- ------------------- ---------------- -----------------------
<S> <C> <C>
Stan Lee(1) 3,345,000 28.2%
P.F.P. Family Holdings, L.P.(2) 3,200,000 27.0
Devendra Mishra(3) 50,000 *
Gill Champion(4) 50,000 *
Stephen M. Gordon(5) 270,000 2.3
Robert M. Schultz(6) 10,000 *
Nelson S. Thall (7) 9,000 *
Robert K. Burgess(8) 721,786 5.7
Arthur E. Schramm, Jr.(9) 12,000 *
All executive officers and directors
as a group (8 persons) 4,467,786 35.5
</TABLE>
- -----------------------
* Less than one percent (1%) of the issued and outstanding shares of
Common Stock.
(1) All shares are held in the name of the Lee Family 1985 Trust.
(2) Includes options to purchase 500,000 shares immediately exercisable
by Paraversal, Inc. Paraversal, Inc. provides the services of Peter
F. Paul, a Co-Founder of the Company pursuant to a consulting
agreement. Mr. Paul is a general partner of P.F.P. Family Holdings,
L.P. While Mr. Paul is not an officer, director or shareholder of
Paraversal, Inc., he may be deemed to share voting and dispositive
power with Paraversal by virtue of his capacity. Mr. Paul disclaims
beneficial ownership with respect to the options held by
Paraversal, Inc.
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<PAGE> 35
(3) Excludes options to purchase 30,000 shares granted to Mr. Mishra,
15,000 of which vest as of January 10, 2001, and 15,000 of which
vest as of January 10, 2002.
(4) Excludes options to purchase 150,000 shares granted to Mr.
Champion, 50,000 of which vest as of July 23, 2000, 5,000 of which
vest as of December 31, 2000, 20,000 of which vest as of January
10, 2001, 50,000 of which vest as of July 23, 2001, 5,000 of which
vest as of December 31, 2001, and 20,000 of which vest as of
January 10, 2002.
(5) Includes 220,000 shares held directly by Mr. Gordon and his spouse,
and 50,000 shares held in a custodial capacity of behalf of a minor
child, and excludes options to purchase 150,000 shares granted to
Mr. Gordon, 50,000 of which vest as of July 23, 2000, 25,000 of
which vest as of December 31, 2000, 50,000 of which vest as of July
23, 2001, and 25,000 of which vest as of December 31, 2001.
(6) Excludes options to purchase 110,000 shares granted to Mr. Schultz,
50,000 of which vest as of July 23, 2000, 5,000 of which vest as of
December 31, 2000, 50,000 of which vest as of July 23, 2001, and
5,000 of which vest as of December 31, 2001.
(7) Includes options to purchase 7,500 shares immediately exercisable
by Mr. Thall. Mr. Thall's address is One Yonge Street, Suite 1103,
Toronto, Ontario, Canada, M5E 1E5.
(8) Includes options to purchase 7,500 shares immediately exercisable
by Mr. Burgess, and includes 714,286 shares of the Company's Series
A Preferred Stock immediately convertible into the Company's common
stock held by Macromedia, Inc. Mr. Burgess, one of our directors,
is the Chairman and Chief Executive Officer and Director of
Macromedia, Inc., whose address is 600 Townsend Street, San
Francisco, California, 91403. Based on information provided to us
by Mr. Burgess and Macromedia, Inc., Mr. Burgess shares voting and
dispositive power with respect to the shares held by Macromedia,
Inc., and disclaims beneficial ownership with respect to the shares
held by Macromedia, Inc.
(9) Includes options to purchase 12,000 shares immediately exercisable
or exercisable within 60 days by Mr. Schramm. Mr. Schramm's address
is 11601 San Vicente Boulevard, Suite 1200, Los Angeles,
California, 90025.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Stanley A. Weston entered into a consulting relationship to provide
licensing and merchandising services to the Company, and entered into an
agreement providing for the issuance of options to purchase 27,500 shares of the
Company's common stock as of October 5, 1999, vesting to occur as follows:
options to purchase 17,500 shares of the company's common stock as of April 1,
2000 and options to purchase all of said 27,500 shares of the company's common
stock as of April 1, 2001. Mr. Weston was elected to serve as a director of the
company, effective as of October 15, 1999, and resigned from the company's board
of directors for personal reasons on December 7, 1999.
The Company entered into a consulting agreement as of January 10, 2000
with Arthur E. Schramm, Jr., who subsequently became a Director of the Company
on March 1, 2000. The term of the agreement is approximately 12 months ending
December 31, 2000, subject to extension, and terminable at will. Under the terms
of the consulting agreement, Mr. Schramm will assist the Company in defining its
product and developing its business plan; introduce the Company to potential
strategic partners for the
32
<PAGE> 36
Company's products and services; and assist the Company in issues of overall
business and capital formation strategies. The Company has granted Mr. Schramm
options to purchase 20,000 shares of the Company's common stock, vesting as
follows: as to 8,000 of the optioned shares as of January 10, 2000, and
commencing as of January 31, 2000, and as of the last day of each month to and
including December 31, 2000, options to purchase an additional 1,000 shares of
the total number of shares optioned.
The Company entered into a seven-year agreement with Paraversal, Inc. to
provide the Company with strategic business development services, including
structuring of corporate partnering relationships and strategic alliances.
Paraversal provides the services of Peter F. Paul, a co-founder of the Company,
and a general partner of P.F.P. Family Holdings, L.P., the holder of
approximately 22.8% of the Company's issued and outstanding common stock as of
March 1, 2000. The agreement may be renewed for two additional three-year terms
by the parties. The agreement provides for the Company to pay Paraversal monthly
compensation of $16,500 for the period commencing October 1, 1999. Coincident
with the receipt by the Company of equity financing in an amount not less than
$5,000,000, the monthly compensation paid by the Company to Paraversal will
increase to $20,000, and upon receipt of an additional equity infusion of
$5,000,000, such monthly compensation will increase to $25,000. Currently, the
Company pays Paraversal $20,000 monthly. Under the agreement, Paraversal is
entitled to an annual bonus in accordance with the terms and provisions mutually
agreed upon with the Company, and will receive options to purchase 200,000
shares of the Company's common stock at a price equal to 110% of the closing bid
price at each date of issue. On October 5, 1999, Paraversal was granted options
to purchase 500,000 shares of the Company's common stock at $5.50, which options
vested on October 8, 1999. The agreement further provides that if Paraversal is
terminated for any reason other than for cause or for death and disability,
Paraversal will be entitled to a lump sum payment of $1,000,000.
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements and Schedules. The Financial Statements and
Schedules required to be filed hereunder are enclosed on Pages F-1 through F-27.
(b) Current Reports on Form 8-K. A Current Report on Form 8-K dated
November 3, 1999, was filed on November 17, 1999 with the Securities and
Exchange Commission, to report a transaction under Item 5, Other Events,
containing information related to the investment of $5,000,002 by Macromedia,
Inc. in the company, in the form of the issuance and delivery of 714,286 shares
of the company's Series A Preferred Stock, and the establishment of a
distribution relationship with Macromedia and its subsidiary, shockwave.com.
(c) Exhibits
<TABLE>
<S> <C>
2.1 Reorganization and Stock Purchase Agreement dated as of June 25, 1999
3.1 Articles of Incorporation
3.2 Articles of Amendment to Articles of Incorporation Filed August 12, 1999
3.3 Articles of Amendment to Articles of Incorporation Filed November 5, 1999
3.4 Bylaws
10.1 Securities Purchase Agreement dated as of November 3, 1999, between the
Registrant and Macromedia, Inc.
10.2 Agreement between the Registrant and Macromedia
</TABLE>
33
<PAGE> 37
<TABLE>
<S> <C>
10.3 Purchase Agreement dated as of February 1, 2000
10.4 Purchase Agreement dated as of February 4, 2000
10.5 Revolving Credit Agreement dated July 23, 1999, between the Registrant
and Santo Development Worldwide
10.6 Revolving Credit Agreement dated July 23, 1999, between the Registrant
and Maxi Technologies Limited
10.7 Financial Consulting Agreement dated as of October 11, 1999, between the
Registrant and VMR Capital Markets, U.S.
10.8 Form of 8% Convertible Debenture Due April 11, 2000
10.9 Warrant Agreement dated as of October 11, 1999, in favor of VMR
Luxembourg, S.A.
10.10 1999 Stock Incentive Plan
10.11 Form of 1999 Stock Incentive Plan Option Agreement
10.12 Agreement dated July 23, 1999, between the Registrant and Gill Champion
10.13 Agreement dated July 23, 1999, between the Registrant and Robert M.
Schultz
10.14 Agreement dated July 23, 1999, between the Registrant and Stephen M.
Gordon
10.15 Agreement dated July 23, 1999, between the Registrant and Dana Moreshead
10.16 Agreement dated July 23, 1999, between the Registrant and Dave Medinnis
10.17 Agreement dated July 23, 1999, between the Registrant and Zachary Foley
10.18 Linking and Stock Issuance Agreement dated March 16, 1999, between the
Registrant and NPO Online, Inc.
10.19 Agreement dated July 23, 1999, between the Registrant and Gary Manfredi
10.20 Agreement dated July 23, 1999, between the Registrant and Shawn McManus
10.21 Agreement dated July 23, 1999, between the Registrant and Andrey
Pavlovskiy
10.22 Agreement dated July 23, 1999, between the Registrant and Aaron Sowd
10.23 Agreement dated July 23, 1999, between the Registrant and Jason Thomas
10.24 Agreement dated July 23, 1999, between the Registrant and William James
Wilkinson, Jr.
10.25 Agreement dated July 23, 1999, between the Registrant and Anthony Winn
10.26 Agreement dated July 23, 1999, between the Registrant and Jeffrey D.
Segal
10.27 Agreement dated July 23, 1999, between the Registrant and Ziffren,
Brittenham, Branca & Fischer LLP
10.28 Agreement dated September 24, 1999, between the Registrant and Iyan Bruce
10.29 Agreement dated September 24, 1999, between the Registrant and Zachary
Foley
10.30 Agreement dated September 24, 1999, between the Registrant and Jennifer
Kahn
10.31 Agreement dated September 24, 1999, between the Registrant and Tony
Pastor
10.32 Agreement dated September 24, 1999, between the Registrant and Mone
Peterson
</TABLE>
34
<PAGE> 38
<TABLE>
<S> <C>
10.33 Agreement dated September 24, 1999, between the Registrant and Patricia
Smith
10.34 Agreement dated September 24, 1999, between the Registrant and Russ Heath
10.35 Agreement dated September 27, 1999, between the Registrant and Brady
Darvin
10.36 Agreement dated September 27, 1999, between the Registrant and Larry
Houston
10.37 Agreement dated September 27, 1999, between the Registrant and Ruben
Martinez
10.38 Agreement dated October 5, 1999, between the Registrant and Stanley A.
Weston
10.39 Agreement dated October 5, 1999, between the Registrant and Jeffrey D.
Segal
10.40 Agreement dated October 5, 1999, between the Registrant and Paraversal,
Inc.
10.41 Agreement dated October 15, 1998, between Registrant and Mr. Stan Lee
10.42 Agreement dated October 22, 1999, between Registrant and Mr. Stan Lee
10.43 Consulting Agreement dated October 5, 1999, between Registrant and
Paraversal, Inc.
10.44 Employment Agreement dated October 8, 1999, between the Registrant and
Stephen M. Gordon
10.45 AcmeCity Interactive Community Agreement dated June 14, 1999, between the
Registrant and AcmeCity, a Delaware LLC
10.46 Agreement dated February 2, 2000, between the Registrant and KBNHA
Enterprises, Inc.
10.47 Publishing Agreement between Simon & Schuster, Inc., Stan Lee and George
Mair
10.48 Agreement dated December 7, 1999, among DC Comics, Stan Lee, the
Registrant and Branded Entertainment, LLC
10.49 Strategic Alliance Agreement dated November 8, 1999, between the
Registrant and Cyberworld International Corporation
10.50 Deal Memo dated as of August 1, 1999, between the Registrant and
WhatsHotNow.com, Inc.
10.51 Sublease Agreement dated as of November 4, 1998, between the Registrant
and One Twelve Interactive, Inc.
10.52 Third Amendment to Office Lease, dated May 27, 1999, between Douglas
Emmett Realty Fund 1997, a California limited partnership, and 1-12
Interactive, Inc., a Delaware corporation
10.53 Office Lease dated September 22, 1999, between the Registrant and
Douglas Emmett Realty Fund 1997, a California limited partnership
10.54 First Amendment to Office Lease dated November 2, 1999, between the
Registrant and Douglas Emmett Realty Fund 1997, a California limited
partnership
21.1 Subsidiaries of the Registrant
27 Financial Data Schedule
</TABLE>
35
<PAGE> 39
STAN LEE MEDIA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<PAGE> 40
STAN LEE MEDIA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Certified Public Accountants F-3
Consolidated Financial Statements
Consolidated Balance Sheets F-4
Consolidated Statements of Operations F-5
Consolidated Statements of Shareholders' Equity F-6
Consolidated Statements of Cash Flows F-8
Notes to Consolidated Financial Statements F-10
</TABLE>
F-2
<PAGE> 41
INDEPENDENT AUDITORS' REPORT
To the Shareholders
Stan Lee Media, Inc. and Subsidiary (a development stage company)
Encino, California
We have audited the accompanying consolidated balance sheets of Stan Lee Media,
Inc. and subsidiary (a development stage company) as of December 31, 1999 and
1998, and the related consolidated statements of operations, shareholders'
equity and cash flows for the year ended December 31, 1999, the period from
inception (October 13, 1998) through December 31, 1998, and the period from
inception (October 31, 1998) through December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Stan Lee Media, Inc. and
subsidiary (a development stage company) as of December 31, 1999 and 1998, and
the results of its operations and its cash flows for the year ended December 31,
1999 and the period from inception (October 13, 1998) through December 31, 1998
and the period from inception (October 13, 1998) through December 31, 1999, in
conformity with generally accepted accounting principles.
/s/ BDO Seidman, LLP
-------------------------------------
Los Angeles, CA
February 4, 2000
F-3
<PAGE> 42
STAN LEE MEDIA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
--------------------------
1999 1998
----------- ---------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 2,020,162 $ 21,276
Inventory 11,883 --
Subscriptions receivable -- 275,000
Prepaid expenses and other current assets 10,450 10,000
--------------------------
Total current assets 2,042,495 306,276
Property and equipment, net of accumulated depreciation (Note 3) 602,009 1,898
Other assets
Debt offering costs (net of $36,257 of accumulated
amortization) (Note 7) 17,756 --
Licensing rights (net of $5,989 of accumulated amortization) (Note 7) 173,686 --
Trademarks 103,636 --
Deposits 47,464 --
--------------------------
Total other assets 342,542 --
--------------------------
$ 2,987,046 $ 308,174
==========================
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 172,267 $ 5,175
Obligations under capital leases, current portion (Note 5) 45,864 --
Note payable (Note 4) 500,000 --
--------------------------
Total current liabilities 718,131 5,175
--------------------------
Obligations under capital leases, long-term portion (Note 5) 80,979 --
Commitments (Note 5)
Shareholders' equity (Notes 1 and 7)
Series A Convertible Preferred stock, par value $0.001,
authorized 1,500,000 issued and outstanding 714,286 and none;
liquidation preference of $7 per share 5,000,002 --
Common stock, par value $0.001, authorized 100,000,000 issued and outstanding
11,433,029 and 8,100,000 11,433 8,100
Additional paid-in capital 5,137,787 327,320
Deficit accumulated during the development stage (7,961,286) (32,421)
--------------------------
Total shareholders' equity 2,187,936 302,999
--------------------------
$ 2,987,046 $ 308,174
==========================
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 43
STAN LEE MEDIA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from Period from
Inception Inception
(October 13, (October 13,
Year Ended 1998) to 1998) to
December 31, December 31, December 31,
1999 1998 1999
----------------------------------------------------
<S> <C> <C> <C>
Revenue $ 30,605 $ -- $ 30,605
---------------------------------------------------
Operating expenses:
Cost of revenue 1,275 1,275
Development costs 1,142,378 -- 1,142,378
General and administrative 6,734,177 32,320 6,766,497
---------------------------------------------------
Total operating expenses 7,877,830 32,320 7,910,150
---------------------------------------------------
Operating loss (7,847,225) (32,320) (7,879,545)
Net interest expense (81,640) (101) (81,741)
---------------------------------------------------
Net loss $(7,928,865) $ (32,421) $(7,961,286)
===================================================
Basic and diluted net loss per share $ (0.81) $ (0.01)
===============================
Weighted average number of shares used in
computing basic and diluted net loss per share 9,776,021 8,100,000
===============================
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 44
STAN LEE MEDIA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (OCTOBER 13, 1998) THROUGH
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During
Preferred Common Paid-In Development
Shares Amount Shares Amount Capital Stage Total
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of founders shares
(October 1998) ($0.001 per
share) -- $ -- 6,900,000 $ 6,900 $ 3,100 $ -- $ 10,000
Issuance of stock for services
($0.001 per share) -- -- 420,000 420 -- -- 420
Issuance of stock for cash
($0.417 per share) -- -- 780,000 780 324,220 -- 325,000
Net loss for period -- -- -- -- -- (32,421) (32,421)
-------------------------------------------------------------------------------------------
BALANCE, at December 31, 1998 -- -- 8,100,000 8,100 327,320 (32,421) 302,999
Issuance of stock for services
($0.001 per share) (Note 7) -- -- 400,000 400 -- -- 400
Reverse merger (Note 1) -- -- 2,525,000 2,525 (13,062) -- (10,537)
Issuance of stock for services
($2.50 per share) (Note 7) -- -- 60,000 60 149,940 -- 150,000
Issuance of stock for cash
($3.00 per share) (Note 7) -- -- 246,029 246 733,854 -- 734,100
Issuance of stock for cash
($4.00 per share) (Note 7) -- -- 37,500 38 149,962 -- 150,000
Issuance of stock for cash
($4.00 per share) (Note 7) -- -- 62,500 62 249,938 -- 250,000
Cancellation and retirement of
stock issued for services
($2.50 per share) (Note 7) -- -- (50,000) (50) (124,950) -- (125,000)
Issuance of stock for debt
financing costs ($6.18 per
share) (Note 7) -- -- 10,000 10 61,790 -- 61,800
Issuance of preferred stock
($7.00 per share) (Note 7) 714,286 5,000,002 -- -- -- -- 5,000,002
Issuance of stock for services
($7.187 per share) (Note 7) -- -- 10,000 10 71,860 -- 71,870
</TABLE>
F-6
<PAGE> 45
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of stock for
licensing right ($7.187
per share) (Note 11) -- -- 25,000 25 179,650 -- 179,675
Issuance of stock for services
($5.50 per share) (Note 7) -- -- 7,000 7 38,493 -- 38,500
Warrants issued for financing
(Note 7) -- -- -- -- 54,014 -- 54,014
Options issued for services
(Note 7) -- -- -- -- 3,258,978 -- 3,258,979
Net loss for year ended
December 31, 1999 -- -- -- -- -- (7,928,865) (7,928,865)
-------------------------------------------------------------------------------------------
BALANCE, at December 31, 1999 714,286 $5,000,002 11,433,029 $ 11,433 $ 5,137,787 $(7,961,286) $ 2,187,936
===========================================================================================
</TABLE>
See accompanying notes to financial statements.
F-7
<PAGE> 46
STAN LEE MEDIA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period From Period From
Inception Inception
Year (October 13, (October 13,
Ended 1998) to 1998) to
December 31, December 31, December 31,
1999 1998 1999
----------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities
Net loss $(7,928,865) $ (32,421) $(7,961,286)
Adjustments to reconcile net loss to net cash and
cash equivalents provided by (used in) operating
activities:
Non-cash items resulting from issuance of stock, options
and warrants 3,492,807 420 3,493,227
Depreciation and amortization 84,531 54 84,585
Changes in:
Inventory (11,883) -- (11,883)
Prepaid expenses and other current assets (450) (10,000) (10,450)
Deposits (47,464) -- (47,464)
Accounts payable 156,555 5,175 161,730
---------------------------------------------
Net cash used in operating activities (4,254,769) (36,772) (4,291,541)
---------------------------------------------
Cash flows from investing activities
Purchase of property and equipment (488,617) (1,952) (490,569)
Application for trademarks (103,636) -- (103,636)
---------------------------------------------
Net cash used in investing activities (592,253) (1,952) (594,205)
---------------------------------------------
Cash flows from financing activities
Proceeds from notes and loans payable 1,417,000 -- 1,417,000
Repayment of notes and loans payable (917,000) -- (917,000)
Payments under capital lease obligations (63,194) -- (63,194)
Receipt of subscriptions 275,000 -- 275,000
Issuance of preferred stock 5,000,002 -- 5,000,002
Issuance of common stock 1,134,100 -- 1,134,000
Capital contribution -- 60,000 60,000
---------------------------------------------
Net cash provided by financing activities: 6,845,908 60,000 6,905,908
---------------------------------------------
Increase (decrease) in cash and cash equivalents 1,998,886 21,276 2,020,162
Cash and cash equivalents, beginning of period 21,276 -- --
---------------------------------------------
Cash and cash equivalents, end of period $ 2,020,162 $ 21,276 $ 2,020,162
=============================================
</TABLE>
See accompanying notes to financial statements.
F-8
<PAGE> 47
STAN LEE MEDIA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - NATURE OF BUSINESS
Stan Lee Media, Inc. ("SLM" or the "Company") (a development stage company) is
an Internet-based, global branded content creation, production and marketing
company founded by comic book icon Stan Lee to conceive, create, co-create and
produce marketable characters and story franchises for entertainment,
merchandising and promotional exploitation worldwide.
Stan Lee Entertainment, Inc. ("Entertainment") was incorporated in the State of
Delaware on October 13, 1998. Stan Lee Media, Inc. ("SLM Delaware") was
originally incorporated in the State of Delaware on January 14, 1999.
Entertainment was merged with SLM Delaware on April 14, 1999 with SLM Delaware
being the surviving corporation. Effective July 23, 1999, SLM Delaware engaged
in a share exchange with Boulder Capital Opportunities, Inc. ("Boulder") a
public company, incorporated in the State of Colorado. This share exchange was
accounted for as a reverse acquisition in which SLM Delaware is considered the
predecessor of the Company because it had operations at the time of the share
exchange. The new name of the company after the share exchange is Stan Lee
Media, Inc. ("SLM" or the "Company"). In this share exchange, the shareholders
of SLM Delaware received 8,500,000 shares of common stock of Boulder in exchange
for all of the issued and outstanding shares of SLM Delaware common stock. The
number of shares outstanding after this transaction was 11,025,000.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of the Company include the accounts of
Stan Lee Media, Inc., and its wholly owned subsidiary. All significant
intercompany balances and transactions have been eliminated.
DEVELOPMENT STAGE
As of December 31, 1999, SLM is considered a development stage company as it has
not recognized significant revenue from planned principal operations.
Accordingly, the Company has provided cumulative consolidated statements of
operations, consolidated statements of stockholders' equity and consolidated
statements of cash flows.
MANAGEMENT PLANS
The Company has incurred cumulative losses of approximately $7.9 million through
December 31, 1999, and currently does not have sufficient cash to fully
implement management's business plan. As a result, management is seeking
additional financing. There can be no assurance that the Company will raise
sufficient financing to enable management to implement the Company's business
plan. (See Note 9).
CASH EQUIVALENTS
SLM considers all highly liquid investments with an original maturity of three
months or less to be cash equivalents.
F-9
<PAGE> 48
STAN LEE MEDIA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVENTORY
Inventory consists of various promotional items and memorabilia based on the
characters created and co-created by Stan Lee. The inventory is stated at the
lower of cost or market on a first-in, first-out basis.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost, with depreciation computed
utilizing the straight-line method. Equipment and furniture are depreciated over
the estimated useful lives, which range from three to five years. Leasehold
improvements are amortized over the shorter of the estimated useful life or the
term of the lease, generally five years.
LICENSING RIGHTS
SLM acquired the right to use certain proprietary software from Cyberworld
International Corporation. The licensing right is being amortized over the term
of the agreement of five years. (See Note 9).
TRADEMARKS
Trademarks include amounts paid for legal fees and registration of trademark
applications in various countries for the characters, names and marks created by
SLM. After the trademarks have been accepted by the agencies of each country,
they will be amortized over an expected life of five to ten years.
LONG-LIVED ASSETS
In accordance with Financial Accounting Standards Board ("FASB") Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of", SLM records impairment losses on long-lived assets
used in operations, including intangible assets, when events and circumstances
indicate that the assets might be impaired and the undiscounted cash flows
estimated to be generated by those assets are less than the carrying amounts of
those assets.
INCOME TAXES
SLM uses the asset and liability method to account for income taxes as required
by Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS No. 109"). Under this method, deferred tax assets and liabilities
are determined based on differences between financial reporting and tax bases of
assets and liabilities and are measured using enacted tax rules and laws that
will be in effect when the differences are expected to reverse.
F-10
<PAGE> 49
STAN LEE MEDIA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially expose SLM to concentration of credit
risk consist primarily of cash and cash equivalents. SLM places its cash and
cash equivalents with major financial institutions. At times, cash balances may
be in excess of the amounts insured by the Federal Deposit Insurance
Corporation, however, management believes the risk of loss to be minimal.
REVENUE
SLM receives webcasting fees for certain Webisode series pursuant to agreements
with customers. Revenue is recognized after each series has been accepted and
after each Webisode of the series has been delivered.
Revenue from distribution fees, licensing and sub-licensing of characters owned
by SLM are recorded in accordance with the distribution agreement and at the
time characters are available to the licensee. Revenue is recognized as earned
and reasonably estimable.
COST OF REVENUE
Cost of revenues consists primarily of costs to develop and produce webisodes.
Webisode costs consist of the costs of development and production of digitally
animated webisodes including labor, material and production overhead. All
Webisode cost capitalized are evaluated quarterly for net realizable value and
all write-downs are included in Cost of Revenue.
NET LOSS PER SHARE
The Company reports loss per share in accordance with Statement of Financial
Accounting Standards No. 128, "Earnings Per Share" (SFAS 128), which requires
the presentation of basic and diluted earnings per share. Basic earnings or loss
per share are calculated by dividing net income (loss) by the weighted average
number of common shares outstanding during the period. Diluted earnings per
share are calculated by dividing net income (loss) by the basic shares and all
dilutive securities, including stock options, warrants and convertible notes,
but does not include the impact of potential common shares which would be
antidilutive. These dilutive securities were antidilutive for 1999.
For the year ended December 31, 1999, potential dilutive securities representing
2,992,500 outstanding stock options, 283,529 outstanding warrants, and 714,286
shares of convertible preferred stock are not included in the earnings per share
calculation since their effect would be antidilutive.
F-11
<PAGE> 50
STAN LEE MEDIA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK BASED COMPENSATION
SLM accounts for employee stock options or similar equity instruments in
accordance with Statement of Financial Accounting Standards (SFAS) No. 123,
"Accounting for Stock-Based Compensation" ("SFAS No. 123"). SFAS No. 123 defines
a fair-value-based method of accounting for employee stock options or similar
equity instruments. This statement gives entities a choice to recognize related
compensation expense by adopting the new fair-value method or to measure
compensation using the intrinsic value method under Accounting Principles Board
(APB) Opinion No. 25 "Accounting for Stock Issued to Employees", the former
standard. If the former standard for measurement is elected, SFAS No. 123
requires supplemental disclosure to show the effect of using the new measurement
criteria. SLM has used the intrinsic value method prescribed by APB Opinion No.
25. See Note 7 for supplemental disclosure.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual amounts could differ from those estimates.
RECLASSIFICATIONS
Certain amounts for prior years have been reclassified to conform with the 1999
financial statement presentation.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "According for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 requires companies to
recognize all derivative contracts as either assets or liabilities in the
balance sheet and to measure them at fair value. If certain conditions are met,
a derivative may be specifically designated as a hedge, the objective of which
is to match the timing of gain or loss recognition on the hedging derivative
with the recognition of (i) the changes in the fair value of the hedged asset or
liability that are attributable to the hedge risk or (ii) the earnings effect of
the hedged forecasted transaction for a derivative not designated as a hedging
instrument, the gain or loss is recongnized in income in the period of change.
SFAS 133 is effective for all fiscal quarters of fiscal years beginning after
June 15, 1999. Historically, the Company has not entered into derivative
contracts either to hedge existing risks or for speculative purposes.
Accordingly, the Company does not expect adoption of the new standard on January
1, 2000 to affect its financial statements.
F-12
<PAGE> 51
STAN LEE MEDIA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In June 1998, the Accounting Standards Executive Committee of the AICPA issued
SOP 98-5, Reporting on the Costs of Start-up Activities. SOP 98-5 requires all
start-up and organizational costs to be expensed as incurred. It also requires
all remaining historically capitalized amounts of these costs
RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
existing at the date of adoption to be expensed and reported as the cumulative
effect of a change in accounting principles. SOP 98-5 is effective for all
fiscal years beginning after December 31, 1998. The adoption of SOP 98-5 on
January 1, 1999 had no effect on the financial statements.
F-13
<PAGE> 52
STAN LEE MEDIA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
December 31, December 31, Estimated
1999 1998 Useful Life
---------------------------------------------
<S> <C> <C> <C>
Automobile $ 15,000 $ -- 5 years
Computer equipment 103,249 1,904 3 years
Computer software 18,011 48 3 years
Furniture and fixtures 187,960 -- 5 years
Leasehold improvements 166,349 -- 5 years
Equipment under capital leases 190,036
---------------------------------------------
680,605 1,952
Less accumulated depreciation and amortization 78,596 54
---------------------------------------------
$602,009 $1,898
=============================================
</TABLE>
At December 31, 1999, accumulated depreciation and amortization included $26,864
related to assets under capital leases.
NOTE 4 - DEBT
SHORT-TERM FINANCING
During 1999 investors provided SLM with a total of $250,000 notes with interest
at 8% per annum payable with interest in one lump sum during 1999. All of these
notes and interest were fully paid during the year.
On October 11, 1999, SLM executed an unsecured promissory note (the "Note") in
the amount of $500,000. The terms of the note call for SLM to pay interest at 8%
per annum. The principal and accrued and unpaid interest shall be payable in one
lump sum by April 11, 2000. Pursuant to the promissory note, warrants for 25,000
shares of SLM's common stock exercisable at $6.18 per share expiring October 11,
2002 were granted to the Note holder. The fair value of $35,512 of these
warrants was capitalized as debt offering costs and amortized over the term of
the loan. The note and all accrued interest were paid in January 2000.
In addition shareholders of SLM advanced a total of $667,000 during 1999, as
working capital. The balance was non-interest bearing and due on demand with no
specific payment provisions. These loans were repaid during 1999.
F-14
<PAGE> 53
STAN LEE MEDIA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - COMMITMENTS
LEASE AGREEMENTS
SLM entered into sublease agreements for office space through October 31, 2004.
Minimum future annual payments under these agreements as of December 31, 1999
are as follows:
<TABLE>
<CAPTION>
Year ended December 31, Amount
----------
<S> <C>
2000 $ 483,763
2001 480,419
2002 393,001
2003 343,982
2004 443,007
----------
$2,144,172
==========
</TABLE>
Rent expense for the year ended December 31, 1999 was $141,978.
EMPLOYMENT AGREEMENT
SLM has entered into an employment agreement with Stan Lee. Under the agreement
Stan Lee will receive a base salary of $250,000 per year, beginning April 1,
1999 and is payable for the remainder of his life. In addition, Stan Lee shall
also receive an annual discretionary bonus as determined by the Board of
Directors. Stan Lee will serve as Chairman and Chief Creative Officer of SLM.
The Company entered into a five-year employment agreement with Stephen M.
Gordon, its Executive Vice President - Operations, commencing as of November 1,
1999, subject to annual successive one-year renewals thereafter unless either
party notifies the other party of its election not to so renew not less than 90
days prior to the expiration of the initial term or the then current renewal
term, as the case may be. Mr. Gordon receives base compensation on an annualized
rate of $135,000 through May 31, 2001, increasing to $150,000 for the period
June 1, 2000 through May 31, 2001, and thereafter, annual base compensation in
an amount not less than $175,000. Mr. Gordon also is entitled to receive an
annual bonus determined by the board of directors in its discretion. All options
granted to Mr. Gordon will vest upon a change in control of Stan Lee Media, Inc.
In addition, if Mr. Gordon is terminated other than for cause, during the first
three years of his employment agreement, Mr. Gordon will receive 200% of his
base compensation as a severance payment; if termination other than cause occurs
during the fourth year of his employment agreement, Mr. Gordon will receive 250%
of his base compensation as a severance payment; and if termination occurs in
the fifth year of his employment agreement or thereafter, Mr. Gordon will
receive 299% of his base compensation as a severance payment.
F-15
<PAGE> 54
STAN LEE MEDIA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - COMMITMENTS (CONTINUED)
EQUIPMENT LEASES
SLM entered into various capital leases for computers and related equipment. The
leases range from 24 to 60 month terms. Minimum future lease payments under
capital leases as of December 31, 1999 for each of the next five years and in
aggregate are:
<TABLE>
<CAPTION>
Year ended Amount
--------
<S> <C>
2000 $ 66,532
2001 58,329
2002 31,667
2003 5,772
2004 527
--------
Total minimum payments $162,827
Less: Amount representing interest (35,984)
--------
Present value of net minimum lease payments $126,843
========
</TABLE>
BUSINESS DEVELOPMENT AGREEMENT
On October 5, 1999, SLM entered into a seven year agreement with Paraversal,
Inc. ("Paraversal"), a related party, to provide SLM with strategic business
development services, including structuring of corporate partnering
relationships and strategic alliances. The agreement calls for SLM to pay
Paraversal monthly compensation of $16,500 for the period commencing October 1,
1999. Coincident with the receipt by SLM of equity financing in an amount not
less than $5,000,000, the monthly compensation paid to Paraversal by SLM will
increase to $20,000 per month. Coincident with an additional receipt by SLM of
equity financing in an amount not less than $5,000,000, the monthly compensation
paid by SLM to Paraversal will increase to $25,000 per month. Under the
agreement, Paraversal is entitled to an annual bonus in accordance with the
terms and provisions mutually agreed upon with SLM.
F-16
<PAGE> 55
STAN LEE MEDIA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - COMMITMENTS (CONTINUED)
BUSINESS DEVELOPMENT AGREEMENT (CONTINUED)
Under the agreement, Paraversal will receive options to purchase 200,000 shares
of SLM's common stock at a price equal to 110% of the closing bid price at each
anniversary date of the agreement. On October 5, 1999, Paraversal was granted
options to purchase 500,000 shares of SLM's common stock exercisable at $5.50,
which options vested on October 8, 1999. The fair value of $1,506,735 of these
options was charged to operations during 1999. Under the agreement, if
Paraversal is terminated for any reason other than for cause or death and
disability, Paraversal will be entitled to a one lump sum payment of $1,000,000.
REVOLVING CREDIT AGREEMENTS
On July 23, 1999 SLM entered into two revolving line of credit agreements for a
total of $2,000,000, of which none was drawn at December 31, 1999. Both lines of
credit terminate on July 31, 2000. The lines bear interest at LIBOR, plus two
percent (2%) per annum computed using a 360-day year.
NOTE 6 - INVESTMENT IN NPO ONLINE, INC.
On March 16, 1999, SLM entered into an agreement with NPO Online, Inc. ("NPO"),
a Company which will provide an e-commerce store front Internet site, that is
linked between SLM's Internet site, which will enable purchasing of retail Comic
Books and related retail Comic Book products of SLM and NPO. In exchange for
exclusive retail linking rights, and joint marketing and promotions, SLM will
receive 10% of the gross revenue received for the NPO sales transacted through
this Internet site to be paid to SLM, on a monthly basis for the previous
month's sales. If SLM sells any merchandise through the NPO site and fulfills
the order itself, SLM will pay 10% of those gross sales to NPO. For any resale
or collectible merchandise sold by SLM using NPO's storefront, which is not
readily available on the retail market, SLM will pay 7.5% of those gross sales
to NPO.
NPO will be the exclusive provider of retail comic books for SLM. For this
exclusivity, NPO issued 180,000 shares of its common stock with a fair value of
$0.285 per share to SLM, at the grant date of March 16, 1999. As of December 31,
1999 the value of this investment of $51,000 was written off and charged to
general and administrative expense.
F-17
<PAGE> 56
STAN LEE MEDIA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - SHAREHOLDERS' EQUITY
SLM has 100,000,000 authorized shares of $0.001 par value common stock and
10,000,000 shares of $0.001 par value preferred stock. Of the total preferred
stock, 1,500,000 shares were designated as Series A. The Series A preferred
stock is convertible into common stock, has a liquidation preference of $7 per
share, and bears dividends equal to any dividends declared on the common shares.
The Series A preferred stock converts into common at the rate of one share of
common stock for one share of preferred stock (subject to adjustment). The
preferred stock shares may be converted any time at the option of the holder.
The preferred shares automatically convert to common shares upon the earlier of
a public offering priced at a minimum of $15 per share and raising proceeds of
$25 million or an affirmative rate of two-thirds of the preferred shareholders.
COMMON STOCK
Between January 1, 1999 and June 30, 1999, stock was issued for services before
any stock was issued for cash. Each issuance was valued at $0.001 per share at
that time.
On July 23, 1999, SLM issued 60,000 shares of restricted common stock at $2.50
per share, the fair value on the date of issuance, for services to employees.
The $150,000 fair value of these shares was charged to operations during 1999.
On December 9, 1999, 50,000 of these shares were cancelled in conjunction with
the termination of an employee. The $125,000 fair value originally expensed at
the date of the grant was reversed upon cancellation. As settlement of amounts
due under the terminated employment contract, SLM issued 7,000 shares of
restricted common stock. The fair value of $38,500 of these shares was charged
to operations.
On July 30, 1999, 37,500 shares of restricted common stock were issued at $4 per
share as part of a private placement, resulting in gross proceeds of $150,000.
During August 1999, 62,500 shares of restricted common stock were issued at $4
per share in private placements, resulting in gross proceeds of $250,000.
On October 12, 1999, SLM issued 10,000 shares of common stock in connection with
a bridge loan from VMR Luxembourg S.A. The fair value of $61,800 ($6.18 per
share) related to these shares was recorded as debt offering costs at December
31, 1999 and is being amortized into interest expense over the term of the loan.
As of December 31, 1999, $61,800 has been amortized to interest expense.
On November 8, 1999, SLM issued 25,000 shares of common stock at $7.19 per share
in exchange for rights to use software developed by Cyberworld International
Corporation, a third party. The fair value of $179,675 of the shares on the date
of issuance was recorded as a licensing right asset.
F-18
<PAGE> 57
STAN LEE MEDIA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On November 8, 1999, SLM issued 10,000 shares of common stock to VMR Capital at
$7.19 per share in relation to the Company's listing on the Frankfurt stock
exchange. The fair value of $71,870 was charged to operations during 1999.
F-19
<PAGE> 58
STAN LEE MEDIA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - SHAREHOLDERS' EQUITY (CONTINUED)
Through July 1999, a total of $738,100 in cash was received for the sale of
stock. The stock sale consists of 246,029 shares of restricted stock that were
issued on July 23, 1999 in consideration for purchase for a value of $3.00 per
share. In addition, the subscription stock investors were granted warrants to
purchase another 246,029 shares at $5.00 per share.
STOCK OPTIONS
From July 23, 1999 through October 5, 1999, SLM entered into stock option
agreements with certain executives, key employees, consultants and non-employee
directors to purchase 2,435,000 common shares at $2.50 to $5.50 per share, the
fair market values at the date of grant. The options have terms ranging from 5
to 10 years. The options and warrants are subject to various vesting terms
ranging from immediate vesting to vesting in two years. Included are 500,000
options to purchase common stock granted on October 5, 1999, at $5.50 per share
to a related party consultant for business development services. These options
have a term of 10 years and are fully vested at December 31, 1999. The fair
value of $2,647,554 of these options was charged to operations during 1999.
WARRANTS
On September 15, 1999, SLM issued warrants to purchase 5,000 common shares in
conjunction with debt financing. The warrants have a $5 per share exercise price
and a term of three years. Since the note was repaid by December 31, 1999, the
fair value of $7,486 of the warrants was charged to interest expense during the
year.
On September 21, 1999, SLM issued warrants to purchase 5,000 common shares in
conjunction with debt financing. The warrants have a $5 per share exercise price
and a term of three years. Since the note was repaid by December 31, 1999, the
fair value of $7,486 of the warrants was charged to interest expense during the
year.
F-20
<PAGE> 59
STAN LEE MEDIA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - SHAREHOLDERS' EQUITY (CONTINUED)
On October 12, 1999, SLM issued warrants to purchase 25,000 shares of common
stock at $6.18 per share through October 11, 2000 in connection with a bridge
loan from VMR Luxembourg S.A.
On November 1, 1999, SLM issued warrants to purchase 2,500 common shares in
conjunction with debt financing. The warrants have a $6 per share exercise price
and a term of three years. As the note was repaid by December 31, 1999, the fair
value of $3,470 of the warrants was charged to interest expense during the year.
The fair value of $35,572 related to all of the above was recorded as debt
offering costs at December 31, 1999 and is being amortized into interest expense
over the six-month term of the loan. As of December 31, 1999, $17,756 remained
capitalized in deferred offering costs.
CONVERTIBLE PREFERRED STOCK ISSUANCE
On November 3, 1999, the Company entered into an agreement with Macromedia, Inc.
("Macromedia") to issue 714,286 shares of the Company preferred stock at $7.00
per preferred share for a total of $5,000,002 in cash. The Company entered into
a five-year distribution agreement with Macromedia to distribute flash-animated
episodes of series produced by the Company. During the first year of the term,
SLM must make 10 submissions of series at an average rate of at least one
submission every two months. Macromedia will reimburse the Company for
production costs plus profit and overhead in addition to a license fee after
delivery of the last episode in each accepted series. The Company is required to
pay $178,000 of the advertising costs to launch the first series.
1999 STOCK OPTION PLAN
The company adopted a Stock Option Plan (the "1999 Plan") which became effective
on October 11, 1999. Each director, officer, employee or consultant of the
Company or any of its subsidiaries is eligible to be considered for the grant of
awards under the 1999 Plan. The maximum number of shares of Common Stock that
may be issued pursuant to awards granted under the 1999 Plan is 1,500,000. Any
shares of Common Stock subject to an award which for any reason expires or
terminates unexercised are again available for issuance under the 1999 Plan.
Options granted generally have a term of five years and usually vest over two
years beginning on the anniversary date of the grant.
F-21
<PAGE> 60
STAN LEE MEDIA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - SHAREHOLDERS' EQUITY (CONTINUED)
The following table summarizes stock option activity under the 1999 Plan and
other options granted by the Board of Directors:
<TABLE>
<CAPTION>
Number of Option
Shares Price
-----------------------
<S> <C> <C>
Outstanding at December 31, 1998 -- $ --
Granted 3,402,500 3.86
Terminated (410,000) 2.50
-----------------------
Outstanding at December 31, 1999 2,992,500 4.05
-----------------------
Exercisable at December 31, 1999 1,527,500 $4.22
-----------------------
</TABLE>
Additional information with respect to outstanding options to purchase common
stock at December 31, 1999 is as follows:
<TABLE>
<CAPTION>
Options outstanding
---------------------------------------------------------
Weighted average Options exercisable
Remaining ------------------------------------
contractual Weighted average Weighted average
Range of exercise prices Number of shares life (in years) exercise price Number of shares exercise price
<S> <C> <C> <C> <C> <C>
$2.50 1,545,000 6.93 $2.50 725,000 $2.50
$5.00 152,500 8.06 5.00 100,000 5.00
$5.01 to $5.50 900,000 7.56 5.48 500,000 5.50
$5.51 to $6.00 130,000 4.94 5.87 2,500 5.88
$6.01 to $6.75 65,000 4.88 6.44 - -
$6.88 200,000 4.83 6.88 200,000 6.88
------------------------------------------------------------------------------------------------
Total 2,992,500 6.91 $4.05 1,527,500 $4.22
================================================================================================
</TABLE>
Under the 1999 Plan, SLM issued 202,500 options to consultants. The fair value
of $611,425 was charged to operations during 1999.
As discussed in Note 2, the Company has adopted the disclosure-only provisions
of SFAS No. 123 which requires the use of option valuation models to provide
supplemental information regarding options. Pro forma information regarding net
loss and loss per share shown below was determined as if the Company had
accounted for its employee stock options using the fair value method pursuant to
SFAS No. 123.
The fair value of the options and warrants at the date of grant was calculated
using the Black-Scholes option pricing model with the following weighted-average
assumptions for 1999: risk free interest rate of 5.8%; dividend yield of 0%;
expected volatility of 90%; and expected life of 5 years. These assumptions
resulted in a weighted average fair value of $1.44 per option and $1.04 per
warrant granted in 1999.
F-22
<PAGE> 61
STAN LEE MEDIA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - SHAREHOLDERS' EQUITY (CONTINUED)
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options. The Company's employee stock options have not been
traded. In addition, the assumptions used in option valuation models are highly
subjective, particularly the expected stock price volatility of the underlying
stock. Because changes in these subjective input assumptions can materially
affect the fair value estimate, in management's opinion, the existing models do
not provide a reliable single measure of the fair value of its employee stock
options.
These pro forma amounts may not be representative of future disclosures since
the estimated fair value of the options is amortized to expense over the
options' vesting periods. The pro forma effect on net loss for 1999 is not
representative of the pro forma effect on net income (loss) in future years
because it reflects expense for a period less than one year's vesting. Pro forma
information in future years will also reflect the amortization of any stock
options granted in succeeding years.
The Company's pro forma information is as follows:
<TABLE>
<CAPTION>
Year Ended
December 31, 1999
-----------------
<S> <C>
Net loss, as reported $(7,928,865)
Net loss, pro forma $(8,192,679)
Basic and diluted loss per share, as reported (0.81)
Basic and diluted loss per share, pro forma (0.84)
</TABLE>
NOTE 8 - SIGNIFICANT BUSINESS AGREEMENTS
PENTAFOUR MEDIA,INC.
The Company entered into a three-year strategic alliance agreement with
Pentafour Media, Inc. on January 11, 1999, pursuant to which the companies will
work together in the creation of entertainment content. Pentafour will provide
services on a "work-for-hire" basis and become co-producers of content.
In exchange for SLM's goodwill and brand association, SLM will receive a
$500,000 credit towards production and promotional materials produced by
Pentafour. This $500,000 will be spread over three years with each year's credit
not exceeding $170,000.
F-23
<PAGE> 62
STAN LEE MEDIA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - SIGNIFICANT BUSINESS AGREEMENTS (CONTINUED)
WARNER BROS./ACMECITY
On June 14, 1999, SLM and Warner Bros./AcmeCity ("WBAC") signed a "Community"
agreement pursuant to which WBAC will provide SLM with web community hosting
services, e-mail, and community tools which will provide exclusive free home
pages, chat and message boards. WBAC also is to provide direct buttons from each
home page to the "stanlee.net" home page of SLM. In exchange for exclusively
hosting SLM's global community of users, WBAC is providing these services to SLM
at no cost, and will pay SLM 50% of the net advertising revenue earned, payable
on a quarterly basis. SLM also has the option to sell advertising inventory on
the WBAC site.
WBAC will be responsible for sales and fulfillment of any premium services such
as purchasing additional memory for a personal home page, and will pay SLM 20%
of the net revenues derived from the sale of these products. SLM will be
responsible for sales and fulfillment of all goods and services within the
Community relating to Stan Lee products and merchandise and will pay WBAC 12.5%
of the gross revenue derived from these sales.
The term of the agreement is 18 months from June 14, 1999 and WBAC will have one
option to renew for an additional 18 months. The option must be exercised by
WBAC no later than 60 days prior to the end of the initial term.
WHATSHOTNOW.COM
On August 1, 1999, WhatsHotNow.com, Inc. ("WHN") and SLM entered into a one-year
agreement (automatically renewable for successive additional one-year terms
unless either party notifies the other party of its non-renewal), whereby WHN
will design and host SLM's official online store. SLM's store shall be SLM's
only official online store. On merchandise acquired by WHN, WHN shall pay Client
100% of the net proceeds after deducting a management fee equal to 23% of Gross
Retail Sales. On merchandise consigned to WHN by SLM, WHN shall pay Client 100%
of the net proceeds after deducting a management fee equal to 18% of Gross
Retail Sales.
CYBERWORLD
On November 8, 1999, the Company entered into a Strategic Alliance Agreement
with Cyberworld (CW) to use technology and products to market, enhance and/or
promote SLM web sites, SLM products and to provide web-hosting services by CW
for such SLM websites. Under the terms of the agreement, SLM issued CW 25,000
restricted shares of SLM common stock, and CW issued SLM warrants to purchase
250,000 of CW's common stock at $1.00 per share, and 250,000 of CW's common
stock at $2.00 per share. Under the terms of the agreement SLM is required to
make royalty payments of 5% related to qualified revenues.
F-24
<PAGE> 63
STAN LEE MEDIA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - SUBSEQUENT EVENTS
BACKSTREET BOYS
On February 2, 2000, SLM entered into an agreement with KBNHA Enterprises, Inc.
f/s/o Nicholas Carter, Alexander J. McLean, Howard Dorough, Kevin Richardson and
Brian Thomas Littrell, professionally collectively known as "The Backstreet
Boys" to produce and co-own a superhero franchise based on their personae,
having superhero alter-egos. The superhero franchise entitled "The Backstreet
Project," co-created by Stan Lee, is co-owned by the Company, and will be
exploited in all media and all major merchandising avenues
As partial consideration for entering into the agreement, KBNHA or its assigns
received options to purchase 300,000 shares of SLM's common stock at an exercise
price of $7.00 per share. The options will vest as follows: (i) 75,000 upon
execution of the agreement, 25,000 upon the initial webcast of the first
Webisode, 50,000 as of February 1, 2001, 50,000 as of August 1, 2001, 50,000 as
of February 1, 2002, and 50,000 as of February 1, 2003
VIACOM
On January 25, 2000 SLM signed an agreement with Viacom Productions to produce
two new five minute programs (called Webisodes) utilizing Mighty Mouse and other
Terry Toons characters. Viacom owns all rights to these characters. SLM shall
prepare and produce the two new five-minute webisodes after approval from
Viacom. Once approved, Viacom will finance the production of the webisodes and
SLM shall receive a production fee equal to 12.5% of the approved production
budget. SLM shall be entitled to 25% of net merchandising revenues derived from
all exploitation of merchandising rights for the characters for a period of two
years. Viacom shall have an option to have SLM produce additional Webisodes
after the initial contract term. Each subsequent series will consist of six
webisodes with SLM having the same rights as the previous contract.
Viacom will have another option to cause SLM to produce a television
broadcast-quality thirty-minute animated series. SLM will be reimbursed for
actual out-of-pocket production costs plus an overhead fee of $12,500 per
episode as well as 25% of Adjusted Gross Receipts, or 50% of Net Profits derived
from the exploitation of the animated series, whichever is greater. SLM will
also be entitled to 25% of net merchandising revenues.
F-25
<PAGE> 64
STAN LEE MEDIA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - SUBSEQUENT EVENTS (CONTINUED)
PRIVATE PLACEMENTS
On February 1, 2000, the Company sold, in a private placement, 200,000 shares of
SLM's restricted common stock at $8.00 per share for a total purchase price of
$1,600,000, and issued five-year warrants to purchase an additional 100,000
shares of common stock at an exercise price of $10.00 per share.
On February 4, 2000, the Company sold, in a private placement, 200,000 shares of
SLM's restricted common stock at $11.00 per share for a total purchase price of
$2,200,000, and issued five-year warrants to purchase an additional 100,000
shares of common stock at an exercise price of $11.00 per share.
Certain registration rights were granted under the terms of these private
placements. Finder's fees totaling $150,000 were paid in conjunction with these
financings.
NOTE 10 - INCOME TAXES
The Company's operating losses generated a deferred tax asset of approximately
$1,000,000 at December 31, 1999. The deferred tax asset has not been recognized
since it is more likely than not that the deferred tax asset will not be
realized. Accordingly, a 100% valuation allowance has been recorded.
F-26
<PAGE> 65
STAN LEE MEDIA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTE 11 - SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITY
During 1999, the Company purchased $190,036 of equipment under capital leases.
On October 12, 1999, the Company issued 10,000 common shares with a fair value
of $61,800 to VMR Capital Markets in conjunction with debt financing.
On November 8, 1999, the Company issued 25,000 common shares with a fair value
of $179,675 to Cyberworld International Corporation for software licensing
rights.
On November 8, 1999, the Company issued 10,000 common shares with a fair value
of $71,870 to VMR Capital Markets for assisting the Company with obtaining a
listing on the Frankfurt stock exchange.
From September through November, 1999, the Company issued warrants in
conjunction with debt offerings. The warrants had a fair value of $54,013, of
which $36,257 was charged to expense during 1999 and the balance was capitalized
as deferred offering costs
During 1999, the Company paid $9,377 for interest.
F-27
<PAGE> 66
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
STAN LEE MEDIA, INC.,
By: /s/ DEVENDRA MISHRA
----------------------------------------------
Devendra Mishra, President and Chief
Executive Officer
By: /s/ ROBERT M. SCHULTZ
----------------------------------------------
Robert M. Schultz, Vice President-Finance
(Principal Financial and Accounting Officer)
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Gill
Champion and Robert M. Schultz, and each of them, as his true and lawful
attorneys-in-fact and agents with full power of substitution and resubstitution,
for him and his name, place and stead, in any and all capacities, to sign any or
all amendments to this Annual Report on Form 10-KSB and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
foregoing, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or either of them, or their substitutes, may lawfully do or cause to be
done by virtue hereof.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ DEVENDRA MISHRA President, Chief Executive March 16, 2000
- ------------------------------ Officer and Director
Devendra Mishra (Principal Executive Officer)
/s/ STAN LEE Chairman of the Board of Directors March 16, 2000
- ------------------------------
Stan Lee
/s/ ROBERT M. SCHULTZ Vice President-Finance March 16, 2000
- ------------------------------ (Principal Financial and
Robert M Schultz Accounting Officer)
</TABLE>
<PAGE> 67
<TABLE>
<S> <C> <C>
/s/ GILL CHAMPION Vice President, Chief March 16, 2000
- ------------------------------- Operating Officer and
Gill Champion Director
/s/ NELSON S. THALL Director March 16, 2000
- -------------------------------
Nelson S. Thall
Director March __, 2000
- -------------------------------
Robert K. Burgess
/s/ ARTHUR E. SCHRAMM, JR. Director March 16, 2000
- -------------------------------
Arthur E. Schramm, Jr.
*By: /s/ ROBERT M. SCHULTZ
--------------------------
Robert M. Schultz
Attorney-in-Fact
</TABLE>
<PAGE> 68
STAN LEE MEDIA, INC.
FORM 10-KSB
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibits Page
----
<S> <C> <C>
2.1 Reorganization and Stock Purchase Agreement dated as of June 25, 1999
3.1 Articles of Incorporation
3.2 Articles of Amendment to Articles of Incorporation Filed August 12, 1999
3.3 Articles of Amendment to Articles of Incorporation Filed November 5, 1999
3.4 Bylaws
10.1 Securities Purchase Agreement dated as of November 3, 1999, between the
Registrant and Macromedia, Inc.
10.2 Agreement between the Registrant and Macromedia
10.3 Purchase Agreement dated as of February 1, 2000
10.4 Purchase Agreement dated as of February 4, 2000
10.5 Revolving Credit Agreement dated July 23, 1999, between the Registrant
and Santo Development Worldwide
10.6 Revolving Credit Agreement dated July 23, 1999, between the Registrant
and Maxi Technologies Limited
10.7 Financial Consulting Agreement dated as of October 11, 1999, between the
Registrant and VMR Capital Markets, U.S.
10.8 Form of 8% Convertible Debenture Due April 11, 2000
10.9 Warrant Agreement dated as of October 11, 1999, in favor of VMR
Luxembourg, S.A.
10.10 1999 Stock Incentive Plan
10.11 Form of 1999 Stock Incentive Plan Option Agreement
10.12 Agreement dated July 23, 1999, between the Registrant and Gill Champion
10.13 Agreement dated July 23, 1999, between the Registrant and Robert M.
Schultz
10.14 Agreement dated July 23, 1999, between the Registrant and Stephen M.
Gordon
10.15 Agreement dated July 23, 1999, between the Registrant and Dana Moreshead
10.16 Agreement dated July 23, 1999, between the Registrant and Dave Medinnis
10.17 Agreement dated July 23, 1999, between the Registrant and Zachary Foley
10.18 Linking and Stock Issuance Agreement dated March 16, 1999, between the
Registrant and NPO Online, Inc.
10.19 Agreement dated July 23, 1999, between the Registrant and Gary Manfredi
10.20 Agreement dated July 23, 1999, between the Registrant and Shawn McManus
10.21 Agreement dated July 23, 1999, between the Registrant and Andrey
Pavlovskiy
10.22 Agreement dated July 23, 1999, between the Registrant and Aaron Sowd
10.23 Agreement dated July 23, 1999, between the Registrant and Jason Thomas
10.24 Agreement dated July 23, 1999, between the Registrant and William James
Wilkinson, Jr.
10.25 Agreement dated July 23, 1999, between the Registrant and Anthony Winn
10.26 Agreement dated July 23, 1999, between the Registrant and Jeffrey D.
Segal
10.27 Agreement dated July 23, 1999, between the Registrant and Ziffren,
Brittenham, Branca & Fischer LLP
10.28 Agreement dated September 24, 1999, between the Registrant and Iyan Bruce
10.29 Agreement dated September 24, 1999, between the Registrant and Zachary
Foley
10.30 Agreement dated September 24, 1999, between the Registrant and Jennifer
Kahn
10.31 Agreement dated September 24, 1999, between the Registrant and Tony
Pastor
10.32 Agreement dated September 24, 1999, between the Registrant and Mone
Peterson
</TABLE>
<PAGE> 69
<TABLE>
<S> <C>
10.33 Agreement dated September 24, 1999, between the Registrant and Patricia
Smith
10.34 Agreement dated September 24, 1999, between the Registrant and Russ Heath
10.35 Agreement dated September 27, 1999, between the Registrant and Brady
Darvin
10.36 Agreement dated September 27, 1999, between the Registrant and Larry
Houston
10.37 Agreement dated September 27, 1999, between the Registrant and Ruben
Martinez
10.38 Agreement dated October 5, 1999, between the Registrant and Stanley A.
Weston
10.39 Agreement dated October 5, 1999, between the Registrant and Jeffrey D.
Segal
10.40 Agreement dated October 5, 1999, between the Registrant and Paraversal,
Inc.
10.41 Agreement dated October 15, 1998, between Registrant and Mr. Stan Lee
10.42 Agreement dated October 22, 1999, between Registrant and Mr. Stan Lee
10.43 Consulting Agreement dated October 5, 1999, between Registrant and
Paraversal, Inc.
10.44 Employment Agreement dated October 8, 1999, between the Registrant and
Stephen M. Gordon
10.45 AcmeCity Interactive Community Agreement dated June 14, 1999, between the
Registrant and AcmeCity, a Delaware LLC
10.46 Agreement dated February 2, 2000, between the Registrant and KBNHA
Enterprises, Inc.
10.47 Publishing Agreement between Simon & Schuster, Inc., Stan Lee and George
Mair
10.48 Agreement dated December 7, 1999, among DC Comics, Stan Lee, the
Registrant and Branded Entertainment, LLC
10.49 Strategic Alliance Agreement dated November 8, 1999, between the
Registrant and Cyberworld International Corporation
10.50 Deal Memo dated as of August 1, 1999, between the Registrant and
WhatsHotNow.com, Inc.
10.51 Sublease Agreement dated as of November 4, 1998, between the Registrant
and One Twelve Interactive, Inc.
10.52 Third Amendment to Office Lease, dated May 27, 1999, between Douglas
Emmett Realty Fund 1997, a California limited partnership, and 1-12
Interactive, Inc., a Delaware corporation
10.53 Office Lease dated September 22, 1999, between the Registrant and
Douglas Emmett Realty Fund 1997, a California limited partnership
10.54 First Amendment to Office Lease dated November 2, 1999, between the
Registrant and Douglas Emmett Realty Fund 1997, a California limited
partnership
21.1 Subsidiaries of the Registrant
27 Financial Data Schedule
</TABLE>
- ------------
<PAGE> 1
[X] EXHIBIT 2.1
[X] REORGANIZATION AND STOCK PURCHASE AGREEMENT
This Reorganization and Stock Purchase Agreement dated as of June 25, 1999,
(this "Agreement") is by and between Boulder Capital Opportunities, Inc., a
Colorado corporation ("BCOI"), shareholders of BCOI who are, or will be, the
owners of or otherwise represent at least Seventy-Five Percent (75%) of all the
issued and outstanding common stock (the "Shareholders"), Stan Lee Media, Inc.,
a Delaware corporation ("SLMI"), and Robert Bryan ("RGB"). BCOI acknowledges and
agrees that the terms and provisions of this Agreement including, without
limitation, the shares of stock transferable hereunder, may be assigned by SLMI
or RGB.
BCOI was incorporated in the State of Colorado on April 22, 1996. Its authorized
capital consist of 100,000,000 shares of common stock, no par value and
10,000,000 shares of preferred stock, no par value. As of the effective date of
this Agreement, BCOI has issued and outstanding 1,010,000 common shares (the
"Outstanding Shares") (BCOI agrees to a 2.5 to 1 forward stock split required
per this Agreement which will result in 2,525,000 issued and outstanding
shares). BCOI has no shares of preferred stock outstanding and will have no
outstanding options, warrants, rights or other contractual agreements relating
to the ability or requirement to issue any additional shares of common or
preferred stock.
The respective board of directors of BCOI, SLMI, RGB and the Shareholders deem
it advisable and in the best interest of their corporations and shareholders of
their corporations that the shareholders of SLMI acquire securities of BCOI in
accordance with the terms and conditions of this Agreement.
1. PLAN OF REORGANIZATION. The Shareholders signing this Agreement are the
owners of or otherwise represent not less than 75% of the outstanding shares of
BCOI which the Shareholders represent is a sufficient majority to carry any vote
for approval of this Agreement under the corporate law of the State of Colorado,
the articles of incorporation of BCOI, and the bylaws of BCOI. At the closing,
the shareholders of SLMI, and or assigns, shall acquire 8,500,000 common shares
(the "New Shares") from treasury and RGB and or assigns shall acquire 165,375
common shares (the "Existing Shares") from shareholders of BCOI.
2. CONSIDERATION. Consideration for the events outlined in paragraph (1) above
shall be:
(a) the exchange of all the issued and outstanding stock of SLMI for the
8,500,000 New Shares of BCOI, thereby making SLMI a wholly owned subsidiary of
BCOI.
(b) items on the due diligence list (Exhibit A) shall be provided to SLMI by
BCOI within 48 hours of signing this Agreement.
(c) On the Closing Date (as hereinafter defined), the board of directors of BCOI
will deliver:
(i) authorized minutes of the board authorizing this transaction;
(ii) attorney opinion letter with respect to the tradability of existing
shareholder free trade shares (the "Free Trade Shares");
(iii) all documentation necessary to reflect approval of a 2.5 to 1
forward split;
(iv) the corporate records of BCOI;
(v) signed Lock Up agreements per (3) below;
(vi) all documentation to reflect a symbol and Cusip number change;
(vii) the preparation and filing of an information statement with the SEC
pursuant to Section 14(f) of the Securities Exchange Act of 1934 and Rule 14f-1
thereunder; and,
(viii) the preparation and filing of Form 8-k with the SEC concerning the
change of control transaction, subject to SLMI's counsel's review and approval;
(d) The BCOI shares shall be issued in certificates in form and substance
satisfactory to SLMI.
3. LOCK UP AGREEMENT. Shareholders and RGB hereby agree to lock up 496,125
and 165,375 of their Free Trade Shares respectively according to the attached
Schedule A which all parties to this Agreement shall approve and sign.
4. CLOSING DATE; PLACE OF CLOSING. The Closing Date shall be July 6, 1999.
The Closing Date can be changed by mutual agreement, but in no event shall the
Closing Date extend beyond 20 days from the date of signing this Agreement.
Place of closing shall be the offices of Artfield Investments, 15301 Ventura
Blvd., #300, Sherman Oaks, CA 91403.
5. DELIVERY OF BCOI SHARES. On or before the Closing Date, BCOI and Shareholders
will have ready for delivery certificates representing the New Shares of BCOI to
be delivered to SLMI and/or assigns, and the Existing Shares of BCOI to be
delivered to RGB and or assigned duly endorsed, together with appropriate stock
powers, so as to make SLMI and/or assigns, and RGB and or assigns, the sole
owners thereof, free and clear of all liens, claims, and encumbrances. Delivery
to be made at such place as to be determined by the parties.
6. REPRESENTATIONS AND WARRANTIES OF BCOI. BCOI represents and warrants to SLMI
as follows:
<PAGE> 2
(a) As of the Closing Date, the 8,500,000 shares of BCOI common stock to be
delivered to SLMI shareholders will constitute duly and validly issued shares of
BCOI, and are fully paid and nonassessable, and will be legally equivalent in
all respects to the common stock issued and outstanding as of the date thereof.
(b) The officers of BCOI have the power and the authority to execute this
Agreement and to perform the obligations contemplated hereby;
(c) Within 48 hours of signing this Agreement, or such other date as agreed,
management of BCOI will deliver to SLMI Audited Financial Statements as of
4/30/99 and the balance sheet of BCOI as of 4/30/99 (the "Year End Financial
Statements") and as of 6/23/99 (unaudited) (the "Interim Financial Statements"
and, together with the Year End Financial Statements, the "Financial
Statements") and the statement of income (loss), stockholders' equity and
changes in financial condition for the periods then ended. All statements shall
be done to GAAP standards.
(d) From and after the date hereof, there will not have been, and prior to
Closing Date there will not be, any material adverse changes in the financial
position of BCOI as set forth in the Financial Statements except changes arising
in the ordinary course of business;
(e) BCOI is not, and as of the Closing Date will not be, involved in any pending
litigation or governmental investigation or proceeding not reflected in the
Financial Statements or otherwise disclosed in writing to SLMI and, to the
knowledge of the Shareholder, no litigation or governmental investigation or
proceeding is threatened against BCOI;
(f) As of the Closing Date, BCOI will be in good standing as a Colorado
corporation;
(g) The authorized capital stock of BCOI consist of 100,000,000 shares of common
stock, no par value and 10,000,000 shares of preferred stock, no par value. As
of the Closing Date, BCOI will have issued and outstanding 11,025,000 common
shares. BCOI has no shares of preferred stock outstanding. No shares have
otherwise been registered under the state or federal securities laws. As of the
Closing Date, all of the issued and outstanding shares of common stock of BCOI
are validly issued, fully paid and non-assessable and there are not, and as of
the Closing Date there will not be, outstanding any other warrants, options or
other agreements on the part of BCOI obligating BCOI to issue any additional
shares of common or preferred stock or any of its securities of any kind;
(h) Opinion letter from legal counsel of BCOI that BCOI counsel has acted as
counsel in this transaction and has examined all appropriate documentation for
the purposes of rendering an opinion that:
(i) All requisite corporate and other authorizations for the execution of
the agreement and performance thereof have been obtained.
(ii) Except as otherwise disclosed, there is no pending threatened
litigation or other legal actions, proceedings or investigations.
(iii) The authorized capital stock is as set forth in this Agreement, and
all outstanding shares are duly authorized, validly issued and fully paid.
(iv) The Company has complied with all filing requirements for the
Securities and Exchange Commission and all NASD filings, and that said filings
conform to the requirements of the respective agencies.
(v) That all prior actions of the corporation in connection with filings,
have conformed to applicable state and federal law.
(vi) That the existing shares represented as free trading on attached
Exhibits B and C are Free Trading.
(i) Neither the execution and delivery of the Agreement, nor the consummation of
the transactions contemplated hereby, will violate any provision of the articles
of incorporation or bylaws of BCOI; will violate, conflict with or result in the
breach or termination of, or otherwise give any contracting party, the right to
terminate or constitute a default under the terms of any agreement or instrument
to which BCOI is a party or by which any of its property or assets may be bound;
will result in the creation of any lien, charge or encumbrance upon the
properties or assets of BCOI, will violate any judgment, order, injunction,
decree or award against or binding upon BCOI or upon its securities, property or
business;
(j) Immediately following the 2.5:1 forward stock split and the purchase and
sale of the New Shares to SLMI, there will be outstanding no more than
11,025,000 shares of common stock of BCOI and no other shares of capital stock.
Attached hereto as Exhibit B is a true and correct list of the shareholders of
BCOI as of the date hereof (excluding SLMI) and the number of shares of the
common stock owned by each (the "Existing Shares"). BCOI has complied with all
federal and state securities and blue sky laws in all offers, sales and
issuances of its securities. The offer, issuance and sale of the Existing Shares
was exempt from registration under the Securities Act pursuant to Section 4(2).
Of the Existing Shares, 545,000 are not "restricted securities" within the
meaning of Rule 144 under the Securities Act; these shares are so designated on
the list attached as Exhibit B. Any notices required to be filed under the
federal and state securities and blue sky laws prior to the date hereof
(including regulation D notices) have been filed. Exhibit C hereto identifies
each issuance of securities by BCOI prior to the date hereof, and accurately
identifies the name of the purchaser, the consideration received, the date of
issuance, and the federal securities law exemption from registration relied upon
by BCOI. Attached as Exhibit D is a true and correct copy of the Articles of
Incorporation and Bylaws of BCOI, as amended and in effect on the date hereof.
(k) BCOI has not had any business or operations of any nature whatsoever, has
not sold any asset, provided any service for compensation, or incurred any
obligations or liability except as otherwise specified in BCOI's Financial
Statements. No shareholder of BCOI has any right to cause BCOI to register
securities of BCOI with the SEC. BCOI has never had any paid employees.
7. REPRESENTATIONS AND WARRANTIES OF SLMI. SLMI represents and warrants
as follows:
<PAGE> 3
(a) SLMI has taken all necessary corporate action to authorize the execution of
this Agreement and the transactions contemplated hereunder.
(b) Neither the execution and delivery of this Agreement, nor the consummation
of the transactions contemplated hereby, will violate any provision of the
articles of incorporation or bylaws of SLMI; will violate, conflict with or
result in breach or termination of or otherwise give any contracting party the
right to terminate or constitute a default under the terms of any agreement or
instrument to which SLMI is a party, or by which any of its property or assets
may be bound; will result in the creation of any lien, charge or encumbrance
upon the properties or assets of SLMI or will violate any judgment, order,
injunction, decree or award against or binding upon SLMI, or upon its
securities, property or business.
(c) All information supplied to BCOI in the Corporate Profile, Business Plan,
Financial Statements, and Proforma of SLMI is accurate and reliable information.
None of the information supplied contains any untrue statement of a material
fact or omits to make any statement of material fact necessary to make the
statements therein not misleading.
(d) Within 48 hours of signing this agreement or such other date as agreed,
management of SLMI will deliver to BCOI the balance sheet and financial
statements of SLMI as of 12/31/98, and balance sheet as of 6/23/99. All
financials to be prepared according to GAAP standards.
(e) From and after the date hereof, there will not have been, and prior to the
Closing Date there will not be, any material adverse changes in the financial
position of SLMI assets as set forth in the balance sheet except changes arising
in the ordinary course of business;
(f) SLMI is not, and as of the Closing Date will not be, involved in any pending
litigation not in the ordinary course of business or governmental investigation
or proceeding not disclosed in writing to BCOI and, to the knowledge of the
Shareholders, no litigation or governmental investigation or proceeding beyond
the ordinary course of business is threatened against SLMI;
(g) As of the Closing Date, SLMI will be in good standing as a Delaware
corporation;
(h) Neither the execution and delivery of the Agreement, nor the consummation of
the transactions contemplated hereby, will violate any provision of the articles
of incorporation or bylaws of SLMI; will violate, conflict with or result in the
breach or termination of or otherwise give any contracting party the right to
terminate or constitute a default under the terms of any agreement or instrument
to which SLMI is a party, or by which any of its property or assets may be
bound; will result in the creation of any lien, charge or encumbrance upon the
properties or assets of SLMI; will violate any judgment, order, injunction,
decree or award against or binding upon SLMI or upon its securities, property or
business;
8. REPRESENTATIONS AND WARRANTIES OF RGB AND MARK DISALVO.
Each of RGB and Mark DiSalvo severally represents and warrants to SLMI as
follows:
(a) this Agreement has been duly executed and delivered by such shareholder and
constitutes a valid and binding obligation of such shareholder enforceable
against such shareholder in accordance with its terms, except that such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
and other similar laws now or hereafter in effect relating to creditors' rights
generally; and
(b) none of such shareholders is, or has been, the subject of any investigation,
action, proceeding, order or decree by any securities governmental authority or
any judgment, order or decree issued by any governmental authority relating to
federal or state securities laws or the regulations of any self-regulatory
organization involved in the securities business.
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BCOI: All obligations of BCOI
and BCOI Shareholders under this Agreement are subject to the fulfillment prior
to, or as of, the Closing Date, of each of the following conditions:
(a) The representations and warranties by SLMI contained in this Agreement or in
any certificate or documents delivered to BCOI pursuant to the provisions
hereof, shall be true at and as of the time of closing as though such
representations and warranties were made at and as of such time.
(b) SLMI shall have performed and complied with all covenants, agreements, and
conditions required by this Agreement to be performed or complied with by it
prior to or at closing;
(c) SLMI shall have delivered to BCOI evidence to the effect that:
(i) SLMI is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware;
(ii) SLMI has the corporate power to carry on its business as now being
conducted;
(iii) This Agreement has been duly authorized, executed and delivered by
SLMI and is a valid and binding obligation of SLMI and enforceable in accordance
with its terms;
(iv) SLMI through its board of directors has taken all corporate action
necessary to authorize the execution, delivery and performance of this
Agreement;
(v) Except as referred to herein, SLMI knows of (a) no actions suit or
other legal proceedings or investigations pending or threatened against or
relating to or materially adversely affecting SLMI; and (b) no unsatisfied
judgments against SLMI;
<PAGE> 4
10. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SLMI: All obligations of
SLMI under this Agreement are subject to the fulfillment prior to, or as of the
Closing Date of each of the following conditions:
(a) The representations and warranties by BCOI contained in this Agreement, or
in any certificate or document delivered to SLMI pursuant to the provisions
hereof, shall be true at and as of the time of closing as though such
representations and warranties were made at and as of such time.
(b) BCOI and BCOI Shareholders shall have performed and complied with all
covenants, agreements, and conditions required by this Agreement to be performed
or complied with by it prior to or at closing.
(c) BCOI shall have delivered to SLMI an attorney opinion letter and evidence to
the effect that:
(i) BCOI is a corporation duly organized, validly existing and in good
standing under the laws of the State of Colorado;
(ii) BCOI has the corporate power to carry on its business as now being
conducted;
(iii) This Agreement has been duly authorized, executed and delivered by
BCOI and is a valid and binding obligation of BCOI and enforceable in accordance
with its terms;
(iv) BCOI through its board of directors has taken all corporate action
necessary to authorized the execution, delivery and performance of this
Agreement;
(v) The documents executed and delivered to SLMI hereunder are valid and
binding in accordance with the terms and vest in SLMI all right, title and
interest in and to the stock of BCOI and said stock when issued shall be validly
issued, fully paid, and non-assessable;
(vi) Except as referred to herein, BCOI knows of (a) no actions suit or
other legal proceedings or investigations pending or threatened against or
relating to or materially adversely affecting BCOI; and (b) no unsatisfied
judgments against BCOI;
(vii) That the existing shares represented as free trading on attached
Exhibits B and C are Free Trading.
(d) BCOI shall have delivered to SLMI evidence to the effect that:
(i) the preparation and filing of an information statement with the SEC
pursuant to Section 14(f) of the Securities Exchange Act of 1934 and Rule 14f-1
thereunder has been completed; and
(ii) the preparation and filing of Form 8-K with the SEC concerning the
change of control transaction has been completed.
(e) SLMI shall have received approval of and consent to the transaction
contemplated herein by SLMI shareholders owning at least 51% of the outstanding
stock of SLMI.
11. PROHIBITED ACTS. BCOI agrees not to do any of the following acts prior
to the Closing Date, and the BCOI Shareholders agree that prior to the Closing
Date, they will not request or permit BCOI to do any of the following acts: (a)
declare or pay any dividends or other distributions on its stock, or purchase or
redeem any of its stock; or (b) issue any stock or other securities, including
any rights or options to purchase or otherwise acquire any of its stock, and
shall not issue any notes or other evidences of indebtedness.
12. REVERSE SPLIT PROHIBITED. BCOI and SLMI agree that BCOI shall not authorize
or perform any reverse stock splits for 18 months from the Closing Date.
13. INDEMNIFICATION. Within the period in paragraph 13 herein, and in accordance
with the terms of that paragraph, each party to this Agreement, shall indemnify
and hold harmless each other party all times after the date of this Agreement
against and in respect of any liability, damage or deficiency, all actions,
suits, proceedings, demands, assessments, judgments, costs, and expenses,
including attorney's fees, incident to any of the foregoing, resulting from
misrepresentations, breach of covenant of warranty or nonfulfillment of any
agreement on the part of such party under this Agreement, or from any
misrepresentation in or omission from any certificate furnished or to be
furnished to a party hereunder. Subject to the terms of this Agreement, the
defaulting party shall reimburse the other party or parties, on demand, for any
payment made by said parties at any time after the Closing Date, in respect of
any liabilities or claim to which the foregoing indemnity relates.
14. NATURE AND SURVIVAL OF REPRESENTATIONS: All representations, warranties and
covenants made by any party in this Agreement shall survive the closing
hereunder for so long as the applicable statute of limitations shall remain
open. Each of the parties hereto is executing and carrying out the provisions of
this Agreement in reliance solely on the representations, warranties and
covenants and agreements contained in this Agreement, or at the closing of the
transaction herein provided for, and not upon any investigation which it might
have made or any representations, warranty, agreement, promise or information,
written or oral, made by the other party or any other person other than as
specifically set forth herein.
15. RESIGNATIONS AND APPOINTMENT OF OFFICERS AND DIRECTORS.
(a) Upon the Closing Date, the officers and directors of BCOI shall become:
Directors: Stan Lee, Devendra Mishra, Gill Champion, Andrea Freitag
President: Devendra Mishra
<PAGE> 5
Vice President: Gill Champion
Secretary: Andrea Freitag
Treasurer: Stephen Gordon
16. NOTICES. Any notices which any of the parties hereto may desire to serve
upon any of the parties hereto shall be in writing and shall be conclusively
deemed to have been received by the parties at its address, if mailed, postage
prepaid, United States mail, registered, return receipt requested, to the
following addresses:
If to current BCOI management or the BCOI Shareholders:
Mark DiSalvo
192 Searidge Court
Shell Beach, CA 93449
If to SLMI management or SLMI:
Stan Lee Media, Inc.
15821 Ventura Blvd., Suite 875
Encino, CA 91436
Attention: Chief Operating Officer
If to RGB:
Robert Bryan
3200 White Alder
Sonoma, CA 95476
17. POST CLOSING COVENANTS. BCOI's counsel (subject to SLMI's counsel's review
and approval) shall prepare and file Form 8- k with the SEC concerning the
change of control transaction.
18. CONDITION SUBSEQUENT. This closing assumes the later closing of a Stock
Purchase Agreement between certain shareholders of BCOI and certain buyers
(including RGB) of BCOI Existing Shares. If the selling shareholders fail to
satisfy their obligations thereunder, SLMI shall have the right to unwind this
entire transaction without imposition of any fee, charge or payment.
19. PUBLICITY. Each party hereto agrees not to issue any press release or make
any public statement (except as required by law) with respect to the
transactions contemplated hereby without the consent of the other party, and in
no event shall any press release be made prior to the Closing Date hereunder.
20. SUCCESSORS. This Agreement shall be binding upon and inure to the benefit of
the heirs, personal representatives, and successors and assigns of the parties.
21. CHOICE OF LAW. This Agreement shall be construed and enforced in accordance
with the laws of the State of California.
22. COUNTERPARTS. This Agreement may be signed in one or more counterparts, all
of which taken together shall constitute the entire Agreement.
23. MISCELLANEOUS
(a) Further Assurance: At any time, and from time to time, after the effective
date, each party will execute such additional instruments and take such action
as may be reasonably requested by the other party to confirm or perfect title to
any property transferred hereunder or otherwise to carry out the intent and
purposes of this Agreement.
(b) Waiver: Any failure on the part of any party hereto to comply with any of
its obligations, agreements or conditions hereunder may be waived in writing by
the party to whom such compliance is owed.
(c) Time: Time is of the essence.
(d) Severability: If any part of this Agreement is deemed to be unenforceable,
the balance of this Agreement shall remain in full force and effect.
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
BOULDER CAPITAL OPPORTUNITIES, INC., a Colorado Corporation
By: /s/ Mark DiSalvo
Mark DiSalvo, President
/s/ Leah DiSalvo
Leah DiSalvo, Secretary
STAN LEE MEDIA, INC., a Delaware Corporation
By: /s/ Gill Champion
Gil Champion, Chief Operating Officer
/s/ Andrea Freitag
Andrea Freitag, Secretary
RGB
By: /s/ Robert Bryan
Robert Bryan
<PAGE> 7
SCHEDULE A
Shareholders and RGB shall agree to a "lock up" of their respective Free Trade
Shares as follows:
Shareholders: 496,125 shares
Free Trade Shares
<TABLE>
<CAPTION>
Date Released Cumulative
<S> <C> <C>
Upon Closing 70,000 70,000
30 days after Closing 70,000 140,000
60 days after Closing 70,000 210,000
90 days after Closing 70,000 280,000
120 days after Closing 70,000 350,000
150 days after Closing 70,000 420,000
180 days after Closing 76,125 496,125
RGB: 165,376 Shares
Upon Closing 23,000 23,000
30 days after Closing 23,000 46,000
60 days after Closing 23,000 69,000
90 days after Closing 23,000 92,000
120 days after Closing 23,000 115,000
150 days after Closing 23,000 138,000
180 days after Closing 27,375 165,375
</TABLE>
Boulder Capital Opportunities, Inc., a Colorado corporation
By: /s/ Mark Disalvo
Mark DiSalvo
By: /s/ Leah Disalvo
Leah DiSalvo
Stan Lee Media, Inc., a Delaware corporation
By: /s/ Gill Champion
Gill Champion, Chief Operating Officer
By: /s/ Andrea Freitag
Andrea Freitag, Secretary
RGB
By: /s/ Robert Bryan
Robert Bryan
<PAGE> 8
Exhibit C
<TABLE>
<S> <C> <C> <C>
Robert Soehngen 4/22/96 560,000 1,400(1)
Gary S. Joiner 4/22/96 50,000 125(2)
Grant W. Peck 4/22/96 50,000 125(2)
Dean F. Sessions 4/22/96 50,000 125(2)
Robert Soehngen 4/23/96 100,000 250
Steven C. Signer 4/26/96 50,000 1,500
Dev K. Mahanti 4/26/96 50,000 1,500
Thomas Soehngen 4/28/96 40,000 1,200
John F. O'Neil 4/29/96 30,000 900
Douglas L. Ray 4/29/96 30,000 900
</TABLE>
(1) Consideration consisted of pre-incorporation consulting services rendered
to the Company related to investigating and developing the Company's proposed
business plan and capital structure and completing the organization and
incorporation of the Company.
(2) Consideration consisted of pre-incorporation consulting services rendered
to the Company related to investigating and developing the Company's proposed
business plan and capital structure.
Each of the sales listed above was made for cash or services. All of the above
sales were made in reliance upon the exemption from registration offered by
Section 4(2) of the Securities Act of 1933, as amended.
<PAGE> 1
Exhibit 3.1
ARTICLES OF INCORPORATION
OF
BOULDER CAPITAL OPPORTUNITIES, INC.
The undersigned, who, if a natural person, is eighteen years of age or
older, hereby establishes a corporation pursuant to the Colorado Business
Corporation Act as amended and adopts the following Articles of Incorporation:
FIRST: The name of the corporation is Boulder Capital Opportunities,
Inc.
SECOND: The corporation shall have and may exercise all of the rights,
powers and privileges now or hereafter conferred upon corporations organized
under the laws of Colorado. In addition, the corporation may do everything
necessary, suitable or proper for the accomplishment of any of its corporate
purposes. The corporation may conduct part or all of its business in any part of
Colorado, the United States or the world and may hold, purchase, mortgage, lease
and convey real and personal property in any of such places.
THIRD: The aggregate number of shares which the corporation shall have
authority to issue is one hundred ten million (110,000,000) shares of which a
portion shall be common stock and a portion shall be preferred stock, all as
described below.
A. Common Stock. The aggregate number of common shares which the
corporation shall have the authority to issue is one hundred million
(100,000,000), which shares shall be designated "Common Stock." Subject to all
the rights of the Preferred Stock as expressly provided herein, by law or by the
Board of Directors pursuant to this Article, the Common Stock of the corporation
shall possess all such rights and privileges as are afforded to capital stock by
applicable law in the absence of any express grant of rights or privileges in
these Articles of Incorporation, including, but not limited to, the following
rights and privileges:
(a) dividends may be declared and paid or set apart for
payment on the Common Stock out of any assets or funds
of the corporation legally available for the payment of
dividends;
(b) the holders of Common Stock shall have unlimited voting
rights, including the right to vote for the election of
directors and on all other matters requiring stockholder
action. Each holder of Common Stock shall have one vote
for each share of Common Stock standing in his name on
the books of the corporation and entitled to vote,
except that in the election of directors each holder of
Common Stock shall have as many votes for each share of
Common Stock held by him as there are directors to be
elected and for whose election the holder of Common
Stock has a right to vote. Cumulative voting shall not
be permitted in the election of directors or otherwise.
(c) on the voluntary or involuntary liquidation, dissolution
or winding up of the corporation, and after paying or
adequately providing for the payment of all of its
obligations and amounts payable in liquidation,
dissolution or winding up, and subject to the rights of
the holders of Preferred Stock, if any, the net assets
of the corporation shall be distributed pro rata to the
holders of the Common Stock.
B. Preferred Stock. The aggregate number of preferred shares which this
corporation shall have the authority to issue is ten million
(10,000,000) shares, each with no par value, which shares shall be
designated "Preferred Stock." Shares of Preferred Stock may be issued
from time to time in one or more series as determined by the Board of
Directors. The Board of Directors is hereby authorized, by resolution or
resolutions, to provide from time to time, out of the unissued shares of
Preferred Stock not then allocated to any series of Preferred Stock, for
a series of the Preferred Stock. Each such series shall have distinctive
serial designations. Before any shares of any such series of Preferred
Stock are issued, the Board of Directors shall fix and determine, and is
hereby expressly empowered to fix and determine, by resolution or
resolutions, the voting powers, full or limited, or no voting powers,
and the designations, preferences and
<PAGE> 2
relative, participating, optional or other special rights, and the
qualifications, limitations and restrictions thereof as provided by
Colorado law. Before issuing any shares of a class or series, the
corporation shall deliver to the secretary of state for filing articles
of amendment to these articles of incorporation that set forth
information required by Colorado law, including but not limited to, the
designations, preferences, limitations, and relative rights of the class
or series of shares.
C. Voting. Unless otherwise ordered by a court of competent
jurisdiction, at all meetings of shareholders one-third of the shares of
a voting group entitled to vote at such meeting, represented in person
or by proxy, shall constitute a quorum of that voting group.
FOURTH: The number of directors of the corporation shall be fixed by the
bylaws, or if the bylaws fail to fix such a number, then by resolution adopted
from time to time by the board of directors, provided that the number of
directors shall not be more than five (5) nor less than one (1). One (1)
director shall constitute the initial board of directors. The following person
is elected to serve as the corporation's initial director until the first annual
meeting of shareholders or until his successors are duly elected and qualified:
Name
Address
Robert Soehngen
2434 Vine Place
Boulder, CO 80304
FIFTH: The street address of the initial registered office of the
corporation is 4750 Table Mesa Drive, Boulder, Colorado 80303. The name of the
initial registered agent of the corporation at such address is Gary S. Joiner.
SIXTH: The address of the initial principal office of the corporation is
4750 Table Mesa Drive, Boulder, Co 80303.
SEVENTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the corporation, and the same are
in furtherance of and not in limitation or exclusion of the powers conferred by
law.
(a) Conflicting Interest Transactions. As used in this paragraph,
"conflicting interest transaction" means any of the following:
(i) a loan or other assistance by the corporation to a director
of the corporation or to an entity in which a director of the
corporation is a director or officer or has a financial
interest; (ii) a guaranty by the corporation of an obligation of
a director of the corporation or of an obligation of an entity
in which a director of the corporation is a director or officer
or has a financial interest; or (iii) a contract or transaction
between the corporation and a director of the corporation or
between the corporation and an entity in which a director of the
corporation is a director or officer or has a financial
interest. No conflicting interest transaction shall be void or
voidable, be enjoined, be set aside, or give rise to an award of
damages or other sanctions in a proceeding by a shareholder or
by or in the right of the corporation, solely because the
conflicting interest transaction involves a director of the
corporation or an entity in which a director of the corporation
is a director or officer or has a financial interest, or solely
because the director is present at or participates in the
meeting of the corporation's board of directors or of the
committee of the board of directors which authorized, approves
or ratifies a conflicting interest transaction, or solely
because the director's vote is counted for such purpose if: (A)
the material facts as to the director's relationship or interest
and as to the conflicting interest transaction are disclosed or
are known to the board of directors or the committee, and the
board of directors or committee in good faith authorizes,
approves or ratifies the conflicting interest transaction by the
affirmative vote of a majority of the disinterested directors,
even though the disinterested directors are less than a quorum;
or (B) the material facts as to the director's relationship or
interest and as to the conflicting interest transaction are
disclosed or are known to the shareholders entitled to vote
thereon, and the conflicting interest transaction is
specifically authorized, approved or ratified in good faith by a
vote of the shareholders; or (C) a conflicting interest
transaction is fair as to the corporation as of the
<PAGE> 3
time it is authorized, approved or ratified by the board of
directors, a committee thereof, or the shareholders. Common or
interested directors may be counted in determining the presence
of a quorum at a meeting of the board of directors or of a
committee which authorizes, approves or ratifies the conflicting
interest transaction.
(b) Loans and Guaranties for the Benefit of Directors. Neither the
board of directors nor any committee thereof shall authorize a
loan by the corporation to a director of the corporation or to
an entity in which a director of the corporation is a director
or officer or has a financial interest, or a guaranty by the
corporation of an obligation of a director of the corporation or
of an obligation of an entity in which a director of the
corporation is a director or officer or has a financial
interest, until at least ten days after written notice of the
proposed authorization of the loan or guaranty has been given to
the shareholders who would be entitled to vote thereon if the
issue of the loan or guaranty were submitted to a vote of the
shareholders. The requirements of this paragraph (b) are in
addition to, and not in substitution for, the provisions of
paragraph (a) of Article SEVENTH.
(c) Indemnification. The corporation shall indemnify, to the maximum
extent permitted by law, any person who is or was a director,
officer, agent, fiduciary or employee of the corporation against
any claim, liability or expenses arising against or incurred by
such person made party to a proceeding because he is or was a
director, officer, agent, fiduciary or employee of the
corporation or because he was a director, officer, agent,
fiduciary or employee of the corporation or because he is or was
serving another entity as a director, officer, partner, trustee,
employee, fiduciary or agent at the corporation's request. The
corporation shall further have the authority to the maximum
extent permitted by law to purchase and maintain insurance
providing such indemnification.
(d) Limitation on Director's Liability. No director of this
corporation shall have any personal liability for monetary
damages to the corporation or its shareholders for breach of his
fiduciary duty as a director, except that this provision shall
not eliminate or limit the personal liability of a director to
the corporation or its shareholders for monetary damages for:
(i) any breach of the director's duty of loyalty to the
corporation or its shareholders; (ii) acts or omissions not in
good faith or which involve intentional misconduct or a knowing
violation of law; (iii) voting for or assenting to a
distribution in violation of Colorado Revised Statutes Section
7-106-401 or the articles of incorporation if it is established
that the director did not perform his duties in compliance with
Colorado Revised Statutes Section 7-108-401, provided that the
personal liability of a director in this circumstance shall be
limited to the amount of the distribution which exceeds what
could have been distributed without violation of Colorado
Revised Statutes Section 7-106- 401 or the articles of
incorporation; or (iv) any transaction from which the director
directly or indirectly derives an improper personal benefit.
Nothing contained herein will be construed to deprive any
director of his right to all defenses ordinarily available to a
director nor will anything herein be construed to deprive any
director of any right he may have for contribution from any
other director or other person.
(e) Negation of Equitable Interests in Shares or Rights. Unless a
person is recognized as a shareholder through procedures
established by the corporation pursuant to Colorado Revised
Statutes Section 7- 107-204 or any similar law, the corporation
shall be entitled to treat the registered holder of any shares
of the corporation as the owner thereof for all purposes
permitted by the Colorado Business Corporation Act, including
without limitation all rights deriving from such shares, and the
corporation shall not be bound to recognize any equitable or
other claim to, or interest in, such shares or rights deriving
from such shares on the part of any other person including
without limitation, a purchaser, assignee or transferee of such
shares, unless and until such other person becomes the
registered holder of such shares or is recognized as such,
whether or not the corporation shall have either actual or
constructive notice of the claimed interest of such other
person. By way of example and not of limitation, until such
other person has become the registered holder of such shares or
is recognized pursuant to Colorado Revised Statutes Section
7-107-204 or any similar applicable law, he shall not be
entitled: (i) to receive notice of the meetings of the
shareholders; (ii) to vote at such meetings; (iii) to examine a
list of the shareholders; (iv) to be paid dividends or other
distributions payable to shareholders; or (v) to own, enjoy and
exercise any other rights deriving from such shares against the
corporation. Nothing contained herein will be construed to
deprive any beneficial shareholder, as
<PAGE> 4
defined in Colorado Revised Statutes Section 7-113-101(1), of
any right he may have pursuant to Article 113 of the Colorado
Business Corporation Act or any subsequent law.
EIGHTH: The name and address of the incorporator is:
Gary S. Joiner
4750 Table Mesa Drive
Boulder, Colorado 80303
DATED the _____ day of April, 1996.
/s/ Gary S. Joiner
Incorporator
Gary S. Joiner hereby consents to the appointment as the initial
registered agent for Global Capital Access Corporation.
/s/ Gary S. Joiner
Initial Registered Agent
<PAGE> 1
Exhibit 3.2
ARTICLES OF AMENDMENT
TO
ARTICLES OF CORPORATION
Pursuant to the provisions of the Colorado Business Corporations Act, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the corporation is Boulder Capital Opportunities, Inc.
SECOND: The following amendment to the Articles of Incorporation was
adopted on August 12, 1999, as prescribed by the Colorado Business
Corporation Act, in the manner marked with an X below:
No shares have been issued or Directors elected - Action by
Incorporators
-----
No shares have been issued but Directors elected - Action by
Directors
- -----
Such amendment was adopted by the board of directors where shares
- ----- have been issued and shareholder action was not required.
X Such amendment was adopted by vote of the shareholders. The number
- ----- of shares voted for the amendment was sufficient for approval.
THIRD: If changing corporate name, the new name of the corporation is Stan
Lee Media, Inc.
FOURTH: The manner, if not set forth in such amendment, in which any
exchange, reclassification, or cancellation of issued shares provided for in the
amendment shall be effected, is as follows: n/a.
If these amendments are to have a delayed effective date, please list that
date: n/a/.
Signature: /s/ Gill Champion
--------------------------
Title: Chief Operating Officer
<PAGE> 1
Exhibit 3.3
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned corporation adopts the following articles of amendment to its
articles of incorporation:
FIRST: The name of the corporation is Stan Lee Media, Inc. (the "corporation"
and sometimes hereinafter referred to as the "Company").
SECOND: ARTICLE THIRD of the articles of incorporation of the corporation shall
be amended by the addition of a new paragraph D, which shall read in its
entirety as follows:
D. Series A Preferred Stock. A class of preferred stock designated as
the Series A Preferred Stock is hereby created out of the Preferred
Stock previously authorized by these Articles of Incorporation. The
aggregate number of the Series A Preferred Stock which this corporation
shall have authority to issue is one million five hundred thousand
shares (1,500,000) shares, each with no par value, which shares shall be
designated as the "Series A Preferred Stock" (the "Preferred Shares").
The powers, designations, preferences and other special rights
of the Preferred Shares is as follows:
Section 1. Dividends. In the event any dividend or other
distribution payable in cash or other property is declared on the Common
Stock (defined below), each holder (a "Holder" and, collectively, the
"Holders") of the Preferred Shares on the record date for such dividend
or distribution shall be entitled to receive per Preferred Share on the
date of payment or distribution of such dividend or other distribution
the amount of cash or property equal to the cash or property which would
be received by the Holders of the number of shares of Common Stock into
which such Preferred Share would be converted pursuant to Section 2
hereof immediately prior to such record date.
Section 2. Distributions Upon Liquidation, Dissolution or
Winding-Up. In the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the Company, the Holders of the Preferred
Shares shall be entitled to receive in cash out of the assets of the
Company, whether from capital or from earnings available for
distribution to its stockholders (the "Liquidation Funds"), before any
amount shall be paid to the holders of any of the capital stock of the
Company of any class junior in rank to the Preferred Shares in respect
of the preferences as to the distributions and payments on the
liquidation, dissolution and winding up of the Company, an amount per
Preferred Share equal to Seven Dollars ($7.00) and any accrued but
unpaid Dividends (such sum being referred to as the "Liquidation
Preference"); provided, however, that, if the Liquidation Funds are
insufficient to pay the full amount due to the Holders of Preferred
<PAGE> 2
Shares and holders of shares of other classes or series of preferred
stock of the Company that are of equal rank with the Preferred Shares as
to payments of Liquidation Funds (the "Pari Passu Shares"), then each
Holder of Preferred Shares and Pari Passu Shares shall receive a
percentage of the Liquidation Funds equal to the full amount of
Liquidation Funds payable to such Holder as a liquidation preference, in
accordance with their respective Certificate of Designations,
Preferences and Rights, as a percentage of the full amount of
Liquidation Funds payable to all Holders of Preferred Shares and holders
of Pari Passu Shares. In addition to the receipt of the Liquidation
Preference, in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company, the Holders of the Preferred
Shares shall be entitled to receive Liquidation Funds distributed to
holders of Common Stock, after the Liquidation Preference has been paid,
to the same extent as if such Holders of Preferred Shares had converted
the Preferred Shares into Common Stock (without regard to any
limitations on conversions herein or elsewhere) and had held such shares
of Common Stock on the record date for such distribution of the
remaining Liquidation Funds. The purchase or redemption by the Company
of stock of any class, in any manner permitted by law, shall not, for
the purposes hereof, be regarded as a liquidation, dissolution or
winding up of the Company. Neither the consolidation or merger of the
Company with or into any other Person, nor the sale or transfer by the
Company of substantially all of its assets, shall, for the purposes
hereof, be deemed to be a liquidation, dissolution or winding up of the
Company. No Holder of Preferred Shares shall be entitled to receive any
amounts with respect thereto upon any liquidation, dissolution or
winding up of the Company other than the amounts provided for herein;
provided that a Holder of Preferred Shares shall be entitled to all
amounts previously accrued with respect to amounts owed hereunder.
Section 3. Conversion of Preferred Shares. Preferred Shares
shall be convertible into shares of the Company's common stock, no par
value (the "Common Stock"), on the terms and conditions set forth in
this Section.
(a) Certain Defined Terms. For purposes of this
Certificate of Designations, the following terms shall have the
following meanings:
(i) "Business Day" means any day in which the
Principal Market is open for business.
(ii) "Closing Bid Price" means, for any security as
of any date, the last closing bid price for such security on the
Principal Market (as defined below) as reported by Bloomberg Financial
Markets ("Bloomberg"), or, if the Principal Market is not the principal
securities exchange or trading market for such security, the last
closing bid price of such security on the principal securities exchange
or trading market where such security is listed or traded as reported by
Bloomberg, or if the foregoing do not apply, the last closing bid price
of such security in the over-the-counter market on the Electronic
Bulletin Board for such security as reported by Bloomberg, or, if no
closing bid price is reported for such security by Bloomberg, the last
closing trade price of such security as reported by Bloomberg, or, if no
last closing trade price is reported for such security by Bloomberg, the
average of the bid prices of any market makers for such
<PAGE> 3
security as reported in the "pink sheets" by the National Quotation
Bureau, Inc. If the Closing Bid Price cannot be calculated for such
security on such date on any of the foregoing bases, the Closing Bid
Price of such security on such date shall be the fair market value as
mutually determined by the Company and the Holders of Preferred Shares.
If the Company and the Holders of Preferred Shares are unable to agree
upon the fair market value of the Common Stock, then such dispute shall
be resolved pursuant to Section 3(e) below. (All such determinations to
be appropriately adjusted for any stock dividend, stock split or other
similar transaction during such period).
(iii) "Closing Date" has the same meaning as the
term is defined in the Securities Purchase Agreement, entered into by
and between the Company and certain investor(s), dated as of November 3,
1999.
(iv) "Conversion Price" means the Fixed Conversion
Price in effect as of such date and subject to adjustment as provided
herein.
(v) "Fixed Conversion Price" means, Seven Dollars
($7.00), subject to adjustment as provided herein.
(vi) "Issuance Date" means, with respect to each
Preferred Share, the date of issuance of the applicable Preferred Share.
(vii) "Person" means an individual, a limited
liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization and a government or any department
or agency thereof.
(viii) "Principal Market" means the Nasdaq National
Market, the Nasdaq SmallCap Market or OTC Electronic Bulletin Board.
(ix) "Registration Rights Agreement" means that
certain Registration Rights Agreement entered into by and between the
Company and certain investor(s), dated as of November 3, 1999.
(x) "Stated Value" means Seven Dollars ($7.00).
(b) Holder's Conversion Right. At any time or times on or
after the Issuance Date, any Holder of Preferred Shares shall be
entitled to convert any whole number of Preferred Shares into fully paid
and nonassessable shares of Common Stock in accordance with Section
3(e), at the Conversion Rate (as defined below). The Company shall not
issue any fraction of a share of Common Stock upon any conversion. All
shares of Common Stock (including fractions thereof) issuable upon
conversion of more than one Preferred Share by a Holder thereof shall be
aggregated for purposes of
3
<PAGE> 4
determining whether the conversion would result in the issuance of a
fraction of a share of Common Stock. If, after the aforementioned
aggregation, the issuance would result in the issuance of a fraction of
a share of Common Stock, the Company shall round such fraction of a
share of Common Stock up to the nearest whole share.
(c) Conversion Rate. The number of shares of Common Stock
issuable upon conversion of each Preferred Share pursuant to Section
3(b) shall be determined according to the following formula (the
"Conversion Rate"):
Stated Value
Conversion Price
(d) Automatic Conversion. The Preferred Shares shall
automatically be converted into shares of Common Stock, at the then
effective Conversion Price, upon the earlier of (i) the closing of a
firm commitment underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended,
covering the offer and sale of Common Stock for the account of the
corporation to the public at a price per share (prior to underwriter
commissions and offering expenses) of not less than Fifteen Dollars
($15.00) per share (appropriately adjusted for any recapitalizations,
stock splits, stock combinations, stock dividends and the like) and an
aggregate offering price to the public of not less than Twenty-Five
Million Dollars ($25,000,000), or (ii) the receipt by the corporation of
the affirmative vote at a duly noticed stockholders' meeting or pursuant
to a duly solicited written consent of the holders of more than
two-thirds of the then outstanding Preferred Shares in favor of the
conversion of all of the Preferred Shares. In the event of the automatic
conversion of the Preferred Shares upon a public offering as set forth
in clause (i) above, the person(s) entitled to receive the Common Stock
issuable upon such conversion of Preferred Shares shall not be deemed to
have converted such Preferred Shares until immediately prior to the
closing of such sale of securities.
(e) Mechanics of Conversion. The conversion of Preferred
Shares shall be conducted in the following manner:
(i) Holder's Delivery Requirements. To convert
Preferred Shares into shares of Common Stock on any date (the
"Conversion Date"), the Holder shall (A) transmit by facsimile (or
otherwise deliver), for receipt on or prior to 11:59 P.M., Pacific Time
on such date, a copy of a fully executed notice of conversion in the
form attached hereto as Exhibit I (the "Conversion Notice") to the
Company's designated transfer agent (the "Transfer Agent") with a copy
thereof to the Company and (B) surrender to a common carrier for
delivery to the Transfer Agent as soon as practicable following such
date the original certificates representing the Preferred Shares being
4
<PAGE> 5
converted (or an indemnification undertaking with respect to such shares
in the case of their loss, theft or destruction) (the "Preferred Stock
Certificates").
(ii) Company's Response. Upon receipt by the
Company of a copy of a Conversion Notice, the Company shall immediately
send, via facsimile, a confirmation of receipt of such Conversion Notice
to such Holder and the Transfer Agent, which confirmation shall
constitute an instruction to the Transfer Agent to process such
Conversion Notice in accordance with the terms herein. Upon receipt by
the Transfer Agent of the Preferred Stock Certificates to be converted
pursuant to a Conversion Notice, the Transfer Agent shall, on the next
business day following the date of receipt (or the second business day
following the date of receipt if received after 11:00 a.m. local time of
the Transfer Agent), (A) issue and surrender to a common carrier for
overnight delivery to the address as specified in the Conversion Notice,
a certificate, registered in the name of the Holder or its designee, for
the number of shares of Common Stock to which the Holder shall be
entitled, or (B) provided the Transfer Agent is participating in The
Depository Trust Company ("DTC") Fast Automated Securities Transfer
Program, upon the request of the Holder, credit such aggregate number of
shares of Common Stock to which the Holder shall be entitled to the
Holder's or its designee's balance account with DTC through its Deposit
Withdrawal Agent Commission system. If the number of Preferred Shares
represented by the Preferred Stock Certificate(s) submitted for
conversion is greater than the number of Preferred Shares being
converted, then the Transfer Agent shall, as soon as practicable and in
no event later than three (3) Business Days after receipt of the
Preferred Stock Certificate(s) and at its own expense, issue and deliver
to the Holder a new Preferred Stock Certificate representing the number
of Preferred Shares not converted.
(iii) Dispute Resolution. In the case of a dispute
as to the arithmetic calculation of the Conversion Rate, the Company
shall instruct the Transfer Agent to issue to the Holder the number of
shares of Common Stock that is not disputed and shall submit the
disputed determinations or arithmetic calculations to the Holder via
facsimile within one (1) Business Day of receipt of such Holder's
Conversion Notice. If such Holder and the Company are unable to agree
upon the arithmetic calculation of the Conversion Rate within one (1)
Business Day of such disputed arithmetic calculation being submitted to
the Holder, then the Company shall within one (1) Business Day submit
via facsimile the disputed arithmetic calculation of the Conversion Rate
to the Company's independent, outside accountant. The Company shall
cause the accountant to perform the calculations and notify the Company
and the Holder of the results no later than forty-eight (48) hours from
the time it receives the disputed calculations. Such accountant's
calculation shall be binding upon all parties absent manifest error.
(iv) Record Holder. The person or persons entitled
to receive the shares of Common Stock issuable upon a conversion of
Preferred Shares shall be
5
<PAGE> 6
treated for all purposes as the record holder or holders of such shares
of Common Stock on the Conversion Date.
(v) Pro Rata Conversion and Redemption. In the
event the Company receives a Conversion Notice from more than one Holder
of Preferred Shares for the same Conversion Date and the Company can
convert some, but not all, of such Preferred Shares, the Company shall
convert from each Holder of Preferred Shares electing to have Preferred
Shares converted at such time a pro rata amount of such Holder's
Preferred Shares submitted for conversion based on the number of
Preferred Shares submitted for conversion on such date by such Holder
relative to the number of Preferred Shares submitted for conversion on
such date.
(f) Fractional Shares. No fractional shares of Common
Stock or scrip shall be issued upon conversion of shares of Preferred
Stock. If more than one share of Preferred Stock shall be surrendered
for conversion at any one time by the same holder, the number of full
shares of Common Stock issuable upon conversion thereof shall be
computed on the basis of the aggregate number of shares of Preferred
Stock so surrendered. Instead of any fractional shares of Common Stock
which would otherwise be issuable upon conversion of any shares of
Preferred Stock, the Company shall pay a cash adjustment in respect of
such fractional interest in an amount equal to that fractional interest
of the then Current Market Price.
(g) Conversion Price Adjustments. The Conversion Price
shall be subject to adjustment from time to time as follows:
(i) Common Stock Issued at Less Than the Conversion
Price. If the Company shall issue any Common Stock other than Excluded
Stock (as hereinafter defined) without consideration or for a
consideration per share less than the Conversion Price in effect
immediately prior to such issuance, the Conversion Price in effect
immediately prior to each such issuance shall immediately (except as
provided below) be reduced to the price determined by dividing (1) an
amount equal to the sum of (A) the number of shares of Common Stock
outstanding immediately prior to such issuance multiplied by the
Conversion Price in effect immediately prior to such issuance and (B)
the consideration, if any, received by the Company upon such issuance,
by (2) the total number of shares of Common Stock outstanding
immediately after such issuance.
For the purposes of any adjustment of the
Conversion Price pursuant to clause (i), the following provisions shall
be applicable:
(A) Cash. In the case of the issuance of Common
Stock for cash, the amount of the consideration received by the Company
shall be deemed to be the amount of the cash proceeds received by the
Company for such Common Stock
6
<PAGE> 7
before deducting therefrom any discounts, commissions, taxes or other
expenses allowed, paid or incurred by the Company for any underwriting
or otherwise in connection with the issuance and sale thereof.
(B) Consideration Other Than Cash. In the case of
the issuance of Common Stock (otherwise than upon the conversion of
shares of capital stock or other securities of the Company) for a
consideration in whole or in part other than cash, including securities
acquired in exchange therefor (other than securities by their terms so
exchangeable), the consideration other than cash shall be deemed to be
the fair value thereof as determined by the Board of Directors,
irrespective of any accounting treatment; provided that such fair value
as determined by the Board of Directors shall not exceed the aggregate
Current Market Price of the shares of Common Stock being issued as of
the date the Board of Directors authorizes the issuance of such shares.
(C) Options and Convertible Securities. In the case
of the issuance of (i) options, warrants or other rights to purchase or
acquire Common Stock (whether or not at the time exercisable) other than
the Excluded Stock, and (ii) securities by their terms convertible into
or exchangeable for Common Stock (whether or not at the time so
convertible or exchangeable) or options, warrants or rights to purchase
such convertible or exchangeable securities (whether or not at the time
exercisable) other than the Excluded Stock:
(1) the aggregate maximum number of shares
of Common Stock deliverable upon exercise of such options, warrants or
other rights to purchase or acquire Common Stock shall be deemed to have
been issued at the time such options, warrants or rights were issued and
for a consideration equal to the consideration (determined in the manner
provided in subclauses (A) and (B) above), if any, received by the
Company upon the issuance of such options, warrants or rights plus the
minimum purchase price provided in such options, warrants or rights for
the Common Stock covered thereby;
(2) 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, warrants or other rights to purchase or acquire such
convertible or exchangeable securities and the subsequent conversion or
exchange thereof, shall be deemed to have been issued at the time such
securities were issued or such options, warrants or rights were issued
and for a consideration equal to the consideration, if any, received by
the Company for any such securities and related options, warrants or
rights (excluding any cash received on account of accrued interest or
accrued dividends), plus the additional consideration (determined in the
manner provided in subclauses (A) and (B) above), if any, to be received
by the
7
<PAGE> 8
Company upon the conversion or exchange of such securities, or upon the
exercise of any related options, warrants or rights to purchase or
acquire such convertible or exchangeable securities and the subsequent
conversion or exchange thereof;
(3) on any change in the number of shares of
Common Stock deliverable upon exercise of any such options, warrants or
rights or conversion or exchange of such convertible or exchangeable
securities or any change in the consideration to be received by the
Company upon such exercise, conversion or exchange, including, but not
limited to, a change resulting from the anti-dilution provisions
thereof, the Conversion Price as then in effect shall forthwith be
readjusted to such Conversion Price as would have been obtained had an
adjustment been made upon the issuance of such options, warrants or
rights not exercised prior to such change, or of such convertible or
exchangeable securities not converted or exchanged prior to such change,
upon the basis of such change;
(4) on the expiration or cancellation of any
such options, warrants or rights, or the termination of the right to
convert or exchange such convertible or exchangeable securities, if the
Conversion Price shall have been adjusted upon the issuance thereof, the
Conversion Price shall forthwith be readjusted to such Conversion Price
as would have been obtained had an adjustment been made upon the
issuance of such options, warrants, rights or such convertible or
exchangeable securities on the basis of the issuance of only the number
of shares of Common Stock actually issued upon the exercise of such
options, warrants or rights, or upon the conversion or exchange of such
convertible or exchangeable securities; and
(5) if the Conversion Price shall have been
adjusted upon the issuance of any such options, warrants, rights or
convertible or exchangeable securities, no further adjustment of the
Conversion Price shall be made for the actual issuance of Common Stock
upon the exercise, conversion or exchange thereof; provided, however,
that no increase in the Conversion Price shall be made pursuant to
subclauses (1) or (2) of this subclause (C).
(ii) Excluded Stock. "Excluded Stock" shall mean
(A) shares of Common Stock issued or reserved for issuance by the
Company as a stock dividend payable in shares of Common Stock, or upon
any subdivision or split-up of the outstanding shares of Common Stock or
Preferred Stock, or upon conversion of shares of Preferred Stock, (B)
options and warrants heretofore granted to key employees, consultants
and advisors of the Company, and (C) 1,500,000 shares of Common Stock to
be issued to key employees, consultants and advisors of the Company
pursuant to the Company's 1999 Stock Incentive Plan, and 150,000 shares
of Common Stock to be issued to non-employee directors pursuant to the
Company's 1999 Stock Compensation Plan, together with any such shares
that are repurchased by the Company and reissued
8
<PAGE> 9
to any such employee, consultant or advisor. All shares of Excluded
Stock which the Company has reserved for issuance shall be deemed to be
outstanding for all purposes of computations under subparagraph 3(g)(i).
(iii) Stock Dividends, Subdivisions,
Reclassifications or Combinations. If the Company shall (i) declare a
dividend or make a distribution on its Common Stock in shares of its
Common Stock, (ii) subdivide or reclassify the outstanding shares of
Common Stock into a greater number of shares, or (iii) combine or
reclassify the outstanding Common Stock into a smaller number of shares,
the Conversion Price in effect at the time of the record date for such
dividend or distribution or the effective date of such subdivision,
combination or reclassification shall be proportionately adjusted so
that the holder of any shares of Preferred Stock surrendered for
conversion after such date shall be entitled to receive the number of
shares of Common Stock which he would have owned or been entitled to
receive had such Preferred Stock been converted immediately prior to
such date. Successive adjustments in the Conversion Price shall be made
whenever any event specified above shall occur.
(iv) Other Distributions. In case the Company shall
fix a record date for the making of a distribution to all holders of
shares of its Common Stock (i) of shares of any class other than its
Common Stock or (ii) of evidence of indebtedness of the Company or any
Subsidiary or (iii) of assets (excluding cash dividends or
distributions, and dividends or distributions referred to in
subparagraph 3(g)(iii) above), or (iv) of rights or warrants (excluding
those referred to in subparagraph 3(g)(i) above), in each such case the
Conversion Price in effect immediately prior thereto shall be reduced
immediately thereafter to the price determined by dividing (1) an amount
equal to the difference resulting from (A) the number of shares of
Common Stock outstanding on such record date multiplied by the
Conversion Price per share on such record date, less (B) the fair market
value (as determined by the Board of Directors, whose determination
shall be conclusive) of said shares or evidences of indebtedness or
assets or rights or warrants to be so distributed, by (2) the number of
shares of Common Stock outstanding on such record date. Such adjustment
shall be made successively whenever such a record date is fixed. In the
event that such distribution is not so made, the Conversion Price then
in effect shall be readjusted, effective as of the date when the Board
of Directors determines not to distribute such shares, evidences of
indebtedness, assets, rights or warrants, as the case may be, to the
Conversion Price which would then be in effect if such record date had
not been fixed.
(v) Consolidation, Merger, Sale, Lease or
Conveyance. In case of any consolidation with or merger of the Company
with or into another corporation, or in case of any sale, lease or
conveyance to another corporation of the assets of the Company as an
entirety or substantially as an entirety, each share of Preferred Stock
shall after the date of such consolidation, merger, sale, lease or
conveyance be
9
<PAGE> 10
convertible into the number of shares of stock or other securities or
property (including cash) to which the Common Stock issuable (at the
time of such consolidation, merger, sale, lease or conveyance) upon
conversion of such share of Preferred Stock would have been entitled
upon such consolidation, merger, sale, lease or conveyance; and in any
such case, if necessary, the provisions set forth herein with respect to
the rights and interests thereafter of the holders of the shares of
Preferred Stock shall be appropriately adjusted so as to be applicable,
as nearly as may reasonably be, to any shares of stock or other
securities or property thereafter deliverable on the conversion of the
shares of Preferred Stock.
(vi) Rounding of Calculations; Minimum Adjustment.
All calculations under this subparagraph (g) shall be made to the
nearest cent or to the nearest one hundredth (1/100th) of a share, as
the case may be. Any provision of this Section 3 to the contrary
notwithstanding, no adjustment in the Conversion Price shall be made if
the amount of such adjustment would be less than $0.05, but any such
amount shall be carried forward and an adjustment with respect thereto
shall be made at the time of and together with any subsequent adjustment
which, together with such amount and any other amount or amounts so
carried forward, shall aggregate $0.05 or more.
(vii) Timing of Issuance of Additional Common Stock
Upon Certain Adjustments. In any case in which the provisions of this
subparagraph (g) shall require that an adjustment shall become effective
immediately after a record date for an event, the Company may defer
until the occurrence of such event (A) issuing to the holder of any
share of Preferred Stock converted after such record date and before the
occurrence of such event the additional shares of Common Stock issuable
upon such conversion by reason of the adjustment required by such event
over and above the shares of Common Stock issuable upon such conversion
before giving effect to such adjustment and (B) paying to such holder
any amount of cash in lieu of a fractional share of Common Stock
pursuant to subparagraph (e) of this Section 3; provided that the
Company upon request shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such
additional shares, and such cash, upon the occurrence of the event
requiring such adjustment.
(h) Current Market Price. The Current Market Price at any
date shall mean, in the event the Common Stock is publicly traded, the
average of the daily closing prices per share of Common Stock for 30
consecutive trading days ending no more than 15 business days before
such date (as adjusted for any stock dividend, split, combination or
reclassification that took effect during such 30 business day period).
The closing price for each day shall be the last reported sale price
regular way or, in case no such reported sale takes place on such day,
the average of the last closing bid and asked prices regular way, in
either case on the Principal Market on which the Common Stock is listed
or
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<PAGE> 11
admitted to trading, or if not listed or admitted to trading on any
national securities exchange, the closing sale price for such day
reported by NASDAQ, if the Common Stock is traded over-the-counter and
quoted in the National Market System, or if the Common Stock is so
traded, but not so quoted, the average of the closing reported bid and
asked prices of the Common Stock as reported by NASDAQ or any comparable
system or, if the Common Stock is not listed on NASDAQ or any 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 from time to time by the Company for that purpose. If the
Common Stock is not traded in such manner that the quotations referred
to above are available for the period required hereunder, Current Market
Price per share of Common Stock shall be deemed to be the fair value as
determined by the Board of Directors, irrespective of any accounting
treatment.
(i) Statement Regarding Adjustments. Whenever the
Conversion Price shall be adjusted as provided in subparagraph 3(g), the
Company shall forthwith file, at the office of any transfer agent for
the Preferred Stock and at the principal office of the Company, a
statement showing in detail the facts requiring such adjustment and the
Conversion Price that shall be in effect after such adjustment, and the
Company shall also cause a copy of such statement to be sent by mail,
first class postage prepaid, to each holder of shares of Preferred Stock
at its address appearing on the Company's records. Each such statement
shall be signed by the Company's independent public accountants, if
applicable. Where appropriate, such copy may be given in advance and may
be included as part of a notice required to be mailed under the
provisions of subparagraph 3(j).
(j) Notice to Holders. Subject to the voting provisions
set forth in Section 5 hereof, in the event the Company shall propose to
take any action of the type described in clause (i) (but only if the
action of the type described in clause (i) would result in an adjustment
in the Conversion Price), (iii), (iv) or (v) of subparagraph 3(g), the
Company shall give notice to each holder of shares of Preferred Stock,
in the manner set forth in subparagraph 3(i), which notice shall specify
the record date, if any, with respect to any such action and the
approximate date on which such action is to take place. Such notice
shall also set forth such facts with respect thereto as shall be
reasonably necessary to indicate the effect of such action (to the
extent such effect may be known at the date of such notice) on the
Conversion Price and the number, kind or class of shares or other
securities or property which shall be deliverable upon conversion of
shares of Preferred Stock. In the case of any action which would require
the fixing of a record date, such notice shall be given at least 10 days
prior to the date so fixed, and in case of all other action, such notice
shall be given at least 15 days prior to the taking of such proposed
action.
(k) Treasury Stock. For the purposes of this Section 3,
the sale or other
11
<PAGE> 12
disposition of any Common Stock theretofore held in the Company's
treasury shall be deemed to be an issuance thereof.
(l) Costs. The Company shall pay all documentary, stamp,
transfer or other transactional taxes attributable to the issuance or
delivery of shares of Common Stock upon conversion of any shares of
Preferred Stock; provided that the Company shall not be required to pay
any taxes which may be payable in respect of any transfer involved in
the issuance or delivery of any certificate for such shares in a name
other than that of the holder of the shares of Preferred Stock in
respect of which such shares are being issued.
(m) Valid Issuance. All shares of Common Stock which may
be issued upon conversion of the shares of Preferred Stock will upon
issuance by the Company be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to
the issuance thereof, and the Company shall take no action which will
cause a contrary result (including without limitation, any action which
would cause the Conversion Price to be less than the par value, if any,
of the Common Stock).
Section 4. Redemption Rights. The holders of Preferred Shares
shall have no redemption rights.
Section 5. Voting Rights.
(a) General Voting Rights. Except as otherwise provided in
this Section and except as otherwise required by law, each Holder of the
Preferred Shares shall be entitled to notice of any stockholders'
meeting and to vote upon any matter submitted to stockholders for vote,
and shall vote together with the holders of the Common Shares as a
single class and not as separate classes. Each Holder of Preferred
Shares shall be entitled to the number of votes equal to the largest
number of full shares of Common Stock into which such Holder's Preferred
Shares could be converted pursuant to the provisions of Section 4 hereof
at the record date for the determination of the stockholders entitled to
vote on such matters. Fractional votes shall not be permitted, however,
and any fractional voting rights resulting from the above formula (after
aggregating all shares into which Series A Preferred Shares held by each
holder could be converted) shall be rounded upward to the nearest whole
number. In all cases where the shares of Preferred Stock have the right
to vote separately as a class, such holders shall be entitled to one
vote for each such share held by them respectively. Each Common Share
issued and outstanding shall have one vote on all matters.
(b) Election of Directors. Notwithstanding the foregoing
voting rights, so long as more than 1,000,000 shares of the Preferred
Shares are outstanding, the holders of the Preferred Shares, voting as a
separate class, shall be entitled to elect one
12
<PAGE> 13
member to the Board of Directors. All directors not elected by holders
of the Preferred Shares shall be elected by the vote of the holders of
the Common Stock and the Preferred Shares voting together and not as
separate classes, with each share voting as provided in Section 5(a).
(c) Protective Provisions. Until October 31, 2001 (in
which case these protective provisions shall be void and of no effect),
without first obtaining the approval (by vote or written consent, as
provided by law) of a majority of the Holders of the Series A Preferred
Shares then outstanding (voting separately as a class), this corporation
shall not do any of the following:
(i) Alter or change the rights, preferences,
privileges, or powers of the Series A Preferred Shares so as to
materially affect the holders of the Series A Preferred Shares;
(ii) Increase the authorized number of Series A
Preferred Shares;
(iii) Create any new class or series of shares
having preferences over or on a parity with the Series A Preferred
Shares, unless the purpose of creation of such class or series is, and
the proceeds to be derived from the sale and issuance thereof are to be
used for, the retirement of the Series A Preferred Shares;
(iv) Effect any sale, lease, assignment, transfer
or other conveyance of all or substantially all of the assets of this
corporation, or any consolidation or merger of this corporation with or
into any other corporation, except for a consolidation or merger for
which no stockholder approval is required;
(v) Approve the appointment of a chief executive
officer for the corporation;
(vi) Approve the corporation's annual operating
plan; or
(vii) Repurchase or redeem any issued and
outstanding shares of Common Stock or shares of Series A Preferred
Stock.
Section 6. Reorganization, Reclassification, Consolidation,
Merger or Sale. Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Company's
assets to another Person or other transaction which is effected in such
a way that holders of Common Stock are entitled to receive (either
directly or upon subsequent liquidation) stock, securities or assets
with respect to or in exchange for Common Stock is referred to herein as
"Organic Change". Until October
13
<PAGE> 14
31, 2001 (in which case this provision shall be void and of no effect),
prior to the consummation of any (i) sale of all or substantially all of
the Company's assets to an acquiring Person or (ii) other Organic Change
following which the Company is not a surviving entity, the Company will
secure from the Person purchasing such assets or the successor resulting
from such Organic Change (in each case, the "Acquiring Entity") a
written agreement (in form and substance satisfactory to the Holders of
a majority of the Preferred Shares then outstanding) to deliver to each
Holder of Preferred Shares in exchange for such shares, a security of
the Acquiring Entity evidenced by a written instrument substantially
similar in form and substance to the Preferred Shares, including,
without limitation, having a stated value and liquidation preference
equal to the Stated Value and the Liquidation Preference of the
Preferred Shares held by such Holder, and satisfactory to the Holders of
a majority of the Preferred Shares then outstanding. Prior to the
consummation of any other Organic Change, the Company shall make
appropriate provision (in form and substance satisfactory to the Holders
of a majority of the Preferred Shares then outstanding) to insure that
each of the Holders of the Preferred Shares will thereafter have the
right to acquire and receive in lieu of or in addition to (as the case
may be) the shares of Common Stock immediately theretofore acquirable
and receivable upon the conversion of such Holder's Preferred Shares
such shares of stock, securities or assets that would have been issued
or payable in such Organic Change with respect to or in exchange for the
number of shares of Common Stock which would have been acquirable and
receivable upon the conversion of such Holder's Preferred Shares as of
the date of such Organic Change (without taking into account any
limitations or restrictions on the convertibility of the Preferred
Shares).
Section 7. Reservation of Shares. The Company shall, at all
times so long as any of the Preferred Shares are outstanding, reserve
and keep available out of its authorized and unissued Common Stock,
solely for the purpose of effecting the conversion of the Preferred
Shares, such number of shares (the "Reserved Amount") of Common Stock as
shall from time to time be sufficient to effect the conversion of all of
the Preferred Shares then outstanding (the "Minimum Amount"). The
initial number of shares of Common Stock reserved for conversions of the
Preferred Shares and each increase in the number of shares so reserved
shall be allocated pro rata among the Holders of the Preferred Shares
based on the number of Preferred Shares held by each Holder at the time
of issuance of the Preferred Shares or increase in the number of
reserved shares, as the case may be. In the event a Holder shall sell or
otherwise transfer any of such Holder's Preferred Shares, each
transferee shall be allocated a pro rata portion of the number of
reserved shares of Common Stock reserved for such transferor. Any shares
of Common Stock reserved and allocated to any Person which ceases to
hold any Preferred Shares shall be allocated to the remaining Holders of
Preferred Shares, pro rata based on the number of Preferred Shares then
held by such Holders.
14
<PAGE> 15
Section 8. Preferred Rank. All shares of Common Stock shall be
of junior rank to all Preferred Shares in respect to the preferences as
to distributions and payments upon the liquidation, dissolution and
winding up of the Company. The rights of the shares of Common Stock
shall be subject to the preferences and relative rights of the Preferred
Shares.
Section 9. Participation. Subject to the rights of the Holders,
if any, of the Pari Passu Shares, the Holders of the Preferred Shares
shall, as Holders of Preferred Stock, be entitled to such dividends paid
and distributions made to the holders of Common Stock to the same extent
as if such Holders of Preferred Shares had converted the Preferred
Shares into Common Stock (without regard to any limitations on
conversion herein or elsewhere) and had held such shares of Common Stock
on the record date for such dividends and distributions. Payments under
the preceding sentence shall be made concurrently with the dividend or
distribution to the holders of Common Stock.
Section 10. Vote to Change the Terms of Preferred Shares. The
affirmative vote at a meeting duly called for such purpose or the
written consent without a meeting, of the Holders of not less than
two-thirds (2/3) of the then outstanding Preferred Shares, shall be
required for any change to this Articles of Amendment to the Company's
Articles of Incorporation which would amend, alter, change or repeal any
of the powers, designations, preferences and rights of the Preferred
Shares.
Section 11. Lost or Stolen Certificates. Upon receipt by the
Company of evidence reasonably satisfactory to the Company of the loss,
theft, destruction or mutilation of any Preferred Stock Certificates
representing the Preferred Shares, and, in the case of loss, theft or
destruction, of any indemnification undertaking by the Holder to the
Company in customary form and, in the case of mutilation, upon surrender
and cancellation of the Preferred Stock Certificate(s), the Company
shall execute and deliver new preferred stock certificate(s) of like
tenor and date; provided, however, the Company shall not be obligated to
re-issue preferred stock certificates if the Holder contemporaneously
requests the Company to convert such Preferred Shares into Common Stock.
Section 12. Remedies, Characterizations, Other Obligations,
Breaches and Injunctive Relief. The remedies provided in this Articles
of Amendment shall be cumulative and in addition to all other remedies
available under this Articles of Amendment, at law or in equity
(including a decree of specific performance and/or other injunctive
relief), no remedy contained herein shall be deemed a waiver of
compliance with the provisions giving rise to such remedy and nothing
herein shall limit a Holder's right to pursue actual damages for any
failure by the Company to comply with the terms of this Articles of
Amendment. The Company covenants to each Holder of Preferred Shares that
there shall be no characterization concerning this instrument other than
as
15
<PAGE> 16
expressly provided herein. Amounts set forth or provided for herein with
respect to payments, conversion and the like (and the computation
thereof) shall be the amounts to be received by the Holder thereof and
shall not, except as expressly provided herein, be subject to any other
obligation of the Company (or the performance thereof). The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Holders of the Preferred Shares and that the
remedy at law for any such breach may be inadequate. The Company
therefore agrees that, in the event of any such breach or threatened
breach, the Holders of the Preferred Shares shall be entitled, in
addition to all other available remedies, to an injunction restraining
any breach, without the necessity of showing economic loss and without
any bond or other security being required.
Section 13. Failure or Indulgence Not Waiver. No failure or
delay on the part of a Holder of Preferred Shares in the exercise of any
power, right or privilege hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other
right, power or privilege.
Section 14. Residual Rights. All rights accruing to the
outstanding shares of this corporation not expressly provided for to the
contrary herein shall be vested in the Common Stock.
THIRD: The foregoing amendment was duly adopted on October 11, 1999, by the
Board of Directors of the corporation in accordance with the authority contained
in paragraph B of Article THIRD of the Articles of Incorporation. Pursuant to
Section 7-106-102 of the Colorado Business Corporation Act, the foregoing
amendment is effective without shareholder action.
Dated: November 3, 1999.
STAN LEE MEDIA, INC.,
By: /s/ Gill Champion
------------------------------------------
Gill Champion, Vice President and
Chief Operating Officer
16
<PAGE> 1
Exhibit 3.4
BYLAWS
OF
BOULDER CAPITAL OPPORTUNITIES, INC.
ARTICLE I
Offices
The principal office of the corporation shall be designated from time to
time by the corporation and may be within or outside of Colorado.
The corporation may have such other offices, either within or outside
Colorado, as the board of directors may designate or as the business of the
corporation may require from time to time.
The registered office of the corporation required by the Colorado
Business Corporation Act to be maintained in Colorado may be, but need not be,
identical with the principal office, and the address of the registered office
may be changed from time to time by the board of directors.
ARTICLE II
Shareholders
Section 1. Annual Meeting. The annual meeting of the shareholders shall
be held during the month of September of each year on a date and at a time fixed
by the board of directors of the corporation (or by the president in the absence
of action by the board of directors), beginning with the year 1997, for the
purpose of electing directors and for the transaction of such other business as
may come before the meeting. If the election of directors is not held on the day
fixed as provided herein for any annual meeting of the shareholders, or any
adjournment thereof, the board of directors shall cause the election to be held
at a special meeting of the shareholders as soon thereafter as it may
conveniently be held.
A shareholder may apply to the district court in the county in Colorado
where the corporation's principal office is located or, if the corporation has
no principal office in Colorado, to the district court of the county in which
the corporation's registered office is located to seek an order that a
shareholder meeting be held (i) if an annual meeting was not held within six
months after the close of the corporation's most recently ended fiscal year or
fifteen months after its last annual meeting, whichever is earlier, or (ii) if
the shareholder participated in a proper call of or proper demand for a special
meeting and notice of the special meeting was not given within thirty days after
the date of the call or the date the last of the demands necessary to require
calling of the meeting was received by the corporation pursuant to C.R.S.
Section 7- 107-102(1)(b), or the special meeting was not held in accordance with
the notice.
Section 2. Special Meetings. Unless otherwise prescribed by statute,
special meetings of the shareholders may be called for any purpose by the
president or by the board of directors. The president shall call a special
meeting of the shareholders if the corporation receives one or more written
demands for the meeting, stating the purpose or purposes for which it is to be
held, signed and dated by holders of shares representing at least ten percent of
all the votes entitled to be cast on any issue proposed to be considered at the
meeting.
<PAGE> 2
Section 3. Place of Meeting. The board of directors may designate any
place, either within or outside Colorado, as the place for any annual meeting or
any special meeting called by the board of directors. A waiver of notice signed
by all shareholders entitled to vote at a meeting may designate any place,
either within or outside Colorado, as the place for such meeting. If no
designation is made, or if a special meeting is called other than by the board,
the place of meeting shall be the principal office of the corporation.
Section 4. Notice of Meeting. Written notice stating the place, date,
and hour of the meeting shall be given not less than ten nor more than sixty
days before the date of the meeting, except that (i) if the number of authorized
shares is to be increased, at least thirty days' notice shall be given, or (ii)
any other longer notice period is required by the Colorado Business Corporation
Act. Notice of a special meeting shall include a description of the purpose or
purposes of the meeting. Notice of an annual meeting need not include a
description of the purpose or purposes of the meeting except the purpose or
purposes shall be stated with respect to (i) an amendment to the articles of
incorporation of the corporation, (ii) a merger or share exchange in which the
corporation is a party and, with respect to a share exchange, in which the
corporation's shares will be acquired, (iii) a sale, lease, exchange or other
disposition, other than in the usual and regular course of business, of all or
substantially all of the property of the corporation or of another entity which
this corporation controls, in each case with or without the goodwill, (iv) a
dissolution of the corporation, or (v) any other purpose for which a statement
of purpose is required by the Colorado Business Corporation Act. Notice shall be
given personally or by mail, private carrier, telegraph, teletype,
electronically transmitted facsimile or other form of wire or wireless
communication by or at the direction of the president, the secretary, or the
officer or persons calling the meeting, to each shareholder of record entitled
to vote at such meeting. If mailed and if in a comprehensible form, such notice
shall be deemed to be given and effective when deposited in the United States
mail, addressed to the shareholder at his address as it appears in the
corporation's current record of shareholders, with postage prepaid. If notice is
given other than by mail, and provided that such notice is in a comprehensible
form, the notice is given and effective on the date received by the shareholder.
If requested by the person or persons lawfully calling such meeting, the
corporation shall give notice thereof at corporation expense. No notice need be
sent to any shareholder if three successive notices mailed to the last known
address of such shareholder have been returned as undeliverable until such time
as another address for such shareholder is made known to the corporation by such
shareholder. In order to be entitled to receive notice of any meeting, a
shareholder shall advise the corporation in writing of any change in such
shareholder's mailing address as shown on the corporation's books and records.
When a meeting is adjourned to another date, time or place, notice need
not be given of the new date, time or place if the new date, time or place of
such meeting is announced before adjournment at the meeting at which the
adjournment is taken. At the adjourned meeting the corporation may transact any
business which may have been transacted at the original meeting. If the
adjournment is for more than 120 days, or if a new record date is fixed for the
adjourned meeting, a new notice of the adjourned meeting shall be given to each
shareholder of record entitled to vote at the meeting as of the new record date.
A shareholder may waive notice of a meeting before or after the time and
date of the meeting by a writing signed by such shareholder. Such waiver
<PAGE> 3
shall be delivered to the corporation for filing with the corporate records.
Further, by attending a meeting either in person or by proxy, a shareholder
waives objection to lack of notice or defective notice of the meeting unless the
shareholder objects at the beginning of the meeting to the holding of the
meeting or the transaction of business at the meeting because of lack of notice
or defective notice. By attending the meeting, the shareholder also waives any
objection to consideration at the meeting of a particular matter not within the
purpose or purposes described in the meeting notice unless the shareholder
objects to considering the matter when it is presented.
Section 5. Fixing of Record Date. For the purposes of determining
shareholders entitled to (i) notice of or vote at any meeting of shareholders or
any adjournment thereof, (ii) receive distributions or share dividends, or (ii)
demand a special meeting, or to make a determination of shareholders for any
other proper purpose, the board of directors may fix a future date as the record
date for any such determination of shareholders, such date in any case to be not
more than seventy days, and, in case of a meeting of shareholders not less than
ten days, prior to the date on which the particular action requiring such
determination of shareholders is to be taken. If no record date is fixed by the
directors, the record date shall be the date on which notice of the meeting is
mailed to shareholders, or the date on which the resolution of the board of
directors providing for a distribution is adopted, as the case may be. When a
determination of shareholders entitled to vote at any meeting of shareholders is
made as provided in this Section, such determination shall apply to any
adjournment thereof unless the board of directors fixes a new record date, which
it must do if the meeting is adjourned to a date more than 120 days after the
date fixed for the original meeting.
Notwithstanding the above, the record date for determining the
shareholders entitled to take action without a meeting or entitled to be given
notice of action so taken shall be the date a writing upon which the action is
taken is first received by the corporation. The record date for determining
shareholders entitled to demand a special meeting shall be the date of the
earliest of any of the demands pursuant to which the meeting is called.
Section 6. Voting Lists. The secretary shall make, at the earlier of ten
days before each meeting of shareholders or two business days after notice of
the meeting has been given, a complete list of the shareholders entitled to be
given notice of such meeting or any adjournment thereof. The list shall be
arranged by voting groups and within each voting group by class or series of
shares, shall be in alphabetical order within each class or series, and shall
show the address of and the number of shares of each class or series held by
each shareholder. For the period beginning the earlier of ten days prior to the
meeting or two business days after notice of the meeting is given and continuing
through the meeting and any adjournment thereof, this list shall be kept on file
at the principal office of the corporation, or at a place (which shall be
identified in the notice) in the city where the meeting will be held. Such list
shall be available for inspection on written demand by any shareholder
(including for the purpose of this Section 6 any holder of voting trust
certificates) or his agent or attorney during regular business hours and during
the period available for inspection. The original stock transfer books shall be
prima facie evidence as to the shareholders entitled to examine such list or to
vote at any meeting of shareholders.
Any shareholder, his agent or attorney may copy the list during regular
business hours and during the period it is available for inspection, provided
(i) the shareholder has been a shareholder for at least three months immediately
<PAGE> 4
preceding the demand or holds at least five percent of all outstanding shares of
any class of shares as of the date of the demand, (ii) the demand is made in
good faith and for a purpose reasonably related to the demanding shareholder's
interest as a shareholder, (iii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iv) the records are directly connected with the described purpose and (v) the
shareholder pays a reasonable charge covering the costs of labor and material
for such copies, not to exceed the estimated cost of production and
reproduction.
Section 7. Recognition Procedure for Beneficial Owners. The board of
directors may adopt by resolution a procedure whereby a shareholder of the
corporation may certify in writing to the corporation that all or a portion of
the shares registered in the name of such shareholder are held for the account
of a specified person or persons. The resolution may set forth (i) the types of
nominees to which it applies, (ii) the rights or privileges that the corporation
will recognize in a beneficial owner, which may include rights and privileges
other than voting; (iii) the form of certification and the information to be
contained therein, (iv) if the certification is with respect to a record date,
the time within which the certification must be received by the corporation, (v)
the period for which the nominee's use of the procedure is effective, and (vi)
such other provisions with respect to the procedure as the board deems necessary
or desirable. Upon receipt by the corporation of a certificate complying with
the procedure established by the board of directors, the persons specified in
the certification shall be deemed, for the purpose or purposes set forth in the
certification, to be the registered holders of the number of shares specified in
place of the shareholder making the certification.
Section 8. Quorum and Manner of Acting. One-third of the votes entitled
to be cast on a matter by a voting group shall constitute a quorum of that
voting group for action on the matter. If less than one-third of such votes are
represented at a meeting, a majority of the votes so represented may adjourn the
meeting from time to time without further notice, for a period not to exceed 120
days for any one adjournment. If a quorum is present at such adjourned meeting,
any business may be transacted which might have been transacted at the meeting
as originally noticed. The shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to leave less than a quorum, unless the meeting is
adjourned and a new record date is set for the adjourned meeting.
If a quorum exists, action on a matter other than the election of
directors by a voting group is approved if the votes cast within the voting
group favoring the action exceed the votes cast within the voting group opposing
the action, unless the vote of a greater number or voting by classes is required
by law or the articles of incorporation.
Section 9. Proxies. At all meetings of shareholders, a shareholder may
vote by proxy by signing an appointment form or similar writing, either
personally or by his duly authorized attorney-in-fact. A shareholder may also
appoint a proxy by transmitting or authorizing the transmission of a telegram,
teletype, or other electronic transmission providing a written statement of the
appointment to the proxy, a proxy solicitor, proxy support service organization,
or other person duly authorized by the proxy to receive appointments as agent
for the proxy, or to the corporation. The transmitted appointment shall set
forth or be transmitted with written evidence from which it can be determined
that the shareholder transmitted or authorized the transmission of the
appointment. The proxy appointment form or similar writing shall be filed with
the secretary of the
<PAGE> 5
corporation before or at the time of the meeting. The appointment of a proxy is
effective when received by the corporation and is valid for eleven months unless
a different period is expressly provided in the appointment form or similar
writing.
Any complete copy, including an electronically transmitted facsimile, of
an appointment of a proxy may be substituted for or used in lieu of the original
appointment for any purpose for which the original appointment could be used.
Revocation of a proxy does not affect the right of the corporation to
accept the proxy's authority unless (i) the corporation had notice that the
appointment was coupled with an interest and notice that such interest is
extinguished is received by the secretary or other officer or agent authorized
to tabulate votes before the proxy exercises his authority under the
appointment, or (ii) other notice of the revocation of the appointment is
received by the secretary or other officer or agent authorized to tabulate votes
before the proxy exercises his authority under the appointment. Other notice of
revocation may, in the discretion of the corporation, be deemed to include the
appearance at a shareholders' meeting of the shareholder who granted the proxy
and his voting in person on any matter subject to a vote at such meeting.
The death or incapacity of the shareholder appointing a proxy does not
affect the right of the corporation to accept the proxy's authority unless
notice of the death or incapacity is received by the secretary or other officer
or agent authorized to tabulate votes before the proxy exercises his authority
under the appointment.
The corporation shall not be required to recognize an appointment made
irrevocable if it has received a writing revoking the appointment signed by the
shareholder (including a shareholder who is a successor to the shareholder who
granted the proxy) either personally or by his attorney-in-fact, notwithstanding
that the revocation may be a breach of an obligation of the shareholder to
another person not to revoke the appointment.
Subject to Section 11 and any express limitation on the proxy's
authority appearing on the appointment form, the corporation is entitled to
accept the proxy's vote or other action as that of the shareholder making the
appointment.
Section 10.Voting of Shares. Each outstanding share, regardless of
class, shall be entitled to one vote, except in the election of directors, and
each fractional share shall be entitled to a corresponding fractional vote on
each matter submitted to a vote at a meeting of shareholders, except to the
extent that the voting rights of the shares of any class or classes are limited
or denied by the articles of incorporation and by the resolution of the board of
directors authorizing the issuance of the shares of any particular class, as
permitted by the Colorado Business Corporation Act. Cumulative voting shall not
be permitted in the election of directors or for any other purpose. Each record
holder of shares of common stock shall be entitled to vote in the election of
directors and shall have as many votes for each of the shares owned by him as
there are directors to be elected and for whose election he has the right to
vote.
At each election of directors, that number of candidates equaling the
number of directors to be elected, having the highest number of votes cast in
favor of their election, shall be elected to the board of directors.
<PAGE> 6
Except as otherwise ordered by a court of competent jurisdiction upon a
finding that the purpose of this Section would not be violated in the
circumstances presented to the court, the shares of the corporation are not
entitled to be voted if they are owned, directly or indirectly, by a second
corporation, domestic or foreign, and the first corporation owns, directly or
indirectly, a majority of the shares entitled to vote for directors of the
second corporation except to the extent the second corporation holds the shares
in a fiduciary capacity.
Redeemable shares are not entitled to be voted after notice of
redemption is mailed to the holders and a sum sufficient to redeem the shares
has been deposited with a bank, trust company or other financial institution
under an irrevocable obligation to pay the holders the redemption price on
surrender of the shares.
Section 11. Corporation's Acceptance of Votes. If the name signed on a
vote, consent, waiver, proxy appointment, or proxy appointment revocation
corresponds to the name of a shareholder, the corporation, if acting in good
faith, is entitled to accept the vote, consent, waiver, proxy appointment or
proxy appointment revocation and give it effect as the act of the shareholder.
If the name signed on a vote, consent, waiver, proxy appointment or proxy
appointment revocation does not correspond to the name of a shareholder, the
corporation, if acting in good faith, is nevertheless entitled to accept the
vote, consent, waiver, proxy appointment or proxy appointment revocation and to
give it effect as the act of the shareholder if: (i) the shareholder is an
entity and the name signed purports to be that of an officer or agent of the
entity; (ii) the name signed purports to be that of an administrator, executor,
guardian or conservator representing the June 28, 1996 shareholder and, if the
corporation requests, evidence of fiduciary status acceptable to the corporation
has been presented with respect to the vote, consent, waiver, proxy appointment
or proxy appointment revocation; (iii)the name signed purports to be that of a
receiver or trustee in bankruptcy of the shareholder and, if the corporation
requests, evidence of this status acceptable to the corporation has been
presented with respect to the vote, consent, waiver, proxy appointment or proxy
appointment revocation; (iv) the name signed purports to be that of a pledgee,
beneficial owner or attorney-in-fact of the shareholder and, if the corporation
requests, evidence acceptable to the corporation of the signatory's authority to
sign for the shareholder has been presented with respect to the vote, consent,
waiver, proxy appointment or proxy appointment revocation; (v) two or more
persons are the shareholder as co-tenants or fiduciaries and the name signed
purports to be the name of at least one of the co-tenants or fiduciaries, and
the person signing appears to be acting on behalf of all the co-tenants or
fiduciaries; or (vi) the acceptance of the vote, consent, waiver, proxy
appointment or proxy appointment revocation is otherwise proper under rules
established by the corporation that are not inconsistent with this Section 11.
The corporation is entitled to reject a vote, consent, waiver, proxy appointment
or proxy appointment revocation if the secretary or other officer or agent
authorized to tabulate votes, acting in good faith, has reasonable basis for
doubt about the validity of the signature on it or about the signatory's
authority to sign for the shareholder. Neither the corporation nor its officers
nor any agent who accepts or rejects a vote, consent, waiver, proxy appointment
or proxy appointment revocation in good faith and in accordance with the
standards of this Section is liable in damages for the consequences of the
acceptance or rejection.
<PAGE> 7
Section 12. Informal Action by Shareholders. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting if a written consent (or counterparts thereof) that sets forth the
action so taken is signed by all of the shareholders entitled to vote with
respect to the subject matter thereof and received by the corporation. Such
consent shall have the same force and effect as a unanimous vote of the
shareholders and may be stated as such in the document. Action taken under this
Section 12 is effective as of the date the last writing necessary to effect this
action is received by the corporation, unless all of the writings specify a
different effective date, in which case such specified date shall be the
effective date for such action. If any shareholder revokes his consent as
provided for herein prior to what would otherwise be the effective date, the
action proposed in the consent shall be invalid. The record date for determining
shareholders entitled to take action without a meeting is the date the
corporation receives a writing upon which the action is taken.
Any shareholder who has signed a writing describing and consenting to
action taken pursuant to this Section 12 may revoke such consent by a writing
signed by the shareholder describing the action and stating that the
shareholder's prior consent thereto is revoked, if such writing is received by
the corporation before the effectiveness of the action.
Section 13. Meetings by Telecommunication. Any or all of the
shareholders may participate in an annual or special shareholders' meeting by,
or the meeting may be conducted through the use of, any means of communication
by which all persons participating in the meeting may hear each other during the
meeting. A shareholder participating in a meeting by this means is deemed to be
present in person at the meeting.
ARTICLE III
Board of Directors
Section 1. General Powers. All corporate powers shall be exercised by or
under the authority of, and the business and affairs of the corporation shall be
managed under the direction of its board of directors, except as otherwise
provided in the Colorado Business Corporation Act or the articles of
incorporation.
Section 2. Number, Qualifications and Tenure. The number of directors of
the corporation shall be fixed from time to time by the board of directors,
within a range of no less than one or more than five. A director shall be a
natural person who is eighteen years of age or older. A director need not be a
resident of Colorado or a shareholder of the corporation.
Directors shall be elected at each annual meeting of shareholders. Each
director shall hold office until the next annual meeting of shareholders
following his election and thereafter until his successor shall have been
elected and qualified. Directors shall be removed in the manner provided by the
Colorado Business Corporation Act.
Section 3. Vacancies. Any director may resign at any time by giving
written notice to the corporation. Such resignation shall take effect at the
time the notice is received by the corporation unless the notice specifies a
later effective date. Unless otherwise specified in the notice of resignation,
the corporation's acceptance of such resignation shall not be necessary to make
it effective. Any vacancy on the board of directors may be filled by the
affirmative
<PAGE> 8
vote of a majority of the shareholders or the board of directors. If the
directors remaining in office constitute fewer than a quorum of the board, the
directors may fill the vacancy by the affirmative vote of a majority of all the
directors remaining in office. If elected by the directors, the director shall
hold office until the next annual shareholder's meeting at which directors are
elected. If elected by the shareholders, the director shall hold office for the
unexpired term of his predecessor in office; except that, if the director's
predecessor was elected by the directors to fill a vacancy, the director elected
by the shareholders shall hold office for the unexpired term of the last
predecessor elected by the shareholders.
Section 4. Regular Meetings. A regular meeting of the board of directors
shall be held without notice immediately after and at the same place as the
annual meeting of shareholders. The board of directors may provide by resolution
the time and place, either within or outside Colorado, for the holding of
additional regular meetings without other notice.
Section 5. Special Meetings. Special meetings of the board of directors
may be called by or at the request of the president or chief executive officer,
or any director. The person or persons authorized to call special meetings of
the board of directors may fix any place, either within or outside Colorado, as
the place for holding any special meeting of the board of directors called by
them, provided that no meeting shall be called outside the State of Colorado
unless a majority of the board of directors has so authorized.
Section 6. Notice. Notice of any special meeting shall be given at least
two days prior to the meeting by written notice either personally delivered or
mailed to each director at his business address, or by notice transmitted by
telegraph, telex, electronically transmitted facsimile or other form of wire or
wireless communication. If mailed, such notice shall be deemed to be given and
to be effective on the earlier of (i) three days after such notice is deposited
in the United States mail, properly addressed, with postage prepaid, or (ii) the
date shown on the return receipt, if mailed by registered or certified mail
return receipt requested. If notice is given by telex, electronically
transmitted facsimile or other similar form of wire or wireless communication,
such notice shall be deemed to be given and to be effective when sent, and with
respect to a telegram, such notice shall be deemed to be given and to be
effective when the telegram is delivered to the telegraph company. If a director
has designated in writing one or more reasonable addresses or facsimile numbers
for delivery of notice to him, notice sent by mail, telegram, telex,
electronically transmitted facsimile or other form of wire or wireless
communication shall not be deemed to have been given or to be effective unless
sent to such addresses or facsimile numbers, as the case may be.
A director may waive notice of a meeting before or after the time and
date of the meeting by a writing signed by such director. Such waiver shall be
delivered to the corporation for filing with the corporate records. Further, a
director's attendance at or participation in a meeting waives any required
notice to him of the meeting unless at the beginning of the meeting, or promptly
upon his arrival, the director objects to holding the meeting or transacting
business at the meeting because of lack of notice or defective notice and does
not thereafter vote for or assent to action taken at the meeting. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the board of directors need be specified in the notice or waiver of notice of
such meeting.
Section 7. Quorum. A majority of the number of directors fixed by the
board of directors pursuant to Section 2 or, if no number is fixed, a majority
of
<PAGE> 9
the number in office immediately before the meeting begins, shall constitute a
quorum for the transaction of business at any meeting of the board of directors.
If less than such majority is present at a meeting, a majority of the directors
present may adjourn the meeting from time to time without further notice, for a
period not to exceed sixty days at any one adjournment.
Section 8. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors. No director may vote or act by proxy at any meeting of directors.
Section 9. Compensation. By resolution of the board of directors, any
director may be paid any one or more of the following: his expenses, if any, of
attendance at meetings, a fixed sum for attendance at each meeting, a stated
salary as director, or such other compensation as the corporation and the
director may reasonably agree upon. No such payment shall preclude any director
from serving the corporation in any other capacity and receiving compensation
therefor.
Section 10. Presumption of Assent. A director of the corporation who is
present at a meeting of the board of directors or committee of the board at
which action on any corporate matter is taken shall be presumed to have assented
to the action taken unless (i) the director objects at the beginning of the
meeting, or promptly upon his arrival, to the holding of the meeting or the
transaction of business at the meeting and does not thereafter vote for or
assent to any action taken at the meeting, (ii) the director contemporaneously
requests that his dissent or abstention as to any specific action taken be
entered in the minutes of the meeting, or (iii) the director causes written
notice of his dissent or abstention as to any specific action to be received by
the presiding officer of the meeting before its adjournment or by the
corporation promptly after the adjournment of the meeting. A director may
dissent to a specific action at a meeting, while assenting to others. The right
to dissent to a specific action taken at a meeting of the board of directors or
a committee of the board shall not be available to a director who voted in favor
of such action.
Section 11. Committees. By resolution adopted by a majority of all the
directors in office when the action is taken, the board of directors may
designate from among its members an executive committee and one or more other
committees, and appoint one or more members of the board of directors to serve
on them. To the extent provided in the resolution, each committee shall have all
the authority of the board of directors, except that no such committee shall
have the authority to (i) authorize distributions, (ii) approve or propose to
shareholders actions or proposals required by the Colorado Business Corporation
Act to be approved by shareholders, (iii) fill vacancies on the board of
directors or any committee thereof, (iv) amend articles of incorporation, (v)
adopt, amend or repeal the bylaws, (vi) approve a plan of merger not requiring
shareholder approval, (vii) authorize or approve the reacquisition of shares
unless pursuant to a formula or method prescribed by the board of directors, or
(viii) authorize or approve the issuance or sale of shares, or contract for the
sale of shares or determine the designations and relative rights, preferences
and limitations of a class or series of shares, except that the board of
directors may authorize a committee or officer to do so within limits
specifically prescribed by the board of directors. The committee shall then have
full power within the limits set by the board of directors to adopt any final
resolution setting forth all preferences,
<PAGE> 10
limitations and relative rights of such class or series and to authorize an
amendment of the articles of incorporation stating the preferences, limitations
and relative rights of a class or series for filing with the Secretary of State
under the Colorado Business Corporation Act.
Sections 4, 5, 6, 7, 8 and 12 of Article III, which govern meetings,
notice, waiver of notice, quorum, voting requirements and action without a
meeting of the board of directors, shall apply to committees and their members
appointed under this Section 11.
Neither the designation of any such committee, the delegation of
authority to such committee, nor any action by such committee pursuant to its
authority shall alone constitute compliance by any member of the board of
directors or a member of the committee in question with his responsibility to
conform to the standards of care set forth in Article III, Section 14 of these
bylaws.
Section 12. Action Without a Meeting. Any action required or permitted
to be taken at a meeting of the directors or any committee designated by the
board of directors may be taken without a meeting if a written consent (or
counterparts thereof) that sets forth the action so taken is signed by all of
the directors entitled to vote with respect to the action taken. Such consent
shall have the same force and effect as a unanimous vote of the directors or
committee members and may be stated as such in any document. Unless the consent
specifies a different effective date, action taken under this Section 12 is
effective at the time the last director signs a writing describing the action
taken, unless, before such time, any director has revoked his consent by a
writing signed by the director and received by the president or secretary of the
corporation.
Section 13. Telephonic Meetings. The board of directors may permit any
director (or any member of a committee designated by the board) to participate
in a regular or special meeting of the board of directors or a committee thereof
through the use of any means of communication by which all directors
participating in the meeting can hear each other during the meeting. A director
participating in a meeting in this manner is deemed to be present in person at
the meeting.
Section 14. Standard of Care. A director shall perform his duties as a
director, including, without limitation his duties as a member of any committee
of the board, in good faith, in a manner he reasonably believes to be in the
best interests of the corporation, and with the care an ordinarily prudent
person in a like position would exercise under similar circumstances. In
performing his duties, a director shall be entitled to rely on information,
opinions, reports or statements, including financial statements and other
financial data, in each case prepared or presented by the persons herein
designated. However, he shall not be considered to be acting in good faith if he
has knowledge concerning the matter in question that would cause such reliance
to be unwarranted. A director shall not be liable to the corporation or its
shareholders for any action he takes or omits to take as a director if, in
connection with such action or omission, he performs his duties in compliance
with this Section 14.
The designated persons on whom a director is entitled to rely are (i)
one or more officers or employees of the corporation whom the director
reasonably believes to be reliable and competent in the matters presented, (ii)
legal counsel, public accountant, or other person as to matters which the
director reasonably believes to be within such person's professional or expert
competence, or (iii) a
<PAGE> 11
committee of the board of directors on which the director does not serve if the
director reasonably believes the committee merits confidence.
ARTICLE IV
Officers and Agents
Section 1. General. The officers of the corporation shall be as
determined by the board of directors from time to time, and may include a
president, one or more vice presidents, a secretary, a treasurer, and such other
officers, assistant officers, committees and agents, including a chairman of the
board, assistant secretaries and assistant treasurers, as the board may consider
necessary. Each officer shall be a natural person eighteen years of age or
older. The board of directors or the officer or officers authorized by the board
shall from time to time determine the procedure for the appointment of officers,
their term of office, their authority and duties and their compensation. One
person may hold more than one office. In all cases where the duties of any
officer, agent or employee are not prescribed by the bylaws, or by the board of
directors, such officer, agent or employee shall follow the orders and
instructions of the president of the corporation.
Section 2. Appointment and Term of Office. The officers of the
corporation shall be appointed by the board of directors at each annual meeting
of the board held after each annual meeting of the shareholders. If the
appointment of officers is not made at such meeting or if an officer or officers
are to be appointed by another officer or officers of the corporation, such
appointment shall be made as soon thereafter as conveniently may be. Each
officer shall hold office until the first of the following occurs: his successor
shall have been duly appointed and qualified, his death, his resignation, or his
removal in the manner provided in
Section 3. Section 3. Resignation and Removal. An officer may resign at
any time by giving written notice of resignation to the corporation. The
resignation is effective when the notice is received by the corporation unless
the notice specifies a later effective date.
Any officer or agent may be removed at any time with or without cause by
the board of directors or an officer or officers authorized by the board. Such
removal does not affect the contract rights, if any, of the corporation or of
the person so removed. The appointment of an officer or agent shall not in
itself create contract rights.
Section 4. Vacancies. A vacancy in any office, however occurring, may be
filled by the board of directors, or by the officer or officers authorized by
the board, for the unexpired portion of the officer's term. If an officer
resigns and his resignation is made effective at a later date, the board of
directors, or officer or officers authorized by the board, may permit the
officer to remain in office until the effective date and may fill the pending
vacancy before the effective date if the board of directors or officer or
officers authorized by the board provide that the successor shall not take
office until the effective date. In the alternative, the board of directors, or
officer or officers authorized by the board of directors, may remove the officer
at any time before the effective date and may fill the resulting vacancy.
Section 5. President. Subject to the direction and supervision of the
board of directors, and unless otherwise determined by the board of directors in
its designation of officers from time to time, the president shall be the chief
<PAGE> 12
executive officer of the corporation, and shall have general and active control
of its affairs and business and general supervision of its officers, agents and
employees. Unless otherwise directed by the board of directors, the president
shall attend in person or by substitute appointed by him, or shall execute on
behalf of the corporation written instruments appointing a proxy or proxies to
represent the corporation, at all meetings of the stockholders of any other
corporation in which the corporation holds any stock. On behalf of the
corporation, the president may in person or by substitute or by proxy execute
written waivers of notice and consents with respect to any such meetings. At all
such meetings and otherwise, the president, in person or by substitute or proxy,
may vote the stock held by the corporation, execute written consents and other
instruments with respect to such stock, and exercise any and all rights and
powers incident to the ownership or said stock, subject to the instructions, if
any, of the board of directors. The president shall have custody of the
treasurer's bond, if any.
Section 6. Vice Presidents. Any vice presidents designated by the board
of directors as officers of the corporation shall assist the president and shall
perform such duties as may be assigned to them by the president or by the board
of directors. In the absence of the president, the vice president, if any (or,
if more than one, the vice presidents in the order designated by the board of
directors, or if the board makes no such designation, then the vice president
designated by the president, or if neither the board nor the president makes any
such designation, the senior vice president as determined by first election to
that office), shall have the powers and perform the duties of the president.
Section 7. Secretary. In the event a secretary is designated by the
board of directors as an officer of the corporation, the secretary shall (i)
prepare and maintain as permanent records the minutes of the proceedings of the
shareholders and the board of directors, a record of all actions taken by the
shareholders or board of directors without a meeting, a record of all actions
taken by a committee of the board of directors in place of the board of
directors on behalf of the corporation, and a record of all waivers of notice of
meetings of shareholders and of the board of directors or any committee thereof,
(ii) see that all notices are duly given in accordance with the provisions of
these bylaws and as required by law, (iii) serve as custodian of the corporate
records and of the seal of the corporation and affix the seal to all documents
when authorized by the board of directors, (iv) keep at the corporation's
registered office or principal place of business a record containing the names
and addresses of all shareholders in a form that permits preparation of a list
of shareholders arranged by voting group and by class or series of shares within
each group, that is alphabetical within each class or series and that shows the
address of, and the number of shares of each class or series held by each
shareholder, unless such a record shall be kept at the office of the
corporation's transfer agent or registrar, (v) maintain at the corporation's
principal office the originals or copies of the corporation's articles of
incorporation, bylaws, minutes of all shareholders' meetings and records of all
action taken by shareholders without a meeting for the past three years, all
written communications within the past three years to shareholders as a group or
to the holders of any class or series of shares as a group, a list of the name
and business addresses of the current directors and officers, a copy of the
corporation's most recent corporate report filed with the Secretary of State,
and financial statements showing in reasonable detail the corporation's assets
and liabilities and results of operations for the last three years, (vi) have
general charge of the stock transfer books of the corporation, unless the
corporation has a transfer agent, (vii) authenticate records of the corporation,
and (vii) in general, perform all duties incident to the office of
<PAGE> 13
secretary and such other duties as from time to time may be assigned to him by
the president or by the board of directors. Assistant secretaries, if any, shall
have the same duties and powers subject to supervision by the secretary. The
directors and/or shareholders may however respectively designate a person other
than the secretary or assistant secretary to keep the minutes of their
respective meetings.
Any books, records, or minutes of the corporation may be in written form
or in any form capable of being converted into written form within a reasonable
time.
Section 8. Treasurer. In the event a treasurer is designated by the
board of directors as an officer of the corporation, the treasurer shall be the
principal financial officer of the corporation, shall have the care and custody
of all funds, securities, evidences of indebtedness and other personal property
of the corporation and shall deposit the same in accordance with the
instructions of the board of directors. He shall receive and give receipts and
acquittances for money paid in on account of the corporation, and shall pay out
of the corporation's funds on hand all bills, payrolls and other just debts of
the corporation of whatever nature upon maturity. He shall perform all other
duties incident to the office of the treasurer and, upon request of the board,
shall make such reports to it as may be required at any time. He shall, if
required by the board, give the corporation a bond in such sums and with such
sureties as shall be satisfactory to the board, conditioned upon the faithful
performance of his duties and for the restoration to the corporation of all
books, papers, vouchers, money and other property of whatever kind in his
possession or under his control belonging to the corporation. He shall have such
other powers and perform such other duties as may from time to time be
prescribed by the board of directors or the president. The assistant treasurers,
if any, shall have the same powers and duties, subject to the supervision of the
treasurer.
The treasurer shall also be the principal accounting officer of the
corporation. He shall prescribe and maintain the methods and systems of
accounting to be followed, keep complete books and records of account as
required by the Colorado Business Corporation Act, prepare and file all local,
state and federal tax returns, prescribe and maintain an adequate system of
internal audit and prepare and furnish to the president and the board of
directors statements of account showing the financial position of the
corporation and the results of its operations.
ARTICLE V
Stock
Section 1. Certificates. The board of directors shall be authorized to
issue any of its classes of shares with or without certificates. The fact that
the shares are not represented by certificates shall have no effect on the
rights and obligations of shareholders. If the shares are represented by
certificates, such shares shall be represented by consecutively numbered
certificates signed, either manually or by facsimile, in the name of the
corporation by one or more persons designated by the board of directors. In case
any officer who has signed or whose facsimile signature has been placed upon
such certificate shall have ceased to be such officer before such certificate is
issued, such certificate may nonetheless be issued by the corporation with the
same effect as if he were such officer at the date of its issue. Certificates of
stock shall be in such form and shall contain such information consistent with
law as shall be prescribed by the board of directors. If shares are not
represented by certificates, within a reasonable time following the issue or
transfer of such shares, the corporation
<PAGE> 14
shall send the shareholder a complete written statement of all of the
information required to be provided to holders of uncertificated shares by the
Colorado Business Corporation Act.
Section 2. Consideration for Shares. Certificated or uncertificated
shares shall not be issued until the shares represented thereby are fully paid.
The board of directors may authorize the issuance of shares for consideration
consisting of any tangible or intangible property or benefit to the corporation,
including cash, promissory notes, services performed or other securities of the
corporation. Future services shall not constitute payment or partial payment for
shares of the corporation. The promissory note of a subscriber or an affiliate
of a subscriber shall not constitute payment or partial payment for shares of
the corporation unless the note is negotiable and is secured by collateral,
other than the shares being purchased, having a fair market value at least equal
to the principal amount of the note. For purposes of this Section 2, "promissory
note" means a negotiable instrument on which there is an obligation to pay
independent of collateral and does not include a non- recourse note.
Section 3. Lost Certificates. In case of the alleged loss, destruction
or mutilation of a certificate of stock, the board of directors may direct the
issuance of a new certificate in lieu thereof upon such terms and conditions in
conformity with law as the board may prescribe. The board of directors may in
its discretion require an affidavit of lost certificate and/or a bond in such
form and amount and with such surety as it may determine before issuing a new
certificate.
Section 4. Transfer of Shares. Upon surrender to the corporation or to a
transfer agent of the corporation of a certificate of stock duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, and receipt of such documentary stamps as may be required by law and
evidence of compliance with all applicable securities laws and other
restrictions, the corporation shall issue a new certificate to the person
entitled thereto, and cancel the old certificate. Every such transfer of stock
shall be entered on the stock books of the corporation which shall be kept at
its principal office or by the person and at the place designated by the board
of directors.
Except as otherwise expressly provided in Article II, Sections 7 and 11,
and except for the assertion of dissenters' rights to the extent provided in
Article 113 of the Colorado Business Corporation Act, the corporation shall be
entitled to treat the registered holder of any shares of the corporation as the
owner thereof for all purposes, and the corporation shall not be bound to
recognize any equitable or other claim to, or interest in, such shares or rights
deriving from such shares on the part of any person other than the registered
holder, including without limitation any purchaser, assignee or transferee of
such shares or rights deriving from such shares, unless and until such other
person becomes the registered holder of such shares, whether or not the
corporation shall have either actual or constructive notice of the claimed
interest of such other person.
Section 5. Transfer Agent, Registrars and Paying Agents. The board may
at its discretion appoint one or more transfer agents, registrars and agents for
making payment upon any class of stock, bond, debenture or other security of the
corporation. Such agents and registrars may be located either within or outside
Colorado. They shall have such rights and duties and shall be entitled to such
compensation as may be agreed.
<PAGE> 15
ARTICLE VI
Indemnification of Certain Persons
Section 1. Indemnification. For purposes of Article VI, a "Proper
Person" means any person who was or is a party or is threatened to be made a
party to any threatened, pending, or complete action, suit or proceeding,
whether civil, criminal, administrative or investigative, and whether formal or
informal, by reason of the fact that he is or was a director, officer, employee,
fiduciary or agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, partner, trustee, employee, fiduciary or
agent of any foreign or domestic profit or nonprofit corporation or of any
partnership, joint venture, trust, profit or nonprofit unincorporated
association, limited liability company, or other enterprise or employee benefit
plan. The corporation shall indemnify any Proper Person against reasonably
incurred expenses (including any attorneys' fees), judgments, penalties, fines
(including any excise tax assessed with respect to an employee benefit plan) and
amounts paid in settlement reasonably incurred by him in connection with such
action, suit or proceeding if it is determined by the groups set forth in
Section 4 of this Article that he conducted himself in good faith and that he
reasonably believed (i) in the case of conduct in his official capacity with the
corporation, that his conduct was in the corporation's best interests, or (ii)
in all other cases (except criminal cases), that his conduct was at least not
opposed to the corporation's best interests, or (iii) in the case of any
criminal proceeding, that he had no reasonable cause to believe his conduct was
unlawful. A Proper Person will be deemed to be acting in his official capacity
while acting as a director, officer, employee or agent on behalf of this
corporation and not while acting on this corporation's behalf for some other
entity.
No indemnification shall be made under this Article VI to a Proper
Person with respect to any claim, issue or matter in connection with a
proceeding by or in the right of a corporation in which the Proper Person was
adjudged liable to the corporation or in connection with any proceeding charging
that the Proper Person derived an improper personal benefit, whether or not
involving action in an official capacity, in which he was adjudged liable on the
basis that he derived an improper personal benefit. Further, indemnification
under this Section in connection with a proceeding brought by or in the right of
the corporation shall be limited to reasonable expenses, including attorneys'
fees, incurred in connection with the proceeding.
Section 2. Right to Indemnification. The corporation shall indemnify any
Proper Person who was wholly successful, on the merits or otherwise, in defense
of any action, suit, or proceeding as to which he was entitled to
indemnification under Section 1 of this Article VI against expenses (including
attorneys' fees) reasonably incurred by him in connection with the proceeding
without the necessity of any action by the corporation other than the
determination in good faith that the defense has been wholly successful.
Section 3. Effect of Termination of Action. The termination of any
action, suit or proceeding by judgment, order, settlement or conviction, or upon
a plea of nolo contendere or its equivalent, shall not of itself create a
presumption that the person seeking indemnification did not meet the standards
of conduct described in Section 1 of this Article VI. Entry of a judgment by
consent as part of a settlement shall not be deemed an adjudication of
liability, as described in Section 2 of this Article VI.
Section 4. Groups Authorized to Make Indemnification Determination.
Except where there is a right to indemnification as set forth in Sections 1 or 2
of this Article or where indemnification is ordered by a court in Section 5, any
<PAGE> 16
indemnification shall be made by the corporation only as authorized in the
specific case upon a determination by a proper group that indemnification of the
Proper Person is permissible under the circumstances because he has met the
applicable standards of conduct set forth in Section 1 of this Article. This
determination shall be made by the board of directors by a majority vote of
those present at a meeting at which a quorum is present, which quorum shall
consist of directors not parties to the proceeding ("Quorum"). If a Quorum
cannot be obtained, the determination shall be made by a majority vote of a
committee of the board of directors designated by the board, which committee
shall consist of two or more directors not parties to the proceeding, except
that directors who are parties to the proceeding may participate in the
designation of directors for the committee. If a Quorum of the board of
directors cannot be obtained and the committee cannot be established, or even if
a Quorum is obtained or the committee is designated and a majority of the
directors constituting such Quorum or committee so directs, the determination
shall be made by (i) independent legal counsel selected by a vote of the board
of directors or the committee in the manner specified in this Section 4, or, if
a Quorum of the full board of directors cannot be obtained and a committee
cannot be established, by independent legal counsel selected by a majority vote
of the full board (including directors who are parties to the action) or (ii) a
vote of the shareholders.
Section 5. Court-Ordered Indemnification. Any Proper Person may apply
for indemnification to the court conducting the proceeding or to another court
of competent jurisdiction for mandatory indemnification under Section 2 of this
Article, including indemnification for reasonable expenses incurred to obtain
court-ordered indemnification. If the court determines that such Proper Person
is fairly and reasonably entitled to indemnification in view of all the relevant
circumstances, whether or not he met the standards of conduct set forth in
Section 1 of this Article or was adjudged liable in the proceeding, the court
may order such indemnification as the court deems proper except that if the
Proper Person has been adjudged liable, indemnification shall be limited to
reasonable expenses incurred in connection with the proceeding and reasonable
expenses incurred to obtain court-ordered indemnification.
Section 6. Advance of Expenses. Reasonable expenses (including
attorneys' fees) incurred in defending an action, suit or proceeding as
described in Section 1 may be paid by the corporation to any Proper Person in
advance of the final disposition of such action, suit or proceeding upon receipt
of (i) a written affirmation of such Proper Person's good faith belief that he
has met the standards of conduct prescribed by Section 1 of this Article VI,
(ii) a written undertaking, executed personally or on the Proper Person's
behalf, to repay such advances if it is ultimately determined that he did not
meet the prescribed standards of conduct (the undertaking shall be an unlimited
general obligation of the Proper Person but need not be secured and may be
accepted without reference to financial ability to make repayment), and (iii) a
determination is made by the proper group (as described in Section 3 of this
Article VI) that the facts as then known to the group would not preclude
indemnification. Determination and authorization of payments shall be made in
the same manner specified in Section 4 of this Article VI.
Section 7. Witness Expenses. The sections of this Article VI do not
limit the corporation's authority to pay or reimburse expenses incurred by a
director in connection with an appearance as a witness in a proceeding at a time
when he has not been a named defendant or respondent in the proceeding.
<PAGE> 17
Section 8. Report to Shareholders. Any indemnification of or advance of
expenses to a director in accordance with this Article VI, if arising out of a
proceeding by or on behalf of the corporation, shall be reported in writing to
the shareholders with or before the notice of the next shareholders' meeting. If
the next shareholder action is taken without a meeting at the instigation of the
board of directors, such notice shall be given to the shareholders at or before
the time the first shareholder signs a writing consenting to such action.
ARTICLE VII
Provision of Insurance
By action of the board of directors, notwithstanding any interest of the
directors in the action, the corporation may purchase and maintain insurance, in
such scope and amounts as the board of directors deems appropriate on behalf of
any person who is or was a director, officer, employee, fiduciary or agent of
the corporation, or who, while a director, officer, employee, fiduciary or agent
of the corporation, is or was serving at the request of the corporation as a
director, officer, partner, trustee, employee, fiduciary or agent of any other
foreign or domestic corporation or of any partnership, joint venture, trust,
profit or nonprofit unincorporated association, limited liability company or
other enterprise or employee benefit plan, against any liability asserted
against, or incurred by, him in that capacity arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provisions of Article VI or applicable law. Any such
insurance may be procured from any insurance company designated by the board of
directors of the corporation, whether such insurance company is formed under the
laws of Colorado or any other jurisdiction of the United States or elsewhere,
including any insurance company in which the corporation has an equity interest
or any other interest, through stock ownership or otherwise.
ARTICLE VIII
Miscellaneous
Section 1. Seal. The corporate seal of the corporation shall be circular
in form and shall contain the name of the corporation and the words, "Seal,
Colorado."
Section 2. Fiscal Year. The fiscal year of the corporation shall be as
established by the board of directors.
Section 3. Amendments. The board of directors shall have power, to the
maximum extent permitted by the Colorado Business Corporation Act, to make,
amend and repeal the bylaws of the corporation at any regular or special meeting
of the board unless the shareholders, in making, amending or repealing a
particular bylaw, expressly provide that the directors may not amend or repeal
such bylaw. The shareholders also shall have the power to make, amend or repeal
the bylaws of the corporation at any annual meeting or at any special meeting
called for that purpose.
Section 4. Gender. The masculine gender is used in these bylaws as a
matter of convenience only and shall be interpreted to include the feminine and
neuter genders as the circumstances indicate.
Section 5. Conflicts. In the event of any irreconcilable conflict
between these bylaws and either the corporation's articles of incorporation or
applicable law, the latter shall control.
<PAGE> 18
Section 6. Definitions. Except as otherwise specifically provided in
these bylaws, all terms used in these bylaws shall have the same definition as
in the Colorado Business Corporation Act.
THE FOREGOING BYLAWS, consisting of eighteen (18) pages, including this
page, constitute the bylaws of Boulder Capital Opportunities, Inc., adopted by
the board of directors of the corporation as of April 22, 1996.
/s/ Robert Soehngen
----------------------------
President
<PAGE> 1
EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as
of November 3, 1999, between STAN LEE MEDIA, INC., a Colorado
corporation (the "Company"), and MACROMEDIA, INC., a Delaware
corporation (the "Investor").
WHEREAS, the Company and the Investor are executing and
delivering this Agreement in reliance upon the exemption from securities
registration afforded by Rule 506 of Regulation D ("Regulation D") as
promulgated by the United States Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933, as amended (the "1933 Act");
WHEREAS, the Company has authorized the following new series of
its preferred stock: the Company's Series A Preferred Stock, no par value (the
"Preferred Stock"), which shall be convertible into shares of the Company's
Common Stock, no par value (the "Common Stock") (as converted, the "Conversion
Shares"), in accordance with the terms of the Company's Articles of Amendment,
substantially in the form attached as Exhibit D hereto (the "Articles of
Amendment");
WHEREAS, the Investor wishes to purchase, upon the terms and
conditions stated in this Agreement, shares of the Preferred Stock; and
WHEREAS, contemporaneously with the execution and delivery of
this Agreement, the parties hereto are executing and delivering a Registration
Rights Agreement substantially in the form attached hereto as Exhibit A (the
"Registration Rights Agreement"), pursuant to which the Company has agreed to
provide certain registration rights under the 1933 Act and the rules and
regulations promulgated thereunder, and applicable state securities laws.
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Investor hereby agree as follows:
I. PURCHASE AND SALE OF PREFERRED SHARES
SECTION 1.01. Purchase of Preferred Shares. In connection with
the offering (the "Offering") by the Company of the Preferred Shares to the
Investor, and subject to the satisfaction (or waiver) of the conditions set
forth in Articles VI and VII below, the Company shall issue and sell to the
Investor and the Investor agrees to purchase from the Company seven hundred
fourteen thousand two hundred eighty-six (714,286) shares of the Preferred Stock
(the "Preferred Shares") in consideration for the cash payment at the closing
(the "Closing") of Five Million Two and NO/100 Dollars ($5,000,002.00) (the
"Purchase Price").
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<PAGE> 2
SECTION 1.02. Closing Date. The date and time of the Closing (the
"Closing Date") shall be 10:00 a.m. Pacific Time, within one (1) business day
following the date hereof, subject to notification of satisfaction (or waiver)
of the conditions to the Closing set forth in Articles VI and VII below (or such
later date as is mutually agreed to by the Company and the Investor). The
Closing shall occur on the Closing Date at the offices of the Company, located
at 15821 Ventura Boulevard, Suite 675, Encino, California, 91436.
SECTION 1.03. Form of Payment. On the Closing Date, (i) subject
to the satisfaction (or waiver) of the conditions set forth in Article VII
below, the Investor shall pay the Purchase Price to the Company for the
Preferred Shares to be issued and sold to the Investor at the Closing, by wire
transfer of immediately available funds in accordance with the Company's written
wire instructions, and (ii) subject to the satisfaction (or waiver) of the
conditions set forth in Article VI below, the Company shall deliver to Investor,
to the attention of Loren E. Hillberg, Vice President and General Counsel,
located at 600 Townsend Street, San Francisco, California, 91403, stock
certificate(s) (the "Preferred Stock Certificates") representing the number of
the Preferred Shares which the Investor is then purchasing, duly executed on
behalf of the Company and registered in the name of the Investor or its
designee.
II. INVESTOR'S REPRESENTATIONS AND WARRANTIES
The Investor represents and warrants to the Company as follows:
SECTION 2.01. Investment Purpose. The Investor is acquiring the
Preferred Shares (the Preferred Shares may also be referred to herein as the
"Securities"), for its own account for investment only and not with a view
towards, or for resale in connection with, the public sale or distribution
thereof, except pursuant to sales registered or exempted under the 1933 Act;
provided, however, that by making the representations herein, the Investor does
not agree to hold any of the Securities for any minimum or other specific term
and reserves the right to dispose of the Securities at any time in accordance
with or pursuant to a registration statement or an exemption under the 1933 Act.
SECTION 2.02. Accredited Investor Status. The Investor is an
"accredited investor" as that term is defined in Rule 501(a)(3) of Regulation D.
SECTION 2.03. Reliance on Exemptions. The Investor understands
that the Securities are being offered and sold to it in reliance on specific
exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying in part upon the truth and
accuracy of, and the Investor's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of the Investor set
forth herein in order to determine the availability of such exemptions and the
eligibility of the Investor to acquire such Securities.
SECTION 2.04. Information. The Investor and its advisors, if any,
have been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Securities which have been requested by the Investor, including without
limitation, the Company's Form 8-K/A filed with the
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<PAGE> 3
Securities and Exchange Commission on September 14, 1999. The Investor and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company. Neither such inquiries nor any other due diligence investigations
conducted by the Investor or its advisors, if any, or its representatives shall
modify, amend or affect the Investor's right to rely on the Company's
representations and warranties contained in Article III below. The Investor
understands that its investment in the Securities involves a high degree of
risk. The Investor has sought such accounting, legal and tax advice as it has
considered necessary to make an informed investment decision with respect to its
acquisition of the Securities.
SECTION 2.05. No Governmental Review. The Investor understands
that no United States federal or state agency or any other government or
governmental agency has passed on or made any recommendation or endorsement of
the Securities or the fairness or suitability of the investment in the
Securities nor have such authorities passed upon or endorsed the merits of the
offering of the Securities.
SECTION 2.06. Transfer or Resale. The Investor understands that
except as provided in the Registration Rights Agreement: (i) the Securities have
not been and are not being registered under the 1933 Act or any state securities
laws, and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) the Investor shall have delivered to the
Company an opinion of counsel, in a generally acceptable form, to the effect
that such Securities to be sold, assigned or transferred may be sold, assigned
or transferred pursuant to an exemption from such registration, or (C) the
Investor provides the Company with reasonable assurance that such Securities can
be sold, assigned or transferred pursuant to Rule 144 promulgated under the 1933
Act, as amended, (or a successor rule thereto) ("Rule 144"); and (ii) any sale
of the Securities made in reliance on Rule 144 may be made only in accordance
with the terms of Rule 144 and further, and if the Investor intends to utilize
Rule 144 but Rule 144 is not applicable to such resale, any resale of the
Securities under circumstances in which the Investor (or the person through whom
the sale is made) may be deemed to be an underwriter (as that term is defined in
the 1933 Act) may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder.
SECTION 2.07. Legends. The Investor understands that the
Preferred Stock Certificates and, until such time as the sale of the Conversion
Shares have been registered under the 1933 Act as contemplated by the
Registration Rights Agreement, the stock certificates representing the
Conversion Shares except as set forth below, shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"1933 ACT"), OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES
HAVE BEEN ACQUIRED FOR INVESTMENT
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<PAGE> 4
AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
(1) IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE 1933 ACT OR APPLICABLE STATE SECURITIES
LAWS, OR (2) IN THE ABSENCE OF AN OPINION OF COUNSEL, IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER THE 1933 ACT OR (3) UNLESS SOLD, TRANSFERRED OR ASSIGNED
PURSUANT TO RULE 144 UNDER SAID ACT."
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if, unless otherwise required by state securities laws, (i) such
Securities are registered for sale under the 1933 Act, (ii) in connection with a
sale transaction, such holder provides the Company with an opinion of counsel,
in a generally acceptable form, to the effect that a public sale, assignment or
transfer of the Securities may be made without registration under the 1933 Act,
or (iii) such holder provides the Company with reasonable assurances that the
Securities can be sold pursuant to Rule 144 without any restriction as to the
number of securities acquired as of a particular date that can then be
immediately sold.
SECTION 2.08. Validity; Enforcement. This Agreement has been duly
and validly authorized, executed and delivered on behalf of the Investor and is
a valid and binding agreement of the Investor enforceable against the Investor
in accordance with its terms, subject as to enforceability to general principles
of equity and to applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies.
SECTION 2.09. Residency. The Investor is a resident of the State
of California.
III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investor as follows:
SECTION 3.01. Organization and Qualification. The Company and its
"Subsidiaries" (which for purposes of this Agreement means any entity in which
the Company, directly or indirectly, owns a controlling position of capital
stock or holds a controlling position of an equity or similar interest) listed
on Schedule 3.01 hereof, are corporations duly organized and validly existing in
good standing under the laws of the jurisdiction in which they are incorporated,
and have the requisite corporate power and authorization to own their properties
and to carry on their business as now being conducted. Each of the Company and
its Subsidiaries is duly qualified as a foreign corporation to do business and
is in good standing in every jurisdiction in which its ownership of property or
the nature of the business conducted by it makes such qualification necessary,
except to the extent that the failure to be so qualified or
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<PAGE> 5
be in good standing would not have a Material Adverse Effect. As used in this
Agreement, "Material Adverse Effect" means any material adverse effect on the
business, properties, assets, operations, results or operations, financial
condition or prospects of the Company and its Subsidiaries, if any, taken as a
whole, or on the transactions contemplated hereby or by the agreements and
instruments to be entered into in connection herewith, or on the authority or
ability of the Company to perform its obligations under the Transaction
Documents (as defined below in Section 3.02).
SECTION 3.02. Authorization; Enforcement; Validity. (i) The
Company has the requisite corporate power and authority to enter into and
perform this Agreement, the Registration Rights Agreement, the Transfer Agent
Instructions (as defined in Article V), the Articles of Amendment and each of
the other agreements entered into by the parties hereto in connection with the
transactions contemplated by this Agreement (collectively, the "Transaction
Documents"), and to issue the Securities in accordance with the terms hereof and
thereof, (ii) the execution and delivery of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated hereby and
thereby, including without limitation the issuance of the Preferred Shares and
the reservation for issuance and the issuance of the Conversion Shares issuable
upon conversion thereof, have been duly authorized by the Company's Board of
Directors and no further consent or authorization is required by the Company,
its Board of Directors or its stockholders, (iii) the Transaction Documents have
been duly executed and delivered by the Company, (iv) the Transaction Documents
constitute the valid and binding obligations of the Company enforceable against
the Company in accordance with their terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies, and (v)
the Articles of Amendment has been filed with the Secretary of State of the
State of Colorado and will be in full force and effect, enforceable against the
Company in accordance with its terms.
SECTION 3.03. Issuance of Securities. The Securities are duly
authorized and, upon issuance in accordance with the terms hereof, shall be (i)
validly issued, fully paid and non-assessable and (ii) free from all taxes,
liens and charges with respect to the issue thereof. The Preferred Shares shall
be entitled to the rights and preferences set forth in the Articles of
Amendment. One million five hundred thousand (1,500,000) shares of Company
Common Stock have been duly authorized and reserved for issuance upon conversion
of the Preferred Shares. Upon conversion in accordance with the Articles of
Amendment, the Conversion Shares will be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, with the holders being entitled to all rights accorded to a
holder of Company Common Stock. The issuance by the Company of the Securities
is, and the issuance by the Company of the Conversion Shares shall be, exempt
from registration under the 1933 Act.
SECTION 3.04. No Conflicts. The execution, delivery and
performance of the Transaction Documents by the Company and the consummation by
the Company of the
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<PAGE> 6
transactions contemplated hereby and thereby (including, without limitation, the
Company's issuance of the Securities and the reservation for issuance and
issuance of the Conversion Shares) will not (i) result in a violation of the
Company's Articles of Incorporation, as amended and as in effect on the date
hereof (the "Articles of Incorporation") or the Company's Bylaws, as amended and
as in effect on the date hereof (the "Bylaws") or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, indenture or
instrument to which the Company or any of its Subsidiaries is a party, or result
in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and the rules and
regulations of the Principal Market (as defined in Section 4.03 below))
applicable to the Company or any of its Subsidiaries or by which any property or
asset of the Company or any of its Subsidiaries is bound or affected. Neither
the Company nor its Subsidiaries is in violation of any term of or in default
under its Articles of Incorporation or Bylaws or their organizational charter or
bylaws, respectively. Neither the Company or any of its Subsidiaries is in
violation of any term of or in default under any contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or order or any statute,
rule or regulation applicable to the Company or its Subsidiaries, except for
possible conflicts, defaults, terminations, amendments which would not have a
Material Adverse Effect. The business of the Company and its Subsidiaries is not
being conducted, and shall not be conducted, in violation of any law, ordinance,
regulation of any governmental entity, except for possible violations the
sanctions for which either individually or in the aggregate would not have a
Material Adverse Effect. Except as specifically contemplated by the Transaction
Documents and as required under the 1933 Act, the Company is not required to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency or any regulatory or
self-regulatory agency in order for it to execute, deliver or perform any of its
obligations under or contemplated by the Transaction Documents in accordance
with the terms hereof or thereof. All consents, authorizations, orders, filings
and registrations which the Company is required to obtain prior to Closing
pursuant to the preceding sentence have been obtained or effected on or prior to
the date hereof. The Company and its Subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing. The Company is not
in violation of the listing requirements of the Principal Market (as defined in
Section 4.03 below).
SECTION 3.05. SEC Documents; Financial Statements. As of the
Closing, the Company has filed all reports, schedules, forms, statements and
other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"1934 Act") (all of the foregoing filed prior to the date hereof and all
exhibits included therein and financial statements and schedules thereto and
documents incorporated by reference therein being hereinafter referred to as the
"SEC Documents"). As of their respective dates, the SEC Documents complied in
all material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light
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<PAGE> 7
of the circumstances under which they were made, not misleading. As of their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Investor which is not
included in the SEC Documents contains any untrue statement of a material fact
or omits to state any material fact necessary in order to make the statements
therein, in the light of the circumstance under which they are or were made, not
misleading. Neither the Company nor any of its Subsidiaries or any of their
officers, directors, employees or agents have provided the Investor with any
material, nonpublic information.
SECTION 3.06. Absence of Certain Changes. Since the most recent
filing by the Company with the SEC, there has been no material adverse change
and no material adverse development in the business, properties, operations,
financial condition, results of operations or prospects of the Company or its
Subsidiaries. The Company has not taken any steps, and does not currently expect
to take any steps, to seek protection pursuant to any bankruptcy law nor does
the Company or any of its Subsidiaries have any knowledge or reason to believe
that its creditors intend to initiate involuntary bankruptcy proceedings.
SECTION 3.07. Absence of Litigation. Except as set forth in the
SEC Documents, there is no action, suit, proceeding, inquiry or investigation
before or by any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company or any of its
Subsidiaries, threatened against or affecting the Company, the Company's Common
Stock, the Common Shares or any of the Company's Subsidiaries or any of the
Company's or the Company's Subsidiaries' officers or directors in their
capacities as such.
SECTION 3.08. No Undisclosed Events, Liabilities, Developments or
Circumstances. No event, liability, development or circumstance has occurred or
exists, or is contemplated to occur, with respect to the Company or its
Subsidiaries or their respective business, properties, prospects, operations or
financial condition, that would be required to be disclosed by the Company under
applicable securities laws on a registration statement filed with the SEC
relating to an issuance and sale by the Company of its Common Stock and which
has not been publicly announced.
SECTION 3.09. No General Solicitation. Neither the Company, nor
any of its affiliates, nor any person acting on its or their behalf, has engaged
in any form of general
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<PAGE> 8
solicitation or general advertising (within the meaning of Regulation D under
the 1933 Act) in connection with the offer or sale of the Securities.
SECTION 3.10. No Integrated Offering. Neither the Company, nor
any of its affiliates, nor any person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under circumstances that would require
registration of any of the Securities under the 1933 Act or cause this Offering
of the Securities to be integrated with prior offerings by the Company for
purposes of the 1933 Act or any applicable stockholder approval provisions,
including, without limitation, under the rules and regulations of any exchange
or automated quotation system on which any of the securities of the Company are
listed or designated, nor will the Company or any of its Subsidiaries take any
action or steps that would require registration of any of the Securities under
the 1933 Act or cause the offering of the Securities to be integrated with other
offerings.
SECTION 3.11. Employee Relations. Neither the Company nor any of
its Subsidiaries is involved in any union labor dispute nor, to the knowledge of
the Company or any of its Subsidiaries, is any such dispute threatened.
SECTION 3.12. Intellectual Property Rights. The Company and its
Subsidiaries own or possess adequate rights or licenses to use all trademarks,
trade names, service marks, service mark registrations, service names,
copyrights, inventions, licenses, approvals, governmental authorizations, trade
secrets and rights necessary to conduct their respective businesses as now
conducted. The Company and its Subsidiaries do not have any knowledge of any
infringement by the Company or its Subsidiaries of trademark, trade name rights,
patents, patent rights, copyrights, inventions, licenses, service names, service
marks, service mark registrations, trade secret or other similar rights of
others, or of any such development of similar or identical trade secrets or
technical information by others and the Company and its Subsidiaries are unaware
of any facts or circumstances which might give rise to any of the foregoing
which would have a Material Adverse Effect. The Company and its Subsidiaries
have taken reasonable security measures to protect the secrecy, confidentiality
and value of all of their intellectual properties.
SECTION 3.13. Environmental Laws. The Company and its
Subsidiaries (i) are in compliance with any and all applicable foreign, federal,
state and local laws and regulations relating to the protection of human health
and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("Environmental Laws"), (ii) have received all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are in
compliance with all terms and conditions of any such permit, license or
approval.
SECTION 3.14. Title. The Company and its Subsidiaries have good
and marketable title to all personal property owned by them which is material to
the business of the Company and its Subsidiaries, in each case free and clear of
all liens, encumbrances and defects
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<PAGE> 9
except such as are described in the SEC Documents or such as do not materially
affect the value of such property and do not interfere with the use made and
proposed to be made of such property by the Company and any of its Subsidiaries.
Any facilities held under lease by the Company and any of its Subsidiaries are
held by them under valid, subsisting and enforceable leases with such exceptions
as are not material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company and its Subsidiaries.
SECTION 3.15. Insurance. The Company and each of its Subsidiaries
are insured by insurers of recognized financial responsibility against such
losses and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged and the Company does not have any reason to believe it
will not be able to renew its existing insurance coverage under substantially
similar terms.
SECTION 3.16. Regulatory Permits. The Company and its
Subsidiaries possess all certificates, authorizations and permits issued by the
appropriate federal, state or foreign regulatory authorities necessary to
conduct their respective businesses, and neither the Company nor any such
Subsidiary has received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit.
SECTION 3.17. Tax Status. The Company and each of its
Subsidiaries has made or filed all federal and state income and all other tax
returns, reports and declarations required by any jurisdiction to which it is
subject (unless and only to the extent that the Company and each of its
Subsidiaries has set aside on its books provisions reasonably adequate for the
payment of all unpaid and unreported taxes) and has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and has set aside on its books provision
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company know of no basis for any such
claim.
SECTION 3.18. Transactions With Affiliates. Except as set forth
in the SEC Documents or as otherwise provided for in Section 3.18 hereto, none
of the officers, control parties, control entities, directors, or employees of
the Company is presently a party to any transaction with the Company or any of
its Subsidiaries (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
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<PAGE> 10
IV. COVENANTS
SECTION 4.01. Best Efforts. Each party shall use its best efforts
timely to satisfy each of the conditions to be satisfied by it as provided in
Articles VI and VII of this Agreement.
SECTION 4.02. Form D and Blue Sky. The Company agrees to file a
Form D with respect to the Securities as required under Regulation D and to
provide a copy thereof to the Investor promptly after such filing. The Company
shall, on or before the Closing Date, take such action as the Company shall
reasonably determine is necessary in order to obtain an exemption for or to
qualify the Securities for sale to the Investor at the Closing pursuant to this
Agreement under applicable securities or "Blue Sky" laws of the states of the
United States, and shall provide evidence of any such action so taken to the
Investor on or prior to the Closing Date. The Company shall make all filings and
reports relating to the offer and sale of the Securities required under
applicable securities or "Blue Sky" laws of the states of the United States
following the Closing Date.
SECTION 4.03. Listing. The Company shall promptly secure the
listing of all of the Registrable Securities (as that term is defined in the
Registration Rights Agreement) upon each national securities exchange, automated
quotation system or bulletin board system, if any, upon which shares of the
Company's Common Stock are then listed (subject to official notice of issuance)
and shall maintain, so long as any other shares of Common Stock shall be so
listed, such listing of all Registrable Securities from time to time issuable
under the terms of the Transaction Documents. The Company shall maintain the
Common Stock's authorization for quotation on the Nasdaq National Market, Nasdaq
SmallCap Market, OTC Electronic Bulletin Board, The New York Stock Exchange,
Inc. or The American Stock Exchange, Inc., as applicable (the "Principal
Market"). Neither the Company nor any of its Subsidiaries shall take any action
which would be reasonably expected to result in the delisting or suspension of
Company Common Stock on the Principal Market. The Company shall promptly, and in
no event later than three (3) business days, provide to the Investor copies of
any notices it receives from the Principal Market regarding the continued
eligibility of Company Common Stock for listing on such automated quotation
system or securities exchange. The Company shall pay all fees and expenses in
connection with satisfying its obligations under this Section.
SECTION 4.04. Reservation of Shares. The Company shall take all
action necessary to at all times have authorized, and reserved for the purpose
of issuance, no less than the number of shares of Company Common Stock needed to
provide for the issuance of the shares of Company Common Stock upon conversion
of all outstanding Preferred Shares.
SECTION 4.05. Issuance of Conversion Shares. The issuance of the
Conversion Shares shall be duly authorized, and when issued in accordance with
the Articles of Amendment, the Conversion Shares will be validly issued, fully
paid and non-assessable and free of all taxes, liens, charges and preemptive
rights with respect to the issue thereof.
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<PAGE> 11
V. TRANSFER AGENT INSTRUCTIONS
The Company shall issue irrevocable instructions to its transfer
agent, Securities Transfer Corporation (the "Transfer Agent"), and any
subsequent transfer agent, substantially in the form of Exhibit B hereto (the
"Transfer Agent Instructions") to issue certificates, registered in the name of
the Investor or its respective nominee(s), for the Conversion Shares in such
amounts as specified from time to time by the Investor to the Company upon
conversion of the Preferred Shares. Prior to registration of the Conversion
Shares under the 1933 Act, all such certificates shall bear the restrictive
legend specified in Section 2.07 of this Agreement. The Company warrants that no
instruction other than the Transfer Agent Instructions referred to in this
Article, and stop transfer instructions to give effect to Section 2.06 hereof
will be given by the Company to its Transfer Agent and that the Securities shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement and the Registration Rights Agreement.
Nothing in this Article shall affect in any way the Investor's obligations and
agreements set forth in Section 2.07 to comply with all applicable prospectus
delivery requirements, if any, upon resale of the Securities. If the Investor
provides the Company with an opinion of counsel, in a generally acceptable form,
to the effect that a public sale, assignment or transfer of the Securities may
be made without registration under the 1933 Act or the Investor provides the
Company with reasonable assurances that the Securities can be sold pursuant to
Rule 144 without any restriction as to the number of securities acquired as of a
particular date that can then be immediately sold, the Company shall permit the
transfer, and, in the case of the Conversion Shares, promptly instruct its
Transfer Agent to issue one or more certificates in such name and in such
denominations as specified by the Investor and without any restrictive legend.
The Company acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Investor by vitiating the intent and purpose of
the transaction contemplated hereby. Accordingly, the Company acknowledges that
the remedy at law for a breach of its obligations under this Article will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Article, that the Investor shall be entitled,
in addition to all other available remedies, to an order and/or injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
VI. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL
The obligation of the Company hereunder to issue and sell the
Preferred Shares to the Investor at the Closing is subject to the satisfaction,
at or before the Closing Date, of each of the following conditions, provided
that these conditions are for the Company's sole benefit and may be waived by
the Company at any time in its sole discretion by providing the Investor with
prior written notice thereof:
(a) The Investor shall have executed each of the Transaction
Documents, where appropriate, to which it is a party and delivered the same to
the Company for the transactions contemplated by this Agreement;
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<PAGE> 12
(b) The representations and warranties of the Investor shall be
true and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and the Investor shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Investor at or prior to the Closing Date; and
(c) The Investor shall have delivered to the Company such other
documents relating to the transactions contemplated by this Agreement as the
Company may reasonable request.
VII. CONDITIONS TO INVESTOR'S OBLIGATION TO PURCHASE
The obligation of the Investor to purchase the Preferred Shares
at the Closing is subject to the satisfaction, at or before the Closing Date, of
each of the following conditions, provided that these conditions are for the
Investor's sole benefit and may be waived by the Investor at any time in its
sole discretion by providing the Company with prior written notice thereof:
(a) The Company shall have executed each of the Transaction
Documents and delivered the same to the Investor;
(b) The Company's Common Stock shall be authorized for quotation
on the Principal Market and trading in Company Common Stock shall not have been
suspended by the SEC or the Principal Market;
(c) The Articles of Amendment shall have been filed with the
Secretary of State of the State of Colorado, and a copy thereof shall have been
delivered to the Investor;
(d) The representations and warranties of the Company shall be
true and correct as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties that speak as of a
specific date) and the Company shall have performed, satisfied and complied with
the covenants, agreements and conditions required by the Transaction Documents
to be performed, satisfied or complied with by the Company at or prior to the
Closing Date;
(e) The Company shall have delivered to the Investor the opinion
of the Company's counsel dated as of the Closing Date, in form, scope and
substance reasonably satisfactory to the Investor and in substantially the form
of Exhibit C attached hereto;
(f) The Company shall have executed and delivered to the Investor
the Preferred Stock Certificates (in such denominations as the Investor shall
request) for the Preferred Shares being purchased by the Investor at the
Closing;
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<PAGE> 13
(g) The Transfer Agent Instructions, in the form of Exhibit B
attached hereto, shall have been delivered to and acknowledged in writing by the
Company's transfer agent and a copy of the executed Transfer Agent Instructions
shall have been delivered to the Investor;
(h) The Company shall have made all filings under all applicable
federal and state securities laws necessary to consummate the issuance of the
Securities pursuant to this Agreement in compliance with such laws;
(i) As of the Closing Date, the Company shall have reserved out
of its authorized and unissued Common Stock, solely for the purpose of effecting
the conversion of the Preferred Shares, no less than the number of shares of
Company Common Stock needed to provide for the issuance of the shares of Company
Common Stock upon conversion of all outstanding Preferred Stock; and
(j) The Company shall have delivered to the Investor Agent such
other documents relating to the transactions contemplated by this Agreement as
the Investor may reasonably request.
VIII. INDEMNIFICATION
In consideration of the Investor's execution and delivery of the
Transaction Documents and acquiring the Securities thereunder and in addition to
all of the Company's other obligations under the Transaction Documents, the
Company shall defend, protect, indemnify and hold harmless the Investor and each
other holder of the Securities and all of their stockholders, officers,
directors, employees and direct or indirect investors and any of the foregoing
person's agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the "Indemnitees") from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements (the
"Indemnified Liabilities"), incurred by any Indemnitee as a result of, or
arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby,
(b) any breach of any covenant, agreement or obligation of the Company contained
in the Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (c) any cause of action, suit or claim brought
or made against such Indemnitee and arising out of or resulting from the
execution, delivery, performance or enforcement of the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby, or
(d) the status of the Investor or holder of the Securities as an investor in the
Company. To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law.
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<PAGE> 14
IX. GENERAL PROVISIONS
SECTION 9.01. Governing Law; Jurisdiction; Waiver of Jury Trial.
This Agreement shall be governed by and construed in all respects by the
internal laws of the State of California (except for the proper application of
the United States federal securities laws), without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of California
or any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of California. Each party hereby irrevocably
submits to the non-exclusive jurisdiction of the state and federal courts
sitting in the County of Los Angeles, State of California. EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR
ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
SECTION 9.02. Counterparts. This Agreement may be executed in two
or more identical counterparts, all of which shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party; provided, however, that a facsimile
signature shall be considered due execution and shall be binding upon the
signatory thereto with the same force and effect as if the signature were an
original, not a facsimile signature.
SECTION 9.03. Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
SECTION 9.04. Severability. If any provision of this Agreement
shall be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
SECTION 9.05. Entire Agreement; Amendments. This Agreement
supersedes all other prior oral or written agreements between the Investor, the
Company, their affiliates and persons acting on their behalf with respect to the
matters discussed herein, and this Agreement and the instruments referenced
herein contain the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor the Investor makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be amended other than by an instrument in writing signed by
the Company and the Investor, and no provision hereof may be waived other than
by an instrument in writing signed by the party against whom enforcement is
sought.
SECTION 9.06. Notices. Any notices, consents, waivers or other
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<PAGE> 15
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered: (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); or (iii) one business day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
If to the Company: Stan Lee Media, Inc.
15821 Ventura Boulevard, Suite 675
Encino, CA 91436
Telephone: (818) 461-1757
Facsimile: (818) 461-1760
Attention: Chief Operating Officer
With a copy to: Jeffrey D. Segal, A Professional
Corporation
10390 Santa Monica Boulevard,
4th Floor
Los Angeles, CA 90025
Telephone: (310) 788-0800
Facsimile: (310) 788-3925
If to the Investor: Macromedia, Inc.
600 Townsend Street
San Francisco, CA 94103
Telephone: (415) 252-2353
Facsimile: (415) 626-0274
Attention: General Counsel
With a copy to: Fenwick & West, LLP
2 Palo Alto Square
Palo Alto, CA 94306
Telephone: (650) 494-0600
Facsimile: (650) 494-1417
Attention: Gordon Davidson, Esq.
If to the Transfer Agent: Securities Transfer Corporation
16910 Dallas Parkway, Suite 100
Dallas, TX 75248
Telephone: (972) 447-9890
Facsimile: (972) 248-4797
Attention: Kevin B. Halter,
Jr., President
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<PAGE> 16
SECTION 9.07. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and assigns, including any purchasers of the Preferred Shares.
SECTION 9.08. Third Party Beneficiaries. This Agreement is
intended for the benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any provision
hereof be enforced by, any other person.
SECTION 9.09. Survival. Unless this Agreement is terminated under
Section 9.11, the agreements and covenants set forth in Article IV and V, and
the indemnification provisions set forth in Article VIII shall survive the
Closing. The Investor shall be responsible only for its own representations,
warranties, agreements and covenants hereunder.
SECTION 9.10. Further Assurances. Each party shall do and
perform, or cause to be done and performed, all such further acts and things,
and shall execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably request in order to
carry out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
SECTION 9.11. Termination. In the event that the Closing shall
not have occurred with respect to the Investor on or before seven (7) business
days from the date hereof due to the Company's or the Investor's failure to
satisfy the conditions set forth in Articles VI and VII above (and the
nonbreaching party's failure to waive such unsatisfied condition(s)), the
nonbreaching party shall have the option to terminate this Agreement with
respect to such breaching party at the close of business on such date without
liability of any party to any other party.
SECTION 9.12. No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
SECTION 9.13. Remedies. The Investor shall have all rights and
remedies set forth in the Transaction Documents and all rights and remedies
which such holders have been granted at any time under any other agreement or
contract and all of the rights which such holders have under any law. Any person
having any rights under any provision of this Agreement shall be entitled to
enforce such rights specifically (without posting a bond or other security), to
recover damages by reason of any breach of any provision of this Agreement and
to exercise all other rights granted by law.
IN WITNESS WHEREOF, the Company and the Investor have caused this
Securities Purchase Agreement to be duly executed by their duly authorized
officer(s) empowered so to act, all as of the date first written above.
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<PAGE> 17
COMPANY: INVESTOR:
STAN LEE MEDIA, INC. MACROMEDIA, INC.
By: /s/ Gill Champion By: /s/ Loren E. Hillberg
------------------------------- -------------------------------
Name: Gill Champion Name: Loren E. Hillberg
Title: Chief Operating Officer Title: Vice President - General
Counsel
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<PAGE> 18
EXHIBITS
<TABLE>
<S> <C>
Exhibit A Form of Registration Rights Agreement
Exhibit B Form of Transfer Agent Instructions
Exhibit C Form of Company Counsel Opinion
Exhibit D Form of Articles of Amendment
</TABLE>
<PAGE> 19
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as
of November 3, 1999, between STAN LEE MEDIA, INC., a Colorado
corporation, and MACROMEDIA, INC.,, a Delaware corporation (the
"Investor").
WHEREAS, in connection with the Securities Purchase Agreement
between the parties of even date herewith (the "Securities Purchase Agreement"),
the Company has agreed, upon the terms and subject to the conditions of the
Securities Purchase Agreement, to issue and sell to the Investor seven hundred
fourteen thousand two hundred eighty-six (714,286) shares of the Company's
Series A Preferred Stock, no par value (the "Preferred Shares"), which will be
convertible into shares of the Company's common stock, no par value (the "Common
Stock") (as converted, the "Conversion Shares") in accordance with the terms of
the Company's Articles of Amendment (the "Articles of Amendment"); and
WHEREAS, to induce the Investor to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"1933 Act"), and applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Investor hereby agree as follows:
I. DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
(a) "Investor" means Macromedia, Inc., a Delaware corporation,
any transferee or assignee thereof to whom the Investor assigns its rights under
this Agreement and who agrees to become bound by the provisions of this
Agreement in accordance with Article VIII and any transferee or assignee thereof
to whom a transferee or assignee assigns its rights under this Agreement and who
agrees to become bound by the provisions of this Agreement in accordance with
Article VIII.
(b) "Person" means a corporation, a limited liability company, an
association, a partnership, an organization, a business, an individual, a
governmental or political subdivision thereof or a governmental agency.
(c) "Register," "registered," and "registration" refer to a
registration effected by preparing and filing one or more Registration
Statements (as defined below) in compliance
<PAGE> 20
with the 1933 Act and pursuant to Rule 415 under the 1933 Act or any successor
rule providing for offering securities on a continuous basis ("Rule 415"), and
the declaration or ordering of effectiveness of such Registration Statement(s)
by the United States Securities and Exchange Commission (the "SEC").
(d) "Registrable Securities" means the Conversion Shares issued
or issuable upon conversion of the Preferred Shares and any shares of capital
stock issued or issuable with respect to the Conversion Shares or Preferred
Shares as a result of any stock split, stock dividend, recapitalization,
exchange, or similar event or otherwise, without regard to any limitation on the
conversion of the Preferred Shares.
(e) "Registration Statement" means a registration statement of
the Company filed under the 1933 Act and pursuant to Rule 415.
Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings set forth in the Securities Purchase Agreement.
II. REGISTRATION
SECTION 2.01. Piggy-Back Registrations. If at any time prior to
the expiration of the Registration Period (as defined in Article III(a)) the
Company proposes to file with the SEC a Registration Statement relating to an
offering for its own account or the account of others under the 1933 Act of any
of its securities (other than on Form S-4 or Form S-8 (or their equivalents at
such time) relating to securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans) the Company shall
promptly send to the Investor written notice of the Company's intention to file
a Registration Statement and of such Investor's rights under this Section and,
if within twenty (20) days after receipt of such notice, such Investor shall so
request in writing, the Company shall include in such Registration Statement all
or any part of the Registrable Securities such Investor requests to be
registered, subject to the priorities set forth in this Section below. The
obligations of the Company under this Section may be waived by the Investor. If
an offering in connection with which the Investor is entitled to registration
under this Section is an underwritten offering, then the Investor whose
Registrable Securities are included in such Registration Statement shall, unless
otherwise agreed by the Company, offer and sell such Registrable Securities in
an underwritten offering using the same underwriter or underwriters and, subject
to the provisions of this Agreement, on the same terms and conditions as other
shares of Company common stock included in such underwritten offering. If a
registration pursuant to this Section is to be an underwritten public offering
and the managing underwriter(s) advise the Company in writing, that in their
reasonable good faith opinion, marketing or other factors dictate that a
limitation on the number of shares of Company common stock which may be included
in the Registration Statement is necessary to facilitate and not adversely
affect the proposed offering, then the Company shall include in such
registration: (1) first, all securities the Company proposes to sell for its own
account, and (2) second, the
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<PAGE> 21
securities requested to be registered by the Investor and other holders of
securities entitled to participate in the registration, as of the date hereof,
drawn from them pro rata based on the number each has requested to be included
in such registration.
SECTION 2.02. Allocation of Registrable Securities. The initial
number of Registrable Securities included in any Registration Statement and each
increase in the number of Registrable Securities included therein shall be
allocated pro rata among the Investor and other holders of securities entitled
to participate in the registration based on the number of Registrable Securities
held, or which could be held, by the Investor at the time the Registration
Statement covering such initial number of Registrable Securities or increase
thereof is declared effective by the SEC. In the event that the Investor sells
or otherwise transfers any of its Registrable Securities, each transferee shall
be allocated a pro rata portion of the then remaining number of Registrable
Securities included in such Registration Statement for such transferor. Any
shares of Common Stock included in a Registration Statement and which remain
allocated to any Person which ceases to hold any Registrable Securities shall be
allocated to the remaining holders, pro rata based on the number of Registrable
Securities then held by such holders.
SECTION 2.03. Legal Counsel. Subject to Article V hereof, the
Investor shall have the right to select one legal counsel as designated by the
holders of a majority of Registrable Securities to review and oversee any
offering pursuant to this Article ("Legal Counsel"). The Company shall
reasonably cooperate with Legal Counsel in performing the Company's obligations
under this Agreement.
SECTION 2.04. Rule 416. The Company and the Investor each
acknowledge that each Registration Statement prepared in accordance hereunder
shall include an indeterminate number of Registrable Securities pursuant to Rule
416 under the 1933 Act so as to cover any and all Registrable Securities which
may become issuable (i) to prevent dilution resulting from stock splits, stock
dividends or similar transactions and (ii) if permitted by law, by reason of the
anti-dilution provisions contained in the Articles of Amendment in accordance
with the terms thereof (collectively, the "Rule 416 Securities"). In this
regard, the Company agrees to use all reasonable efforts to ensure that the
maximum number of Registrable Securities which may be registered pursuant to
Rule 416 under the 1933 Act are covered by each Registration Statement and,
absent guidance from the SEC or other definitive authority to the contrary, the
Company shall use all reasonable efforts to affirmatively support and to not
take any position adverse to the position that each Registration Statement filed
hereunder covers all of the Rule 416 Securities. If the Company determines that
the Registration Statement filed hereunder does not cover all of the Rule 416
Securities, the Company shall immediately (i) provide to the Investor written
evidence setting forth the basis for the Company's position and the authority
therefor and (ii) prepare and file an amendment to such Registration Statement
or a new Registration Statement in accordance with Section 2.05 below.
SECTION 2.05. Sufficient Number of Shares Registered. In the
event the number of shares available under a Registration Statement filed
pursuant to Section 2.01 is
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<PAGE> 22
insufficient to cover all of the Registrable Securities or the Investor's
allocated portion of the Registrable Securities pursuant to Section 2.02 (a
"Deficit Failure"), the Company shall amend the Registration Statement, or file
a new Registration Statement (on the short form available therefor, if
applicable), or both, so as to cover at least the number of such Registrable
Securities in each case, as soon as practicable, but in any event not later than
fifteen (15) days after the necessity therefor arises. The Company shall use it
best efforts to cause such amendment and/or new Registration Statement to become
effective as soon as practicable following the filing thereof. For purposes of
the foregoing provision, the number of shares available under a Registration
Statement shall be deemed "insufficient to cover all of the Registrable
Securities" if at any time the number of Registrable Securities issued or
issuable upon conversion of the Preferred Shares is greater than the quotient
determined by dividing (i) the number of shares of Common Stock available for
resale under such Registration Statement by (ii) 1. For purposes of the
calculation set forth in the foregoing sentence, any restrictions on the
convertibility of the Preferred Shares shall be disregarded and such calculation
shall assume that the Preferred Shares are then convertible into shares of
Common Stock at the then prevailing Conversion Rate (as defined in the Company's
Articles of Amendment).
SECTION 2.06. S-3 Registrations. Notwithstanding any provisions
to the contrary set forth in this Agreement, the Investor shall have the right
to demand an unlimited number of registrations of the Preferred Shares on Form
S-3 only, provided that (i) the amount of Preferred Shares to be registered
pursuant to each such demand shall not be less than One Million Dollars
($1,000,000); (ii) all expenses are borne by the Investor, excluding fees of
Legal Counsel otherwise provided for in this Agreement; and (iii) the Investor
continues to hold beneficially at least 200,000 issued and outstanding Preferred
Shares and such shares are not freely transferable under Rule 144 without any
discount in price due to the volume or other limitations imposed by such Rule.
As promptly as practicable after the receipt of a written demand from the
Investor, the Company shall prepare and file a Registration Statement with the
Securities and Exchange Commission on Form S-3, and shall use its best efforts
to cause such Registration Statement to be declared effective by the SEC as
promptly as practicable.
III. RELATED OBLIGATIONS
Whenever the Investor has requested that any Registrable
Securities be registered pursuant to Section 2.01 hereof or at such time as the
Company is obligated to file a Registration Statement with the SEC pursuant to
Section 2.05 hereof, the Company will use its best efforts to effect the
registration of the Registrable Securities in accordance with the intended
method of disposition thereof and, pursuant thereto, the Company shall have the
following obligations:
(a) The Company shall promptly prepare and file with the SEC a
Registration Statement with respect to the Registrable Securities after the date
of issuance of any Preferred Shares for the registration of Registrable
Securities pursuant to Section 2.01 and use its best efforts to cause such
Registration Statement relating to the Registrable Securities to become
effective as soon as possible after such filing for the registration of
Registrable Securities
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pursuant to Section 2.01, and keep such Registration Statement effective
pursuant to Rule 415 at all times until the earlier of (i) the date as of which
the Investor may sell all of the Registrable Securities without restriction
pursuant to Rule 144(k) promulgated under the 1933 Act (or successor thereto) or
(ii) the date on which (A) the Investor shall have sold all the Registrable
Securities and (B) none of the Preferred Shares is outstanding (the
"Registration Period"), which Registration Statement (including any amendments
or supplements thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein, or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading.
(b) The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to a
Registration Statement and the prospectus used in connection with such
Registration Statement, which prospectus is to be filed pursuant to Rule 424
promulgated under the 1933 Act, as may be necessary to keep such Registration
Statement effective at all times during the Registration Period, and, during
such period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company covered by such
Registration Statement until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in such Registration
Statement.
(c) The Company shall permit Legal Counsel to review and comment
upon a Registration Statement and all amendments and supplements thereto at
least five (5) days prior to their filing with the SEC, and not file any
document in a form to which Legal Counsel reasonably objects. The Company shall
furnish to Legal Counsel, without charge, (i) any correspondence from the SEC or
the staff of the SEC to the Company or its representatives relating to any
Registration Statement, (ii) promptly after the same is prepared and filed with
the SEC, one copy of any Registration Statement and any amendment(s) thereto,
including financial statements and schedules, all documents incorporated therein
by reference and all exhibits and (iii) upon the effectiveness of any
Registration Statement, one copy of the prospectus included in such Registration
Statement and all amendments and supplements thereto.
(d) The Company shall furnish to the Investor whose Registrable
Securities are included in any Registration Statement, without charge, (i)
promptly after the same is prepared and filed with the SEC, at least one copy of
such Registration Statement and any amendment(s) thereto, including financial
statements and schedules, all documents incorporated therein by reference and
all exhibits, (ii) upon the effectiveness of any Registration Statement, ten
(10) copies of the prospectus included in such Registration Statement and all
amendments and supplements thereto (or such other number of copies as such
Investor may reasonably request) and (iii) such other documents, including
copies of any preliminary or final prospectus, as such Investor may reasonably
request from time to time in order to facilitate the disposition of the
Registrable Securities owned by such Investor.
(e) The Company shall use reasonable efforts to (i) register and
qualify the
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<PAGE> 24
Registrable Securities covered by a Registration Statement under
such other securities or "blue sky" laws of such jurisdictions in the United
States as Legal Counsel or any Investor reasonably requests, (ii) prepare and
file in those jurisdictions, such amendments (including post-effective
amendments) and supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof during the Registration Period,
(iii) take such other actions as may be necessary to maintain such registrations
and qualifications in effect at all times during the Registration Period, and
(iv) take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (x) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section, (y) subject itself to
general taxation in any such jurisdiction, or (z) file a general consent to
service of process in any such jurisdiction. The Company shall promptly notify
Legal Counsel and the Investor who holds Registrable Securities of the receipt
by the Company of any notification with respect to the suspension of the
registration or qualification of any of the Registrable Securities for sale
under the securities or "blue sky" laws of any jurisdiction in the United States
or its receipt of actual notice of the initiation or threatening of any
proceeding for such purpose.
(f) As promptly as practicable after becoming aware of such
event, the Company shall notify Legal Counsel and the Investor in writing of the
happening of any event as a result of which the prospectus included in a
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and promptly prepare a supplement or
amendment to such Registration Statement to correct such untrue statement or
omission, and deliver ten (10) copies of such supplement or amendment to Legal
Counsel and the Investor (or such other number of copies as Legal Counsel or
such Investor may reasonably request). The Company shall also promptly notify
Legal Counsel and the Investor in writing (i) when a prospectus or any
prospectus supplement or post-effective amendment has been filed, and when a
Registration Statement or any post-effective amendment has become effective
(notification of such effectiveness shall be delivered to Legal Counsel and the
Investor by facsimile on the same day of such effectiveness and by overnight
mail), (ii) of any request by the SEC for amendments or supplements to a
Registration Statement or related prospectus or related information, and (iii)
of the Company's reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate.
(g) The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, or the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension at
the earliest possible moment and to notify Legal Counsel and the Investor who
holds Registrable Securities being sold (and, in the event of an underwritten
offering, the managing underwriters) of the issuance of such order and the
resolution thereof or its receipt of actual notice of the initiation
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<PAGE> 25
or threat of any proceeding for such purpose.
(h) At the request of the Investor, the Company shall furnish to
such Investor, on the date of the effectiveness of the Registration Statement
and thereafter from time to time on such dates as an Investor may reasonably
request (i) if required by an underwriter, a letter, dated such date, from the
Company's independent certified public accountants in form and substance as is
customarily given by independent certified public accountants to underwriters in
an underwritten public offering, addressed to the underwriters, and (ii) an
opinion, dated as of such date, of counsel representing the Company for purposes
of such Registration Statement, in form, scope and substance as is customarily
given in an underwritten public offering, addressed to the underwriters and the
Investor.
(i) The Company shall make available for inspection by (i) the
Investor, (ii) Legal Counsel, (iii) any underwriter participating in any
disposition pursuant to a Registration Statement, (iv) one firm of accountants
or other agents retained by the Investor, and (v) one firm of attorneys retained
by such underwriters (collectively, the "Inspectors") all pertinent financial
and other records, and pertinent corporate documents and properties of the
Company (collectively, the "Records"), as shall be reasonably deemed necessary
by each Inspector, and cause the Company's officers, directors and employees to
supply all information which any Inspector may reasonably request; provided,
however, that each Inspector shall hold in strict confidence and shall not make
any disclosure (except to an Investor) or use of any Record or other information
which the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (a) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in any
Registration Statement or is otherwise required under the 1933 Act, (b) the
release of such Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement of which
the Inspector has knowledge. The Investor agrees that it shall, upon learning
that disclosure of such Records is sought in or by a court or governmental body
of competent jurisdiction or through other means, give prompt notice to the
Company and allow the Company, at its expense, to undertake appropriate action
to prevent disclosure of, or to obtain a protective order for, the Records
deemed confidential.
(j) The Company shall hold in confidence and not make any
disclosure of information concerning the Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement. The Company agrees that it shall, upon learning that disclosure of
such information concerning the Investor is sought in or by a court or
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<PAGE> 26
governmental body of competent jurisdiction or through other means, give prompt
written notice to such Investor and allow such Investor, at the Investor's
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.
(k) The Company shall use its best efforts either to (i) cause
all the Registrable Securities covered by a Registration Statement to be listed
on each securities exchange on which securities of the same class or series
issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange, or
(ii) secure designation and quotation of all the Registrable Securities covered
by the Registration Statement on the Nasdaq National Market System or, if,
despite the Company's best efforts to satisfy the preceding clause (i) or (ii),
the Company is unsuccessful in satisfying the preceding clause (i) or (ii), to
secure the inclusion for quotation on The Nasdaq SmallCap Market for such
Registrable Securities and, without limiting the generality of the foregoing, to
arrange for at least two market makers to register with the National Association
of Securities Dealers, Inc. ("NASD") as such with respect to such Registrable
Securities. The Company shall pay all fees and expenses in connection with
satisfying its obligation under this Section.
(l) The Company shall provide a transfer agent and registrar of
all such Registrable Securities not later than the effective date of such
Registration Statement.
(m) If requested by the managing underwriters or the Investor,
the Company shall (i) immediately incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriters and the
Investor agree should be included therein relating to the sale and distribution
of Registrable Securities, including, without limitation, information with
respect to the number of Registrable Securities being sold to such underwriters,
the purchase price being paid therefor by such underwriters and any other terms
of the underwritten (or best efforts underwritten) offering of the Registrable
Securities to be sold in such offering; (ii) make all required filings of such
prospectus supplement or post-effective amendment as soon as notified of the
matters to be incorporated in such prospectus supplement or post-effective
amendment; and (iii) supplement or make amendments to any Registration Statement
if requested by a shareholder or any underwriter of such Registrable Securities.
(n) The Company shall use its best efforts to cause the
Registrable Securities covered by the applicable Registration Statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to consummate the disposition of such Registrable
Securities.
(o) The Company shall otherwise use its best efforts to comply
with all applicable rules and regulations of the SEC in connection with any
registration hereunder and the Company shall use its best efforts to file with
the SEC in a timely manner all reports and documents required of the Company
under the 1933 Act and the Securities Exchange Act of 1934 (the "1934 Act").
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<PAGE> 27
(p) Within two (2) business days after the Registration Statement
which includes the Registrable Securities is ordered effective by the SEC, the
Company shall deliver, and shall cause legal counsel for the Company to deliver,
to the transfer agent for such Registrable Securities (with copies to the
Investors whose Registrable Securities are included in such Registration
Statement) confirmation that the Registration Statement has been declared
effective by the SEC in the form attached hereto as Exhibit A.
(q) The Company shall take all other reasonable actions necessary
to expedite and facilitate disposition by the Investor of Registrable Securities
pursuant to a Registration Statement.
IV. OBLIGATIONS OF INVESTOR
(a) At least seven (7) days prior to the first anticipated filing
date of the Registration Statement, the Company shall notify the Investor in
writing of the information the Company requires from the Investor if the
Investor elects to have any of the Investor's Registrable Securities included in
such Registration Statement. It shall be a condition precedent to the
obligations of the Company to complete the registration pursuant to this
Agreement with respect to the Registrable Securities of the Investor that such
Investor shall furnish to the Company such information regarding itself and the
Registrable Securities held by it as shall be reasonably required to effect the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request.
(b) The Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of any Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from such Registration Statement.
(c) In the event the Investor elects to participate in an
underwritten public offering pursuant to Article II, the Investor agrees to
enter into and perform such Investor's obligations under an underwriting
agreement, in usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the managing underwriter of
such offering and take such other actions as are reasonably required in order to
expedite or facilitate the disposition of the Registrable Securities.
V. EXPENSES OF REGISTRATION
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Articles II and III, including, without limitation,
all registration, listing and qualifications fees, printers and accounting
fees, and fees and disbursements of counsel for the Company and fees and
disbursements of Legal Counsel shall be paid by the Company; provided, however,
that the fees
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and disbursements of Legal Counsel shall not exceed Ten Thousand Dollars
($10,000).
VI. INDEMNIFICATION
In the event any Registrable Securities are included in a
Registration Statement under this Agreement:
(a) To the fullest extent permitted by law, the Company will, and
hereby does, indemnify, hold harmless and defend the Investor who holds such
Registrable Securities, the directors, officers, partners, employees, agents,
representatives of, and each Person, if any, who controls the Investor within
the meaning of the 1933 Act or the 1934 Act, and any underwriter (as defined in
the 1933 Act) for the Investor, and the directors and officers of, and each
Person, if any, who controls, any such underwriter within the meaning of the
1933 Act or the 1934 Act (each, an "Indemnified Person"), against any losses,
claims, damages, liabilities, judgments, fines, penalties, charges, costs,
attorneys' fees, amounts paid in settlement or expenses, joint or several,
(collectively, "Claims") incurred in investigating, preparing or defending any
action, claim, suit, inquiry, proceeding, investigation or appeal taken from the
foregoing by or before any court or governmental, administrative or other
regulatory agency, body or the SEC, whether pending or threatened, whether or
not an indemnified party is or may be a party thereto ("Indemnified Damages"),
to which any of them may become subject insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon: (i) any untrue statement or alleged untrue statement of a
material fact in a Registration Statement or any post-effective amendment
thereto or in any filing made in connection with the qualification of the
offering under the securities or other "blue sky" laws of any jurisdiction in
which Registrable Securities are offered ("Blue Sky Filing"), or the omission or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement or (iv) any material violation
of this Agreement (the matters in the foregoing clauses (i) through (iv) being,
collectively, "Violations"). The Company shall reimburse the Investor and each
such underwriter or controlling person, promptly as such expenses are incurred
and are due and payable, for any legal fees or other reasonable expenses
incurred by them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this subsection (a) of this Article: (i) shall not apply
to a Claim by an Indemnified Person arising out of or based upon a Violation
which occurs in reliance upon and in conformity
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<PAGE> 29
with information furnished in writing to the Company by such Indemnified Person
or underwriter for such Indemnified Person expressly for use in connection with
the preparation of the Registration Statement or any such amendment thereof or
supplement thereto; (ii) with respect to any preliminary prospectus, shall not
inure to the benefit of any such person from whom the person asserting any such
Claim purchased the Registrable Securities that are the subject thereof (or to
the benefit of any person controlling such person) if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
in the prospectus, as then amended or supplemented, and the Indemnified Person
was promptly advised in writing not to use the incorrect prospectus prior to the
use giving rise to a violation and such Indemnified Person, notwithstanding such
advice, used it; (iii) shall not be available to the extent such Claim is based
on a failure of the Investor to deliver or to cause to be delivered the
prospectus made available by the Company; and (iv) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the prior
written consent of the Company, which consent shall not be unreasonably
withheld. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investor pursuant to Article
IX.
(b) In connection with any Registration Statement in which the
Investor is participating, the Investor agrees to severally and not jointly
indemnify, hold harmless and defend, to the same extent and in the same manner
as is set forth in subsection (a) of this Article, the Company, each of its
directors, each of its officers who signs the Registration Statement, each
Person, if any, who controls the Company within the meaning of the 1933 Act or
the 1934 Act (collectively and together with an Indemnified Person, an
"Indemnified Party"), against any Claim or Indemnified Damages to which any
Indemnified Party may become subject, under the 1933 Act, the 1934 Act or
otherwise, insofar as such Claim or Indemnified Damages arise out of or are
based upon any Violation, in each case to the extent, and only to the extent,
that such Violation occurs in reliance upon and in conformity with written
information furnished to the Company by such Investor expressly for use in
connection with such Registration Statement; and, subject to subsection (d) of
this Article, such Investor will reimburse any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such Claim; provided, however, that the indemnity agreement contained in this
subsection (b) and the agreement with respect to contribution contained in
Article VII shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of such Investor, which
consent shall not be unreasonably withheld. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
Indemnified Party and shall survive the transfer of the Registrable Securities
by the Investor pursuant to Article VIII.
(c) The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information such persons so furnished in writing
expressly for inclusion in the Registration Statement.
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(d) Promptly after receipt by an Indemnified Person or
Indemnified Party under this Article of notice of the commencement of any action
or proceeding (including any governmental action or proceeding) involving a
Claim, such Indemnified Person or Indemnified Party shall, if a Claim in respect
thereof is to be made against any indemnifying party under this Article, deliver
to the indemnifying party a written notice of the commencement thereof, and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses to be paid by the indemnifying party, if, in
the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. The Company shall
pay reasonable fees for only one separate legal counsel for the Investor, and
such legal counsel shall be selected by the Investor holding a majority in
interest of the Registrable Securities included in the Registration Statement to
which the Claim relates. The Indemnified Party or Indemnified Person shall
cooperate fully with the indemnifying party in connection with any negotiation
or defense of any such action or claim by the indemnifying party and shall
furnish to the indemnifying party all information reasonably available to the
Indemnified Party or Indemnified Person which relates to such action or claim.
The indemnifying party shall keep the Indemnified Party or Indemnified Person
fully apprized at all times as to the status of the defense or any settlement
negotiations with respect thereto. No indemnifying party shall be liable for any
settlement of any action, claim or proceeding effected without its written
consent, provided, however, that the indemnifying party shall not unreasonably
withhold, delay or condition its consent. No indemnifying party shall, without
the consent of the Indemnified Party or Indemnified Person, consent to entry of
any judgment or enter into any settlement or other compromise which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party or Indemnified Person of a release from all liability
in respect to such claim or litigation. Following indemnification as provided
for hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to all third parties, firms
or corporations relating to the matter for which indemnification has been made.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Person or Indemnified
Party under this Article, except to the extent that the indemnifying party is
prejudiced in its ability to defend such action.
(e) The indemnification required by this Article shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or Indemnified Damages are incurred.
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(f) The indemnity agreements contained herein shall be in
addition to (i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
VII. CONTRIBUTION
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Article VI to the fullest extent permitted by law; provided, however, that
no seller of Registrable Securities guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any seller of Registrable Securities who was not guilty of
fraudulent misrepresentation.
VIII. ASSIGNMENT OF REGISTRATION RIGHTS
The rights under this Agreement shall be automatically assignable
by the Investor to any transferee of all or any portion of Registrable
Securities if: (i) the Investor agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is furnished to the
Company within a reasonable time after such assignment; (ii) the Company is,
within a reasonable time after such transfer or assignment, furnished with
written notice of (a) the name and address of such transferee or assignee, and
(b) the securities with respect to which such registration rights are being
transferred or assigned; (iii) immediately following such transfer or assignment
the further disposition of such securities by the transferee or assignee is
restricted under the 1933 Act and applicable state securities laws; provided,
however, that the transferee or assignee may subsequently transfer or assign all
or any portion of the Registrable Securities if an exemption from registration
under the 1933 Act is applicable to such transfer or assignment; (iv) at or
before the time the Company receives the written notice contemplated by clause
(ii) of this sentence the transferee or assignee agrees in writing with the
Company to be bound by all of the provisions contained herein; and (v) such
transfer shall have been made in accordance with the applicable requirements of
the Securities Purchase Agreement.
IX. AMENDMENT OF REGISTRATION RIGHTS
Provisions of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and the Investor who then hold two-thirds of the Registrable Securities. Any
amendment or waiver effected in accordance with this Article shall be binding
upon the Investor and the Company. No such amendment shall be effective to the
extent that it applies to less than all of the holders of the Registrable
Securities. No consideration shall be offered or paid to any Person to amend or
consent to a waiver or modification of any provision of any of this Agreement
unless the same consideration also is
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offered to all of the parties to this Agreement.
X. GENERAL PROVISIONS
SECTION 10.01. Governing Law; Jurisdiction; Waiver of Jury Trial.
This Agreement shall be governed by and construed in all respects by the
internal laws of the State of California (except for the proper application of
the United States federal securities laws), without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of California
or any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of California. Each party hereby irrevocably
submits to the non-exclusive jurisdiction of the state and federal courts
sitting in the County of Los Angeles, State of California. EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR
ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
SECTION 10.02. Counterparts. This Agreement may be executed in
two or more identical counterparts, all of which shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party; provided, however, that a facsimile
signature shall be considered due execution and shall be binding upon the
signatory thereto with the same force and effect as if the signature were an
original, not a facsimile signature.
SECTION 10.03. Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
SECTION 10.04. Severability. If any provision of this Agreement
shall be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
SECTION 10.05. Entire Agreement; Amendments. This Agreement, the
Securities Purchase Agreement and the Articles of Amendment constitute the
entire agreement among the parties hereto with respect to the subject matter
hereof and thereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and therein. This
Agreement, the Securities Purchase Agreement and the Articles of Amendment
supersede all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof and thereof.
SECTION 10.06. Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be
14
<PAGE> 33
in writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one business day after deposit with
a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
If to the Company: Stan Lee Media, Inc.
15821 Ventura Boulevard, Suite 675
Encino, CA 91436
Telephone: (818) 461-1757
Facsimile: (818) 461-1760
Attention: Chief Operating Officer
With a copy to: Jeffrey D. Segal, A Professional
Corporation
10390 Santa Monica Boulevard, 4th Floor
Los Angeles, CA 90025
Telephone: (310) 788-0800
Facsimile: (310) 788-3925
If to the Investor: Macromedia, Inc.
600 Townsend Street
San Francisco, CA 94103
Telephone: (415) 252-2353
Facsimile: (415) 626-0274
Attention: General Counsel
With a copy to: Fenwick & West, LLP
2 Palo Alto Square
Palo Alto, CA 94306
Telephone: (650) 494-0600
Facsimile: (650) 494-1417
Attention: Gordon Davidson, Esq.
SECTION 10.07. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and assigns, including any purchasers of the Preferred Shares.
SECTION 10.08. Third Party Beneficiaries. This Agreement is
intended for the benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any provision
hereof be enforced by, any other person.
SECTION 10.09. Further Assurances. Each party shall do and
perform, or
15
<PAGE> 34
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
SECTION 10.10. Consents. All consents and other determinations to
be made by the Investor pursuant to this Agreement shall be made, unless
otherwise specified in this Agreement, by the Investor holding a majority of the
Registrable Securities, determined as if all of the Preferred Shares then
outstanding have been converted into Registrable Securities without regard to
any limitation on conversions of Preferred Shares.
SECTION 10.11. Construction. A Person is deemed to be a holder of
Registrable Securities whenever such Person owns or is deemed to own of record
such Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more Persons with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rules of
strict construction will be applied against any party.
SECTION 10.12. Remedies. The Investor shall have all rights and
remedies set forth in the Transaction Documents and all rights and remedies
which such holders have been granted at any time under any other agreement or
contract and all of the rights which such holders have under any law. Any person
having any rights under any provision of this Agreement shall be entitled to
enforce such rights specifically (without posting a bond or other security), to
recover damages by reason of any breach of any provision of this Agreement and
to exercise all other rights granted by law.
IN WITNESS WHEREOF, the Company and the Investor have caused this
Registration Rights Agreement to be duly executed by their duly authorized
officer(s) empowered so to act, all as of the date first written above.
COMPANY: INVESTOR:
STAN LEE MEDIA, INC. MACROMEDIA, INC.
By: /s/ Gill Champion By: /s/ Loren E. Hillberg
--------------------------- --------------------------------
Name: Gill Champion Name: Loren E. Hillberg
Title: Chief Operating Officer Title: Vice President - General
Counsel
16
<PAGE> 35
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
Securities Transfer Corporation
16910 Dallas Parkway, Suite 100
Dallas, TX 75248
Attention: Kevin B. Halter, Jr., President.
Re: Stan Lee Media, Inc.
Ladies and Gentlemen:
We are special counsel to Stan Lee Media, Inc., a Colorado corporation
(the "Company"). We have reviewed that certain Securities Purchase Agreement
(the "Purchase Agreement") entered into by and among the Company and the buyers
named therein (collectively, the "Holders"), pursuant to which the Company
issued to the Holders shares of its Series A Preferred Stock, no par value (the
"Preferred Shares") convertible into shares of the Company's common stock, no
par value (the "Conversion Shares"). Pursuant to the Purchase Agreement, the
Company also has entered into a Registration Rights Agreement with the Holders
(the "Registration Rights Agreement") pursuant to which the Company agreed,
among other things, to register the Registrable Securities (as defined in the
Registration Rights Agreement), including the Conversion Shares, under the
Securities Act of 1933, as amended (the "1933 Act"). In connection with the
Company's obligations under the Registration Rights Agreement, on ____________,
the Company filed a Registration Statement on Form ____________ (File No.
____________) (the "Registration Statement") with the Securities and Exchange
Commission (the "SEC") relating to the Registrable Securities which names each
of the Holders as a selling stockholder thereunder.
In connection with the foregoing, we advise you that a member of
the SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge,
after telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.
Very truly yours,
[ISSUER'S COUNSEL]
By:
17
<PAGE> 36
STAN LEE MEDIA, INC.
15821 Ventura Boulevard, 4th Floor
Encino, CA 91436
Telephone: (818) 461-1757
Fax: (818) 461-1760
November 3, 1999
Securities Transfer Corporation
16910 Dallas Parkway, Suite 100
Dallas, TX 75248
Attention: Kevin B. Halter, Jr., President.
Re: Transfer Agent Instructions
Ladies and Gentlemen:
Reference is made to that certain Securities Purchase Agreement
(the "Purchase Agreement"), dated as of November 3, 1999 (the "Closing Date"),
between Stan Lee Media, Inc., a Colorado corporation (the "Company"), and
Macromedia, Inc., a Delaware corporation (the "Holder") pursuant to which the
Company is issuing to the Holder an aggregate of seven hundred fourteen thousand
two hundred eighty-six (714,286) shares of Series A Preferred Stock, no par
value, of the Company (the "Preferred Shares") convertible into Company common
stock (the "Conversion Shares"). This letter shall serve as our irrevocable
authorization and direction to you as "Transfer Agent" (provided that you are
the transfer agent of the Company at such time) to remove any restrictive legend
placed on the certificates representing the Conversion Shares (the "Conversion
Share Certificates") in the event that (i) the Holder sells, transfers or
disposes any or all of such Holder's Conversion Shares pursuant to the
Registration Statement (as contemplated by the Purchase Agreement) and the
Holder has fulfilled the applicable prospectus delivery requirements, or (ii)
the Holder sells, transfers or disposes of any or all of the Holder's Conversion
Shares pursuant to an opinion of Holder's counsel, such opinion in a generally
acceptable form, to the effect that such sale, transfer or disposition is exempt
from registration under the Securities Act of 1933, as amended (the "1933 Act"),
or (iii) the Holder sells, transfers or disposes of any or all of such Holder's
Conversion Shares pursuant to Rule 144 promulgated under the 1933 Act, as
amended ("Rule 144") provided that the Holder provides the Company with
reasonable assurances that the Conversion Shares have been or are to be sold
pursuant to Rule 144.
The Company may from time to time notify you to place
stop-transfer restrictions on the Conversion Share Certificates in the event a
registration statement covering the Conversion Shares is subject to amendment
for events then current.
<PAGE> 37
Securities Transfer Corporation
November 1, 1999
Page 19
Please be advised that the Holder is relying upon this letter as
an inducement to enter into the Purchase Agreement and, accordingly, the Holder
is a third party beneficiary to these instructions.
Should you have any questions concerning this matter, please
contact the undersigned at (818) 461-1757.
Very truly yours,
STAN LEE MEDIA, INC.
By:
-------------------------------
Its:
-----------------------
ACKNOWLEDGED AND AGREED:
SECURITIES TRANSFER CORPORATION
By:
--------------------------------
Its:
-----------------------
Date: November 3, 1999.
Enclosure
cc: Loren E. Hillberg, Vice President
Macromedia, Inc.
19
<PAGE> 38
[Form of Company Counsel Opinion]
November 3, 1999
Macromedia, Inc.
600 Townsend Street
San Francisco, CA 94103
Ladies and Gentlemen:
We have acted as special counsel to Stan Lee Media, Inc., a
Colorado corporation (the "Company"), with respect to certain financing
arrangements entered into between the Company and you, Macromedia, Inc., a
Delaware corporation ("Macromedia"). Pertinent documents (the "Transaction
Documents") executed by the Company and Macromedia include that certain
Securities Purchase Agreement and Registration Rights Agreement, each dated as
of November 3, 1999.
In our capacity as special counsel to the Company, we have
examined and relied upon such documents and instruments as we have deemed
appropriate, including the Transaction Documents. In conducting our examination,
we have assumed, without investigation, the genuineness of all signatures, the
correctness of all certificates, the authenticity of all documents submitted to
us as originals, the conformity to original documents of all documents submitted
to us as certified or photostatic copies and the authenticity of the originals
of such copies, and the accuracy and completeness of all records made available
to us. In rendering our opinion below, we have assumed, without investigation,
that any certificate or other document on which we have relied that was given or
dated earlier than the date of this opinion letter continued to remain accurate
insofar as relevant to such opinions from such earlier date through and
including the date of this opinion letter. In addition, we have assumed, without
investigation, the accuracy of the representations, warranties and covenants as
to factual matters made in the Transaction Documents and the accuracy of
representations and statements as to factual matters made by officers of the
Company in certificates and by public officials.
Whenever a statement herein is qualified by "known to us," "to
our knowledge" or similar phrase, it is intended to indicate that, during our
course of representation of the Company, no information that would give us
current actual knowledge of the inaccuracy of such statement has come to the
attention of those attorneys in this firm who have rendered legal services in
connection with the representation described in the introductory paragraph of
this opinion letter. However, we have not undertaken any independent
investigation to determine the accuracy of such statement, and no inference as
to our knowledge of any matters bearing on the accuracy of any such statement
should be drawn from the fact of our representation of the
<PAGE> 39
Company.
Our opinions below are limited to the matters expressly set forth
in this opinion letter, and no opinion is to be implied or may be inferred
beyond the matters expressly so stated. We disclaim any obligation to update
this opinion letter for events occurring after the date of this opinion letter.
Our opinions below are limited to the effect of the state laws of the State of
California and of the federal laws of the United States.
Based upon and subject to the foregoing, we are of the opinion
that:
(a) The Company and each of its subsidiaries is a corporation
duly incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has the requisite corporate power and
authority to conduct its business, and to own, lease and operate its properties,
as described in the Company's Form 8-K/A filed with the Securities and Exchange
Commission on September 14, 1999.
(b) The Company has the requisite corporate power and authority
to execute, deliver and perform its obligations under the Transaction Documents,
including issuance of the Preferred Shares in accordance with the terms thereof.
The execution and delivery of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated therein have been duly
authorized by the Company's Board of Directors and no further consent or
authorization of the Company, its Board of Directors or its stockholders is
required therefor. The Transaction Documents have been duly executed and
delivered by the Company. The Transaction Documents constitute the valid and
binding agreements of the Company, enforceable against the Company in accordance
with their respective terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies.
(c) The issuance and sale of the Preferred Shares have been duly
authorized, and when issued in accordance with the terms of the Securities
Purchase Agreement, the Preferred Shares will be validly issued, fully paid and
non-assessable and free of all taxes, liens, charges and preemptive rights with
respect to the issue thereof. Upon conversion of the Preferred Shares, the
issuance and sale of the Conversion Shares shall be duly authorized, and when
issued in accordance with the terms of the Articles of Amendment, the Conversion
Shares will be validly issued, fully paid and non-assessable and free of all
taxes, liens, charges and preemptive rights with respect to the issue thereof.
<PAGE> 40
(d) No authorization, approval, consent, filing or other order of
any Federal or state governmental body, regulatory agency, self-regulatory
organization or stock exchange or market, or the stockholders of the Company, or
any court, or, to our knowledge, any third party, is required to be obtained by
the Company to enter into and perform its obligations under the Transaction
Documents for the issuance and sale of the Preferred Shares or the issuance of
the Conversion Shares as contemplated by the Transaction Documents.
(e) To our knowledge, and except as disclosed in the Securities
Purchase Agreement, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board or body or any governmental
agency or self-regulatory organization pending or threatened against the Company
or any of its subsidiaries or any of the properties of the Company or any of its
subsidiaries which might reasonably be expected to have a material adverse
effect on the Company's financial condition, business, properties or assets.
(f) The execution, delivery and performance by the Company of the
Transaction Documents, the consummation by the Company of the transactions
contemplated thereby and the compliance by the Company with the terms thereof
does not (i) violate, conflict with or constitute a default (or an event which,
with the giving of notice or lapse of time or both, constitutes or would
constitute a default) under (1) the Company's Articles of Incorporation, as
amended, or the Company's Bylaws, or (2) any agreement, note, lease, mortgage,
deed or other instrument to which the Company is a party or by which the Company
is bound and which the Company has filed as an exhibit to its reports filed with
the SEC under the 1934 Act or which, to our knowledge, the Company otherwise is
required or will be required to file as an exhibit to its reports under the 1934
Act; or (ii) result in any violation of any statute, law, rule or regulation
known to us to be applicable to the Company or, to the best of our knowledge,
any order, writ, injunction or decree, if such violation would have a material
adverse effect on the Company's financial condition, business, properties or
assets.
This opinion is rendered solely for your benefit and the benefit
of your wholly-owned subsidiary, Shockwave.com, Inc., a Delaware corporation, in
connection with the execution and delivery by Company and Macromedia of the
Transaction Documents and may not be relied upon by any other persons or
furnished to any other persons without our prior written consent.
Very truly yours,
<PAGE> 41
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned corporation adopts the following articles of amendment to its
articles of incorporation:
FIRST: The name of the corporation is Stan Lee Media, Inc. (the "corporation"
and sometimes hereinafter referred to as the "Company").
SECOND: ARTICLE THIRD of the articles of incorporation of the corporation shall
be amended by the addition of a new paragraph D, which shall read in its
entirety as follows:
D. Series A Preferred Stock. A class of preferred stock designated as
the Series A Preferred Stock is hereby created out of the Preferred
Stock previously authorized by these Articles of Incorporation. The
aggregate number of the Series A Preferred Stock which this corporation
shall have authority to issue is one million five hundred thousand
shares (1,500,000) shares, each with no par value, which shares shall be
designated as the "Series A Preferred Stock" (the "Preferred Shares").
The powers, designations, preferences and other special rights of
the Preferred Shares is as follows:
Section 1. Dividends. In the event any dividend or other
distribution payable in cash or other property is declared on the Common
Stock (defined below), each holder (a "Holder" and, collectively, the
"Holders") of the Preferred Shares on the record date for such dividend
or distribution shall be entitled to receive per Preferred Share on the
date of payment or distribution of such dividend or other distribution
the amount of cash or property equal to the cash or property which would
be received by the Holders of the number of shares of Common Stock into
which such Preferred Share would be converted pursuant to Section 2
hereof immediately prior to such record date.
Section 2. Distributions Upon Liquidation, Dissolution or
Winding-Up. In the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the Company, the Holders of the Preferred
Shares shall be entitled to receive in cash out of the assets of the
Company, whether from capital or from earnings available for
distribution to its stockholders (the "Liquidation Funds"), before any
amount shall be paid to the holders of any of the capital stock of the
Company of any class junior in rank to the Preferred Shares in respect
of the preferences as to the distributions and payments on the
liquidation, dissolution and winding up of the Company, an amount per
Preferred
<PAGE> 42
Share equal to Seven Dollars ($7.00) and any accrued but unpaid
Dividends (such sum being referred to as the "Liquidation Preference");
provided, however, that, if the Liquidation Funds are insufficient to
pay the full amount due to the Holders of Preferred Shares and holders
of shares of other classes or series of preferred stock of the Company
that are of equal rank with the Preferred Shares as to payments of
Liquidation Funds (the "Pari Passu Shares"), then each Holder of
Preferred Shares and Pari Passu Shares shall receive a percentage of the
Liquidation Funds equal to the full amount of Liquidation Funds payable
to such Holder as a liquidation preference, in accordance with their
respective Certificate of Designations, Preferences and Rights, as a
percentage of the full amount of Liquidation Funds payable to all
Holders of Preferred Shares and holders of Pari Passu Shares. In
addition to the receipt of the Liquidation Preference, in the event of
any voluntary or involuntary liquidation, dissolution or winding up of
the Company, the Holders of the Preferred Shares shall be entitled to
receive Liquidation Funds distributed to holders of Common Stock, after
the Liquidation Preference has been paid, to the same extent as if such
Holders of Preferred Shares had converted the Preferred Shares into
Common Stock (without regard to any limitations on conversions herein or
elsewhere) and had held such shares of Common Stock on the record date
for such distribution of the remaining Liquidation Funds. The purchase
or redemption by the Company of stock of any class, in any manner
permitted by law, shall not, for the purposes hereof, be regarded as a
liquidation, dissolution or winding up of the Company. Neither the
consolidation or merger of the Company with or into any other Person,
nor the sale or transfer by the Company of substantially all of its
assets, shall, for the purposes hereof, be deemed to be a liquidation,
dissolution or winding up of the Company. No Holder of Preferred Shares
shall be entitled to receive any amounts with respect thereto upon any
liquidation, dissolution or winding up of the Company other than the
amounts provided for herein; provided that a Holder of Preferred Shares
shall be entitled to all amounts previously accrued with respect to
amounts owed hereunder.
Section 3. Conversion of Preferred Shares. Preferred Shares shall
be convertible into shares of the Company's common stock, no par value
(the "Common Stock"), on the terms and conditions set forth in this
Section.
(a) Certain Defined Terms. For purposes of this
Certificate of Designations, the following terms shall have the
following meanings:
(i) "Business Day" means any day in which the
Principal Market is open for business.
(ii) "Closing Bid Price" means, for any security as
of any date, the last closing bid price for such security on the
Principal Market (as defined below) as
2
<PAGE> 43
reported by Bloomberg Financial Markets ("Bloomberg"), or, if the
Principal Market is not the principal securities exchange or trading
market for such security, the last closing bid price of such security on
the principal securities exchange or trading market where such security
is listed or traded as reported by Bloomberg, or if the foregoing do not
apply, the last closing bid price of such security in the
over-the-counter market on the Electronic Bulletin Board for such
security as reported by Bloomberg, or, if no closing bid price is
reported for such security by Bloomberg, the last closing trade price of
such security as reported by Bloomberg, or, if no last closing trade
price is reported for such security by Bloomberg, the average of the bid
prices of any market makers for such security as reported in the "pink
sheets" by the National Quotation Bureau, Inc. If the Closing Bid Price
cannot be calculated for such security on such date on any of the
foregoing bases, the Closing Bid Price of such security on such date
shall be the fair market value as mutually determined by the Company and
the Holders of Preferred Shares. If the Company and the Holders of
Preferred Shares are unable to agree upon the fair market value of the
Common Stock, then such dispute shall be resolved pursuant to Section
3(e) below. (All such determinations to be appropriately adjusted for
any stock dividend, stock split or other similar transaction during such
period).
(iii) "Closing Date" has the same meaning as the
term is defined in the Securities Purchase Agreement, entered into by
and between the Company and certain investor(s), dated as of November 3,
1999.
(iv) "Conversion Price" means the Fixed Conversion
Price in effect as of such date and subject to adjustment as provided
herein.
(v) "Fixed Conversion Price" means, Seven Dollars
($7.00), subject to adjustment as provided herein.
(vi) "Issuance Date" means, with respect to each
Preferred Share, the date of issuance of the applicable Preferred Share.
(vii) "Person" means an individual, a limited
liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization and a government or any department
or agency thereof.
(viii) "Principal Market" means the Nasdaq National
Market, the Nasdaq SmallCap Market or OTC Electronic Bulletin Board.
(ix) "Registration Rights Agreement" means that
certain Registration Rights Agreement entered into by and between the
Company and certain
3
<PAGE> 44
investor(s), dated as of November 3, 1999.
(x) "Stated Value" means Seven Dollars ($7.00).
(b) Holder's Conversion Right. At any time or times on or
after the Issuance Date, any Holder of Preferred Shares shall be
entitled to convert any whole number of Preferred Shares into fully paid
and nonassessable shares of Common Stock in accordance with Section
3(e), at the Conversion Rate (as defined below). The Company shall not
issue any fraction of a share of Common Stock upon any conversion. All
shares of Common Stock (including fractions thereof) issuable upon
conversion of more than one Preferred Share by a Holder thereof shall be
aggregated for purposes of determining whether the conversion would
result in the issuance of a fraction of a share of Common Stock. If,
after the aforementioned aggregation, the issuance would result in the
issuance of a fraction of a share of Common Stock, the Company shall
round such fraction of a share of Common Stock up to the nearest whole
share.
(c) Conversion Rate. The number of shares of Common Stock
issuable upon conversion of each Preferred Share pursuant to Section
3(b) shall be determined according to the following formula (the
"Conversion Rate"):
Stated Value
-----------------
Conversion Price
(d) Automatic Conversion. The Preferred Shares shall
automatically be converted into shares of Common Stock, at the then
effective Conversion Price, upon the earlier of (i) the closing of a
firm commitment underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended,
covering the offer and sale of Common Stock for the account of the
corporation to the public at a price per share (prior to underwriter
commissions and offering expenses) of not less than Fifteen Dollars
($15.00) per share (appropriately adjusted for any recapitalizations,
stock splits, stock combinations, stock dividends and the like) and an
aggregate offering price to the public of not less than Twenty-Five
Million Dollars ($25,000,000), or (ii) the receipt by the corporation of
the affirmative vote at a duly noticed stockholders' meeting or pursuant
to a duly solicited written consent of the holders of more than
two-thirds of the then outstanding Preferred Shares in favor of the
conversion of all of the Preferred Shares. In the event of the automatic
conversion of the Preferred Shares upon a public offering as set forth
in clause (i) above, the person(s) entitled to receive the Common Stock
issuable upon such conversion of Preferred Shares shall not be deemed to
have converted such Preferred Shares until immediately prior to the
closing of such sale of securities.
4
<PAGE> 45
(e) Mechanics of Conversion. The conversion of
Preferred Shares shall be conducted in the following manner:
(i) Holder's Delivery Requirements. To
convert Preferred Shares into shares of Common Stock on any date (the
"Conversion Date"), the Holder shall (A) transmit by facsimile (or
otherwise deliver), for receipt on or prior to 11:59 P.M., Pacific Time
on such date, a copy of a fully executed notice of conversion in the
form attached hereto as Exhibit I (the "Conversion Notice") to the
Company's designated transfer agent (the "Transfer Agent") with a copy
thereof to the Company and (B) surrender to a common carrier for
delivery to the Transfer Agent as soon as practicable following such
date the original certificates representing the Preferred Shares being
5
<PAGE> 46
converted (or an indemnification undertaking with respect to such shares
in the case of their loss, theft or destruction) (the "Preferred Stock
Certificates").
(ii) Company's Response. Upon receipt by the
Company of a copy of a Conversion Notice, the Company shall immediately
send, via facsimile, a confirmation of receipt of such Conversion Notice
to such Holder and the Transfer Agent, which confirmation shall
constitute an instruction to the Transfer Agent to process such
Conversion Notice in accordance with the terms herein. Upon receipt by
the Transfer Agent of the Preferred Stock Certificates to be converted
pursuant to a Conversion Notice, the Transfer Agent shall, on the next
business day following the date of receipt (or the second business day
following the date of receipt if received after 11:00 a.m. local time of
the Transfer Agent), (A) issue and surrender to a common carrier for
overnight delivery to the address as specified in the Conversion Notice,
a certificate, registered in the name of the Holder or its designee, for
the number of shares of Common Stock to which the Holder shall be
entitled, or (B) provided the Transfer Agent is participating in The
Depository Trust Company ("DTC") Fast Automated Securities Transfer
Program, upon the request of the Holder, credit such aggregate number of
shares of Common Stock to which the Holder shall be entitled to the
Holder's or its designee's balance account with DTC through its Deposit
Withdrawal Agent Commission system. If the number of Preferred Shares
represented by the Preferred Stock Certificate(s) submitted for
conversion is greater than the number of Preferred Shares being
converted, then the Transfer Agent shall, as soon as practicable and in
no event later than three (3) Business Days after receipt of the
Preferred Stock Certificate(s) and at its own expense, issue and deliver
to the Holder a new Preferred Stock Certificate representing the number
of Preferred Shares not converted.
(iii) Dispute Resolution. In the case of a dispute
as to the arithmetic calculation of the Conversion Rate, the Company
shall instruct the Transfer Agent to issue to the Holder the number of
shares of Common Stock that is not disputed and shall submit the
disputed determinations or arithmetic calculations to the Holder via
facsimile within one (1) Business Day of receipt of such Holder's
Conversion Notice. If such Holder and the Company are unable to agree
upon the arithmetic calculation of the Conversion Rate within one (1)
Business Day of such disputed arithmetic calculation being submitted to
the Holder, then the Company shall within one (1) Business Day submit
via facsimile the disputed arithmetic calculation of the Conversion Rate
to the Company's independent, outside accountant. The Company shall
cause the accountant to perform the calculations and notify the Company
and the Holder of the results no later than forty-eight (48) hours from
the time it receives the disputed calculations. Such accountant's
calculation shall be binding upon all parties absent manifest error.
6
<PAGE> 47
(iv) Record Holder. The person or persons entitled
to receive the shares of Common Stock issuable upon a conversion of
Preferred Shares shall be treated for all purposes as the record holder
or holders of such shares of Common Stock on the Conversion Date.
(v) Pro Rata Conversion and Redemption. In the
event the Company receives a Conversion Notice from more than one Holder
of Preferred Shares for the same Conversion Date and the Company can
convert some, but not all, of such Preferred Shares, the Company shall
convert from each Holder of Preferred Shares electing to have Preferred
Shares converted at such time a pro rata amount of such Holder's
Preferred Shares submitted for conversion based on the number of
Preferred Shares submitted for conversion on such date by such Holder
relative to the number of Preferred Shares submitted for conversion on
such date.
(f) Fractional Shares. No fractional shares of Common
Stock or scrip shall be issued upon conversion of shares of Preferred
Stock. If more than one share of Preferred Stock shall be surrendered
for conversion at any one time by the same holder, the number of full
shares of Common Stock issuable upon conversion thereof shall be
computed on the basis of the aggregate number of shares of Preferred
Stock so surrendered. Instead of any fractional shares of Common Stock
which would otherwise be issuable upon conversion of any shares of
Preferred Stock, the Company shall pay a cash adjustment in respect of
such fractional interest in an amount equal to that fractional interest
of the then Current Market Price.
(g) Conversion Price Adjustments. The Conversion Price
shall be subject to adjustment from time to time as follows:
(i) Common Stock Issued at Less Than the Conversion
Price. If the Company shall issue any Common Stock other than Excluded
Stock (as hereinafter defined) without consideration or for a
consideration per share less than the Conversion Price in effect
immediately prior to such issuance, the Conversion Price in effect
immediately prior to each such issuance shall immediately (except as
provided below) be reduced to the price determined by dividing (1) an
amount equal to the sum of (A) the number of shares of Common Stock
outstanding immediately prior to such issuance multiplied by the
Conversion Price in effect immediately prior to such issuance and (B)
the consideration, if any, received by the Company upon such issuance,
by (2) the total number of shares of Common Stock outstanding
immediately after such issuance.
For the purposes of any adjustment of the
Conversion Price pursuant to clause (i), the following provisions shall
be applicable:
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(A) Cash. In the case of the issuance of Common
Stock for cash, the amount of the consideration received by the Company
shall be deemed to be the amount of the cash proceeds received by the
Company for such Common Stock before deducting therefrom any discounts,
commissions, taxes or other expenses allowed, paid or incurred by the
Company for any underwriting or otherwise in connection with the
issuance and sale thereof.
(B) Consideration Other Than Cash. In the case of
the issuance of Common Stock (otherwise than upon the conversion of
shares of capital stock or other securities of the Company) for a
consideration in whole or in part other than cash, including securities
acquired in exchange therefor (other than securities by their terms so
exchangeable), the consideration other than cash shall be deemed to be
the fair value thereof as determined by the Board of Directors,
irrespective of any accounting treatment; provided that such fair value
as determined by the Board of Directors shall not exceed the aggregate
Current Market Price of the shares of Common Stock being issued as of
the date the Board of Directors authorizes the issuance of such shares.
(C) Options and Convertible Securities. In the case
of the issuance of (i) options, warrants or other rights to purchase or
acquire Common Stock (whether or not at the time exercisable) other than
the Excluded Stock, and (ii) securities by their terms convertible into
or exchangeable for Common Stock (whether or not at the time so
convertible or exchangeable) or options, warrants or rights to purchase
such convertible or exchangeable securities (whether or not at the time
exercisable) other than the Excluded Stock:
(1) the aggregate maximum number of shares of
Common Stock deliverable upon exercise of such options, warrants or
other rights to purchase or acquire Common Stock shall be deemed to have
been issued at the time such options, warrants or rights were issued and
for a consideration equal to the consideration (determined in the manner
provided in subclauses (A) and (B) above), if any, received by the
Company upon the issuance of such options, warrants or rights plus the
minimum purchase price provided in such options, warrants or rights for
the Common Stock covered thereby;
(2) 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,
warrants or other rights to purchase or acquire such convertible or
exchangeable securities and the subsequent conversion or exchange
thereof, shall be deemed to have been issued at the time such
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<PAGE> 49
securities were issued or such options, warrants or rights were issued
and for a consideration equal to the consideration, if any, received by
the Company for any such securities and related options, warrants or
rights (excluding any cash received on account of accrued interest or
accrued dividends), plus the additional consideration (determined in the
manner provided in subclauses (A) and (B) above), if any, to be received
by the Company upon the conversion or exchange of such securities, or
upon the exercise of any related options, warrants or rights to purchase
or acquire such convertible or exchangeable securities and the
subsequent conversion or exchange thereof;
(3) on any change in the number of shares of
Common Stock deliverable upon exercise of any such options, warrants or
rights or conversion or exchange of such convertible or exchangeable
securities or any change in the consideration to be received by the
Company upon such exercise, conversion or exchange, including, but not
limited to, a change resulting from the anti-dilution provisions
thereof, the Conversion Price as then in effect shall forthwith be
readjusted to such Conversion Price as would have been obtained had an
adjustment been made upon the issuance of such options, warrants or
rights not exercised prior to such change, or of such convertible or
exchangeable securities not converted or exchanged prior to such change,
upon the basis of such change;
(4) on the expiration or cancellation of any
such options, warrants or rights, or the termination of the right to
convert or exchange such convertible or exchangeable securities, if the
Conversion Price shall have been adjusted upon the issuance thereof, the
Conversion Price shall forthwith be readjusted to such Conversion Price
as would have been obtained had an adjustment been made upon the
issuance of such options, warrants, rights or such convertible or
exchangeable securities on the basis of the issuance of only the number
of shares of Common Stock actually issued upon the exercise of such
options, warrants or rights, or upon the conversion or exchange of such
convertible or exchangeable securities; and
(5) if the Conversion Price shall have been
adjusted upon the issuance of any such options, warrants, rights or
convertible or exchangeable securities, no further adjustment of the
Conversion Price shall be made for the actual issuance of Common Stock
upon the exercise, conversion or exchange thereof; provided, however,
that no increase in the Conversion Price shall be made pursuant to
subclauses (1) or (2) of this subclause (C).
(ii) Excluded Stock. "Excluded Stock" shall
mean (A) shares of Common Stock issued or reserved for issuance by the
Company as a stock dividend payable in shares of Common Stock, or upon
any subdivision or split-up of the
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<PAGE> 50
outstanding shares of Common Stock or Preferred Stock, or upon
conversion of shares of Preferred Stock, (B) options and warrants
heretofore granted to key employees, consultants and advisors of the
Company, and (C) 1,500,000 shares of Common Stock to be issued to key
employees, consultants and advisors of the Company pursuant to the
Company's 1999 Stock Incentive Plan, and 150,000 shares of Common Stock
to be issued to non-employee directors pursuant to the Company's 1999
Stock Compensation Plan, together with any such shares that are
repurchased by the Company and reissued to any such employee, consultant
or advisor. All shares of Excluded Stock which the Company has reserved
for issuance shall be deemed to be outstanding for all purposes of
computations under subparagraph 3(g)(i).
(iii) Stock Dividends, Subdivisions,
Reclassifications or Combinations. If the Company shall (i) declare a
dividend or make a distribution on its Common Stock in shares of its
Common Stock, (ii) subdivide or reclassify the outstanding shares of
Common Stock into a greater number of shares, or (iii) combine or
reclassify the outstanding Common Stock into a smaller number of shares,
the Conversion Price in effect at the time of the record date for such
dividend or distribution or the effective date of such subdivision,
combination or reclassification shall be proportionately adjusted so
that the holder of any shares of Preferred Stock surrendered for
conversion after such date shall be entitled to receive the number of
shares of Common Stock which he would have owned or been entitled to
receive had such Preferred Stock been converted immediately prior to
such date. Successive adjustments in the Conversion Price shall be made
whenever any event specified above shall occur.
(iv) Other Distributions. In case the Company shall
fix a record date for the making of a distribution to all holders of
shares of its Common Stock (i) of shares of any class other than its
Common Stock or (ii) of evidence of indebtedness of the Company or any
Subsidiary or (iii) of assets (excluding cash dividends or
distributions, and dividends or distributions referred to in
subparagraph 3(g)(iii) above), or (iv) of rights or warrants (excluding
those referred to in subparagraph 3(g)(i) above), in each such case the
Conversion Price in effect immediately prior thereto shall be reduced
immediately thereafter to the price determined by dividing (1) an amount
equal to the difference resulting from (A) the number of shares of
Common Stock outstanding on such record date multiplied by the
Conversion Price per share on such record date, less (B) the fair market
value (as determined by the Board of Directors, whose determination
shall be conclusive) of said shares or evidences of indebtedness or
assets or rights or warrants to be so distributed, by (2) the number of
shares of Common Stock outstanding on such record date. Such adjustment
shall be made successively whenever such a record date is fixed. In the
event that such distribution is not so made, the Conversion Price then
in effect shall be readjusted, effective as of the date when the
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Board of Directors determines not to distribute such shares, evidences
of indebtedness, assets, rights or warrants, as the case may be, to the
Conversion Price which would then be in effect if such record date had
not been fixed.
(v) Consolidation, Merger, Sale, Lease or
Conveyance. In case of any consolidation with or merger of the Company
with or into another corporation, or in case of any sale, lease or
conveyance to another corporation of the assets of the Company as an
entirety or substantially as an entirety, each share of Preferred Stock
shall after the date of such consolidation, merger, sale, lease or
conveyance be convertible into the number of shares of stock or other
securities or property (including cash) to which the Common Stock
issuable (at the time of such consolidation, merger, sale, lease or
conveyance) upon conversion of such share of Preferred Stock would have
been entitled upon such consolidation, merger, sale, lease or
conveyance; and in any such case, if necessary, the provisions set forth
herein with respect to the rights and interests thereafter of the
holders of the shares of Preferred Stock shall be appropriately adjusted
so as to be applicable, as nearly as may reasonably be, to any shares of
stock or other securities or property thereafter deliverable on the
conversion of the shares of Preferred Stock.
(vi) Rounding of Calculations; Minimum Adjustment.
All calculations under this subparagraph (g) shall be made to the
nearest cent or to the nearest one hundredth (1/100th) of a share, as
the case may be. Any provision of this Section 3 to the contrary
notwithstanding, no adjustment in the Conversion Price shall be made if
the amount of such adjustment would be less than $0.05, but any such
amount shall be carried forward and an adjustment with respect thereto
shall be made at the time of and together with any subsequent adjustment
which, together with such amount and any other amount or amounts so
carried forward, shall aggregate $0.05 or more.
(vii) Timing of Issuance of Additional Common Stock
Upon Certain Adjustments. In any case in which the provisions of this
subparagraph (g) shall require that an adjustment shall become effective
immediately after a record date for an event, the Company may defer
until the occurrence of such event (A) issuing to the holder of any
share of Preferred Stock converted after such record date and before the
occurrence of such event the additional shares of Common Stock issuable
upon such conversion by reason of the adjustment required by such event
over and above the shares of Common Stock issuable upon such conversion
before giving effect to such adjustment and (B) paying to such holder
any amount of cash in lieu of a fractional share of Common Stock
pursuant to subparagraph (e) of this Section 3; provided that the
Company upon request shall deliver to such holder a due bill or other
appropriate
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instrument evidencing such holder's right to receive such additional
shares, and such cash, upon the occurrence of the event requiring such
adjustment.
(h) Current Market Price. The Current Market Price
at any date shall mean, in the event the Common Stock is publicly
traded, the average of the daily closing prices per share of Common
Stock for 30 consecutive trading days ending no more than 15 business
days before such date (as adjusted for any stock dividend, split,
combination or reclassification that took effect during such 30 business
day period). The closing price for each day shall be the last reported
sale price regular way or, in case no such reported sale takes place on
such day, the average of the last closing bid and asked prices regular
way, in either case on the Principal Market on which the Common Stock is
listed or admitted to trading, or if not listed or admitted to trading
on any national securities exchange, the closing sale price for such day
reported by NASDAQ, if the Common Stock is traded over-the-counter and
quoted in the National Market System, or if the Common Stock is so
traded, but not so quoted, the average of the closing reported bid and
asked prices of the Common Stock as reported by NASDAQ or any comparable
system or, if the Common Stock is not listed on NASDAQ or any 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 from time to time by the Company for that purpose. If the
Common Stock is not traded in such manner that the quotations referred
to above are available for the period required hereunder, Current Market
Price per share of Common Stock shall be deemed to be the fair value as
determined by the Board of Directors, irrespective of any accounting
treatment.
(i) Statement Regarding Adjustments. Whenever the
Conversion Price shall be adjusted as provided in subparagraph 3(g), the
Company shall forthwith file, at the office of any transfer agent for
the Preferred Stock and at the principal office of the Company, a
statement showing in detail the facts requiring such adjustment and the
Conversion Price that shall be in effect after such adjustment, and the
Company shall also cause a copy of such statement to be sent by mail,
first class postage prepaid, to each holder of shares of Preferred Stock
at its address appearing on the Company's records. Each such statement
shall be signed by the Company's independent public accountants, if
applicable. Where appropriate, such copy may be given in advance and may
be included as part of a notice required to be mailed under the
provisions of subparagraph 3(j).
(j) Notice to Holders. Subject to the voting
provisions set forth in Section 5 hereof, in the event the Company shall
propose to take any action of the type described in clause (i) (but only
if the action of the type described in clause (i) would result in an
adjustment in the Conversion Price), (iii), (iv) or (v) of subparagraph
3(g),
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the Company shall give notice to each holder of shares of Preferred
Stock, in the manner set forth in subparagraph 3(i), which notice shall
specify the record date, if any, with respect to any such action and the
approximate date on which such action is to take place. Such notice
shall also set forth such facts with respect thereto as shall be
reasonably necessary to indicate the effect of such action (to the
extent such effect may be known at the date of such notice) on the
Conversion Price and the number, kind or class of shares or other
securities or property which shall be deliverable upon conversion of
shares of Preferred Stock. In the case of any action which would require
the fixing of a record date, such notice shall be given at least 10 days
prior to the date so fixed, and in case of all other action, such notice
shall be given at least 15 days prior to the taking of such proposed
action.
(k) Treasury Stock. For the purposes of this Section 3,
the sale or other disposition of any Common Stock theretofore held in
the Company?s treasury shall be deemed to be an issuance thereof.
(l) Costs. The Company shall pay all documentary, stamp,
transfer or other transactional taxes attributable to the issuance or
delivery of shares of Common Stock upon conversion of any shares of
Preferred Stock; provided that the Company shall not be required to pay
any taxes which may be payable in respect of any transfer involved in
the issuance or delivery of any certificate for such shares in a name
other than that of the holder of the shares of Preferred Stock in
respect of which such shares are being issued.
(m) Valid Issuance. All shares of Common Stock which may
be issued upon conversion of the shares of Preferred Stock will upon
issuance by the Company be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to
the issuance thereof, and the Company shall take no action which will
cause a contrary result (including without limitation, any action which
would cause the Conversion Price to be less than the par value, if any,
of the Common Stock).
Section 4. Redemption Rights. The holders of Preferred Shares
shall have no redemption rights.
Section 5. Voting Rights.
(a) General Voting Rights. Except as otherwise
provided in this Section and except as otherwise required by law, each
Holder of the Preferred Shares shall be entitled to notice of any
stockholders' meeting and to vote upon any matter submitted to
stockholders for vote, and shall vote together with the holders of the
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<PAGE> 54
Common Shares as a single class and not as separate classes. Each Holder
of Preferred Shares shall be entitled to the number of votes equal to
the largest number of full shares of Common Stock into which such
Holder's Preferred Shares could be converted pursuant to the provisions
of Section 4 hereof at the record date for the determination of the
stockholders entitled to vote on such matters. Fractional votes shall
not be permitted, however, and any fractional voting rights resulting
from the above formula (after aggregating all shares into which Series A
Preferred Shares held by each holder could be converted) shall be
rounded upward to the nearest whole number. In all cases where the
shares of Preferred Stock have the right to vote separately as a class,
such holders shall be entitled to one vote for each such share held by
them respectively. Each Common Share issued and outstanding shall have
one vote on all matters.
(b) Election of Directors. Notwithstanding the foregoing
voting rights, so long as more than 1,000,000 shares of the Preferred
Shares are outstanding, the holders of the Preferred Shares, voting as a
separate class, shall be entitled to elect one member to the Board of
Directors. All directors not elected by holders of the Preferred Shares
shall be elected by the vote of the holders of the Common Stock and the
Preferred Shares voting together and not as separate classes, with each
share voting as provided in Section 5(a).
(c) Protective Provisions. Until October 31, 2001 (in
which case these protective provisions shall be void and of no effect),
without first obtaining the approval (by vote or written consent, as
provided by law) of a majority of the Holders of the Series A Preferred
Shares then outstanding (voting separately as a class), this corporation
shall not do any of the following:
(i) Alter or change the rights, preferences,
privileges, or powers of the Series A Preferred Shares so as to
materially affect the holders of the Series A Preferred Shares;
(ii) Increase the authorized number of Series A
Preferred Shares;
(iii) Create any new class or series of shares
having preferences over or on a parity with the Series A Preferred
Shares, unless the purpose of creation of such class or series is, and
the proceeds to be derived from the sale and issuance thereof are to be
used for, the retirement of the Series A Preferred Shares;
(iv) Effect any sale, lease, assignment, transfer
or other conveyance of all or substantially all of the assets of this
corporation, or any
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consolidation or merger of this corporation with or into any other
corporation, except for a consolidation or merger for which no
stockholder approval is required;
(v) Approve the appointment of a chief executive
officer for the corporation;
(vi) Approve the corporation's annual operating
plan; or
(vii) Repurchase or redeem any issued and
outstanding shares of Common Stock or shares of Series A Preferred
Stock.
Section 6. Reorganization, Reclassification, Consolidation,
Merger or Sale. Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Company's
assets to another Person or other transaction which is effected in such
a way that holders of Common Stock are entitled to receive (either
directly or upon subsequent liquidation) stock, securities or assets
with respect to or in exchange for Common Stock is referred to herein as
"Organic Change". Until October 31, 2001 (in which case this provision
shall be void and of no effect), prior to the consummation of any (i)
sale of all or substantially all of the Company's assets to an acquiring
Person or (ii) other Organic Change following which the Company is not a
surviving entity, the Company will secure from the Person purchasing
such assets or the successor resulting from such Organic Change (in each
case, the "Acquiring Entity") a written agreement (in form and substance
satisfactory to the Holders of a majority of the Preferred Shares then
outstanding) to deliver to each Holder of Preferred Shares in exchange
for such shares, a security of the Acquiring Entity evidenced by a
written instrument substantially similar in form and substance to the
Preferred Shares, including, without limitation, having a stated value
and liquidation preference equal to the Stated Value and the Liquidation
Preference of the Preferred Shares held by such Holder, and satisfactory
to the Holders of a majority of the Preferred Shares then outstanding.
Prior to the consummation of any other Organic Change, the Company shall
make appropriate provision (in form and substance satisfactory to the
Holders of a majority of the Preferred Shares then outstanding) to
insure that each of the Holders of the Preferred Shares will thereafter
have the right to acquire and receive in lieu of or in addition to (as
the case may be) the shares of Common Stock immediately theretofore
acquirable and receivable upon the conversion of such Holder's Preferred
Shares such shares of stock, securities or assets that would have been
issued or payable in such Organic Change with respect to or in exchange
for the number of shares of Common Stock which would have been
acquirable and receivable upon the conversion of such Holder's Preferred
Shares as of the date of such Organic Change (without taking into
account any limitations or restrictions on the convertibility of the
Preferred Shares).
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Section 7. Reservation of Shares. The Company shall, at
all times so long as any of the Preferred Shares are outstanding,
reserve and keep available out of its authorized and unissued Common
Stock, solely for the purpose of effecting the conversion of the
Preferred Shares, such number of shares (the "Reserved Amount") of
Common Stock as shall from time to time be sufficient to effect the
conversion of all of the Preferred Shares then outstanding (the "Minimum
Amount"). The initial number of shares of Common Stock reserved for
conversions of the Preferred Shares and each increase in the number of
shares so reserved shall be allocated pro rata among the Holders of the
Preferred Shares based on the number of Preferred Shares held by each
Holder at the time of issuance of the Preferred Shares or increase in
the number of reserved shares, as the case may be. In the event a Holder
shall sell or otherwise transfer any of such Holder's Preferred Shares,
each transferee shall be allocated a pro rata portion of the number of
reserved shares of Common Stock reserved for such transferor. Any shares
of Common Stock reserved and allocated to any Person which ceases to
hold any Preferred Shares shall be allocated to the remaining Holders of
Preferred Shares, pro rata based on the number of Preferred Shares then
held by such Holders.
Section 8. Preferred Rank. All shares of Common Stock shall be of
junior rank to all Preferred Shares in respect to the preferences as to
distributions and payments upon the liquidation, dissolution and winding
up of the Company. The rights of the shares of Common Stock shall be
subject to the preferences and relative rights of the Preferred Shares.
Section 9. Participation. Subject to the rights of the Holders,
if any, of the Pari Passu Shares, the Holders of the Preferred Shares
shall, as Holders of Preferred Stock, be entitled to such dividends paid
and distributions made to the holders of Common Stock to the same extent
as if such Holders of Preferred Shares had converted the Preferred
Shares into Common Stock (without regard to any limitations on
conversion herein or elsewhere) and had held such shares of Common Stock
on the record date for such dividends and distributions. Payments under
the preceding sentence shall be made concurrently with the dividend or
distribution to the holders of Common Stock.
Section 10. Vote to Change the Terms of Preferred Shares. The
affirmative vote at a meeting duly called for such purpose or the
written consent without a meeting, of the Holders of not less than
two-thirds (2/3) of the then outstanding Preferred Shares, shall be
required for any change to this Articles of Amendment to the Company's
Articles of Incorporation which would amend, alter, change or repeal any
of the powers, designations, preferences and rights of the Preferred
Shares.
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Section 11. Lost or Stolen Certificates. Upon receipt by the
Company of evidence reasonably satisfactory to the Company of the loss,
theft, destruction or mutilation of any Preferred Stock Certificates
representing the Preferred Shares, and, in the case of loss, theft or
destruction, of any indemnification undertaking by the Holder to the
Company in customary form and, in the case of mutilation, upon surrender
and cancellation of the Preferred Stock Certificate(s), the Company
shall execute and deliver new preferred stock certificate(s) of like
tenor and date; provided, however, the Company shall not be obligated to
re-issue preferred stock certificates if the Holder contemporaneously
requests the Company to convert such Preferred Shares into Common Stock.
Section 12. Remedies, Characterizations, Other Obligations,
Breaches and Injunctive Relief. The remedies provided in this Articles
of Amendment shall be cumulative and in addition to all other remedies
available under this Articles of Amendment, at law or in equity
(including a decree of specific performance and/or other injunctive
relief), no remedy contained herein shall be deemed a waiver of
compliance with the provisions giving rise to such remedy and nothing
herein shall limit a Holder's right to pursue actual damages for any
failure by the Company to comply with the terms of this Articles of
Amendment. The Company covenants to each Holder of Preferred Shares that
there shall be no characterization concerning this instrument other than
as expressly provided herein. Amounts set forth or provided for herein
with respect to payments, conversion and the like (and the computation
thereof) shall be the amounts to be received by the Holder thereof and
shall not, except as expressly provided herein, be subject to any other
obligation of the Company (or the performance thereof). The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Holders of the Preferred Shares and that the
remedy at law for any such breach may be inadequate. The Company
therefore agrees that, in the event of any such breach or threatened
breach, the Holders of the Preferred Shares shall be entitled, in
addition to all other available remedies, to an injunction restraining
any breach, without the necessity of showing economic loss and without
any bond or other security being required.
Section 13. Failure or Indulgence Not Waiver. No failure or delay
on the part of a Holder of Preferred Shares in the exercise of any
power, right or privilege hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other
right, power or privilege.
Section 14. Residual Rights. All rights accruing to the
outstanding shares of this corporation not expressly provided for to the
contrary herein shall be vested in the
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Common Stock.
THIRD: The foregoing amendment was duly adopted on October 11, 1999, by the
Board of Directors of the corporation in accordance with the authority contained
in paragraph B of Article THIRD of the Articles of Incorporation. Pursuant to
Section 7-106-102 of the Colorado Business Corporation Act, the foregoing
amendment is effective without shareholder action.
Dated: November 3, 1999.
STAN LEE MEDIA, INC.,
By: /s/ Gill Champion
--------------------------------------
Gill Champion, Vice President and
Chief Operating Officer
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<PAGE> 1
EXHIBIT 10.2
AGREEMENT
BETWEEN STAN LEE MEDIA AND MACROMEDIA
DATED AS OF __________________
1. PARTIES AND PURPOSE: Macromedia ("Macromedia") and Stan Lee Media, Inc.
("SLM") enter into this agreement for Macromedia to distribute episodic
super-hero series produced by SLM (the "SLM Series") comprised of
flash-animated episodes of approximate five minutes duration created for
initial exploitation over the Internet (Webisodes") for possible
exhibition on Macromedia's "Shockwave" Internet site or any other site
established by Macromedia as its premiere site for delivering content on
the Internet ("Shockwave"). The parties will discuss in good faith the
possibility of altering the format of the Webisodes (duration, etc.) to
the extent that it is believed that another format may be more successful;
provided, neither party can change the format of an Accepted Project
(defined below) without the consent of the other.
2. TERM OF AGREEMENT: The Term shall commence on execution hereof and
continue for five years. If all Webisodes deliverable hereunder have not,
in fact, been delivered by the end of the Term, then the Term shall be
extended until the delivery of the last such contractually required
Webisode. During the term, Macromedia agrees that it intends that
Shockwave shall be its main website for the delivery of original animated
entertainment content on the Internet. If, during the term, Macromedia
shall have a site other than Shockwave as such main site, then SLM shall
have the option to require Macromedia to place the content produced
hereunder on such other site, as well as on Shockwave, and, if such option
is exercised, then all references herein to Shockwave shall thereafter
refer to both such other site and to Shockwave.
3. SHOCKWAVE AND THE SLM CHANNEL:
a) The parties agree to use reasonable best efforts to find ways in
which SLM content shall be featured and promoted by Macromedia and
Shockwave, and SLM and Stan Lee shall promote Macromedia and
Shockwave. Without limiting the foregoing, for no less than the
initial six months from webcast of the first Webisode hereunder,
Shockwave shall establish and maintain a separate "first tier" SLM
Channel (i.e. a channel primarily accessible directly from the home
page, as distinct from a so-called "sub-channel", which are
primarily accessed from first tier channels or other sub-channels)
within Shockwave (the "SLM Channel"). After the initial six months,
Macromedia shall have the right to enable access to the SLM Channel
via a generic link (eg, "superhero" or "comics") on the Shockwave
home page. Further without limitation, SLM shall use reasonable
efforts to include references to the SLM Channel URL in all of its
marketing and advertising activity.
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b) During at least the four (4) weeks following its launch, the SLM
Channel and the first SLM/Shockwave Series (defined in paragraph 4
below) shall be displayed and promoted ("Featured") more prominently
than any other content and channels of content on Shockwave.
Thereafter, the SLM Channel and each SLM/Shockwave Series (defined
in paragraph 4 below) shall be Featured no less prominently than any
other content and channels of content on Shockwave; provided,
however, that during the first four weeks following the launch of
another series on Shockwave, such series may be Featured in a manner
more prominent than the SLM/Shockwave Series are then Featured In
any event the SLM Channel and each SLM/Shockwave Series shall
continue to be Featured in a very prominent manner at all times, and
each additional SLM/Shockwave Series (after the first) shall
prominently be Featured during its launch. The SLM Channel and any
SLM/Shockwave Series will receive prominent credit in ads and
publicity issued by Macromedia or under Macromedia' control for
Shockwave ("Shockwave Ads"), the SLM Channel and any SLM/Shockwave
Series. To the extent that Shockwave Ads Feature other content and
not the SLM/Shockwave Series, then Macromedia shall within a period
of 6 weeks cause to be produced and distributed a substantially
equal number of ads of substantially equal quality Featuring
SLM/Shockwave Series without reference to other non-SLM content. In
the event of an alleged breach by Macromedia of the foregoing, SLM
shall accord Macromedia written notice and Macromedia shall have 30
days within which to cure such alleged breach.
c) Macromedia shall give good faith consideration to offering SLM the
first right to produce, for reasonable fees to be mutually agreed,
additional content to be featured on Shockwave as well as on any
other age- and theme-appropriate sites and communications owned or
controlled by Macromedia. The additional content may include, for
example, interstitial material and material used to entertain a user
during a download of Macromedia files.
d) The SLM Channel shall feature additional content as determined by
SLM and Macromedia in order to "enhance" the SLM Channel, including
chat, games, e-commerce, and other community building activities
("Enhancements").
e) SLM shall have the right to maintain other SLM-branded websites
which may include Enhancements of SLM/Shockwave Series, archived
Webisodes of SLM/Shockwave Series and any other programming and
products, subject to the exclusivity described in 5(b) below.
f) Macromedia has reviewed SLM's agreement with AcmeCity and will
comply with any applicable requirements contained therein. In this
regard, SLM has represented to Macromedia that the requirement
applicable to linkage from the SLM/Shockwave Channel is a
requirement to link to the SLM home page,
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which, in turn, will provide linkage to AcmeCity. Macromedia will
rely on such representation in providing such linkage and SLM will
indemnify Macromedia in connection therewith as described in 13,
below.
4. FIRST LOOK:
a) The parties agree that the first SLM Series for Shockwave shall be
"7th Portal" (which shall substantially follow the presentations
previously given by SLM to Macromedia).
b) During the Term, prior to any submission thereof to a third party,
SLM will submit to Macromedia on a 15 day "first look" basis, any
project owned or controlled by SLM (or any affiliated entity) which
SLM desires to develop or produce as a series of Webisodes for the
Internet. During the first year of the Term, SLM shall make 10 such
submissions at an average rate of at least one submission every 2
months; provided that no further submissions shall be required as a
result of this sentence if SLM no longer has a first look obligation
hereunder (e.g. 5 have been accepted as described in (c) below). Any
submission shall include a brief description and tentative character
designs of the "Key Characters" (as defined below), the universe of
the series and ideas for possible future episodes, as well as the
contemplated per-Webisode budget (the "Budget") for the applicable
Series. Each submission shall be deemed to meet the submission
requirements unless Macromedia shall, within 3 business days of
receipt thereof, inform SLM, in writing, of the specific manner in
which such submission is deficient. To the extent that SLM has
expenses which benefit more than one project, SLM shall make a good
faith allocation of such expenses between projects. The budget (and
the actual costs if a series is, in fact, produced) shall identify
and include the allocations of such expenses as determined by SLM in
good faith. If Macromedia is interested in webcasting a submitted
project on Shockwave and so advises SLM in writing during the
aforesaid 15 day period, then the project will be deemed an
"Accepted Project" and Macromedia will pay for each Webisode, within
5 business days of the SLM's delivery thereof, the amount described
in the Budget as submitted. Any Accepted Project shall be defined as
an "SLM/Shockwave Series". The terms hereof applicable to 7th Portal
shall apply to any such SLM/Shockwave Series. Each Webisode of an
Accepted Project shall, absent information to the contrary provided
to Macromedia as part of its submission of such project, be of a
quality substantially consistent with that of the previously
delivered Webisodes.
c) SLM's duty to submit projects on a first look basis to Macromedia
shall not apply at any time during which Macromedia shall have
accepted five (5) projects (subject to the exclusions described in
the penultimate sentence of this paragraph (c)). Notwithstanding the
foregoing, if SLM elects at its
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discretion to cease producing Webisodes of a particular
SLM/Shockwave Series, it shall have the right to do so, by written
notice to Macromedia, provided, Macromedia shall again have a first
look at subsequent projects owned or controlled by SLM (or any
affiliated entity) which SLM desires to develop or produce as a
series of Webisodes for the Internet until it has replaced said
SLM/Shockwave Series. To the extent that any new SLM project is
either (i) a revival of a prior SLM/Shockwave Series (i.e. new
Webisodes of such series) which SLM (as distinct from Macromedia)
has elected to cease producing, or (ii) which has as Key Characters
one or more Key Characters from existing SLM/Shockwave Series, then
Macromedia shall have a first look, as described above, regardless
of the number of SLM/Shockwave Series previously accepted. As used
herein "Key Character" means any character that has appeared in at
least 5/13 of the Webisodes of a specific SLM/Shockwave Series for
any production year, and that was not publicly exploited (on more
than merely an incidental basis) prior to its inclusion in the
applicable SLM/Shockwave Series (SLM agrees that no such previously
exploited character shall be included in more than 5/13 of the
Webisodes without Macromedia's approval).
d) As to any submitted projects that Macromedia rejects or is deemed to
have rejected (including all SLM/Shockwave Series for which
Macromedia has failed to exercise its option for additional
Webisodes as described in 6(a) below ), SLM will be free to set it
up with a third party, with no further obligation to Macromedia
(subject, however, if the project has any changed material elements
(including the Key Characters and the budget) since last passed on
by Macromedia, to SLM again submitting to Macromedia for a first
look as described above, the project containing such changed
elements). SLM's services on such outside projects will not
interfere with the timely delivery of SLM/Shockwave Series.
e) The Budget (as initially submitted by SLM) for each Webisode of a
SLM/Shockwave Series shall be based on SLM's good faith estimate of
the costs (prorated over 22 Webisodes or such other number as the
parties may agree shall be produced with respect to an Accepted
Project) of producing such Series and shall include an allowance of
15% for SLM overhead and 10% for SLM profit (with no overhead on
profit and no profit on overhead). After delivery of the last of
each block of 22 Webisodes of a particular SLM/Shockwave Series, SLM
shall deliver a statement of the actual costs incurred in the
production of such episodes plus overhead and profit as aforesaid.
If the actual costs (plus overhead and profit thereon) were less
than the aggregate fees actually paid by Macromedia for said 22
Webisodes, then Macromedia shall be entitled to a credit equal to
the difference against future Webisode license fees. Macromedia
shall have the right to audit SLM's actual costs once per year and
once per 22 Webisode block within 12 months
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after submission of the statement referred to above; provided,
Macromedia shall not have the right to contest SLM's good faith
allocation of actual costs.
5. EXCLUSIVITY:
a) SLM's services shall be exclusive to Macromedia and Shockwave only
as specifically set forth herein. For example, it is understood that
SLM shall have the right to produce programming such as Webisodes
featuring elements it does not own or control for and with third
parties outside of this agreement and to maintain other SLM-branded
websites, without any obligation to Macromedia.
b) Each Webisode of a SLM/Shockwave Series shall be available
exclusively to Macromedia for a period of six months (the "Exclusive
Webcast Period") from the Initial Webcast Date (as defined in the
next two (2) sentences). The Initial Webcast Date with respect to
the first Webisode of a SLM/Shockwave Series shall be mutually
agreed between the parties but shall be no later than ten (10)
business days after delivery by SLM of the first three Webisodes of
such SLM/Shockwave Series unless SLM otherwise agrees. The Initial
Webcast Date of each subsequent Webisode of a SLM/Shockwave Series
shall be two weeks after the Initial Webcast Date of the prior
Webisode of such SLM/Shockwave Series so long as SLM shall have
timely delivered such Webisode to Macromedia.. SLM shall endeavor,
in good faith, to deliver the first Webisode of SLM/Shockwave Series
(in a form reasonably required by Macromedia for exploitation of
same on the Internet) within 60 days of Macromedia's acceptance
thereof (or, in the case of a series in years after the first year,
after Macromedia's exercise of its option for such subsequent year)
and to deliver the remaining episodes for each production year at
the rate of approximately one episode each two weeks. SLM shall keep
Macromedia fully apprised of any material schedule delays as soon as
SLM is aware of same.
c) After each respective 6-month Exclusive Webcast Period, SLM shall
consult with Macromedia with respect to the subsequent exploitation
of such Webisodes, with SLM having the final decision with regard
thereto. All such Webisodes also shall be archived non-exclusively
on the SLM Channel of Shockwave without additional charges to
Macromedia, except for the Contingent Compensation described in 10,
below; provided, however, that if Macromedia shall fail to exercise
its option for further Webisodes, as described in 6(a) below, and if
SLM shall thereafter cause new Webisodes of such Series to be
available on the Internet from a non-Macromedia source, then, after
the end of the exclusivity period for the Webisodes of such series
previously delivered hereunder, Macromedia shall no longer have a
right to authorize any third party to exhibit any past Webisodes of
such series, all
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such rights thereafter, as between the parties hereto, being vested
solely in SLM.
d) Macromedia's Webisode exclusivity extends to made-for-the-Internet
use of Key Characters (but not where such Internet use is primarily
for the purpose of advertising and marketing non-Internet
exploitation of such Key Characters) in each SLM/Shockwave Series,
so long as any Webisodes of such Series are exclusive to Macromedia
hereunder. Notwithstanding the foregoing such exclusivity shall not
apply to either (i) Key Characters where Macromedia has elected to
cancel the applicable SLM/Shockwave Series, (ii) the appearance of
any Key Characters as "guest stars" on any non-Shockwave series
owned or controlled by SLM, but in no event may any such third party
"guest star" appearance of a Key Character exceed 4 Webisodes in
each calendar year; provided that SLM has obtained a comparable
right for itself for analogous "guest star" appearances by Key
Characters from such non-Shockwave series on SLM/Shockwave Series or
(iii) Webisodes not originally produced in the English language.
Macromedia agrees that it will not authorize, on sites controlled by
it, any parody of any character owned by SLM, whether part of an
SLM/Macromedia Series or otherwise, including, without limitation,
any character which is intended to trade off the good will of any
such SLM character (e.g. similar overall look or powers).
e) In the event that at the time that SLM initially submits an SLM
Series for Macromedia's consideration and Macromedia accepts same,
Macromedia advises SLM in writing that (a) Macromedia is desirous of
acquiring specific denominated foreign language versions of
Webisodes of such Series and (b) Macromedia has or will at all
relevant times have --- established versions of the Shockwave
website in each such denominated foreign language (i.e., such
language is the main language of such site), then Macromedia rights
hereunder shall include the applicable foreign language rights along
with the English language rights to such Webisodes during the
applicable Exclusive Webcast Period. In such event, Macromedia shall
be required to produce (or to have SLM produce) versions of each
such Webisode translated, dubbed and otherwise re-purposed in and
for each such foreign language, at Macromedia's expense (and with
SLM's creative approval under paragraph 7 below), and webcast such
foreign language version at such site commencing on about the same
date that such Webisode is webcast in the English language and
otherwise on the same terms applicable to the equivalent English
language Webisode subject to any additional laws and regulations
applicable to the foreign-language version of such Webisode outside
the United States. With respect to successive production years for
each SLM/Shockwave Series, at the time Macromedia elects to exercise
its option to extend under 6(a) below, Macromedia shall again have
the right to acquire
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specific denominated foreign language rights on the same terms as
outlined above.
6. SLM/SHOCKWAVE SERIES: The terms and conditions of the license fee
agreement between SLM and Shockwave shall include the following:
a) With respect to subsequent production years for each SLM/Shockwave Series,
SLM shall submit to Macromedia, at least 105 days prior to the end of the
one (1) year period commencing on delivery of the first Webisode for the
each production year, for the next subsequent production year: (i) any
required change in the budget, and, (ii) to the extent known as of the
date of submission, (aa) new character designs (if any) and (bb)
contemplated story arcs. Macromedia shall have four (4) consecutive annual
options to have SLM deliver new Webisodes, exercisable in writing no later
than 90 days prior to the end of the one (1) year period commencing on
delivery of the first Webisode for the preceding production year, but in
no event earlier than the date 20 days following the delivery of the
elements referred to in (i) and (ii) above. Shockwave shall webcast all
Webisodes of a SLM/Shockwave Series produced, including a minimum of 22
Webisodes per production year. If Macromedia does not make each such
Webisode available for viewing at Shockwave on the Initial Webcast Date
and throughout the entire Exclusive Webcast Period, after notice from SLM,
then such exclusive period shall end and SLM shall have the right to make
each such Webisode available at any other websites, at its sole
discretion; provided, Macromedia shall not be relieved of its obligations
with respect to all Webisodes for which Macromedia shall have exercised
its option.
b) License Fee:
i) SLM/Shockwave Series: For each Webisode of a SLM/Shockwave
Series, Macromedia shall pay SLM a license fee equal to the
average Webisode budget, as more fully described in 4(e)
above.
ii) Subject to 8(a) below, Macromedia shall have a credit of
$535,500 against the first sums payable to SLM as license fees
for Webisodes of the 7th Portal; provided such credited sums
shall not be repayable to Macromedia.
7. CREATIVE CONTROLS: SLM shall have absolute creative control and "final
cut" with respect to the SLM Series as well as any non-series exploitation
of any Key Character. "Creative controls" will be deemed to extend to the
selection of scripts, writers, writing staff, directors, other producers
(including executive, co-executive, supervising, associate and
co-producers), consultants, cast and key post-production personnel. To the
extent that Macromedia shall, with SLM's consent, create or cause
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the creation of any materials not delivered by SLM hereunder containing
any Key Character or other SLM element, Macromedia shall submit same to
SLM, and if SLM has not disapproved same within 10 business days
(reducible for exigent circumstances, but to no fewer than 3 business
days) of its receipt, then such submitted material shall be deemed
approved. SLM agrees that all Webisodes, and all other content delivered
hereunder shall endeavor to conform to Macromedia's written Standards and
Practice rules and Quality Assurance Processes applicable to all
Macromedia Internet Activities and required technical protocols for, so
long as a copy of such rules and protocol requirements have been delivered
to SLM prior to the commencement of production of the applicable Webisode.
If a Webisode that has been approved for exhibition thereafter fails to
meet Macromedia's Quality Assurance Process standards, the parties
mutually shall agree on a method to effect any needed corrections. Neither
party's rights of approval hereunder shall be exercised in a manner so as
to frustrate the purposes of this agreement.
8. ADVERTISING AND CREDIT:
a) SLM shall pay $178,500 of the advertising costs for the launch of
the SLM Channel and 7th Portal during or prior to the 4 week period
referred to in 3(b) above, which costs shall be reviewed and
reasonably approved by Macromedia.
b) The parties shall co-host major media events to announce this
agreement and the launch of 7th Portal and the SLM Channel.
c) All ads and publicity for the SLM Channel and any SLM/Shockwave
Series, and any press release relating to this agreement, shall
require SLM's and Macromedia's reasonable approval. No ad under the
direct or indirect control of or authorized by Macromedia appears in
conjunction with any SLM/Shockwave Series Webisode or any other use
of any Key Character (including, without limitation, any ad created
by a third party which is authorized by Macromedia to appear on a
Macromedia or Shockwave website containing any SLM/Shockwave Series
Webisode or any other use of any Key Character) shall advertise a
product which is inappropriate (using general national US community
standards) for use by children between the ages of 10 and 18,
including, without limitation, ads for tobacco, alcohol, drugs
(whether or not prescription or "over-the counter" drugs), sexually
related services, gambling and any illegal activity. In the event of
a breach by Macromedia of the foregoing, SLM shall notify Macromedia
and Macromedia shall have 24 hours within which to cure such breach
by removing the applicable ad.
d) SLM shall use reasonable efforts to cause Macromedia or its
individual designee to receive co-production credit or a
co-executive producing credit in
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connection with the ancillary exploitation of SLM/Shockwave Series
elements.
9. OWNERSHIP: SLM shall own in perpetuity all rights in and to the SLM Series
and the SLM Channel, including the Webisodes themselves as well as the
underlying characters and other elements, including all copyright,
trademark and other rights of every kind and nature, subject only to the
express rights granted herein, including, without limitation, the right to
continue exploiting Webisodes after the exclusive period as described and
subject to 5(b) above.
10. CONTINGENT COMPENSATION: Macromedia shall receive the following contingent
compensation in respect of the exploitation of all SLM/Shockwave Series
and all Key Characters therefrom:
a) Internet Licenses: Macromedia shall be entitled to receive 50% of
all adjusted gross income ("AGI") derived from the following:
i) Licenses of English-language Webisodes of a SLM/Shockwave
Series to other Internet sites. Macromedia shall be
responsible for such licenses during the Exclusive Webcast
Period of the applicable Webisode (for no additional fee);
provided any such licenses shall require SLM's reasonable
approval. After the initial six months, SLM shall be
responsible for such licenses.
ii) Licenses to Internet sites of non-English language versions of
the Webisodes. Subject to 5(e) above (i.e, if Macromedia does
not acquire such rights for its own foreign language website),
SLM shall be responsible for all such licenses; provided,
Macromedia shall have the right reasonably to approve the
licensee of any such webcast rights during the Exclusive
Webcast Period of the English-language version of the
applicable Webisode. In addition to the foregoing, and again
subject to Macromedia's rights under 5(e) above, to the extent
that SLM desires to license to a third party for webcast
during Macromedia's Exclusive Webcast Periods more than a
single season's block of non-English language versions of
Webisodes (i.e., 22 Webisodes) of an SLM/Shockwave Series,
then Macromedia shall have the right reasonably to approve the
terms of such a license. Further, and again subject to
Macromedia's rights under 5(e) above, to the extent that SLM
desires to license to a third party for webcast during
Macromedia's Exclusive Webcast Period non-English language
Webisodes (i.e., 22 Webisodes) of an SLM/Shockwave Series for
which no license fee is denominated but instead SLM is
receiving consideration in another form (eg, a purchase of
stock in
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SLM), then Macromedia also shall have the right reasonably to
approve the terms of such a license.
iii) Sales of the right to view or download Webisodes from the SLM
Channel via the Shockmachine or otherwise. Macromedia shall be
responsible for any such sales from Shockwave (for no
additional fee); provided that Macromedia shall consult in
good faith with SLM as to specific pricing and selection of
Webisodes for such sale purposes. After such consultation,
Macromedia's decision with regard to pricing for any public or
other unrelated third party arms-length sale shall be final.
Any sale to a Macromedia related party and any "bundling" in a
single sale with non-SLM product shall be subject to SLM's
prior written approval.
iv) Advertising and Sponsorships on pages on Shockwave exhibited
SLM/Shockwave Series, and other uses Key Characters in
connection with other Macromedia products. Macromedia shall be
responsible for all such advertising and sponsorship sales and
shall have the right to designate third parties as its agents
for such purposes; provided, the fee charged by Macromedia for
such purposes (inclusive of any third party fee) shall not
exceed 30%.
v) The parties agree that each new Webisode of a SLM/Shockwave
Series shall be available for free viewing at Shockwave for a
period of no less than three months during the Macromedia six
month exclusive period for such Webisode.
b) Other Exploitation: Macromedia shall be entitled to receive 10% of
all AGI received by SLM from all other exploitation of the
SLM/Shockwave Series and any elements thereof (including, without
limitation, any Key Characters) including, without limitation,
advertising on SLM sites, merchandising, ancillary media
productions, etc. SLM shall be responsible for all such exploitation
or shall have the right to designate third parties as its agents for
such purposes; provided, the fee charged by SLM for such purposes
(inclusive of any third party fee) shall not exceed 30%. SLM shall
consult in good faith with Macromedia with respect to such
exploitation. In the event that income is derived from the
exploitation of SLM/Shockwave Series together with other SLM owned
properties, SLM shall make a good faith allocation.
c) AGI shall be defined as gross sums received by SLM or Macromedia (or
their respective affiliates) after deducting the following in the
following order:
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i) Any sums included in such gross monies which are contractually
required by the payor (e.g., the financier of a television
series being produced by SLM) to be expended to create the
materials or elements for which the gross monies are paid (eg,
a license fee for an episode of a television program which fee
includes, in part, the cost of producing the program);
ii) Distribution/service/sales fees (described above);
iii) Third party participations (which shall be included in the
submitted budget or otherwise approved, in writing, by
Macromedia); and
iv) Costs borne/advanced by SLM, including, by way of example,
unreimbursed costs of materials or programming created by SLM
to the extent such materials or programming are approved or
accepted by Macromedia, and distribution expenses.
d) All income shall be collected directly by the party responsible for
the applicable exploitation, and shall be accounted to the other
party on a quarterly basis. Each party shall have the right to audit
the books and records of the other party with respect to sums
payable hereunder on reasonable notice, no more than one per year or
once with respect to any accounting period.
e) Notwithstanding anything to the contrary contained hereinabove, in
the event that Macromedia fails to order and exhibit in accordance
with this agreement 22 episodes of an SLM/Shockwave Series (other
than due to SLM's actions or omissions), then Macromedia shall not
be entitled to any share in Contingent Compensation.
11. ECOMMERCE: Macromedia may from time-to-time establish eCommerce
businesses. SLM shall endeavor to offer Macromedia's eCommerce businesses
the first opportunity to provide services to SLM, the SLM Channel and the
SLM/Shockwave Series. In the event SLM desires to utilize the services of
any such eCommerce business, the parties shall negotiate in good faith the
appropriate consideration therefor.
12. REMEDIES: Excepting only in the case of exploitation of the SLM/Shockwave
Series Webisodes or the Key Characters which is prohibited hereunder, the
parties hereto agree that, in the event of a purported breach hereof, the
party claiming said breach shall be limited to recovering actual damages
caused by such breach, and in no event shall such party have any right to
collateral, consequential or punitive damages, or any right to seek
injunctive or equitable relief.
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13. INDEMNITY: Each party agrees to indemnify the other from and against any
and all costs, damages liabilities and expenses (including, without
limitation reasonable attorneys' fees and expenses) in connection with any
breach by such party of any obligation or representation hereunder,
including, without limitation, any claim that the representation contained
in 3(f) above is incorrect. Upon receiving any third party claim, the
party receiving same will promptly inform the other party thereof, and the
indemnifying party shall be solely responsible for all responses to any
such claim, including, without limitation, any legal responses and
defenses with regard thereto and the direction of all lawyers in
connection therewith. If the indemnifying party shall fail to defend
against such claim, and shall continue to do so for a period of thirty
(30) days after notice of such failure from the indemnified party, then
the indemnified party shall have the right to set up a reasonable reserve
for such claim and to cease making payments or deliveries hereunder until
such reserve has been filled or the indemnifying party has commenced such
defense, and such failure to make payment or delivery shall not be a
breach hereof or extend any dates hereunder.
15. CLEAR RIGHTS: SLM represents and warrants that (except to the extent where
there was notification in the original submission or where otherwise
approved in writing by Macromedia) the Webisodes and other material
delivered by SLM shall be solely owned by SLM and free and clear of any
third party claims or encumbrances, or violate the rights of any third
party (including, without limitation, copyrights, trademarks and the right
to be free from defamation) when used by Macromedia in the manner
authorized hereunder.
16. OTHER TERMS: This agreement is deemed to include other customary terms as
are set forth in agreements of this nature (e.g., warranties and
indemnities, E&O, etc.), as same may be negotiated in good faith. Unless
and until a more formal agreement is signed, this shall constitute a
binding agreement between the parties.
17. ENTIRE AGREEMENT; AMENDMENTS: This Agreement supersedes all other prior
oral or written agreements between the parties, their affiliates and
persons acting on their behalf with respect to the matters discussed
herein, and this Agreement and the instruments referenced herein contain
the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither party makes any representation, warranty, covenant or
undertaking with respect to such matters. For purposes of interpretation,
this agreement will be deemed to have been drafted by both parties. No
provision of this Agreement may be amended other than by an instrument in
writing signed by the Company and the Investor, and no provision hereof
may be waived other than by an instrument in writing signed by the party
against whom enforcement is sought.
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AGREED AND ACCEPTED:
- -------------------
STAN LEE MEDIA, INC. MACROMEDIA, INC.
By: /s/ Gill Champion By: /s/ Loren E. Hillberg
----------------------------- ---------------------------------
Its: VP-Chief Operating Officer Its: Vice President/General Counsel
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EXHIBIT 10.3
STAN LEE MEDIA, INC.
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (the "Agreement") is made as of February ___,
2000 (the "Agreement Date"), by and between Stan Lee Media, Inc., a Colorado
corporation (the "Company") with its principal office at 15821 Ventura
Boulevard, Suite 675, Encino, California 91436, and the purchasers listed on
Schedule A attached hereto (individually, a "Purchaser" and collectively
"Purchasers").
RECITALS
WHEREAS, the Company desires to issue and sell to the Purchaser and the
Purchaser desires to purchase from the Company, on the terms and subject to the
conditions set forth in this Agreement, 200,000 shares (the "Shares") of the
Company's common stock, no par value (the "Common Stock") at $8.00 per share for
a total purchase price of $1,600,000.
AGREEMENT
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants and agreements set forth herein, and for other valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the
parties hereto agree as follows:
Section 1
Purchase and Sale of Common Stock and Warrants
1.1 Purchase and Sale of Common Stock. Subject to the terms and
conditions of this Agreement, at the Closing (as defined below) each Purchaser,
severally and not jointly, agrees to purchase from the Company, and the Company
agrees to issue and sell to each Purchaser the number of shares of Common Stock
set forth opposite each Purchaser's name on Schedule A hereto at a purchase
price (the "Purchase Price") of $8.00 per share.
1.2 Issuance of Warrants. The Company shall issue to each Purchaser a
warrant (individually a "Warrant" and collectively the "Warrants") exercisable
for fifty percent (50%) of the number of Shares purchased by such Purchaser.
Each Warrant, the form of which is attached hereto as Exhibit D, entitles the
registered holder thereof to purchase shares of Common Stock at a price of
$10.00 per share, subject to adjustment in certain circumstances, commencing on
the date hereof until five years from the Closing (as defined below). The
Shares, the Warrants, the Penalty Warrants (defined below) and the shares of
Common Stock issuable upon exercise of the Warrants and Penalty Warrants (the
"Warrant Shares") are herein collectively referred to as the "Securities."
<PAGE> 2
Section 2
Closing Date; Delivery
2.1 Closing Date. The completion of the purchase and sale of the Shares
will be held at a location mutually agreeable to the parties on February 1, 2000
(the "Closing"). The date of the Closing is hereinafter referred to as the
"Closing Date."
2.2 Delivery. At the Closing, the Company will deliver to Purchaser the
certificates evidencing the Shares and an opinion of Jeffrey D. Segal, a
Professional Corporation, counsel to the Company, in the form of Exhibit A. Such
delivery shall be against payment of the Purchase Price for the Shares by wire
transfer of immediately available funds to the Company's bank account (in
accordance with instructions furnished by the Company).
Section 3
Representations and Warranties of the Company
The Company represents and warrants to the Purchasers as follows:
3.1 Organization and Standing. The Company and each of its subsidiaries
is a corporation duly organized and validly existing under and by virtue of the
laws of the state in which it is incorporated and is in good standing as a
domestic corporation under the laws of said state, and has the requisite
corporate power and authority to own its properties and to carry on its business
as now being conducted. Other than as disclosed in Schedule 3.1 hereof, the
Company has no subsidiaries or direct or indirect ownership in any firm,
corporation or business which either individually or in the aggregate is
material to the business of the Company. The Company and each of its
subsidiaries is qualified to do business and is in good standing as a foreign
corporation in every jurisdiction in which its ownership of property or conduct
of business requires it to be so qualified and in which the failure to so
qualify would have a material adverse effect on the financial condition or
business of the Company or any of its subsidiaries.
3.2 Corporate Power; Authorization. The Company has all requisite legal
and corporate power and authority and has taken all requisite corporate action
to duly authorize, execute and deliver this Agreement, to sell and issue the
Shares and the Warrant, and to carry out and perform all of its obligations
under and contemplated by this Agreement. This Agreement has been duly executed
and delivered by an authorized officer of the Company and constitutes the legal,
valid and binding obligation of the Company, enforceable in accordance with its
terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization or similar laws relating to or affecting the enforcement of
creditors' rights generally, and (b) as limited by equitable principles
generally (regardless of whether such enforceability is considered a proceeding
in equity or at law).
3.3 Issuance and Delivery. The Shares, the Warrants and the Penalty
Warrants (defined below) have been duly authorized and, when issued and
delivered in compliance with this Agreement, will be duly and validly issued and
delivered and will be outstanding, fully paid, nonassessable and free and clear
of all pledges, liens, encumbrances and restrictions other than
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any liens or encumbrances created by or imposed on the holders thereof through
no action of the Company; provided, however, that the Shares, the Warrants and
the Penalty Warrants will be subject to restrictions on transfer and state and
federal securities laws and as provided herein. The Warrant Shares have been
duly authorized and reserved for issuance upon exercise of the Warrant and
Penalty Warrant (as applicable), and such shares, when issued upon such exercise
in accordance with the terms of the Company's Certificate of Incorporation, the
Warrant or the Penalty Warrant (as applicable), and when the price is paid upon
exercise of the Warrant or the Penalty Warrant (as applicable), shall be fully
paid and nonassessable. No preemptive rights or other rights to subscribe for or
purchase exist with respect to the issuance and sale of the Securities by the
Company pursuant to this Agreement. Except as provided in Schedule 3.3, no
stockholder of the Company has any right (which has not been waived or has not
expired by reason of lapse of time following notification of the Company's
intent to file the Registration Statement) to require the Company to register
the sale of any securities owned by such holder under the Securities Act of
1933, as amended (the "Securities Act"), in the Registration Statement. Except
as provided in Schedule 3.3, no further approval or authority of the
stockholders or the Board of Directors of the Company will be required for the
issuance and sale of the Securities to be sold by the Company as contemplated
herein.
3.4 SEC Documents; Financial Statements; Subsequent Events. The Company
has filed in a timely manner all documents that the Company was required to file
with the Securities and Exchange Commission ("SEC") during the twelve (12)
months preceding the date of this Agreement. As of their respective filing
dates, all documents filed by the Company with the SEC (the "SEC Documents")
complied in all material respects with the requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") or the Securities Act, as
applicable and all rules and regulations thereunder. None of the SEC Documents
contained, as of their respective dates, any untrue statement of material fact
or omitted to state a material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances under which
they were made, not misleading, and such SEC Documents, when read as a whole, do
not contain any untrue statements of a material fact and do not omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company and each of its subsidiaries included in the SEC
Documents (the "Financial Statements") comply in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto. The Financial Statements have been prepared in
accordance with United States generally accepted accounting principles
consistently applied, and fairly present the financial position of the Company
and any subsidiaries at the dates thereof and the results of the Company's
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal adjustments).
3.5 Governmental Consents. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
federal, state, or local governmental authority on the part of the Company is
required in connection with the execution and delivery of this Agreement that
has not been accomplished and the consummation of the transactions contemplated
by this Agreement except for (a) the filing of a Form D with the SEC with
respect to the issuance of the Securities, (b) the filing of a Nasdaq Small Cap
Market Notification Form (pursuant to Rule 10b-17 promulgated under the Exchange
Act) with the Nasdaq Small Cap Market, each of which will be filed in a timely
manner, if required, and (c)
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<PAGE> 4
qualification (or taking such action as may be necessary to secure an exemption
from qualification, if available) of the offer and sale of the Securities under
applicable state laws, which filings and qualifications, if required, will be
accomplished in a timely manner.
3.6 Exempt Transactions. Subject to the accuracy of the Purchasers'
representations and warranties in Section 4 of this Agreement, the offer, sale
and issuance of the Securities in conformity with the terms of this Agreement
constitute transactions exempt from the registration requirements of Section 5
of the Securities Act and from the registration or qualification requirements of
the laws of any applicable state or United States jurisdiction.
3.7 No Material Adverse Change. Since September 30, 1999, there have not
been any changes in the assets, liabilities, financial condition, business or
operations of the Company or any of its subsidiaries from that reflected in the
Financial Statements except changes in the ordinary course of business which
have not been, either individually or in the aggregate, materially adverse.
3.8 Intellectual Property. The Company and its subsidiaries own or
possess adequate rights to use all patents, patent rights, inventions,
trademarks, trade names, copyrights, licenses, governmental authorizations,
trade secrets and know-how that are used or necessary for the conduct of their
business as described in the SEC Documents; except as described in the SEC
Documents, neither the Company nor any of its subsidiaries has received any
notice of, or has any knowledge of, any infringement of or conflict with
asserted rights of others with respect to any patent, patent right, invention,
trademarks, trade names, copyrights, licenses, governmental authorizations,
trade secret or know-how that, individually or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would have a material adverse
effect on the condition (financial or otherwise), earnings, operations or
business of the Company and its subsidiaries considered as a whole.
3.9 Authorized Capital Stock. The authorized capital stock of the
Company conforms, as of the dates for which such information is given, in all
material respects to the statements relating thereto contained in the SEC
Documents. The issued and outstanding shares of capital stock of the Company
have been duly authorized, validly issued and are fully paid and nonassessable;
except as set forth or referred to in the SEC Documents or as otherwise
specified in Schedule 3.9, no warrants, options or other rights to purchase,
agreements or other obligation to issue, or agreements or other rights to
convert any obligation into, any shares of capital stock of the Company have
been granted or entered into by the Company. All of the above securities of the
Company were issued in compliance with all applicable federal and state
securities laws and were not issued in violation of or subject to any preemptive
rights or other rights to subscribe for or purchase securities. No holder of any
security of the Company is entitled to any preemptive or similar rights to
purchase any securities of the Company.
3.10 Litigation. There are no actions, suits, proceedings or
investigations pending or, to the best of the Company's knowledge, threatened
against the Company or any of its subsidiaries or properties before or by any
court or arbitrator or any governmental body, agency or official in which there
is a reasonable likelihood (in the judgment of the Company) of an adverse
decision that (a) would have a material adverse effect on the Company's
subsidiaries or properties or assets or the business of the Company or any of
its subsidiaries as presently
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<PAGE> 5
conducted or proposed to be conducted, or (b) would impair the ability of the
Company to perform in any material respect its obligations under this Agreement.
Neither the Company nor any of its subsidiaries is in default with respect to
any judgment, order or decree of any court or governmental agency or
instrumentality which, individually or in the aggregate, would have a material
adverse effect on the assets, properties or business of the Company or any of
its subsidiaries.
3.11 Preemptive and Registration Rights. There are no preemptive rights,
rights of first refusal, repurchase rights or any other right of the Company or
any third party as to the Securities which have not been satisfied or waived,
and except as provided in this Agreement (including Schedule 3.11 hereto), the
Company has not granted or agreed to grant any registration rights that would be
applicable to the registration for resale of the Securities pursuant to the
Registration Statement, as defined in and contemplated by Section 7.1 hereof, to
any person or entity which have not been satisfied or waived.
3.12 Compliance With Other Instruments. The business and operations of
the Company and its subsidiaries have been and are being conducted in accordance
with all applicable laws, rules and regulations of all governmental authorities,
except for such violations of applicable laws, rules and regulations which would
not, individually or in the aggregate, have a material adverse effect on the
assets, properties, financial condition or business of the Company or any of its
subsidiaries. Neither the execution and delivery of, nor the performance or
compliance with, this Agreement and the transactions contemplated hereby, will,
with or without the giving of notice or the passage of time, (i) result in any
breach of, or constitute a default under, or result in the imposition of any
lien or encumbrance upon any asset or property of the Company or any of its
subsidiaries pursuant to any agreement or other instrument to which the Company
or any of its subsidiaries is a party or by which it or any of its properties,
assets or rights is bound or effected, except for such breach or default or the
imposition of any such lien or encumbrance which, either individually or in the
aggregate, would not have a material adverse effect on the assets, properties,
financial condition or business of the Company or any of its subsidiaries, or
(ii) violate the Certificate of Incorporation or Bylaws of the Company or any of
its subsidiaries, or, except as set forth on Schedule 3.12, any law, rule,
regulation, judgment, order or decree. Neither the Company nor any of its
subsidiaries is in violation of its Certificate of Incorporation or Bylaws or in
violation of or in default under, any lien, indenture, mortgage, lease,
agreement, instrument, commitment or arrangements, except for such defaults
which would not, individually or in the aggregate, have a material adverse
effect on the assets, properties, financial condition or business of the Company
or any of its subsidiaries, or subject to any restriction which would prohibit
the Company from entering into or performing its obligations under the
Agreement.
3.13 Brokers or Finders. Except as set for on Schedule 3.13, in
connection with this transaction, no person, firm or corporation has or will
have, as a result of any act or omission of the Company, any right, interest or
valid claim against the Purchasers for any commission, fee or other compensation
as a finder or broker in connection with the transactions contemplated by this
Agreement.
3.14 Compliance With Environmental Laws. Except as disclosed in the SEC
Documents, neither the Company nor any of its subsidiaries is in violation of
any applicable
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<PAGE> 6
statute, law or regulation relating to the environment or occupational health
and safety, and no material expenditures are or will be required in order to
comply with any such existing statute, law or regulation. Neither the Company
nor any of its subsidiaries has any material liability to any governmental
authority or other third party arising under or as a result of any such past or
existing statute, law or regulation.
3.15 Contracts. The contracts so described in the SEC Documents or
incorporated by reference therein are in full force and effect on the date
hereof, except for contracts the termination or expiration of which would,
individually or in the aggregate, not have a material adverse effect on the
business, properties or assets of the Company or any of its subsidiaries, and
neither the Company nor any of its subsidiaries, nor to the Company's knowledge,
any other party is in breach of or default under any of such contracts.
3.16 Properties. The Company and its subsidiaries have good and
marketable title to all the properties and assets reflected as owned in the
financial statements included in the SEC Documents, subject to no lien,
mortgage, pledge, charge or encumbrance of any kind except (i) those, if any,
reflected in such financial statements or SEC Documents, or (ii) those which are
not material in amount and do not adversely affect the use made and promised to
be made of such property by the Company and its subsidiaries. The Company and
any applicable subsidiary holds its leased properties under valid and binding
leases, with such exceptions as are not materially significant in relation to
the business of the Company and the subsidiaries. Except as disclosed in the SEC
Documents, the Company and its subsidiaries own or lease all such properties as
are necessary to their operations as now conducted or as proposed to be
conducted.
3.17 Compliance. Neither the Company nor any of its subsidiaries has
been advised or has reason to believe that either it or any of its subsidiaries
is not conducting business in compliance with all applicable laws, rules and
regulations of the jurisdictions in which it is conducting business; except
where failure to be so in compliance would not materially adversely affect the
condition (financial or otherwise), business, results of operations or prospects
of the Company or any of its subsidiaries.
3.18 Taxes. The Company and its subsidiaries have filed all necessary
federal, state and foreign income and franchise tax returns and have paid or
accrued all taxes shown as due thereon, and the Company and its subsidiaries
have no knowledge of any tax deficiency which has been or might be asserted or
threatened against the Company or its subsidiaries which could materially and
adversely affect the business, operations or properties of the Company or its
subsidiaries.
3.19 Transfer Taxes. On the Closing Date, all stock transfer or other
taxes (other than income taxes) which are required to be paid in connection with
the sale and transfer of the Securities to be sold to the Purchasers hereunder
will be, or will have been, fully paid or provided for by the Company and all
laws imposing such taxes will be or will have been complied with fully.
3.20 Insurance. Each of the Company and its subsidiaries maintains
insurance of the types and in the amounts generally deemed adequate for its
business, including, but not limited to, insurance covering all real and
personal property owned or leased by the Company and its
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subsidiaries against theft, damage, destruction, acts of vandalism and all other
risks customarily insured against, all of which insurance is in full force and
effect.
3.21 Contributions. Neither the Company nor any of its subsidiaries has,
directly or indirectly, at any time during the last five years (i) made any
unlawful contribution to any candidate for public office, or failed to disclose
fully any contribution in violation of law, or (ii) made any payment to any
federal or state governmental officer or official, or other person charged with
similar public or quasi-public duties, other than payments required or permitted
by the laws of the United States or any jurisdiction thereof.
Section 4
Representations, Warranties and Covenants of the Purchasers
Each Purchaser, severally and not jointly, hereby represents and
warrants to the Company as follows:
4.1 Authorization. (i) Purchaser has all requisite legal and corporate
or other power and capacity and has taken all requisite corporate or other
action to execute and deliver this Agreement, to purchase the Securities to be
purchased by it and to carry out and perform all of its obligations under this
Agreement, and (ii) this Agreement constitutes the legal, valid and binding
obligation of Purchaser, enforceable in accordance with its terms, except (a) as
limited by applicable bankruptcy, insolvency, reorganization, or similar laws
relating to or affecting the enforcement of creditors' rights generally and (b)
as limited by equitable principles generally (regardless of whether such
enforceability is considered a proceeding in equity or at law).
4.2 Investment Experience. Purchaser is an "accredited investor" as
defined in Rule 501(a) under the Securities Act. Purchaser is aware of the
Company's business affairs and financial condition and has had access to and has
acquired sufficient information about the Company to reach an informed and
knowledgeable decision to acquire the Securities. Purchaser has such business
and financial experience as is required to give it the capacity to protect its
own interests in connection with the purchase of the Securities.
4.3 Investment Intent. Purchaser is purchasing the Securities for its
own account as principal, and not as a nominee or agent, for investment purposes
only, and not with a present view to, or for, resale, distribution or
fractionalization thereof, in whole or in part, within the meaning of the
Securities Act. Purchaser understands that the offer and sale of the Securities
have not been registered under the Securities Act or registered or qualified
under any state securities law in reliance on specific exemptions therefrom
which exemptions may depend upon, among other things, the bona fide nature of
Purchaser's investment intent as expressed herein. Purchaser will not, directly
or indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit
any offers to buy, purchase or otherwise acquire or take a pledge of) any of the
Shares, the Warrants, the Penalty Warrants and the Warrant Shares except in
compliance with the Securities Act, and the rules and regulations promulgated
thereunder.
4.4 Registration or Exemption Requirements. Purchaser further
acknowledges and understands that the Securities may not be resold or otherwise
transferred except in a transaction
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<PAGE> 8
registered under the Securities Act or unless an exemption from such
registration is available. Purchaser understands that the certificate(s)
evidencing the Securities will be imprinted with a legend that prohibits the
transfer of such securities unless (i) they are registered or such registration
is not required, and (ii) if the transfer is pursuant to an exemption from
registration other than Rule 144 under the Securities Act and, if the Company
shall so request in writing, an opinion of counsel reasonably satisfactory to
the Company is obtained to the effect that the transaction is so exempt.
4.5 Removal of Legend. Any legend endorsed on a certificate pursuant to
this Agreement shall be removed, and the Company shall issue a certificate
without such legend to the Purchaser, if such Security is being disposed of
pursuant to a registration statement under the Securities Act or pursuant to
Rule 144 or any similar rule then in effect or if such holder provides the
Company with an opinion of counsel satisfactory to the Company to the effect
that a transfer of such Security may be made without registration. In addition,
if the holder of such Security delivers to the Company an opinion of such
counsel reasonably satisfactory to the Company to the effect that no subsequent
transfer of such Security will require registration under the Securities Act,
the Company will promptly upon such contemplated transfer deliver new
certificates evidencing such security that do not bear the legend set forth in
this Agreement.
Section 5
Conditions to each Purchaser's Obligation to Close
The obligation of each Purchaser to purchase the Shares and the Warrants
at the Closing is subject to the fulfillment as of the Closing Date of the
following conditions, any of which may be waived in whole or in part by such
Purchaser.
5.1 Representations and Warranties. The representations and warranties
made by the Company in Section 3 hereof shall be true and correct in all
material respects when made, and shall be true and correct in all material
respects on the Closing Date with the same force and effect as if they had been
made on and as of said date.
5.2 Covenants. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company on or prior to the Closing Date
shall have been performed or complied with in all material respects.
5.3 Compliance Certificate. The President or Chief Financial Officer of
the Company shall have delivered to each Purchaser a certificate, dated as of
the Closing Date, certifying that the conditions specified in Sections 5.1 and
5.2 have been fulfilled and stating that since September 30, 1999, there shall
have been no material adverse change in the assets, liabilities, financial
condition, business or operations of the Company and its subsidiaries from that
reflected in the Financial Statements except changes in the ordinary course of
business which have not been, either individually or in the aggregate,
materially adverse.
5.4 Legal Opinion of Company Counsel. Jeffrey D. Segal, a Professional
Corporation, counsel to the Company, shall have delivered a legal opinion,
addressed to the Purchasers, in the form attached as Exhibit A hereto.
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5.5 Closing Date. The Closing shall have occurred on or prior to
February 3, 2000.
Section 6
Conditions to Closing of Company
The Company's obligation to sell and issue the Shares and the Warrants
at the Closing to each Purchaser is subject to the fulfillment or waiver of the
following conditions:
6.1 Representations and Warranties. The representations and warranties
made by Purchaser in Section 4 hereof shall be true and correct in all material
respects when made, and shall be true and correct in all material respects on
the Closing Date with the same force and effect as if they had been made on and
as of such date.
6.2 Covenants. All covenants, agreements and conditions contained in
this Agreement to be performed by Purchaser on or prior to the Closing Date
shall have been performed or complied with in all material respects.
Section 7
Registration Covenants of the Company
The Company hereby covenants and agrees as follows:
7.1 Certain Definitions. As used in this Section 7, the following terms
shall have the following meanings:
(a) "Effectiveness Period" shall begin upon the effective date of a
Registration Statement and end on the earlier of (i) four years after the
effective date of a Registration Statement, (ii) completion of the distribution
described in the Registration Statement or (iii) with respect to any Holder,
such time as all Registrable Securities held by such Holder may be sold in
compliance with Rule 144 within any three-month period.
(b) "Holder" shall mean each Purchaser and any transferee or subsequent
transferee of at least 20% of the Registrable Securities originally issued to
such Purchaser (other than a transferee who purchases the Registrable Securities
in a sale effected pursuant to any Registration Statement or pursuant to Rule
144) provided that such Purchaser has assigned its rights under this Agreement
to such transferee, directly or indirectly, such transferee has assumed the
obligations of a Holder hereunder and a copy of such written assignment and
assumption is provided to the Company.
(c) "Indemnified Party" and "Indemnifying Party" shall be as defined in
Section 7.6.
(d) "Losses" shall be as defined in Section 7.6.
(e) "Prospectus" shall mean the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a
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prospectus filed as part of an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act), as amended or supplemented by
any prospectus supplement, including, without limitation, with respect to the
terms of the offering of any portion of the Registrable Securities covered by
such Registration Statement and all other amendments and supplements to the
prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such prospectus.
(f) "Register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
(g) "Registrable Securities" shall mean the Shares, the Warrant Shares
and any other security of the Company issued as a dividend or other distribution
with respect to or in exchange for or in replacement of the Shares or the
Warrant Shares; provided, however, that Registrable Securities shall not include
any such Shares that have been sold by a Holder under an effective Registration
Statement or under Rule 144.
(h) "Registration Statement" shall mean any registration statement of
the Company that covers any of the Registrable Securities pursuant to the
provisions of this Agreement, including the Prospectus, amendments and
supplements to such registration statement, including post-effective amendments,
all exhibits and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
(i) "Rule 144" shall mean Rule 144, as promulgated by the SEC under the
Securities Act, as such rule may be amended from time to time, or any similar
successor rule that may be promulgated by the SEC.
(j) "Rule 158" shall mean Rule 158, as promulgated by the SEC under the
Securities Act, as such rule may be amended from time to time, or any similar
successor rule that may be promulgated by the SEC.
(k) "Rule 424" shall mean Rule 424 as promulgated by the SEC under the
Securities Act, as such rule may be amended from time to time, or any similar
successor rule that may be promulgated by the SEC.
(l) "Violation" shall be as defined in Section 7.6.
7.2 Registration Requirement. The Company shall use its best efforts
following the Closing (i) to prepare and file a Registration Statement with the
SEC under the Securities Act to register the resale of the Registrable
Securities by the Holders within 180 days following the Closing, and (ii) to
have such Registration Statement declared effective as soon as possible
thereafter, and in any event within 225 days following the Closing; and (iii) to
register for resale the Shares prior to the date the Registration Statement is
declared effective (the "Effective Date"), as of any date prior to the Effective
Date that the Company registers any of its equity securities that are
outstanding on the date hereof. If the Registration Statement has not been
declared effective with 225 days following the Closing or at any such time as a
Penalty Warrant
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is issued to a Holder, the Company shall also be required to register for resale
any and all Warrant Shares issuable on exercise of Penalty Warrants to the same
extent they were Shares.
7.3 Registration Procedures. In connection with the Company's
registration obligations under Section 7.2 hereof, the Company shall effect such
registration to permit the sale of the Registrable Securities in accordance with
the method or methods of disposition as set forth on Exhibit B hereto, and
pursuant thereto the Company shall as expeditiously as practicable:
(a) Before filing any Registration Statement or Prospectus (other than
documents that would be incorporated or deemed to be incorporated therein by
reference and that the Company is required by applicable securities laws or
stock exchange or quotation system requirements to file), furnish to the Holders
copies of all such documents proposed to be filed, which documents will be
subject to the review of such Holders and their counsel, if any, and the Company
shall not file any such Registration Statement or any Prospectus (other than
such documents which, upon filing, would be incorporated or deemed to be
incorporated by reference therein and that the Company is required by applicable
securities laws or stock exchange or quotation system requirements to file) to
which the Holders of a majority of the securities covered by such Registration
Statement shall reasonably object on a timely basis. In the event of any such
objection, the Holders shall provide the Company with any requested revisions to
such prospectus or supplement within three (3) business days of such objection.
(b) Notify the Holder in writing that the Registration Statement has
been declared effective on the date that it is declared effective, which notice
shall further state that the Registration Statement is not, to the Company's
knowledge, subject to any stop order, and provide to holder an opinion of
counsel to the Company in substantially the form of Exhibit C hereto. The
Company shall also prepare and file with the SEC such amendments and
post-effective amendments to the Registration Statement as may be necessary to
keep such Registration Statement continuously effective for the Effectiveness
Period; cause the related Prospectus to be amended or supplemented by any
required Prospectus amendment or supplement, and as so amended or supplemented
to be filed pursuant to Rule 424 (or any similar provisions then in force) under
the Securities Act; and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such Registration
Statement during the applicable period in accordance with the methods of
disposition intended by the Holders thereof set forth in such Registration
Statement as so amended or in such Prospectus as so supplemented.
(c) Notify the Holders promptly, and confirm such notice in writing, (i)
when a Prospectus or any Prospectus supplement or post-effective amendment has
been filed, and, with respect to a Registration Statement or any post-effective
amendment, when the same has become effective, (ii) of the issuance by the SEC
or any other federal or state governmental authority of any stop order
suspending the effectiveness of a Registration Statement or the initiation of
any proceedings for that purpose, (iii) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose, (iv) of the existence of any fact or the happening of any event that
makes any statement
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<PAGE> 12
made in such Registration Statement or related Prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in any
material respect or which requires the making of any changes in such
Registration Statement, Prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and so that in the case
of the Prospectus, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, and (v) of the Company's reasonable determination
that a post-effective amendment to a Registration Statement would be
appropriate.
(d) Use best efforts to obtain the withdrawal of any order suspending
the effectiveness of a Registration Statement, or the lifting of any suspension
of the qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction within the United States, at the
earliest practicable time.
(e) If reasonably requested by the Holders of a majority of the
securities being sold, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment such information as the Company and the Holders of a
majority of such securities agree should be included therein as required by
applicable law, (ii) make all required filings of such Prospectus supplement or
such post-effective amendment as soon as practicable after the Company has
received notification of the matters to be incorporated in such Prospectus
supplement or post-effective amendment, and (iii) supplement or make amendments
to any Registration Statement consistent with clause (i) or (ii) above;
provided, that the Company shall not be required to take any actions under this
paragraph that are not, in the opinion of counsel for the Company, in compliance
with applicable law.
(f) Furnish to each Holder and its counsel, if any, upon written request
and without charge to such Holder, at least one conformed copy of the
Registration Statement or Statements and any post-effective amendment thereto,
including financial statements (but excluding schedules, all documents
incorporated or deemed to be incorporated therein by reference and all exhibits,
unless requested in writing by such Holder or counsel).
(g) Deliver to each Holder and its counsel, if any, without charge, as
many copies of the Prospectus or Prospectuses relating to such Registrable
Securities (including each preliminary prospectus) and any amendment or
supplement thereto as such persons may reasonably request in writing; and the
Company hereby consents to the use of such Prospectus or each amendment or
supplement thereto by each Holder in connection with the offering and sale of
the Registrable Securities covered by such Prospectus or any amendment or
supplement thereto.
(h) Use reasonable efforts to register and qualify the Registrable
Securities under (or obtain exemption from) the securities or Blue Sky laws of
such jurisdictions within the United States as any Holder reasonably requests in
writing; use reasonable efforts to keep each such registration or qualification
(or exemption therefrom) effective during the Effectiveness Period and use
reasonable efforts to do any and all other acts or things necessary or advisable
to enable
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<PAGE> 13
the disposition in such jurisdictions of the Registrable Securities covered by
the applicable Registration Statement; provided, that the Company will not be
required to (i) qualify generally to do business in any jurisdiction where it is
not then so qualified or (ii) take any action that would subject it to general
service of process in any such jurisdiction where it is not then so subject.
(i) Within five (5) business days following the occurrence of any event
contemplated by paragraphs 7.3(c)(iv) or 7.3(c)(v) above, prepare and file with
the SEC a supplement or post-effective amendment to each Registration Statement
or an amendment or supplement to the related Prospectus or any document
incorporated therein by reference or file any other required document (such as a
Current Report on Form 8-K) so that, as thereafter delivered to the purchasers
of the Registrable Securities being sold thereunder, such Prospectus will not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
(j) If necessary in connection with a disposition of Registrable
Securities, make available for inspection, at the offices where normally kept
during reasonable business hours, by a representative of any Holder and any
attorney or accountant retained by such Holder, financial and other records,
pertinent corporate documents and properties of the Company and its subsidiaries
as they may reasonably request, and cause the officers, directors and employees
of the Company and its subsidiaries to supply all information reasonably
requested by any such representative, attorney or accountant in connection with
such disposition; provided, that any records, information or documents that are
designated by the Company in writing as confidential at the time of delivery of
such records, information or documents shall be kept confidential by such
Persons, and such Persons shall so agree in writing.
(k) Comply with all applicable rules and regulations of the SEC and make
generally available to its security holders earning statements satisfying the
provisions of Section 11 (a) of the Securities Act and Rule 158 thereunder no
later than 45 days after the end of any 12-month period (or 90 days after the
end of any 12-month period if such period is a fiscal year) commencing on the
first day of the first fiscal quarter of the Company, after the effective date
of a Registration Statement, which statements shall cover said 12-month period.
(l) Cooperate with the Holders and transfer agent and registrar to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any restrictive legends; and
enable such Registrable Securities to be in such denominations and registered in
such names as a Holder may request.
(m) Cause the Shares to be listed on each securities exchange or
quotation system on which the Company's Common Stock is then listed no later
than the date the Registration Statement is declared effective and, in
connection therewith, to the extent applicable, to make any required filings
under the Exchange Act and to have such filings declared effective thereunder.
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<PAGE> 14
(n) Provide a transfer agent and registrar for all Shares and Warrant
Shares registered pursuant hereunder and a CUSIP number for all such Shares and
Warrant Shares, in each case not later than the effective date of such
registration.
In connection with the disclosures in a Registration Statement, as
required under the Securities Act, the Company may require a Holder, and each
Holder agrees, to furnish to the Company in writing such information regarding
the distribution of the Registrable Securities covered by such Registration
Statement as the Company may, from time to time, reasonably request in writing
and the Company may exclude from such registration the Registrable Securities of
any Holder if such Holder unreasonably fails to furnish such information in
writing within a reasonable time after receiving such request. Each Holder
agrees promptly to furnish to the Company all information required to be
disclosed in such Registration Statement in order to make the information
previously furnished to the Company by such Holder not misleading. Any sale of
any Registrable Securities by any Holder shall constitute a representation and
warranty by such Holder that the required information relating to such Holder
and its plan of distribution is as set forth in the Prospectus delivered by such
Holder in connection with such disposition, that such Prospectus does not as of
the time of such sale contain any untrue statement of a material fact relating
to such Holder or its plan of distribution and that such Prospectus does not as
of the time of such sale omit to state any material fact relating to such Holder
or its plan of distribution necessary to make the statements in such Prospectus,
in the light of the circumstances under which they were made, not misleading.
Each Holder agrees that, upon receipt of any notice from the Company of
the happening of (i) any event of the kind described in paragraphs 7.3(c)(ii),
7.3(c)(iii), 7.3(c)(iv) or 7.3(c)(v) hereof, or (ii) a determination by the
Company's Board of Directors that it is advisable to suspend use of the
Prospectus for a discrete period of time due to pending corporate developments
such as negotiation of a material transaction, such Holder will forthwith
discontinue disposition of such Registrable Securities covered by the applicable
Registration Statement or Prospectus until such Holder's receipt of the copies
of the supplemented or amended Prospectus contemplated by paragraph 7.3(i)
hereof, or until such Holder is advised in writing by the Company that the use
of the applicable Prospectus may be resumed, and has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus. The Company agrees to so advise
such Holder promptly after the Company determines that the use of the applicable
Prospectus may be resumed. The Company shall not suspend use of a Prospectus or
Registration Statement under this paragraph of Section 7.3 for any period of 10
or more consecutive days or totaling more than 20 days in any 12 month period.
Once declared effective by the Commission, if the Prospectus or Registration
Statement becomes unavailable for a period greater than the period allowed in
the preceding sentence, Purchaser shall be entitled to receive, in addition to
all other remedies available at law or in equity, a Penalty Warrant equal to 3%
of the number of shares held by Holder for each month (pro rata for partial
months) that the Prospectus or Registration Statement is unavailable. Such
Penalty Warrant shall be issued on the day after the Prospectus or Registration
statement becomes available, at the price and on the terms as provided by
section 7.4(b), below. Any period for which use of a Prospectus or Registration
Statement is suspended under this paragraph of Section 7.3 shall be added to the
time for which the Company is required
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<PAGE> 15
to maintain the effectiveness of such Registration Statement, including the
Prospectus constituting a part thereof, under Section 7.3(b).
7.4 Registration Penalty.
(a) If the Registrable Securities have not been registered for
resale by date that is 225 days following the Closing (the "Penalty Date"), the
Company shall be obligated to issue Holder a Warrant (a "Penalty Warrant") on
substantially the form attached hereto as Exhibit D. The number of shares for
which each Penalty Warrant is exercisable for is to be determined as follows:
for each month (pro rata for partial months) following the Penalty Date that the
Registrable Securities have not been registered for resale a Penalty Warrant
shall be issued for 3% of the number of Shares held by Holder on the Penalty
Date. No Penalty Warrants shall be issuable if the Registration Statement is
declared effective within 225 days following the Closing. For the purposes of
this subsection (a), a "month" shall be deemed to begin on the same numbered day
in each calendar month as the numbered day of the month on which the Closing
occurs. As the obligation to issue the Penalty Warrants accrues, the Company
shall reserve for issuance the number of shares of Common Stock corresponding
number of shares of Common Stock the Penalty Warrants can be exercised.
(b) Although the obligation to issue Penalty Warrants will begin
on the day after the Penalty Date, the Company shall not actually issue such
Penalty Warrants until the earlier of (i) the day after the Company first
registers the Registrable Securities for resale or (ii) six months and one day
after the Penalty Date (the "Penalty Warrant Issuance Date"). In the event
clause (ii) in the preceding sentence applies then additional Penalty Warrants
shall be issued, pursuant to this subsection, every three months after the first
Penalty Warrant Issuance Date, as appropriate (each a "Penalty Warrant Issuance
Date" and collectively the "Penalty Warrant Issuance Dates"). The maximum
duration of the period of exercisability for each Penalty Warrant shall be until
the fifth anniversary of the respective Penalty Warrant Issuance Date. The
initial Exercise Price per share of the Penalty Warrant shall be the lower of
(i) $10.00 or (ii) 110% of the price which was the lowest closing sale price of
the Common Stock, as reported by the Nasdaq-Amex Stock Market or any exchange on
which the Common Stock is traded (or if the stock is not so reported, then as
reported by the local over-the-counter market), during the period between the
Closing and the respective Penalty Warrant Issuance Date.
7.5 Restriction on Registration. From the date hereof through a period
of 60 days following the date that the Registration Statement is first declared
effective, the Company shall not register any securities other than securities
issued in connection with (1) any stock option plan, stock purchase plan, stock
bonus plan or other plan for the benefit of employees, consultants, officers or
directors of the Company or (2) the exercise of any rights, warrants or options
heretofore granted or issued by the Company for the acquisition of any
securities.
7.6 Registration Expenses. All fees and expenses incident to the
performance of or compliance with this Agreement by the Company shall be borne
by the Company whether or not any of the Registration Statements become
effective and whether or not any of the Registrable Securities are transferred
pursuant to the Registration Statement. Such fees and expenses shall include,
without limitation, (i) all registration and filing fees (including, without
limitation, fees
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and expenses (A) with respect to designation of the Registrable Securities as
eligible for trading on applicable securities exchange or quotation system, and
(B) of compliance with securities or Blue Sky laws), (ii) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities in a form eligible for deposit with The Depository Trust
Company and of printing Prospectuses), (iii) messenger, telephone and delivery
expenses, (iv) fees and disbursements of counsel for the Company in connection
with the Company's performance of its obligations under this Agreement, (v)
reasonable fees and disbursements of all independent certified public
accountants, (vi) Securities Act liability insurance if the Company so desires
such insurance, (vii) fees and expenses of all other persons retained by the
Company in connection with the performance by the Company of its duties under
this Agreement and (viii) fees and expenses of counsel to Purchaser up to a
maximum of $10,000. Except as set forth in the preceding sentences of this
paragraph, the Company shall not be responsible for paying the expenses of
Holder, or its counsel, incurred in connection with the registration or approval
of the Registration Statement or the transactions contemplated thereby by
governmental agencies or authorities other than those administering applicable
securities laws and applicable exchange or quotation system regulations. In
addition, the Company will, in any event, bear its own internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit, the fees and expenses incurred in connection with the listing of the
Registrable Securities on any securities exchange or quotation system on which
similar securities issued by the Company are then listed and the fees and
expenses of any person, including special experts, retained by the Company.
7.7 Indemnification.
(a) By the Company. To the maximum extent permitted by law, the Company
will indemnify and hold harmless each Holder of Registrable Securities, each
person, if any, who controls such Holder within the meaning of the Securities
Act or the Exchange Act, and each underwriter, if any, of Registrable
Securities, against any losses, claims, damages, liabilities or expenses (joint
or several) (collectively "Losses") to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
Losses (or actions in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (collectively, a "Violation"): (i)
any untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any state securities law. The
Company will reimburse each such Holder or controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such Losses (or action in respect thereof); provided, however,
that the indemnity agreement contained in this Section 7.7 shall not apply to
amounts paid in settlement of any such Losses (or action in respect thereof) if
such settlement is effected without the consent of the Company (in which case
the parties shall first have met and conferred in good faith regarding such
settlement), nor shall the Company be liable in any such case for any such
Losses (or action in respect thereof) to the extent that they arise out of or
are based upon a Violation which arises out of or is based upon
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<PAGE> 17
information furnished in writing expressly for use in connection with such
registration by any such Holder, controlling person, as the case may be;
provided, further, that the Company will not be liable to any Holder or
controlling person or underwriter, as the case may be with respect to any Losses
arising out of or based upon any untrue statement or alleged untrue statement or
omission or alleged omission to state a material fact in any preliminary
prospectus which is corrected in an amended, supplemented or final prospectus if
the purchaser asserting such Losses purchased from such Holder or underwriter,
as applicable, and was not, due to the fault of such Holder, sent or given a
copy of such amended, supplemented or final prospectus at or prior to the sale
of Registrable Securities to such purchaser.
(b) By Holders. To the maximum extent permitted by law, each Holder
(severally, but not jointly) will, if Registrable Securities held by such Holder
are included in the Registrable Securities as to which such registration,
qualification or compliance is being effected, indemnify and hold harmless the
Company, each of its directors and officers, each underwriter, if any, of
Registrable Securities, and each person who controls the Company or such
underwriter within the meaning of the Securities Act or the Exchange Act,
against any Losses to which the Company or any such director or controlling
person may become subject, under the Securities Act, the Exchange Act or other
federal or state law, insofar as such Losses (or actions in respect thereto)
arise out of or are based upon any Violation, in each case to the extent (and
only to the extent) that such Violation arises out of or is based upon
information furnished by such Holder in writing expressly for use in connection
with such registration; and each such Holder will reimburse any legal or other
expenses reasonably incurred by the Company or any such controlling person in
connection with investigating or defending any such Losses (or actions in
respect thereof); provided, however, that the indemnity agreement contained in
this Section 7.7(b) shall not apply to amounts paid in settlement of any such
Losses (or actions in respect thereof) if such settlement is effected without
the consent of the Holder (in which case the parties shall first have met and
conferred in good faith regarding such settlement). Each Holder's liability
under this Section 7.7(b) shall not exceed the net proceeds received by such
Holder from the sale of Registrable Securities held by such Holder included in
such registration, qualification or compliance.
(c) Procedures. Each party entitled to indemnification under this
Section (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld or delayed). Without limiting the generality of the
foregoing, if the Indemnified Party has been advised in writing by its counsel
that representation of both the Indemnified and Indemnifying Party by the same
counsel would be inappropriate under standards of professional conduct due to
actual or potential differing interests, with respect to such claim or
litigation, the Indemnifying Party shall bear the expense of another counsel who
shall represent the Indemnified Party and any other persons or entities who have
indemnification rights from the Indemnifying Party hereunder, with respect to
such claim or litigation, and shall be selected as provided in the first
sentence of this Section 7.7(c). The Indemnified Party may participate in such
defense at such party's expense
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<PAGE> 18
(except to the extent that the Indemnifying Party is required to pay the expense
of such counsel pursuant to this Section 7.7(c)), and provided further that the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Agreement, except
to the extent such failure is prejudicial to the Indemnifying Party in defending
such claim or litigation. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified Party
(which consent shall not be unreasonably withheld or delayed), consent to entry
of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability with respect to such claim or
litigation.
(d) Contribution. If the indemnification provided for in this Section is
held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any Losses referred to therein, then the Indemnifying
Party, in lieu of indemnifying such Indemnified Party hereunder, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Losses in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party (on the one hand) and of the Indemnified Party
(on the other) in connection with the statements or omissions which resulted in
such Losses as well as any other relevant equitable considerations. The relative
fault of the Indemnifying Party and of the Indemnified Party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the Indemnifying Party or by the Indemnified Party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
7.8 Information Requirements. The Company shall file in a timely manner
the reports required to be filed by it under the Securities Act and the Exchange
Act, and if at any time the Company is not required to file such reports, it
will, upon the request of any Holder, make publicly available other information
so long as necessary to permit sales pursuant to Rule 144 under the Securities
Act. The Company further covenants that it will cooperate with any Holder and
take such further action as such Holder may reasonably request (including
without limitation making such representations as any such Holder may reasonably
request), all to the extent required from time to time to enable such Holder to
sell Registrable Securities without registration under the Securities Act within
the limitation of the exemptions provided by Rule 144 under the Securities Act.
Upon the request of any Holder, the Company shall deliver to such Holder a
written statement as to whether it has complied with such filing requirements.
The Company shall file in a timely manner the reports required to be filed by it
under the Exchange Act and shall comply with all other requirements set forth in
the instructions to any Securities Act registration form used in connection with
any Shelf Registration effected pursuant hereto in order to allow the Company to
be eligible to file registration statements on such form.
Section 8
Other Affirmative Covenants of the Company
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8.1 Nasdaq Listing. The Company shall use its best efforts to obtain
approval for listing of the Shares and the Warrant Shares on the Nasdaq SmallCap
Market as soon as practicable following the date hereof.
8.2 Antidilution. If the Company should decide to issue and sell any
additional shares of capital stock of the Company, or any warrants, securities
convertible into capital stock of the Company or other rights to subscribe for
or to purchase any capital stock of the Company (all such capital stock,
warrants, securities convertible into capital stock and other rights being
hereinafter collectively referred to as "Additional Securities") for a
consideration per share (the "Lower Purchase Price") less than the Purchase
Price, then, forthwith upon such issue or sale, the Company shall issue to each
Purchaser a number of additional shares of Common Stock in accordance with the
following formula:
AS = (TPP/LPP) - OS
where
AS = the number of additional shares of Common Stock to be issued
to a Purchaser
TPP = the total consideration paid by a Purchaser for the Shares
LPP = the Lower Purchase Price
OS = the number of original shares of Common Stock each Purchaser
acquired pursuant to this Agreement plus the aggregate number of
shares of Common Stock, if any, previously issued to such
Purchaser pursuant to this section 8.2
If AS is a negative number, then no additional shares of Common Stock shall be
issued in connection with the issuance of additional securities.
8.3 Notice of Adjustment. Upon the requirement to issue additional
securities pursuant to Section 8.2 above, then and in each such case, the
Company shall give written notice thereof, by first class mail, postage prepaid,
addressed to each Purchaser, which notice shall state the number of additional
shares of Common Stock to be issued, setting forth in reasonable detail the
method of calculation and the facts upon which such calculation is based.
8.4 Termination of Antidilution Adjustment. No additional shares of
Common Stock shall be issued to a Purchaser pursuant to Section 8.2 hereof after
the earlier of (a) the date as of which such Purchaser has sold or transferred
more than fifty percent (50%) of the Shares originally purchased by such
Purchaser under this Agreement, or (b) the last day of a six-month period
beginning on or after the date the Registration Statement is declared effective
and during which the average of the closing prices of the Common Stock on the
Nasdaq Small Cap Market (or such other exchange on which the Common Stock is
registered) over that six-month period is at least $8.00.
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Section 9
Restrictions on Transferability of Securities;
Compliance with Securities Act
9.1 Restrictions on Transferability. No Shares, Warrants, Penalty
Warrants or Warrant Shares shall be transferred unless (a) such transfer is made
in compliance with applicable federal and state securities laws and (b) prior to
such transfer, the transferees sign a counterpart to this Agreement pursuant to
which it or they agree to be bound by the terms of this Agreement. The Company
shall not be required to (a) transfer on its books any shares that shall have
been sold or transferred in violation of any of the provisions of this Agreement
or (b) treat as the owner of such shares or to accord the right to vote as such
owner or to pay dividends to any transferee to whom such shares shall have been
so transferred.
9.2 Restrictive Legend. Each certificate representing the Securities
shall bear substantially the following legend (in addition to any legends
required under applicable securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT
PURPOSES ONLY AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM.
9.3 Transfer of Securities After Registration. Each Purchaser, severally
and not jointly, hereby covenants with the Company not to make any sale of the
Shares, the Warrants, the Penalty Warrants or the Warrant Shares except either
(i) in accordance with the Registration Statement, in which case Purchaser
covenants to comply with the requirement of delivering a current prospectus,
(ii) in accordance with Rule 144, in which case such Purchaser covenants to
comply with Rule 144, or (iii) in accordance with another exemption from the
registration requirements of the Securities Act. The legend set forth in Section
9.2 will be removed from a certificate representing the Securities following and
in connection with any sale of the Securities pursuant to subsection (i) or (ii)
hereof, but not in connection with any sale of Shares pursuant to subsection
(iii) hereof, and also will be removed at such time that the Securities may be
sold under Rule 144 without restriction as to volume and manner of sale.
9.4 Purchaser Information. Each Purchaser, severally and not jointly,
covenants that it will promptly notify the Company of any changes in the
information set forth in the Registration Statement regarding such Purchaser,
under the heading "Selling Security Holders" or "Plan of Distribution" or
elsewhere.
Section 10
Miscellaneous
10.1 Construction. The Company and the Purchasers have participated
jointly in the negotiation and drafting of this Agreement. No presumption or
burden of proof shall arise
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favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement.
10.2 Notices. Any notice, request, demand, waiver, consent, approval or
other communication which is required or permitted to be given to any party
hereunder shall be in writing and shall be deemed given only if delivered to the
party personally or sent to the party by telecopy, telegram or by registered or
certified mail (return receipt requested) with postage and registration or
certification fees thereon prepaid, addressed to the party at its address set
forth below:
If to the Company:
Stan Lee Media, Inc.
15821 Ventura Boulevard, Suite 675
Encino, California 91436
If to Purchasers, at the address for such Purchaser set forth on
the signature page hereto, or as subsequently requested in
writing.
10.3 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
10.4 Survival of Representations, Warranties and Agreements. The
representations and warranties of the Company shall survive the execution and
delivery of this Agreement. No independent investigation of the Company by
Purchasers, their counsel, or any of their agents or employees, shall in any way
limit or restrict the scope of the representations and warranties made by the
Company in this Agreement. All covenants and agreements set forth herein shall
survive the Closing without limitation, except as otherwise specifically
provided herein.
10.5 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
the conflicts of laws principles thereof.
10.6 Severability. The parties agree that (a) the provisions of this
Agreement shall be severable in the event that any provision hereof is held by a
court of competent jurisdiction to be invalid, void or otherwise unenforceable,
(b) such invalid, void or otherwise unenforceable provision shall be
automatically replaced by another provision which is as similar as possible in
terms to such invalid, void or otherwise unenforceable provision but which is
valid and enforceable, and (c) the remaining provisions shall remain enforceable
to the fullest extent permitted by law.
10.7 No Third Party Beneficiaries. Nothing herein expressed or implied
is intended or should be construed to confer upon or give to any person other
than the parties hereto and their successors and assigns any rights or remedies
under or by reason of this Agreement.
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10.8 Entire Agreement. This Agreement constitutes the entire
understanding of the parties with respect to the subject matter hereof, and
supersedes any prior agreements or understandings, written or oral, between the
parties with respect to the subject matter hereof.
10.9 Amendment and Waiver. The parties may, by mutual agreement, amend
this Agreement in any respect in a writing executed by each party, and any
party, as to such party, may waive any of its rights hereunder. To be effective,
any such waiver must be in writing and be signed by the party providing such
waiver. The rights and remedies herein provided are cumulative and are not
exclusive of any rights or remedies which any party may otherwise have at law or
in equity. The waiver by any party hereto of any breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach, whether or not similar.
10.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but which together
shall constitute one and the same instrument.
10.11 Headings. The headings preceding the text of the sections and
subsections hereof are inserted solely for convenience of reference, and shall
not constitute a part of this Agreement nor shall they affect its meaning,
construction or effect.
10.12 Public Announcement. In the event any party proposes to issue any
press release or public announcement concerning any provisions of this Agreement
or the transactions contemplated hereby, such party shall so advise the other
party hereto, and the parties shall thereafter use their best efforts to cause a
mutually agreeable release or announcement to be issued. Neither party will
publicly disclose or divulge any provisions of this Agreement or the
transactions contemplated hereby without the other parties' written consent,
except as may be required by applicable law (including applicable SEC rules and
regulations) or stock exchange regulation, and except for communications to
employees.
10.13 Further Assurances. Each party to this Agreement shall do and
perform or cause to be done and performed all such further acts and things and
shall execute and deliver all such other agreements, certificates, instruments
and documents as the other party hereto may reasonably request in order to carry
out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
10.14 Expenses. The Company and Purchaser will each bear their own fees
and expenses in connection with the transactions contemplated by this Agreement;
provided, that the Company shall pay at the Closing up to $10,000 of legal fees
and expenses of Shartsis, Friese & Ginsburg, LLP, counsel to Larry Dunn.
10.15 Exculpation Among Purchasers. Each Purchaser acknowledges that it
is not relying upon any person, firm or corporation, other than the Company and
its officers and directors, in making its investment or decision to invest in
the Company. Each Purchaser agrees that no Purchaser nor the respective
controlling person, officers, directors, partners, agents or employees of any
Purchaser shall be liable to any other Purchaser for any action heretofore or
hereafter taken or omitted to be taken by any of them in connection with the
purchase of the
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<PAGE> 23
Shares or the Warrant Shares or the execution of or performance under any of the
related documents.
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<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first written above.
STAN LEE MEDIA, INC.
/s/ Robert M. Schultz
-------------------------------------
Name: Robert M. Schultz
--------------------------------
Title: Vice President-Finance
-------------------------------
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<PAGE> 25
PURCHASER:
------------------------------
Name:
--------------------------------
Title:
-------------------------------
Address:
<PAGE> 26
EXHIBIT A
LEGAL OPINION
<PAGE> 27
EXHIBIT B
PLAN OF DISTRIBUTION
<PAGE> 28
EXHIBIT C
LEGAL OPINION
_____________, 2000
- -----------------
Ladies and Gentlemen:
We have acted as counsel for _______, Inc., a Delaware corporation (the
"Company"), in connection with the issuance and sale to you of certain Shares of
its common stock, par value $.__ per share, pursuant to the Purchase Agreement
dated February _, 2000 (the "Stock Purchase Agreement") among the Company and
you and in connection with the Company's registration with the SEC of such
Shares for resale by you. This opinion letter is being rendered to you pursuant
to Section 7.3(b) of the Stock Purchase Agreement in connection with the SEC
declaring effective the Registration Statement for your resale of the Shares.
Capitalized terms not otherwise defined in this opinion letter have the meanings
given them in the Stock Purchase Agreement.
In our capacity as counsel to the Company, we have examined, among other
things, originals, or copies identified to our satisfaction as being true
copies, of the Registration Statement on Form S-1 (File No. 333-____________)
initially filed by the Company with the SEC on ____________, 2000, for the
purpose of registering the resale of the Shares under the Securities Act; [and
amendments thereto]; and oral advice on ______________, 2000, from an SEC staff
examiner, that the SEC had declared such Registration Statement, as so amended,
effective as of ______ p.m., Washington, D.C. time, on _____________, 2000.
As used in this opinion letter, the phrase "to our knowledge" means as
to matters of fact that, based on the actual knowledge of individual attorneys
within the firm principally responsible for handling current matters for the
Company (and not including any constructive or imputed notice of any
information), no facts have been disclosed to us that have caused us to conclude
that the opinions expressed are factually incorrect; but our affirmative factual
investigation for the purpose of rendering this opinion letter has been limited
to obtaining (a) oral advice received on ___________, from an SEC staff
examiner, that the SEC had declared such Registration Statement, as amended,
effective at _____ p.m. Washington, D.C. time, on _________ , 2000 and (b) oral
advice received on ___________, 2000 from an SEC staff examiner that there is no
stop order suspending the effectiveness of the Registration Statement.
Based upon our examination of and reliance upon the foregoing, we are of
the opinion that as of the date hereof:
1. The Registration Statement has become effective under the Securities Act
and, to our knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose are
pending before or contemplated by the SEC.
<PAGE> 29
This opinion letter is rendered as of the date first written above
solely for your benefit in connection with the Stock Purchase Agreement and the
Registration Statement and may not be delivered to, quoted or relied upon by any
person other than you, or for any other purpose, without our prior written
consent. Our opinion is expressly limited to the matters set forth above and we
render no opinion, whether by implication or otherwise, as to any other matters
relating to the Company, the Stock Purchase Agreement, the Registration
Statement or the Shares. We assume no obligation to advise you of facts,
circumstances, events or developments which hereafter may be brought to our
attention and which may alter, affect or modify the opinions expressed herein.
Very truly yours,
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<PAGE> 30
EXHIBIT D
FORM OF WARRANT
<PAGE> 1
EXHIBIT 10.4
STAN LEE MEDIA, INC.
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (the "Agreement") is made as of February 4, 2000
(the "Agreement Date"), by and between Stan Lee Media, Inc., a Colorado
corporation (the "Company") with its principal office at 15821 Ventura
Boulevard, Suite 675, Encino, California 91436, and the purchasers listed on
Schedule A attached hereto (individually, a "Purchaser" and collectively
"Purchasers").
RECITALS
WHEREAS, the Company desires to issue and sell to the Purchaser and the
Purchaser desires to purchase from the Company, on the terms and subject to the
conditions set forth in this Agreement, 200,000 shares (the "Shares") of the
Company's common stock, no par value (the "Common Stock") at $11.00 per share
for a total purchase price of $2,200,000.
AGREEMENT
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants and agreements set forth herein, and for other valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the
parties hereto agree as follows:
Section 1
Purchase and Sale of Common Stock and Warrants
1.1 Purchase and Sale of Common Stock. Subject to the terms and conditions
of this Agreement, at the Closing (as defined below) each Purchaser, severally
and not jointly, agrees to purchase from the Company, and the Company agrees to
issue and sell to each Purchaser the number of shares of Common Stock set forth
opposite each Purchaser's name on Schedule A hereto at a purchase price (the
"Purchase Price") of $11.00 per share.
1.2 Issuance of Warrants. The Company shall issue to each Purchaser a
warrant (individually a "Warrant" and collectively the "Warrants") exercisable
for fifty percent (50%) of the number of Shares purchased by such Purchaser.
Each Warrant, the form of which is attached hereto as Exhibit D, entitles the
registered holder thereof to purchase shares of Common Stock at a price of
$11.00 per share, subject to adjustment in certain circumstances, commencing on
the date hereof until five years from the Closing (as defined below). The
Shares, the Warrants, the Penalty Warrants (defined below) and the shares of
Common Stock issuable upon exercise of the Warrants and Penalty Warrants (the
"Warrant Shares") are herein collectively referred to as the "Securities."
<PAGE> 2
Section 2
Closing Date; Delivery
2.1 Closing Date. The completion of the purchase and sale of the Shares
will be held at a location mutually agreeable to the parties on February 7, 2000
(the "Closing"). The date of the Closing is hereinafter referred to as the
"Closing Date."
2.2 Delivery. At the Closing, the Company will deliver to Purchaser the
certificates evidencing the Shares and an opinion of Jeffrey D. Segal, a
Professional Corporation, counsel to the Company, in the form of Exhibit A. Such
delivery shall be against payment of the Purchase Price for the Shares by wire
transfer of immediately available funds to the Company's bank account (in
accordance with instructions furnished by the Company).
Section 3
Representations and Warranties of the Company
The Company represents and warrants to the Purchasers as follows:
3.1 Organization and Standing. The Company and each of its subsidiaries is
a corporation duly organized and validly existing under and by virtue of the
laws of the state in which it is incorporated and is in good standing as a
domestic corporation under the laws of said state, and has the requisite
corporate power and authority to own its properties and to carry on its business
as now being conducted. Other than as disclosed in Schedule 3.1 hereof, the
Company has no subsidiaries or direct or indirect ownership in any firm,
corporation or business which either individually or in the aggregate is
material to the business of the Company. The Company and each of its
subsidiaries is qualified to do business and is in good standing as a foreign
corporation in every jurisdiction in which its ownership of property or conduct
of business requires it to be so qualified and in which the failure to so
qualify would have a material adverse effect on the financial condition or
business of the Company or any of its subsidiaries.
3.2 Corporate Power; Authorization. The Company has all requisite legal
and corporate power and authority and has taken all requisite corporate action
to duly authorize, execute and deliver this Agreement, to sell and issue the
Shares and the Warrant, and to carry out and perform all of its obligations
under and contemplated by this Agreement. This Agreement has been duly executed
and delivered by an authorized officer of the Company and constitutes the legal,
valid and binding obligation of the Company, enforceable in accordance with its
terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization or similar laws relating to or affecting the enforcement of
creditors' rights generally, and (b) as limited by equitable principles
generally (regardless of whether such enforceability is considered a proceeding
in equity or at law).
3.3 Issuance and Delivery. The Shares, the Warrants and the Penalty
Warrants (defined below) have been duly authorized and, when issued and
delivered in compliance with this Agreement, will be duly and validly issued and
delivered and will be outstanding, fully paid, nonassessable and free and clear
of all pledges, liens, encumbrances and restrictions other than
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<PAGE> 3
any liens or encumbrances created by or imposed on the holders thereof through
no action of the Company; provided, however, that the Shares, the Warrants and
the Penalty Warrants will be subject to restrictions on transfer and state and
federal securities laws and as provided herein. The Warrant Shares have been
duly authorized and reserved for issuance upon exercise of the Warrant and
Penalty Warrant (as applicable), and such shares, when issued upon such exercise
in accordance with the terms of the Company's Certificate of Incorporation, the
Warrant or the Penalty Warrant (as applicable), and when the price is paid upon
exercise of the Warrant or the Penalty Warrant (as applicable), shall be fully
paid and nonassessable. No preemptive rights or other rights to subscribe for or
purchase exist with respect to the issuance and sale of the Securities by the
Company pursuant to this Agreement. Except as provided in Schedule 3.3, no
stockholder of the Company has any right (which has not been waived or has not
expired by reason of lapse of time following notification of the Company's
intent to file the Registration Statement) to require the Company to register
the sale of any securities owned by such holder under the Securities Act of
1933, as amended (the "Securities Act"), in the Registration Statement. Except
as provided in Schedule 3.3, no further approval or authority of the
stockholders or the Board of Directors of the Company will be required for the
issuance and sale of the Securities to be sold by the Company as contemplated
herein.
3.4 SEC Documents; Financial Statements; Subsequent Events. The Company
has filed in a timely manner all documents that the Company was required to file
with the Securities and Exchange Commission ("SEC") during the twelve (12)
months preceding the date of this Agreement. As of their respective filing
dates, all documents filed by the Company with the SEC (the "SEC Documents")
complied in all material respects with the requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") or the Securities Act, as
applicable and all rules and regulations thereunder. None of the SEC Documents
contained, as of their respective dates, any untrue statement of material fact
or omitted to state a material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances under which
they were made, not misleading, and such SEC Documents, when read as a whole, do
not contain any untrue statements of a material fact and do not omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company and each of its subsidiaries included in the SEC
Documents (the "Financial Statements") comply in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto. The Financial Statements have been prepared in
accordance with United States generally accepted accounting principles
consistently applied, and fairly present the financial position of the Company
and any subsidiaries at the dates thereof and the results of the Company's
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal adjustments).
3.5 Governmental Consents. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
federal, state, or local governmental authority on the part of the Company is
required in connection with the execution and delivery of this Agreement that
has not been accomplished and the consummation of the transactions contemplated
by this Agreement except for (a) the filing of a Form D with the SEC with
respect to the issuance of the Securities, (b) the filing of a Nasdaq Small Cap
Market Notification Form (pursuant to Rule 10b-17 promulgated under the Exchange
Act) with the Nasdaq Small Cap Market, each of which will be filed in a timely
manner, if required, and (c)
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<PAGE> 4
qualification (or taking such action as may be necessary to secure an exemption
from qualification, if available) of the offer and sale of the Securities under
applicable state laws, which filings and qualifications, if required, will be
accomplished in a timely manner.
3.6 Exempt Transactions. Subject to the accuracy of the Purchasers'
representations and warranties in Section 4 of this Agreement, the offer, sale
and issuance of the Securities in conformity with the terms of this Agreement
constitute transactions exempt from the registration requirements of Section 5
of the Securities Act and from the registration or qualification requirements of
the laws of any applicable state or United States jurisdiction.
3.7 No Material Adverse Change. Since September 30, 1999, there have not
been any changes in the assets, liabilities, financial condition, business or
operations of the Company or any of its subsidiaries from that reflected in the
Financial Statements except changes in the ordinary course of business which
have not been, either individually or in the aggregate, materially adverse.
3.8 Intellectual Property. The Company and its subsidiaries own or possess
adequate rights to use all patents, patent rights, inventions, trademarks, trade
names, copyrights, licenses, governmental authorizations, trade secrets and
know-how that are used or necessary for the conduct of their business as
described in the SEC Documents; except as described in the SEC Documents,
neither the Company nor any of its subsidiaries has received any notice of, or
has any knowledge of, any infringement of or conflict with asserted rights of
others with respect to any patent, patent right, invention, trademarks, trade
names, copyrights, licenses, governmental authorizations, trade secret or
know-how that, individually or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a material adverse effect on
the condition (financial or otherwise), earnings, operations or business of the
Company and its subsidiaries considered as a whole.
3.9 Authorized Capital Stock. The authorized capital stock of the Company
conforms, as of the dates for which such information is given, in all material
respects to the statements relating thereto contained in the SEC Documents. The
issued and outstanding shares of capital stock of the Company have been duly
authorized, validly issued and are fully paid and nonassessable; except as set
forth or referred to in the SEC Documents or as otherwise specified in Schedule
3.9, no warrants, options or other rights to purchase, agreements or other
obligation to issue, or agreements or other rights to convert any obligation
into, any shares of capital stock of the Company have been granted or entered
into by the Company. All of the above securities of the Company were issued in
compliance with all applicable federal and state securities laws and were not
issued in violation of or subject to any preemptive rights or other rights to
subscribe for or purchase securities. No holder of any security of the Company
is entitled to any preemptive or similar rights to purchase any securities of
the Company.
3.10 Litigation. There are no actions, suits, proceedings or
investigations pending or, to the best of the Company's knowledge, threatened
against the Company or any of its subsidiaries or properties before or by any
court or arbitrator or any governmental body, agency or official in which there
is a reasonable likelihood (in the judgment of the Company) of an adverse
decision that (a) would have a material adverse effect on the Company's
subsidiaries or properties or assets or the business of the Company or any of
its subsidiaries as presently
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<PAGE> 5
conducted or proposed to be conducted, or (b) would impair the ability of the
Company to perform in any material respect its obligations under this Agreement.
Neither the Company nor any of its subsidiaries is in default with respect to
any judgment, order or decree of any court or governmental agency or
instrumentality which, individually or in the aggregate, would have a material
adverse effect on the assets, properties or business of the Company or any of
its subsidiaries.
3.11 Preemptive and Registration Rights. There are no preemptive rights,
rights of first refusal, repurchase rights or any other right of the Company or
any third party as to the Securities which have not been satisfied or waived,
and except as provided in this Agreement (including Schedule 3.11 hereto), the
Company has not granted or agreed to grant any registration rights that would be
applicable to the registration for resale of the Securities pursuant to the
Registration Statement, as defined in and contemplated by Section 7.1 hereof, to
any person or entity which have not been satisfied or waived.
3.12 Compliance With Other Instruments. The business and operations of the
Company and its subsidiaries have been and are being conducted in accordance
with all applicable laws, rules and regulations of all governmental authorities,
except for such violations of applicable laws, rules and regulations which would
not, individually or in the aggregate, have a material adverse effect on the
assets, properties, financial condition or business of the Company or any of its
subsidiaries. Neither the execution and delivery of, nor the performance or
compliance with, this Agreement and the transactions contemplated hereby, will,
with or without the giving of notice or the passage of time, (i) result in any
breach of, or constitute a default under, or result in the imposition of any
lien or encumbrance upon any asset or property of the Company or any of its
subsidiaries pursuant to any agreement or other instrument to which the Company
or any of its subsidiaries is a party or by which it or any of its properties,
assets or rights is bound or effected, except for such breach or default or the
imposition of any such lien or encumbrance which, either individually or in the
aggregate, would not have a material adverse effect on the assets, properties,
financial condition or business of the Company or any of its subsidiaries, or
(ii) violate the Certificate of Incorporation or Bylaws of the Company or any of
its subsidiaries, or, except as set forth on Schedule 3.12, any law, rule,
regulation, judgment, order or decree. Neither the Company nor any of its
subsidiaries is in violation of its Certificate of Incorporation or Bylaws or in
violation of or in default under, any lien, indenture, mortgage, lease,
agreement, instrument, commitment or arrangements, except for such defaults
which would not, individually or in the aggregate, have a material adverse
effect on the assets, properties, financial condition or business of the Company
or any of its subsidiaries, or subject to any restriction which would prohibit
the Company from entering into or performing its obligations under the
Agreement.
3.13 Brokers or Finders. Except as set for on Schedule 3.13, in connection
with this transaction, no person, firm or corporation has or will have, as a
result of any act or omission of the Company, any right, interest or valid claim
against the Purchasers for any commission, fee or other compensation as a finder
or broker in connection with the transactions contemplated by this Agreement.
3.14 Compliance With Environmental Laws. Except as disclosed in the SEC
Documents, neither the Company nor any of its subsidiaries is in violation of
any applicable
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<PAGE> 6
statute, law or regulation relating to the environment or occupational health
and safety, and no material expenditures are or will be required in order to
comply with any such existing statute, law or regulation. Neither the Company
nor any of its subsidiaries has any material liability to any governmental
authority or other third party arising under or as a result of any such past or
existing statute, law or regulation.
3.15 Contracts. The contracts so described in the SEC Documents or
incorporated by reference therein are in full force and effect on the date
hereof, except for contracts the termination or expiration of which would,
individually or in the aggregate, not have a material adverse effect on the
business, properties or assets of the Company or any of its subsidiaries, and
neither the Company nor any of its subsidiaries, nor to the Company's knowledge,
any other party is in breach of or default under any of such contracts.
3.16 Properties. The Company and its subsidiaries have good and marketable
title to all the properties and assets reflected as owned in the financial
statements included in the SEC Documents, subject to no lien, mortgage, pledge,
charge or encumbrance of any kind except (i) those, if any, reflected in such
financial statements or SEC Documents, or (ii) those which are not material in
amount and do not adversely affect the use made and promised to be made of such
property by the Company and its subsidiaries. The Company and any applicable
subsidiary holds its leased properties under valid and binding leases, with such
exceptions as are not materially significant in relation to the business of the
Company and the subsidiaries. Except as disclosed in the SEC Documents, the
Company and its subsidiaries own or lease all such properties as are necessary
to their operations as now conducted or as proposed to be conducted.
3.17 Compliance. Neither the Company nor any of its subsidiaries has been
advised or has reason to believe that either it or any of its subsidiaries is
not conducting business in compliance with all applicable laws, rules and
regulations of the jurisdictions in which it is conducting business; except
where failure to be so in compliance would not materially adversely affect the
condition (financial or otherwise), business, results of operations or prospects
of the Company or any of its subsidiaries.
3.18 Taxes. The Company and its subsidiaries have filed all necessary
federal, state and foreign income and franchise tax returns and have paid or
accrued all taxes shown as due thereon, and the Company and its subsidiaries
have no knowledge of any tax deficiency which has been or might be asserted or
threatened against the Company or its subsidiaries which could materially and
adversely affect the business, operations or properties of the Company or its
subsidiaries.
3.19 Transfer Taxes. On the Closing Date, all stock transfer or other
taxes (other than income taxes) which are required to be paid in connection with
the sale and transfer of the Securities to be sold to the Purchasers hereunder
will be, or will have been, fully paid or provided for by the Company and all
laws imposing such taxes will be or will have been complied with fully.
3.20 Insurance. Each of the Company and its subsidiaries maintains
insurance of the types and in the amounts generally deemed adequate for its
business, including, but not limited to, insurance covering all real and
personal property owned or leased by the Company and its
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<PAGE> 7
subsidiaries against theft, damage, destruction, acts of vandalism and all other
risks customarily insured against, all of which insurance is in full force and
effect.
3.21 Contributions. Neither the Company nor any of its subsidiaries has,
directly or indirectly, at any time during the last five years (i) made any
unlawful contribution to any candidate for public office, or failed to disclose
fully any contribution in violation of law, or (ii) made any payment to any
federal or state governmental officer or official, or other person charged with
similar public or quasi-public duties, other than payments required or permitted
by the laws of the United States or any jurisdiction thereof.
Section 4
Representations, Warranties and Covenants of the Purchasers
Each Purchaser, severally and not jointly, hereby represents and warrants
to the Company as follows:
4.1 Authorization. (i) Purchaser has all requisite legal and corporate or
other power and capacity and has taken all requisite corporate or other action
to execute and deliver this Agreement, to purchase the Securities to be
purchased by it and to carry out and perform all of its obligations under this
Agreement, and (ii) this Agreement constitutes the legal, valid and binding
obligation of Purchaser, enforceable in accordance with its terms, except (a) as
limited by applicable bankruptcy, insolvency, reorganization, or similar laws
relating to or affecting the enforcement of creditors' rights generally and (b)
as limited by equitable principles generally (regardless of whether such
enforceability is considered a proceeding in equity or at law).
4.2 Investment Experience. Purchaser is an "accredited investor" as
defined in Rule 501(a) under the Securities Act. Purchaser is aware of the
Company's business affairs and financial condition and has had access to and has
acquired sufficient information about the Company to reach an informed and
knowledgeable decision to acquire the Securities. Purchaser has such business
and financial experience as is required to give it the capacity to protect its
own interests in connection with the purchase of the Securities.
4.3 Investment Intent. Purchaser is purchasing the Securities for its own
account as principal, and not as a nominee or agent, for investment purposes
only, and not with a present view to, or for, resale, distribution or
fractionalization thereof, in whole or in part, within the meaning of the
Securities Act. Purchaser understands that the offer and sale of the Securities
have not been registered under the Securities Act or registered or qualified
under any state securities law in reliance on specific exemptions therefrom
which exemptions may depend upon, among other things, the bona fide nature of
Purchaser's investment intent as expressed herein. Purchaser will not, directly
or indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit
any offers to buy, purchase or otherwise acquire or take a pledge of) any of the
Shares, the Warrants, the Penalty Warrants and the Warrant Shares except in
compliance with the Securities Act, and the rules and regulations promulgated
thereunder.
4.4 Registration or Exemption Requirements. Purchaser further acknowledges
and understands that the Securities may not be resold or otherwise transferred
except in a transaction
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<PAGE> 8
registered under the Securities Act or unless an exemption from such
registration is available. Purchaser understands that the certificate(s)
evidencing the Securities will be imprinted with a legend that prohibits the
transfer of such securities unless (i) they are registered or such registration
is not required, and (ii) if the transfer is pursuant to an exemption from
registration other than Rule 144 under the Securities Act and, if the Company
shall so request in writing, an opinion of counsel reasonably satisfactory to
the Company is obtained to the effect that the transaction is so exempt.
4.5 Removal of Legend. Any legend endorsed on a certificate pursuant to
this Agreement shall be removed, and the Company shall issue a certificate
without such legend to the Purchaser, if such Security is being disposed of
pursuant to a registration statement under the Securities Act or pursuant to
Rule 144 or any similar rule then in effect or if such holder provides the
Company with an opinion of counsel satisfactory to the Company to the effect
that a transfer of such Security may be made without registration. In addition,
if the holder of such Security delivers to the Company an opinion of such
counsel reasonably satisfactory to the Company to the effect that no subsequent
transfer of such Security will require registration under the Securities Act,
the Company will promptly upon such contemplated transfer deliver new
certificates evidencing such security that do not bear the legend set forth in
this Agreement.
Section 5
Conditions to each Purchaser's Obligation to Close
The obligation of each Purchaser to purchase the Shares and the Warrants
at the Closing is subject to the fulfillment as of the Closing Date of the
following conditions, any of which may be waived in whole or in part by such
Purchaser.
5.1 Representations and Warranties. The representations and warranties
made by the Company in Section 3 hereof shall be true and correct in all
material respects when made, and shall be true and correct in all material
respects on the Closing Date with the same force and effect as if they had been
made on and as of said date.
5.2 Covenants. All covenants, agreements and conditions contained in this
Agreement to be performed by the Company on or prior to the Closing Date shall
have been performed or complied with in all material respects.
5.3 Compliance Certificate. The President or Chief Financial Officer of
the Company shall have delivered to each Purchaser a certificate, dated as of
the Closing Date, certifying that the conditions specified in Sections 5.1 and
5.2 have been fulfilled and stating that since September 30, 1999, there shall
have been no material adverse change in the assets, liabilities, financial
condition, business or operations of the Company and its subsidiaries from that
reflected in the Financial Statements except changes in the ordinary course of
business which have not been, either individually or in the aggregate,
materially adverse.
5.4 Legal Opinion of Company Counsel. Jeffrey D. Segal, a Professional
Corporation, counsel to the Company, shall have delivered a legal opinion,
addressed to the Purchasers, in the form attached as Exhibit A hereto.
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<PAGE> 9
5.5 Closing Date. The Closing shall have occurred on or prior to February
7, 2000.
Section 6
Conditions to Closing of Company
The Company's obligation to sell and issue the Shares and the Warrants at
the Closing to each Purchaser is subject to the fulfillment or waiver of the
following conditions:
6.1 Representations and Warranties. The representations and warranties
made by Purchaser in Section 4 hereof shall be true and correct in all material
respects when made, and shall be true and correct in all material respects on
the Closing Date with the same force and effect as if they had been made on and
as of such date.
6.2 Covenants. All covenants, agreements and conditions contained in this
Agreement to be performed by Purchaser on or prior to the Closing Date shall
have been performed or complied with in all material respects.
Section 7
Registration Covenants of the Company
The Company hereby covenants and agrees as follows:
7.1 Certain Definitions. As used in this Section 7, the following terms
shall have the following meanings:
(a) "Effectiveness Period" shall begin upon the effective date of a
Registration Statement and end on the earlier of (i) four years after the
effective date of a Registration Statement, (ii) completion of the distribution
described in the Registration Statement or (iii) with respect to any Holder,
such time as all Registrable Securities held by such Holder may be sold in
compliance with Rule 144(k).
(b) "Holder" shall mean each Purchaser and its officers, directors and
employees, and the officers, directors and employees of its affiliates, and any
transferee or subsequent transferee of at least 20% of the Registrable
Securities originally issued to such Purchaser (other than a transferee who
purchases the Registrable Securities in a sale effected pursuant to any
Registration Statement or pursuant to Rule 144) provided that such Purchaser has
assigned its rights under this Agreement to such transferee, directly or
indirectly, such transferee has assumed the obligations of a Holder hereunder
and a copy of such written assignment and assumption is provided to the Company.
(c) "Indemnified Party" and "Indemnifying Party" shall be as defined in
Section 7.6.
(d) "Losses" shall be as defined in Section 7.6.
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(e) "Prospectus" shall mean the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement,
including, without limitation, with respect to the terms of the offering of any
portion of the Registrable Securities covered by such Registration Statement and
all other amendments and supplements to the prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such prospectus.
(f) "Register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
(g) "Registrable Securities" shall mean the Shares, the Warrant Shares and
any other security of the Company issued as a dividend or other distribution
with respect to or in exchange for or in replacement of the Shares or the
Warrant Shares; provided, however, that Registrable Securities shall not include
any such Shares that have been sold by a Holder under an effective Registration
Statement or under Rule 144.
(h) "Registration Statement" shall mean any registration statement of the
Company that covers any of the Registrable Securities pursuant to the provisions
of this Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits and
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
(i) "Rule 144" shall mean Rule 144, as promulgated by the SEC under the
Securities Act, as such rule may be amended from time to time, or any similar
successor rule that may be promulgated by the SEC.
(j) "Rule 158" shall mean Rule 158, as promulgated by the SEC under the
Securities Act, as such rule may be amended from time to time, or any similar
successor rule that may be promulgated by the SEC.
(k) "Rule 424" shall mean Rule 424 as promulgated by the SEC under the
Securities Act, as such rule may be amended from time to time, or any similar
successor rule that may be promulgated by the SEC.
(l) "Violation" shall be as defined in Section 7.6.
7.2 Registration Requirement. Following the Closing, the Company shall:
(i) prepare and file a Registration Statement with the SEC under the Securities
Act to register the resale of the Registrable Securities by the Holders within
180 days following the Closing, and (ii) have such Registration Statement
declared effective as soon as possible thereafter, and in any event within 225
days following the Closing; and (iii) register for resale the Shares prior to
the date the Registration Statement is declared effective (the "Effective
Date"), as of any date prior to the Effective Date that the Company registers
any of its equity securities that are outstanding on the
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date hereof. If the Registration Statement has not been declared effective with
225 days following the Closing or at any such time as a Penalty Warrant is
issued to a Holder, the Company shall also be required to register for resale
any and all Warrant Shares issuable on exercise of Penalty Warrants to the same
extent they were Shares.
7.3 Registration Procedures. In connection with the Company's registration
obligations under Section 7.2 hereof, the Company shall effect such registration
to permit the sale of the Registrable Securities in accordance with the method
or methods of disposition as set forth on Exhibit B hereto, and pursuant thereto
the Company shall as expeditiously as practicable:
(a) Before filing any Registration Statement or Prospectus (other than
documents that would be incorporated or deemed to be incorporated therein by
reference and that the Company is required by applicable securities laws or
stock exchange or quotation system requirements to file), furnish to the Holders
copies of all such documents proposed to be filed, which documents will be
subject to the review of such Holders and their counsel, if any, and the Company
shall not file any such Registration Statement or any Prospectus (other than
such documents which, upon filing, would be incorporated or deemed to be
incorporated by reference therein and that the Company is required by applicable
securities laws or stock exchange or quotation system requirements to file) to
which the Holders of a majority of the securities covered by such Registration
Statement shall reasonably object on a timely basis. In the event of any such
objection, the Holders shall provide the Company with any requested revisions to
such prospectus or supplement within three (3) business days of such objection.
(b) Notify the Holder in writing that the Registration Statement has been
declared effective on the date that it is declared effective, which notice shall
further state that the Registration Statement is not, to the Company's
knowledge, subject to any stop order, and provide to holder an opinion of
counsel to the Company in substantially the form of Exhibit C hereto. The
Company shall also prepare and file with the SEC such amendments and
post-effective amendments to the Registration Statement as may be necessary to
keep such Registration Statement continuously effective for the Effectiveness
Period; cause the related Prospectus to be amended or supplemented by any
required Prospectus amendment or supplement, and as so amended or supplemented
to be filed pursuant to Rule 424 (or any similar provisions then in force) under
the Securities Act; and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such Registration
Statement during the applicable period in accordance with the methods of
disposition intended by the Holders thereof set forth in such Registration
Statement as so amended or in such Prospectus as so supplemented.
(c) Notify the Holders promptly, and confirm such notice in writing, (i)
when a Prospectus or any Prospectus supplement or post-effective amendment has
been filed, and, with respect to a Registration Statement or any post-effective
amendment, when the same has become effective, (ii) of the issuance by the SEC
or any other federal or state governmental authority of any stop order
suspending the effectiveness of a Registration Statement or the initiation of
any proceedings for that purpose, (iii) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable
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Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose, (iv) of the existence of any fact or the happening
of any event that makes any statement made in such Registration Statement or
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or which requires the making
of any changes in such Registration Statement, Prospectus or documents so that,
in the case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
so that in the case of the Prospectus, it will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and (v) of the
Company's reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate.
(d) Use best efforts to obtain the withdrawal of any order suspending the
effectiveness of a Registration Statement, or the lifting of any suspension of
the qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction within the United States, at the
earliest practicable time.
(e) If reasonably requested by the Holders of a majority of the securities
being sold, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment such information as the Company and the Holders of a
majority of such securities agree should be included therein as required by
applicable law, (ii) make all required filings of such Prospectus supplement or
such post-effective amendment as soon as practicable after the Company has
received notification of the matters to be incorporated in such Prospectus
supplement or post-effective amendment, and (iii) supplement or make amendments
to any Registration Statement consistent with clause (i) or (ii) above;
provided, that the Company shall not be required to take any actions under this
paragraph that are not, in the opinion of counsel for the Company, in compliance
with applicable law.
(f) Furnish to each Holder and its counsel, if any, upon written request
and without charge to such Holder, at least one conformed copy of the
Registration Statement or Statements and any post-effective amendment thereto,
including financial statements (but excluding schedules, all documents
incorporated or deemed to be incorporated therein by reference and all exhibits,
unless requested in writing by such Holder or counsel).
(g) Deliver to each Holder and its counsel, if any, without charge, as
many copies of the Prospectus or Prospectuses relating to such Registrable
Securities (including each preliminary prospectus) and any amendment or
supplement thereto as such persons may reasonably request in writing; and the
Company hereby consents to the use of such Prospectus or each amendment or
supplement thereto by each Holder in connection with the offering and sale of
the Registrable Securities covered by such Prospectus or any amendment or
supplement thereto.
(h) Use reasonable efforts to register and qualify the Registrable
Securities under (or obtain exemption from) the securities or Blue Sky laws of
such jurisdictions within the United States as any Holder reasonably requests in
writing; use reasonable efforts to keep each such
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registration or qualification (or exemption therefrom) effective during the
Effectiveness Period and use reasonable efforts to do any and all other acts or
things necessary or advisable to enable the disposition in such jurisdictions of
the Registrable Securities covered by the applicable Registration Statement;
provided, that the Company will not be required to (i) qualify generally to do
business in any jurisdiction where it is not then so qualified or (ii) take any
action that would subject it to general service of process in any such
jurisdiction where it is not then so subject.
(i) Within five (5) business days following the occurrence of any event
contemplated by paragraphs 7.3(c)(iv) or 7.3(c)(v) above, prepare and file with
the SEC a supplement or post-effective amendment to each Registration Statement
or an amendment or supplement to the related Prospectus or any document
incorporated therein by reference or file any other required document (such as a
Current Report on Form 8-K) so that, as thereafter delivered to the purchasers
of the Registrable Securities being sold thereunder, such Prospectus will not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
(j) If necessary in connection with a disposition of Registrable
Securities, make available for inspection, at the offices where normally kept
during reasonable business hours, by a representative of any Holder and any
attorney or accountant retained by such Holder, financial and other records,
pertinent corporate documents and properties of the Company and its subsidiaries
as they may reasonably request, and cause the officers, directors and employees
of the Company and its subsidiaries to supply all information reasonably
requested by any such representative, attorney or accountant in connection with
such disposition; provided, that any records, information or documents that are
designated by the Company in writing as confidential at the time of delivery of
such records, information or documents shall be kept confidential by such
Persons, and such Persons shall so agree in writing.
(k) Comply with all applicable rules and regulations of the SEC and make
generally available to its security holders earning statements satisfying the
provisions of Section 11 (a) of the Securities Act and Rule 158 thereunder no
later than 45 days after the end of any 12-month period (or 90 days after the
end of any 12-month period if such period is a fiscal year) commencing on the
first day of the first fiscal quarter of the Company, after the effective date
of a Registration Statement, which statements shall cover said 12-month period.
(l) Cooperate with the Holders and transfer agent and registrar to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any restrictive legends; and
enable such Registrable Securities to be in such denominations and registered in
such names as a Holder may request.
(m) Cause the Shares to be listed on each securities exchange or quotation
system on which the Company's Common Stock is then listed no later than the date
the Registration Statement is declared effective and, in connection therewith,
to the extent applicable, to make any required filings under the Exchange Act
and to have such filings declared effective thereunder.
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(n) Provide a transfer agent and registrar for all Shares and Warrant
Shares registered pursuant hereunder and a CUSIP number for all such Shares and
Warrant Shares, in each case not later than the effective date of such
registration.
In connection with the disclosures in a Registration Statement, as
required under the Securities Act, the Company may require a Holder, and each
Holder agrees, to furnish to the Company in writing such information regarding
the distribution of the Registrable Securities covered by such Registration
Statement as the Company may, from time to time, reasonably request in writing
and the Company may exclude from such registration the Registrable Securities of
any Holder if such Holder unreasonably fails to furnish such information in
writing within a reasonable time after receiving such request. Each Holder
agrees promptly to furnish to the Company all information required to be
disclosed in such Registration Statement in order to make the information
previously furnished to the Company by such Holder not misleading. Any sale of
any Registrable Securities by any Holder shall constitute a representation and
warranty by such Holder that the required information relating to such Holder
and its plan of distribution is as set forth in the Prospectus delivered by such
Holder in connection with such disposition, that such Prospectus does not as of
the time of such sale contain any untrue statement of a material fact relating
to such Holder or its plan of distribution and that such Prospectus does not as
of the time of such sale omit to state any material fact relating to such Holder
or its plan of distribution necessary to make the statements in such Prospectus,
in the light of the circumstances under which they were made, not misleading.
Each Holder agrees that, upon receipt of any notice from the Company of
the happening of (i) any event of the kind described in paragraphs 7.3(c)(ii),
7.3(c)(iii), 7.3(c)(iv) or 7.3(c)(v) hereof, or (ii) a determination by the
Company's Board of Directors that it is advisable to suspend use of the
Prospectus for a discrete period of time due to pending corporate developments
such as negotiation of a material transaction, such Holder will forthwith
discontinue disposition of such Registrable Securities covered by the applicable
Registration Statement or Prospectus until such Holder's receipt of the copies
of the supplemented or amended Prospectus contemplated by paragraph 7.3(i)
hereof, or until such Holder is advised in writing by the Company that the use
of the applicable Prospectus may be resumed, and has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus. The Company agrees to so advise
such Holder promptly after the Company determines that the use of the applicable
Prospectus may be resumed. The Company shall not suspend use of a Prospectus or
Registration Statement under this paragraph of Section 7.3 more than twice in
any 12 month period. Once declared effective by the Commission, if the
Prospectus or Registration Statement becomes unavailable for a period greater
than the period allowed in the preceding sentence, Purchaser shall be entitled
to receive, in addition to all other remedies available at law or in equity, a
Penalty Warrant equal to 3% of the number of shares held by Holder for each
month (pro rata for partial months) that the Prospectus or Registration
Statement is unavailable. Such Penalty Warrant shall be issued on the day after
the Prospectus or Registration statement becomes available, at the price and on
the terms as provided by section 7.4(b), below. Any period for which use of a
Prospectus or Registration Statement is suspended under this paragraph of
Section 7.3 shall be added to the
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time for which the Company is required to maintain the effectiveness of such
Registration Statement, including the Prospectus constituting a part thereof,
under Section 7.3(b).
7.4 Registration Penalty.
(a) If the Registrable Securities have not been registered for
resale by a date that is 225 days following the Closing (the "Penalty Date"),
the Company shall be obligated to issue Holder a Warrant (a "Penalty Warrant")
on substantially the form attached hereto as Exhibit D. The number of shares for
which each Penalty Warrant is exercisable for is to be determined as follows:
for each month (pro rata for partial months) following the Penalty Date that the
Registrable Securities have not been registered for resale a Penalty Warrant
shall be issued for 3% of the number of Shares held by Holder on the Penalty
Date. No Penalty Warrants shall be issuable if the Registration Statement is
declared effective within 225 days following the Closing. For the purposes of
this subsection (a), a "month" shall be deemed to begin on the same numbered day
in each calendar month as the numbered day of the month on which the Closing
occurs. As the obligation to issue the Penalty Warrants accrues, the Company
shall reserve for issuance the number of shares of Common Stock corresponding
number of shares of Common Stock the Penalty Warrants can be exercised.
(b) Although the obligation to issue Penalty Warrants will begin on
the day after the Penalty Date, the Company shall not actually issue such
Penalty Warrants until the earlier of (i) the day after the Company first
registers the Registrable Securities for resale or (ii) six months and one day
after the Penalty Date (the "Penalty Warrant Issuance Date"). In the event
clause (ii) in the preceding sentence applies then additional Penalty Warrants
shall be issued, pursuant to this subsection, every three months after the first
Penalty Warrant Issuance Date, as appropriate (each a "Penalty Warrant Issuance
Date" and collectively the "Penalty Warrant Issuance Dates"). The maximum
duration of the period of exercisability for each Penalty Warrant shall be until
the fifth anniversary of the respective Penalty Warrant Issuance Date. The
initial Exercise Price per share of the Penalty Warrant shall be the lower of
(i) $11.00 or (ii) 110% of the price which was the lowest closing sale price of
the Common Stock, as reported by the Nasdaq-Amex Stock Market or any exchange on
which the Common Stock is traded (or if the stock is not so reported, then as
reported by the local over-the-counter market), during the period between the
Closing and the respective Penalty Warrant Issuance Date.
7.5 Restriction on Registration. From the date hereof through a period of
60 days following the date that the Registration Statement is first declared
effective, the Company shall not register any securities other than securities
issued in connection with (1) any stock option plan, stock purchase plan, stock
bonus plan or other plan for the benefit of employees, consultants, officers or
directors of the Company or (2) the exercise of any rights, warrants or options
heretofore granted or issued by the Company for the acquisition of any
securities.
7.6 Registration Expenses. All fees and expenses incident to the
performance of or compliance with this Agreement by the Company shall be borne
by the Company whether or not any of the Registration Statements become
effective and whether or not any of the Registrable Securities are transferred
pursuant to the Registration Statement. Such fees and expenses shall include,
without limitation, (i) all registration and filing fees (including, without
limitation, fees
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and expenses (A) with respect to designation of the Registrable Securities as
eligible for trading on applicable securities exchange or quotation system, and
(B) of compliance with securities or Blue Sky laws), (ii) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities in a form eligible for deposit with The Depository Trust
Company and of printing Prospectuses), (iii) messenger, telephone and delivery
expenses, (iv) fees and disbursements of counsel for the Company in connection
with the Company's performance of its obligations under this Agreement, (v)
reasonable fees and disbursements of all independent certified public
accountants, (vi) Securities Act liability insurance if the Company so desires
such insurance, (vii) fees and expenses of all other persons retained by the
Company in connection with the performance by the Company of its duties under
this Agreement and (viii) fees and expenses of counsel to Purchaser up to a
maximum of $10,000. Except as set forth in the preceding sentences of this
paragraph, the Company shall not be responsible for paying the expenses of
Holder, or its counsel, incurred in connection with the registration or approval
of the Registration Statement or the transactions contemplated thereby by
governmental agencies or authorities other than those administering applicable
securities laws and applicable exchange or quotation system regulations. In
addition, the Company will, in any event, bear its own internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit, the fees and expenses incurred in connection with the listing of the
Registrable Securities on any securities exchange or quotation system on which
similar securities issued by the Company are then listed and the fees and
expenses of any person, including special experts, retained by the Company.
7.7 Indemnification.
(a) By the Company. To the maximum extent permitted by law, the Company
will indemnify and hold harmless each Holder of Registrable Securities, each
person, if any, who controls such Holder within the meaning of the Securities
Act or the Exchange Act, and each underwriter, if any, of Registrable
Securities, against any losses, claims, damages, liabilities or expenses (joint
or several) (collectively "Losses") to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
Losses (or actions in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (collectively, a "Violation"): (i)
any untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any state securities law. The
Company will reimburse each such Holder or controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such Losses (or action in respect thereof); provided, however,
that the indemnity agreement contained in this Section 7.7 shall not apply to
amounts paid in settlement of any such Losses (or action in respect thereof) if
such settlement is effected without the consent of the Company (in which case
the parties shall first have met and conferred in good faith regarding such
settlement), nor shall the Company be liable in any such case for any such
Losses (or action in respect thereof) to the extent that they arise out of or
are based upon a Violation which arises out of or is based upon
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information furnished in writing expressly for use in connection with such
registration by any such Holder, controlling person, as the case may be;
provided, further, that the Company will not be liable to any Holder or
controlling person or underwriter, as the case may be with respect to any Losses
arising out of or based upon any untrue statement or alleged untrue statement or
omission or alleged omission to state a material fact in any preliminary
prospectus which is corrected in an amended, supplemented or final prospectus if
the purchaser asserting such Losses purchased from such Holder or underwriter,
as applicable, and was not, due to the fault of such Holder, sent or given a
copy of such amended, supplemented or final prospectus at or prior to the sale
of Registrable Securities to such purchaser.
(b) By Holders. To the maximum extent permitted by law, each Holder
(severally, but not jointly) will, if Registrable Securities held by such Holder
are included in the Registrable Securities as to which such registration,
qualification or compliance is being effected, indemnify and hold harmless the
Company, each of its directors and officers, each underwriter, if any, of
Registrable Securities, and each person who controls the Company or such
underwriter within the meaning of the Securities Act or the Exchange Act,
against any Losses to which the Company or any such director or controlling
person may become subject, under the Securities Act, the Exchange Act or other
federal or state law, insofar as such Losses (or actions in respect thereto)
arise out of or are based upon any Violation, in each case to the extent (and
only to the extent) that such Violation arises out of or is based upon
information furnished by such Holder in writing expressly for use in connection
with such registration; and each such Holder will reimburse any legal or other
expenses reasonably incurred by the Company or any such controlling person in
connection with investigating or defending any such Losses (or actions in
respect thereof); provided, however, that the indemnity agreement contained in
this Section 7.7(b) shall not apply to amounts paid in settlement of any such
Losses (or actions in respect thereof) if such settlement is effected without
the consent of the Holder (in which case the parties shall first have met and
conferred in good faith regarding such settlement). Each Holder's liability
under this Section 7.7(b) shall not exceed the net proceeds received by such
Holder from the sale of Registrable Securities held by such Holder included in
such registration, qualification or compliance.
(c) Procedures. Each party entitled to indemnification under this Section
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld or delayed). Without limiting the generality of the foregoing, if the
Indemnified Party has been advised in writing by its counsel that representation
of both the Indemnified and Indemnifying Party by the same counsel would be
inappropriate under standards of professional conduct due to actual or potential
differing interests, with respect to such claim or litigation, the Indemnifying
Party shall bear the expense of another counsel who shall represent the
Indemnified Party and any other persons or entities who have indemnification
rights from the Indemnifying Party hereunder, with respect to such claim or
litigation, and shall be selected as provided in the first sentence of this
Section 7.7(c). The Indemnified Party may participate in such defense at such
party's expense
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(except to the extent that the Indemnifying Party is required to pay the expense
of such counsel pursuant to this Section 7.7(c)), and provided further that the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Agreement, except
to the extent such failure is prejudicial to the Indemnifying Party in defending
such claim or litigation. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified Party
(which consent shall not be unreasonably withheld or delayed), consent to entry
of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability with respect to such claim or
litigation.
(d) Contribution. If the indemnification provided for in this Section is
held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any Losses referred to therein, then the Indemnifying
Party, in lieu of indemnifying such Indemnified Party hereunder, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Losses in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party (on the one hand) and of the Indemnified Party
(on the other) in connection with the statements or omissions which resulted in
such Losses as well as any other relevant equitable considerations. The relative
fault of the Indemnifying Party and of the Indemnified Party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the Indemnifying Party or by the Indemnified Party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
7.8 Information Requirements. The Company shall file in a timely manner
the reports required to be filed by it under the Securities Act and the Exchange
Act, and if at any time the Company is not required to file such reports, it
will, upon the request of any Holder, make publicly available other information
so long as necessary to permit sales pursuant to Rule 144 under the Securities
Act. The Company further covenants that it will cooperate with any Holder and
take such further action as such Holder may reasonably request (including
without limitation making such representations as any such Holder may reasonably
request), all to the extent required from time to time to enable such Holder to
sell Registrable Securities without registration under the Securities Act within
the limitation of the exemptions provided by Rule 144 under the Securities Act.
Upon the request of any Holder, the Company shall deliver to such Holder a
written statement as to whether it has complied with such filing requirements.
The Company shall file in a timely manner the reports required to be filed by it
under the Exchange Act and shall comply with all other requirements set forth in
the instructions to any Securities Act registration form used in connection with
any Shelf Registration effected pursuant hereto in order to allow the Company to
be eligible to file registration statements on such form.
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Section 8
Other Affirmative Covenants of the Company
8.1 Nasdaq Listing. The Company shall use its best efforts to obtain
approval for listing of the Shares and the Warrant Shares on the Nasdaq SmallCap
Market as soon as practicable following the date hereof.
8.2 Antidilution. If the Company should decide to issue and sell any
additional shares of capital stock of the Company, or any warrants, securities
convertible into capital stock of the Company or other rights to subscribe for
or to purchase any capital stock of the Company (all such capital stock,
warrants, securities convertible into capital stock and other rights being
hereinafter collectively referred to as "Additional Securities") for a
consideration per share (the "Lower Purchase Price") less than the Purchase
Price, then, forthwith upon such issue or sale, the Company shall issue to each
Purchaser a number of additional shares of Common Stock in accordance with the
following formula:
AS = (TPP/LPP) - OS
where
AS = the number of additional shares of Common Stock to be issued to a
Purchaser
TPP = the total consideration paid by a Purchaser for the Shares
LPP = the Lower Purchase Price
OS = the number of original shares of Common Stock each Purchaser
acquired pursuant to this Agreement plus the aggregate number of
shares of Common Stock, if any, previously issued to such Purchaser
pursuant to this section 8.2
If AS is a negative number, then no additional shares of Common Stock shall be
issued in connection with the issuance of additional securities.
8.3 Notice of Adjustment. Upon the requirement to issue additional
securities pursuant to Section 8.2 above, then and in each such case, the
Company shall give written notice thereof, by first class mail, postage prepaid,
addressed to each Purchaser, which notice shall state the number of additional
shares of Common Stock to be issued, setting forth in reasonable detail the
method of calculation and the facts upon which such calculation is based.
8.4 Termination of Antidilution Adjustment. No additional shares of Common
Stock shall be issued to a Purchaser pursuant to Section 8.2 hereof after the
last day of a twelve (12) month period beginning on or after the date the
Registration Statement is declared effective and during which the average of the
closing prices of the Common Stock on the Nasdaq Small Cap Market (or such other
exchange on which the Common Stock is registered) over that twelve (12) month
period is at least $11.00.
-19-
<PAGE> 20
Section 9
Restrictions on Transferability of Securities;
Compliance with Securities Act
9.1 Restrictions on Transferability. No Shares, Warrants, Penalty Warrants
or Warrant Shares shall be transferred unless (a) such transfer is made in
compliance with applicable federal and state securities laws and (b) prior to
such transfer, the transferees sign a counterpart to this Agreement pursuant to
which it or they agree to be bound by the terms of this Agreement. The Company
shall not be required to (a) transfer on its books any shares that shall have
been sold or transferred in violation of any of the provisions of this Agreement
or (b) treat as the owner of such shares or to accord the right to vote as such
owner or to pay dividends to any transferee to whom such shares shall have been
so transferred.
9.2 Restrictive Legend. Each certificate representing the Securities shall
bear substantially the following legend (in addition to any legends required
under applicable securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT
PURPOSES ONLY AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM.
9.3 Transfer of Securities After Registration. Each Purchaser, severally
and not jointly, hereby covenants with the Company not to make any sale of the
Shares, the Warrants, the Penalty Warrants or the Warrant Shares except either
(i) in accordance with the Registration Statement, in which case Purchaser
covenants to comply with the requirement of delivering a current prospectus,
(ii) in accordance with Rule 144, in which case such Purchaser covenants to
comply with Rule 144, or (iii) in accordance with another exemption from the
registration requirements of the Securities Act. The legend set forth in Section
9.2 will be removed from a certificate representing the Securities following and
in connection with any sale of the Securities pursuant to subsection (i) or (ii)
hereof, but not in connection with any sale of Shares pursuant to subsection
(iii) hereof, and also will be removed at such time that the Securities may be
sold under Rule 144 without restriction as to volume and manner of sale.
9.4 Purchaser Information. Each Purchaser, severally and not jointly,
covenants that it will promptly notify the Company of any changes in the
information set forth in the Registration Statement regarding such Purchaser,
under the heading "Selling Security Holders" or "Plan of Distribution" or
elsewhere.
-20-
<PAGE> 21
Section 10
Miscellaneous
10.1 Construction. The Company and the Purchasers have participated
jointly in the negotiation and drafting of this Agreement. No presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement.
10.2 Notices. Any notice, request, demand, waiver, consent, approval or
other communication which is required or permitted to be given to any party
hereunder shall be in writing and shall be deemed given only if delivered to the
party personally or sent to the party by telecopy, telegram or by registered or
certified mail (return receipt requested) with postage and registration or
certification fees thereon prepaid, addressed to the party at its address set
forth below:
If to the Company:
Stan Lee Media, Inc.
15821 Ventura Boulevard, Suite 675
Encino, California 91436
If to Purchasers, at the address for such Purchaser set forth on the
signature page hereto, or as subsequently requested in writing.
10.3 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
10.4 Survival of Representations, Warranties and Agreements. The
representations and warranties of the Company shall survive the execution and
delivery of this Agreement. No independent investigation of the Company by
Purchasers, their counsel, or any of their agents or employees, shall in any way
limit or restrict the scope of the representations and warranties made by the
Company in this Agreement. All covenants and agreements set forth herein shall
survive the Closing without limitation, except as otherwise specifically
provided herein.
10.5 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
the conflicts of laws principles thereof.
10.6 Severability. The parties agree that (a) the provisions of this
Agreement shall be severable in the event that any provision hereof is held by a
court of competent jurisdiction to be invalid, void or otherwise unenforceable,
(b) such invalid, void or otherwise unenforceable provision shall be
automatically replaced by another provision which is as similar as possible in
terms to such invalid, void or otherwise unenforceable provision but which is
valid and enforceable, and (c) the remaining provisions shall remain enforceable
to the fullest extent permitted by law.
<PAGE> 22
10.7 No Third Party Beneficiaries. Nothing herein expressed or implied is
intended or should be construed to confer upon or give to any person other than
the parties hereto and their successors and assigns any rights or remedies under
or by reason of this Agreement.
10.8 Entire Agreement. This Agreement constitutes the entire understanding
of the parties with respect to the subject matter hereof, and supersedes any
prior agreements or understandings, written or oral, between the parties with
respect to the subject matter hereof.
10.9 Amendment and Waiver. The parties may, by mutual agreement, amend
this Agreement in any respect in a writing executed by each party, and any
party, as to such party, may waive any of its rights hereunder. To be effective,
any such waiver must be in writing and be signed by the party providing such
waiver. The rights and remedies herein provided are cumulative and are not
exclusive of any rights or remedies which any party may otherwise have at law or
in equity. The waiver by any party hereto of any breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach, whether or not similar.
10.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but which together
shall constitute one and the same instrument.
10.11 Headings. The headings preceding the text of the sections and
subsections hereof are inserted solely for convenience of reference, and shall
not constitute a part of this Agreement nor shall they affect its meaning,
construction or effect.
10.12 Public Announcement. In the event any party proposes to issue any
press release or public announcement concerning any provisions of this Agreement
or the transactions contemplated hereby, such party shall so advise the other
party hereto, and the parties shall thereafter use their best efforts to cause a
mutually agreeable release or announcement to be issued. Neither party will
publicly disclose or divulge any provisions of this Agreement or the
transactions contemplated hereby without the other parties' written consent,
except as may be required by applicable law (including applicable SEC rules and
regulations) or stock exchange regulation, and except for communications to
employees.
10.13 Further Assurances. Each party to this Agreement shall do and
perform or cause to be done and performed all such further acts and things and
shall execute and deliver all such other agreements, certificates, instruments
and documents as the other party hereto may reasonably request in order to carry
out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
10.14 Expenses. The Company and Purchaser will each bear their own fees
and expenses in connection with the transactions contemplated by this Agreement;
provided, that the Company shall pay at the Closing up to $5,000 of legal fees
and expenses, collectively, of the Purchasers.
10.15 Exculpation Among Purchasers. Each Purchaser acknowledges that it is
not relying upon any person, firm or corporation, other than the Company and its
officers and directors, in making its investment or decision to invest in the
Company. Each Purchaser agrees
-22-
<PAGE> 23
that no Purchaser nor the respective controlling person, officers,
directors, partners, agents or employees of any Purchaser shall be liable to any
other Purchaser for any action heretofore or hereafter taken or omitted to be
taken by any of them in connection with the purchase of the Shares or the
Warrant Shares or the execution of or performance under any of the related
documents.
-23-
<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first written above.
STAN LEE MEDIA, INC.
/s/ Robert M. Schultz
-----------------------------
Name: Robert M. Schultz
Title: Vice President-Finance
<PAGE> 25
PURCHASER:
------------------------------
------------------------------
Name:
-------------------------
Title:
-------------------------
Address:
-------------------------
<PAGE> 26
EXHIBIT A
LEGAL OPINION
<PAGE> 27
EXHIBIT B
PLAN OF DISTRIBUTION
<PAGE> 28
EXHIBIT C
LEGAL OPINION
, 2000
- -----------------
- -----------------
Ladies and Gentlemen:
We have acted as counsel for _______, Inc., a Delaware corporation (the
"Company"), in connection with the issuance and sale to you of certain Shares of
its common stock, par value $.__ per share, pursuant to the Purchase Agreement
dated February _, 2000 (the "Stock Purchase Agreement") among the Company and
you and in connection with the Company's registration with the SEC of such
Shares for resale by you. This opinion letter is being rendered to you pursuant
to Section 7.3(b) of the Stock Purchase Agreement in connection with the SEC
declaring effective the Registration Statement for your resale of the Shares.
Capitalized terms not otherwise defined in this opinion letter have the meanings
given them in the Stock Purchase Agreement.
In our capacity as counsel to the Company, we have examined, among other
things, originals, or copies identified to our satisfaction as being true
copies, of the Registration Statement on Form S-1 (File No. 333-____________)
initially filed by the Company with the SEC on ____________, 2000, for the
purpose of registering the resale of the Shares under the Securities Act; [and
amendments thereto]; and oral advice on ______________, 2000, from an SEC staff
examiner, that the SEC had declared such Registration Statement, as so amended,
effective as of ______ p.m., Washington, D.C. time, on _____________, 2000.
As used in this opinion letter, the phrase "to our knowledge" means as to
matters of fact that, based on the actual knowledge of individual attorneys
within the firm principally responsible for handling current matters for the
Company (and not including any constructive or imputed notice of any
information), no facts have been disclosed to us that have caused us to conclude
that the opinions expressed are factually incorrect; but our affirmative factual
investigation for the purpose of rendering this opinion letter has been limited
to obtaining (a) oral advice received on ___________, from an SEC staff
examiner, that the SEC had declared such Registration Statement, as amended,
effective at _____ p.m. Washington, D.C. time, on _________ , 2000 and (b) oral
advice received on ___________, 2000 from an SEC staff examiner that there is no
stop order suspending the effectiveness of the Registration Statement.
Based upon our examination of and reliance upon the foregoing, we are of
the opinion that as of the date hereof:
1. The Registration Statement has become effective under the Securities Act and,
to our knowledge, no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose are pending before
or contemplated by the SEC.
<PAGE> 29
This opinion letter is rendered as of the date first written above solely
for your benefit in connection with the Stock Purchase Agreement and the
Registration Statement and may not be delivered to, quoted or relied upon by any
person other than you, or for any other purpose, without our prior written
consent. Our opinion is expressly limited to the matters set forth above and we
render no opinion, whether by implication or otherwise, as to any other matters
relating to the Company, the Stock Purchase Agreement, the Registration
Statement or the Shares. We assume no obligation to advise you of facts,
circumstances, events or developments which hereafter may be brought to our
attention and which may alter, affect or modify the opinions expressed herein.
Very truly yours,
<PAGE> 30
EXHIBIT D
FORM OF WARRANT
<PAGE> 1
EXHIBIT 10.5
REVOLVING CREDIT AGREEMENT
AGREEMENT dated as of July 23, 1999, between SANTO
DEVELOPMENT WORLDWIDE, a British Virgin Islands corporation
("Lender"), and BOULDER CAPITAL OPPORTUNITIES, INC., a Colorado
corporation ("Borrower").
WHEREAS, the Borrower has applied to the Lender for a revolving line
of credit in an aggregate principal amount at any one time outstanding of not
more than One Million U.S. Dollars (US$1,000,000) (the "Commitment"), to expire
on July 31, 2000 (the "Maturity Date"). The proceeds of revolving credit loans
made pursuant to the Commitment are to be used by the Borrower for working
capital purposes in connection with the operations of the Borrower.
WHEREAS, the Lender is willing to make revolving credit loans to the
Borrower upon the terms and subject to the conditions set forth in this
Agreement.
NOW, THEREFORE, the Lender and the Borrower hereby agree as follows:
I. THE LOANS
SECTION 1.01. Revolving Credit Loans. The Lender shall make
revolving credit loans to the Borrower from the date hereof until the Maturity
Date, in an aggregate principal amount at any one time outstanding up to but not
in excess of the amount of the Commitment. The Lender shall make the initial
revolving credit loan against delivery to the Lender of the Note (as defined in
Section 1.02 hereof) duly executed on behalf of the Borrower, by depositing the
proceeds of such loan in the form of immediately available funds to the account
of the Borrower at a banking institution located in the County of Los Angeles,
State of California (the "Bank"). Any subsequent revolving credit loans shall be
made in the same manner except that the Borrower may designate a different
account in the notice referred to in the next sentence hereof. The Borrower
shall give the Lender at least two business days' prior written notice of any
requested revolving credit loan hereunder, which notice shall specify the
proposed amount thereof in substantially the form attached hereto as Exhibit B
and the other information provided for on such form. Each revolving credit loan
hereunder shall be in the aggregate principal amount of $5,000 or an integral
multiple thereof. Prior to the Maturity Date, the Borrower may borrow, pay,
prepay and reborrow hereunder in accordance with this Section and Section 1.03
hereof.
SECTION 1.02. Revolving Credit Note. On the date of the first
borrowing hereunder, the Borrower shall issue and deliver to the Lender a
promissory note, dated the date of such borrowing and in the face amount of the
Commitment. Such note shall be in substantially the form attached hereto as
Exhibit A (the "Note") and shall be duly executed and delivered on behalf of the
Borrower. The Lender shall, and is hereby authorized by the Borrower to, set
forth on the reverse side of the Note the amount of each revolving credit loan
made pursuant to Section 1.01 hereof and the other information provided for on
such reverse side. The principal of the Note shall be due and payable on the
Maturity Date. The Note shall
<PAGE> 2
bear interest from its date on the unpaid principal amount thereof at the rate
of the London Interbank Offered Rates (LIBOR) published in The Wall Street
Journal on such date plus two percent (2%) per annum (computed on the basis of
the actual number of days elapsed over a year of 360 days). Interest shall be
due and payable monthly on the first day of each month, commencing on the first
day of the first full month beginning at least 30 days after issuance of the
Note, and at maturity. Interest shall be payable on any overdue payment or
mandatory prepayment of principal at the maximum rate permitted by law (computed
as aforesaid). Any holder of the Note seeking to enforce the same shall have all
the rights of a noteholder as provided hereunder and under applicable law.
SECTION 1.03. Prepayment of Note. (a) Optional. The Borrower may at
its option prepay the Note in whole at any time or in part from time to time
without penalty or premium. Each prepayment of the Note pursuant to this
subsection shall be applied to principal, shall be in the then unpaid principal
amount of the Note or an integral multiple of $2,500 and shall be accompanied by
the payment of accrued and unpaid interest on the amount of such prepayment to
the date thereof.
(b) Mandatory. The Borrower shall prepay the Note within 60 days
following dissolution of the Borrower, in the then unpaid principal amount
thereof together with accrued and unpaid interest on the amount of such
prepayment to the date thereof. Each prepayment of the Note pursuant to this
subsection shall be applied first to accrued and unpaid interest on, and then to
the principal of, the Note.
II. CONDITIONS OF LENDING
The obligation of the Lender to lend hereunder is subject to the
following conditions precedent:
SECTION 2.01. No Default. The Borrower shall be in compliance with
all the terms and provisions set forth in this Agreement on its part to be
observed and performed, and no event of default specified in Article IV hereof,
nor any event which upon notice or lapse of time or both would constitute such
an event of default, shall have occurred and be continuing at such time after
giving effect to such borrowing.
III. COVENANTS OF BORROWER
The Borrower covenants and agrees with the Lender that, so long as
any of the principal of or interest on the Note shall remain unpaid, unless the
Lender shall otherwise consent in advance in writing, it shall not declare, pay
or make directly or indirectly any distribution whether in cash, property,
securities or a combination thereof with respect to any interest in Borrower,
nor shall it redeem, purchase, retire or otherwise acquire for consideration, or
set apart any sum for, any such interest.
IV. DEFAULTS AND REMEDIES
The occurrence of any of the following events or conditions (herein
"Events of
<PAGE> 3
Default") shall, at the option of Lender and without notice to or demand on
Borrower, constitute an Event of Default hereunder:
(a) Borrower's failure to pay the Note as and when due after the
expiration of any cure period (whether upon demand, acceleration or otherwise);
(b) Borrower's written admission of its inability to pay its debts
as they mature or an assignment of Borrower for the benefit of creditors;
(c) Borrower's institution (by petition, application, answer,
consent or otherwise) of any bankruptcy, insolvency, reorganization,
arrangement, readjustment of debt, dissolution, liquidation, or similar
proceedings under the laws of any jurisdiction;
(d) Borrower's consent to the appointment of a trustee or receiver
for all or a substantial portion of its property;
(e) the adjudication of Borrower as a bankrupt or insolvent under
any federal or state law;
(f) the appointment of a receiver, trustee, conservator or similar
person for Borrower or for all or a substantial part of the property of Borrower
without the application or consent of Borrower if such appointment shall
continue undischarged for a period of sixty (60) days; or the substitution of
any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt,
dissolution, liquidation or similar proceedings under the laws of any
jurisdiction (by petition, application or otherwise) against Borrower which
remain undismissed for a period of sixty (60) days;
(g) the issuance of a writ or order of attachment or any similar
process by any court against all or a substantial part of the property of
Borrower if such writ or order of attachment or similar process is not stayed or
is not released within forty-five (45) days after its entry or levy or after any
stay is vacated or set aside; and/or
(h) a material adverse change in the financial condition, affairs or
operations of Borrower or any other obligor or guarantor of the Obligations,
including, without limitation, loss of a material contract or license.
Upon the occurrence of any Event of Default, Lender may, at its
option, without notice to or demand on Borrower, declare the Note immediately
due and payable after any cure periods, and Lender shall have all rights and
remedies of a secured party under Chapter 5 of Division 9 of the California
Uniform Commercial Code and other applicable law as well as the rights and
remedies set forth in the Security Agreement. All rights, powers and remedies
provided herein are cumulative and not exclusive of any rights, powers or
remedies otherwise provided by law. Any single or partial exercise of any right,
power or remedy shall not preclude the further exercise of any other right,
power or remedy.
<PAGE> 4
V. GENERAL PROVISIONS
SECTION 5.01. Notices. All notices, requests, demands and other
communications shall be in writing and deemed to have been duly given when
delivered personally, by facsimile transmission upon receipt of a "clear" or
"ok" transmission notice, or five (5) days following deposit in the United
States mail, first class, postage prepaid, duly addressed:
If to Borrower: Boulder Capital Opportunities, Inc.
15821 Ventura Blvd., Suite 675
Encino, CA 91436
Attention of Chief Operating Officer.
If to Lender: Santo Development Worldwide
Unit 1204A
12/F Peregrine Tower, Lippo Centre
89 Queensway
Hong Kong
Any party may, pursuant to written notice in compliance with this Section, alter
or change the address or the identity of the person to whom any notice is to be
sent.
SECTION 5.02. Assignment. Either party shall have the right to
assign its rights hereunder to any affiliate or successor in interest whether by
merger, consolidation, purchase of assets or otherwise.
SECTION 5.03. Further Assurances. Each party hereby agrees to
execute and deliver such instruments and documents as the other party may deem
necessary or advisable to effectuate the contemplated transaction.
SECTION 5.04. No Waiver. No term or condition of this Agreement
shall be deemed to have been waived, nor shall any party hereto be estopped from
enforcing any provision of this Agreement, except by written instrument of the
party charged with such waiver or estoppel. Any written waiver shall not be
deemed a continuing waiver unless specifically stated, shall operate only as to
the specific term or condition waived and shall not constitute a waiver of such
term or condition for the future or as to any act other than that specifically
waived.
SECTION 5.05. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
SECTION 5.06. Entire Agreement; Amendments. This Agreement contains
the entire agreement of the parties hereto in regard to the subject matter
hereof, and may not be changed orally but only by a written document signed by
the party against whom enforcement of waiver, change, modification, extension or
discharge is sought.
<PAGE> 5
SECTION 5.07. Headings. Headings contained in this Agreement are for
convenient reference only; they are not a part of this Agreement and are not to
affect in any way the substance or interpretation of this Agreement.
SECTION 5.08. Survival of Provisions. In case any one or more of the
provisions or any portion of any provision contained in this Agreement should be
found to be invalid, illegal or unenforceable in any respect, such provision or
portion thereof shall be modified or deleted in such manner so as to afford the
parties the fullest protection commensurate with making this Agreement, as
modified, legal and enforceable under applicable laws, and the validity,
legality and enforceability of any such provision shall not in any way be
affected or impaired thereby, such remaining provisions or portion of any such
provision construed as severable and independent thereof.
SECTION 5.09. Arbitration; Attorneys' Fees. Any dispute or conflict
which arises between the parties hereto shall be submitted to the American
Arbitration Association, before a panel of three arbitrators, in accordance with
its then current Commercial Rules in Los Angeles County, California, for
arbitration and the parties shall be bound by the results of such arbitration in
accordance with the California Code of Civil Procedure Section 1283.05. If
either party brings an action for judicial review or enforcement of the
arbitration proceedings, award or decision, the prevailing party in any such
action, trial or appeal shall be entitled to its reasonable attorneys' fees to
be paid by the nonprevailing party as fixed by the court.
SECTION 5.10. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be considered a duplicate original, but
all of which together shall constitute one and the same instrument.
SECTION 5.11. Construction. In all matters of interpretation,
whenever necessary to give effect to any provision of this Agreement, each
gender shall include the others, the singular shall include the plural, and the
plural shall include the singular.
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, all as of the date and year first above written.
BORROWER: BOULDER CAPITAL OPPORTUNITIES, INC.,
By: /s/ Gill Champion
--------------------------------------------
Its: Chief Operating Officer
LENDER: SANTO DEVELOPMENT WORLDWIDE,
For and on Behalf of
Execorp Limited
By: /s/
--------------------------------------------
Its: Director of Santo Development
Worldwide Limited
<PAGE> 7
REVOLVING UNSECURED PROMISSORY NOTE
U.S.$1,000,000 Encino, California
__________________
FOR VALUE RECEIVED, BOULDER CAPITAL OPPORTUNITIES, INC., a Colorado
corporation ("Maker") promises to pay to the order of SANTO DEVELOPMENT
WORLDWIDE, a British Virgin Islands corporation ("Holder"), at such place or to
such other party or parties as the Holder of this Note may from time to time
designate in writing, the aggregate unpaid principal amount of all loans made by
the Holder to the Maker as set forth on the reverse hereof up to the principal
sum of ONE MILLION U.S. DOLLARS (US$1,000,000), with interest on unpaid
principal at a rate of the London Interbank Offered Rates (LIBOR) published in
The Wall Street Journal on such date plus two percent (2%) per annum; provided,
however, that if the outstanding principal of this Note is not paid in full on
or before July 31, 2000, then Maker shall thereafter pay Holder interest on
unpaid principal at the maximum rate permitted by law.
Principal and interest shall be payable in lawful money of the
United States. The unpaid balance of this obligation at any time shall be the
difference between the amount set forth above less the principal and interest
payments made hereunder, which balance may be endorsed hereon from time to time
by the Holder hereof. Any payment hereunder shall be credited first on interest
then due and the remainder, if any, on principal, and interest shall thereupon
cease upon the amount of principal so credited.
Maker may prepay the full amount or a portion of the balance of
principal and interest on this Note then remaining unpaid at any time before
such payment comes due, without penalty. Maker shall prepay the principal
balance of this Note as required by that certain Revolving Credit Agreement of
even date herewith between Maker as Borrower, and Holder as Lender. Each
prepayment of this Note shall be applied first to accrued and unpaid interest
on, and then to the principal of, this Note.
In the event Maker fails to pay when due any and all amounts which
may from time to time be due and owing under the terms of this Note, the Holder
may, in its sole discretion, declare the entire unpaid principal amount
hereunder, together with all interest accrued and unpaid and any other sum due
and payable hereunder, immediately due and payable in full. Failure at any time
to exercise this right shall not constitute a waiver of the right to exercise
the same right at any other time.
Maker hereby expressly waives presentment, protest and demand,
notice of protest, demand and dishonor and nonpayment of this Note and any other
notice of any kind, and expressly agrees that this Note, or any payment
thereunder may be extended from time to time without in any way affecting the
liability of Maker with respect to the Note or the indebtedness evidenced
hereby.
Maker agrees to pay as additional principal hereunder any and all
costs incurred by Holder in employing an attorney in connection with the actions
or proceedings (including any
<PAGE> 8
bankruptcy proceedings) which may be brought or which Holder may defend or join
to enforce the terms of this Note, or any other agreement or document pertaining
to this indebtedness, or which may be incurred in connection with the
appointment of a receiver, or which may be incurred in enforcing or collecting
this Note with or without legal or equitable actions or proceedings. Maker
hereby waives to the fullest extent permitted by law all right to plead any
statute of limitations as a defense to any actions hereunder.
This Note may not be terminated orally, but only by discharge in
writing signed by the party who is the Holder of this Note at the time of
discharge. This Note shall be governed by and construed in accordance with the
laws of the State of California.
MAKER:
BOULDER CAPITAL OPPORTUNITIES, INC.,
By:
----------------------------------------
Its:
------------------------------------
<PAGE> 9
[Reverse of Revolving Credit Note]
<TABLE>
<CAPTION>
Amount of Unpaid Principal Name of Person
Date Loan Balance of Note Rate of Interest Making Notation
- ---- --------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 10
EXHIBIT B
Notice of Draw-Down
__________________, 1999
Santo Development Worldwide
Unit 1204A
12/F Peregrine Tower, Lippo Centre
89 Queensway
Hong Kong
Re: Revolving Credit Agreement with Boulder Capital Opportunities, Inc.
Ladies and Gentlemen:
Pursuant to Section 1.01 of the above-referenced Agreement, the undersigned does
hereby request a revolving credit loan in the amount of $ , to be delivered by
wire transfer or other mutually acceptable means to the undersigned's account as
designated below:
________________________________________ Bank
________________________________________
________________________________________
ABA Routing #___________________________
For Credit to Account #_________________
For Account of Boulder Capital Opportunities, Inc.
The undersigned does hereby certify that the proceeds of such loan will be used
in connection with the operations of Boulder Capital Opportunities, Inc., a
Colorado corporation.
Very truly yours,
BOULDER CAPITAL OPPORTUNITIES, INC.,
By:
----------------------------------------
Its:
------------------------------------
<PAGE> 1
Exhibit 10.6
REVOLVING CREDIT AGREEMENT
AGREEMENT dated as of July 23, 1999, between MAXI TECHNOLOGIES
LIMITED, a British Virgin Islands corporation ("Lender"), and
BOULDER CAPITAL OPPORTUNITIES, INC., a Colorado corporation
("Borrower").
WHEREAS, the Borrower has applied to the Lender for a revolving
line of credit in an aggregate principal amount at any one time outstanding of
not more than One Million U.S. Dollars (US$1,000,000) (the "Commitment"), to
expire on July 31, 2000 (the "Maturity Date"). The proceeds of revolving credit
loans made pursuant to the Commitment are to be used by the Borrower for working
capital purposes in connection with the operations of the Borrower.
WHEREAS, the Lender is willing to make revolving credit loans to
the Borrower upon the terms and subject to the conditions set forth in this
Agreement.
NOW, THEREFORE, the Lender and the Borrower hereby agree as
follows:
I. THE LOANS
SECTION 1.01. Revolving Credit Loans. The Lender shall make
revolving credit loans to the Borrower from the date hereof until the Maturity
Date, in an aggregate principal amount at any one time outstanding up to but not
in excess of the amount of the Commitment. The Lender shall make the initial
revolving credit loan against delivery to the Lender of the Note (as defined in
Section 1.02 hereof) duly executed on behalf of the Borrower, by depositing the
proceeds of such loan in the form of immediately available funds to the account
of the Borrower at a banking institution located in the County of Los Angeles,
State of California (the "Bank"). Any subsequent revolving credit loans shall be
made in the same manner except that the Borrower may designate a different
account in the notice referred to in the next sentence hereof. The Borrower
shall give the Lender at least two business days' prior written notice of any
requested revolving credit loan hereunder, which notice shall specify the
proposed amount thereof in substantially the form attached hereto as Exhibit B
and the other information provided for on such form. Each revolving credit loan
hereunder shall be in the aggregate principal amount of $5,000 or an integral
multiple thereof. Prior to the Maturity Date, the Borrower may borrow, pay,
prepay and reborrow hereunder in accordance with this Section and Section 1.03
hereof.
SECTION 1.02. Revolving Credit Note. On the date of the first
borrowing hereunder, the Borrower shall issue and deliver to the Lender a
promissory note, dated the date of such borrowing and in the face amount of the
Commitment. Such note shall be in substantially the form attached hereto as
Exhibit A (the "Note") and shall be duly executed and delivered on behalf of the
Borrower. The Lender shall, and is hereby authorized by the Borrower to, set
forth on the reverse side of the Note the amount of each revolving credit loan
made pursuant to Section 1.01 hereof and the other information provided for on
such reverse side. The principal of the Note shall be due and payable on the
Maturity Date. The Note shall
<PAGE> 2
bear interest from its date on the unpaid principal amount thereof at the rate
of the London Interbank Offered Rates (LIBOR) published in The Wall Street
Journal on such date plus two percent (2%) per annum (computed on the basis of
the actual number of days elapsed over a year of 360 days). Interest shall be
due and payable monthly on the first day of each month, commencing on the first
day of the first full month beginning at least 30 days after issuance of the
Note, and at maturity. Interest shall be payable on any overdue payment or
mandatory prepayment of principal at the maximum rate permitted by law (computed
as aforesaid). Any holder of the Note seeking to enforce the same shall have all
the rights of a noteholder as provided hereunder and under applicable law.
SECTION 1.03. Prepayment of Note. (a) Optional. The Borrower may at
its option prepay the Note in whole at any time or in part from time to time
without penalty or premium. Each prepayment of the Note pursuant to this
subsection shall be applied to principal, shall be in the then unpaid principal
amount of the Note or an integral multiple of $2,500 and shall be accompanied by
the payment of accrued and unpaid interest on the amount of such prepayment to
the date thereof.
(b) Mandatory. The Borrower shall prepay the Note within 60 days
following dissolution of the Borrower, in the then unpaid principal amount
thereof together with accrued and unpaid interest on the amount of such
prepayment to the date thereof. Each prepayment of the Note pursuant to this
subsection shall be applied first to accrued and unpaid interest on, and then to
the principal of, the Note.
II. CONDITIONS OF LENDING
The obligation of the Lender to lend hereunder is subject to the
following conditions precedent:
SECTION 2.01. No Default. The Borrower shall be in compliance with
all the terms and provisions set forth in this Agreement on its part to be
observed and performed, and no event of default specified in Article IV hereof,
nor any event which upon notice or lapse of time or both would constitute such
an event of default, shall have occurred and be continuing at such time after
giving effect to such borrowing.
III. COVENANTS OF BORROWER
The Borrower covenants and agrees with the Lender that, so long as
any of the principal of or interest on the Note shall remain unpaid, unless the
Lender shall otherwise consent in advance in writing, it shall not declare, pay
or make directly or indirectly any distribution whether in cash, property,
securities or a combination thereof with respect to any interest in Borrower,
nor shall it redeem, purchase, retire or otherwise acquire for consideration, or
set apart any sum for, any such interest.
IV. DEFAULTS AND REMEDIES
The occurrence of any of the following events or conditions (herein
"Events of
<PAGE> 3
Default") shall, at the option of Lender and without notice to or demand on
Borrower, constitute an Event of Default hereunder:
(a) Borrower's failure to pay the Note as and when due after the
expiration of any cure period (whether upon demand, acceleration or otherwise);
(b) Borrower's written admission of its inability to pay its debts
as they mature or an assignment of Borrower for the benefit of creditors;
(c) Borrower's institution (by petition, application, answer,
consent or otherwise) of any bankruptcy, insolvency, reorganization,
arrangement, readjustment of debt, dissolution, liquidation, or similar
proceedings under the laws of any jurisdiction;
(d) Borrower's consent to the appointment of a trustee or receiver
for all or a substantial portion of its property;
(e) the adjudication of Borrower as a bankrupt or insolvent under
any federal or state law;
(f) the appointment of a receiver, trustee, conservator or similar
person for Borrower or for all or a substantial part of the property of Borrower
without the application or consent of Borrower if such appointment shall
continue undischarged for a period of sixty (60) days; or the substitution of
any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt,
dissolution, liquidation or similar proceedings under the laws of any
jurisdiction (by petition, application or otherwise) against Borrower which
remain undismissed for a period of sixty (60) days;
(g) the issuance of a writ or order of attachment or any similar
process by any court against all or a substantial part of the property of
Borrower if such writ or order of attachment or similar process is not stayed or
is not released within forty-five (45) days after its entry or levy or after any
stay is vacated or set aside; and/or
(h) a material adverse change in the financial condition, affairs
or operations of Borrower or any other obligor or guarantor of the Obligations,
including, without limitation, loss of a material contract or license.
Upon the occurrence of any Event of Default, Lender may, at its
option, without notice to or demand on Borrower, declare the Note immediately
due and payable after any cure periods, and Lender shall have all rights and
remedies of a secured party under Chapter 5 of Division 9 of the California
Uniform Commercial Code and other applicable law as well as the rights and
remedies set forth in the Security Agreement. All rights, powers and remedies
provided herein are cumulative and not exclusive of any rights, powers or
remedies otherwise provided by law. Any single or partial exercise of any right,
power or remedy shall not preclude the further exercise of any other right,
power or remedy.
<PAGE> 4
V. GENERAL PROVISIONS
SECTION 5.01. Notices. All notices, requests, demands and other
communications shall be in writing and deemed to have been duly given when
delivered personally, by facsimile transmission upon receipt of a "clear" or
"ok" transmission notice, or five (5) days following deposit in the United
States mail, first class, postage prepaid, duly addressed:
If to Borrower: Boulder Capital Opportunities, Inc.
15821 Ventura Blvd., Suite 675
Encino, CA 91436
Attention of Chief Operating Officer.
If to Lender: Maxi Technologies Limited
P.O. Box 3444
Road Town, Tortola
British Virgin Islands
Any party may, pursuant to written notice in compliance with this Section, alter
or change the address or the identity of the person to whom any notice is to be
sent.
SECTION 5.02. Assignment. Either party shall have the right to
assign its rights hereunder to any affiliate or successor in interest whether by
merger, consolidation, purchase of assets or otherwise.
SECTION 5.03. Further Assurances. Each party hereby agrees to
execute and deliver such instruments and documents as the other party may deem
necessary or advisable to effectuate the contemplated transaction.
SECTION 5.04. No Waiver. No term or condition of this Agreement
shall be deemed to have been waived, nor shall any party hereto be estopped from
enforcing any provision of this Agreement, except by written instrument of the
party charged with such waiver or estoppel. Any written waiver shall not be
deemed a continuing waiver unless specifically stated, shall operate only as to
the specific term or condition waived and shall not constitute a waiver of such
term or condition for the future or as to any act other than that specifically
waived.
SECTION 5.05. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of California.
SECTION 5.06. Entire Agreement; Amendments. This Agreement contains
the entire agreement of the parties hereto in regard to the subject matter
hereof, and may not be changed orally but only by a written document signed by
the party against whom enforcement of waiver, change, modification, extension or
discharge is sought.
<PAGE> 5
SECTION 5.07. Headings. Headings contained in this Agreement are
for convenient reference only; they are not a part of this Agreement and are not
to affect in any way the substance or interpretation of this Agreement.
SECTION 5.08. Survival of Provisions. In case any one or more of
the provisions or any portion of any provision contained in this Agreement
should be found to be invalid, illegal or unenforceable in any respect, such
provision or portion thereof shall be modified or deleted in such manner so as
to afford the parties the fullest protection commensurate with making this
Agreement, as modified, legal and enforceable under applicable laws, and the
validity, legality and enforceability of any such provision shall not in any way
be affected or impaired thereby, such remaining provisions or portion of any
such provision construed as severable and independent thereof.
SECTION 5.09. Arbitration; Attorneys' Fees. Any dispute or conflict
which arises between the parties hereto shall be submitted to the American
Arbitration Association, before a panel of three arbitrators, in accordance with
its then current Commercial Rules in Los Angeles County, California, for
arbitration and the parties shall be bound by the results of such arbitration in
accordance with the California Code of Civil Procedure Section 1283.05. If
either party brings an action for judicial review or enforcement of the
arbitration proceedings, award or decision, the prevailing party in any such
action, trial or appeal shall be entitled to its reasonable attorneys' fees to
be paid by the nonprevailing party as fixed by the court.
SECTION 5.10. Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be considered a duplicate original,
but all of which together shall constitute one and the same instrument.
SECTION 5.11. Construction. In all matters of interpretation,
whenever necessary to give effect to any provision of this Agreement, each
gender shall include the others, the singular shall include the plural, and the
plural shall include the singular.
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, all as of the date and year first above written.
BORROWER: BOULDER CAPITAL OPPORTUNITIES, INC.,
By: /s/ Gill Champion
--------------------------------------------
Its: Chief Operating Officer
------------------------------------
LENDER: MAXI TECHNOLOGIES LIMITED,
For and on behalf of
Grandfield Holdings Group
By: /s/ Stephen Adane
--------------------------------------------
Its: Authorized Signature
------------------------------------
<PAGE> 7
REVOLVING UNSECURED PROMISSORY NOTE
U.S.$1,000,000 Encino, California
FOR VALUE RECEIVED, BOULDER CAPITAL OPPORTUNITIES, INC., a Colorado
corporation ("Maker") promises to pay to the order of MAXI TECHNOLOGIES LIMITED,
a British Virgin Islands corporation ("Holder"), at such place or to such other
party or parties as the Holder of this Note may from time to time designate in
writing, the aggregate unpaid principal amount of all loans made by the Holder
to the Maker as set forth on the reverse hereof up to the principal sum of ONE
MILLION U.S. DOLLARS (US$1,000,000), with interest on unpaid principal at a rate
of the London Interbank Offered Rates (LIBOR) published in The Wall Street
Journal on such date plus two percent (2%) per annum; provided, however, that if
the outstanding principal of this Note is not paid in full on or before July 31,
2000, then Maker shall thereafter pay Holder interest on unpaid principal at the
maximum rate permitted by law.
Principal and interest shall be payable in lawful money of the
United States. The unpaid balance of this obligation at any time shall be the
difference between the amount set forth above less the principal and interest
payments made hereunder, which balance may be endorsed hereon from time to time
by the Holder hereof. Any payment hereunder shall be credited first on interest
then due and the remainder, if any, on principal, and interest shall thereupon
cease upon the amount of principal so credited.
Maker may prepay the full amount or a portion of the balance of
principal and interest on this Note then remaining unpaid at any time before
such payment comes due, without penalty. Maker shall prepay the principal
balance of this Note as required by that certain Revolving Credit Agreement of
even date herewith between Maker as Borrower, and Holder as Lender. Each
prepayment of this Note shall be applied first to accrued and unpaid interest
on, and then to the principal of, this Note.
In the event Maker fails to pay when due any and all amounts which
may from time to time be due and owing under the terms of this Note, the Holder
may, in its sole discretion, declare the entire unpaid principal amount
hereunder, together with all interest accrued and unpaid and any other sum due
and payable hereunder, immediately due and payable in full. Failure at any time
to exercise this right shall not constitute a waiver of the right to exercise
the same right at any other time.
Maker hereby expressly waives presentment, protest and demand,
notice of protest, demand and dishonor and nonpayment of this Note and any other
notice of any kind, and expressly agrees that this Note, or any payment
thereunder may be extended from time to time without in any way affecting the
liability of Maker with respect to the Note or the indebtedness evidenced
hereby.
Maker agrees to pay as additional principal hereunder any and all
costs incurred by Holder in employing an attorney in connection with the actions
or proceedings (including any
<PAGE> 8
bankruptcy proceedings) which may be brought or which Holder may defend or join
to enforce the terms of this Note, or any other agreement or document pertaining
to this indebtedness, or which may be incurred in connection with the
appointment of a receiver, or which may be incurred in enforcing or collecting
this Note with or without legal or equitable actions or proceedings. Maker
hereby waives to the fullest extent permitted by law all right to plead any
statute of limitations as a defense to any actions hereunder.
This Note may not be terminated orally, but only by discharge in
writing signed by the party who is the Holder of this Note at the time of
discharge. This Note shall be governed by and construed in accordance with the
laws of the State of California.
MAKER:
BOULDER CAPITAL OPPORTUNITIES, INC.,
By:
------------------------------------
Its:
------------------------------
<PAGE> 9
[Reverse of Revolving Credit Note]
<TABLE>
<CAPTION>
Amount of Unpaid Principal Name of Person
Date Loan Balance of Note Rate of Interest Making Notation
- ---- --------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 10
EXHIBIT B
Notice of Draw-Down
, 1999
- -------------------
Maxi Technologies Limited
P.O. Box 3444
Road Town, Tortola
British Virgin Islands
Re: Revolving Credit Agreement with Boulder Capital Opportunities, Inc.
Ladies and Gentlemen:
Pursuant to Section 1.01 of the above-referenced Agreement, the undersigned does
hereby request a revolving credit loan in the amount of $ , to be delivered by
wire transfer or other mutually acceptable means to the undersigned's account as
designated below:
Bank
-----------------------------------
-----------------------------------
-----------------------------------
ABA Routing #
-----------------------------
For Credit to Account #
------------------------------
For Account of Boulder Capital Opportunities, Inc.
The undersigned does hereby certify that the proceeds of such loan will be used
in connection with the operations of Boulder Capital Opportunities, Inc., a
Colorado corporation.
Very truly yours,
BOULDER CAPITAL OPPORTUNITIES,
INC.,
By:
------------------------------------
Its:
-------------------------------
<PAGE> 1
EXHIBIT 10.7
VMR CAPITAL MARKETS U.S.
1901 Avenue of the Stars, Suite 1500
Los Angeles, CA 90067
Telephone: (310) 286-2211
Fax: (310) 286-2373
FINANCIAL CONSULTING AGREEMENT
This Financial Consulting Agreement (the "Agreement") is made as of
October 11, 1999, by and between, Stan Lee Media, Inc., a Colorado corporation,
having its business address at 15821 Ventura Boulevard, Suite 675, Encino,
California 91436 (hereinafter the "Company"), and VMR Capital Markets U.S.,
having its principal place of business at 1901 Avenue of the Stars, Suite 1500,
Los Angeles, California 90067 (hereinafter the "Consultant").
In consideration of the mutual promises contained herein and on the terms
and conditions hereinafter set forth, the Company and Consultant agree as
follows:
1. Provision of Services
(a) Consultant agrees, to the extent reasonably requested by a duly
authorized officer of the Company and reasonably required in the conduct of the
business of the Company, to place at the disposal of the Company its judgment
and experience and to provide business development services to the Company,
including the following:
(i) assist the Company in its financing and marketing
efforts by;
A. on or before October 12, 1999, securing from VMR
Luxemburg S.A., Convertible Debentures in an
aggregate principal amount of $500,000, to be
dated October 12, 1999, to mature on April 11,
2000, to bear interest at 8% per annum, and to be
substantially in the form attached hereto, in
partial consideration for the issuance to the
holder of the Convertible Debentures of 25,000
warrants to purchase the Company's Common Stock at
the closing ask price as reflected on the OTC
Electronic Bulletin Board upon the date of
closing.
B. structuring an Equity Private Placement in the
minimum offering amount of $6 million to close not
later than December 31, 1999, upon terms deemed
reasonably acceptable by the Company, including
the preparation of a private placement memorandum
subject to the Company's prior reasonable
approval. The Company shall not be responsible for
expenses incurred in connection with such private
placement offering in excess of $25,000.
<PAGE> 2
C. structuring a secondary offering to the general
public for a minimum of $15 million and delivering
to the Company on or before December 15, 1999, a
duly executed letter of intent from a major German
bank committing to said secondary offering. Said
secondary offering will be undertaken by
underwriter(s) reasonably acceptable to the
Company to close not later than June 30, 2000. The
secondary offering will be linked to Company's
performance and will take place on an exchange
mutually acceptable to the Company and Consultant.
(ii) provide access to the Consultant's retail sales force
and introduction to institutional investors in the
United States and Europe through roadshow stops and
conference calls;
(iii) [intentionally omitted.]
(iv) on or before November 7, 1999, list the Company for
trading on the third segment of the Frankfurt Stock
Exchange, and develop a trading market for the Company's
Common Stock thereon (e.g., number of market makers,
trading volume, etc.) as determined in the Company's
reasonable discretion. Consultant represents and
warrants that said listing will permit duly licensed
firms to actively solicit purchasers for the Company's
Common Stock.
(v) advise with regard to stockholder relations and public
relations matters.
All such services shall at all times be at the request of the Company.
(b) Consultant agrees to use its best efforts at all times in the
furnishing of advice and recommendations, and for this purpose Consultant shall
at all times maintain or keep available for the Company an adequate organization
of personnel or a network of outside professionals for the performance of its
obligations under this Agreement.
2. Compensation. In consideration for services to be rendered under this
Agreement, Company will issue in the name of the Consultant, and place into
escrow with Jeffrey D. Segal, A Professional Corporation ("Escrow Holder"),
subject to delivery to the Consultant in accordance with the provisions set
forth in this Section, 100,000 shares of the Company's "restricted" Common Stock
in lieu of any monthly retainer fee, which shares shall possess piggyback
registration rights. Consultant and Company acknowledge and agree to exculpate
and indemnify Escrow Holder in the manner provided for in Exhibit A hereto, the
terms of which are incorporated herein as if set forth at length herein.
The escrowed shares shall be delivered to Consultant solely in the amount
and upon the occurrence of the following events:
<PAGE> 3
Financial Consulting Agreement
VMR Capital Markets U.S. and Stan Lee Media, Inc.
Page 3
(i) 10,000 shares of the Company's "restricted" Common Stock concurrent
with the funding of the Bridge Loan described in Section 1(a)(i)(A)
above;
(ii) 10,000 shares of the Company's "restricted" Common Stock concurrent
with the approval of listing of the Company's Common Stock upon the
Frankfurt Stock Exchange and the development of a trading market for
the Company's Common Stock thereon as determined in the Company's
reasonable discretion;
(iii) 10,000 shares of the Company's "restricted" Common Stock concurrent
with the closing of a private placement reasonably acceptable to the
Company covering the Equity Private Placement in an amount not less
that $6 million described in Section 1(a)(i)(B) above; and
(iv) commencing as of January 31, 2000, and monthly thereafter, ending
October 31, 2000 (subject to earlier termination in accordance with
the provisions hereof), 7,000 shares of the Company's "restricted"
Common Stock based upon Consultant's satisfactory performance of its
duties hereunder as determined by Company in its reasonable
discretion.
In addition to the foregoing stock compensation, Company shall issue in
the name of Consultant, and place into escrow with Escrow Holder, 100,000
warrants to purchase the Company's Common Stock at a price not less than 110% of
the closing ask price of the Company's Common Stock on the OTC Electronic
Bulletin Board determined as of the date of funding the Convertible Debentures,
which warrants shall possess piggyback registration rights, subject to the
following delivery terms and conditions:
(a) 50,000 of the escrowed warrants shall be delivered to Consultant on
April 11, 2000 provided that Consultant has fulfilled its
obligations pursuant to Section 1 of this Agreement, including
without limitation, securing the requisite financings described
therein; and
(b) the remaining 50,000 of the escrowed warrants shall be delivered to
Consultant on October 11, 2000 provided that Consultant has
fulfilled its obligations pursuant to Section 1 of this Agreement,
including without limitation, securing the requisite financings
described therein.
The Company further agrees to the following compensation:
1. 2% cash placement fee for the Bridge Loan, payable by Company
substantially contemporaneous with its receipt of such loan
proceeds.
2. 9% cash placement fee and 5% warrant coverage on Equity
Private Placement in an amount not less than $6 million,
payable by Company substantially contemporaneous with its
receipt of such offering proceeds.
<PAGE> 4
Financial Consulting Agreement
VMR Capital Markets U.S. and Stan Lee Media, Inc.
Page 4
3. up to 10% cash placement fee and 3% cash non-accountable
expense fee (subject to good faith negotiations by Company and
Consultant based on offering size), and 8% warrant coverage,
on secondary offering in an amount not less than $15 million,
payable by Company substantially contemporaneous with its
receipt of such offering proceeds.
3. Expenses Payment Schedule. Consultant shall seek Company's prior
approval prior to incurring any expenses aggregating more than $500 monthly in
furtherance of its obligations hereunder. Consultant will invoice the Company
for its actual expenses for each month within fifteen (15) days of the end of
the month and submit proper substantiation therefor to Company. Payment of
invoices will be due upon receipt.
4. Liability of Consultant. In furnishing the Company with management
advice and other services as herein provided, neither Consultant nor any
officer, director or agent therefor shall be liable to the Company or its
creditors for errors of judgment or for anything except willful malfeasance, bad
faith or gross negligence in the performance of its duties or reckless disregard
of its obligations and duties under the terms of this Agreement.
It is further understood and agreed that Consultant may rely upon
information furnished to it that is reasonably believed to be accurate and
reliable and that, except as herein provided, Consultant shall not be
accountable for any loss suffered by the Company by reason of the Company's
action or non-action on the basis of any advice, recommendation or approval of
Consultant, its partners, employees or agents.
5. Status of Consultant. Consultant shall be deemed to be an independent
contractor and, except as expressly provided or authorized in this Agreement,
shall have no authority to act for or represent the Company.
6. Other Activities of Consultant. The Company recognizes that Consultant
now renders and may continue to render management and other services to other
companies which may or may not have policies and conduct activities similar to
those of the Company. Consultant shall be free to render such advice and other
services and the Company hereby consents thereto. Consultant shall not be
required to devote its full time and attention to the performance of its duties
under this Agreement, but shall devote only so much of its time and attention as
it deems reasonable or necessary for such purposes.
7. Control. Nothing contained herein shall be deemed to require the
Company to take any action contrary to its Articles of Incorporation or Bylaws,
or any applicable statute or regulation, or to deprive its Board of Directors of
their responsibility for any control of the conduct or the affairs of the
Company.
8. Term. Consultant's retention hereunder shall be for a term of 12 months
commencing upon the execution of this Agreement, subject to earlier termination
by Company for cause, including without limitation, Consultant's failure to
timely assist the Company in its
<PAGE> 5
Financial Consulting Agreement
VMR Capital Markets U.S. and Stan Lee Media, Inc.
Page 5
financing and marketing efforts by failing to satisfy the timing deadlines set
forth in Section 1 of this Agreement. Upon such election to terminate by the
Company, Consultant acknowledges and agrees that Company shall have no further
obligation to compensate Consultant whatsoever. In addition, the Company shall
have the unfettered right to use the services of other financial consultants
and/or investment banks in which case the Company may terminate this Agreement
upon payment to Consultant of all accrued and unpaid compensation as of the date
of such termination, and the parties agree to negotiate in good faith concerning
the payment to Consultant of any unearned portion of the compensation provided
for in this Agreement.
9. Provision of Information; Confidentiality. Company shall cooperate
fully with Consultant in connection with its financial review and analysis of
the Company and shall provide Consultant with such information concerning
Company as Consultant deems necessary or appropriate for such review and
analysis (collectively, the "Information). Consultant shall keep in confidence
and shall not, without the Company's consent, disclose to any person (except its
own counsel or as such counsel has advised is required by applicable law) any
nonpublic Information furnished by Company to Consultant, and Consultant shall
execute and deliver a confidentiality and nondisclosure agreement in favor of
Company.
10. Miscellaneous. This Agreement sets forth the entire agreement and
understanding between the parties and supersedes all prior discussions,
agreements and understandings of every and any nature between them. This
Agreement shall be construed and interpreted according to the laws of the State
of California.
<PAGE> 6
Financial Consulting Agreement
VMR Capital Markets U.S. and Stan Lee Media, Inc.
Page 6
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their respective officers or representatives duly authorized the day and year
first above written.
STAN LEE MEDIA, INC.,
By: /s/ Gill Champion
------------------------------------
Gill Champion, Vice President & COO
Acknowledged and Accepted: VMR CAPITAL MARKETS U.S.
Dated: October 11, 1999. By: /s/ Todd M. Ficeto
------------------------------------
Name: Todd M. Ficeto
Title: President
<PAGE> 7
Financial Consulting Agreement
VMR Capital Markets U.S. and Stan Lee Media, Inc.
Page 1
EXHIBIT A
Exculpation and Indemnification of Escrow Holder
Jeffrey D. Segal, A Professional Corporation (the "Escrow Holder") shall
have no duties or responsibilities other than those expressly set forth in the
Financial Consulting Agreement dated October , 1999 (the "Agreement") attached
thereto, between Stan Lee Media, Inc. and VMR Capital Markets U.S. The Escrow
Holder shall have no duty to enforce any obligation of any person, other than
the Escrow Holder, to make any payment or delivery, or to direct or enforce any
obligation of any person to perform any other act. The Escrow Holder shall be
under no liability to anyone by reason of any failure on the part of any party
hereto or any maker, endorser or other signatory of any document or any other
person to perform such person's obligations under any such document. Except for
the Agreement and any instructions to the Escrow Holder under the Agreement, the
Escrow Holder shall not be obligated to recognize any agreement between any or
all of the persons referred to herein, notwithstanding its knowledge thereof.
The Escrow Holder shall not be liable for any action taken or omitted by
it, or any action suffered by it to be taken or omitted, in good faith and in
the exercise of its own best judgment, and may rely conclusively and shall be
protected in acting upon any order, notice, demand, certificate, opinion or
advice of counsel (including counsel chosen by the Escrow Holder), statement,
instrument, report or other paper or document (not only as to its due execution
and the validity and effectiveness of its provisions, but also as to the truth
and acceptability of any information therein contained) which is believed by the
Escrow Holder to be genuine and to be signed or presented by the proper person
or persons. The Escrow Holder shall not be bound by any notice or demand, or any
waiver, modification, termination or rescission of the Agreement or any of the
terms hereof, unless evidenced by a writing delivered to the Escrow Holder
signed by the proper party or parties and, if the duties or rights of the Escrow
Holder are affected, unless it shall give its prior written consent thereto.
The Escrow Holder shall not be responsible for the sufficiency or accuracy
of the form of, or the execution, validity, value or genuineness of, any
document or property received, held or delivered by it hereunder, or of
signature or endorsement thereon, or for any description therein, nor shall the
Escrow Holder be responsible or liable in any respect on account of the
identity, authority or rights of the persons executing or delivering or
purporting to execute or deliver any document or property of the Agreement. The
Escrow Holder shall not be liable for any loss that may be incurred by reason of
any investment of any monies that it holds hereunder which investment is
authorized by the Agreement pursuant to the provisions thereof.
In the absence of written notice to the contrary from the proper person or
persons, the Escrow Holder shall have the right to assume that a fact or an
event, by reason of which an action would or might be taken by the Escrow
Holder, does not exist or has not occurred without incurring liability for any
action taken or omitted, or any action suffered by it to be
<PAGE> 8
Financial Consulting Agreement
VMR Capital Markets U.S. and Stan Lee Media, Inc.
Page 2
taken or omitted, in good faith and in the exercise of its own best judgment, in
reliance upon such assumption.
The Escrow Holder shall be indemnified and held harmless against any
liability for taxes and for any penalties or interest in respect of taxes, on
such investment income or payments in the manner provided below.
The Escrow Holder shall be indemnified and held harmless by the parties to
the Agreement from and against any expenses, including counsel fees and
disbursements, or loss suffered by Escrow Holder in connection with any claim or
demand, which, in any way, directly or indirectly, arises out of or relates to
the Agreement, the services of the Escrow Holder thereunder or any income earned
from investment of such monies; except, that if the Escrow Holder shall be found
guilty of willful misconduct, fraud or gross negligence under the Agreement,
then, in that event, Escrow Holder shall bear all such losses, claims, damages
and expenses. Promptly after the receipt by Escrow Holder of notice of any
demand or claim or the commencement of any action, suit or proceeding, the
Escrow Holder shall, if a claim in respect thereof is to be made against any of
the other parties hereto, notify such other parties thereof in writing; but the
failure by Escrow Holder to give such notice shall not relieve any party from
any liability which such party may have to Escrow Holder hereunder. For the
purposes hereof, the terms "expense" and "loss" shall include all amounts paid
or payable to satisfy any claim, demand or liability, or in settlement of any
claim, demand, action, suit or proceeding settled with the express written
consent of the parties hereto, and all costs and expenses, including, but not
limited to, reasonable counsel fees and disbursements, paid or incurred in
investigation or defending against any such claim, demand, action, suit or
proceeding.
If any legal action or proceeding is brought by any party to this
transaction, including but not limited to, the parties to the Agreement, the
Escrow Holder, or any other related or interested party, the Escrow Holder has
the absolute right, solely within its discretion, to interplead into any such
action. In such event, the Escrow Holder may, in its sole discretion, withhold
or stop all proceedings, and withhold any funds or documents pending the
resolution of the controversy. If no action has been filed, Escrow Holder in its
sole discretion, may file a suit in interpleader and obtain an order from the
court requiring the parties to interplead and litigate in such court their
several claims and rights amongst themselves. If any dispute arises, regardless
of whether or not suit is filed, Escrow Holder is ipso facto released and
discharged from all obligations to further perform any and all duties or
obligations imposed upon it in the Escrow Account pursuant to the Agreement. If
the Escrow Holder incurs any costs or fees in connection with any such dispute
or proceeding, the parties to the Agreement each agrees to fully indemnify the
Escrow Holder and reimburse it for any costs and expenses occasioned by such
controversy or litigation, including reasonable attorneys' fees.
<PAGE> 1
Exhibit 10.8
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND TRANSFER OF
SUCH SECURITIES IS SUBJECT TO THE CONDITIONS SET FORTH HEREIN. BORROWER RESERVES
THE RIGHT TO REFUSE THE TRANSFER OF SUCH SECURITIES UNTIL SUCH CONDITIONS HAVE
BEEN FULFILLED WITH RESPECT TO SUCH TRANSFER.
STAN LEE MEDIA, INC.
8% CONVERTIBLE DEBENTURE DUE APRIL 11, 2000
FOR VALUE RECEIVED, STAN LEE MEDIA, INC., a Colorado corporation
("Borrower"), hereby promises to pay to VMR LUXEMBOURG, S.A. ("Holder"), the
principal sum of Five Hundred Thousand Dollars ($500,000), on April 11, 2000
("Maturity Date"), and to pay interest thereon at the rate of eight percent (8%)
per annum from the date hereof until paid. Interest shall be payable in one lump
sum at the time of payment of the unpaid principal, and interest shall be
calculated on the basis of a 360-day year of twelve 30-day months. This
Debenture is the sole authorized Debenture of the Borrower, designated as its 8%
Convertible Debenture Due April 11, 2000, limited to $500,000 aggregate
principal amount (the "Convertible Debenture"). As additional consideration
therefor, Holder shall be entitled to warrants to purchase shares of Borrower's
Common Stock as more particularly set forth in that certain Warrant Agreement of
even date herewith attached hereto.
I. PAYMENT; PREPAYMENT
Principal and accrued and unpaid interest shall be payable in one lump sum
not later than the earlier to occur of (x) the Maturity Date, and (y) 60 days
following the receipt by the Borrower of equity financing in an amount not less
than Two Million Dollars ($2,000,000). In addition, Borrower may prepay the full
amount or a portion of the balance of principal and interest on this Debenture
then remaining unpaid at any time before such payment comes due, without
penalty.
II. CONVERSION
SECTION 2.01. Conversion Right. The Holder shall have the right until the
earlier to occur of prepayment of this Debenture and April 11, 2000, to convert
the principal amount of this Debenture, or any portion of any principal amount
hereof, at a conversion price equal to $7.00 principal amount for one fully paid
and nonassessable share of Common Stock, no par value, of Borrower. Upon the
surrender hereof accompanied by Holder's written request for conversion
substantially in the form of Annex I attached hereto at the principal office of
Borrower, Borrower shall pay all interest accrued hereon to the date of
conversion. Such conversion shall be deemed to have been made immediately prior
to the close of business on the date on which Borrower shall have received a
valid request to convert. If only a portion of this Debenture is converted,
Borrower shall deliver to the Holder a certificate for the proper number of
shares of Common Stock for the portion converted and a new Debenture in the form
hereof for the balance of the principal amount hereof.
<PAGE> 2
SECTION 2.02. Authorized Shares. Borrower covenants that during the period
the conversion right exists, Borrower will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of the Common Stock upon the conversion of this Debenture. Borrower agrees that
its issuance of this Debenture shall constitute full authority to its officers
who are charged with the duty of executing stock certificates to execute and
issue the necessary certificates for shares of Common Stock upon the conversion
of this Debenture and a new Debenture in the form hereof for the balance of the
principal amount hereof.
III. EVENTS OF DEFAULT
In case an event of default (defined as being the failure to pay the
principal and accrued interest as provided for in this Debenture) has occurred
and is continuing, all sums of principal and interest then remaining unpaid
hereon and all other amounts payable hereunder may be declared immediately due
and payable in the manner and in the effect and subject to the conditions
provided in this Debenture.
IV. REGISTRATION
Upon conversion, the Holder shall be entitled to piggyback registration
rights with respect to the Common Stock to be issued thereunder, as follows: If
the Borrower at any times proposes to file a registration statement under the
Act respecting any securities of the Borrower on a form appropriate for
registration of a sale of Common Stock (excluding registrations of shares of
Common Stock to be offered in connection with the Borrower's employee benefit
plans and registrations of securities to be offered by the Borrower in
connection with acquisitions, mergers or similar transactions), it will at such
time give written notice to Holder of its intention to do so. Upon the written
request of Holder given within 15 days after receipt of any such notice (which
request shall specify the Common Stock intended to be sold or disposed of by
Holder and describe the nature of any proposed sale or other disposition
thereof), the Borrower shall use its best efforts, but shall not be obligated,
to cause all such Common Stock specified in such request to be so registered. In
the event that any such registration shall be underwritten, if the underwriters
notify the Borrower in writing that the inclusion in such underwriting of such
Common Stock would materially and adversely affect the underwriting, the
Borrower shall have the right not to include such Common Stock. In any
registration pursuant to this Debenture, Holder shall pay the Borrower for the
incremental portion of the federal and state registration and filing fees
attributable to the Common Stock and shall pay all underwriting commissions,
discounts, underwriting expenses and taxes attributable to the Warrant Stock.
The Borrower shall indemnify Holder and each underwriter of Common
Stock(and any person who controls such underwriter within the meaning of Section
15 of the Securities Act) against all claims, losses, damages, liabilities and
expenses resulting from any untrue statement or alleged untrue statement of a
material fact contained in a prospectus or in any related registration
statement, notification or the like or from any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as the same may have been
based upon information furnished in writing to the Borrower by Holder or such
underwriter expressly for use therein and
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<PAGE> 3
used in accordance with such writing.
Holder shall furnish to the Borrower such information concerning Holder as
may be requested by the Borrower which is necessary in connection with any
registration or qualification of Common Stock, and to indemnify the Borrower,
its officers and directors and each underwriter of the Borrower's securities
(and any person who controls the Borrower or any such underwriter within the
meaning of Section 15 of the Securities Act), against all claims, losses,
damages, liabilities and expenses resulting from any untrue statement or alleged
untrue statement of material fact contained in a prospectus or any related
registration statement, notification or the like, or omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, to the extent the same
was derived from information furnished in writing to the Borrower by Holder
expressly for use therein and used in accordance with such writing.
If any action is brought or any claim is made against any persons
indemnified pursuant to this Section in respect of which indemnity may be sought
against the indemnitor pursuant to this Section, such person shall promptly
notify the indemnitor in writing of the institution of such action or the making
of such claim and the indemnitor shall promptly notify the indemnitor in writing
of the institution of such action or the making of such claim and the indemnitor
shall assume the defense of such action or claim, including the employment of
counsel and payment of expenses. Such person shall have the right to employ his,
its or their own counsel in any such case, but the fees and expenses of such
counsel shall be at the expense of such person unless the employment of such
counsel shall have been authorized in writing by the indemnitor in connection
with the defense of such action or claim or the indemnitor shall not have
employed counsel to have charge of the defense of such action or claim or such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to him, it or them which are different from or additional to
those available to the indemnitor (in which the case the indemnitor shall have
the right to direct any different or additional defense of such action or claim
on behalf of the indemnified party or parties), in any of which events such fees
and expenses of not more than one additional counsel for the indemnified person
shall be borne by the indemnitor. Except as expressly provided above, in the
event that the indemnitor shall not previously have assumed the defense of any
such action or claim, at such time as the indemnitor does not assume the defense
of such action or claim, the indemnitor shall thereafter be liable to any person
indemnified pursuant to this Section for any legal or other expenses
subsequently incurred by such person in investigating, preparing or defending
against such action or claim. Anything in this Section to the contrary
notwithstanding, the indemnitor shall not be liable for any settlement of any
such claim or action effected without its written consent.
V. GENERAL PROVISIONS
SECTION 5.01. Governing Law; Jurisdiction; Waiver of Jury Trial. This
Agreement shall be governed by and construed in all respects by the internal
laws of the State of California (except for the proper application of the United
States federal securities laws),
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<PAGE> 4
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of California or any other jurisdictions) that would cause
the application of the laws of any jurisdictions other than the State of
California. Each party hereby irrevocably submits to the non-exclusive
jurisdiction of the state and federal courts sitting in the County of Los
Angeles, State of California. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT
MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR
ANY TRANSACTION CONTEMPLATED HEREBY.
SECTION 5.02. Headings. The headings of this Agreement are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Agreement.
SECTION 5.03. Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
SECTION 5.04. Entire Agreement; Amendments. This Agreement supersedes all
other prior oral or written agreements between the Holder, the Borrower, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Borrower nor the Holder makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended other than by an instrument in writing signed by the
Borrower and the Holder, and no provision hereof may be waived other than by an
instrument in writing signed by the party against whom enforcement is sought.
SECTION 5.05. Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered: (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); or (iii) one business day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
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<PAGE> 5
If to Borrower: Stan Lee Media, Inc.
15821 Ventura Boulevard, Suite 675
Encino, CA 91436
Telephone: (818) 461-1757
Facsimile: (818) 461-1760
Attention: Chief Operating Officer
If to the Holder: VMR Luxembourg S.A.
c/o VMR Capital Markets U.S.
1901 Avenue of the Stars, Suite 1500
Los Angeles, CA 90067
Telephone: (310) 286-2111
Facsimile: (310) 286-2373
Attention: President
SECTION 5.06. Assignment. This Agreement shall not be assignable without
the prior written consent of the Borrower.
SECTION 5.07. Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
SECTION 5.08. Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
SECTION 5.09. No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
SECTION 5.10. Maximum Interest Rate. It is the intent of the Holder of
this Debenture to contract in strict compliance with all applicable usury laws.
If the interest paid or received on this Debenture during its full term produces
an interest rate in excess of the maximum nonusurious interest rate permitted by
applicable state or federal law, whichever permits the higher rate, then the
Holder shall refund to the Borrower or, at the Holder's option, credit against
the principal of this Debenture such portion of such interest as shall be
necessary to produce a rate equal to such a maximum nonusurious rate. All
consideration paid or agreed to be paid for the use, forbearance or detention of
this indebtedness evidenced hereby shall be amortized, allocated and spread over
the term hereof, so that the interest rate is uniform throughout the full term
hereof.
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<PAGE> 6
IN WITNESS WHEREOF, Borrower has caused this Debenture to be
signed in its name by its duly authorized as of the date first above written.
STAN LEE MEDIA, INC.,
By: /s/ Gill Champion
------------------------------------
Gill Champion, Vice President & COO
VMR LUXEMBOURG S.A.
By: /s/ Florian Homm
------------------------------------
Florian Homm, Chairman
Attachment: Annex I - Form of Conversion Notice
6
<PAGE> 7
ANNEX I
[Form of Conversion Notice]
To Stan Lee Media, Inc.:
The undersigned owner of this Debenture hereby irrevocable
exercises its option to convert this Debenture, or portion hereof below
designated, into shares of Common Stock, no par value, of Stan Lee Media, Inc.,
a Colorado corporation, in accordance with the terms of the Debenture, and
directs that the shares issuable and deliverable upon the conversion and any
Debentures representing any unconverted principal amount hereof, be issued and
delivered to the registered holder hereof unless a different name has been
indicated below (in which case the terms and conditions of transfer shall have
been complied with). If shares are to be issued in the name of a person other
than the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto.
Dated:
-------------------------------
------------------------------------------
Name:
Title:
Fill in for registration of shares of Common Stock and Debentures if to be
issued otherwise than to the registered holder.
- -------------------------------------
Name
- -------------------------------------
Social Security or other Taxpayer
Identification Number
Principal Amount to be Converted:
-----------------------------------------
- -------------------------------------
- -------------------------------------
- -------------------------------------
Print Name and Address
1
<PAGE> 1
EXHIBIT 10.9
THESE SECURITIES AND THE SECURITIES ISSUABLE UPON THEIR EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
AND MAY NOT BE TRANSFERRED UNLESS COVERED BY AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT, A "NO ACTION" LETTER FROM THE SECURITIES AND EXCHANGE
COMMISSION WITH RESPECT TO SUCH TRANSFER, A TRANSFER MEETING THE REQUIREMENTS OF
RULE 144 OF THE SECURITIES AND EXCHANGE COMMISSION, OR AN OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY SUCH TRANSFER IS EXEMPT FROM
SUCH REGISTRATION.
STAN LEE MEDIA, INC.
WARRANT TO PURCHASE COMMON STOCK
This is to certify that, for value received, VMR LUXEMBOURG S.A.
(the "Holder" and/or "Warrantholder"), is entitled to purchase from STAN LEE
MEDIA, INC., a Colorado corporation (the "Company"), twenty-five thousand
(25,000) shares of Common Stock, no par value per share, of the Company ("Common
Stock"), at a purchase price per share of Six and 18/100 Dollars ($6.18) at such
times and under such terms and conditions as are hereinafter stated; provided
that the number of shares of Common Stock to be received upon exercise of this
Warrant and the price to be paid for a share of Common Stock shall be adjusted
from time to time as hereinafter set forth. The Common Stock subject to this
Warrant is hereinafter sometimes referred to as "Warrant Stock," and the
exercise price of a share of Warrant Stock, in effect at any time and as
adjusted from time to time, is hereinafter sometimes referred to as the
"Exercise Price."
I. EXERCISE OF WARRANT
SECTION 1.01. Exercise Period. Holder may exercise this Warrant
in whole or part at any time and from time to time after the date hereof to and
including the day immediately preceding 5:00 P.M. (Los Angeles time) three years
from the date hereof, as to all shares of Warrant Stock.
SECTION 1.02. Method of Exercise. Each exercise of this Warrant
shall be accomplished by presentation and delivery to the Company of a Notice of
Exercise in the form designated as Exhibit A attached hereto and incorporated
herein by reference, duly executed and accompanied by payment of the Exercise
Price for the number of shares of Common Stock specified in such Notice of
Exercise, together with all Federal and state taxes applicable upon such
exercise.
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<PAGE> 2
II. RESERVATION OF SHARES
The Company hereby agrees that at all times there shall be
reserved for issuance and delivery upon exercise of this Warrant such number of
shares of its Common Stock as shall be required for issuance and delivery upon
full exercise of this Warrant.
III. FRACTIONAL SHARES
No fractional shares or scrip representing fractional shares
shall be issued upon the exercise of this Warrant, but the Company shall pay the
cash value of any fraction of a share of Common Stock upon the exercise of the
Warrant.
IV. RIGHTS OF HOLDER
Holder shall not, by virtue hereof, be entitled to any rights of
a shareholder of the Company either at law or in equity, and the rights of
Holder under this Warrant are limited to those expressed herein.
V. ANTI-DILUTION PROVISIONS
SECTION 5.01. Adjustments of Exercise Price. Unless otherwise
specified herein, if the Company should at any time or from time to time
hereafter issue or sell any shares of its Common Stock without consideration or
for a consideration per share less than the Exercise Price in effect immediately
prior to the time of such issue or sale, then forthwith upon such issue or sale
the Exercise Price of the shares shall be adjusted to a price (computed to the
nearest cent) determined by dividing (1) the sum of (a) the number of shares of
Common Stock outstanding immediately prior to such issue or sale multiplied by
the Exercise Price in effect immediately prior to such issue or sale and (b) the
consideration, if any, received by the Company upon such issue or sale by (2)
the total number of shares of Common Stock outstanding immediately after such
issue or sale. For purposes of this Section 5.01, the following provisions shall
also be applicable:
(a) Options and Warrants. Except for options and warrants to
purchase shares pursuant to written compensatory agreements with Company
employees and/or consultants, and except for options and warrants not to exceed
an additional three million (3,000,000) shares of Common Stock of the Company
from time to time outstanding, as are issued upon exercise of options granted or
to be granted under any stock option plan of the Company which provides for the
grant of stock options to employees, consultants and directors of the Company,
or as hereinafter adopted by the Company pursuant to any future registrations on
Forms S-4 and/or S-8, if at any time hereafter the Company shall, in any manner,
grant any right to subscribe for or to purchase, or any option for the purchase
of Common Stock or any stock or other securities convertible into or
exchangeable for Common Stock (such convertible or exchangeable stock or
securities being hereinafter referred to as "Convertible Securities") other than
this Warrant, and the minimum price per share for which Common Stock is issuable
pursuant to such rights or option or upon conversion or exchange of such
Convertible Securities (determined by dividing (1) the total amount, if any,
received or receivable by the Company as consideration for the
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<PAGE> 3
granting of such rights or options, plus, in the case of such Convertible
Securities, the minimum aggregate amount of additional consideration, if any,
payable upon the conversion or exchange thereof by (2) the total maximum number
of shares of Common Stock issuable pursuant to such rights or options or upon
the conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such rights or options) shall be less
than the Exercise Price in effect immediately prior to the time of the granting
of such rights or options, then the total maximum number of shares of Common
Stock issuable pursuant to such rights or options or upon conversion or exchange
of the total maximum amount of such Convertible Securities issuable upon the
exercise of such rights or options shall (as of the date of granting of such
rights or options) be deemed to be outstanding and to have been issued for said
price per share as so determined; provided that no further adjustment of the
Exercise Price shall be made upon the actual issue of Common Stock so deemed to
have been issued; provided further that upon the expiration of such rights
(including rights to convert or exchange) or options, (1) the number of shares
of Common Stock deemed to have been issued and outstanding by reason of the fact
that they were issuable pursuant to such rights or options (including rights to
convert or exchange), which were not exercised shall no longer be deemed to be
issued and outstanding, and (2) the Exercise Price shall forthwith be adjusted
to the price which would have prevailed had all adjustments been made on the
basis of the issue only of the shares of Common Stock actually issued upon the
exercise of such rights or options or upon conversion or exchange of such
Convertible Securities.
(b) Convertible Securities. If the Company shall in any manner
issue or sell any Convertible Securities, and the minimum price per share for
which Common Stock is issuable upon conversion or exchange of such Convertible
Securities (determined by dividing (1) the total amount received or receivable
by the Company as consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the conversion or exchange thereof, by (2) the
total maximum number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities) shall be less than the Exercise
Price in effect immediately prior to the time of such issue or sale, then the
total maximum number of shares of Common Stock issuable upon conversion or
exchange of all such Convertible Securities shall (as of the date of the issue
or sale of such Convertible Securities) be deemed to be outstanding and to have
been issued for said price per share as so determined; provided, that no further
adjustment of the Exercise Price shall be made upon the actual issue of Common
Stock so deemed to have been issued; provided further, that if any such issue or
sale of such Convertible Securities is made upon exercise of any right to
subscribe for or to purchase or any option to purchase any such Convertible
Securities for which an adjustment of the Exercise Price has been or is to be
made pursuant to other provisions of this Section 5.01, no further adjustment of
the Exercise Price shall be made by reason of such issue or sale.
(c) Reclassifications, etc. The reclassification of securities
other than Common Stock into securities including Common Stock shall be deemed
to involve the issuance of such Common Stock for a consideration other than cash
immediately prior to the close of business on the date fixed for the
determination of security holders entitled to receive such
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<PAGE> 4
Common Stock. If any share of Common Stock or Convertible Securities or any
rights or options to purchase any such stock or other securities shall be issued
together with other stock or securities or other assets of the Company for a
consideration which includes both, the Board of Directors of the Company shall
determine what part of the consideration so received is to be deemed to be
consideration for the issue of such shares of such Common Stock, Convertible
Securities, rights, or options.
(d) Determination of Date of Issue. If the Company shall take a
record of the holders of any Common Stock for the purpose of entitling them (1)
to receive a dividend or other distribution payable in Common Stock or in
Convertible Securities, or (2) to subscribe for or purchase Common Stock or
Convertible Securities, then such record date shall be deemed to be the date of
the issue or sale of the share of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(e) Treasury Shares. For the purpose of this Section, shares of
Common Stock at any relevant time owned or held by, or for the account of, the
Company shall not be deemed outstanding.
SECTION 5.02. Adjustment of Number of Shares. Notwithstanding
anything contained in this Article V to the contrary, if the Company shall at
any time issue Common Stock or Convertible Securities by way of dividend or
other distribution on any stock of the Company or subdivide or combine the
outstanding shares of Common Stock, then the Exercise Price shall be
proportionately decreased in the case of such issuance (on the day following the
date fixed for determining shareholders entitled to receive such dividend or
other distribution) or decreased in the case of such subdivision or increased in
the case of such combination (on the date that such subdivision or combination
shall become effective).
SECTION 5.03. Number of Shares Adjusted. Upon any adjustment of
the Exercise Price, Holder shall thereafter (until another such adjustment) be
entitled to purchase, at the new Exercise Price, the number of shares,
calculated to the nearest full share, obtained by multiplying the number of
shares of Common Stock initially issuable upon exercise of this Warrant by the
Exercise Price in effect on the date hereof and dividing the product so obtained
by the new Exercise Price.
SECTION 5.04. Common Stock Defined. "Common Stock" means the
Company's common stock authorized as of the date hereof and any other class of
stock hereinafter authorized ranking on a parity with such Common Stock.
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<PAGE> 5
VI. RECLASSIFICATION, REORGANIZATION OR MERGER
In the event of any reclassification, capital reorganization or
other change of outstanding shares of Common Stock (other than as a result of an
issuance of Common Stock by way of dividend or other distribution or of a
subdivision or combination), or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of this
Warrant), or in case of any sale or conveyance to any other corporation of the
property and assets of the Company as an entirety or substantially as an
entirety, as a condition to any of the foregoing, the Company shall cause
effective provision to be made so that Holder shall have the right thereafter,
by exercising this Warrant, to purchase the kind and amount of shares of stock
and other securities and property receivable upon such reclassification, capital
reorganization or other change, consolidation, merger, sale or conveyance as if
Holder had exercised this Warrant prior to such transaction. Any such provision
shall include provision for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Warrant. The
foregoing provisions of this Article shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of Common Stock
and to successive consolidations, mergers, sales or conveyances. In the event
that in any such capital reorganization or reclassification, consolidation,
merger, sale or conveyance, additional shares of Common Stock shall be issued in
exchange, conversion, substitution or payment, in whole or in part, for or of a
security of the Company other than Common Stock, any such issue shall be treated
as an issue of Common Stock covered by the provisions of Section 5.01 hereof
with the amount of the consideration received upon the issue thereof being
determined by the Board of Directors of the Company, such determination to be
final and binding on Holder.
VII. SPIN-OFFS
In the event the Company spins off a subsidiary by distributing
to the shareholders of the Company, as a dividend or otherwise, the stock of the
subsidiary, the Company shall reserve, for the life of this Warrant, shares of
the subsidiary to be delivered to Holder upon exercising this Warrant to the
same extent as if Holder were the owner of record of the Warrant Stock on the
record date for payment of the shares of the subsidiary.
VIII. REGISTRATION RIGHTS
SECTION 8.01. Piggyback Registration. If the Company at any times
proposes to file a registration statement under the Act respecting any
securities of the Company on a form appropriate for registration of a sale of
Warrant Stock (excluding registrations of shares of Common Stock to be offered
in connection with the Company's employee benefit plans and registrations of
securities to be offered by the Company in connection with acquisitions, mergers
or similar transactions), it will at such time give written notice to Holder of
its intention to do so. Upon the written request of Holder given within 15 days
after receipt of any such
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<PAGE> 6
notice (which request shall specify the Warrant Stock intended to be sold or
disposed of by Holder and describe the nature of any proposed sale or other
disposition thereof), the Company shall use its best efforts, but shall not be
obligated, to cause all such Warrant Stock specified in such request to be so
registered. In the event that any such registration shall be underwritten, if
the underwriters notify the Company in writing that the inclusion in such
underwriting of such Warrant Stock would materially and adversely affect the
underwriting, the Company shall have the right not to include such Warrant
Stock.
SECTION 8.02. Other Registrations. If, in connection with a
registration under the Act, any Warrant Stock requires registration or
qualification with or approval of any United States or state governmental
official or authority other than registration under the Act before the Warrant
Stock may be sold, the Company shall use its best efforts to cause any such
Warrant Stock to be duly registered or approved as may be required; provided,
however, that the Company shall not be required to give a general consent to
service of process or to qualify as a foreign corporation or subject itself to
taxation as doing business in any such state.
SECTION 8.03. Registration Obligations. The Company shall deliver
to Holder after effectiveness of any registration under this Warrant such
reasonable number of copies of a definitive prospectus included in such
registration statement and of any revised or supplemental prospectus filed as
Holder may from time to time request. The Company shall file post-effective
amendments or supplements to such registration statement for a period of up to
90 days after the commencement of the offering and so long as a prospectus is
required to be delivered under the Act in order that the registration statement
may be effective at all times during such period and at all times comply with
the various applicable federal and state securities laws (after which period the
Company may withdraw such Warrant Stock from registration), and shall deliver
copies of the prospectus contained therein as hereinabove provided. Holder shall
notify the Company when his sales are completed.
Prior to filing a registration statement which includes Warrant
Stock, the Company shall (i) provide copies of such registration statement at a
reasonable time before it is filed for the review of Holder and the underwriters
of Holder; and (ii) make available to such Holders or underwriters the
appropriate employees and records for purposes of performing the requisite "due
diligence".
SECTION 8.04. Expenses. In any registration pursuant to Section
8.01 of this Warrant, Holder shall pay the Company for the incremental portion
of the federal and state registration and filing fees attributable to the
Warrant Stock and shall pay all underwriting commissions, discounts,
underwriting expenses and taxes attributable to the Warrant Stock.
SECTION 8.05. Indemnity. The Company shall indemnify Holder and
each underwriter of Warrant Stock (and any person who controls such underwriter
within the meaning of Section 15 of the Securities Act) against all claims,
losses, damages, liabilities and expenses resulting from any untrue statement or
alleged untrue statement of a material fact contained in a prospectus or in any
related registration statement, notification or the like or from any
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<PAGE> 7
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as the same may have been based upon information furnished in
writing to the Company by Holder or such underwriter expressly for use therein
and used in accordance with such writing.
Holder shall furnish to the Company such information concerning
Holder as may be requested by the Company which is necessary in connection with
any registration or qualification of Warrant Stock pursuant to Section 8.01
hereof, and to indemnify the Company, its officers and directors and each
underwriter of the Company's securities (and any person who controls the Company
or any such underwriter within the meaning of Section 15 of the Securities Act),
against all claims, losses, damages, liabilities and expenses resulting from any
untrue statement or alleged untrue statement of material fact contained in a
prospectus or any related registration statement, notification or the like, or
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, to
the extent the same was derived from information furnished in writing to the
Company by Holder expressly for use therein and used in accordance with such
writing.
If any action is brought or any claim is made against any persons
indemnified pursuant to this Section in respect of which indemnity may be sought
against the indemnitor pursuant to this Section, such person shall promptly
notify the indemnitor in writing of the institution of such action or the making
of such claim and the indemnitor shall promptly notify the indemnitor in writing
of the institution of such action or the making of such claim and the indemnitor
shall assume the defense of such action or claim, including the employment of
counsel and payment of expenses. Such person shall have the right to employ his,
its or their own counsel in any such case, but the fees and expenses of such
counsel shall be at the expense of such person unless the employment of such
counsel shall have been authorized in writing by the indemnitor in connection
with the defense of such action or claim or the indemnitor shall not have
employed counsel to have charge of the defense of such action or claim or such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to him, it or them which are different from or additional to
those available to the indemnitor (in which the case the indemnitor shall have
the right to direct any different or additional defense of such action or claim
on behalf of the indemnified party or parties), in any of which events such fees
and expenses of not more than one additional counsel for the indemnified person
shall be borne by the indemnitor. Except as expressly provided above, in the
event that the indemnitor shall not previously have assumed the defense of any
such action or claim, at such time as the indemnitor does not assume the defense
of such action or claim, the indemnitor shall thereafter be liable to any person
indemnified pursuant to this Section for any legal or other expenses
subsequently incurred by such person in investigating, preparing or defending
against such action or claim. Anything in this Section to the contrary
notwithstanding, the indemnitor shall not be liable for any settlement of any
such claim or action effected without its written consent.
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<PAGE> 8
IX. PAYMENT OF TAXES
The Company will pay any documentary stamp taxes attributable to
the initial issuance of the Warrant Shares; provided, however, that the Company
shall not be required to pay any tax or taxes which may be payable in respect of
any transfer involved in the issue or delivery of any certificates for shares of
Common Stock in the name other than that of the Holder of the Warrant.
X. NOTICES
All notices, requests, demands and other communications hereunder
shall be in writing and may be personally delivered or sent by telecopy or first
class certified or registered mail. Any notice, request, demand or other
communication required or permitted hereunder shall be deemed effectively given
(i) on the date of delivery if personally delivered, (ii) three business days
after deposit in the mails if mailed by first class certified or registered
mail, postage prepaid, or (iii) twenty-four hours after being sent by telecopy,
with confirmation sheet. All such notices, certificates, requests, demands and
other communications shall be sent or given to the addresses indicated below or
at such other address(es) as a party may specify by written notice:
If to Company: Stan Lee Media, Inc.
15821 Ventura Boulevard, Suite 675
Encino, CA 91436
Attention of Chief Operating Officer
Fax: (818) 461-1757
If to Holder: VMR Luxembourg S.A.
c/o VMR Capital Markets U.S.
1901 Avenue of the Stars, Suite 1500
Los Angeles, CA 90067
Attention of President.
Fax: (310) 286-2373
XI. REDEMPTION
Subject to the provisions of this Agreement, on not less than
fifteen (15) days notice given at any time after the first anniversary of this
Agreement, the Warrant Stock may be redeemed at the option of the Company at a
redemption price of $.05 per Warrant Share, provided the closing price of the
Company's Common Stock exceeds Eight Dollars ($8.00) for thirty (30) consecutive
trading days. For these purposes, the closing price of the Common Stock shall be
determined by the closing bid price, as reported on The NASDAQ SmallCap Stock
Market or National Market System or any comparable system or, if the Company's
Common Stock is not reported on The NASDAQ SmallCap Stock Market or National
Market System or a comparable system, the average of the closing bid and asked
prices as furnished by two
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<PAGE> 9
members of the National Association of Securities Dealers, Inc. reasonably
selected by the Company for that purpose.
In case the Company shall desire to exercise its right to redeem
the Warrant Stock, it shall mail a notice of redemption to the Holder, first
class, postage prepaid, not later than the fifteenth (15th) day before the date
fixed for redemption at its last address set forth in the Company's records. Any
notice mailed in the manner provided herein shall be conclusively presumed to
have been duly given whether or not the Holder receives such notice. The
redemption notice shall specify the redemption price, the date fixed for
redemption (the "Redemption Date"), the place where the Warrants shall be
delivered and the redemption price paid, and that the right to exercise the
Warrants shall terminate at 5:00 P.M. (Los Angeles time) on the business day
immediately preceding the Redemption Date. No failure to mail such notice nor
any defect therein or in the mailing thereof shall affect the validity of the
proceedings for such redemption except to a holder to whom notice was not mailed
or whose notice was defective. An affidavit by the Company Secretary that notice
of redemption has been mailed shall, in the absence of fraud, be prima facie
evidence of the facts stated herein. On and after the Redemption Date, the
Holder shall have no further rights except to receive, upon surrender of the
Warrant, the redemption price. From and after the Redemption Date, the Company
shall, at the place specified in the notice of redemption, upon presentation and
surrender to the Company by or on behalf of the Holder of the Warrant Stock to
be redeemed, deliver or cause to be delivered to or upon the written order of
the Holder a sum in cash equal to the redemption price of each such Warrant
Share. From and after the Redemption Date and upon the deposit or setting aside
by the Company of a sum sufficient to redeem all Warrant Stock called for
redemption, such Warrant Stock shall expire and become void and all rights
hereunder, except the right to receive payment of the redemption price, shall
cease.
XII. WARRANTHOLDER NOT DEEMED STOCKHOLDER
The Holder shall not, as such, be entitled to vote or to receive
dividends or be deemed the holder of Common Stock that may at any time be
issuable upon exercise of such Warrant Stock for any purpose whatsoever, nor
shall anything set forth in this Agreement be construed to confer upon the
Holder, as such, any of the rights of a stockholder of the Company or any right
to vote for the election of directors or upon any matters submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon any recapitalization, issue or reclassification
of stock, change of par value or change of stock to no par value, consolidation,
merger or otherwise), or to receive notice of meetings, or to receive dividends
or subscription rights, until such Holder shall have exercised such Warrants and
been issued shares of Common Stock in accordance with the provisions hereof.
XIII. GOVERNING LAW
This Agreement shall be governed by the laws of the State of
California without regard to principles of conflicts of laws.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of this October , 1999.
COMPANY: STAN LEE MEDIA, INC.
By: /s/ Gill Champion
----------------------------------------
Gill Champion, Vice President & COO
HOLDER: VMR LUXEMBOURG S.A.
By:
-----------------------------------
[Signature]
--------------------------------------
[Name and Title]
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<PAGE> 11
EXHIBIT A
[FRONT]
WARRANT TO PURCHASE ________________________ SHARES OF COMMON STOCK
VOID AFTER 5:00 P.M.,
PACIFIC TIME ON OCTOBER __ , 2002
STAN LEE MEDIA, INC.
This certifies that, for value received, VMR LUXEMBOURG S.A., the
registered holder hereof (the "Warrantholder") is entitled to purchase from Stan
Lee Media, Inc., a Colorado corporation (the "Company"), at any time during the
period commencing at 9:00 A.M., Pacific Time, on October , 1999, and continuing
through 5:00 P.M. Pacific Time, on October , 2002, at the purchase price per
share of Common Stock of Dollars ($ ) (the "Warrant Price"), the number of
shares of Common Stock of the Company set forth above (the "Common Stock"). The
number of shares of Common Stock of the Company purchasable upon exercise of
this Warrant shall be subject to adjustment from time to time as set forth in
the Warrant Agreement dated October , 1999 (the "Warrant Agreement") between the
Company and Warrantholder, to all of which the Warrantholder by acceptance
hereof consents.
The Warrant evidenced hereby may be exercised in whole or in part
by presentation of this Warrant Certificate with the Purchase Form attached
hereto duly executed and simultaneous payment and/or cancellation of
indebtedness of the Warrant Price at the principal office of the Company.
Payment of such price shall be made at the option of the Warrantholder in cash,
by check, or by wire transfer. The Warrant evidenced hereby represents the right
to purchase an aggregate of up to ____________________________ (_______) shares
of the Company's Common Stock and is issued under and in accordance with the
Warrant Agreement.
Upon any partial exercise of the Warrant evidenced hereby, there
shall be signed and issued to the Warrantholder a new Warrant Certificate in
respect of the shares of Common Stock as to which the Warrant evidenced hereby
shall not have been exercised. The Warrant or any portion thereof may be
exchanged at the office of the Company by surrender of this Warrant Certificate
properly endorsed for one or more new Warrant Certificates representing the same
aggregate number of shares of Common Stock as here evidenced by the Warrant
exchanged. No fractional shares of Common Stock will be issued upon the exercise
of rights to purchase hereunder, but the Company shall pay the cash value of any
fraction of a share of Common Stock upon the exercise of the Warrant.
This Warrant Certificate does not entitle any Warrantholder to
any of the rights of a stockholder of the Company.
STAN LEE MEDIA, INC.,
Dated: October ____, 1999 By:
---------------------------------------
Gill Champion, Vice President & COO
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[BACK]
STAN LEE MEDIA, INC.
PURCHASE FORM
Mailing Address:
STAN LEE MEDIA, INC.
15821 Ventura Boulevard, Suite 675
Encino, CA 91436
The undersigned hereby irrevocably elects to exercise the right
of purchase represented by the within Warrant Certificate for, and to purchase
thereunder __________________, shares of Common Stock (the "Shares") provided
for therein, and requests that certificates for the Shares be issued in the name
of: ___________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Please print or type name, address and taxpayer
i.d. number/Social Security Number)
and if said number of Shares shall not be all the Shares purchasable hereunder,
that a new Warrant Certificate for the balance of the Shares purchasable under
the within Warrant Certificate be registered in the name of the undersigned
Warrantholder as below indicated and delivered to the address stated below.
Dated:
-------------------------------------------------------------------------
Name of Warrantholder or Assignee:
---------------------------------------------
Address:
-----------------------------------------------------------------------
Signature:
---------------------------------------------------------------------
Note: The above signature must correspond with the name as written upon
the face of this Warrant Certificate in every particular, without alteration or
enlargement or any change whatever.
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<PAGE> 1
EXHIBIT 10.10
STAN LEE MEDIA, INC.
1999 INCENTIVE STOCK PLAN
(adopted by Board of Directors on October 11, 1999)
(adopted by Shareholders on ____________)
1. Purposes of the Plan. The purposes of this 1999 Stock Incentive Plan
are to attract and retain the best available personnel for positions of
substantial responsibility, to provide additional incentive to Employees and
Consultants of the Company and its Subsidiaries and to promote the success of
the Company's business. Options granted under the Plan may be Incentive Stock
Options (as defined under Section 422 of the Code) or Nonstatutory Stock
Options, as determined by the Administrator at the time of grant of an Option
and subject to the applicable provisions of Section 422 of the Code, as amended,
and the regulations promulgated thereunder. Stock purchase rights may also be
granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "Affiliate" means an entity other than a Subsidiary (as defined
below) in which the Company owns an equity interest.
(c) "Applicable Laws" means the legal requirements relating to the
administration of stock option and restricted stock purchase plans under
applicable U.S. state corporate laws, U.S. federal and applicable state
securities laws, the Code, any stock exchange rules or regulations and the
applicable laws of any other country or jurisdiction where Options or Stock
Purchase Rights are granted under the Plan, as such laws, rules, regulations and
requirements shall be in place from time to time.
(d) "Board" means the Board of Directors of the Company.
(e) "Change in Control" means a sale of all or substantially all of
the Company's assets, or a merger, consolidation or other capital reorganization
of the Company with or into another corporation; provided, however, that a
merger, consolidation or other capital reorganization in which the holders of
more than 50% of the shares of capital stock of the Company outstanding
immediately prior to such transaction continue to hold (either by the voting
securities remaining outstanding or by being converted into voting securities of
the surviving entity) more than 50% of the total voting power represented by the
voting securities of the Company, or such surviving entity, outstanding
immediately after such transaction shall not constitute a Change in Control.
<PAGE> 2
(f) "Code" means the Internal Revenue Code of 1986, as amended.
(g) "Committee" means the Committee appointed by the Board of
Directors in accordance with Section 4(a) and (b) of the Plan.
(h) "Common Stock" means the Common Stock of the Company.
(i) "Company" means Stan Lee Media, Inc., a Colorado corporation.
(j) "Consultant" means any person, including an advisor, who renders
services to the Company, or any Parent, Subsidiary or Affiliate, and is
compensated for such services, and any director of the Company whether
compensated for such services or not.
(k) "Continuous Status as an Employee or Consultant" means the
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of: (i) sick leave; (ii) military leave;
(iii) any other leave of absence approved by the Administrator, provided that
such leave is for a period of not more than 90 days, unless reemployment upon
the expiration of such leave is guaranteed by contract or statute, or unless
provided otherwise pursuant to Company policy adopted from time to time; or (iv)
in the case of transfers between locations of the Company or between the
Company, its Parent(s), Subsidiaries, Affiliates or their respective successors.
For purposes of this Plan, a change in status from an Employee to a Consultant
or from a Consultant to an Employee will not constitute an interruption of
Continuous Status as an Employee or Consultant.
(l) "Director" means a member of the Board.
(m) "Employee" means any person (including if appropriate, any Named
Executive, Officer or Director) employed by the Company or any Parent,
Subsidiary or Affiliate of the Company, with the status of employment determined
based upon such minimum number of hours or periods worked as shall be determined
by the Administrator in its discretion, subject to any requirements of the Code.
The payment by the Company of a director's fee to a director shall not be
sufficient to constitute "employment" of such director by the Company.
(n) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(o) "Fair Market Value" means, as of any date, the fair market value
of Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or an automated quotation system or bulletin board, including without
limitation, the National Market of the National Association of Securities
Dealers, Inc. Automated Quotation ("Nasdaq") System, the
2
<PAGE> 3
Nasdaq SmallCap Market, OTC Electronic Bulletin Board, The New York Stock
Exchange, Inc., or The American Stock Exchange, Inc., its Fair Market Value
shall be the closing sales price for such stock (or the closing bid, if no sales
were reported), as quoted on such system or exchange, or the exchange with the
greatest volume of trading in Common Stock for the last market trading day prior
to the time of determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the Nasdaq System (but not
on the National Market thereof) or regularly quoted by a recognized securities
dealer but selling prices are not reported, its Fair Market Value shall be the
mean between the high bid and low asked prices for the Common Stock for the last
market trading day prior to the time of determination, as reported in The Wall
Street Journal or such other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(p) "Incentive Stock Option" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code, as
designated in the applicable written Option Agreement.
(q) "Listed Security" means any security of the Company that is
listed or approved for listing on a national securities exchange or designated
or approved for designation as a national market system security on an
interdealer quotation system by the National Association of Securities Dealers,
Inc.
(r) "Named Executive" means any individual who, on the last day of
the Company's fiscal year, is the chief executive officer of the Company (or is
acting in such capacity) or among the four most highly compensated officers of
the Company (other than the chief executive officer). Such officer status shall
be determined pursuant to the executive compensation disclosure rules under the
Exchange Act.
(s) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option, as designated in the applicable written
Option Agreement.
(t) "Officer" means a person who is an officer of the Company within
the meaning of Section 16(a) of the Exchange Act and the rules and regulations
promulgated thereunder.
(u) "Option" means a stock option granted pursuant to the Plan.
(v) "Option Agreement" means a written agreement between an Optionee
and the Company reflecting the terms of an Option granted under the Plan and
includes any documents attached to such Option Agreement, including, but not
limited to, a notice of stock option grant and a form of exercise notice.
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<PAGE> 4
(w) "Option Exchange Program" means a program whereby outstanding
Options are exchanged for Options with a lower exercise price.
(x) "Optioned Stock" means the Common Stock subject to an Option or a
Stock Purchase Right.
(y) "Optionee" means an Employee or Consultant who receives an Option
or a Stock Purchase Right.
(z) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code, or any successor provision.
(aa) "Plan" means this 1999 Incentive Stock Plan.
(bb) "Reporting Person" means an Officer, Director, or greater than
10% stockholder of the Company within the meaning of Rule 16a-2 under the
Exchange Act, who is required to file reports pursuant to Rule 16a-3 under the
Exchange Act.
(cc) "Restricted Stock" means shares of Common Stock acquired
pursuant to a grant of a Stock Purchase Right under Section 11 below.
(dd) "Restricted Stock Purchase Agreement" means a written agreement
between a holder of a Stock Purchase Right and the Company reflecting the terms
of a Stock Purchase Right granted under the Plan and includes any documents
attached to such agreement.
(ee) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange
Act, as the same may be amended from time to time, or any successor provision.
(ff) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
(gg) "Stock Exchange" means any stock exchange or consolidated stock
price reporting system on which prices for the Common Stock are quoted at any
given time.
(hh) "Stock Purchase Right" means the right to purchase Common Stock
pursuant to Section 11 below.
(ii) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code, or any successor
provision.
3. Stock Subject to the Plan. Subject to the provisions of Section 13 of
the Plan, the
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<PAGE> 5
maximum aggregate number of Shares that may be optioned and sold under the Plan
is one million five hundred thousand (1,500,000) Shares of Common Stock. The
Shares may be authorized, but unissued, or reacquired Common Stock. If an Option
should expire or become unexercisable for any reason without having been
exercised in full, or is surrendered pursuant to an Option Exchange Program, the
unpurchased Shares that were subject thereto shall, unless the Plan shall have
been terminated, become available for future grant under the Plan. In addition,
any Shares of Common Stock which are retained by the Company upon exercise of an
Option or Stock Purchase Right in order to satisfy the exercise or purchase
price for such Option or Stock Purchase Right or any withholding taxes due with
respect to such exercise shall be treated as not issued and shall continue to be
available under the Plan. Shares repurchased by the Company pursuant to any
repurchase right which the Company may have shall not be available for future
grant under the Plan.
4. Administration of the Plan.
(a) General. The Plan shall be administered by the Board or a
Committee, or a combination thereof, as determined by the Board. The Plan may be
administered by different administrative bodies with respect to different
classes of Optionees and, if permitted by the Applicable Laws, the Board may
authorize one or more officers (who may (but need not) be Officers) to grant
Options or Stock Purchase Rights to Employees and Consultants.
(b) Administration With Respect to Reporting Persons. With respect to
Options granted to Reporting Persons and Named Executives, the Plan may (but
need not) be administered so as to permit such Options to qualify for the
exemption set forth in Rule 16b-3 and to qualify as performance-based
compensation under Section 162(m) of the Code.
(c) Committee Composition. If a Committee has been appointed pursuant
to this Section 4, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board may
increase the size of any Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies (however caused) and remove all members of a Committee
and thereafter directly administer the Plan, all to the extent permitted by the
Applicable Laws and, in the case of a Committee administering the Plan pursuant
to Section 4(b) above, to the extent permitted or required by Rule 16b-3 and
Section 162(m) of the Code.
(d) Powers of the Administrator. Subject to the provisions of the
Plan and in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any Stock Exchange, the Administrator
shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(o) of the Plan;
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<PAGE> 6
(ii) to select the Consultants and Employees to whom Options and
Stock Purchase Rights or any combination thereof may from time to time be
granted hereunder;
(iii) to determine whether and to what extent Options and Stock
Purchase Rights or any combination thereof are granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder, which terms and
conditions include but are not limited to the exercise or purchase price, the
time or times when Options or Stock Purchase Rights may be exercised (which may
be based on performance criteria), any vesting acceleration or waiver of
forfeiture restrictions, and any restriction or limitation regarding any Option,
Optioned Stock, Stock Purchase Right or Restricted Stock, based in each case on
such factors as the Administrator, in its sole discretion, shall determine;
(vii) to determine whether and under what circumstances an Option
may be settled in cash under Section 10(g) instead of Common Stock;
(viii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option shall have declined since the date the Option was granted;
(ix) to determine the terms and restrictions applicable to Stock
Purchase Rights and the Restricted Stock purchased by exercising such Stock
Purchase Rights;
(x) to initiate an Option Exchange Program;
(xi) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan; and
(xii) in order to fulfill the purposes of the Plan and without
amending the Plan, to modify grants of Options or Stock Purchase Rights to
participants who are foreign nationals or employed outside of the United States
in order to recognize differences in local law, tax policies or customs.
(d) Effect of Administrator's Decision. All decisions, determinations
and interpretations of the Administrator shall be final and binding on all
holders of Options or Stock Purchase Rights.
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5. Eligibility.
(a) Recipients of Grants. Nonstatutory Stock Options and Stock
Purchase Rights may be granted to Employees and Consultants. Incentive Stock
Options may be granted only to Employees; provided, however, that Employees of
Affiliates shall not be eligible to receive Incentive Stock Options. An Employee
or Consultant who has been granted an Option or Stock Purchase Right may, if he
or she is otherwise eligible, be granted additional Options or Stock Purchase
Rights.
(b) Type of Option. Each Option shall be designated in the Option
agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value of Shares with respect to which Options designated as
Incentive Stock Options are exercisable for the first time by any Optionee
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options. For purposes of this Section 5(b), Incentive Stock
Options shall be taken into account in the order in which they were granted, and
the Fair Market Value of the Shares subject to an Incentive Stock Option shall
be determined as of the date of the grant of such Option.
(c) The Plan shall not confer upon the holder of any Option or Stock
Purchase Right any right with respect to continuation of employment or
consulting relationship with the Company, nor shall it interfere in any way with
such holder's right or the Company's right to terminate his or her employment or
consulting relationship at any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company as described in Section 20 of the Plan. It shall
continue in effect for a term of ten years unless sooner terminated under
Section 16 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that the term shall be no more than ten
years from the date of grant thereof or such shorter term as may be provided in
the Option Agreement and provided further that, in the case of an Incentive
Stock Option granted to an Optionee who, at the time the Option is granted, owns
stock representing more than 10% of the total combined voting power of all
classes of stock of the Company or any Parent or Subsidiary, the term of the
Option shall be five years from the date of grant thereof or such shorter term
as may be provided in the Option Agreement.
8. Limitation. Subject to adjustment as provided in Section 14 below,
the maximum number of Shares which may be subject to Options and Stock Purchase
Rights granted to any one Employee under this Plan for any fiscal year of the
Company shall be five hundred thousand
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<PAGE> 8
(500,000) Shares.
9. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the Board and
set forth in the Option Agreement, but shall be subject to the following:
(i) In the case of an Incentive Stock Option that is:
(A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more than 10% of the total
combined voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.
(B) granted to any other Employee, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator, provided however that
the per share exercise price of an Option granted to a Named Executive of the
Company shall be no less than 100% of the Fair Market Value per Share on the
date of grant if such Option is intended to qualify as performance-based
compensation under Section 162(m) of the Code.
(iii) Notwithstanding the foregoing, Options may be granted with
a per Share exercise price other than as required above pursuant to a merger or
other corporate transaction.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note (subject to the provisions of the Colorado Business
Corporation Act), (4) cancellation of indebtedness, (5) other Shares that (x) in
the case of Shares acquired upon exercise of an Option, have been owned by the
Optionee for more than six months on the date of surrender or such other period
as may be required to avoid a charge to the Company's earnings, and (y) have a
Fair Market Value on the date of surrender equal to the aggregate exercise price
of the Shares as to which such Option shall be exercised, (6) authorization for
the Company to retain from the total number of Shares as to which the Option is
exercised that number of Shares having a Fair Market Value on the date of
exercise equal to the exercise price for the total number of Shares as to which
the Option is exercised, (7) delivery of a properly executed exercise notice
together with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price and
any applicable
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<PAGE> 9
income or employment taxes, (8) delivery of an irrevocable subscription
agreement for the Shares that irrevocably obligates the option holder to take
and pay for the Shares not more than twelve months after the date of delivery of
the subscription agreement, (9) any combination of the foregoing methods of
payment, or (10) such other consideration and method of payment for the issuance
of Shares to the extent permitted under the Applicable Laws. In making its
determination as to the type of consideration to accept, the Administrator shall
consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator and reflected in the Option Agreement, which
may include vesting requirements and/or including performance criteria with
respect to the Company and/or the Optionee. The Administrator shall have the
discretion, after the grant of an Option, to adjust the vesting of an Option
held by an Employee or Consultant as a result in a change in the terms or
conditions under which such person is providing services to the Company, or for
any other reason. The Administrator shall have the discretion to determine
whether and to what extent the vesting of Options shall be tolled during any
unpaid leave of absence; provided however that in the absence of such
determination, vesting of Options shall be tolled during any such leave.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and the Company has
received full payment for the Shares with respect to which the Option is
exercised. Full payment may, as authorized by the Administrator, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 12 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares that thereafter may be available, both for purposes of the Plan
and for sale under the Option, by the number of Shares as to which the Option is
exercised.
(b) Termination of Employment or Consulting Relationship. In the
event of termination of an Optionee's Continuous Status as an Employee or
Consultant with the Company, such Optionee may, but only within three months (or
such other period of time as is determined
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<PAGE> 10
by the Administrator, with such determination in the case of an Incentive Stock
Option being made at the time of grant of the Option) after the date of such
termination (but in no event later than the expiration date of the term of such
Option as set forth in the Option Agreement), exercise his or her Option to the
extent that the Optionee was entitled to exercise it at the date of such
termination. To the extent that the Optionee was not entitled to exercise the
Option at the date of such termination, or if the Optionee does not exercise
such Option to the extent so entitled within the time specified herein, the
Option shall terminate and the Optioned Stock underlying the unexercised portion
of the Option shall revert to the Plan. No termination shall be deemed to occur
and this Section 9(b) shall not apply if (i) the Optionee is a Consultant who
becomes an Employee, or (ii) the Optionee is an Employee who becomes a
Consultant.
(c) Disability of Optionee. Notwithstanding Section 10(b) above, in
the event of termination of an Optionee's Continuous Status as an Employee or
Consultant as a result of his or her total and permanent disability (within the
meaning of Section 22(e)(3) of the Code), such Optionee may, but only within
twelve months from the date of such termination (but in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), exercise the Option to the extent otherwise entitled to exercise it
at the date of such termination. To the extent that the Optionee was not
entitled to exercise the Option at the date of termination, or if the Optionee
does not exercise such Option to the extent so entitled within the time
specified herein, the Option shall terminate and the Optioned Stock underlying
the unexercised portion of the Option shall revert to the Plan.
(d) Death of Optionee. In the event of the death of an Optionee
during the period of Continuous Status as an Employee or Consultant since the
date of grant of the Option, or within 30 days following termination of the
Optionee's Continuous Status as an Employee or Consultant, the Option may be
exercised, at any time within twelve months following the date of death (but in
no event later than the expiration date of the term of such Option as set forth
in the Option Agreement), by such Optionee's estate or by a person who acquired
the right to exercise the Option by bequest or inheritance, but only to the
extent of the right to exercise that had accrued at the date of death or, if
earlier, the date of termination of the Optionee's Continuous Status as an
Employee or Consultant. To the extent that the Optionee was not entitled to
exercise the Option at the date of death or termination, as the case may be, or
if the Optionee does not exercise such Option to the extent so entitled within
the time specified herein, the Option shall terminate and the Optioned Stock
underlying the unexercised portion of the Option shall revert to the Plan.
(e) Extension of Exercise Period. The Administrator shall have full
power and authority to extend the period of time for which an Option is to
remain exercisable following termination of an Optionee's Continuous Status as
an Employee or Consultant from the periods set forth in Sections 10(b), 10(c)
and 10(d) above or in the Option Agreement to such greater time as the Board
shall deem appropriate, provided, that in no event shall such option be
exercisable later than the date of expiration of the term of such Option as set
forth in the Option Agreement.
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<PAGE> 11
(f) Rule 16b-3. Options granted to Reporting Persons shall comply
with Rule 16b-3 and shall contain such additional conditions or restrictions as
may be required thereunder to qualify for the maximum exemption for Plan
transactions.
(g) Buy-Out Provisions. The Administrator may at any time offer to
buy out for a payment in cash or Shares an Option previously granted based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time such offer is made.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing of the terms, conditions and restrictions related to the
offer, including the number of Shares that such person shall be entitled to
purchase, the price to be paid, and the time within which such person must
accept such offer, which shall in no event exceed 30 days from the date upon
which the Administrator made the determination to grant the Stock Purchase
Right. The offer shall be accepted by execution of a Restricted Stock Purchase
Agreement in the form determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment with the Company for any reason (including death or
disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock Purchase Agreement shall be the original purchase price paid by
the purchaser and may be paid by cancellation of any indebtedness of the
purchaser to the Company.
(c) Other Provisions. The Restricted Stock Purchase Agreement shall
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock Purchase Agreements need not be the
same with respect to each purchaser.
(d) Rights as a Stockholder. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
stockholder, and shall be a stockholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 12
of the Plan.
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<PAGE> 12
12. Tax Withholding.
(a) General. As a condition to the exercise of Options or Stock
Purchase Rights granted hereunder, the Optionee or holder of such Stock Purchase
Right shall make such arrangements as the Administrator may require for the
satisfaction of any federal, state, local or foreign withholding tax obligations
that may arise in connection with the exercise, receipt or vesting of such
award. The Company shall not be required to issue any Shares under the Plan
until such obligations are satisfied.
(b) Stock Withholding to Satisfy Withholding Tax Obligations. At the
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph. When an Optionee incurs tax liability in
connection with an Option or Stock Purchase Right, which tax liability is
subject to tax withholding under applicable tax laws, and the Optionee is
obligated to pay the Company an amount required to be withheld under applicable
tax laws, the Optionee may satisfy the withholding tax obligation by one or some
combination of the following methods: (i) by cash or check payment, (ii) out of
the Optionee's current compensation, (iii) if permitted by the Administrator, in
its discretion, by surrendering to the Company Shares that (A) in the case of
Shares previously acquired from the Company, have been owned by the Optionee for
more than six months on the date of surrender, and (B) have a Fair Market Value
on the date of surrender equal to or less than the amount required to be
withheld, or (iv) by electing to have the Company withhold from the Shares to be
issued upon exercise of the Option, or the Shares to be issued in connection
with the Stock Purchase Right, if any, that number of Shares having a Fair
Market Value equal to the amount required to be withheld. For this purpose, the
Fair Market Value of the Shares to be withheld shall be determined on the date
that the amount of tax to be withheld is to be determined (the "Tax Date").
Any surrender by a Reporting Person of previously owned Shares to
satisfy tax withholding obligations arising upon exercise of this Option must
comply with the applicable provisions of Rule 16b-3.
All elections by an Optionee to have Shares withheld to satisfy tax
withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(x) the election must be made on or prior to the applicable Tax Date;
(y) once made, the election shall be irrevocable as to the particular
Shares of the Option or Stock Purchase Right as to which the election is made;
and
(z) all elections shall be subject to the consent or disapproval of
the Administrator.
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In the event the election to have Shares withheld is made by an Optionee
and the Tax Date is deferred under Section 83 of the Code because no election is
filed under Section 83(b) of the Code, the Optionee shall receive the full
number of Shares with respect to which the Option or Stock Purchase Right is
exercised but such Optionee shall be unconditionally obligated to tender back to
the Company the proper number of Shares on the Tax Date.
13. Adjustments Upon Changes in Capitalization, Merger or Certain Other
Transactions.
(a) Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option or Stock Purchase Right, and the number of shares of
Common Stock that have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or that have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, the number of Shares set forth in Section 8 above, as well as
the price per share of Common Stock covered by each such outstanding Option or
Stock Purchase Right, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination, recapitalization or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Board shall notify the Optionee
at least 15 days prior to such proposed action. To the extent it has not been
previously exercised, the Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.
(c) Change in Control. In the event of a Change in Control, each
outstanding Option or Stock Purchase Right shall be assumed or an equivalent
option or right shall be substituted by the successor corporation or a Parent or
Subsidiary of such successor corporation, unless such successor corporation does
not agree to assume the outstanding Options or Stock Purchase Rights or to
substitute equivalent options or rights, in which case such Options or Stock
Purchase Rights shall terminate upon the consummation of the transaction. For
purposes of this Section 13(c), an Option or a Stock Purchase Right shall be
considered assumed, without limitation, if, at the time of issuance of the stock
or other consideration upon such Change in Control, each holder of an Option or
Stock Purchase Right would be entitled to receive upon exercise of the Option or
Stock Purchase Right the same number and kind of shares of stock or the same
amount of property, cash or securities as such holder would have been entitled
to receive upon the occurrence of the
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<PAGE> 14
transaction if the holder had been, immediately prior to such transaction, the
holder of the number of Shares of Common Stock covered by the Option or the
Stock Purchase Right at such time (after giving effect to any adjustments in the
number of Shares covered by the Option or Stock Purchase Right as provided for
in this Section 13); provided, however, that if such consideration received in
the Change in Control was not solely common stock of the successor corporation
or its Parent, the Administrator may, with the consent of the successor
corporation, provide for the consideration to be received upon exercise of the
Option to be solely common stock of the successor corporation or its Parent
equal to the Fair Market Value of the per Share consideration received by
holders of Common Stock in the transaction.
(d) Certain Distributions. In the event of any distribution to the
Company's stockholders of securities of any other entity or other assets (other
than dividends payable in cash or stock of the Company) without receipt of
consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per Share of Common Stock covered by each
outstanding Option or Stock Purchase Right to reflect the effect of such
distribution.
14. Non-Transferability of Options and Stock Purchase Rights. Options
and Stock Purchase Rights may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution, provided that, after the date, if any, upon which the
Common Stock becomes a Listed Security, the Administrator may in its discretion
grant transferable Nonstatutory Stock Options pursuant to Option Agreements
specifying (i) the manner in which such Nonstatutory Stock Options are
transferable and (ii) that any such transfer shall be subject to the Applicable
Laws. The designation of a beneficiary by an Optionee will not constitute a
transfer. An Option or Stock Purchase Right may be exercised, during the
lifetime of the holder of the Option or Stock Purchase Right, only by such
holder or a transferee permitted by this Section 14.
15. Time of Granting Options and Stock Purchase Rights. The date of
grant of an Option or Stock Purchase Right shall, for all purposes, be the date
on which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by the Board; provided,
however, that in the case of any Incentive Stock Option, the grant date shall be
the later of the date on which the Administrator makes the determination
granting such Incentive Stock Option or the date of commencement of the
Optionee's employment relationship with the Company. Notice of the determination
shall be given to each Employee or Consultant to whom an Option or Stock
Purchase Right is so granted within a reasonable time after the date of such
grant.
16. Amendment and Termination of the Plan.
(a) Authority to Amend or Terminate. The Board may at any time
amend, alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation (other than an adjustment made pursuant to Section
13 above) shall be made that would impair the rights of any Optionee under any
grant theretofore made, without his or her consent. In addition, to the extent
necessary and desirable to comply with the Applicable Laws the Company
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<PAGE> 15
shall obtain stockholder approval of any Plan amendment in such a manner and to
such a degree as required.
(b) Effect of Amendment or Termination. No amendment or termination
of the Plan shall adversely affect Options already granted, unless mutually
agreed otherwise between the Optionee and the Administrator, which agreement
must be in writing and signed by the Optionee and the Company.
17. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option or Stock Purchase Right unless the
exercise of such Option or Stock Purchase Right and the issuance and delivery of
such Shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any Stock Exchange.
As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by law.
18. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of the Company
to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
19. Agreements. Options and Stock Purchase Rights shall be evidenced by
written Option Agreements and Restricted Stock Purchase Agreements,
respectively, in such form(s) as the Administrator shall approve from time to
time.
20. Stockholder Approval. If required by the Applicable Laws,
continuance of the Plan shall be subject to approval by the stockholders of the
Company within twelve months before or after the date the Plan is adopted. Such
stockholder approval shall be obtained in the degree and manner required under
the Applicable Laws. All Options and Stock Purchase Rights issued under the Plan
shall become void in the event such approval is not obtained.
21. Documents to Optionees. At the time of issuance of any awards under
the Plan, the Company shall provide to the recipient of such award a copy of the
Plan and any agreement(s) pursuant to which awards granted under the Plan are
issued.
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<PAGE> 16
22. Awards Granted to California Residents. Options and Stock Purchase
Rights granted under the Plan to persons resident in California shall be subject
to the provisions set forth in Attachment A hereto. To the extent the provisions
of the Plan conflict with the provisions set forth on Attachment A, the
provisions on Attachment A shall govern the terms of such Options.
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<PAGE> 17
Attachment A
Provisions Applicable to Award Recipients
Resident in California
Until such time as any security of the Company becomes a Listed Security
and if required by the Applicable Laws, the following additional terms shall
apply to Options and Stock Purchase Rights, and Shares issued upon exercise of
such awards, granted under the Stan Lee Media, Inc. 1999 Incentive Stock Plan
(the "Plan") to persons resident in California as of the date of grant of any
such award (each such person, a "California Recipient"):
1. In the case of a Nonstatutory Stock Option, that is:
(a) granted to a California Recipient who, at the time of the grant
of such Option, owns stock representing more than 10% of the total combined
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the per Share exercise price shall be no less than 110% of the Fair Market Value
on the date of grant.
(b) granted to any California Recipient who is a Named Executive of
the Company, the per Share exercise price shall be no less than 100% of the Fair
Market Value per Share on the date of grant.
(c) granted to any other California Recipient, the per Share exercise
price shall be no less than 85% of the Fair Market Value per Share on the date
of grant.
2. In the case of Stock Purchase Rights granted to a California
Recipient, the purchase price applicable to such right shall not be less than
85% of the Fair Market Value of the Shares as of the date of the offer, or, in
the case of a person owning stock representing more than 10% of the total
combined voting power of all classes of stock of the Company or any Parent or
Subsidiary, the price shall not be less than 100% of the Fair Market Value of
the Shares as of the date of the offer.
3. With respect to an Option or Stock Purchase Right issued to any
California Recipient who is not an Officer, Director or Consultant, such Option
or Stock Purchase Right shall become exercisable, or any repurchase option in
favor of the Company shall lapse, at the rate of at least 20% per year over five
years from the date the award is granted.
4. (a) Subject to Section 10(c) of the Plan and to Section 4(b) below,
in the event of termination of a California Recipient's Continuous Status as an
Employee or Consultant with the Company, such California Recipient shall have at
least 30 days after the date of such termination (but in no event later than the
expiration of the term of such Option as set forth in the Option Agreement) to
exercise such Option.
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<PAGE> 18
(b) In the event of termination of a California Recipient's
Continuous Status as an Employee or Consultant as a result of a disability which
does not fall within the meaning of total and permanent disability (as set forth
in Section 22(e)(3) of the Code), such California Recipient may, but only within
six months from the date of such termination (but in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), exercise the Option to the extent otherwise entitled to exercise it
at the date of such termination. However, to the extent that such California
Recipient fails to exercise an Option which is an Incentive Stock Option (within
the meaning of Section 422 of the Code) within three months of the date of such
termination, the Option will not qualify for Incentive Stock Option treatment
under the Code. To the extent that the California Recipient was not entitled to
exercise the Option at the date of termination, or if the California Recipient
does not exercise such Option to the extent so entitled within six months from
the date of termination, the Option shall terminate and the Optioned Stock
underlying the unexercised portion of the Option shall revert to the Plan.
5. The Company shall provide financial statements at least annually to
each California Recipient during the period such person has one or more Options
or Stock Purchase Rights outstanding, and in the case of an individual who
acquired Shares pursuant to the Plan, during the period such individual owns
such Shares. The Company shall not be required to provide such information if
the issuance of awards under the Plan is limited to key employees whose duties
in connection with the Company assure their access to equivalent information.
6. Capitalized terms not defined in this Attachment shall have the
meanings set forth in the Plan.
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<PAGE> 1
EXHIBIT 10.11
STOCK OPTION AGREEMENT
Stan Lee Media, Inc. a Colorado corporation ("Company"), desiring to
afford an opportunity to the Grantee named below to purchase certain shares of
the Company's Common Stock, no par value, to provide the Grantee with an added
incentive as an Employee or Consultant of the Company or of one or more of its
Subsidiaries, hereby grants to Grantee, and the Grantee accepts, an option (the
"Option") to purchase the number of such shares optioned as specified below,
during the term ending at midnight (prevailing local time at the Company's
principal offices) on the expiration date of this Option specified below, at the
option exercise price specified below, subject to and upon the following terms
and conditions:
1. Identifying Provisions: As used in this Option, the following terms
shall have the following meanings:
(a) Grantee: ____________________________
(b) Date of Grant: ____________________________
(c) Number of Shares optioned: ____________________________
(d) Option exercise price per share: ____________________________
(e) Expiration Date: ____________________________
2. Timing of Purchases: This Option is not exercisable in any part until
one (1) year after the date of grant. Subject to the provisions for termination
and acceleration, this Option shall become exercisable in installments as
follows:
(a) after one (1) year after the date of grant, up to fifty percent
(50%) of the total number of shares optioned; and
(b) after two (2) years after the date of grant, up to all of the
optioned shares until and including the expiration date of the Option whereupon
the Option shall expire and may thereafter no longer be exercised.
The Company hereby agrees that at all times there shall be reserved for
issuance and delivery upon exercise of the Option such number of shares of its
Common Stock as shall be required for issuance and delivery upon full exercise
of the Option.
3. Restrictions on Exercise: The following additional provisions shall
apply to the exercise of the Option:
(a) Termination of Employment. If the Grantee's employment by the
Company or any of its subsidiaries is terminated for any reason other than death
only that portion of this Option exercisable at the time of such termination of
employment may thereafter be exercised, and it may not be exercised more than
three (3) months after such termination nor after the expiration date of this
Option, whichever date is sooner, unless such termination is by reason of the
Grantee's permanent and total
<PAGE> 2
Stan Lee Media, Inc.
Stock Option Agreement
Page 2
disability, in which case such period of three (3) months shall be extended to
one (1) year. In all other respects, this Option shall terminate upon such
termination of employment.
(b) Death of Grantee. If the Grantee shall die during the term of
this Option, the Grantee's legal representative or representatives, or the
person or persons entitled to do so under the Grantee's last will and testament
or under applicable intestate laws, shall have the right to exercise this
Option, but only for the number of shares as to which the Grantee was entitled
to exercise this Option in accordance with Section 2 hereof on the date of his
death, and such right shall expire and this Option shall terminate one (1) year
after the date of the Grantee's death or on the expiration date of this Option,
whichever date is sooner. In all other respects, this Option shall terminate
upon such death.
(c) Continuity of Employment. This Option shall not be exercisable by
the Grantee in any part unless at all times beginning with the date of grant and
ending no more than three (3) months prior to the date of exercise, the Grantee
has, except for military service leave, sick leave or other bona fide leave of
absence (such as temporary employment by the United States Government) been in
the continuous employ of the Company or a parent or subsidiary thereof, except
that such period of three (3) months shall be one (1) year following any
termination of the Grantee's employment by reason of his permanent and total
disability.
4. Non-Transferable: The Grantee may not transfer this Option except by
will or the laws of descent and distribution. This Option shall not be otherwise
transferred, assigned, pledged, hypothecated or disposed of in any way, whether
by operation of law or otherwise, and shall be exercisable during the Grantee's
lifetime only by the Grantee or his guardian or legal representative.
5. Rights in Shares Before Issuance and Delivery: No person, including
the Grantee, shall be entitled to the privileges of stock ownership in respect
of any shares issuable upon exercise of this Option, unless and until such
shares have been issued to such person as fully paid shares.
6. Adjustments and Corporate Reorganizations: If the Company shall at
any time issue Common Stock by way of dividend or other distribution on any
stock of the Company or subdivide or combine the outstanding shares of Common
Stock, then the exercise price shall be proportionately decreased in the case of
such issuance (on the day following the date fixed for determining shareholders
entitled to receive such dividend or other distribution), or decreased in the
case of such subdivision, or increased in the case of such combination (on the
date that such subdivision or combination shall become effective). Upon any
adjustment of the exercise price, Grantee shall thereafter (until another such
adjustment) be entitled to purchase, at the new exercise price, the number of
shares, calculated to the nearest full share, obtained by multiplying the number
of shares of Common Stock initially issuable upon exercise of the Option by the
exercise price in effect on the date hereof and dividing the product so obtained
by the new exercise price.
In the event of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock (other than as a result of an
issuance of Common Stock by way of dividend or other distribution or of a
subdivision or combination), or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of the
Option), or in
<PAGE> 3
Stan Lee Media, Inc.
Stock Option Agreement
Page 3
case of any sale or conveyance to any other corporation of the property and
assets of the Company as an entirety or substantially as an entirety, as a
condition to any of the foregoing, the Company shall cause effective provision
to be made (including acceleration of vesting) so that Grantee shall have the
right thereafter, by exercising the Option, to purchase the kind and amount of
shares of stock and other securities and property receivable upon such
reclassification, capital reorganization or other change, consolidation, merger,
sale or conveyance as if Grantee had exercised the Option prior to such
transaction, unless such successor corporation does not agree to assume the
outstanding Options or Stock Purchase Rights or to substitute equivalent options
or rights, in which case such Options or Stock Purchase Rights shall terminate
upon the consummation of the transaction. Any such provision shall include
provision for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in the Option. The foregoing
provisions shall similarly apply to successive reclassifications, capital
reorganizations and changes of shares of Common Stock and to successive
consolidations, mergers, sales or conveyances.
In the event the Company spins off a subsidiary by distributing to the
shareholders of the Company, as a dividend or otherwise, the stock of the
subsidiary, the Company shall reserve, for the life of the Option, shares of the
subsidiary to be delivered to Grantee upon exercising the Option to the same
extent as if Grantee were the owner of record of Common Stock on the record date
for payment of the shares of the subsidiary.
7. Exercise, Payment for and Delivery of Stock: Each exercise of the
Option shall be accomplished by presentation and delivery to the Company of a
notice of exercise, duly executed and accompanied by payment of the exercise
price for the number of shares of Common Stock specified in such notice of
exercise, together with all Federal and state taxes applicable upon such
exercise. Notwithstanding the foregoing provisions requiring payment by cash or
check, Grantee shall have the right, in his sole and absolute discretion, to
elect a "cashless" exercise of the net value of the Option as more fully
described in the Company's 1999 Stock Incentive Plan.
8. Restricted Stock Provisions: Shares of stock issued on exercise of
this Option shall upon issuance be restricted securities as such term is defined
in Rule 144(a)(3) of the Securities Act of 1933, as amended. The restrictions
imposed under this paragraph shall apply as well to all shares or other
securities issued in respect of restricted stock in connection with any stock
split, reverse stock split, stock dividend, recapitalization, reclassification,
spin-off, split-off, merger, consolidation or reorganization.
9. Stock Option Plan. This Option is subject to, and the Company and the
Grantee agree to be bound by, all of the terms and conditions of the Company's
1999 Stock Incentive Plan under which this Option was granted, as the same shall
have been amended from time to time in accordance with the terms hereof,
provided that no such amendment shall deprive the Grantee, without his consent,
of this Option or any of his rights hereunder. Pursuant to said Plan, the board
of directors of the Company or its Committee established for such purposes is
vested with final authority to interpret and construe the Plan and this Option,
and is authorized to adopt rules and regulations for carrying out the Plan. A
copy of the Plan in its present form is available for inspection during business
hours by the Grantee or other persons entitled to exercise this Option at the
Company's principal office.
10. Notices: Any notice to be given to the Company shall be addressed to
the Company in care of its Secretary at its principal office, and any notice to
be given to the Grantee shall be addressed to
<PAGE> 4
Stan Lee Media, Inc.
Stock Option Agreement
Page 4
him at the address beneath his signature hereto or at such other address as the
Grantee may hereafter designate in writing to the Company. Any such notice shall
be deemed duly given when addressed as aforesaid, registered or certified, and
deposited, postage and registry or certification fee prepaid, in a post office
or branch post office regularly maintained by the United States Postal Service.
11. Governing Law: This Agreement shall be governed by the laws of the
State of California without regard to principles of conflicts of laws.
IN WITNESS WHEREOF, the Company has granted this Option on the date of
grant specified above.
STAN LEE MEDIA, INC.
By:
---------------------------------
Its:
-----------------------------
AGREED AND ACCEPTED AS OF
THIS DAY OF .
---------- ------------------------
- -------------------------------
Grantee
- -------------------------------
Street Address
- -------------------------------
City and State
<PAGE> 1
Exhibit 10.12
STOCK OPTION AGREEMENT
Boulder Capital Opportunities, Inc., a Colorado corporation ("Company"),
desiring to afford an opportunity to the Grantee named below to purchase certain
shares of the Company's Common Stock, no par value, to provide the Grantee with
an added incentive as an employee of the Company or of one or more of its
subsidiaries, hereby grants to Grantee, and the Grantee accepts, an option (the
"Option") to purchase the number of such shares optioned as specified below,
during the term ending at midnight (prevailing local time at the Company's
principal offices) on the expiration date of this Option specified below, at the
option exercise price specified below, subject to and upon the following terms
and conditions:
1. Identifying Provisions: As used in this Option, the following terms
shall have the following meanings:
<TABLE>
<S> <C>
(a) Grantee: Gill Champion
(b) Date of Grant: July 23, 1999
(c) Number of Shares optioned: One Hundred Thousand (100,000)
(d) Option exercise price per share: Two and 50/100 Dollars ($2.50)
(e) Expiration Date: July 22, 2004
</TABLE>
2. Timing of Purchases: This Option is not exercisable in any part until
one (1) year after the date of grant. Subject to the provisions for termination
and acceleration, this Option shall become exercisable in installments as
follows:
(a) after one (1) year after the date of grant, up to fifty percent
(50%) of the total number of shares optioned; and
(b) after two (2) years after the date of grant, up to all of the
optioned shares until and including the expiration date of the Option whereupon
the Option shall expire and may thereafter no longer be exercised.
The Company hereby agrees that at all times there shall be reserved for
issuance and delivery upon exercise of the Option such number of shares of its
Common Stock as shall be required for issuance and delivery upon full exercise
of the Option.
3. Restrictions on Exercise: The following additional provisions shall
apply to the exercise of the Option:
(a) Termination of Employment. If the Grantee's employment by the
Company or any of its subsidiaries is terminated for any reason other than death
only that portion of this Option exercisable at the time of such termination of
employment may thereafter be exercised, and it may not be exercised more than
three (3) months after such termination nor after the expiration date of this
Option, whichever date is sooner, unless such termination is by reason of the
Grantee's permanent and total disability, in which case such period of three (3)
months shall be extended to one (1) year. In all other respects, this Option
shall terminate upon such termination of employment.
<PAGE> 2
Boulder Capital Opportunities, Inc.
Stock Option Agreement
As of July 23, 1999
Page 2
(b) Death of Grantee. If the Grantee shall die during the term of
this Option, the Grantee's legal representative or representatives, or the
person or persons entitled to do so under the Grantee's last will and testament
or under applicable intestate laws, shall have the right to exercise this
Option, but only for the number of shares as to which the Grantee was entitled
to exercise this Option in accordance with Section 2 hereof on the date of his
death, and such right shall expire and this Option shall terminate one (1) year
after the date of the Grantee's death or on the expiration date of this Option,
whichever date is sooner. In all other respects, this Option shall terminate
upon such death.
(c) Continuity of Employment. This Option shall not be exercisable by
the Grantee in any part unless at all times beginning with the date of grant and
ending no more than three (3) months prior to the date of exercise, the Grantee
has, except for military service leave, sick leave or other bona fide leave of
absence (such as temporary employment by the United States Government) been in
the continuous employ of the Company or a parent or subsidiary thereof, except
that such period of three (3) months shall be one (1) year following any
termination of the Grantee's employment by reason of his permanent and total
disability.
4. Non-Transferable: The Grantee may not transfer this Option except by
will or the laws of descent and distribution. This Option shall not be otherwise
transferred, assigned, pledged, hypothecated or disposed of in any way, whether
by operation of law or otherwise, and shall be exercisable during the Grantee's
lifetime only by the Grantee or his guardian or legal representative.
5. Rights in Shares Before Issuance and Delivery: No person, including
the Grantee, shall be entitled to the privileges of stock ownership in respect
of any shares issuable upon exercise of this Option, unless and until such
shares have been issued to such person as fully paid shares.
6. Adjustments and Corporate Reorganizations: If the Company shall at
any time issue Common Stock by way of dividend or other distribution on any
stock of the Company or subdivide or combine the outstanding shares of Common
Stock, then the exercise price shall be proportionately decreased in the case of
such issuance (on the day following the date fixed for determining shareholders
entitled to receive such dividend or other distribution), or decreased in the
case of such subdivision, or increased in the case of such combination (on the
date that such subdivision or combination shall become effective). Upon any
adjustment of the exercise price, Grantee shall thereafter (until another such
adjustment) be entitled to purchase, at the new exercise price, the number of
shares, calculated to the nearest full share, obtained by multiplying the number
of shares of Common Stock initially issuable upon exercise of the Option by the
exercise price in effect on the date hereof and dividing the product so obtained
by the new exercise price.
In the event of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock (other than as a result of an
issuance of Common Stock by way of dividend or other distribution or of a
subdivision or combination), or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of the
Option), or in case of any sale or conveyance to any other corporation of the
property and assets of the Company as an entirety or substantially as an
entirety, as a condition to any of the foregoing, the Company shall cause
effective provision to be made (including acceleration of vesting) so that
Grantee
<PAGE> 3
Boulder Capital Opportunities, Inc.
Stock Option Agreement
As of July 23, 1999
Page 3
shall have the right thereafter, by exercising the Option, to purchase the kind
and amount of shares of stock and other securities and property receivable upon
such reclassification, capital reorganization or other change, consolidation,
merger, sale or conveyance as if Grantee had exercised the Option prior to such
transaction. Any such provision shall include provision for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in the Option. The foregoing provisions shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of Common Stock
and to successive consolidations, mergers, sales or conveyances.
In the event the Company spins off a subsidiary by distributing to the
shareholders of the Company, as a dividend or otherwise, the stock of the
subsidiary, the Company shall reserve, for the life of the Option, shares of the
subsidiary to be delivered to Grantee upon exercising the Option to the same
extent as if Grantee were the owner of record of Common Stock on the record date
for payment of the shares of the subsidiary.
7. Exercise, Payment for and Delivery of Stock: Each exercise of the
Option shall be accomplished by presentation and delivery to the Company of a
notice of exercise, duly executed and accompanied by payment of the exercise
price for the number of shares of Common Stock specified in such notice of
exercise, together with all Federal and state taxes applicable upon such
exercise.
8. Restricted Stock Provisions: Shares of stock issued on exercise of
this Option shall upon issuance be restricted securities as such term is defined
in Rule 144(a)(3) of the Securities Act of 1933, as amended. The restrictions
imposed under this paragraph shall apply as well to all shares or other
securities issued in respect of restricted stock in connection with any stock
split, reverse stock split, stock dividend, recapitalization, reclassification,
spin-off, split-off, merger, consolidation or reorganization.
9. Notices: Any notice to be given to the Company shall be addressed to
the Company in care of its Secretary at its principal office, and any notice to
be given to the Grantee shall be addressed to him at the address beneath his
signature hereto or at such other address as the Grantee may hereafter designate
in writing to the Company. Any such notice shall be deemed duly given when
addressed as aforesaid, registered or certified, and deposited, postage and
registry or certification fee prepaid, in a post office or branch post office
regularly maintained by the United States Postal Service.
10. Governing Law: This Agreement shall be governed by the laws of the
State of California without regard to principles of conflicts of laws.
<PAGE> 4
Boulder Capital Opportunities, Inc.
Stock Option Agreement
As of July 23, 1999
Page 4
IN WITNESS WHEREOF, the Company has granted this Option on the date of
grant specified above.
BOULDER CAPITAL OPPORTUNITIES, INC.
By: /s/ Stephen M. Gordon
-----------------------------------
Its: Treasurer
AGREED AND ACCEPTED AS OF
THIS 23RD DAY OF JULY, 1999.
/s/ Gill Champion
- -----------------------------------
Gill Champion
1508 Greenfield Ave.
- -----------------------------------
Street Address
Los Angeles, CA 90025
- -----------------------------------
City and State
<PAGE> 1
Exhibit 10.13
STOCK OPTION AGREEMENT
Boulder Capital Opportunities, Inc., a Colorado corporation ("Company"),
desiring to afford an opportunity to the Grantee named below to purchase certain
shares of the Company's Common Stock, no par value, to provide the Grantee with
an added incentive as an employee of the Company or of one or more of its
subsidiaries, hereby grants to Grantee, and the Grantee accepts, an option (the
"Option") to purchase the number of such shares optioned as specified below,
during the term ending at midnight (prevailing local time at the Company's
principal offices) on the expiration date of this Option specified below, at the
option exercise price specified below, subject to and upon the following terms
and conditions:
1. Identifying Provisions: As used in this Option, the following terms
shall have the following meanings:
<TABLE>
<S> <C>
(a) Grantee: Robert Schultz
(b) Date of Grant: July 23, 1999
(c) Number of Shares optioned: One Hundred Thousand (100,000)
(d) Option exercise price per share: Two and 50/100 Dollars ($2.50)
(e) Expiration Date: July 22, 2004
</TABLE>
2. Timing of Purchases: This Option is not exercisable in any part until
one (1) year after the date of grant. Subject to the provisions for termination
and acceleration, this Option shall become exercisable in installments as
follows:
(a) after one (1) year after the date of grant, up to fifty percent
(50%) of the total number of shares optioned; and
(b) after two (2) years after the date of grant, up to all of the
optioned shares until and including the expiration date of the Option whereupon
the Option shall expire and may thereafter no longer be exercised.
The Company hereby agrees that at all times there shall be reserved for
issuance and delivery upon exercise of the Option such number of shares of its
Common Stock as shall be required for issuance and delivery upon full exercise
of the Option.
3. Restrictions on Exercise: The following additional provisions shall
apply to the exercise of the Option:
(a) Termination of Employment. If the Grantee's employment by the
Company or any of its subsidiaries is terminated for any reason other than death
only that portion of this Option exercisable at the time of such termination of
employment may thereafter be exercised, and it may not be exercised more than
three (3) months after such termination nor after the expiration date of this
Option, whichever date is sooner, unless such termination is by reason of the
Grantee's permanent and total disability, in which case such period of three (3)
months shall be extended to one (1) year. In all other respects, this Option
shall terminate upon such termination of employment.
<PAGE> 2
Boulder Capital Opportunities, Inc.
Stock Option Agreement
As of July 23, 1999
Page 2
(b) Death of Grantee. If the Grantee shall die during the term of
this Option, the Grantee's legal representative or representatives, or the
person or persons entitled to do so under the Grantee's last will and testament
or under applicable intestate laws, shall have the right to exercise this
Option, but only for the number of shares as to which the Grantee was entitled
to exercise this Option in accordance with Section 2 hereof on the date of his
death, and such right shall expire and this Option shall terminate one (1) year
after the date of the Grantee's death or on the expiration date of this Option,
whichever date is sooner. In all other respects, this Option shall terminate
upon such death.
(c) Continuity of Employment. This Option shall not be exercisable by
the Grantee in any part unless at all times beginning with the date of grant and
ending no more than three (3) months prior to the date of exercise, the Grantee
has, except for military service leave, sick leave or other bona fide leave of
absence (such as temporary employment by the United States Government) been in
the continuous employ of the Company or a parent or subsidiary thereof, except
that such period of three (3) months shall be one (1) year following any
termination of the Grantee's employment by reason of his permanent and total
disability.
4. Non-Transferable: The Grantee may not transfer this Option except by
will or the laws of descent and distribution. This Option shall not be otherwise
transferred, assigned, pledged, hypothecated or disposed of in any way, whether
by operation of law or otherwise, and shall be exercisable during the Grantee's
lifetime only by the Grantee or his guardian or legal representative.
5. Rights in Shares Before Issuance and Delivery: No person, including
the Grantee, shall be entitled to the privileges of stock ownership in respect
of any shares issuable upon exercise of this Option, unless and until such
shares have been issued to such person as fully paid shares.
6. Adjustments and Corporate Reorganizations: If the Company shall at
any time issue Common Stock by way of dividend or other distribution on any
stock of the Company or subdivide or combine the outstanding shares of Common
Stock, then the exercise price shall be proportionately decreased in the case of
such issuance (on the day following the date fixed for determining shareholders
entitled to receive such dividend or other distribution), or decreased in the
case of such subdivision, or increased in the case of such combination (on the
date that such subdivision or combination shall become effective). Upon any
adjustment of the exercise price, Grantee shall thereafter (until another such
adjustment) be entitled to purchase, at the new exercise price, the number of
shares, calculated to the nearest full share, obtained by multiplying the number
of shares of Common Stock initially issuable upon exercise of the Option by the
exercise price in effect on the date hereof and dividing the product so obtained
by the new exercise price.
In the event of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock (other than as a result of an
issuance of Common Stock by way of dividend or other distribution or of a
subdivision or combination), or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of the
Option), or in case of any sale or conveyance to any other corporation of the
property and assets of the Company as an entirety or substantially as an
entirety, as a condition to any of the foregoing, the Company shall cause
effective provision to be made (including acceleration of vesting) so that
Grantee
<PAGE> 3
Boulder Capital Opportunities, Inc.
Stock Option Agreement
As of July 23, 1999
Page 3
shall have the right thereafter, by exercising the Option, to purchase the kind
and amount of shares of stock and other securities and property receivable upon
such reclassification, capital reorganization or other change, consolidation,
merger, sale or conveyance as if Grantee had exercised the Option prior to such
transaction. Any such provision shall include provision for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in the Option. The foregoing provisions shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of Common Stock
and to successive consolidations, mergers, sales or conveyances.
In the event the Company spins off a subsidiary by distributing to the
shareholders of the Company, as a dividend or otherwise, the stock of the
subsidiary, the Company shall reserve, for the life of the Option, shares of the
subsidiary to be delivered to Grantee upon exercising the Option to the same
extent as if Grantee were the owner of record of Common Stock on the record date
for payment of the shares of the subsidiary.
7. Exercise, Payment for and Delivery of Stock: Each exercise of the
Option shall be accomplished by presentation and delivery to the Company of a
notice of exercise, duly executed and accompanied by payment of the exercise
price for the number of shares of Common Stock specified in such notice of
exercise, together with all Federal and state taxes applicable upon such
exercise.
8. Restricted Stock Provisions: Shares of stock issued on exercise of
this Option shall upon issuance be restricted securities as such term is defined
in Rule 144(a)(3) of the Securities Act of 1933, as amended. The restrictions
imposed under this paragraph shall apply as well to all shares or other
securities issued in respect of restricted stock in connection with any stock
split, reverse stock split, stock dividend, recapitalization, reclassification,
spin-off, split-off, merger, consolidation or reorganization.
9. Notices: Any notice to be given to the Company shall be addressed to
the Company in care of its Secretary at its principal office, and any notice to
be given to the Grantee shall be addressed to him at the address beneath his
signature hereto or at such other address as the Grantee may hereafter designate
in writing to the Company. Any such notice shall be deemed duly given when
addressed as aforesaid, registered or certified, and deposited, postage and
registry or certification fee prepaid, in a post office or branch post office
regularly maintained by the United States Postal Service.
10. Governing Law: This Agreement shall be governed by the laws of the
State of California without regard to principles of conflicts of laws.
<PAGE> 4
Boulder Capital Opportunities, Inc.
Stock Option Agreement
As of July 23, 1999
Page 4
IN WITNESS WHEREOF, the Company has granted this Option on the date of
grant specified above.
BOULDER CAPITAL OPPORTUNITIES, INC.
By: /s/ Gill Champion
-----------------------------------
Its: Chief Operating Officer
----------------------------
AGREED AND ACCEPTED AS OF
THIS 23RD DAY OF JULY, 1999.
/s/ Robert Schultz
- -----------------------------------
Robert Schultz
1837 Midvale Avenue, Apt. 203
- -----------------------------------
Street Address
Los Angeles, CA 90025
- -----------------------------------
City and State
<PAGE> 1
Exhibit 10.14
STOCK OPTION AGREEMENT
Boulder Capital Opportunities, Inc., a Colorado corporation ("Company"),
desiring to afford an opportunity to the Grantee named below to purchase certain
shares of the Company's Common Stock, no par value, to provide the Grantee with
an added incentive as an employee of the Company or of one or more of its
subsidiaries, hereby grants to Grantee, and the Grantee accepts, an option (the
"Option") to purchase the number of such shares optioned as specified below,
during the term ending at midnight (prevailing local time at the Company's
principal offices) on the expiration date of this Option specified below, at the
option exercise price specified below, subject to and upon the following terms
and conditions:
1. Identifying Provisions: As used in this Option, the following terms
shall have the following meanings:
<TABLE>
<S> <C>
(a) Grantee: Stephen M. Gordon
(b) Date of Grant: July 23, 1999
(c) Number of Shares optioned: One Hundred Thousand (100,000)
(d) Option exercise price per share: Two and 50/100 Dollars ($2.50)
(e) Expiration Date: July 22, 2004
</TABLE>
2. Timing of Purchases: This Option is not exercisable in any part until
one (1) year after the date of grant. Subject to the provisions for termination
and acceleration, this Option shall become exercisable in installments as
follows:
(a) after one (1) year after the date of grant, up to fifty percent
(50%) of the total number of shares optioned; and
(b) after two (2) years after the date of grant, up to all of the
optioned shares until and including the expiration date of the Option whereupon
the Option shall expire and may thereafter no longer be exercised.
The Company hereby agrees that at all times there shall be reserved for
issuance and delivery upon exercise of the Option such number of shares of its
Common Stock as shall be required for issuance and delivery upon full exercise
of the Option.
3. Restrictions on Exercise: The following additional provisions shall
apply to the exercise of the Option:
(a) Termination of Employment. If the Grantee's employment by the
Company or any of its subsidiaries is terminated for any reason other than death
only that portion of this Option exercisable at the time of such termination of
employment may thereafter be exercised, and it may not be exercised more than
three (3) months after such termination nor after the expiration date of this
Option, whichever date is sooner, unless such termination is by reason of the
Grantee's permanent and total disability, in which case such period of three (3)
months shall be extended to one (1) year. In all other respects, this Option
shall terminate upon such termination of employment.
<PAGE> 2
Boulder Capital Opportunities, Inc.
Stock Option Agreement
As of July 23, 1999
Page 2
(b) Death of Grantee. If the Grantee shall die during the term of
this Option, the Grantee's legal representative or representatives, or the
person or persons entitled to do so under the Grantee's last will and testament
or under applicable intestate laws, shall have the right to exercise this
Option, but only for the number of shares as to which the Grantee was entitled
to exercise this Option in accordance with Section 2 hereof on the date of his
death, and such right shall expire and this Option shall terminate one (1) year
after the date of the Grantee's death or on the expiration date of this Option,
whichever date is sooner. In all other respects, this Option shall terminate
upon such death.
(c) Continuity of Employment. This Option shall not be exercisable
by the Grantee in any part unless at all times beginning with the date of grant
and ending no more than three (3) months prior to the date of exercise, the
Grantee has, except for military service leave, sick leave or other bona fide
leave of absence (such as temporary employment by the United States Government)
been in the continuous employ of the Company or a parent or subsidiary thereof,
except that such period of three (3) months shall be one (1) year following any
termination of the Grantee's employment by reason of his permanent and total
disability.
4. Non-Transferable: The Grantee may not transfer this Option except by
will or the laws of descent and distribution. This Option shall not be otherwise
transferred, assigned, pledged, hypothecated or disposed of in any way, whether
by operation of law or otherwise, and shall be exercisable during the Grantee's
lifetime only by the Grantee or his guardian or legal representative.
5. Rights in Shares Before Issuance and Delivery: No person, including
the Grantee, shall be entitled to the privileges of stock ownership in respect
of any shares issuable upon exercise of this Option, unless and until such
shares have been issued to such person as fully paid shares.
6. Adjustments and Corporate Reorganizations: If the Company shall at
any time issue Common Stock by way of dividend or other distribution on any
stock of the Company or subdivide or combine the outstanding shares of Common
Stock, then the exercise price shall be proportionately decreased in the case of
such issuance (on the day following the date fixed for determining shareholders
entitled to receive such dividend or other distribution), or decreased in the
case of such subdivision, or increased in the case of such combination (on the
date that such subdivision or combination shall become effective). Upon any
adjustment of the exercise price, Grantee shall thereafter (until another such
adjustment) be entitled to purchase, at the new exercise price, the number of
shares, calculated to the nearest full share, obtained by multiplying the number
of shares of Common Stock initially issuable upon exercise of the Option by the
exercise price in effect on the date hereof and dividing the product so obtained
by the new exercise price.
In the event of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock (other than as a result of an
issuance of Common Stock by way of dividend or other distribution or of a
subdivision or combination), or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of the
Option), or in case of any sale or conveyance to any other corporation of the
property and assets of the Company as an entirety or substantially as an
entirety, as a condition to any of the foregoing, the Company shall cause
effective provision to be made (including acceleration of vesting) so that
Grantee
<PAGE> 3
Boulder Capital Opportunities, Inc.
Stock Option Agreement
As of July 23, 1999
Page 3
shall have the right thereafter, by exercising the Option, to purchase the kind
and amount of shares of stock and other securities and property receivable upon
such reclassification, capital reorganization or other change, consolidation,
merger, sale or conveyance as if Grantee had exercised the Option prior to such
transaction. Any such provision shall include provision for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in the Option. The foregoing provisions shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of Common Stock
and to successive consolidations, mergers, sales or conveyances.
In the event the Company spins off a subsidiary by distributing to the
shareholders of the Company, as a dividend or otherwise, the stock of the
subsidiary, the Company shall reserve, for the life of the Option, shares of the
subsidiary to be delivered to Grantee upon exercising the Option to the same
extent as if Grantee were the owner of record of Common Stock on the record date
for payment of the shares of the subsidiary.
7. Exercise, Payment for and Delivery of Stock: Each exercise of the
Option shall be accomplished by presentation and delivery to the Company of a
notice of exercise, duly executed and accompanied by payment of the exercise
price for the number of shares of Common Stock specified in such notice of
exercise, together with all Federal and state taxes applicable upon such
exercise.
8. Restricted Stock Provisions: Shares of stock issued on exercise of
this Option shall upon issuance be restricted securities as such term is defined
in Rule 144(a)(3) of the Securities Act of 1933, as amended. The restrictions
imposed under this paragraph shall apply as well to all shares or other
securities issued in respect of restricted stock in connection with any stock
split, reverse stock split, stock dividend, recapitalization, reclassification,
spin-off, split-off, merger, consolidation or reorganization.
9. Notices: Any notice to be given to the Company shall be addressed to
the Company in care of its Secretary at its principal office, and any notice to
be given to the Grantee shall be addressed to him at the address beneath his
signature hereto or at such other address as the Grantee may hereafter designate
in writing to the Company. Any such notice shall be deemed duly given when
addressed as aforesaid, registered or certified, and deposited, postage and
registry or certification fee prepaid, in a post office or branch post office
regularly maintained by the United States Postal Service.
10. Governing Law: This Agreement shall be governed by the laws of the
State of California without regard to principles of conflicts of laws.
<PAGE> 4
Boulder Capital Opportunities, Inc.
Stock Option Agreement
As of July 23, 1999
Page 4
IN WITNESS WHEREOF, the Company has granted this Option on the date of
grant specified above.
BOULDER CAPITAL OPPORTUNITIES, INC.
By: /s/ Gill Champion
-----------------------------------
Its: Chief Operating Officer
------------------------------
AGREED AND ACCEPTED AS OF
THIS 23RD DAY OF JULY, 1999.
/s/ Stephen M. Gordon
- -----------------------------------
Stephen M. Gordon
4970 Kester Avenue, #10
- -----------------------------------
Street Address
Sherman Oaks, CA 91403
- -----------------------------------
City and State
<PAGE> 1
Exhibit 10.15
STOCK OPTION AGREEMENT
Boulder Capital Opportunities, Inc., a Colorado corporation ("Company"),
desiring to afford an opportunity to the Grantee named below to purchase certain
shares of the Company's Common Stock, no par value, to provide the Grantee with
an added incentive as an employee of the Company or of one or more of its
subsidiaries, hereby grants to Grantee, and the Grantee accepts, an option (the
"Option") to purchase the number of such shares optioned as specified below,
during the term ending at midnight (prevailing local time at the Company's
principal offices) on the expiration date of this Option specified below, at the
option exercise price specified below, subject to and upon the following terms
and conditions:
1. Identifying Provisions: As used in this Option, the following terms
shall have the following meanings:
<TABLE>
<S> <C>
(a) Grantee: Dana Moreshead
(b) Date of Grant: July 23, 1999
(c) Number of Shares optioned: Fifty Thousand (50,000)
(d) Option exercise price per share: Two and 50/100 Dollars ($2.50)
(e) Expiration Date: July 22, 2004
</TABLE>
2. Timing of Purchases: Subject to the provisions for termination and
acceleration, this Option shall become exercisable in installments as follows:
(a) after February 2, 2000, up to fifty percent (50%) of the total
number of shares optioned; and
(b) after February 2, 2001, up to all of the optioned shares until
and including the expiration date of the Option whereupon the Option shall
expire and may thereafter no longer be exercised.
The Company hereby agrees that at all times there shall be reserved for
issuance and delivery upon exercise of the Option such number of shares of its
Common Stock as shall be required for issuance and delivery upon full exercise
of the Option.
3. Restrictions on Exercise: The following additional provisions shall
apply to the exercise of the Option:
(a) Termination of Employment. If the Grantee's employment by the
Company or any of its subsidiaries is terminated for any reason other than death
only that portion of this Option exercisable at the time of such termination of
employment may thereafter be exercised, and it may not be exercised more than
three (3) months after such termination nor after the expiration date of this
Option, whichever date is sooner, unless such termination is by reason of the
Grantee's permanent and total disability, in which case such period of three (3)
months shall be extended to one (1) year. In all other respects, this Option
shall terminate upon such termination of employment.
<PAGE> 2
Boulder Capital Opportunities, Inc.
Stock Option Agreement
As of July 23, 1999
Page 2
(b) Death of Grantee. If the Grantee shall die during the term of
this Option, the Grantee's legal representative or representatives, or the
person or persons entitled to do so under the Grantee's last will and testament
or under applicable intestate laws, shall have the right to exercise this
Option, but only for the number of shares as to which the Grantee was entitled
to exercise this Option in accordance with Section 2 hereof on the date of his
death, and such right shall expire and this Option shall terminate one (1) year
after the date of the Grantee's death or on the expiration date of this Option,
whichever date is sooner. In all other respects, this Option shall terminate
upon such death.
(c) Continuity of Employment. This Option shall not be exercisable by
the Grantee in any part unless at all times beginning with the date of grant and
ending no more than three (3) months prior to the date of exercise, the Grantee
has, except for military service leave, sick leave or other bona fide leave of
absence (such as temporary employment by the United States Government) been in
the continuous employ of the Company or a parent or subsidiary thereof, except
that such period of three (3) months shall be one (1) year following any
termination of the Grantee's employment by reason of his permanent and total
disability.
4. Non-Transferable: The Grantee may not transfer this Option except by
will or the laws of descent and distribution. This Option shall not be otherwise
transferred, assigned, pledged, hypothecated or disposed of in any way, whether
by operation of law or otherwise, and shall be exercisable during the Grantee's
lifetime only by the Grantee or his guardian or legal representative.
5. Rights in Shares Before Issuance and Delivery: No person, including
the Grantee, shall be entitled to the privileges of stock ownership in respect
of any shares issuable upon exercise of this Option, unless and until such
shares have been issued to such person as fully paid shares.
6. Adjustments and Corporate Reorganizations: If the Company shall at
any time issue Common Stock by way of dividend or other distribution on any
stock of the Company or subdivide or combine the outstanding shares of Common
Stock, then the exercise price shall be proportionately decreased in the case of
such issuance (on the day following the date fixed for determining shareholders
entitled to receive such dividend or other distribution), or decreased in the
case of such subdivision, or increased in the case of such combination (on the
date that such subdivision or combination shall become effective). Upon any
adjustment of the exercise price, Grantee shall thereafter (until another such
adjustment) be entitled to purchase, at the new exercise price, the number of
shares, calculated to the nearest full share, obtained by multiplying the number
of shares of Common Stock initially issuable upon exercise of the Option by the
exercise price in effect on the date hereof and dividing the product so obtained
by the new exercise price.
In the event of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock (other than as a result of an
issuance of Common Stock by way of dividend or other distribution or of a
subdivision or combination), or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of the
Option), or in case of any sale or conveyance to any other corporation of the
property and assets of the Company as an entirety or substantially as an
entirety, as a condition to any of the foregoing, the Company shall cause
effective provision to be made (including acceleration of vesting) so that
Grantee
<PAGE> 3
Boulder Capital Opportunities, Inc.
Stock Option Agreement
As of July 23, 1999
Page 3
shall have the right thereafter, by exercising the Option, to purchase the kind
and amount of shares of stock and other securities and property receivable upon
such reclassification, capital reorganization or other change, consolidation,
merger, sale or conveyance as if Grantee had exercised the Option prior to such
transaction. Any such provision shall include provision for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in the Option. The foregoing provisions shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of Common Stock
and to successive consolidations, mergers, sales or conveyances.
In the event the Company spins off a subsidiary by distributing to the
shareholders of the Company, as a dividend or otherwise, the stock of the
subsidiary, the Company shall reserve, for the life of the Option, shares of the
subsidiary to be delivered to Grantee upon exercising the Option to the same
extent as if Grantee were the owner of record of Common Stock on the record date
for payment of the shares of the subsidiary.
7. Exercise, Payment for and Delivery of Stock: Each exercise of the
Option shall be accomplished by presentation and delivery to the Company of a
notice of exercise, duly executed and accompanied by payment of the exercise
price for the number of shares of Common Stock specified in such notice of
exercise, together with all Federal and state taxes applicable upon such
exercise.
8. Restricted Stock Provisions: Shares of stock issued on exercise of
this Option shall upon issuance be restricted securities as such term is defined
in Rule 144(a)(3) of the Securities Act of 1933, as amended. The restrictions
imposed under this paragraph shall apply as well to all shares or other
securities issued in respect of restricted stock in connection with any stock
split, reverse stock split, stock dividend, recapitalization, reclassification,
spin-off, split-off, merger, consolidation or reorganization.
9. Notices: Any notice to be given to the Company shall be addressed to
the Company in care of its Secretary at its principal office, and any notice to
be given to the Grantee shall be addressed to him at the address beneath his
signature hereto or at such other address as the Grantee may hereafter designate
in writing to the Company. Any such notice shall be deemed duly given when
addressed as aforesaid, registered or certified, and deposited, postage and
registry or certification fee prepaid, in a post office or branch post office
regularly maintained by the United States Postal Service.
10. Governing Law: This Agreement shall be governed by the laws of the
State of California without regard to principles of conflicts of laws.
<PAGE> 4
Boulder Capital Opportunities, Inc.
Stock Option Agreement
As of July 23, 1999
Page 4
IN WITNESS WHEREOF, the Company has granted this Option on the date of
grant specified above.
BOULDER CAPITAL OPPORTUNITIES, INC.
By: /s/ Gill Champion
-----------------------------------
Its: Chief Operating Officer
------------------------------
AGREED AND ACCEPTED AS OF
THIS 23RD DAY OF JULY, 1999.
/s/ Dana Moreshead
- -----------------------------------
Dana Moreshead
8225 Handley Avenue
- -----------------------------------
Street Address
Westchester, CA 90045
- -----------------------------------
City and State
<PAGE> 1
Exhibit 10.16
STOCK OPTION AGREEMENT
Boulder Capital Opportunities, Inc., a Colorado corporation ("Company"),
desiring to afford an opportunity to the Grantee named below to purchase certain
shares of the Company's Common Stock, no par value, to provide the Grantee with
an added incentive as an employee of the Company or of one or more of its
subsidiaries, hereby grants to Grantee, and the Grantee accepts, an option (the
"Option") to purchase the number of such shares optioned as specified below,
during the term ending at midnight (prevailing local time at the Company's
principal offices) on the expiration date of this Option specified below, at the
option exercise price specified below, subject to and upon the following terms
and conditions:
1. Identifying Provisions: As used in this Option, the following terms
shall have the following meanings:
<TABLE>
<S> <C>
(a) Grantee: Dave Medinnis
(b) Date of Grant: July 23, 1999
(c) Number of Shares optioned: Fifty Thousand (50,000)
(d) Option exercise price per share: Two and 50/100 Dollars ($2.50)
(e) Expiration Date: July 22, 2004
</TABLE>
2. Timing of Purchases: Subject to the provisions for termination and
acceleration, this Option shall become exercisable in installments as follows:
(a) after April 1, 2000, up to fifty percent (50%) of the total
number of shares optioned; and
(b) after April 1, 2001, up to all of the optioned shares until and
including the expiration date of the Option whereupon the Option shall expire
and may thereafter no longer be exercised.
The Company hereby agrees that at all times there shall be reserved for
issuance and delivery upon exercise of the Option such number of shares of its
Common Stock as shall be required for issuance and delivery upon full exercise
of the Option.
3. Restrictions on Exercise: The following additional provisions shall
apply to the exercise of the Option:
(a) Termination of Employment. If the Grantee's employment by the
Company or any of its subsidiaries is terminated for any reason other than death
only that portion of this Option exercisable at the time of such termination of
employment may thereafter be exercised, and it may not be exercised more than
three (3) months after such termination nor after the expiration date of this
Option, whichever date is sooner, unless such termination is by reason of the
Grantee's permanent and total disability, in which case such period of three (3)
months shall be extended to one (1) year. In all other respects, this Option
shall terminate upon such termination of employment.
<PAGE> 2
Boulder Capital Opportunities, Inc.
Stock Option Agreement
As of July 23, 1999
Page 2
(b) Death of Grantee. If the Grantee shall die during the term of
this Option, the Grantee's legal representative or representatives, or the
person or persons entitled to do so under the Grantee's last will and testament
or under applicable intestate laws, shall have the right to exercise this
Option, but only for the number of shares as to which the Grantee was entitled
to exercise this Option in accordance with Section 2 hereof on the date of his
death, and such right shall expire and this Option shall terminate one (1) year
after the date of the Grantee's death or on the expiration date of this Option,
whichever date is sooner. In all other respects, this Option shall terminate
upon such death.
(c) Continuity of Employment. This Option shall not be exercisable by
the Grantee in any part unless at all times beginning with the date of grant and
ending no more than three (3) months prior to the date of exercise, the Grantee
has, except for military service leave, sick leave or other bona fide leave of
absence (such as temporary employment by the United States Government) been in
the continuous employ of the Company or a parent or subsidiary thereof, except
that such period of three (3) months shall be one (1) year following any
termination of the Grantee's employment by reason of his permanent and total
disability.
4. Non-Transferable: The Grantee may not transfer this Option except by
will or the laws of descent and distribution. This Option shall not be otherwise
transferred, assigned, pledged, hypothecated or disposed of in any way, whether
by operation of law or otherwise, and shall be exercisable during the Grantee's
lifetime only by the Grantee or his guardian or legal representative.
5. Rights in Shares Before Issuance and Delivery: No person, including
the Grantee, shall be entitled to the privileges of stock ownership in respect
of any shares issuable upon exercise of this Option, unless and until such
shares have been issued to such person as fully paid shares.
6. Adjustments and Corporate Reorganizations: If the Company shall at
any time issue Common Stock by way of dividend or other distribution on any
stock of the Company or subdivide or combine the outstanding shares of Common
Stock, then the exercise price shall be proportionately decreased in the case of
such issuance (on the day following the date fixed for determining shareholders
entitled to receive such dividend or other distribution), or decreased in the
case of such subdivision, or increased in the case of such combination (on the
date that such subdivision or combination shall become effective). Upon any
adjustment of the exercise price, Grantee shall thereafter (until another such
adjustment) be entitled to purchase, at the new exercise price, the number of
shares, calculated to the nearest full share, obtained by multiplying the number
of shares of Common Stock initially issuable upon exercise of the Option by the
exercise price in effect on the date hereof and dividing the product so obtained
by the new exercise price.
In the event of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock (other than as a result of an
issuance of Common Stock by way of dividend or other distribution or of a
subdivision or combination), or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of the
Option), or in case of any sale or conveyance to any other corporation of the
property and assets of the Company as an entirety or substantially as an
entirety, as a condition to any of the foregoing, the Company shall cause
effective provision to be made (including acceleration of vesting) so that
Grantee
<PAGE> 3
Boulder Capital Opportunities, Inc.
Stock Option Agreement
As of July 23, 1999
Page 3
shall have the right thereafter, by exercising the Option, to purchase the kind
and amount of shares of stock and other securities and property receivable upon
such reclassification, capital reorganization or other change, consolidation,
merger, sale or conveyance as if Grantee had exercised the Option prior to such
transaction. Any such provision shall include provision for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in the Option. The foregoing provisions shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of Common Stock
and to successive consolidations, mergers, sales or conveyances.
In the event the Company spins off a subsidiary by distributing to the
shareholders of the Company, as a dividend or otherwise, the stock of the
subsidiary, the Company shall reserve, for the life of the Option, shares of the
subsidiary to be delivered to Grantee upon exercising the Option to the same
extent as if Grantee were the owner of record of Common Stock on the record date
for payment of the shares of the subsidiary.
7. Exercise, Payment for and Delivery of Stock: Each exercise of the
Option shall be accomplished by presentation and delivery to the Company of a
notice of exercise, duly executed and accompanied by payment of the exercise
price for the number of shares of Common Stock specified in such notice of
exercise, together with all Federal and state taxes applicable upon such
exercise.
8. Restricted Stock Provisions: Shares of stock issued on exercise of
this Option shall upon issuance be restricted securities as such term is defined
in Rule 144(a)(3) of the Securities Act of 1933, as amended. In addition, if the
employment of the Grantee with the Company or a subsidiary of the Company is
terminated for any reason other than Cause, then the Option vesting period shall
be accelerated to coincide with said act of termination; provided, however, that
such acceleration of vesting shall not occur if Grantee leaves voluntarily. The
restrictions imposed under this paragraph shall apply as well to all shares or
other securities issued in respect of restricted stock in connection with any
stock split, reverse stock split, stock dividend, recapitalization,
reclassification, spin-off, split-off, merger, consolidation or reorganization.
For purposes of this paragraph, the term "Cause" shall mean the occurrence of
any of the following events: (i) if Grantee shall be found guilty of fraud,
dishonesty, misappropriation of funds, embezzlement, or other acts of misconduct
in the rendering of services on behalf of Company; (ii) for Grantee's scandalous
or grossly immoral, felonious, improper or unethical conduct; or (iii) if
Grantee willfully and continuously fails or refuses to comply with the policies,
standards and regulations of Company as are from time to time established in the
reasonable discretion of the Company's Board of Directors.
9. Notices: Any notice to be given to the Company shall be addressed to
the Company in care of its Secretary at its principal office, and any notice to
be given to the Grantee shall be addressed to him at the address beneath his
signature hereto or at such other address as the Grantee may hereafter designate
in writing to the Company. Any such notice shall be deemed duly given when
addressed as aforesaid, registered or certified, and deposited, postage and
registry or certification fee prepaid, in a post office or branch post office
regularly maintained by the United States Postal Service.
10. Governing Law: This Agreement shall be governed by the laws of the
State of California without regard to principles of conflicts of laws.
<PAGE> 4
Boulder Capital Opportunities, Inc.
Stock Option Agreement
As of July 23, 1999
Page 4
IN WITNESS WHEREOF, the Company has granted this Option on the date of
grant specified above.
BOULDER CAPITAL OPPORTUNITIES, INC.
By: /s/ Gill Champion
-----------------------------------
Its: Chief Operating Officer
-------------------------------
AGREED AND ACCEPTED AS OF
THIS 23RD DAY OF JULY, 1999.
/s/ Dave Medinnis
- -----------------------------------
Dave Medinnis
2536 Parkland Ct.
- -----------------------------------
Street Address
Santa Clara, CA
- -----------------------------------
City and State
<PAGE> 1
Exhibit 10.17
STOCK OPTION AGREEMENT
Boulder Capital Opportunities, Inc., a Colorado corporation ("Company"),
desiring to afford an opportunity to the Grantee named below to purchase certain
shares of the Company's Common Stock, no par value, to provide the Grantee with
an added incentive as an employee of the Company or of one or more of its
subsidiaries, hereby grants to Grantee, and the Grantee accepts, an option (the
"Option") to purchase the number of such shares optioned as specified below,
during the term ending at midnight (prevailing local time at the Company's
principal offices) on the expiration date of this Option specified below, at the
option exercise price specified below, subject to and upon the following terms
and conditions:
1. Identifying Provisions: As used in this Option, the following terms
shall have the following meanings:
<TABLE>
<S> <C>
(a) Grantee: Zachary Foley
(b) Date of Grant: July 23, 1999
(c) Number of Shares optioned: Twenty Thousand (20,000)
(d) Option exercise price per share: Two and 50/100 Dollars ($2.50)
(e) Expiration Date: July 22, 2004
</TABLE>
2. Timing of Purchases: This Option is not exercisable in any part until
one (1) year after the date of grant. Subject to the provisions for termination
and acceleration, this Option shall become exercisable in installments as
follows:
(a) after one (1) year after the date of grant, up to fifty percent
(50%) of the total number of shares optioned; and
(b) after two (2) years after the date of grant, up to all of the
optioned shares until and including the expiration date of the Option whereupon
the Option shall expire and may thereafter no longer be exercised.
The Company hereby agrees that at all times there shall be reserved for
issuance and delivery upon exercise of the Option such number of shares of its
Common Stock as shall be required for issuance and delivery upon full exercise
of the Option.
3. Restrictions on Exercise: The following additional provisions shall
apply to the exercise of the Option:
(a) Termination of Employment. If the Grantee's employment by the
Company or any of its subsidiaries is terminated for any reason other than death
only that portion of this Option exercisable at the time of such termination of
employment may thereafter be exercised, and it may not be exercised more than
three (3) months after such termination nor after the expiration date of this
Option, whichever date is sooner, unless such termination is by reason of the
Grantee's permanent and total disability, in which case such period of three (3)
months shall be extended to one (1) year. In all other respects, this Option
shall terminate upon such termination of employment.
<PAGE> 2
Boulder Capital Opportunities, Inc.
Stock Option Agreement
As of July 23, 1999
Page 2
(b) Death of Grantee. If the Grantee shall die during the term of
this Option, the Grantee's legal representative or representatives, or the
person or persons entitled to do so under the Grantee's last will and testament
or under applicable intestate laws, shall have the right to exercise this
Option, but only for the number of shares as to which the Grantee was entitled
to exercise this Option in accordance with Section 2 hereof on the date of his
death, and such right shall expire and this Option shall terminate one (1) year
after the date of the Grantee's death or on the expiration date of this Option,
whichever date is sooner. In all other respects, this Option shall terminate
upon such death.
(c) Continuity of Employment. This Option shall not be exercisable by
the Grantee in any part unless at all times beginning with the date of grant and
ending no more than three (3) months prior to the date of exercise, the Grantee
has, except for military service leave, sick leave or other bona fide leave of
absence (such as temporary employment by the United States Government) been in
the continuous employ of the Company or a parent or subsidiary thereof, except
that such period of three (3) months shall be one (1) year following any
termination of the Grantee's employment by reason of his permanent and total
disability.
4. Non-Transferable: The Grantee may not transfer this Option except by
will or the laws of descent and distribution. This Option shall not be otherwise
transferred, assigned, pledged, hypothecated or disposed of in any way, whether
by operation of law or otherwise, and shall be exercisable during the Grantee's
lifetime only by the Grantee or his guardian or legal representative.
5. Rights in Shares Before Issuance and Delivery: No person, including
the Grantee, shall be entitled to the privileges of stock ownership in respect
of any shares issuable upon exercise of this Option, unless and until such
shares have been issued to such person as fully paid shares.
6. Adjustments and Corporate Reorganizations: If the Company shall at
any time issue Common Stock by way of dividend or other distribution on any
stock of the Company or subdivide or combine the outstanding shares of Common
Stock, then the exercise price shall be proportionately decreased in the case of
such issuance (on the day following the date fixed for determining shareholders
entitled to receive such dividend or other distribution), or decreased in the
case of such subdivision, or increased in the case of such combination (on the
date that such subdivision or combination shall become effective). Upon any
adjustment of the exercise price, Grantee shall thereafter (until another such
adjustment) be entitled to purchase, at the new exercise price, the number of
shares, calculated to the nearest full share, obtained by multiplying the number
of shares of Common Stock initially issuable upon exercise of the Option by the
exercise price in effect on the date hereof and dividing the product so obtained
by the new exercise price.
In the event of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock (other than as a result of an
issuance of Common Stock by way of dividend or other distribution or of a
subdivision or combination), or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of the
Option), or in case of any sale or conveyance to any other corporation of the
property and assets of the Company as an entirety or substantially as an
entirety, as a condition to any of the foregoing, the Company shall cause
effective provision to be made (including acceleration of vesting) so that
Grantee
<PAGE> 3
Boulder Capital Opportunities, Inc.
Stock Option Agreement
As of July 23, 1999
Page 3
shall have the right thereafter, by exercising the Option, to purchase the kind
and amount of shares of stock and other securities and property receivable upon
such reclassification, capital reorganization or other change, consolidation,
merger, sale or conveyance as if Grantee had exercised the Option prior to such
transaction. Any such provision shall include provision for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in the Option. The foregoing provisions shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of Common Stock
and to successive consolidations, mergers, sales or conveyances.
In the event the Company spins off a subsidiary by distributing to the
shareholders of the Company, as a dividend or otherwise, the stock of the
subsidiary, the Company shall reserve, for the life of the Option, shares of the
subsidiary to be delivered to Grantee upon exercising the Option to the same
extent as if Grantee were the owner of record of Common Stock on the record date
for payment of the shares of the subsidiary.
7. Exercise, Payment for and Delivery of Stock: Each exercise of the
Option shall be accomplished by presentation and delivery to the Company of a
notice of exercise, duly executed and accompanied by payment of the exercise
price for the number of shares of Common Stock specified in such notice of
exercise, together with all Federal and state taxes applicable upon such
exercise.
8. Restricted Stock Provisions: Shares of stock issued on exercise of
this Option shall upon issuance be restricted securities as such term is defined
in Rule 144(a)(3) of the Securities Act of 1933, as amended. The restrictions
imposed under this paragraph shall apply as well to all shares or other
securities issued in respect of restricted stock in connection with any stock
split, reverse stock split, stock dividend, recapitalization, reclassification,
spin-off, split-off, merger, consolidation or reorganization.
9. Notices: Any notice to be given to the Company shall be addressed to
the Company in care of its Secretary at its principal office, and any notice to
be given to the Grantee shall be addressed to him at the address beneath his
signature hereto or at such other address as the Grantee may hereafter designate
in writing to the Company. Any such notice shall be deemed duly given when
addressed as aforesaid, registered or certified, and deposited, postage and
registry or certification fee prepaid, in a post office or branch post office
regularly maintained by the United States Postal Service.
10. Governing Law: This Agreement shall be governed by the laws of the
State of California without regard to principles of conflicts of laws.
<PAGE> 4
Boulder Capital Opportunities, Inc.
Stock Option Agreement
As of July 23, 1999
Page 4
IN WITNESS WHEREOF, the Company has granted this Option on the date of
grant specified above.
BOULDER CAPITAL OPPORTUNITIES, INC.
By: /s/ Gill Champion
-----------------------------------
Its: Chief Operating Officer
-----------------------------
AGREED AND ACCEPTED AS OF
THIS 23RD DAY OF JULY, 1999.
/s/ Zachary Foley
- -----------------------------------
Zachary Foley
126 N. Flores #402
- -----------------------------------
Street Address
West Hollywood, CA 90069
- -----------------------------------
City and State
<PAGE> 1
EXHIBIT 10.18
LINKING AND STOCK ISSUANCE AGREEMENT
THIS LINKING AND STOCK ISSUANCE AGREEMENT ("Agreement") is entered into
as of the 16th day of March, 1999 (the "Effective Date"), by and between STAN
LEE MEDIA, INC., a Delaware corporation, located at 15821 Ventura Boulevard,
Suite 675, Encino, California, 91436 ("SLM"), and NPO ONLINE, INC., a Delaware
corporation, located at 304 Hudson, 7th Floor North, New York, NY 10013 ("NPO").
RECITALS
A. SLM plans to create and operate a site on the Internet that will
include an online community involving newly-developed Properties and Community
Features.
B. NPO is building a site on the Internet which will include a virtual
store through which Comic Books and related products will be available to the
public for purchase, and which will include Auction Services, Community
Features, and NPO-created content.
C. Subject to the terms and conditions of this Agreement, SLM and NPO
desire that NPO create a storefront on the SLM Site and that the Parties
establish certain links between their respective Internet sites.
Therefore, the Parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
1.1 "Affiliates" shall mean for each Person at issue, a Person that
directly or indirectly (including, but not limited to, through one or
more intermediaries) controls, is controlled by, or is under common
control with such Person at issue.
1.2 "Auction Services" shall mean the facilitation of sales of Comic
Books and related products between and among users of the Internet.
1.3 "Available Stock" shall have the meaning set forth in
Section 3.6.1.
1.4 "Bankruptcy Event" shall have the meaning set forth in Section 8.5.
1.5 "Comic Books" shall mean serialized printed material, whether in
individual issues or in compilations, which predominantly features
narrative series of art, excluding such printed material that has been
out of print for more than nine months and remains out of print.
1.6 "Community Features" shall mean those portions of a Site that
contain discussion content provided by users of the Internet and allow
for the interactive reading and inputting of such content.
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1.7 "Confidential Information" shall have the meaning set forth in
Section 10.1.
1.8 "Customer Information" shall have the meaning set forth in
Section 9.3.
1.9 "Effective Date" shall have the meaning set forth in the preamble
to this Agreement.
1.10 "Exclusive Products" shall have the meaning set forth in
Section 3.3.1.
1.11 "Home Page" shall mean a third-party user's primary entranceway
to the SLM Site and/or the NPO Site, as applicable.
1.12 "Improvements" shall mean any change to the content or layout of
the NPO Storefront subsequent to the Scheduled Launch Date made with
SLM's consent, excluding (a) Maintenance, (b) any change made pursuant
to Section 3.1.2 of this Agreement, and (c) any change made by NPO to
the NPO Site as a whole not made solely to benefit the function of the
NPO Storefront.
1.13 "Intellectual Property" shall have the meaning set forth in
Section 9.1.
1.14 "Link" shall mean a bar, button, tout, listing or gateway which
contains a Party's Proprietary Feature and connects from one page of a
web site to another.
1.15 "Maintenance" shall mean ordinary daily upkeep of the NPO
Storefront, including, but not limited to, placement of products.
1.16 "NPO" shall have the meaning set forth in the preamble to this
Agreement.
1.17 "NPO Advertising Inventory" shall mean the advertising content
displayed on the NPO Site, as adjusted for the amount of time each
advertising piece is displayed.
1.18 "NPO Shares" shall have the meaning set forth in Section 3.5.2.
1.19 "NPO Site" shall mean NPO's Internet site located at the
www.NextPlanetOver.com URL or any replacement URL.
1.20 "NPO Storefront" shall have the meaning set forth in
Section 3.1.1.
1.21 "Objecting Notice" shall have the meaning set forth in
Section 3.1.3.
1.22 "Offer" shall have the meaning set forth in Section 3.6.1.
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1.23 "Operational" shall mean accessible to users of the Internet and
capable of processing orders for Comic Books and related products.
1.24 "Organic" shall have the meaning set forth in Section 3.1.1.
1.25 "Outstanding NPO Shares" shall have the meaning set forth in
Section 11.3.
1.26 "Party" shall mean SLM and/or NPO individually, and "Parties"
shall mean SLM and NPO collectively.
1.27 "Person" shall mean any natural person, legal entity, or other
organized group of persons or entities. (All pronouns, whether personal
or impersonal, which refer to Persons include natural persons and other
Persons).
1.28 "Properties" means Comic Book characters.
1.29 "Proprietary Feature" shall mean any trademark, service mark,
trade name, domain name, navigational element or design logo which is
proprietary to SLM and/or NPO.
1.30 "Scheduled Launch Date" shall mean June 1, 1999.
1.31 "Sites" shall mean the SLM Site and/or the NPO Site, as
applicable.
1.32 "SLM" shall have the meaning set forth in the preamble to this
Agreement.
1.33 "SLM Advertising Inventory" shall mean the advertising content
displayed on the SLM Site, as adjusted for the amount of time each
advertising piece is displayed.
1.34 "SLM Navigational Menu" shall mean the primary system by which
users of the SLM Site move between locations within the SLM Site.
1.35 "SLM Site" shall mean SLM's Internet site located at the
www.StanLee.net URL or any replacement URL.
1.36 "Term" shall have the meaning set forth in Article 8.
1.37 "Untagged Customer" shall mean a Person who has purchased a
product on the NPO Storefront prior to making any purchase on the NPO
Site, and who enters the NPO Site without doing so (i) from an Internet
Site with which NPO has a referral agreement, or (ii) from a search
engine or portal with which NPO is registered.
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2. RELATIONSHIP
2.1 Intent and Development. The intent of the Parties is to develop a
corporate affiliation for marketing and promotion purposes and to create a
commercial relationship between the Parties. Subject to the terms and conditions
of this Agreement, SLM and NPO agree to develop their respective Sites, and for
the NPO Storefront (as hereinafter defined) to appear on the SLM Site, as set
forth in this Agreement. The Parties agree in good faith to provide cooperation
and technical support as requested by the other Party to implement the
foregoing.
2.2 Introductions. Each Party hereto shall promote the business of the
other Party hereto by introducing such other Party to any and all prospective
partners and strategic alliances.
2.3 Collaboration. SLM and NPO shall use their best efforts to develop
and deliver as necessary to each other any and all URLs and URL formats (as
applicable) to the other Party. SLM and NPO will collaborate in good faith on
the design, appearance and placement of all Links. Each Party shall have final
approval over the "look and feel" of the Links that contain such Party's
Proprietary Feature, which approval will not be unreasonably withheld or
delayed.
3. THE NPO STOREFRONT ON THE SLM SITE
3.1 Functionality, Layout, and Maintenance. SLM agrees that it shall
include the following functionality and layout in the SLM Site:
3.1.1 The SLM Site shall contain a Link to the
NextPlanetOver.com storefront though which NPO shall offer for sale Comic Books
and related products (the "NPO Storefront"). The Link to the NPO Storefront
shall be displayed prominently within the SLM Navigational Menu. The NPO
Storefront shall be designed by and integrated into the NPO Site's existing
infrastructure by Organic Online, Inc., or any Person subsequently specified by
NPO ("Organic"), pursuant to SLM's direction and at SLM's expense. Other than
the NPO Storefront design, all other expenses necessary to integrate the NPO
Storefront into the NPO Site shall be borne equally by NPO and SLM. The design
of the NPO Storefront shall be subject to NPO's prior approval, which approval
shall not be unreasonably delayed or withheld. The NPO Storefront shall have the
same look and feel as the other portions or the SLM Site.
3.1.2 Subject to the provisions of this Section 3.1.2, third
parties shall have access through the NPO Storefront to any and all products
offered by NPO, other than products of a graphic or explicit nature or content
that are deemed unsuitable for children under the age of fourteen. SLM shall
have the right to notify NPO of SLM's reasonable objection to the inclusion of
any product within the NPO Storefront if such product, in SLM's
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judgment, is not appropriate for sale to the customers of SLM due to the
product's graphic or explicit nature or content (an "Objecting Notice"), which
such Objecting Notice shall specify the product or products offered by NPO to
which SLM reasonably objects pursuant to this Section 3.1.3. Within five (5)
business days of the date of the Objecting Notice, NPO shall cause the products
specified in such Objecting Notice to be removed from the NPO Storefront.
3.1.3 NPO shall perform, or shall cause to be performed, all
Maintenance at NPO's expense. SLM shall reimburse NPO for the cost, including
any allocated costs, of all Improvements requested by SLM.
3.2 Financial Terms.
3.2.1 SLM shall receive ten percent (10%) of the gross revenue
received for NPO sales transacted through the NPO Storefront. Subject to the
prior approval of NPO, which approval shall not be unreasonably delayed or
withheld, Organic shall create a methodology, at SLM's direction and at SLM's
expense, to track all such transactions. NPO shall use such methodology to track
all such transactions. Sales data and payments shall be provided monthly (thirty
days in arrears) to SLM.
3.2.2 If SLM sells any merchandise through the NPO Storefront
and fulfills such orders itself, SLM shall bear all costs of such sales and the
products sold therein. In addition, SLM shall: (i) for retail items, pay NPO ten
percent (10%) of the gross revenue received from such sales; and (ii) for resale
or collectible items not readily available on the retail market, pay NPO
seven-and-one-half percent (7.5%) of the gross revenue received from such sales.
Sales data and payments shall be provided monthly (thirty days in arrears) to
NPO.
3.3 Other SLM Responsibilities.
3.3.1 SLM and NPO shall consult and specify certain of SLM's
products, including, but not limited to, products based on SLM's Properties or
related thereto, which shall be sold through the Internet exclusively on the NPO
Site and NPO Storefront during the Term (the "Exclusive Products"). In no event
shall fewer than one Exclusive Product be specified per calendar quarter. If,
for any particular calendar quarter, NPO and SLM shall fail to agree on which
SLM products are to be Exclusive Products within such time period, NPO shall
select one SLM product to be an Exclusive Product; provided, however, that the
next occurring calendar quarter in which NPO and SLM fail to agree on which SLM
products are to be Exclusive Products within such time period, SLM shall select
one SLM product to be an Exclusive Product.
3.3.2 SLM shall cause the NPO Storefront to be Operational on
or before the Scheduled Launch Date. If the NPO Storefront is not Operational
before the Scheduled Launch Date, for whatever cause (provided such cause is not
due solely to actions taken or any failure to act on the part of NPO), then: (i)
NPO's obligations under this Agreement shall be
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suspended until such time that the NPO Storefront becomes operational; (ii)
SLM's obligations under this Agreement shall continue in effect; and (iii) the
Term shall be extended for a period of time equal to the period of time between
the Scheduled Launch Date and the date on which the NPO Storefront becomes
Operational.
3.3.3 SLM shall design or cause the design of the SLM Site and
the NPO Storefront to inform users of the SLM Site or NPO Storefront that users'
personal information is being collected, the nature of such information being
collected, the means by which such information is collected, the uses to which
such information will be put, whether users have the ability to opt out of
having such information collected and whether users may correct such data once
it is collected, SLM's policy regarding disclosure to third parties of such
information and the collection of such information from natural persons under 18
years of age, and to gather users' consent to all of the foregoing.
3.4 Other NPO Responsibilities.
3.4.1 NPO shall cause the NPO Site to be Operational on or
before the Scheduled Launch Date. If the NPO Site is not Operational before the
Scheduled Launch Date, for whatever cause, then SLM's obligations under this
Agreement shall be suspended until such time that the NPO Site becomes
operational. If the NPO Site is not Operational within sixty (60) days after the
Scheduled Launch Date, for whatever cause, then SLM shall have the right to
terminate this Agreement.
3.4.2 NPO shall design or cause the design of the NPO Site to
inform users of the NPO Site that users' personal information is being
collected, the nature of such information being collected, the means by which
such information is collected, the uses to which such information will be put,
whether users have the ability to opt out of having such information collected
and whether users may correct such data once it is collected, NPO's policy
regarding disclosure to third parties of such information and the collection of
information from natural persons under 18 years of age, and to gather users'
consent to all of the foregoing.
3.4.3 Within 30 days of the Effective Date, NPO shall cause,
at his election, Mr. Stan Lee to be elected to the Board of Directors of NPO in
accordance with the bylaws of NPO, and Mr. Stan Lee shall serve on the Board of
Directors of NPO, providing appropriate Directors liability insurance is in
place. At all times during the Term and while SLM owns any NPO Shares, SLM shall
appoint a representative of SLM, satisfactory to NPO (it being understood that
Mr. Stan Lee is satisfactory), to serve as a director of NPO.
3.5 Exclusivity and Share Issuance.
3.5.1 The NPO Site shall be the only and exclusive provider of
Comic Books on or through the SLM Site. Neither SLM nor Mr. Stan Lee shall
endorse or promote the marketing or sale of Comic Books by any other online
retailer other than NPO.
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3.5.2 In consideration for SLM's grant for exclusivity to the
NPO Site, and for other good and valuable consideration, NPO shall issue to SLM
within ten (10) days of the Effective Date the greater of (as of the date of
such issuance) either (i) 180,000 shares of its common stock, $.001 par value
per share, or (ii) such number of shares of its common stock, $.001 par value
per share, equal to two-and-one-half percent (2.5%), measured as of the date
hereof, of NPO's total outstanding NPO Stock (such shares ultimately issued,
together with all other capital stock of NPO acquired by SLM after the date
hereof, hereinafter referred to as the "NPO Shares").
3.6 Right of First Offer.
3.6.1 If SLM shall desire to sell or otherwise dispose of all
or any of its NPO Shares, SLM shall submit a written offer to sell such shares
(the "Available Stock") to NPO on terms and conditions not less favorable than
those on which SLM proposes to sell such Available Stock (the "Offer"). The
Offer shall disclose the identity of the proposed purchaser, the number and
price per share of the Available Stock proposed to be sold, the method of
payment, the proposed closing date (which shall in no event be sooner than 35
days after the expiration or acceptance of the Offer) and any other material
terms and conditions relating to the proposed sale.
3.6.2 NPO shall have the first right to purchase, in whole or
in part, the Available Stock. NPO shall exercise its right to purchase the
Available Stock by notifying SLM within 15 calendar days of the date of the
Offer, which such notice shall indicate NPO's acceptance of the Offer and the
amount of Available Stock NPO shall purchase. In the event NPO does not elect to
purchase all of the Available Stock, then each other stockholder of NPO shall
have the right to purchase his or her pro rata share thereof. In such event, NPO
shall notify each of its Common Stock stockholders at the same time that NPO
sends its acceptance to SLM or the end of the fifteen-day period during which
such notice is called for, whichever occurs first, which such notice shall set
forth this Section 3.6, the Offer and any NPO response thereto. To accept the
Offer, each stockholder of NPO shall notify NPO and SLM of such acceptance
within 15 calendar days of the date of the notice received by NPO. Each other
stockholder of NPO who elects to purchase his pro rata share shall have the
right to purchase, on a pro rata basis with any other stockholder who so elects,
any pro rata share or portion thereof not purchased.
3.6.3 In the event that NPO and its stockholders do not notify
SLM of their intention to purchase all of the Available Stock before the end of
the time periods set forth in Section 3.6.2, then the Offer shall expire, NPO
and its stockholders shall not be permitted to purchase any of the Available
Stock, and SLM may sell the Available Stock at any time within 30 days after the
expiration of the Offer; provided, however, that (i) such sale shall be made on
terms no more favorable to the purchaser than those specified in the Offer and
(ii) any purchaser must agree in writing, prior to such sale, to take the
Available Stock subject to the
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terms of this Agreement. SLM shall remain subject to this Agreement to the
extent it retains any of its shares of stock, including, but not limited to, the
Available Stock.
4. OTHER SERVICES
4.1 Auction Services. NPO shall provide all Auction Services reasonable
requested by SLM for the SLM Site, provided that SLM establishes reasonable
performance guidelines for such Auction Services sufficiently in advance.
4.2 Advertising. No less than ten percent (10%) of the SLM Advertising
Inventory shall advertise the NPO Storefront. If NPO sells or leases any of the
NPO Advertising Inventory, then the SLM Site shall be advertised on an amount of
NPO Advertising Inventory equal to five percent (5%) of the NPO Advertising
Inventory sold or leased.
4.3 Community Features. This Agreement is not intended to include or
otherwise encompass any of NPO's Community Features, and NPO shall have no
obligation to SLM with respect to such Community Features.
5. LAUNCH DATE
5.1 SLM shall use its best efforts to (a) complete its responsibilities
and implement the layout and functionality for the SLM Site and the NPO
Storefront as described in Article 3, and (b) operate and maintain the SLM Site
as described in this Agreement by the Scheduled Launch Date.
6. PUBLICITY
6.1 Each Party shall include the other Party in all press releases that
are in any way pertinent to the other Party or this Agreement, which shall refer
to the other Party as an "affiliated partner." Each press release of each Party
must be approved by the other Party as to such portions of such press release
that discuss the other Party. Lack of a response by such approving party within
forty-eight hours (excluding Saturdays, Sundays, and any federal holidays) of
receipt thereof via facsimile will be deemed to be approval thereby.
6.2 Upon the termination or expiration of this Agreement, each Party
shall be permitted to issue press releases solely to that effect without
approval by the other Party.
7. TERMINATION OF EXCLUSIVITY
7.1 Termination of Exclusivity. The number of titles of Comic Books
issued in serial form (e.g., "Incredible Hulk," "Uncanny X-Men," etc.) offered
for sale by NPO on the NPO Storefront shall be measured as of August 1, 1999. If
NPO no longer offers for sale at least seventy-five percent (75%) of such titles
(provided such titles remain in production and
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distribution) at any time from and after June 1, 2001, SLM shall have the right,
in its sole discretion, upon 30 days notice to NPO, to terminate the provisions
of Section 3.5.1 hereof.
8. TERM AND TERMINATION
8.1 Term. Unless terminated earlier pursuant to the provisions of this
Article 8, this Agreement shall commence on the Effective Date and run for an
initial period of three (3) years after the Effective Date. Thereafter, this
Agreement shall automatically renew for additional three (3) year terms unless
either Party gives written notice of termination to the other Party at least
ninety (90) days prior to the end of the then current term. Such initial
three-year period, and any renewal period, is referred to in this Agreement as
the "Term."
8.2 Termination for Cause. In the event of any material breach of this
Agreement (including, but not limited to, a breach of any provision of Article 3
hereof), the non-breaching Party may terminate this Agreement by giving thirty
(30) days prior written notice to the breaching Party; provided, however, that
this Agreement shall not terminate if the breaching Party has cured the breach
prior to the expiration of such thirty (30) day period or has used its best
efforts to cure such breach within such thirty (30) days period and can
demonstrate to the reasonable satisfaction of the other Party that based on such
efforts such breach will be promptly cured after the expiration of such thirty
(30) day period.
8.3 Termination for Inadequate Fill Rate. Either Party may terminate
this Agreement upon 30 days notice if the ratio of unfilled orders to total
orders placed for the other Party's products ordered through the NPO Storefront
is greater than 1:2 for three consecutive months. For the purposes of this
Section 8.3, "unfilled orders" shall be measured as of the end of each calendar
month and shall mean any customer order which has not been delivered to the
customer within 15 days of the date of order, for whatever reason, excepting
back orders and advance orders.
8.4 Termination for Dissolution. Either Party may immediately terminate
this Agreement upon the other Party's dissolution or ceasing to do business.
8.5 Termination for Bankruptcy. Either Party may terminate this
Agreement upon a Bankruptcy Event involving the other Party. For purposes
hereof, "Bankruptcy Event" means the person in question becomes insolvent, or
voluntarily or involuntary proceedings by or against such person are instituted
under the bankruptcy laws or under any insolvency law, or a receiver or
custodian is appointed for such person, or proceedings are instituted by or
against such person for corporate reorganization or the dissolution of such
person, which proceedings, if involuntary, shall not have been dismissed within
sixty (60) days after the date of filing, or such person makes an assignment for
the benefit of its creditors, or substantially all of the assets of such person
are seized or attached and not released within sixty (60) days thereafter.
8.6 Survival. The provisions of Articles 1 (Definitions), 6
(Publicity), 8 (Term and
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Termination), 9 (Ownership), 10 (Confidentiality), 11 (Representations and
Warranties), 12 (Indemnification), 13 (Disclaimer of Warranty), 14 (No
Consequential Damages), 15 (Dispute Resolution) and 16 (General) and Section 3.6
(Right of First Offer), will survive any termination or expiration of this
Agreement.
8.7 Effect of Termination. Upon expiration or termination of this
Agreement for any reason, each Party shall (i) cease to provide any Links to the
other Party's Internet site, (ii) remove any and all Proprietary Features of the
other Party from its Internet site and (iii) promptly, and at the option of the
other Party, either destroy or return to the other Party, and will not take or
use, all items of any nature that belong to the other Party and all records (in
any form, format or medium) containing or relating to Confidential Information.
In addition, the NPO Storefront shall be removed from the SLM Site.
9. OWNERSHIP
9.1 Each Party owns and shall retain all right, title and interest in
its names, logos, trademarks and service marks, copyrights and proprietary
technology including, but not limited to, those names, logos, trademarks and
service marks, copyrights and proprietary technology currently used or any which
may be developed in the future (collectively, the "Intellectual Property").
Neither Party shall copy, distribute, reproduce or use the other Party's
Intellectual Property except as expressly permitted under this Agreement. Upon
notice from SLM, NPO shall immediately terminate the use of any advertising
materials using SLM's name or logo. Upon notice from NPO, SLM shall immediately
terminate the use of any advertising materials using NPO's name or logo.
9.2 Neither Party shall contest or impair, directly or indirectly, the
other Party's ownership of any of such other Party's Intellectual Property,
anywhere, nor the fact that the use of such Intellectual Property by it will
inure to the benefit of the other Party. Neither Party will assist others to
contest or impair the same and each Party hereby expressly acknowledges the
other Party's superior rights therein.
9.3 Notwithstanding any provision of this Agreement to the contrary,
NPO and SLM shall own jointly all right, title and interest to customer
information, including, but not limited to, demographic information, purchasing
history and survey information (the "Customer Information"), derived or gathered
from Persons who purchase NPO products through the NPO Storefront. NPO and SLM
each may market to such Persons with the consent of the other party, such
consent not to be unreasonably withheld; provided, however, that any marketing
by NPO to such Persons shall identify NPO as "[email protected]" or
any replacement identifying term acceptable to both parties. NPO and SLM each
hereby covenant and agree that it will not sell, license, assign or otherwise
transfer the Customer Information to any third party. NPO and SLM further
covenant and agree that a breach of the covenant contained in the preceding
sentence by a party shall forfeit such party's rights in and to any Customer
Information collected after the date of
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such breach, and that the non-breaching party shall own all right, title and
interest to such Customer Information.
9.4 Each Party shall promptly notify the other of any infringement of
or challenge to the other Party's rights in the Intellectual Property or the
Customer Information or any improper usage of the same, as either Party becomes
aware of such infringement, challenge or improper usage.
9.5 For each Untagged Customer who purchases products at the NPO Site,
NPO shall remit to SLM two dollars ($2.00) for or five percent (5%) of,
whichever is less, each such purchase made by such Untagged Customer for a
period of twelve months from the date of the first such purchase by such
Untagged Customer.
10. CONFIDENTIALITY
10.1 For the purposes of this Agreement, "Confidential Information"
means information about the disclosing Party's (or its suppliers') business or
activities that is proprietary and confidential, which shall include all
business, financial, technical and other information of a Party marked or
designated by such Party as "confidential" or "proprietary" or information
which, by the nature of the circumstances surrounding the disclosure, ought in
good faith to be treated as confidential.
10.2 Confidential Information will not include information that (i) is
in or enters the public domain without breach of this Agreement, (ii) the
receiving Party lawfully receives from a third party without restriction on
disclosure and without breach of a nondisclosure obligation, (iii) the receiving
Party knew prior to receiving such information from the disclosing Party or (iv)
the receiving Party develops independent of any information from the disclosing
Party as evidenced by written records.
10.3 Each Party agrees (i) that it will not disclose to any third party
or use any Confidential Information disclosed to it by the other except as
expressly permitted in this Agreement or with the written consent of the other
Party and (ii) that it will take all reasonable measures to maintain the
confidentiality of all Confidential Information of the other Party in its
possession or control, which will in no event be less than the measures it uses
to maintain the confidentiality of its own information of similar importance.
10.4 The terms and conditions of this Agreement will be deemed to be
Confidential Information and will not be disclosed without the written consent
of the other Party.
10.5 Notwithstanding the foregoing, each Party may disclose
Confidential Information (i) to the extent required by a court of competent
jurisdiction or other governmental authority or otherwise as required by law or
regulation, and/or (ii) on a "need to know" basis under an obligation of
confidentiality to its legal counsel, prospective purchasers,
11
<PAGE> 12
accountants, banks and other financing sources and their advisors.
11. REPRESENTATIONS AND WARRANTIES
11.1 Authority. Each Party represents and warrants that it has, and
will retain during the term hereof, all right, title and authority to enter into
this Agreement, to grant the other Party the rights and licenses herein granted
and to perform all of its obligations under this Agreement.
11.2 No Restrictions. Each Party represents and warrants that (i) there
are no restrictions, agreements or understandings whatsoever to which the
representing Party is a Party which would prevent or make unlawful its execution
of this Agreement or its engagement hereunder; and (ii) that its execution of
this Agreement and its engagement hereunder shall not constitute a breach of any
contract, agreement or understanding, oral or written, to which it is a Party or
by which it is bound.
11.3 Capitalization. NPO represents and warrants that the total
authorized capital stock of NPO is 11,000,000 shares of Common Stock, $.001 par
value per share, of which 7,003,158 shares are issued and outstanding on the
date hereof ("Outstanding NPO Shares"). Except as set forth on Schedule 11.3
hereto, there are no existing options, warrants, calls, commitments or other
rights of any character (including, but not limited to, conversion or preemptive
rights) relating to the acquisition of any issued or unissued capital stock or
other securities of NPO. The individuals listed on Schedule 11.3 are the record
owners of all the Outstanding NPO Shares in the respective amounts specified on
Schedule 11.3. When issued, the NPO Shares will be duly and validly issued,
fully paid and nonassessable.
11.4 Investment. SLM represents and warrants that it (i) understands
that the SLM Shares have not been registered under the Securities Act, or under
any state securities laws, and are being offered and sold in reliance upon
federal and state exemptions for transactions not involving any public offering,
(ii) is acquiring the NPO Shares solely for its own account for investment
purposes, and not with a view to the distribution thereof, (iii) is a
sophisticated investor with knowledge and experience in business and financial
matters, (iv) has received certain information concerning NPO and has had the
opportunity to obtain additional information as desired in order to evaluate the
merits and the risks inherent in holding the NPO Shares, and (v) is able to bear
the economic risk and lack of liquidity inherent in holding the NPO Shares.
12. INDEMNIFICATION
12.1 Except as set forth in Section 12.2, each Party shall indemnify,
defend and hold harmless the other Party and its Affiliates, and their
respective directors, members, officers, employees and agents, from and against
any and all liability, claim, loss, damage, injury or expense (including, but
not limited to, reasonable attorneys' fees) brought by a third party,
12
<PAGE> 13
arising out of a breach, or alleged breach, of any of its representations,
warranties or obligations herein.
12.2 SLM shall indemnify, defend and hold harmless NPO and its
Affiliates, and their respective directors, officers, employees and agents, from
and against any claims, demands, losses, penalties, fines, fees, charges,
assessments, liabilities, damages, judgments, orders, decrees, actions,
administrative or other proceedings, costs and expenses (including, but not
limited to, court costs, attorneys' fees, and expert witness fees), and any
interference with the operation of the NPO Site or the NPO Storefront, howsoever
caused, which directly or indirectly relate to or result wholly or in part from,
or are alleged to relate to or arise wholly or in part from the expressive
content of a product or products offered by NPO through the NPO Storefront.
13. DISCLAIMER OF WARRANTY
EXCEPT AS OTHERWISE PROVIDED FOR IN THIS AGREEMENT, THE SLM SITE, THE
NPO SITE, AND THE NPO STOREFRONT ON THE SLM SITE ARE PROVIDED ON AN "AS IS"
BASIS WITHOUT WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT
NOT LIMITED TO WARRANTIES OF TITLE OR IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE, OTHER THAN THOSE WARRANTIES WHICH ARE IMPLIED
BY OR INCAPABLE OF EXCLUSION, RESTRICTION OR MODIFICATION UNDER THE LAWS
APPLICABLE TO THIS AGREEMENT.
14. NO CONSEQUENTIAL DAMAGES
IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY SPECIAL,
INCIDENTAL OR CONSEQUENTIAL DAMAGES, WHETHER BASED ON BREACH OF CONTRACT, TORT
(INCLUDING NEGLIGENCE) OR OTHERWISE, WHETHER OR NOT THAT PARTY HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGE.
15. DISPUTE RESOLUTION
15.1 The Parties agree that any breach of either of the Parties'
obligations regarding trademarks, service marks or trade names, confidentiality,
Intellectual Property and/or exclusivity would result in irreparable injury for
which there is no adequate remedy at law. Therefore, in the event of any breach
or threatened breach of a Party's obligations regarding trademarks, service
marks or trade names, confidentiality, ownership or exclusivity the aggrieved
Party will be entitled to seek equitable relief in addition to its other
available legal remedies in a court of competent jurisdiction.
15.2 In the event of disputes between the Parties arising from or
concerning in any
13
<PAGE> 14
manner the subject matter of this Agreement, other than disputes arising from or
concerning trademarks, service marks or trade names, Intellectual Property,
confidentiality and/or exclusivity, the Parties will first attempt to resolve
the dispute(s) through good faith negotiation. In the event that the dispute(s)
cannot be resolved through good faith negotiation, within thirty (30) days of
written notification of such dispute(s), either Party may refer the dispute(s)
to a mutually acceptable mediator.
15.3 In the event that disputes between the Parties arising from or
concerning in any manner the subject matter of this Agreement, other than
disputes arising from or concerning trademarks, services marks or trade names,
Intellectual Property, confidentiality and/or exclusivity, cannot be resolved
through good faith negotiation within (30) days of written notification of
mediation, either Party may refer the dispute(s) to the American Arbitration
Association for resolution through binding arbitration by a single arbitrator in
Chicago, Illinois pursuant to the American Arbitration Association's rules
applicable to commercial disputes, which Arbitrator shall be familiar with
Internet and Computer Law.
16. GENERAL
16.1 Assignment. Neither Party may assign this Agreement, in whole or
in part, without the other Party's written consent, except that no consent will
be required in connection with (i) a merger, reorganization or sale of all, or
substantially all, of such Party's assets or stock or (ii) either Party's
assignment and/or delegation of its rights and responsibilities hereunder to a
wholly owned subsidiary or joint venture in which the assigning Party holds an
interest. Any attempt to assign this Agreement other than as permitted above
will be null and void.
16.2 Legends. Each certificate for the NPO Shares obtained pursuant to
this Agreement shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"). SUCH SECURITIES
HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE
1933 ACT, UNLESS, IN THE OPINION (WHICH SHALL BE IN FORM AND SUBSTANCE
SATISFACTORY TO THE CORPORATION) OF COUNSEL SATISFACTORY TO THE COMPANY, SUCH
REGISTRATION IS NOT REQUIRED.
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO THAT CERTAIN LINKING AND STOCK ISSUANCE AGREEMENT DATED [ ], 1999 AND MAY NOT
BE SOLD, ASSIGNED, TRANSFERRED, GIVEN, DONATED, PLEDGED, HYPOTHECATED, PLACED IN
TRUST OR OTHERWISE VOLUNTARILY OR INVOLUNTARILY DISPOSED OF OR OTHERWISE
14
<PAGE> 15
ENCUMBERED EXCEPT PURSUANT TO THE TERMS OF SUCH AGREEMENT."
16.3 Stockholders' Agreement. NPO and SLM shall promptly execute a
Stockholders' Agreement, in form and substance requested by and satisfactory to
an investor or group of investors who provide financing to NPO as part of NPO's
next round of financing, at the time of such financing. Upon execution of such
Stockholders' Agreement, SLM shall forthwith permit NPO to place, or to cause to
be placed, an appropriate legend on the NPO Shares, indicating that the NPO
Shares are subject to such Stockholders' Agreement.
16.4 Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Delaware, without reference to its
provisions concerning conflict of laws.
16.5 Notice. Any notice under this Agreement will be in writing and
delivered by personal delivery, express courier, confirmed facsimile, confirmed
E-mail or certified or registered mail, return receipt requested, and will be
deemed given upon personal delivery, one (1) day after deposit with express
courier, upon confirmation of receipt of facsimile or E-mail or five (5) days
after deposit in the mail. Notices will be sent to a Party at its address set
forth in this Agreement or such other address as that Party may specify in
writing pursuant to this Article.
16.6 No Agency. The Parties are independent contractors and will have
no power or authority to assume or create any obligation or responsibility on
behalf of each other. This Agreement will not be construed to create or imply
any partnership, agency or joint venture.
16.7 Force Majeure. Any delay in or failure of performance by either
Party under this Agreement will not be considered a breach of this Agreement and
will be excused to the extent caused by any occurrence beyond the reasonable
control of such Party including, but not limited to, acts of God, power outages
and governmental restrictions.
16.8 Severability. In the event that any of the provisions of this
Agreement are held to be unenforceable by a court or arbitrator, the remaining
portions of the Agreement will remain in full force and effect.
16.9 Entire Agreement. This Agreement is the complete and exclusive
agreement between the Parties with respect to the subject matter hereof,
superseding any prior agreements and communications (both written and oral)
regarding such subject matter. This Agreement may only be modified, or any
rights under it waived, by a written document executed by both Parties.
15
<PAGE> 16
16.10 Counterparts. This Agreement may be executed in counterparts,
each of which will serve to evidence the Parties' binding agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the Effective Date.
STAN LEE MEDIA, INC. NPO ONLINE, INC.
By: /s/ Gill Champion By: /s/ David M. Reid
Name: Gill Champion Name: David M. Reid
Title: Chief Operating Officer Title: Chief Operating Officer
16
<PAGE> 17
JOINDER TO LINKING AND STOCK ISSUANCE AGREEMENT
Stan Lee Media, Inc. warrants and represents it has authority to bind Stan
Lee, Chairman and COO of SLM, in connection with any and all obligations created
hereunder.
STAN LEE MEDIA, INC.
By: /s/ Gill Champion
Name: Gill Champion
Title: Chief Operating Officer
17
<PAGE> 1
Exhibit 10.19
STOCK OPTION AGREEMENT
Boulder Capital Opportunities, Inc., a Colorado corporation ("Company"),
desiring to afford an opportunity to the Grantee named below to purchase certain
shares of the Company's Common Stock, no par value, to provide the Grantee with
an added incentive as an employee of the Company or of one or more of its
subsidiaries, hereby grants to Grantee, and the Grantee accepts, an option (the
"Option") to purchase the number of such shares optioned as specified below,
during the term ending at midnight (prevailing local time at the Company's
principal offices) on the expiration date of this Option specified below, at the
option exercise price specified below, subject to and upon the following terms
and conditions:
1. Identifying Provisions: As used in this Option, the following terms
shall have the following meanings:
<TABLE>
<S> <C>
(a) Grantee: Gary Manfredi
(b) Date of Grant: July 23, 1999
(c) Number of Shares optioned: Seventy Thousand (70,000)
(d) Option exercise price per share: Two and 50/100 Dollars ($2.50)
(e) Expiration Date: July 22, 2004
</TABLE>
2. Timing of Purchases: This Option is not exercisable in any part until
one (1) year after the date of grant. Subject to the provisions for termination
and acceleration, this Option shall become exercisable in installments as
follows:
(a) after one (1) year after the date of grant, up to fifty percent
(50%) of the total number of shares optioned; and
(b) after two (2) years after the date of grant, up to all of the
optioned shares until and including the expiration date of the Option whereupon
the Option shall expire and may thereafter no longer be exercised.
The Company hereby agrees that at all times there shall be reserved for
issuance and delivery upon exercise of the Option such number of shares of its
Common Stock as shall be required for issuance and delivery upon full exercise
of the Option.
3. Restrictions on Exercise: The following additional provisions shall
apply to the exercise of the Option:
(a) Termination of Employment. If the Grantee's employment by the
Company or any of its subsidiaries is terminated for any reason other than death
only that portion of this Option exercisable at the time of such termination of
employment may thereafter be exercised, and it may not be exercised more than
three (3) months after such termination nor after the expiration date of this
Option, whichever date is sooner, unless such termination is by reason of the
Grantee's permanent and total disability, in which case such period of three (3)
months shall be extended to one (1) year. In all other respects, this Option
shall terminate upon such termination of employment.
<PAGE> 2
Boulder Capital Opportunities, Inc.
Stock Option Agreement
As of July 23, 1999
Page 2
(b) Death of Grantee. If the Grantee shall die during the term of
this Option, the Grantee's legal representative or representatives, or the
person or persons entitled to do so under the Grantee's last will and testament
or under applicable intestate laws, shall have the right to exercise this
Option, but only for the number of shares as to which the Grantee was entitled
to exercise this Option in accordance with Section 2 hereof on the date of his
death, and such right shall expire and this Option shall terminate one (1) year
after the date of the Grantee's death or on the expiration date of this Option,
whichever date is sooner. In all other respects, this Option shall terminate
upon such death.
(c) Continuity of Employment. This Option shall not be exercisable by
the Grantee in any part unless at all times beginning with the date of grant and
ending no more than three (3) months prior to the date of exercise, the Grantee
has, except for military service leave, sick leave or other bona fide leave of
absence (such as temporary employment by the United States Government) been in
the continuous employ of the Company or a parent or subsidiary thereof, except
that such period of three (3) months shall be one (1) year following any
termination of the Grantee's employment by reason of his permanent and total
disability.
4. Non-Transferable: The Grantee may not transfer this Option except by
will or the laws of descent and distribution. This Option shall not be otherwise
transferred, assigned, pledged, hypothecated or disposed of in any way, whether
by operation of law or otherwise, and shall be exercisable during the Grantee's
lifetime only by the Grantee or his guardian or legal representative.
5. Rights in Shares Before Issuance and Delivery: No person, including
the Grantee, shall be entitled to the privileges of stock ownership in respect
of any shares issuable upon exercise of this Option, unless and until such
shares have been issued to such person as fully paid shares.
6. Adjustments and Corporate Reorganizations: If the Company shall at
any time issue Common Stock by way of dividend or other distribution on any
stock of the Company or subdivide or combine the outstanding shares of Common
Stock, then the exercise price shall be proportionately decreased in the case of
such issuance (on the day following the date fixed for determining shareholders
entitled to receive such dividend or other distribution), or decreased in the
case of such subdivision, or increased in the case of such combination (on the
date that such subdivision or combination shall become effective). Upon any
adjustment of the exercise price, Grantee shall thereafter (until another such
adjustment) be entitled to purchase, at the new exercise price, the number of
shares, calculated to the nearest full share, obtained by multiplying the number
of shares of Common Stock initially issuable upon exercise of the Option by the
exercise price in effect on the date hereof and dividing the product so obtained
by the new exercise price.
In the event of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock (other than as a result of an
issuance of Common Stock by way of dividend or other distribution or of a
subdivision or combination), or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of the
Option), or in case of any sale or conveyance to any other corporation of the
property and assets of the Company as an entirety or substantially as an
entirety, as a condition to any of the foregoing, the Company shall cause
effective provision to be made (including acceleration of vesting) so that
Grantee
<PAGE> 3
Boulder Capital Opportunities, Inc.
Stock Option Agreement
As of July 23, 1999
Page 3
shall have the right thereafter, by exercising the Option, to purchase the kind
and amount of shares of stock and other securities and property receivable upon
such reclassification, capital reorganization or other change, consolidation,
merger, sale or conveyance as if Grantee had exercised the Option prior to such
transaction. Any such provision shall include provision for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in the Option. The foregoing provisions shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of Common Stock
and to successive consolidations, mergers, sales or conveyances.
In the event the Company spins off a subsidiary by distributing to the
shareholders of the Company, as a dividend or otherwise, the stock of the
subsidiary, the Company shall reserve, for the life of the Option, shares of the
subsidiary to be delivered to Grantee upon exercising the Option to the same
extent as if Grantee were the owner of record of Common Stock on the record date
for payment of the shares of the subsidiary.
7. Exercise, Payment for and Delivery of Stock: Each exercise of the
Option shall be accomplished by presentation and delivery to the Company of a
notice of exercise, duly executed and accompanied by payment of the exercise
price for the number of shares of Common Stock specified in such notice of
exercise, together with all Federal and state taxes applicable upon such
exercise.
8. Restricted Stock Provisions: Shares of stock issued on exercise of
this Option shall upon issuance be restricted securities as such term is defined
in Rule 144(a)(3) of the Securities Act of 1933, as amended. The restrictions
imposed under this paragraph shall apply as well to all shares or other
securities issued in respect of restricted stock in connection with any stock
split, reverse stock split, stock dividend, recapitalization, reclassification,
spin-off, split-off, merger, consolidation or reorganization.
9. Notices: Any notice to be given to the Company shall be addressed to
the Company in care of its Secretary at its principal office, and any notice to
be given to the Grantee shall be addressed to him at the address beneath his
signature hereto or at such other address as the Grantee may hereafter designate
in writing to the Company. Any such notice shall be deemed duly given when
addressed as aforesaid, registered or certified, and deposited, postage and
registry or certification fee prepaid, in a post office or branch post office
regularly maintained by the United States Postal Service.
10. Governing Law: This Agreement shall be governed by the laws of the
State of California without regard to principles of conflicts of laws.
<PAGE> 4
Boulder Capital Opportunities, Inc.
Stock Option Agreement
As of July 23, 1999
Page 4
IN WITNESS WHEREOF, the Company has granted this Option on the date of
grant specified above.
BOULDER CAPITAL OPPORTUNITIES, INC.
By: /s/ Gill Champion
-----------------------------------
Its: Chief Operating Officer
------------------------------
AGREED AND ACCEPTED AS OF
THIS 23RD DAY OF JULY, 1999.
/s/ Gary Manfredi
- -----------------------------------
Gary Manfredi
612B Victoria Ave.
- -----------------------------------
Street Address
Venice, CA 90291
- -----------------------------------
City and State
<PAGE> 1
Exhibit 10.20
STOCK OPTION AGREEMENT
Boulder Capital Opportunities, Inc., a Colorado corporation ("Company"),
desiring to afford an opportunity to the Grantee named below to purchase certain
shares of the Company's Common Stock, no par value, to provide the Grantee with
an added incentive as an employee of the Company or of one or more of its
subsidiaries, hereby grants to Grantee, and the Grantee accepts, an option (the
"Option") to purchase the number of such shares optioned as specified below,
during the term ending at midnight (prevailing local time at the Company's
principal offices) on the expiration date of this Option specified below, at the
option exercise price specified below, subject to and upon the following terms
and conditions:
1. Identifying Provisions: As used in this Option, the following terms
shall have the following meanings:
<TABLE>
<S> <C>
(a) Grantee: Shawn McManus
(b) Date of Grant: July 23, 1999
(c) Number of Shares optioned: Fifty Thousand (50,000)
(d) Option exercise price per share: Two and 50/100 Dollars ($2.50)
(e) Expiration Date: July 22, 2004
</TABLE>
2. Timing of Purchases: This Option is not exercisable in any part until
one (1) year after the date of grant. Subject to the provisions for termination
and acceleration, this Option shall become exercisable in installments as
follows:
(a) after one (1) year after the date of grant, up to fifty percent
(50%) of the total number of shares optioned; and
(b) after two (2) years after the date of grant, up to all of the
optioned shares until and including the expiration date of the Option whereupon
the Option shall expire and may thereafter no longer be exercised.
The Company hereby agrees that at all times there shall be reserved for
issuance and delivery upon exercise of the Option such number of shares of its
Common Stock as shall be required for issuance and delivery upon full exercise
of the Option.
3. Restrictions on Exercise: The following additional provisions shall
apply to the exercise of the Option:
(a) Termination of Employment. If the Grantee's employment by the
Company or any of its subsidiaries is terminated for any reason other than death
only that portion of this Option exercisable at the time of such termination of
employment may thereafter be exercised, and it may not be exercised more than
three (3) months after such termination nor after the expiration date of this
Option, whichever date is sooner, unless such termination is by reason of the
Grantee's permanent and total disability, in which case such period of three (3)
months shall be extended to one (1) year. In all other respects, this Option
shall terminate upon such termination of employment.
<PAGE> 2
Boulder Capital Opportunities, Inc.
Stock Option Agreement
As of July 23, 1999
Page 2
(b) Death of Grantee. If the Grantee shall die during the term of
this Option, the Grantee's legal representative or representatives, or the
person or persons entitled to do so under the Grantee's last will and testament
or under applicable intestate laws, shall have the right to exercise this
Option, but only for the number of shares as to which the Grantee was entitled
to exercise this Option in accordance with Section 2 hereof on the date of his
death, and such right shall expire and this Option shall terminate one (1) year
after the date of the Grantee's death or on the expiration date of this Option,
whichever date is sooner. In all other respects, this Option shall terminate
upon such death.
(c) Continuity of Employment. This Option shall not be exercisable by
the Grantee in any part unless at all times beginning with the date of grant and
ending no more than three (3) months prior to the date of exercise, the Grantee
has, except for military service leave, sick leave or other bona fide leave of
absence (such as temporary employment by the United States Government) been in
the continuous employ of the Company or a parent or subsidiary thereof, except
that such period of three (3) months shall be one (1) year following any
termination of the Grantee's employment by reason of his permanent and total
disability.
4. Non-Transferable: The Grantee may not transfer this Option except by
will or the laws of descent and distribution. This Option shall not be otherwise
transferred, assigned, pledged, hypothecated or disposed of in any way, whether
by operation of law or otherwise, and shall be exercisable during the Grantee's
lifetime only by the Grantee or his guardian or legal representative.
5. Rights in Shares Before Issuance and Delivery: No person, including
the Grantee, shall be entitled to the privileges of stock ownership in respect
of any shares issuable upon exercise of this Option, unless and until such
shares have been issued to such person as fully paid shares.
6. Adjustments and Corporate Reorganizations: If the Company shall at
any time issue Common Stock by way of dividend or other distribution on any
stock of the Company or subdivide or combine the outstanding shares of Common
Stock, then the exercise price shall be proportionately decreased in the case of
such issuance (on the day following the date fixed for determining shareholders
entitled to receive such dividend or other distribution), or decreased in the
case of such subdivision, or increased in the case of such combination (on the
date that such subdivision or combination shall become effective). Upon any
adjustment of the exercise price, Grantee shall thereafter (until another such
adjustment) be entitled to purchase, at the new exercise price, the number of
shares, calculated to the nearest full share, obtained by multiplying the number
of shares of Common Stock initially issuable upon exercise of the Option by the
exercise price in effect on the date hereof and dividing the product so obtained
by the new exercise price.
In the event of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock (other than as a result of an
issuance of Common Stock by way of dividend or other distribution or of a
subdivision or combination), or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of the
Option), or in case of any sale or conveyance to any other corporation of the
property and assets of the Company as an entirety or substantially as an
entirety, as a condition to any of the foregoing, the Company shall cause
effective provision to be made (including acceleration of vesting) so that
Grantee
<PAGE> 3
Boulder Capital Opportunities, Inc.
Stock Option Agreement
As of July 23, 1999
Page 3
shall have the right thereafter, by exercising the Option, to purchase the kind
and amount of shares of stock and other securities and property receivable upon
such reclassification, capital reorganization or other change, consolidation,
merger, sale or conveyance as if Grantee had exercised the Option prior to such
transaction. Any such provision shall include provision for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in the Option. The foregoing provisions shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of Common Stock
and to successive consolidations, mergers, sales or conveyances.
In the event the Company spins off a subsidiary by distributing to the
shareholders of the Company, as a dividend or otherwise, the stock of the
subsidiary, the Company shall reserve, for the life of the Option, shares of the
subsidiary to be delivered to Grantee upon exercising the Option to the same
extent as if Grantee were the owner of record of Common Stock on the record date
for payment of the shares of the subsidiary.
7. Exercise, Payment for and Delivery of Stock: Each exercise of the
Option shall be accomplished by presentation and delivery to the Company of a
notice of exercise, duly executed and accompanied by payment of the exercise
price for the number of shares of Common Stock specified in such notice of
exercise, together with all Federal and state taxes applicable upon such
exercise.
8. Restricted Stock Provisions: Shares of stock issued on exercise of
this Option shall upon issuance be restricted securities as such term is defined
in Rule 144(a)(3) of the Securities Act of 1933, as amended. The restrictions
imposed under this paragraph shall apply as well to all shares or other
securities issued in respect of restricted stock in connection with any stock
split, reverse stock split, stock dividend, recapitalization, reclassification,
spin-off, split-off, merger, consolidation or reorganization.
9. Notices: Any notice to be given to the Company shall be addressed to
the Company in care of its Secretary at its principal office, and any notice to
be given to the Grantee shall be addressed to him at the address beneath his
signature hereto or at such other address as the Grantee may hereafter designate
in writing to the Company. Any such notice shall be deemed duly given when
addressed as aforesaid, registered or certified, and deposited, postage and
registry or certification fee prepaid, in a post office or branch post office
regularly maintained by the United States Postal Service.
10. Governing Law: This Agreement shall be governed by the laws of the
State of California without regard to principles of conflicts of laws.
<PAGE> 4
Boulder Capital Opportunities, Inc.
Stock Option Agreement
As of July 23, 1999
Page 4
IN WITNESS WHEREOF, the Company has granted this Option on the date of
grant specified above.
BOULDER CAPITAL OPPORTUNITIES, INC.
By: /s/ Gill Champion
-----------------------------------
Its: Chief Operating Officer
------------------------------
AGREED AND ACCEPTED AS OF
THIS 23RD DAY OF JULY, 1999.
/s/ Shawn McManus
- -----------------------------------
Shawn McManus
835 N. Myers St.
- -----------------------------------
Street Address
Burbank, CA 91506
- -----------------------------------
City and State
<PAGE> 1
Exhibit 10.21
STOCK OPTION AGREEMENT
Boulder Capital Opportunities, Inc., a Colorado corporation ("Company"),
desiring to afford an opportunity to the Grantee named below to purchase certain
shares of the Company's Common Stock, no par value, to provide the Grantee with
an added incentive as an employee of the Company or of one or more of its
subsidiaries, hereby grants to Grantee, and the Grantee accepts, an option (the
"Option") to purchase the number of such shares optioned as specified below,
during the term ending at midnight (prevailing local time at the Company's
principal offices) on the expiration date of this Option specified below, at the
option exercise price specified below, subject to and upon the following terms
and conditions:
1. Identifying Provisions: As used in this Option, the following terms
shall have the following meanings:
<TABLE>
<S> <C>
(a) Grantee: Andrey Pavlovskiy
(b) Date of Grant: July 23, 1999
(c) Number of Shares optioned: Fifty Thousand (50,000)
(d) Option exercise price per share: Two and 50/100 Dollars ($2.50)
(e) Expiration Date: July 22, 2004
</TABLE>
2. Timing of Purchases: This Option is not exercisable in any part until
one (1) year after the date of grant. Subject to the provisions for termination
and acceleration, this Option shall become exercisable in installments as
follows:
(a) after one (1) year after the date of grant, up to fifty percent
(50%) of the total number of shares optioned; and
(b) after two (2) years after the date of grant, up to all of the
optioned shares until and including the expiration date of the Option whereupon
the Option shall expire and may thereafter no longer be exercised.
The Company hereby agrees that at all times there shall be reserved for
issuance and delivery upon exercise of the Option such number of shares of its
Common Stock as shall be required for issuance and delivery upon full exercise
of the Option.
3. Restrictions on Exercise: The following additional provisions shall
apply to the exercise of the Option:
(a) Termination of Employment. If the Grantee's employment by the
Company or any of its subsidiaries is terminated for any reason other than death
only that portion of this Option exercisable at the time of such termination of
employment may thereafter be exercised, and it may not be exercised more than
three (3) months after such termination nor after the expiration date of this
Option, whichever date is sooner, unless such termination is by reason of the
Grantee's permanent and total disability, in which case such period of three (3)
months shall be extended to one (1) year. In all other respects, this Option
shall terminate upon such termination of employment.
<PAGE> 2
Boulder Capital Opportunities, Inc.
Stock Option Agreement
As of July 23, 1999
Page 2
(b) Death of Grantee. If the Grantee shall die during the term of
this Option, the Grantee's legal representative or representatives, or the
person or persons entitled to do so under the Grantee's last will and testament
or under applicable intestate laws, shall have the right to exercise this
Option, but only for the number of shares as to which the Grantee was entitled
to exercise this Option in accordance with Section 2 hereof on the date of his
death, and such right shall expire and this Option shall terminate one (1) year
after the date of the Grantee's death or on the expiration date of this Option,
whichever date is sooner. In all other respects, this Option shall terminate
upon such death.
(c) Continuity of Employment. This Option shall not be exercisable by
the Grantee in any part unless at all times beginning with the date of grant and
ending no more than three (3) months prior to the date of exercise, the Grantee
has, except for military service leave, sick leave or other bona fide leave of
absence (such as temporary employment by the United States Government) been in
the continuous employ of the Company or a parent or subsidiary thereof, except
that such period of three (3) months shall be one (1) year following any
termination of the Grantee's employment by reason of his permanent and total
disability.
4. Non-Transferable: The Grantee may not transfer this Option except by
will or the laws of descent and distribution. This Option shall not be otherwise
transferred, assigned, pledged, hypothecated or disposed of in any way, whether
by operation of law or otherwise, and shall be exercisable during the Grantee's
lifetime only by the Grantee or his guardian or legal representative.
5. Rights in Shares Before Issuance and Delivery: No person, including
the Grantee, shall be entitled to the privileges of stock ownership in respect
of any shares issuable upon exercise of this Option, unless and until such
shares have been issued to such person as fully paid shares.
6. Adjustments and Corporate Reorganizations: If the Company shall at
any time issue Common Stock by way of dividend or other distribution on any
stock of the Company or subdivide or combine the outstanding shares of Common
Stock, then the exercise price shall be proportionately decreased in the case of
such issuance (on the day following the date fixed for determining shareholders
entitled to receive such dividend or other distribution), or decreased in the
case of such subdivision, or increased in the case of such combination (on the
date that such subdivision or combination shall become effective). Upon any
adjustment of the exercise price, Grantee shall thereafter (until another such
adjustment) be entitled to purchase, at the new exercise price, the number of
shares, calculated to the nearest full share, obtained by multiplying the number
of shares of Common Stock initially issuable upon exercise of the Option by the
exercise price in effect on the date hereof and dividing the product so obtained
by the new exercise price.
In the event of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock (other than as a result of an
issuance of Common Stock by way of dividend or other distribution or of a
subdivision or combination), or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of the
Option), or in case of any sale or conveyance to any other corporation of the
property and assets of the Company as an entirety or substantially as an
entirety, as a condition to any of the foregoing, the Company shall cause
effective provision to be made (including acceleration of vesting) so that
Grantee
<PAGE> 3
Boulder Capital Opportunities, Inc.
Stock Option Agreement
As of July 23, 1999
Page 3
shall have the right thereafter, by exercising the Option, to purchase the kind
and amount of shares of stock and other securities and property receivable upon
such reclassification, capital reorganization or other change, consolidation,
merger, sale or conveyance as if Grantee had exercised the Option prior to such
transaction. Any such provision shall include provision for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in the Option. The foregoing provisions shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of Common Stock
and to successive consolidations, mergers, sales or conveyances.
In the event the Company spins off a subsidiary by distributing to the
shareholders of the Company, as a dividend or otherwise, the stock of the
subsidiary, the Company shall reserve, for the life of the Option, shares of the
subsidiary to be delivered to Grantee upon exercising the Option to the same
extent as if Grantee were the owner of record of Common Stock on the record date
for payment of the shares of the subsidiary.
7. Exercise, Payment for and Delivery of Stock: Each exercise of the
Option shall be accomplished by presentation and delivery to the Company of a
notice of exercise, duly executed and accompanied by payment of the exercise
price for the number of shares of Common Stock specified in such notice of
exercise, together with all Federal and state taxes applicable upon such
exercise.
8. Restricted Stock Provisions: Shares of stock issued on exercise of
this Option shall upon issuance be restricted securities as such term is defined
in Rule 144(a)(3) of the Securities Act of 1933, as amended. The restrictions
imposed under this paragraph shall apply as well to all shares or other
securities issued in respect of restricted stock in connection with any stock
split, reverse stock split, stock dividend, recapitalization, reclassification,
spin-off, split-off, merger, consolidation or reorganization.
9. Notices: Any notice to be given to the Company shall be addressed to
the Company in care of its Secretary at its principal office, and any notice to
be given to the Grantee shall be addressed to him at the address beneath his
signature hereto or at such other address as the Grantee may hereafter designate
in writing to the Company. Any such notice shall be deemed duly given when
addressed as aforesaid, registered or certified, and deposited, postage and
registry or certification fee prepaid, in a post office or branch post office
regularly maintained by the United States Postal Service.
10. Governing Law: This Agreement shall be governed by the laws of the
State of California without regard to principles of conflicts of laws.
<PAGE> 4
Boulder Capital Opportunities, Inc.
Stock Option Agreement
As of July 23, 1999
Page 4
IN WITNESS WHEREOF, the Company has granted this Option on the date of
grant specified above.
BOULDER CAPITAL OPPORTUNITIES, INC.
By: /s/ Gill Champion
-----------------------------------
Its: Chief Operating Officer
AGREED AND ACCEPTED AS OF
THIS 23RD DAY OF JULY, 1999.
/a/ Andrey Pavlovskiy
- -----------------------------------
Andrey Pavlovskiy
7040 Hawthorne Ave. #4
- -----------------------------------
Street Address
Los Angeles, CA
- -----------------------------------
City and State
<PAGE> 1
Exhibit 10.22
STOCK OPTION AGREEMENT
Boulder Capital Opportunities, Inc., a Colorado corporation ("Company"),
desiring to afford an opportunity to the Grantee named below to purchase certain
shares of the Company's Common Stock, no par value, to provide the Grantee with
an added incentive as an employee of the Company or of one or more of its
subsidiaries, hereby grants to Grantee, and the Grantee accepts, an option (the
"Option") to purchase the number of such shares optioned as specified below,
during the term ending at midnight (prevailing local time at the Company's
principal offices) on the expiration date of this Option specified below, at the
option exercise price specified below, subject to and upon the following terms
and conditions:
1. Identifying Provisions: As used in this Option, the following terms
shall have the following meanings:
<TABLE>
<S> <C>
(a) Grantee: Aaron Sowd
(b) Date of Grant: July 23, 1999
(c) Number of Shares optioned: Twenty Thousand (20,000)
(d) Option exercise price per share: Two and 50/100 Dollars ($2.50)
(e) Expiration Date: July 22, 2004
</TABLE>
2. Timing of Purchases: This Option is not exercisable in any part until
one (1) year after the date of grant. Subject to the provisions for termination
and acceleration, this Option shall become exercisable in installments as
follows:
(a) after one (1) year after the date of grant, up to fifty percent
(50%) of the total number of shares optioned; and
(b) after two (2) years after the date of grant, up to all of the
optioned shares until and including the expiration date of the Option whereupon
the Option shall expire and may thereafter no longer be exercised.
The Company hereby agrees that at all times there shall be reserved for
issuance and delivery upon exercise of the Option such number of shares of its
Common Stock as shall be required for issuance and delivery upon full exercise
of the Option.
3. Restrictions on Exercise: The following additional provisions shall
apply to the exercise of the Option:
(a) Termination of Employment. If the Grantee's employment by the
Company or any of its subsidiaries is terminated for any reason other than death
only that portion of this Option exercisable at the time of such termination of
employment may thereafter be exercised, and it may not be exercised more than
three (3) months after such termination nor after the expiration date of this
Option, whichever date is sooner, unless such termination is by reason of the
Grantee's permanent and total disability, in which case such period of three (3)
months shall be extended to one (1) year. In all other respects, this Option
shall terminate upon such termination of employment.
<PAGE> 2
Boulder Capital Opportunities, Inc.
Stock Option Agreement
As of July 23, 1999
Page 2
(b) Death of Grantee. If the Grantee shall die during the term of
this Option, the Grantee's legal representative or representatives, or the
person or persons entitled to do so under the Grantee's last will and testament
or under applicable intestate laws, shall have the right to exercise this
Option, but only for the number of shares as to which the Grantee was entitled
to exercise this Option in accordance with Section 2 hereof on the date of his
death, and such right shall expire and this Option shall terminate one (1) year
after the date of the Grantee's death or on the expiration date of this Option,
whichever date is sooner. In all other respects, this Option shall terminate
upon such death.
(c) Continuity of Employment. This Option shall not be exercisable by
the Grantee in any part unless at all times beginning with the date of grant and
ending no more than three (3) months prior to the date of exercise, the Grantee
has, except for military service leave, sick leave or other bona fide leave of
absence (such as temporary employment by the United States Government) been in
the continuous employ of the Company or a parent or subsidiary thereof, except
that such period of three (3) months shall be one (1) year following any
termination of the Grantee's employment by reason of his permanent and total
disability.
4. Non-Transferable: The Grantee may not transfer this Option except by
will or the laws of descent and distribution. This Option shall not be otherwise
transferred, assigned, pledged, hypothecated or disposed of in any way, whether
by operation of law or otherwise, and shall be exercisable during the Grantee's
lifetime only by the Grantee or his guardian or legal representative.
5. Rights in Shares Before Issuance and Delivery: No person, including
the Grantee, shall be entitled to the privileges of stock ownership in respect
of any shares issuable upon exercise of this Option, unless and until such
shares have been issued to such person as fully paid shares.
6. Adjustments and Corporate Reorganizations: If the Company shall at
any time issue Common Stock by way of dividend or other distribution on any
stock of the Company or subdivide or combine the outstanding shares of Common
Stock, then the exercise price shall be proportionately decreased in the case of
such issuance (on the day following the date fixed for determining shareholders
entitled to receive such dividend or other distribution), or decreased in the
case of such subdivision, or increased in the case of such combination (on the
date that such subdivision or combination shall become effective). Upon any
adjustment of the exercise price, Grantee shall thereafter (until another such
adjustment) be entitled to purchase, at the new exercise price, the number of
shares, calculated to the nearest full share, obtained by multiplying the number
of shares of Common Stock initially issuable upon exercise of the Option by the
exercise price in effect on the date hereof and dividing the product so obtained
by the new exercise price.
In the event of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock (other than as a result of an
issuance of Common Stock by way of dividend or other distribution or of a
subdivision or combination), or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of the
Option), or in case of any sale or conveyance to any other corporation of the
property and assets of the Company as an entirety or substantially as an
entirety, as a condition to any of the foregoing, the Company shall cause
effective provision to be made (including acceleration of vesting) so that
Grantee shall have the right thereafter, by exercising the Option, to purchase
the kind and amount of shares of stock and other securities and property
receivable upon such reclassification, capital reorganization or other change,
consolidation, merger, sale or conveyance as if Grantee had exercised the Option
prior to such transaction. Any such provision shall include provision for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in the Option. The foregoing provisions
<PAGE> 3
Boulder Capital Opportunities, Inc.
Stock Option Agreement
As of July 23, 1999
Page 3
shall similarly apply to successive reclassifications, capital reorganizations
and changes of shares of Common Stock and to successive consolidations, mergers,
sales or conveyances.
In the event the Company spins off a subsidiary by distributing to the
shareholders of the Company, as a dividend or otherwise, the stock of the
subsidiary, the Company shall reserve, for the life of the Option, shares of the
subsidiary to be delivered to Grantee upon exercising the Option to the same
extent as if Grantee were the owner of record of Common Stock on the record date
for payment of the shares of the subsidiary.
7. Exercise, Payment for and Delivery of Stock: Each exercise of the
Option shall be accomplished by presentation and delivery to the Company of a
notice of exercise, duly executed and accompanied by payment of the exercise
price for the number of shares of Common Stock specified in such notice of
exercise, together with all Federal and state taxes applicable upon such
exercise.
8. Restricted Stock Provisions: Shares of stock issued on exercise of
this Option shall upon issuance be restricted securities as such term is defined
in Rule 144(a)(3) of the Securities Act of 1933, as amended. The restrictions
imposed under this paragraph shall apply as well to all shares or other
securities issued in respect of restricted stock in connection with any stock
split, reverse stock split, stock dividend, recapitalization, reclassification,
spin-off, split-off, merger, consolidation or reorganization.
9. Notices: Any notice to be given to the Company shall be addressed to
the Company in care of its Secretary at its principal office, and any notice to
be given to the Grantee shall be addressed to him at the address beneath his
signature hereto or at such other address as the Grantee may hereafter designate
in writing to the Company. Any such notice shall be deemed duly given when
addressed as aforesaid, registered or certified, and deposited, postage and
registry or certification fee prepaid, in a post office or branch post office
regularly maintained by the United States Postal Service.
10. Governing Law: This Agreement shall be governed by the laws of the
State of California without regard to principles of conflicts of laws.
<PAGE> 4
Boulder Capital Opportunities, Inc.
Stock Option Agreement
As of July 23, 1999
Page 4
IN WITNESS WHEREOF, the Company has granted this Option on the date of
grant specified above.
BOULDER CAPITAL OPPORTUNITIES, INC.
By: /s/ Gill Champion
------------------------------
Its: Chief Operating Officer
AGREED AND ACCEPTED AS OF
THIS 23RD DAY OF JULY, 1999.
/s/ Aaron Sowd
- ------------------------------
Aaron Sowd
3833 Beethoven St.
- ------------------------------
Street Address
Los Angeles, CA 90066
- ------------------------------
City and State
<PAGE> 1
Exhibit 10.23
STOCK OPTION AGREEMENT
Boulder Capital Opportunities, Inc., a Colorado corporation ("Company"),
desiring to afford an opportunity to the Grantee named below to purchase certain
shares of the Company's Common Stock, no par value, to provide the Grantee with
an added incentive as an employee of the Company or of one or more of its
subsidiaries, hereby grants to Grantee, and the Grantee accepts, an option (the
"Option") to purchase the number of such shares optioned as specified below,
during the term ending at midnight (prevailing local time at the Company's
principal offices) on the expiration date of this Option specified below, at the
option exercise price specified below, subject to and upon the following terms
and conditions:
1. Identifying Provisions: As used in this Option, the following terms
shall have the following meanings:
<TABLE>
<S> <C>
(a) Grantee: Jason Thomas
(b) Date of Grant: July 23, 1999
(c) Number of Shares optioned: Twenty Thousand (20,000)
(d) Option exercise price per share: Two and 50/100 Dollars ($2.50)
(e) Expiration Date: July 22, 2004
</TABLE>
2. Timing of Purchases: This Option is not exercisable in any part until
one (1) year after the date of grant. Subject to the provisions for termination
and acceleration, this Option shall become exercisable in installments as
follows:
(a) after one (1) year after the date of grant, up to fifty percent
(50%) of the total number of shares optioned; and
(b) after two (2) years after the date of grant, up to all of the
optioned shares until and including the expiration date of the Option whereupon
the Option shall expire and may thereafter no longer be exercised.
The Company hereby agrees that at all times there shall be reserved for
issuance and delivery upon exercise of the Option such number of shares of its
Common Stock as shall be required for issuance and delivery upon full exercise
of the Option.
3. Restrictions on Exercise: The following additional provisions shall
apply to the exercise of the Option:
(a) Termination of Employment. If the Grantee's employment by the
Company or any of its subsidiaries is terminated for any reason other than death
only that portion of this Option exercisable at the time of such termination of
employment may thereafter be exercised, and it may not be exercised more than
three (3) months after such termination nor after the expiration date of this
Option, whichever date is sooner, unless such termination is by reason of the
Grantee's permanent and total disability, in which case such period of three (3)
months shall be extended to one (1) year. In all other respects, this Option
shall terminate upon such termination of employment.
<PAGE> 2
Boulder Capital Opportunities, Inc.
Stock Option Agreement
As of July 23, 1999
Page 2
(b) Death of Grantee. If the Grantee shall die during the term of
this Option, the Grantee's legal representative or representatives, or the
person or persons entitled to do so under the Grantee's last will and testament
or under applicable intestate laws, shall have the right to exercise this
Option, but only for the number of shares as to which the Grantee was entitled
to exercise this Option in accordance with Section 2 hereof on the date of his
death, and such right shall expire and this Option shall terminate one (1) year
after the date of the Grantee's death or on the expiration date of this Option,
whichever date is sooner. In all other respects, this Option shall terminate
upon such death.
(c) Continuity of Employment. This Option shall not be exercisable by
the Grantee in any part unless at all times beginning with the date of grant and
ending no more than three (3) months prior to the date of exercise, the Grantee
has, except for military service leave, sick leave or other bona fide leave of
absence (such as temporary employment by the United States Government) been in
the continuous employ of the Company or a parent or subsidiary thereof, except
that such period of three (3) months shall be one (1) year following any
termination of the Grantee's employment by reason of his permanent and total
disability.
4. Non-Transferable: The Grantee may not transfer this Option except by
will or the laws of descent and distribution. This Option shall not be otherwise
transferred, assigned, pledged, hypothecated or disposed of in any way, whether
by operation of law or otherwise, and shall be exercisable during the Grantee's
lifetime only by the Grantee or his guardian or legal representative.
5. Rights in Shares Before Issuance and Delivery: No person, including
the Grantee, shall be entitled to the privileges of stock ownership in respect
of any shares issuable upon exercise of this Option, unless and until such
shares have been issued to such person as fully paid shares.
6. Adjustments and Corporate Reorganizations: If the Company shall at
any time issue Common Stock by way of dividend or other distribution on any
stock of the Company or subdivide or combine the outstanding shares of Common
Stock, then the exercise price shall be proportionately decreased in the case of
such issuance (on the day following the date fixed for determining shareholders
entitled to receive such dividend or other distribution), or decreased in the
case of such subdivision, or increased in the case of such combination (on the
date that such subdivision or combination shall become effective). Upon any
adjustment of the exercise price, Grantee shall thereafter (until another such
adjustment) be entitled to purchase, at the new exercise price, the number of
shares, calculated to the nearest full share, obtained by multiplying the number
of shares of Common Stock initially issuable upon exercise of the Option by the
exercise price in effect on the date hereof and dividing the product so obtained
by the new exercise price.
In the event of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock (other than as a result of an
issuance of Common Stock by way of dividend or other distribution or of a
subdivision or combination), or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of the
Option), or in case of any sale or conveyance to any other corporation of the
property and assets of the Company as an entirety or substantially as an
entirety, as a condition to any of the foregoing, the Company shall cause
effective provision to be made (including acceleration of vesting) so that
Grantee
<PAGE> 3
Boulder Capital Opportunities, Inc.
Stock Option Agreement
As of July 23, 1999
Page 3
shall have the right thereafter, by exercising the Option, to purchase the kind
and amount of shares of stock and other securities and property receivable upon
such reclassification, capital reorganization or other change, consolidation,
merger, sale or conveyance as if Grantee had exercised the Option prior to such
transaction. Any such provision shall include provision for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in the Option. The foregoing provisions shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of Common Stock
and to successive consolidations, mergers, sales or conveyances.
In the event the Company spins off a subsidiary by distributing to the
shareholders of the Company, as a dividend or otherwise, the stock of the
subsidiary, the Company shall reserve, for the life of the Option, shares of the
subsidiary to be delivered to Grantee upon exercising the Option to the same
extent as if Grantee were the owner of record of Common Stock on the record date
for payment of the shares of the subsidiary.
7. Exercise, Payment for and Delivery of Stock: Each exercise of the
Option shall be accomplished by presentation and delivery to the Company of a
notice of exercise, duly executed and accompanied by payment of the exercise
price for the number of shares of Common Stock specified in such notice of
exercise, together with all Federal and state taxes applicable upon such
exercise.
8. Restricted Stock Provisions: Shares of stock issued on exercise of
this Option shall upon issuance be restricted securities as such term is defined
in Rule 144(a)(3) of the Securities Act of 1933, as amended. The restrictions
imposed under this paragraph shall apply as well to all shares or other
securities issued in respect of restricted stock in connection with any stock
split, reverse stock split, stock dividend, recapitalization, reclassification,
spin-off, split-off, merger, consolidation or reorganization.
9. Notices: Any notice to be given to the Company shall be addressed to
the Company in care of its Secretary at its principal office, and any notice to
be given to the Grantee shall be addressed to him at the address beneath his
signature hereto or at such other address as the Grantee may hereafter designate
in writing to the Company. Any such notice shall be deemed duly given when
addressed as aforesaid, registered or certified, and deposited, postage and
registry or certification fee prepaid, in a post office or branch post office
regularly maintained by the United States Postal Service.
10. Governing Law: This Agreement shall be governed by the laws of the
State of California without regard to principles of conflicts of laws.
<PAGE> 4
Boulder Capital Opportunities, Inc.
Stock Option Agreement
As of July 23, 1999
Page 4
IN WITNESS WHEREOF, the Company has granted this Option on the date of
grant specified above.
BOULDER CAPITAL OPPORTUNITIES, INC.
By: /s/ Gill Champion
------------------------------
Its: Chief Operating Officer
-------------------------
AGREED AND ACCEPTED AS OF
THIS 23RD DAY OF JULY, 1999.
/s/ Jason Thomas
- ------------------------------
Jason Thomas
6704 Reseda #211
- ------------------------------
Street Address
Tarzana, CA 91345
- ------------------------------
City and State
<PAGE> 1
Exhibit 10.24
STOCK OPTION AGREEMENT
Boulder Capital Opportunities, Inc., a Colorado corporation ("Company"),
desiring to afford an opportunity to the Grantee named below to purchase certain
shares of the Company's Common Stock, no par value, to provide the Grantee with
an added incentive as an employee of the Company or of one or more of its
subsidiaries, hereby grants to Grantee, and the Grantee accepts, an option (the
"Option") to purchase the number of such shares optioned as specified below,
during the term ending at midnight (prevailing local time at the Company's
principal offices) on the expiration date of this Option specified below, at the
option exercise price specified below, subject to and upon the following terms
and conditions:
1. Identifying Provisions: As used in this Option, the following terms
shall have the following meanings:
<TABLE>
<S> <C>
(a) Grantee: Jamie Wilkinson
(b) Date of Grant: July 23, 1999
(c) Number of Shares optioned: One Hundred Fifty Thousand (150,000)
(d) Option exercise price per share: Two and 50/100 Dollars ($2.50)
(e) Expiration Date: July 22, 2004
</TABLE>
2. Timing of Purchases: This Option is not exercisable in any part until
one (1) year after the date of grant. Subject to the provisions for termination
and acceleration, this Option shall become exercisable in installments as
follows:
(a) after one (1) year after the date of grant, up to fifty percent
(50%) of the total number of shares optioned; and
(b) after two (2) years after the date of grant, up to all of the
optioned shares until and including the expiration date of the Option whereupon
the Option shall expire and may thereafter no longer be exercised.
The Company hereby agrees that at all times there shall be reserved for
issuance and delivery upon exercise of the Option such number of shares of its
Common Stock as shall be required for issuance and delivery upon full exercise
of the Option.
3. Restrictions on Exercise: The following additional provisions shall
apply to the exercise of the Option:
(a) Termination of Employment. If the Grantee's employment by the
Company or any of its subsidiaries is terminated for any reason other than death
only that portion of this Option exercisable at the time of such termination of
employment may thereafter be exercised, and it may not be exercised more than
three (3) months after such termination nor after the expiration date of this
Option, whichever date is sooner, unless such termination is by reason of the
Grantee's permanent and total disability, in which case such period of three (3)
months shall be extended to one (1) year. In all other respects, this Option
shall terminate upon such termination of employment.
<PAGE> 2
Boulder Capital Opportunities, Inc.
Stock Option Agreement
As of July 23, 1999
Page 2
(b) Death of Grantee. If the Grantee shall die during the term of
this Option, the Grantee's legal representative or representatives, or the
person or persons entitled to do so under the Grantee's last will and testament
or under applicable intestate laws, shall have the right to exercise this
Option, but only for the number of shares as to which the Grantee was entitled
to exercise this Option in accordance with Section 2 hereof on the date of his
death, and such right shall expire and this Option shall terminate one (1) year
after the date of the Grantee's death or on the expiration date of this Option,
whichever date is sooner. In all other respects, this Option shall terminate
upon such death.
(c) Continuity of Employment. This Option shall not be exercisable
by the Grantee in any part unless at all times beginning with the date of grant
and ending no more than three (3) months prior to the date of exercise, the
Grantee has, except for military service leave, sick leave or other bona fide
leave of absence (such as temporary employment by the United States Government)
been in the continuous employ of the Company or a parent or subsidiary thereof,
except that such period of three (3) months shall be one (1) year following any
termination of the Grantee's employment by reason of his permanent and total
disability.
4. Non-Transferable: The Grantee may not transfer this Option except by
will or the laws of descent and distribution. This Option shall not be otherwise
transferred, assigned, pledged, hypothecated or disposed of in any way, whether
by operation of law or otherwise, and shall be exercisable during the Grantee's
lifetime only by the Grantee or his guardian or legal representative.
5. Rights in Shares Before Issuance and Delivery: No person, including
the Grantee, shall be entitled to the privileges of stock ownership in respect
of any shares issuable upon exercise of this Option, unless and until such
shares have been issued to such person as fully paid shares.
6. Adjustments and Corporate Reorganizations: If the Company shall at
any time issue Common Stock by way of dividend or other distribution on any
stock of the Company or subdivide or combine the outstanding shares of Common
Stock, then the exercise price shall be proportionately decreased in the case of
such issuance (on the day following the date fixed for determining shareholders
entitled to receive such dividend or other distribution), or decreased in the
case of such subdivision, or increased in the case of such combination (on the
date that such subdivision or combination shall become effective). Upon any
adjustment of the exercise price, Grantee shall thereafter (until another such
adjustment) be entitled to purchase, at the new exercise price, the number of
shares, calculated to the nearest full share, obtained by multiplying the number
of shares of Common Stock initially issuable upon exercise of the Option by the
exercise price in effect on the date hereof and dividing the product so obtained
by the new exercise price.
In the event of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock (other than as a result of an
issuance of Common Stock by way of dividend or other distribution or of a
subdivision or combination), or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of the
Option), or in case of any sale or conveyance to any other corporation of the
property and assets of the Company as an entirety or substantially as an
entirety, as a condition to any of the foregoing, the Company shall cause
effective provision to be made (including acceleration of vesting) so that
Grantee
<PAGE> 3
Boulder Capital Opportunities, Inc.
Stock Option Agreement
As of July 23, 1999
Page 3
shall have the right thereafter, by exercising the Option, to purchase the kind
and amount of shares of stock and other securities and property receivable upon
such reclassification, capital reorganization or other change, consolidation,
merger, sale or conveyance as if Grantee had exercised the Option prior to such
transaction. Any such provision shall include provision for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in the Option. The foregoing provisions shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of Common Stock
and to successive consolidations, mergers, sales or conveyances.
In the event the Company spins off a subsidiary by distributing to the
shareholders of the Company, as a dividend or otherwise, the stock of the
subsidiary, the Company shall reserve, for the life of the Option, shares of the
subsidiary to be delivered to Grantee upon exercising the Option to the same
extent as if Grantee were the owner of record of Common Stock on the record date
for payment of the shares of the subsidiary.
7. Exercise, Payment for and Delivery of Stock: Each exercise of the
Option shall be accomplished by presentation and delivery to the Company of a
notice of exercise, duly executed and accompanied by payment of the exercise
price for the number of shares of Common Stock specified in such notice of
exercise, together with all Federal and state taxes applicable upon such
exercise.
8. Restricted Stock Provisions: Shares of stock issued on exercise of
this Option shall upon issuance be restricted securities as such term is defined
in Rule 144(a)(3) of the Securities Act of 1933, as amended. The restrictions
imposed under this paragraph shall apply as well to all shares or other
securities issued in respect of restricted stock in connection with any stock
split, reverse stock split, stock dividend, recapitalization, reclassification,
spin-off, split-off, merger, consolidation or reorganization.
9. Notices: Any notice to be given to the Company shall be addressed to
the Company in care of its Secretary at its principal office, and any notice to
be given to the Grantee shall be addressed to him at the address beneath his
signature hereto or at such other address as the Grantee may hereafter designate
in writing to the Company. Any such notice shall be deemed duly given when
addressed as aforesaid, registered or certified, and deposited, postage and
registry or certification fee prepaid, in a post office or branch post office
regularly maintained by the United States Postal Service.
10. Governing Law: This Agreement shall be governed by the laws of the
State of California without regard to principles of conflicts of laws.
<PAGE> 4
Boulder Capital Opportunities, Inc.
Stock Option Agreement
As of July 23, 1999
Page 4
IN WITNESS WHEREOF, the Company has granted this Option on the date of
grant specified above.
BOULDER CAPITAL OPPORTUNITIES, INC.
By: /s/ Gill Champion
---------------------------------
Its: Chief Operating Officer
--------------------------------
AGREED AND ACCEPTED AS OF
THIS 23RD DAY OF JULY, 1999.
/s/ Jamie Wilkinson
- -----------------------------------
Jamie Wilkinson
8130 Gould Ave.
- -----------------------------------
Street Address
Los Angeles, CA 90046
- -----------------------------------
City and State
<PAGE> 1
EXHIBIT 10.25
STOCK OPTION AGREEMENT
Boulder Capital Opportunities, Inc., a Colorado corporation ("Company"),
desiring to afford an opportunity to the Grantee named below to purchase certain
shares of the Company's Common Stock, no par value, to provide the Grantee with
an added incentive as an employee of the Company or of one or more of its
subsidiaries, hereby grants to Grantee, and the Grantee accepts, an option (the
"Option") to purchase the number of such shares optioned as specified below,
during the term ending at midnight (prevailing local time at the Company's
principal offices) on the expiration date of this Option specified below, at the
option exercise price specified below, subject to and upon the following terms
and conditions:
1. Identifying Provisions: As used in this Option, the following terms
shall have the following meanings:
(a) Grantee: Anthony Winn
(b) Date of Grant: July 23, 1999
(c) Number of Shares optioned: Twenty Thousand (20,000)
(d) Option exercise price per share: Two and 50/100 Dollars ($2.50)
(e) Expiration Date: July 22, 2004
2. Timing of Purchases: This Option is not exercisable in any part
until one (1) year after the date of grant. Subject to the provisions for
termination and acceleration, this Option shall become exercisable in
installments as follows:
(a) after one (1) year after the date of grant, up to fifty percent
(50%) of the total number of shares optioned; and
(b) after two (2) years after the date of grant, up to all of the
optioned shares until and including the expiration date of the Option whereupon
the Option shall expire and may thereafter no longer be exercised.
The Company hereby agrees that at all times there shall be reserved for
issuance and delivery upon exercise of the Option such number of shares of its
Common Stock as shall be required for issuance and delivery upon full exercise
of the Option.
3. Restrictions on Exercise: The following additional provisions shall
apply to the exercise of the Option:
(a) Termination of Employment. If the Grantee's employment by the
Company or any of its subsidiaries is terminated for any reason other than
death only that portion of this Option exercisable at the time of such
termination of employment may thereafter be exercised, and it may not be
exercised more than three (3) months after such termination nor after the
expiration date of this Option, whichever date is sooner, unless such
termination is by reason of the Grantee's permanent and total disability, in
which case such period of three (3) months shall be extended to one (1) year. In
all other respects, this Option shall terminate upon such termination of
employment.
<PAGE> 2
Boulder Capital Opportunities, Inc.
Stock Option Agreement
As of July 23, 1999
Page 2
(b) Death of Grantee. If the Grantee shall die during the term of
this Option, the Grantee's legal representative or representatives, or the
person or persons entitled to do so under the Grantee's last will and testament
or under applicable intestate laws, shall have the right to exercise this
Option, but only for the number of shares as to which the Grantee was entitled
to exercise this Option in accordance with Section 2 hereof on the date of his
death, and such right shall expire and this Option shall terminate one (1) year
after the date of the Grantee's death or on the expiration date of this Option,
whichever date is sooner. In all other respects, this Option shall terminate
upon such death.
(c) Continuity of Employment. This Option shall not be exercisable
by the Grantee in any part unless at all times beginning with the date of grant
and ending no more than three (3) months prior to the date of exercise, the
Grantee has, except for military service leave, sick leave or other bona fide
leave of absence (such as temporary employment by the United States Government)
been in the continuous employ of the Company or a parent or subsidiary thereof,
except that such period of three (3) months shall be one (1) year following any
termination of the Grantee's employment by reason of his permanent and total
disability.
4. Non-Transferable: The Grantee may not transfer this Option except by
will or the laws of descent and distribution. This Option shall not be otherwise
transferred, assigned, pledged, hypothecated or disposed of in any way, whether
by operation of law or otherwise, and shall be exercisable during the Grantee's
lifetime only by the Grantee or his guardian or legal representative.
5. Rights in Shares Before Issuance and Delivery: No person, including
the Grantee, shall be entitled to the privileges of stock ownership in respect
of any shares issuable upon exercise of this Option, unless and until such
shares have been issued to such person as fully paid shares.
6. Adjustments and Corporate Reorganizations: If the Company shall at
any time issue Common Stock by way of dividend or other distribution on any
stock of the Company or subdivide or combine the outstanding shares of Common
Stock, then the exercise price shall be proportionately decreased in the case of
such issuance (on the day following the date fixed for determining shareholders
entitled to receive such dividend or other distribution), or decreased in the
case of such subdivision, or increased in the case of such combination (on the
date that such subdivision or combination shall become effective). Upon any
adjustment of the exercise price, Grantee shall thereafter (until another such
adjustment) be entitled to purchase, at the new exercise price, the number of
shares, calculated to the nearest full share, obtained by multiplying the number
of shares of Common Stock initially issuable upon exercise of the Option by the
exercise price in effect on the date hereof and dividing the product so obtained
by the new exercise price.
In the event of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock (other than as a result of an
issuance of Common Stock by way of dividend or other distribution or of a
subdivision or combination), or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of the
Option), or in case of any sale or conveyance to any other corporation of the
property and assets of the Company as an entirety or substantially as an
entirety, as a condition to any of the foregoing, the Company shall cause
effective provision to be made (including acceleration of vesting) so that
Grantee shall have the right thereafter, by exercising the Option, to purchase
the kind and amount of shares of stock and other securities and property
receivable upon such reclassification, capital reorganization or other change,
consolidation, merger, sale or conveyance as if Grantee had exercised the Option
prior to such transaction. Any such provision shall include provision for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in the Option. The foregoing provisions
<PAGE> 3
Boulder Capital Opportunities, Inc.
Stock Option Agreement
As of July 23, 1999
Page 3
shall similarly apply to successive reclassifications, capital reorganizations
and changes of shares of Common Stock and to successive consolidations, mergers,
sales or conveyances.
In the event the Company spins off a subsidiary by distributing to the
shareholders of the Company, as a dividend or otherwise, the stock of the
subsidiary, the Company shall reserve, for the life of the Option, shares of the
subsidiary to be delivered to Grantee upon exercising the Option to the same
extent as if Grantee were the owner of record of Common Stock on the record date
for payment of the shares of the subsidiary.
7. Exercise, Payment for and Delivery of Stock: Each exercise of the
Option shall be accomplished by presentation and delivery to the Company of a
notice of exercise, duly executed and accompanied by payment of the exercise
price for the number of shares of Common Stock specified in such notice of
exercise, together with all Federal and state taxes applicable upon such
exercise.
8. Restricted Stock Provisions: Shares of stock issued on exercise of
this Option shall upon issuance be restricted securities as such term is defined
in Rule 144(a)(3) of the Securities Act of 1933, as amended. The restrictions
imposed under this paragraph shall apply as well to all shares or other
securities issued in respect of restricted stock in connection with any stock
split, reverse stock split, stock dividend, recapitalization, reclassification,
spin-off, split-off, merger, consolidation or reorganization.
9. Notices: Any notice to be given to the Company shall be addressed to
the Company in care of its Secretary at its principal office, and any notice to
be given to the Grantee shall be addressed to him at the address beneath his
signature hereto or at such other address as the Grantee may hereafter designate
in writing to the Company. Any such notice shall be deemed duly given when
addressed as aforesaid, registered or certified, and deposited, postage and
registry or certification fee prepaid, in a post office or branch post office
regularly maintained by the United States Postal Service.
10. Governing Law: This Agreement shall be governed by the laws of the
State of California without regard to principles of conflicts of laws.
<PAGE> 4
Boulder Capital Opportunities, Inc.
Stock Option Agreement
As of July 23, 1999
Page 4
IN WITNESS WHEREOF, the Company has granted this Option on the date of
grant specified above.
BOULDER CAPITAL OPPORTUNITIES, INC.
By: /s/ Gill Champion
-----------------------------
Its: Chief Operating Officer
AGREED AND ACCEPTED AS OF
THIS 23RD DAY OF JULY, 1999.
/s/ Anthony Winn
- ----------------------------
Anthony Winn
3833 Mentone Ave #3
- ----------------------------
Street Address
Culver City, CA 90232
- ----------------------------
City and State
<PAGE> 1
EXHIBIT 10.26
BOULDER CAPITAL OPPORTUNITIES, INC.
15821 Ventura Boulevard, Suite 675
Encino, CA 91436
As of July 23, 1999
VIA FACSIMILE TRANSMISSION
Jeffrey D. Segal
10390 Santa Monica Boulevard, 4th Floor
Los Angeles, CA 90025
Ladies and Gentlemen:
We, Boulder Capital Opportunities, Inc., a Colorado corporation
("Company"), hereby grant you, Jeffrey D. Segal ("Segal"), an option (the
"Option") to purchase one hundred fifty thousand (150,000) shares of Company's
Common Stock, no par value, at an exercise price of Two and 50/100 Dollars
($2.50) per share (the "Exercise Price"), subject to adjustment as described
below. The Option shall vest as of January 22, 2000, may be exercised in whole
or in part, and shall be exercisable at any time after vesting to and including
July 22, 2009.
Each exercise of the Option shall be accomplished by presentation and
delivery to the Company of a notice of exercise, duly executed and accompanied
by payment of the Exercise Price for the number of shares of Common Stock
specified in such notice of exercise, together with all Federal and state taxes
applicable upon such exercise.
The Company hereby agrees that at all times there shall be reserved for
issuance and delivery upon exercise of the Option such number of shares of its
Common Stock as shall be required for issuance and delivery upon full exercise
of the Option. All shares of the Company's Common Stock to be issued to Segal
upon exercise of the Option will be restricted securities as such term is
defined in Rule 144(a)(3) of the Securities Act of 1933, as amended.
If Company at any times proposes to file a registration statement under
the Securities Act of 1933, as amended, respecting any securities of Company
(excluding registrations of securities to be offered in connection with
Company's employee benefit plans and registrations of securities to be offered
by Company in connection with acquisitions, mergers or similar transactions), it
will at such time give written notice to Segal of its intention to do so. Upon
the written request of Segal given within fifteen (15) days after receipt of any
such notice (which request shall specify the securities intended to be sold or
disposed of by Segal and describe the nature of any proposed sale or other
disposition thereof), Company shall use its best efforts, but shall not be
obligated, to cause all such securities specified in such request to be so
registered. In the event that any such registration shall be underwritten, if
the underwriters notify Company
<PAGE> 2
Jeffrey D. Segal
As of July 23, 1999
Page 2
in writing that the inclusion in such underwriting of such securities would
materially and adversely affect the underwriting, Company shall have the right
not to include such securities. In any registration pursuant to this paragraph,
Segal shall pay Company for the incremental portion of the Federal and state
registration and filing fees attributable to such securities and shall pay all
underwriting commissions, discounts, underwriting expenses and taxes
attributable to such securities.
Segal shall not, by virtue hereof, be entitled to any rights of a
shareholder of the Company either at law or in equity, and the rights of Segal
under the Option are limited to those expressed herein.
If the Company shall at any time issue Common Stock by way of dividend
or other distribution on any stock of the Company or subdivide or combine the
outstanding shares of Common Stock, then the Exercise Price shall be
proportionately decreased in the case of such issuance (on the day following the
date fixed for determining shareholders entitled to receive such dividend or
other distribution), or decreased in the case of such subdivision, or increased
in the case of such combination (on the date that such subdivision or
combination shall become effective). Upon any adjustment of the Exercise Price,
Segal shall thereafter (until another such adjustment) be entitled to purchase,
at the new Exercise Price, the number of shares, calculated to the nearest full
share, obtained by multiplying the number of shares of Common Stock initially
issuable upon exercise of the Option by the Exercise Price in effect on the date
hereof and dividing the product so obtained by the new Exercise Price.
In the event of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock (other than as a result of an
issuance of Common Stock by way of dividend or other distribution or of a
subdivision or combination), or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of the
Option), or in case of any sale or conveyance to any other corporation of the
property and assets of the Company as an entirety or substantially as an
entirety, as a condition to any of the foregoing, the Company shall cause
effective provision to be made (including acceleration of vesting) so that Segal
shall have the right thereafter, by exercising the Option, to purchase the kind
and amount of shares of stock and other securities and property receivable upon
such reclassification, capital reorganization or other change, consolidation,
merger, sale or conveyance as if Segal had exercised the Option prior to such
transaction. Any such provision shall include provision for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in the Option. The foregoing provisions shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of Common Stock
and to successive consolidations, mergers, sales or
<PAGE> 3
Jeffrey D. Segal
As of July 23, 1999
Page 3
conveyances.
In the event the Company spins off a subsidiary by distributing to the
shareholders of the Company, as a dividend or otherwise, the stock of the
subsidiary, the Company shall reserve, for the life of the Option, shares of the
subsidiary to be delivered to Segal upon exercising the Option to the same
extent as if Segal were the owner of record of Common Stock on the record date
for payment of the shares of the subsidiary.
The Option may not be sold, transferred, assigned or hypothecated by
Segal without the prior written consent of Company. Nothing express of implied
in this letter agreement is intended or shall be construed to confer upon or
give to any third party any rights or remedies by virtue of the Option granted
hereunder or any exercise or non-exercise thereof.
This letter agreement shall be governed by the laws of the State of
California without regard to principles of conflicts of laws.
If acceptable, please sign where indicated below and return an executed
counterpart of this letter agreement to Company.
Very truly yours,
BOULDER CAPITAL OPPORTUNITIES, INC.,
By: /s/ Stephen M. Gordon
-----------------------------------
Its: Treasurer
AGREED AND ACCEPTED AS OF
THIS 23RD DAY OF JULY, 1999.
/s/ Jeffrey D. Segal
- --------------------------------
Jeffrey D. Segal
<PAGE> 1
EXHIBIT 10.27
BOULDER CAPITAL OPPORTUNITIES, INC.
15821 Ventura Boulevard, Suite 675
Encino, CA 91436
As of July 23, 1999
VIA FACSIMILE TRANSMISSION
- --------------------------
Ziffren, Brittenham, Branca & Fischer LLP
1801 Century Park West
Los Angeles, CA 90067-6406
Attention: Kenneth Ziffren, Esq.
Ladies and Gentlemen:
We, Boulder Capital Opportunities, Inc., a Colorado corporation
("Company"), and you, Ziffren, Brittenham, Branca & Fischer LLP ("ZBBF"), hereby
amend and restate the first two sentences set forth in paragraph 3(a) of the
July 12, 1999 representation agreement (the "Representation Agreement"), by
Company granting to ZBBF an option (the "Option") to purchase five hundred
seventy-five thousand (575,000) shares of Company's Common Stock, no par value
per share, at an exercise price of Two and 50/100 Dollars ($2.50) per share (the
"Exercise Price"), subject to adjustment as described below. The Option shall
vest as of January 22, 2000, may be exercised in whole or in part, and shall be
exercisable at any time after vesting to and including July 22, 2009. The Option
shall be subject to cancellation unilaterally by Company at any time prior to
vesting should Company be dissatisfied with and terminates ZBBF's provision of
services pursuant to the Representation Agreement.
Each exercise of the Option shall be accomplished by presentation and
delivery to the Company of a notice of exercise, duly executed and accompanied
by payment of the Exercise Price for the number of shares of Common Stock
specified in such notice of exercise, together with all Federal and state taxes
applicable upon such exercise.
The Company hereby agrees that at all times there shall be reserved for
issuance and delivery upon exercise of the Option such number of shares of its
Common Stock as shall be required for issuance and delivery upon full exercise
of the Option. All shares of the Company's Common Stock to be issued to ZBBF
upon exercise of the Option will be restricted securities as such term is
defined in Rule 144(a)(3) of the Securities Act of 1933, as amended.
If Company at any times proposes to file a registration statement under
the Securities Act of 1933, as amended, respecting any securities of Company
(excluding registrations of securities to be offered in connection with
Company's employee benefit plans and registrations of securities to be offered
by Company in connection with acquisitions, mergers or similar
<PAGE> 2
Ziffren, Brittenham, Branca & Fischer LLP
As of July 23, 1999
Page 2
transactions), it will at such time give written notice to ZBBF of its intention
to do so. Upon the written request of ZBBF given within fifteen (15) days after
receipt of any such notice (which request shall specify the securities intended
to be sold or disposed of by ZBBF and describe the nature of any proposed sale
or other disposition thereof), Company shall use its best efforts, but shall not
be obligated, to cause all such securities specified in such request to be so
registered. In the event that any such registration shall be underwritten, if
the underwriters notify Company in writing that the inclusion in such
underwriting of such securities would materially and adversely affect the
underwriting, Company shall have the right not to include such securities. In
any registration pursuant to this paragraph, ZBBF shall pay Company for the
incremental portion of the Federal and state registration and filing fees
attributable to such securities and shall pay all underwriting commissions,
discounts, underwriting expenses and taxes attributable to such securities.
ZBBF shall not, by virtue hereof, be entitled to any rights of a
shareholder of the Company either at law or in equity, and the rights of ZBBF
under the Option are limited to those expressed herein.
If the Company shall at any time issue Common Stock by way of dividend
or other distribution on any stock of the Company or subdivide or combine the
outstanding shares of Common Stock, then the Exercise Price shall be
proportionately decreased in the case of such issuance (on the day following the
date fixed for determining shareholders entitled to receive such dividend or
other distribution), or decreased in the case of such subdivision, or increased
in the case of such combination (on the date that such subdivision or
combination shall become effective). Upon any adjustment of the Exercise Price,
ZBBF shall thereafter (until another such adjustment) be entitled to purchase,
at the new Exercise Price, the number of shares, calculated to the nearest full
share, obtained by multiplying the number of shares of Common Stock initially
issuable upon exercise of the Option by the Exercise Price in effect on the date
hereof and dividing the product so obtained by the new Exercise Price.
In the event of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock (other than as a result of an
issuance of Common Stock by way of dividend or other distribution or of a
subdivision or combination), or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of the
Option), or in case of any sale or conveyance to any other corporation of the
property and assets of the Company as an entirety or substantially as an
entirety, as a condition to any of the foregoing, the Company shall cause
effective provision to be made (including acceleration of vesting) so that ZBBF
shall have the right thereafter, by exercising the Option, to purchase the kind
and amount of shares of stock
<PAGE> 3
Ziffren, Brittenham, Branca & Fischer LLP
As of July 23, 1999
Page 3
and other securities and property receivable upon such reclassification, capital
reorganization or other change, consolidation, merger, sale or conveyance as if
ZBBF had exercised the Option prior to such transaction. Any such provision
shall include provision for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in the Option. The foregoing
provisions shall similarly apply to successive reclassifications, capital
reorganizations and changes of shares of Common Stock and to successive
consolidations, mergers, sales or conveyances.
In the event the Company spins off a subsidiary by distributing to the
shareholders of the Company, as a dividend or otherwise, the stock of the
subsidiary, the Company shall reserve, for the life of the Option, shares of the
subsidiary to be delivered to ZBBF upon exercising the Option to the same extent
as if ZBBF were the owner of record of Common Stock on the record date for
payment of the shares of the subsidiary.
The Option may not be sold, transferred, assigned or hypothecated by
ZBBF without the prior written consent of Company. Nothing express or implied in
this letter agreement is intended or shall be construed to confer upon or give
to any third party any rights or remedies by virtue of the Option granted
hereunder or any exercise or non-exercise thereof.
This letter agreement shall be governed by the laws of the State of
California without regard to principles of conflicts of laws.
Except as otherwise amended by this letter agreement, the Representation
Agreement shall remain in full force and effect. If acceptable, please sign
where indicated below and return an executed counterpart of this letter
agreement which the parties agree shall be binding upon receipt of facsimile
counterpart signature pages.
Very truly yours,
BOULDER CAPITAL OPPORTUNITIES, INC.,
By: /s/ Gill Champion
------------------------------
Gill Champion, Vice President
AGREED AND ACCEPTED AS OF
THIS 23RD DAY OF JULY, 1999.
ZIFFREN, BRITTENHAM, BRANCA & FISCHER LLP
By: /s/ Kenneth M. Ziffren
-----------------------------
<PAGE> 1
EXHIBIT 10.28
STOCK OPTION AGREEMENT
Stan Lee Media, Inc., a Colorado corporation ("Company"), desiring to
afford an opportunity to the Grantee named below to purchase certain shares of
the Company's Common Stock, no par value, to provide the Grantee with an added
incentive as an employee of the Company or of one or more of its subsidiaries,
hereby grants to Grantee, and the Grantee accepts, an option (the "Option") to
purchase the number of such shares optioned as specified below, during the term
ending at midnight (prevailing local time at the Company's principal offices) on
the expiration date of this Option specified below, at the option exercise price
specified below, subject to and upon the following terms and conditions:
1. Identifying Provisions: As used in this Option, the following
terms shall have the following meanings:
<TABLE>
<S> <C>
(a) Grantee: Iyan Bruce
(b) Date of Grant: September 24, 1999
(c) Number of Shares optioned: Ten Thousand (10,000)
(d) Option exercise price per share: Five and 50/100 Dollars ($5.50)
(e) Expiration Date: September 23, 2004
</TABLE>
2. Timing of Purchases: This Option is not exercisable in any part
until one (1) year after the date of grant. Subject to the provisions for
termination and acceleration, this Option shall become exercisable in
installments as follows:
(a) after one (1) year after the date of grant, up to fifty
percent (50%) of the total number of shares optioned; and
(b) after two (2) years after the date of grant, up to all of the
optioned shares until and including the expiration date of the Option whereupon
the Option shall expire and may thereafter no longer be exercised.
The Company hereby agrees that at all times there shall be reserved for
issuance and delivery upon exercise of the Option such number of shares of its
Common Stock as shall be required for issuance and delivery upon full exercise
of the Option.
3. Restrictions on Exercise: The following additional provisions
shall apply to the exercise of the Option:
(a) Termination of Employment. If the Grantee's employment by the
Company or any of its subsidiaries is terminated for any reason other than death
only that portion of this Option exercisable at the time of such termination of
employment may thereafter be exercised, and it may not be exercised more than
three (3) months after such termination nor after the expiration date of this
Option, whichever date is sooner, unless such termination is by reason of the
Grantee's permanent and total disability, in which case such period of three (3)
months shall be extended to one (1) year. In all other respects, this Option
shall terminate upon such termination of employment.
<PAGE> 2
Stan Lee Media, Inc.
Stock Option Agreement
As of September 24, 1999
Page 2
(b) Death of Grantee. If the Grantee shall die during the term of
this Option, the Grantee's legal representative or representatives, or the
person or persons entitled to do so under the Grantee's last will and testament
or under applicable intestate laws, shall have the right to exercise this
Option, but only for the number of shares as to which the Grantee was entitled
to exercise this Option in accordance with Section 2 hereof on the date of his
death, and such right shall expire and this Option shall terminate one (1) year
after the date of the Grantee's death or on the expiration date of this Option,
whichever date is sooner. In all other respects, this Option shall terminate
upon such death.
(c) Continuity of Employment. This Option shall not be
exercisable by the Grantee in any part unless at all times beginning with the
date of grant and ending no more than three (3) months prior to the date of
exercise, the Grantee has, except for military service leave, sick leave or
other bona fide leave of absence (such as temporary employment by the United
States Government) been in the continuous employ of the Company or a parent or
subsidiary thereof, except that such period of three (3) months shall be one (1)
year following any termination of the Grantee's employment by reason of his
permanent and total disability.
4. Non-Transferable: The Grantee may not transfer this Option except by
will or the laws of descent and distribution. This Option shall not be otherwise
transferred, assigned, pledged, hypothecated or disposed of in any way, whether
by operation of law or otherwise, and shall be exercisable during the Grantee's
lifetime only by the Grantee or his guardian or legal representative.
5. Rights in Shares Before Issuance and Delivery: No person, including
the Grantee, shall be entitled to the privileges of stock ownership in respect
of any shares issuable upon exercise of this Option, unless and until such
shares have been issued to such person as fully paid shares.
6. Adjustments and Corporate Reorganizations: If the Company shall at
any time issue Common Stock by way of dividend or other distribution on any
stock of the Company or subdivide or combine the outstanding shares of Common
Stock, then the exercise price shall be proportionately decreased in the case of
such issuance (on the day following the date fixed for determining shareholders
entitled to receive such dividend or other distribution), or decreased in the
case of such subdivision, or increased in the case of such combination (on the
date that such subdivision or combination shall become effective). Upon any
adjustment of the exercise price, Grantee shall thereafter (until another such
adjustment) be entitled to purchase, at the new exercise price, the number of
shares, calculated to the nearest full share, obtained by multiplying the number
of shares of Common Stock initially issuable upon exercise of the Option by the
exercise price in effect on the date hereof and dividing the product so obtained
by the new exercise price.
In the event of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock (other than as a result of an
issuance of Common Stock by way of dividend or other distribution or of a
subdivision or combination), or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of the
Option), or in case of any sale or conveyance to any other corporation of the
property and assets of the Company as an entirety or substantially as an
entirety, as a condition to any of the foregoing, the Company shall cause
effective provision to be made (including acceleration of vesting) so that
Grantee shall have the right thereafter, by exercising the Option, to purchase
the kind and amount of shares of stock and other securities and property
receivable upon such reclassification, capital reorganization or other change,
consolidation, merger, sale or conveyance as if Grantee had exercised the Option
prior to such transaction. Any such provision shall include provision for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in the Option. The foregoing provisions
<PAGE> 3
Stan Lee Media, Inc.
Stock Option Agreement
As of September 24, 1999
Page 3
shall similarly apply to successive reclassifications, capital reorganizations
and changes of shares of Common Stock and to successive consolidations, mergers,
sales or conveyances.
In the event the Company spins off a subsidiary by distributing to the
shareholders of the Company, as a dividend or otherwise, the stock of the
subsidiary, the Company shall reserve, for the life of the Option, shares of the
subsidiary to be delivered to Grantee upon exercising the Option to the same
extent as if Grantee were the owner of record of Common Stock on the record date
for payment of the shares of the subsidiary.
7. Exercise, Payment for and Delivery of Stock: Each exercise of the
Option shall be accomplished by presentation and delivery to the Company of a
notice of exercise, duly executed and accompanied by payment of the exercise
price for the number of shares of Common Stock specified in such notice of
exercise, together with all Federal and state taxes applicable upon such
exercise.
8. Restricted Stock Provisions: Shares of stock issued on exercise of
this Option shall upon issuance be restricted securities as such term is defined
in Rule 144(a)(3) of the Securities Act of 1933, as amended. The restrictions
imposed under this paragraph shall apply as well to all shares or other
securities issued in respect of restricted stock in connection with any stock
split, reverse stock split, stock dividend, recapitalization, reclassification,
spin-off, split-off, merger, consolidation or reorganization.
9. Notices: Any notice to be given to the Company shall be addressed to
the Company in care of its Secretary at its principal office, and any notice to
be given to the Grantee shall be addressed to him at the address beneath his
signature hereto or at such other address as the Grantee may hereafter designate
in writing to the Company. Any such notice shall be deemed duly given when
addressed as aforesaid, registered or certified, and deposited, postage and
registry or certification fee prepaid, in a post office or branch post office
regularly maintained by the United States Postal Service.
10. Governing Law: This Agreement shall be governed by the laws of
the State of California without regard to principles of conflicts of laws.
<PAGE> 4
Stan Lee Media, Inc.
Stock Option Agreement
As of September 24, 1999
Page 4
IN WITNESS WHEREOF, the Company has granted this Option on the date of
grant specified above.
STAN LEE MEDIA, INC.
By: /s/ Gill Champion
------------------
Its: C.O.O.
----------------
AGREED AND ACCEPTED AS OF
THIS 24TH DAY OF SEPTEMBER, 1999.
/s/ Iyan Bruce
- -----------------------
Iyan Bruce
5850 West 3rd St. PMB #101
- -----------------------
Street Address
Los Angeles, CA 90036
- -----------------------
City and State
<PAGE> 1
EXHIBIT 10.29
STOCK OPTION AGREEMENT
Stan Lee Media, Inc., a Colorado corporation ("Company"), desiring to
afford an opportunity to the Grantee named below to purchase certain shares of
the Company's Common Stock, no par value, to provide the Grantee with an added
incentive as an employee of the Company or of one or more of its subsidiaries,
hereby grants to Grantee, and the Grantee accepts, an option (the "Option") to
purchase the number of such shares optioned as specified below, during the term
ending at midnight (prevailing local time at the Company's principal offices) on
the expiration date of this Option specified below, at the option exercise price
specified below, subject to and upon the following terms and conditions:
1. Identifying Provisions: As used in this Option, the following
terms shall have the following meanings:
<TABLE>
<S> <C>
(a) Grantee: Zachary Foley
(b) Date of Grant: September 24, 1999
(c) Number of Shares optioned: Ten Thousand (10,000)
(d) Option exercise price per share: Five and 50/100 Dollars ($5.50)
(e) Expiration Date: September 23, 2004
</TABLE>
2. Timing of Purchases: This Option is not exercisable in any part
until one (1) year after the date of grant. Subject to the provisions for
termination and acceleration, this Option shall become exercisable in
installments as follows:
(a) after one (1) year after the date of grant, up to fifty
percent (50%) of the total number of shares optioned; and
(b) after two (2) years after the date of grant, up to all of the
optioned shares until and including the expiration date of the Option whereupon
the Option shall expire and may thereafter no longer be exercised.
The Company hereby agrees that at all times there shall be reserved for
issuance and delivery upon exercise of the Option such number of shares of its
Common Stock as shall be required for issuance and delivery upon full exercise
of the Option.
3. Restrictions on Exercise: The following additional provisions
shall apply to the exercise of the Option:
(a) Termination of Employment. If the Grantee's employment by the
Company or any of its subsidiaries is terminated for any reason other than death
only that portion of this Option exercisable at the time of such termination of
employment may thereafter be exercised, and it may not be exercised more than
three (3) months after such termination nor after the expiration date of this
Option, whichever date is sooner, unless such termination is by reason of the
Grantee's permanent and total disability, in which case such period of three (3)
months shall be extended to one (1) year. In all other respects, this Option
shall terminate upon such termination of employment.
<PAGE> 2
Stan Lee Media, Inc.
Stock Option Agreement
As of September 24, 1999
Page 2
(b) Death of Grantee. If the Grantee shall die during the term of
this Option, the Grantee's legal representative or representatives, or the
person or persons entitled to do so under the Grantee's last will and testament
or under applicable intestate laws, shall have the right to exercise this
Option, but only for the number of shares as to which the Grantee was entitled
to exercise this Option in accordance with Section 2 hereof on the date of his
death, and such right shall expire and this Option shall terminate one (1) year
after the date of the Grantee's death or on the expiration date of this Option,
whichever date is sooner. In all other respects, this Option shall terminate
upon such death.
(c) Continuity of Employment. This Option shall not be
exercisable by the Grantee in any part unless at all times beginning with the
date of grant and ending no more than three (3) months prior to the date of
exercise, the Grantee has, except for military service leave, sick leave or
other bona fide leave of absence (such as temporary employment by the United
States Government) been in the continuous employ of the Company or a parent or
subsidiary thereof, except that such period of three (3) months shall be one (1)
year following any termination of the Grantee's employment by reason of his
permanent and total disability.
4. Non-Transferable: The Grantee may not transfer this Option except by
will or the laws of descent and distribution. This Option shall not be otherwise
transferred, assigned, pledged, hypothecated or disposed of in any way, whether
by operation of law or otherwise, and shall be exercisable during the Grantee's
lifetime only by the Grantee or his guardian or legal representative.
5. Rights in Shares Before Issuance and Delivery: No person, including
the Grantee, shall be entitled to the privileges of stock ownership in respect
of any shares issuable upon exercise of this Option, unless and until such
shares have been issued to such person as fully paid shares.
6. Adjustments and Corporate Reorganizations: If the Company shall at
any time issue Common Stock by way of dividend or other distribution on any
stock of the Company or subdivide or combine the outstanding shares of Common
Stock, then the exercise price shall be proportionately decreased in the case of
such issuance (on the day following the date fixed for determining shareholders
entitled to receive such dividend or other distribution), or decreased in the
case of such subdivision, or increased in the case of such combination (on the
date that such subdivision or combination shall become effective). Upon any
adjustment of the exercise price, Grantee shall thereafter (until another such
adjustment) be entitled to purchase, at the new exercise price, the number of
shares, calculated to the nearest full share, obtained by multiplying the number
of shares of Common Stock initially issuable upon exercise of the Option by the
exercise price in effect on the date hereof and dividing the product so obtained
by the new exercise price.
In the event of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock (other than as a result of an
issuance of Common Stock by way of dividend or other distribution or of a
subdivision or combination), or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of the
Option), or in case of any sale or conveyance to any other corporation of the
property and assets of the Company as an entirety or substantially as an
entirety, as a condition to any of the foregoing, the Company shall cause
effective provision to be made (including acceleration of vesting) so that
Grantee
<PAGE> 3
Stan Lee Media, Inc.
Stock Option Agreement
As of September 24, 1999
Page 3
shall have the right thereafter, by exercising the Option, to purchase the kind
and amount of shares of stock and other securities and property receivable upon
such reclassification, capital reorganization or other change, consolidation,
merger, sale or conveyance as if Grantee had exercised the Option prior to such
transaction. Any such provision shall include provision for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in the Option. The foregoing provisions shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of Common Stock
and to successive consolidations, mergers, sales or conveyances.
In the event the Company spins off a subsidiary by distributing to the
shareholders of the Company, as a dividend or otherwise, the stock of the
subsidiary, the Company shall reserve, for the life of the Option, shares of the
subsidiary to be delivered to Grantee upon exercising the Option to the same
extent as if Grantee were the owner of record of Common Stock on the record date
for payment of the shares of the subsidiary.
7. Exercise, Payment for and Delivery of Stock: Each exercise of the
Option shall be accomplished by presentation and delivery to the Company of a
notice of exercise, duly executed and accompanied by payment of the exercise
price for the number of shares of Common Stock specified in such notice of
exercise, together with all Federal and state taxes applicable upon such
exercise.
8. Restricted Stock Provisions: Shares of stock issued on exercise of
this Option shall upon issuance be restricted securities as such term is defined
in Rule 144(a)(3) of the Securities Act of 1933, as amended. The restrictions
imposed under this paragraph shall apply as well to all shares or other
securities issued in respect of restricted stock in connection with any stock
split, reverse stock split, stock dividend, recapitalization, reclassification,
spin-off, split-off, merger, consolidation or reorganization.
9. Notices: Any notice to be given to the Company shall be addressed to
the Company in care of its Secretary at its principal office, and any notice to
be given to the Grantee shall be addressed to him at the address beneath his
signature hereto or at such other address as the Grantee may hereafter designate
in writing to the Company. Any such notice shall be deemed duly given when
addressed as aforesaid, registered or certified, and deposited, postage and
registry or certification fee prepaid, in a post office or branch post office
regularly maintained by the United States Postal Service.
10. Governing Law: This Agreement shall be governed by the laws of
the State of California without regard to principles of conflicts of laws.
<PAGE> 4
Stan Lee Media, Inc.
Stock Option Agreement
As of September 24, 1999
Page 4
IN WITNESS WHEREOF, the Company has granted this Option on the date of
grant specified above.
STAN LEE MEDIA, INC.
By: /s/ Gill Champion
-----------------------------
Its: C.O.O.
-----------------------
AGREED AND ACCEPTED AS OF
THIS 24TH DAY OF SEPTEMBER, 1999.
/s/ Zachary Foley
- ---------------------------
Zachary Foley
1236 N. Flores St. #402
- ---------------------------
Street Address
West Hollywood, CA 90069
- ---------------------------
City and State
<PAGE> 1
Exhibit 10.30
STOCK OPTION AGREEMENT
Stan Lee Media, Inc., a Colorado corporation ("Company"), desiring to
afford an opportunity to the Grantee named below to purchase certain shares of
the Company's Common Stock, no par value, to provide the Grantee with an added
incentive as an employee of the Company or of one or more of its subsidiaries,
hereby grants to Grantee, and the Grantee accepts, an option (the "Option") to
purchase the number of such shares optioned as specified below, during the term
ending at midnight (prevailing local time at the Company's principal offices) on
the expiration date of this Option specified below, at the option exercise price
specified below, subject to and upon the following terms and conditions:
1. Identifying Provisions: As used in this Option, the following terms
shall have the following meanings:
<TABLE>
<S> <C>
(a) Grantee: Jennifer Kahn
(b) Date of Grant: September 24, 1999
(c) Number of Shares optioned: Ten Thousand (10,000)
(d) Option exercise price per share: Five and 50/100 Dollars ($5.50)
(e) Expiration Date: September 23, 2004
</TABLE>
2. Timing of Purchases: This Option is not exercisable in any part
until one (1) year after the date of grant. Subject to the provisions for
termination and acceleration, this Option shall become exercisable in
installments as follows:
(a) after one (1) year after the date of grant, up to fifty
Percent (50%) of the total number of shares optioned; and
(b) after two (2) years after the date of grant, up to all of the
optioned shares until and including the expiration date of the Option whereupon
the Option shall expire and may thereafter no longer be exercised.
The Company hereby agrees that at all times there shall be reserved for
issuance and delivery upon exercise of the Option such number of shares of its
Common Stock as shall be required for issuance and delivery upon full exercise
of the Option.
3. Restrictions on Exercise: The following additional provisions shall
apply to the exercise of the Option:
(a) Termination of Employment. If the Grantee's employment by the
Company or any of its subsidiaries is terminated for any reason other than death
only that portion of this Option exercisable at the time of such termination of
employment may thereafter be exercised, and it may not be exercised more than
three (3) months after such termination nor after the expiration date of this
Option, whichever date is sooner, unless such termination is by reason of the
Grantee's permanent and total disability, in which case such period of three (3)
months shall be extended to one (1) year. In all other respects, this Option
shall terminate upon such termination of employment.
<PAGE> 2
Stan Lee Media, Inc.
Stock Option Agreement
As of September 24, 1999
Page 2
(b) Death of Grantee. If the Grantee shall die during the term of
this Option, the Grantee's legal representative or representatives, or the
person or persons entitled to do so under the Grantee's last will and testament
or under applicable intestate laws, shall have the right to exercise this
Option, but only for the number of shares as to which the Grantee was entitled
to exercise this Option in accordance with Section 2 hereof on the date of his
death, and such right shall expire and this Option shall terminate one (1) year
after the date of the Grantee's death or on the expiration date of this Option,
whichever date is sooner. In all other respects, this Option shall terminate
upon such death.
(c) Continuity of Employment. This Option shall not be exercisable
by the Grantee in any part unless at all times beginning with the date of grant
and ending no more than three (3) months prior to the date of exercise, the
Grantee has, except for military service leave, sick leave or other bona fide
leave of absence (such as temporary employment by the United States Government)
been in the continuous employ of the Company or a parent or subsidiary thereof,
except that such period of three (3) months shall be one (1) year following any
termination of the Grantee's employment by reason of his permanent and total
disability.
4. Non-Transferable: The Grantee may not transfer this Option except by
will or the laws of descent and distribution. This Option shall not be otherwise
transferred, assigned, pledged, hypothecated or disposed of in any way, whether
by operation of law or otherwise, and shall be exercisable during the Grantee's
lifetime only by the Grantee or his guardian or legal representative.
5. Rights in Shares Before Issuance and Delivery: No person, including
the Grantee, shall be entitled to the privileges of stock ownership in respect
of any shares issuable upon exercise of this Option, unless and until such
shares have been issued to such person as fully paid shares.
6. Adjustments and Corporate Reorganizations: If the Company shall at
any time issue Common Stock by way of dividend or other distribution on any
stock of the Company or subdivide or combine the outstanding shares of Common
Stock, then the exercise price shall be proportionately decreased in the case of
such issuance (on the day following the date fixed for determining shareholders
entitled to receive such dividend or other distribution), or decreased in the
case of such subdivision, or increased in the case of such combination (on the
date that such subdivision or combination shall become effective). Upon any
adjustment of the exercise price, Grantee shall thereafter (until another such
adjustment) be entitled to purchase, at the new exercise price, the number of
shares, calculated to the nearest full share, obtained by multiplying the number
of shares of Common Stock initially issuable upon exercise of the Option by the
exercise price in effect on the date hereof and dividing the product so obtained
by the new exercise price.
In the event of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock (other than as a result of an
issuance of Common Stock by way of dividend or other distribution or of a
subdivision or combination), or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of the
Option), or in case of any sale or conveyance to any other corporation of the
property and assets of the Company as an entirety or substantially as an
entirety, as a condition to any of the foregoing, the Company shall cause
effective provision to be made (including acceleration of vesting) so that
Grantee
<PAGE> 3
Stan Lee Media, Inc.
Stock Option Agreement
As of September 24, 1999
Page 3
shall have the right thereafter, by exercising the Option, to purchase the kind
and amount of shares of stock and other securities and property receivable upon
such reclassification, capital reorganization or other change, consolidation,
merger, sale or conveyance as if Grantee had exercised the Option prior to such
transaction. Any such provision shall include provision for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in the Option. The foregoing provisions shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of Common Stock
and to successive consolidations, mergers, sales or conveyances.
In the event the Company spins off a subsidiary by distributing to the
shareholders of the Company, as a dividend or otherwise, the stock of the
subsidiary, the Company shall reserve, for the life of the Option, shares of the
subsidiary to be delivered to Grantee upon exercising the Option to the same
extent as if Grantee were the owner of record of Common Stock on the record date
for payment of the shares of the subsidiary.
7. Exercise, Payment for and Delivery of Stock: Each exercise of the
Option shall be accomplished by presentation and delivery to the Company of a
notice of exercise, duly executed and accompanied by payment of the exercise
price for the number of shares of Common Stock specified in such notice of
exercise, together with all Federal and state taxes applicable upon such
exercise.
8. Restricted Stock Provisions: Shares of stock issued on exercise of
this Option shall upon issuance be restricted securities as such term is defined
in Rule 144(a)(3) of the Securities Act of 1933, as amended. The restrictions
imposed under this paragraph shall apply as well to all shares or other
securities issued in respect of restricted stock in connection with any stock
split, reverse stock split, stock dividend, recapitalization, reclassification,
spin-off, split-off, merger, consolidation or reorganization.
9. Notices: Any notice to be given to the Company shall be addressed to
the Company in care of its Secretary at its principal office, and any notice to
be given to the Grantee shall be addressed to him at the address beneath his
signature hereto or at such other address as the Grantee may hereafter designate
in writing to the Company. Any such notice shall be deemed duly given when
addressed as aforesaid, registered or certified, and deposited, postage and
registry or certification fee prepaid, in a post office or branch post office
regularly maintained by the United States Postal Service.
10. Governing Law: This Agreement shall be governed by the laws of the
State of California without regard to principles of conflicts of laws.
<PAGE> 4
Stan Lee Media, Inc.
Stock Option Agreement
As of September 24, 1999
Page 4
IN WITNESS WHEREOF, the Company has granted this Option on the date of
grant specified above.
STAN LEE MEDIA, INC.
By: /s/ Gill Champion
--------------------------
Its: Chief Operating Officer
-------------------------
AGREED AND ACCEPTED AS OF
THIS 24TH DAY OF SEPTEMBER, 1999.
/s/ Jennifer Kahn
- ---------------------------------
Jennifer Kahn
1430 Amherst Ave., #1
- ---------------------------------
Street Address
Los Angeles, CA 90025
- ---------------------------------
City and State
<PAGE> 1
Exhibit 10.31
STOCK OPTION AGREEMENT
Stan Lee Media, Inc., a Colorado corporation ("Company"), desiring to
afford an opportunity to the Grantee named below to purchase certain shares of
the Company's Common Stock, no par value, to provide the Grantee with an added
incentive as an employee of the Company or of one or more of its subsidiaries,
hereby grants to Grantee, and the Grantee accepts, an option (the "Option") to
purchase the number of such shares optioned as specified below, during the term
ending at midnight (prevailing local time at the Company's principal offices) on
the expiration date of this Option specified below, at the option exercise price
specified below, subject to and upon the following terms and conditions:
1. Identifying Provisions: As used in this Option, the following terms
shall have the following meanings:
<TABLE>
<S> <C>
(a) Grantee: Tony Pastor
(b) Date of Grant: September 24, 1999
(c) Number of Shares optioned: Ten Thousand (10,000)
(d) Option exercise price per share: Five and 50/100 Dollars ($5.50)
(e) Expiration Date: September 23, 2004
</TABLE>
2. Timing of Purchases: This Option is not exercisable in any part
until one (1) year after the date of grant. Subject to the provisions for
termination and acceleration, this Option shall become exercisable in
installments as follows:
(a) after one (1) year after the date of grant, up to fifty
percent (50%) of the total number of shares optioned; and
(b) after two (2) years after the date of grant, up to all of the
optioned shares until and including the expiration date of the Option whereupon
the Option shall expire and may thereafter no longer be exercised.
The Company hereby agrees that at all times there shall be reserved for
issuance and delivery upon exercise of the Option such number of shares of its
Common Stock as shall be required for issuance and delivery upon full exercise
of the Option.
3. Restrictions on Exercise: The following additional provisions shall
apply to the exercise of the Option:
(a) Termination of Employment. If the Grantee's employment by the
Company or any of its subsidiaries is terminated for any reason other than death
only that portion of this Option exercisable at the time of such termination of
employment may thereafter be exercised, and it may not be exercised more than
three (3) months after such termination nor after the expiration date of this
Option, whichever date is sooner, unless such termination is by reason of the
Grantee's permanent and total disability, in which case such period of three (3)
months shall be extended to one (1) year. In all other respects, this Option
shall terminate upon such termination of employment.
<PAGE> 2
Stan Lee Media, Inc.
Stock Option Agreement
As of September 24, 1999
Page 2
(b) Death of Grantee. If the Grantee shall die during the term of
this Option, the Grantee's legal representative or representatives, or the
person or persons entitled to do so under the Grantee's last will and testament
or under applicable intestate laws, shall have the right to exercise this
Option, but only for the number of shares as to which the Grantee was entitled
to exercise this Option in accordance with Section 2 hereof on the date of his
death, and such right shall expire and this Option shall terminate one (1) year
after the date of the Grantee's death or on the expiration date of this Option,
whichever date is sooner. In all other respects, this Option shall terminate
upon such death.
(c) Continuity of Employment. This Option shall not be exercisable
by the Grantee in any part unless at all times beginning with the date of grant
and ending no more than three (3) months prior to the date of exercise, the
Grantee has, except for military service leave, sick leave or other bona fide
leave of absence (such as temporary employment by the United States Government)
been in the continuous employ of the Company or a parent or subsidiary thereof,
except that such period of three (3) months shall be one (1) year following any
termination of the Grantee's employment by reason of his permanent and total
disability.
4. Non-Transferable: The Grantee may not transfer this Option except by
will or the laws of descent and distribution. This Option shall not be otherwise
transferred, assigned, pledged, hypothecated or disposed of in any way, whether
by operation of law or otherwise, and shall be exercisable during the Grantee's
lifetime only by the Grantee or his guardian or legal representative.
5. Rights in Shares Before Issuance and Delivery: No person, including
the Grantee, shall be entitled to the privileges of stock ownership in respect
of any shares issuable upon exercise of this Option, unless and until such
shares have been issued to such person as fully paid shares.
6. Adjustments and Corporate Reorganizations: If the Company shall at
any time issue Common Stock by way of dividend or other distribution on any
stock of the Company or subdivide or combine the outstanding shares of Common
Stock, then the exercise price shall be proportionately decreased in the case of
such issuance (on the day following the date fixed for determining shareholders
entitled to receive such dividend or other distribution), or decreased in the
case of such subdivision, or increased in the case of such combination (on the
date that such subdivision or combination shall become effective). Upon any
adjustment of the exercise price, Grantee shall thereafter (until another such
adjustment) be entitled to purchase, at the new exercise price, the number of
shares, calculated to the nearest full share, obtained by multiplying the number
of shares of Common Stock initially issuable upon exercise of the Option by the
exercise price in effect on the date hereof and dividing the product so obtained
by the new exercise price.
In the event of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock (other than as a result of an
issuance of Common Stock by way of dividend or other distribution or of a
subdivision or combination), or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of the
Option), or in case of any sale or conveyance to any other corporation of the
property and assets of the Company as an entirety or substantially as an
entirety, as a condition to any of the foregoing, the Company shall cause
effective provision to be made (including acceleration of vesting) so that
Grantee
<PAGE> 3
Stan Lee Media, Inc.
Stock Option Agreement
As of September 24, 1999
Page 3
shall have the right thereafter, by exercising the Option, to purchase the kind
and amount of shares of stock and other securities and property receivable upon
such reclassification, capital reorganization or other change, consolidation,
merger, sale or conveyance as if Grantee had exercised the Option prior to such
transaction. Any such provision shall include provision for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in the Option. The foregoing provisions shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of Common Stock
and to successive consolidations, mergers, sales or conveyances.
In the event the Company spins off a subsidiary by distributing to the
shareholders of the Company, as a dividend or otherwise, the stock of the
subsidiary, the Company shall reserve, for the life of the Option, shares of the
subsidiary to be delivered to Grantee upon exercising the Option to the same
extent as if Grantee were the owner of record of Common Stock on the record date
for payment of the shares of the subsidiary.
7. Exercise, Payment for and Delivery of Stock: Each exercise of the
Option shall be accomplished by presentation and delivery to the Company of a
notice of exercise, duly executed and accompanied by payment of the exercise
price for the number of shares of Common Stock specified in such notice of
exercise, together with all Federal and state taxes applicable upon such
exercise.
8. Restricted Stock Provisions: Shares of stock issued on exercise of
this Option shall upon issuance be restricted securities as such term is defined
in Rule 144(a)(3) of the Securities Act of 1933, as amended. The restrictions
imposed under this paragraph shall apply as well to all shares or other
securities issued in respect of restricted stock in connection with any stock
split, reverse stock split, stock dividend, recapitalization, reclassification,
spin-off, split-off, merger, consolidation or reorganization.
9. Notices: Any notice to be given to the Company shall be addressed to
the Company in care of its Secretary at its principal office, and any notice to
be given to the Grantee shall be addressed to him at the address beneath his
signature hereto or at such other address as the Grantee may hereafter designate
in writing to the Company. Any such notice shall be deemed duly given when
addressed as aforesaid, registered or certified, and deposited, postage and
registry or certification fee prepaid, in a post office or branch post office
regularly maintained by the United States Postal Service.
10. Governing Law: This Agreement shall be governed by the laws of the
State of California without regard to principles of conflicts of laws.
<PAGE> 4
Stan Lee Media, Inc.
Stock Option Agreement
As of September 24, 1999
Page 4
IN WITNESS WHEREOF, the Company has granted this Option on the date of
grant specified above.
STAN LEE MEDIA, INC.
By: /s/ Gill Champion
----------------------------------
Its: Chief Operating Officer
---------------------------------
AGREED AND ACCEPTED AS OF
THIS 24TH DAY OF SEPTEMBER, 1999.
/s/ Tony Pastor
- ---------------------------------
Tony Pastor
980 Taehevah Drive
- ---------------------------------
Street Address
Palm Springs, CA 92262
- ---------------------------------
City and State
<PAGE> 1
Exhibit 10.32
STOCK OPTION AGREEMENT
Stan Lee Media, Inc., a Colorado corporation ("Company"), desiring to
afford an opportunity to the Grantee named below to purchase certain shares of
the Company's Common Stock, no par value, to provide the Grantee with an added
incentive as an employee of the Company or of one or more of its subsidiaries,
hereby grants to Grantee, and the Grantee accepts, an option (the "Option") to
purchase the number of such shares optioned as specified below, during the term
ending at midnight (prevailing local time at the Company's principal offices) on
the expiration date of this Option specified below, at the option exercise price
specified below, subject to and upon the following terms and conditions:
1. Identifying Provisions: As used in this Option, the following terms
shall have the following meanings:
<TABLE>
<S> <C>
(a) Grantee: Mone Peterson
(b) Date of Grant: September 24, 1999
(c) Number of Shares optioned: Ten Thousand (10,000)
(d) Option exercise price per share: Five and 50/100 Dollars ($5.50)
(e) Expiration Date: September 23, 2004
</TABLE>
2. Timing of Purchases: This Option is not exercisable in any part
until one (1) year after the date of grant. Subject to the provisions for
termination and acceleration, this Option shall become exercisable in
installments as follows:
(a) after one (1) year after the date of grant, up to fifty
Percent (50%) of the total number of shares optioned; and
(b) after two (2) years after the date of grant, up to all of the
optioned shares until and including the expiration date of the Option whereupon
the Option shall expire and may thereafter no longer be exercised.
The Company hereby agrees that at all times there shall be reserved for
issuance and delivery upon exercise of the Option such number of shares of its
Common Stock as shall be required for issuance and delivery upon full exercise
of the Option.
3. Restrictions on Exercise: The following additional provisions shall
apply to the exercise of the Option:
(a) Termination of Employment. If the Grantee's employment by the
Company or any of its subsidiaries is terminated for any reason other than death
only that portion of this Option exercisable at the time of such termination of
employment may thereafter be exercised, and it may not be exercised more than
three (3) months after such termination nor after the expiration date of this
Option, whichever date is sooner, unless such termination is by reason of the
Grantee's permanent and total disability, in which case such period of three (3)
months shall be extended to one (1) year. In all other respects, this Option
shall terminate upon such termination of employment.
<PAGE> 2
Stan Lee Media, Inc.
Stock Option Agreement
As of September 24, 1999
Page 2
(b) Death of Grantee. If the Grantee shall die during the term of
this Option, the Grantee's legal representative or representatives, or the
person or persons entitled to do so under the Grantee's last will and testament
or under applicable interstate laws, shall have the right to exercise this
Option, but only for the number of shares as to which the Grantee was entitled
to exercise this Option in accordance with Section 2 hereof on the date of his
death, and such right shall expire and this Option shall terminate one (1) year
after the date of the Grantee's death or on the expiration date of this Option,
whichever date is sooner. In all other respects, this Option shall terminate
upon such death.
(c) Continuity of Employment. This Option shall not be exercisable
by the Grantee in any part unless at all times beginning with the date of grant
and ending no more than three (3) months prior to the date of exercise, the
Grantee has, except for military service leave, sick leave or other bona fide
leave of absence (such as temporary employment by the United States Government)
been in the continuous employ of the Company or a parent or subsidiary thereof,
except that such period of three (3) months shall be one (1) year following any
termination of the Grantee's employment by reason of his permanent and total
disability.
4. Non-Transferable: The Grantee may not transfer this Option except by
will or the laws of descent and distribution. This Option shall not be otherwise
transferred, assigned, pledged, hypothecated or disposed of in any way, whether
by operation of law or otherwise, and shall be exercisable during the Grantee's
lifetime only by the Grantee or his guardian or legal representative.
5. Rights in Shares Before Issuance and Delivery: No person, including
the Grantee, shall be entitled to the privileges of stock ownership in respect
of any shares issuable upon exercise of this Option, unless and until such
shares have been issued to such person as fully paid shares.
6. Adjustments and Corporate Reorganizations: If the Company shall at
any time issue Common Stock by way of dividend or other distribution on any
stock of the Company or subdivide or combine the outstanding shares of Common
Stock, then the exercise price shall be proportionately decreased in the case of
such issuance (on the day following the date fixed for determining shareholders
entitled to receive such dividend or other distribution), or decreased in the
case of such subdivision, or increased in the case of such combination (on the
date that such subdivision or combination shall become effective). Upon any
adjustment of the exercise price, Grantee shall thereafter (until another such
adjustment) be entitled to purchase, at the new exercise price, the number of
shares, calculated to the nearest full share, obtained by multiplying the number
of shares of Common Stock initially issuable upon exercise of the Option by the
exercise price in effect on the date hereof and dividing the product so obtained
by the new exercise price.
In the event of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock (other than as a result of an
issuance of Common Stock by way of dividend or other distribution or of a
subdivision or combination), or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of the
Option), or in case of any sale or conveyance to any other corporation of the
property and assets of the Company as an entirety or substantially as an
entirety, as a condition to any of the foregoing, the Company shall cause
effective provision to be made (including acceleration of vesting) so that
Grantee
<PAGE> 3
Stan Lee Media, Inc.
Stock Option Agreement
As of September 24, 1999
Page 3
shall have the right thereafter, by exercising the Option, to purchase the kind
and amount of shares of stock and other securities and property receivable upon
such reclassification, capital reorganization or other change, consolidation,
merger, sale or conveyance as if Grantee had exercised the Option prior to such
transaction. Any such provision shall include provision for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in the Option. The foregoing provisions shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of Common Stock
and to successive consolidations, mergers, sales or conveyances.
In the event the Company spins off a subsidiary by distributing to the
shareholders of the Company, as a dividend or otherwise, the stock of the
subsidiary, the Company shall reserve, for the life of the Option, shares of the
subsidiary to be delivered to Grantee upon exercising the Option to the same
extent as if Grantee were the owner of record of Common Stock on the record date
for payment of the shares of the subsidiary.
7. Exercise, Payment for and Delivery of Stock: Each exercise of the
Option shall be accomplished by presentation and delivery to the Company of a
notice of exercise, duly executed and accompanied by payment of the exercise
price for the number of shares of Common Stock specified in such notice of
exercise, together with all Federal and state taxes applicable upon such
exercise.
8. Restricted Stock Provisions: Shares of stock issued on exercise of
this Option shall upon issuance be restricted securities as such term is defined
in Rule 144(a)(3) of the Securities Act of 1933, as amended. The restrictions
imposed under this paragraph shall apply as well to all shares or other
securities issued in respect of restricted stock in connection with any stock
split, reverse stock split, stock dividend, recapitalization, reclassification,
spin-off, split-off, merger, consolidation or reorganization.
9. Notices: Any notice to be given to the Company shall be addressed to
the Company in care of its Secretary at its principal office, and any notice to
be given to the Grantee shall be addressed to him at the address beneath his
signature hereto or at such other address as the Grantee may hereafter designate
in writing to the Company. Any such notice shall be deemed duly given when
addressed as aforesaid, registered or certified, and deposited, postage and
registry or certification fee prepaid, in a post office or branch post office
regularly maintained by the United States Postal Service.
10. Governing Law: This Agreement shall be governed by the laws of the
State of California without regard to principles of conflicts of laws.
<PAGE> 4
Stan Lee Media, Inc.
Stock Option Agreement
As of September 24, 1999
Page 4
IN WITNESS WHEREOF, the Company has granted this Option on the date of
grant specified above.
STAN LEE MEDIA, INC.
By: /s/ Gill Champion
--------------------------
Its: Chief Operating Officer
-------------------------
AGREED AND ACCEPTED AS OF
THIS 24TH DAY OF SEPTEMBER, 1999.
/s/ Mone Peterson
- ---------------------------------
Mone Peterson
116 N. Craig Ave.
- ---------------------------------
Street Address
Pasadena, California
- ---------------------------------
City and State
<PAGE> 1
Exhibit 10.33
STOCK OPTION AGREEMENT
Stan Lee Media, Inc., a Colorado corporation ("Company"), desiring to
afford an opportunity to the Grantee named below to purchase certain shares of
the Company's Common Stock, no par value, to provide the Grantee with an added
incentive as an employee of the Company or of one or more of its subsidiaries,
hereby grants to Grantee, and the Grantee accepts, an option (the "Option") to
purchase the number of such shares optioned as specified below, during the term
ending at midnight (prevailing local time at the Company's principal offices) on
the expiration date of this Option specified below, at the option exercise price
specified below, subject to and upon the following terms and conditions:
1. Identifying Provisions: As used in this Option, the following terms
shall have the following meanings:
<TABLE>
<S> <C>
(a) Grantee: Patty Smith
(b) Date of Grant: September 24, 1999
(c) Number of Shares optioned: Ten Thousand (10,000)
(d) Option exercise price per share: Five and 50/100 Dollars ($5.50)
(e) Expiration Date: September 23, 2004
</TABLE>
2. Timing of Purchases: This Option is not exercisable in any part
until one (1) year after the date of grant. Subject to the provisions for
termination and acceleration, this Option shall become exercisable in
installments as follows:
(a) after one (1) year after the date of grant, up to fifty
percent (50%) of the total number of shares optioned; and
(b) after two (2) years after the date of grant, up to all of the
optioned shares until and including the expiration date of the Option whereupon
the Option shall expire and may thereafter no longer be exercised.
The Company hereby agrees that at all times there shall be reserved for
issuance and delivery upon exercise of the Option such number of shares of its
Common Stock as shall be required for issuance and delivery upon full exercise
of the Option.
3. Restrictions on Exercise: The following additional provisions shall
apply to the exercise of the Option:
(a) Termination of Employment. If the Grantee's employment by the
Company or any of its subsidiaries is terminated for any reason other than death
only that portion of this Option exercisable at the time of such termination of
employment may thereafter be exercised, and it may not be exercised more than
three (3) months after such termination nor after the expiration date of this
Option, whichever date is sooner, unless such termination is by reason of the
Grantee's permanent and total disability, in which case such period of three (3)
months shall be extended to one (1) year. In all other respects, this Option
shall terminate upon such termination of employment.
<PAGE> 2
Stan Lee Media, Inc.
Stock Option Agreement
As of September 24, 1999
Page 2
(b) Death of Grantee. If the Grantee shall die during the term of
this Option, the Grantee's legal representative or representatives, or the
person or persons entitled to do so under the Grantee's last will and testament
or under applicable intestate laws, shall have the right to exercise this
Option, but only for the number of shares as to which the Grantee was entitled
to exercise this Option in accordance with Section 2 hereof on the date of his
death, and such right shall expire and this Option shall terminate one (1) year
after the date of the Grantee's death or on the expiration date of this Option,
whichever date is sooner. In all other respects, this Option shall terminate
upon such death.
(c) Continuity of Employment. This Option shall not be exercisable
by the Grantee in any part unless at all times beginning with the date of grant
and ending no more than three (3) months prior to the date of exercise, the
Grantee has, except for military service leave, sick leave or other bona fide
leave of absence (such as temporary employment by the United States Government)
been in the continuous employ of the Company or a parent or subsidiary thereof,
except that such period of three (3) months shall be one (1) year following any
termination of the Grantee's employment by reason of his permanent and total
disability.
4. Non-Transferable: The Grantee may not transfer this Option except by
will or the laws of descent and distribution. This Option shall not be otherwise
transferred, assigned, pledged, hypothecated or disposed of in any way, whether
by operation of law or otherwise, and shall be exercisable during the Grantee's
lifetime only by the Grantee or his guardian or legal representative.
5. Rights in Shares Before Issuance and Delivery: No person, including
the Grantee, shall be entitled to the privileges of stock ownership in respect
of any shares issuable upon exercise of this Option, unless and until such
shares have been issued to such person as fully paid shares.
6. Adjustments and Corporate Reorganizations: If the Company shall at
any time issue Common Stock by way of dividend or other distribution on any
stock of the Company or subdivide or combine the outstanding shares of Common
Stock, then the exercise price shall be proportionately decreased in the case of
such issuance (on the day following the date fixed for determining shareholders
entitled to receive such dividend or other distribution), or decreased in the
case of such subdivision, or increased in the case of such combination (on the
date that such subdivision or combination shall become effective). Upon any
adjustment of the exercise price, Grantee shall thereafter (until another such
adjustment) be entitled to purchase, at the new exercise price, the number of
shares, calculated to the nearest full share, obtained by multiplying the number
of shares of Common Stock initially issuable upon exercise of the Option by the
exercise price in effect on the date hereof and dividing the product so obtained
by the new exercise price.
In the event of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock (other than as a result of an
issuance of Common Stock by way of dividend or other distribution or of a
subdivision or combination), or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of the
Option), or in case of any sale or conveyance to any other corporation of the
property and assets of the Company as an entirety or substantially as an
entirety, as a condition to any of the foregoing, the Company shall cause
effective provision to be made (including acceleration of vesting) so that
Grantee
<PAGE> 3
Stan Lee Media, Inc.
Stock Option Agreement
As of September 24, 1999
Page 3
shall have the right thereafter, by exercising the Option, to purchase the kind
and amount of shares of stock and other securities and property receivable upon
such reclassification, capital reorganization or other change, consolidation,
merger, sale or conveyance as if Grantee had exercised the Option prior to such
transaction. Any such provision shall include provision for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in the Option. The foregoing provisions shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of Common Stock
and to successive consolidations, mergers, sales or conveyances.
In the event the Company spins off a subsidiary by distributing to the
shareholders of the Company, as a dividend or otherwise, the stock of the
subsidiary, the Company shall reserve, for the life of the Option, shares of the
subsidiary to be delivered to Grantee upon exercising the Option to the same
extent as if Grantee were the owner of record of Common Stock on the record date
for payment of the shares of the subsidiary.
7. Exercise, Payment for and Delivery of Stock: Each exercise of the
Option shall be accomplished by presentation and delivery to the Company of a
notice of exercise, duly executed and accompanied by payment of the exercise
price for the number of shares of Common Stock specified in such notice of
exercise, together with all Federal and state taxes applicable upon such
exercise.
8. Restricted Stock Provisions: Shares of stock issued on exercise of
this Option shall upon issuance be restricted securities as such term is defined
in Rule 144(a)(3) of the Securities Act of 1933, as amended. The restrictions
imposed under this paragraph shall apply as well to all shares or other
securities issued in respect of restricted stock in connection with any stock
split, reverse stock split, stock dividend, recapitalization, reclassification,
spin-off, split-off, merger, consolidation or reorganization.
9. Notices: Any notice to be given to the Company shall be addressed to
the Company in care of its Secretary at its principal office, and any notice to
be given to the Grantee shall be addressed to him at the address beneath his
signature hereto or at such other address as the Grantee may hereafter designate
in writing to the Company. Any such notice shall be deemed duly given when
addressed as aforesaid, registered or certified, and deposited, postage and
registry or certification fee prepaid, in a post office or branch post office
regularly maintained by the United States Postal Service.
10. Governing Law: This Agreement shall be governed by the laws of the
State of California without regard to principles of conflicts of laws.
<PAGE> 4
Stan Lee Media, Inc.
Stock Option Agreement
As of September 24, 1999
Page 4
IN WITNESS WHEREOF, the Company has granted this Option on the date of
grant specified above.
STAN LEE MEDIA, INC.
By: /s/ Gill Champion
----------------------------
Its: C.O.O.
------------------------
AGREED AND ACCEPTED AS OF
THIS 24TH DAY OF SEPTEMBER, 1999.
/s/ Patty Smith
- ----------------------------------
Patty Smith
327 W. Lutge Ave.
- ----------------------------------
Street Address
Burbank, CA 91506
- ----------------------------------
City and State
<PAGE> 1
Exhibit 10.34
STOCK OPTION AGREEMENT
Stan Lee Media, Inc., a Colorado corporation ("Company"), desiring to
afford an opportunity to the Grantee named below to purchase certain shares of
the Company's Common Stock, no par value, to provide the Grantee with an added
incentive as an employee of the Company or of one or more of its subsidiaries,
hereby grants to Grantee, and the Grantee accepts, an option (the "Option") to
purchase the number of such shares optioned as specified below, during the term
ending at midnight (prevailing local time at the Company's principal offices) on
the expiration date of this Option specified below, at the option exercise price
specified below, subject to and upon the following terms and conditions:
1. Identifying Provisions: As used in this Option, the following terms
shall have the following meanings:
<TABLE>
<S> <C>
(a) Grantee: Russ Heath
(b) Date of Grant: September 24, 1999
(c) Number of Shares optioned: Ten Thousand (10,000)
(d) Option exercise price per share: Five and 50/100 Dollars ($5.50)
(e) Expiration Date: September 23, 2004
</TABLE>
2. Timing of Purchases: This Option is not exercisable in any part until
one (1) year after the date of grant. Subject to the provisions for termination
and acceleration, this Option shall become exercisable in installments as
follows:
(a) after one (1) year after the date of grant, up to fifty percent
(50%) of the total number of shares optioned; and
(b) after two (2) years after the date of grant, up to all of the
optioned shares until and including the expiration date of the Option whereupon
the Option shall expire and may thereafter no longer be exercised.
The Company hereby agrees that at all times there shall be reserved for
issuance and delivery upon exercise of the Option such number of shares of its
Common Stock as shall be required for issuance and delivery upon full exercise
of the Option.
3. Restrictions on Exercise: The following additional provisions shall
apply to the exercise of the Option:
(a) Termination of Employment. If the Grantee's employment by the
Company or any of its subsidiaries is terminated for any reason other than death
only that portion of this Option exercisable at the time of such termination of
employment may thereafter be exercised, and it may not be exercised more than
three (3) months after such termination nor after the expiration date of this
Option, whichever date is sooner, unless such termination is by reason of the
Grantee's permanent and total disability, in which case such period of three (3)
months shall be extended to one (1) year. In all other respects, this Option
shall terminate upon such termination of employment.
<PAGE> 2
Stan Lee Media, Inc.
Stock Option Agreement
As of September 24, 1999
Page 2
(b) Death of Grantee. If the Grantee shall die during the term of
this Option, the Grantee's legal representative or representatives, or the
person or persons entitled to do so under the Grantee's last will and testament
or under applicable intestate laws, shall have the right to exercise this
Option, but only for the number of shares as to which the Grantee was entitled
to exercise this Option in accordance with Section 2 hereof on the date of his
death, and such right shall expire and this Option shall terminate one (1) year
after the date of the Grantee's death or on the expiration date of this Option,
whichever date is sooner. In all other respects, this Option shall terminate
upon such death.
(c) Continuity of Employment. This Option shall not be exercisable by
the Grantee in any part unless at all times beginning with the date of grant and
ending no more than three (3) months prior to the date of exercise, the Grantee
has, except for military service leave, sick leave or other bona fide leave of
absence (such as temporary employment by the United States Government) been in
the continuous employ of the Company or a parent or subsidiary thereof, except
that such period of three (3) months shall be one (1) year following any
termination of the Grantee's employment by reason of his permanent and total
disability.
4. Non-Transferable: The Grantee may not transfer this Option except by
will or the laws of descent and distribution. This Option shall not be otherwise
transferred, assigned, pledged, hypothecated or disposed of in any way, whether
by operation of law or otherwise, and shall be exercisable during the Grantee's
lifetime only by the Grantee or his guardian or legal representative.
5. Rights in Shares Before Issuance and Delivery: No person, including
the Grantee, shall be entitled to the privileges of stock ownership in respect
of any shares issuable upon exercise of this Option, unless and until such
shares have been issued to such person as fully paid shares.
6. Adjustments and Corporate Reorganizations: If the Company shall at
any time issue Common Stock by way of dividend or other distribution on any
stock of the Company or subdivide or combine the outstanding shares of Common
Stock, then the exercise price shall be proportionately decreased in the case of
such issuance (on the day following the date fixed for determining shareholders
entitled to receive such dividend or other distribution), or decreased in the
case of such subdivision, or increased in the case of such combination (on the
date that such subdivision or combination shall become effective). Upon any
adjustment of the exercise price, Grantee shall thereafter (until another such
adjustment) be entitled to purchase, at the new exercise price, the number of
shares, calculated to the nearest full share, obtained by multiplying the number
of shares of Common Stock initially issuable upon exercise of the Option by the
exercise price in effect on the date hereof and dividing the product so obtained
by the new exercise price.
In the event of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock (other than as a result of an
issuance of Common Stock by way of dividend or other distribution or of a
subdivision or combination), or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of the
Option), or in case of any sale or conveyance to any other corporation of the
property and assets of the Company as an entirety or substantially as an
entirety, as a condition to any of the foregoing, the Company shall cause
effective provision to be made (including acceleration of vesting) so that
Grantee
<PAGE> 3
Stan Lee Media, Inc.
Stock Option Agreement
As of September 24, 1999
Page 3
shall have the right thereafter, by exercising the Option, to purchase the kind
and amount of shares of stock and other securities and property receivable upon
such reclassification, capital reorganization or other change, consolidation,
merger, sale or conveyance as if Grantee had exercised the Option prior to such
transaction. Any such provision shall include provision for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in the Option. The foregoing provisions shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of Common Stock
and to successive consolidations, mergers, sales or conveyances.
In the event the Company spins off a subsidiary by distributing to the
shareholders of the Company, as a dividend or otherwise, the stock of the
subsidiary, the Company shall reserve, for the life of the Option, shares of the
subsidiary to be delivered to Grantee upon exercising the Option to the same
extent as if Grantee were the owner of record of Common Stock on the record date
for payment of the shares of the subsidiary.
7. Exercise, Payment for and Delivery of Stock: Each exercise of the
Option shall be accomplished by presentation and delivery to the Company of a
notice of exercise, duly executed and accompanied by payment of the exercise
price for the number of shares of Common Stock specified in such notice of
exercise, together with all Federal and state taxes applicable upon such
exercise.
8. Restricted Stock Provisions: Shares of stock issued on exercise of
this Option shall upon issuance be restricted securities as such term is defined
in Rule 144(a)(3) of the Securities Act of 1933, as amended. The restrictions
imposed under this paragraph shall apply as well to all shares or other
securities issued in respect of restricted stock in connection with any stock
split, reverse stock split, stock dividend, recapitalization, reclassification,
spin-off, split-off, merger, consolidation or reorganization.
9. Notices: Any notice to be given to the Company shall be addressed to
the Company in care of its Secretary at its principal office, and any notice to
be given to the Grantee shall be addressed to him at the address beneath his
signature hereto or at such other address as the Grantee may hereafter designate
in writing to the Company. Any such notice shall be deemed duly given when
addressed as aforesaid, registered or certified, and deposited, postage and
registry or certification fee prepaid, in a post office or branch post office
regularly maintained by the United States Postal Service.
10. Governing Law: This Agreement shall be governed by the laws of the
State of California without regard to principles of conflicts of laws.
<PAGE> 4
Stan Lee Media, Inc.
Stock Option Agreement
As of September 24, 1999
Page 4
IN WITNESS WHEREOF, the Company has granted this Option on the date of
grant specified above.
STAN LEE MEDIA, INC.
By: /s/ Gill Champion
-------------------------------
Its: Chief Operating Officer
--------------------------
AGREED AND ACCEPTED AS OF
THIS 24TH DAY OF SEPTEMBER, 1999.
/s/ Russ Heath
- -------------------------------
Russ Heath
13525 Leadwell St.
- -------------------------------
Street Address
Van Nuys, CA 91405
- -------------------------------
City and State
<PAGE> 1
Exhibit 10.35
STOCK OPTION AGREEMENT
Stan Lee Media, Inc. a Colorado corporation ("Company"), desiring to
afford an opportunity to the Grantee named below to purchase certain shares of
the Company's Common Stock, no par value, to provide the Grantee with an added
incentive as an Employee or Consultant of the Company or of one or more of its
Subsidiaries, hereby grants to Grantee, and the Grantee accepts, an option (the
"Option") to purchase the number of such shares optioned as specified below,
during the term ending at midnight (prevailing local time at the Company's
principal offices) on the expiration date of this Option specified below, at the
option exercise price specified below, subject to and upon the following terms
and conditions:
1. Identifying Provisions: As used in this Option, the following terms
shall have the following meanings:
<TABLE>
<S> <C>
(a) Grantee: Brady R. Darvin
(b) Date of Grant: September 27, 1999
(c) Number of Shares optioned: Fifteen Thousand (15,000)
(d) Option exercise price per share: Five and 50/100 ($5.50)
(e) Expiration Date: September 26, 2004
</TABLE>
2. Timing of Purchases: This Option is not exercisable in any part until
one (1) year after the date of grant. Subject to the provisions for termination
and acceleration, this Option shall become exercisable in installments as
follows:
(a) after one (1) year after the date of grant, up to fifty percent
(50%) of the total number of shares optioned; and
(b) after two (2) years after the date of grant, up to all of the
optioned shares until and including the expiration date of the Option whereupon
the Option shall expire and may thereafter no longer be exercised.
The Company hereby agrees that at all times there shall be reserved for
issuance and delivery upon exercise of the Option such number of shares of its
Common Stock as shall be required for issuance and delivery upon full exercise
of the Option.
3. Restrictions on Exercise: The following additional provisions shall
apply to the exercise of the Option:
(a) Termination of Employment. If the Grantee's employment by the
Company or any of its subsidiaries is terminated for any reason other than death
only that portion of this Option exercisable at the time of such termination of
employment may thereafter be exercised, and it may not be exercised more than
three (3) months after such termination nor after the expiration date of this
Option, whichever date is sooner, unless such termination is by reason of the
Grantee's permanent and total disability, in which case such period of three (3)
months shall be extended to one (1) year. In all other respects, this Option
shall terminate upon such termination of employment.
<PAGE> 2
Stan Lee Media, Inc.
Stock Option Agreement
Page 2
(b) Death of Grantee. If the Grantee shall die during the term of
this Option, the Grantee's legal representative or representatives, or the
person or persons entitled to do so under the Grantee's last will and testament
or under applicable intestate laws, shall have the right to exercise this
Option, but only for the number of shares as to which the Grantee was entitled
to exercise this Option in accordance with Section 2 hereof on the date of his
death, and such right shall expire and this Option shall terminate one (1) year
after the date of the Grantee's death or on the expiration date of this Option,
whichever date is sooner. In all other respects, this Option shall terminate
upon such death.
(c) Continuity of Employment. This Option shall not be exercisable by
the Grantee in any part unless at all times beginning with the date of grant and
ending no more than three (3) months prior to the date of exercise, the Grantee
has, except for military service leave, sick leave or other bona fide leave of
absence (such as temporary employment by the United States Government) been in
the continuous employ of the Company or a parent or subsidiary thereof, except
that such period of three (3) months shall be one (1) year following any
termination of the Grantee's employment by reason of his permanent and total
disability.
4. Non-Transferable: The Grantee may not transfer this Option except by
will or the laws of descent and distribution. This Option shall not be otherwise
transferred, assigned, pledged, hypothecated or disposed of in any way, whether
by operation of law or otherwise, and shall be exercisable during the Grantee's
lifetime only by the Grantee or his guardian or legal representative.
5. Rights in Shares Before Issuance and Delivery: No person, including
the Grantee, shall be entitled to the privileges of stock ownership in respect
of any shares issuable upon exercise of this Option, unless and until such
shares have been issued to such person as fully paid shares.
6. Adjustments and Corporate Reorganizations: If the Company shall at
any time issue Common Stock by way of dividend or other distribution on any
stock of the Company or subdivide or combine the outstanding shares of Common
Stock, then the exercise price shall be proportionately decreased in the case of
such issuance (on the day following the date fixed for determining shareholders
entitled to receive such dividend or other distribution), or decreased in the
case of such subdivision, or increased in the case of such combination (on the
date that such subdivision or combination shall become effective). Upon any
adjustment of the exercise price, Grantee shall thereafter (until another such
adjustment) be entitled to purchase, at the new exercise price, the number of
shares, calculated to the nearest full share, obtained by multiplying the number
of shares of Common Stock initially issuable upon exercise of the Option by the
exercise price in effect on the date hereof and dividing the product so obtained
by the new exercise price.
In the event of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock (other than as a result of an
issuance of Common Stock by way of dividend or other distribution or of a
subdivision or combination), or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of the
Option), or in case of any sale or conveyance to any other corporation of the
property and assets of the Company as an entirety or substantially as an
entirety, as a condition to any of the foregoing, the Company shall cause
effective provision to be made (including acceleration of vesting) so that
Grantee shall have the right thereafter, by exercising the Option, to purchase
the kind and amount of shares of
<PAGE> 3
Stan Lee Media, Inc.
Stock Option Agreement
Page 3
stock and other securities and property receivable upon such reclassification,
capital reorganization or other change, consolidation, merger, sale or
conveyance as if Grantee had exercised the Option prior to such transaction,
unless such successor corporation does not agree to assume the outstanding
Options or Stock Purchase Rights or to substitute equivalent options or rights,
in which case such Options or Stock Purchase Rights shall terminate upon the
consummation of the transaction. Any such provision shall include provision for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in the Option. The foregoing provisions shall similarly
apply to successive reclassifications, capital reorganizations and changes of
shares of Common Stock and to successive consolidations, mergers, sales or
conveyances.
In the event the Company spins off a subsidiary by distributing to the
shareholders of the Company, as a dividend or otherwise, the stock of the
subsidiary, the Company shall reserve, for the life of the Option, shares of the
subsidiary to be delivered to Grantee upon exercising the Option to the same
extent as if Grantee were the owner of record of Common Stock on the record date
for payment of the shares of the subsidiary.
7. Exercise, Payment for and Delivery of Stock: Each exercise of the
Option shall be accomplished by presentation and delivery to the Company of a
notice of exercise, duly executed and accompanied by payment of the exercise
price for the number of shares of Common Stock specified in such notice of
exercise, together with all Federal and state taxes applicable upon such
exercise.
8. Restricted Stock Provisions: Shares of stock issued on exercise of
this Option shall upon issuance be restricted securities as such term is defined
in Rule 144(a)(3) of the Securities Act of 1933, as amended. The restrictions
imposed under this paragraph shall apply as well to all shares or other
securities issued in respect of restricted stock in connection with any stock
split, reverse stock split, stock dividend, recapitalization, reclassification,
spin-off, split-off, merger, consolidation or reorganization.
9. Stock Option Plan. This Option is subject to, and the Company and the
Grantee agree to be bound by, all of the terms and conditions of the Company's
1999 Stock Incentive Plan under which this Option was granted, as the same shall
have been amended from time to time in accordance with the terms hereof,
provided that no such amendment shall deprive the Grantee, without his consent,
of this Option or any of his rights hereunder. Pursuant to said Plan, the board
of directors of the Company or its Committee established for such purposes is
vested with final authority to interpret and construe the Plan and this Option,
and is authorized to adopt rules and regulations for carrying out the Plan. A
copy of the Plan in its present form is available for inspection during business
hours by the Grantee or other persons entitled to exercise this Option at the
Company's principal office.
10. Notices: Any notice to be given to the Company shall be addressed to
the Company in care of its Secretary at its principal office, and any notice to
be given to the Grantee shall be addressed to him at the address beneath his
signature hereto or at such other address as the Grantee may hereafter designate
in writing to the Company. Any such notice shall be deemed duly given when
addressed as aforesaid, registered or certified, and deposited, postage and
registry or certification fee prepaid, in a post office or branch post office
regularly maintained by the United States Postal Service.
<PAGE> 4
Stan Lee Media, Inc.
Stock Option Agreement
Page 4
11. Governing Law: This Agreement shall be governed by the laws of the
State of California without regard to principles of conflicts of laws.
IN WITNESS WHEREOF, the Company has granted this Option on the date of
grant specified above.
STAN LEE MEDIA, INC.
By: /s/ Gill Champion
-------------------------------
Its: Chief Operating Officer
--------------------------
AGREED AND ACCEPTED AS OF
THIS 27TH DAY OF SEPTEMBER, 1999.
/s/ Brady R. Darvin
- -------------------------------
Grantee
4804 Gaviota Ave. #204
- -------------------------------
Street Address
Encino, CA 91436
- -------------------------------
City and State
<PAGE> 1
Exhibit 10.36
STOCK OPTION AGREEMENT
Stan Lee Media, Inc. a Colorado corporation ("Company"), desiring to
afford an opportunity to the Grantee named below to purchase certain shares of
the Company's Common Stock, no par value, to provide the Grantee with an added
incentive as an Employee or Consultant of the Company or of one or more of its
Subsidiaries, hereby grants to Grantee, and the Grantee accepts, an option (the
"Option") to purchase the number of such shares optioned as specified below,
during the term ending at midnight (prevailing local time at the Company's
principal offices) on the expiration date of this Option specified below, at the
option exercise price specified below, subject to and upon the following terms
and conditions:
1. Identifying Provisions: As used in this Option, the following terms
shall have the following meanings:
<TABLE>
<S> <C>
(a) Grantee: Larry Houston
(b) Date of Grant: September 27, 1999
(c) Number of Shares optioned: Twenty Thousand (20,000)
(d) Option exercise price per share: Five and 50/100 ($5.50)
(e) Expiration Date: September 26, 2004
</TABLE>
2. Timing of Purchases: This Option is not exercisable in any part until
one (1) year after the date of grant. Subject to the provisions for termination
and acceleration, this Option shall become exercisable in installments as
follows:
(a) after one (1) year after the date of grant, up to fifty percent
(50%) of the total number of shares optioned; and
(b) after two (2) years after the date of grant, up to all of the
optioned shares until and including the expiration date of the Option whereupon
the Option shall expire and may thereafter no longer be exercised.
The Company hereby agrees that at all times there shall be reserved for
issuance and delivery upon exercise of the Option such number of shares of its
Common Stock as shall be required for issuance and delivery upon full exercise
of the Option.
3. Restrictions on Exercise: The following additional provisions shall
apply to the exercise of the Option:
(a) Termination of Employment. If the Grantee's employment by the
Company or any of its subsidiaries is terminated for any reason other than death
only that portion of this Option exercisable at the time of such termination of
employment may thereafter be exercised, and it may not be exercised more than
three (3) months after such termination nor after the expiration date of this
Option, whichever date is sooner, unless such termination is by reason of the
Grantee's permanent and
<PAGE> 2
Stan Lee Media, Inc.
Stock Option Agreement
Page 2
total disability, in which case such period of three (3) months shall be
extended to one (1) year. In all other respects, this Option shall terminate
upon such termination of employment.
(b) Death of Grantee. If the Grantee shall die during the term of
this Option, the Grantee's legal representative or representatives, or the
person or persons entitled to do so under the Grantee's last will and testament
or under applicable intestate laws, shall have the right to exercise this
Option, but only for the number of shares as to which the Grantee was entitled
to exercise this Option in accordance with Section 2 hereof on the date of his
death, and such right shall expire and this Option shall terminate one (1) year
after the date of the Grantee's death or on the expiration date of this Option,
whichever date is sooner. In all other respects, this Option shall terminate
upon such death.
(c) Continuity of Employment. This Option shall not be exercisable by
the Grantee in any part unless at all times beginning with the date of grant and
ending no more than three (3) months prior to the date of exercise, the Grantee
has, except for military service leave, sick leave or other bona fide leave of
absence (such as temporary employment by the United States Government) been in
the continuous employ of the Company or a parent or subsidiary thereof, except
that such period of three (3) months shall be one (1) year following any
termination of the Grantee's employment by reason of his permanent and total
disability.
4. Non-Transferable: The Grantee may not transfer this Option except by
will or the laws of descent and distribution. This Option shall not be otherwise
transferred, assigned, pledged, hypothecated or disposed of in any way, whether
by operation of law or otherwise, and shall be exercisable during the Grantee's
lifetime only by the Grantee or his guardian or legal representative.
5. Rights in Shares Before Issuance and Delivery: No person, including
the Grantee, shall be entitled to the privileges of stock ownership in respect
of any shares issuable upon exercise of this Option, unless and until such
shares have been issued to such person as fully paid shares.
6. Adjustments and Corporate Reorganizations: If the Company shall at
any time issue Common Stock by way of dividend or other distribution on any
stock of the Company or subdivide or combine the outstanding shares of Common
Stock, then the exercise price shall be proportionately decreased in the case of
such issuance (on the day following the date fixed for determining shareholders
entitled to receive such dividend or other distribution), or decreased in the
case of such subdivision, or increased in the case of such combination (on the
date that such subdivision or combination shall become effective). Upon any
adjustment of the exercise price, Grantee shall thereafter (until another such
adjustment) be entitled to purchase, at the new exercise price, the number of
shares, calculated to the nearest full share, obtained by multiplying the number
of shares of Common Stock initially issuable upon exercise of the Option by the
exercise price in effect on the date hereof and dividing the product so obtained
by the new exercise price.
In the event of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock (other than as a result of an
issuance of Common Stock by way of dividend or other distribution or of a
subdivision or combination), or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of the
Option), or in case of any sale or conveyance to any other corporation of the
property and assets
<PAGE> 3
Stan Lee Media, Inc.
Stock Option Agreement
Page 3
of the Company as an entirety or substantially as an entirety, as a condition to
any of the foregoing, the Company shall cause effective provision to be made
(including acceleration of vesting) so that Grantee shall have the right
thereafter, by exercising the Option, to purchase the kind and amount of shares
of stock and other securities and property receivable upon such
reclassification, capital reorganization or other change, consolidation, merger,
sale or conveyance as if Grantee had exercised the Option prior to such
transaction, unless such successor corporation does not agree to assume the
outstanding Options or Stock Purchase Rights or to substitute equivalent options
or rights, in which case such Options or Stock Purchase Rights shall terminate
upon the consummation of the transaction. Any such provision shall include
provision for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in the Option. The foregoing
provisions shall similarly apply to successive reclassifications, capital
reorganizations and changes of shares of Common Stock and to successive
consolidations, mergers, sales or conveyances.
In the event the Company spins off a subsidiary by distributing to the
shareholders of the Company, as a dividend or otherwise, the stock of the
subsidiary, the Company shall reserve, for the life of the Option, shares of the
subsidiary to be delivered to Grantee upon exercising the Option to the same
extent as if Grantee were the owner of record of Common Stock on the record date
for payment of the shares of the subsidiary.
7. Exercise, Payment for and Delivery of Stock: Each exercise of the
Option shall be accomplished by presentation and delivery to the Company of a
notice of exercise, duly executed and accompanied by payment of the exercise
price for the number of shares of Common Stock specified in such notice of
exercise, together with all Federal and state taxes applicable upon such
exercise.
8. Restricted Stock Provisions: Shares of stock issued on exercise of
this Option shall upon issuance be restricted securities as such term is defined
in Rule 144(a)(3) of the Securities Act of 1933, as amended. The restrictions
imposed under this paragraph shall apply as well to all shares or other
securities issued in respect of restricted stock in connection with any stock
split, reverse stock split, stock dividend, recapitalization, reclassification,
spin-off, split-off, merger, consolidation or reorganization.
9. Stock Option Plan. This Option is subject to, and the Company and the
Grantee agree to be bound by, all of the terms and conditions of the Company's
1999 Stock Incentive Plan under which this Option was granted, as the same shall
have been amended from time to time in accordance with the terms hereof,
provided that no such amendment shall deprive the Grantee, without his consent,
of this Option or any of his rights hereunder. Pursuant to said Plan, the board
of directors of the Company or its Committee established for such purposes is
vested with final authority to interpret and construe the Plan and this Option,
and is authorized to adopt rules and regulations for carrying out the Plan. A
copy of the Plan in its present form is available for inspection during business
hours by the Grantee or other persons entitled to exercise this Option at the
Company's principal office.
10. Notices: Any notice to be given to the Company shall be addressed to
the Company in care of its Secretary at its principal office, and any notice to
be given to the Grantee shall be addressed to him at the address beneath his
signature hereto or at such other address as the Grantee may hereafter designate
in writing to the Company. Any such notice shall be deemed duly given when
addressed as aforesaid, registered or certified, and deposited, postage and
registry or certification fee prepaid, in a post office or branch post office
regularly maintained by the United States Postal Service.
<PAGE> 4
Stan Lee Media, Inc.
Stock Option Agreement
Page 4
11. Governing Law: This Agreement shall be governed by the laws of the
State of California without regard to principles of conflicts of laws.
IN WITNESS WHEREOF, the Company has granted this Option on the date of
grant specified above.
STAN LEE MEDIA, INC.
By: /s/ Gill Champion
-------------------------------
Its: Chief Operating Officer
--------------------------
AGREED AND ACCEPTED AS OF
THIS 27TH DAY OF SEPTEMBER, 1999.
/s/ Larry Houston
- -------------------------------
Larry Houston
764 Lucille Court
- -------------------------------
Street Address
Moorpark, CA 93021-1241
- -------------------------------
City and State
<PAGE> 1
Exhibit 10.37
STOCK OPTION AGREEMENT
Stan Lee Media, Inc. a Colorado corporation ("Company"), desiring to
afford an opportunity to the Grantee named below to purchase certain shares of
the Company's Common Stock, no par value, to provide the Grantee with an added
incentive as an Employee or Consultant of the Company or of one or more of its
Subsidiaries, hereby grants to Grantee, and the Grantee accepts, an option (the
"Option") to purchase the number of such shares optioned as specified below,
during the term ending at midnight (prevailing local time at the Company's
principal offices) on the expiration date of this Option specified below, at the
option exercise price specified below, subject to and upon the following terms
and conditions:
1. Identifying Provisions: As used in this Option, the following terms
shall have the following meanings:
<TABLE>
<S> <C>
(a) Grantee: Ruben Martinez
(b) Date of Grant: September 27, 1999
(c) Number of Shares optioned: Ten Thousand (10,000)
(d) Option exercise price per share: Five and 50/100 ($5.50)
(e) Expiration Date: September 26, 2004
</TABLE>
2. Timing of Purchases: This Option is not exercisable in any part
until one (1) year after the date of grant. Subject to the provisions for
termination and acceleration, this Option shall become exercisable in
installments as follows:
(a) after one (1) year after the date of grant, up to fifty
percent (50%) of the total number of shares optioned; and
(b) after two (2) years after the date of grant, up to all of the
optioned shares until and including the expiration date of the Option whereupon
the Option shall expire and may thereafter no longer be exercised.
The Company hereby agrees that at all times there shall be reserved for
issuance and delivery upon exercise of the Option such number of shares of its
Common Stock as shall be required for issuance and delivery upon full exercise
of the Option.
3. Restrictions on Exercise: The following additional provisions shall
apply to the exercise of the Option:
(a) Termination of Employment. If the Grantee's employment by the
Company or any of its subsidiaries is terminated for any reason other than death
only that portion of this Option exercisable at the time of such termination of
employment may thereafter be exercised, and it may not be exercised more than
three (3) months after such termination nor after the expiration date of this
Option, whichever date is sooner, unless such termination is by reason of the
Grantee's permanent and total disability, in which case such period of three (3)
months shall be extended to one (1) year. In all other respects, this Option
shall terminate upon such termination of employment.
<PAGE> 2
(b) Death of Grantee. If the Grantee shall die during the term of
this Option, the Grantee's legal representative or representatives, or the
person or persons entitled to do so under the Grantee's last will and testament
or under applicable intestate laws, shall have the right to exercise this
Option, but only for the number of shares as to which the Grantee was entitled
to exercise this Option in accordance with Section 2 hereof on the date of his
death, and such right shall expire and this Option shall terminate one (1) year
after the date of the Grantee's death or on the expiration date of this Option,
whichever date is sooner. In all other respects, this Option shall terminate
upon such death.
(c) Continuity of Employment. This Option shall not be exercisable
by the Grantee in any part unless at all times beginning with the date of grant
and ending no more than three (3) months prior to the date of exercise, the
Grantee has, except for military service leave, sick leave or other bona fide
leave of absence (such as temporary employment by the United States Government)
been in the continuous employ of the Company or a parent or subsidiary thereof,
except that such period of three (3) months shall be one (1) year following any
termination of the Grantee's employment by reason of his permanent and total
disability.
4. Non-Transferable: The Grantee may not transfer this Option except by
will or the laws of descent and distribution. This Option shall not be otherwise
transferred, assigned, pledged, hypothecated or disposed of in any way, whether
by operation of law or otherwise, and shall be exercisable during the Grantee's
lifetime only by the Grantee or his guardian or legal representative.
5. Rights in Shares Before Issuance and Delivery: No person, including
the Grantee, shall be entitled to the privileges of stock ownership in respect
of any shares issuable upon exercise of this Option, unless and until such
shares have been issued to such person as fully paid shares.
6. Adjustments and Corporate Reorganizations: If the Company shall at
any time issue Common Stock by way of dividend or other distribution on any
stock of the Company or subdivide or combine the outstanding shares of Common
Stock, then the exercise price shall be proportionately decreased in the case of
such issuance (on the day following the date fixed for determining shareholders
entitled to receive such dividend or other distribution), or decreased in the
case of such subdivision, or increased in the case of such combination (on the
date that such subdivision or combination shall become effective). Upon any
adjustment of the exercise price, Grantee shall thereafter (until another such
adjustment) be entitled to purchase, at the new exercise price, the number of
shares, calculated to the nearest full share, obtained by multiplying the number
of shares of Common Stock initially issuable upon exercise of the Option by the
exercise price in effect on the date hereof and dividing the product so obtained
by the new exercise price.
In the event of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock (other than as a result of an
issuance of Common Stock by way of dividend or other distribution or of a
subdivision or combination), or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of the
Option), or in case of any sale or conveyance to any other corporation of the
property and assets of the Company as an entirety or substantially as an
entirety, as a condition to any of the foregoing, the Company shall cause
effective provision to be made (including acceleration of vesting) so that
Grantee shall have the right thereafter, by exercising the Option, to purchase
the kind and amount of shares of
<PAGE> 3
stock and other securities and property receivable upon such reclassification,
capital reorganization or other change, consolidation, merger, sale or
conveyance as if Grantee had exercised the Option prior to such transaction,
unless such successor corporation does not agree to assume the outstanding
Options or Stock Purchase Rights or to substitute equivalent options or rights,
in which case such Options or Stock Purchase Rights shall terminate upon the
consummation of the transaction. Any such provision shall include provision for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in the Option. The foregoing provisions shall similarly
apply to successive reclassifications, capital reorganizations and changes of
shares of Common Stock and to successive consolidations, mergers, sales or
conveyances.
In the event the Company spins off a subsidiary by distributing to the
shareholders of the Company, as a dividend or otherwise, the stock of the
subsidiary, the Company shall reserve, for the life of the Option, shares of the
subsidiary to be delivered to Grantee upon exercising the Option to the same
extent as if Grantee were the owner of record of Common Stock on the record date
for payment of the shares of the subsidiary.
7. Exercise, Payment for and Delivery of Stock: Each exercise of the
Option shall be accomplished by presentation and delivery to the Company of a
notice of exercise, duly executed and accompanied by payment of the exercise
price for the number of shares of Common Stock specified in such notice of
exercise, together with all Federal and state taxes applicable upon such
exercise.
8. Restricted Stock Provisions: Shares of stock issued on exercise of
this Option shall upon issuance be restricted securities as such term is defined
in Rule 144(a)(3) of the Securities Act of 1933, as amended. The restrictions
imposed under this paragraph shall apply as well to all shares or other
securities issued in respect of restricted stock in connection with any stock
split, reverse stock split, stock dividend, recapitalization, reclassification,
spin-off, split-off, merger, consolidation or reorganization.
9. Stock Option Plan. This Option is subject to, and the Company and
the Grantee agree to be bound by, all of the terms and conditions of the
Company's 1999 Stock Incentive Plan under which this Option was granted, as the
same shall have been amended from time to time in accordance with the terms
hereof, provided that no such amendment shall deprive the Grantee, without his
consent, of this Option or any of his rights hereunder. Pursuant to said Plan,
the board of directors of the Company or its Committee established for such
purposes is vested with final authority to interpret and construe the Plan and
this Option, and is authorized to adopt rules and regulations for carrying out
the Plan. A copy of the Plan in its present form is available for inspection
during business hours by the Grantee or other persons entitled to exercise this
Option at the Company's principal office.
10. Notices: Any notice to be given to the Company shall be addressed to
the Company in care of its Secretary at its principal office, and any notice to
be given to the Grantee shall be addressed to him at the address beneath his
signature hereto or at such other address as the Grantee may hereafter designate
in writing to the Company. Any such notice shall be deemed duly given when
addressed as aforesaid, registered or certified, and deposited, postage and
registry or certification fee prepaid, in a post office or branch post office
regularly maintained by the United States Postal Service.
11. Governing Law: This Agreement shall be governed by the laws of the
State of California without regard to principles of conflicts of laws.
<PAGE> 4
IN WITNESS WHEREOF, the Company has granted this Option on the date of
grant specified above.
STAN LEE MEDIA, INC.
By: /s/ Gill Champion
--------------------------------
Its: C.O.O.
-------
AGREED AND ACCEPTED AS OF
THIS 27TH DAY OF SEPTEMBER, 1999.
Grantee: /s/ Ruben Martinez
Street Address: 3905 E. 52nd Street
City and State: Maywood, CA 90270
<PAGE> 1
Exhibit 10.38
STOCK OPTION AGREEMENT
Stan Lee Media, Inc. a Colorado corporation ("Company"), desiring to
afford an opportunity to the Grantee named below to purchase certain shares of
the Company's Common Stock, no par value, to provide the Grantee with an added
incentive as an Employee or Consultant of the Company or of one or more of its
Subsidiaries, hereby grants to Grantee, and the Grantee accepts, an option (the
"Option") to purchase the number of such shares optioned as specified below,
during the term ending at midnight (prevailing local time at the Company's
principal offices) on the expiration date of this Option specified below, at the
option exercise price specified below, subject to and upon the following terms
and conditions:
1. Identifying Provisions: As used in this Option, the following terms
shall have the following meanings:
<TABLE>
<S> <C>
(a) Grantee: Stanley A. Weston
(b) Date of Grant: October 5, 1999
(c) Number of Shares optioned: 27,500
(d) Option exercise price per share: $5.00
(e) Expiration Date: October 4, 2004
</TABLE>
2. Timing of Purchases: Subject to the provisions for termination and
acceleration, this Option shall become exercisable in installments as follows:
(a) after April 1, 2000, up to 17,500 of the total number of
shares optioned; and
(b) after April 1, 2001, up to all of the optioned shares until
and including the expiration date of the Option whereupon the Option shall
expire and may thereafter no longer be exercised.
The Company hereby agrees that at all times there shall be reserved for
issuance and delivery upon exercise of the Option such number of shares of its
Common Stock as shall be required for issuance and delivery upon full exercise
of the Option.
3. Non-Transferable: The Grantee may not transfer this Option except by
will or the laws of descent and distribution. This Option shall not be otherwise
transferred, assigned, pledged, hypothecated or disposed of in any way, whether
by operation of law or otherwise, and shall be exercisable by the Grantee or his
guardian or legal representative.
4. Rights in Shares Before Issuance and Delivery: No person, including
the Grantee, shall be entitled to the privileges of stock ownership in respect
of any shares issuable upon exercise of this Option, unless and until such
shares have been issued to such person as fully paid shares.
5. Exercise, Payment for and Delivery of Stock: Each exercise of the
Option shall be accomplished by presentation and delivery to the Company of a
notice of exercise, duly executed and
<PAGE> 2
accompanied by payment of the exercise price for the number of shares of Common
Stock specified in such notice of exercise, together with all Federal and state
taxes applicable upon such exercise. Notwithstanding the foregoing provisions
requiring payment by cash or check, Grantee shall have the right, in his sole
and absolute discretion, to elect a "cashless" exercise of the net value of the
Option.
6. Restricted Stock Provisions: Shares of stock issued on exercise of
this Option shall upon issuance be restricted securities as such term is defined
in Rule 144(a)(3) of the Securities Act of 1933, as amended. The restrictions
imposed under this paragraph shall apply as well to all shares or other
securities issued in respect of restricted stock in connection with any stock
split, reverse stock split, stock dividend, recapitalization, reclassification,
spin-off, split-off, merger, consolidation or reorganization.
7. Notices: Any notice to be given to the Company shall be addressed to
the Company in care of its Secretary at its principal office, and any notice to
be given to the Grantee shall be addressed to him at the address beneath his
signature hereto or at such other address as the Grantee may hereafter designate
in writing to the Company. Any such notice shall be deemed duly given when
addressed as aforesaid, registered or certified, and deposited, postage and
registry or certification fee prepaid, in a post office or branch post office
regularly maintained by the United States Postal Service.
8. Governing Law: This Agreement shall be governed by the laws of the
State of California without regard to principles of conflicts of laws.
IN WITNESS WHEREOF, the Company has granted this Option on the date of
grant specified above.
STAN LEE MEDIA, INC.
By: /s/ Gill Champion
------------------------------
Its: Chief Operating Officer
-----------------------------
AGREED AND ACCEPTED AS OF
THIS 5TH DAY OF OCTOBER, 1999.
Grantee: /s/ Stanley A. Weston
Street Address: 116 Central Park South
City and State: New York, NY 10019
<PAGE> 1
EXHIBIT 10.39
STAN LEE MEDIA, INC.
15821 Ventura Boulevard, Suite 675
Encino, CA 91436
As of October 5, 1999
VIA FACSIMILE TRANSMISSION
- --------------------------
Jeffrey D. Segal
10390 Santa Monica Boulevard, 4th Floor
Los Angeles, CA 90025
Ladies and Gentlemen:
We, Stan Lee Media, Inc., a Colorado corporation ("Company"), hereby
grant you, Jeffrey D. Segal ("Segal"), an option (the "Option") to purchase one
hundred thousand (100,000) shares of Company's Common Stock, no par value, at an
exercise price of Five and NO/100 Dollars ($5.00) per share (the "Exercise
Price"), subject to adjustment as described below. The Option shall vest as of
January 22, 2000, may be exercised in whole or in part, and shall be exercisable
at any time after vesting to and including October 4, 2009.
Each exercise of the Option shall be accomplished by presentation and
delivery to the Company of a notice of exercise, duly executed and accompanied
by payment of the Exercise Price for the number of shares of Common Stock
specified in such notice of exercise, together with all Federal and state taxes
applicable upon such exercise.
The Company hereby agrees that at all times there shall be reserved for
issuance and delivery upon exercise of the Option such number of shares of its
Common Stock as shall be required for issuance and delivery upon full exercise
of the Option. All shares of the Company's Common Stock to be issued to Segal
upon exercise of the Option will be restricted securities as such term is
defined in Rule 144(a)(3) of the Securities Act of 1933, as amended.
If Company at any times proposes to file a registration statement under
the Securities Act of 1933, as amended, respecting any securities of Company
(excluding registrations of securities to be offered in connection with
Company's employee benefit plans and registrations of securities to be offered
by Company in connection with acquisitions, mergers or similar transactions), it
will at such time give written notice to Segal of its intention to do so. Upon
the written request of Segal given within fifteen (15) days after receipt of any
such notice (which request shall specify the securities intended to be sold or
disposed of by Segal and describe the nature of any proposed sale or other
disposition thereof), Company shall use its best efforts, but shall not be
obligated, to cause all such securities specified in such request to be so
registered. In the event that any such registration shall be underwritten, if
the underwriters notify Company in writing that the inclusion in such
underwriting of such securities would materially and
<PAGE> 2
Jeffrey D. Segal
As of October 5, 1999
Page 2
adversely affect the underwriting, Company shall have the rightnot to include
such securities. In any registration pursuant to this paragraph, Segal shall pay
Company for the incremental portion of the Federal and state registration and
filing fees attributable to such securities and shall pay all underwriting
commissions, discounts, underwriting expenses and taxes attributable to such
securities.
Segal shall not, by virtue hereof, be entitled to any rights of a
shareholder of the Company either at law or in equity, and the rights of Segal
under the Option are limited to those expressed herein.
If the Company shall at any time issue Common Stock by way of dividend
or other distribution on any stock of the Company or subdivide or combine the
outstanding shares of Common Stock, then the Exercise Price shall be
proportionately decreased in the case of such issuance (on the day following the
date fixed for determining shareholders entitled to receive such dividend or
other distribution), or decreased in the case of such subdivision, or increased
in the case of such combination (on the date that such subdivision or
combination shall become effective). Upon any adjustment of the Exercise Price,
Segal shall thereafter (until another such adjustment) be entitled to purchase,
at the new Exercise Price, the number of shares, calculated to the nearest full
share, obtained by multiplying the number of shares of Common Stock initially
issuable upon exercise of the Option by the Exercise Price in effect on the date
hereof and dividing the product so obtained by the new Exercise Price.
In the event of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock (other than as a result of an
issuance of Common Stock by way of dividend or other distribution or of a
subdivision or combination), or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of the
Option), or in case of any sale or conveyance to any other corporation of the
property and assets of the Company as an entirety or substantially as an
entirety, as a condition to any of the foregoing, the Company shall cause
effective provision to be made (including acceleration of vesting) so that Segal
shall have the right thereafter, by exercising the Option, to purchase the kind
and amount of shares of stock and other securities and property receivable upon
such reclassification, capital reorganization or other change, consolidation,
merger, sale or conveyance as if Segal had exercised the Option prior to such
transaction. Any such provision shall include provision for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in the Option. The foregoing provisions shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of Common Stock
and to successive consolidations, mergers, sales or conveyances.
<PAGE> 3
Jeffrey D. Segal
As of October 5, 1999
Page 3
In the event the Company spins off a subsidiary by distributing to the
shareholders of the Company, as a dividend or otherwise, the stock of the
subsidiary, the Company shall reserve, for the life of the Option, shares of the
subsidiary to be delivered to Segal upon exercising the Option to the same
extent as if Segal were the owner of record of Common Stock on the record date
for payment of the shares of the subsidiary.
The Option may not be sold, transferred, assigned or hypothecated by
Segal without the prior written consent of Company. Nothing express of implied
in this letter agreement is intended or shall be construed to confer upon or
give to any third party any rights or remedies by virtue of the Option granted
hereunder or any exercise or non-exercise thereof.
This letter agreement shall be governed by the laws of the State of
California without regard to principles of conflicts of laws.
If acceptable, please sign where indicated below and return an executed
counterpart of this letter agreement to Company.
Very truly yours,
STAN LEE MEDIA, INC.,
By: /s/ Stephen M. Gordon
--------------------------------------------
Its: Executive Vice President/Operations
-----------------------------------
AGREED AND ACCEPTED AS OF
THIS 5TH DAY OF OCTOBER, 1999.
/s/ Jeffrey D. Segal
- -------------------------------
Jeffrey D. Segal
<PAGE> 1
EXHIBIT 10.40
STAN LEE MEDIA, INC.
15821 Ventura Boulevard, Suite 675
Encino, CA 91436
As of October 5, 1999
VIA FACSIMILE TRANSMISSION
- --------------------------
Paraversal, Inc.
c/o Stan Lee Media, Inc.
15821 Ventura Boulevard, Suite 675
Encino, CA 91436
Ladies and Gentlemen:
We, Stan Lee Media, Inc., a Colorado corporation ("Company"), hereby
grant you, Paraversal, Inc. ("Paraversal"), an option (the "Option") to purchase
five hundred thousand (500,000) shares of Company's Common Stock, no par value,
at an exercise price of Five and 50/100 Dollars ($5.50) per share (the "Exercise
Price"), subject to adjustment as described below. The Option shall vest as of
January 22, 2000, may be exercised in whole or in part, and shall be exercisable
at any time after vesting to and including October 4, 2009.
Each exercise of the Option shall be accomplished by presentation and
delivery to the Company of a notice of exercise, duly executed and accompanied
by payment of the Exercise Price for the number of shares of Common Stock
specified in such notice of exercise, together with all Federal and state taxes
applicable upon such exercise.
The Company hereby agrees that at all times there shall be reserved for
issuance and delivery upon exercise of the Option such number of shares of its
Common Stock as shall be required for issuance and delivery upon full exercise
of the Option. All shares of the Company's Common Stock to be issued to
Paraversal upon exercise of the Option will be restricted securities as such
term is defined in Rule 144(a)(3) of the Securities Act of 1933, as amended.
If Company at any times proposes to file a registration statement under
the Securities Act of 1933, as amended, respecting any securities of Company
(excluding registrations of securities to be offered in connection with
Company's employee benefit plans and registrations of securities to be offered
by Company in connection with acquisitions, mergers or similar transactions), it
will at such time give written notice to Paraversal of its intention to do so.
Upon the written request of Paraversal given within fifteen (15) days after
receipt of any such notice (which request shall specify the securities intended
to be sold or disposed of by Paraversal and describe the nature of any proposed
sale or other disposition thereof), Company shall use its best efforts, but
shall not be
<PAGE> 2
Paraversal, Inc.
As of October 5, 1999
Page 2
obligated, to cause all such securities specified in such request to be so
registered. In the event that any such registration shall be underwritten, if
the underwriters notify Company in writing that the inclusion in such
underwriting of such securities would materially and adversely affect the
underwriting, Company shall have the right not to include such securities. In
any registration pursuant to this paragraph, Paraversal shall pay Company for
the incremental portion of the Federal and state registration and filing fees
attributable to such securities and shall pay all underwriting commissions,
discounts, underwriting expenses and taxes attributable to such securities.
Paraversal shall not, by virtue hereof, be entitled to any rights of a
shareholder of the Company either at law or in equity, and the rights of
Paraversal under the Option are limited to those expressed herein.
If the Company shall at any time issue Common Stock by way of dividend
or other distribution on any stock of the Company or subdivide or combine the
outstanding shares of Common Stock, then the Exercise Price shall be
proportionately decreased in the case of such issuance (on the day following the
date fixed for determining shareholders entitled to receive such dividend or
other distribution), or decreased in the case of such subdivision, or increased
in the case of such combination (on the date that such subdivision or
combination shall become effective). Upon any adjustment of the Exercise Price,
Paraversal shall thereafter (until another such adjustment) be entitled to
purchase, at the new Exercise Price, the number of shares, calculated to the
nearest full share, obtained by multiplying the number of shares of Common Stock
initially issuable upon exercise of the Option by the Exercise Price in effect
on the date hereof and dividing the product so obtained by the new Exercise
Price.
In the event of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock (other than as a result of an
issuance of Common Stock by way of dividend or other distribution or of a
subdivision or combination), or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of the
Option), or in case of any sale or conveyance to any other corporation of the
property and assets of the Company as an entirety or substantially as an
entirety, as a condition to any of the foregoing, the Company shall cause
effective provision to be made (including acceleration of vesting) so that
Paraversal shall have the right thereafter, by exercising the Option, to
purchase the kind and amount of shares of stock and other securities and
property receivable upon such reclassification, capital reorganization or other
change, consolidation, merger, sale or conveyance as if Paraversal had exercised
the Option prior to such transaction. Any such provision shall include provision
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in the Option. The foregoing
<PAGE> 3
Paraversal, Inc.
As of October 5, 1999
Page 3
provisions shall similarly apply to successive reclassifications, capital
reorganizations and changes of shares of Common Stock and to successive
consolidations, mergers, sales or conveyances.
In the event the Company spins off a subsidiary by distributing to the
shareholders of the Company, as a dividend or otherwise, the stock of the
subsidiary, the Company shall reserve, for the life of the Option, shares of the
subsidiary to be delivered to Paraversal upon exercising the Option to the same
extent as if Paraversal were the owner of record of Common Stock on the record
date for payment of the shares of the subsidiary.
The Option may be sold, transferred, assigned or hypothecated by
Paraversal without the prior written consent of Company. Nothing express of
implied in this letter agreement is intended or shall be construed to confer
upon or give to any third party any rights or remedies by virtue of the Option
granted hereunder or any exercise or non-exercise thereof.
This letter agreement shall be governed by the laws of the State of
California without regard to principles of conflicts of laws.
If acceptable, please sign where indicated below and return an executed
counterpart of this letter agreement to Company.
Very truly yours,
STAN LEE MEDIA, INC.,
By: /s/ Stephen M. Gordon
--------------------------------------------
Its: EVP/Operations
-----------------------------
AGREED AND ACCEPTED AS OF
THIS 5TH DAY OF OCTOBER, 1999.
PARAVERSAL, INC.
/s/ J.P. Paul
---------------
<PAGE> 1
Exhibit 10.41
Stan Lee Entertainment Inc.
15821 Ventura Blvd., Suite 675
Encino, CA 91436
October 15, 1998
Mr. Stan Lee
9143 Oriole Way
Los Angeles, CA 90068
Re: Employment Agreement/Rights Assignment
Dear Stan:
Confirming our discussions, this letter, when accepted and agreed by you, shall
constitute an agreement-between you and Stan Lee Entertainment, Inc. (the
"Company") relating to the terms of your employment with the Company as set
forth below:
1. Stan Lee will serve as Chairman and Chief Creative Officer of Company,
based in Los Angeles, for a term commencing as of the date hereof and
terminating on the death of Stan Lee.
2. Stan Lee's services shall be exclusive with the exception of those
services provided under a lifetime agreement with Marvel Enterprises,
Inc., which shall require no more than an average of 10 - 15 hours per
week on its behalf. All other services performed and intellectual
property created for the Company, or for any other entity, which entity
shall be approved in writing by the Company, shall inure to the benefit
of the Company to the entire extent your participation provides. Your
services to Company shall include, but not be limited to, the following:
(a) Serve, and be listed in all directories and publications, as
Chairman, Publisher and Chief Creative Officer of the Company,
including attending corporate meetings, developing and
supervising development and production of intellectual property
in any and all media, directing and guiding the creative staff
or staffs of the Company, all subsidiaries and affiliates as
reasonably requested by the company.
(b) Act as Executive Producer or Co-Executive Producer for all media
productions and receive customary fees accordingly.
(c) Apply your good faith, best efforts to enhance the brand and
good will of the company, support and stimulate strategic
alliances, joint ventures, sponsors, production partners and all
direct and ancillary business of the company.
(d) Serve as spokesman for the company to all media and assemblies
as reasonably requested by the company.
Page 1 of 3
<PAGE> 2
(e) Take all actions and contribute all creative talents within your
reasonable capability, pursuant to your good faith determination
of your schedule, as may reasonably be required to advance the
interests of the company.
3. As compensation to you for all rights and services contributed by you,
to the Company hereunder, notwithstanding any disability, the Company
agrees to provide the following compensation for your life:
a) Base Salary - You shall receive a base salary of $250,000 (Two
Hundred Fifty Thousand Dollars) per annum payable in equal
monthly installments commencing February 1, 1999, payable to you
or any company you so designate in lieu of making payments to
you individually.
b) Bonuses - You shall receive bonuses on those projects you
personally initiate and/or accomplish with approved entities
from your participation as assigned to the company. You shall
also receive ten per cent of all net profits after taxes
reported by the Company on its Federal Tax Return. The Company
will compute, account and pay to you your participation due, if
any, on account of said profits, for the annual period ending
each January 31 during your life, on an annual basis within a
reasonable time after the end of each such period.
c) Stock Options - The Company agrees to issue to you, in
accordance with the Company's Stock Option Plan, as and when it
may be adopted, the highest number of options offered to Company
executives.
d) Expenses/Fringe Benefits - You are to receive prompt
reimbursement for all ordinary and necessary business expenses
incurred by you in connection with your activities on behalf of
the Company upon presentation of appropriate documentation, and
you shall be permitted your customary style of business travel,
which shall be first class with sedan limousine and stay in
deluxe hotels.
e) Insurance - The company shall no later than December 31, 1998,
secure a term life insurance policy in the minimum principal sum
of two million dollars, providing your designated heir as
co-beneficiary with the company on the event of your death.
4. In express consideration for the performance of the foregoing
obligations of the Company, you agree as follows:
a) I assign, convey and grant to the Company forever, all right,
title and interest I may have or control, now or in the future,
in the following: Any and all ideas, names, titles, characters,
symbols, logos, designs, likenesses, visual representations,
artwork, stories, plots, scripts, episodes, literary property,
and the conceptual universe related thereto, including my name
and likeness (the "Property") which will or have been in whole
or part disclosed in writing to, published, merchandised,
advertised, and/or licensed by Company, its affiliates and
successors in interest and licensees (which by agreement inures
to Company's benefit) or any of them and any copyrights,
trademarks, statutory rights, common
Page 2 of 3
<PAGE> 3
law, goodwill, moral rights and any other rights whatsoever in
the Property in any and all media and/or fields, including all
rights to renewal or extensions of copyright and make
applications or institute suits therefor (the "Rights").
b) Subject to a material breach of this agreement, I hereby agree
to execute upon request from Company any documents it deems
reasonably necessary to effect the purposes of this agreement,
c) Subject to a material breach of this agreement, I will never
file with the U.S. Copyright or Patent and Trademark Office or
any governmental or public agency, and will never assert or
assist others in asserting on my behalf or in claiming rights
through me, any claim to ownership of the Rights in the
Property, or in making any objection to Company's complete and
unrestricted right to use and exploit said Property or Rights in
any form, manner or medium Company may desire.
5. This Agreement, including the assignment set forth herein, shall be
binding upon the parties hereto, their affiliates and subsidiaries,
legal representatives, successors and predecessors in interest, heirs
and assigns.
6. The invalidity of any provision or part hereof or obligation hereunder,
or the contravention thereby of any law, rule or regulation of any
State, the Federal Government or any agency, shall not relieve any party
from its obligation under, nor deprive any party of advantages of any
other provision of this Agreement.
7. This Agreement will constitute the entire understanding between the
parties in connection with Stan Lee's relationship with the Company from
the date hereof and may not be amended or modified except by a writing
signed by the party charged. This agreement shall be governed by and
construed under the laws of the State of California.
Signed at Los Angeles, California, this 20 day of October, 1998.
Stan Lee Entertainment, Inc.
By: /s/ STEPHEN M. GORDON
------------------------------------
President
/s/ STAN LEE
- ---------------------------------------
Stan Lee
Page 3 of 3
<PAGE> 1
EXHIBIT 10.42
STAN LEE
9143 Oriole Way
Los Angeles, CA 90068
As of October 8, 1999
Board of Directors of
Stan Lee Media, Inc.
15821 Ventura Boulevard, Suite 675
Encino, CA 91436
Re: Amendment to Employment Agreement/Rights Agreement
Ladies and Gentlemen:
Reference is made to that certain Employment Agreement/Rights
Agreement dated as of October 15, 1998 (the "Agreement"), with Stan Lee Media,
Inc., as successor-in-interest to Stan Lee Entertainment, Inc. (the "Company").
I have been represented by financial advisors and independent
counsel of my own choice throughout all negotiations which have preceded the
execution of this letter agreement, and have executed this letter agreement with
the consent and upon the advice of such independent advisors, or have knowingly,
voluntarily and willingly waived the right to such independent advisors. I
represent and warrant to the Company that no person, or any agent or attorney of
any person, has made any promise, representation or warranty whatsoever, express
or implied, not contained in this letter agreement concerning the subject matter
hereof to induce the execution of this letter agreement and acknowledge
execution of this letter agreement was not in reliance upon any promise,
representation or warranty not contained in this letter agreement. I hereby
relinquish all right, title and interest to receive ten percent (10%) of all net
profits after taxes reported by the Company on its Federal Tax Return as
provided for in Section 3(b) of the Agreement. Except as otherwise amended
hereby, the Agreement shall remain in full force and effect.
If you have any questions regarding the foregoing, please feel
free to contact the undersigned.
EXCELSIOR!
/s/ Stan Lee
STAN LEE
ACCEPTED AND APPROVED:
Stan Lee Media, Inc.
By: /s/ Gill Champion
-----------------------------
Gill Champion,
Chief Operating Officer
Dated: October 22, 1999.
<PAGE> 1
Exhibit 10.43
CONSULTING AGREEMENT
AGREEMENT dated as of October 5, 1999, between STAN LEE
MEDIA, INC., a Colorado corporation ("Company"), and PARAVERSAL,
INC. ("Consultant").
Company currently is engaged in the business of deploying the
global brand, intellectual property, development capabilities and goodwill of
comic book publisher Stan Lee to the Internet, as well as other new media and
traditional media platforms, and the commercial exploitation of such content
through e-commerce, product and merchandise licensing and sales, online
publishing, gaming, distance learning, financial services, sponsorships,
co-branding, advertising, product placement and endorsements. Consultant is
experienced in structuring corporate partnering relationships and strategic
alliances, and coordinating public relations efforts, through services rendered
by Peter F. Paul (being hereinafter sometimes referred to, collectively, as
"Consultant"), who is a co-founder of Company.
Company desires to retain the experience, skills, abilities,
background and knowledge of the Consultant, and the Consultant is willing to
accept such engagement, in each case, for the purposes and on the terms and
conditions described in this Agreement.
Accordingly, the Company and the Consultant hereby agree as
follows:
I. TERM
The term of the Consultant's engagement under this Agreement
shall be for a period of seven (7) years, commencing as of October 1, 1999,
unless earlier terminated as provided in Article IV hereof; and thereafter, this
Agreement shall be renewed for two (2) additional, successive three (3) year
periods unless either party gives notice of its desire not to renew this
Agreement to the other party not more than 180 days and not less than 60 days
prior to the expiration of the initial or the then current renewal term, as the
case may be (the "Consulting Period").
II. ENGAGEMENT; DUTIES AND ACCEPTANCE
SECTION 2.01. Engagement. Company hereby engages the Consultant
to provide strategic business development services, including structuring of
corporate partnering relationships and strategic alliances; provide
marketing/creative direction input; coordinate the Company's public relations
efforts, including the positioning of the Company and Mr. Stan Lee; schedule and
develop strategy for Mr. Stan Lee's brand/profile, including supervision of Mr.
Stan Lee's personal appearances and accompany Mr. Stan Lee to such appearances;
and to serve in such other capacity or capacities as the Company may from time
to time prescribe, subject always to the discretion of the Company's Board of
Directors. The Consultant shall render such services to the Company and the
promotion of its interests as the Consultant and the Company
<PAGE> 2
shall mutually determine. Unless the parties otherwise agree in writing, the
Consultant shall, during the term of this Agreement, perform the services
required under this Agreement at the Company's principal executive offices,
located at 15821 Ventura Boulevard, Suite 675, Encino, California, 91436.
Notwithstanding the foregoing, the Company and the Consultant shall mutually
agree as to the travel requirements related to the services to be performed by
the Consultant hereunder. The Consultant shall report to the Chairman of the
Company and to the Company's Board of Directors.
The Consultant's expenditure of reasonable amounts of time for
other business pursuits, personal business, charitable or professional
activities shall not be deemed a breach of his undertaking to provide the
required services hereunder, subject always to the provisions of Section 5.02
hereof, provided that such activities do not interfere materially with the
Consultant's ability to render such services hereunder.
SECTION 2.02. Acceptance of Engagement by Consultant. The
Consultant accepts such engagement and shall render the services required by
this Agreement to be rendered by Peter F. Paul, a co-founder of the Company. The
Consultant hereby agrees to execute and deliver the Company's "Confidentiality
and Invention Assignment Agreement," in the form attached hereto. The terms of
that agreement require the Consultant to refrain for a period of time after
engagement from competing with the Company or using or disclosing the Company's
Confidential Information (as defined in the agreement) or any confidential
information received during its prior engagements in any manner which might be
detrimental to or conflict with the business interests of the Company.
III. CONSULTANT'S COMPENSATION
SECTION 3.01. Base Compensation.
(a) Salary. As compensation for all services to be rendered
pursuant to this Agreement, the Company shall pay the Consultant and the
Consultant shall accept, initial monthly compensation of Sixteen Thousand Five
Hundred Dollars ($16,500), for the period commencing October 1, 1999, subject to
adjustment as described below (collectively, the "Salary"). Coincident with the
receipt by the Company of equity financing in an amount not less than Five
Million Dollars ($5,000,000), the Salary payable by the Company to Consultant
shall automatically and without any further act on the part of Company be
increased to monthly compensation of Twenty Thousand Dollars ($20,000).
Coincident with the receipt by the Company of additional equity financing in an
amount not less than an additional Five Million Dollars ($5,000,000), the Salary
payable by the Company to Consultant shall automatically and without any further
act on the part of Company be increased to monthly compensation of Twenty-Five
Thousand Dollars ($25,000). The Salary shall be payable in accordance with the
Company's standard payroll policies, but not less frequently than monthly.
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(b) Review. During the term of this Agreement (and as the same
may be renewed or extended), the salary described in Section 3.01(a) hereof
shall be reviewed by the Board of Directors of the Company and may be adjusted
(but in no event to an amount less than the salary then in effect), if the Board
of Directors of the Company, in its sole discretion, determines that such
adjustment is warranted.
SECTION 3.02. Bonus. In addition to the salary, the Consultant
shall be entitled to an annual bonus (the "Bonus") in accordance with the terms
and provisions of the executive bonus program to be mutually agreed upon by the
Consultant and the Company.
SECTION 3.03. Deferred Compensation. Company shall pay Consultant
the sum of One Hundred Seventy-Five Thousand Dollars ($175,000) for services
rendered since December 1998 in two installments at such times as mutually
agreed upon by Company and Consultant. Said services include, without
limitation, (i) supervising negotiations with Marvel Enterprises, Inc. enabling
Mr. Stan Lee to acquire all rights to his name, brand and likeness for
competitive use; (ii) securing the assignment by Mr. Stan Lee in favor of the
Company to all such rights and all rights to Mr. Lee's future creations; (iii)
assisting Mr. Stan Lee in the development of Company's first Super-Hero
franchise by introducing basic computer beta tester game and alien invasion
through Internet story concept, global Super Hero team strategy for creating
local and global franchise with brand presence and support in key global market
region; (iv) identifying and negotiating relationships with Organic, Inc., Next
Planet Over, Warner/Acme City, IBM (production studio sponsorship relationship),
Pulse Network, Championship Marketing Group, professional relationships with
public relations firms (MPRM, Bender/Helper Impact, Hill & Knowlton), and legal
counsel (including without limitation, Ziffren, Brittenham, Branca & Fischer,
LLP); (v) identifying and associating the initial members of the Company's Board
of Directors; and (vi) identifying and securing an investment vehicle for the
Company's emergence as a public company.
SECTION 3.04. Stock Options. Company and Consultant acknowledge
and agree that Consultant (or its designee) has been granted options to purchase
five hundred thousand (500,000) shares of the Company's Common Stock pursuant to
that certain written compensatory agreement dated as of October 5, 1999. In
addition thereto, Company shall grant to Consultant, in arrears, upon each
anniversary date of the Consultant's engagement hereunder, an additional two
hundred thousand (200,000) shares of the Company's Common Stock at a price equal
to 110% of the closing bid price of the Company's Common Stock on its Principal
Market determined as of the date of each such grant. "Principal Market" means
the Nasdaq National Market System, the Nasdaq SmallCap Market or the OTC
Electronic Bulletin Board as appropriate. Consultant shall be entitled to such
additional stock options as may be granted to it under any Company stock option
plan(s) from time to time in effect at the Company.
SECTION 3.05. Credits. The Company shall cause Peter F. Paul to
be listed in all corporate histories, directories and publications as Co-Founder
of the Company with
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Mr. Stan Lee; list Peter F. Paul as the Co-Executive Producer with Mr. Stan Lee
on all Company productions; with respect to The 7th Portal, issue a credit as
follows: The 7th Portal, Based on a Concept by Peter F. Paul; and with respect
to other Company productions, list credits for Peter F. Paul based on activities
related to each such production. Such credits shall survive in perpetuity and
subsequent to the termination and/or expiration of this Agreement.
SECTION 3.06. Participation in Employee Benefit Plans. Company
shall make available to the Consultant the Company benefit program currently in
effect or as may be established from time to time by the Company's Board of
Directors for senior executives, including without limitation, any incentive
compensation plans or group benefit plans.
SECTION 3.07. Reimbursement of Expenses. The Consultant is
authorized to incur reasonable expenses in connection with the business of the
Company, including expenses for entertainment, first class business travel with
sedan limousine and stay in deluxe hotels, and similar items. The Company shall
provide Consultant with a Company credit card and reimburse the Consultant for
all such expenses.
SECTION 3.08. Other Compensation. The Consultant shall receive
such other compensation as may from time to time be granted to the Consultant by
the Company's Board of Directors.
SECTION 3.09. Office and Support Personnel. The Company shall
provide the Consultant with an executive office at the Company's principal
executive offices and support personnel, including without limitation, an
executive assistant, and other facilities and services, in scope and amount
substantially similar to those provided to Mr. Stan Lee.
IV. TERMINATION
SECTION 4.01. Termination by Consultant Upon Notice. The
Consultant may terminate this Agreement, with or without cause, effective upon
delivery of ninety (90) days' written notice of termination to the Company to
such effect.
SECTION 4.02. Termination by Company for Cause. The Company may,
at any time, terminate this Agreement, for Cause. "Cause" means: (a) willful and
repeated failure to comply with the lawful directions of the Board of Directors;
(b) gross negligence or willful misconduct in the performance of Consultant's
duties to the Company; or (c) conviction of any act of fraud against, or
misappropriation of material property belonging to the Company, conviction of
any criminal statute constituting a misdemeanor involving moral turpitude or
conviction of a felony, chronic alcoholism or drug addiction.
Upon termination pursuant to the provisions of this Section, the Consultant
would be entitled to receive only such compensation accrued and unpaid as of the
termination date.
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SECTION 4.03. Termination for Death and Disability. This
Agreement shall be terminated effective immediately and automatically, upon the
death or permanent disability of the Consultant. For purposes of this
subsection, "permanent disability" shall be deemed to have occurred if the
Consultant is unable by reason of illness or physical or mental disability to
perform the services required under this Agreement for a period aggregating 180
days within any period of 12 consecutive months during the Consulting Period.
SECTION 4.04. Termination Other Than for Cause. If the Consultant
is terminated for any reason other than as set forth in Sections 4.02 and 4.03
hereof, the Consultant would be entitled to receive the following compensation
and benefits:
(a) A lump sum payment of One Million Dollars ($1,000,000), which
shall be deemed liquidated damages; and
(b) The Company would maintain in full force and effect the
Consultant's group benefit plans or provide the Consultant with alternative
substantially equivalent coverage for the greater of (i) two years, and (ii) the
unexpired term of this Agreement.
SECTION 4.06. Effect of Termination. Termination of this
Agreement shall not release or discharge either party hereto from any
obligation, debt or liability which may previously have occurred and remains to
be performed upon the date of termination. In addition, the provisions of
Article V of this Agreement shall survive such termination or expiration of the
term of this Agreement.
V. OBLIGATIONS OF CONSULTANT
SECTION 5.01. Acceptance of "Confidentiality and Invention
Assignment Agreement". Consultant hereby agrees to execute and deliver, and to
abide by, the terms and conditions set forth in that certain "Confidentiality
and Invention Assignment Agreement" attached hereto.
SECTION 5.02. Competition. Without Company's prior written
approval, Consultant agrees that, during the Consulting Period (and as the same
may be renewed or extended) or, if Consultant terminates this Agreement without
a material breach by Company, Consultant shall not, directly or indirectly, for
his own account or the account of any other person, firm or company (i) offer or
sell any products or services, or participate in any business which offers or
sells any products or services, which compete directly or indirectly with the
products or services offered or sold, or proposed by Company to be offered or
sold, by Company on the date of such expiration or termination that Consultant
would have knowledge of by virtue of his capacity; (ii) induce or attempt to
induce any person(s) or entities which were customers of Company during the
Consulting Period or were being actively solicited at the time of termination
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of the Consulting Period to cease doing business or not to commence doing
business in whole or in part with Company or solicit the business of any such
customer for any products or services which compete with any of the products or
services offered or sold, or proposed by Company to be offered or sold, by
Company on the date of such expiration or earlier termination that Consultant
would have knowledge of by virtue of his capacity; or (iii) solicit, interfere
with, or endeavor to cause any employee or consultant of Company to leave his
employment or engagement or induce or attempt to induce any such employee or
consultant to breach his employment or engagement agreement with Company.
Participation in a business shall include, but not be limited to, serving as a
director, officer, employee, agent or other representative of or having an
interest in the business as an owner, stockholder, partner, limited partner,
joint venturer, material creditor or any other financial interest; provided,
however, that the following shall not be in violation of this covenant: (i) the
ownership by Consultant of not more than three (3) percent of the outstanding
shares of stock of any such business listed on any national stock exchange or
registered under the federal securities laws and actively traded in the
over-the-counter market; and (ii) participation by Consultant in any capacity in
any business, which participation has received a specific written approval of a
majority of the Board of Directors of Company, which approval is hereby given by
Company to Consultant in connection with its activities related to the following
projects: (A) Global Language Solutions (substantially all of its activities are
based in South America, which principally teaches English as a "second" language
to indigenous populations); (B) Digicon Entertainment (a 3-D motion capture
production company); and (C) American Spirit Foundation
(www.americanspiritfdn.org).
SECTION 5.03. Rights and Remedies Upon Breach of Consultant's
Obligations. Because of the unique and proprietary nature of the Company's
Confidential Information and business operations and practices, and the unique
character of Consultant's services, and because any material breach of any of
the provisions of this Agreement will cause irreparable injury to Company for
which money damages would not be an adequate remedy, it is understood and agreed
that Company's remedy for a material breach by Consultant of this Agreement will
be inadequate, and that, therefore, in the event of any material breach by
Consultant of his obligations pursuant to the terms of this Agreement, Company
shall be entitled, upon application to any court of competent jurisdiction, to
equitable relief (including, without limitation, provisional and permanent
injunctive relief and specific performance) in order to enforce or prevent
violation of such provision or provisions. Nothing contained herein shall be
construed as prohibiting Company from pursuing any other remedies provided to it
by this Agreement or available to it at law or in equity for such breach
including, without limitation, the recovery of money damages from Consultant.
SECTION 5.04. Survival of Consultant's Obligations. Consultant's
obligations pursuant to this Article shall survive the termination of this
Agreement.
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VI. GENERAL PROVISIONS
SECTION 6.01. Notices. All notices, requests, consents or other
communications provided for in or to be given under this Agreement shall be in
writing, may be delivered in person, by facsimile transmission (fax), by
overnight air courier or by mail, and shall be deemed to have been duly given
and to have become effective (a) upon receipt if delivered in person or by fax,
(b) one (1) day after having been delivered to an overnight air courier or (c)
three (3) days after having been deposited in the mails as certified or
registered matter, all fees prepaid, directed to the parties or their assignees
at the following addresses (or at such other address as shall be given in
writing by a party hereto):
If to Consultant: Paraversal, Inc./Peter F. Paul
16350 Ventura Boulevard, Suite 369
Encino, CA 91436
Fax: (818) 789-4129
If to Company: Stan Lee Media, Inc.
15821 Ventura Boulevard, Suite 675
Encino, CA 91436
Attention of Chief Operating Officer
Fax: (818) 461-1760
SECTION 6.02. Assignment. The Consultant shall be entitled to
assign and delegate the duties prescribed to be performed by it hereunder to an
entity controlling, controlled by or under common control with the Consultant.
Except as otherwise set forth in the preceding sentence, this Agreement shall
not be assigned, pledged or transferred in any way by either party hereto. Any
attempted assignment, pledge, transfer or other disposition of this Agreement or
any rights, interests or benefits contrary to the foregoing provisions shall be
null and void.
SECTION 6.03. Conflicting Agreements. Consultant hereby
represents and warrants to Company that its entering into this Agreement, and
the obligations and duties undertaken by it hereunder, will not conflict with,
constitute a breach of or otherwise violate the terms of any engagement or other
agreement to which it is a party and that it is not required to obtain the
consent of any person, firm, corporation or other entity in order to enter into
this Agreement.
SECTION 6.04. Indemnification; Insurance. Company shall indemnify
Consultant and hold Consultant harmless from any claims, actions, charges,
expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with any proceeding to which Consultant was or
is a party or is threatened to be made a party arising by reason of the fact
that Consultant is or was a consultant of Company. For purposes of this Section,
"proceeding" means any threatened, pending or completed action or proceeding,
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<PAGE> 8
whether civil, criminal, administrative or investigative, and includes an action
or proceeding by or in the right of Company to procure a judgment in its favor,
and "expenses" includes, without limitation, attorneys' fees and any expenses of
establishing a right to indemnification under this Agreement or under the laws
of the State of California. In addition, to the extent economically practicable
as determined by the Company in its sole discretion, Company shall include
Consultant as an additional named insured on its insurance policies, including
without limitation, any officers' and directors' liability insurance policy.
SECTION 6.05. No Waiver. No term or condition of this Agreement
shall be deemed to have been waived, nor shall any party hereto be estopped from
enforcing any provision of this Agreement, except by written instrument of the
party charged with such waiver or estoppel. Any written waiver shall not be
deemed a continuing waiver unless specifically stated, shall operate only as to
the specific term or condition waived and shall not constitute a waiver of such
term or condition for the future or as to any act other than the act
specifically waived.
SECTION 6.06. Governing Law; Venue. This Agreement shall be
governed by and construed in accordance with the laws of the State of
California. In the event of any dispute or controversy arising under this
Agreement or the transactions contemplated herein, the parties mutually consent
to the jurisdiction of the state and federal courts located in Los Angeles,
California, and agree that any litigation may be served outside of California
with the same force and effect as if service had been made in California.
SECTION 6.07. Entire Agreement; Amendments. This Agreement,
including the "Confidentiality and Invention Assignment Agreement" attached
hereto, is intended by the parties as a final expression of their Agreement with
respect to the terms included herein, and may not be contradicted or varied by
evidence of any prior or contemporaneous agreement. Any change, revision or
modification of any provision of this Agreement shall not be binding unless
executed in writing and signed by a duly authorized representative of each of
the parties hereto.
SECTION 6.08. Headings. Headings contained herein are for
convenient reference only; they are not a part of this Agreement and are not to
affect in any way the substance or interpretation of this Agreement.
SECTION 6.09. Survival of Provisions. In case any one or more of
the provisions or any portion of any provision contained in this Agreement
(including, without limitation, any geographical or temporal restrictions,
contained in Article V hereof) should be found to be invalid, illegal or
unenforceable in any respect, such provision or portion thereof shall be
modified or deleted in such manner so as to afford the parties the fullest
protection commensurate with making this Agreement, as modified, legal and
enforceable under applicable laws, and the validity, legality and enforceability
of any such provision shall not in any way be
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<PAGE> 9
affected or impaired thereby, such remaining provisions or portion of any such
provision construed as severable and independent thereof.
SECTION 6.10. Arbitration; Attorneys' Fees. Any dispute or
conflict which arises between the parties hereto shall be submitted to the
American Arbitration Association, before a single arbitrator, in accordance with
its then current Commercial Rules in Los Angeles, California, for arbitration
and the parties shall be bound by the results of such arbitration in accordance
with applicable California law. If either party brings an action for judicial
review or enforcement of the arbitration proceedings, award or decision, the
prevailing party in any such action, trial or appeal shall be entitled to its
reasonable attorneys' fees to be paid by the nonprevailing party as fixed by the
court.
SECTION 6.11. Waiver of Jury. With respect to any dispute arising
under or in connection with this Agreement or any related agreement, as to which
no party invokes the right to arbitration hereinabove provided, or as to which
legal action nevertheless occurs, each party irrevocably waives all rights it
may have to a jury trial. THIS WAIVER IS KNOWINGLY, INTENTIONALLY, AND
VOLUNTARILY MADE BY EACH PARTY, AND EACH ACKNOWLEDGES THAT NONE OF THE OTHER
PARTIES NOR ANY PERSON ACTING ON BEHALF OF THE OTHER PARTIES HAS MADE ANY
REPRESENTATION OF FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO
MODIFY OR NULLIFY ITS EFFECT. EACH PARTY FURTHER ACKNOWLEDGES THAT IT HAS BEEN
REPRESENTED (OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF
THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER, BY INDEPENDENT LEGAL COUNSEL
SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS
THIS WAIVER WITH COUNSEL. EACH PARTY FURTHER ACKNOWLEDGES THAT IT HAS READ AND
UNDERSTANDS THE MEANING AND RAMIFICATIONS OF THIS WAIVER PROVISION.
SECTION 6.12. Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be considered a duplicate original.
SECTION 6.13. Construction. Each of the parties hereto has been
represented by counsel throughout this transaction who has carefully negotiated
the provisions hereof. The language in all parts of this Agreement shall be in
all cases construed simply according to its fair meaning and not strictly for or
against any of the parties. When the context so requires in this Agreement, the
masculine gender includes the feminine and/or the neuter, and the singular
number includes the plural.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, in the case of Company by its duly authorized officer(s) empowered so
to act, all as of the date first above written.
STAN LEE MEDIA, INC.,
By: /s/ Gill Champion
---------------------------------------
Gill Champion, Chief Operating Officer
PARAVERSAL, INC.,
By: /s/ Peter F. Paul
---------------------------------------
[Signature of Consultant]
PETER F. PAUL
------------------------------------------
[Type or Print Name and Title]
10
<PAGE> 11
CONFIDENTIALITY AND INVENTION ASSIGNMENT AGREEMENT
AGREEMENT dated as of October 5, 1999, between STAN LEE
MEDIA, INC., a Colorado corporation and its affiliated companies
(collectively, the "Company"), and PARAVERSAL, INC.
("Paraversal") and PETER F. PAUL ("Paul"; Paul and Paraversal
being hereinafter referred to, collectively, as "Consultant").
In consideration of the commencement of Consultant's engagement
and the compensation paid to Consultant, Consultant acknowledges and agrees with
the Company as follows:
<PAGE> 12
I. EFFECTIVENESS
This Agreement shall become effective on the earlier of (i)
commencement of Consultant's engagement with the Company, or (ii) the date and
time at which any Confidential Information (as defined in Section 2.01 below)
was or is first disclosed to Consultant.
II. PROTECTION OF COMPANY'S CONFIDENTIAL INFORMATION
SECTION 2.01. Confidential Information. The Company has and will
develop, compile, and own certain proprietary techniques and confidential
information which have great value in its business (said techniques and
information being hereinafter referred to, collectively, as "Confidential
Information"). The Company has and also will have access to Confidential
Information of its Clients. ("Clients" shall mean any persons or entities for
whom the Company performs services or furnishes goods, or from whom the Company
or Consultant obtains information). Confidential Information includes not only
information disclosed by the Company or its Clients to Consultant in the course
of his or her engagement, but also information developed or learned by
Consultant during the course of his or her engagement with the Company, such as
Innovations (as defined in Section 4.01 below). Confidential Information is to
be broadly defined. Confidential Information includes all information that has
or could have commercial value or other utility in the business in which the
Company or Clients are engaged or contemplate engaging. Confidential Information
also includes all information of which the unauthorized disclosure could be
detrimental to the interests of the Company or Clients, whether or not such
information is identified as Confidential Information by the Company or Clients.
By example and without limitation, Confidential Information includes all
technical and non-technical information including copyright, trade secret and
proprietary information, pricing strategies and models, know-how, processes,
algorithms, software programs, software source documents, and formulas related
to the current, future or proposed products and services of the Company, and
includes, without limitation, the Company's information concerning pricing
strategies, financial information, procurement and purchasing requirements,
business forecasts, and sales and marketing plans and information.
Notwithstanding the foregoing, Confidential Information shall
expressly exclude any information that (i) was in the public domain at the time
it was communicated to the Employee; (ii) entered into the public domain
subsequent to the time it was communicated to the Employee through no fault of
the Employee; (iii) was in the Employee's possession free of any obligation of
confidence at the time it was communicated to the Employee; (iv) was developed
by Employee independently of and without reference to any information
communicated to the Employee by the Company; or (v) disclosure was required by
any governmental body, was otherwise required by law, or was necessary to
establish the rights of either party under this Agreement.
SECTION 2.02. Protection of Confidential Information. Consultant
agrees that at all times during or after his or her engagement, he or she will
hold in trust, keep
<PAGE> 13
Paraversal, Inc.
As of October 5, 1999
Page 3
confidential, and not disclose to any third party or make any use of the
Confidential Information of the Company or Clients except for the benefit of the
Company or Clients and in the course of his or her engagement with the Company.
Consultant further agrees not to cause the transmission, removal, or transport
of Confidential Information or Innovations from the Company's principal place of
business at 15821 Ventura Boulevard, Suite 675, Encino, California, 91436, or
such other place of business specified by the Company, without prior written
approval of the President of the Company. Consultant acknowledges that he or she
is aware that the unauthorized disclosure of Confidential Information of the
Company or its Clients may be highly prejudicial to their interests, an invasion
of privacy, and an improper disclosure of trade secrets. Whenever the approval,
designation, specification, or other act of the President of the Company is
required under this Agreement, the President may, by written designation,
authorize an agent of the Company to perform such act.
III. PRIOR KNOWLEDGE AND RELATIONSHIPS
SECTION 3.01. Prior Knowledge and Innovations. Except as
disclosed on Schedule A to this Agreement, Consultant does not know anything
about the Company's Confidential Information, other than the information he or
she has learned from the Company. Consultant also has disclosed on Schedule A a
complete list of all inventions or innovations proprietary to Consultant and
which Consultant wants to exclude from the application of this Agreement. The
Company agrees to receive and hold all such disclosures in confidence.
SECTION 3.02. Prior Commitments. Except as disclosed on Schedule
A to this Agreement, Consultant has no other agreements, relationships, or
commitments to any other person or entity which conflict with Consultant's
obligations to the Company under this Agreement.
SECTION 3.03. Proprietary Information or Trade Secrets of Others.
Consultant will not disclose to the Company, or use, or induce the Company to
use, any proprietary information or trade secrets of others. Consultant
represents and warrants that he or she has returned all property and
confidential information belonging to all prior employers.
IV. ASSIGNMENT OF CONSULTANT INNOVATIONS
SECTION 4.01. Disclosure. Consultant will promptly disclose in
writing to the Company all discoveries, developments, designs, ideas,
innovations, improvements, inventions, formulas, processes, techniques,
know-how, and data (whether or not patentable or registerable under copyright or
similar statutes) made, conceived, reduced to practice, or learned by Consultant
(either alone or jointly with others) during the period of his or her
engagement,
<PAGE> 14
Paraversal, Inc.
As of October 5, 1999
Page 4
that are related to or useful in the business of the Company, or which result
from tasks assigned to Consultant by the Company, or from the use of premises
owned, leased, or otherwise acquired by the Company (all of the foregoing being
hereinafter referred to, collectively, as "Innovations").
SECTION 4.02. Assignment of Innovations. Consultant acknowledges
and agrees that all Innovations belong to and shall be the sole property of the
Company and shall be Innovations of the Company subject to the provisions of
this Agreement. Consultant hereby assigns to the Company all right, title, and
interest Consultant may have or may acquire in and to all Innovations.
Consultant agrees to sign and deliver to the Company (either during or
subsequent to his or her engagement) such other documents as the Company
considers desirable to evidence (1) the assignment of all rights of Consultant,
if any, in any Innovations to the Company and/or (2) the Company's ownership of
such Innovations. Any provision in this Agreement requiring Consultant to assign
rights to an Innovation does not apply to any invention for which no equipment,
supplies, facilities or trade secret information of the Company was used and
which was developed entirely on Consultant's own time and which does not relate
to the business of the Company.
SECTION 4.03. Power of Attorney. In the event the Company is
unable to secure Consultant's signature on any document necessary to apply for,
prosecute, obtain, or enforce any patent, copyright, or other right or
protection relating to any Innovation, whether due to mental or physical
incapacity or any other cause, Consultant hereby irrevocably designates and
appoints the Company and each of its duly authorized officers and agents as his
or her agent and attorney-in-fact, to act for and in his or her behalf and stead
to execute and file any such document and to do all other lawfully permitted
acts to further the prosecution, issuance, and enforcement of patents,
copyrights, or other right or protections with the same force and effect as if
executed and delivered by the Consultant.
V. TERMINATION OF ENGAGEMENT
SECTION 5.01. Delivery of Documents and Data on Termination of
Engagement. In the event of termination (voluntary or otherwise) of Consultant's
engagement with the Company, Consultant agrees, promptly and without request, to
deliver to and inform the Company of all documents and data pertaining to his or
her engagement and the Confidential Information and Innovations of the Company
or Clients, whether prepared by Consultant or otherwise coming into his or her
possession or control, and to sign Schedule B to this Agreement. Consultant will
not retain any written or other tangible material containing any information
concerning or disclosing any of the Confidential Information or Innovations of
the Company or Clients. Consultant recognizes that the unauthorized taking of
any of the
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Paraversal, Inc.
As of October 5, 1999
Page 5
Company's trade secrets is a crime under California Penal Code Section 499c and
is punishable by imprisonment in a state prison or in a county jail for a time
not exceeding one year, or by a fine not exceeding Five Thousand Dollars
($5,000), or by both such fine and such imprisonment. Consultant further
recognizes that such unauthorized taking of the Company's trade secrets could
also result in civil liability under California Civil Code Section 3426, and
that willful misappropriation may result in an award against Consultant for
triple the amount of the Company's damages and the Company's attorneys' fees in
collecting such damages.
SECTION 5.02. Obligations of Consultant After Termination of
Engagement. In the event of termination (voluntary or otherwise) of Consultant's
engagement with the Company, Consultant agrees that he or she will protect the
value of the Confidential Information and Innovations of the Company and Clients
and will prevent the misappropriation or disclosure thereof. Consultant will not
disclose or use to his or her benefit (or the benefit of any third party) or to
the detriment of the Company or its Clients any Confidential Information or
Innovation. Consultant further agrees that for a period of one year immediately
following termination (voluntary or otherwise) of Consultant's engagement with
the Company, Consultant shall not interfere with the business of the Company by
inducing an employee to leave the Company's employ or by inducing a consultant
to sever the consultant's relationship with the Company.
In addition, each party hereto shall refrain thereafter from
uttering any disparaging remarks or criticisms of the other party or its
officers, directors, shareholders, employees, representatives or agents which
might have the effect of injuring such party or such officers', directors',
shareholders', employees', representatives' or agents' character, reputations,
or profitability, and such party shall be entitled in the case of each such
utterance to liquidated damages in the amount of $10,000. Each party hereto
acknowledges that the liquidated damages specified above approximate the amount
of damages which a party would sustain taking into account, from the nature of
the case, that it would be impracticable or extremely difficult to fix the
actual damages. Each party hereto acknowledges further that such damages are
reasonable under the circumstances existing at the time this Agreement is made
and that this provision for liquidated damages is valid under Section 1671 of
the California Civil Code. Each party's entitlement to liquidated damages as
provided herein is in addition to, and not in lieu of, all its other rights and
remedies available hereunder or under applicable law or in equity.
VI. GENERAL PROVISIONS
SECTION 6.01. Notices. All notices, demands, requests, consents,
approvals or other communications required or permitted to be given hereunder
shall be in
<PAGE> 16
Paraversal, Inc.
As of October 5, 1999
Page 6
writing and may be personally served or may be deposited in the United States
mail, registered or certified, return receipt requested, postage prepaid,
addressed as follows:
If to the Company: Stan Lee Media, Inc.
15821 Ventura Boulevard, Suite 675
Encino, CA 91436
Attention of Chief Operating Officer.
If to the Consultant: Paraversal, Inc./Peter F. Paul
16350 Ventura Boulevard, Suite 369
Encino, CA 91436
or at such other address as such party shall have specified most recently to the
other party by written notice. Notice mailed as provided herein shall be deemed
given on the date of delivery, as evidenced by the return receipt.
SECTION 6.02. Governing Law. This Agreement shall be construed
under the substantive laws of the State of California and without giving effect
to California choice-of-law or conflict-of-law principles. In the event of any
dispute or controversy arising under this Agreement or the transactions
contemplated herein, the parties mutually consent to the jurisdiction of the
state courts of California and the federal district court for the Central
District of California, and agree that any litigation may be served outside of
California with the same force and effect as if service had been made in
California.
SECTION 6.03. Parties in Interest. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that this Agreement may not be
assigned by the Consultant without the prior written consent of the Company;
provided, however, further, that the Company shall be entitled to assign all its
rights and delegate all its duties hereunder without the consent or any act on
the part of the Consultant.
SECTION 6.04. Entire Agreement; Amendment. This Agreement and the
schedules hereto constitutes and contains the entire agreement of the parties
hereto and supersedes any and all prior negotiations, correspondence,
undertakings and agreements between the parties respecting the subject matter
hereof. This Agreement may not be amended or modified, except by written
instrument signed by the party to be bound.
<PAGE> 17
Paraversal, Inc.
As of October 5, 1999
Page 7
SECTION 6.05. Waiver. Neither any failure nor any delay on the
part of the Company or the Consultant in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise or the exercise
of any other right, power or privilege.
SECTION 6.06. Survival of Provisions. In case any one or more of
the provisions or any portion of any provision contained in this Agreement
should be found to be invalid, illegal or unenforceable in any respect, such
provision or portion thereof shall be modified or deleted in such manner so as
to afford the parties the fullest protection commensurate with making this
Agreement, as modified, legal and enforceable under applicable laws, and the
validity, legality and enforceability of any such provision shall not in any way
be affected or impaired thereby, such remaining provisions or portion of any
such provision construed as severable and independent thereof.
SECTION 6.07. Arbitration; Attorneys' Fees. Any dispute or
conflict which arises between the parties hereto shall be submitted to the
American Arbitration Association in accordance with its then current Commercial
Rules in Los Angeles County, California, for arbitration and the parties shall
be bound by the results of such arbitration in accordance with the California
Code of Civil Procedure Section 1283.05. If either party brings an action for
judicial review or enforcement of the arbitration proceedings, award or
decision, the prevailing party in any such action, trial or appeal shall be
entitled to its reasonable attorneys' fees to be paid by the nonprevailing party
as fixed by the court.
SECTION 6.08. Waiver of Jury. With respect to any dispute arising
under or in connection with this Agreement or any related agreement, as to which
no party invokes the right to arbitration hereinabove provided, or as to which
legal action nevertheless occurs, each party irrevocably waives all rights it
may have to a jury trial. THIS WAIVER IS KNOWINGLY, INTENTIONALLY, AND
VOLUNTARILY MADE BY EACH PARTY, AND EACH ACKNOWLEDGES THAT NONE OF THE OTHER
PARTIES NOR ANY PERSON ACTING ON BEHALF OF THE OTHER PARTIES HAS MADE ANY
REPRESENTATION OF FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO
MODIFY OR NULLIFY ITS EFFECT. EACH PARTY FURTHER ACKNOWLEDGES THAT IT HAS BEEN
REPRESENTED (OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF
THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER, BY INDEPENDENT LEGAL COUNSEL
SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS
THIS WAIVER WITH COUNSEL. EACH PARTY FURTHER ACKNOWLEDGES THAT IT HAS READ AND
UNDERSTANDS THE MEANING AND RAMIFICATIONS OF THIS WAIVER PROVISION.
<PAGE> 18
Paraversal, Inc.
As of October 5, 1999
Page 8
SECTION 6.09. Engagement at Will. Engagement and compensation can
be terminated, with or without cause, and with or without notice, at any time,
at the option of the Company or the Consultant. No provision set forth in this
Agreement shall limit or otherwise alter the foregoing.
SECTION 6.10. Counterparts. This Agreement may be executed in two
or more counterparts, but all of which, when taken together, shall constitute
one and the same Agreement.
IN WITNESS WHEREOF, the Consultant and in the case of the
Company, by its duly authorized officer empowered so to act, have duly executed
this Agreement, as of the date first above written.
COMPANY: STAN LEE MEDIA, INC.,
By: /s/ Gill Champion
-----------------------------------------
Its: C.O.O.
-------------------------------------
CAUTION: THIS AGREEMENT AFFECTS YOUR RIGHTS TO INNOVATIONS YOU MAKE DURING YOUR
ENGAGEMENT, AND RESTRICTS YOUR RIGHT TO DISCLOSE OR USE THE COMPANY'S
CONFIDENTIAL INFORMATION DURING OR SUBSEQUENT TO YOUR ENGAGEMENT. CONSULTANT HAS
READ THIS AGREEMENT CAREFULLY AND UNDERSTANDS ITS TERMS. CONSULTANT HAS
COMPLETELY FILLED OUT SCHEDULE A TO THIS AGREEMENT.
CONSULTANT: PARAVERSAL, INC.,
By: /s/ Peter F. Paul
-----------------------------------------
Its: Authorized Representative
-------------------------------------
/s/ Peter F. Paul
--------------------------------------------
PETER F. PAUL
<PAGE> 1
Exhibit 10.44
EMPLOYMENT AGREEMENT
AGREEMENT dated as of October 8, 1999, between STAN LEE MEDIA, INC., a
Colorado corporation (the "Company"), and STEPHEN M. GORDON ("Employee").
Company currently is engaged in the business of deploying the global
brand, intellectual property, development capabilities and goodwill of comic
book publisher Stan Lee to the Internet, as well as other new media and
traditional media platforms, and the commercial exploitation of such content
through e-commerce, product and merchandise sales, online publishing, gaming,
distance learning, financial services, sponsorships, co-branding, advertising,
product placement and endorsements. Employee is experienced in general
management, technology, human resources and operational issues affecting
Company.
Company desires to employ the Employee, and Employee is willing to
accept such employment, in each case, subject to the terms and conditions set
forth in this Agreement.
Accordingly, Company and Employee hereby agree as follows:
I. TERM OF EMPLOYMENT
The term of Employee's employment under this Agreement shall be for a
period of five (5) years, commencing as of November 1, 1999, unless earlier
terminated as provided in Article IV hereof (the "Employment Period"). Following
the initial five (5) year term, this Agreement shall be renewed automatically
for successive terms of one (1) year unless either party gives notice to the
other at least ninety (90) days prior to the expiration of any such term of its
or his intention not to renew.
II. EMPLOYMENT; DUTIES AND ACCEPTANCE
SECTION 2.01. Employment. Employee shall devote his full-time services,
skill and time to the affairs of the Company and the promotion of its interests,
and Employee shall not accept other employment during the Employment Period.
Employee shall be the Executive Vice President - Operations of Company and shall
be responsible, subject always to the direction of the Company's Board of
Directors, for working with Company's general management, business development
and marketing teams. Employee shall report to Stan Lee, the Chairman and Chief
Creative Officer of the Company, to Peter F. Paul, a Company consultant, and as
otherwise directed by the Company's Board of Directors. Employee's expenditure
of reasonable amounts of time for personal, business, charitable or professional
activities shall not be deemed a breach of his undertaking to provide the
required services hereunder, subject always to the provisions of Section 5.02
hereof, provided that such activities do not interfere materially with
Employee's ability to render such services.
SECTION 2.02. Acceptance of Employment by Employee. Employee accepts
such employment with Company and shall render the services required by this
Agreement to be
<PAGE> 2
rendered by him, and hereby agrees to execute and deliver the Company's
"Confidentiality and Invention Assignment Agreement," in the form attached
hereto. The terms of that agreement require the Employee to refrain for a period
of time after employment from competing with the Company or using or disclosing
the Company's Confidential Information (as defined in the agreement) or any
confidential information received during your prior employment in any manner
which might be detrimental to or conflict with the business interests of the
Company or its employees.
III. EMPLOYEE'S COMPENSATION
SECTION 3.01. Base Compensation. As compensation for services to be
rendered pursuant to this Agreement, Company shall pay Employee and Employee
shall accept, a base salary (the "Salary") at the annual rate of One Hundred
Thirty-Five Thousand Dollars ($135,000) for the period commencing November 1,
1999 and ending May 31, 2000, increasing to One Hundred Fifty Thousand Dollars
($150,000) for the period commencing June 1, 2000 and ending May 31, 2001, and
thereafter, at an annualized rate of not less than One Hundred Seventy-Five
Thousand Dollars ($175,000), subject to annual adjustment, upwards but not
downwards, for the remainder of the Employment Period, and as the same may be
renewed or extended. The salary shall be payable to Employee in semi-monthly
payments in accordance with the Company's standard payroll policies.
SECTION 3.02. Bonus. In addition to the Salary, Employee shall be
entitled to an annual bonus (the "Bonus") in the amount of Twenty-Five Thousand
Dollars ($25,000) payable on or before December 31, 1999, and thereafter, shall
be entitled to such additional bonuses as may be determined by the Company's
Board of Directors.
SECTION 3.03. Stock Options. Company and Employee acknowledge and agree
that Employee has previously been granted options to purchase One Hundred
Thousand (100,000) shares of the Company's Common Stock pursuant to that certain
written compensatory agreement dated July 23, 1999. Employee shall be entitled
to such additional stock options as may be granted to him under any Company
stock option plan(s) from time to time in effect at the Company.
SECTION 3.04. Participation in Employee Benefit Plans. Company shall
make available to the Employee the Company benefit program currently in effect
or as may be established from time to time by its Board of Directors for
similarly situated employees, including without limitation, any incentive
compensation plans or group benefit plans.
SECTION 3.05. Vacation and Sick Leave Provisions. Employee shall receive
not less than fifteen (15) working days' vacation each year, exclusive of legal
holidays. At the option of Employee, unused vacation days may be carried over to
succeeding years or Employee shall be entitled to payment therefor at the end of
Company's fiscal year or Employee's anniversary date of employment, whichever is
mutually determined appropriate by Company and Employee. In addition, the
Employee shall be entitled to sick leave benefits during the term of this
Agreement in accordance with the customary policies applied to similarly
situated employees of the Company.
<PAGE> 3
SECTION 3.06. Reimbursement of Expenses. Subject to prior approval by
the Company, Employee shall be reimbursed for reasonable expenses incurred in
connection with the business of Company upon the presentation by Employee, from
time to time, of an itemized account of and proper receipts for such
expenditures, including without limitation, a monthly automobile allowance in an
amount not less than Seven Hundred Fifty Dollars ($750).
SECTION 3.07. Other Compensation. Employee shall receive such other
compensation as may from time to time be granted to Employee by Company's Board
of Directors.
SECTION 3.08. Withholding. All payments due to Employee under any
provisions of this Agreement shall be reduced by any amounts required to be
withheld by Company from time to time from such payments under applicable
Federal, state or local law or regulations then in effect.
IV. TERMINATION
SECTION 4.01. Termination by Either Party Upon Notice. Either party may
terminate this Agreement, with or without cause, effective upon delivery of
written notice of termination to the other party.
SECTION 4.02. Termination by Company for Cause. Company may, at any
time, terminate this Agreement, for Cause. "Cause" means: (a) willful and
repeated failure to comply with the lawful directions of the Board of Directors;
(b) gross negligence or willful misconduct in the performance of Employee's
duties to the Company; (c) commission of any act of fraud against, or
misappropriation of material property belonging to the Company; or (d) action by
Employee that is materially injurious to the business or reputation of the
Company, in each case as determined in good faith by the Board of Directors,
including without limitation, action by Employee involving violation of any
criminal statute constituting a misdemeanor involving moral turpitude or a
felony, chronic alcoholism or drug addiction.
Upon termination pursuant to the provisions of this Section, Employee would be
entitled to receive only such compensation accrued and unpaid as of the
termination date.
SECTION 4.03. Termination for Death and Disability. This Agreement shall
be terminated effective immediately and automatically, upon the death or
permanent disability of Employee. For purposes of this subsection, "permanent
disability" shall be deemed to have occurred if Employee is unable by reason of
illness or physical or mental disability to perform the services required under
this Agreement for a period aggregating 120 days within any period of 12
consecutive months during the Employment Period. Upon termination for death,
Employee would be entitled to receive only such compensation accrued and unpaid
as of the termination date. Under termination for permanent disability, Employee
would be entitled to receive full compensation and benefits for the initial six
(6) months following the determination
3
<PAGE> 4
of "permanent disability", and one-half of such compensation and benefits for
the next succeeding six (6) month period.
SECTION 4.04. Termination Other Than for Cause. If Employee is
terminated for any reason other than as set forth in Sections 4.02 and 4.03
hereof, then Employee would be entitled to receive compensation and benefits as
follows:
(a) Cash Severance.
(i) During the first, second and third year of this
Agreement, 200% of the annual Salary at its then current level,
payable in a lump sum or at the times such salary would
otherwise have been payable were Employee to remain employed
with Company, as determined by Employee in his sole discretion,
and acceleration of vesting of all options;
(ii) During the fourth year of this Agreement, 250% of
the annual Salary at its then current level, payable in a lump
sum or at the times such salary would otherwise have been
payable were Employee to remain employed with Company, as
determined by Employee in his sole discretion, and acceleration
of vesting of all options;
(iii) During the fifth year of this Agreement, 299% of
the annual Salary at its then current level, payable in a lump
sum or at the times such salary would otherwise have been
payable were Employee to remain employed with Company, as
determined by Employee in his sole discretion, and acceleration
of vesting of all options; and
(b) Continuation of Benefits. Company would maintain in full
force and effect Employee's benefit plans (or provide Employee with
alternative substantially equivalent coverage) for a period equal to
nine (9) months, or as otherwise required by applicable Federal and/or
state law.
Further, if Executive is terminated after a Change in Control (as
hereinafter defined), or if Executive elects to terminate his employment within
six months following a Change in Control, then Executive shall be entitled to
receive not less than the compensation and benefits set forth in this Section,
including the acceleration of vesting of all options. For purposes of this
Section, the term "Change in Control" shall be deemed to have occurred if (i)
any "person" (as defined in Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934 (the "Exchange Act")) other than the Company or a
subsidiary of the Company (a "Company") or any employee benefit plan sponsored
by the Company or any Company shall after the date hereof directly or indirectly
acquire or dispose of a beneficial interest (within the meaning of Rule 13d-3
under the Exchange Act) in securities of the Company representing thirty percent
(30%) or more of the combined voting power of Company's then outstanding
securities, (ii)
4
<PAGE> 5
during any period of two consecutive years, individuals who at the beginning of
such period constitute the Board of Directors of Company cease for any reason to
constitute a majority thereof (unless each new director was elected by, or on
the recommendation of, a majority of the directors then still in office who were
directors at the beginning of the period); or (iii) Company disposes of a
substantial portion of its assets. In the event of a merger or other business
combination in which Company is a party, the term "Board of Directors" shall
include the board of directors (or equivalent) of the entity which ultimately,
directly or indirectly, succeeds to the business and operations of Company.
SECTION 4.05. Effect of Termination. Termination of this Agreement shall
not release or discharge either party hereto from any obligation, debt or
liability which may previously have occurred and remains to be performed upon
the date of termination. In addition, the provisions of Article V of this
Agreement shall survive such termination or expiration of the term of this
Agreement.
V. OBLIGATIONS OF EMPLOYEE
SECTION 5.01. Acceptance of "Confidentiality and Invention Assignment
Agreement". Employee hereby agrees to execute and deliver, and to abide by, the
terms and conditions set forth in that certain "Confidentiality and Invention
Assignment Agreement" attached hereto.
SECTION 5.02. Competition. Without Company's prior written approval,
Employee agrees that, during the Employment Period (and as the same may be
renewed or extended) or, if Employee terminates this Agreement without a
material breach by Company, for a period of one (1) year from the date thereof,
Employee shall not, directly or indirectly, for his own account or the account
of any other person, firm or company, limited solely to super-hero content
created for exploitation over the Internet or otherwise (the "Super Hero
Business"), (i) offer or sell any products or services, or participate in any
business which offers or sells any products or services which compete directly
or indirectly with the Super Hero Business on the date of such expiration or
termination that Employee would have knowledge of by virtue of his capacity;
(ii) induce or attempt to induce any person(s) or entities which were customers
of Company during the Employment Period or were being actively solicited at the
time of termination of the Employment Period to cease doing business or not to
commence doing business in whole or in part with Company or solicit the business
of any such customer which compete with the Super Hero Business on the date of
such expiration or earlier termination that Employee would have knowledge of by
virtue of his capacity; or (iii) solicit, interfere with, or endeavor to cause
any employee or consultant of Company to leave his employment or engagement or
induce or attempt to induce any such employee or consultant to breach his
employment or engagement agreement with Company. Participation in a business
shall include, but not be limited to, serving as a director, officer, employee,
agent or other representative of or having an interest in the business as an
owner, stockholder, partner, limited partner, joint venturer, material creditor
or any other financial interest; provided, however, that the following
5
<PAGE> 6
shall not be in violation of this covenant: (i) the ownership by Employee of not
more than three (3) percent of the outstanding shares of stock of any such
business listed on any national stock exchange or registered under the federal
securities laws and actively traded in the over-the-counter market; and (ii)
participation by Employee in any capacity in any business, which participation
has received a specific written approval of a majority of the Board of Directors
of Company.
SECTION 5.03. Rights and Remedies Upon Breach of Employee's Obligations.
Because of the unique and proprietary nature of the Company's Confidential
Information and business operations and practices, and the unique character of
Employee's services, and because any material breach of any of the provisions of
this Agreement will cause irreparable injury to Company for which money damages
would not be an adequate remedy, it is understood and agreed that Company's
remedy for a material breach by Employee of this Agreement will be inadequate,
and that, therefore, in the event of any material breach by Employee of his
obligations pursuant to the terms of this Agreement, Company shall be entitled,
upon application to any court of competent jurisdiction, to equitable relief
(including, without limitation, provisional and permanent injunctive relief and
specific performance) in order to enforce or prevent violation of such provision
or provisions. Nothing contained herein shall be construed as prohibiting
Company from pursuing any other remedies provided to it by this Agreement or
available to it at law or in equity for such breach including, without
limitation, the recovery of money damages from Employee.
SECTION 5.04. Survival of Employee's Obligations. Employee's obligations
pursuant to this Article shall survive the termination of this Agreement.
VI. GENERAL PROVISIONS
SECTION 6.01. Notices. All notices, requests, consents or other
communications provided for in or to be given under this Agreement shall be in
writing, may be delivered in person, by facsimile transmission (fax), by
overnight air courier or by mail, and shall be deemed to have been duly given
and to have become effective (a) upon receipt if delivered in person or by fax,
(b) one (1) day after having been delivered to an overnight air courier or (c)
three (3) days after having been deposited in the mails as certified or
registered matter, all fees prepaid, directed to the parties or their assignees
at the following addresses (or at such other address as shall be given in
writing by a party hereto):
If to Employee: Stephen M. Gordon
17831 Cathedral Place
Encino, CA 91316
Fax: (818) 342-0215
If to Company: Stan Lee Media, Inc.
6
<PAGE> 7
15821 Ventura Boulevard, Suite 675
Encino, CA 91436
Attention of Chief Operating Officer
Fax: (818) 461-1760
SECTION 6.02. Assignment. This Agreement shall not be assigned, pledged
or transferred in any way by either party hereto. Any attempted assignment,
pledge, transfer or other disposition of this Agreement or any rights, interests
or benefits contrary to the foregoing provisions shall be null and void.
SECTION 6.03. Conflicting Agreements. Employee hereby represents and
warrants to Company that his entering into this Agreement, and the obligations
and duties undertaken by him hereunder, will not conflict with, constitute a
breach of or otherwise violate the terms of any employment or other agreement to
which he is a party and that he is not required to obtain the consent of any
person, firm, corporation or other entity in order to enter into this Agreement.
SECTION 6.04. Indemnification; Insurance. Company shall indemnify
Employee and hold Employee harmless from any claims, actions, charges, expenses,
judgments, fines, settlements and other amounts actually and reasonably incurred
in connection with any proceeding to which Employee was or is a party or is
threatened to be made a party arising by reason of the fact that Employee is or
was an employee of Company. For purposes of this Section, "proceeding" means any
threatened, pending or completed action or proceeding, whether civil, criminal,
administrative or investigative, and includes an action or proceeding by or in
the right of Company to procure a judgment in its favor, and "expenses"
includes, without limitation, attorneys' fees and any expenses of establishing a
right to indemnification under this Agreement or under the laws of the State of
California. In addition, to the extent economically practicable as determined by
the Company in its sole discretion, Company shall include Employee as an
additional named insured on its insurance policies.
SECTION 6.05. No Waiver. No term or condition of this Agreement shall be
deemed to have been waived, nor shall any party hereto be estopped from
enforcing any provision of this Agreement, except by written instrument of the
party charged with such waiver or estoppel. Any written waiver shall not be
deemed a continuing waiver unless specifically stated, shall operate only as to
the specific term or condition waived and shall not constitute a waiver of such
term or condition for the future or as to any act other than the act
specifically waived.
SECTION 6.06. Governing Law; Venue. This Agreement shall be governed by
and construed in accordance with the laws of the State of California. In the
event of any dispute or controversy arising under this Agreement or the
transactions contemplated herein, the parties mutually consent to the
jurisdiction of the state and federal courts located in Los Angeles, California,
and agree that any litigation may be served outside of California with the same
force
7
<PAGE> 8
and effect as if service had been made in California.
SECTION 6.07. Entire Agreement; Amendments. This Agreement, including
the "Confidentiality and Invention Assignment Agreement" attached hereto, is
intended by the parties as a final expression of their Agreement with respect to
the terms included herein, and may not be contradicted or varied by evidence of
any prior or contemporaneous agreement. All prior negotiations, correspondence,
memoranda, and agreements, whether oral or written, are merged herein. Any
change, revision or modification of any provision of this Agreement shall not be
binding unless executed in writing and signed by a duly authorized
representative of each of the parties hereto.
SECTION 6.08. Headings. Headings contained herein are for convenient
reference only; they are not a part of this Agreement and are not to affect in
any way the substance or interpretation of this Agreement.
SECTION 6.09. Survival of Provisions. In case any one or more of the
provisions or any portion of any provision contained in this Agreement
(including, without limitation, any geographical or temporal restrictions,
contained in Article V hereof) should be found to be invalid, illegal or
unenforceable in any respect, such provision or portion thereof shall be
modified or deleted in such manner so as to afford the parties the fullest
protection commensurate with making this Agreement, as modified, legal and
enforceable under applicable laws, and the validity, legality and enforceability
of any such provision shall not in any way be affected or impaired thereby, such
remaining provisions or portion of any such provision construed as severable and
independent thereof.
SECTION 6.10. Arbitration; Attorneys' Fees. Any dispute or conflict
which arises between the parties hereto shall be submitted to the American
Arbitration Association, before a single arbitrator, in accordance with its then
current Commercial Rules in Los Angeles, California, for arbitration and the
parties shall be bound by the results of such arbitration in accordance with
applicable California law. If either party brings an action for judicial review
or enforcement of the arbitration proceedings, award or decision, the prevailing
party in any such action, trial or appeal shall be entitled to its reasonable
attorneys' fees to be paid by the nonprevailing party as fixed by the court.
SECTION 6.11. Waiver of Jury. With respect to any dispute arising under
or in connection with this Agreement or any related agreement, as to which no
party invokes the right to arbitration hereinabove provided, or as to which
legal action nevertheless occurs, each party irrevocably waives all rights it
may have to a jury trial. THIS WAIVER IS KNOWINGLY, INTENTIONALLY, AND
VOLUNTARILY MADE BY EACH PARTY, AND EACH ACKNOWLEDGES THAT NONE OF THE OTHER
PARTIES NOR ANY PERSON ACTING ON BEHALF OF THE OTHER PARTIES HAS MADE ANY
REPRESENTATION OF FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO
MODIFY OR NULLIFY ITS EFFECT. EACH PARTY FURTHER ACKNOWLEDGES THAT
8
<PAGE> 9
IT HAS BEEN REPRESENTED (OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE
SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER, BY INDEPENDENT LEGAL
COUNSEL SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO
DISCUSS THIS WAIVER WITH COUNSEL. EACH PARTY FURTHER ACKNOWLEDGES THAT IT HAS
READ AND UNDERSTANDS THE MEANING AND RAMIFICATIONS OF THIS WAIVER PROVISION.
SECTION 6.12. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be considered a duplicate original.
SECTION 6.13. Construction. Each of the parties hereto has been
represented by counsel throughout this transaction who has carefully negotiated
the provisions hereof. The language in all parts of this Agreement shall be in
all cases construed simply according to its fair meaning and not strictly for or
against any of the parties. When the context so requires in this Agreement, the
masculine gender includes the feminine and/or the neuter, and the singular
number includes the plural.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, in the case of Company by its duly authorized officer(s) empowered so
to act, all as of the date first above written.
STAN LEE MEDIA, INC.,
By: /s/ Stan Lee
-----------------------------------
Stan Lee, Chairman
/s/ Stephen M. Gordon
---------------------------------------
[Signature of Employee]
Stephen M. Gordon
---------------------------------------
[Type or Print Name of Employee]
9
<PAGE> 10
CONFIDENTIALITY AND INVENTION ASSIGNMENT AGREEMENT
AGREEMENT dated as of October 8, 1999, between STAN LEE MEDIA, INC., a
Colorado corporation and its affiliated companies (collectively, the "Company"),
and STEPHEN M. GORDON ("Employee").
In consideration of the commencement of Employee's employment and the
compensation paid to Employee, Employee acknowledges and agrees with the Company
as follows:
I. EFFECTIVENESS
This Agreement shall become effective on the earlier of (i) commencement
of Employee's employment with the Company, or (ii) the date and time at which
any Confidential Information (as defined in Section 2.01 below) was or is first
disclosed to Employee.
II. PROTECTION OF COMPANY'S CONFIDENTIAL INFORMATION
SECTION 2.01. Confidential Information. The Company has and will
develop, compile, and own certain proprietary techniques and confidential
information which have great value in its business (said techniques and
information being hereinafter referred to, collectively, as "Confidential
Information"). The Company has and also will have access to Confidential
Information of its Clients. ("Clients" shall mean any persons or entities for
whom the Company performs services or furnishes goods, or from whom the Company
or Employee obtains information). Confidential Information includes not only
information disclosed by the Company or its Clients to Employee in the course of
his or her employment, but also information developed or learned by Employee
during the course of his or her employment with the Company, such as Innovations
(as defined in Section 4.01 below). Confidential Information is to be broadly
defined. Confidential Information includes all information that has or could
have commercial value or other utility in the business in which the Company or
Clients are engaged or contemplate engaging. Confidential Information also
includes all information of which the unauthorized disclosure could be
detrimental to the interests of the Company or Clients, whether or not such
information is identified as Confidential Information by the Company or Clients.
By example and without limitation, Confidential Information includes all
technical and non-technical information including copyright, trade secret and
proprietary information, pricing strategies and models, know-how, processes,
algorithms, software programs, software source documents, and formulas related
to the current, future or proposed products and services of the Company, and
includes, without limitation, the Company's information concerning pricing
strategies, financial information, procurement and purchasing requirements,
business forecasts, and sales and marketing plans and information.
<PAGE> 11
Notwithstanding the foregoing, Confidential Information shall expressly
exclude any information that (i) was in the public domain at the time it was
communicated to the Employee; (ii) entered into the public domain subsequent to
the time it was communicated to the Employee through no fault of the Employee;
(iii) was in the Employee's possession free of any obligation of confidence at
the time it was communicated to the Employee; (iv) was developed by Employee
independently of and without reference to any information communicated to the
Employee by the Company; or (v) disclosure was required by any governmental
body, was otherwise required by law, or was necessary to establish the rights of
either party under this Agreement.
SECTION 2.02. Protection of Confidential Information. Employee agrees
that at all times during or after his or her employment, he or she will hold in
trust, keep confidential, and not disclose to any third party or make any use of
the Confidential Information of the Company or Clients except for the benefit of
the Company or Clients and in the course of his or her employment with the
Company. Employee further agrees not to cause the transmission, removal, or
transport of Confidential Information or Innovations from the Company's
principal place of business at 15821 Ventura Boulevard, Suite 675, Encino,
California, 91436, or such other place of business specified by the Company,
without prior written approval of the President of the Company. Employee
acknowledges that he or she is aware that the unauthorized disclosure of
Confidential Information of the Company or its Clients may be highly prejudicial
to their interests, an invasion of privacy, and an improper disclosure of trade
secrets. Whenever the approval, designation, specification, or other act of the
President of the Company is required under this Agreement, the President may, by
written designation, authorize an agent of the Company to perform such act.
III. PRIOR KNOWLEDGE AND RELATIONSHIPS
SECTION 3.01. Prior Knowledge and Innovations. Except as disclosed on
Schedule A to this Agreement, Employee does not know anything about the
Company's Confidential Information, other than the information he or she has
learned from the Company. Employee also has disclosed on Schedule A a complete
list of all inventions or innovations proprietary to Employee and which Employee
wants to exclude from the application of this Agreement. The Company agrees to
receive and hold all such disclosures in confidence.
SECTION 3.02. Prior Commitments. Except as disclosed on Schedule A to
this Agreement, Employee has no other agreements, relationships, or commitments
to any other person or entity which conflict with Employee's obligations to the
Company under this Agreement.
SECTION 3.03. Proprietary Information or Trade Secrets of Others.
Employee will not disclose to the Company, or use, or induce the Company to use,
any proprietary information or trade secrets of others. Employee represents and
warrants that he or she has returned all property and confidential information
belonging to all prior employers.
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IV. ASSIGNMENT OF EMPLOYEE INNOVATIONS
SECTION 4.01. Disclosure. Employee will promptly disclose in writing to
the Company all discoveries, developments, designs, ideas, innovations,
improvements, inventions, formulas, processes, techniques, know-how, and data
(whether or not patentable or registerable under copyright or similar statutes)
made, conceived, reduced to practice, or learned by Employee (either alone or
jointly with others) during the period of his or her employment, that are
related to or useful in the business of the Company, or which result from tasks
assigned to Employee by the Company, or from the use of premises owned, leased,
or otherwise acquired by the Company (all of the foregoing being hereinafter
referred to, collectively, as "Innovations").
SECTION 4.02. Assignment of Innovations. Employee acknowledges and
agrees that all Innovations belong to and shall be the sole property of the
Company and shall be Innovations of the Company subject to the provisions of
this Agreement. Employee hereby assigns to the Company all right, title, and
interest Employee may have or may acquire in and to all Innovations. Employee
agrees to sign and deliver to the Company (either during or subsequent to his or
her employment) such other documents as the Company considers desirable to
evidence (1) the assignment of all rights of Employee, if any, in any
Innovations to the Company and/or (2) the Company's ownership of such
Innovations. Any provision in this Agreement requiring Employee to assign rights
to an Innovation does not apply to any invention that qualifies under California
Labor Code Section 2870, which section is reproduced in the Written Notification
to Employee attached as Schedule C hereto.
SECTION 4.03. Power of Attorney. In the event the Company is unable to
secure Employee's signature on any document necessary to apply for, prosecute,
obtain, or enforce any patent, copyright, or other right or protection relating
to any Innovation, whether due to mental or physical incapacity or any other
cause, Employee hereby irrevocably designates and appoints the Company and each
of its duly authorized officers and agents as his or her agent and
attorney-in-fact, to act for and in his or her behalf and stead to execute and
file any such document and to do all other lawfully permitted acts to further
the prosecution, issuance, and enforcement of patents, copyrights, or other
right or protections with the same force and effect as if executed and delivered
by the Employee.
V. TERMINATION OF EMPLOYMENT
SECTION 5.01. Delivery of Documents and Data on Termination of
Employment. In the event of termination (voluntary or otherwise) of Employee's
employment with the Company, Employee agrees, promptly and without request, to
deliver to and inform the Company of all documents and data pertaining to his or
her employment and the Confidential Information and Innovations of the Company
or Clients, whether prepared by Employee or
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otherwise coming into his or her possession or control, and to sign Schedule B
to this Agreement. Employee will not retain any written or other tangible
material containing any information concerning or disclosing any of the
Confidential Information or Innovations of the Company or Clients. Employee
recognizes that the unauthorized taking of any of the Company's trade secrets is
a crime under California Penal Code Section 499c and is punishable by
imprisonment in a state prison or in a county jail for a time not exceeding one
year, or by a fine not exceeding Five Thousand Dollars ($5,000), or by both such
fine and such imprisonment. Employee further recognizes that such unauthorized
taking of the Company's trade secrets could also result in civil liability under
California Civil Code Section 3426, and that willful misappropriation may result
in an award against Employee for triple the amount of the Company's damages and
the Company's attorneys' fees in collecting such damages.
SECTION 5.02. Obligations of Employee After Termination of Employment.
In the event of termination (voluntary or otherwise) of Employee's employment
with the Company, Employee agrees that he or she will protect the value of the
Confidential Information and Innovations of the Company and Clients and will
prevent the misappropriation or disclosure thereof. Employee will not disclose
or use to his or her benefit (or the benefit of any third party) or to the
detriment of the Company or its Clients any Confidential Information or
Innovation. Employee further agrees that for a period of one year immediately
following termination (voluntary or otherwise) of Employee's employment with the
Company, Employee shall not interfere with the business of the Company by
inducing an employee to leave the Company's employ or by inducing a consultant
to sever the consultant's relationship with the Company.
In addition, each party hereto shall refrain thereafter from uttering
any disparaging remarks or criticisms of the other party or its officers,
directors, shareholders, employees, representatives or agents which might have
the effect of injuring such party or such officers', directors', shareholders',
employees', representatives' or agents' character, reputations, or
profitability, and such party shall be entitled in the case of each such
utterance to liquidated damages in the amount of $10,000. Each party hereto
acknowledges that the liquidated damages specified above approximate the amount
of damages which a party would sustain taking into account, from the nature of
the case, that it would be impracticable or extremely difficult to fix the
actual damages. Each party hereto acknowledges further that such damages are
reasonable under the circumstances existing at the time this Agreement is made
and that this provision for liquidated damages is valid under Section 1671 of
the California Civil Code. Each party's entitlement to liquidated damages as
provided herein is in addition to, and not in lieu of, all its other rights and
remedies available hereunder or under applicable law or in equity.
VI. GENERAL PROVISIONS
SECTION 6.01. Notices. All notices, demands, requests, consents,
approvals or other communications required or permitted to be given hereunder
shall be in writing and may
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be personally served or may be deposited in the United States mail, registered
or certified, return receipt requested, postage prepaid, addressed as follows:
If to the Company: Stan Lee Media, Inc.
15821 Ventura Boulevard, Suite 675 Encino,
CA 91436 Attention of Chief Operating
Officer.
If to the Employee: Stephen M. Gordon
17831 Cathedral Place
Encino, CA 91316
or at such other address as such party shall have specified most recently to the
other party by written notice. Notice mailed as provided herein shall be deemed
given on the date of delivery, as evidenced by the return receipt.
SECTION 6.02. Governing Law. This Agreement shall be construed under the
substantive laws of the State of California and without giving effect to
California choice-of-law or conflict-of-law principles. In the event of any
dispute or controversy arising under this Agreement or the transactions
contemplated herein, the parties mutually consent to the jurisdiction of the
state courts of California and the federal district court for the Central
District of California, and agree that any litigation may be served outside of
California with the same force and effect as if service had been made in
California.
SECTION 6.03. Parties in Interest. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that this Agreement may not be assigned by the
Employee without the prior written consent of the Company; provided, however,
further, that the Company shall be entitled to assign all its rights and
delegate all its duties hereunder without the consent or any act on the part of
the Employee. In case of such assignment and delegation of duties by the
Company, the Employee hereby agrees to execute any releases and other
certificates, agreements and instruments requested by the Company to effectuate
the release of the Company from any liabilities and obligations hereunder.
SECTION 6.04. Entire Agreement; Amendment. This Agreement and the
schedules hereto constitutes and contains the entire agreement of the parties
hereto and supersedes any and all prior negotiations, correspondence,
undertakings and agreements between the parties respecting the subject matter
hereof. This Agreement may not be amended or modified, except by written
instrument signed by the party to be bound.
SECTION 6.05. Waiver. Neither any failure nor any delay on the part of
the Company or the Employee in exercising any right, power or privilege
hereunder shall
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operate as a waiver thereof, nor shall a single or partial exercise thereof
preclude any other or further exercise or the exercise of any other right, power
or privilege.
SECTION 6.06. Survival of Provisions. In case any one or more of the
provisions or any portion of any provision contained in this Agreement should be
found to be invalid, illegal or unenforceable in any respect, such provision or
portion thereof shall be modified or deleted in such manner so as to afford the
parties the fullest protection commensurate with making this Agreement, as
modified, legal and enforceable under applicable laws, and the validity,
legality and enforceability of any such provision shall not in any way be
affected or impaired thereby, such remaining provisions or portion of any such
provision construed as severable and independent thereof.
SECTION 6.07. Arbitration; Attorneys' Fees. Any dispute or conflict
which arises between the parties hereto shall be submitted to the American
Arbitration Association in accordance with its then current Commercial Rules in
Los Angeles County, California, for arbitration and the parties shall be bound
by the results of such arbitration in accordance with the California Code of
Civil Procedure Section 1283.05. If either party brings an action for judicial
review or enforcement of the arbitration proceedings, award or decision, the
prevailing party in any such action, trial or appeal shall be entitled to its
reasonable attorneys' fees to be paid by the nonprevailing party as fixed by the
court.
SECTION 6.08. Waiver of Jury. With respect to any dispute arising under
or in connection with this Agreement or any related agreement, as to which no
party invokes the right to arbitration hereinabove provided, or as to which
legal action nevertheless occurs, each party irrevocably waives all rights it
may have to a jury trial. THIS WAIVER IS KNOWINGLY, INTENTIONALLY, AND
VOLUNTARILY MADE BY EACH PARTY, AND EACH ACKNOWLEDGES THAT NONE OF THE OTHER
PARTIES NOR ANY PERSON ACTING ON BEHALF OF THE OTHER PARTIES HAS MADE ANY
REPRESENTATION OF FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO
MODIFY OR NULLIFY ITS EFFECT. EACH PARTY FURTHER ACKNOWLEDGES THAT IT HAS BEEN
REPRESENTED (OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF
THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER, BY INDEPENDENT LEGAL COUNSEL
SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS
THIS WAIVER WITH COUNSEL. EACH PARTY FURTHER ACKNOWLEDGES THAT IT HAS READ AND
UNDERSTANDS THE MEANING AND RAMIFICATIONS OF THIS WAIVER PROVISION.
SECTION 6.09. Employment at Will. Employment and compensation can be
terminated, with or without cause, and with or without notice, at any time, at
the option of the Company or the Employee. No provision set forth in this
Agreement shall limit or otherwise alter the foregoing.
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SECTION 6.10. Counterparts. This Agreement may be executed in two or
more counterparts, but all of which, when taken together, shall constitute one
and the same Agreement.
IN WITNESS WHEREOF, the Employee and in the case of the Company, by its
duly authorized officer empowered so to act, have duly executed this Agreement,
as of the date first above written.
COMPANY: STAN LEE MEDIA, INC.,
By: /s/ Stan Lee
------------------------------
Stan Lee, Chairman
CAUTION: THIS AGREEMENT AFFECTS YOUR RIGHTS TO INNOVATIONS YOU MAKE DURING YOUR
EMPLOYMENT, AND RESTRICTS YOUR RIGHT TO DISCLOSE OR USE THE COMPANY'S
CONFIDENTIAL INFORMATION DURING OR SUBSEQUENT TO YOUR EMPLOYMENT. EMPLOYEE HAS
READ THIS AGREEMENT CAREFULLY AND UNDERSTANDS ITS TERMS. EMPLOYEE HAS COMPLETELY
FILLED OUT SCHEDULE A TO THIS AGREEMENT AND HAS RECEIVED A COPY OF THE WRITTEN
NOTIFICATION TO EMPLOYEE CONTAINING CALIFORNIA LABOR CODE SECTION 2870 ATTACHED
AS SCHEDULE C HERETO.
EMPLOYEE: /s/ Stephen M. Gordon
-----------------------------------
STEPHEN M. GORDON
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<PAGE> 1
EXHIBIT 10.45
ACMECITY INTERACTIVE COMMUNITY AGREEMENT
JUNE 14, 1999
THE PARTIES (AS DEFINED BELOW) INTEND TO COOPERATE TO CREATE A
CO-BRANDED PERSONAL HOME PAGE COMMUNITY WITHIN THE EXISTING ACMECITY COMMUNITY.
THE PURPOSE OF THIS AGREEMENT IS TO SET FORTH THE FOLLOWING MUTUAL
UNDERSTANDINGS BY AND AMONG THE PARTIES RELATED TO THE COMMUNITY (AS DEFINED
HEREIN):
1. PARTIES. AcmeCity ("AcmeCity"), a Delaware LLC and Stan Lee Media, Inc., a
Delaware corporation ("Stan Lee"). AcmeCity is a joint venture between Warner
Bros. Online ("WB Online") and FortuneCity.com, Inc.
2. TERM.
(a) The Term of this Agreement shall be 18 months from the date hereof.
(b) AcmeCity shall have one (1) option to renew this Agreement for an
additional successive term of 18 months (the "Option"). The Option shall be
exercised by AcmeCity no later than 60 days prior to the expiration of the Term.
3. THE COMMUNITY. AcmeCity shall create the Community within AcmeCity for Stan
Lee fans or may create many communities representing various Stan Lee properties
(all of the communities shall be known as the "Community"). The Community is
intended to provide a forum for users who desire to create personal home pages
dedicated to Stan Lee characters, storylines or other Stan Lee Content (as
defined herein)
4. COMMUNITY DEVELOPMENT AND HOSTING. AcmeCity shall provide all site
development, design, production, maintenance, monitoring, hosting and
administrative functionality for the Community. AcmeCity shall have the right to
edit the Stan Lee Content for timing and space considerations. Except as
provided in the previous sentence, AcmeCity may not edit the Content without
Stan Lee's prior written approval.
5. STAN LEE CONTENT.
(a) Stan Lee shall provide a sufficient supply of Stan Lee-branded
elements (e.g. Stan Lee artwork, images, logos, etc.) to AcmeCity for use in the
Community. Such materials shall be made available within 5 business days after a
request from AcmeCity. Such materials shall, in the mutual discretion of
AcmeCity and Stan Lee, give the Community a similar look and feel to Stan Lee's
official web site currently located at www.StanLee.net ("Stan Lee Online").
(b) Stan Lee shall use its best efforts (including good faith
negotiation with Marvel Characters, Inc. to enter into a definitive agreement)
to provide the Community with digital assets related to Stan Lee created comic
characters and stories previously distributed the
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Marvel Comics brand (the "Marvel Assets"). The Marvel Assets shall also include
all artwork and depictions of the principal characters created by Mr. Stan Lee
and distributed by Marvel Characters, Inc. or its affiliates. The Marvel Assets
shall only be used for publicity, advertising, public relations, historical or
other related purposes, provided that such usages do not confuse ownership or
source of origin of the Marvel Assets and that such usages are given full
attribution of trademark and copyright to Marvel Characters, Inc. The Marvel
Assets shall be placed in a section of the Community called "history,"
"retrospective" or similar names. WB Online shall decide, in its sole
discretion, to exhibit or use the Marvel Assets, if at all, in the Community.
(c) Stan Lee shall provide a comic industry news section (such section
is currently called the "Stanzine") in the Community. Such section shall be
placed in the "What's New" portion of the Community.
(d) The content listed in paragraphs (a) through (c) of this Section 5
shall be the "Stan Lee Content."
(e) The quality and accuracy of the Stan Lee Content shall be solely the
responsibility of Stan Lee.
(f) For the duration of the Term, AcmeCity shall have the right to
maintain the Stan Lee Content (as defined herein) in an archive.
6. STAN LEE REPRESENTATIONS, WARRANTIES AND INDEMNITIES.
(a) In addition to the warranties contained in the AcmeCity Standard
Terms and Conditions and without limiting the generality thereof, Stan Lee
represents and warrants that the creation of a section in AcmeCity relating to
Stan Lee which contains Marvel Assets or authorizes third parties to use Marvel
Assets in a personal web space as contemplated by the limitations detailed in
Section 5(b) of this Agreement (i) shall not infringe, violate or misappropriate
any copyright or trademark of, violate any agreement with, or otherwise violate
or infringe on any rights of the kind or nature of, Marvel Characters, Inc., its
affiliates or any third party; and (ii) shall not violate the terms of any
agreement between Stan Lee Media, Inc., Mr. Stan Lee, or any affiliate of
either, on one hand and Marvel Characters, Inc. or its affiliates, on the other.
Stan Lee further represents and warrants that it has all rights necessary to
grant to AcmeCity the rights granted hereunder and all rights necessary to grant
to AcmeCity the rights to exhibit, display or utilize Marvel Assets in any
manner consistent with this Agreement.
(b) In addition to the indemnities contained in the AcmeCity Standard
Terms and Conditions and without limiting the generality thereof, Stan Lee
further agrees to defend, indemnify and hold WB Online and any of its owners,
principals, employees, licensees, sole proprietors, partners, officers,
directors, shareholders, agents, affiliates, successors, assigns, and
representatives harmless from and against all claims, liability and expense
(including reasonable attorneys' fees and costs) arising out of or relating to
the use or display of any part of the Marvel Assets in accordance with this
Agreement and any negligent act, misfeasance, or nonfeasance by Stan Lee or any
of its agents, contractors, servants, employees, or licensees or the breach or
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alleged breach of Stan Lee's representations, warranties or agreements herein.
At WB Online's request, Stan Lee shall provide a defense for WB Online in any
such action or proceeding, actual, threatened, or potential (or, at WB Online's
election, reimburse WB Online for reasonable fees and costs of WB Online's own
counsel).
7. COMMUNITY CONTENT.
(a) All content created for and provided to the Community shall conform
to the AcmeCity standard terms and conditions as listed in Exhibit A attached
hereto and shall be subject to the approval of both AcmeCity and Stan Lee.
(b) All content created by third party users or AcmeCity in the
Community, except for the Stan Lee Content, shall be and shall remain the
property of AcmeCity after the termination of this Agreement.
8. ADVERTISING.
(a) WB Online shall control and sell all advertising inventory within
the Community.
(b) WB Online shall pay Stan Lee fifty percent (50%) of the Net
Advertising Revenue (as defined herein) derived from the Community on a
quarterly basis. "Net Advertising Revenue" shall be defined as the amount
remaining after deducting from the Gross Advertising Revenue (as defined herein)
a 30% sales and ad serving fee, a 10% hosting fee, a 10% policing and monitoring
fee and a 10% design, production, and maintenance fee. "Gross Advertising
Revenue" shall be defined as all monies actually received by WB Online in
connection with sales or sponsorships of advertisements on Community pages.
(c) AcmeCity acknowledges that some of the Content will be associated
with certain sponsorships. AcmeCity shall act in good faith and use commercially
reasonable efforts to use such sponsorships in the Community. In no event,
however, shall AcmeCity, due to such sponsorships, be prohibited from selling
advertising anywhere within the Community.
(d) Stan Lee shall have the option to sell advertising inventory in the
Community under the following conditions:
(i) Stan Lee shall provide WB Online with 60 days written notice
of its intention to sell advertising inventory in the Community;
and
(ii) Stan Lee shall receive the written approval of WB Online
sales and advertising staff regarding advertising terms and
conditions including, but not limited to, CPM, the number of
guaranteed impressions, the length of advertising deals and
other client considerations.
In the event that Stan Lee is not able to provide WB Online with such 60
day written notice and still desires to sell advertising inventory in the
Community, Stan Lee must receive
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WB Online's written approval of such transaction in advance and such approval
may be withheld in the sole discretion of WB Online.
9. PROMOTIONS.
(a) AcmeCity shall promote the Community as follows:
(i) The Community will be AcmeCity's featured community of the
day for at least four days over a two week period following the
Community launch (the "Launch"). Featured community promotion will
include a home page icon, and a prominently placed, above-the-fold text
tout. Following the two week period after Launch, the Community will be
included in the general AcmeCity featured community rotation.
(ii) Images from the Community will be included in the general
rotation of images displayed within the circular graphic located in the
center of the AcmeCity home page.
(iii) Within two weeks following the Launch, the Community shall
be featured in a special edition AcmeCity newsletter distributed to all
registered users of AcmeCity.
(iv) Subject to available content, AcmeCity will develop and
produce a Stan Lee streaming media page for inclusion in the Community,
and make commercially reasonable efforts to gain linkage to the page
from MSN's streaming video guide.
(v) The Community shall include a link to the stanlee.net site
from all "What's New," "Explore," and "Community" main screen pages.
(b) Stan Lee shall promote the Community as follows:
(i) Stan Lee shall use its best efforts to provide a guaranteed
amount of marketing consideration within Stan Lee's affiliated online
sites and via related offline Stan Lee initiatives promoting the
Community. Such marketing consideration shall be detailed on Exhibit A
attached hereto.
(ii) Mr. Stan Lee, the individual, shall use his best efforts to
provide a guaranteed level of online and offline marketing consideration
through the inclusion of the AcmeCity Community URL in offline
publications, appearances (if any), special autographed merchandise,
broadcast programs, and online chats and other promotions. Such
marketing consideration shall be detailed on Exhibit B attached hereto.
(iii) Stan Lee and Mr. Stan Lee shall provide the virtual
character now known as "Stan 2.0" to the Community for marketing and
promotion surrounding the launch of the Community and on a weekly basis
throughout the Term. "Stan 2.0" shall be exclusive to
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the Community for 60 days from the initial appearance of "Stan 2.0."
(c) The URL for the Community shall be www.stanlee.acmecity.com.
10. LINKS.
(a) Stan Lee shall provide above-the-fold linkage from prominent
locations within Stan Lee Online to the Community, including, but not limited
to, the Stan Lee Online home page and the Stan Lee navigation bar, if any.
(b) Stan Lee shall provide above-the-fold default linkage from prominent
locations in all other Stan Lee web sites, including, but not limited to, all
sites officially associated with Stan Lee.
(c) AcmeCity shall provide a link to Stan Lee Online on each homepage
created within the Community.
11. EXCLUSIVITY. AcmeCity shall serve as the exclusive provider of personal
home page services for Stan Lee and its affiliates and shall have
exclusive access among all personal home page providers for Stan Lee and
all Stan Lee properties.
12. E-COMMERCE RIGHTS.
(a) WB Online shall be responsible for sales and fulfillment of any
premium Community services (e.g. the purchase of additional memory for a
personal home page) or Community merchandise. WB Online shall pay Stan Lee
twenty percent (20%) of the net revenue derived from the sale of such products.
Net revenue shall be calculated by subtracting all costs and expenses of WB
Online or AcmeCity associated with such sale, including, but not limited to,
costs of goods sold, costs of fulfillment, and costs of hosting of personal home
pages.
(b) Stan Lee shall be responsible for sales and fulfillment of all goods
and services within the Community relating to Stan Lee products and any other
Stan Lee-based merchandise (the "Products"). Stan Lee shall pay WB Online twelve
and one-half percent (12.5%) of the gross revenue derived from such sales
regardless of whether such sales are completed online or by other means.
(c) If Stan Lee does not source the Products then Stan Lee shall pay
AcmeCity fifty percent (50%) of all revenue it receives from sale of the
Products if such sale was due to traffic driven from the Community or WB Online.
(d) Stan Lee shall pay AcmeCity fifty percent (50%) of all revenue it
receives from the sale of comic books (or similar items) through Next Planet
Over or another third party entity if such sale was due to traffic driven from
the Community or WB Online.
13. PUBLICITY. AcmeCity and Stan Lee shall issue a joint press release
announcing this
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transaction. Each Party shall approve any and all press releases before they are
issued. Any subsequent release concerning this transaction shall be approved by
both Parties before it is issued.
14. MISCELLANEOUS:
(a) International Version of the Community. All of the terms herein
shall apply to both the domestic and the international version of the Community.
The international version of the Community shall mean both international user
access to English-based content and local language versions of the Community in
foreign languages.
(b) Ownership of Demographic Data. AcmeCity and Stan Lee shall each own
a one-half undivided interest in the demographic data registered in the
Community. Use of such names shall be limited by the AcmeCity standard terms and
conditions or the reasonable approval of WB Online and Stan Lee.
(c) Forms of Distribution. All of the terms and conditions contained in
this agreement shall be applicable if the Community is distributed on the
internet or via commercial online services and delivered to the user through any
means or media, whether now known or hereinafter devised, including, but not
limited to, narrowband, broadband and wireless distribution, throughout the
universe and in any and all languages.
(d) Entire Agreement. This Agreement and its exhibit contain the entire
agreement between the Parties and may not be modified, amended or changed except
by written instrument signed by duly authorized executives of each Parties and
designated as an amendment
(e) Waiver. The failure by any Party at any time to require performance
by any other Party or to claim a breach of any provision of this Agreement shall
not be construed as affecting any subsequent breach or the right to require
performance or to claim a breach with respect thereto.
(f) Construction. The Parties agree that this Agreement was fully
negotiated by the Parties and, therefore, no provision of this Agreement shall
be interpreted against any Party because such Party or its legal representative
drafted such provision.
(g) Notices. Any notice or other communication hereunder must be given
in writing and (a) delivered in person, (b) transmitted by facsimile or
telecommunications mechanism or (c) mailed by certified or registered mail,
postage prepaid, receipt requested, to the addresses set forth below:
Warner Bros. Online
4000 West Alameda Ave., 5th Floor
Burbank, California 91522-1705
Facsimile No.: (818) 977-3135
Attn: General Counsel
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Stan Lee Media
15821 Ventura Blvd., Suite 675
Encino, California 91436
Facsimile No.: (818) 461-1760
Attn: Chief Operating Officer
(h) Counterparts. This Agreement may be executed in counterparts and
each shall be deemed an original.
(i) Facsimile Signatures. This Agreement may be executed by facsimile
signature.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK.]
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THE PARTIES INDICATE THEIR AGREEMENT TO THE FOREGOING BY SIGNING IN THE SPACE
PROVIDED BELOW.
"ACMECITY"
By: WARNER BROS. ONLINE
Its: Manager
_/s/ Jim Moloshok
By: Jim Moloshok
Its: President
_/s/ Jeff Weiner
By: Jeff Weiner
Its: Vice President of Planning,
Development & Administration
"STAN LEE MEDIA, INC.",
a Delaware corporation
_/s/ Gill Champion
By: Gill Champion
Its: Chief Operating Officer
8
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EXHIBIT A
Marketing Consideration to be Provided by Stan Lee Media, Inc.
Stan Lee Media, Inc. shall use its best efforts to provide offline Stan
Lee initiatives promoting the Community. Such marketing consideration shall
include, but not be limited to:
1. Promotional inserts in poly-bagged comic collectibles distributed
through between 2,000 and 25,000 mini-marts around the United States
over the term of the agreement.
2. Print advertisements in comic book and related mass market magazines.
3. Direct mailings to comic book enthusiasts around the world.
4. In-store promotions in comic book stores.
5. Regular media support though all news releases, interviews and articles
relating to Mr. Stan Lee and Stan Lee media.
6. Promotion of the Community in future advertising and packaging for
ancillary media products. For example, the AcmeCity URL would be
included in the screen credits for a feature film or television show and
on the cover art for any related soundtracks or music related products.
7. Promotion of the Community in future advertising and packaging for
ancillary products. For example, the AcmeCity URL would be included in
the packaging and cover art for ancillary merchandising products such as
action figures, t-shirts, etc.
<PAGE> 10
EXHIBIT B
Mr. Stan Lee, the individual, shall use his best efforts to provide a
guaranteed level of online and offline marketing consideration through the
inclusion of the AcmeCity Community URL in offline publications, appearances at
Siggraph, Comicon San Diego, Comic Action Show in Essen, Germany, among others,
and all other appearances Stan shall attend, special autographed merchandise
designed in association with Acme City, broadcast programs including ZD TV,
Entertainment Tonight, and online chats and other promotions. In addition, if
Mr. Stan Lee prepares any sort of fan newsletter (either online or offline), Mr.
Stan Lee will include some information about the Community including the
AcmeCity URL.
<PAGE> 11
ACMECITY STANDARD TERMS AND CONDITIONS
1. GENERAL SCOPE OF AGREEMENT: The specific services provided by Stan Lee to WB
Online and ACME City (Collectively "WB Online") pursuant to this Agreement are
set forth in the attached agreement (the "Agreement"). In the event of conflict
between these Standard Terms and Conditions and the terms in the Agreement, the
terms set forth in the Agreement shall govern with respect to the conflicting
term only. Any terms not specifically defined herein shall be defined as set
forth in the Agreement, which is incorporated herein by reference.
2. CONTENT RESTRICTIONS: The Content or the information collected under this
Agreement (the "Information") shall not contain anything that, in WB Online's
sole judgment, may be in bad taste or in violation of law, may constitute libel
or slander, may be inconsistent with WB Online's public image, may fail to meet
community standards regarding obscenity or indecency, or may tend to bring
disparagement, ridicule, or scorn upon WB Online. If notified of allegedly
infringing, defamatory, damaging, obscene, illegal, or offensive material, WB
Online may (but shall not be required to) investigate the allegation and
determine in good faith and at its sole discretion whether to remove, or to
request that Stan Lee cease dissemination of the Content or use of the
Information. If Stan Lee refuses such request, WB Online may, at its sole
discretion and without prejudice to any other rights WB Online may have against
Stan Lee, immediately remove the Content or stop providing the Information or
terminate this Agreement. WB Online shall not be liable for any damages incurred
by Stan Lee because of any such action. WB Online may, at its sole discretion,
place on any Web home page, or on any other graphical or non-graphical
interface, an on-screen disclaimer that limits WB Online's responsibility for
the Content or the Information.
3. GENERAL OBLIGATIONS OF STAN LEE: Stan Lee shall:
1. Promptly comply with all laws, ordinances, orders, rules,
regulations, and requirements of all federal, state, and municipal
governments and appropriate departments, commissions, boards, and
offices thereof, at its sole cost and expense;
2. Pay promptly when due all obligations incurred directly or indirectly
in connection with this Agreement and with any operations in connection
with Web home pages, Web Sites, or any other Internet graphical or
non-graphical interfaces, including but not limited to all taxes and
assessments and all accounts and other indebtedness of every kind and
character incurred by or on behalf of Stan Lee in connection with any
operations in connection with Web home pages, Web Sites, or any other
Internet graphical or non-graphical interfaces.
4. DEFAULT: Either party shall be in default of this Agreement if it breaches
any material provision hereof and fails within 10 days after receipt of notice
of default to correct such default, or to commence corrective action and proceed
with due diligence to correct such default, or it becomes insolvent, makes an
assignment for the benefit of its creditors, a receiver is appointed or a
petition in Bankruptcy is filed with respect to the party and is not dismissed
within 30 days. Either party may terminate this Agreement at any time after a
party is in default of this Agreement.
5. OWNERSHIP AND USE OF URLS AND MEMBER DATA. WB Online shall have the exclusive
right to own, control, maintain and use any and all user traffic throughout the
Community and URLs or other names, designs or branding established for the
Community (excluding designs or trademarks owned by Stan Lee). WB Online shall
be entitled to own, report and claim as its own all traffic, visitors to the
Community web site and registered users (if any) within the Community.
6. WARRANTY: Stan Lee represents and warrants that the use of the Content by WB
Online: complies with all applicable laws and regulations; does not require any
payment, accordance of credit or the performance of any other obligations by WB
Online to any third party; does not infringe or misappropriate any copyright,
trademark, patent, the trade secrets or any other rights of any third persons,
or otherwise violate this Agreement. If notified of any claim to the contrary,
WB Online may, at its sole discretion, remove or request the removal of the
subject material.
7. INDEMNIFICATION: Stan Lee shall defend, indemnify and hold WB Online and any
of its owners, principals, employees, licensees, sole proprietors, partners,
officers, directors, shareholders, agents, affiliates, successors, assigns, and
representatives harmless from and against all claims, liability and expense
(including reasonable attorneys' fees and costs) arising out of or relating to
the use or display of any part of the Content and any negligent act,
misfeasance, or nonfeasance by Stan Lee or any of its agents, contractors,
servants, employees, or licensees or the breach or alleged breach of Stan Lee's
representations, warranties or agreements herein. At WB Online's request, Stan
Lee shall provide a defense for WB Online in any such action or proceeding,
actual, threatened, or potential (or, at WB Online's election, reimburse WB
Online for reasonable fees and costs of WB Online's own counsel). WB Online
shall defend, indemnify and hold Stan Lee and any of its owners, principals,
employees, licensees, sole proprietors, partners, officers, directors,
shareholders, agents, affiliates,
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<PAGE> 12
successors, assigns, and representatives harmless from and against all claims,
liability and expense (including reasonable attorneys' fees and costs) arising
out of or relating to the use or display of any part of the Content and any
negligent act, misfeasance, or nonfeasance by WB Online or any of its agents,
contractors, servants, employees, or licensees or the breach or alleged breach
of WB Online's representations, warranties or agreements herein. At Stan Lee's
request, WB Online shall provide a defense for Stan Lee in any such action or
proceeding, actual, threatened, or potential (or, at Stan Lee's election,
reimburse Stan Lee for reasonable fees and costs of Stan Lee's own counsel).
8. INDEPENDENT CONTRACTORS: The relationship of Stan Lee and WB Online
established by this Agreement is that of independent contractors, and nothing
contained in this Agreement shall be construed to give either party the power to
direct and control the day-to-day activities of the other, constitute the
parties as partners, joint venturers, co-owners or otherwise as participants in
a joint or common undertaking, or allow either party to create or assume any
obligation on behalf of the other party for any purpose whatsoever. All
financial obligations associated with each party's business are the sole
responsibility of that party.
9. CONFIDENTIALITY: The parties acknowledge that by reason of their relationship
to each other hereunder, each shall have access to certain information and
materials concerning the other's business, plans, customers, technology and
products that is confidential and of substantial value to that other party,
which value would be impaired if such information were disclosed to third
parties ("CONFIDENTIAL INFORMATION"). Confidential Information of Stan Lee shall
include, without limitation, the technical parameters of the Service provided by
Stan Lee whether or not so marked. Confidential Information of WB Online
includes without limitation, the technical parameters of the Service provided by
whether or not so marked, and all business related information with regard to
the organization of Entertaindom, WB Online and any of its designees or
affiliates. Each party agrees that it shall not use in any way, for its own
account or the account of any third party, except as expressly permitted by this
Agreement, nor disclose to any third party, any such Confidential Information
revealed to it by the other party and shall take every reasonable precaution to
protect the confidentiality of such information. Each party agrees not to
disclose any financial terms or specific clauses of this Agreement to any third
party without the other's written consent in its sole discretion, except as
required by securities or other applicable laws and to such party's accountants,
attorneys and other professional advisors, in which case each party shall notify
the other party of such disclosure in writing.
10. ASSIGNMENT OR TRANSFER: This Agreement is non-assignable by Stan Lee. This
Agreement may be assigned freely by WB Online to any entity of Time Warner,
Inc., Warner Bros. or Warner Bros. Online, or to any entity of which Time
Warner, Inc., Warner Bros. or Warner Bros. Online owns a substantial interest.
Such assignment shall be binding upon the undersigned and inure to the benefit
of such assignee and such assignment shall be deemed a novation forever
releasing and discharging WB Online from any further liability or obligation to
Stan Lee.
11. NO WAIVER: The waiver by the parties of any breach or default, or series of
breaches or defaults, of any term, covenant, or condition herein shall not be
deemed a waiver of any subsequent or continuing breach of default of the same or
any other term, covenant, or condition contained in this Agreement. No such
waiver shall be effective unless set forth in a writing signed by the party
being charged with the waiver.
12. NO GUARANTEE: Except as set forth in the Agreement, WB Online does not
represent, warrant, or guarantee that WB Online will use the Content or that
Stan Lee will receive or experience any revenues or profits in connection with
the use of the Content with the Community. If WB Online decides to use the
Content, it may decide to remove the Content at anytime for any reason without
any liability to Stan Lee except for payments previously incurred and due under
this Agreement.
13. STATEMENTS: If required pursuant to the Agreement, WB Online will provide
statements within 45 days after the close of the applicable calendar quarter.
14. AMENDMENT OR MODIFICATION: This Agreement may not be amended, modified,
enlarged, altered, or changed in any way except by a subsequent written
agreement signed by all parties to this Agreement.
15. SURVIVAL OF COVENANTS: The covenants relating to payment, liability and
indemnification with respect to any provision of this Agreement shall survive
any expiration, cancellation, or termination of the Agreement.
16. SEVERABILITY: If any term, provision, covenant, or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the remainder of the terms, provisions, covenants, or
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired, or invalidated; provided, however, that in the
event any part hereof relating to the payment of fees to WB Online is for any
reason declared invalid or unenforceable, WB Online shall have the option of
immediately terminating this Agreement upon written notice to Stan Lee.
2
<PAGE> 13
17. FORCE MAJEURE: WB Online and Stan Lee shall be excused from performance
hereunder to the extent that performance is prevented, delayed, or obstructed by
causes beyond WB Online's or Stan Lee's reasonable control, including but not
limited to Acts of God (fire, storm, floods, earthquakes, etc.), civil
disturbances, disruption of telecommunications or other essential services, or
interruption or termination of service by an Internet access Stan Lee being used
by WB Online to link to the Internet. In the event of an interruption or
termination of service by the Internet access provider being used by WB Online
to link to the Internet, WB Online shall take reasonable measures to obtain
alternate access to the Internet, but shall not be liable for any damages to
Stan Lee caused by any disruption in service.
18. MISCELLANEOUS:
1. Governing Law: This Agreement shall be deemed to have been negotiated
and entered into, and shall be construed in accordance with the laws of
the State of California and of the United States applicable to
agreements which are fully negotiated, signed and performed within such
state. All actions, proceedings or litigation brought by Stan Lee
against WB Online shall be instituted and prosecuted solely within the
State of California. Stan Lee hereby consents to the jurisdiction of the
state courts of California and the federal courts located in the Central
District of the State of California as to any matter arising out of or
relating to this Agreement.
2. Illegality: Nothing contained herein shall require the commission of
any act or the payment of any compensation which is contrary to law, and
if there shall exist any conflict between any provision contained herein
and any such law, the latter shall prevail.
19. ENTIRE AGREEMENT: This Agreement and the attached Agreement, which is hereby
incorporated by reference, expresses the entire agreement between WB Online and
Stan Lee and shall replace and supersede all prior arrangements and
representations, either oral or written, as to the subject matter hereof.
3
<PAGE> 1
EXHIBIT 10.46
Stan Lee Media, Inc.
15821 Ventura Boulevard
Suite 675
Encino, CA 91436
February 2, 2000
KBNHA Enterprises, Inc.
c/o The Firm
9100 Wilshire Blvd.
Suite 400W
Beverly Hills, CA 90212
RE: BackStreet Boys/Stan Lee Media
Gentlemen:
The following will set forth the agreement between Stan Lee Media ("SLM")
and KBNHA Enterprises, Inc. ("KBNHA ") f/s/o Nicholas Carter, Alexander J.
McLean, Howard Dorough, Kevin Richardson and Brian Thomas Littrell,
professionally collectively known as "The Backstreet Boys" with respect to that
certain property tentatively entitled "The Backstreet Project" which features
superhero-type versions of the actual members of the Backstreet Boys (the
"Property"):
1. KBNHA has prepared and submitted a written proposal for the Property
(herein such proposal being referred to as the "Assigned Material"). SLM
shall develop the Property including, without limitation, add or enhance
the story lines, scripts, characters, art, etc. (collectively, the
"Enhancements"). The Assigned Material together with the Enhancements are
referred to as the Property.
2. KBNHA and SLM will share equally, subject to paragraph 9 below, in all
rights of every kind and nature in and to the Property including, without
limitation, the right to exploit same in all manner and media, as well as
all merchandising rights, etc. (the "Rights").
3. The parties mutually shall approve all creative elements of the Property;
provided, KBNHA shall designate one person as its approval liaison.
<PAGE> 2
a) SLM shall submit each project (such as an individual Webisode or
comic book, defined as a "Project") for KBNHA 's approval in the
form of scripts, storyboards or otherwise. KBNHA shall notify SLM of
any reasonable, required changes within 10 business days. So long as
SLM complies with such requested changes, KBNHA shall be deemed to
have approved the particular element.
b) With respect to the first Project produced by SLM (e.g., the initial
Webisode or comic book), if SLM fails or refuses to comply with
changes requested by KBNHA within a reasonable period, KBNHA shall
have the right to terminate this agreement by written notice, in
which event all rights to the Assigned Material shall revert to
KBNHA and all rights to the Enhancements will vest with SLM, it
being understood that the Enhancements cannot be exploited to the
extent same are identified with The Backstreet Boys.
c) After creation of the first Project, KBNHA shall not have the right
to terminate this agreement unless:
i) SLM ceases without consent to continue to produce new Projects
within 30 days after written notice from KBNHA ; or
ii) SLM produces Webisodes or comic books which shall not have
reasonably been approved by KBNHA as set forth in
sub-paragraph (a) above.
iii) SLM terminates its relationship with Stan Lee.
4. Stan Lee and Nick Carter shall share "created by" credit with respect to
the Property and Enhancements; provided, neither shall receive any
additional compensation in connection therewith.
5. SLM shall produce an initial twelve (12) "Webisodes" based on the
Property, consisting of animated episodes of approximate five (5) minute
duration for initial exploitation over the Internet at websites mutually
designated by the parties but including in all events any websites owned
or operated by SLM and, if SLM and KBNHA can work out a mutually
acceptable agreement with Shockwave, via the "Shockwave" website. It is
understood that a mutually acceptable deal with Shockwave will include
equity in Shockwave. At SLM's discretion, SLM shall have the right
initially to produce more or less than 12 Webisodes of more or less than 5
minutes duration, with the intention that the total, initial minutes of
production shall approximate one hour. SLM shall have the right, at its
sole discretion, to produce additional
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<PAGE> 3
Webisodes featuring the Property, totalling no more than 120 minutes per
year (each such year of production being deemed a "Production Year", with
the first such year commencing on execution hereof), for a period of four
Production Years from execution hereof. Notwithstanding the foregoing,
KBNHA shall have the right upon written notice to SLM no less than 90 days
prior to the close of the second Production Year of the term to elect not
to proceed with the third and fourth Production Years of the term.
6. KBNHA will use best efforts to provide that a majority of the members of
The Backstreet Boys, personally, will participate with Stan Lee in a press
conference to launch this agreement and to otherwise cooperate in
publicizing the Webisodes. It also is agreed that there shall be a
hyperlink at all official Backstreet Boys website(s), including
Backstreetboys.com, and the official website for the Backstreet Boys'
then-current management company, which is presently The Firm, which will
enable visitors to that site to go directly to the pages at which the
Webisodes are available for viewing (which pages shall be on a site with
the URL "Backstreetproject.com" which shall be hosted by SLM); provided,
SLM agrees that such pages may be viewed within the frame of the
applicable Backstreet Boys website(s). SLM shall provide KBNHA with
database information pertaining to persons who view the Webisodes and
KBNHA and The Firm shall provide database information pertaining to
visitors to their official websites who view the Webisodes, it being
understood that neither party shall have the right to sell or license the
other party's database information to third parties, but shall solely have
the right to use same for each party's own marketing purposes.
7. SLM shall have the right to license the Property in all other manner and
media on such terms as SLM shall determine, but with KBNHA 's consultation
and approval in respect of each such license; provided, KBNHA shall not
withhold its approval in a manner to frustrate the purposes of this
agreement or the ability of SLM to recover its investment in the
Webisodes. SLM has been advised that KBNHA has a outstanding merchandising
agreement with Winterland which agreement affects merchandising rights in
the names and likenesses, and certain other identification related to The
Backstreet Boys.
8. SLM shall cause one comic book based on the property to be produced before
the release of the first Webisode hereunder, subject to KBNHA 's
reasonable approval. SLM shall cause additional comic books featuring the
Property to be produced and commercially exploited, in such number as the
number and content of the produced Webisodes merits, with the intention
that there will be one comic book for each 30 minutes of Webisodes
produced.
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<PAGE> 4
9. All consideration derived from the exploitation of the Property (cash,
stock, etc.) shall be collected by SLM and allocated and paid in the
following sequence:
a) First, for SLM to recover any and all reasonable out-of-pocket costs
specifically incurred in connection with production and exploitation
of the Webisodes, Comic Books and other approved Projects (including
reasonable allocations for a portion of any SLM internal costs such
as salaries of SLM employees [other than Stan Lee] to the extent
that same are rendering specific services on a Project) plus 15% of
all costs as a services fee in lieu of any costs not associated with
persons rendering specific services on a Project; and
b) Second, 35% to SLM and 65% to KBNHA.
c) KBNHA shall receive detailed breakdowns of all of the costs referred
to in (a) above, and shall have the right to review appropriate
back-up for any of the allocations addressed therein. It is
understood that without KBNHA approval the recoupable costs of a
single Webisode will not exceed $69,000 and of the initial creation
costs of a single comic book will not exceed $23,000 (not including
manufacturing and distribution costs). By way of clarification, once
SLM shall have recouped the costs referred to in 9(a) above, as
limited by this subparagraph (c), payments under 9(b) above shall
become payable on a prospective basis.
10. The term of the agreement shall continue in perpetuity with respect to all
produced Webisodes and the Property; provided, SLM shall not license the
Webisodes or Property for new exploitation after the date five years after
release of the last such Webisode without KBNHA 's reasonable approval.
11. KBNHA will not authorize any other superhero exploitations of the
Backstreet Boys during the term. KBNHA shall not otherwise be restricted
hereunder.
12. Pursuant to the Stock Option Agreement annexed hereto as an exhibit, so
long as KBNHA shall not be in material breach of its obligations
hereunder, KBNHA will receive warrants for 300,000 shares of SLM stock at
an exercise price of $7.00 per share, which warrants will vest as follows:
75,000 on execution hereof, 25,000 upon the initial webcast of the first
Webisode (but not later than 6 months after execution hereof unless KBNHA
shall have failed to approve the first Webisode by such date), 50,000 upon
the
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<PAGE> 5
commencement of the 13th month of the term, 50,000 upon the commencement
of the 19th month of the term, and (so long as KBNHA shall not have
exercised its option not to proceed with the third Production Year) 50,000
shares on the commencement of the 25th month of the term hereof and a
final 50,000 shares on the commencement of the 37th month of the term
hereof. The vesting of applicable portions the foregoing shares shall be
contingent on KBNHA having approved the production of all required
Webisodes during the prior Production Years of the term.
13. SLM will compute Gross Revenues as of each March 31, June 30, September 30
and December 31 for the prior three (3) months. Within ninety (90) days
after each calendar quarterly period concerned, SLM will send KBNHA a
statement covering Gross Revenues and will pay KBNHA KBNHA 's share of
Gross Revenues due.
a) SLM will maintain accurate books and records which report the
recognition of Gross Revenues. KBNHA may, at its own expenses,
examine and copy those books and records, as provided in this
paragraph. KBNHA may make such an examination for a particular
statement within three (3) years after the date when the other party
sends the examining party the statement concerned. KBNHA may make
those examinations only during SLM's usual business hours, and at
the place where it keeps the books and records. Such books and
records shall be kept at the SLM office in Los Angeles, California,
unless otherwise notified. KBNHA will be required to notify SLM at
least ten (10) days before the date of planned examination.
14. Each party agrees to take all action and cooperate as is reasonably
necessary, at the other party's request and expense, to protect the
other's respective rights, titles, and interests, and further agrees to
execute any documents that might be necessary to perfect each party's
ownership of such rights, titles, and interests.
15. WARRANTIES; REPRESENTATIONS; INDEMNITIES:
a) KBNHA represents and warrants that:
i) it has full power and authority to enter into this Agreement.
ii) it has sufficient right and authority to grant to SLM all
licenses and rights granted by KBNHA hereunder.
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<PAGE> 6
iii) the Assigned Material and the use thereof as permitted
pursuant to this Agreement shall not violate any law or
infringe upon or violate any rights of any Person.
b) SLM represents and warrants that:
i) it is has the full power and authority to enter into and fully
perform this Agreement.
ii) the Enhancements developed or furnished by SLM hereunder and
the use thereof shall not violate any law or infringe upon or
violate any rights of any Person.
c) Each party shall at all times indemnify, hold harmless and defend
the other party from and against any and all claims, losses,
liability, costs and expenses (including but not limited to
attorneys' fees) to the extent arising from or relating to any
breach or alleged breach of this agreement by the indemnifying
party.
16. GENERAL:
a) Neither party may assign this Agreement, or their respective rights
and obligations hereunder, in whole or in part without the other
party's prior written consent. Any attempt to assign this Agreement
without such consent shall be void and of no effect ab initio.
Notwithstanding the foregoing, either party may assign this
Agreement to any entity controlling, controlled by or under common
control with, the assignor, or to any entity that acquires the
assignor by purchase of stock or by merger or otherwise, or by
obtaining substantially all of the assignor's assets, provided that
any such assignee, or any division thereof, thereafter succeeds to
all of the rights and is subject to all of the obligations of the
assignor under this Agreement.
b) This Agreement, along with the Exhibits hereto, contains the entire
agreement and understanding between the parties hereto with respect
to the subject matter hereof and supersedes all prior agreements and
understandings relating to such subject matter. Neither party shall
be liable or bound to any other party in any manner by any
representations, warranties or covenants relating to such subject
matter except as specifically set forth herein.
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<PAGE> 7
c) This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall
become effective when one or more such counterparts have been signed
by each of the parties and delivered to each of the other parties.
d) This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto. By an instrument in
writing, any two parties hereto may waive compliance by the third
party with any term or provision of this Agreement that such third
party was or is obligated to comply with or perform.
e) This Agreement shall be governed by and construed in accordance with
the internal laws of the State of California applicable to
agreements made and to be performed entirely within such State,
without regard to the conflicts of law principles of such State.
f) Each party shall comply in all material respects with all laws and
regulations applicable to its activities under this Agreement.
g) If any provision of this Agreement (or any portion thereof) or the
application of any such provision (or any portion thereof) to any
Person or circumstance shall be held invalid, illegal or
unenforceable in any respect by a court of competent jurisdiction,
such invalidity, illegality or unenforcability shall not affect any
other provision hereof (or the remaining portion thereof) or the
application of such provision to any other Persons or circumstances.
h) All notices or other communications required or permitted to be
given hereunder shall be in writing and shall be delivered by hand
or sent, postage prepaid, by registered, certified or express mail
or reputable overnight courier service and shall be deemed given
when so delivered by hand, or if mailed, three days after mailing
(one business day in the case of express mail or overnight courier
service), to the addresses set forth above.
i) The parties to this Agreement are independent contractors. There is
no relationship of partnership, joint venture, employment,
franchise, or agency between the parties. Neither party shall have
the power to bind the other or incur obligations on the other's
behalf without the other's prior written consent.
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<PAGE> 8
j) No failure of either party to exercise or enforce any of its rights
under this Agreement shall act as a waiver of such right.
17. ZIFFREN, BRITTENHAM, BRANCA & FISCHER: The parties hereto acknowledge that
the Ziffren, Brittenham, Branca & Fischer law firm has, with the prior
consent of the parties, represented both Stan Lee Media and certain
interests in KBNHA Enterprises, Inc. (together with other unrelated
counsel) in connection with the negotiation and documentation of this
agreement. Annexed hereto is a copy of a letter agreement affirming such
consent which is (or shall prior to the execution hereof) executed by the
parties hereto.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives as of the date first above written.
AGREED TO AND ACCEPTED
STAN LEE MEDIA KBNHA ENTERPRISES, INC.
By: /s/ Gill Champion By: /s/ Kevin Richardson
--------------------------- ---------------------------------
Its: Vice President-COO Its:
--------------------------- ---------------------------------
DATED: February 2000 DATED:
--------------------------- ---------------------------------
The undersigned acknowledge that they have read the foregoing agreement,
consent to its execution and agree to be bound by the terms thereof as same may
affect them. The undersigned further acknowledge that KBNHA Enterprises, Inc.
has the right to enter into said agreement and, accordingly, guarantee the
performance of KBNHA Enterprises, Inc. of all of its undertakings thereunder.
The undersigned agree to look solely to KBNHA Enterprises, Inc. for any
compensation payable to them in connection with the foregoing.
/s/ Nicholas Carter /s/ Alexander J. McLean
- ------------------------------ ----------------------------------------
Nicholas Carter Alexander J. McLean
/s/ Howard Dorough /s/ Kevin Richardson
- ------------------------------ ----------------------------------------
Howard Dorough Kevin Richardson
/s/ Brian Thomas Littrell
- ------------------------------
Brian Thomas Littrell
-8-
<PAGE> 1
Exhibit 10.47
Publishing Agreement
SIMON & SCHUSTER, INC.
1230 Avenue of the Americas
New York, New York 10020
(212) 698-7000
(the "Publisher")
and
Stan Lee and George Mair
(Jointly and severally herein the "Author")
whose agent is Crawford Literary Agency
3920 Bayside Road
Fort Myers, Florida 33931
Agree:
FIRST: The Author
A. shall deliver to the Publisher one copy of the literary work now
entitled STAN LEE: MASTER OF IMAGINATION (the "Literary Work") in Final
Form on or before March 1, 2000. The complete manuscript of the Literary
Work shall be approximately 75,000 words in length, shall include 25-50
Illustrations (supplied by the Author in reproducible quality as part of
the complete manuscript) and is described as follows: the life of Stan
Lee, told in the first-person by Mr. Lee with third-party commentary about
Mr. Lee's historical influence interspersed throughout;
B. makes the warranties and representations set forth in Part Two
Paragraphs 36-45 of the Basic Agreement;
C. grants and assigns to the Publisher:
(i) all primary rights except calendar rights, audio rights and
video rights; and
(ii) the shares provided in THIRD: A of this Publishing Agreement
of the proceeds on disposition of the secondary rights; and
<PAGE> 2
D. grants the Publisher the first opportunity to consider Stan Lee's
next (i.e., written after the Literary Work) full-length work of
non-fiction for publication on mutually satisfactory terms. If, within 60
days following submission of a detailed outline for such work to the
Publisher, or within 30 days after delivery and acceptance of the complete
manuscript for the Literary Work, whichever shall be later, Publisher and
Mr. Lee are unable in good faith to agree upon terms for publication, Mr.
Lee shall be free thereafter to submit such next work to other publishers
and shall advise Publisher of the best offer thereafter made by any other
publisher with respect to said next work, whereupon Publisher shall have
the right to exercise its option with an advance equal to ten percent
above the said best offer made by any other publisher. During the period
of this option, Author shall not submit such next work to other
publishers, nor seek offers from or negotiate with others with respect
thereto.
SECOND: The Publisher
A. shall publish the Literary Work in book form within 18 months after
acceptance of the manuscript therefore. The Publisher acknowledges,
however, that it currently intends to publish the Literary Work in its
Spring publishing season of 2001 and shall make reasonable efforts to
adhere to such schedule;
B. shall pay the Author, as an advance against and on account of all
monies accruing to Author under this Agreement, the sum of Thirty Thousand
Dollars ($30,000), payable as follows:
$15,000 on signing hereof; and
$15,000 on delivery and acceptance of the complete manuscript, as
satisfactory to the Publisher; and
(i) royalties at the following rates, based on the catalog retail
price of every copy sold in the United States, less returns, for
sales of the trade hardcover edition (if any), exclusive of sales
specified in subparagraph (iv) below:
10% on the first 5,000 copies;
12-1/2% on the next 5,000 copies; and
15% on all copies sold thereafter;
(ii) royalties at the following rates, based on the catalog retail
price of every copy sold in the United States, less returns, for
sales of the trade paperback edition, exclusive of sales specified
in subparagraph (iv) below:
7-1/2% on all copies sold;
<PAGE> 3
(iii) 50% of the proceeds on disposition of the other primary
rights, except as otherwise provided herein; and
(iv) in accordance with the provisions in Part Five of the Basic
Agreement, for sales by mail order, at special discount, for export
or outside the United States, as unbound sheets, from reduced
printings, to book clubs, or as excess stock, or for any textbook,
large print or hardcover reprint editions, on calendars and on
electronic editions of the Literary Work published by the Publisher
itself under one of its own imprints.
THIRD: The Publisher and the Author
A. shall share the proceeds on disposition of the secondary rights,
except as otherwise provided herein, as follows:
<TABLE>
<S> <C> <C>
Dramatic Rights 100% to Author 0% to Publisher
Motion Picture Rights 100% to Author 0% to Publisher
Theme Park Rights 100% to Author 0% to Publisher
Radio Rights 100% to Author 0% to Publisher
Television Rights 100% to Author 0% to Publisher
*First Periodical Rights 90% to Author 10% to Publisher
Commercial Rights 100% to Author 0% to Publisher
Foreign Language Rights 100% to Author 0% to Publisher
British Commonwealth Rights 100% to Author 0% to Publisher
</TABLE>
Publisher is authorized exclusively on behalf of the Author to dispose of
such secondary rights as are preceded by an asterisk.
B. shall be bound by all of the terms and conditions of the Basic
Agreement which follows and which is made an integral part of this
Publishing Agreement; and
C. agree to the following special provisions, which shall prevail over
any conflicting provisions in the Basic Agreement:
<PAGE> 4
1. The Author shall purchase a minimum of 5,000 copies of a
hardcover edition of the Work from Publisher, ordered in sufficient time
for Publisher to add such quantity to its first print run. Publisher shall
sell such copies to the Author at a discount of 70% off from the suggested
catalog retail price, F.O.B. Publisher's warehouse plus applicable sales
tax. Thereafter, the Author may, in its discretion but subject to
Publisher's availability of stock, purchase additional hardcover and/or
paperback copies of the Work from Publisher, subject to the Publisher's
availability of stock thereof, at the following discounts: 1-99 copies per
order, 40% off; 100-999 copies per order, 50% off; and 1,000 copies or
more per order, 55% off, or at such other discount as the Author may agree
upon with Publisher's Special Sales Department. Payment for all such
purchases shall be made as follows:
(a) 50% on or about the time of confirmation of the order, upon
notice to the Author from Publisher that such payment is due; and
(b) the balance thirty days after delivery of the first shipment
of books to the Author, provided the author supplies the Publisher
with satisfactory references to establish credit to carry said
balance. In the event the Author is unable to provide such
satisfactory references, then said balance shall be paid in full
prior to shipment of books to the Author.
All copies purchased by the Author hereunder are non-returnable, and
no royalty shall be paid to the Author on copies purchased at discounts of
greater than 40% off. The Author shall have the right to resell such
copies in the Author's discretion, but only outside of Publisher's normal
trade retain and wholesale channels.
<TABLE>
<CAPTION>
AUTHOR SIMON & SCHUSTER, INC.
<S> <C>
/s/ Stan Lee (L.S.) By /s/ N. GUMPERT
- ---------------------- ------------------------------
Stan Lee AUTHORIZED SIGNATURE
Soc. Sec. #:
------------------------
Citizenship:
------------------------
/s/ George Mair (L.S.)
- ----------------------
George Mair
Soc. Sec. #:
------------------------
Citizenship:
------------------------
Dated: November 11, 1999
------------------------------
Walker
</TABLE>
<PAGE> 5
BASIC AGREEMENT
Relating to the Publishing Agreement dated November 11, 1999
Between Simon & Schuster, Inc., Publisher, and
Stan Lee and George Mair, Author,
For the publication of the literary work now entitled
STAN LEE: MASTER OF IMAGINATION
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART ONE
Definition of Terms 6
PART TWO
Author's Warranties 11
PART THREE
Extent of Grant 12
PART FOUR
Copyright 15
PART FIVE
Royalties and Other payments 15
PART SIX
Delivery of Manuscript and Correction of Proofs 18
PART SEVEN
Delays in Publication 20
PART EIGHT
Disputes 20
PART NINE
Indemnification and Defense of Litigation 21
PART TEN
Infringement by Others 22
PART ELEVEN
Withdrawal from Publication 22
PART TWELVE
Breach by Publisher 22
PART THIRTEEN
Miscellaneous Provisions 23
</TABLE>
<PAGE> 6
Basic Agreement
PART ONE
Definition of Terms
As Used in this Basic Agreement and in the Publishing Agreement:
Primary Rights
1. "Primary rights" shall mean all of the rights defined in Part One
Paragraphs 2 through 14 inclusive. The territory within which such rights are
exercisable is set forth in Part three Paragraph 46.
Trade Edition Rights, Trade Editions
2. "Trade edition rights" shall mean the exclusive right to publish, or
authorize others to publish, trade editions of the Literary Work referred to in
the Publishing Agreement. "Trade Editions: shall mean the first edition of the
Literary Work in hardcover book form, and all other editions in book form except
those referred to in the following paragraphs. The Publisher may publish a trade
paperback edition prior to or simultaneous with any hardcover edition, and may
refrain, in its discretion, from the publication of a hardcover edition (subject
only to the Publisher's obligations in THIRD: C.1 of the Publishing Agreement to
supply copies of a hardcover edition to the Author, on the terms thereof).
Book Club Rights
3. "Book club rights" shall mean the exclusive right to authorize book
clubs to print and sell the Literary Work in book form.
Mass Market and Trade Paperback Rights
4. (a) "Mass market paperback rights" shall mean the exclusive right,
after the publication of the first trade edition, to authorize others (not
including book clubs) to publish paperback editions of the Literary Work in
formats known in the publishing industry as designed primarily for mass market
distribution through such channels as chain store outlets and news and magazine
wholesalers.
(b) "Trade paperback rights" shall mean the exclusive right to
publish, or authorize others to publish, paperback editions of the Literary Work
in formats known in the publishing industry as designed primarily for
distribution through book trade channels.
<PAGE> 7
Calendar Rights
5. "Calendar rights" shall mean the exclusive right to use, or to
authorize others to use, all or any portion of the Literary Work as the basis
for one or more calendars, which may include solely text and/or illustrations
from the Literary Work or which may combine text and/or illustrations from the
Literary Work with text and/or illustrations from other works. The calendar
rights are reserved by the Author.
Textbook Rights
6. "Textbook rights" shall mean the exclusive right to publish, or to
authorize others to publish, the Literary Work or any portion thereof in
textbook form for distribution to or use in educational or other similar
institutions.
Permissions
7. "Permissions" shall mean the exclusive right, after publication of
the trade edition, to reproduce, or to authorize others to reproduce, portions
of the Literary Work, including, without limitation, selections from, parts of,
and/or photographs, charts, maps, drawings, index, illustrations and other
illustrative or decorative material from the Literary Work, to the extent that
the Publisher deems appropriate. Publisher may authorize copyright and
permissions clearance organizations to act in full or in part on its behalf and
Publisher shall account to the Author for royalties received from such
organizations designated as arising from reproduction of the Literary Work.
Abridgment or Condensation Rights
8. "Abridgment or condensation rights" shall mean the exclusive right
to publish, or to authorize others to publish, either as part of a book (as
distinguished from a periodical), or as a separate book publication, an
abbreviated version of the Literary Work, not exceeding two-thirds of the
original version in length, all of which must be (i) in the original text, if it
is an abridgment, or (ii) approved in writing by the Author, if it is a
condensation.
Second Periodical Rights
9. "Second periodical rights" shall mean the exclusive right to publish
all or part of the Literary Work in a periodical (including a magazine or
newspaper), serially or in one issue, after publication of the trade edition of
the Literary Work.
Transcription Rights
10. "Transcription rights" shall mean the exclusive right to use the
Literary Work, or any portion thereof, as a basis for phonographic, tape, wire,
magnetic, electronic, light wave amplification, photographic, microfilm,
microfiche, slides, filmstrips, transparencies, programming for any method of
information storage, reproduction or retrieval, and for any other forms or means
of copying, recording, storage or retrieval (now known or hereafter devised) the
<PAGE> 8
text of the Literary Work, including recordings made for the blind, but
excluding any uses encompassed in the electronic rights.
Electronic Rights
11. "Electronic rights" shall mean the sole and exclusive right to use
or adapt, and to authorize others to use or adapt, the Literary Work or any
portion thereof, for one or more "electronic versions." As used herein, the term
"electronic versions" shall mean any and all methods of copying, recording,
storage, retrieval or transmissions of all or any portion of the Literary Work,
alone or in combination with other works or materials (including still
photographs and illustrations, video footage, sound and additional text),
including in any multimedia work or electronic book, by any electronic,
electromagnetic or other means now known or hereafter devised, including,
without limitation, by analog or digital signal, whether in sequential or
non-sequential order, on any and all physical media now known or hereafter
devised including, without limitation, magnetic tape, floppy disks, interactive
CD, CD-ROM, laser disk, optical disk, integrated circuit card or chip and any
other human or machine readable medium, whether or not permanently affixed in
such media, and the broadcast or transmission thereof by any means now known or
hereafter devised, but excluding audio recording rights, video recording rights
and all uses encompassed in the definitions of motion picture rights and
television rights (provided that the exercise of any of the foregoing rights, if
reserved herein by the Author or licensed to any third party, shall not preclude
the exercise of electronic rights.
Audio Rights
12. "Audio rights" shall mean the exclusive right to use or adapt, and
to authorize others to use or adapt, the Literary Work or any portion thereof as
the basis for one or more non-dramatic audio recordings. The audio rights are
reserved by the Author, but the Publisher will have the first exclusive
opportunity to acquire such rights on mutually satisfactory terms. If the Author
and Publisher are unable in good faith to agree on terms for the Publisher's
acquisition of such rights within 30 days after they commence negotiations
therefore (which negotiations will not begin until after delivery and acceptance
of the complete manuscript for the Literary Work), then the Author shall be free
thereafter to offer the audio rights to other publishers.
Video Rights
13. "Video rights" shall mean the exclusive right to use or adapt, and
to authorize others to use or adapt, the Literary Work or any portion thereof as
the basis for one or more non-dramatic video recordings. The video rights are
reserved by the Author.
Digest Rights
14. "Digest rights" shall mean the exclusive right to publish, or to
authorize others to publish, in any magazine - whether devoted exclusively to
abbreviated versions, or consisting primarily of other material - an abbreviated
version (abridged or condensed) of the Literary Work, which version shall be
complete in one issue and shall not exceed approximately 30,000 words or
one-half of the length of the Literary Work, whichever is less.
<PAGE> 9
Secondary Rights
15. "Secondary rights" shall mean all the rights defined in Part One
Paragraphs 16 through 23 inclusive. The territory within which such rights are
exercisable is set forth in Part Three Paragraph 47.
Dramatic Rights
16. "Dramatic rights" shall mean the exclusive right to use, or to
authorize others to use, the Literary Work, title, plot, episodes, events,
scenes and characters depicted therein, in whole or in part, for (i) writing a
dramatic version thereof, or a drama in any way based thereon and (ii) producing
or performing either of the above on the stage.
Motion Picture Rights
17. "Motion picture rights" shall mean the exclusive right to use, or to
authorize others to use, the Literary Work, title, plot, episodes, events,
scenes and characters depicted therein, in whole or in part, for the purpose of
making motion pictures primarily for exhibition in regular commercial channels,
and shall include the allied motion picture rights. "Allied motion picture
rights" shall mean (i) the exclusive right to condense, or to authorize others
to condense, the Literary Work, or the commercial motion picture treatment
thereof, into not more than 7,500 words, for the purpose of promoting motion
pictures based on the Literary Work, and (ii) such limited radio or television
rights as are customarily granted for the purpose of using those mediums to
promote motion pictures based on the Literary Work.
Theme Park Rights
18. "Theme part rights" shall mean the exclusive right to use all or any
portion of the Literary Work in and in connection with amusement/tour/theme
parks. Such rights shall include, without limitation, the right to (i) create,
present, stage and/or perform any attraction, presentation, show and/or ride
based upon and/or derived from the Literary Work; (ii) use "walk-around"
performances by actors recreating characters in the Literary Work; (iii) use the
Literary Work in and/or in connection with any such attraction, presentation,
show and/or ride; and (iv) use any of the foregoing to advertise, exploit and/or
promote any such amusement/tour/theme park.
Radio Rights
19. "Radio rights" shall mean the exclusive right to use, or to
authorize others to use, the Literary Work, title, plot, episodes, events,
scenes and characters depicted therein, in whole or in part, for AM, FM or other
broadcasting.
<PAGE> 10
Television Rights
20. "Television rights" shall mean the exclusive right to use, or to
authorize others to use, the Literary Work, title, plot, episodes, events,
scenes and characters depicted therein, in whole or in part, for broadcast
performances on television.
First Periodical Rights
21. "First periodical rights" shall mean the exclusive right to publish,
or authorize others to publish, all or part of the Literary Work in a periodical
(including a magazine or newspaper), serially or in one issue, before
publication of the trade edition of the Literary Work.
Commercial Rights
22. "Commercial rights" shall mean the exclusive right to use, or to
authorize others to use, in whole or in part, the Literary Work, the title of
the Literary Work, and the names and characterizations of characters created in
the Literary Work, as a basis for (i) trademarks or trade names for other
products, or (ii) toys or games.
Foreign Language Rights and British Commonwealth Rights
23. (a) "Foreign language rights" shall mean the exclusive right to
translate or to authorize others to translate the Literary Work in whole or in
part into one or more foreign languages, and to publish, or to authorize others
to publish, such translations in any part of the world.
(b) "British Commonwealth rights" shall mean the exclusive right to
publish and to authorize others to publish the Literary Work in whole or in part
in the English language in the British Commonwealth as defined by Publisher at
the date of this agreement, excluding Canada and Israel.
(c) Whichever party controls foreign language or British
Commonwealth rights in the Literary Work shall control all publishing rights
thereto as well as non-publishing primary rights. Non-publishing secondary
rights shall in all instances be controlled by the party who is otherwise
authorized to dispose of such rights pursuant to this agreement.
Author's Unshared Secondary Rights
24. "Author's unshared secondary rights" shall mean all secondary rights
as to which, under Part THIRD: A of the Publishing Agreement, the Author is to
retain all the proceeds from disposition.
<PAGE> 11
Shared Secondary Rights
25. "Shared secondary rights" shall mean all secondary rights as to
which, under Part THIRD: A of the Publishing Agreement, the Author and the
Publisher are to share the proceeds from disposition.
Sale, Disposition or Grant of Rights
26. A "sale," "disposition" or "grant" of rights shall include an
assignment, transfer, bargain or license of the rights referred to or of any
interest or option relating to such rights.
Proceeds on Disposition of Primary Rights
27. "Proceeds on disposition of the primary rights" shall mean the gross
amount received on the sale or disposition of such primary rights, less any
costs and expenses incurred by the Publisher in connection with or by reason of
such sale or disposition.
Proceeds on Disposition of Secondary Rights
28. "Proceeds on disposition of the secondary rights" shall mean the
gross amount received from the sale or disposition of such secondary rights,
less any third party commission which may be paid for services rendered in
connection with such disposition, either to the Author's agent designated in the
Publishing Agreement or to any agent authorized by the Publisher to dispose of
such secondary rights, and less any bank fees or other monetary transfer charges
incurred by the Publisher or Author in connection with or by reason of such sale
or disposition.
Final Form
29. "Final Form" shall mean a complete, legible, typewritten manuscript
of the Literary Work (including photographs, charts, maps, drawings or index, if
any of these are required), or, if Publisher requests, diskettes or other
electronic format specified by Publisher containing the Literary Work,
acceptable to the Publisher in content and form.
Agreed Publication Date
30. "Agreed publication date" shall mean the date on which the Publisher
has agreed in the Publishing Agreement to publish the Literary Work.
Actual Publication Date
31. "Actual publication date" shall mean the date of the first sale and
shipment of the Literary Work.
<PAGE> 12
Base Royalty Rate
32. "Base royalty rate" shall mean the royalty rates provided in Part
SECOND: B (i) and (ii) of the Publishing Agreement.
Mail Order Sales
33. "Mail order sales" shall mean sales of the Literary Work directly to
the consumer through mail order coupon advertising, direct-by-mail solicitation,
or other direct response sales employing the mails.
Special Discount Sales
34. "Special discount sales" shall mean sales made in the United States
outside regular trade channels at a discount of more than 50% from the catalog
retail price. Sales to book clubs shall not be included under special discount
sales.
Agreement
35. "Agreement" (or "this agreement") shall mean the Publishing
Agreement and this Basic Agreement.
PART TWO
Author's Warranties
The Author warrants and represents that:
Sole Author and Proprietor
36. Author is the sole author and proprietor of the Literary Work.
Authority to Grant
37. Author has full power and authority to make this agreement and to
grant the rights granted hereunder, and Author has not previously assigned,
transferred or otherwise encumbered the same; and Author has no prior agreement,
commitment, or other arrangement, oral or written, to write or participate in
writing any other book-length work and will enter into no such agreement,
commitment, or other arrangement until after delivery of the manuscript of the
Literary Work in Final Form.
<PAGE> 13
Not Previously Published, Not in Public Domain
38. The Literary Work is wholly original, has not been previously
published, and is not in the public domain.
No Infringement
39. The Literary Work does not infringe any statutory or common law
copyright or any proprietary right of any third party.
Not Libelous
40. The Literary Work does not invade the right of privacy of any third
person, or contain any matter libelous or otherwise in contravention of the
rights of any third person, and, if the Literary Work is not a work of fiction,
all statements in the Literary Work asserted as facts are true or are based upon
reasonable research for accuracy.
Not Unlawful
41. (a) The Literary Work contains no matter which is obscene or matter
the publication or sale whereof otherwise violates any federal or state statute
or regulation, nor does Author's entering into this agreement violate any such
statute or regulation, nor is the Literary Work in any other manner unlawful.
Not Injurious
41. (b) Nothing contained in the Literary Work shall be injurious to the
health of the user.
Permissions
41. (c) If the Author incorporates in the Literary Work any writings,
drawings, photographs or other material either previously published or not,
either by the Author or another artist or writer, Author shall, prior to
delivery of the Literary Work in Final Form obtain and, whenever requested by
Publisher, deliver to the Publisher proper and complete written permission and
authorization from the owner of the common law or statutory copyright or other
right to use the same in the Literary Work and for the purpose of promoting or
advertising the Literary Work throughout the world.
Next Work
42. The Literary Work will be the Author's next book (whether under the
Author's own name or otherwise), that he or she will not undertake to write any
other work for publication in book form before delivery to the Publisher or the
manuscript of the Literary Work in Final Form, and that in no event will he or
she publish or authorize publication of any other book-
<PAGE> 14
length work of which he or she is an author or co-author until six months after
publication of the Literary Work.
Investigation by Publisher
43. The Publisher shall be under no obligation to make an independent
investigation to determine whether the foregoing warranties and representations
are true and correct; and any independent investigation by or for the Publisher,
or its failure to investigate, shall not constitute a defense to the Author in
any action based upon a breach of any of the foregoing warranties.
Effect of Warranties and Representations
44. The warranties and representations of Author hereunder are true on
the date of the execution of this agreement and shall be true on the date of the
actual publication of the Literary Work, and at all intervening times. The
Publisher may rely on the truth of the warranties and representations herein in
dealings with any third party in connection with the exercise or disposition of
any rights in the Literary Work.
Warranties to Survive Termination
45. Each of the foregoing warranties and representations shall survive
the termination of this agreement.
PART THREE
Extent of Grant
Territorial Extent of Primary Rights
46. Under the grant of primary rights, the Publisher and its grantees
shall have:
(a) the exclusive right of publication in the English language and the
Spanish language in the United States, its territories and possessions (which
include but are not limited to all U.S. military installations), the Philippine
Republic and Canada, and the non-exclusive right of publication in the English
language throughout the rest of the world except within the British Commonwealth
(excluding Canada); and
(b) the non-exclusive right to sell or authorize others to sell
Publisher's edition of the Literary Work in Australia if no other English
language edition is for sale in Australia within 30 days after first English
language publication in accordance with the provisions of the Australian
Copyright Amendment Act of 1991. The Author shall advise Publisher immediately
following Author's disposition of Australian rights in the Literary Work. The
Publisher shall pay the Author royalties on such sales at the applicable export
royalty rate.
<PAGE> 15
Territorial Extent of Secondary Rights
47. The secondary rights are world-wide rights, and all provisions as to
the disposition of such secondary rights and the sharing of the proceeds thereof
shall apply equally in all countries of the world.
Duration of Grant
48. All rights granted under this agreement are, except where expressly
subject to earlier termination, to continue in effect during the full term of
the copyright of the Literary Work in the United States under the laws of the
United States.
Author's Rights
49. All rights not expressly granted by the Author to the Publisher are
reserved by the Author. The Author shall not exercise or dispose of any reserved
rights in such a way as substantially to destroy, detract from, impair or
frustrate the value of any rights granted herein to the Publisher, nor shall the
Author publish or permit to be published during the term of this agreement any
book or other writing based substantially on subject matter, material,
characters of incidents in the Literary Work without the written consent of the
Publisher. The Author has not granted and will not grant to any person (except
to the Publisher), permission, authority, right or license for publication or
distribution of the Literary Work in the open English language market, in a
mass-market or trade paperback edition, sooner than the latter of one year
following the publication of any British hardcover edition or three months
following publication of the first United States mass market paperback edition.
The Author shall not submit any full-length work or proposal therefore in any
form to the Publisher or to any third party until he or she has delivered to the
Publisher the complete manuscript of the Literary Work in Final Form.
Disposition or Exercise by Publisher of Primary Rights
50. The Publisher shall have the exclusive right, but shall not be
obligated, to dispose of or exercise any or all of the primary rights in the
Literary Work. During the Author's lifetime, however, such right shall be
subject to the Author's consent in case of disposition of mass market paperback
rights, such consent not unreasonably to be withheld or delayed. The Publisher
shall notify the Author promptly after each disposition of primary rights, but
inadvertent failure to do so will not be deemed a breach of this agreement.
Disposition of Author's Unshared Secondary Rights
51. The Author shall have the exclusive right to dispose of the Author's
unshared secondary rights, and shall notify the Publisher promptly after each
such disposition.
Flow-Through to Publisher
52. Deleted
<PAGE> 16
Disposition by Publisher of Shared Secondary Rights
53. The Publisher shall have the exclusive right, but shall not be
obligated, as agent of the Author to dispose of the shared secondary rights as
to which it has authority from the Author. The Publisher may appoint an agent to
dispose of any rights of which the Publisher is authorized to dispose. When
Publisher is specifically authorized to dispose of rights such authorization
shall be deemed an agency coupled with an interest.
Approvals, Sales to Affiliates
54. Neither the Publisher nor the Author shall unreasonably withhold
consent where such consent is requested in connection with the disposition or
exercise of rights under this agreement. The Author and the Publisher shall each
have the right to receive copies of any contracts made with respect to said
rights on request therefore. The Publisher may sell copies of the Literary Work
and license primary and secondary rights granted to Publisher in the Literary
Work to Publisher's parent, subsidiaries, affiliates and divisions, provided
that the terms for such sale or license shall be no less favorable to the Author
than the terms which Publisher in its reasonable judgment would accept from an
unrelated third party.
Author's Consent
55. When the Author's written consent or approval is requested under
this agreement, if the Author, or Author's agent or estate does not answer the
Publisher's request for such consent or approval within a reasonable time, or if
after reasonable diligence the Publisher has not succeeded in informing the
Author or Author's agent or estate that such consent or approval is desired, the
Author shall be deemed to have given his or her consent.
Author's Name and Likeness
56. The Publisher may use the name and photograph or other likeness of
the Author on the cover and jacket and generally in connection with the
advertising and promotion of the Literary Work.
Author and Publisher to Execute Documents
57. The Author shall, when requested by the Publisher, execute all
documents which may be reasonably necessary or appropriate to enable the
Publisher to exercise or deal with any of the rights granted hereunder. Author
hereby appoints Publisher to be Author's attorney-in-fact to execute in Author's
name and to file any and all documents necessary to record in the Copyright
Office the assignment of exclusive rights made to Publisher hereunder.
License Without Fee
58. The Publisher is authorized to publish or license publication of the
Literary Work in Braille or large type editions for sale to the physically
handicapped and is authorized to publish or license publication of extracts of
the Literary Work containing not more than one
<PAGE> 17
chapter or 10,000 words for promotional purposes and in connection with motion
picture licenses, without compensation therefore. In the event compensation is
received it shall be shared as provided in Part SECOND: B(iii) of the Publishing
Agreement.
PART FOUR
Copyright
Copyright in the United States
59. The Publisher shall identify the Author as the owner of the
copyright in the Literary Work and may register such copyright in the United
States in the name of the Author.
Notice
60. The Publisher shall print in each copy of the Literary Work
published by it any notice required to comply with the applicable copyright laws
of the United States and the provisions of the Universal Copyright Convention
and the Berne Copyright Convention.
Protection of Copyright in Disposition of Rights
61. Any agreement made by the Author or by the Publisher to dispose of
any rights in and to the Literary Work shall require the licensee or grantee to
take all necessary and appropriate steps to protect the copyright in the
Literary Work.
Foreign Copyright
62. The Publisher may take such steps as it deems appropriate to
copyright the Literary Work in countries other than the United States, but the
Publisher shall be under no obligation to procure copyright in any such
countries, and shall not be liable to the Author for any acts or omissions by it
in connection therewith. The Author may copyright the Literary Work in any
foreign country if the Publisher fails to take steps to obtain such a copyright
within 30 days after receiving a written request from the Author to do so.
<PAGE> 18
PART FIVE
Royalties and Other Payments
Computation of Royalties Generally
63. When royalties are based on the catalog retail price they shall be
computed on the basis of the number of copies actually sold by the Publisher,
less returns. No royalties shall be computed on copies given away for review or
promotion, nor on copies given to the Author.
On Mail Orders and Special Discounts
64. On mail order sales and special discount sales the royalty shall be
5% of the net amount actually received from such sales.
On Sheet and Export
65. On copies sold for export to third parties or outside the United
States by Publisher or its affiliates, and on unbound sheet sales, royalties
shall be calculated on the net amount actually received from such sales. No
royalty will be payable to the Author with respect to any unbound sheet sales or
full copy sales for export where such copies are furnished to a licensee at the
Publisher's cost plus a handling charge for such sheets and/or copies.
On Sales From Reduced Printings
66. On sales made out of any new printings or bindings of 2,500 copies
or less, made more than one year after publication date, royalties shall be
computed at one-half the base royalty rate.
Royalty Statements and Payments
67. The Publisher shall render royalty statements and make accounting
and royalty and other payments to the Author (s) in February for the preceding
period April 1 to September 30, and (b) in August for the preceding period
October 1 to March 31. Publisher may from time to time change such accounting
periods provided no longer than six months elapses between any two accountings
to the Author. If for any royalty period the current period total activity in
the Author's account for the Literary work is less than $100, then the Publisher
may defer the rendering of a statement and payment until such royalty period as
the cumulative activity since the last statement exceeds such amount.
Details to Be Shown
68. Royalty statement shall state the number of copies sold and returned
during the period covered and the reserve for returns being held by the
Publisher. If Author so requests in writing, the Publisher shall, within 60 days
after its receipt of such request, advise the Author in
<PAGE> 19
available detail of the number of copies printed, sold, and given away during
the current period covered by the last royalty statement rendered to the Author,
as well as the approximate number of salable copies on hand at the end of said
period.
Book Club Sales
69. On sales to book clubs, the amount allocated as royalty or other
compensation to the Publisher shall be divided equally between the Author and
the Publisher. No royalty will be payable to the Author on unbound sheet sales
or full copy sales to book clubs where such copies are furnished at the
Publisher's cost plus a handling charge for such sheets and/or copies.
Certain Primary Rights Exercised By Publisher
70. (a) On the exercise of textbook rights by publication under one of
its own imprints royalties (but no further advance) shall be paid to the Author
at the following rates: (i) 6% of the catalog retail price on the first 25,000
copies sold within the United States, exclusive of sales specified in
subparagraph (iii) below; and (ii) 7-1/2% of the catalog retail price on all
copies sold within the United States thereafter, exclusive of the sales
specified in subparagraph (iii) below; and (iii) 5% of the net amount actually
received on mail order sales, on all copies sold for export or outside the
United States and on special discount sales.
(b) On Publisher's publication of a large print edition or a
hardcover reprint edition of the Literary Work under one of its own imprints,
royalties (but no further advance) shall be paid to the Author at the following
rates: (i) 10% of the net amount received by Publisher on all copies sold within
the United States, exclusive of sales specified in subparagraph (ii) below, and
(ii) 5% of the net amount received on mail order sales, on all copies sold for
export or outside the United States and on special discount sales.
(c) On the exercise of electronic rights under one of its own or its
affiliated imprints royalties (but no further advance) shall be paid to the
Author on electronic versions at the prevailing rate paid for similar uses.
Author and Publisher shall negotiate in good faith to establish such rate. If
the Literary Work is combined with another work or works in an electronic
version, the Author's royalty on such electronic version shall be a pro rata
share of the total royalty payable for such electronic version, based on the
proportion material from the Literary Work bears to the electronic version as a
whole.
Remainder and Salvage Sales
71. When the Publisher in its sole discretion determines that copies of
the Literary work are not readily salable at regular prices within a reasonable
time, the Publisher may remainder copies of the Literary Work (but not earlier
than 12 months from the actual publication date) or dispose of such copies as
surplus at the best price obtainable. Notwithstanding anything set forth in this
agreement, no royalty shall be payable on copies of the Literary Work sold at a
discount of 85% or more from the catalog retail price. Publisher shall
<PAGE> 20
make no remainder sale without first offering copies to the Author at the
estimated remainder price, provided, however, that inadvertent failure to offer
such copies to the Author will not be deemed a material breach of this
agreement.
Payment of Advances
72. The payment of advances to the Author, including such payment
following delivery of the manuscript, shall not be deemed to be evidence either
that the manuscript of the Literary Work is acceptable to the Publisher, or that
the Author has complied with Author's warranties or other agreements hereunder.
An unearned advance under this agreement or any other agreement between Author
and Publisher will not be deemed an overpayment.
Offset
73. Any advance royalties or other sums paid to or on behalf of the
Author under this agreement or other wise, and any amounts due from the Author
to the Publisher, may be applied in reduction of any amounts payable to the
Author under this agreement. In the event of any overpayment by the Publisher to
the Author, the Publisher may, in addition to any other remedies available to
it, recoup such overpayment by deducting it from any amount payable to the
Author under this agreement or any other agreement between Author and Publisher
will not be deemed an overpayment.
Freight Pass-Through
74. In some instances Publisher prints on the jackets and/or covers of
its books a suggested cover price that is higher than its catalog retail price.
In such instances, where the royalty is based on the retail price, the catalog
retail price, not the suggested cover price, shall be the basis for the
computation. The difference between the two prices enables the retailer to
recoup its freight costs.
Reserve for Returns
75. Any amounts payable to the Author hereunder shall be subject to such
reasonable reserve for returns of copies of the Literary Work as the Publisher
shall establish in its reasonable discretion.
Author's Right to Examine Books of Account
76. The Author or the Author's representative may, upon written request,
conduct a reasonable examination of the books and records of the Publisher
insofar as they relate to the Literary Work for the period of two years
immediately preceding such examination. Such examination shall be on Publisher's
premises at a time convenient to Publisher, but no later than 90 days after
Author's request for such examination. Statements rendered hereunder shall be
final and binding upon Author unless objected to in writing, setting forth the
specific objections thereto and the basis for such objections, within two years
after the date of the statement.
<PAGE> 21
Author's Agent
77. If the Author has an agent, as indicated by the inclusion of an
agent's name and address in the Publishing Agreement, until receipt by the
Publisher of notice signed by the Author canceling the agent's authority
hereunder, all payments accruing to the Author under this agreement shall be
made to such Author's agent, and the receipt by the Author's agent shall
constitute a full and valid discharge of the Publisher's obligations for such
payments under this agreement. Author's agent is fully authorized to do and
perform all acts on behalf of the author in all matters arising out of or under
this agreement, and the Publisher may conclusively rely upon such authority
until actual receipt by Publisher of written notice, signed by the Author,
canceling or limiting such authority. No such revocation or limitation shall
affect the validity of any act of the agent prior to receipt of such notice by
the Publisher to the extent that the Publisher has relied thereon.
PART SIX
Delivery of Manuscript and Correction of Proofs
Failure of Author to Deliver Work in Final Form
78. (a) Timely delivery of the literary Work in Final Form is essential
to the Publisher and is of the essence of this agreement. Any extension of the
delivery date must be in writing signed by the Publisher. If the Author fails to
deliver the Literary Work in Final Form within 30 days after the time specified,
the Publisher shall have the option to give the Author a notice in writing
terminating this agreement, and in such event the Publisher may then recover and
the Author shall repay on demand all amounts advanced to the Author. In the
event that the Author completes a manuscript for the Literary Work after
termination of this agreement pursuant to the preceding sentence, then the
Publisher shall have the option, exercisable within 30 days after receipt of
said manuscript, to acquire the Literary Work on the same terms and conditions
as provided in this agreement.
(b) The Publisher shall not be obligated to accept or publish the
Literary Work if in its sole judgment such work is not acceptable to it. If the
Author delivers a manuscript of the Literary Work within the time specified, in
what the Author represents to be Final Form, the Literary Work shall be deemed
to be acceptable to the Publisher unless, within 90 days after receipt thereof
by the Publisher, the Publisher notifies the Author in writing of the reasons
why the submitted manuscript is unacceptable (including, without limitation,
reservations or questions of the Publisher concerning matters within any of the
warranties, representations and agreements contained in Paragraphs 36-42), in
which case the Author shall have a period of 60 days to respond to the
satisfaction of the Publisher in respect to all subject matter of such notice.
If the Author fails to deliver a revised manuscript within said 60-day period,
or if the revised manuscript is not acceptable to the Publisher, then Author
shall repay on demand all amounts advanced to the Author and upon such repayment
this agreement shall terminate. If the
<PAGE> 22
Publisher in its sole discretion determines to submit the manuscript to a legal
review, the Author shall cooperate with Publisher or Publisher's counsel in such
review and notwithstanding anything to the contrary in this agreement the time
for Publisher to accept or reject the Literary Work shall be extended to 30 days
after completion of the legal review.
Delay for Author's Illness
79. If because of illness or any other factor beyond his or her control,
the Author is unable to deliver the Literary Work by the date provided in the
Publishing Agreement, the date for such delivery shall be extended for a
reasonable time. If after the elapse of such reasonable time the Author
continues to be unable to deliver the Literary Work or to satisfy the
Publisher's request for changes or substantiation, then the Publisher may give
written notice of termination, effective at the expiration of 60 days or such
longer period as the Publisher may specify in such notice, and if the Author
shall fail to deliver the manuscript in Final Form within such period then this
agreement shall terminate and the Author shall repay on demand all amounts
advanced to Author. If the Author dies prior to acceptance by the Publisher,
whether or not following delivery of the manuscript in Final Form, the
Publisher, in its sole discretion, may terminate this agreement upon giving a
written notice of termination to the Author's personal representatives within 90
days of receipt by Publisher of notice of Author's death. In such event the
Publisher may then recover from such personal representatives all amounts
previously advanced hereunder.
Failure to Deliver Photos, Charts, Etc.; Care of Property
80. (a) If the Author fails to deliver photographs, charts, maps,
drawings, or the index, in cases where any of these are required by Publisher
for the Literary Work, the Publisher shall have the right (but not the
obligation) to cause the same to be prepared, and in such event the cost of such
preparation shall be borne by the Author as follows: (i) Author shall pay such
costs upon receipt of an invoice from the Publisher; (ii) Publisher may withhold
a portion of any advances payable to the Author under this agreement and deduct
such costs from said advances; or (iii) at Publisher's option, Publisher may
charge such cost to Author's royalty account, provided however that if the
advance payable to Author under this agreement is unearned one year after
publication of the Literary Work, then Author will reimburse Publisher for such
costs upon receipt of an invoice from Publisher.
(b) Publisher shall be responsible for only the same care of any
property of Author in its hands as it takes of its own. Except in the case of
Publisher's gross negligence, Publisher shall not be responsible for loss or
damage to any property furnished by Author while in Publisher's custody or in
the custody of anyone to whom delivery of such property is necessary in
connection with the production of the Literary Work or is otherwise made with
Author's consent. Author shall retain copies of any such property and, in the
case of photographs, the negative for each photograph furnished.
Correction of Proofs
81. The Publisher shall supply the Author with one set of galley or
other first proofs and, at its option, subsequent proofs, and the Author shall
return each set of proofs with his or
<PAGE> 23
her corrections to the Publisher within 21 days of receipt thereof. The
Publisher also shall proofread the proofs. If the Author shall fail to return
the corrected proofs within the 21-day period herein specified, the Publisher
may publish the Literary Work without the Author's approval of the proofs -
provided, however, that if, because of illness or any other factor beyond his or
her control, the Author informs the Publisher that he or she is unable so to
return the corrected proofs, his or her time for correcting such proofs shall be
extended for another 21-day period, and after that period the Publisher may
publish the Literary Work without the Author's approval of the proofs.
Cost of Author's Alterations
82. If, in the correction of proofs, the author requests changes from
the text of the manuscript, the Author shall bear the cost of such changes over
15% of the original cost of composition, as follows: (i) Author shall pay such
costs upon receipt of an invoice from the Publisher; (ii) Publisher may withhold
a portion of any advances payable to the Author under this agreement and deduct
such costs from said advances; or (iii) at Publisher's option, Publisher may
charge such cost to Author's royalty account, provided however, that if the
advance payable to the Author under this agreement is unearned one year after
publication of the Literary Work, then the Author will reimburse Publisher for
such costs upon receipt of an invoice from Publisher. At Author's request
Publisher shall submit an itemized statement of such charges and shall make
available corrected proofs for the Author's inspection at the Publisher's
office.
No Obligation to Publish
83. (a) Notwithstanding anything contained herein to the contrary, the
Publisher shall not be obligated to publish the Literary Work if, in its sole
and absolute judgment, whether before or after acceptance thereof, the Literary
Work contains libelous or obscene material, or its publication would violate the
right of privacy, common law or statutory copyright, or any other right of any
person. In such event, Publisher shall be entitled on demand to the return of
all monies advanced to the Author hereunder, and to terminate this agreement.
Notwithstanding any request by Publisher for change or substantiation, nothing
in this agreement shall be deemed to impose upon the Publisher any duty of
independent investigation or to relieve the Author of any of the obligations
assumed by Author hereunder, including, without limitation, the ongoing validity
of Author's warranties and representations.
(b) Notwithstanding anything contained herein to the contrary, the
Publisher shall not be obligated to publish the Literary Work if, in its sole
and absolute judgment, whether before or after acceptance thereof, supervening
events or circumstances since the date of this agreement have, in the sale
judgment of the Publisher, materially adversely changed the economic
expectations of the Publisher in respect to the Literary Work at the time of the
making of this agreement, and in such event all of the Publisher's rights in and
to the Literary Work shall terminate and revert to the Author on the giving by
the Publisher to the Author of notice of its decision, or, if the Publisher
fails to do so, by the Author pursuant to Paragraph 84, and in any such event,
except as provided in Paragraph 79, the Author shall be entitled as liquidated
damages and in lieu of all damages and remedies, legal or equitable, to retain
all payments theretofore made to the Author under this agreement.
<PAGE> 24
PART SEVEN
Delays in Publication
Delays Due to Publisher's Fault
84. The Publisher, in its sole and absolute discretion, shall have the
right to reschedule publication of the Literary Work beyond the agreed
publication date for a reasonable time. If publication of the Literary Work is
delayed in the absence of excusable circumstances the Author's sole and
exclusive remedy shall be to give the Publisher a notice in writing, stating
that if the Publisher fails to publish the Literary Work within 180 days after
the date of such notice, then all of the Publisher's rights in and to the
Literary Work shall terminate at the end of such 180-day period; and if, in such
event, the Publisher shall fail to publish the Literary Work within such 180-day
period, all of the Publisher's rights in and to the Literary Work shall
terminate and revert to the Author, and the Author shall be entitled, as
liquidated damages and in lieu of all damages and remedies, legal or equitable,
to retain all payments theretofore made to Author under this agreement.
Delays Not Due to Publisher's Fault
85. If publication is delayed beyond the agreed publication date because
of acts of conditions beyond the control of the Publisher or its suppliers or
contractors, including (by way of illustration and not by way of limitation)
war, shortages of material, strikes, riots, civil commotions, fire or flood, the
agreed publication date shall be extended to a date six months following removal
of the cause of the delay.
PART EIGHT
Disputes Between Parties
Disputes Between Parties
86. Exclusive jurisdiction for the determination of any dispute solely
between or among parties to this agreement is hereby vested in the Supreme
Court, New York County, or, at the election of either party of the
jurisdictional prerequisites at the time exist, in the United States District
Court for the Southern District of New York, and each party hereto shall submit
to the jurisdiction of either such court in the City and State of New York for
the determination of any such dispute and hereby consents (in addition to
service of process by any other means provided at the time by law) to service of
process on him, her or it, as the case may be, by registered mail, first class
postage prepaid, return receipt requested, addressed t the party named in such
process at the address to which notices may be given pursuant to Paragraph 106
of this agreement. Such notice by mail so given shall confer jurisdiction upon
such court.
<PAGE> 25
PART NINE
Indemnification and Defense of Litigation
Indemnification by Author
87. The Author shall indemnify and hold the Publisher harmless against
any loss, liability, damage, cost or expense (including reasonable attorneys'
fees) arising out of or for the purpose of avoiding any suit, proceeding, claim
or demand or the settlement thereof, which may be brought or made against the
Publisher by reason of the publication, sale, or distribution of, or disposition
of rights in respect to the Literary Work, based on the contents of the Literary
Work, except in connection with matters involving solely controversies arising
out of or based on commercial transactions between the Publisher and its
customers.
Notice of Suits Brought
88. Prompt notice of any suit, proceeding, claim or demand brought or
made against the Publisher or Author shall be given to the Author or Publisher
respectively.
Cost of Defending Suits
89. If any suit, claim or demand is brought or made, other than as
excepted in Paragraph 87, the Publisher may elect (i) to undertake the defense
thereof, or (ii) to notify the Author to undertake the defense. If the Publisher
does so notify the Author, the Author shall undertake such defense; and in such
cases the Publisher may, at its option, join in the defense. In all the
foregoing events the cost and expense of any defense shall be born by the
Author, unless the Author has, pursuant to notification from the Publisher,
undertaken the defense and the Publisher at its option elects to join with the
Author in the defense, in which case the total cost and expense (including
reasonable attorneys' fees) shall be shared equally by the Publisher and Author.
Limitation on Liability
90. Whenever any non-excepted suit, claim or demand is instituted, the
Publisher may withhold payments due to the Author under this agreement, or any
other agreement between the Author and the Publisher. If a final adverse
judgment is rendered in such a suit and is not discharged by the Author, the
Publisher may apply the payments so withheld to its expenses and to the
satisfaction and discharge of such judgment. Author shall be insured under the
Publisher's liability policy which covers claims for libel and other forms of
defamation, invasion of privacy or publicity and infringement of copyright or
trademark arising from publication of the Literary Work, to the extent such
policy is valid and collectible. In connection with such coverage and
notwithstanding the other provisions of this Part Nine, with respect to all
judgments, settlements and costs of defense, including attorneys' fees and other
costs of claims covered by the policy, the Publisher and the Author shall share
equally the first $100,000 of all such costs; thereafter the Author's liability
shall be limited to 10% of all such costs up to the limits of the policy.
<PAGE> 26
Publisher shall retain counsel to represent Publisher and Author in any
proceeding brought with respect to all such claims and shall control the defense
of such claims, and Author shall cooperate fully with Publisher and said counsel
in such defense. Notwithstanding the foregoing, Author shall be solely
responsible for the cost of counsel separately retained by the Author for any
reason and for judgments, settlements and costs of defense, including all
attorneys' fees, attributable to a willful or reckless breach of this agreement
by Author, and for any uninsured amount upon the finding of any copyright
infringement.
PART TEN
Infringement by Others
Suits, by Publisher or Author
91. If during the existence of this agreement the copyright, or any
other right in respect to the Literary Work, is infringed upon or violated, the
Publisher may, at its own cost and expense, take such legal action, in the
Author's name if necessary, as may be required to restrain such infringement and
to seek damages therefore. The Publisher shall not be liable to the Author for
the Publisher's failure to take such legal steps. If the Publisher does not
bring such an action, the Author may do so in his or her own name and at his or
her own cost and expense. Money damages recovered for an infringement shall be
applied first toward the repayment of the expense of bringing and maintaining
the action, and thereafter the balance shall be divided equally between the
Author and Publisher.
PART ELEVEN
Withdrawal From Publication
If Discontinued or Out of Print
92. If, at any time after the expiration of two years from the actual
publication date, the Publisher allows all of its editions of the Literary Work
to go out of print and such status continues in effect for six months after the
Author has made a written request for Publisher to put the Literary Work back
into print, and if there is no English language or foreign language reprint
edition authorized by Publisher available or contracted for, then the Author may
by a notice in writing terminate this agreement subject to any licenses
previously granted by Publisher (and any renewals or extensions thereof) and
Publisher's right to continue to share in the proceeds therefrom. In the event
of such termination the Author shall have the right to purchase any available
plates or film of the Literary Work at cost, and/or any remaining copies or
sheets of the Literary Work at cost. If the Author does not purchase such
plates, film, copies or sheets, then
<PAGE> 27
the Publisher may dispose of them at any price and retain the proceeds of such
sale. The Publisher is under no obligation to retain any such plates, film,
copies or sheets. The Literary Work shall not be deemed out of print as long as
it is (a) available in any edition, including electronic editions, in
Publisher's inventory; (b) offered for sale by Publisher in its catalog or order
form; or (c) electronically stored and available to the consumer for retrieval.
PART TWELVE
Breach by Publisher
Termination for Material Breach
93. Except as otherwise specifically provided in this agreement, if the
Publisher shall commit a material breach of this agreement and shall fail to
remedy the breach within 60 days after receiving a written notice from the
Author requesting the Publisher to remedy such breach, the Author may by a
notice in writing (a) revoke the Publisher's right to publish the Literary Work,
if it has not been published at such time; (b) require the Publisher to cease
further publication of the Literary Work, if it has been published at such time,
but in such event the Publisher shall be permitted to sell all copies of those
editions of the Literary Work which have already been printed or are in the
process of being printed; (c) revoke the grant to the Publisher of such of the
other primary rights as the Publisher has not already exercised or disposed of;
(d) revoke any power given to the Publisher to dispose of such secondary rights
as have not already been disposed of; and (e) revoke any grant of the rights
made to the Publisher in the Publishing Agreement to share in the proceeds on
disposition of such secondary rights as have not already disposed of. In such
event the Author shall have the right to purchase any available plates or film
of the Literary Work at cost, and/or remaining copies or sheets of the Literary
Work already printed at the Publisher's manufacturing cost. If the Author does
not purchase such places, film copies or sheets, the Publisher may dispose of
them at any price and retain the proceeds of such sale. The Publisher is under
no obligation to retain any such places, film, copies or sheets. Any right of
the Author pursuant to Paragraph 76 shall survive such termination.
PART THIRTEEN
Miscellaneous Provisions
Publisher Shall Determine Style, etc.
94. The format, imprint, style of printing and binding, and all matters
relating to the manufacture, sale, distribution and promotion of the Literary
Work shall be determined at the sole discretion of the Publisher. The Publisher
may not make changes in the manuscript of the Literary Work without the consent
of the Author, except that the Publisher may make changes (i)
<PAGE> 28
in the capitalization and punctuation of the Literary Work, to make it conform
to the Publisher's accepted style, or (ii) in the spelling and punctuation of a
British edition of the Literary Work, to make it conform to American usage.
Title Changes
95. The title of the Literary Work as set forth in the Publishing
Agreement may be changed by mutual agreement of the Author and the Publisher.
Single Author to Represent
96. When there is more than one author, any one may be designated in
writing to act on behalf of all the authors jointly, and the Publisher may rely
on the acts of the author so designated as representative of and binding upon
all authors; and in the absence of such designation, the Publisher may deal with
any one of the authors as the agent and representative of all, and may rely on
the acts of such author-representative as binding on all the authors.
Free Copies for Author, Purchases by Author
97. The Publisher shall present the Author with fifty-three copies of
each edition of the Literary Work published by the Publisher, upon publication.
The Author shall have the right to purchase additional copies for his or her own
use, and not for resale, at a 40% discount from the catalog retail price (or
otherwise in accordance with the provisions of THIRD: C.1 of the Publishing
Agreement).
Revisions
98. (a) Author shall revise the first and subsequent editions of the
Literary Work at the request of Publisher and supply any new matter necessary
from time to time to keep the Literary Work up to date. If Author shall neglect,
be incapable, be unwilling or, in Publisher's judgment, will not be able to
revise or supply new matter at a time and in a form satisfactory to Publisher,
then Publisher shall have the right to engage some other person(s) to do so.
When such revisions are not made by Author, Publisher may cause such fact to be
evidenced in the revised edition. Publisher shall have all rights in connection
with all subsequent editions which Publisher has in the original Literary Work.
(b) All royalties payable to the Author on each subsequent edition
will be computed separately from the number of copies sold of prior
editions. If individuals other than Author revise any editions of the
Literary Work, then Author shall receive as royalties on the first such
revised edition 50% of the royalties otherwise due hereunder. Thereafter,
with respect to any subsequent edition to which the Author does not
contribute, the royalty shall equal 50% less than Author received on the
prior edition, through and including the third such revision and on any
revision subsequent thereto Author will not receive any royalties.
<PAGE> 29
Publisher to Execute Documents
99. If any of the rights granted to the Publisher revert to the Author,
the Publisher shall execute all documents which may be necessary or appropriate
to revest all such rights in the Author.
Acceptance of Agreement
100. This agreement shall be binding on the Publisher only when it has
been signed by an authorized officer of the Publisher.
Laws Applicable to Agreement
101. This agreement shall be construed in accordance with the laws of the
State of New York applicable to agreements made and performed therein.
Agreement on Binding on Successors in Interest
102. This agreement shall be binding upon and inure to the benefit of the
executors, administrators and assigns of the Author, and upon and to the
successors and assigns of the Publisher.
Modification of Agreement
103. This agreement may not be modified, altered or changed except by an
instrument in writing signed by the party to be charged.
Waivers Are Not Cumulative
104. No waiver of any term or condition of this agreement, or of any
breach of this agreement or of any part thereof, shall be deemed a waiver of any
other term or condition of this agreement or of any later breach of this
agreement or of any part thereof, nor shall publication or continued publication
or payment by the Publisher following notice or claim of facts which, if true,
would constitute a breach of warranty, representation or agreement of the
Author, constitute or imply any waiver by the Publisher of any defenses, rights
or remedies of the Publisher. No failure by either party to assert any right
under this agreement shall preclude any later assertion of such right.
Validity and Enforceability
105. The invalidity or unenforceability of any provision of this
agreement shall not affect the validity or enforceability of any other provision
hereof, and any such invalid or unenforceable provision shall be deemed to be
severable.
<PAGE> 30
Notices
106. All notices to be given hereunder by either party shall be in
writing and shall be sent to the other party at the respective addresses as they
are given in the Publishing Agreement, unless said addresses are changed by
either party by a notice in writing to the other party. All notices shall be
sent by registered mail or other form of receipted or acknowledged delivery
including a fax transmission acknowledged as received by the party to which it
is sent.
Singular Shall Include Plural
107. Wherever required by the context in this agreement, the singular
shall include the plural, and the masculine shall include the feminine and the
neuter. The term "Author" shall include the "Authors" if there are more than
one.
Captions, Table of Contents, etc.
108. Captions or printed marginal notes, and the table of contents of
this agreement are for convenience only, and are not to be deemed part of this
agreement.
<PAGE> 1
EXHIBIT 10.48
AGREEMENT
December 7, 1999
TALENT: STAN LEE ("Lee")
9143 Oriole Way
Los Angeles CA 90069
STAN LEE MEDIA, INC. ("SLM")
15821 Ventura Boulevard, Suite 675
Encino CA 91436
and
Branded Entertainment LLC ("Branded")
For the services of MICHAEL USLAN ("Uslan")
333 Crestmont Road
Cedar Grove, NJ 07009
PROPERTY: THE DC UNIVERSE INCLUDING ALL MAJOR DC CHARACTERS
SERVICES: FULL SCRIPT (INCLUDING SYNOPSIS, PLOT AND DIALOGUE)
(hereinafter "Script")
WORK: TWELVE (12) ISSUES OF APPROXIMATELY 48 STORY PAGES EACH;
PROJECTED TO BE INITIALLY PUBLISHED AS SIX ISSUES ON A
BIMONTHLY BASIS FOLLOWED BY GAP OF SUCH PERIOD AS THE PARTIES
MUTUALLY AGREE FOLLOWED BY ANOTHER SIX ISSUES TO BE PUBLISHED
ON A BIMONTHLY BASIS, ALL SUCH ISSUES TO BE PUBLISHED IN ONE OR
MORE FORMATS (hereinafter "Issue[s]") FOLLOWED BY ONE OR MORE
COLLECTED EDITIONS OF THE ISSUES (hereinafter "Collection[s]")
tentatively entitled "THE STANIVERSE" OR "IF STAN LEE HAD
CREATED THE DC UNIVERSE" (hereinafter the "Title" which term
shall include any title under which the Work is ultimately
published)
The following shall constitute the complete and sole understanding and agreement
between Talent and DC Comics, 1700 Broadway, New York, NY 10019 ("DC").
1. Engagement and Services:
(a) DC hereby engages Talent, as an independent contractor, to create
the Script for the Work, based upon the Property. Talent accepts such
engagement.
(b) Talent shall deliver the completed Script for each Issue to DC on a
schedule to be determined by DC and Talent with the understanding that the first
six (6) Issues are intended to be published between Fall, 2000 and the end of
2001, and subsequently to be collected and published in a single volume, and the
second six Issues to be published on such schedule as the parties shall mutually
agree and subsequently to be collected and published in a single volume.
(c) Talent further shall complete any revisions requested by DC as
expeditiously as possible but in any event by such date upon which the parties
expressly agree such revisions are to be delivered to DC.
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(d) DC's approval of any plot or synopsis of the Script in no way limits
DC's right to further revisions of any portion of the Script. An editor selected
by DC in consultation with Talent will be assigned to supervise and work with
Talent in the fulfillment by Talent of its obligations hereunder. Talent agrees
to cooperate with such editor and to respect DC's instructions, directions,
requests, rules and regulations including those involving artistic taste and
judgment.
(e) Talent shall cooperate with DC in the promotion, publicity and
advertising of the Work as published in Issues and Collection(s). In particular,
Lee shall make a reasonable number of personal and media appearances to promote
the Work, provided that: (i) DC shall bear all reasonable expenses for such
appearances by Lee who shall be permitted to travel first class and stay in
accommodations consistent with such accommodations as are afforded to DC's
Executive Vice President and Publisher traveling for business; (ii) DC shall
give Lee reasonable notice of the dates and places of all proposed appearances;
and (iii) no appearances shall be required of Lee in places other than in Los
Angeles, Chicago, or New York, or at the San Diego Comiccon.
(f) It is the express intent of the parties that the Work, and any
"Sequel" or "Crossover" to be written by Talent as provided in paragraphs 8 and
10 below, shall be written by Lee with Uslan providing background assistance
based on Uslan's unusual familiarity and knowledge of both Lee's prior writing
and the Property. Notwithstanding the foregoing, provided the Work, any Sequel
or any Crossover is written under Lee's supervision and control, Lee's failure
to write all or any part of the same himself shall not be deemed to be a
material breach of this Agreement.
2. Compensation:
(a) On sales by DC of copies of Issues and/or Collections of the Work or
any other DC publication based on the Work, and on sales by DC of "Retail
Products" (as defined in Schedule A hereto) based on the Work, DC shall pay
Talent the applicable royalties in accordance with Schedule A.
(b) On sales of "Licensed Reprint Editions" as such term is defined in
Schedule B hereto, DC shall pay Talent the applicable share of revenues in
accordance with Schedule B.
(c) On licensed uses of the Work in film, television, publishing (other
than in Licensed Reprint Editions or Licensed Reprint Editions of Sequels),
promotions and merchandise, DC shall pay Talent the applicable share of revenues
in accordance with Schedule B hereto, provided such licensed use incorporates
Lee's name and/or the Title, or any other name or title that derives from Lee's
name or the Title. In the event such licensed use makes no use of Lee's name or
the Title, no consideration shall be due to Talent for such licensed use except
as may be otherwise provided in paragraph 6 below.
(d) In the event DC elects to create any promotional program based on
the Work utilizing Lee's name or the Title which program is intended by DC to
itself generate significant revenues in excess of the costs of conducting such
program, DC shall, in good faith, negotiate with Talent an appropriate royalty
to pay Talent therefor.
(e) DC shall divide and make all payments to be made to Talent hereunder
between Lee, SLM and Branded as follows, or as Uslan may otherwise direct:
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(i) Branded: (A) Thirty Three and One-Third percent (33.33%) of
all amounts due to Talent for: (1) publications of the Work pursuant to Schedule
A; and (2) Licensed Reprint Editions of the Work pursuant to Schedule B; and (B)
Twenty Five percent (25%) of all other amounts due to Talent hereunder including
from publications of Sequels and Licensed Reprint Editions of Sequels; and
(ii) Lee: as Lee shall direct DC in writing; and
(iii) the balance to SLM.
(f) All payment(s) to Lee, SLM or Branded hereunder shall constitute
good and valid discharges by DC in respect of DC's payment obligations to Talent
hereunder.
3. Representations and Warranties:
(a) Lee, SLM, and Branded each represent, warrant and agree: that it is
free to enter into this Agreement and has the right to grant all rights granted
to DC hereunder; that except insofar as the Script may derive from the Property,
the Script created by Talent hereunder will be wholly original with Talent or in
the public domain throughout the world, and shall not infringe or violate any
copyright, trademark, right of privacy or publicity or any other right of any
person or entity, or defame and third party; and that Lee, SLM and Branded will
each indemnify DC, its parent company, affiliated companies, assigns, licensees
and successors in interest and each of their officers, directors and employees,
from and against any and all claims, actions, damages, costs and expenses,
including attorneys' fees, arising out of any material breach of any of the
warranties made by it hereunder.
(b) DC shall indemnify Talent and Uslan against any and all claims,
actions, damages, costs and expenses, including attorneys' fees, which may arise
from Talent's use of material supplied to him by an officer or authorized
employee of DC for use in connection with the Script, including all uses of the
Property approved for publication by DC's editor assigned to the Work.
4. Ownership:
(a) The Work created hereunder has been specially commissioned by DC for
use as a contribution to a collective work, and constitutes a work made for hire
as that term is used in the United States Copyright Act of 1976. Talent
acknowledges that he has entered this agreement before commencing performance of
the services he has been engaged to perform hereunder. In the event the Work is
deemed not to be a work made for hire, then Talent hereby assigns to DC all
rights in the Work, effective as of the date of creation of such Work, including
copyright and any renewals, extensions or revivals thereof and trademark rights,
and all other rights to exploit the Work, in all media now or hereafter
existing, throughout the world in perpetuity. Upon DC's request, Talent shall
execute any additional documents necessary to evidence this assignment. DC shall
also have the right, but not the obligation, to use Talent's name, Lee's
approved likeness and Lee's approved biographical information in connection with
the Work and the advertising, promotion, and/or publicity therefor. The
inadvertent failure by DC to secure Lee's approval of his likeness or
biographical information hereunder shall not be a material breach of this
Agreement.
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(b) Talent acknowledges that the Work shall be derivative of
pre-existing material including, without limitation, the names and pictorial and
literary representations of fictional characters, companies, places and things
(the "Preexisting Material"); that DC owns or otherwise has rights in the
Preexisting Material; that Talent would be unable to produce the Work without
the Preexisting Material; and (iv) that Talent shall not have, acquire or claim
right or privilege to use any of the Preexisting Material except as provided
herein or as DC otherwise consents in writing. Talent further acknowledges that
DC may and regularly does assign, and has assigned, other artists, writers and
creators to do work based upon or incorporating the Preexisting Material and/or
related properties and that if any similarities appear between such other
artists, writers or creators' work and the Work it shall be purely coincidental
since both will have been based on the Preexisting Material. Talent hereby
waives any claim(s) for royalties or consideration of any kind or otherwise in
connection with any such similar works.
5. Incapacity; Force Majeure; Default:
(a) If Talent does not comply with its obligations hereunder by reason
of illness, incapacity or disability ("Incapacity"), DC may suspend the Services
hereunder and if such Incapacity continues for a period or periods aggregating
three (3) months, DC may terminate Talent's engagement hereunder.
(b) If publication of the Work shall be prevented or interrupted because
of "force majeure" (i.e. any unexpected or disruptive event sufficient to excuse
performance hereof as a matter of law), DC may suspend the Services hereunder
and if any such force majeure event should exceed three (3) months , DC may
terminate Talent's engagement hereunder.
(c) If Talent fails to perform Talent's obligations hereunder other than
by reason of Incapacity or Force Majeure, and Talent shall fail to remedy such
situation within thirty (30) days of written notice from DC, DC may terminate
Talent's engagement hereunder, and DC shall have the right, but not the
obligation, to engage another writer or writers to complete the Work. In such
event: (i) DC may reduce the royalties payable to Talent pursuant to paragraph 2
above for any Issues, the Scripts for which Talent started but did not complete,
by such amounts that DC has agreed to pay any other writer(s) engaged to
complete such Scripts; (ii) DC shall have no obligation to pay Talent any
compensation for any Issues for which Talent shall have not written the Scripts
hereunder; and (iii) for any Collected Edition(s), Licensed Reprint Edition(s)
and/or licensed or promotional use(s) of the Work, DC shall pay Talent based on
DC's pro-rata allocation among the final contributions made by Talent and by
such other writer(s) of the Work. Notwithstanding the foregoing, upon Talent's
receipt of written notice from DC as set forth above, Branded may propose to
remedy the situation by itself engaging another writer or writers to complete
the Scripts. In the event DC desires to complete the Work and shall approve of
Branded's proposed writer or writer(s), Talent shall engage such writers to
complete the Scripts pursuant to agreements approved by DC in advance in
writing, and DC's obligations to pay Talent as set forth herein shall remain in
full force and effect.
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6. Original Characters:
(a) In the event Talent introduces into the Work any fictional character
that qualifies as an "Original Character" as defined below, DC shall pay Talent
additional compensation for certain uses of such Original Character by DC in
accordance with Schedule C hereto. Notwithstanding anything to the contrary
herein or in Schedule C hereto, in the event that the terms of this Agreement
and/or the Schedules hereto can be construed or interpreted as entitling Talent
to compensation for both the use of the Work and the use of an Original
Character based on the same publication, retail product or licensed use, Talent
shall be entitled only to the applicable compensation due to him from the use of
the Work and not the Original Character.
(b) As used herein an "Original Character" shall mean a newly created
character first appearing in the Work that meets the following criteria:
(i) The character must have an original name that is not derived
from the name, nickname or any other identifier of any pre-existing DC character
or any other fictional element or property pre-existing in the "DC Universe" as
such term is commonly understood in the comic book industry;
(ii) The character must possess one or more original powers that
are not derived from, identical to or substantially, materially or confusingly
similar to any powers possessed by any pre-existing DC characters, it being
understood that possessing some powers similar to powers possessed by other DC
character(s) shall not disqualify a character from being deemed an Original
Character so long as such character possesses original powers in addition to
such pre-existing powers;
(iii) The character must wear an original costume that is not
derived from, identical to or substantially, materially or confusingly similar
to any costume worn at any time by any pre-existing DC characters, it being
understood that the use of any elements common to comic book characters'
costumes or apparel in general, such as a cape, boots or a mask, shall not
disqualify a character from being deemed an Original Character;
(iv) The character must fulfill an essential role in the plot
development and storyline of the Work, and such role must not presently exist in
the DC Universe. For example, a new Police Commissioner of Gotham City, a new
girlfriend of Superman, or a new Editor of the Daily Planet would not satisfy
this criteria; and
(v) The character must otherwise not be derivative of any past or
present DC characters, elements, or properties from DC mythology.
(c) DC shall determine whether a character first appearing in the Work
shall qualify as an Original Character in its sole good faith reasonable
discretion. In making such determination, DC shall give Talent the opportunity
to explain why Talent maintains such character should be treated as an Original
Character.
(d) DC acknowledges that satisfying the criteria necessary for a
character to qualify as an Original Character is a difficult test to meet. In
recognition thereof, DC agrees that if a character introduced into the Work by
Talent does not satisfy all of the Original Character criteria, but such
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character, in DC's sole good faith discretion, nevertheless meets the criteria
set forth below, DC shall pay Talent royalties on DC's exploitation of such
character calculated at a rate of twenty percent (20%) of the basic applicable
royalty rates for an Original Character as set forth in Schedule C hereto. A
character not qualifying as an Original Character hereunder may qualify for a
reduced royalty as set forth herein if it meets the following criteria:
(i) The character, including the name(s), costume, powers,
profession as may be applicable, literary and visual depictions thereof,
alter-ego as may be applicable, abstract personality traits, mannerisms, origin,
and background, must be sufficiently developed, concrete and distinctive such
that the character could readily be used as a lead character in another work of
fiction without significant additional character development;
(ii) The character must fulfill an essential role in the plot
development and storyline of the Work;
(iii) If all of the DC Universe-derived aspects of the character
were removed, the character would remain a whole, concrete and distinct
character that would be essentially the same character that appeared in the Work
even though such character might lack a name and/or some distinctive attire; and
(iv) No other comic book writer, artist (other than Talent's
collaborating artists in such character, if any) or creator shall have any
interest in, or colorable claim of creator credit, in whole or in part, in or to
such character.
7. Discount Sales to Talent: For a period commencing as of DC's initial
publication of the first Issue of the Work and ending twelve (12) months after
DC's initial publication of the last Issue of the Work, DC shall offer Talent
the opportunity to purchase from DC all DC publications comprising or based on
the Work and all Retail Products based on the Work, if any, subject to
availability and to such reasonable limitations as DC may impose, at such prices
below wholesale as the parties shall mutually determine. Talent shall use all
publications and Retail Products purchased by Talent hereunder solely for resale
as collectibles through a single website owned and operated by Talent. The
depiction of any DC properties on such website shall be in accordance with DC's
standard website guidelines.
8. Sequels and Prequels:
(a) In the event that DC, at any time, desires to publish a "Sequel", DC
shall give Talent, by written notice, the first option to write such Sequel on
substantially the same terms and conditions hereof. As used herein, the term
"Sequel" shall mean a comic book series featuring the same universe as portrayed
by Talent and/or all or some of the major characters as interpreted by Talent in
the Work and shall include both sequel and prequel storylines.
(b) Talent shall exercise its option hereunder by giving written notice
to DC of its desire to write the Sequel within thirty (30) days of Talent's
receipt of written notice from DC of DC's desire to publish such Sequel.
(c) If Talent is unable to or declines to write the Sequel or if Talent
fails to notify DC of its desire to write the Sequel within said thirty (30) day
period, DC shall be free to engage any third
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party to write the Sequel subject to the following:
(i) Talent, or Talent's representative, as the case may be, shall
have the right to withhold the use of Lee's name, the Title, and any other name
or title that derives from Lee's name or the Title, as the title or part of the
title of the Sequel. Talent, or Talent's representative, shall exercise such
right, if at all, by giving DC written notice of its exercise of such right
within thirty (30) days of: (A) the date Talent declines to write the Sequel, if
applicable; or (B) Talent's receipt of DC's written notice of DC's desire to
publish a Sequel if Talent is unable to write the Sequel. In such event, DC
shall be free to use any and all other elements of the Work in the Sequel
without any consideration due to Talent except as may be otherwise provided in
paragraph 6 above.
(ii) If DC uses Lee's name, the Title or any other name or title
that derives from Lee's name or the Title as the title or part of the title of
the Sequel, DC shall pay Talent royalties on its exploitation of the Sequel
calculated at a rate of thirty three and one-third percent (33 1/3%) of the
basic applicable royalty rates for the Work as set forth in Schedules A and B to
this Agreement.
(iii) Talent shall be deemed to be unable to write the Sequel if
Lee is not able to render the services set forth in paragraph 1 above.
(d) In the event DC desires to publish one or more further Sequel(s) to
the Work, DC shall give Talent, by written notice, the first option to write any
such Sequel(s) on substantially the same terms and conditions hereof, provided,
however, that Talent shall have written the immediately preceding Sequel to the
Work.
(e) Talent shall exercise its option hereunder by giving written notice
to DC of its desire to write such further Sequel within thirty (30) days
following Talent's receipt of written notice from DC of DC's desire to publish a
such further Sequel.
(f) If Talent is unable to or declines to write any further Sequel or if
Talent fails to notify DC of its desire to write any Sequel within said thirty
(30) day period, DC shall be free to engage any third party to write such Sequel
and any subsequent Sequel subject to the following:
(i) Talent shall have the right to withhold the use of Lee's
name, the Title, and any other name or title that derives from Lee's name or the
Title, as the title or part of the title of the applicable Sequel. Talent, or
Talent's representative, shall exercise such right, if at all, by giving DC
written notice of its exercise of such right within thirty (30) days of: (A) the
date Talent declines to write the such Sequel, if applicable; or (B) Talent's
receipt of DC's written notice of DC's desire to publish such additional Sequel
if Talent is unable to write the second Sequel. In such event, DC shall be free
to use any and all other elements of the Work in the additional Sequel without
any consideration due to Talent except as may be otherwise provided in paragraph
6 above;
(ii) If DC uses Lee's name, the Title, or any other name or title
that derives from Lee's name or the Title as the title or part of the title of
the additional Sequel, and:
(A) Talent shall have elected not to write such Sequel
even though Lee was, at such time, still writing professionally
on a continuing basis, DC shall pay Talent royalties on its
exploitation of such Sequel calculated at a rate of thirty three
and one-third percent (33 1/3%) of the basic applicable royalty
rates for the Work as set
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forth in Schedules A and B to this Agreement; or
(B) Talent shall have not written such Sequel because
Lee had, at such time, ceased writing professionally, DC shall
pay Talent royalties on its exploitation of such Sequel
calculated at a rate of fifty percent (50%) of the basic
applicable royalty rates for the Work as set forth in Schedules
A and B to this Agreement.
(g) Notwithstanding the foregoing, DC shall have no obligation to
publish any Sequels to the Work.
(h) DC shall have the right to use elements of the Work and/or any
Sequel thereto in any DC publication that does not use Lee's name without
further consideration to Talent except to the extent DC may be obligated to pay
Talent consideration pursuant to paragraph 6 above.
(i) Talent acknowledges that his option rights to write Sequels
hereunder shall apply only to comic book series, and shall not apply to prose
novels, novelizations of comic book storylines, television productions, motion
pictures or any other media productions of the Work.
(j) DC agrees that even if Lee is unable to l write a Sequel for any
reason or if Talent no longer has the option to write any Sequels hereunder at
such time as DC desires to publish a Sequel hereunder, DC shall nevertheless
give Talent written notice of its desire to publish such Sequel. Such notice
shall trigger Talent's right to withhold the use of Lee's name, the Title, and
any other name or title that derives from Lee's name or the Title pursuant to
paragraph 8(c)(i) or 8(f)(ii), respectively.
9. Internet Productions: In the event that DC desires to produce any
version of the Work for display, access and use online, beyond routine
promotional uses of the Work, and for which DC determines it must engage a
freelance writer(s), artist(s) or web page producer(s) or designers, DC shall
offer SLM the first opportunity to negotiate with DC to secure such engagement.
DC may limit the time period for such negotiation to be concluded as DC may
determine is appropriate in DC's sole good faith discretion, provided in no
event shall DC limit such negotiation period to less than five (5) business
days. In the event the parties shall fail to reach an agreement within the
applicable time period, DC shall be free to engage any third party to render the
applicable services hereunder, provided, however, that DC shall, if DC
determines it is appropriate in DC's sole discretion, offer Talent the
opportunity to better any offer received by DC from any third party to render
the applicable services.
10. Crossover Publications:
(a) In addition to Sequels, DC shall give due consideration to the
possibility of publishing crossover series with other publishers based on the
Work and other character universes created by Talent including those created by
Talent for SLM and/or Marvel Comics (a "Crossover").
(b) In the event that DC arranges to co-publish any such Crossover with
the respective third party owner of the character universe created by Talent DC
shall, subject to DC's agreement with such third party owner, give Talent, by
written notice, the first option to negotiate with DC to write the Crossover.
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(c) Talent shall exercise its option hereunder by giving written notice
to DC of its desire to write the Crossover within thirty (30) days of Talent's
receipt of written notice from DC of DC's desire to publish a Crossover. The
parties shall then negotiate in good faith the terms and conditions upon which
Talent shall write the Crossover - it being understood that the economic terms
of this Agreement shall not serve as precedent for any such deal.
(d) If DC and Talent shall fail to reach an agreement pursuant to which
Talent shall write the Crossover within thirty (30) days following DC's receipt
of written notice from Talent of Talent's desire to write the Crossover, or if
Talent is unable to write the Crossover or fails to respond to DC's written
notice of DC's desire to co-publish a Crossover within thirty (30) days of
Talent's receipt thereof, DC shall be free to engage any third party to write
the Crossover, subject to the following:
(i) Talent shall have the right to withhold the use of Lee's
name, the Title, and any other name or title that derives from Lee's name or the
Title, as the title or part of the title of the Crossover. Talent, or Talent's
representative, shall exercise such right, if at all, by giving DC written
notice of its exercise of such right within thirty (30) days of: (A) the date
Talent declines to write the Crossover; or (B) the date the parties otherwise
determine that Talent will not write the Crossover. In such event, DC shall be
free to use any and all other elements of the Work in the Crossover without any
consideration due to Talent;
(ii) If DC uses Lee's name, the Title, or any other name or title
that derives from Lee's name or the Title as the title or part of the title of
the Crossover, and:
(A) Talent shall have not written the Crossover even
though, at such time, Lee was still writing professionally on a
continuing basis, DC shall pay Talent royalties on its
exploitation of the Crossover calculated at a rate of thirty
three and one-third percent (33 1/3%) of the basic applicable
royalty rates for the Work as set forth in the Schedules A and B
to this Agreement, as such rates may be pro-rated to account for
the other publisher's interest in the Crossover; or
(B) Talent shall have not written the Crossover and Lee
shall have ceased writing professionally at the time DC shall
have engaged a writer to write the Crossover, DC shall pay
Talent royalties on its exploitation of the Crossover calculated
at a rate of fifty percent (50%) of the basic applicable royalty
rates for the Work as set forth in Schedules A and B to this
Agreement, as such rates may be pro-rated to account for the
other publisher's interest in the Crossover; and
(iii) Notwithstanding anything to the contrary herein, DC agrees
that it shall not co-publish any Crossover based on the Work and Marvel-owned
properties without Talent's prior written consent. Talent may condition such
consent on securing the right to write such Crossover on the same or better
terms as the terms set forth in this Agreement.
11. Publication: It is the express intent of the parties that DC publish the
Work as described above. Notwithstanding the foregoing, DC's failure to publish
all or any of the Work shall not be deemed to be a material breach of this
Agreement.
12. Credits and Author's Copies:
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(a) DC agrees to accord Lee credit as writer of the Work on the cover
and credits page of each edition of the Work published by DC in a manner
consistent with DC's current credit practices and to accord Uslan credit in
substantially the following form "Project Initiated By Michael Uslan" or a
similar descriptive term on the credits page of each edition of the Work
published by DC in substantially the same size and style type as Lee's credit
and otherwise in such manner as DC deems appropriate. DC shall require by
contract that any licensee of DC include similar credit provisions in any
licensed edition of the Work. DC shall accord Lee and Uslan similar credits on
Sequels published by DC where applicable.
(b) DC shall use reasonable efforts to accord, or cause its licensees to
accord, Lee and Uslan credits comparable to the credits set forth in the
preceding paragraph in connection with motion pictures, television productions,
direct-to-video productions, and Internet productions based on the Work as well
as other licensed uses of the Work where such credits are usual and customary
(but not on merchandise such as toys, games and clothing).
(c) Upon publication of the Work, DC agrees to provide Talent
collectively with one hundred (100) copies of each Issue and collected edition
of the Work free of charge, as follows: seventy-five (75) copies directly to Lee
and twenty-five (25) copies directly to Branded.
13. Audit Rights: Talent may audit the books and records of DC solely in
order to verify statements issued to Talent hereunder. Any such audit shall be
at Talent's expense; provided, that if the audit reveals underpayments in excess
of ten percent (10%) DC shall reimburse Talent the reasonable costs thereof. Any
audit shall be conducted only upon reasonable notice by a certified public
accountant during regular business hours at DC's offices and in such manner as
not to interfere with DC's normal business activities. In no event shall an
audit with respect to any statement start later than twenty-four (24) months
after the date of that statement nor shall any audit continue for longer than
ten (10) consecutive business days, nor shall audits be made more frequently
than twice a year, nor shall the books and records supporting any statement be
audited more than once. All statements shall be binding upon Talent and not
subject to any claims or proceedings unless objection is made in writing stating
the basis thereof and delivered to DC within twenty-four (24) months of the date
of the statement to which objection is made, or if an audit is started within
that period, then within thirty (30) days of the completion of that audit.
14. Notices: All notices or payments which Talent may wish to serve or may
be required to serve on DC hereunder shall be in writing and shall be sent
prepaid by any receipted form of delivery at the address set forth above (or to
such other address as DC may specify by notice duly given); and, except as
otherwise provided in paragraph 1(f) above, all notices or payments which DC may
wish to serve or may be required to serve on Talent hereunder shall be in
writing and shall be sent to Branded prepaid by any receipted form of delivery
at the address set forth above (or to such other address as Branded may specify
by notice duly given) with a copy to Ziffren, Brittenham, Branca & Fischer LLP,
1801 Century Park West, Los Angeles, CA 90067-6406 (Attention Gary Stiffelman).
Notices shall be deemed given on the date of mailing thereof or if made by
personal delivery on the date thereof.
15. Time Warner Companies: In the normal course of its operations, DC does
business on an arm's length basis with other companies either wholly or
partially controlled by DC's corporate parent, Time Warner Inc. (the "TWI
Companies"). Talent agrees that DC may do business with
TWI Companies with respect to the Work and Talent shall not challenge such
dealings solely or
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mainly on the basis of the Companies' affiliation.
16. Miscellaneous:
(a) A waiver of any provision of this Agreement in any instance shall
not be deemed a waiver of such provision for the future, nor of any subsequent
breach thereof.
(b) In the event of any breach of this Agreement or any portion thereof
by DC, Talent's sole remedy shall be an action at law for damages, if any. In no
event shall Talent have the right to injunctive relief or to enjoin or restrain
or otherwise interfere with the publication or distribution of any materials
prepared hereunder or the exercise of any rights granted to DC herein and under
no circumstances shall any such breach entitle Talent to any reversion of
termination of DC's rights under this Agreement. In the event of any breach of
this Agreement or any portion thereof by Talent, DC's sole remedy shall be as
expressly set forth in this Agreement and/or shall be an action at law for
damages, if any. In no event shall DC have the right to injunctive relief to
force Talent to render any services for DC hereunder.
(c) This Agreement shall be governed by and construed in accordance with
the laws of the State of New York applicable to agreements executed and fully
performed therein. New York courts (state and federal) only will have
jurisdiction over the parties and any controversies regarding this agreement;
any action or proceeding which involves such a controversy will be brought only
in those courts, in New York County. In the event that any provision hereof
violates any present or future statute, law, ordinance or regulation, the latter
shall prevail and the Agreement shall be deemed modified to the extent required
by such statute, law, ordinance or regulation.
ACCEPTED AND AGREED: DC COMICS
By: /s/ Stan Lee By: /s/ Paul Levitz
------------------------------- -----------------------------------
Stan Lee Paul Levitz
Executive Vice President
and Publisher
STAN LEE MEDIA, INC.
By: /s/ Gill Champion
-------------------------------------------
Title: Vice President/Chief Operating Officer
----------------------------------------
BRANDED ENTERTAINMENT LLC
By: /s/ Michael Uslan
-----------------------------------
Michael Uslan
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SCHEDULE A
ROYALTY PROVISIONS FOR DC EDITIONS
1. Definitions: Reference is made to the agreement to which this Schedule is
attached (the "Agreement"). Except as expressly set forth in this Schedule, all
defined terms in the Agreement shall have the same meanings when used herein.
For purposes of this Schedule A, the following definitions shall apply:
(a) "NET SALES" means DC's actual sales through its wholesale and retail
distribution channels of copies of DC publications and/or units of Retail
Products sold by DC, less: returned copies or units; damaged and/or lost copies
or units; and copies or units distributed as premiums or promotional materials
(such promotional materials to include but not be limited to the Work or
excerpts therefrom when used to promote, publicize and/or advertise the Work, DC
or DC's properties in general, and given away by DC to the trade or the public),
or copies or units sold to uncollectible accounts; or copies sold at discounts
in excess of seventy percent (70%) of cover price. Sales of additional printings
of any publication following its first printing, shall count as additional sales
of such publication.
(b) "ENTIRE STORY CONTENT" means one work occupying all of the story
content of a publication or retail product.
2. For publications: DC shall pay Talent a royalties as follows:
(a) On DC's sale of any Issue:
5.0% of the cover price on Net Sales of the first 200,000 copies of such
Issue; and 6.0% of the cover price on Net Sales of such Issue in excess
of 200,000 copies.
(b) On DC's sale of any Collection:
5.0% of the cover price on Net Sales of the first 100,000 copies of such
Collection; and 6.0% of the cover price on Net Sales of such Collection
in excess of 100,000 copies.
(c) On DC's sale of any other DC publication based on the Work such as
any DC-published original novel or novelization or a companion guide or a Who's
Who character reference to the Work:
5.0% of the cover price on Net Sales of such publication.
3. For Retail Products:
(a) With respect to any Retail Product based solely on the Work, DC
shall pay Talent a royalty of five percent (5%) of DC's Net Sales.
(b) With respect to any Retail Product under this paragraph not based
solely on the Work, see paragraph 5 below.
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4. Multiple formats: If the Work is published by DC in more than one format at
or about the same time, each with a different cover price, the Net Sales of the
initial print run of the format with the lower cover price shall be applied
toward the 200,000 copy threshold before Net Sales of the initial print run of
the format with the higher cover price shall be applied thereto.
5. Multiple works:
(a) General Rule: In the event that the Work is not the Entire Story
Content of a publication or the sole material on which a Retail Product is
based, DC shall pay Talent that proportion of royalties which the Work shall
bear to the Entire Story Content of the publication or that proportion of
royalties which the material from the Work on which a Retail Product is based
shall bear to the Retail Product as a whole, except as provided in paragraph
5(b) below.
(b) Minimum Royalty Rate for Use in Multiple Work: If the Work comprises
less than twenty-five percent (25%) but no less than ten percent (10%) of the
Entire Story Content of a publication or the material on which a Retail Product
is based, DC shall either first obtain Talent's consent, which shall not be
unreasonably withheld, or DC shall pay Talent the "Minimum Royalty Rate." As
used herein, "Minimum Royalty Rate" shall mean twenty-five percent (25%) of the
total royalties that Talent would receive if the Work constituted the Entire
Story Content of a publication or the sole material on which a Retail Product is
based. In the event DC obtains Talent's consent hereunder, DC shall pay Talent a
royalty calculated in accordance with paragraph 5(a) above.
(c) De Minimus uses: If the Work comprises less than ten percent (10%)
of the Entire Story Content of a publication or the material on which a Retail
Product is based, DC shall pay Talent that proportion of royalties which the
Work shall bear to the Entire Story Content of the publication or that
proportion of royalties which the material from the Work on which a Retail
Product is based shall bear to the Retail Product as a whole.
(d) Approval for Publication in Anthologies including other works:
Notwithstanding the foregoing, DC shall not reprint any Issue(s) or Collections
in an anthology or other collection of work that includes any publication other
than the Work or Sequel(s) to the Work without Talent's prior written approval,
which approval shall not be unreasonably withheld, delayed or conditioned.
Nothing herein, however, shall prohibit DC from: (i) reprinting excerpts from
the Work in other publications such as, without limitation, collections of art,
cover collections, or historical or scholarly works of non-fiction (e.g. books
about the history of DC Comics); or (ii) permitting international licensees from
publishing any Issue(s) or Collections in anthologies or other collections of
work including other publications.
6. Payments: For any publication or Retail Product sold by DC hereunder for
which DC assigns a "Final Sale" date, DC shall make any payment due under this
Schedule A not later than sixty (60) days after DC shall determine the "Final
Sale" of the respective publication or Retail Product. For publications or
Retail Products sold on a non-returnable basis only the Final Sale, if
applicable, shall be determined by DC not later than sixty (60) days after the
last announced on sale date for such publication or Retail Product. For
publications or Retail Products sold on a returnable basis, the Final Sale shall
be determined by DC not later than eight (8) months after the last announced off
sale date for such publication or Retail Product. For publications or Retail
Products sold primarily on a non-returnable basis but with returnable
distribution to retail chains, DC shall determine the
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Final Sale on the returnable distribution not later than eight (8) months after
each the announced on sale date of such publication or Retail Product. DC shall
make all payments due for any sales of any publication or Retail Product under
this Schedule A for which DC does not assign a Final Sale date on a quarterly
basis not later than ninety (90) days after the end of each quarter, provided,
however, that if any payment otherwise due Talent hereunder shall be in a sum of
less than fifty dollars ($50.00), DC may delay such payment until payments due
Talent hereunder shall total fifty dollars ($50.00).
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SCHEDULE B
LICENSED USE ROYALTIES
1. Definitions: Reference is made to the agreement to which this Schedule is
attached (the "Agreement"). Except as expressly set forth in this Schedule, all
defined terms in the Agreement shall have the same meanings when used herein.
For purposes of this Schedule B, the following definitions shall apply:
(a) LICENSED REPRINT EDITION: Any Work originally published by DC
which is reprinted in whole or in part, in any format, in any
language, released for sale through any distribution system by
a third party under license with DC that grants such party the
rights to publish and sell such edition anywhere in the world.
(b) NET RECEIPTS: All amounts actually received by DC in United
States Dollars (i.e. less any unrecouped foreign taxes, import
duties and/or currency exchange losses) from the licensing of
rights to the Work less, and bad debts and less all direct
costs incurred by DC. Notwithstanding the foregoing, with
respect to Licensed Reprint Editions only, direct costs shall
not include agency commissions, which shall be borne entirely
by DC.
2. Schedule of Payments:
(a) For each Licensed Reprint Edition of a Work which is distributed for
sale to the public, Talent shall be entitled to receive an amount equal to
Twenty Percent (20%) of DC's Net Receipts derived therefrom.
(b) For all licensed uses of the Work, other than as Licensed Reprint
Editions, including Lee's name or the Title, or any other name or title that
derives from Lee's name or the Title, Talent shall be entitled to receive an
amount equal to ten percent (10%) of DC's Net Receipts derived therefrom.
(c) Any advance against royalties paid to DC by a licensee shall be
considered received by DC when such amount is or becomes non-returnable.
(d) In the event that multiple works or multiple DC properties shall be
featured in any licensed use hereunder (and thereby have mixed Net Receipts) the
sums due hereunder shall be based on a pro-rata allocation by DC among all
respective works or DC properties.
3. Payments: DC shall make all payments due under this Schedule B on a quarterly
basis not later than ninety (90) days after the end of each quarter, provided,
however, that if any payment otherwise due Talent hereunder shall be in a sum of
less than fifty dollars ($50.00), DC may delay such payment until payments due
Talent hereunder shall total fifty dollars ($50.00). Upon Talent's written
request, DC shall nevertheless issue Talent an accounting for any such quarter.
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SCHEDULE C
ORIGINAL CHARACTER ROYALTIES
Reference is made to the agreement to which this Schedule is attached (the
"Agreement"). Except as expressly set forth in this Schedule, all defined terms
in the Agreement shall have the same meanings when used herein.
1. Original Publications: For each print publication published by DC for
sale to the general public which uses the Original Character's name as its title
or in its title (e.g. The Adventures of [Character Name]) and which features the
Character substantially as expressed in the Work) (a "New Work"), DC shall pay
Talent an amount equal to one percent (1.0%) of the cover price of the New Work
on Net Sales of such New Work.
As used herein, Net Sale(s) shall mean the number of copies or units which are
actually sold by DC through DC's wholesale and retail distribution channels less
the number of copies or units which are returned, damaged, lost, distributed by
DC as premiums or promotions and/or distributed to uncollectible accounts or
sold at discounts in excess of seventy percent (70%) of cover price. Sales of
additional printings of any Work following its first printing shall be accounted
for as additional sales of such Work.
2. Retail Products and Services: For each product other than a Work and/or
for each service produced by DC and distributed or rendered by DC itself for
sale to the public (and not by a licensee of DC) through DC's wholesale and
retail distribution channels (a "Retail Product or Service") which is based upon
an Original Character, Talent shall be entitled to receive an amount equal to
five percent (5%) of DC's Net Sales.
3. Licensed Uses:
(a) For each Licensed Reprint Edition of a New Work which is distributed
for sale to the public, Talent shall be entitled to receive an amount equal to
Ten Percent (10%) of DC's Net Receipts derived therefrom.
(b) For all licensed uses of an Original Character, other than in
Licensed Reprint Editions of New Works, Talent shall be entitled to receive an
amount equal to twenty-five percent (25%) of DC's Net Receipts derived
therefrom.
"Net Receipts" shall mean all amounts actually received by DC in United States
Dollars from the licensing of rights to the Character, less any unrecouped
foreign taxes, import duties and/or currency exchange losses, and less all
direct costs incurred by DC. Notwithstanding the foregoing, with respect to
Licensed Reprint Editions only, direct costs shall not include agency
commissions, which shall be borne entirely by DC. Any advance against royalties
paid to DC by a licensee shall be considered received by DC when such amount is
or becomes non-returnable.
8. Contingencies Affecting Royalties: In the event that DC determines that
any one of the following contingencies apply, then the royalties payable
hereunder may be reduced as follows.
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(a) Spin-Offs: In the event that DC uses or licenses the use of a
version of an Original Character that DC determines (i) consists primarily or
only of "Spin-Off Elements"; and (ii) is published under a substantially
different title than the Original Character's name (if published under any
title) or is not substantially as originally created and written or drawn by
Talent, then DC shall pay Talent royalties based upon DC's pro rata allocation
of the amounts set forth in paragraph above among all elements used as created
by Talent and all Spin-Off elements. The foregoing allocation (and all other
allocations) made by DC pursuant to this agreement shall be made in good faith
in DC's sole discretion.
As used herein, "elements" shall include without limitation characters,
stories, themes, titles, names, logos, devices, designs, locales, scripts,
artwork, and any portion of the foregoing. "Spin-Off Elements" shall mean
elements either (i) not created by Talent; or (ii) originally created by Talent
and later substantially changed or developed by another party.
(b) Commingling of Elements: In the event that DC uses or licenses the
use of an Original Character, or any element thereof, in combination and/or in
conjunction with any other property, including other characters, then DC shall
pay Talent royalties based upon DC's pro rata allocation of the amounts set
forth above among all such elements. Notwithstanding the foregoing, no royalties
shall be due for any Minor Use of an Original Character. As used herein, Minor
Use shall mean a use of an Original Character in another property, as in, for
example, multi property crossovers, guest appearances, occasional team-ups,
cameos and "Who's Who" or other index type listings, as those terms are commonly
used in the comic book industry.
(c) It is understood and agreed that in the event that the terms of the
Agreement to which this Schedule is attached and/or this Schedule C can be
construed or interpreted as entitling Talent to compensation for both the use of
the Work, as defined in the Agreement, and the use of an Original Character
based on the same publication, retail product or licensed use, Talent shall be
entitled only to the applicable compensation due to him from the use of the
Work, and in connection therewith, nothing in this Schedule C may be used to
reduce the royalties payable to Talent for the use of the Work as otherwise
provided in the Agreement and Schedules A and B to the Agreement.
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EXHIBIT 10.49
STRATEGIC ALLIANCE AGREEMENT
This STRATEGIC ALLIANCE AGREEMENT ("Agreement") is entered into as of November
8, 1999, (the "Effective Date") by and between Cyberworld International
Corporation ("Cyberworld" or "CW") with its place of business located at 25
Watline Avenue, Suite 202, Mississauga, Ontario L4Z2Z1 and Stan Lee Media, Inc.
("SLM"), with its place of business located at 15821 Ventura Blvd., Suite 675,
Encino CA 91436.
WHEREAS, Cyberworld is the leading developer and provider of visual and
interactive, multi-media, 2-D and 3D graphics technology used to create
multi-dimensional environments ("QBORGS"), including but not limited to web site
environments; and digital media; and
WHEREAS, SLM is an internet-based, multi-media company which produces original
branded animated characters and content and / or represents the properties of
third parties (collectively SLM Products").
WHEREAS, the parties desire to enter into a strategic relationship in order to
license SLM to use certain Cyberworld technology and products to market, enhance
and/or promote SLM web sites, SLM Products and to provide web hosting services
by CW for such SLM web sites;
NOW, THEREFORE, in consideration of the covenants and conditions contained
herein, the parties agree as follows:
1. DEFINITIONS
The following terms have the following meanings when used in this Agreement:
"CLIENTS" shall mean the customers of SLM who:
(i) access any SLM web site or use SLM digital media to access and or
download the SLM or CW Browser; and or the SLM or CW Personal Edition
Builder as defined herein, and / or
(ii) access and or download from any SLM web site or digital media,
directly or indirectly to buy or use SLM or CW properties created with
CW technology or for use with CW technology, and/or
(iii) access using the CW 3D mail capability, QBORGS and or SLM or CW
properties, created by or intended to be used ,within QBORGS created
using CW technology
(iv) contract with SLM to develop QBORGS or publish QBORGS to the web
(direct or through 3D mail), to Digital Media or to printed media, as
defined herein for use on any SLM web site or associated Digital Media.
"CW BROWSER" means the patents pending, multi-dimensional, multi-media, split
window CW product used to view certain Internet web sites or certain aspects of
certain such web sites, provided to SLM by CW and subject to the terms and
conditions of this Agreement.
"SLM BROWSER" means the CW Browser modified by CW on behalf of SLM to create a
branded personal viewer for SLM to use on SLM web sites and/or associated
Digital Media.
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"CW BUILDER" means the patents pending CW Technology Edition product which can
be used by SLM personnel (employee or contractors ) to create and modify SLM
QBORGS.
"SLM PERSONAL EDITION BUILDER" means a customized version of the current free CW
Personal Edition builder product which can be used by SLM Clients to create
QBORGS.
"DIGITAL MEDIA" means all digital media including but not limited to CD's and
DVD's that may contain QBORGS, SLM and/or CW Browsers, and/or SLM and/or CW
Personal Edition Builders developed and/or provided by SLM for the use by its
Clients.
"DOCUMENTATION" means the user guides and manuals, as applicable, provided by CW
as part of the CW technology, if any.
"GROSS REVENUE" means any revenue generated (or amounts used as off-sets) by the
creation, producing and/or publishing of QBORGS or Digital Media and any sums
received by SLM from any participating Client to create (whether in part or
whole) such QBORGS or Digital Media.
"QBORGS" means a binary object relationship grid developed using the patents
pending CW technology with the end result being either a web property or web
site or both.
"ROYALTIES" shall mean all amounts due to CW relating to any financial
consideration received by SLM, in any form such as but not limited to royalties,
commissions, QBORG fees, advertising, sponsorship fees, publishing to digital
media, etc. that result directly or indirectly from the use of the CW technology
by SLM. Royalties shall be calculated upon the gross value of any transaction
between SLM and any Client related to the use of CW technology and/or
development of QBORGS and ancillary products such as collectables and Theme Paks
(defined as collection of objects, images, sounds, etc. which applies to a
particular theme that can be used in conjunction with QBORGS).
"SOFTWARE LICENSE AGREEMENT" means the licensing document or "click-wrap" which
may be included with the CW technology pursuant to this Agreement. Software is
licensed not sold.
2. RIGHTS GRANTED
2.1 CW LICENSING RIGHTS GRANTED RE TECHNOLOGY EDITION PRODUCTS. Subject to CW's
standard Software License Agreement, CW hereby grants to SLM a limited,
non-exclusive right and license to use the CW Browser and CW Builder in order to
develop and view QBORGS for use by SLM and SLM Clients. The license is
restricted and is for the sole use of SLM in its facilities in Encino,
California. This license does not permit SLM to sell, lend, give away or allow
its Clients, employees, contractors, other SLM companies or third parties to use
the CW Browser and/or the CW Builder in any manner not contemplated specifically
in this Agreement.
Subject to the payment of Royalties as identified herein this license does
provide for SLM to use the CW Browser and CW Builder to create QBORGs for use
internally in creating, maintaining and viewing its web site and for the
creation, maintenance and web distribution of SLM and CW web based properties
that utilize either SLM properties and / or properties that SLM represents. This
license also provides for the use of the CW Browser and CW Builder to create and
view
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QBORGs that will be downloaded from the SLM web sites, or published to Digital
Media and / or distributed through CW 3D mail capabilities.
2.2 CW LICENSING RIGHTS GRANTED RE PERSONAL EDITION PRODUCTS. Subject to CW's
standard Software Licensing Agreement, CW hereby grants to SLM a limited,
non-exclusive right and license to use and distribute the free version of the CW
Browser and CW Builder. These products may be used to create and view QBORGS
that incorporate ancillary products such as Theme Paks or other properties
created by SLM, CW or third parties, subject to the payment of Royalties as
defined herein. This license does not give SLM or any other party the right to
use these products in any manner not contemplated specifically in this
agreement.
2.3 CW LICENSING RIGHTS GRANTED RE SLM CUSTOMIZED PERSONAL EDITION PRODUCTS.
Subject to CW's standard Software Licensing Agreement, CW hereby grants to SLM a
limited, non-exclusive right and license to use and distribute the SLM Browser
and SLM Personal Edition Builder to its Clients. These custom products may be
used to create and view QBORGS that incorporate ancillary products such as Theme
Paks or other properties created by SLM, CW or third parties, subject to the
payment of Royalties as defined herein. This license does not give SLM or any
other party the right to use these products in any manner not contemplated
specifically in this agreement.
2.4 CW LICENSING RIGHTS GRANTED TO SLM RE POINTS 2.1, 2.2 AND 2.3. The licensing
rights granted pursuant to this Agreement and defined in points 2.1, 2.2, 2.3
include the right for SLM to use the CW Browser, CW Builder, SLM Browser and/or
SLM Personal Edition Builder to create revenue streams which will be shared with
CW as defined herein. Revenue streams can include, but are not limited to,
charging for the use any SLM Personal Edition Builder, building QBORGs for
resale, licensing, renting, charging for the download of Theme Paks and other
SLM properties, web products and ancillary products, etc. to create and conduct
advertising campaigns on the CW Browser and/or SLM Browser within the QBORGS, to
conduct 3D mail campaigns, publish to Digital Media and/or charging Clients or
customer sponsorship fees. This license does not give SLM or any other party the
right to create revenues from the use of the CW products in any manner not
contemplated specifically in this Agreement.
2.5 CW BROWSER RIGHTS
2.5.1 The intention of this agreement is to provide a browser that is
branded for use by SLM and customized to reflect the image that SLM wishes to
portray in the web community.
CW will provide SLM with three branding positions on the SLM Browser. The upper
right hand corner of the SLM Browser has a programmable box that may be used as
a "logo" position. The top corner of the upper left hand portion of the SLG
Browser may be used for a descriptive name, and the lower left hand corner may
be used to highlight the specific SLM program or property being viewed by the
Clients. SLM acknowledges that the term "Powered by Cyberworld " will be
prominently displayed on every SLM Browser.
CW will undertake to customize the SLM Browser cosmetically to reflect the image
that SLM wish it to have. SLM acknowledges that the cost of the non-recurring
engineering resources (NRE) to customize the SLM Browser will be to the account
of SLM.
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2.5.2 In addition, there will be a fourth programmable position or field
which will be located on the bottom and in the center of the SLM Browser . The
intent is that this position may be used for promotional purposes and, provided
this Agreement is in good standing, the usage will be subject to the
restrictions and payments of Royalties to CW as defined herein.
2.6 QBORGS RIGHTS
2.6.1 Subject to the payment of Royalties fees as indicated in Schedule
A, and provided this contract is in good standing, CW hereby grants to SLM a
license to use the CW Builder in order to build QBORGS for SLM Clients for use
on the SLM web site or associated Digital Media.
2.6.2 The QBORG development rights granted herein for the SLM or any
other rights granted pursuant to this Agreement, do not permit SLM or any
affiliated or related organization to build web sites or develop Digital Media
outside the SLM web sites or associated Digital Media using CW technology. In
addition, except as expressly permitted under this Agreement, the rights granted
under this Agreement do NOT permit SLM or any other related or non related
entity or individual(s) to, use, show or publish QBORGS built by SLM on any
Digital Media or, for use on any web site other than SLM web sites or Digital
Media relating to such web sites.
2.6.3 SLM shall be solely responsible for providing first level support
("First Level Support") to its Clients unless mutually agreed in writing
otherwise. First Level Support means that SLM Clients will contact SLM directly
for any and all problems related to QBORGS or associated Digital Media. It is
the responsibility of SLM to resolve such problems. If such problems cannot be
resolved, SLM and only SLM may contact CW for second level support. CW may
charge SLM for any and all time that CW spends providing support to SLM on
problems if it is determined by CW that the problem is not attributable to the
CW technology. CW also reserves the right to renegotiate the maintenance
agreement and rates as relates to this Section 2 if SLM or its' designate are
unable to provide the level of First Level Support necessary to ensure Client
satisfaction to the degree deemed appropriate by CW.
2.6.4 SLM MUST SATISFY CW COUNSEL THAT THE SLM AGREEMENTS BETWEEN SLM
AND CLIENTS PROVIDE COMPLETE PROTECTION OF CW RIGHTS AND INTELLECTUAL PROPERTY
RELATIVE TO THE CLIENTS USE OF THE QBORGS AND/OR DIGITAL MEDIA. SUCH AGREEMENTS
MUST CLEARLY INDICATE THAT NEITHER SLM OR THEIR CLIENTS, THEIR AFFILIATES OR
SUBDIVISIONS HAVE ANY RIGHTS TO THE CW TECHNOLOGY BEYOND THOSE GRANTED WITH THE
SLM BROWSER AND THE SLM PERSONAL EDITION BUILDER, NOR TO ANY QBORGS CREATED BY
SLM OR CW ,DIRECTLY OR INDIRECTLY, OTHER THAN TO USE IT ON THE SLM WEB SITE
AND/OR ASSOCIATED DIGITAL MEDIA. IN ADDITION, SUCH AGREEMENTS MUST CLEARLY STATE
THAT UPON TERMINATION OF THIS AGREEMENT OR, UPON THE TERMINATION OF THE
AGREEMENTS BETWEEN SLM AND ANY CLIENT, THE CLIENT, LOSES ALL RIGHT TO USE, SHOW,
COPY OR PUBLISH QBORGS.
2.7 DIGITAL MEDIA LICENSING RIGHTS. CW hereby grants to SLM the limited
non-exclusive right and license to use the CW Browser, SLM Browser, CW Builder
and/or SLM Personal Edition Builder in order to produce, publish and distribute
Digital Media with QBORGS,
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including advertising to promote the SLM web sites and/or for Client promotional
purposes related to the SLM web sites subject to the following:
1. Providing revenue is not derived from Digital Media publishing and
distribution, this activity shall be Royalty free. However, should any
Gross Revenue be derived from such Digital Media publishing and
distribution, Royalties would be due and payable to CW as identified
herein.
2. Should SLM derive any Gross Revenue from the creation, publishing and/or
distribution, etc. of the Digital Media, SLM shall pay to CW the
Royalties in accordance with Schedule A.
2.8 LIMITATIONS ON USE BY SLM. SLM shall not use or duplicate the CW technology
for any purpose other than as specified in this Agreement or make the CW
technology available to unauthorized third parties. SLM shall not rent,
electronically distribute, or timeshare the CW technology or market the CW
technology by interactive cable or remote processing services or otherwise
distribute the CW technology other than as specified in this Agreement. SLM
agrees not to cause or permit the reverse engineering, disassembly, or
decompilation of the CW technology.
2.9 CW INTELLECTUAL PROPERTY RIGHTS. CW and its suppliers shall retain all
title, copyright, and other proprietary rights in the CW technology as provided
to SLM by CW pursuant to this Agreement, or any modifications or translations
thereof. SLM, and/or SLM's Clients do not acquire any rights, title or interest
in the CW technology other than those rights specified in this Agreement.
2.10 SLM PRODUCT RIGHTS. In consideration of the rights and option to purchase
warrants, as indicated in Schedule A, granted here, SLM hereby grants to CW the
perpetual, limited, non-exclusive, worldwide right and license to use,
distribute, sublicense the SLM Products in order to promote CW technology. CW
shall not use or duplicate the SLM Products for any purpose other than as
specified in this Agreement or make the SLM Products available to unauthorized
third parties
2.11 SLM INTELLECTUAL PROPERTY RIGHTS. SLM shall retain all title, copyright,
and other proprietary rights in the SLM Products, any modifications or
translations thereof. CW, and/or CW's customers do not acquire any rights, title
or interest in the SLM Products other than those rights specified in this
Agreement.
3. SLM WEB SITE HOSTING SERVICES
CW HOSTING SERVICE. CW shall provide hosting services for the SLM web site that
include QBORGS via a CW provided server which shall be located on the SLM
communications backbone and located at the SLM site. SLM shall be responsible
for maintenance of the CW provided server and SLM web site. Title to and
ownership of the CW provided server shall remain with CW. In addition, SLM shall
be solely responsible for providing high quality and speed communications links
(T3 or better) to the CW provided server. CW reserves to right to test and
either accept or reject any communication link which fails to meet the quality
and speed CW determines is necessary to support the SLM web site. CW is free to
add third party web sites to the
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CW provided server and shall be solely responsible for maintenance of such third
party web sites.
4. ANNUAL MAINTENANCE
4.1 MAINTENANCE AND SUPPORT. CW will provide direct support to SLM for the
versions of the software provided to SLM through the term of the. Under this
level of support SLM will be entitled to any and all maintenance releases of the
CW Viewer and CW Builder products released by CW during the term of the
Agreement and to email and phone support during the hours of 9:00 am - 6:00pm
EDT, Monday through Friday. Primary contacts will be designated for CW and SLM
through whom these communications will take place.
4.2 FIRST LEVEL SUPPORT. SLM will be responsible for providing first level
support to its Clients throughout the term of the Agreement unless mutually
agreed in writing otherwise. CW would be pleased to provide second line support
if requested by SLM under mutually agreed upon terms and conditions terms.
4.3 CUSTOMER SATISFACTION. CW reserves the right to renegotiate the support
component of this Agreement and take over direct support if , CW, deems that SLM
or its' designate is unable to provide the level of first line support necessary
to ensure customer satisfaction to the degree deemed appropriate by CW.
5. RESPONSIBILITIES OF THE PARTIES
5.1 SLM RESPONSIBILITIES. In addition to any other obligations of SLM under this
Agreement, SLM shall be responsible for the following:
5.1.1 SLM shall provide to CW the most current release of the SLM Products
and any new SLM Products, as such new SLM Products are developed by
SLM, during the term of this Agreement.
5.1.2 SLM shall actively produce and maintain the SLM web siteand/ or web
properties using the SLM Browser or any other CW technology.
5.1.3 SLM shall work with CW to facilitate and create the required
software links to the CW web site necessary to fulfill the
transactions contemplated in this Agreement, including without
limitation, a prominent button on the home page of any SLM web site
which includes the button "Powered by CyberWorld".
5.1.4 SLM shall provide sufficient proof to CW, as determined solely by
CW, that SLM has the capability to track the number of end-users who
use the Internet viewing any web site through the use of the SLM
Browser. Should CW determine that the SLM tracking system is
inadequate to track such end-user, then any decrease in Royalties
shall be null and void until such time as CW is satisfied with such
tracking.
5.1.5 SLM will ensure that CW will be fairly and promptly compensated, as
per the terms of this Agreement, for all revenues received by the
SLM from all sources directly or indirectly during the term of this
Agreement.
5.1.6 SLM shall maintain books and records in connection with the
activities under this Agreement and make such books and records
available to CW in accordance with Section 7 herein below.
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5.1.7 SLM agrees it will acknowledge, on a best efforts and reasonable
basis, to identify CW as the technology used in the development of
the SLM Browser web site and include the language "Powered by
Cyberworld" in any and all publicity of any kind related to such web
sites, including without limitation, any Digital Media.
5.1.8 SLM shall prominently display "Powered by Cyberworld" on any and all
SLM Browser web site home pages.
5.1.9 SLM will work with CW in conducting joint press conferences from
time to time with regards to the SLM Browser web sites, including
the direct involvement of Stan Lee.
5.1.10 SLM shall ensure that its agreements with Clients provide protection
of the rights of CW relative to CW technology and/or and its use
thereof and will vigorously enforce protection of CW rights if SLM
becomes aware CW's rights are being violated or if requested to do
so by CW.
5.2 CW RESPONSIBILITIES. In addition to any other obligations of CW under this
Agreement, CW shall be responsible for the following:
5.2.1 CW shall provide the most current release of the standard CW Browser
and Builder to SLM for the construction of the CW powdered SLM web
sites. As of the date of execution of this Agreement, this is
version 4.0 of both the standard CW Browser and the Builder
products.
5.2.2 CW shall work with SLM to facilitate and create the required
software links to the CW web site.
5.2.3 CW shall provide a CW server at CW's expense on site at SLM in order
to host the SLM Browser web site.
5.2.4 CW, subject to the availability of resources, may provide
Professional Services if requested by SLM in accordance with the
then current CW fees for such services. Prior to commencement of any
Professional Services, SLM shall submit a written request for such
services and CW shall provide a good faith estimate of the cost of
such requested Professional Services.
5.2.5 CW shall provide two (2) days of training relative to the CW
technology at no cost to SLM on CW's site in Canada. This training
can be provided to SLM at the SLM site subject to payment of all
expenses for travel, food and lodging.
6. FEES, ROYALTIES AND TAXES
6.1 LICENSE FEES. In consideration of the licenses granted herein to SLM, SLM
shall pay to CW the non-refundable, irrevocable amount of 25,000 shares of SLM
stock (net of any local taxes, royalties or fees) in accordance with Schedule A,
Part I, "Program License Fees".
6.2 ROYALTIES. SLM shall pay to CW, on a monthly basis, Royalties as defined in
this Agreement and as indicated and in accordance with Schedule A. SLM shall
provide CW with a quarterly report detailing all sources of Royalties payable to
CW.
6.3 DIGITAL MEDIA FEES. SLM shall pay to CW, on a monthly basis, the Digital
Media fees in accordance with Schedule A.
6.4 ADVERTISING FEES. SLM shall pay to CW, on a monthly basis, Royalties from
advertising gross revenue as indicated in Schedule A of this Agreement.
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6.5 TAXES. Prices quoted herein do not include any applicable taxes or duties.
SLM shall pay, indemnify and hold CW harmless from, any and all sales / use,
consumption, gross receipts, value-added, personal property, duties or other tax
(including interest and penalties imposed thereon) on the transactions
contemplated herein.
6.6 GENERAL PAYMENT TERMS. Unless otherwise indicated in this Agreement, SLM
shall pay to CW any and all amounts due to CW within fifteen (15) days of the
end of each month or as indicated in Schedule A, as applicable. The failure to
pay such amounts when due shall be considered a material breach of this
Agreement. All amounts referred to herein or in any Schedules hereto are in
United States dollars and shall be made without deductions based on any taxes or
withholdings, except where such deduction is based on the gross income of CW.
The Royalties and/or fees listed in this Agreement do not include taxes, duties,
etc. and/or fees imposed by federal, state, provincial or local government. If
CW is required to pay sales, use, property, value-added, or other federal,
state, provincial or local taxes and/or fees based on the licenses granted or
services provided under this Agreement, or the licenses granted or services
provided by SLM pursuant to this Agreement, then such taxes shall be billed to
and paid by SLM. This shall not apply to taxes based on CW's income. Any amounts
due and payable by SLM hereunder which remain unpaid after the due date shall be
subject to late penalty fees equal to 1.5% per month from the due date until
such amount is paid. SLM agrees to pay any and all media and shipping charges
where applicable.
6.7 TIMELY PAYMENTS. Failure on the part of SLM to make timely payments of all
Royalties under this Agreement, including without limitation licensing fees,
shall be a material breach of this Agreement.
7. REPORTS AND RECORDS
7.1 REPORTS AND PAYMENT. At the end of each quarter, SLM shall provide a written
report of all Client activity and royalties for which SLM received compensation
or consideration as defined in this Agreement. Payment of any Royalties due to
CW shall have this accompanying documentation provided by SLM in accordance with
the terms of this Agreement.
7.2 RECORDS INSPECTION. SLM shall maintain books and records in connection with
activity contemplated under this Agreement. CW may audit the relevant books,
records and computer systems of the SLM to ensure compliance with the terms of
this Agreement. Any such audits shall be conducted during regular business hours
at the SLM's offices and shall not interfere unreasonably with the SLM's
business activities. If an audit reveals that the SLM has underpaid Royalties to
CW, SLM shall be invoiced for such underpaid Royalties plus interest on such
underpaid Royalties at the lesser of twelve (12) percent per annum or the
maximum rate allowed under applicable law, calculated from the time the
underpaid Royalties were originally due until the time they are paid, with such
payment due immediately upon receipt of invoice. If an audit reveals a 5% or
greater non-compliance for any particular quarter by SLM in accordance with the
terms of this Agreement, then the SLM shall pay CW's reasonable costs of
conducting the audit.
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8. TERM AND TERMINATION
8.1 TERM. This Agreement shall become effective on the Effective Date and shall
continue for a term of five (5) years and will automatically terminate without
written notice unless the parties mutually agree to an extension prior to the
expiration of the Agreement.
8.2 TERMINATION BY CW. CW may terminate this Agreement in the event of the
default by SLM in the performance of any of the terms and conditions of this
Agreement or any present or future Schedule hereto if SLM fails to correct the
breach within the ten (10) day period following delivery of written notice to
SLM of such default. This cure period shall not apply to licensee fees that are
past due which shall not require any prior written notice. In addition, CW may
immediately terminate this Agreement if SLM institutes or if any proceeding is
commenced against or affecting SLM;
a) seeking to adjudicate it a bankrupt or insolvent;
b) seeking liquidation, dissolution, winding up, reorganization,
arrangement, protection, relief or composition of it or any of its
property or debt;
c) making a proposal with respect to it under any law relating to
bankruptcy, insolvency, reorganization or compromise of debts or
other similar laws; or
d) seeking to appoint a receiver, trustee, agent, custodian or other
similar official for it or for part of its assets or property.
SLM acknowledges that CW's rights of termination in this Agreement are
reasonable in the circumstances and have been freely bargained by the parties.
In the event of any disagreement or dispute between the parties, SLM agrees that
in all events it can be compensated in damages and accordingly waives and agrees
to forego all applications for injunctive relief against CW in all
jurisdictions. SLM acknowledges and agrees that SLM shall have no claim against
CW for damages or otherwise as a result of or arising from the termination of
this Agreement.
Should SLM fail to make any payments required hereunder when due then, CW may
terminate this Agreement by providing written notice to SLM and declare all sums
due and to become due hereunder, immediately due and payable. The cure period
indicated above, shall not apply to past due Royalty payments. In addition, use
of any and all QBORGS shall be immediately removed from all SLM web sites.
8.3 FORCE MAJEURE. Neither party shall be liable to the other for failure or
delay in the performance of a required obligation if such failure or delay is
caused by strike, riot, fire, flood, natural disaster, or other similar cause
beyond such party's control, provided that such party gives prompt written
notice of such condition and resumes its performance as soon as possible, and
provided further that the other party may terminate this Agreement if such
condition continues for a period of one hundred eighty (180) days.
8.4 EFFECT OF TERMINATION.
8.4.1 TERMINATION FOR SLM DEFAULT. Upon termination of this Agreement
due to SLM's uncured breach or default of this Agreement;
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a) all SLM's rights to market and use the CW technology as set forth
in this Agreement shall cease;
b) SLM shall return to CW the CW technology that were provided by CW
to SLM in support of this Agreement;
c) SLM shall certify in writing that all archival or backup copies of
any CW technology have been deleted and destroyed;
d) SLM will continue to provide to CW quarterly reports pursuant and
to pay to CW any Royalties due in accordance with this Agreement
for a period of one (1) year following termination;
e) SLM may not add or develop any new QBORGS.
f) The CW Warrants as set forth in Schedule A shall be cancelled
Should SLM fail to pay any Royalties due, title to and ownership of all
QBORGS developed by SLM Clients shall revert to CW immediately.
8.4.2 EXPIRATION OF AGREEMENT. Upon expiration of this Agreement;
a) all SLM's rights to market and use the CW technology as set forth
in this Agreement shall cease;
b) except for existing CW inventory which contains SLM Products, all
CW's rights to use the SLM Products as set forth in this Agreement
shall cease:
c) SLM shall return to CW any CW technology that was provided by CW to
SLM in support of this Agreement;
d) SLM shall certify in writing that all archival or backup copies of
any CW technology has been deleted and destroyed;
e) SLM will continue to provide to CW quarterly reports pursuant and
to pay to CW any Royalties due in accordance with this Agreement
for a period of one (1) year following termination;
f) SLM may not add or develop any new QBORGS
g) CW may not add or develop any new CW products which include the SLM
Products.
Should SLM fail to pay any Royalties due, title to and ownership of all QBORGS
developed by SLM Clients shall revert to CW immediately.
The termination of this Agreement, or any license thereof shall not limit CW
from pursuing any other remedies available to it, including injunctive relief,
nor shall such termination relieve SLM's obligation to pay all Royalties that
have accrued or that SLM has agreed to pay under Schedule A or any or other
similar document under this Agreement.
8.5. SURVIVAL OF TERMS. The parties' rights and obligations under Sections 1,
Sections 6, 7, 8,. 9, 10 and subsection 2.9 and 2.11 shall survive termination
of this Agreement. In addition, the provisions of this Agreement that under a
commercially reasonable interpretation reveals that the parties likely would
have such provisions survive termination or expiration of this Agreement shall
survive to the extent necessary to fulfil the purpose of such provision.
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9. INDEMNITY, WARRANTIES, REMEDIES, LIMITATION OF LIABILITY
9.1 CW INFRINGEMENT INDEMNITY. CW will defend and indemnify SLM with respect to
amounts required to be paid to a third party from a claim that the CW technology
furnished and used within the scope of this Agreement infringe such third
party's United States or Canadian copyright or patent, provided that: (a) SLM
notifies CW in writing within seven (7) days of the claim; (b) CW has sole
control of the defense and all related settlement negotiations; and (c) SLM
provides CW with the assistance, information and authority necessary to perform
CW's obligations under this paragraph. Reasonable out-of-pocket expenses
incurred by SLM in providing such assistance will be reimbursed by CW.
CW shall have no liability for any claim of infringement based on: (a) use of a
superseded or altered release of the CW technology if the infringement would
have been avoided by the use of a current unaltered release of the CW technology
that CW provides to the SLM; or (b) the combination, operation or use of any CW
technology furnished under this Agreement with software, hardware or other
materials not furnished by CW if such infringement would have been avoided by
the use of the CW technology without such software, hardware or other materials.
In the event any CW technology are held or are believed by CW to infringe such
third party's United States or Canadian copyright or patent, CW shall have the
option, at its expense, to: (a) modify the CW technology to be non-infringing;
(b) obtain for SLM a license to continue using the CW technology; or (c)
terminate the license for the infringing CW technology and refund the license
fees paid for such CW technology, prorated over a five (5) year term from the
Effective Date. This Section 9.1 states CW's entire liability and SLM's
exclusive remedy for infringement.
9.2 SLM"S INFRINGEMENT INDEMNITY. SLM will defend and indemnify CW with respect
to amounts required to be paid to a third party from a claim that the SLM
Products furnished and used within the scope of this Agreement infringe such
third party's United States or Canadian copyright or patent, provided that: (a)
CW notifies SLM in writing within seven (7) days of the claim; (b) SLM has sole
control of the defense and all related settlement negotiations; and (c) CW
provides SLM with the assistance, information and authority necessary to perform
SLM's obligations under this paragraph. Reasonable out-of-pocket expenses
incurred by CW in providing such assistance will be reimbursed by SLM.
In the event the SLM Products are held or are believed by SLM to infringe such
third party's United States or Canadian copyright or patent, SLM shall, solely
at SLM's option, obtain for CW a license to continue using the SLM Products at
no cost to CW; or (c) terminate the license for the infringing SLM Products and
pay to CW an amount not to the cost to CW to rectify with it's customers the
withdrawal of the SLM Products.
9.3 SOFTWARE LICENSE AGREEMENT WARRANTIES. The only warranties that CW shall
make in connection with the CW technology shall be those set forth in the
applicable Software License Agreement and such warranties and all limitations in
respect of such warranties shall be deemed to be incorporated herein as if set
forth herein at length. SLM shall not make any warranty on CW's behalf.
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9.4 LIMITATION OF LIABILITY. IN NO OTHER EVENT, INCLUDING TERMINATION OF THIS
AGREEMENT, SHALL CW BE LIABLE FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR
CONSEQUENTIAL DAMAGES, OR DAMAGES FOR LOSS OF PROFITS, WHETHER IN AN ACTION IN
CONTRACT OR TORT, EVEN THOUGH CW HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES. CW'S LIABILITY FOR DAMAGES HEREUNDER SHALL IN NO EVENT EXCEED THE
AMOUNT OF FEES PAID BY SLM UNDER THIS AGREEMENT, AND IF SUCH DAMAGES RESULT FROM
SLM OR CLIENT'S USE OF THE CW TECHNOLOGY, SUCH LIABILITY SHALL BE LIMITED TO
LICENSE FEES PAID FOR THE RELEVANT CW TECHNOLOGY GIVING RISE TO THE LIABILITY,
PRORATED OVER A FIVE (5) YEAR TERM FROM THE EFFECTIVE DATE OF THIS AGREEMENT.
9.5 EQUITABLE RELIEF. SLM acknowledges that any breach of its obligations with
respect to proprietary rights of CW will cause CW irreparable injury for which
there are inadequate remedies at law and that CW shall be entitled to equitable
relief in addition to all other remedies available to it.
10. GENERAL TERMS AND CONDITIONS
10.1 CONFIDENTIAL INFORMATION.
10.1.1 DEFINITION. As used in this Agreement, the term "Confidential
Information" shall include but not be limited to any information that has
economic value to the party and which are not known to the general public at
large and that includes, but is not limited to trade secrets, video technology,
knowledge concerning each parties products, marketing strategy, customer
accounts, service requirements and information concerning research development
and marketing of each party" products and/or services.
10.1.2 GENERAL. Each party shall treat as confidential all "Confidential
Information" of the other party, shall not use such Confidential Information
except as expressly set forth herein or otherwise authorized in writing, shall
implement reasonable procedures to prohibit the disclosure, unauthorized
duplication, misuse or removal of the other party's Confidential Information and
shall not disclose such Confidential Information to any third party except as
may be necessary and required in connection with the rights and obligations of
such party under this Agreement, and subject to confidentiality and nonuse
obligations at least as protective as those set forth herein. Without limiting
the foregoing, each of the parties shall use at least the same procedures and
degree of care which it uses to prevent the disclosure of its own confidential
information of like importance to prevent the disclosure of Confidential
Information disclosed to it by the other party under this Agreement, but in no
event less than reasonable care. The parties further agree to keep confidential
the terms and conditions of this Agreement. Each parties Confidential
Information shall remain the sole and exclusive property of that party.
10.1.3 EXCEPTIONS. Notwithstanding the above, neither party shall have
liability to the other with regard to any Confidential Information of the other
which: (i) was generally known and available in the public domain at the time it
was disclosed or becomes generally known and available in the public domain
through no fault of the receiver; (ii) was known to the receiver at the time of
disclosure as shown by the files of the receiver in existence at the time of
disclosure; (iii) is disclosed with the prior written approval of the discloser;
(iv) was independently
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developed by the receiver without any use of the discloser's Confidential
Information; or (v) becomes known to the receiver from a source other than the
discloser without breach of this Agreement by the receiver and otherwise not in
violation of the discloser's rights.
10.1.4 REMEDIES. If either party breaches any of its obligations with
respect to confidentiality and unauthorized use of Confidential Information
hereunder, the other party shall be entitled to seek equitable relief to protect
its interest therein, including but not limited to injunctive relief, as well as
money damages.
10.2 COPYRIGHTS. The CW technology is copyrighted by Cyberworld and SLM shall
not modify the copyright notices on the CW technology. CW shall not modify any
copyright notices on any SLM Products.
10.3 TRADEMARKS. "CYBERWORLD", "CYBERHOME", "QBORG", and "Emerchandiser", are
the trademarks of CW and SLM shall have no rights in such marks except as
expressly set forth herein and as specified in writing from time to time. SLM's
use of CW's trademarks shall be in accordance with CW's trademark policies and
procedures in effect from time-to-time. SLM agrees not to use the trademark
"CYBERWORLD" or "QBORG" or any mark beginning or ending with the words
"CYBERWORLD," "CYBERHOME," "QBORG" or any other mark likely to cause confusion
with the trademark "CYBERWORLD", "CYBERHOME" or "QBORG" or as any portion of the
SLM's tradename, or trademark for any other products or services of SLM. SLM
shall have the right to use the trademark "CYBERWORLD, "CYBERWORLD" or "QBORG"
and other CW trademarks solely to refer to CYBERWORLD's products and/or
services.
SLM agrees with respect to each registered trademark of CW, to include in each
advertisement, brochure, or other such use of the trademark, the trademark
symbol "circle R" and the following statement:
CYBERWORLD is a registered trademark of CYBERWORLD International Corporation,
Mississauga, Ontario
Unless otherwise notified in writing by CW, the SLM agrees, with respect to
every other trademark of CW, to include in each advertisement, brochure, or
other such use of the trademark, the symbol "TM" and the following statement:
Before publishing or disseminating any advertisement, press release or
promotional materials bearing one or more trademarks of CW, the SLM agrees to
deliver a sample of the advertisement, press release or promotional materials to
CW for prior approval, and such approval shall not be unreasonably withheld.
Should CW notify SLM that the use of the CW trademark is inappropriate, SLM will
not publish or otherwise disseminate the advertisement, press release or
promotional materials until they have been modified to CW's satisfaction.
SLM shall not market the CW technology in any way that implies that the CW
technology is the proprietary product of SLM or of any party other than CW.
10.4 RELATIONSHIPS BETWEEN PARTIES. In all matters relating to this Agreement,
SLM will act as an independent contractor. Neither party will represent that it
has any authority to assume or
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create any obligation, express or implied, on behalf of the other party, nor to
represent the other party as agent, employee, franchisee, or in any other
capacity.
10.5 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns. SLM
may not assign or otherwise transfer any rights under this Agreement without
CW's prior written consent.
10.6 NOTICE. All notices, including notices of address change, required to be
sent hereunder shall be in writing and when sent in writing shall be deemed to
have been given when delivered by courier service or mailed by first class mail
to the SLM to the address listed in the recital above or to the CW address in
Mississauga, Ontario, as applicable.
10.7 GOVERNING LAW/JURISDICTION. This Agreement, and all matters arising out of
or relating to this Agreement, shall be governed by the laws of the Province of
Ontario, Canada and shall apply regardless of any conflict of laws provisions.
This Agreement will not be governed by the United Nations Convention of
Contracts for the International Sale of Goods, the application of which is
expressly excluded. In event of any dispute between the parties hereto, the
parties will attempt in good faith to agree on the rights of the respective
parties concerning such dispute. If no such agreement can be reached within
thirty (30) days after good faith negotiation, either party may demand mediation
of the matter. If no such agreement can be reached within thirty (30) days after
good faith mediation, the parties may proceed legal action within the courts.
The parties agree that any legal action or proceeding relating to this Agreement
shall be instituted in any provincial or federal court in the Province of
Ontario. CW and SLM agree to submit to the jurisdiction of, and agree that venue
is proper in, the aforesaid courts in any such legal action or proceeding.
10.8 SEVERABILITY. In the event any provision of this Agreement is held to be
invalid or unenforceable, the remaining provisions of this Agreement will remain
in full force and effect.
10.9 EXPORT. SLM agrees to comply fully with all relevant export laws and
regulations of the United States and Canada to assure that neither the CW
technology, nor any direct product thereof, are exported, directly or
indirectly, in violation of United States and/or Canadian law.
10.10 NON-SOLICITATION. During the term of this Agreement, the CW and SLM shall
not solicit or assist any third party to solicit any employee of the other party
to become an officer, director, employee or agent of any corporation of such
third party, or otherwise entice away from the employment of the other company
any employee of that company.
10.11 WAIVER. The waiver by either party of any default or breach of this
agreement shall not constitute a waiver of any other or subsequent default or
breach.
10.12 PRESS RELEASES: CW may use the SLM name in a press release disclosing the
parties and the nature of this Agreement and in advertising re CYBERWORLD
disclosing SLM's name and Clients name, in each case with the prior written
approval of the SLM, such approval not to be unreasonably withheld.
10.13 ENTIRE AGREEMENT. This Agreement and the attached Schedules constitutes
the complete agreement between the parties and supersedes all prior or
contemporaneous agreements or representations, written or oral, concerning the
subject matter of this Agreement. This
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Agreement may not be modified or amended except in writing signed by a duly
authorized representative of each party; no other act, document, usage or custom
shall be deemed to amend or modify this Agreement.
This Agreement may be executed in any number of counterparts, each of which
shall be an original and all of which shall constitute together but one of the
same document. All terms and conditions of any SLM purchase order or other
ordering document hall be superseded by the terms and conditions of this
Agreement and shall be of no force and effect unless CW specifically agrees to
any such terms and conditions in writing.
IN WITNESS WHEREOF the parties have executed this Agreement.
CYBERWORLD SLM
_/s/ Keith H. Soley /s/ Robert M. Schultz
- ---------------------------------- -----------------------------------
Signature Signature
Keith H. Soley Robert M. Schultz
- ---------------------------------- -----------------------------------
Name (typed or printed) Name (typed or printed)
President Vice President-Finance
- ---------------------------------- -----------------------------------
Title Title
November 14, 1999 November , 1999
- ---------------------------------- -----------------------------------
Date Date
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SCHEDULE A
FEES AND ROYALTIES
1. PROGRAMS LICENSE FEES
In accordance with Section 6 of the Agreement, SLM shall provide to CW as
consideration for the rights granted herein, to SLM 25,000 shares of SLM common
stock which shall be equal to an amount for the license fee and all software
maintenance over the term of the Agreement. Such stock is to be registered in
the next group of SLM stock registered and shall have full piggyback rights as
relates to any SLM common stock registered between the Effective Date of this
Agreement and the date the stock granted to CW is registered.
2. DIGITAL MEDIA FEES
Providing, SLM creates, produces and distributes Digital Media at its own
expense for promotion of the SLM web sites and/or web properties developed
pursuant to this Agreement, and providing such Digital Media do not produce any
Gross Revenue, as defined in the Agreement, such distribution shall be royalty
free.
Should SLM receive payments, directly or indirectly, relating to the creation,
production, and / or distribution of any Digital Media that involves the use or
display of the CW Programs in any way, SLM shall pay to CW a royalty of 5% of
the total of such payments.
3. ROYALTIES (EXCLUDING ADVERTISING AND/OR SPONSORSHIP ROYALTIES)
In accordance with Section 6 of the Agreement, SLM shall pay to CW a 5% royalty
based upon the gross value of the consideration that SLM receives in any form,
specifically excluding any advertising or sponsorship fees, such as but not
limited to licensing fees, digital media fees, consulting fees, software
development, 3D mail, rents, commissions or any other kind of consideration
and/or fees, etc. that result directly or indirectly from the use of the CW
technology by SLM. Royalties shall be calculated upon the gross value of each
Client transaction with SLM, including without limitation, the value of
applicable taxes.
4. ADVERTISING AND/OR SPONSORSHIP FEES
Should the CW technology be used for revenue producing SLM or Client advertising
and/or Client sponsorship, including without limitation any advertising or
sponsorship on Digital Media either directly or indirectly, SLM agrees to pay to
CW a royalty of the total consideration received by SLM from Clients measured
against the number of "unique" SLM Browsers registered off the SLM website
("Users") EACH year by Clients as follows:
<TABLE>
<S> <C> <C> <C>
1-50,000 15% 150,001 - 200,000: 12%
50,001 -100,000: 14% 200,001 - 250,000: 11%
100,001-150,000: 13% 250,001 - 300,000: 10%
</TABLE>
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Such Users shall be cumulative annually only and shall not accumulate from year
to year. SLM shall provide written quarterly reports as to the number of such
Users and the royalty rate for the subsequent quarter shall be in accordance
with the number of Users reported.
"Unique" Users shall mean one valid Client name/address. Should a Client
download the SLM Browsers and register more than once, such Client shall only be
counted for the first download.
5. CW WARRANTS
In accordance with Section 2.7 of the Agreement, CW shall make available to SLM
500,000 warrant options under the following terms and conditions:
250,000 warrants at US $ 1.00 per unit
and 250,000 warrants at US $ 2.00 per unit
CW, following execution of this agreement, will provide to SLM a formal warrant
agreement that will confirm the terms and conditions of the warrants. Nominally,
these warrants will have a five year term, commencing from the date of execution
of this agreement and, provided the agreement is in good standing, can be
exercised by SLM at the end of the five years or sooner. These warrant options
must be exercised in the event that a liquidation event takes places within CW.
CW agrees to provide to SLM written notification, delivered by courier to SLM
offices of CW's intent to execute a liquidation event, such as an IPO, merger or
acquisition of all or substantially all of CW's assets. SLM shall have the right
to exercise any and all outstanding warrant options within ten (10) working days
from receipt of such notification. Should SLM fail to exercise such options
within the ten (10) day period, such options shall revert back to CW.
SLM must exercise these warrant options on or before November 14, 2004. Should
SLM fail to exercise such options on or before November 14, 2004, such options
shall revert back to CW. This agreement must be in good standing for SLM to be
able to exercise these warrants. Should this agreement be terminated, all
warrants not exercised will revert back to CW. Should this agreement not be in
good standing SLM will not have the right to exercise these warrant options
until the contract is returned to a good standing status.
6. PROFESSIONAL SERVICES FEES
SL shall pay to CW $250 per hour for design and development or supervisory
personnel or $150 per hour for content development personnel. CW reserves the
right to increase Professional Services Fees not to exceed 5% per year
7. CURRENCY
In the event that SLM charges a Client in a currency other than the US$ then CW
will be paid its fees and/or Royalties in US $ calculated at the accepted
conversion rate on the day that the transaction took place. The US $ equivalent
shall not be less than then the minimums quoted herein.
<PAGE> 1
EXHIBIT 10.50
DEAL MEMO
The following memorializes the agreement between WhatsHotNow.com, Inc., (WHN")
and Stan Lee Media, Inc. ("Client") as of August 1, 1999, regarding the creation
of the Client's official online store, according to the following terms and
conditions:
1. Design, Host & Operate Online Stores. WHN shall design and host an
electronic, online store ("Client Store") that shall be accessible from
Client's official website and WhatsHotNow.com. Client shall have
approval over the use and placement of Client's name, likeness,
trademarks and other intellectual property. WHN shall be responsible for
the information architecture of the site. WHN shall: (i) provide secure
transaction processing; (ii) fulfill and ship all orders, (iii) provide
customer service support, (iv) provide Client with sales data; and (v)
be responsible for maintaining the design and functionality of the
stores.
2. Creation of Unique Merchandise. Subject to Client's approval in each
instance, and existing third party licenses, WHN shall have the
non-exclusive right to utilize Client's image, likeness, characters and
brand identity for the manufacture and sale of consumer products in the
Client Stores.
3. Third Party Products. Client shall provide any and all merchandise owned
or controlled by Client to WHN on consignment. Client shall use best
efforts to enable WHN to acquire merchandise from licensees on the best
terms possible including but not limited to: consignment, and with an
exclusive window to sell new releases.
4. Collectibles and Memorabilia. Client shall provide WHN with collectibles
and memorabilia suitable for sale, auction, or promotion in the Client
Store.
5. Exclusivity. The Client Store shall be Client's only official online
store. The Client Store shall, subject to pre-existing agreements, be
the only exclusively online retailer authorized to sell Client
merchandise.
6. Revenue Sharing and Link Commission.
o On merchandise acquired by WHN, WHN shall pay Client 100% of the Net
Proceeds after deducting a management fee equal to 23% of Gross
Retail sales.
o On merchandise consigned to WHN by Client, WHN shall pay Client 100%
of the Net Proceeds after deducting a management fee equal to 18% of
Gross Retail Sales.
o On unique consigned merchandise (signed, exclusive, or limited
editions): WHN shall pay Client 100% of the Net Proceeds after
deducting a Management Fee equal to 9% of Gross Retail Sales.
<PAGE> 2
o WHN shall pay Client a 10% affiliate commission according to WHN's
standard affiliate terms for all sales of non-Client Store
merchandise directly attributable to links from Client's website to
WhatsHotNow.com.
o Net Proceeds is based on the actual amount charged the customer less
tax, actual shipping and handling, credit card processing, cost of
goods if applicable, third party commissions if applicable, and the
WHN management fee.
o Gross Retail Sales is the actual amount charged the consumer and
collected by WHN.
o All accounting shall be made within 30 days of the end of each
calendar quarter.
o Client shall have approval over pricing for all consigned
merchandise.
7. Marketing and Promotion. Client shall use its best efforts to promote
and drive traffic to Client's official website and the Client Store. On
a minimum of 10 days per year, the Client Store shall be featured on the
home page of WhatsHotNow.com, and on a minimum of 10 days per year, one
or more products from the Client Store shall be featured on the home
page of WhatsHotNow.com. On the confirmation email confirming any
purchase consisting exclusively of Stan Lee Products, such email shall
include a promotional link to the Stan Lee community home page. The
Client Store shall promote and link to the home page of WHN and Client's
official website in a manner to be mutually approved by the parties.
8. Term. The first 90 days of this Agreement shall be considered a trial
period wherein either party may terminate at any time, thereafter the
term shall be 1 year and renew automatically for additional one-year
periods unless either party notifies the other in writing of its
intention not to renew 90 days prior to the then-current termination
date.
9. Customer Database. Client shall own the customer database created by
sales generated in the Client Store from Client's Website; provided,
however, that WHN shall have the perpetual right to use and exploit such
customer database created hereunder in connection with stores owned
and/or managed by WHN. WHN agrees that it shall not have the right to,
and shall not, sell, rent, lease, license or otherwise disseminate such
customer database to any third party or otherwise exploit the customer
database except as permitted pursuant to this Agreement.
10. Audit. Client shall have the right to audit WHN's books and records
relating directly to the Client Store. No such audit shall occur more
than once in any twelve-month period, and shall be at Client's sole
expense and only during WHN's regular business hours after giving WHN
reasonable notice. If, after an audit, it is determined that there is a
greater than five percent (5%) difference in WHN's favor between what
was paid to Client and what should have been paid to Client, then WHN
shall pay the cost of the audit, including reasonable accountant and
attorney fees. If, after completion of an audit, Client does not
commence an action within 90 days in connection with the audited
statements, such statements shall be deemed correct, conclusive and
binding.
<PAGE> 3
11. Press Releases. Client and WHN shall have mutual approval over any press
releases by either of them relating specifically to Stan Lee Media
and/or WhatsHotNow.com. Notwithstanding the foregoing, neither company
shall be restricted from incidental mentions of the other in its
marketing or publicity materials as part of a listing of its clients or
vendors.
12. More Formal Agreement. The parties anticipate entering into a more
formal agreement. Until such time, this Deal Memo Agreement shall
legally bind the parties and govern the relationship.
Understood and Agreed
WHATSNOTNOW.COM, INC. STAN LEE MEDIA, INC.
By: /s/ By /s/ GILL CHAMPION
----------------------------- ---------------------------------
Its Its Chief Operating Officer
------------------------- -----------------------------
<PAGE> 1
EXHIBIT 10.51
SUBLEASE AGREEMENT
SUBLEASE AGREEMENT dated as of November 4, 1998, between One Twelve
Interactive Inc., a division of Global Language Solution Inc. (the "Sublessor"),
and STAN LEE ENTERTAINMENT, INC., a Delaware corporation (the "Sublessee").
WHEREAS, the Sublessor is the tenant under that certain Office
Lease dated as of April 13, 1998, with DOUGLAS EMMET REALTY FUND, a California
Limited Partnership, as "Landlord", relating to the office space located at
15821 Ventura Boulevard, Suite 675, California, 91436 (the "Premises"); and
WHEREAS, the Sublessor and the Sublessee desire to enter into
this Agreement for the sublease of the Premises subject, in each case, to the
terms and conditions of this Agreement.
NOW, THEREFORE, the parties hereby agree as follows:
I. SUBLEASE OF PREMISES
SECTION 1.01. Sublease of Premises. The Sublessor hereby
subleases to the Sublessee, and the Sublessee hereby hires from the Sublessor,
the Premises with all furniture and equipment found there, and the Premises is
being accepted without any representation and warranty, subject further to the
terms and conditions of this Agreement.
SECTION 1.02. Master Lease. The Sublessee shall familiarize
itself with an the terms and provisions of the Master Lease, a copy of which has
been provided to the Sublessee. The Sublessee (i) shall not do anything on or
about the Premises which could constitute a breach of the Master Lease, and (ii)
shall enjoy and perform, with respect to the Premises, an the rights and
obligations enjoyed and imposed upon the Sublessor pursuant to the terms of the
Master Lease. The provisions of the Master Lease are incorporated herein by this
reference as if set forth at length herein. In the event of any conflict between
this Agreement and the Master Lease, this Agreement shall control.
II. TERM OF SUBLEASE; TERMINATION
SECTION 2.01. Term. The term of this Agreement shall commence on
November 1, 1999, and shall be co-extensive with the term of the Master Lease,
which the parties agree shall expire on April 30, 2002.
SECTION 2.02. Effect of Expiration of Term and/or Earlier
Termination. Expiration of the term of the Master Lease and/or earlier
termination of this Agreement shall not release or discharge either party hereto
from any obligation, debt or liability which may have previously accrued and
remains to be performed on such date.
1
<PAGE> 2
III. RENT
SECTION 3.01. Fixed Rent. As of the commencement of this
Agreement, Sublessee shall pay to Sublessor as fixed rent for the Premises and
all furniture and equipment found therein a monthly rental of SEVEN THOUSAND
FIVE HUNDRED Dollars ($7,500.00), payable on the first day of each month during
the term of this Agreement. Sublessor acknowledges that all Guaranteed Minimum
Monthly Rental (as such term is defined in the Master Lease) in excess of the
$7,500.00 fixed rent payable by this Section shall remain the sole obligation of
Sublessor.
SECTION 3.02. Additional Rent; Net Sublease. In addition to the
payment of fixed rent as described in Section 3.01 hereof, Sublessee shall pay
to Sublessor One Hundred percent (100%) of all other costs, expenses and
obligations of every kind whatsoever relating to the Premises imposed upon
Sublessor under the Master Lease which may arise or become due during the term
of this Agreement (which amounts shall be included within the term "additional
rent"), subject to any other provisions of this Agreement which expressly
provide for adjustment or abatement of rent or other charges.
This Agreement is and shall be deemed and construed to be an
absolutely net sublease and the additional rent specified herein shall be net to
the Sublessor in each month during the term of this Agreement, and shall be
payable by Sublessee to Sublessor monthly at the time and in the manner that
fixed rent described in Section 3.01 hereof is paid.
SECTION 3.03 Security Deposit Sublessee shall deposit a total of
$12,500 with Sublessor as security for the faithful compliance with the
obligations hereunder. In the event of any additions to this lease requiring
additional security to be held by Landlord, then Sublessee shall make all such
additional security payments as may be required.
SECTION 3.04. Late Charges. If payment of any sums required to be
paid or deposited by Sublessee to Sublessor under this Agreement, and payments
made by Sublessor under any provision hereof for which Sublessor is entitled to
reimbursement by Sublessee, shall become overdue for a period of ten (10) days
beyond the date on which they are due and payable as in this Agreement provided,
to the extent permitted by applicable law, a late charge equal to six percent
(6%) of the late payment shall be due thereon on demand, but not less than One
Hundred Dollars ($100.00). Any unpaid amounts from Sublessee to Sublessor which
remain due and unpaid for more than thirty (30) days of the due date thereof,
including any and all late charges assessed thereon, shall bear interest at the
rate per annum equal to the lesser of eighteen percent (18%) and the maximum
amount allowable under applicable law. If non-payment of any late charges shall
occur, Sublessor shall have, in addition to all other rights and remedies, all
the rights and remedies provided for herein and by law and in the case of
non-payment of rent, including but not limited to the imposition of additional
late charges. No failure by Sublessor to insist upon the strict performance by
Sublessee of Sublessee's obligations to pay late charges shall constitute a
waiver by Sublessor of its rights to enforce the provisions of this Section in
any instance thereafter occurring.
2
<PAGE> 3
SECTION 3.04. Expenses. Sublessee shall use various accounts of
Sublessor relating to telephone, and related office services until it
establishes its own accounts. Sublessee agrees to pay all expenses incurred
using Sublessor's accounts upon presentation of a monthly statement by
Sublessor.
SECTION 3.05. Manner of Payment. All payments of fixed rent and
any additional rent shall be made without prior demand and without offset,
deduction or counterclaim, in lawful money of the United States of America. Such
payments shall be made at the address designated by Sublessor from time to time.
IV. OBLIGATIONS OF SUBLESSEE
The Sublessee hereby expressly assumes and agrees to perform
insofar as the Premises are concerned all the obligations and covenants required
by the Master Lease to be kept or performed by the Sublessor, as tenant, except
that the obligation to pay rent to the Landlord under the Master Lease shall be
considered partially performed by the Sublessee to the extent and in the amount
that rent is paid to the Sublessor in accordance with this Agreement. The
Sublessee shall pay the rent herein reserved, shall use the Premises for the
purpose stated in the Master Lease, and shall surrender the Premises on
expiration or earlier termination of the term hereof in as good condition as
they are at commencement of the term hereof, reasonable wear and tear excepted.
V. OBLIGATIONS OF SUBLESSOR
The Sublessor agrees to perform insofar as the Premises are
concerned all the obligations and covenants required by the Master Lease to be
kept or performed by the Sublessor including, without limitation, the obligation
to pay rent to the Landlord. The Sublessor acknowledges that in the event of a
default by the Sublessor under the Master Lease, the Sublessee shall be entitled
to written notice from the Sublessor of such default and may cure such default
by contacting directly the Landlord. In such event, any monetary obligations
undertaken by the Sublessee to cure such default by the Sublessor shall be
offset against any future rental and additional rental obligations of the
Sublessee under this Agreement. In addition, the Sublessor agrees to use its
best efforts and to take such further action as required or requested by the
Sublessee to effectuate the sublease of the Master Lease to the Sublessee.
VI. NO ASSIGNMENT, SUBLETTING OR ENCUMBRANCE
Sublessor, Sublessee, and/or each of its respective successors
and assigns acknowledge and agree that it must obtain prior written consent of
Landlord prior to any subsequent assignment, subletting, mortgage, pledge or
encumbrance.
3
<PAGE> 4
VII. GENERAL PROVISIONS
SECTION 7.01. Notices. All notices, requests, demands and other
communications shall be in writing and deemed to have been duly given when
delivered personally, by facsimile transmission upon receipt of a "clear" or
"ok" transmission notice, or three days following deposit in the United States
mail, first class, postage prepaid, duly addressed:
If to Sublessee: Stan Lee Media, Inc.
15821 Ventura Boulevard, Suite 675
Encino, CA 91436
Attention of Chief Operating Officer.
Fax: (818) 461-1760
With a copy to: Jeffrey D. Segal, Esq.
Jeffrey D. Segal, A Professional Corporation
10390 Santa Monica Blvd., 4th Floor
Los Angeles, CA 90025
Fax: (310) 788-3925
If to Sublessor: 112 Interactive Inc.
16639 Ventura Blvd., Suite 369
Encino, CA 91436
Attention of Guillermo Frixione
Any party may, pursuant to written notice in compliance with this Section, alter
or change the address or the identity of the person to whom any notice is to be
sent.
SECTION 7.02. Further Assurances. Each party hereby agrees to
execute and deliver such instruments and documents as the other party may deem
necessary or advisable to effectuate the contemplated transaction.
SECTION 7.03. No Waiver. No term or condition of this Agreement
shall be deemed to have been waived, nor shall any party hereto be estopped from
enforcing any provision of this Agreement, except by written instrument of the
party charged with such waiver or estoppel. Any written waiver shall not be
deemed a continuing waiver unless specifically stated, shall operate only as to
the specific term or condition waived and shall not constitute a waiver of such
term or condition for the future or as to any act other than that specifically
waived.
SECTION 7.04. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of California.
SECTION 7.05. Entire Agreement; Amendments. This Agreement
contains the entire agreement of the parties hereto in regard to the subject
matter hereof, and may not be changed orally but only by a written document
signed by the party against whom enforcement of waiver, change, modification,
extension or discharge is sought.
4
<PAGE> 5
SECIION 7.06. Headings. Headings contained in this Agreement are
for convenient reference only; they are not a part of this Agreement and are not
to affect in any way the substance or interpretation of this Agreement.
SECTION 7.07. Survival of Provisions. In case any one or more of
the provisions or any portion of any provision contained in this Agreement
should be found to be invalid, illegal or unenforceable in any respect, such
provision or portion therefore shall be modified or deleted in such manner so as
to afford the parties the fullest protection commensurate with making this
Agreement, as modified, legal and enforceable under applicable laws, and the
validity, legality and enforceability of any such provision shall not in any way
be affected or impaired thereby, such remaining provisions or portion of any
such provision construed as severable and independent thereof.
SECTION 7.08. Arbitration: Attorneys' Fees. Any dispute or
conflict which arises between the parties hereto shall be submitted to the
American Arbitration Association, before a single arbitrator, in accordance with
its then current Commercial Rules in Los Angeles County, California, for
arbitration and the parties shall be bound by the results of such arbitration in
accordance with the California Code of Civil Procedure Section 1283.05. If
either party brings an action for judicial review or enforcement of the
arbitration proceedings, award or decision, the prevailing party in any such
action, trial or appeal shall be entitled to its reasonable attorneys' fees to
be paid by the nonprevailing party as fixed by the court.
SECTION 7.09. Counterparts; Facsimile Signatures. This Agreement
may be executed in two or more counterparts, each of which shall be considered a
duplicate original, but all of which together shall constitute one and the same
instrument. Each party hereto, and their respective successors and assigns shall
be authorized to rely upon the signatures of all of the parties hereto which are
delivered by facsimile as constituting a duly authorized, irrevocable, actual,
current delivery of this Agreement with original ink signatures of each person
and entity; provided, however, that each party hereto that delivers such
facsimile signatures to another party hereto, covenants and agrees that it shall
deliver an executed original of the same to the party(ies) so receiving the
previous facsimile signatures within five (5) days after delivery of such
facsimile signatures.
SECTION 7.10. Construction. In all matters of interpretation,
whenever necessary to give effect to any provision of this Agreement, each
gender shall include the others, the singular shall include the plural, and the
plural shall include the singular.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, all as of the date and year first above written.
SUBLESSOR: 112 Interactive Inc.
By: /s/
-------------------------------
Its: Chairman
SUBLESSEE: STAN LEE MEDIA, INC.
By: /s/ STEPHEN M. GORDON
-------------------------------
Its: Executive Vice President
-----------------------
6
<PAGE> 1
EXHIBIT 10.52
THIRD AMENDMENT TO OFFICE LEASE
THIS THIRD AMENDMENT TO OFFICE LEASE (the "Third Amendment"), dated May 27,
1999, is made by and between DOUGLAS EMMETT REALTY FUND 1997, a California
limited partnership ("Lessor"), with offices at 12121 Wilshire Boulevard, Suite
600, Los Angeles, California 90025, and 1-12 INTERACTIVE, INC., a Delaware
corporation, d/b/a Language Solution ("Lessee"), with offices at 15821 VENTURA
BOULEVARD, SUITE 675, Encino, California 91436.
WHEREAS,
A. Encino Terrace Center (N'Encmo"), pursuant to the provisions of that
certain written Standard Office Lease - Gross, dated April 13, 1998, as amended
by the First Lease Amendment, dated August 14, 1998, leased to Lessee and Lessee
leased from Encino space in the property located at 15821 Ventura Boulevard,
Encino, California 91436 (the "Building"), commonly known as Suite 675 (the
"Original Premises"), as highlighted in yellow on Exhibit 2A, attached hereto
and made a part hereof by reference;
B. On or about January 12, 1999, DOUGLAS EMMET REALTY FUND 1997, a
California limited partnership acquired all of Encino's interest, rights and
title in and to the real property and Building in which the Premises are
located, becoming successor-in-interest to Encino and Lessor under the Lease;
C. Thereafter Lessor and Lessee entered into that certain Second
Amendment to Office Lease, which collectively with the documents contained in
Recital A hereinabove shall hereinafter be referred to as the "Lease," wherein
Tenant expanded the Premises pursuant to the provisions contained in said Second
Amendment;
D. The provisions of said Second Amendment specify that Lessee's
expansion shall be effective the next business day after Lessor substantially
completes the Improvements for which Lessor was obligated, as conclusively
evidenced by Lessee taking possession of the Expansion Space;
E. Lessee took possession of the Expansion Space on April 30, 1999.
NOW, THEREFORE, IN CONSIDERATION of the covenants and provisions contained
herein, and other good and valuable consideration, the sufficiency of which
lessor and Lessee hereby acknowledge, Lessor and Lessee agree:
1. CONFIRMATION OF DEFINED TERMS. Unless modified herein, all terms previously
defined and capitalized in the Lease sill hold the same meaning for the
purposes of this Third Amendment.
2. CONFIRMATION OF EFFECTIVE DATE. The Effective Date of Lessee's expansion is
hereby confirmed to be May 1, 1999.
3. CONFIRMATION OF EXTENSION OF TERM. The Extended Term is hereby confirmed to
be from and including July 31, 2001, through and including midnight on April
30, 2002
4. ACCEPTANCE OF EXPANSION SPACE. Lessee acknowledges and agrees that Lessor
has completed the Improvements for which Lessor was obligated under the
Second Amendment to Lessee's satisfaction, and, as of the Effective Date,
the Premises, as expanded by the Expansion Space, were in good order and
repair.
5. REVISION IN BASE RENT. Lessee acknowledges that, commencing the Effective
Date, and continuing through January 31, 2000, Lessee shall pay Base Rent in
the amount of $11,149.00 per month. Furthermore, die
1
<PAGE> 2
provisions of Section 5 of the Second Amendment are deleted in their
entirety, and replaced In lieu thereof with the following:
Commencing February 1, 2000, and continuing through April 30, 2000, the Base
Rent payable by Lessee shall increase from $11,749.00 per month to
$11,959.00 per month; and
Commencing May 1, 2000, and continuing through April 30, 2001, the Base Rent
payable by Lessee shall increase from $11,959.00 per month to $12,104.70 per
month; and
Commencing May 1, 2001, and continuing throughout the remainder of the
Extended Term, the Base Rent payable by Lessee shall increase from $12,104
70 per month to $12,254.70 per month."
6. EXTENSION OF GUARANTY OF LEASE. By their signatures hereinbelow, Tenant and
Guarantor acknowledge and agree that, as a material consideration for
Landlord entering into this Third Amendment, the provisions and covenants
contained in that certain Guaranty of Lease, executed by Guarantor on March
26, 1999 as a. portion of the Second Amendment (the "Guaranty"), shall
extend to and include the provisions of this Third Amendment, as if the same
had been originally incorporated into the Lease referenced in said Guaranty.
7. WARRANTY OF AUTHORITY. If Lessor or Lessee signs as a corporation or a
partnership, each of the persons executing this Third Amendment on behalf of
Lessor or Lessee hereby covenants and warrants that the corporation
executing hereinbelow is a duly authorized and existing entity that is
qualified to do business in California; that the person(s) signing on behalf
of either Lessor or Lessee have full right and authority to enter into this
Third Amendment; and that each and every person signing on behalf of either
Lessor or Lessee are authorized in writing to do so.
If either signatory hereto is a corporation, the person(s) executing on behalf
of said entity shall affix the appropriate corporate seal to each area in
the document where request therefor is noted, and the other party shall be
entitled to conclusively presume that by doing so the entity for which said
corporate seal has been affixed is attesting to and ratifying this Third
Amendment.
8. SUCCESSORS AND HEIRS. The provisions of this Third Amendment shall inure to
the benefit of Lessor's and Lessee's respective successors, assigns, heirs
and all persons claiming by, through or under them.
9. CONFIDENTIALITY. Lessor and Lessee agree that the covenants and provisions
of this shall not be divulged to anyone not directly involved in the
management, administration, ownership, lending against, or subleasing of the
Premises, other than Lessee's or Lessor's counsel-of-record or leasing or
sub-leasing broker or record.
10. GOVERNING LAW. The provisions of this Third Amendment shall be governed by
the laws of the State of California.
11. REAFFIRMATION. Lessor and Lessee acknowledge and agree that the Lease, as
amended by the documents referred to in Recital A hereinabove, and as
further amended herein, constitutes the entire agreement by and between
Lessor and Lessee, and supersedes any and all other agreements written or
oral between the parties hereto. Furthermore, except as modified herein, all
other covenants and provisions of the Lease shall remain unmodified and in
full force and effect.
IN WITNESS WHEREOF, Lessor and Lessee have duly executed this document as of the
day and year written below.
2
<PAGE> 3
<TABLE>
<S> <C>
LESSOR: LESSEE:
DOUGLAS EMMETT REALTY FUND 1997, 1-12 INTERACTIVE, INC., a Delaware corporation,
A California limited partnership d/b/a Language Solutions
By: DOUGLAS, EMMETT & COMPANY, its agent By: /s/ Andrea Freitag
--------------------------------------
Signer's Name: _______________________
By: /s/ Kenneth Panzer [ ] President [ ] Vice President or
-------------------------------------- [ ] Chief Executive Officer
Kenneth Panzer (Check Title Above)
AND
By: /s/ Peter Paul
--------------------------------------
Date: June 17, 1999
------------------------------------
Signer's Name: _______________________
[ ] Secretary [ ] Treasurer or
[ ] Chief Financial Officer
(Check Title Above)
AFFIX CORPORATE SEAL HERE
GUARANTOR:
By executing below,
Guarantor
acknowledges receipt
of the original
Lease, as amended.
/s/ Stan Lee
-------------------------------------------
Stan Lee, an individual
Date: June 15, 1999
-------------------------------------
</TABLE>
3
<PAGE> 1
EXHIBIT 10.53
OFFICE LEASE
Between
DOUGLAS EMMETT REALTY FUND 1997,
a California limited partnership
as Landlord
and
STAN LEE MEDIA, INC.,
a Delaware corporation
as Tenant
Dated
September 22, 1999
<PAGE> 2
OFFICE LEASE
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE PAGE
- ------- ----
<S> <C>
l Demise of Premises................................................................1
2 Commencement Date and Term .......................................................2
3 Payment of Rent, Late Charge and Security Deposit.................................3
4 Additional Rent ..................................................................5
5 Ethics ...........................................................................9
6 Use of Premises ..................................................................9
7 Condition Upon Vacating and Removal of Personal Property ........................10
8 Utilities and Services ..........................................................10
9 Tenant's Indemnification and Limitation on Landlord's Liability..................12
10 Compliance with Laws ............................................................13
11 Assignment and Subletting .......................................................14
12 Maintenance, Repairs, Damage, Destruction, Renovation and/or Alteration..........16
13 Condemnation ....................................................................20
14 Mortgage Subordination and Attornment ...........................................21
15 Estoppel Certificates ...........................................................22
16 Notices .........................................................................22
17 Default and Landlord's Option to Cure............................................22
18 Damages; Remedies; Re-Entry by Landlord; Etc.....................................24
19 Insurance .......................................................................25
20 Miscellaneous ...................................................................26
21 Parking .........................................................................29
22 Concierge Services...............................................................30
23 Option to Extend Term ...........................................................31
24 Right of First Offer ............................................................32
25 Guaranty of Lease ...............................................................32
Signatures .............................................................................33
</TABLE>
Exhibits
- --------
A -- Suite Plan
B -- Improvement Construction Agreement
B-1 -- Construction by Tenant During Term
C -- Rules and Regulations
D -- Sign Criteria
iii
<PAGE> 3
OFFICE LEASE
BASIC LEASE INFORMATION
Date: September 22, 1999
Landlord: DOUGLAS EMMETT REALTY FUND 1997,
a California limited partnership
Tenant: STAN LEE MEDIA, INC.,
a Delaware corporation
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECTION
- -------
<S> <C> <C>
1.1 Premises: Suite 100, 15821 Ventura Boulevard
Encino, California 91436
1.4 Rentable Area of Premises: approximately 7,442 square feet
1.4 Usable Area of Premises: approximately 6,207 square feet
2.1 Term: Approximately Five (5) Years
Anticipated Commencement Date: November 15, 1999 (as modified by Section 2.1)
Anticipated Expiration October 31, 2004 (as modified by Section 2.1)
3.1 Fixed Monthly Rent: $ 13,767.70
3.3 Fixed Monthly Rent Increase Three percent (3%) per annum
Date of First Increase: October 1, 2000 (provided such date is the first
(1st) day of the thirteenth (13th) month of the Term)
Frequency of Increase: Annually thereafter
3.7 Security Deposit: $15,495.67 (See also Section 20.22)
4.1 Tenant's Share: 1.78%
4.2 Base Year for Operating Expenses: 2000
6.1 Use of Premises: Administration and animation production offices
16.1 Tenant's Address for Notices:
Before the Commencement Date 15821 Ventura Boulevard, Suite 675
Encino, California 91436
After the Commencement Date 15821 Ventura Boulevard, Suite 100
Encino, California 91436
Contact: Steve Gordon
Landlord's Address for Notices: Douglas Emmett Realty Fund 1997
C/o Douglas, Emmett & Co.
12121 Wilshire Boulevard, Suite 600
Los Angeles, California 90025
20.5 Brokers Douglas, Emmett & Company
12121 Wilshire Boulevard, Suite 600
Los Angeles, California 90025 AND
Mr. Tim O'Rourke
Julien J. Studley, Inc.
10960 Wilshire Boulevard, Suite 1500
Los Angeles, California 90024
21.1 Parking Permits: Nineteen (19) permits for unreserved spaces
</TABLE>
Except as noted hereinbelow, the foregoing Basic Lease Information is hereby
incorporated into and made a part of the Lease. The Section reference in the
left margin of the Basic Lease Information exists solely to indicate where such
reference initially appears in the Lease document. Except as specified
hereinbelow, each such reference shall in the Lease document shall incorporate
the applicable Basic Lease Information. However, in the event of any conflict
between any reference contained in the Basic Lease Information and the specific
information wording of the Lease, the wording of the Lease shall control.
ii
<PAGE> 4
OFFICE LEASE
THIS OFFICE LEASE, dated September 22, 1999, is by and among DOUGLAS EMMETT
REALTY FUND 1997, a California limited partnership ("Landlord"), with an office
at 12121 Wilshire Boulevard, Suite 600, Los Angeles, California 90025, STAN LEE
MEDIA, INC., a Delaware corporation ("Tenant"), with an office at 15821 Ventura
Boulevard, Suite 675, Encino, California 91436, and Mr. Stan Lee, an individual
("Guarantor").
ARTICLE 1
DEMISE OF PREMISES
SECTION 1.1. DEMISE. Subject to the covenants and agreements contained in this
Lease, Landlord leases to Tenant and Tenant hires from Landlord, Suite Number
100 (the "Premises") on the ground floor, in the building located at 15821
Ventura Boulevard, Encino, California 91436 (the "Building"). The configuration
of the Premises is highlighted on Exhibit A, attached hereto and made a part
hereof by reference, and Landlord and Tenant acknowledge and agree that the
intent of both parties hereto is that said configuration shall not be materially
altered by construction of the demising walls separating the same from the
balance of the space from which it is being demised.
Tenant acknowledges that it has made its own inspection of and inquiries
regarding the Premises, which are already improved. Therefore, except for the
improvements to be completed pursuant to Exhibit B, attached hereto and made a
part hereof by reference, Tenant accepts the Premises in their "as-is"
condition, except for latent defects unknown to Tenant and which could not be
discovered by Tenant upon the exercise of reasonable diligence. Tenant further
acknowledges that Landlord has made no representation or warranty, express or
implied, except as are contained in this Lease and its Exhibits, regarding the
condition, suitability or usability of the Premises or the Building for the
purposes intended by Tenant. However, the above provision notwithstanding,
Landlord shall deliver the Premises with all mechanical, electrical and plumbing
systems directly serving the Premises in good working order (or promptly repair
the same upon receipt of notice from Tenant of the failure of any such system).
The Building, the Building's parking facilities, any outside plaza areas,
land and other improvements surrounding the Building which are designated from
time to time by Landlord as common areas appurtenant to or servicing the
Building, and the land upon which any of the foregoing are situated, are herein
sometimes collectively referred to as the "Real Property."
SECTION 1.2. TENANT'S NON-EXCLUSIVE USE. Subject to the contingencies contained
herein, Tenant is granted the nonexclusive use of the common corridors and
hallways, stairwells, elevators, restrooms, parking facilities, lobbies and
other public or common areas located on the Real Property. However, the manner
in which such public and common areas are maintained and operated shall be at
the sole discretion of Landlord, and Tenant's use thereof shall be subject to
such rules, regulations and restrictions as Landlord may make from time to time.
SECTION 1.3. LANDLORD'S RESERVATION OF RIGHTS. Landlord specifically reserves to
itself use, control and repair of the structural portions of all perimeter walls
of the Premises, any balconies, terraces or roofs adjacent to the Premises
(including any flagpoles or other installations on said walls, balconies,
terraces or roofs) and any space in and/or adjacent to the Premises used for
shafts, stairways, pipes, conduits, ducts, mail chutes, conveyors, pneumatic
tubes, electric or other utilities, sinks, fan rooms or other Building
facilities, and the use thereof, as well as access thereto through the Premises.
Landlord also specifically reserves to itself the following rights:
a) To designate all sources furnishing sign painting or lettering;
b) To constantly have pass keys to the Premises;
c) To grant to anyone the exclusive right to conduct any particular business or
undertaking in the Building, so long as Landlord's granting of the same does
not prohibit Tenant's use of the Premises for Tenant's Specified Use, as
defined in Article 6;
d) Subject to the provisions of Article 12 and any other applicable provision
of this Lease, to enter the Premises at any reasonable time upon not less
than twenty-four (24) hours written notice (except for emergencies) to
inspect, repair, alter, improve, update or make additions to the Premises or
the Building;
e) During the last six (6) months of the Term, upon reasonable prior notice, to
exhibit the Premises to prospective future tenants;
f) Subject to the provisions of Article 12, to, at any time, and from time to
time, whether at Tenant's request or pursuant to governmental requirement,
repair, alter, make additions to, improve, or decorate all or any portion of
the real property, Building or Premises. In connection therewith, and
without limiting the generality of the foregoing rights, Landlord shall
specifically have the right to remove, alter, improve or rebuild all or any
part of the lobby of the Building as the same is presently or shall
hereafter be constituted;
g) Subject to the provisions of Article 12, Landlord reserves the right to make
alterations or additions to or change the location of elements of the Real
Property and any common areas appurtenant thereto; and/or
h) To take such other actions as may reasonably be necessary when the same are
required to preserve, protect or improve the Premises, the Building, or
Landlord's interest therein.
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<PAGE> 5
SECTION 1.4. AREA. Landlord and Tenant agree that the Usable Area of the
Premises has been measured according to the June, 1996 standards published by
the Building Owners' and Managers' Association ("BOMA"), and that Landlord is
utilizing a deemed add-on factor of 19.89% to compute the Rentable Area of the
Premises. Rentable Area herein is calculated as 1.1989 times the estimated
Usable Area, regardless of what the actual square footage of the common areas of
the Building may be, and whether or not they are more or less than 19.89% of the
total estimated Usable Area of the Building. The purpose of this calculation is
solely to provide a general basis for comparison and pricing of this space in
relation to other spaces in the market area.
Landlord and Tenant further agree that even if the Rentable or Usable Area
of the Premises and/or the total Building Area are later determined to be more
or less than the figures stated herein, for all purposes of the Lease, the
figures stated herein shall be conclusively deemed to be the actual Rentable or
Usable Area of the Premises, as the case may be.
SECTION 1.5. QUIET ENJOYMENT. Contingent upon Tenant keeping, observing and
performing all of the covenants, agreements, terms, provisions and conditions of
this Lease on its part to be kept, observed and performed, and subject to the
limitations imposed under Article 14 of this Lease, Tenant shall lawfully and
quietly hold, occupy and enjoy the Premises during the Term.
SECTION 1.6. NO LIGHT, AIR OR VIEW EASEMENT. Any diminution or shutting off of
light, air or view by any structure which is now or may hereafter be erected on
lands adjacent to the Building shall in no way affect this Lease or impose any
liability on Landlord. Noise, dust or vibration or other ordinary incidents to
new construction of improvements on lands adjacent to the Building, whether or
not by Landlord, shall in no way affect this Lease or impose any liability on
Landlord.
ARTICLE 2
COMMENCEMENT DATE AND TERM
SECTION 2.1. COMMENCEMENT DATE AND TERM. This Lease shall commence the next
business day after the date Landlord substantially completes the Improvements
contemplated under Exhibit B (the "Commencement Date"), and shall end, unless
sooner terminated as otherwise provided herein, at midnight on the last calendar
day of the calendar month which occurs five (5) years (the "Term") after the
Commencement Date (the "Termination Date"). The anticipated Commencement Date is
November 15, 1999. Landlord and Tenant shall promptly execute an amendment to
this Lease (the "First Amendment"), confirming the finalized Commencement Date
and Term as soon as they are ascertained.
For purposes of establishing the Commencement Date, substantial completion
shall be defined as that point in the construction process when all of the
structural, mechanical, plumbing and electrical work specified herein has been
performed; the paint, carpet, hard flooring materials, base moldings, and
millwork, if any, have been installed, and a majority of the other finish work
specified in Tenant's plans has been completed in such a manner that Tenant is
not prevented from taking occupancy due to the non-issuance of any required
governmental permit or approval, and such that Tenant could, if it took
possession of the Premises, enjoy beneficial occupancy thereof.
Tenant's taking possession of the Premises and/or commencing Tenant's normal
business operations in the Premises shall be deemed conclusive evidence that, as
of the Commencement Date, Landlord has substantially completed the Tenant
Improvements contemplated hereunder, and that except for any minor punchlist
items to be completed, the Premises are in good order and repair.
Provided that Tenant does not delay Landlord's completion of the
Improvements that Landlord is required to complete, Tenant may take possession
of the Premises up to one ( 1 ) calendar week prior to the anticipated
Commencement Date, solely for the purpose of installing Tenant's furniture,
fixtures and equipment, computer and telephone cabling. Said early possession
shall be subject to Tenant complying with all of the provisions and covenants
contained herein, except that Tenant shall not be obligated to pay Fixed Monthly
Rent or Additional Rent until the Commencement Date. If Tenant's early
possession does so delay completion of the Improvements, then such delay shall
be chargeable to Tenant by:
a) reducing the Allowance by an amount equal to the per-diem Fixed Monthly
Rent payable hereunder, multiplied by the total number of days Landlord
was so delayed; and
b) extending the anticipated Commencement Date by an equal number of days as
the total number of days Landlord was so delayed.
If for any reason (including Landlord's inability to complete the
Improvements called for hereunder) Landlord is unable to deliver possession of
the Premises to Tenant on the anticipated Commencement Date, this Lease shall
not be void or voidable, nor shall Landlord be liable to Tenant for any damage
resulting from Landlord's inability to deliver such possession. However, Tenant
shall not be obligated to pay the Fixed Monthly Rent or Additional Rent that
Tenant is required to pay pursuant to Section3.1 until such possession of the
Premises has been delivered to Tenant by Landlord. Except for such delay in the
commencement of Rent, Landlord's failure to give possession on the anticipated
Commencement Date shall in no way affect Tenant's obligations hereunder.
If possession of the Premises is not tendered by Landlord within one hundred
twenty (120) days after the anticipated Commencement Date, then Landlord and
Tenant shall each have the right to terminate this Lease by giving written
notice, one to the other, within ten (10) days after such failure. If such
notice of termination is not given by either Landlord or Tenant within said ten
(10) day time period, then this Lease shall continue in full force and effect.
If, due to Force Majeure, Landlord is unable to tender possession of the
Premises within one hundred eighty (180) days after the anticipated Commencement
Date, then this Lease, and the rights and obligations of Landlord and Tenant
hereunder, shall terminate automatically, without further liability by either
party to the other, and without further document; Nation being required.
2
<PAGE> 6
SECTION 2.2. HOLDING OVER. If Tenant fails to deliver possession of the Premises
on the Termination Date, but holds over after the expiration or earlier
termination of this Lease without the express prior written consent of Landlord,
such tenancy shall be construed, as a tenancy from month-to-month on the same
terms and conditions as are contained herein, except that the Fixed Monthly Rent
payable by Tenant during such period of holding over shall automatically
increase as of the Termination to an amount equal to one hundred fifty percent
(150%) for the first (1~) sixty (60) days and two hundred percent (200%)
thereafter of the Fixed Monthly Rent payable by Tenant the calendar month
immediately prior to the date when Tenant commences such holding over (the
Holdover Rent). Such Holdover Rent shall be paid during such period as Tenant
retains possession of the Premises. However, Tenant's payment of such Holdover
Rent, and Landlord's acceptance thereof, shall not constitute a waiver by
Landlord of any of Landlord's rights or remedies with respect to such holding
over, nor shall it be deemed to be a consent by Landlord to Tenant's continued
occupancy or possession of the Premises past the time period covered Tenant's
payment of the Holdover Rent.
Furthermore, if Tenant fails to deliver possession of the Premises to
Landlord upon the expiration or earlier termination of this Lease, then, in
addition to any other liabilities to Landlord accruing therefrom, Tenant shall
protect, defend, indemnify and hold Landlord harmless from all loss, costs
(including reasonable attorneys' fees and expenses) and liability resulting from
such failure, including without limiting the foregoing, any claims made by any
succeeding tenant arising out of Tenant's failure to so surrender, and any lost
profits to Landlord resulting therefrom.
Notwithstanding the provisions contained hereinabove regarding Tenant's
liability for a continuing holdover, Landlord agrees to use commercially
reasonable efforts to insert into any future lease of another tenant proposing
to occupy the Premises provisions similar to those contained in Section 2.1,
permitting mitigation of Tenant's damages arising out of Tenant's temporary
holdover.
ARTICLE 3
PAYMENT OF RENT, LATE CHARGE
SECTION 3.1. PAYMENT OF FIXED MONTHLY RENT AND ADDITIONAL RENT. "Rent" shall
mean: all payments of monies in any form whatsoever required under the terms and
provisions of this Lease, and shall consist of:
a) "Fixed Monthly Rent," which shall be payable in equal monthly installments
of $13,767.70; plus
a) Additional Rent as provided in Article 4 and elsewhere in this Lease.
Provided that Tenant is not in default (after the expiration of time and the
opportunity to cure) on or any time prior to the Commencement Date, sixty
percent (60%) of the Fixed Monthly Rent due for the second (2nd) through fourth
(4th) calendar months of the Term and ten percent (10%) of the Fixed Monthly
Rent for the fifth (5th) through seventh (7th) calendar months of the Term
(collectively the "Rent Deferral") shall be deferred until the end of the Term.
Further provided that no event has occurred which, with the giving of notice
or the passage of time or both would constitute a material default by Tenant
under this Lease (but subject to Tenant's rights under this Lease and at law to
cure such default), Landlord shall, on the last calendar day of the Term, fully
abate and forgive the Rent Deferral.
If on the last day of the Term, Tenant is in default of its obligations
under this Lease beyond any applicable notice and cure period, or if a "Default
Termination" is properly made by Landlord pursuant to the provisions of Article
18 hereof, then the full amount of the Rent Deferral, including interest thereon
at the rate of ten percent (10%) per annum, computed from the date of such
deferral, shall be immediately due and payable as Rent.
Except as otherwise stated, the entire Fixed Monthly Rent shall be due and
playable, in advance, on or before the first (1st) day of each and every
calendar month until the end of the Term, pursuant to this Section 3.1. SECTION
3.2. MANNER OF PAYMENT. Tenant shall pay Fixed Monthly Rent and Additional Rent
immediately upon the same becoming due and payable (provided with regard to any
non-regularly recurring Additional Rent charge that payment shall not be due
until Tenant has received a minimum of ten (10) days written notice of such
charge), without demand therefor, and without any abatement, set off or
deduction whatsoever, except as may be expressly provided in this Lease.
Landlord's failure to submit statements to Tenant stating the amount of Fixed
Monthly Rent or Additional Rent then due, including Landlord's failure to
provide to Tenant a calculation of the adjustment as required in Section 3.3 or
the Escalation Statement referred to in Article 4, shall not constitute
Landlord's waiver of Tenant's requirement to pay the Rent called for herein.
Tenant's failure to pay Additional Rent as provided herein shall constitute a
material default equal to Tenant's failure to pay Fixed Monthly Rent when due.
Rent shall be payable in advance on the first day of each and every calendar
month throughout the Term, in lawful money of the United States of America, to
Landlord at 15821 Ventura Boulevard, Suite 235, Encino, California 91436, or at
such other place(s) as Landlord designates in writing to Tenant. Tenant's
obligation to pay Rent shall begin on the Commencement Date and continue
throughout the Term, without abatement, setoff or deduction, except as otherwise
specified hereinbelow.
Concurrent with Tenant's execution and delivery to Landlord of this Lease,
Tenant shall pay to Landlord the Fixed Monthly Rent due for the first (1st)
month of the Term in the amount of $13,767.70.
SECTION 3.3. FIXED MONTHLY RENT INCREASE. Commencing the first calendar day of
the thirteenth (13th) calendar month of the Term, and continuing through the
last calendar day of the twenty-fourth (24th) calendar month of the Term, the
Fixed Monthly Rent payable by Tenant shall increase from $13,767.70 per month to
$14,180.73 per month.
Commencing the first calendar day of the twenty-fifth (25th) calendar month
of the Term, and continuing through the last calendar day of the thirty-sixth
(36th) calendar month of the Term. the Fixed Monthly Rent payable by Tenant
shall increase from $14.180.73 per month to $14.606.15 per month.
Commencing the first calendar day of the thirty-seventh (37th) calendar
month of the Term, and continuing through the last calendar day of the
forty-eighth (48th) calendar month of the Term, the Fixed Monthly Rent payable
by Tenant shall increase from $14,606.15 per month to $15,044.34 per month.
3
<PAGE> 7
Commencing the first calendar day of the forth-ninth (49th) calendar month of
the Term, and continuing throughout the remainder of the initial Term, the Fixed
Monthly Rent payable by Tenant shall increase from $15,044.34 per month to
$15,495.67 per month.
Landlord and Tenant shall, in the First Amendment, confirm the actual dates
upon which the changes in Fixed Monthly Rent specified above shall occur.
SECTION 3.4. TENANT'S PAYMENT OF CERTAIN TAXES. Tenant shall, concurrent with
Tenant's next scheduled payment of Fixed Monthly Rent, reimburse Landlord, as
Additional Rent, for any and all taxes, surcharges, levies, assessments, fees
and charges payable by Landlord when:
a) assessed on, measured by, or reasonably attributable to:
i) the cost or value of Tenant's equipment, furniture, fixtures and other
personal property located in the Premises, or
ii) the cost or value of any leasehold improvements in or to the Premises in
excess of $35.00 per square foot, provided the same have been made in
connection with Tenant's execution of this Lease, and without regard to
whether title to or payment for such improvements vests with Tenant or
Landlord;
b) on or measured by any rent payable hereunder, including, without limitation,
any gross income tax, gross receipts tax, or excise tax levied by the City
or County of Los Angeles or any other governmental body with respect to the
receipt of such rent (computed as if such rent were the only income of
Landlord), but solely when levied by the appropriate City or County agency
in lieu of, or as an adjunct to, such business license(s), fees or taxes as
would otherwise have been payable by Tenant directly to such taxing
authority;
c) upon or with respect to the possession, leasing, operating, management,
maintenance, alteration, repair, use or occupancy by Tenant of the Premises
or any portion thereof; or
d) solely because Landlord and Tenant entered into this transaction or executed
any document transferring an interest in the Premises to Tenant. If it
becomes unlawful for Tenant so to reimburse Landlord, the rent payable to
Landlord under this Lease shall be revised to net Landlord the same rent
after imposition of any such tax as would have been payable to Landlord
prior to the imposition of any such tax.
Said taxes shall be due and payable whether or not now customary or within
the contemplation of Landlord and Tenant. Notwithstanding the above, in no event
shall the provisions of this Section 3.4 serve to entitle Landlord to
reimbursement from Tenant for any federal, state, county or city income tax or
business license fee payable by Landlord or the managing agent of Landlord.
SECTION 3.5. CERTAIN ADJUSTMENTS. If:
a) the Commencement Date occurs on other than January 1st of a calendar year,
or the Lease expires or terminates on other than December 31st of a
calendar year;
b) the size of the Premises changes during a calendar year;
c) or any abatement of Fixed Monthly Rent or Additional Rent occurs during a
calendar year, then the amount payable by Tenant or reimbursable by
Landlord during such year shall be adjusted proportionately on a daily
basis, and the obligation to pay such amount shall survive the expiration
or earlier termination of this Lease.
If the Commencement Date occurs on other than the first day of a calendar
month, or the Lease expires on a day other than the last day of a calendar
month, then the Fixed Monthly Rent and Additional Rent payable by Tenant shall
be appropriately apportioned (based on a Fixed Monthly Rent of $13,767.70 in the
event the Commencement Date occurs on a date other than the first (1st) day of a
calendar month) on a prorate basis for the number of days remaining in the month
of the Term for which such proration is calculated.
If the amount of Fixed Monthly Rent or Additional Rent due is modified
pursuant to the Terms of this Lease, such modification shall take effect the
first day of the calendar month immediately following the date such modification
would have been scheduled.
SECTION 3.6. LATE CHARGE AND INTEREST. Tenant acknowledges that late payment by
Tenant to Landlord of Fixed Monthly Rent or Additional Rent will cause Landlord
to incur costs not contemplated by this Lease, the exact amount of which are
extremely difficult and impracticable to fix. Such costs include, without
limitation, processing and accounting charges and late charges that may be
imposed on Landlord by the terms of any encumbrance and note secured by any
encumbrance covering the Premises. Therefore, if any installment of Fixed
Monthly Rent or Additional Rent and other payment due from Tenant hereunder is
not received by Landlord within five (5) business days of the date it becomes
due, Tenant shall pay to Landlord on demand an additional sum equal to five
percent (5%) of the overdue amount as a late charge. The parties agree that this
late charge represents a fair and reasonable settlement against the costs that
Landlord incur by reason of Tenant's late payment. Acceptance of any late charge
shall not constitute a waiver of Tenant's default with respect to the overdue
amount, or prevent Landlord from exercising any of the other rights and remedies
available to Landlord.
Every installment of Fixed Monthly Rent and Additional Rent and any other
payment due hereunder from Tenant to Landlord which is not paid within twelve
(12) days alter the same becomes due and payable shall, in addition to any Late
Charge already paid by Tenant, bear interest at the rate of ten percent (10%)
per annum from the date that the same originally became due and payable until
the date it is paid. Landlord shall bill Tenant for said interest, and Tenant
shall pay the same within five (5) business days of receipt of Landlord's
billing.
SECTION 3.7. SECURITY DEPOSIT. Concurrent with Tenant's execution and tendering
of this Lease to Landlord, Tenant shall deposit the sum of $15,495.67 (the
"Security Deposit"), which amount Tenant shall thereafter at all times maintain
on deposit with Landlord as security for Tenant's full and faithful observance
and performance of its obligations under this Lease (expressly including,
without limitation, the payment as and when due of the Fixed Monthly Rent,
Additional Rent and any other sums or damages payable by Tenant hereunder and
the payment of any and all other damages for which Tenant shall be liable by
reason of any act or omission contrary to any of said covenants or agreements).
Landlord shall have the right to commingle the Security Deposit with its general
assets and shall not be obligated to pay Tenant interest thereon.
4
<PAGE> 8
If at any time Tenant defaults in the performance of any of its obligations
under this Lease, after the expiration of notice and the opportunity to cure,
then, Landlord may:
a) apply as much of the Security Deposit as may be necessary cure Tenant's
non-payment of the Fixed Monthly Rent, Additional Rent and/or other sums or
damages due from Tenant; and/or;
b) if Tenant is in default of any of the covenants or agreements of this Lease;
apply so much of the Security Deposit as may be necessary to reimburse all
expenses incurred by Landlord in curing such default; or
c) if the Security Deposit is insufficient to pay the sums specified in Section
3.7 (a) or (b), elect to apply the entire Security Deposit in partial
payment thereof, and proceed against Tenant pursuant to the provisions of
Article 17 and Article 18 herein.
If, as a result of Landlord's application of any portion or all of the
Security Deposit, the amount held by Landlord declines to less than $15,495.67,
Tenant shall, within ten (10) days after demand therefor, deposit with Landlord
additional cash sufficient to bring the then-existing balance held as the
Security Deposit to the amount specified hereinabove. Tenant's failure to
deposit said amount shall constitute a material breach of this Lease.
At the expiration or earlier termination of this Lease, Landlord shall
deduct from the Security Deposit being held on behalf of Tenant any unpaid sums,
costs, expenses or damages payable by Tenant pursuant to the provisions of this
Lease; and/or any costs required to cure Tenant's default or performance of any
other covenant or agreement of this Lease, and shall, within thirty (30) days
after the expiration or earlier termination of this Lease, return to Tenant,
without interest, all or such part of the Security Deposit as then remains on
deposit with Landlord.
ARTICLE 4
ADDITIONAL RENT
SECTION 4.1. CERTAIN DEFINITIONS. As used in this Lease:
a) "ESCALATION STATEMENT" means a statement by Landlord, setting forth the
amount payable by Tenant or by Landlord, as the case may be, for a specified
calendar year pursuant to this Article 4.
b) "OPERATING EXPENSES" means the following in a referenced calendar year,
including the Base Year as hereinafter defined, calculated assuming the
Building is at least ninety-five percent (95%) occupied: all costs of
management, operation, maintenance, and repair of the Building.
By way of illustration only, Operating Expenses shall include, but not be
limited to: management fees paid by Landlord to any third-party, which shall not
exceed those reasonable and customary in the geographic area in which the
Building is located (and which shall not in any event exceed four percent (4%)
of the gross revenues of the Building); water and sewer charges; any and all
insurance premiums not otherwise directly payable by Tenant; license, permit and
inspection fees; air conditioning (including repair of same); heat; light; power
and other utilities; steam; labor; cleaning and janitorial services; guard
services; supplies; materials; equipment and tools.
Operating Expenses shall also include the cost or portion thereof of those
capital improvements made to the Building by Landlord during the Term:
i) to the extent that such capital improvements reduce other direct expenses,
when the same were made to the Building by Landlord after the Commencement
Date, or
ii) that are required under any governmental law or regulation that was not
applicable to the Building as of the Commencement Date.
Said capital improvement costs, or the allocable portion thereof (as
referred to in clauses (i) and (ii) above), shall be amortized pursuant to
generally-accepted accounting principles, together with interest on the
unamortized balance at the rate of ten percent (10%) per annum.
Operating Expenses shall also include all general and special real estate
taxes, increases in assessments or special assessments and any other ad valorem
taxes, rates, levies and assessments paid during a calendar year (or portion
thereof) upon or with respect to the Building and the personal property used by
Landlord to operate the Building, whether paid to any governmental or
quasi-governmental authority, and all taxes specifically imposed in lieu of any
such taxes (but excluding taxes referred to in Section 3.4 for which Tenant or
other tenants in the Building are liable) including fees of counsel and experts,
reasonably incurred by, or reimbursable by Landlord in connection with any
application for a reduction in the assessed valuation of the Building and/or the
land thereunder or for a judicial review thereof: (collectively "Appeal Fees"),
but solely to the extent that the Appeal Fees result directly in a reduction of
taxes otherwise payable by Tenant. However, in no event shall the portion of
Operating Expenses used to calculate any billing to Tenant attributable to real
estate taxes and assessments for any expense year be less than the billing for
real estate taxes and assessments during the Base Year.
Operating Expenses shall also include, but not be limited to, the premiums
for the following insurance coverage: all-risk, structural, fire, boiler and
machinery, liability, earthquake and for replacement of tenant improvements to a
maximum of $35.00 per usable square foot, and for such other coverage(s), and at
such policy limit(s) as Landlord deems reasonably prudent and/or are required by
any lender or ground lessor, which coverage and limits Landlord may, in
Landlord's reasonable discretion, change from time to time.
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If, in any calendar year following the Base Year, as defined hereinbelow (a
"Subsequent Year"), a new expense item (e.g. earthquake insurance, concierge
services; entry card systems), is included in Operating Expenses which was not
included in the Base Year Operating Expenses, then the cost of such new item
shall be added to the Base Year Operating Expenses for purposes of determining
the Additional Rent payable under this Article 4 for such Subsequent Year.
During each Subsequent Year, the same amount shall continue to be included in
the computation of Operating Expenses for the Base Year, resulting in each such
Subsequent Year Operating Expenses only including the increase in the cost of
such new item over the Base Year, as so adjusted. However, if in any Subsequent
Year thereafter, such new item is not included in Operating Expenses, no such
addition shall be made to Base Year Operating Expenses.
Conversely, as reasonably determined by Landlord, when an expense item that
was originally included in the Base Year Operating Expenses is, in any
Subsequent Year, no longer included in Operating Expenses, then the cost of such
item shall be deleted from the Base Year Operating Expenses for purposes of
determining the Additional Rent payable under this Article 4 for such Subsequent
Year. The same amount shall continue to be deleted from the Base Year Operating
Expenses for each Subsequent Year thereafter that the item is not included.
However, if such expense item is again included in the Operating Expenses for
any Subsequent Year, then the amount of said expense item originally included in
the Base Year Operating Expenses shall again be added back to the Base Year
Operating Expenses.
Notwithstanding anything in this Section 4.1(b) to the contrary; for purposes of
this Lease, Operating Expenses shall not include the following:
(a) costs incurred in connection with the original construction
of the Building or in connection with any major change in the Building such as
adding or deleting floors;
(b) costs of the design and construction of tenant improvements
to the Premises or the premises of other tenants or other occupants and the
amount of any allowances or credits paid to or granted to tenants or other
occupants for any such design or construction;
(c) depreciation, interest and principal payments on mortgages
and other debt costs, if any;
(d) marketing costs, legal fees, space planners' fees,
advertising and promotional expenses, and brokerage fees incurred in connection
with the original development, subsequent improvement, or future leasing of the
Building;
(e) costs for which the Landlord is reimbursed, or would have
been reimbursed if Landlord had carried the insurance Landlord is required to
carry pursuant to this Lease, or would have been reimbursed if Landlord had used
commercially reasonable efforts to collect such amounts, by any tenant or
occupant of the Building or by insurance from its carrier or any tenant's
carrier;
(f) any bad debt loss, rent loss, or reserves for bad debts or
rent loss or any reserves of any kind;
(g) costs associated with the operation of the business of the
partnership or entity which constitutes the Landlord, as the same are
distinguished from the costs of operation of the Building, including partnership
accounting and legal matters, costs of defending any lawsuits with any mortgagee
(except in an instance where the actions of Tenant may be at issue), costs of
selling, syndicating, financing, mortgaging or hypothecating any of the
Landlord's interest in the Building, and costs incurred in connection with any
disputes between Landlord and its employees, between Landlord and Building
management, or between Landlord and other tenants or occupants;
(h) the wages and benefits of any employee who does not devote
substantially all of his or her employed time to the Building unless such wages
and benefits are prorated to reflect time spent on operating and managing the
Building vis-a-vis time spent on matters unrelated to operating and managing the
Building; provided. that in no event shall Operating Expenses for purposes of
this Lease include wages and/or benefits attributable to personnel above the
level of Building manager or Building engineer;
(i) late charges, penalties, liquidated damages, and interest
charged to Landlord due to Landlord's failure to pay any taxes due in a timely
manner;
(j) any amounts paid as ground rental or as rental for the
Building by the Landlord;
(k) costs, including permit, license and inspection costs,
incurred with respect to the installation of tenant improvements made for new
tenants or other occupants in the Building or incurred in renovating or
otherwise improving, decorating, painting or redecorating vacant space for
tenants or other occupants of the Building (excluding, however, such costs
relating to any common areas of the Building or parking facilities);
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(l) costs of capital repairs and alterations, capital
improvements and equipment, except as set forth above;
(m) any amount paid by Landlord or to the parent organization or
a subsidiary or affiliate of Landlord for supplies and/or services in the
Building to the extent the same exceeds the costs of such supplies and/or
services rendered by qualified, first-class unaffiliated third parties on a
competitive basis;
(n) any compensation paid to clerks, attendants or other persons
in commercial concessions operated by or on behalf of the Landlord;
(o) rentals and other related expenses incurred in leasing air
conditioning systems, elevators or other equipment which if purchased the cost
of which would be excluded from Operating Expenses as a capital cost, except
equipment not affixed to the Building which is used in providing janitorial or
similar services and, further excepting from this exclusion such equipment
rented or leased to remedy or ameliorate an emergency condition in the Building;
(p) all items and services for which Tenant or any other tenant
in the Building reimburses Landlord, provided that Landlord shall use
commercially reasonable efforts to collect such reimbursable amounts, or which
Landlord provides selectively to one or more tenants (other than Tenant) without
reimbursement;
(q) electric power costs for which any tenant directly contracts
with a public service company;
(r) costs, other than those incurred in ordinary maintenance and
repair, for sculpture, paintings, fountains or other objects of art;
(s) any costs expressly excluded from Operating Expenses
elsewhere in this Lease;
(t) rent for any office space occupied by Building management
personnel to the extent the size or rental rate of such office space exceeds the
size or fair market rental value of office space occupied by management
personnel of comparable buildings in the geographic area of the Building, with
adjustment where appropriate for the size of the applicable project;
(u) Landlord's general corporate overhead and general and
administrative expenses;
(v) costs arising from the gross negligence or willful misconduct
of Landlord or "Landlord Parties," as that term is defined in Section 9.4 of
this Lease;
(w) costs incurred to comply with any governmental or
quasi-governmental rule, regulation or requirement now in force or which may
hereafter be enacted or promulgated ("Applicable Law") as such Applicable Law
may apply to hazardous materials ("Hazardous Material") as defined by such
Applicable Law, which Hazardous Material was in existence in the Building prior
to the Commencement Date, and was of such a nature that a federal, state or
municipal government or quasi-government authority, if it had then had knowledge
of the presence of such Hazardous Material. in the state, and under the
conditions that it then existed in the Building or on the Real Property would
have then required the removal, remediation or other action with respect to such
Hazardous Material; and costs incurred with respect to Hazardous Material, which
Hazardous Material is brought into the Building or on the Real Property after
the date hereof by Landlord and is of such a nature, at that time, that a
federal, state or municipal governmental or quasi-governmental authority, if it
had then had knowledge of the presence of such Hazardous Material, in the state,
and under the conditions, that it then exists in the Building or on the Real
Property, would have then required the removal, remediation or other action with
respect to such Hazardous Material;
(x) costs arising from Landlord's charitable or political
contributions;
(y) any entertainment or dining expenses for any purpose;
(z) in-house legal and/or accounting (as opposed to office
building bookkeeping) fees; and
(aa) legal fees and costs, settlements, judgments or awards paid
or incurred because of disputes between Landlord and Tenant, Landlord and other
tenants or prospective occupants or prospective tenants/occupants or providers
of goods and services to the Building;
(bb) legal fees and costs concerning the negotiation and
preparation of this Lease or any litigation between Landlord and Tenant; and
(cc) any reserves retained by Landlord.
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c) "TENANT'S SHARE" means 1.78%.
SECTION 4.2. CALCULATION OF TENANT'S SHARE OF INCREASES IN OPERATING EXPENSES.
If, commencing with the calendar year 2001, the Operating Expenses for any
calendar year during the Term, or portion thereof, (including the last calendar
year of the Term), have increased over the Operating Expenses for the calendar
year 2000 (the "Base Year"), then within thirty (30) days after Tenant's receipt
of Landlord's computation of such increase (an "Escalation Statement"), Tenant
shall pay to Landlord, as Additional Rent, an amount equal to the product
obtained by multiplying such increase by Tenant's Share.
Landlord may, at or after the start of any calendar year, subsequent to the
calendar year 2000, notify Tenant of the amount which Landlord estimates will be
Tenant's monthly share of any such increase in Operating Expenses for such
calendar year over the Base Year and the amount thereof shall be added to the
Fixed Monthly Rent payments required to be made by Tenant in such year. If
Tenant's Share of any such increase in rent payable hereunder as shown on the
Escalation Statement is greater or less than the total amounts actually billed
to and paid by Tenant during the year covered by such statement, then within
thirty (30) days thereafter, Tenant shall pay in cash any sums owed Landlord or,
if applicable, Tenant shall either receive a credit against any Fixed Monthly
Rent and/or Additional Rent next accruing for any sum owed Tenant, or if
Landlord's Escalation Statement is rendered after the expiration or earlier
termination of this Lease and indicates that Tenant's estimated payments have
exceeded the total amount to which Tenant was obligated, then provided that
Landlord is not owed any other sum by Tenant, Landlord shall issue a cash refund
to Tenant within thirty (30) days after Landlord's completion of such Escalation
Statement.
SECTION 4.3. TENANT'S PAYMENT OF DIRECT CHARGES AS ADDITIONAL RENT.
Tenant shall promptly and duly pay all costs and expenses incurred for or in
connection with any Tenant Change or Tenant Service, and discharge any
mechanic's or other lien created against the Premises, Building or the Real
Property arising as a result of or in connection with any Tenant Change or
Tenant Service as Additional Rent by paying the same, bonding or manner
otherwise provided by law.
Any other cost, expense, charge, amount or sum (other than Fixed Monthly
Rent) payable by Tenant as provided in this Lease shall also be considered
Additional Rent.
Certain individual items of cost or expense may, in the reasonable
determination of Landlord, be separately charged and billed to Tenant by
Landlord, either alone or in conjunction with another party or parties, if they
are deemed in good faith by Landlord to apply solely to Tenant and/or such other
party or parties and are not otherwise normally recaptured by Landlord as part
of normal operating expenses. Insofar as is reasonable, Landlord shall attempt
to give Tenant prior notice and the opportunity to cure any circumstance that
would give rise to such separate and direct billing.
Said separate billing shall be paid as Additional Rent, regardless of
Tenant's Share. Such allocations by Landlord shall be binding on Tenant unless
patently unreasonable, and shall be payable within ten (10) days after receipt
of Landlord's billing therefor.
SECTION 4.4. LANDLORD'S BOOKS END RECORDS. Within ninety (90) days after receipt
of an Escalation Statement by Tenant, if Tenant disputes the amount of
Additional Rent set forth in the Escalation Statement, either an employee of
Tenant or an- independent certified public accountant which accountant is a
member of a nationally recognized accounting firm and is not working on a
contingency fee basis), designated and paid for by Tenant. may, after reasonable
notice to Landlord and at reasonable times, inspect Landlord's records with
respect to the Escalation Statement at Landlord's offices, provided that Tenant
is not then in default under this Lease and further provided Tenant has paid all
amounts required to be paid under the applicable Escalation Statement. In
connection with such inspection, Tenant and Tenant's agent must agree in advance
to follow Landlord's reasonable rules and procedures regarding inspections of
Landlord's records, and shall execute a commercially reasonable confidentiality
agreement regarding such inspection. Tenant's failure to dispute the amount of
Additional Rent set forth in any Escalation Statement within ninety (90) days of
Tenant's receipt of such Escalation Statement shall be deemed to be Tenant's
approval of such Escalation Statement, and Tenant thereafter waives the right or
ability to dispute the amounts set forth in such Escalation Statement. If after
such inspection, Tenant still disputes such Additional Rent, a determination as
to the proper amount shall be made, at Tenant's expense, by an independent
certified public accountant (the "Accountant") selected by Landlord and subject
to Tenant's reasonable approval; provided that if such determination by the
Accountant determines that Operating Expenses were overstated by more than five
percent (5%), then the cost of the Accountant and the cost of such determination
shall be paid for by Landlord. Tenant hereby acknowledges that Tenant's sole
right to inspect Landlord's books and records and to contest the amount of
Operating Expenses payable by Tenant shall be as set forth in this Section 4.4,
and Tenant hereby waives any and all other rights pursuant to applicable law to
inspect such books and records and/or to contest the amount of Operating
Expenses payable by Tenant.
ARTICLE 5
ETHICS
SECTION 5.1. ETHICS. Landlord and Tenant agree to conduct their business or
practice in compliance with any appropriate and applicable codes of professional
or business practice.
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ARTICLE 6
USE OF PREMISES
SECTION 6.1. USE. The Premises shall only be used as administrative and
animation production offices (the "Specified Use") and for no other purposes,
without Landlord's prior written consent, which consent shall be in Landlord's
sole discretion. Any proposed revision of the Specified Use by Tenant shall be
for a use consistent with those customarily found in first-class office
buildings. Reasonable grounds for Landlord withholding its consent shall
include, but not be limited to:
a) the proposed use will place a disproportionate burden on the Building
systems;
b) the proposed use is for governmental or medical purposes or for a company
whose primary business is that of conducting boiler-room type transactions
or sales;
c) the proposed use would generate excessive foot traffic to the Premises
and/or Building.
So long as Tenant is in control of the Premises, Tenant covenants and agrees
that it shall not use, suffer or permit any person(s) to use all or any portion
of the Premises for any purpose in violation of the laws of the United States of
America, the State of California, or the ordinances, regulations or requirements
of the City of Encino or County of Los Angeles, or other lawful authorities
having jurisdiction over the Building.
Tenant shall not do or permit anything to be done in or about the Premises
which will in any way obstruct or unreasonably interfere with the rights of
other tenants or occupants of the Building, or injure or annoy them. Tenant
shall not use or allow the Premises to be used for any pornographic or violent
purposes, nor shall Tenant cause, commit, maintain or permit the continuance of
any nuisance or waste in, on or about the Premises. Tenant shall not use the
Premises in any manner that in Landlord's reasonable judgment would adversely
affect or interfere with any services Landlord is required to furnish to Tenant
or to any other tenant or occupant of the Building, or that would interfere with
or obstruct the proper and economical rendition of any such service.
SECTION 6.2. EXCLUSIVE USE. Landlord represents that Tenant's Specified Use of
the Premises does not conflict with exclusive use provisions granted by Landlord
in other leases for the Building. Landlord further agrees that it shall, in the
future, not grant an exclusive use privilege to any other tenant in the Building
that will prevent Tenant from continuing to use the Premises for its Specified
Use.
Tenant acknowledges and agrees that it shall not engage in any of the uses
specified hereinbelow, for which Landlord has already granted exclusive rights:
Provided that Tenant has received written notice of the same from Landlord,
and further provided that Landlord does not grant a future exclusive use right
that prohibits Tenant from engaging in the Specified Use, then Tenant agrees
that it shall not violate any exclusive use provision(s) granted by Landlord to
other tenants in the Building.
SECTION 6.3. RULES AND REGULATIONS. Tenant shall observe and comply with the
rules and regulations set forth in Exhibit C, and such other and further
reasonable and non-discriminatory rules and regulations as Landlord may make or
adopt and communicate to Tenant at any time or from time to time, when said
rules, in the reasonable judgment of Landlord, may be necessary or desirable to
ensure the first-class operation, maintenance, reputation or appearance of the
Building. However, if any conflict arises between the provisions of this Lease
and any such rule or regulation, the provisions of this Lease shall control.
Provided Landlord makes commercially reasonable efforts to seek compliance
by all occupants of the Building with the rules and regulations adopted by
Landlord, Landlord shall not be responsible to Tenant for the failure of any
other tenants or occupants of the Building to comply with said rules and
regulations.
ARTICLE 7
CONDITION UPON VACATING & REMOVAL OF PROPERTY
SECTION 7.1. CONDITION UPON VACATING. At the expiration or earlier termination
of this Lease, Tenant shall:
a) terminate its occupancy of, quit and surrender to Landlord. all or such
portion of the Premises upon which this Lease has so terminated,
broom-clean and in the same condition as received except for:
i) ordinary wear and tear, or
ii) loss or damage by fire or other casualty which shall not have been
caused by the gross negligence or willful misconduct of Tenant or
its agents, clients, contractors, employees, invitees, licensees,
officers, partners or shareholders; and
b) surrender the Premises free of any and all debris and trash and any of
Tenant's personal property, furniture, fixtures and equipment that do not
otherwise become a part of the Real Property, pursuant to the provisions
contained in Section 7.2 hereinbelow; and
c) at Tenant's sole expense, forthwith and with all due diligence remove any
Tenant Change made by Tenant and restore the Premises to their original
condition, reasonable wear and tear excepted. However, Tenant shall only
be obligated to remove said Tenant Change if it was made without
Landlord's approval and/or if Landlord notified Tenant of its obligation
to do so at the time Landlord approved Tenant's request for a Tenant
Change. If Tenant fails to complete such removal and/or to repair any
damage caused by the removal of any Tenant Change, Landlord may do so and
may charge the cost thereof to Tenant.
SECTION 7.2. TENANT'S PROPERTY. All fixtures, equipment, improvements and
installations attached or built into the Premises at any time during the Term
shall, at the expiration or earlier termination of this Lease, be deemed the
property of Landlord; become a permanent part of the Premises and remain
therein. However, if said equipment improvements and/or installations can be
removed without causing any structural damage to the Premises, then, provided
after such removal Tenant restores the Premises to the condition existing prior
to installation of Tenant's trade fixtures or equipment, Tenant shall be
permitted, at Tenant's sole expense, to remove said trade fixtures and
equipment.
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ARTICLE 8
UTILITIES AND SERVICES
SECTION 8.1. NORMAL BUILDING HOURS / HOLIDAYS. The "Normal Business Hours" of
the Building, during which Landlord shall furnish the services specified in this
Article are defined as 7:00 A.M. to 7:00 P.M., Monday through Friday, and 9:00
A.M. to 1:00 P.M. on Saturday, any one or more Holiday(s) excepted.
The "Holidays" which shall be observed by Landlord in the Building are
defined as any federally-recognized holiday and any other holiday specified
enumerated herein, which are: New Years Day, Presidents' Day, Memorial Day, the
4th of July, Labor Day, Thanksgiving Day, the day after Thanksgiving, and
Christmas Day (each individually a "Holiday"). Tenant acknowledges that the
Building shall be closed on each and every such Holiday, and Tenant shall not be
guaranteed access to Landlord or Landlord's managing agent(s) on each such
Holiday.
SECTION 8.2. ACCESS TO THE BUILDING AND GENERAL SERVICES. Subject to Force
Majeure and any power outage(s) which may occur in the Building when the same
are out of Landlord's reasonable control, Landlord shall furnish the following
services to the Premises twenty-four (24) hours per day, seven days per week:
a) During Normal Business Hours, bulb replacement for building standard
lights;
b) access to and use of the parking facilities for persons holding valid
parking permits;
c) access to and use of the elevators and Premises,
d) use of electrical lighting on an as-needed basis within the Premises; and
e) use of a reasonable level of water for kitchen and toilet facilities in
the Premises and common area bathrooms.
SECTION 8.3. JANITORIAL SERVICES. Landlord shall furnish the Premises with
reasonable and customary janitorial services five (5) days per business week,
except when the Building is closed on any Holiday. Landlord shall retain the
sole discretion to choose and/or revise the janitorial company providing said
services to the Premises and/or Building.
SECTION 8.4. SECURITY SERVICES. Tenant acknowledges that Landlord currently
provides uniformed guard service to the Building twenty-four (24) hours per day,
seven (7) days a week, solely for the purposes of providing surveillance of,
information and directional assistance to persons entering the Building.
Tenant acknowledges that such guard service shall not provide any measure of
security or safety to the Building or the Premises, and that Tenant shall take
such actions as it may deem necessary and reasonable to ensure the safety and
security of Tenant's property l fir person or the property or persons of
Tenant's agents, clients, contractors, directors, employees, invitees,
licensees, officers, partners or shareholders. Tenant agrees and acknowledges
that, except in the case of the gross negligence or willful misconduct of
Landlord or its directors, employees, officers, partners or shareholders,
Landlord shall not be liable to Tenant in any manner whatsoever arising out of
the failure of Landlord's guard service to secure any person or property from
harm.
Tenant agrees and acknowledges that Landlord, in Landlord's sole discretion,
shall have the option, but not the obligation to add, decrease revise the hours
of and/or change the level of services being provided by any guard company
serving the Building, tenant further agrees that [Tenant shall not engage or
hire any outside guard or security company without Landlord's prior written
consent, which shall be in Landlord's sole discretion.
SECTION 8.5. UTILITIES. During Normal Business Hours Landlord shall furnish a
reasonable level of water, heat, ventilation and air conditioning ("HVAC"), and
a sufficient amount of electric current to provide customary business lighting
and to operate ordinary office business machines, such as a single personal
computer and ancillary printer per one hundred and twenty (120) Rentable square
feet contained in the Premises, facsimile machines, small copiers customarily
used for general office purposes, and such other equipment and office machines
as do not result in above-standard use of the existing electrical system. So
long as the same remain reasonably cost competitive, Landlord shall retain the
sole discretion to choose the utility vendor(s) to supply such services to the
Premises and the Building.
Except with the prior written consent of Landlord, which shall not be
unreasonably withheld, conditioned and/or delayed, Tenant shall not install or
use any equipment, apparatus or device in the Premises that requires the
installation of a 220 voltage circuit; consumes more than five (5) kilowatts per
hour per item; or the aggregate use of which will in any way increase the
connected load to more than 5 Watts per square foot, or cause the amount of
electricity to be furnished or supplied for use in the Premises to more than 1.2
kWh per usable square foot, per month.
Except with the prior written consent of Landlord, Tenant shall not connect
any electrical equipment to the electrical system of the Building, except
through electrical outlets already existing in the Premises, nor shall Tenant
pierce, revise, delete or add to the electrical, plumbing, mechanical or HVAC
systems in the Premises.
SECTION 8.6. AFTER HOURS HVAC AND/OR EXCESS UTILITY USAGE. If Tenant requires
HVAC service during other than Normal Business Hours ("Excess HVAC"), Tenant
shall make its request in writing at least six (6) hours before the close of the
normal business day. Otherwise, Landlord shall have no obligation to provide
Excess HVAC. Tenant's request shall be deemed conclusive evidence of its
willingness to pay the costs specified herein.
If Tenant requires electric current in excess of the amounts specified
hereinabove, water or gas in excess of that customarily furnished to the
Premises as office space ("Excess Utility Use"), Tenant shall first procure
Landlord's prior written consent to such Excess Utility Use, which Landlord may
reasonably refuse.
In lieu of Landlord's refusal, Landlord may cause a meter or sub-meter to be
installed to measure the amount of water, gas and/or electric current consumed
by Tenant in the Premises. The cost of any such meter(s), and the installation,
maintenance, and repair thereof, shall be paid by Tenant as Additional Rent.
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After completing installation of said meter(s), and/or if Tenant requests Excess
HVAC, then Tenant shall pay, as Additional Rent, within thirty (30) calendar
days after Tenant's receipt of Landlord's billing, for the actual amounts of all
water, steam, compressed air, electric current and/or Excess HVAC consumed
beyond the normal levels Landlord is required herein to provide. Said billing
shall be calculated on the usage indicated by such meter(s), sub-meter(s), or
Tenant's written request therefor, and shall be issued by Landlord at the rates
charged for such services by the local public utility furnishing the same, plus
any additional expense reasonably incurred by Landlord in providing said Excess
Utility Use and/or in keeping account of the water, steam, compressed air and
electric current so consumed, plus an administrative and billing fee equal to
fifteen percent (15%) of the costs so billed. As of the date of execution of
this Lease, the charge for Excess HVAC is $45.00 per hour. However, such charge
is subject to adjustment by Landlord, from time to time.
SECTION 8.7. CHANGES AFFECTING HVAC. Tenant shall also pay as Additional Rent
for any additional costs Landlord incurs to repair any failure of the HVAC
equipment and systems to perform their function when said failure arises out of
or in connection with any change in, or alterations to, the arrangement of
partitioning in the Premises after the Commencement Date, or from occupancy by,
on average, more than one person for every one hundred and twenty-five (125)
usable square feet of the Premises, or from Tenant's failure to keep all HVAC
vents within the Premises free of obstruction.
SECTION 8.8. DAMAGED OR DEFECTIVE SYSTEMS. Tenant shall give written notice to
Landlord within twenty-four (24) hours of any alleged damage to, or defective
condition in any part or appurtenance of the Building's sanitary, electrical,
HVAC or other systems serving, located in, or passing through, the Premises.
Provided that the repair or remedy of said damage or defective condition is
within the reasonable control of Landlord, it shall be remedied by Landlord with
reasonable diligence. Otherwise, Landlord shall make such commercially
reasonable efforts as may be available to Landlord to effect such remedy or
repair, but except in the case of Landlord's gross negligence and/or willful
misconduct or the gross negligence and/or willful misconduct of Landlord's
agents, contractors, directors, employees, officers, partners, and/or
shareholders, Landlord shall not be liable to Tenant for any failure thereof.
Tenant shall not be entitled to claim any damages arising from any such
damage or defective condition nor shall Tenant be entitled to claim any eviction
by reason of any such damage defective condition unless:
a) the same was caused by Landlord's gross negligence or willful misconduct
while operating or maintaining the Premises or the Building;
b) the damage or defective condition has substantially prevented Tenant from
conducting its normal business operations or obtaining access to at least
fifty percent (50%) of the Premises: and
c) Landlord shall have failed to commence the remedy thereof and proceeded
with reasonable diligence to complete the same after Landlords receipt of
notice thereof from Tenant.
Furthermore, if such damage or defective condition was caused by, or is
attributed to, a Tenant Change or the unreasonable or improper use of such
system(s) by Tenant or its employees, licensees or invitees:
d) the cost of the remedy thereof shall be paid by Tenant as Additional Rent
pursuant to the provisions of Section 4.3;
e) in no event shall Tenant be entitled to any abatement of rent as specified
above; and
f) Tenant shall be estopped from making any claim for damages arising out of
Landlord's repair thereof.
SECTION 8.9. LIMITATION ON LANDLORD'S LIABILITY FOR FAILURE TO PROVIDE UTILITIES
AND/OR SERVICES. Subject to the provisions of Section 8.11 below, except in the
case of Landlord's gross negligence or willful misconduct or the gross
negligence or willful misconduct of Landlord's agents, contractors, directors,
employees, licensees, officers, partners or shareholders, Tenant hereby releases
Landlord from any liability for damages, by abatement of rent or otherwise, for
any failure or delay in furnishing any of the services or utilities specified in
this Article 8, (including, but not limited to telephone and telecommunication
services), or for any diminution in the quality or quantity thereof.
Tenant's release of Landlord's liability shall be applicable when such
failure, delay or diminution is occasioned, in whole or in part, by repairs,
replacements, or improvements, by any strike, lockout or other labor trouble, by
Landlord's inability to secure electricity, gas, water or other fuel at the
Building after Landlord's reasonable effort to do so, by accident or casualty
whatsoever, by act or default of Tenant or parties other than Landlord, or by
any other cause beyond Landlord's reasonable control. Such failures, delays or
diminution shall never be deemed to constitute a constructive eviction or
disturbance of Tenant's use and possession of the Premises, or serve to relieve
Tenant from paying Rent or performing any of its obligations under the Lease.
Furthermore, Landlord shall not be liable under any circumstances for a
loss of, injury to, or interference with, Tenant's business, including, without
limitation, any loss of profits occurring or arising through or in connection
with or incidental to Landlord's failure to furnish any of the services or
utilities required by this Article 8.
Notwithstanding the above, Landlord shall use commercially reasonable
efforts to remedy any delay, defect or insufficiency in providing the services
and or utilities required hereunder.
SECTION 8.10. TENANT PRONDED SERVICES. Tenant shall make no contract or employ
any labor in connection with the maintenance, cleaning or other servicing of the
physical structures of the Premises or for installation of any computer,
telephone or other cabling, equipment or materials provided in or to the
Premises (collectively and individually a "Tenant Service") without the prior
consent of Landlord, which consent shall not be unreasonably withheld. Tenant
shall not permit the use of any labor, material or equipment in the performance
of any Tenant Service if the use thereof, in Landlord's reasonable judgment,
would violate the provisions of any agreement between Landlord and any union
providing work, labor or services in or about the Premises, Building and/or
create labor disharmony in the Building.
11
<PAGE> 15
SECTION 8.11. RENT ABATEMENT. Notwithstanding the foregoing, if:
a) Tenant is substantially prevented from using the Premises as a result of
Landlord's failure to provide the utilities and services called for
hereunder;
b) The remedy of such failure is reasonably within the control of Landlord;
c) Tenant has immediately notified Landlord in writing of such interruption, d)
Such interruption of services was not caused by or materially contributed to
by Tenant; and
e) Such interruption continues for more than six (6) consecutive business days
(the "Interruption Period") after Tenant has given Landlord written notice,
then Tenant's Fixed Monthly Rent and Additional Rent shall be abated from
and after the last day of the Interruption Period until such time as
Landlord restores the utilities or service so interrupted. However, in any
event, Landlord shall promptly cure or commence to cure such interruption
and diligently prosecute same to completion.
ARTICLE 9
TENANT'S INDEMNIFICATION AND LIMITATION ON LANDLORD'S LIABILITY
SECTION 9.1. TENANT'S INDEMNIFICATION AND HOLD HARMLESS. For the purposes of
this Section 9.1, "Indemnitee(s)" shall jointly and severally refer to Landlord
and Landlord's agents, clients, contractors, directors, employees, officers,
partners, and/or shareholders.
Tenant shall indemnify and hold Indemnitees harmless from and against all
claims, suits, demands, damages, judgments, costs, interest and expenses
(including attorneys fees and costs incurred in the
12
<PAGE> 16
defense thereof) to which any Indemnity may be subject or suffer when the same
arise out of the negligence or willful of Tenant or the negligence or willful
misconduct of Tenant's agents, contractors, directors, employees, licensees,
officers, partners or shareholders in connection with the use of, work in,
construction to, or actions in, on, upon or about the Premises, including any
actions relating to the installation, placement, removal or financing of any
Tenant Change, improvements, fixtures and/or equipment in, on, upon or about the
Premises.
Tenant's indemnification shall extend to any and all claims and occurrences.
whether for injury to or death of any person or persons. or for damage to
property (including any loss of use thereof, or otherwise, occurring during the
Term or prior to the Commencement Date (if Tenant has been given early access to
the Premises for whatever purpose), and to all claims arising from any condition
of the Premises due to or resulting from any default by Tenant in the keeping,
observance or performance of any covenant or provision of this Lease, or from
the negligence or willful misconduct of Tenant or the negligence or willful
misconduct of Tenant's agents, contractors, directors, employees, licensees,
officers, partners or shareholders.
SECTION 9.2. NULLITY OF TENANT'S INDEMNIFICATION IN EVENT OF GROSS NEGLIGENCE.
Notwithstanding anything to the contrary contained in this Lease, Tenant's
indemnification shall not extend to the gross negligence or willful misconduct
of Landlord or the gross negligence or willful misconduct of Landlord's agents,
contractors, directors, employees, officers, partners or shareholders, nor to
such events and occurrences for which Landlord otherwise carries insurance
coverage.
SECTION 9.3. TENANT'S WAIVER OF LIABILITY. Provided that any injury or damage
suffered by Tenant or Tenant's agents, clients, contractors, directors,
employees, invitees, officers, partners, and/or shareholders did not arise out
of the gross negligence or willful misconduct of Landlord or the gross
negligence or willful misconduct of Landlord's agents, contractors, employees,
officers, partners or shareholders, Tenant shall make no claim against Landlord
and Landlord shall not be liable or responsible in any way for, and Tenant
hereby waives all claims against Landlord with respect to or arising out of:
injury or damage to any person or property in or about the Premises by or from
any cause whatsoever under the reasonable control or management of Tenant.
SECTION 9.4. LIMITATION OF LANDLORD'S LIABILITY. Tenant expressly agrees that,
notwithstanding anything in this Lease and/or any applicable law to the
contrary, the liability of Landlord and Landlord's agents, contractors,
directors, employees, licensees, officers, partners or shareholders, including
any successor in interest thereto (collectively and individually the "Landlord
Parties"), and any recourse by Tenant against Landlord or the Landlord Parties
shall be limited solely and exclusively to the interest of Landlord in the
Building.
Tenant specifically agrees that neither Landlord nor any of the Landlord Parties
shall have any personal liability therefor. Further, Tenant hereby expressly
waives and releases such personal liability on behalf of itself and all
persons claiming by, through or under Tenant.
SECTION 9.5. TRANSFER OF LANDLORD'S LIABILITY. Tenant expressly agrees that, to
the extent that any transferee assumes the obligations of Landlord hereunder,
and provided Landlord has either transferred the complete Security Deposit held
pursuant to this Lease or refunded the same to Tenant as of the date of such
transfer, then the covenants and agreements on the part of Landlord to be
performed under this Lease which arise and/or accrue after the date of such
transfer shall not be binding upon Landlord herein named from and after the date
of transfer of its interest in the Building.
SECTION 9.6. LANDLORD'S INDEMNIFICATION. Landlord shall indemnify, and hold
Tenant and Tenant's agents, contractors, directors, employees, officers,
partners or shareholders harmless from and against any and all claims, causes of
action, liabilities, losses, reasonable costs and expenses, including reasonable
attorneys' fees and court costs, arising from or in connection with:
a) any activity occurring, or condition existing, at or in the Building (other
than in the Premises) when such activity or condition is under the
reasonable control of Landlord, except when the same is caused in whole or
in part by the negligence or willful misconduct of Tenant or Tenant's
employees, agents, or contractors, or by Tenant's breach or default in the
performance of any obligation under this Lease; or
b) any activity occurring, or condition existing in the Premises when solely
caused by the gross negligence or willful misconduct of Landlord or
Landlord's employees, agents, or contractors.
<PAGE> 17
ARTICLE 10
COMPLIANCE WITH LAWS
SECTION 10.1. TENANT'S COMPLIANCE WITH LAWS. Tenant shall not use, permit to be
used, or permit anything to be done in or about all or any portion of the
Premises which will in any way violate any laws, statutes, ordinances, rules,
orders or regulations duly issued by any governmental authority having
Jurisdiction over the Premises, or by the Board of Fire Underwriters (or any
successor thereto) (collectively "Codes").
SECTION 10.2. TENANT TO COMPLY ET SOLE EXPENSE. Tenant shall, at its sole
expense, promptly remedy any violation of such Codes, provided, however, that
nothing contained in this Section 10.2 shall require Tenant to make any
structural changes to the Premises, unless such changes are required due to
either Tenant or Tenant's agents, clients, contractors, directors, employees,
invitees, licensees, officers, partners or shareholders use of the Premises for
purposes other than general office purposes consistent with a Class A office
building.
SECTION 10.3. CONCLUSIVE EVIDENCE OF VIOLATION. The judgment of any court of
competent jurisdiction; Tenant's admission; or the admission of any one or more
of Tenant's agents, contractors, directors, employees, officers, partners or
shareholders in any against Tenant, whether or not Landlord is a party thereto,
that Tenant has so violated any one or more Codes shall be conclusive evidence
of such violation as between Landlord and Tenant.
SECTION 10.4. LANDLORD'S COMPLIANCE WITH LAWS. Landlord shall comply with all
Codes relating to the Building, provided that compliance with such Codes is not
the responsibility of Tenant under this Lease, and provided further that
Landlord's failure to comply therewith would prohibit Tenant from obtaining or
maintaining a certificate of occupancy for the Premises, or would unreasonably
and materially affect the safety of Tenant's employees or create a significant
health hazard for Tenant's employees. Landlord shall be permitted to include in
Operating Expenses any costs or expenses incurred by Landlord under this Section
10.4 to the extent consistent with the provisions of Section 4. l (b) above.
ARTICLE 11
ASSIGNMENT AND SUBLETTING
SECTION 11.1. PERMISSION REQUIRED FOR ASSIGNMENT OR SUBLET. Unless Landlord's
prior written consent has been given, which consent shall not be unreasonably
withheld, conditioned and/or delayed, this Lease shall not, nor shall any
interest herein, be assignable as to the interest of Tenant by operation of law;
nor shall Tenant:
a) assign, mortgage, pledge, encumber or otherwise transfer this Lease, the
Term and estate hereby granted or any interest hereunder;
b) permit the Premises or any part thereof to be utilized by anyone other than
Tenant (whether as by a concessionaire, franchisee, licensee, permittee or
otherwise); or
c) except as hereinafter provided, sublet the Premises or any part thereof
(collectively with the items contained in this Section 11.1, a "Transfer").
Any assignment, mortgage, pledge, encumbrance, transfer or sublease without
Landlord's prior written consent shall be voidable, and, in Landlord's sole
election, shall constitute a material default under this Lease.
SECTION 11.2. VOLUNTARY ASSIGNMENT DUE TO CHANGES IN STRUCTURE OF TENANT. Any
dissolution, merger, consolidation, or other reorganization of Tenant, or the
single sale or other transfer of a controlling percentage of the capital stock
of Tenant (other than the sale of such stock pursuant to a public offering that
results in a majority of the same members of the Board and executive officers
remaining in control of said corporation) and or the single sale of fifty
percent (50%) or more of the value of the assets of Tenant, shall be deemed a
voluntary assignment. The phrase "controlling percentage" means the ownership
of, and the right to vote stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of Tenant's capital stock issued,
outstanding, and entitled to vote for the election of directors. Notwithstanding
anything to the contrary contained herein, the preceding paragraph shall not
apply to corporations whose stock is traded through a recognized United States
exchange or over the counter.
Any withdrawal or change (whether voluntary, involuntary, or by operation of
law) in the partnership by one or more partners who own, in the aggregate fifty
percent (50%) or more of the partnership, or the dissolution of the partnership,
shall be deemed a voluntary assignment.
If Tenant is comprised of more than one individual, a purported assignment
(whether voluntary, involuntary, or by operation of law), by any one of the
persons executing this Lease shall be deemed a voluntary assignment.
<PAGE> 18
SECTION 11.3. REQUEST TO ASSIGN OR SUBLEASE. If at any time during the Term,
Tenant wishes to assign this Lease or any interest therein, or to sublet all or
any portion of the Premises, then at least thirty (30) days prior to the date
when Tenant desires the assignment or sublease to be effective, Tenant shall
give written notice to Landlord setting forth the name, address, and business of
the proposed assignee or sublessee, business and personal credit applications
completed on Landlord's standard application forms, and information (including
references and such financial documentation as Landlord shall reasonably
prescribe) concerning the character and financial condition of the proposed
assignee or sublessee, the effective date of the assignment or sublease, and all
the material terms and conditions of the proposed assignment, and with reference
solely to a sublease: a detailed description of the space proposed to be sublet,
together with any rights of the proposed sublessee to use Tenant's improvements
and/or ancillary services with the Premises.
SECTION 11.4. LANDLORD'S CONSENT. Landlord shall have twenty (20) days after
Tenant's notice of assignment and/or sublease is received with the financial
information reasonably requested by Landlord to advise Tenant of Landlord's
consent to or disapproval of such proposed assignment or sublease, which consent
shall not be unreasonably withheld, conditioned and/or delayed. Any disapproval
by Landlord shall contain Landlord's detailed reasons for such disapproval.
Tenant acknowledges that Landlord's consent shall be based upon the criteria
listed in Sections 11.4 (a) through (e) below, and subject to Landlord's right
to unilaterally disapprove of any proposed assignment and/or sublease, based on
the existence of any condition contained within Section l l.5 hereinbelow. If
Landlord provides its consent or fails to provide its disapproval within the
time period specified, Tenant shall be free to complete the assignment and/or
sublet such space to the party contained in Tenant's notice, subject to the
following conditions:
a) The assignment and/or sublease shall be on the same terms as were set forth
in the notice given to Landlord;
b) The assignment and/or sublease shall be documented in a written format that
is reasonably acceptable to Landlord, which form shall specifically include
the assignee's and/or sublessee's acknowledgement and acceptance of the
obligation contained in this Lease, in so far as applicable;
c) The assignment and/or sublease shall not be valid, nor shall the assignee or
sublessee take possession of the Premises, or subleased portion thereof,
until an executed duplicate original of such sublease and/or assignment has
been delivered to Landlord;
d) The assignee and/or sublessee shall have no further right to assign this
Lease and/or sublease the Premises;
e) Tenant shall pay monthly to Landlord one-half (1/2) of the "Net Rental
Profit" per square foot received by Tenant. Such Net Rental Profit shall be
payable to Landlord as Additional Rental under this Lease without affecting
or reducing any other obligation of Tenant hereunder.
Net Rental Profit shall be calculated by subtracting the Rent and Additional
Rent paid to Landlord by Tenant, as well as Tenant's reasonable costs of
subletting such space (such as rent abatement, fair market leasing commissions,
reasonable marketing expenses, new leasehold improvements, and reasonable
attorney fees and expenses, as well as any economic consideration received by
Tenant arising out of the sale of Tenant's business, or because Tenant provides
ancillary business services to the sublessee, such as reception or secretarial
services, or office furnishings or equipment, from the total rent per square
foot that Tenant is paid by any sublessee.
Tenant shall deliver to Landlord a statement within thirty (30) days after the
end of each calendar year and/or within thirty (30) days after the expiration or
earlier termination of the Term of this Lease in which any sublease of the
Premises has occurred, specifying for each such sublease:
i) the date of its execution and delivery, the number of square feet of the
Rentable Area demised thereby and the Term thereof, and
ii) a computation in reasonable detail showing
1) the amounts (if any) paid and payable by Tenant to Landlord pursuant to
this Section 11.4 with respect to such sublease for the period covered
by such statement and
2) the amounts (if any) paid and payable by Tenant to Landlord pursuant to
this Section 11.4 with respect to any payments received from a sublessee
during such period but which relate to an earlier period.
<PAGE> 19
SECTION 11.5. REASONABLE GROUNDS FOR DENIAL OF ASSIGNMENT AND/OR SUBLEASE.
Landlord and Tenant agree that, in addition to such other reasonable grounds as
Landlord may assert for withholding its consent, it shall be reasonable under
this Lease and any applicable law for Landlord to withhold its consent to any
proposed Transfer, where any one or more of the following conditions exists:
a) The proposed sublessee or assignee (a "Transferee") is, in Landlord's
reasonable judgment, of a character or reputation which is not consistent
with those businesses customarily found in a Class A office building within
the geographic vicinity of the Building;
b) The Transferee is engaged in a business or intends to use all or any portion
of the Premises for purposes which are not consistent with those generally
found in the Building or other Class A office buildings in the vicinity of
the Building, provided, however, that in no event shall Landlord be
permitted to decline Tenant's request for a Transfer solely on the basis of
said Transferee's intent to change the Specified Use from that of Tenant,
unless such proposed change shall violate any Exclusive Use provision
already granted by Landlord;
c) The Transferee is either a governmental agency or instrumentality thereof;
d) The Transfer will result in more than a reasonable and safe number of
occupants within the Premises;
e) The Transferee is not a party of reasonable financial worth and/or financial
stability in light of the responsibilities involved under the sublease, if a
sublessee, or the Lease, if an assignee, on the date consent is requested,
or has demonstrated a prior history of credit instability or unworthiness;
f) The Transfer will cause Landlord to be in violation of another lease or
agreement to which Landlord is a party, or would give another occupant of
the Building a right to cancel its lease;
g) The Transferee will retain any right originally granted to Tenant to
exercise a right of renewal, right of expansion, right of first offer or
other similar right held by Tenant. However, nothing contained herein shall
prevent Tenant from exercising any Option to Extend the Term hereof it may
have early, concurrent with Tenant's request for such transfer;
h) Either the proposed Transferee, or any person or entity which directly or
indirectly, controls, is controlled by, or is under common control with, the
proposed Transferee:
i) is a tenant in the Building at the time Tenant requests approval of the
proposed Transfer, or
ii) Is engaged in on-going negotiations with Landlord to lease space in the
Building at the time Tenant requests approval of the proposed Transfer;
i) The Transferee intends to use all or a portion of the Premises for medical
procedures or for a primary business which is as a boiler-room type sales or
marketing organization. If Landlord withholds or conditions its consent and
Tenant believes that Landlord did so contrary to the terms of this Lease,
Tenant may, as its sole remedy, prosecute an action for declaratory relief
to determine if Landlord properly withheld or conditioned its consent, and
Tenant hereby waives all other remedies, including without limitation those
set forth in California Civil Code Section 1995.310.
SECTION 11.6. TENANT'S CONTINUED OBLIGATION. Any consent by Landlord to an
assignment of this Lease and/or sublease of the Premises shall not release
Tenant from any of Tenant's obligations hereunder or be deemed to be a consent
by Landlord to any subsequent hypothecation, assignment, subletting, occupation
or use by another person, and Tenant shall remain liable to pay the Rent and/or
perform all other obligations to be performed by Tenant hereunder. Landlord's
acceptance of Rent or Additional Rent from any other person shall not be deemed
to be a waiver by landlord any provision of this Lease. Landlord's consent to
one assignment or subletting shall not be deemed consent to any subsequent
assignment or subletting.
If any assignee or sublessee of Tenant or any successor of Tenant defaults
in the performance of any of the provisions of this Lease, whether or not
Landlord has collected Rent directly from said assignee or sublessee, Landlord
may proceed directly against Tenant without- the necessity of exhausting
remedies against such assignee, sublessee or other successor-in-interest.
Provided that in no event shall any father assignment, sublease, amendment or
modification to this Lease serve to either increase Tenant's liability or expand
Tenant's duties or obligations hereunder, or relieve Tenant of its liability
under this Lease, then Landlord may consent to subsequent assignments or
subletting of this Lease or amendments or modifications to this Lease with any
assignee, without notifying Tenant or any successor of Tenant, and without
obtaining their consent thereto.
<PAGE> 20
SECTION 11.7. TENANT TO PAY LANDLORD'S COSTS. If Tenant assigns or sublets the
Premises or requests the consent of Landlord to any assignment, subletting or
other modification of this Lease, or if Tenant requests the consent of Landlord
for any act that Tenant proposes to do, whether or not Landlord shall grant
consent thereto, then Tenant shall, concurrent with Tenant's submission of any
written request therefor, pay Landlord's reasonably anticipated costs for review
of Tenant's documentation, credit check and processing fees, as well as any
reasonable legal fees incurred by Landlord in connection therewith (which legal
fees shall not exceed $1,500.00).
SECTION 11.8. SUCCESSORS AND ASSIGNS. Subject to the provisions contained
herein, the covenants and agreements contained in this Lease shall bind and
inure to the benefit of Landlord and Tenant, their respective successors and
assigns and all persons claiming by, through or under them.
ARTICLE 12
MAINTENANCE, REPAIRS, DAMAGE, DESTRUCTION, RENOVATION AND/OR
ALTERATION
SECTION 12.1. TENANT'S OBLIGATION TO MAINTAIN. Tenant shall, at Tenant's sole
expense, maintain the Premises in good order and repair, and shall also keep
clean any portion of the Premises which Landlord is not obligated to clean. Such
obligation shall include the clean-out; repair and/or replacement of Tenant's
garbage disposal(s), Instant-Heat or other hot water producing equipment, if
any, and the cleaning and removal of any dishes and/or food prior to the same
becoming unsanitary. If Tenant becomes obligated to repair anything within the
Premises, Tenant shall advise Landlord's managing agent of such need, which
request shall be presumed conclusive evidence of Tenant's obligation and
willingness to reimburse Landlord for such repair(s).
Further, Tenant shall pay the cost of any injury, damage or breakage in,
upon or to the Premises created by Tenant's gross negligence or willful
misconduct or the gross negligence or willful misconduct of Tenant's agents,
clients, contractors, directors, employees, invitees, licensees, officers,
partners or shareholders.
Subject to Tenant's obligation for reimbursement to Landlord, as specified
herein, Landlord shall make all repairs to the Premises and the exterior walls,
foundation and roof of the Building, the structural portions of the floors of
the Building, the systems and equipment of the Building and the Tenant
Improvements installed in the Premises. However, if such repairs, maintenance or
cleaning are required due to Tenant's gross negligence or willful misconduct or
the gross negligence or willful misconduct of Tenant's agents, clients,
contractors, directors, employees, invitees, licensees, officers, partners or
shareholders, then, Tenant shall, within ten (10) days after receipt of
Landlord's billing therefor, reimburse Landlord, as Additional Rent, for any
expense of such repairs, cleaning and/or maintenance in excess of any insurance
proceeds available for reimbursement thereof, including for any deductible
anticipated in connection therewith.
Tenant hereby waives all right to make repairs at Landlord's expense under
the provisions of Section 1932(1), 1941 and 1942 of the Civil Code of
California.
SECTION 12.2. REPAIR PERIOD NOTICE. Tenant shall give prompt notice to Landlord
of Tenant's actual knowledge of any damage or destruction to all or any part of
the Premises or Building resulting from or arising out of any fire, earthquake,
or other identifiable event of a sudden, unexpected or unusual nature
(individually or collectively a "Casualty"). The time periods specified in this
Section 12.2. shall commence after Landlord receives said written notice from
Tenant of the occurrence of a Casualty. After receipt of Tenant's written notice
that a Casualty has occurred, Landlord shall, within the later of:
a) sixty (60) days after the date on which Landlord determines the full
extent of the damage caused by the Casualty; or
b) thirty (30) days after Landlord has determined the extent of the insurance
proceeds available to effectuate repairs, but
c) in no event more than one hundred and twenty ( 120) days after the
Casualty, provide written notice to Tenant indicating the anticipated time
period for repairing the Casualty (the "Repair Period Notice"). The Repair
Period Notice shall also state, if applicable, Landlord's election either
to repair the Premises, or to terminate this Lease, to the provisions of
Section 12.3, and if Landlord elects to terminate this Lease, Landlord
shall use commercially reasonable efforts to provide Tenant with a minimum
period of ninety (90) days within which to fully vacate the Premises.
SECTION 12.3. LANDLORD'S OPTION TO TERMINATE OR REPAIR. Notwithstanding anything
to the contrary contained herein, Landlord shall have the option. but not the
obligation to elect not to rebuild or restore the Premises and/or the Building
if one or more of the following conditions is present:
a) repairs to the Premises cannot reasonably be completed within one hundred
and eighty (180) days after the date of the Casualty (when such repairs
are made without the payment of overtime or other premiums);
<PAGE> 21
b) repairs required cannot be made pursuant to the then-existing laws or
regulations affecting the Premises or Building, or the Building cannot be
restored except in a substantially different structural or architectural
form than existed before the Casualty;
c) the holder of any mortgage on the Building or ground or underlying lessor
with respect to the Real Property and/or the Building shall require that all
or such large a portion of the insurance proceeds be used to retire the
mortgage debt, so that the balance of insurance proceeds remaining available
to Landlord for completion of repairs shall be insufficient to repair said
damage or destruction;
d) the holder of any mortgage on the Building or ground or underlying lessor
with respect to the Real Property and/or the Building shall terminate the
mortgage, ground or underlying lease, as the case may be;
e) provided Landlord has carried the coverage Landlord is required to obtain
under Section 19.1 of this Lease, the damage is not fully covered, except
for deductible amounts, by Landlord's insurance policies;
f) more than thirty-three and one-third percent (33 1/3%) of the Building is
damaged or destroyed, whether or not the Premises is affected, provided that
Landlord elects to terminate all other leases for offices of a similar size
in the Building.
If Landlord elects not to complete repairs to the Building or Premises,
pursuant to this Section 12.3, Landlord's election to terminate this Lease shall
be stated in the Repair Period Notice, in which event this Lease shall cease and
terminate as of the date contained in Landlord's Repair Period Notice.
If one hundred percent of the Building is damaged or destroyed, as certified
by an independent building inspector, this Lease shall automatically terminate
after Tenant's receipt of written notice of such termination from Landlord, and
without action beyond the giving of such notice being required by either
Landlord or Tenant.
Upon any termination of this Lease pursuant to this Section 12.3, Tenant
shall pay its prorate share of Fixed Monthly Rent and Additional Rent, properly
apportioned up to the date of such termination, reduced by any abatement of Rent
to which Tenant is entitled under Section 12.5; after which both Landlord and
Tenant shall thereafter be freed and discharged of all further obligations under
the Lease, except for those obligations which by their provisions specifically
survive the expiration or earlier termination of the Term.
SECTION 12.4. TENANT'S OPTION TO TERMINATE. If
a) the Repair Period Notice provided by Landlord indicates that the anticipated
period for repairing the Casualty exceeds one hundred and eighty (180) days
after the Casualty (the "Repair Period"), or
b) The Casualty to the Premises occurs during the last twelve ( 12) months of
the Term; then
Tenant shall have the option, but not the obligation, to terminate this
Lease by providing written notice ("Tenant's Termination Notice") to Landlord
within thirty (30) days after receiving the Repair Period Notice in the case of
12.4 (a); or within thirty (30) days after the Casualty, in the case of Section
12.4 (b). Furthermore, if:
c) Landlord does not complete the repairs required hereinabove within the
Repair Period, and
d) further provided Landlord has not diligently commenced and continued to
prosecute to completion repair of the damage and/or destruction caused by
the Casualty, and
e) Landlord has not completed the repairs thereafter on or before thirty (30)
days after the expiration of the Repair Period,
then Tenant shall also have the option, but not the obligation, to terminate
this Lease by giving Landlord written notice of its intention to so terminate,
which notice shall be given not more than forty-five (45) days after expiration
of the Repair Period.
Tenant's failure to provide Landlord with Tenant's Termination Notice within
the time periods specified hereinabove shall be deemed conclusive evidence that
Tenant has waived its option to terminate this Lease.
SECTION 12.5. TEMPORARY SPACE AND/OR RENT ABATEMENT DURING REPAIRS OR
RENOVATION. During the Repair Period or during any such period that Landlord
completes Work (as defined hereinbelow) or Renovations (as defined hereinbelow),
if available, and if requested by Tenant, Landlord shall make available to
Tenant other space in the Building which, in Tenant's reasonable opinion, is
suitable for the temporary conduct of Tenant's business. However, if such
temporary space is smaller than the Premises, Tenant shall pay Fixed Monthly
Rent and Additional Rent for the temporary space based upon the calculated rate
per Rentable square foot payable hereunder for the Premises, times the number of
Rentable square feet available for Tenant's use in the temporary space.
<PAGE> 22
If no temporary space is available that is reasonably satisfactory to
Tenant, and any part of the Premises is rendered untenantable by reason of such
Casualty, Work or optional renovation; and further provided that the Casualty
was not the result of the gross negligence or willful misconduct of Tenant or
the gross negligence and/or willful misconduct of Tenant's agents. contractors,
directors, employees, licensees, of officers, partners or shareholders. then to
the extent that all or said portion of the usable area of the Premises is so
rendered untenantable by reason or such Casualty, Work or optional renovation.
Tenant shall be provided with a proportionate abatement of Fixed Monthly Rent
and Additional Rent. Said proportional abatement shall be based on the Usable
Square Footage of the Premises that cannot and is not actually used by Tenant,
divided by the total Usable square feet contained in the Premises. That
proportional abatement, if any, shall be provided during the period beginning on
the later of:
a) the date of the Casualty; or
b) the actual date on which Tenant ceases to conduct Tenant's normal business
operations in all or any portion of the Premises, and
shall end on the date Landlord achieves substantial completion of
restoration of the Premises. Tenant's acceptance of said abatement of Rent shall
be deemed conclusive evidence of Tenant's waiver of any further claim or right
of future claim for any loss or damage asserted by Tenant arising out of the
Casualty Repair, Work or Renovation, as the case may be.
SECTION 12.6. TENANT'S WAIVER OF CONSEQUENTIAL DAMAGES. Subject to Section 12.4,
the provisions contained in Section 12.5 are Tenant's sole remedy arising out of
any Casualty. Landlord shall not be liable to Tenant or any other person or
entity for any direct, indirect, or consequential damage (including but not
limited to lost profits of Tenant or loss of or interference with Tenant's
business), unless caused by the gross negligence or willful misconduct of
Landlord or the gross negligence or willful misconduct of Landlord's agents,
contractors, directors, employees, licensees, officers, partners or
shareholders, due to, arising out of, or as a result of the Casualty (including
but not limited to the termination of the Lease in connection with the
Casualty).
SECTION 12.7. REPAIR OF THE PREMISES WHEN CASUALTY NOT CAUSED BY TENANT. If the
cost of repair of any Casualty is covered under one or more of the insurance
policies Landlord is required herein to provide, then,- provided such Casualty
is not a result of Tenant's negligence or misconduct or the negligence or
misconduct of Tenant's agents, contractors, directors, employees, licensees,
officers, partners or shareholders, Landlord shall restore the base core and
shell of the Premises to its condition prior to the Casualty and repair and/or
replace the Improvements previously installed in the Premises, to a maximum of
$35.00 per usable square foot. Tenant shall have the option to either, at
Tenant's sole expense, complete the balance of repairs needed to restore the
Improvements contained in the Premises to their condition prior to the Casualty
or to continue Tenant's normal business operations in the Premises in the
condition to which Landlord has so restored the Improvements.
If Landlord has elected to complete repairs to the Premises, and has not
elected to terminate this Lease, as specified in Section 12.3, then Landlord
shall complete such repairs within the Repair Period, in a manner, and at times,
which do not unreasonably interfere with Tenant's use of that portion of the
Premises remaining unaffected by the Casualty. Provided Landlord has elected to
make the repairs required hereunder, this Lease shall not be void or voidable
during the Repair Period, nor shall Landlord be deemed to have constructively
evicted Tenant thereby.
SECTION 12.8. REPAIR OF THE PREMISES WHEN CASUALTY CAUSED BY TENANT. If the
Casualty to all or any portion of the Premises resulted from the gross
negligence and/or willful misconduct of Tenant or the gross negligence and/or
willful misconduct of Tenant's agents, contractors, directors, employees,
licensees, officers, partners or shareholders, Landlord shall not be required to
repair any such injury or damage. Landlord shall only repair, at its expense,
damage or destruction to the Building, and Tenant shall pay the cost of
repairing the Premises and any deductible payable by Landlord for repair of the
Building. Furthermore, Tenant hereby waives the provisions of California Civil
Code Sections 1932(2) and 1933(4) and the provisions of any successor or other
law of like import.
If the Casualty to all or any portion of the Premises was caused by the
gross negligence and/or willful misconduct of Tenant or the gross negligence
and/or willful misconduct of Tenant's agents, contractors, directors, employees,
officers, partners, and/or shareholders, then, except in the case of Landlord's
gross negligence and/or willful misconduct, Landlord shall not be liable for any
inconvenience or annoyance to Tenant or Tenant's agents, clients, contractors,
directors, employees, invitees, licensees, officers, partners or shareholders,
or for injury to the business of Tenant resulting in any way from such damage,
or from Landlord's undertaking of such repairs.
SECTION 12.9. REPAIR OF THE BUILDING. Except as specified hereinabove. unless
Landlord terminates this Lease as permitted hereinabove, Landlord shall repair
the Building, parking structure or other supporting structures and facilities
within two hundred and seventy (270) days after Landlord becomes aware of such
damage and/or destruction.
<PAGE> 23
SECTION 12.10. GOVERNMENT-REQUIRED REPAIRS. If, during the Term, additional
inspections other than those standard annual or biannual inspections to which
the Building may generally be subject; testing, repairs and/or reconstruction
(collectively the "Work") are required by any governmental authority, or if,
upon the recommendation of its engineers, Landlord independently elects to
undertake all or any portion of the Work prior to being required to do so by
such governmental authority, Landlord shall give notice thereof to Tenant and
shall use its best efforts not to unreasonably interfere with Tenant's use of
the Premises while completing the Work. Tenant shall cooperate fully with
Landlord in connection with the Work and, upon the prior written request Of
Landlord, shall make the Premises available for completion of the Work. Tenant
agrees that Landlord shall allocate all costs associated with completion of the
Work to the Building's Operating Expenses, when permitted under to the
provisions of Section 4.1 of this Lease.
If Landlord elects to undertake the Work during the Term, then Tenant shall
be entitled to an abatement of rent, pursuant to the provisions of Section 12.5
hereinabove, and Landlord shall be completely responsible for repair of any
damage to the Premises and all costs associated with the removal. moving and/or
storage of Tenant's furniture. artwork. office equipment and files. Landlord
will restore any and all areas damaged by completion of the Work to their
previous quality and pay ail clean-up costs. Landlord further agrees that it
shall use commercially reasonable efforts to see that all construction, such as
coring or power nailing that could be disruptive to Tenant's normal business
operations shall, in so far as is reasonably possible, be performed between the
hours of 7:00 p.m. to 7:00 a.m. Monday through Friday; after 1:00 p.m. on
Saturdays and/or at any time on Sundays.
Except in the case of Landlord's gross negligence and/or willful misconduct
or the gross negligence and/or willful misconduct of Landlord's agents,
contractors, directors, employees, officers, partners, and/or shareholders,
Tenant shall not have the right to terminate this Lease as a result of Landlord
undertaking the Work, nor shall Tenant or any third party claiming under Tenant
be entitled to make any claim against Landlord for any interruption,
interference or disruption of Tenant's business or loss of profits therefrom as
a result of the Work, and Tenant hereby releases Landlord from any claim which
Tenant may have against Landlord arising from or relating to, directly or
indirectly, the performance of the Work by Landlord.
SECTION 12.11. OPTIONAL LANDLORD RENOVATION. Subject to Landlord's obligations
pursuant to the attached Exhibit B regarding initial construction within the
Premises, it is specifically understood and agreed that Landlord has no
obligation and has made no promises to alter, remodel, improve, renovate or
decorate the Premises, Building, or any part thereof and that, except as set
forth herein, no representations respecting the condition of the Premises or the
Building have been made by Landlord to Tenant.
However, Tenant acknowledges that, at any time and from time to time during
the Term, Landlord may elect, in Landlord's sole discretion, to renovate,
improve, alter or modify the Building and/or Premises including without
limitation, the parking facilities, common areas, systems, equipment, roof, and
structural portion of the same, which Renovations may include, without
limitation:
a) modifying the common areas and tenant spaces to comply with applicable laws
and regulations, including regulations relating to the physically disabled,
seismic conditions and building safety and security and
b) installing new carpeting, lighting and wall covering in the Building common
areas,
which Sections 12.1 1 (a) and 12.1 l (b) shall hereinafter collectively be
known as "the Renovations".
In connection with such Renovations, Landlord may, among other things, erect
scaffolding or other necessary structures in the Building, limit or eliminate
access to portions of the Building, common areas or parking facilities serving
the Building, or perform other work in the Building, which work may create
noise, dust or debris that remains in the Building.
Upon not less than forty-eight (48) hours written reasonable notice,
Landlord shall have the right to access through the Premises as well as the
right to take into and upon and through all or any part of the Premises, or any
other part of the Building, all materials that may reasonably be required to
make such repairs, alterations, decorating, additions or improvements pursuant
to the provisions of this Section 12.11. So long as Tenant shall maintain
reasonable access to the Premises, Building and parking facilities, Landlord
shall also have the right, in the course of the Renovations, to close entrances,
doors, corridors, elevators, or other building facilities, or temporarily to
abate the operation of such facilities.
So long as Tenant is not required to vacate the Premises for any reason
arising out of the Renovations, and maintains reasonable access to the Premises,
Tenant shall permit all of the Renovations to be done, and except in the case of
Landlord's gross negligence or willful misconduct or the gross negligence or
willful misconduct of Landlord's contractors, directors, employees, officers,
partners or shareholders, without claiming Landlord is guilty of the
constructive eviction or disturbance of Tenant's use and possession.
Further, except in the case of Landlord's gross negligence or willful
misconduct, or that of its agents, contractors, employees, officers, partners or
shareholders, Landlord shall not be liable to Tenant in any manner, whether for
reimbursement of any expense, injury, loss or damage to Tenant's property,
business, or any person claiming by or under Tenant, and whether by reason of
interference with the business of Tenant or inconvenience or annoyance to
Tenant or the customers of Tenant resulting from any work done in or about
the Premises or the Building or to any
<PAGE> 24
adjacent or nearby building, land, street or alley. However, Landlord agrees
that the Renovations shall be scheduled insofar as is commercially reasonable to
permit Tenant to continue its normal business operations, with advance notice
thereof, and in such commercially reasonable manner so as to minimize Tenant's
inconvenience.
SECTION 12.12. OPTIONAL TENANT CHANGES DURING THE TERM. After completion of the
initial Improvements contemplated hereunder, if any, Tenant shall make no
alteration, change, addition, removal, demolition, improvement, repair or
replacement in, on, upon, to or about the Premises, or at any time to any
portion of the Building (collectively or individually a "Tenant Change"),
without the prior written consent of Landlord, which consent shall be in
Landlord's reasonable discretion. Except as otherwise specified in Article 7,
any Tenant Change shall, at the termination of this Lease, become a part of the
Building and belong to Landlord, pursuant to the provisions of Article 7. Any
application for Landlord's consent to a Tenant Change, and the completion
thereof, shall be in conformance with the provisions of Exhibit B-1, attached
hereto and made a part hereof by reference.
Tenant shall not knowingly permit Tenant's agents, clients, contractors,
directors, employees, invitees, licensees, officers, partners or shareholders to
deface the walls, floors and/or ceilings of the Premises, nor marls, drive
nails, screws or drill holes into, paint. or in any way mar any surface in the
Building. Notwithstanding the above. Tenant is hereby permitted to install such
pictures. certificates. licenses. artwork, bulletin boards and similar items as
are normally used in Tenants business. so long as such installation is carefully
attached to the walls by Tenant in a manner reasonably prescribed by Landlord.
If Tenant desires, as a part of any Tenant Change, to make any revisions
whatsoever to the electrical, HVAC, mechanical, plumbing, or structural systems
of the Building or Premises, such revisions must be completed by subcontractors
specified by Landlord and in the manner and location(s) reasonably prescribed by
Landlord. If Tenant desires to install any telephone outlets, the same shall be
installed in the manner and location(s) reasonably prescribed by Landlord.
If Landlord consents to any requested Tenant Change, Tenant shall give
Landlord a minimum of fifteen (15) days written notice prior to commencement
thereof. Landlord reserves the option, but not the obligation, to enter upon the
Premises for the purpose of posting and maintaining such notices on the Premises
as may be reasonably necessary to protect Landlord against mechanic's liens,
material man's liens or other liens, and/or for posting any other notices that
may be proper and necessary in connection with Tenant's completion of the Tenant
Change.
If any alterations, additions or improvements made by Tenant after or apart
from Landlord's completion of the initial Improvements contemplated pursuant to
Exhibit "B" attached hereto result in Landlord being required to make any
alterations to other portions of the Building in order to comply with any
applicable statutes, ordinances or regulations (e.g., "handicap ordinances")
then Tenant shall reimburse Landlord upon demand for all costs and expenses
incurred by Landlord in making such alterations. However, Landlord shall be
solely responsible for any such costs incurred due solely to the change in the
status of the Premises from "unoccupied" to "occupied".
SECTION 12.13. EXPRESS AGREEMENT. The provisions of this Lease, including those
contained in this Article 12, constitute an express agreement between Landlord
and Tenant that applies in the event of any Casualty to the Premises, Building
or Real Property. Tenant, therefore, fully waives the provisions of any statute
or regulations, including California Civil Code Sections 1932(2) and 1933(4),
and any other law or statute which purports to govern the rights or obligations
of Landlord and Tenant concerning a Casualty in the absence of express
agreement. Tenant and Landlord expressly agree and accept that any successor or
other law of like import shall have no application hereunder.
ARTICLE 13
CONDEMNATION
SECTION 13.1. CONDEMNATION OF THE PREMISES. If more than twenty five percent
(25%) of the Premises is lawfully condemned or taken in any manner for any
public or quasi-public use, or if any portion of the Building is condemned or
taken in such a manner that Tenant is reasonably prevented from obtaining access
to the Building or the Premises, this Lease may be terminated at the option of
either Landlord or Tenant by one party giving the other thirty (30) days written
notice of its intent to do so. If either Landlord or Tenant provide the other
party written notice of termination, the Term and estate hereby granted shall
forthwith cease and terminate as of the earlier of the date of vesting of title
in such condemnation or taking or the date of taking of possession by the
condemning authority.
If less than twenty-five percent (25%) of the Premises is so condemned or
taken, then the term and estate hereby granted with respect to such part shall
forthwith cease and terminate as of the earlier of the date of vesting of title
in such condemnation or taking or the date of taking of possession by the
condemning authority, and the Fixed Monthly Rent payable hereunder (and
Additional Rent payable pursuant to Articles 3 or 4) shall be abated on a
prorated basis, by dividing the total number of Usable square feet so taken by
the total number of Usable square feet contained in the Premises, then
multiplying said percentage on a monthly basis, continuing from the date of such
vesting of title to the date specified in this Lease for the expiration of the
Term hereof.
Notwithstanding the above, if any vacant space remains in the Building,
Landlord shall provide Tenant a first right of offer to lease such vacant space
on the same terms and conditions as are contained in this Lease, in which case
this Lease shall be amended to replace the Premises with such vacant space.
<PAGE> 25
SECTION 13.2. CONDEMNATION OF THE BUILDING. If less than twenty-five percent
(25%) of the Building is so condemned or taken, then Landlord shall, to the
extent of the proceeds of the condemnation payable to Landlord and with
reasonable diligence, restore the remaining portion of the Building as nearly as
practicable to its condition prior to such condemnation or taking; except that,
if such proceeds constitute less than ninety percent (90%) of Landlord's
estimate of the cost of rebuilding or restoration, then Landlord may terminate
this Lease on thirty (30) days prior written notice to Tenant.
If more than twenty-five percent (25%) of the Building is so condemned or
taken, but the Premises are unaffected thereby, then Landlord shall have the
option but not the obligation, which election shall be in Landlord's sole
discretion, to terminate this Lease, effective the earlier of the date of
vesting of title in such condemnation or the date Landlord delivers actual
possession of the Building and Premises to the condemning authority, which
election by Landlord shall be provided to Tenant in writing.
SECTION 13.3. AWARD. If any condemnation or taking of all or a part of the
Building takes place, Tenant shall be entitled to join in any action claiming
compensation therefore, and Landlord shall be entitled to receive that portion
of the award made for the value of the Building, Premises, leasehold
improvements made or reimbursed by Landlord, or bonus value of the Lease, and
Tenant shall only be entitled to receive any award made for the value of the
estate Vested this Lease in Tenant, including Tenant's proximate damages to
Tenant's business and reasonable relocation expenses. Nothing shall preclude
Tenant from intervening in any such condemnation proceeding to claim or receive
from the condemning authority any compensation to which Tenant may otherwise
lawfully be entitled in such case in respect of Tenant's property or for moving
to a new location.
SECTION 13.4. CONDEMNATION FOR A LIMITED PERIOD. Notwithstanding the provisions
of Section 13.1,13.2 or 13.3, except during the final twelve (12) months of the
Term, if all or any portion of the Premises are condemned or taken for
governmental occupancy for a limited period, anticipated to be no longer than
sixty (60) days then this Lease shall not terminate; there shall be no abatement
of Fixed Monthly Rent or Additional Rent payable hereunder; and Tenant shall be
entitled to receive the entire award therefor (whether paid as damages, rent or
otherwise).
If, during the final twelve (12) months of the Term, all or any portion of
the Premises are condemned or taken for governmental occupancy for a limited
period anticipated to be in excess of sixty (60) days, or for a period extended
after the expiration of the initial Term, Tenant shall have the option, but not
the obligation, to terminate this Lease, in which case, Landlord shall be
entitled to such part of such award as shall be properly allocable to the cost
of restoration of the Premises, and the balance of such award shall be
apportioned between Landlord and Tenant as of the date of such termination.
If the termination of such governmental occupancy is prior to expiration of
this Lease, and Tenant has not elected to terminate this Lease, Tenant shall,
upon receipt thereof and to the extent an award has been made, restore the
Premises as nearly as possible to the condition in which they were prior to the
condemnation or taking.
ARTICLE 14
MORTGAGE SUBORDINATION; ATTORNMENT AND MODIFICATION OF LEASE
SECTION 14.1. SUBORDINATION. Subject to Tenant's receipt of an appropriate
non-disturbance agreement(s) as set forth below, this Lease shall be subject and
subordinate to all present and future ground or underlying leases of the
Building and to the lien of any mortgage, trust deed or other encumbrances now
or hereafter in force against the Building, if any, and to all renewals,
extensions, modifications, consolidations and replacements thereof, and to all
advances made or hereafter to be made upon the security of such mortgages or
trust deeds, unless the holders of such mortgages, trust deeds or other
encumbrances, or the lessors under such ground lease or underlying leases,
require in writing that this Lease be superior thereto. Landlord's delivery to
Tenant of commercially reasonable non-disturbance agreement(s) (the
"Nondisturbance Agreement ") in favor of Tenant from any ground lessors,
mortgage holders or lien holders of Landlord who come into existence following
the date hereof but prior to the expiration of the Lease Term shall be in
consideration of and a condition precedent to, Tenant's agreement to be bound by
the provisions of this Article 14. Such commercially reasonable non-disturbance
agreement(s) shall include the obligation of any such successor ground lessor,
mortgage holder or lien holder to recognize Tenant's rights specifically set
forth in this Lease and Landlord's obligations to comply with the provisions of
this Lease. Subject to Tenant's receipt of the non-disturbance agreement(s)
described above, Tenant covenants and agrees in the event any proceedings are
brought for the foreclosure of any such mortgage or deed in lieu thereof (or if
any ground lease is terminated), to attorn to the lienholder or purchaser or any
successors thereto upon any such foreclosure sale or deed in lieu thereof (or to
the ground lessor), to recognize such purchaser or lienholder or ground lessor
as the lessor under this Lease, provided such lienholder or purchaser or ground
lessor shall agree to accept this Lease and not disturb Tenant's occupancy, so
long as Tenant is not in default of its obligations pursuant to this Lease.
Landlord's interest herein may be assigned as security at any time to any
lienholder. Tenant shall, within ten (10) business days of request by Landlord,
execute such further instruments or assurances as Landlord may reasonably deem
necessary to evidence or confirm the subordination or superiority of this Lease
to any such mortgages, trust deeds, ground leases or underlying leases in
accordance with the provisions of this Article 14. Subject to Tenant's
receipt of the Nondisturbance Agreement described herein, Tenant waives the
provisions of any current or future laws which may give or purport to give
Tenant any right or election to terminate or otherwise adversely affect this
Lease and the obligations of the Tenant hereunder in the event of any
foreclosure proceeding or sale.
<PAGE> 26
SECTION 14.2. ATTORNMENT. Tenant confirms that if by reason of a default under
an underlying mortgage the interest of Landlord in the Premises is terminated,
provided Tenant is granted in writing continued quiet enjoyment of the Premises
pursuant to the terms and provisions of this Lease, Tenant shall attorn to the
holder of the reversionary interest in the Premises and shall recognize such
holder as Tenant's landlord under this Lease. Tenant shall, within ten (10)
calendar days after request therefor, execute and deliver, at any time and from
time to time, upon the request of Landlord or of the holder of an underlying
mortgage any instrument which may be necessary or appropriate to evidence such
attornment. If Tenant fails to so execute and deliver any such instrument, then
Tenant hereby irrevocably appoints Landlord or such holder as its
attorney-in-fact to execute and deliver for and on behalf of Tenant any such
instrument.
SECTION 14.3. MODIFICATION OF LEASE. If any current or prospective mortgagee or
ground lessor for the Building requires a modification or modifications of this
Lease, which modification or modifications will not cause an increased cost or
expense to Tenant or in any other way materially and adversely change the rights
and obligations of Tenant hereunder, then in such event, Tenant agrees that this
Lease may be so modified.. Tenant agrees to execute and deliver to Landlord
within ten (10) business days following the request therefor whatever documents
are required to effectuate said modification. Should Landlord or any such
current or prospective mortgagee or ground lessor require execution of a short
form of Lease for recording, containing, among other, customary provisions, the
names of the parties, a description of the Premises and the Term, Tenant agrees
to execute and deliver to Landlord such short form of Lease within ten (10)
business days following the request therefor.
ARTICLE 15
ESTOPPEL CERTIFICATES
SECTION 15.1. ESTOPPEL CERTIFICATES. Tenant shall. within ten (10) business days
after receipt of Landlord's written request therefor, execute, acknowledge and
deliver to Landlord an Estoppel Certificate, which may be conclusively relied
upon by any prospective purchaser, mortgagee or beneficiary under any deed of
trust covering the Building or any part thereof. Said Estoppel Certificate shall
certify the following:
a) that this Lease is unmodified and in full force and effect (or, if there
have been modifications, that this Lease is in full force and effect, as
modified, and stating the date and nature of each modification);
b) the date, if any, to which rental and other sums payable hereunder have
been paid;
c) that no notice has been received by Tenant of any default which has not
been cured, except as to defaults specified in the certificate;
d) that Landlord is not in default under this Lease or, if so, specifying
such default; and
e) such other factual matters as may be reasonably requested by Landlord.
Tenant's failure to deliver the Estoppel Certificate within the time period
specified above shall constitute a material default under the Lease, and
Landlord shall have the option, but not the obligation, to enforce the remedies
contained in Article 18.
ARTICLE 16
NOTICES
SECTION 16.1. NOTICES. Any notice, consent, approval, agreement, certification,
request, bill, demand, statement, acceptance or other communication hereunder (a
"notice") shall be in writing and shall be considered duly given or furnished
when:
a) delivered-personally or by messenger or overnight delivery service, with
signature evidencing such delivery;
b) upon the date of delivery, after being mailed in a postpaid envelope, sent
certified mail, return receipt requested, when addressed to Landlord as
set forth in the Basic Lease Information and to Tenant at the Premises and
any other address for Tenant specified in the Basic Lease Information; or
to such other address or addressee as either party may designate by a
written notice given pursuant hereto; or
c) upon confirmation of good transmission if sent via facsimile machine to
such phone number as shall have been provided in writing by Landlord or
Tenant, one to the other.
If Tenant fails to provide another valid address, other than the Premises,
upon which service to Tenant can be perfected, then Tenant hereby appoints as
its agent to receive the service of all dispossessory or distraint proceedings
and notices thereunder the person in charge of or occupying the Premises at the
time, and if no person shall be in charge of or occupy the same, then such
service may be made by attaching the same to the main entrance of the Premises.
<PAGE> 27
ARTICLE 17
DEFAULT AND LANDLORD'S OPTION TO CURE
SECTION 17.1. TENANT'S DEFAULT. For the purposes of this Section 17.1, if the
term "Tenant", as used in this Lease, refers to more than one person, then, such
term shall be deemed to include all of such persons or any one of them; if any
of the obligations of Tenant under this Lease are guaranteed, the term "Tenant,"
as used in Section 17.1(e) and Section 17.1(f), shall be deemed to also include
the guarantor or, if there is more than one guarantor, all or any one of them;
and if this Lease has been assigned, the term "Tenant," as used in Sections 17.1
(a) through (h), inclusive, shall be deemed to include the assignee and
assignor, jointly and severally, unless Landlord shall have, in connection with
such assignment, previously released the assignor from any further liability
under this Lease, in which event the term "Tenant," as used in said
subparagraphs, shall not include the assignor that was previously released.
Tenant's continued occupancy and quiet enjoyment of the Premises and this
Lease and the covenants and estate hereby granted are subject to the limitation
that:
a) if Tenant defaults in the payment of any Fixed Monthly Rent or Additional
Rent after the expiration of any applicable notice and cure period, or
b) if Tenant abandons or vacates the Premises (other than a temporary basis
in the context of an assignment, sublet, or remodeling of the Premises),
or
c) if Tenant defaults in the keeping, observance or performance of any
covenant or agreement set forth in Sections 6.1, 6.2, 12.12, or 19.3, and
if such default continues and is not cured by Tenant before the expiration
of Landlord's written 3-Day Notice to Cure or Quit; or
d) if Tenant defaults in the keeping, observance or performance of any
covenant or agreement including any provisions of the rules and
regulations established by Landlord (other than a default of the character
referred to in Sections 17.1 (a), (b) or (c)), an if such default
continues and is not cured by Tenant within fifteen (15) days after
Landlord has ail en to Tenant a notice specifying the same, or, in the
case of such a default which for causes beyond Tenant's reasonable control
(including occupancy of a sublessee)cannot with due diligence be cured
within such period of fifteen (15) days, If tenant:
i) does not, promptly upon Tenant's receipt of such notice, advise
Landlord of Tenant's intention duly to institute all steps necessary
to cure such default or
ii) does not duly institute and thereafter diligently prosecute to
completion all steps (including, if appropriate. legal proceedings
against a defaulting sublessee ~ necessary to cure the same. or
e) if Tenant fails to deliver the Estoppel Certificate required under Article
l S hereof within the time period specified, or
f) if Tenant:
i) applies for or consents to the appointment of, or the taking of
possession by a receiver, custodian, trustee or liquidator of itself
or of all or a substantial part of its property;
ii) admits in writing its inability, or is generally unable, to pay its
debts as such debts become due;
iii) makes a general assignment for the benefit of its creditors;
iv) commences a voluntary case under federal bankruptcy laws (as now or
hereafter in effect); v) files a petition seeking to take advantage
of any other law relating to bankruptcy, insolvency, reorganization,
winding up, or composition or adjustment of debts;
vi) fails to controvert in a timely or appropriate manner, or acquiesces
in writing to, any petition filed against it in an involuntary case
under such bankruptcy laws; vii)take any action for the purpose of
effecting any of the foregoing, or
g) if a proceeding or case is commenced, without the application or consent
of Tenant, in any court of competent jurisdiction, seeking:
i) the liquidation, reorganization, dissolution, winding up, or
composition or readjustment of debts, of Tenant; or
ii) the appointment of a trustee, receiver, custodian, liquidator or the
like of Tenant or of all or a substantial part of its assets; or
iii) similar relief with respect of Tenant under any law relating to
bankruptcy, insolvency, reorganization, winding up, or composition
or adjustment of debts, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or ordering
any of the foregoing shall be entered and continue unstayed and in
effect, for a period of sixty (60) days, or an order for relief
against Tenant shall be entered in an involuntary case under such
bankruptcy laws, or
h) if Tenant fails to take possession of and move into the Premises within
fifteen (15) calendar days after Landlord tenders the same in writing to
Tenant, unless Tenant acknowledges and accepts the Commencement Date as
occurring within such fifteen-day time period, and pays Rent thereon from
such Commencement Date;
then, in any or each such event, Tenant shall be deemed to have committed a
material default under this Lease.
<PAGE> 28
SECTION 17.2. LANDLORD'S OPTION TO CURE TENANT'S DEFAULT. If Tenant enters into
a default under this Lease, in lieu of Landlord's issuance of a written notice,
as specified hereinbelow, Landlord may cure the same at the sole expense of
Tenant:
a) immediately and without notice in the case of emergency; if said default is
specified in Sections 17.1 (a), (b) or (c), or if such default unreasonably
interferes with the use by any other tenant of the Building, with the
efficient operation of the Building; or will result in a violation of law or
in a cancellation of any insurance policy maintained by Landlord, and
b) after the expiration of Landlord's 3-Day Notice of Intent to Cure, in the
case of any default other than those specified in Section 17.2 (a)
hereinabove.
SECTION 17.3. LANDLORD'S OPTION TO TERMINATE THIS LEASE. In addition to any
other remedies Landlord may have at law or in equity, Landlord shall be entitled
to give to Tenant a written notice of intention to terminate this Lease at the
expiration of three (3) days from the date of the giving of such notice, and if
such notice is given by Landlord, and Tenant fails to cure the defaults
specified therein, then this Lease and the Term and estate hereby granted
(whether or not the Commencement Date has already occurred) shall terminate upon
the expiration of such three (3) day period (a "Default Termination"), with the
same effect as if the last of such three (3) days were the Termination Date,
except that Tenant shall remain liable for damages as provided hereinbelow or
pursuant to law.
SECTION 17.4. CERTAIN PAYMENTS. Bills for all reasonable costs and expenses
incurred by Landlord in connection with any performance by it under Section 17.2
shall be payable, as Additional Rent, pursuant to the provisions of Section 4.3.
SECTION 17.5. CERTAIN WAIVERS. Unless Tenant has submitted documentation that it
validly disputes Landlord's billing for Fixed Monthly Rent hereunder, or is
completing an audit of Landlord's Operating Expense Statement, if Tenant is in
default in payment of Fixed Monthly Rent or Additional Rent hereunder, Tenant
waives the right to designate the items against which any payments made by
Tenant are to be credited. In lieu thereof, Landlord may apply any payments
received from Tenant to the then-oldest billing remaining unpaid on Tenant's
rental account or to any other payment due from Tenant, as Landlord sees fit.
SECTION 17.6. LANDLORD DEFAULT. Notwithstanding anything to the contrary set
forth in this Lease, Landlord shall not be in default in the performance of any
obligation required to be performed by Landlord pursuant to this Lease unless:
a) in the event such default is with respect to the payment of money, Landlord
fails to pay such unpaid amounts within five (5) business days of written
notice from Tenant that the same was not paid when due, or
b) in the event such default is other than the obligation to pay money,
Landlord fails to perform such obligation within thirty (30) days after the
receipt of notice from Tenant specifying in detail Landlord's failure to
perform; provided, however, if the nature of Landlord's obligation is such
that more than thirty (30) days are required for its performance. then
Landlord shall not be in default 1naer this Lease if it shall commence such
performance within such third (30) days period and thereafter diligently
pursue the same to completion within a reasonable time period.
Upon any such default by Landlord under this Lease, Tenant may, except as
otherwise specifically provided in this Lease to the contrary, exercise any of
its rights provided at law or in equity.
ARTICLE 18
DAMAGES; REMEDIES; RE-ENTRY BY LANDLORD; ETC.
SECTION 18.1. DAMAGES. If Landlord terminates this Lease, pursuant to the
provisions of Section 17.3 (a "Default Termination"), then Landlord may recover
from Tenant the total of:
a) the worth at the time of award of the unpaid Fixed Monthly Rent and
Additional Rent earned to the date of such Default Termination; and
b) the worth at the time of award of the amount by which the unpaid Fixed
Monthly Rent and Additional Rent which would have been earned after the date
of such Default Termination until the time of award exceeds the amount of
such rental loss that Tenant proves could have been reasonably avoided; and
c) the worth at the time of award of the amount by which the unpaid Fixed
Monthly Rent and Additional Rent which would have been earned for the
balance of the Term after the time of award exceeds the amount of such
rental loss that Tenant proves could have been reasonably avoided; and
d) any other amount reasonably necessary to compensate Landlord for all of the
detriment proximately caused by Tenant's failure to observe or perform any
of its covenants and agreements under this Lease or which in the ordinary
course of events would be likely to result therefrom, including, without
limitation, the payment of the reasonable expenses incurred or paid by
Landlord in re-entering and securing possession of the Premises and in the
reletting thereof (including, without limitation, altering and preparing the
Premises for new tenants and brokers' commission); and
<PAGE> 29
e) at Landlord's sole election, such other amounts in addition to or in lieu of
the foregoing as may be permitted from time to time under applicable
California laws.
SECTION 18.2. COMPUTATIONS: The "worth at the time of award" is computed:
a) in paragraphs (a) and (b) above, by allowing interest at the rate of ten
percent (10%) per annum (but in no event in excess of the maximum rate
permitted by law); and
b) in paragraph (c) above, by discounting such amount at the discount rate of
the Federal Reserve Bank of San Francisco at the time of award plus one
percent (1%).
c) For purposes of computing unpaid rental which would have accrued and become
payable under this Lease, unpaid rental shall consist of the sum of:
i) the total Fixed Monthly Rent for the balance of the Term, plus
ii) a computation of Tenant's Share of Additional Rent due under the Lease
including, without limitation, Tenant's Proportionate Share of any
increase in Operating Expenses (including real estate taxes) for the
balance of the Term. For purposes of computing any increases due Landlord
hereunder, Additional Rent for the calendar year of the default and for
each future calendar year in the Term shall be assumed to be equal to the
Additional Rent for the calendar year prior to the year in which default
occurs, compounded at a rate equal to the mean average rate of inflation
for the preceding five calendar years as determined by the United States
Department of Labor, Bureau of Labor Statistics Consumer Price Index (All
Urban Consumers, all items, 1982-84 equals 100) for the metropolitan area
or region of which Los Angeles, California is a part. If such index is
discontinued or revised, the average rate of inflation shall be determined
by reference to the index designated as the successor or substitute index
by the government of the United States.
SECTION 18.3. RE-ENTRY BY LANDLORD.
a) If a Default Termination occurs or any default specified in Sections 17.1
(a) through (g) occurs and continues beyond the period of grace (if any)
therefor, Landlord or Landlord's authorized representatives may re-enter the
Premises and remove all persons and all property therefrom, either by
summary dispossession proceedings or by any suitable action or proceeding at
law, without being liable to indictment, prosecution or damages therefor,
and may repossess and enjoy the Premises. No re-entry or repossession of the
Premises by Landlord or its representatives under this Section 18.3 shall be
construed as an election to terminate this Lease unless a notice of such
election is given to Tenant or unless the termination thereof is decreed by
a court of competent jurisdiction. The words "re-enter", "re-entry" and
"re-entering" as used herein are not restricted to their technical legal
meanings.
b) If any default specified in Sections 17.1 (a) through (g) occurs and
continues beyond the period of grace (if any) therefor, then if Landlord
does not elect to terminate this Lease Landlord may, from time to time and
without terminating this Lease, enforce all its rights and remedies under
this Lease, including the right to recover the Fixed Monthly Rent and
Additional Rent as the same becomes payable by Tenant hereunder.
If Landlord consents thereto, Tenant may sublet the Premises or any part
thereof (which consent Landlord agrees will not be unreasonably withheld),
subject to Tenants compliance with the requirements of Article 11 of this Lease.
So long as Landlord is exercising this remedy it will not terminate Tenant's
right to possession of the Premises, but it may engage in the acts permitted by
Section 1951.4(c) of the California Civil Code.
c) If Tenant abandons the Premises in breach of this Lease, Landlord shall have
the right to relet the Premises or any part thereof on such terms and
conditions and at such rentals as Landlord in its sole discretion may deem
advisable, with the right to make alterations and repairs in and to the
Premises necessary to reletting. If Landlord so elects to relet, then gross
rentals received by Landlord from the reletting shall be applied:
i) FIRST, to the payment of the reasonable expenses incurred or paid by
Landlord in re-entering and securing possession of the Premises and in
the reletting thereof (including, without limitation, altering and
preparing the Premises for new tenants and brokers' commissions);
ii) SECOND, to the payment of the Fixed Monthly Rent and Additional Rent
payable by Tenant hereunder; and
iii) THIRD, the remainder, if any, to be retained by Landlord and applied to
the payment of future Fixed Monthly Rent and Additional Rent as the same
become due.
Should the gross rentals received by Landlord from the reletting be
insufficient to pay in full the sums stated in Section 18.3 (a)and(b)
hereinabove, Tenant shall, upon demand, pay the deficiency to Landlord.
<PAGE> 30
SECTION 18.4. CERTAIN WAIVERS. After Landlord has actually obtained possession
of the Premises pursuant to any lawful order of possession granted in a valid
court of law, Tenant thereafter waives and surrenders for Tenant, and for all
claiming under Tenant, all rights and privileges now or hereafter existing to
redeem the Premises (whether by order or judgment of any court or by any legal
process or writ); to assert Tenant's continued right to occupancy of the
Premises; or to have a continuance of this Lease for the Term hereof. Tenant
also waives the provisions of any law relating to notice and/or delay in levy of
execution in case of an eviction or dispossession for nonpayment of rent, and of
any successor or other law of like import.
SECTION 18.5. CUMULATIVE REMEDIES. The remedies of Landlord provided for in this
Lease are cumulative and are not intended to be exclusive of any other remedies
to which Landlord may be lawfully entitled. The exercise by Landlord of any
remedy to which it is entitled shall not preclude or hinder the exercise of any
other such remedy.
ARTICLE 19
INSURANCE
SECTION 19.1. LANDLORD OBLIGATIONS: Landlord agrees to at all times secure from
a company holding a Best's rating of A-7 or better and admitted to do business
in the State of California, and maintain during the entire Term of this Lease
the following coverage:
a) A Commercial General Liability policy with extended Risk endorsements and a
combined single limit of Two Million Dollars ($2,000,000).
b) An All Risk policy of standard fire and extended coverage, with vandalism
and malicious mischief endorsements, covering full replacement value of the
Building, the parking facilities, common area improvements and any and all
improvements installed in, on or upon the Premises and affixed thereto,
provided that the premium cost for coverage of the Improvements to the
Premises in excess of a total value equal to thirty-five Dollars ($35.00)
per usable square foot of the Premises shall, at the sole option of Tenant
be directly reimbursed from Tenant to Landlord, pursuant to the provisions
of Article 4 of this Lease, or be covered by Tenant's self-insurance, at
Tenant's sole risk.
Tenant acknowledges and agrees that Landlord shall have no obligation and
shall not carry insurance of any kind on Tenant's goods, furniture or
furnishings or on Tenant's Property, nor shall Landlord be obligated to repair
any damage thereto or to replace the same.
SECTION 19.2. TENANT OBLIGATIONS. Within ten (10) days prior to the earlier of
the Commencement Date or Tenant's anticipated early possession date of the
Premises, Tenant shall secure and maintain during the entire Term insurance
coverage from a company holding a Best's rating of A-7 or better, and admitted
to do business in the State of California, as follows:
a) A Commercial General Liability policy, with extended Risk endorsements and a
Combined Single Limit of Two Million Dollars ($2,000,000);
b) An All Risk policy of standard fire and extended coverage, with vandalism
and malicious mischief endorsements, covering the full replacement value of
its personal property, for losses occurring in, on, or about the Premises.
The proceeds from any such policy shall first be used by Tenant for the
replacement of the personal property so damaged or destroyed;
c) Workmen's Compensation insurance in a minimum amount of $500,000, and in
full compliance with the requirements of the State of California; and
d) A policy of insurance covering Tenant's losses from interruption of
Tenant's normal business activities.
Each and every policy which Tenant is to provide hereunder shall
specifically include the liability assumed by Tenant pursuant to the provisions
of this Lease (provided that the amount of such insurance shall not serve to
limit the liability of Tenant hereunder), and shall be primary insurance for
such liability, and not excess over or contributory with any other existing or
new insurance in force for or on behalf of Landlord. Each policy shall not
eliminate cross-liability and shall contain a severability of interest clause.
SECTION 19.3. COMPLIANCE WITH BUILDING INSURANCE REQUIREMENTS. After Tenant
takes occupancy of the Premises, Tenant shall not violate or knowingly permit
in, on or upon the Premises the violation of any condition imposed by such
standard fire insurance policies as are normally issued for office buildings in
the City or County in which the Building is located. Tenant shall not do, suffer
or permit anything to be done, or keep, suffer or permit anything to be kept, in
the Premises which would increase the risk ratings or premium calculation
factors on the Building or property therein ( collectively an "Increased Risk"),
or which would result in insurance companies of good standing refusing to insure
the Building or any property appurtenant thereto in such amounts and against
such risks as Landlord may reasonably determine from time to time are
appropriate.
Notwithstanding the above, if additional insurance is available to cover
such Increased Risk, Tenant shall not be in default hereunder if:
a) Tenant authorizes Landlord in writing to obtain such additional insurance;
and
<PAGE> 31
b) prepays the annual cost thereof to Landlord for such additional coverage, as
well as the additional costs, if any, of any increase in Landlord's other
insurance premiums resulting from the existence or continuance of such
Increased Risk;
SECTION 19.4. ADDITIONAL INSUREDS. Tenant agrees that Landlord shall be named as
an additional insured or loss payee on the aforementioned policies of insurance,
as appropriate in the insurance industry.
SECTION 19.5. WAIVER OF SUBROGATION. Provided Landlord and Tenant have each and
both obtained the policies of insurance required pursuant to the provisions of
Sections 19.1 and 19.2 hereinabove, Tenant and Landlord agree that if a loss
occurs due to any of the perils for which they are required hereunder to provide
insurance, that each party shall look solely to the insurance policies covering
such loss or risk for recovery. Landlord and Tenant hereby grant to each other,
on behalf of any insurer providing insurance to either of them with respect to
the demised premises, a waiver of any right of subrogation which any such
insurer of one party may acquire against the other by virtue of payment of any
loss under such insurance.
If either Landlord or Tenant fails to provide the insurance policy or
policies required hereinabove, the waiver of subrogation contained in this
Section 19.5 shall no longer inure to the benefit of the party failing to
provide such insurance, and the party claiming against such uninsured party
shall be entitled to restitution of all damages and expenses suffered and/or
claimed, without limitation.
SECTION 19.6. PROOF OF COVERAGE. Upon written request from one to the other, the
parties hereto shall each provide the other a certified copy or copies of the
certificate(s) of insurance evidencing the existence of the coverage required
hereunder.
SECTION 19.7. PROTECTION AGAINST CANCELLATION. Upon written request, proof must
also be given by each party to the other, that each of the policies required
pursuant to this Article 19 expressly provides that the policy shall not be
canceled until the expiration of thirty (30) days' prior written notice to the
other party.
SECTION 19.8. FAILURE TO SECURE. If at any time during the Term, and after
expiration of three (3) business days prior written demand therefore from
Landlord, Tenant fails to:
a) Provide Landlord with access to a registered insurance broker of record that
can verify Tenant's compliance with the requirement contained in this
Article 19; or
b) provide documentation reasonably acceptable to Landlord that Tenant has
secured and maintained the insurance coverage required hereunder, then
such failure shall be considered a material default under the Lease, and
Landlord shall have the option, but not the obligation, without further notice
or demand to obtain such insurance on behalf of or as the agent of Tenant and in
Tenant's name.
Tenant shall pay Landlord's billing for the premiums associated with such
insurance policy or policies within five (5) days after receipt of Landlord's
billing, as well as such other reasonable costs and fees arising out of such
default, together with interest on the entire amount so advanced by Landlord, at
the rate of ten percent (10%) per annum, computed from the date of such advance.
Such advances, if made by Landlord, shall be construed as and considered
Additional Rent under this Lease.
SECTIONS 19.9. PROCEEDS. Proceeds from any such policy or policies shall be
payable to both Landlord and Tenant as their respective interests may appear.
ARTICLE 20
MISCELLANEOUS
SECTION 20.1. ENTIRE AGREEMENT. This Lease, including the exhibits and guaranty
of lease, if any, annexed hereto, contains all of the agreements and
understandings relating to the leasing of the Premises and the obligations of
Landlord and Tenant in connection therewith and neither party and no agent or
representative thereof has made or is making, and neither party in executing and
delivering this Lease is relying upon, any warranties or representations, excel
the extent set forth in this Lease.
All understandings and agreements heretofore had between Landlord and Tenant
relating to the leasing of the Premises are merged in this Lease, which alone
fully and completely expresses their agreement. The Riders (if any) and Exhibits
annexed to this Lease and the Construction Agreement are hereby incorporated
herein and made a part hereof.
<PAGE> 32
SECTION 20.2. NO WAIVER OR MODIFICATION. The failure of Landlord or Tenant to
insist in any instance upon the strict keeping, observance or performance of any
covenant or agreement contained in this Lease or to exercise any election herein
contained shall not be construed as a waiver or relinquishment for the future of
such covenant or agreement, but the same shall continue and remain in full force
and effect. No waiver or modification by either Landlord or Tenant of any
covenant or agreement contained in this Lease shall be deemed to have been made
unless the same is in writing executed by the party whose rights are being
waived or modified. No surrender of possession of any part of the Premises shall
release Tenant from any of its obligations hereunder unless accepted in writing
by Landlord. The receipt and retention by Landlord, and the payment by Tenant,
of Fixed Monthly Rent or Additional Rent with knowledge of the breach of any
covenant or agreement contained in this Lease shall not be deemed a waiver of
such breach by either Landlord or Tenant.
SECTION 20.3. TIME OF THE ESSENCE. Time is of the essence of this Lease and of
all provisions hereof, except in respect to the delivery of possession of the
Premises at the Commencement Date.
SECTION 20.4. FORCE MAJEURE. For the purposes of this Lease, "Force Majeure"
shall be defined as any or all prevention, delays or stoppages and/or the
inability to obtain services, labor, materials or reasonable substitutes
therefor, when such prevention, delay, stoppage or failure is due to strikes,
lockouts, labor disputes, acts of God, governmental actions, civil commotion,
fire or other casualty, and/or other causes beyond the reasonable control of the
party obligated to perform, except that Force Majeure may not be raised as a
defense for Tenant's non-performance of any obligations imposed by the Lease
with regard to the payment of Fixed Monthly Rent and/or Additional Rent.
Notwithstanding anything to the contrary contained in this Lease, Force
Majeure shall excuse the performance of such party for a period equal to any
such prevention, delay, stoppage or inability. Therefore, if this Lease
specifies a time period for performance of an obligation by either party, that
time period shall be extended by the period of any delay in such party's
performance caused by a Force Majeure.
SECTION 20.5. BROKER. Landlord and Tenant represent to one another that each has
dealt with no broker in connection with this Lease other than DOUGLAS, EMMETT &
COMPANY AND JULIEN J. STUDLEY, Inc. Landlord and Tenant shall hold one another
harmless from and against any and all liability, loss, damage, expense, claim,
action, demand, suit or obligation arising out of or relating to a breach by the
indemnifying party of such representation. Landlord agrees to pay all
commissions due to the brokers listed above created by Tenant's execution of
this Lease.
SECTION 20.6. GOVERNING LAW. This Lease shall be governed by and construed in
accordance with the laws of the State of California.
SECTION 20.7. SUBMISSION OF LEASE. Whether or not rental deposits have been
received by Landlord from Tenant, and whether or not Landlord has delivered to
Tenant an unexecuted draft version of this Lease for Tenant's review and/or
signature, no contractual or other rights shall exist between Landlord and
Tenant with respect to the Premises, nor shall this Lease be valid and/or in
effect until this Lease has been fully executed and a duplicate original of said
fully-executed Lease has been delivered to both Landlord and Tenant.
The submission of this Lease to Tenant shall be for examination purposes
only, and does not and shall not constitute a reservation of or an option for
Tenant to lease, or otherwise create any interest by Tenant in the Premises or
any other offices or space situated in the Building. Execution of this Lease by
Tenant and its return to Landlord shall not be binding upon Landlord,
notwithstanding any time interval, until Landlord has in fact executed and
delivered a fully-executed duplicate original of this Lease to Tenant. Landlord
and Tenant agree hereby to authorize transmission of all or portions of
documents, including signature lines thereon, by facsimile machines, and further
authorize the other party to rely conclusively upon such facsimile transmissions
as if the original had been received.
SECTIONS 20.8. CAPTIONS. The captions in this Lease are for convenience only and
shall not in any way limit or be deemed to construe or interpret the terms and
provisions hereof.
SECTION 20.9. SINGULAR AND PLURAL, ETC. The words "Landlord" and "Tenant", as
used herein, shall include the plural as well as the singular. Words used in the
masculine gender include the feminine and neuter. If there be more than one
Landlord or Tenant the obligations hereunder imposed upon Landlord and Tenant
shall be joint and several.
SECTION 20.10. INDEPENDENT COVENANTS. Except where the covenants contained in
one Article of this Lease are clearly affected by or contingent upon fulfillment
by either party of another Article or paragraph of this Lease, this Lease shall
be construed as though the covenants herein between Landlord and Tenant are
independent and not dependent and Tenant hereby expressly waives the benefit of
any statute to the contrary and agrees that if Landlord fails to perform its
obligations set forth herein, Tenant shall not be entitled to make any repairs
or perform any actions hereunder at Landlord's expense or to any set-off of the
Rent or other amounts owing hereunder against Landlord; provided, however, that
the foregoing shall in no way impair the right of Tenant to commence a separate
action against Landlord for the violation by Landlord of the provisions hereof
so long as notice is first given to Landlord and any holder of a mortgage or
deed of trust covering the Building, Real Property or any portion thereof, of
whose address Tenant has theretofore been notified, and an opportunity is
granted to Landlord and such holder to correct such violations as provided
above.
<PAGE> 33
SECTION 20.11. SEVERABILITY. If any covenant or agreement of this Lease or the
application thereof to any person or circumstance shall be held to be invalid or
unenforceable, then and in each such event the remainder of this Lease or the
application of such covenant to any other person or any other circumstance shall
not be thereby affected, and each covenant and agreement hereof shall remain
valid and enforceable to the fullest extent permitted by law.
SECTION 20.12. WARRANTY OF AUTHORITY. If Landlord or Tenant signs as a
corporation or a partnership, each of the persons executing this Lease on behalf
of Landlord or Tenant hereby covenant and warrant that each is a duly authorized
and existing entity, that each has and is qualified to do business in
California, that the persons signing on behalf of Landlord or Tenant have full
right and authority to enter into this Lease, and that each and every person
signing on behalf of either Landlord or Tenant are authorized to do so. If
either party hereto is a corporation, said party shall affix the appropriate
corporate seal to each area on the document where request therefore is noted,
and the other party shall be entitled to conclusively presume that by doing so
the party so affixing said seal is attesting to and ratifying this Lease.
SECTION 20.13. NO REPRESENTATIONS OR WARRANTIES. Neither Landlord nor Landlord's
agents or attorneys have made any representations or warranties with respect to
the Premises, the Building or this Lease, except as expressly set forth herein,
and no rights, easements or licenses are or shall be acquired by Tenant by
implication or otherwise.
SECTION 20.14. NO JOINT VENTURE OR PARTNERSHIP. This Lease shall not be deemed
or construed to create or establish any relationship of partnership or joint
venture or similar relationship or arrangement between Landlord and Tenant
hereunder.
SECTION 20.15. TENANT'S OBLIGATIONS AT ITS SOLE EXPENSE. Notwithstanding the
fact that certain references in this Lease to acts required to be performed by
Tenant hereunder, or to breaches or defaults of this Lease by Tenant, omit to
state that such acts shall be performed at Tenant's sole expense, or omit to
state that such breaches or defaults by Tenant are material, unless the context
clearly implies to the contrary each and every act to be performed or obligation
to be fulfilled by Tenant pursuant to this Lease shall be performed or fulfilled
at Tenant's sole expense, and all breaches or defaults by Tenant hereunder shall
be deemed material.
SECTION 20.16. ATTORNEYS' FEES. If litigation is instituted between Landlord and
Tenant, the cause for which arises out of or in relation to this Agreement, the
prevailing party in such litigation shall be entitled to receive its costs (not
limited to court costs), expenses and reasonable attorneys' fees from the
non-prevailing party as the same may be awarded by the court.
SECTION 20.17. WAIVER OF TRIAL BY JURY. In the interest of saving time and
expense, Landlord and Tenant hereby consent to trial without a jury in any
action, proceeding or counterclaim brought by either of the parties hereto
against the other or their successor-in-interest in respect to any matters
arising out of or relating to this Lease.
SECTION 20.18. NO MERGER. The voluntary or other surrender of this Lease by
Tenant, or a mutual cancellation thereof, shall not work a merger, and shall, at
the option of Landlord terminate all or any existing subleases or subtenancies,
or may, at the option of Landlord, operate as an assignment to it of any or all
such subleases or subtenancies.
SECTION 20.19. PROHIBITION AGAINST RECORDING. Except as provided in Section 14.3
of this Lease, neither this Lease, nor any memorandum, affidavit or other
writing with respect thereto, shall be recorded by Tenant or by anyone acting
through, under or on behalf of Tenant, and the recording thereof in violation of
this provision shall make this Lease null and void at Landlord's election.
SECTION 20.20. HAZARDOUS WASTE. Tenant specifically agrees that, except for such
limited quantities of office materials and supplies as are customarily used in
Tenant's normal business operations, Tenant shall not engage or permit at any
time, any operations or activities upon, or any use or occupancy of the
Premises, or any portion thereof, for the purpose of or in any way involving the
handling, manufacturing, treatment, storage, use, transportation, spillage,
leakage, dumping, discharge or disposal (whether legal or illegal, accidental or
intentional) of any hazardous substances, materials or wastes, or any wastes
regulated under any local, state or federal law.
Tenant shall, during the Term, remain in full compliance with all applicable
laws governing its use and occupancy of the Premises, including, without
limitation, the handling, manufacturing, treatment, storage, disposal,
discharge, use, and transportation of hazardous substances, materials or wastes,
and any wastes regulated under any local, state or federal law. Tenant will
remain in full compliance with the terms and conditions of all permits and
licenses issued to it by any governmental authority on account of any or all of
its activities on the Premises.
<PAGE> 34
SECTION 20.21. TRANSPORTATION MANAGEMENT. Tenant shall, at Tenant's sole
expense, fully comply with all present or future programs intended to manage
parking, transportation or traffic in and around the Building, when the same
have been mandated by an outside governmental authority having jurisdiction
therefor and not when required for the convenience of Landlord.
In connection therewith, Tenant shall be responsible for the transportation
planning and management for all of Tenant's employees while located at the
Premises, by working directly with Landlord, any governmental transportation
management organization or any other transportationrelated committees or
entities reasonably designated by Landlord. Such programs may include, without
limitation:
a) restrictions on the number of peak-hour vehicle trips generated by Tenant;
b) requirements for increased vehicle occupancy;
<PAGE> 35
c) implementing an in-house ride-sharing program and/or appointing an
employee transportation coordinator;
d) working with employees of any Building (or area-wide) ridesharing program
manager;
e) instituting employer-sponsored incentives (financial or in-kind) to
encourage employees to ridesharing; and
f) utilizing flexible work shifts for employees.
SECTION 20.22. SIGNAGE. Tenant may not install, inscriber paint or affix any
awning, shade, sign, advertisement or notice on or to any part of the outside or
inside of the Building, or in any portion of the Premises visible from the
outside of the Building or common areas without Landlord's prior written
consent, which shall not be unreasonably withheld, conditioned or delayed.
Additionally, provided Tenant deposits with Landlord an additional
$1,000.00, to be held by Landlord as a supplemental Security Deposit, Tenant may
install one (1) exterior eyebrow sign and one (1) panel for the existing pylon
sign, each to be designed and located in a manner compatible with the Building
design and other signage, as determined and approved in the sole discretion of
Landlord, in writing, in advance, based on detailed sign plans to be submitted
to Landlord by Tenant, and subject to Tenant's obligation to comply with all
applicable governmental requirements with regard to such signage and the
requirements set forth in the attached Exhibit D.
All signage and/or directory listings installed on behalf of Tenant, whether
installed in, on or upon the public corridors, doorways, Building directory
and/or parking directory (if any), or in any other location whatsoever visible
outside of the Premises, shall be installed by Landlord, at Tenant's sole
expense (but limited to a reasonable cost for such item(s)).
Tenant's identification on or in any common area of the Building shall be
limited to Tenant's name and suite designation, and in no event shall Tenant be
entitled to the installation of Tenant's logo in any portion of the Building or
common areas, except as specifically set forth herein. Furthermore, the size,
style, and placement of letters to be used in any of Tenant's signage shall be
determined by Landlord, in Landlord's sole discretion (which discretion shall
not be exercised in a discriminatory manner with regard to Tenant), in full
conformance with any signage program for the Building. Additionally, Tenant
shall be entitled to one (1) listing on the Building directory, or any parking
directory ancillary thereto, which shall only show Tenant's business name and
suite designation. Tenant shall also be entitled to a maximum of five (5)
additional listings on said Building and/or parking directory, which listings
shall be limited solely to Tenant's officers, employees, subsidiaries,
affiliates and/or sublessees, if any. All of said listings shall be subject to
Landlord's prior written approval, which shall not be unreasonably withheld,
conditioned or delayed.
SECTION 20.23. DISCLOSURE. Landlord and Tenant acknowledge that principals of
Landlord have a financial interest in Douglas Emmett Realty Advisors and P.L.E.
Builders.
SECTION 20.24. CONFIDENTIALITY. Landlord and Tenant agree that the covenants and
provisions of this Lease shall not be divulged to anyone not directly involved
in the management, administration, ownership, lending against, or subleasing of
the Premises, which permitted disclosure shall include, but not be limited to,
the board members, legal counsel and/or accountants of either Landlord or
Tenant.
ARTICLE 21
PARKING
SECTION 21.1. PARKING. Throughout the Term, Tenant shall purchase and assign to
its employees monthly parking permits up to the maximum number of permits set
forth in Section 21.1 of the Basic Lease Information ("BLI"). Except as
otherwise permitted by Landlord's management agent in its reasonable discretion,
and based on the availability thereof, in no event shall Tenant be entitled to
purchase more than the maximum nor less than fifty percent (50%) of the total
number of parking permits listed in the BLI. However, to the minimum limit
specified hereinabove, Tenant may decrease the total number of parking permits
purchased pursuant to this Article 21 at any time during the Term after Tenant
has given Landlord at least thirty (30) days prior written notice of such
reduction.
Furthermore, if additional parking permits are available on a month-to-month
basis, which determination shall be in the sole discretion of Landlord's parking
agent, Tenant shall be permitted to purchase one or more of said permits on a
first-come, first-served basis.
At any time that Tenant either elects to purchase less than the total number
of permits to which Tenant is entitled, or fails to pay for the total number of
parking permits to which Tenant is entitled, Tenant shall lose the right to
purchase any additional parking permits beyond those that had been purchased
and/or paid for by Tenant the calendar month immediately preceding the date of
such loss, until the expiration of sixty (60) days prior written notice given
from Tenant to Landlord, indicating Tenant's intention to reclaim one or more of
said lost parking permits, at which time, to the extent that Landlord has not
already leased one or more of the parking permits Tenant had previously
surrendered to another occupant of the Building on a long-term basis, Landlord
shall restore the total number of parking permits contained in Tenant's written
notice to Landlord.
The initial rates to be paid by Tenant for such permits shall be: $77.00 per
single unreserved permit and $132.00 per single reserved permit per month,
including the ten percent (10%) tax currently charged by the City of Los
Angeles.
Said parking permits shall allow Tenant to park in the Building parking
facility at the prevailing monthly parking rate then in effect, which rate may
be thereafter changed from time to time, in Landlord's sole discretion. Landlord
shall retain sole discretion to designate the location of each parking space,
and whether it shall be assigned, or unassigned, unless specifically agreed to
otherwise in writing between Landlord and Tenant.
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<PAGE> 36
Guests and invitees of Tenant shall have the right to use, in common with
guests and invitees of other tenants of the Building, the transient parking
facilities of the Building at the then-posted parking rates and charges, or at
such other rate or rates and charges as may be agreed upon from time to time
between Landlord and Tenant in writing. Such rate(s) or charges may be changed
by Landlord from time to time in Landlord's sole discretion, and shall include,
without limitation, any and all fees or taxes relating to parking assessed to
Landlord for such parking facilities.
Tenant or Tenants agents, clients, contractors, directors, employees,
invitees, licensees, officers, partners or shareholders continued use or said
transient. as well as monthly parking, shall be contingent upon Tenant and
Tenant's agents, clients, contractors, directors, employees, invitees,
licensees, officers, partners or shareholders continued compliance with the
reasonable and non-discriminatory rules and regulations adopted by Landlord,
which rules and regulations may change at any time or from time to time during
the Term hereof in Landlord's sole discretion.
ARTICLE 22
CONCIERGE SERVICES
SECTION 22.1. PROVISION OF SERVICES. Landlord and Tenant acknowledge and
understand that Landlord may, from time to time, make it possible for Tenant to
use or purchase a variety of personal services which may include, but not be
limited to, personal shopping, assistance with choosing or obtaining travel
reservations, accommodations and/or tickets; tickets to performances,
recommendations to eating establishments; and the like (collectively "Concierge
Services").
Tenant acknowledges that said Concierge Services are provided by Landlord
solely as an accommodation to and for the convenience of Tenant and Tenant's
agents, contractors, directors, employees, licensees, officers, partners or
shareholders, and Landlord does not make any representation, warranty or
guarantee, express or implied, as to the quality, value, accuracy, or
completeness of said Concierge Services, or whether or not Tenant shall be
satisfied with the services and/or goods so provided and/or recommended.
Landlord hereby disclaims any control over the variety or sufficiency of such
services to be provided.
Tenant acknowledges that Tenant is not required to use such Concierge
Services as a condition precedent to compliance with the Lease; that Tenant's
use of such Concierge Services is strictly voluntary, and at the sole discretion
and control of Tenant. Tenant shall independently make such financial
arrangements for payment of the services provided as Tenant deems reasonable and
of value.
SECTION 22.2. INDEMNIFICATION AND RELEASE BY TENANT. Notwithstanding anything to
the contrary contained in the Lease, any city, county, state or federal
ordinance, statute, regulation or law, Tenant's signature hereon indicates
Tenant's agreement that solely as it relates to the purchase or use of Concierge
Services by Tenant or the agents, contractors, employees, officers, partners,
and/or shareholders of Tenant, Tenant, on behalf of itself and its agents,
contractors, directors, employees, licensees, officers, partners or
shareholders, does and shall hereby forever hold Landlord and Landlord's
affiliates, agents, assigns, contractors, directors, employees, officers, parent
organization, partners, representatives, shareholders, and subsidiaries
(collectively the "Indemnitees") harmless from and forever release, remise,
discharge, acquit and relieve the Indemnitees from and against any and all
claims, demands, causes of action, obligations, liabilities, agreements,
damages, cost (including, without limitation, reasonable attorneys' fees), loss,
or liability of any kind or nature, whether asserted, known or unknown,
suspected or unsuspected, in any way connected with, which any one or more of
the Indemnitees may sustain or incur by reason of, related to, associated with,
or arising out of the provision, use or the rendering of any such Concierge
Services or the delivery of such Concierge Services to Tenant or Tenant's
agents, clients, contractors, directors, employees, invitees, licensees,
officers, partners or shareholders.
Solely as it relates to the purchase or use of Concierge Services by Tenant
or the agents, contractors, employees, officers, partners, and/or shareholders
of Tenant, Tenant hereby expressly waives all rights and benefits conferred by
the provisions of Section 1542 of the Civil Code of the State of California,
which reads as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE AND WHICH, IF
KNOWN BY HIM, MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR."
In so doing, Tenant acknowledges that it will be unable to make any claim
against Landlord or any other Indemnitees for damages that may exist as of the
date or after the date of this release, but which Tenant does not know to exist,
and which, if known, would materially have affected Tenant's decision to execute
this document, regardless of whether Tenant's lack of knowledge, if any, is the
result of ignorance, oversight, error, negligence or other cause.
ARTICLE 23
OPTION TO EXTEND TERM
SECTION 23.1. OPTION TO EXTEND TERM. Provided Tenant is not in material default
after the expiration of notice and the opportunity to cure on the date or at any
time during the remainder of the Term after Tenant gives notice to Landlord of
Tenant's intent to exercise its rights pursuant to this Article 23, Tenant is
given the option to extend the term for an additional Five (5) year period (the
"Extended Term"), commencing the next calendar day after the expiration of the
Term (the "Option"). The Option shall apply only to the entirety of the
Premises, and Tenant shall have no right to exercise the Option as to only a
portion of the Premises.
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<PAGE> 37
Tenant's exercise of this Option is contingent upon Tenant giving written
notice to Landlord (the Option Notice") of Tenant's election to exercise its
rights pursuant to this Option by Certified Mail, Return Receipt Requested, no
more than twelve (12) and no less than nine (9) months prior to the Termination
Date.
SECTION 23.2. MONTHLY FEED RENT PAYABLE. As Monthly Fixed Rent during the
Extended Term, Tenant shall pay Landlord the greater of the Monthly Fixed Rent
due from Tenant for the month immediately preceding the expiration of the
initial Term or the then Fair Market Value of the Premises for the Extended
Term. The term Fair Market Value shall be defined as the effective rent
reasonably achievable by Landlord, and shall include but not be limited to, all
economic benefits obtainable by Landlord, such as Monthly Fixed Rent, periodic
Fixed Rent adjustments, Additional Rent in the form of Operating Expense
reimbursements, and any and all other monetary or non-monetary consideration
that may be given in the market place to a non-renewal tenant, as is chargeable
for a similar use of comparable space in the geographic area of the Premises.
Said computation shall specifically be based on the Premises in its "as-is"
condition, without payment of any brokerage commission to any broker. If either
Landlord or Tenant elect to have a broker represent them during negotiations for
extension of the Term, and/or Tenant requests the installation of any further
improvements into the Premises, the cost of such improvements to be made and/or
commissions to be paid shall be amortized over the Extended Term on a
straight-line basis, with interest thereon at ten percent (10%), by
appropriately increasing the Fair Market Value previously determined.
Landlord and Tenant shall have 30 days (the "Negotiation Period") after
Landlord receives the Option Notice in which to agree on the Fair Market Value.
If Landlord and Tenant agree on the Fair Market Value during the Negotiation
Period, they shall immediately execute an amendment to the Lease extending the
Term and stating the Fair Market Value.
SECTION 24.3 APPRAISERS TO SET FIXED RENT. If Landlord and Tenant are unable to
agree on the Fair Market Value during the Negotiation Period, then:
a) Within five (5) days after the expiration of the Negotiation Period, Tenant
shall have the right to void the Option Notice by hand delivery of written
notice (the "Termination Notice") to Landlord within such five (5) days
period, and the Lease shall expire on the Termination Date; or
b) If the Termination Notice is not timely delivered by Tenant, Landlord and
Tenant, each at its own cost, shall select an independent real estate
appraiser with at least ten (10) years full-time commercial appraisal
experience in the area in which the Premises are located, and shall provide
written notice to the other party of the identity and address of the
appraiser so appointed. Landlord and Tenant shall make such selection within
ten (10) days after the expiration of the Negotiation Period.
c) Within thirty (30) days of having been appointed to do so (the "Appraisal
Period"), the two (2) appraisers so appointed shall meet and set the Fair
Market Value for the Extended Term. In setting the Fair Market Value, the
appraisers shall solely consider the use of the Premises for general of flee
purposes.
SECTION 23.4 FAILURE BY APPRAISERS TO SET FAIR MARKET VALUE. If the two (2)
appointed appraisers are unable to agree on the Fair Market Value within ten
(10) days after expiration of the Appraisal Period, they shall elect a third
appraiser of like or better qualifications, and who has not previously acted in
any capacity for either Landlord or Tenant. Landlord and Tenant shall each bear
one half of the costs of the third appraiser's fee.
Within 30 days after the selection of the third appraiser (the "Second
Appraisal Period") the Fair Market Value for the Extended Term shall be set by a
majority of the appraisers now appointed.
If a majority of the appraisers are unable to set the Fair Market Value
within the Second Appraisal Period, the three (3) appraisers shall individually
render separate appraisals of the Fair Market Value, and their three (3)
appraisals shall be added together, then divided by three (3); resulting in an
average of the appraisals, which shall be the Fair Market Value during the
Extended Term.
However, if the low appraisal or high appraisal varies by more than Ten
Percent (10%) from the middle appraisal, then one ( 1 ) or both shall be
disregarded. If only one ( 1 ) appraisal is disregarded, the remaining two (2)
appraisals shall be added together and their total divided by two (2), and the
resulting average shall be the Fair Market Value. If both the low and high
appraisal are disregarded, the middle appraisal shall be the Fair Market Value
for the Premises during the Extended Term. The appraisers shall immediately
notify Landlord and Tenant of the Fair Market Value so established, and Landlord
and Tenant shall immediately execute an amendment to the Lease, extending the
Term and revising the Fixed Rent payable pursuant to the Fair Market Value so
established.
Landlord or Tenant's failure to execute such amendment establishing the Fair
Market Value within fifteen (15) days after the other party's request therefor
shall constitute a material default under the Lease. and if Tenant is the party
failing to so execute, this Option shall become null and void and of no further
force or effect.
SECTION 23.5. NO RIGHT OF REINSTATEMENT OR FURTHER EXTENSION. Once Tenant has
either failed to exercise its rights to extend the term pursuant to this Article
24 or failed to execute the amendment called for hereunder, it shall have no
right of reinstatement of its Option to Extend the Term, nor shall Tenant have
any right to a further or second extension of the Term beyond the period stated
in Section 23.1 hereinabove.
SECTION 23.6. NO ASSIGNMENT OF OPTION. This Option is personal to the original
Tenant signing the Lease, and shall be null, void and of no further force or
effect as of the date that Tenant assigns the
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Lease to an unaffiliated entity and/or subleases more than forty-nine percent
(49%) of the total Rentable Area of the Premises.
ARTICLE 24
RIGHT OF FIRST OFFER
SECTION 24.1. RIGHT OF FIRST OFFER.
a) Subject to any pre-existing rights of first otter and/or refusal which
Landlord or Landlord s predecessors may have granted other tenants in the
Building at the time this Lease is executed; and
b) Provided Tenant is not in material uncured default after the expiration of
time and the opportunity to cure as of the date or any time after Tenant
renders to Landlord Tenant's Expansion Notice; and
c) At least eighteen (18) months remain before expiration of the Term of this
Lease, or Tenant iswilling to enter into an extension of the Term for a
minimum of eighteen (18) additional months;
then, Landlord grants Tenant a one-time right of first offer to lease Suite
145 on the ground floor of the Building (the "Expansion Premises") as shown on
the attached Exhibit A, if it is vacant and available for rent during the Term
of this Lease, including any extension thereof, as follows:
If Suite 145 is available for lease at any time during the term, or Extended
Term, if any, of this Lease, Landlord shall give written notice thereof (the
"Offer Notice") to Tenant, specifying the terms and conditions upon which
Landlord is willing to lease the Expansion Premises then available.
SECTION 24.2 TENANT'S ACCEPTANCE. Tenant shall have ten (10) business days after
receipt of the Offer Notice from Landlord to advise Landlord of Tenant's
election (the "Acceptance") to lease the Expansion Premises on the same terms
and conditions as Landlord has specified in its Offer Notice. If the Acceptance
is so given, then within ten (10) days thereafter, Landlord and Tenant shall
sign an amendment to this Lease, adding the Expansion Premises to the Premises
and incorporating all of the terms and conditions originally contained in
Landlord's Offer Notice.
SECTION 24.3 FAILURE TO ACCEPT EXTINGUISHES RIGHTS. If Tenant does not tender
the Acceptance of Landlord's Offer Notice, or if Landlord and Tenant fail to
execute the amendment to Lease called for above within the time period
specified, then Landlord may lease such portion of the Expansion Premises as is
then available to any third party it chooses without liability to Tenant on
terms and conditions reasonably similar to those specified in Landlord's Offer
Notice, and Tenant's option to expand into that portion of the Expansion
Premises not accepted by Tenant shall be null and void thereafter.
ARTICLE 25
GUARANTY OF LEASE
GUARANTY OF LEASE. Stan Lee, an individual, whose Social Security number is
###-##-####, and whose home address is 9143 Oriole Way, Los Angeles, California
90069 ("Guarantor"), as a material inducement to and in consideration of
Landlord entering into this Lease with Tenant, unconditionally guarantees and
promises to and for the benefit of Landlord that Tenant shall perform the
provisions of the Lease that Tenant is to perform.
If Guarantor is more than one person, Guarantor's obligations are joint and
several and are independent of Tenant's obligations. A separate action may be
brought or prosecuted against any Guarantor whether the action is brought or
prosecuted against any other Guarantor or Tenant, or all, or whether any other
Guarantor or Tenant, or all, are joined in the action.
The provisions of the Lease may be changed by agreement between Landlord and
Tenant at any time, or by course of conduct, without the consent of or notice to
Guarantor, and this Guaranty shall guarantee the performance of the Lease as
changed. An assignment of this Lease (as permitted by the Lease) shall not
affect this Guaranty, nor shall this Guaranty be affected-by Landlord's failure
or delay to enforce any of its rights.
If Tenant defaults under the Lease, Landlord can proceed immediately against
Guarantor or Tenant, or both, or Landlord can enforce against guarantor or
Tenant, or both, any rights that it has under the Lease, or pursuant to
applicable laws. If the Lease terminates and Landlord has any rights it can
enforce against Tenant after termination, Landlord can enforce those rights
against Guarantor without giving previous notice to Tenant or Guarantor, or
without making any demand on either of them.
Guarantor waives the right to require Landlord to:
a) proceed against Tenant;
b) proceed against or exhaust any security that Landlord holds from Tenant; or
c) pursue any other remedy in Landlord's power.
Guarantor waives any defense by reason of any disability of Tenant, and
waives any other defense based on the termination of Tenant's liability from any
cause. Until all Tenant's obligations to Landlord have been discharged in full,
Guarantor has no right of subrogation against Tenant. Guarantor waives its right
to enforce any remedies that Landlord now has, or later may have, against
Tenant. Guarantor waives any right to participate in any security now or later
held by Landlord. Guarantor waives all presentments, demands for performance,
notices of nonperformance, protests, notices of protest, notices of dishonor,
and notices of acceptance of this Guaranty, and waives all notices of the
existence, creation, or incurring of new or additional obligations.
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If Landlord disposes of-its interest in the Lease, "Landlord," as used in
this Guaranty, shall mean Landlord's successors, and Guarantor's obligations
under this Guaranty shall be binding on Guarantees successors or assigns. ~
This Guaranty of Lease will continue unchanged by any bankruptcy,
reorganization or INSOLVENCY of Tenant or any successor or assignee thereof or
by any disaffirmance or abandonment by a trustee of Tenant. The bankruptcy.
reorganization or insolvency of one or more of the undersigned or a default
hereunder by one or more or the undersigned shall nor affect the obligations of
the other undersigned party or parties under this Guaranty. Each of the
undersigned hereby waives notice of ANY DEMAND BY Landlord as well as any notice
of nonpayment of rent or other default under the Lease by Tenant. If notice is
given to any of the undersigned, it shall constitute notice to each of the
undersigned.
If any party hereto incurs costs or attorneys' fees in connection with any
legal proceeding involving the enforcement or interpretation of the rights or
obligations of the undersigned under this Guaranty of Lease, or to enforce any
provisions under the Lease, including Landlord's instituting an unlawful
detainer action to obtain possession of the Premises, the prevailing party to
such action shall be entitled to receive said party's costs and reasonable
attorneys' fees, regardless of whether such proceeding is prosecuted to
judgment.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this
Lease, effective the day and year first above written.
<TABLE>
<S> <C>
LANDLORD: TENANT:
DOUGLAS EMMETT REALTY FUND 1997, STAN LEE MEDIA, [ - ,
a California limited partnership a Delaware corporation)
By: DOUGLAS,EMMETT & COMPANY, By: /s/ Gill Champion
its agent ----------------------------
Signer's Name: Gill Champion
[ ] President [X] Vice President or [ ] Chief Executive Officer
(Check Title Above)
By: /s/ Kenneth Panzer and
-------------------------
Kenneth Panzer
Dated: September 27, 1999 By: /s/ Stephen M. Gordon
----------------------------
Signer's Name: Stephen M. Gordon
[ ] Secretary [X] Treasurer or [ ] Chief Financial Officer
(Check Title Above)
</TABLE>
AFFIX CORPORATE SEAL HERE
Guarantor:
/s/ Stan Lee
-----------------------
Stan Lee, an individual
Date: September 24, 1999
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<PAGE> 40
EXHIBIT A- PREMISES PLAN
Suite 100 at 15821 Ventura Boulevard, Encino, California 91436
Rentable Area: approximately 7,442 square feet
Usable Area: approximately 6207 square feet
(Measured pursuant to the provision of Section 1.4 of the Lease)
[SUITE 145 DRAWING]
<PAGE> 41
EXHIBIT B
IMPROVEMENT CONSTRUCTION AGREEMENT
CONSTRUCTION TO BE PERFORMED BY LANDLORD WITH AN ALLOWANCE
SECTION 1. COMPLETION OF IMPROVEMENTS. Landlord, through its general contractor
("Contractor"), shall furnish and install within the Premises those items of
general construction, shown on the final Plans and Specifications approved by
Landlord and Tenant pursuant to the Schedule of Approvals below, in compliance
with all applicable codes and regulations, and complete any construction
required in the common areas of the Building when such construction is required
by or arises out of completion of the Improvements (collectively the
"Improvements").
The definition of Improvements shall include all costs associated with
completing the Tenant Improvements, including but not limited to, space
planning, design, architectural, and engineering fees, contracting, labor and
material costs, municipal fees and permit costs, and document development and/or
reproduction.
Tenant acknowledges and agrees that any change in the scope of work or
details of construction after Tenant's sign off of the finalized working
drawings shall constitute a "Tenant Change," the costs of which Tenant shall pay
pursuant to the provisions of Subsection 2 (d) hereinbelow.
SECTION 2. LANDLORD'S ALLOWANCE.
a) Tenant shall bear all costs of construction of the Improvements in excess of
the Allowance, and shall deposit such excess costs with Landlord pursuant to
the provisions of Subsection 2 (d) hereinbelow. Landlord shall have no
obligation whatsoever to commence construction of the Improvements until
such time as Tenant has deposited the excess costs of construction, and
Tenant's failure to make such deposit timely, as required, shall be assessed
against Tenant as a Tenant delay, pursuant to the provisions contained in
subsection 2 (e).
b) Landlord shall contribute a maximum sum of $20.00 per Usable square foot
contained in the Premises (the "Allowance") which may solely be applied
towards completion of the Improvements, and which Landlord shall pay
directly to Contractor for Tenant's account.
c) Prior to commencing construction of the Improvements, Landlord shall submit
to Tenant a written statement showing the total anticipated cost of the
Improvements, which statement shall include Contractor's estimated charges
for general conditions, overhead and profit (which shall in no event exceed,
in the aggregate, twelve percent (12%) of the total cost of the
Improvements) and an estimate of all other costs, including a five percent
(5%) administrative fee payable to the managing agent of Landlord for
supervision of completion of the construction. Landlord shall require
Contractor to obtain competitive bids from a minimum of three (3)
sub-contractors for each trade involved in the construction of the
Improvements, except with regard to any portion affecting the Building's
mechanical, electrical or plumbing systems, which aspects shall nonetheless
be required to be competitively priced.
Tenant's failure to give written approval of such statement within five (5)
working days after submission thereof shall be conclusively deemed a disapproval
of such statement, and Contractor shall not commence the Improvements. Any delay
of Tenant, after the expiration of ten (10) days from receipt of Landlord's
statement, to provide Landlord with a revised scope of work and written approval
of a revised cost statement therefor shall be considered a Tenant delay,
assessable against Tenant pursuant to the provisions of Subsection 2 (e)
hereinbelow.
d) Tenant agrees to pay Landlord within five (5) working days after receipt of
Landlord's billing for the estimated cost of all the Improvements in excess
of the Allowance and/or for the actual costs of any Tenant Change. Tenant's
failure to make such payment timely, as specified herein, shall release
Landlord from any obligation to commence or continue construction of the
Improvements, and each of Tenant's continued failure to make payment shall
be treated as a Tenant delay, assessable against Tenant pursuant to the
provisions of Subsection 2 (e) hereinbelow.
Tenant hereby authorizes Landlord to pay Contractor interim payments from
the funds so deposited towards completion of the Improvements, except that
Landlord shall retain the sum of ten percent (10%) of the total cost of
Improvements, as revised by Tenant Changes, if any, until such time as:
(i) Tenant has advised Landlord of its approval of completion of the
Improvements, which approval shall not be unreasonably withheld,
conditioned or delayed; or
(ii) Contractor has provided reasonable documentation that the Improvements,
pursuant to the original scope of work, have been reasonably completed.
<PAGE> 42
EXHIBIT B (CONTINUED)
IMPROVEMENT CONSTRUCTION AGREEMENT
Within thirty (30) business days after Contractor has reasonably completed
the Improvements, Landlord shall provide Tenant with a final statement,
indicating any difference between the estimated cost of the Improvements, the
final cost of the Improvements; any initial or interim payments made by Tenant
towards completion thereof; the amount of Allowance contributed and the balance
owing from or to Tenant. Any balance owed to Tenant shall be returned with such
statement, and any shortfall due Landlord shall be paid within five (5) days
after Tenant's receipt of Landlord's billing.
e) Any delay caused by Tenant shall be a material breach of this Lease, and in
addition to any other remedies available to Landlord hereunder, Tenant shall
be assessed a penalty therefor, by decreasing the Allowance in an amount
equal to the daily value of Monthly Fixed Rent, computed by dividing the
Monthly Fixed Rent by 30 days, and multiplying this figure by the total
number of days Tenant failed to perform as required hereunder.
f) Landlord and Tenant agree that if the Improvements are actually constructed
by Contractor at a cost which is less than the Allowance, there shall be no
monetary adjustment between Landlord and Tenant and the cost savings shall
accrue to the benefit of Landlord.
SECTION 3. PLANS AND SPECIFICATIONS. Tenant shall, through Landlord's architect
or space planner, provide such information and directions as are necessary to
complete the architectural and engineering Plans and Specifications required for
the construction of the Improvements. Tenant shall provide instructions to
Landlord's architect or space planner so as to meet the Schedule of Approvals
set forth in Paragraph 5 below. Notwithstanding Tenant's obligation to provide
instructions to Landlord's architect or space planner, all Plans and
Specifications referred to herein are subject to Landlord's approval, which
shall not be unreasonably withheld, conditioned or delayed.
SECTION 4. COMPLETION OF WORK NOT INCLUDED AS IMPROVEMENTS. Any work not shown
in the final construction Plans and Specifications, including but not limited
to, telephone service, furnishings, installation of Tenant's trade fixtures or
cabinetry (collectively "Tenant Work"), shall be separately contracted and paid
for by Tenant. Tenant shall obtain Landlord's written approval of Tenant's
suppliers and contractors prior to commencement of any Tenant Work.
Landlord shall give reasonable access to Tenant's suppliers and contractors
so as to achieve timely completion of any Tenant Work. Notwithstanding
Landlord's obligation to provide such access, completion of all Tenant Work
shall be subject to Landlord's supervision, policies and procedures, and shall
be scheduled with Contractor and completed in such as manner as to not
unreasonably hinder or delay completion of the Improvements.
SECTION 5. SCHEDULE OF APPROVALS. Subject to Force Majeure, Tenant shall comply
with the following Schedule of Approvals:
<TABLE>
<CAPTION>
EVENT TIME
- ------ ----
<S> <C>
a) Deadline by which Tenant shall have met
with Landlord's space planner. Completed
b)Deadline for space plan approval. Completed
c)Deadline for notifying Landlord of Tenant's September 20, 1999
selection of finishes and materials.
d)Deadline for Tenant's approval of final October 1 1999
Plans, Specifications and working drawings.
e)Deadline for Tenant's approval of
Landlord's cost estimate of Improvements. October 11, 1999
</TABLE>
SECTION 6. CONSTRUCTION INSURANCE REQUIREMENTS. Contractor, at the its sole
expense, shall obtain and maintain public liability and workmen's compensation
insurance adequate to protect Tenant and Landlord from and against any and all
liability for death or injury to persons or damage to property caused in or
about the Premises by reason of completion of the Improvements.
Tenant shall, at Tenant's sole expense, either obtain and maintain public
liability and workmen's compensation insurance adequate to fully protect
Landlord as well as Tenant from-and against any and all liability for death or
injury to persons or damage to property caused in or about the Premises by
reason completion of any Tenant Work, or shall cause Tenant's contractors or
subcontractors to provide such insurance.
B-2
<PAGE> 43
EXHIBIT B (CONTINUED) O
IMPROVEMENT CONSTRUCTION AGREEMENT
SECTION 7. COMPLETION OF PUNCH LIST. Within twenty (20) days after occupancy of
the Premises, Tenant shall submit to Landlord a "punch list" of
Tenant,Improvement items that require repair or correction by Landlord. Provided
that said items were included within the original plans and/or part of change
orders to such plans approved by Landlord in writing, Landlord shall diligently
proceed to correct those items within thirty (30) days of receipt of Tenant's
list.
SECTION 8. CONSTRUCTION WARRANTIES. Landlord agrees that, subject to Tenant's
performance hereunder, Landlord shall complete the Improvements, and shall
correct any construction defects about which Tenant notifies Landlord in writing
within one (1) year following the Commencement Date. Tenant's right to repair of
any defect shall be extended for such longer period as may be covered by
warranties provided by Contractor or subcontractor(s).
<TABLE>
<CAPTION>
LANDLORD: TENANT:
-------- -------
<S> <C>
DOUGLAS EMMETT REALTY FUND 1997, STAN LEE MEDIA, INC.,
a California limited partnership a Delaware Corporation
By: DOUGLAS, EMMETT & COMPANY, By: /s/ GILL CHAMPION
its agent Signer's Name:
[ ] President [X] Vice President or [ ] Chief Executive Officer
By: /s/ KENNETH PANZER (Check Title Above)
Kenneth Panzer and
Dated: By: /s/ STEPHEN M. GORDON
Signer's Name:
[ ] Secretary [X] Treasurer or [ ] Chief Financial Officer
(Check Title Above)
AFFIX CORPORATE SEAL
Dated:
GUARANTOR:
/S/ STAN LEE
Stan Lee, an individual
Date:
</TABLE>
B-3
<PAGE> 44
EXHIBIT B1
CONSTRUCTION BY TENANT DURING TERM
1. If Tenant wishes to make a Tenant Change, as specified in Section 12.12 of
the Lease, such Tenant Change shall be completed pursuant to the provisions
of Section 12.12. of the Lease and this Exhibit B1. Tenant shall bear all
costs of said Tenant Change, which shall be paid directly to Tenant's
general contractor ("Contractor"). Contractor shall complete construction
to-the Premises pursuant to the final Plans and Specifications approved in
writing by Landlord and Tenant (the "Tenant Chance"'. n compliance with all
applicable codes and regulations. Tenant's selections of finishes and
materials shall be indicated on the Plans and Specifications, and shall be
equal to or better than the minimum Building standards and specifications.
All work not shown on the final Plans and Specifications, but which is to be
included in the Tenant Change, including but not limited to, telephone
service installation, furnishings or cabinetry, shall be installed pursuant
to Landlord's reasonable directives.
2. Prior to commencing any work:
a) Tenant's proposed Contractor and the Contractor's proposed subcontractors
and suppliers shall be approved in writing by Landlord, which approval shall
not be unreasonably withheld, conditioned or delayed. As a condition of such
approval, so long as the same are reasonably cost competitive, then
Contractor shall use Landlord's Heating, Venting, and Air-conditioning,
plumbing, and electrical subcontractors for such work.
During completion of any Tenant Change, neither Tenant or Contractor shall
permit any subcontractors, workmen, laborers, material or equipment to come
into or upon the Building if the use thereof, in Landlord's reasonable
judgment, would violate Landlord's agreement with any union providing work,
labor or services in or about the Building.
b) Contractor shall submit to Landlord and Tenant a written bid for completion
of the Tenant Change. Said bid shall include Contractor's overhead, profit,
and fees, and, if the proposed Tenant Change is for cosmetic work in excess
of $10,000 in aggregate value per occurrence or for structural work of any
kind, Contractor shall:
i) prepay to Landlord's managing agent $250.00 as partial payment of said
managing agent's construction administration fee, as specified
hereinbelow, and
ii)upon completion of said Tenant Change, pay an administration fee for
supervision of said Tenant Change equal to fifty dollars ($50.00) per
hour, to a maximum of five percent (5%) of the total cost of the Tenant
Change, to defray said agent's costs for supervision of the construction;
c) Tenant or Contractor shall submit all Plans and Specifications to Landlord,
and no work on the Premises shall be commenced before Tenant has received
Landlord's final written approval thereof, which shall not be unreasonably
withheld, delayed or conditioned;
d) Contractor shall complete all architectural and planning review and obtain
all permits, including signage, required by the city, state or county in
which the Premises are located; and
e) Contractor shall submit to Landlord verification of public liability and
workmen's compensation insurance adequate to fully protect Landlord and
Tenant from and against any and all liability for death or injury to persons
or damage to property caused in or about or by reason of the construction of
any work done by Contractor or Contractor's subcontractors or suppliers.
f) Unless otherwise waived in writing by Landlord, which waiver shall be in
Landlord's sole discretion, Contractor shall provide payment and performance
bonds in an amount equal to 100% of the estimated amount of Tenant Change,
as specified to Landlord pursuant to Paragraph 2 (b).
3. Contractor and Contractor's subcontractors and suppliers shall be subject to
Landlord's reasonable administrative control and supervision. Landlord shall
provide Contractor and Contractor's subcontractors and suppliers with
reasonable access to the Premises.
4. During construction of the Tenant Change, Contractor shall adhere to the
procedures contained hereinbelow, which represent Landlord's minimum
requirements for completion of the Tenant Change.
5. Upon completion of the Tenant Change, Tenant shall provide Landlord with
such evidence as Landlord may reasonably request that the Contractor has
been paid in full, and Contractor shall provide Landlord with lien releases
as requested by Landlord, confirmation that no liens have been filed against
the Premises or the Building. If any liens arise against the Premises or the
Building as a result of the Tenant Change, Tenant shall immediately, at
Tenant's sole expense, remove such liens and provide Landlord evidence that
the title to the Building and Premises have been cleared of such liens.
6. Whether or not Tenant or Contractor timely complete the Tenant Change,
unless the Lease is otherwise terminated pursuant to the provisions
contained therein, Tenant acknowledges and agrees that Tenant's obligations
under the Lease to pay Fixed Monthly Rent and/or Additional Rent shall
continue unabated.
CONSTRUCTION POLICY
The following policies outlined are the construction procedures for the
Building. As a material consideration to Landlord for granting Landlord's
permission to Tenant to complete the construction contemplated hereunder, Tenant
agrees to be bound by and follow the provisions contained hereinbelow:
1. ADMINISTRATION
a) Contractors to notify the management office for the Building prior to
starting any work. No EXCEPTIONS. All jobs must be scheduled by the general
contractor or sub-contractor when no general contractor is being used.
EXHIBIT (CONTINUED)
CONSTRUCTION BY TENANT DURING TERM!
<PAGE> 45
b) The general contractor is to provide the Building Manager with a copy of the
projected work schedule for the suite, prior to the start of construction.
c) Contractor will make sure that at least one set of drawings will have the
Building Manager's initials approving the plans and a copy delivered to the
Building Office.
d) As-built construction. including mechanical drawings and air balancing
reports will be submitted at the end of each project.
e) The HVAC contractor is to provide the following items to the Building
Manager upon being awarded the contract from the general contractor:
i) A plan showing the new ducting layout, all supply and return air grille
locations and all thermostat locations. The plan sheet should also include
the location of any fire dampers.
ii) An Air Balance Report reflecting the supply air capacity throughout the
suite, which is to be given to the Chief Building Engineer at the finish of
the HVAC installation.
f) All paint bids should reflect a one-time touch-up paint on all suites. This
is to be completed approximately five (5) days after move-in date.
g) The general contractor must provide for the removal of all trash and debris
arising during the course of construction. At no time are the building's
trash compactors and/or dumpsters to be used by the general contractor's
clean-up crews for the disposal of any trash or debris accumulated during
construction. The Building Office assumes no responsibility for bins.
Contractor is to monitor and resolve any problems with bin usage without
involving the Building Office. Bins are to be emptied on a regular basis and
NEVER allowed to overflow. Trash is to be placed in the bin.
h) Contractors will include in their proposals all costs to include: parking,
elevator service, additional security (if required), restoration of carpets,
etc. Parking will be validated only if contractor is working directly for
the Building Office.
i) Any problems with construction per the plan, will be brought to the
attention of and documented to the Building Manager. Any changes that need
additional work not described in the bid will be approved in writing by the
Building Manager. All contractors doing work on this project should first
verify the scope of work (as stated on the plans) before submitting bids;
not after the job has started.
2. BUILDING FACILITIES COORDINATION
a) All deliveries of material will be made through the parking lot entrance.
b) Construction materials and equipment will not be stored in any area without
prior approval of the Building Manager.
c) Only the freight elevator is to be used by construction personnel and
equipment. Under no circumstances are construction personnel with materials
and/or tools to use the "passenger" elevators.
3. HOUSEKEEPING
a) Suite entrance doors are to remain closed at all times, except when hauling
or delivering construction materials.
b) All construction done on the property that requires the use of lobbies or
common area corridors will have carpet or other floor protection. The
following are the only prescribed methods allowed: i) Mylar: Extra
heavy-duty to be taped from the freight elevator to the suite under
construction. ii) Masonite: 1/4 inch Panel, Taped to floor and adjoining
areas. All corners, edges and joints to have adequate anchoring to provide
safe and "trip-free" transitions. Materials to be extra heavyduty and
installed from freight elevator to the suite under construction.
c) Restroom wash basins will not be used to fill buckets, make pastes, wash
brushes, etc. If facilities are required, arrangements for utility closets
will be made with the Building Office.
d) Food and related lunch debris are not to be left in the suite under
construction.
e) All areas the general contractor or their sub-contractors work in must be
kept clean. All suites the general contractor works in will have
construction debris removed PRIOR to completion inspection. This includes
dusting of all window sills, light diffusers, cleaning of cabinets and
sinks. All common areas are to be kept clean of building materials at all
times so as to allow tenants access to their suites or the building.
4. CONSTRUCTION REQUIREMENTS
a) All Life and Safety and applicable Building Codes will be strictly enforced
(i.e. tempered glass, fire dampers, exit signs, smoke detectors, alarms,
etc.). Prior coordination with the Building Manager is required.
b) Electric panel schedules must be brought up to date identifying all new
circuits added.
c) All electrical outlets and lighting circuits are to be properly identified.
Outlets will be labeled on backside of each cover plate.
B1-1
<PAGE> 46
EXHIBIT B-1 (CONTINUED)
CONSTRUCTION BY TENANT DURING TERM
d) All electrical and phone closets being used must have panels replaced and
DOORS SHUT AT THE END of each day's work. Any electrical closet that is
opened with the panel exposed must have a work person PRESENT
e) All electricians, telephone personnel, etc. will, upon completion of their
respective projects, pick up and discard their trash leaving the telephone
and electrical rooms clean. If this is not complied with. a clean-up will be
conducted by the building janitors and the general contractor will be
back-charged for this service.
f) Welding or burning with an open flame will not be done without prior
approval of the Building Manager. Fire extinguishers must be on hand at all
times.
g) All "anchoring" of walls or supports to the concrete are not to be done
during normal working hours (7:30 AM - 6 00 PM, Monday through Friday). This
work must be scheduled before or after these hours during the week or on the
weekend.
h) All core drilling is not to be done during normal working hours (7:30 AM -
6:00 PM, Monday through Friday). This work must be scheduled before or after
these hours during the week or on the weekend.
i) All HVAC work must be inspected by the Building Engineer. The following
procedures will be followed by the general contractor:
i) A preliminary inspection of the HVAC work in progress will be
scheduled through the Building Office prior to the reinstallation of
the ceiling grid.
ii) A second inspection of the HVAC operation will also be scheduled
through the Building Office and will take place with the attendance
of the HVAC contractor's Air Balance Engineer. This inspection will
take place when the suite in question is ready to be air-balanced.
iii) The Building Engineer will inspect the construction on a periodic
basis as well.
j) All existing thermostats, ceiling tiles, lighting fixtures and air
conditioning grilles shall be saved and turned over to the Building
Engineer.
GOOD HOUSEKEEPING RULES AND REGULATIONS WILL BE STRICTLY ENFORCED. THE
BUILDING OFFICE AND ENGINEERING DEPARTMENT WILL DO EVERYTHING POSSIBLE TO MAKE
YOUR JOB EASIER. HOWEVER, CONTRACTORS WHO DO NOT OBSERVE THE CONSTRUCTION POLICY
WILL NOT BE ALLOWED TO PERFORM WITHIN THIS BUILDING. THE COST OF REPAIRING ANY
DAMAGES THAT ARE CAUSED BY TENANT OR TENANT'S CONTRACTOR DURING THE COURSE OF
CONSTRUCTION SHALL BE DEDUCTED FROM TENANT'S ALLOWANCE OR TENANT'S SECURITY
DEPOSIT, AS APPROPRIATE.
<TABLE>
<S> <C>
LANDLORD: TENANT:
DOUGLAS EMMETT REALTY FUND 1997, STAN LEE MEDIA, INC.,
a California limited partnership a Delaware corporation
By: DOUGLAS, EMMETT & COMPANY, By: /s/ GILL CHAMPION
----------------------------
Signer's Name: I
By: /s/ KENNETH PANZER [ ] President [X]Vice President or [ ] Chief Executive Officer
------------------------------------ ( Check Title Above)
Kenneth Panzer and
Dated: By: /s/ STEPHEN M. GORDON
---------------------------
Signer's Name:
[ ] Secretary [X] Treasurer or [ ] Chief Financial Officer
(Check Title Above)
AFFIX CORPORATE SEAL HERE.
Dated:
GUARANTOR
/s/ STAN LEE
-----------------------
Stan Lee, an individual
Date:
</TABLE>
B1-2
<PAGE> 47
EXHIBIT C
RULES AND REGULATIONS
BUILDING RULES AND REGULATIONS
1 Access. Tenant and/or Tenant's agents, clients, contractors, directors,
employees, inductees, licensees, officers, partners or shareholders shall
only use the sidewalks, entrances, lobby(ies), garage(s), elevators,
stairways, and public corridors as a means of ingress and egress, and shall
take such actions as may reasonably be necessary to ensure that the same
remain unobstructed at all times.
The entrance and exit doors to the Premises are to be kept closed at all
times except as required for orderly passage to and from the Premises.
Except on balconies available for the joint or exclusive use of Tenant as
otherwise specified hereinabove, Tenant shall not permit its agents,
clients, contractors, directors, employees, invitees, licensees, officers,
partners or shareholders to loiter in any part of the Building or obstruct
any means of ingress or egress. Tenant shall not cover any doors, and shall
not cover any window, other than with vertical or mini-blinds pre-approved
in writing by Landlord. Landlord specifically disapproves the installation
of any film or foil covering whatsoever on the windows of the Premises.
Neither Tenant, nor its agents, clients, contractors, directors, employees,
invitees, licensees, officers, partners or shareholders shall go up on the
roof or onto any balcony serving the Building, except upon such roof,
portion thereof, or balcony as may be contiguous to the Premises and is
designated in writing by Landlord as a roof-deck, roof-garden area, or
exclusive use balcony area.
2. RESTROOM FACILITIES. The toilet rooms, toilets, urinals, wash bowls and
other apparatus (the "Restroom Facilities"), whether contained in the common
areas of the Building and/or the interior of the Premises, shall not be used
for any purpose other than that for which they were designed. Tenant shall
not permit its agents, clients, contractors, directors, employees, invitees,
licensees, officers, partners or shareholders to throw foreign substances of
any kind whatsoever or papers not specifically designated for use in the
Restroom facilities down any toilet, or to dispose of the same in any way
not in keeping with the instructions provided to Tenant by the management of
the Building regarding same, and Tenant hereby specifically agrees to
reimburse Landlord directly for the expense of any breakage, stoppage or
damage resulting from Tenant's violation of this rule.
3. HEAVY EQUIPMENT. Landlord reserves the right, in Landlord's sole discretion,
to decline, limit or designate the location for installation of any safes,
other unusually heavy, or unusually large objects to be used or brought into
the Premises the Building. In each case where Tenant requests installation
of one or more such unusually heavy item(s), which request shall be
conclusively evidenced by Tenant's effort to bring such item(s) into the
Building or Premises, Tenant shall reimburse Landlord for the costs of any
engineering or structural analysis required by Landlord in connection
therewith. In all cases, each such heavy object shall be placed on a metal
stand or metal plates or such other mounting detail of such size as shall be
prescribed by Landlord.
Tenant hereby indemnifies Landlord against any damage or injury done to
persons, places, things or the Building or its common areas when such damage
or injury primarily arises out of Tenant's installation or use of one or
more unusually heavy objects. Tenant further agrees to reimburse Landlord
for the costs of repair of any damage done to the Building or property
therein by putting in, taking out, or maintaining such safes or other
unusually heavy objects.
4. TRANSPORTATION OF FREIGHT. Except as otherwise agreed to by Landlord in
writing, Tenant or Tenant's agents, clients, contractors, directors,
employees, invitees, licensees, officers, partners or shareholders shall
only carry freight, furniture or bulky materials in or out of the Building
before or after Normal Business Hours, as specified in Section 15 of these
rules. Tenant may only install and/or move such freight, furniture or bulky
material after previous written notice of its intention to complete such a
move, given to the Office of the Building. The persons and/or company
employed by Tenant for such work must be professional movers, reasonably
acceptable to Landlord, and said movers must provide Landlord with a
certificate of insurance evidencing the existence of workmen's compensation
and all risk liability coverage in a minimum amount of $2,000,000.
Tenant may, subject to the provisions of the immediately preceding
paragraph, move freight, furniture, bulky matter and other material in or
out of the Premises on Saturdays between the hours of 8:00 A.M. and 6:00
P.M., provided that Tenant pays in advance for Landlord's reasonably
anticipated additional costs, if any, for elevator operators, security
guards and other expenses arising by reason of such move by Tenant.
5. FLAMMABLE MATERIALS. Except for such limited quantities of office materials
and supplies as are customarily utilized in Tenant's normal business
operations, Tenant shall not use or keep in the Premises or the Building any
kerosene, gasoline, flammable or combustible fluid or material, other than
those limited quantities of normal business operating materials as may
reasonably be necessary for the operation or maintenance of office
equipment. Nor shall Tenant keep or bring into the Premises or the Building
any other toxic or hazardous material specifically disallowed pursuant to
California state law.
6. COOKING / ODORS / NUISANCES. Tenant shall not permit its agents, clients,
contractors, directors, employees, invitees, licensees, officers, partners
or shareholders to engage in the preparation and/or serving of foods
unless the Premises includes a self-contained kit-then area. Nor shall
Tenant permit
<PAGE> 48
EXHIBIT C (CONTINUED)
RULES AND REGULATIONS
the odors arising from such cooking, or any other improper
hoises,vibrations, or odors to be emanate from the Premises. Tenant shall
not obtain for use in the Premises, ice, drinking water, food, beverage,
towel or other similar services except at such reasonable hours and under
such reasonable regulations as may be specified by Landlord.
Tenant hereby agrees to instruct ail persons entering the Premises to comply
with the requirements of the Building, by advising all persons entering the
Premises that smoking of any tobacco or other substance is prohibited at all
times, except in such common areas located outside the Building as may be
designated by the Building management.
Tenant shall not permit Tenant's agents, clients, contractors, directors,
employees, invitees, licensees, officers, partners or shareholders to interfere
in any way with other tenants of the Building or with those having business with
them.
Tenant shall not permit its agents, clients, contractors, directors,
employees, invitees, licensees, officers, partners or shareholders to bring or
keep within the Building any animal, bird or bicycle, except such seeing-eye dog
or other disability assistance type animal as may comply with the requirements
of any handicapped ordinances having jurisdiction therefor.
Tenant shall store its trash and garbage within the Premises. No material
shall be placed in the trash boxes or receptacles if such material is a
hazardous waste or toxic substance or is of such a nature that its disposal in
Landlord's ordinary and customary manner of removing and disposing of trash and
garbage would be a violation of any law, ordinance or company regulation
governing such disposal. All garbage and refuse disposal shall be made only
through entry ways and elevators provided for such purposes and at such times as
Landlord shall designate. As and when directed by Landlord and/or if required by
any governmental agency having jurisdiction therefor, Tenant shall comply with
all directives for recycling and separation of trash.
Tenant shall not employ any person to do janitorial work in any part of the
Premises without the prior written consent of Landlord, which consent may be
withheld in Landlord's sole discretion.
Landlord-reserves the right to exclude or expel from the Building any person
who in Landlord's sole discretion is intoxicated or under the influence of
liquor or drugs or who, in any manner, engages in any act in violation of the
Rules and Regulations of the Building.
Tenant shall not conduct any public or private auction, fire sale or other
sale of Tenant's personal property, furniture, fixtures or equipment or any
other property located in or upon the Premises, without Landlord's prior written
consent, which consent shall be in Landlord's sole discretion.
7. STORAGE. Tenant may only store goods, wares, or merchandise on or in the
Premises in areas specifically designated by Landlord for such storage.
8. DIRECTIVES TO MANAGEMENT. Tenant's requirements, other than those Landlord
specifically agrees to perform elsewhere in this Lease, shall only be
attended to upon the Building management's receipt of Tenant's written
request therefor. Landlord's employees shall not perform any work or do
anything outside of their regular duties unless under special instruction
from the Building management. No security guard, janitor or engineer or
other employee of the Building management shall admit any person (Tenant or
otherwise) to the Premises without specific instructions from the Office of
the Building and written authorization for such admittance from Tenant.
9. KEYS AND LOCKS. Landlord shall furnish Tenant with two keys to each door
lock existing in the Premises. Tenant shall reimburse Landlord a reasonable
charge for these and any additional keys. Tenant shall not be permitted to
have keys made, nor shall Tenant alter any lock or install a new or
additional lock or bolts on any door of the Premises without Landlord's
prior written consent. Tenant shall, in each case, furnish Landlord with a
key for any additional lock installed or changed by Tenant or Tenant's
agent(s). Tenant, upon the expiration or earlier termination of this Lease,
shall deliver to Landlord all keys in the possession of Tenant or Tenant's
agents, clients, contractors, directors, employees, invitees, licensees,
officers, partners or shareholders for doors in the Building, whether or not
furnished to Tenant by Landlord. If Tenant, or Tenant's agents, clients,
contractors, directors, employees, invitees, licensees, officers, partners
or shareholders, lose or misplace any key(s) to the Building, Landlord
shall, in Landlord's sole discretion, either replace said key(s) or re-key
such locks as may be affected thereby, and Tenant shall reimburse Landlord
for all such costs of such re-keying and/or replacement.
10. SOLICITATION. Tenant and/or its agents, clients, contractors, directors,
employees, invitees, licensees, officers, partners or shareholders shall not
permit any canvassing, peddling, soliciting and/or distribution of handbills
or any other written materials to occur in the Premises and/or the Building,
nor shall Tenant or Tenant's agents, clients, contractors, directors,
employees, invitees, licensees, officers, partners or shareholders engage in
such solicitation or distribution activities.
C-2
<PAGE> 49
EXHIBIT C (CONTINUED)
RULES AND REGULATIONS
11. RETAIL SALES, SERVICES AND MANUFACTURING PROHIBITED. Except with the prior
written consent of Landlord, Tenant shall not sell, or permit the retail
sale of, newspapers, magazines, periodicals, theater tickets or any other
goods or merchandise to the general public in or on the Premises, nor
shall Tenant carry on or permit or allow any employee or other person to
carry on the independent business of stenography, typewriting or any
similar business in or from the Premises for the service or accommodation
of other occupants of any other portion of the Building. Tenant shall not
permit the Premises to be used for manufacturing or for any illegal
activity of any kind, or for any business or activity other than for
Tenant's specific use.
12. CHANGE IN NAME OR ADDRESS. Landlord shall have the right, exercisable
without notice and without liability to Tenant, to change the name and
street address of the Building.
13. PROJECTIONS FROM PREMISES. Tenant shall not install any radio or
television antenna, loudspeaker or other device on the roof or the
exterior walls of the Building or in any area projecting outside the
interior walls of the Premises. Tenant shall not install or permit to be
installed any awnings, air conditioning units or other projections,
without the prior written consent of Landlord.
14. SUPERIORITY OF LEASE. These Rules and Regulations are in addition to, and
shall not be construed to in any way modify or amend, in whole or in part,
the covenants, agreements or provisions of this Lease. If a conflict or
disagreement between the Lease and these Rules becomes apparent, this
Lease shall prevail.
15. CHANGES TO RULES AND REGULATIONS. Provided such changes do not materially
harm Tenant's ability to conduct its normal business operations, Landlord
shall retain the right to change, add or rescind any rule or regulation
contained herein, or to make such other and further reasonable and
nondiscriminatory Rules and Regulations as in Landlord's sole judgment
may, from time to time, become necessary for the management, safety, care
and cleanliness of the Premises, the Building or the Parking Facilities,
or for the preservation of good order therein, or for the convenience of
other occupants and tenants therein, so long as such recision, addition,
deletion or change is thereafter reasonably applied to all occupants of
the Building affected thereby.
PARKING RULES AND REGULATIONS
A. Tenant shall strictly comply with all posted speed limits, directional
signs, yield signs, stops signs and all other signs within or about the
parking facilities.
B. Tenant shall register all vehicle license plate numbers with the Building
management.
C. Tenant shall be responsible for the cost of repairing any damage to the
parking facilities or cleaning any debris create or left by Tenant,
including, without limitation, oil leakage from motor vehicles parked in
the parking facilities under its auspices.
D. Landlord, in addition to reserving the right to designate one or more
areas solely for visitor parking, which areas may be changed by Landlord
from time to time with or without prior notice to Tenant, reserves the
right to allocate additional visitor spaces on any floor of the parking
facilities. Tenant shall not park any vehicles in any spaces designated as
visitor only spaces or customer spaces within the parking facilities.
E. Tenant shall strictly comply with all rules, regulations, ordinances,
speed limits, and statutes affecting handicapped parking and/or access,
and shall not park any vehicles within the fire lanes, along parking curbs
or in striped areas.
F. Tenant shall only use the number of parking permits allocated to it and
shall not permit more than one of its employees to utilize the same
parking permit. Landlord reserves the right to assign or reassign parking
spaces within the Parking facilities to Tenant from time to time, and
provided Landlord is required to do so by reason of any action arising out
of a governmental mandate imposed on Landlord, Landlord further reserves
the right at any time to substitute an equivalent number of parking spaces
in a parking facilities or subterranean or surface parking facility within
a reasonable distance of the Premises.
G. Except with Landlord's managing agent(s)' prior written consent, Tenant
shall not leave vehicles in the parking facilities overnight, nor park any
vehicles in the parking facilities other than automobiles, motorcycles,
motor-driven or non-motor-driven bicycles or four-wheeled trucks or vans.
Landlord may, in its sole discretion, designate separate areas for
bicycles and motorcycles. Tenant shall ensure that vehicles parking in the
parking facilities by using the parking permits assigned to Tenant shall
be parked entirely within the striped lines designating a single space and
are not so situated or of such a width or length as to impede access to or
egress from vehicles parked m adjacent areas or doors or loading docks.
Further, all vehicles utilizing Tenant's parking permits shall not be
higher than any height limitation that may be posted, or of such a size,
weight or dimension so that entry of such vehicle into the parking
facilities would cause any damage or injury thereto.
C-3
<PAGE> 50
EXHIBIT C (continued)
RULES AND REGULATIONS
H. Tenant shall not allow any of the vehicles parked using Tenant's permits, or
the vehicles of any of Tenant's suppliers, shippers, customers or invitees
to be loaded or unloaded in any area other than those specifically
designated by Landlord for loading.
T. Tenant shall not use or occupy the parking facilities in any manner which
will unreasonably interfere with the use of the parking facilities by other
tenants or occupants of the Building. Without limitation, Tenant agrees to
promptly turn off any vehicle alarm system activated and sounding an alarm
in the parking facilities. In the event said alarm system fails to turn off
and no longer sound an intruder alert fifteen (15) minutes after commencing
such an alarm, Landlord shall reserve the right to remove the vehicle from
the parking facilities at Tenant's sole expense.
J. Tenant acknowledges that the Rules and Regulations as posted herein shall be
in effect twenty-four hours per day, seven days per week, without exception.
K. Tenant acknowledges that the uniformed guard officers and parking attendants
serving the parking facilities are authorized to issue verbal and written
warnings of Tenant's violations of any of the rules and regulations
contained herein. Except in the case of a car alarm continuing to sound in
excess of a maximum of fifteen minutes, in which case no further notice by
Landlord shall be required. If Tenant or Tenant's agents, contractors,
directors, employees, officers, partners or shareholders continue to
materially breach these rules and regulations after expiration of written
notice and the opportunity to cure has been given to Tenant, then in
addition to such other remedies and request for injunctive relief it may
have, Landlord shall have the right, without additional notice, to remove or
tow away the vehicle involved and store the same, all costs of which shall
be borne exclusively by Tenant and/or revoke Tenant's parking privileges and
rights under the Lease.
<TABLE>
<S> <C>
LANDLORD: TENANT:
DOUGLAS EMMETT REALTY FUND 1997, STAN LEE MEDIA, INC.,
a California limited partnership a Delaware corporation
By: DOUGLAS, EMMETT & COMPANY, By: /s/ GILL CHAMPION
-----------------------------
Signer's Name: I
By: /s/ KENNETH PANZER [ ] President [X] Vice President or [ ] Chief Executive Officer
-------------------------------------- ( Check Title Above)
Kenneth Panzer and
Dated: By: /s/ STEPHEN M. GORDON
-------------------------------
Signer's Name:
[ ] Secretary [X] Treasurer or [ ] Chief Financial Officer
(Check Title Above)
AFFIX CORPORATE SEAL HERE.
Dated:
GUARANTOR
/s/ STAN LEE
-------------------------------
Stan Lee, an individual
Date:
</TABLE>
C-4
<PAGE> 1
EXHIBIT 10.54
FIRST AMENDMENT TO OFFICE LEASE
THIS FIRST AMENDMENT TO OFFICE LEASE (the "First Amendment"), dated
November 2, 1999, is made by and between DOUGLAS EMMETT REALTY FUND 1997, A
California limited partnership ("Landlord"), WITH OFFICES AT 12121 Wilshire
Boulevard, Suite 600, Los Angeles, California 90025, and STAN LEE MEDIA, INC., a
Delaware corporation ("Tenant"), with offices at 15821 Ventura Boulevard, Suite
675, Encino, California 91436.
WHEREAS,
A. Landlord, pursuant to the provisions of that certain written Office
Lease, dated September 22, 1999 (the "Lease"), leased to Tenant space in the
property located at 15821 Ventura Boulevard, Encino, California 91436 (the
"Building"), commonly known as Suite 100 (the "Original Premises");
B. Pursuant to Article 24 of the Lease, Tenant holds a Right of First
Offer to lease Suite 145 on the ground floor of the Building (the "Expansion
Premises") as shown on Exhibit 1A attached hereto, which Expansion Premises
shall be conclusively deemed to contain 6,807 square feet of Rentable Area and
5,678 square feet of Usable Area;
C. Tenant wishes to exercise its right to add the Expansion Premises to
the original Premises; and
D. Landlord and Tenant, for their mutual benefit, wish to revise certain
other covenants and provisions of the Lease.
NOW, THEREFORE, IN CONSIDERATION of the covenants and provisions contained
herein, and other good and valuable consideration, the sufficiency of which
Landlord and Tenant hereby acknowledge, Landlord and Tenant agree:
1. CONFIRMATION OF DEFINED TERMS. Unless modified herein, all terms
previously defined and capitalized in the Lease shall hold the same
meaning for the purposes of this First Amendment.
2. EFFECTIVE DATE OF EXPANSION. The expansion contemplated hereunder shall
be effective the next business day after the date Landlord substantially
completes the Improvements contemplated under Exhibit 1B attached hereto
(the "Effective Date"). The anticipated Effective Date is December 15,
1999. Landlord and Tenant shall promptly execute a further amendment
confirming the finalized Effective Date and Term as soon as they are
established.
Landlord shall use commercially reasonable efforts to provide
Tenant a minimum of two (2) weeks prior written notice of the date
Landlord reasonable anticipates Tenant shall be able to take possession
of the Expansion Premises.
Provided that Tenant does not delay Landlord's completion of any
work within the Expansion Premises, Tenant may enter the Expansion
Premises up to one (1) calendar week prior to the anticipated Effective
Date, solely for the purpose of installing Tenant's furniture, fixtures
and equipment, computer and telephone cabling. Said early entry shall be
subject to Tenant complying with all of the provisions and covenants
contained herein, except that Tenant shall not be obligated to pay any
increase in Monthly Fixed Rent or Additional Rent that Tenant is
required to pay hereunder until the Effective Date. If Tenant's early
possession does so delay completion of the
<PAGE> 2
repairs, then such delay shall be chargeable to Tenant by reducing the
Allowance by an amount equal to the per-diem Monthly Fixed Rent payable
hereunder, multiplied by the total number of days Landlord is so
delayed.
If for any reason Landlord is unable to deliver possession of
the Expansion Premises to Tenant on the anticipated Effective Date, the
provisions of this First Amendment shall not be void or voidable, nor
shall Landlord be liable to Tenant for any damage resulting from
Landlord's inability to deliver such possession. However, Tenant shall
not be obligated to pay Fixed Monthly Rent or Additional Rent with
regard to the Expansion Premises until possession of the Expansion
Premises has been delivered to Tenant. Except for such delay in the
commencement of the payment of Rent, Landlord's failure to give
possession on the anticipated Effective Date shall in no way affect
Tenant's obligations hereunder.
If possession of the Expansion Premises is not tendered by
Landlord within one hundred twenty (120) days after the anticipated
Effective Date, then Tenant shall have the right to terminate the
provisions of this First Amendment by giving written notice to Landlord,
which notice shall be given within ten (10) days after the expiration of
such one hundred twenty (120 day period. If such notice of termination
is not given by Tenant within such ten (10) day time period, then this
First Amendment shall continue in full force and effect.
If possession of the Expansion Premises is not tendered within
one hundred eighty (180) days after the anticipated Effective Date, then
this First Amendment, and the rights and obligations of Landlord and
Tenant hereunder, shall terminate automatically, without further
liability by either party to the other, and without further
documentation being required.
3. EXPANSION OF PREMISES. As of the Effective Date, the definition of the
Premises shall be revised to include both the Original Premises and the
Expansion Premises, and wherever in the original Lease the word
"Premises" is found, it shall thereafter refer to both the Original
Premises and the Expansion Premises together, as if the same had been
originally included in the Lease.
As of the Effective Date, the Usable Area of the Premises shall
increase from 6,207 square feet to 11,885 square feet and the Rentable
Area of the Premises shall increase from 7,442 square feet to 14,249
square feet.
Landlord and Tenant agree that the Usable Area of the Premises
has been measured according to the June, 1996 standards published by the
Building Owners' and Managers' Association ("BOMA"), and that Landlord
is utilizing a deemed add-on factor of 19.89% to compute the Rentable
Area of the Premises. Rentable Area herein is calculated as 1.1989 times
the estimated Usable Area, regardless of what the actual square footage
of the common areas of the Building may be, and whether or not they are
more or less than 19.89% of the total estimated Usable Area of the
Building. The purpose of this calculation is solely to provide a general
basis for comparison and pricing of this space in relation to other
spaces in the market area.
Landlord and Tenant further agree that even if the Rentable Area
of Usable Area of the Premises and/or the total Building Area are later
determined to be more or less than the figures
2
<PAGE> 3
stated herein, for all purposes of the Lease, the figures stated herein
shall be conclusively deemed to be the actual Rentable Area and Usable
Area of the premises.
4. REVISION IN FIXED MONTHLY RENT. Subject to Tenant's Rent Deferral rights
as set forth in Section 3.1 of the Lease (which Rent Deferral rights
shall apply only to the Original Premises), commencing on the Effective
Date and continuing through the last day of the twelfth (12th) calendar
month of the Term, the Fixed Monthly Rent to be paid by Tenant shall
increase from $13,767.70 per month to $26,360.65 per month; and
Commencing on the first (1st) day of the thirteenth (13th)
calendar month of the Term and continuing through the last day of the
twenty-fourth (24th) calendar month of the Term, the Fixed Monthly Rent
to be paid by Tenant shall increase from $26,360.65 per month to
$27,151.47 per month; and
Commencing on the first (1st) day of the twenty-fifth (25th)
calendar month of the Term, and continuing through the last day of the
thirty-sixth (36th calendar month of the Term, the Fixed Monthly Rent to
be paid by Tenant shall increase from $27,151.47 per month to $27,966.01
per month; and
Commencing on the first (1st) day of the thirty-seventh (37th)
calendar month of the Term, and continuing through the last day of the
forty-eighth (48th) calendar month of the Term, the Fixed Monthly Rent
to be paid by Tenant shall increase from $27,966.01 per month to
$28,805.00 per month; and
Commencing on the first (1st) day of the forty-ninth (49th)
calendar month of the Term, and continuing throughout the remainder of
the initial Term, the Fixed Monthly Rent to be paid by Tenant shall
increase from $28,805.00 per month to $29,669.14 per month.
Concurrently with Tenant's execution and delivery of this First
Amendment, Tenant shall pay to Landlord an amount equal to the first
(1st) month's rent for the Expansion Premises and the Security Deposit
referred to in Section 10 below.
5. REVISION IN TENANT'S SHARE. As of the Effective Date, Tenant's Share, as
specified in Article 5 of the original Lease, solely as it relates to
the Expansion Premises shall be 1.61%.
6. USE. The Expansion Premises shall only be used for administration and
animation production offices (the "Specified Use") and for no other
purposes, without Landlord's prior written consent as provided in
Article 2 of the Lease.
7. INCREASE IN PARKING PERMITS. As of the Effective Date, Tenant shall be
entitled to rent a total of thirty-five (35), rather than nineteen (19),
unreserved parking permits with a corresponding increase in Tenant's
minimum rental obligation from nine (9) to seventeen (17) permits.
8. ACCEPTANCE OF EXPANSION PREMISES. Tenant acknowledges that it has made
its own inspection of and inquiries regarding the Expansion Premises.
Therefore, except for the Improvements to be made by Landlord pursuant
to the provisions of the attached Exhibit 1B, Tenant accepts the
3
<PAGE> 4
Expansion Premises in their "as-is" condition. Tenant further
acknowledges that Landlord has made no representation or warranty,
express or implied except as are contained in this First Amendment and
its Exhibits, regarding the condition, suitability or usability of the
Expansion Premises or the Building for the purposes intended by Tenant.
9. SECURITY DEPOSIT. Landlord acknowledges that it currently holds the sum
of $15,495.67 as a Security Deposit under the Lease, which amount
Landlord shall continue to hold throughout the Initial Term, unless
otherwise depleted pursuant to the provisions of the Lease. Concurrent
with Tenant's execution and tendering to Landlord of this First
Amendment, Tenant shall tender the sum of $14,173.47, which amount
Landlord shall add to the Security Deposit already held by Landlord, so
that thereafter, throughout the Extended Term, provided the same is not
otherwise depleted, Landlord shall hold a total of $29,669.14 as a
Security Deposit on behalf of Tenant.
10. BROKER REPRESENTATION. Landlord and Tenant represent to one another that
it has dealt with no broker in connection with this First Amendment
other than DOUGLAS, EMMETT & COMPANY and JULIEN J. STUDLEY, INC..
Landlord and Tenant shall hold one another harmless from and against any
and all liability, loss, damage, expense, claim, action, demand, suit or
obligation arising out of or relating to a breach by the indemnifying
party of such representation. Landlord agrees to pay all commissions due
to the brokers listed above created by Tenant's execution of this First
Amendment.
11. SUCCESSORS AND HEIRS. The provisions of this First Amendment shall inure
to the benefit of Landlord's and Tenant's respective successors,
assigns, heirs and all persons claiming by, through or under them.
12. CONFIDENTIALITY. Landlord and Tenant shall each use commercially
reasonable efforts to ensure that the covenants and provisions of this
First Amendment are not discussed with anyone not directly involved in
the management, administration, ownership, lending against, or
subleasing of the Premises, other than Tenant's or Landlord's
counsel-of-record or leasing or sub-leasing broker-of-record.
13. SUBMISSION OF DOCUMENT. No expanded contractual or other rights shall
exist between Landlord and Tenant with respect to the Expansion
Premises, as contemplated under this First Amendment, until both
Landlord and Tenant have executed and delivered this First Amendment,
whether or not any additional rental or security deposits have been
received by Landlord, and notwithstanding that Landlord has delivered to
Tenant an unexecuted copy of this First Amendment.
14. GOVERNING LAW. The provisions of this First Amendment shall be governed
by the laws of the State of California.
15. REAFFIRMATION. Landlord and Tenant acknowledge and agree that the Lease,
as amended herein, constitutes the entire agreement by and between
Landlord and Tenant, and supersedes any and all other agreements written
or oral between the parties hereto. Furthermore, except as modified
herein, all other covenants and provisions of the Lease shall remain
unmodified and in full force and effect.
4
<PAGE> 5
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this document as of
the day and year written below.
LANDLORD: TENANT:
DOUGLAS EMMETT REALTY FUND 1997, STAN LEE MEDIA, INC.,
A California limited partnership a Delaware corporation
By: DOUGLAS, EMMETT & COMPANY, By: /s/ Gill Champion
its agent -----------------------------
By: /s/ Kenneth Panzer Signer's Name: Gill Champion
---------------------------------- -------------------
Kenneth Panzer [ ] President [X] Vice President
or [ ] Chief Executive Officer
(Check Title Above)
AND
Dated: November 30, 1999
------------------------ By: /s/ STEPHEN M. GORDON
------------------------------
Signer's Name: Stephen M. Gordon
------------------
[ ] Secretary [X] Treasurer
or [ ] Chief Financial Officer
(Check Title Above)
AFFIX CORPORATE SEAL HERE
GUARANTOR:
By their signatures hereinbelow, Tenant and
Guarantor(s) acknowledge and agree that, as
a material element of the consideration for
Landlord entering into this First Amendment,
The provisions and covenants contained in
That certain Guaranty of Lease, executed by
Guarantor on September 22, 1999 (the
"Guaranty"), shall extend to and include the
provisions of this First Amendment, as if
the same had been originally incorporated
into the Lease referenced in said Guaranty.
/s/ Stan Lee
---------------------------------
Mr. Stan Lee, an individual
Dated: November 16, 1999
---------------------------
5
<PAGE> 6
EXHIBIT 1B
IMPROVEMENT CONSTRUCTION AGREEMENT
CONSTRUCTION TO BE PERFORMED BY LANDLORD WITH AN ALLOWANCE
SECTION 1. COMPLETION OF IMPROVEMENTS. Landlord, through its general contractor
("Contractor"), shall furnish and install within the Expansion Premises those
items of general construction, shown on the final Plans and Specifications
approved by Landlord and Tenant pursuant to the Schedule of Approvals below, in
compliance with all applicable codes and regulations, and complete any
construction required in the common areas of the Building when such construction
is required by or arises out of completion of the Improvements (collectively the
"Improvements").
The definition of Improvements shall include all costs associated with
completing the Tenant Improvements, including but not limited to, space
planning, design, architectural, and engineering fees, contracting, labor and
material costs, municipal fees and permit costs, and document development and/or
reproduction.
Tenant acknowledges and agrees that any change in the scope of work or
details of construction after Tenant's sign off of the finalized working
drawings shall constitute a "Tenant Change," the costs of which Tenant shall pay
pursuant to the provisions of Subsection 2 (d) hereinbelow.
SECTION 2. LANDLORD'S ALLOWANCE.
a) Tenant shall bear all costs of construction of the Improvements in
excess of the Allowance, and shall deposit such excess costs with
Landlord pursuant to the provisions of Subsection 2 (d) hereinbelow.
Landlord shall have no obligation whatsoever to commence construction of
the Improvements until such time as Tenant has deposited the excess
costs of construction, and Tenant's failure to make such deposit timely,
as required, shall be assessed against Tenant as a Tenant delay,
pursuant to the provisions contained in subsection 2 (e).
b) Landlord shall contribute a maximum sum of $35.00 per square foot of
Usable Area contained in the Expansion Premises (the "allowance") which
may solely be applied towards completion of the Improvements, and which
Landlord shall pay directly to Contractor for Tenant's account.
c) Prior to commencing construction of the Improvements, Landlord shall
submit to Tenant a written statement showing the total anticipated cost
of the Improvements, which statement shall include Contractor's
estimated charges for general conditions, overhead and profit (which
shall in no event exceed, in the aggregate, twelve percent (12%) of the
total cost of the Improvements) and an estimate of all other costs,
including a five percent (5%) administrative fee payable to the managing
agent of Landlord for supervision of completion of the construction.
Landlord shall require Contractor to obtain competitive bids from a
minimum of three (3) sub-contractors for each trade involved in the
construction of the Improvements, except with regard to any portion
affecting the Building's mechanical, electrical or plumbing systems,
which aspects shall nonetheless be required to be competitively priced.
Tenant's failure to give written approval of such statement
within five (5) working days after submission thereof shall be
conclusively deemed a disapproval of such statement, and Contractor
shall not commence the Improvements. Any delay of Tenant, after the
expiration of
<PAGE> 7
ten (10) days from receipt of Landlord's statement, to provide Landlord
with a revised scope of work and written approval of a revised cost
statement therefore shall be considered a Tenant delay, assessable
against Tenant pursuant to the Provisions of Subsection 2 (e)
hereinbelow.
d) Tenant agrees to pay Landlord within five (5) working days after receipt
of Landlord's billing for the estimated cost of all the Improvements in
excess of the Allowance and/or for the actual costs of any Tenant
Change. Tenant's failure to make such payment timely, as specified
herein, shall release Landlord from any obligation to commence or
continue construction of the Improvements, and each of Tenant's
continued failure to make payment shall be treated as a Tenant delay,
assessable against Tenant pursuant to the provisions of Subsection 2 (e)
hereinbelow.
Tenant hereby authorizes Landlord to pay Contractor interim
payments from the funds so deposited towards completion of the
Improvements, except that Landlord shall retain the sum of ten percent
(10%) of the total cost of Improvements, as revised by Tenant Changes,
if any, until such time as:
(i) Tenant has advised Landlord of its approval of completion of the
Improvements, which approval shall not be unreasonably withheld,
conditioned or delayed; or
(ii) Contractor has provided reasonable documentation that the
Improvements, pursuant to the original scope of work, have been
reasonably completed.
Within thirty (30) business days after Contractor has
reasonably completed the Improvements, Landlord shall provide
Tenant with a final statement, indicating any difference between
the estimated cost of the Improvements, the final cost of the
Improvements; any initial or interim payments made by Tenant
towards completion thereof; the amount of Allowance contributed
and the balance owing from or to Tenant. Any balance owed to
Tenant shall be returned with such statement, and any shortfall
due Landlord shall be paid within five (5) days after Tenant's
receipt of Landlord's billing.
e) Any delay caused by Tenant shall be a material breach of this Lease, and
in addition to any other remedies available to Landlord hereunder,
Tenant shall be assessed a penalty therefore, by decreasing the
Allowance in an amount equal to the daily value of Monthly Fixed Rent,
computed by dividing the Monthly Fixed Rent by 30 days, and multiplying
this figure by the total number of days Tenant failed to perform as
required hereunder.
f) Landlord and Tenant agree that if the Improvements are actually
constructed by Contractor at a cost which is less than the Allowance,
there shall be no monetary adjustment between Landlord and Tenant and
the cost savings shall accrue to the benefit of Landlord.
SECTION 3. PLANS AND SPECIFICATIONS. Tenant shall, through Landlord's architect
or space planner, provide such information and directions as are necessary to
complete the architectural and engineering Plans and Specifications required for
the construction of the Improvements. Tenant shall provide instructions to
Landlord's architect or space planner so as to meet the Schedule of Approvals
set forth in Paragraph 5 below. Notwithstanding Tenant's obligation to provide
instructions to Landlord's architect or space planner, all Plans and
Specifications referred to herein are subject to Landlord's approval, which
shall not be unreasonably withheld, conditioned or delayed.
B-2
<PAGE> 8
SECTION 4. COMPLETION OF WORK NOT INCLUDED AS IMPROVEMENTS. Any work not shown
in the final construction Plans and Specifications, including but not limited
to, telephone service, furnishings, installation of Tenant's trade fixtures or
cabinetry (collectively "Tenant Work"), shall be separately contracted and paid
for by Tenant. Tenant shall obtain Landlord's written approval of Tenant's
suppliers and contractors prior to commencement of any Tenant Work.
Landlord shall give reasonable access to Tenant's suppliers and
contractors so as to achieve timely completion of any Tenant Work.
Notwithstanding Landlord's obligation to provide such access, completion of all
Tenant Work shall be subject to Landlord's supervision, policies and procedures,
and shall be scheduled with Contractor and completed in such as manner as to not
unreasonably hinder or delay completion of the Improvements.
SECTION 5. SCHEDULE OF APPROVALS. Subject to Force Majeure, Tenant shall comply
with the following Schedule of Approvals:
<TABLE>
<CAPTION>
EVENT TIME
- ----- ----
<S> <C> <C>
A) Deadline by which Tenant shall have met Completed
with Landlord's space planner.
B) Deadline for space plan approval. November 1, 1999
C) Deadline for notifying Landlord of Tenant's November 8, 1999
selection of finishes and materials.
D) Deadline for Tenant's approval of final November 15, 1999
Plans, Specifications and working drawings.
E) Deadline for Tenant's approval of Landlord's November 22, 1999
cost estimate of Improvements.
</TABLE>
SECTION 6. CONSTRUCTION INSURANCE REQUIREMENTS. Contractor, at its sole expense,
shall obtain and maintain public liability and workmen's compensation insurance
adequate to protect Tenant and Landlord from and against any and all liability
for death or injury to persons or damage to property caused in or about the
Expansion Premises by reason of completion of the Improvements.
Tenant shall, at Tenant's sole expense, either obtain and maintain
public liability and workmen's compensation insurance adequate to fully protect
Landlord as well as Tenant from and against any and all liability for death or
injury to persons or damage to property caused in or about the Expansion
Premises by reason completion of any Tenant Work, or shall cause Tenant's
contractors or subcontractors to provide such insurance.
SECTION 7. COMPLETION OF PUNCH LIST. Within twenty (20) days after occupancy of
the Expansion Premises, Tenant shall submit to Landlord a "punch list" of Tenant
Improvement items that require repair or correction by Landlord. Provided that
said items were included within the original plans and/or part of
B-3
<PAGE> 9
change orders to such plans approved by Landlord in writing, Landlord shall
diligently proceed to correct those items within thirty (30) days of receipt of
Tenant's list.
SECTION 8. CONSTRUCTION WARRANTIES. Landlord agrees that, subject to Tenant's
performance hereunder, Landlord shall complete the Improvements, and shall
correct any construction defects about which Tenant notifies Landlord in writing
within one (1) year following the Commencement Date. Tenant's right to repair of
any defect shall be extended for such longer period as may be covered by
warranties provided by Contractor or subcontractor(s).
LANDLORD: TENANT:
DOUGLAS EMMETT REALTY FUND 1997, STAN LEE MEDIA, INC.,
A California limited partnership a Delaware corporation
By: DOUGLAS, EMMETT & COMPANY, By: /s/ GILL CHAMPION
--------------------------------- ------------------------------
its agent
Signer's Name: Gill Champion
--------------------
[ ] President [X] Vice President
or [ ] Chief Executive Officer
(Check Title Above)
By: /s/ KENNETH PANZER
---------------------------------
Kenneth Panzer and
Dated: By: /s/ STEPHEN M. GORDON
----------------------------- -------------------------------
Signer's Name: Stephen M. Gordon
--------------------
[ ] Secretary [X] Treasurer
or [ ] Chief Financial Officer
(Check Title Above)
AFFIX CORPORATE SEAL HERE
Dated:
----------------------------
GUARANTOR:
/s/ STAN LEE
----------------------------------
Mr. Stan Lee, an individual
Dated:
----------------------------
B-4
<PAGE> 1
EXHIBIT 21.1
List of Subsidiaries
Stan Lee Media, Inc., a Delaware corporation
Eat-Time Media, Inc., a Delaware corporation
Excelsior Entertainment, Inc., a Delaware corporation
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 2,020,162
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 11,883
<CURRENT-ASSETS> 2,042,495
<PP&E> 680,605
<DEPRECIATION> (78,596)
<TOTAL-ASSETS> 2,987,046
<CURRENT-LIABILITIES> 718,131
<BONDS> 0
0
5,000,002
<COMMON> 11,433
<OTHER-SE> (2,823,499)
<TOTAL-LIABILITY-AND-EQUITY> 2,987,046
<SALES> 30,605
<TOTAL-REVENUES> 30,605
<CGS> 1,275
<TOTAL-COSTS> 7,877,830
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 81,640
<INCOME-PRETAX> (7,928,865)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,928,865)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,928,865)
<EPS-BASIC> (.81)
<EPS-DILUTED> (.81)
</TABLE>
